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

You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes appearing in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors." You should carefully read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from the results described below.

Overview

We are an innovative clinical-stage biotechnology company pioneering the development of dual-sided fusion proteins as an entirely new class of biologic medicine. We believe our approach has the potential to fundamentally transform the therapeutic modulation of the immune system. We have created a novel approach to immune-modulation by designing biologics with structural characteristics that are not achievable by existing therapeutic modalities. Compounds derived from our proprietary ARC® platform simultaneously inhibit checkpoint molecules and activate costimulatory molecules within a single therapeutic. Our initial product candidates are designed to be differentiated therapeutics addressing molecular targets that are well characterized and scientifically validated in immuno-oncology but are underexploited by current treatment modalities.

Our lead, wholly owned product candidate, SL-172154, has been rationally designed to simultaneously inhibit the CD47/SIRPα checkpoint interaction to restore an anti-tumor immune response and to activate the CD40 costimulatory receptor to bolster an immune response. We are currently conducting a Phase 1 clinical trial evaluating SL-172154 in patients with ovarian cancer, and we expect to announce initial data from the dose-escalation portion of this trial in the second half of 2021. We are also conducting a second Phase 1 trial evaluating SL-172154 in patients with CSCC or HNSCC, and we expect to announce initial data from the dose-escalation portion of this trial in the first half of 2022. Our second product candidate, SL-279252, which is being developed in collaboration with Takeda, has been rationally designed to simultaneously inhibit the PD-1/PD-L1 interaction and activate the OX40 receptor. We are evaluating SL-279252 in a Phase 1 clinical trial in patients with advanced

solid tumors and lymphoma, and we expect to announce data from the dose-escalation portion of this trial in the second half of 2021. In addition to our clinical-stage ARC product candidates, we possess a deep pipeline of preclinical immuno-oncology product candidates. Longer-term, we are pursuing additional disease areas, including autoimmune diseases, where our dual-sided fusion protein platforms may provide advantages over current treatment modalities.

Since our inception in 2016, we have devoted substantially all of our resources to developing and perfecting our intellectual property rights, conducting research and development activities, including undertaking preclinical studies of our product candidates, conducting clinical trials of our most advanced product candidates, manufacturing our product candidates, organizing and staffing our company, business planning, and raising capital. We do not have any products approved for sale, and we have not generated any revenue from product sales. We have funded our operations as of the filing date of this Annual Report on Form 10-K through the net proceeds of our initial public offering for approximately $213.5 million, the sale of redeemable convertible preferred stock for approximately $152.9 million, the issuance of convertible notes for approximately $10.5 million and payments received pursuant to our collaboration agreement with Takeda for approximately $78.4 million.

For the years ended December 31, 2020 and 2019, our net loss was $36.6 million and $24.0 million, respectively. We have not been profitable since inception, and as of December 31, 2020, we had an accumulated deficit of $72.1 million and $335.4 million in cash and cash equivalents and short-term investments. We expect to continue to incur significant expenses and increasing operating losses in the near term. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

•continue to advance the preclinical and clinical development of our lead product candidates;

•initiate preclinical studies and clinical trials for additional product candidates that we may identify in the future;

•expand our operational, financial, and management systems;

•increase personnel and infrastructure to support our clinical development, research and manufacturing efforts;

•build out and expand our in-house process development and manufacturing capabilities;

•continue to develop, perfect, and defend our intellectual property portfolio; and

•incur additional legal, accounting, or other expenses in operating our business, including the additional costs associated with operating as a public company.

We do not expect to generate significant product revenue unless and until we successfully complete development and obtain regulatory and marketing approval of, and begin to sell, one or more of our product candidates, which we expect will take several years. We expect to spend a significant amount in development and marketing costs prior to such time. We may never succeed in achieving regulatory and marketing approval for our product candidates. We may obtain unexpected results from our preclinical and clinical trials. We may elect to discontinue, delay, or modify preclinical and clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. Accordingly, until such time as we can generate significant product revenue, if ever, we expect to continue to seek private or public equity and debt financing to meet our capital requirements. There can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to commercialize our product candidates. In addition, we may not be profitable even if we commercialize any of our product candidates.

COVID-19 Pandemic

There is significant uncertainty as to the effects of the ongoing COVID-19 pandemic, which may, among other things, materially impact our business, including our ongoing and planned clinical trials. We have experienced, and expect to continue to experience, delays in our SL-172154 and SL-279252 clinical trials as a result of the ongoing pandemic. Our manufacturing operations have been impacted by the ongoing pandemic, including delays with our third-party manufacturer and difficulties in obtaining raw materials needed to manufacture material for our clinical trials. Additionally, we have experienced, and expect to continue to experience, delays in enrolling patients, missed treatments for enrolled patients, and performance delays from certain third-party vendors supporting the SL-172154 and SL-279252 clinical trials, although the significance of these delays is difficult to predict.

