UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-41199

Amylyx Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-4600503
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
43 Thorndike St. Cambridge, Massachusetts	02141
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 682-0917

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	AMLX	Nasdaq Global Select Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 9, 2022, the registrant had 58,533,226 shares of common stock, $0.0001 par value per share, outstanding.

AMYLYX PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited)	5
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		36

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” or the negative of these terms or other comparable terminology. These statements are not guarantees of future results or performance and involve substantial risks and uncertainties. Forward-looking statements in this Quarterly Report include, but are not limited to, express or implied statements about:

•our ability to obtain and maintain regulatory approval of AMX0035 and any future product candidates;

•our ability to successfully commercialize and market AMX0035 and any future product candidates, if approved, and the timing of any commercialization and marketing efforts;

•our ability to contract with third-party suppliers, manufacturers and other service providers and their ability to perform adequately and to produce sufficient quantities of clinical and potentially future commercial supplies;

•the potential market size, opportunity and growth potential for AMX0035 and any future product candidates, if approved;

•our ability to build our own sales and marketing capabilities, or seek collaborative partners, to commercialize AMX0035 and any future product candidates, if approved;

•our ability to obtain funding for our operations;

•the initiation, timing, progress and results of our preclinical studies and clinical trials, including our Phase 3 clinical trial of AMX0035 for the treatment of ALS, known as the PHOENIX trial, and our research and development activities;

• our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

•our ability to advance AMX0035 and any future product candidates into, and successfully complete, clinical trials;

•our ability to successfully recruit and enroll suitable patients in our clinical trials;

•the timing or likelihood of the accomplishment of various scientific, clinical, regulatory filings and approvals and other product development objectives;

•the pricing and reimbursement of our product candidates, if approved;

•the rate and degree of market acceptance AMX0035 and any future product candidates by physicians, patients, third-party payors and others in the medical community;

•the implementation of our business model, strategic plans for our business, product candidates and technology;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

•developments relating to our competitors and our industry, including any regulatory developments;

•the accuracy of our estimates regarding expenses, capital requirements, cash runway and future and needs for additional financing;

•our financial performance; and

•other risks and uncertainties, including those listed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, or our Annual Report.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report, as well as in Part I, Item 1A. and elsewhere in our Annual Report. Given these uncertainties, you should not place undue reliance on these

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forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

All of our forward-looking statements are as of the date of this Quarterly Report only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report that modify or impact any of the forward-looking statements contained in this Quarterly Report will be deemed to modify or supersede such statements in this Quarterly Report.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AMYLYX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(Unaudited)

	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	110,403		$	50,191
Short-term investments		144,802			45,927
Prepaid expenses and other current assets		10,283			5,392
Deferred offering costs		—			3,441
Total current assets		265,488			104,951
Property and equipment, net		1,290			474
Restricted cash		419			189
Operating lease right-of-use assets		6,785			—
Other assets		456			—
Total assets	$	274,438		$	105,614
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	10,045		$	4,372
Accrued expenses and other current liabilities		16,256			13,024
Operating lease liabilities, current portion		1,405			—
Total current liabilities		27,706			17,396
Operating lease liabilities, net of current portion		5,786			—
Deferred rent		—			35
Total liabilities		33,492			17,431
Commitments and contingencies (Note 13)
Series A redeemable convertible preferred stock, $0.0001 par value; 0 and 6,289,609    shares authorized, issued and outstanding as of March 31, 2022 and December 31, 2021,    respectively		—			7,675
Series B redeemable convertible preferred stock, $0.0001 par value; 0 and 15,100,000    shares authorized as of March 31, 2022 and December 31, 2021; 0 and 14,496,835 shares    issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		—			64,387
Series C-1 redeemable convertible preferred stock, $0.0001 par value; 0 and 13,150,430    shares authorized, issued and outstanding as of March 31, 2022 and December 31, 2021,    respectively		—			134,791
Series C-2 redeemable convertible preferred stock, $0.0001 par value; 0 and 3,170,585    shares authorized, issued and outstanding as of March 31, 2022 and December 31, 2021,    respectively		—			32,498
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000,000 and 0 shares authorized as of    March 31, 2022 and December 31, 2021, respectively; 0 shares issued    or outstanding as of March 31, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value; 300,000,000 authorized and 57,864,186 issued and    outstanding as of March 31, 2022; 56,500,000 shares authorized and 7,020,487 shares    issued and outstanding as of December 31, 2021		6			1
Additional paid-in capital		444,784			4,667
Accumulated deficit		(203,693	)		(155,845	)
Accumulated other comprehensive (loss) income		(151	)		9
Total stockholders’ equity (deficit)		240,946			(151,168	)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)	$	274,438		$	105,614

