The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (GAAP) as defined by the Financial Accounting Standards Board (FASB). The consolidated financial statements include the accounts of DICE Therapeutics, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. The Company evaluates its estimates, including those related to revenue recognition, the fair value of convertible preferred stock warrants, income taxes uncertainties, share-based compensation, including the fair value of common stock, and related assumptions on an ongoing basis using historical experience and other factors, and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Cash equivalents and marketable securities are financial instruments that potentially subject the Company to concentrations of credit risk. Cash and cash equivalents are deposited in checking and sweep accounts at a financial institution. Such deposits may, at times, exceed federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company invests in money market funds, treasury bills and notes, government bonds, commercial paper, and corporate notes. The Company limits its credit risk associated with

cash equivalents and marketable securities by placing them with banks and institutions it believes are credit-worthy and in highly rated investments.

All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash and cash equivalents. Cash equivalents include marketable securities having an original maturity of three months or less at the time of purchase.

Restricted cash consists of funds in a money market account that serves as collateral for lease agreements.

The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:

	December 31,
	2021		2020
	(In thousands)
Cash and cash equivalents	$	115,826	$	59,687
Restricted cash		348		149
Total cash, cash equivalents, and restricted cash	$	116,174	$	59,836

Investments are classified as available-for-sale securities, and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company classifies certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, deemed temporary in nature, are reported as a separate component of accumulated other comprehensive income (loss). A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and the cost of securities sold is determined using the specific-identification method.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date.

Fair value is measured based on a three-level hierarchy of inputs, of which the first two are considered observable and the last unobservable. Unobservable inputs reflect the Company’s own assumptions about current market conditions. The use of observable inputs is maximized, where available, and the use of unobservable inputs is minimized when measuring fair value. The three-level hierarchy of inputs is as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts reflected in the consolidated balance sheets for cash, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their short-term nature.

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets, generally five years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheet and the resulting gain or loss is reflected in the consolidated statements of operations in the period realized. Maintenance and repairs are charged to the consolidated statements of operations as incurred.

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. Recoverability is measured by comparing the carrying amount of the asset or asset group to the future net undiscounted cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group exceeds the projected discounted future net cash flows arising from the asset. The Company has not identified any such impairment losses to date.

The Company accounts for its freestanding warrants on its convertible preferred stock and warrants on its common stock as liabilities at fair value. The convertible preferred stock warrants are classified as liabilities because the underlying convertible preferred stocks are contingently redeemable and, therefore, may obligate the Company to transfer assets at some point in the future. The common stock warrants are classified as liabilities because the terms of the warrants provide for certain adjustments to the exercise price that do not meet the criteria for equity classification. The warrants are recorded at fair value upon issuance and re-measured at each reporting period, with changes in fair value recognized as a component of other income (expense) in the consolidated statements of operations. The warrants are remeasured to fair value until the earlier of the exercise of the warrants, the expiration of the warrants, or until such time as the warrants are no longer considered liability instruments. Upon the closing of the IPO in September 2021, the convertible preferred stock warrants were converted into warrants to purchase common stock and the related warrant liabilities were reclassified to additional paid-in capital, a component of stockholders’ equity. All of the outstanding common stock warrants were net exercised in September 2021. Consequently, there are no warrants outstanding as of December 31, 2021.

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive to in exchange for those goods or services. To determine revenue recognition for customer contracts, the Company 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; (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 it will collect the consideration it is entitled to in exchange for the

goods and services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of ASC Topic 606, Revenue from Contracts with Customers, and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company enters into collaboration agreements under which it may obtain upfront license fees, research and development funding, and development, regulatory and commercial milestone payments and royalty payments. The Company’s performance obligations under these arrangements may include licenses of intellectual property, and research and development services.

In the collaboration agreements, the Company has a performance obligation to perform research and development services to identify compounds as therapeutic candidates against identified targets. The revenue is recognized as the research and development services are being performed and the results of the research and development services are provided to the customer. The customers have options to elect commercial licenses of intellectual property. As the customer options are not considered to be a material right, customer options are accounted for as separate contracts if and when they are exercised by the customer.

The Company is eligible to receive milestone payments under the collaborative arrangements. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. If it is probable that a significant revenue reversal would not occur, the associated milestone value would be included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

Under the collaborative arrangements, the Company may be eligible to receive sales-based royalties, including milestone payments based on the level of sales, and in which the license is deemed to be the predominant item to which the royalties relate. The Company would recognize revenue when the related sales occur to earn the royalty or sales-based milestone payments.