Further, due to public health guidance measures, we have in the past and may in the future implement a work-from-home policy for our employees, excluding those necessary to maintain minimum basic operations, which may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. For example, with our personnel working from home, some of our research activities that require our personnel to be in our laboratories may be delayed. We may also experience delays or disruptions to our operations if and when our employees need to take time off work due to illness or other COVID-19-related impacts to our workforce.

Due to the impact of the COVID-19 pandemic and work-from-home policies and other operational limitations mandated by federal, state, and local governments as a result of the pandemic, certain of our research and development activities, including the conduct of preclinical studies, have been delayed and may be further delayed and other aspects of our business, such as the conduct of various corporate functions and the ability of our Board and management to provide oversight and guidance may be adversely impacted until such operational limitations are lifted. The COVID-19 pandemic or local outbreaks associated with the COVID-19 pandemic could result in difficulty manufacturing our product candidates, securing clinical trial site locations, CROs, and/or trial monitors and other critical vendors and consultants supporting our clinical trials. In addition, outbreaks or the perception of an outbreak near a clinical trial site location could impact our ability to enroll patients or to complete all scheduled physician visits for currently enrolled patients. These situations, or others associated with COVID-19 pandemic, could cause delays in our clinical trial plans and could increase expected costs, all of which could have a material adverse effect on our business and its financial condition. At the current time, we are unable to quantify the potential effects of the COVID-19 pandemic on our future operations.

Collaboration Agreement

Collaboration Agreement with Takeda

On August 8, 2017, we entered into a Collaboration Agreement with Millennium Pharmaceuticals, Inc., or Takeda, a wholly owned subsidiary of Takeda Pharmaceutical Company, Ltd., or the Collaboration Agreement. The Collaboration Agreement was subsequently amended in April 2018, October 2018, and March 2020.

Pursuant to the Collaboration Agreement, we are required to use our commercially reasonable efforts to conduct preclinical and Phase 1 clinical trials for two molecules, SL-279252 and SL-115154, and Takeda has an exclusive option to license one or both of these clinical-stage ARC molecules for a specified amount of time up to and following the conclusion of each respective Phase 1 trial. While we are currently evaluating SL-279252 in a Phase 1 clinical trial, we have not yet conducted a Phase 1 clinical trial for SL-115154. During the development phase of the Collaboration Agreement, we may not, by ourselves or through a third party, develop or commercialize a compound, molecule or product that targets both PD-1 and OX40L, or a compound, molecule or product that targets both CSF1R and CD40L. Additionally, under the Collaboration Agreement, Takeda is granted a right of first negotiation to enter into licenses for each molecule within a specified class of ARC molecules.

As of December 31, 2020, under the Collaboration Agreement, we have received approximately $78.4 million in option payments, milestone payments, and expense reimbursements from Takeda, which includes an $11.3 million non-refundable up-front payment applied to the license fee for SL-279252. Pursuant to the Collaboration Agreement, we are eligible to receive up to an additional $33.8 million if Takeda exercises options to enter into license agreements for SL-279252 and $45.0 million if Takeda exercises options to enter into license agreements for SL-115154. If Takeda exercises its exclusive option to license one or both of the clinical-stage ARC molecules (SL-279252 and SL-115154), each license agreement would, among other things, require Takeda to be solely responsible to use its commercially reasonable efforts, at its cost, to develop, manufacture, and commercialize the licensed ARC molecules. If both ARC molecules are licensed, we would be entitled to additional payments of up to an aggregate of $450 million in clinical, regulatory, and sales milestone payments. In addition, we would be eligible for tiered royalty payments on net sales of licensed products at percentages ranging from the high single digits to sub-teens, subject to specified reductions, during the royalty term.

Unless sooner terminated, the Collaboration Agreement will continue until the later of (a) the earlier of (i) the 90th day following delivery of a report detailing certain results of the SL-279252 Phase 1 clinical trial and (ii) the exercise by Takeda of its right to an exclusive license with respect to SL-279252, and (b) the earlier of (i) the 90th day following delivery of a report detailing certain results of the SL-115154 Phase 1 clinical trial and (ii) the exercise by Takeda of its right to an exclusive license with respect to SL-115154. Either party may terminate the Collaboration Agreement prior to expiration upon the insolvency or uncured material breach of the other party.

Components of our Results of Operation

Collaboration Revenue – Related Party

We have no products approved for commercial sale, and we have not generated any revenue from commercial product sales. Our total revenue to date has been generated solely from our Collaboration Agreement with Takeda. We expect to continue to recognize revenue under this agreement as development work is performed. We expect that any collaboration revenue we generate from our Collaboration Agreement with Takeda and any future collaboration partners will fluctuate from period to period.