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AMYLYX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Operating expenses:
Research and development	$	21,464		$	6,864
General and administrative		26,350			6,004
Total operating expenses		47,814			12,868
Loss from operations		(47,814	)		(12,868	)
Other income (expense), net:
Interest income		131			2
Change in fair value of convertible notes		—			(1,918	)
Other (expense) income, net		(19	)		261
Total other income (expense), net		112			(1,655	)
Loss before income taxes		(47,702	)		(14,523	)
Provision for income taxes		146			—
Net loss	$	(47,848	)	$	(14,523	)
Net loss per share attributable to common stockholders —basic and diluted	$	(0.93	)	$	(2.33	)
Weighted-average shares used in computing net loss per share attributable    to common stockholders—basic and diluted		51,604,310			6,234,637

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AMYLYX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Net loss	$	(47,848	)	$	(14,523	)
Other comprehensive loss:
Foreign currency translation adjustment		(68	)		—
Net unrealized loss on investments held		(92	)		—
Other comprehensive loss		(160	)		—
Comprehensive loss	$	(48,008	)	$	(14,523	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AMYLYX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

(Unaudited)

	Series A Redeemable Convertible Preferred Stock						Series B Redeemable Convertible Preferred Stock						Series C-1 Redeemable Convertible Preferred Stock						Series C-2 Redeemable Convertible Preferred Stock						Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares		Amount		Capital		Loss			Deficit			Deficit
Balance as of    December 31, 2020		6,289,609		$	7,675			14,496,835		$	64,387			—		$	—			—		$	—			6,137,206	$	1	$	1,188	$	—		$	(67,914	)	$	(66,725	)
Issuance of common    stock upon exercise    of stock options		—			—			—			—			—			—			—			—			290,032		—		31		—			—			31
Stock-based    compensation expense		—			—			—			—			—			—			—			—			—		—		586		—			—			586
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(14,523	)		(14,523	)
Balance as of    March 31, 2021		6,289,609		$	7,675			14,496,835		$	64,387			—		$	—			—		$	—			6,427,238	$	1	$	1,805	$	—		$	(82,437	)	$	(80,631	)
Balance as of    December 31, 2021		6,289,609		$	7,675			14,496,835		$	64,387			13,150,430		$	134,791			3,170,585		$	32,498			7,020,487	$	1	$	4,667	$	9		$	(155,845	)	$	(151,168	)
Conversion of preferred stock into    common stock    upon initial public offering		(6,289,609	)		(7,675	)		(14,496,835	)		(64,387	)		(13,150,430	)		(134,791	)		(3,170,585	)		(32,498	)		39,474,330		4		239,347		—			—			239,351
Issuance of common    stock upon initial public offering,    net of issuance costs of $19,639		—			—			—			—			—			—			—			—			11,369,369		1		196,378		—			—			196,379
Stock-based    compensation expense		—			—			—			—			—			—			—			—			—		—		4,392		—			—			4,392
Other comprehensive loss		—			—			—			—			—			—			—			—			—		—		—		(160	)		—			(160	)
Net loss		—			—			—			—			—			—			—			—			—		—		—		—			(47,848	)		(47,848	)
Balance as of    March 31, 2022		—		$	—			—		$	—			—		$	—			—		$	—			57,864,186	$	6	$	444,784	$	(151	)	$	(203,693	)	$	240,946

