The Company has restated its previously reported unaudited interim condensed consolidated financial statements for the three months ended March 31, 2022 to correct an error related to revenue that was incorrectly recognized. For the three months ended March 31, 2022, correcting this error increased the Company’s net loss by $4.9 million.

As discussed in Note 9, the Company entered into the LianBio License Agreement and received an upfront payment of $12.0 million and is eligible to receive up to $135.0 million in future payments based upon the achievement of specified development, regulatory and commercialization milestones. In the three months ended March 31, 2022, the Company achieved a development

milestone of $5.0 million for dosing the first patient in its global Phase 3 clinical trial. At the time the milestone was achieved, the Company recognized the entire $5.0 million as revenue in the three months ended March 31, 2022.

In connection with the third quarter 2022 financial statement close process, the Company determined that the $5.0 million development milestone should have been allocated to the performance obligations previously identified in the LianBio License Agreement and the allocated amounts should have been recognized under the revenue recognition model previously developed for each performance obligation.

The error in the recognition of the milestone amount was a result of the Company misapplying the provisions of ASC Topic 606, Revenue from Contracts with Customers, in accounting for the achievement of the milestone.

As a result of the restatement, the Company has made adjustments to present the corrected amount of collaboration revenue as a reduction to revenue previously recognized in the accompanying condensed consolidated statements of operations and comprehensive loss and as an increase in deferred revenue in the accompanying March 31, 2022 condensed consolidated balance sheet.

Set forth below are the adjustments to the Company’s previously issued unaudited statements of operations and comprehensive loss and unaudited balance sheet for the period affected by the restatement. The restatement adjustments did not affect the net cash used in operating activities in the Company’s statements of cash flows.


(in thousands, except per share data)	Three Months Ended March 31, 2022
Statement of Operations and Comprehensive Loss	As Reported			Adjustment			As Restated
Collaboration revenue	$	5,367		$	(4,899	)	$	468
Loss from operations	$	(7,026	)	$	(4,899	)	$	(11,925	)
Net loss	$	(7,012	)	$	(4,899	)	$	(11,911	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.54	)	$	(0.38	)	$	(0.92	)

	As of March 31, 2022
Balance Sheet	As Reported			Adjustment			As Restated
Deferred revenue	$	10,060		$	4,163		$	14,223
Deferred revenue, net of current portion	$	1,288		$	736		$	2,024
Total liabilities	$	19,189		$	4,899		$	24,088
Accumulated deficit	$	(200,409	)	$	(4,899	)	$	(205,308	)
Stockholders' equity	$	28,156		$	(4,899	)	$	23,257

	Three Months Ended March 31, 2022
Statement of Cash Flows	As Reported			Adjustment			As Restated
Net loss	$	(7,012	)	$	(4,899	)	$	(11,911	)
Deferred revenue	$	(367	)	$	4,899		$	4,532

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2022. Since the date of those financial statements, there have been no changes to its significant accounting policies except as noted below.

Revenue Recognition

Under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying good or service relative to the option exercise price. The exercise of a material right is accounted for as a contract modification for accounting purposes.

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. The Company validates the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. The Company assessed its revenue generating arrangement in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the use of an output or input method.

Collaborative arrangement revenue

On May 31, 2021, the Company entered into a License and Collaboration Agreement (“LianBio License Agreement”) with LianBio Inflammatory Limited (“LianBio”) to develop and commercialize LYR-210 in Greater China (mainland China, Hong Kong, Taiwan, and Macau), South Korea, Singapore and Thailand. See Note 9 for further discussion of the arrangement.

Net Loss per Share

The Company has reported losses since inception and has computed basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including options to purchase common stock and restricted stock units, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same.

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):


	Three Months Ended March 31,
	2022		2021
Stock options		2,962,177		1,762,605
Restricted stock units		42,879		—
Total		3,005,056		1,762,605