EWTX US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Edgewise Therapeutics, Inc. should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements. You should carefully read the “Risk Factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need. Guided by our holistic drug discovery approach to targeting the muscle as an organ, we have combined our foundational expertise in muscle biology and small molecule engineering to build our proprietary, muscle focused drug discovery platform. Our platform utilizes custom-built high throughput and translatable systems that measure integrated muscle function in whole organ extracts to identify small molecule precision medicines regulating key proteins in muscle tissue, initially focused on addressing rare neuromuscular and cardiac diseases. Our lead candidate, EDG-5506, is an orally administered

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allosteric, selective, fast myofiber (type II) myosin small molecule inhibitor designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD), and recently completed a Phase 1 clinical trial. We have developed and characterized a library of selective fast skeletal myosin inhibitors exhibiting a broad range of pharmacological and pharmacokinetic (PK) properties. We also intend to advance two other muscle-focused precision medicines into clinical development. Our second program, EDG-5440, is a next generation myosin ATPase modulator designed to target skeletal muscle in a specific set of rare neuromuscular diseases. Our third program, EDG-002, focuses on identification of novel mechanism cardiac modulators. We are initially pursuing a new target for inherited hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism across other cardiac disorders. We believe our programs also offer substantial opportunities for us to expand into related rare diseases for which there are limited or no approved treatments.

In October 2021, we announced positive topline results from the MAD portion of a first-in-human Phase 1, HV clinical trial. In addition, in January 2022, we announced positive topline results from the BMD, or Phase 1b, portion of a first-in-human Phase 1 clinical trial assessing the safety, tolerability, PK and PD of EDG-5506. We are currently enrolling a follow-on open-label, single-center study that will assess the safety and PK of EDG-5506 over one year in adults with BMD. We anticipate initiation of Phase 2 trials in individuals with BMD in the first half of 2022 and DMD in the second half of 2022.

Since our inception in 2017, we have devoted substantially all of our focus and financial resources to discovering, identifying and developing potential product candidates, including advancing our development programs, conducting preclinical studies of our product candidates and initiating a clinical trial, organizing and staffing our company, business planning, raising capital and securing related intellectual property rights. To date, we have not completed the development of any of our product candidates, have not generated any revenue and have never been profitable. Our ability to achieve profitability, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We will need substantial additional funding to support our continuing operations and pursue our development and commercialization strategy. Until such time that we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants from organizations and foundations. We may be unable to raise additional funds or to enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay or terminate our efforts to expand our product pipeline.

We have incurred significant losses since the commencement of our operations. Our net losses were $42.8 million and $17.1 million for the years ended December 31, 2021 and 2020, respectively, and we expect to continue to incur significant losses for the foreseeable future as we advance our product candidates through preclinical development and clinical trials and seek regulatory approval of our product candidates. Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

As of December 31, 2021, we had an accumulated deficit of $77.0 million. To date, we have financed our operations primarily through private placements of convertible preferred stock and an initial public offering (IPO) of our common stock. From inception through December 31, 2021, these private placements have provided gross proceeds of $160.7 million and the IPO generated net proceeds of $186.1 million after deducting underwriting discounts and commissions and offering costs of $16.3 million. We believe that our existing cash and cash equivalents and marketable securities of $280.8 million will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.

In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended operating activities. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, have resulted in increased operational expenses, certain adjustments to the operations of our clinical trial, delays in the enrollment of new patients at our clinical trial site, and

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delays in certain supply chain activities and collecting and analyzing data from patients in our clinical trial, and may further disrupt our business and delay our development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct business in the ordinary course as well as the spread, severity and potential resurgence of COVID-19, the impact of new COVID-19 variants, and vaccination deployment efforts. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our clinical trial and other related business activities.

Components of Our Results of Operations

Operating expenses

Research and development expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We record research and development expenses when these are incurred. Such expenses include:

● laboratory supplies;

● expenses related to compliance with regulatory requirements; and

● payments made under third-party licensing agreements.

The majority of these expenses have been incurred to advance our lead product candidate, EDG-5506. We expect that significant additional spending will be required to progress EDG-5506 through the remainder of the clinical development phases. These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply.

We track our direct research and development expenses on a program-by-program basis once a lead compound has been selected and clinical trials have been initiated. These direct costs consist primarily of external costs such as fees paid to outside consultants, CROs, CDMOs, clinical trial sites and central laboratories in connection with our discovery and preclinical activities, process development, manufacturing and clinical development activities. These expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. Our direct research and development expenses by program also include costs of laboratory supplies that can be directly attributed to

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a specific program as well as any fees incurred under license agreements. We do not allocate employee-related costs, including stock-based compensation, or facility expenses, including rent, depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities and to manage our preclinical development, manufacturing and clinical development activities.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance EDG-5506 through clinical trials and additional product candidates enter clinical trials; continue to develop our proprietary drug discovery platform; continue to discover and develop additional product candidates; and hire additional personnel.

The successful development of our product candidates is highly uncertain, and we do not believe it is possible at this time to accurately project the nature, timing and extent of expenses necessary to complete the development of our product candidates. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

● the timing and progress of preclinical and clinical development activities;

● the number and scope of preclinical and clinical programs we decide to pursue;

● establishing an appropriate safety profile with IND-enabling studies;

● the receipt of regulatory approvals from applicable regulatory authorities;

● our ability to establish new licensing or collaboration arrangements;

● the performance of our future collaborators, if any;

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Any changes in the outcome of any of these factors could significantly impact the costs and timing

associated with the development of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries, related benefits and stock-based compensation expense for personnel in executive, finance, accounting, legal and administrative functions. General and administrative expenses also include facilities and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued research and development of our programs.

Interest income

Interest income primarily consists of interest income generated from our cash, cash equivalents and marketable securities.