We have received cash of $14.0 million and $8.5 million for the years ended December 31, 2020 and 2019, respectively, from Takeda under the Collaboration Agreement. We have recognized total aggregate revenue of $51.9 million through December 31, 2020 under the Collaboration Agreement.

Operating Expense

Research and Development

Our research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. These expenses include:

•expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

•manufacturing and development expenses and the costs of acquiring and manufacturing preclinical study and clinical trial materials;

•analysis of manufacturing processes for optimization;

•employee-related expenses, including salaries, benefits, and stock-based compensation;

•fees paid to consultants who assist with research and development activities;

•expenses relating to regulatory activities, including filing fees paid to regulatory agencies;

•laboratory materials and supplies used to support our research activities; and

•allocated expenses for facility-related costs.

The following table summarizes our research and development expenses by product candidate:

Year ended December 31,

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we conduct additional preclinical studies and clinical trials, including later-stage clinical trials, for our current and future product candidates and pursue regulatory approval of our product candidates.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time consuming. The actual probability of success for our product candidates may be affected by a variety of factors including:

•the safety and efficacy of our product candidates;

•early clinical data for our product candidates;

•investment in our clinical programs;

•the ability of collaborators to successfully develop our licensed product candidates;

•competition;

•manufacturing capability; and

•commercial viability.

We may never succeed in achieving regulatory approval for any of our product candidates due to the uncertainties discussed above. We are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if ever.

General and Administrative Expense

General and administrative expense consists primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense, for employees and consultants in executive, finance, accounting, legal, information technology and human resource functions. General and administrative expense also includes corporate facility costs, including rent,

utilities, depreciation, and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.

We expect that our general and administrative expense will increase in the future to support our growing research and development activities and as a result of the increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers, and accountants, among other expenses, including the Company’s new office lease signed in January 2021 discussed in more detail in Note 12 to our financial statements included elsewhere in this Annual Report on Form 10-K. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of Nasdaq and the SEC, insurance, and investor relations costs. If any of our current or future product candidates obtains U.S. regulatory approval, we expect that we would incur significantly increased expenses associated with building a sales and marketing team.

Interest Income

Interest income consists of interest earned on our cash, cash equivalents and short-term investments, which consists of amounts held in a money market fund and at various times in short-term government and corporate obligations.

IncomeTaxes

Since our inception, we have not recorded any income tax benefits for the net operating losses, or NOLs, we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized. Our NOLs and tax credit carryforwards will begin to expire in 2036. We have recorded a full valuation allowance against our deferred tax assets at each balance sheet date.

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

The following table sets forth our results of operations for the years ended December 31, 2020 and 2019.

Year Ended December 31, Change

(in thousands) 2020 2019 Dollar Percentage

Collaboration revenue – related party $ 9,934 $ 9,887 $ 47 0.5 %

Operating expenses:

Other income (expense):

Collaboration Revenue – Related Party

Collaboration revenue remained relatively unchanged for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Collaboration revenue is primarily comprised of clinical and development work on SL-279252 associated with the Collaboration Agreement.

Research and Development Expense

Research and development expenses increased by $8.3 million, or 28.3%, to $37.5 million for the year ended December 31, 2020 from $29.2 million for the year ended December 31, 2019. The increase was primarily attributable to an increase of $7.3 million in manufacturing and clinical costs in connection with SL-279252 and SL-172154 and an increase of $1.8 million in personnel costs as a result of an increase in headcount to expand our manufacturing and clinical development capabilities, offset by a decrease of $1.7 million in nonclinical studies as a result of completing nonclinical studies for SL-172154 in 2019. The remaining $0.9 million increase resulted from an increase in sample analysis, laboratory, pharmacology and facilities expenses offset by a decrease in consulting fees.

General and Administrative Expense

General and administrative expenses increased by $3.6 million, or 63.6%, to $9.4 million for the year ended December 31, 2020 from $5.7 million for the year ended December 31, 2019. The increase was primarily due to a $3.2 million increase in personnel-related costs driven by higher employee headcount needed to support our growing research and development activities as well being a public company.

Interest Income

Interest income decreased by $0.6 million to $0.5 million for the year ended December 31, 2020 from $1.2 million for the year ended December 31, 2019. The decrease was primarily due to a decrease in interest rates period over period.

Liquidity and Capital Resources

Since our inception, our primary sources of liquidity have been generated through our Collaboration Agreement with Takeda and by sales of our preferred stock and common stock, including our IPO.As of December 31, 2020, we had an accumulated deficit of $72.1 million and $335.4 million of cash and cash equivalents and short-term investments.