Upfront payments and fees are recorded as deferred revenue upon receipt or when due, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional.

Research and development costs are expensed as incurred and consist primarily of new product development. Research and development costs include salaries and benefits, consultants’ fees, process development costs, share-based compensation, laboratory supplies, preparation of regulatory submission expenses, and allocated facilities related expenses as well as fees paid to third parties that conduct certain preclinical research and development activities on the Company’s behalf.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers. Such activities include preclinical studies, clinical trials and other research services. The Company estimates these expenses based on discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and includes these costs in research and development expenses. These costs are accrued based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed may vary from the Company’s estimates, resulting in adjustments to expense in future periods.

The Company maintains a share-based compensation plan as a long-term incentive for employees, consultants and directors of the Company.

Share-based compensation is measured at the date of grant, based on the estimated fair value of the award, and recognized as an expense over the employee’s requisite service period (usually the vesting period) on a straight-line basis. The Company estimates the grant date fair value of the stock options, and the resulting share-based compensation, using the Black-Scholes option pricing model. The Company accounts for forfeitures as they occur.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of each profit interest unit and stock option that requires judgment. Changes in these variables and assumptions can materially affect the resulting estimates of fair value. These variables and assumptions include the per unit fair value of the underlying common units, exercise price, expected term, risk-free interest rate, expected dividend rate, and the expected unit and stock price volatility over the expected term as follows:

Fair Value of Common Units— For all periods prior to the IPO in September 2021, the grant-date fair market value of common units underlying unit options were determined by the Company’s Board of Managers with assistance of third-party valuation specialists. Because there had been no public market for the Company’s common units, the Board of Managers exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair market value, which included important developments in the Company’s operations, the prices at which the Company sold units of its convertible preferred units, the rights, preferences and privileges of the Company’s convertible preferred units relative to those of the Company’s common units, actual operating results, financial performance, external market conditions in the life sciences industry, general U.S. market conditions, equity market conditions of comparable public companies, and the lack of marketability of the Company’s common units.

Fair Value of Common Stock— After the completion of the IPO, the fair value of each share of underlying common stock is based on the closing price of the Company’s common stock as reported on the date of grant on the Nasdaq Global Market.

Expected Term—The expected term represents the period that share-based awards are expected to be outstanding. Prior to the IPO, the Company’s profit interest units did not have a contractual term. However, there was a constructive maturity of the profit interest units based on the expected exit or liquidity scenarios for the Company. After the completion of the IPO, the Company’s historical stock option exercise information is limited due to a lack of sufficient data points, and does not provide a reasonable basis upon which to estimate an expected term. The expected term for option grants is therefore determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Expected Volatility—Prior to the IPO, the Company had limited information on the volatility of profit interest units as the units were not actively traded on any public markets. The expected volatility was derived from the historical unit volatilities of comparable peer public companies within its industry. After the completion of the IPO, because the Company does not have sufficient trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life science companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on the similar size, stage in the life cycle, or area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available and to align with the expected term.

Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the measurement date with maturities approximately equal to the expected term.

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share for each period presented, as the effects of potentially dilutive securities are antidilutive given the net loss of the Company.

Comprehensive loss is comprised of net loss and changes in accumulated other comprehensive income (loss) on the Company’s marketable securities related to unrealized gains and losses.

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Management makes an assessment of the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s historical operating performance and the recorded cumulative net losses in prior fiscal periods, the net deferred tax assets have been fully offset by a valuation allowance.

The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in the provision for income taxes.

The Company has a single operating segment. The Company’s chief decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for purposes of allocating resources, making operating decisions, and evaluating performance.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The standard will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. For public entities, this standard is effective for fiscal years beginning after December 15, 2018. As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, this standard will become effective for the Company on January 1, 2022. Upon the adoption of this standard, the Company expects to recognize a right-of-use asset and lease liability on the consolidated balance sheets but does not expect the adoption to have a material impact on its consolidated statements of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). This standard requires measurement and recognition of expected credit losses for financial assets. The FASB subsequently issued clarifications to this standard. This standard will become effective for the Company for fiscal years beginning after December 15, 2022. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements and related disclosures.