Results of Operations

Comparison of the years ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31, ​ ​ ​

​ ​ (in thousands)

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Loss from operations ​ ​ ​ ​ ​ ​

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Research and development expenses

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The following table summarizes our research and development expenses:

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31, ​ ​ ​

​ ​ (in thousands)

External research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Internal costs, including personnel related ​ 10,655 ​ 4,304 ​ 6,351

​

Research and development expenses were $32.2 million for the year ended December 31, 2021 compared to $15.0 million for the year ended December 31, 2020. The increase of $17.2 million was primarily driven by $6.1 million of higher external research and development expenses related to our Phase 1 clinical trial of EDG-5506, an increase of $4.8 million related to increased costs in outsourced chemistry, drug metabolism and efficacy studies for drug discovery and

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preclinical development of our other programs and an increase of $6.4 million in internal costs, including personnel related. Internal costs increased by $6.1 million in personnel-related costs, due largely to an increased employee headcount and stock-based compensation to support the growth of our research and development programs and $0.3 million in lab supply costs and depreciation expense.

General and administrative expenses

General and administrative expenses were $11.0 million for the year ended December 31, 2021 compared to $2.2 million for the year ended December 31, 2020. The increase of $8.8 million was primarily related to the cost of operating as a public company, including $3.9 million in increased personnel-related costs from increased headcount and stock-based compensation, $2.2 million in increased directors and officers insurance and $2.7 million in increased professional and consulting costs and other administrative costs.

Interest income

Interest income was $0.4 million and $0.1 million for the years ended December 31, 2021 and 2020, respectively. The increase of $0.3 million was the result of higher cash and marketable securities balances from the proceeds of our IPO in 2021 as compared to our cash balances in 2020, resulting in higher interest income earned.

Liquidity and Capital Resources

Sources of liquidity

Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily with proceeds from the sale of convertible preferred stock and the initial public offering of our common stock. Through December 31, 2021, we had received gross proceeds of $160.7 million from the sale of convertible preferred stock and $186.1 million in net proceeds from the initial public offering of our common stock after deducting underwriting discounts, commissions and offering costs of $16.3 million. As of December 31, 2021, we had cash, cash equivalents and marketable securities in the amount of $280.8 million.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

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​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

​ ​ (in thousands)

Net cash used in operating activities ​ $ (33,507) ​ $ (14,634)

Net cash used in investing activities ​ (242,227) ​ (24,381)

Net cash provided by financing activities ​ 186,384 ​ 120,278

Net (decrease) increase in cash and cash equivalents ​ $ (89,350) ​ $ 81,263

​

Operating activities

Cash used in operating activities in the year ended December 31, 2021 was primarily driven by our net loss for the period of $42.8 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $4.6 million. Cash used in operating activities was reduced by non-cash charges of $4.7 million relating to stock-based compensation expense of $4.4 million and depreciation of $0.3 million.

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Cash used in operating activities in the year ended December 31, 2020 was primarily driven by our net loss for the period of $17.1 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $2.0 million. Cash used in operating activities was also impacted by non-cash charges of $0.5 million relating to stock-based compensation expense of $0.3 million and depreciation expense of $0.2 million.

Investing activities

Cash used in investing activities during the year ended December 31, 2021 amounted to $242.2 million which was due to $288.2 million in purchases of marketable securities and $0.7 million for purchases of equipment, which was partially offset by $43.2 million in maturities of marketable securities and $3.4 million of sales of marketable securities.

Cash used in investing activities during the year ended December 31, 2020 amounted to $24.4 million which was due to $24.2 million in purchases of marketable securities and $0.2 million for purchases of equipment.

Financing activities

Net cash provided by financing activities during the year ended December 31, 2021 was $186.4 million, primarily consisting of cash proceeds from the initial public offering of the Company’s common stock. In addition, we generated cash proceeds of $0.4 million from the issuance of common stock upon the exercise of stock options and the employee stock purchase plan and paid $0.1 million in preferred stock issuance costs.

Net cash provided by financing activities during the year ended December 31, 2020 was $120.3 million, primarily consisting of cash proceeds of $120.1 million generated from our sale of shares of Series B-2 and Series C convertible preferred stock. In addition, we generated cash proceeds of $0.2 million from the issuance of common stock upon the exercise of stock options.

Funding requirements

We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates, and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. In addition, we expect to incur additional costs associated with operating as a public company. Our expenses will also increase if, and as, we:

● advance our product candidates through preclinical and clinical development;

● continue to invest in our proprietary drug discovery platform;

● seek to discover and develop additional product candidates;

● hire additional clinical, quality control, scientific and other personnel;

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● maintain, expand, protect and enforce our intellectual property portfolio; and

● acquire or in-license other product candidates and technologies.

We do not currently have material any long-term capital requirements other than what will be required to fund operations for the foreseeable future and the amounts disclosed on the contractual obligations and commitments section below. In order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including:

● conducting preclinical studies and clinical trials;

● the costs, timing and outcome of regulatory review of our product candidates;

● the number and characteristics of other product candidates that we pursue;

● the cost and timing of hiring new employees to support our continued growth;

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A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts. We may also be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

The issuance of additional equity securities may cause our stockholders to experience dilution. Future equity or debt financings may contain terms that are not favorable to us or our stockholders including debt instruments imposing covenants that restrict our operations and limit our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions.

Operating and Capital Expenditure Requirements and Contractual Obligations

We expect that our existing cash and cash equivalents and marketable securities, will be sufficient to enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.

Our short-term material cash requirements as of December 31, 2021 are to fund our operations, which consist primarily of research and development expenses related to our programs, and to a lesser extent, general and administrative expenses. We have entered into contracts in the normal course of business with CROs, CDMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.