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AMYLYX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Cash flows used in operating activities:
Net loss	$	(47,848	)	$	(14,523	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		4,392			586
Depreciation expense		35			10
Net amortization of premiums and discounts on investments		2			—
Change in fair value of convertible notes		—			1,918
Changes in operating assets and liabilities:
Interest receivable		(1	)		(2	)
Prepaid expenses and other current assets		(4,890	)		(244	)
Operating lease right-of-use assets		374			—
Other assets		(456	)		102
Accounts payable		5,020			177
Accrued expenses and deferred rent		2,741			(667	)
Operating lease liabilities		(3	)		—
Net cash used in operating activities		(40,634	)		(12,643	)
Cash flows used in investing activities:
Purchases of property and equipment		(342	)		(14	)
Purchases of investments		(123,880	)		—
Proceeds from maturities of short-term investments		24,911			—
Net cash used in investing activities		(99,311	)		(14	)
Cash flows from financing activities:
Forgiveness of PPP loan		—			(263	)
Proceeds from initial public offering		200,897			—
Initial public offering costs paid during the quarter		(442	)		—
Proceeds from issuance of convertible notes—related parties		—			14,272
Proceeds from issuance of convertible notes		—			11,887
Proceeds from exercise of stock options		—			31
Net cash provided by financing activities		200,455			25,927
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(68	)		—
Net increase in cash, cash equivalents and restricted cash		60,442			13,270
Cash, cash equivalents and restricted cash, beginning of period		50,380			13,066
Cash, cash equivalents and restricted cash, end of period	$	110,822		$	26,336
Supplemental disclosure of cash flow information:
Unrealized loss on short-term investments	$	92		$	—
Purchases of property and equipment included in accounts payable	$	509		$	—
Right-of-use assets and liabilities upon ASC842 adoption	$	2,201		$	—
Right-of-use assets obtained in exchange for lease liabilities	$	4,958		$	—
Movement of deferred offering costs to equity	$	2,474		$	—
Initial public offering costs included in accounts payable and accrued expenses	$	1,602		$	388
Conversion of preferred stock to common stock upon initial public offering	$	239,351		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AMYLYX PHARMACEUTICALS, INC.

NOTES TO CONDENSED Consolidated FINANCIAL STATEMENTS

(unaudited)

1. Nature of the Business

Amylyx Pharmaceuticals, Inc., together with its wholly owned subsidiaries (“Amylyx” or the “Company”) was incorporated under the laws of the State of Delaware on January 10, 2014 and headquartered in Cambridge, Massachusetts. The Company is a clinical stage biotechnology company with a goal to improve the quality and length of life of patients suffering from neurodegenerative disease. The Company is pursuing commercialization of its asset, AMX0035, which it believes is the first drug candidate to show both a functional and survival benefit in a large-scale clinical trial of patients with amyotrophic lateral sclerosis, or ALS. The Company believes AMX0035 has the potential to be a foundational therapy, meaning that it could be used alone or in conjunction with other therapies to change the treatment paradigm across a broad range of neurodegenerative diseases. The Company has designed AMX0035 to target two key pathways of neuron death, specifically endoplasmic reticulum, or ER, stress and mitochondrial dysfunction. The Company is focused on the development of and potential commercialization of AMX0035 for ALS globally. In addition, the Company is developing AMX0035 for other neurodegenerative diseases by leveraging its unique knowledge and relationships in the neurodegenerative space.

In January 2022, the Company completed an initial public offering (the “IPO”), in which the Company issued and sold 11,369,369 shares of its common stock at a price of $19.00 per share. After deducting underwriting discounts and commissions and estimated offering expenses, the Company received net proceeds of approximately $196.4 million. Upon the completion of the initial public offering, all of the Company’s outstanding shares of preferred stock were converted into shares of its common stock.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, the outcome of clinical trials, potential difficulties with or delays in timing with respect to the regulatory approval processes of the U.S. Food and Drug Administration (“FDA”), Health Canada, the European Medicines Agency and other comparable foreign authorities, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, ability to secure additional capital to fund operations, and risks associated with the ongoing COVID-19 global pandemic, including potential delays associated with the Company’s ongoing and anticipated trials. The COVID-19 pandemic may have an adverse impact on the Company’s operations, supply chains and distribution systems or those of its contractors, and increase expenses, including as a result of impacts associated with preventive and precautionary measures that are being taken, such as restrictions on travel and border crossings. The Company and its contractors may experience disruptions in supply of items that are essential for its research and development activities, including, for example, raw materials and bulk drug substances that the Company imports from Europe and Canada used in the manufacturing of AMX0035, and any future product candidates. In addition, the continued spread of COVID-19 has disrupted global healthcare and healthcare regulatory systems which could divert healthcare resources away from, or materially delay, U.S. Food and Drug Administration (“FDA”) approval and approval by other health authorities worldwide with respect to AMX0035 and any future product candidates. Furthermore, the Company’s clinical trials may be negatively affected by the ongoing COVID-19 outbreak. Site initiation, patient enrollment and patient follow-up visits may be delayed, for example, due to prioritization of hospital resources toward the COVID-19 outbreak, travel restrictions, the inability to access sites for initiation and monitoring, and difficulties recruiting or retaining patients in the Company’s ongoing and planned clinical trials.