Capital Resources and Funding Requirements

Our primary uses of cash and cash equivalents and short-term investments are to fund our operations, which consist primarily of research and development expenditures related to our programs, product development costs, research expenses, administrative support and working capital requirements. We anticipate incurring additional net losses and negative cash flows from operations in the near future until such time, if ever, that we can generate significant sales of our product candidates currently in development. Our future funding requirements will depend on many factors, including:

•the scope, timing, progress, and results of discovery, preclinical development, laboratory testing, and clinical trials for our product candidates;

•the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;

•the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;

•the costs of preparing, filing, and prosecuting patent applications, maintaining, and enforcing our intellectual property rights and defending other intellectual property-related claims;

•the costs and fees associated with the discovery, acquisition, or in-license of additional product candidates or technologies;

•our ability to establish additional collaborations on favorable terms, if at all;

•the costs required to scale up our clinical, regulatory, and manufacturing capabilities;

•the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing, distribution, and storage capabilities, for any of our product candidates for which we receive marketing approval; and

•revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

Until we obtain regulatory approval to market our product candidates, if ever, we cannot generate revenues from sales of our products. Even if we are able to sell our products, we may not generate a sufficient amount of product revenues to finance our cash requirements. Accordingly, we may seek to raise additional capital through equity offerings and/or debt financings or from other potential sources of liquidity, which may include new collaborations, licensing or other commercial agreements for one or more of our development programs or patent portfolios. There can be no assurance that such funding may be available to us on acceptable terms, or at all. The issuance of equity securities may result in dilution to stockholders and issuance of debt securities may have rights, preferences and privileges senior to those of our common stock and the terms of the debt securities could impose significant restrictions on our operations. The failure to raise funds as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. Additionally, if additional funding is not secured when required, we may need to delay or curtail our operations until such funding is received, which would have a material adverse impact on our business prospects and results of operations.

We believe that our cash and cash equivalents and short-term investments as of December 31, 2020 will enable us to fund our operating expenses through the end of 2024.

Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

Year ended December 31,

Net cash used in operating activities $ (33,659) $ (20,975)

Net cash used in investing activities (146,322) (3,592)

Net cash (used in) provided by financing activities 330,866 (64)

Net (decrease) increase in cash and cash equivalents $ 150,885 $ (24,631)

Net Cash Used in Operating Activities

During the year ended December 31, 2020, net cash used in operating activities was $33.7 million and primarily reflected our net loss of $36.6 million, offset primarily by noncash charges of $1.9 million in stock-based compensation and depreciation and a $1.0 million net increase in our operating assets and liabilities.

During the years ended December 31, 2019, net cash used in operating activities was $21.0 million and primarily reflected our net loss of $24.0 million, offset primarily by noncash charges of $1.0 million in stock-based compensation and depreciation and a $2.2 million net increase in our operating assets and liabilities.

Net Cash Used in Investing Activities

During the year ended December 31, 2020, net cash used in investing activities was $146.3 million of which $183.2 million was used to purchase short-term investments, $37.6 million was received from the sale of short-term investments and $0.7 million was used to purchase property and equipment.

During the year ended December 31, 2019, net cash used in investing activities was $3.6 million of which $44.3 million was used to purchase short-term investments, $41.1 million was received from the sale of short-term investments and $0.4 million was used to purchase property and equipment.

Net Cash (Used in) Provided by Financing Activities

During the year ended December 31, 2020, net cash provided by financing activities was $330.9 million and was primarily from the sale of our Series B and B-1 redeemable convertible preferred stock and proceeds from our initial public offering.

During the year ended December 31, 2019, net cash used in financing activities was $0.1 million and was a result of payments for public offering costs.

Contractual Obligations and Other Commitments

The following table summarizes our contractual obligations and commitments at December 31, 2020:

(in thousands) Less than1 year 1 to3 years 3 to5 years More than5 years Total

The Company also signed a new lease in January 2021 for the relocation of its Austin office, which is discussed in more detail in Note 12 to our financial statements included elsewhere in this Annual Report on Form 10-K. The following table summarizes our contractual obligations and commitments related to the new lease:

(in thousands) Less than1 year 1 to3 years 3 to5 years More than5 years Total

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum, or variable price provisions, and the approximate timing of the actions under the contracts. Payments due upon cancellation consisting only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation are not included in the preceding tables as the amount and timing of such payments are not known.

We have not included any potential contingent payments upon the achievement by us of specified regulatory and commercial events, as applicable, or patent prosecution or royalty payments we may be required to make under the Heat License Agreement (as defined below). We have excluded these potential payments in the preceding tables because the timing and likelihood of these contingent payments are not currently known and would be difficult to predict or estimate. Contractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities for which we cannot reasonably predict future payment. Our contractual obligations result primarily from obligations for various contract manufacturing organizations and clinical research organizations, which include potential payments we may be required to make under its agreements. The contracts also contain variable costs and milestones that are hard to predict as they are based on such things as patients enrolled and clinical trial sites. The timing of payments and actual amounts paid under contract manufacturing organization, or CMO, and CRO agreements may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations. Also, those agreements are cancellable upon written notice by us and, therefore, not long-term liabilities.