In addition, we have exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) pursuant to a license agreement effective November 20, 2020. Under the license agreement, we are obligated to make payments to OSIF aggregating up to $1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones. We are also obligated to pay low single-digit royalties to OSIF based on net sales by us and our affiliates and sublicensees of each product covered by the OSIF licensed patent rights. In addition, in the event we sublicense the OSIF licensed patent rights, we are obligated to pay OSIF a specified portion of income we receive from sublicensing.

Our long-term cash requirements as of December 31, 2021 include our lease obligations. In January 2022, we entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado. The new lease commences on or around September 1, 2022 and includes escalating rent payments and an 84-month term. The lease agreement includes a tenant improvement allowance for $1.0 million of construction costs to be paid for by the landlord and up to an additional $2.0 million of tenant improvement allowance for which the Company will repay the landlord on an amortized straight-line basis over the initial term of the lease, commencing on the commencement date and continuing for the duration of the initial term at 6% interest. The total annual minimum lease payments will be less than $0.5 million per year with a total of approximately $3.3 million committed under the lease agreement.

Critical Accounting Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on a periodic basis. Our actual results may differ from these estimates.

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The economic uncertainty in the current environment caused by the COVID-19 pandemic could limit our ability to accurately make and evaluate our estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

While our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this Annual Report, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Research and development expenses and accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, based on a pre-determined schedule or when contractual milestones are met, but some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of clinical trial accruals accordingly on a prospective basis. Examples of estimated accrued research and development expenses include fees paid to:

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• vendors in connection with preclinical development activities;

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• CROs and investigative sites in connection with preclinical studies and clinical trials; and

​

• CDMOs in connection with the production of preclinical and clinical trial materials.

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​

We base our expenses related to external research and development services on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs and CDMOs that supply, conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly.

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Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

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Stock-based compensation

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We measure stock-based awards granted to employees, directors and non-employee consultants based on their fair value on the date of grant and recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. We issue stock options with only service-based vesting conditions and record the expense for these awards using the straight-line method.

​

We estimate the fair value of each stock option grant at the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs based on certain subjective assumptions.

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Changes to these assumptions can materially affect the fair value of stock options and ultimately the amount of stock-based compensation expense recognized in our financial statements. These assumptions include:

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Expected Term — We have opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option, which is generally 10 years.

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Expected Volatility — Due to our limited operating history and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on an analysis of the volatility used by a peer group of publicly traded companies. In evaluating similarity, we consider factors such as industry, stage of life cycle and size.

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Risk-Free Interest Rate — The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of our stock options.

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Expected Dividend — To date, we have not issued any dividends and do not expect to issue dividends over the life of the options and therefore have estimated the dividend yield to be zero.

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We determine the fair market value of our common stock using the closing price of our common stock as reported on the Nasdaq Global Select Market.

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Stock-based compensation expense was $4.4 million for the year ended December 31, 2021. As of December 31, 2021, there was $25.2 million of total unrecognized stock-based compensation expense related to unvested stock-based compensation awards, which is expected to be recognized over a weighted-average period of approximately 3.4 years.

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Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing in our Annual Report.

Emerging Growth Company and Smaller Reporting Company Status

Section 107 of The Jumpstart Our Business Startups Act of 2012 (JOBS Act) permits an “emerging growth company” such as us to take advantage of an extended transition time to comply with new or revised accounting standards as applicable to public companies. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies.

We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (1) the market value of our stock held by non-affiliates is less than $250 million or (2) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure

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requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk

As of December 31, 2021, we had cash, cash equivalents and marketable securities of $280.8 million. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term maturities and the low-risk profile of our investments, an immediate one percentage point relative change in market interest rates would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

As of December 31, 2021, we had no debt outstanding and are therefore not exposed to interest rate risk with respect to debt.

Foreign currency exchange risk

Our primary operations are transacted in U.S. Dollars, but certain service agreements with third parties are denominated in currencies other than the U.S. Dollar, primarily the British Pound and the Euro. Accordingly, we are subject to foreign exchange risk and therefore, fluctuations in the value of the U.S. Dollar against the British Pound and the Euro may impact the amounts reported for expenses and obligations incurred under such agreements. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% relative change in foreign exchange rates during any of the periods presented would not have had a material impact on our financial condition or results of operations.

There was no material foreign currency risk for the year ended December 31, 2021.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

EDGEWISE THERAPEUTICS, INC.

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​ Page

BALANCE SHEETS 148

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 149

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) 150

STATEMENTS OF CASH FLOWS 151

NOTES TO FINANCIAL STATEMENTS 152

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Edgewise Therapeutics, Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Edgewise Therapeutics, Inc. (the Company) as of December 31, 2021 and 2020, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2020.

Denver, Colorado

February 24, 2022

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EDGEWISE THERAPEUTICS, INC.

BALANCE SHEETS

(In thousands, except for share and per-share amounts)

​ ​ ​ ​ ​ ​ ​

​ ​ As of ​ As of

​ ​ December 31, ​ December 31,

Assets ​ ​ ​ ​

Current assets ​ ​ ​

Marketable securities, available for sale ​ 265,223 ​ 24,178

Prepaid expenses and other assets ​ 2,984 ​ 551

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Property and equipment ​ 1,614 ​ 946

Less: accumulated depreciation ​ (702) ​ (430)

Total property and equipment ​ 912 ​ 516

Other non-current assets ​ 548 ​ 975

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Liabilities, convertible preferred stock, and stockholders' equity (deficit) ​ ​

​ ​ ​ ​ ​ ​ ​

Current liabilities ​ ​ ​

Other long term liabilities ​ ​ 329 ​ ​ —

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Commitments and contingencies (see note 5) ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Convertible preferred stock ​ ​

Total convertible preferred stock ​ — ​ 160,214

​ ​ ​ ​ ​ ​ ​

Stockholders' equity (deficit) ​ ​

Accumulated other comprehensive loss ​ ​ (514) ​ ​ —

Total stockholders' equity (deficit) ​ 274,383 ​ (33,420)

