On October 18, 2021, the Company entered into an Asset Purchase Agreement, or APA, with Millennium Pharmaceuticals, Inc. or Millennium, a wholly owned subsidiary of Takeda Pharmaceutical Company Limited, or Takeda, pursuant to which the Company acquired and licensed from Millennium certain technology, intellectual property and other assets related to Takeda’s small molecule programs sapanisertib (CB-228, formerly known as TAK-228) and mivavotinib (CB-659, formerly known as TAK-659), or the Takeda Programs.

Under the APA, Millennium assigned or caused to be assigned to the Company certain patents and know-how solely related to the Takeda Programs and necessary for the exploitation of products containing the CB-228 and CB-659 compounds, as well as specified regulatory materials, agreements, materials and inventory related to the Takeda Programs. Takeda also granted to the Company a license under certain other intellectual property necessary for the exploitation of such products. The Company granted to Millennium a license under the intellectual property assigned by Takeda to the Company (including intellectual property controlled by the Company via the assigned contracts) in order for Millennium to perform its obligations under the APA, ancillary agreements executed in connection with the APA and other retained agreements and for Millennium’s internal research use.

The Company must use commercially reasonable efforts to develop and commercialize at least one CB-228 product and one CB-659 product in each of the United States, Japan and certain European countries.

Pursuant to the APA, in October 2021, the Company paid Millennium an upfront payment of $10.0 million in cash and issued to Millennium 1,000,000 shares of its Series A convertible preferred stock as referenced below. In determining the total purchase consideration paid to Millennium, the Series A convertible preferred stock shares were classified as level 3 in the valuation hierarchy due to the presence of significant unobservable inputs, and were valued upon issuance at $40.9 million using the Black-Scholes option-pricing model and the following assumptions:


		Description
Credit spread	12.4%	Allowance for counterparty credit risk of the Company given the liquidation preference and obligation to issue more shares as the stock price decreases
Probability of a Qualified Financing	75%	As determined upon issuance date
Expected timing of a Qualified Financing	0.5 years	As determined upon issuance date
Expected term	0.7 years	Weighted average of time to a Qualified Financing and time to the Mandatory Pricing Date, as determined upon issuance date
Volatility	55%	Based on the Company’s trading history for its common stock over the estimated term to the mandatory pricing date
Risk-free interest rate	0.08%	Based on the U.S. constant maturity treasury yield curve at the time of issuance over the expected term
Common stock price	$2.04	The Company's closing common stock price on October 15, 2021

Total consideration transferred was $50.9 million and was comprised of the $10 million cash payment and the estimated fair value of the shares of the Company’s Series A convertible preferred stock of $40.9 million. The Company recorded a charge of $50.9 million related to the assets acquired to “research and development related to asset acquisition” in the consolidated statements of operations as the assets acquired had no alternative future use at the time of the acquisition. There were no material direct transaction costs related to the transaction.

The Company will make tiered earn-out payments of high single-digits to low teens on net sales of CB-228 products and CB-659 products, subject to certain customary reductions. Millennium will be eligible to receive up to an aggregate of $470.0 million in clinical development, regulatory and sales milestone payments across both Takeda Programs.

The term of the APA will continue until the expiration of the Company's obligations to make earn-out payments, unless earlier terminated. Either party may terminate the APA in the event of an uncured material breach of the other party or in the case of insolvency of the other party.

On October 18, 2021, in accordance with the APA, the Company entered into a Preferred Stock Purchase Agreement, or the Purchase Agreement, with Millennium, pursuant to which it agreed to issue 1,000,000 shares of its Series A convertible preferred stock, or the Series A preferred stock. Each share of Series A preferred stock is initially convertible at the option of the holder into approximately 17.2 shares of common stock, based on the Company’s $2.04 per share closing stock price on October 15, 2021. The conversion rate of the Series A preferred stock is subject to anti-dilution adjustments that if triggered would result in the issuance of additional shares of common stock upon conversion.

The holder of the Series A preferred stock has the following rights, preferences and privileges:

The holder of Series A preferred stock will be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A preferred stock are convertible on any matter presented to the stockholders of the Company or at any meeting of stockholders, subject to certain beneficial ownership limitations.

Additionally, certain matters require the approval of the Series A preferred stock, voting as a separate class, including to (i) amend the Company’s organizational documents in a way that has an adverse effect on the Series A preferred stock, (ii) create or authorize the creation of any new security, or reclassify or amend any existing security, of the Company that are senior to, or equal in priority with, the Series A preferred stock, including any shares of Series A preferred stock, with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends and rights of redemption or (iii) purchase or

redeem, or pay or declare, any dividend or make any distribution on, any shares of capital stock of the Company, subject to certain exceptions.

The Series A preferred stock will automatically convert, subject to certain beneficial ownership limitations, on the earlier of (i) the 18-month anniversary of the date of issuance, or the Mandatory Pricing Date, into 17,156,863 shares of common stock, subject to adjustment into additional shares of common stock if the volume weighted-average price of common stock on the thirty (30) trading days prior to the Mandatory Pricing Date is lower than $2.04 and (ii) a qualified financing that results in net proceeds to the Company of at least $40.0 million, excluding the conversion of the Series A preferred stock, a Qualified Financing, into 17,156,863 shares of common stock, subject to adjustment into additional shares of common stock if the weighted-average price paid by investors in the Qualified Financing is lower than $2.04 per share.

The Series A preferred stock is convertible, subject to certain beneficial ownership limitations, at the option of the holder thereof, at any time prior to the Mandatory Pricing Date or a Qualified Financing into common stock into 17,156,863 shares of common stock, subject to adjustment into additional shares of common stock if the volume weighted-average sales price per share of certain shares of common stock sold from the issuance date of the Series A preferred stock through the date of the election to convert is lower than $2.04 per share.

The Series A preferred stock will be entitled to dividends or distributions on shares of Series A preferred stock equal to and in the same form as dividends or distributions actually paid on shares of the common stock when, as and if such dividends or distributions are paid. No dividends had been declared by the Board of Directors as of December 31, 2021.

The Series A preferred stock will have preference over the common stock with respect to distribution of assets or available proceeds, as applicable, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or any other deemed liquidation event, and will be entitled to a liquidation preference equal to the greater of the original issuance price of the Series A preferred stock and the payment such holder would have received had the Series A preferred stock been converted into shares of common stock immediately prior to such liquidation event.

The holders of the Series A preferred stock have no redemption rights. However, if the Company is unable to obtain stockholder approval, and as a result the Series A preferred stockholders are unable to convert all the shares into common stock, then the parties shall promptly negotiate in good faith the timing and amount per share to be paid to compensate the holder for such inability (“Redemption Event”); provided, however that the Company shall not be required to make any cash redemption payment until at least three years after the Closing Date without the Company’s consent.

The Company has recorded the Series A preferred stock at an estimated fair value at the time of issuance of $40.9 million, net of issuance costs of approximately $0.2 million. The Company has classified the Series A preferred stock as temporary equity due to the uncertainty of having sufficient authorized common stock reserved for issuance to cover the potential conversion of the Series A preferred stock into common stock if any of the conversion features (optional or automatic) are triggered.

If the Company does not receive the Requisite Stockholder Approval, then the Company may be required to compensate the holder, upon occurrence of a Redemption Event. At the end of each reporting period, the Company will adjust the Series A preferred stock carrying value to the greater of the issuance date fair value of $40.9 million or the current redemption amount in accordance with ASC 480-10-S99-3A, Distinguishing Liabilities from Equity.