Heat License Agreement

In June 2016, we entered into an Exclusive License Agreement, or the Heat License Agreement, with Heat Biologics Inc., or Heat. The Heat License Agreement was subsequently amended in November 2016, December 2016, and March 2017. Pursuant to the Heat License Agreement, Heat granted to us a worldwide, sublicensable exclusive license to research, develop, manufacture, and commercialize products under three provisional patent applications, including all patents issuing from such applications, or the Fusion Protein Patent Rights and a worldwide, sublicensable nonexclusive license to research, develop, manufacture, and commercialize certain know-how owned and controlled by Heat related to the Fusion Protein Patent Rights.

Under the Heat License Agreement, Heat was required to conduct certain research and development services under a mutually-agreed upon research and development plan and Heat was eligible to receive financial support from us for these efforts. Effective March 2017, Heat completed all research and development services under the Heat License Agreement and assigned to us three patent applications and all data derived from the research and development activities, referred to collectively as the Research Services Inventions. Pursuant to the terms of the Heat License Agreement, we are obligated to use commercially reasonable efforts to diligently research and develop at least one product covered by the Fusion Protein Patent Rights, including the obligation to file an IND application for such product. Our development efforts, including the development of SL-279252 and certain other ARC compounds, to date satisfy these obligations.

Unless sooner terminated or extended, the term of the Heat License Agreement continues until the later of 20 years following the effective date and the expiration of the last-to-expire royalty term. Either party may terminate the agreement due to a material breach by the other party (subject to a 90-day cure period) or if the other party files for bankruptcy. In the event we terminate the Heat License Agreement due to a material breach by Heat, Heat must assign to us all right, title, and interest in the patent rights licensed under the Heat License Agreement.

In addition to an upfront payment of $50,000, which we made in 2016, the Heat License Agreement requires us to make further payments to Heat in the future of up to $20.6 million in the aggregate, for the achievement of specified development, regulatory, and commercial sale milestones for certain licensed products. We are also required to pay Heat a percentage of certain upfront fees or other non-royalty payments not tied to milestone events that we receive in connection with certain sublicenses of the Fusion Protein Patent Rights. We will be required to pay Heat a royalty on all worldwide net sales by us, our affiliates, and sublicenses of certain licensed products in the low single digits. Royalties are payable, on a product-by-product and country-by-country basis, commencing on the first commercial sale of such product and continuing until the last-to-expire valid patent claim to the licensed patent rights that cover such product in that country.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, the accrual for research and development expenses, and the valuation of stock-based awards. We base our estimates on historical experience, known trends and events, and various other factors that are

believed to be 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. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We have and may continue to enter into collaboration agreements with other companies. Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering and patent committees. We evaluate the promised goods or services in the contract to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, we consider the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, we develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines, and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

When we conclude that a contract should be accounted for as a combined performance obligation and recognized over time, we then determine the period over which revenue should be recognized and the method by which to measure revenue. We generally recognize revenue using a cost-based input method.

We recognize collaboration revenue when our customer or collaborator obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for such arrangements, we perform the following five steps:

i.identify the contract(s) with a customer;

ii.identify the performance obligations in the contract;

iii.determine the transaction price;

iv.allocate the transaction price to the performance obligations within the contract; and

v.recognize revenue when (or as) the entity satisfies a performance obligation.

We only apply the five-step model to contracts when we determine that it is probable we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

At contract inception, we assess the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the arrangement consist of a license to our intellectual property and research, development and manufacturing services. We may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

We determine transaction price based on the amount of consideration we expect to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, we estimate the probability and extent of consideration we expect to receive under the contract utilizing either the most-likely amount method or expected amount method, whichever best estimates the amount expected to be received. We then consider any constraints on the variable consideration and include in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

We then allocate the transaction price to each performance obligation based on the relative standalone selling price and recognize revenue as the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations that consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine

whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

We record amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in our balance sheet. Deferred revenues expected to be recognized as revenue within the 12 months following the balance sheet date are classified as a current liability. Deferred revenues not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as noncurrent liabilities.

Research and Development Expense

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred.

We accrue an expense for nonclinical studies and clinical trial activities performed by vendors based upon estimates of the proportion of work completed. We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

We make estimates of our prepaid and accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Stock-Based Compensation

We measure compensation expense for all share-based awards based on the estimated fair value of the share-based awards on the grant date. We use the Black-Scholes option pricing model to value our stock option awards. We recognize compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. We have not issued awards for which vesting is subject to a market or performance conditions.