​ ​ ​ ​ ​ ​ ​

​

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

​

​

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EDGEWISE THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except for share and per-share amounts)

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

​ ​ ​ ​ ​ ​ ​

Operating expenses ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Other income ​ ​

Interest income ​ 402 ​ 69

Total other income ​ 402 ​ 69

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Other comprehensive loss: ​ ​ ​ ​ ​ ​

Unrealized loss on available-for-sale securities ​ ​ (514) ​ ​ —

​ ​ ​ ​ ​ ​ ​

Net loss per share, basic and diluted ​ $ (1.14) ​ $ (23.17)

Weighted-average shares outstanding, basic and diluted ​ 37,526,332 ​ 739,004

​

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

​

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EDGEWISE THERAPEUTICS, INC.

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

(In thousands, except share data)

​

Net loss — ​ — — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ​ — ​ (17,123) ​ (17,123)

​

​

​

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

​

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EDGEWISE THERAPEUTICS, INC.

STATEMENTS OF CASH FLOWS

(In thousands)

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

Cash flows from operating activities ​ ​ ​ ​ ​

Stock-based compensation ​ 4,404 ​ 354

Changes in assets and liabilities: ​ ​ ​

Prepaid expenses, other assets and other long-term liabilities ​ (2,392) ​ (417)

Net cash used in operating activities ​ (33,507) ​ (14,634)

​ ​ ​ ​ ​ ​ ​

Cash flows from investing activities ​ ​ ​

Purchases of marketable securities ​ (288,203) ​ (24,178)

Sales of marketable securities ​ ​ 3,444 ​ ​ —

Maturities of marketable securities ​ ​ 43,200 ​ ​ —

Purchases of property and equipment ​ (668) ​ (203)

Net cash used in investing activities ​ (242,227) ​ (24,381)

​ ​ ​ ​ ​ ​ ​

Cash flows from financing activities ​ ​

​ ​ ​ ​ ​ ​ ​

Proceeds from issuance of Series C convertible preferred stock ​ ​ — ​ ​ 95,001

Payment of preferred stock issuance costs ​ ​ (124) ​ ​ —

Exercise of stock options ​ 112 ​ 202

Proceeds from Employee Stock Purchase Plan ​ ​ 248 ​ ​ —

Net cash provided by financing activities ​ 186,384 ​ 120,278

​ ​ ​ ​ ​ ​ ​

Net change in cash and cash equivalents ​ (89,350) ​ 81,263

Cash and cash equivalents at beginning of period ​ 104,916 ​ 23,653

Cash and cash equivalents at end of period ​ $ 15,566 ​ $ 104,916

Supplemental disclosures of non-cash financing activities: ​ ​

Preferred stock issuance costs included in accrued other expenses ​ $ — ​ $ 124

​

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

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EDGEWISE THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2021 AND 2020

NOTE 1 DESCRIPTION OF BUSINESS

Organization and Description of Business

Edgewise Therapeutics, Inc. (the Company) was incorporated as a Delaware corporation in May 2017, and it is headquartered in Boulder, Colorado. The Company is a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need. The Company’s lead product candidate, EDG-5506, is an orally administered small molecule designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD). The Company is using its proprietary drug discovery platform to develop a pipeline of precision medicine product candidates that target key muscle proteins and modulators to address a broad array of genetically defined muscle disorders.

Initial Public Offering and Reverse Stock Split

On March 30, 2021, the Company completed its initial public offering (IPO) in which it issued and sold 12,650,000 shares of common stock at a price of $16.00 per share, including 1,650,000 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO was $186.1 million after deducting underwriting discounts and commissions of $14.2 million and offering expenses of approximately $2.1 million. In addition, in connection with the IPO, all shares of convertible preferred stock outstanding at the time of the IPO converted into 35,557,569 shares of common stock. On March 19, 2021, the Company amended its certificate of incorporation to effect a 1-for-1.8932 reverse stock split of its issued and outstanding common and convertible preferred stock. The accompanying financial statements and related notes give retroactive effect to the reverse stock split for all periods presented.

Risks and Uncertainties

In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a pandemic. The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, have resulted in increased operational expenses, certain adjustments to the operations of the Company’s clinical trial, the suspension of enrollment of new patients at the Company’s clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in the Company’s clinical trial, and may further disrupt the business and delay the development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct business in the ordinary course as well as the spread, severity and potential resurgence of COVID-19, the impact of new COVID-19 variants, and vaccination deployment efforts. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities.

​

Liquidity and Capital Resources

The Company has an accumulated deficit of $77.0 million and, cash, cash equivalents and marketable securities of $280.8 million as of December 31, 2021. The Company’s ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles. The Company’s ability to secure capital is dependent upon success in developing its technology and product candidates. The Company cannot provide assurance that additional capital will be available on acceptable terms, if at all. The issuance of additional equity or debt securities will likely result in substantial dilution to the Company’s stockholders. Should additional capital not be available to the Company in the near term, or not be available on acceptable terms, the Company may be unable to realize value from the Company’s assets or discharge liabilities in the normal course of business, which may, among other alternatives, cause the Company to delay, substantially reduce, or discontinue operational activities to conserve

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cash balances, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. The Company believes that the $280.8 million of cash, cash equivalents and marketable securities on hand as of December 31, 2021 will be sufficient to fund its operations in the normal course of business and meet its liquidity needs through at least the next 12 months from the issuance of these financial statements.