There can be no assurance that the Company will be able to successfully complete the development of, or receive regulatory approval for, any products developed, and if approved, that any products will be commercially viable. Any products resulting from the Company’s current research and development efforts will require significant additional research and development, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance reporting capabilities. The Company has not generated any revenues from the sale of any products to date. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Going Concern

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the unaudited consolidated financial statements are issued.

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Since its inception, the Company has devoted substantially all of its efforts to research and development activities, including recruiting management and technical staff, raising capital, producing materials for non-clinical and clinical studies, and building infrastructure to support such activities. Expenses have primarily been for research and development and related general and administrative costs. The Company has generated revenues through five grants from ALS Association, ALS Finding a Cure Foundation, Cure Alzheimer’s Fund, Alzheimer’s Drug Discovery Foundation and Alzheimer’s Association (collectively, the “Grantors”). In addition to money received from its grants, the Company has also financed its operations through the issuance of redeemable convertible preferred stock and convertible notes (see Notes 8 and 7, respectively). In addition, the Company has financed its operation pursuant to the loan under the Paycheck Protection Program, or the PPP, of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (the “PPP Loan”) as administered by the SBA (See Note 7). In January 2022, the Company completed the initial public offering of its common stock.

The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses and negative cash flows from operations since inception. As of March 31, 2022, the Company had an accumulated deficit of $203.7 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to build capabilities and develop AMX0035, and any future product candidates. The Company expects that its cash, cash equivalents and short-term investments as of March 31, 2022 will enable the Company to fund its ongoing operating expenses and capital expenditure requirements for at least the twelve-month period following the issuance of these condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021 and the notes thereto, which are included in the Company’s most recent Annual Report on Form 10-K. Since the date of those consolidated financial statements, there have been no material changes to its significant accounting policies, with the exception of significant accounting policies related to the adoption of FASB ASC Topic 842, Leases, effective January 1, 2022, as described below.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and ASU of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process. Management’s estimation process often may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: determining the fair value of the Company’s common stock prior to the Company’s initial public offering in January 2022; determining the fair value of convertible notes; accrued expenses; stock option valuations; valuation allowance for deferred tax assets and research and development expenses.

Recently Adopted Accounting Pronouncements

Effective January 1, 2022, the Company adopted the requirements under the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) using the cumulative effect adjustment transition option. Comparative periods have not been restated. This standard requires entities that lease assets to recognize the assets and liabilities for the rights and obligations created by those leases on the balance sheet. The Company elected the available package of practical expedients which allows it to not reassess previous accounting conclusions around whether arrangements are or contain

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leases, the classification of its leases, and the treatment of initial direct costs. The Company has made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. ASC 842 was issued in order to increase transparency and comparability of financial reporting related to leasing arrangements. The main difference between previous U.S. GAAP (“ASC 840”) and ASC 842 is the recognition of right-of-use lease assets and lease liabilities by lessees for those leases that were classified as operating leases under ASC 840. At January 1, 2022, the Company recorded right-of-use assets of $2.2 million and operating lease liabilities of $2.2 million. Adoption of the standard did not have a material impact on the consolidated statements of operations. For additional information regarding how the Company is accounting for leases under ASC 842, refer to Note 5, Leases.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. ASU 2016-13 requires a cumulative effect adjustment to the consolidated balance sheet as of the beginning of the first reporting period in which the guidance is effective. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except Securities and Exchange Commission filers that are not smaller reporting companies. ASU 2016-13 will be effective for the Company beginning January 1, 2023. The Company intends to adopt the ASU when it becomes effective. The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its condensed consolidated financial statements and related disclosures.

3. SHORT-TERM INVESTMENTS

Short-term investments, which are classified as available-for-sale, consisted of the following:

Balance at March 31, 2022:	Amortized Cost Basis		Unrealized Loss			Fair Value
	(in thousands)
Treasury notes	$	12,054	$	(15	)	$	12,039
Treasury bills