The Black-Scholes option-pricing model requires the use of subjective assumptions that include the expected stock price volatility and the fair value of the underlying common stock on the date of grant. See Note 9 to our audited financial statements included elsewhere in this Annual Report on Form 10-K for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted during the year ended December 31, 2020.

Recent Accounting Pronouncements

See Note 2 to our financial statements found elsewhere in this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our financial statements.

Emerging Growth Company and Smaller Reporting Company Status

We are an emerging growth company as defined in the JOBS Act. Under the JOBS Act, an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards and delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We have evaluated the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (1) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (2) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor

discussion and analysis. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (i) following the fifth anniversary of the completion of our initial public offering, (ii) in which we have total annual gross revenues of at least $1.07 billion or (iii) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company” as defined under the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 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 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.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

Item 8. Audited Financial Statements

SHATTUCK LABS, INC.

INDEX TO FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 74

Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 78

Notes to Financial Statements 79

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Shattuck Labs, Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Shattuck Labs, Inc. (the Company) as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, changes in redeemable 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, 2020 and 2019, 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 2018.

Austin, Texas

March 16, 2021

SHATTUCK LABS, INC.

BALANCE SHEETS

(In thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 10,190 3,355

Current liabilities:

Deferred revenue - related party net of current portion 21,306 9,571

Commitments and contingencies (Note 6)

Stockholders’ equity (deficit):

Accumulated other comprehensive income (loss) (63) 54

See accompanying notes to financial statements

SHATTUCK LABS, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

Year Ended December 31,

Collaboration revenue - related party $ 9,934 $ 9,887

Operating expenses:

Other income (expense):

Other comprehensive income (loss):

Unrealized gain (loss) on investments (117) 54

Net loss per share—basic and diluted $ (2.36) $ (3.17)

See accompanying notes to financial statements

SHATTUCK LABS, INC.

STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share amounts)

Shares Amount Shares Amount Shares Amount Shares Amount

Exercise of stock options — — — — — — 84,741 — — — — —

Stock-based compensation expense — — — — — — — — 461 — — 461

Unrealized gain on investments — — — — — — — — — 54 — 54

Stock-based compensation expense — — — — — — — — 1,266 — — 1,266

Unrealized loss on investments — — — — — — — — — (117) — (117)

See accompanying notes to financial statements

SHATTUCK LABS, INC.

STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash flows from operations:

Adjustments to reconcile net loss to net cash used in operations:

Accretion of short-term investments 1 (166)

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (6,835) 1,903

Non-current assets (326) —

Deferred revenue—related party 6,569 (2,966)

Deferred rent 89 (41)

Net cash used in operating activities (33,659) (20,975)

Cash flows from investing activities:

Purchases of property and equipment (727) (470)

Sale and maturities of short-term investments 37,595 41,148

Net cash used in investing activities (146,322) (3,592)

Cash flows from financing activities:

Proceeds from the initial public offering 232,301 —

Issuance costs of the initial public offering (18,738) (34)

Proceeds from sale of Series B-1 redeemable convertible preferred stock 83,000 —

Issuance costs of Series B-1 redeemable convertible preferred stock (387) —

Proceeds from sale of Series B redeemable convertible preferred stock 34,620 —

Issuance costs of Series B redeemable convertible preferred stock (159) (30)

Proceeds from exercise of stock options 229 —

Net cash (used in) provided by financing activities 330,866 (64)

Net increase (decrease) in cash and cash equivalents 150,885 (24,631)

Cash and cash equivalents, beginning of period 7,013 31,644

Cash and cash equivalents, end of period $ 157,898 $ 7,013

Supplemental disclosures of noncash financial activities:

Accrued public offering costs $ — $ 3

Unpaid amounts related to purchase of property and equipment $ 454 $ —

See accompanying notes to financial statements

SHATTUCK LABS, INC.

NOTES TO FINANCIAL STATEMENTS

1. Organization and Description of Business

Shattuck Labs, Inc. (the “Company”) was incorporated in 2016 in the State of Delaware and is a clinical-stage biopharmaceutical company developing dual-sided fusion proteins, including its ARC® and GADLENTM platforms, as novel classes of biologic medicines capable of multifunctional activity with potential applications in oncology and inflammatory diseases. Using its proprietary technology, the Company is building a pipeline of therapeutics, initially focused on the treatment of solid tumors and hematologic malignancies. The Company has two clinical-stage product candidates, SL-172154 and SL-279252, and has several compounds in preclinical development.

Stock Split

Effective October 1, 2020, the Board of Directors and the stockholders of the Company approved a 6.85-for-1 stock split of the Company’s outstanding common stock and adjusted the conversion ratio of the Company’s preferred stock accordingly. All common stock, preferred stock, and per share information has been retroactively adjusted to give effect to this forward stock split and the adjusted conversion ratios for all periods presented. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately increased and the respective per share value and exercise prices, if applicable, were proportionately decreased in accordance with the terms of the agreements governing such securities. There were no changes in the par values of the Company’s common stock and preferred stock as a result of the forward stock split.