​

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Segment Information

The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein. All equipment and other fixed assets are physically located within the United States.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents as of December 31, 2021 primarily consist of money market accounts and cash equivalents and as of December 31, 2020 primarily consist of money market accounts and commercial paper.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and marketable securities. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. The Company believes that it is not exposed to significant credit risk as its deposits are held at financial institutions that management believes to be of high credit quality. The Company has not experienced any losses on deposits since inception. The Company regularly invests excess cash with major financial institutions in money market funds, corporate debt securities, and commercial paper, all of which can be readily purchased and sold using established markets. The Company believes that the market risk arising from our holdings of these financial instruments is mitigated based on the fact that many of these securities are of high credit rating.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the statement of operations. Deferred offering costs as of December 31, 2021 and December 31, 2020 were $0 and $0.7 million, respectively. Such costs are classified in other non-current assets in the accompanying balance sheets.

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Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the related asset, which is generally three to five years, and in the case of leasehold improvements, the shorter of the estimated useful lives of the assets or the term of the lease. Depreciation expense was $0.3 million and $0.2 million for the years ended December 31, 2021 and 2020, respectively.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the related asset compared to its carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value. There were no impairment charges or long-lived assets disposed of during the years ended December 31, 2021 and 2020, respectively.

Income Taxes

Deferred income taxes are provided on temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases.

Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if such deferred tax assets are deemed more likely than not that some or all of the deferred tax assets will not be realized. Historically, the Company has not recognized these potential benefits in its financial statements and has fully reserved for such net deferred tax assets, as it believes it is more likely than not that the full benefit of these net deferred tax assets will not be realized before expiration. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years. The Company evaluated its tax positions and determined it has no uncertain tax positions as of December 31, 2021.

Fair Value of Financial Instruments

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820), establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are those that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—quoted prices in active markets for identical assets and liabilities.

Level 2—other significant observable inputs (including quoted prices for similar assets and liabilities, interest rates, credit risk, etc.).

Level 3—significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities).

Marketable Securities, Available For Sale

All marketable securities have been classified as “available-for-sale” 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 its 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, net of any related tax effects, are excluded from earnings and are included in other

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comprehensive income and reported as a separate component of stockholders’ equity (deficit) until realized. Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net. The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. In accordance with the Company’s investment policy, management invests in money market funds, corporate bonds, commercial paper, asset-backed securities and government securities. The Company has not experienced any losses on its deposits of cash, cash equivalents, and marketable securities since inception.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Fair Value ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Market

​ Hierarchy Cost Basis Gains Losses Value

Cash equivalents: ​ ​ ​ ​

Money market funds Level 1 ​ $ 15,466 ​ $ — ​ $ — ​ $ 15,466

Marketable securities, available for sale: ​ ​ ​ ​ ​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Fair Value ​ Amortized ​ Unrealized ​ Unrealized ​ Fair Market

​ ​ Hierarchy Cost Basis Gains Losses Value

Cash equivalents: ​ ​ ​ ​

Money market funds Level 1 ​ $ 94,020 ​ $ — ​ $ — ​ $ 94,020

Marketable securities, available for sale: ​ ​ ​ ​

Asset-backed securities Level 2 ​ 7,246 ​ — ​ — ​ 7,246

Corporate debt securities Level 2 ​ 13,937 ​ — ​ — ​ 13,937

Commercial paper Level 2 ​ 2,995 ​ — ​ — ​ 2,995

​

The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. Investments in asset-backed securities, corporate debt securities, commercial paper and U.S. government treasury and agency securities, and supranational and sovereign government securities have been classified as Level 2 as they are valued using quoted prices in less active markets or other directly or indirectly observable inputs. Fair values of asset-backed securities, corporate debt securities, commercial paper, U.S. government treasury and agency securities, and supranational and sovereign government securities were derived based on input of market prices from multiple sources at each reporting period. With regard to commercial paper, all of the securities had high credit ratings and one year or less to maturity; therefore, fair value was derived from accretion of purchase price to face value over the term of maturity or quoted market prices for similar instruments if available. During the years ended December 31, 2021 and 2020, there were no transfers of financial assets between Level 1 and Level 2. As of December 31, 2021, the remaining contractual maturities of $184.8 million of marketable securities were less than one year and $80.9 million were one to three years.

The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the

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investment is less than the amortized cost basis, the Company has assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on marketable securities at December 31, 2021 were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and/or circumstances from non-owner sources. The Company’s only element of other comprehensive income (loss) was net unrealized gain (loss) on marketable securities.

Stock-Based Compensation

In accordance with ASC Topic 718, Compensation—Stock Compensation, the Company recognizes compensation expense for all stock-based awards issued to employees based on the estimated grant-date fair value, which is recognized as expense on a straight-line basis over the requisite service period. The Company has elected to recognize forfeitures as they occur. The fair value of stock options is determined using the Black-Scholes option-pricing model. The determination of fair value for stock-based awards on the date of grant using an option-pricing model requires management to make certain assumptions including expected volatility, expected term, risk-free interest rate and expected dividends in addition to the Company’s common stock valuation (see Note 4).

Due to the absence of an active market for the Company’s common stock prior to the closing of the Company’s IPO, the Company utilized methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock. In determining the exercise prices for options granted, the Company considered the fair value of the common stock as of the grant date. The fair value of the common stock has been determined based upon a variety of factors, including the Company’s financial position, historical performance and operating results, the Company’s stage of development, the progress of the Company’s research and development programs, the prices at which the Company sold its convertible preferred stock, the superior rights, preferences and privileges of the Company’s convertible preferred stock relative to its common stock, external market conditions affecting the biotechnology industry, the lack of marketability of the Company’s common stock and the prospects of a liquidity event and the analysis of IPO and market performance of similar companies as well as recently completed mergers and acquisitions of peer companies. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date. Following the completion of the Company’s IPO, the fair value of its common stock is determined based on the closing price of its common stock on the date of grant.

Research and Development Expenses and Accrued Research and Development Expenses

Expenditures made for research and development are charged to expense as incurred. External costs consist primarily of payments to contract research organizations (CROs), contract development and manufacturing organizations (CDMOs), sample acquisition costs and laboratory supplies purchased in connection with the Company’s discovery and preclinical activities, and process development and clinical development activities. Internal costs consist primarily of employee-related costs, facilities, depreciation and costs related to compliance with regulatory requirements. Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

The Company records expenses related to external research and development services based on its estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs and CDMOs that supply, conduct and manage preclinical studies and clinical trials on its behalf. The financial terms of these contracts vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be

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expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or the amount of prepaid expenses accordingly.

Emerging Growth Company Status

The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Issued Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases(ASC Topic 842). The new guidance maintains two classifications of leases: finance leases, which replace capital leases, and operating leases. Lessees will need to recognize a right-of-use asset and a lease liability on the statement of financial position for those leases previously classified as operating leases under the old guidance. The initial liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for direct costs. The accounting standard will be effective for the Company beginning January 1, 2022. The Company estimates that there will be no material effect on the financial statements upon adoption.

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NOTE 3 CONVERTIBLE PREFERRED STOCK AND COMMON STOCK

The Company is authorized to issue two classes of stock designated as common stock and preferred stock. As of December 31, 2021 the total number of shares authorized was 1,200,000,000. The total number of shares of common stock authorized was 1,000,000,000. The total number of shares of preferred stock authorized was 200,000,000. All shares of the Company’s capital stock have a par value of $0.0001 per share.

Common stockholders are entitled to dividends if and when declared by the Board of Directors of the Company and after any convertible preferred share dividends are fully paid. The holder of each share of common stock is entitled to one vote.

The Company had no convertible preferred stock outstanding as of December 31, 2021. The Company’s convertible preferred stock was classified in the December 31, 2020 balance sheet as temporary equity in the accompanying balance sheets given that the number of members on the Company’s Board of Directors and the voting interests held by convertible preferred stockholders which could cause certain events to occur that were outside of the Company’s control whereby the Company could be obligated to redeem the convertible preferred stock. The Company did not adjust the carrying values of the convertible preferred stock to the respective liquidation preferences of such shares as the instruments were not redeemable, and the Company believed it was not probable that the instruments would have become redeemable as of the December 31, 2020 balance sheet date.

As of December 31, 2020, the rights and preferences of the convertible preferred stock were as follows:

Dividends

Each holder of convertible preferred stock is entitled to non-cumulative dividends at an annual rate of 8.0% of the original issue price of such series of convertible preferred stock. Such dividends are payable only when, and if declared by the Company’s Board of Directors. As of December 31, 2020, the Company’s Board of Directors has not declared any dividends.

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Liquidation preference

In the event of a liquidation event, the holders of shares of convertible preferred stock then outstanding would be entitled to be paid out of the proceeds of such liquidation event prior to the holders of common stock. The entitled amount per share would be equal to the sum of the applicable original issue price for such share of convertible preferred stock, plus any declared but unpaid dividends on each such share of convertible preferred stock. If upon such liquidation event, the assets of the Company legally available for distribution to the holders of convertible preferred stock are insufficient to permit the payment to such holders of the full amounts specified, then the entire assets of the Company legally available for distribution whould be distributed with equal priority and pro rata among the holders of convertible preferred stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to the Company’s certificate of incorporation.

The convertible preferred stock was subject to automatic redemption in the consolidation or merger of the Company or sale of all or substantially all of the Company’s assets in which the stockholders of the Company immediately prior to the transaction hold less than 50% of the outstanding securities of the surviving entity. Proceeds available for distribution from such transaction would be distributed consistent with a liquidation event.

In the event of any liquidation event, the holders of shares of Series C convertible preferred stock then outstanding would be entitled to be paid on a pro rata basis out of the proceeds of such liquidation event before payment would be made to the holders of Series A or Series B convertible preferred stock. After the payment in full of all amounts due to the holders of Series C convertible preferred stock, the holders of shares of Series A and Series B convertible preferred stock then outstanding would be entitled to be paid on a pari passu basis out of the remaining proceeds before any payment shall be made to the holders of the Company’s common stock. Upon completion of distribution of the Series A, Series B and Series C convertible preferred stock liquidation preference, all of the remaining proceeds of such liquidation event would be distributed pro rata among the holders of common stock and the holders of Series A and Series B convertible preferred stock on an as-converted to common stock basis at the then effective applicable conversion rate for such series of convertible preferred stock.

Conversion

The Company’s convertible preferred stock had conversion rights which entitled the holders to convert their preferred shares into common stock. The conversion rate would be determined by dividing the original issue price of the series of convertible preferred stock by the applicable conversion price at the time of conversion (which is initially the original issue price) for such series of convertible preferred stock. Each share of convertible preferred stock would automatically convert into common stock (i) upon the election of certain holders of Series A, Series B and Series C convertible preferred stock or (ii) upon the completion of a firm underwritten public offering of the Company’s common stock for which the public offering price per share was not less than $8.80 and pursuant to which the Company received gross proceeds of at least $70.0 million, prior to deductions for underwriting discounts, commissions and expenses.

Voting

The holder of each share of convertible preferred stock was entitled to one vote for each share of common stock into which it would convert.

Series B-1 Convertible Preferred Stock

On August 27, 2019, the Company sold an aggregate of 7,888,392 shares of Series B-1 convertible preferred stock at a price of $3.178 per share for aggregate gross proceeds of approximately $25.1 million to the Company.