Initial Public Offering

On October 14, 2020, the Company completed the initial public offering ("IPO") of its common stock pursuant to a Registration Statement on Form S-1 as amended (File Nos. 333-248918 and 333-249393). The Company sold an aggregate of 13,664,704 shares of common stock (including 1,782,352 shares issued pursuant to the underwriters' option to purchase additional shares) at a public offering price of $17.00 per share. The Company received net proceeds of approximately $213.5 million, after deducting underwriting discounts and commissions and offering expenses of $18.8 million. Upon the completion of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock were converted into 20,300,253 shares of common stock.

Liquidity

The Company has incurred losses and negative cash flows from operations since inception and has an accumulated deficit of $72.1 million as of December 31, 2020. The Company anticipates incurring additional losses and negative cash flows from operations until such time, if ever, that it can generate significant sales of its product candidates currently in development, and is highly dependent on its ability to find additional sources of funding in the form of licensing of its technology, collaboration agreements, and/or public and private debt and equity financings. Adequate additional funding may not be available to the Company on acceptable terms, or at all. The failure to raise funds as and when needed could have a negative impact on the Company’s financial condition and ability to pursue its clinical operations, research and development and commercialization of its product candidates. Management believes that the Company’s cash and cash equivalents and short-term investments of $335.4 million as of December 31, 2020, are sufficient to fund projected operations of the Company through at least the end of 2024.

COVID-19 Pandemic

On March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The virus and actions taken to mitigate its spread have had, and are expected to continue to have, a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates and conducts its business and which the Company’s partners operate and conduct their business. The Company is currently following the recommendations of local health authorities to minimize exposure risk for its team members and visitors. However, the scale and scope of this pandemic is unknown and the duration of the business disruption and related financial impact cannot be reasonably estimated at this time. While the Company has implemented specific business continuity plans to reduce the potential impact of COVID-19, there is no guarantee that the Company’s continuity plans will be successful.

The Company has already experienced disruptions to its business such as work-from-home orders for offices and similar disruptions have occurred for its partners. Specifically, the outbreak has caused disruptions in its ability to manufacture clinical trial materials, including the acquisition of raw materials needed for such manufacturing, enrollment and treatment of patients in clinical trials in process, and slowdowns and shutdowns of the laboratories and other service providers that are being relied upon in the development of the Company’s product candidates.

The extent to which the COVID-19 pandemic or any other health epidemic may impact the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to mitigate its impact, among others. Accordingly, the COVID-19 pandemic could have a material adverse effect on the Company’s business, results of operations and financial condition.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses, and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates, if any, are recorded in the period in which they become known and actual results could differ from management’s estimates.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one segment.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. Fair value measurements are classified and disclosed in one of the following categories:

•Level 1: Observable inputs such as quoted prices in active markets for identical assets the reporting entity has the ability to access as of the measurement date;

•Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Fair value measurements are classified based on the lowest level of input that is significant to the measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values stated below takes into account the market for its financial assets and liabilities, the associated credit risk and other factors as required. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Management believes that the carrying amounts of the Company’s financial instruments, including short-term investments and accounts payable, approximate fair value due to the short-term nature of those instruments.

Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents, and short-term investments. The Company maintains its cash and cash equivalents at one accredited financial institution in amounts that exceed federally-insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company invests in only highly rated debt securities that management believes protects the Company from risk of default and impairment of value.

All of the Company’s revenue is derived from its collaboration agreement with Millennium Pharmaceuticals, Inc., a wholly owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”) (see Note 8).

The Company is highly dependent on a single third-party manufacturer to supply drug products for its research and development activities of its programs, including clinical trials and non-clinical studies. These programs could be adversely affected by a significant interruption in the supply of such drug products.

The Company is highly dependent on two contract research organizations (“CROs”) and a limited number of third-party service providers to manage and support its clinical trials. These programs could be adversely affected by a significant disruption in services provided by these CROs and third parties.

Cash Equivalents

The Company considers all demand deposits with financial institutions and all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents. Cash equivalents consisted of $2.7 million held in operating accounts, $80.2 million in money market funds and $75.0 million in government obligations as of December 31, 2020 and $6.5 million in a money market fund and $0.5 million in operating accounts as of December 31, 2019.