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Series B-2 Convertible Preferred Stock

The Company’s Series B-1 and Series B-2 Convertible Preferred Stock Agreement contained a provision for a closing of 6,527,654 shares of Series B-2 convertible preferred stock at $3.841 per share, or $25.1 million. Such issuance and sale of the Company’s Series B-2 convertible preferred stock was to occur within 120 days of delivery of notice by the Company to its investors upon the earliest of the following on or before August 27, 2021: (i) the Company filed an Investigational New Drug (IND) for a Type II Myosin Inhibitor with the U.S. Food and Drug Administration (FDA) and had not received communication from the FDA within 35 days after such filing that prevents the IND from becoming ineffective; (ii) the first dosing of a human subject in one of the United Kingdom, France, Germany, Italy, Spain, Canada, Belgium, Netherlands, Luxembourg, Finland, Australia, New Zealand and Japan with a Type II Myosin inhibitor; and (iii) holders of a majority of the Series B-1 convertible preferred stock approved the closing of the second tranche of Series B-2 convertible preferred stock. The Company performed an assessment of the Series B-2 convertible preferred stock purchase agreement in accordance with the authoritative guidance and concluded that the mandatory closing did not meet the definition of a freestanding financial instrument as it was not legally detachable or separately exercisable.

If Series B-1 convertible preferred stockholders did not participate in this closing, every 5.282 shares of Series A and Series B-1 convertible preferred stock held would have automatically converted into one share of common stock. In July 2020, the closing of Series B-2 convertible preferred stock was triggered upon the filing and related acceptance of the Company’s IND by the FDA. The closing of the Series B-2 convertible preferred stock issuance occurred on August 12, 2020 with all Series B-1 stockholders participating.

Series C Convertible Preferred Stock

On December 3, 2020, the Company sold an aggregate of 12,954,423 shares of Series C convertible preferred stock at a price of $7.333 per share for aggregate gross proceeds of approximately $95.0 million to the Company.

Immediately prior to the completion of the IPO in March 2021, all outstanding shares of the Company’s convertible preferred stock were automatically converted into 35,557,569 shares of common stock.

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NOTE 4 STOCK-BASED COMPENSATION AWARDS

Equity Incentive Plans

In March 2021, the Company’s Board of Directors adopted, and its stockholders approved, the Company’s 2021 Equity Incentive Plan (2021 Plan), which became effective in March 2021 in connection with the IPO. Upon adoption of the 2021 Plan, the Company restricted the grant of future equity awards under its 2017 Equity Incentive Plan, as amended and restated (the 2017 Plan).

​

The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to its employees, directors, and consultants and its subsidiary corporations’ employees and consultants. The vesting of stock options is stated in each individual grant agreement, which is generally four years. Options granted expire 10 years after the date of grant. A total of 5,040,00 shares of the Company’s common stock were initially reserved for issuance pursuant to the 2021 Plan. The 2021 Plan share reserve will be increased by the number of shares under the 2017 Plan that are repurchased, forfeited, expired or cancelled after the effective date of the 2021 Plan up to the limit under the 2021 Plan. The number of shares available for issuance under the 2021 Plan increases annually on the first day of each fiscal year beginning with the Company’s 2022 fiscal year, equal to the least of (1) 5,040,000 shares, (2) five percent (5%) of the outstanding shares of its common stock as of the last day of the immediately preceding fiscal year; or (c) such other amount as the Company’s Board of Directors may determine.

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As of December 31, 2021, there were 3,010,909 shares available for future issuance under the 2021 Plan.

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Option activity for the year ended December 31, 2021 is as follows:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average

​ ​ ​ ​ Weighted ​ ​ ​ ​ Remaining

​ ​ ​ ​ Average ​ Total Intrinsic ​ Contractual Life

​ Options Exercise Price Value (Years)

​

The Company recognized $4.4 million and $0.3 million in stock-based compensation expense in connection with the equity incentive plan for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was unrecognized stock-based compensation cost of $25.2 million, which is expected to be recognized over a term of 3.4 years. The aggregate intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was $4.3 million and $58,000 respectively. For options granted during the years ended December 31, 2021 and 2020, the weighted-average grant date fair value was $11.30 and $0.89 per share, respectively. There were additional options issued outside of this plan as discussed under Founder Stock Options.

Founder Stock Options

On September 19, 2017, the Company granted one of its founders the option to purchase 1,795,880 shares of the Company’s common stock at an exercise price of $0.18 per share which vest monthly over a four-year period that expires 15 years after the date of grant. This grant is separate from the Company’s equity incentive plans discussed above. As of December 31, 2021, 1,531,780 options were both outstanding and exercisable. There were no options exercised during the year ended December 31, 2021. Compensation expense with respect to these options was $17,000 and $35,000 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, there was no unrecognized stock-based compensation expense. As of December 31, 2021, the intrinsic value of options outstanding and exercisable was $23.1 million. The weighted-average remaining contractual life of stock options is 10.5 years as of December 31, 2021.

Fair Value Assumptions

The fair value of option grants is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the use of the following assumptions:

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​ ​ ​ ​ ​

​ ​ Year ended December 31,

Expected dividend rate ​ — ​ —

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The expected term is based on the “simplified method” described in the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin Topic 14 which is determined as the midpoint between the vesting date and the contractual end of the option grant. Stock price volatility was estimated based on the estimated stock price volatility of a peer group of publicly traded companies over a similar term. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at the time of grant. The dividend yield was zero as the Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

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2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (ESPP) enables eligible employees of the Company to purchase shares of common stock at a discount. As of December 31, 2021, the Company has reserved for issuance 485,780 shares of common stock pursuant to the ESPP. Each offering period is approximately twelve months long. ESPP participants will purchase shares of common stock at a price per share equal to 85% of the lesser of (1) the fair market value per share of the common stock on the first trading day of the offering period or (2) the fair market value of the common stock on the purchase date.

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Total stock-based compensation expense related to all equity plans was allocated as follows (in thousands):

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​ ​ ​ ​ ​ ​ ​

​ ​ Year ended

​ ​ December 31,

Research and development $ 2,790 $ 228

General and administrative ​ 1,614 ​ 126

Total stock-based compensation expense ​ $ 4,404 ​ $ 354

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NOTE 5 COMMITMENTS AND CONTINGENCIES

License Agreements

On November 20, 2020 the Company exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) pursuant to a license agreement. Under the license agreement, the Company is obligated to make payments to OSIF aggregating up to $1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones. The Company is also obligated to pay low single-digit royalties to OSIF based on net sales by the Company and its affiliates and sublicensees of each product covered by the OSIF licensed patent rights. In addition, in the event the Company sublicenses the OSIF licensed patent rights, the Company is obligated to pay OSIF a specified portion of income received from sublicensing.

Lease Agreements

The Company leases office and lab space under lease agreements. These leases expire in August 2022. Rent expense was $110,000 and $77,000 for the years ended December 31, 2021 and 2020, respectively. Future minimum rentals as of December 31, 2021 were $141,000, all of which is to be paid within the next 12 months. In January 2022, the Company entered into a lease agreement for additional office and laboratory space. Please refer to Note 10 for further information.

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the year ended December 31, 2021 and no material legal proceedings are currently pending or threatened.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board of Directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is

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not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations in its financial statements as of December 31, 2021.

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NOTE 6 INCOME TAXES

Since inception, the Company has incurred net taxable losses, and accordingly, no current provision for income taxes has been recorded. The effective income tax rate of the provision for income taxes differs from the federal statutory rate as follows:

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​ ​ ​ ​ ​ ​ ​

​ ​ As of December 31, ​

Federal tax at statutory rate ​ 21.0 % ​ 21.0 %

State taxes, net of federal deduction ​ 4.5 % ​ 3.7 %

Research and development credits ​ 1.8 % ​ 1.7 %

Change in valuation allowance ​ (27.3) % ​ (26.4) %

Effective income tax rate ​ — ​ ​ — ​

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Deferred tax assets and liabilities are as follows (in thousands):

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​ ​ ​ ​ ​ ​ ​

​ ​ As of December 31,

Deferred tax assets (liabilities): ​ ​ ​ ​ ​ ​

Federal net operating loss carryforward ​ $ 14,570 ​ $ 7,117

State net operating loss carryforward ​ ​ 3,187 ​ ​ 1,240

Federal R&D credit ​ ​ 1,130 ​ ​ 398

Accrued expenses ​ ​ 773 ​ ​ —

Stock-based compensation ​ ​ 771 ​ ​ 39

Property and equipment ​ ​ (42) ​ ​ (34)

Total net deferred tax asset ​ ​ 20,530 ​ ​ 8,850

Net deferred tax asset (liability) ​ $ — ​ $ —

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The Company has federal and state net operating loss carryforwards (NOLs) of approximately $69.4 million and $33.9 million as of December 31, 2021 and 2020, respectively. The state NOLs and approximately $1.2 million of the federal NOLs as of December 31, 2021 and 2020 expire in 2037. The remaining federal NOLs of approximately $68.2 million and $32.7 million as of December 31, 2021 and 2020 do not expire. As of December 31, 2021 and 2020, a valuation allowance was recorded equal to 100% of net deferred tax assets as the Company does not believe it is more likely than not that it will realize the recorded net deferred tax assets. The increase in the recorded valuation allowance was $11.7 million and $4.5 million in 2021 and 2020, respectively.

The Company had federal research tax credit carryforwards of approximately $1.1 million and $0.4 million as of December 31, 2021 and 2020, respectively. The Company has performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2039, if unused.

Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, the Company’s ability to use NOL and research tax credit carry forwards to offset future taxable income may be limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period. The Company has not completed an ownership change analysis pursuant to IRC Section 382. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of NOL and research tax carryforwards available to offset future taxable income and income tax liabilities in future years may be significantly restricted or eliminated. Further, deferred tax assets associated with such NOLs and research tax

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credits could be significantly reduced upon realization of an ownership change within the meaning of IRC Section 382.

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NOTE 7 EMPLOYEE BENEFIT PLANS

In 2017, the Company established a qualified 401(k) plan which covers all employees who meet eligibility requirements. The Company’s contribution to the plan, as determined by the Company’s Board of Directors, was discretionary until September 2021 when the Company initiated a match with a maximum amount of 4% of the participant’s compensation. During the years ended December 31, 2021 and 2020, the Company made matching contributions of $47,000 and $0 respectively.

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NOTE 8 NET LOSS PER SHARE

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the convertible preferred stock and common stock options are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

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​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Numerator ​ ​ ​ ​ ​ ​

Denominator ​ ​ ​ ​

Net loss per share, basic and diluted ​ $ (1.14) ​ $ (23.17)

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The following weighted average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive:

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​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

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NOTE 9 ACCRUED OTHER EXPENSES

Accrued other expenses consisted of the following amounts (in thousands):

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​ ​ ​ ​ ​ ​ ​

​ ​ As of December 31, ​ As of December 31,

Accrued research and development costs ​ $ 3,470 ​ $ 550

Accrued IPO costs ​ ​ — ​ 452

Accrued license fees ​ — ​ 300

Total accrued other expenses ​ $ 3,881 ​ $ 1,587

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NOTE 10 SUBSEQUENT EVENTS

In January 2022 the Company entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado. The new lease commences on or around September 1, 2022 and includes escalating rent payments and a 84-month term. The lease agreement includes a tenant improvement allowance for $1.0 million of construction costs to be paid for by the landlord and up to an additional $2.0 million of tenant improvement allowance for which the Company will repay the landlord on an amortized straight-line basis over the initial term of the lease, commencing on the commencement date and continuing for the duration of the initial term at 6% interest. Future minimum lease payments are as follows (in thousands):

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​ ​ ​ ​

Year Ended December 31, ​ ​

Total future minimum lease payments ​ $ 3,302

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