Short-Term Investments

Short-term investments consist of highly rated debt securities and U.S. Treasury and corporate entity commercial paper with maturities of more than three months but less than one year at the date of purchase. The Company classifies its short-term investments at the time of purchase as available-for-sale securities and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported in accumulated other comprehensive income, a component of stockholders’ equity (deficit), until realized. The Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, on January 1, 2020, which amended our accounting for available-for-sale debt securities. Credit impairments are recorded through an allowance rather than a direct write-down of the security and are recorded through a charge to the consolidated statement of operations. Unrealized gains or losses not related to credit impairments are recorded in accumulated other comprehensive gain/(loss) in the consolidated balance sheets. The Company reviews available-for-sale debt securities for impairments related to credit losses and other factors each quarter.

Deferred Offering Costs

The Company capitalizes certain legal, accounting, and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs will be recorded against gross proceeds.

Series A, Series B and Series B-1 Redeemable Convertible Preferred Stock

The Company records shares of redeemable convertible preferred stock at their respective fair values on the date of issuance, net of issuance costs. The redeemable convertible preferred stock is recorded outside of stockholders’ equity on the balance sheet because the shares contain liquidation features that are not solely within the Company’s control. Upon the completion of the Company’s IPO in the fourth quarter of 2020, all outstanding shares of the Company’s redeemable convertible preferred stock were converted into common stock. See Note 7 for a discussion of the redeemable convertible preferred stock.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include prepaid expenses for general business purposes and services used in research projects, which are stated at cost and amortized on a straight-line basis over the related period of benefit. Supplies and materials that have multiple applications for alternative future use are expensed as they are consumed.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of the asset. Expenditures for repairs and maintenance that do not extend the estimated useful life or improve an asset are expensed as incurred. Upon retirement or sale, the cost and related accumulated depreciation and amortization of assets disposed of are removed from the accounts, and any resulting gain or loss is included in the statement of operations and comprehensive loss.

Depreciation periods are as follows:

Office equipment 3 years

Furniture and fixtures 5 to 10 years

Lab equipment 5 years

Leasehold improvements Shorter of lease term or 15 years

Impairment of Long-Lived Assets

Long-lived assets are reviewed for indications of possible impairment whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying

amounts to the future undiscounted cash flows attributable to these assets. An impairment loss is recognized to the extent an asset group is not recoverable, and the carrying amount exceeds the projected discounted future cash flows arising from these assets. There were no impairments of long-lived assets for the years ended December 31, 2020 and 2019.

Deferred Rent

The Company records rent expense on a straight-line basis over the term of the leases and, accordingly records the difference between cash payments and the recognition of rent expense as a deferred rent asset or liability. Incentives granted under the Company’s leases, including allowances to fund leasehold improvements, are deferred and recognized as adjustments to rent expense on a straight-line basis over the term of the leases.

Revenue Recognition

Collaboration revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering committees. The Company evaluates the promised goods or services in the contract to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, the Company considers the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

Upon the amendment of an existing agreement, the Company evaluates whether the amendment represents a modification to an existing contract which would be recorded through a cumulative catch-up to revenue or a separate contract. If it is determined that it is a separate contract, the Company will evaluate the necessary revenue recognition through the five-step process described below.

When the Company concludes that a contract should be accounted for as a combined performance obligation and recognized over time, the Company must then determine the period over which revenue should be recognized and the method by which to measure revenue. The Company generally recognizes revenue using a cost-based input method.

The Company recognizes collaboration revenue when its customer or collaborator obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

i.identify the contract(s) with a customer;

ii.identify the performance obligations in the contract;

iii.determine the transaction price;

iv.allocate the transaction price to the performance obligations within the contract and;

v.recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements may consist of a license, or options to license, the Company’s intellectual property and research, development and manufacturing services. The Company may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At

contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most-likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s accompanying balance sheet. Deferred revenues expected to be recognized as revenue within the 12 months following the balance sheet date are classified as a current liability. Deferred revenues not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as non-current liabilities.

The Company’s collaboration revenue arrangements includes the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes research and development milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most-likely amount approach. The Company primarily uses the most-likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty.) The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, the Company has not granted a development and commercialization license nor recognized any revenue related to sales-based royalties or milestone payments based on the level of sales.

Research and Development Services: The Company will record costs associated with development and process optimization activities as research and development expenses in the statement of operations and comprehensive loss consistent with ASC 730, Research and Development. The Company considered the guidance in ASC 808, Collaborative Agreements and will recognize the payments received from these agreements as revenue when the related costs are incurred.

Research and Development Costs

Research and development cost are expensed as incurred, and include salaries, stock-based compensation and other personnel-related costs, equipment and supplies, preclinical studies, clinical trials, and manufacturing development activities.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers, including contract research and manufacturing organizations. The Company accrues for expenses resulting from obligations under agreements with CROs, contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which materials or services are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid asset which will be amortized as the contracted services are performed. As actual costs become known, the Company adjusts its accruals and prepaid assets accordingly. Inputs, such as the services performed, the number of patients enrolled, or the study duration, may vary from the Company’s estimates, resulting in adjustments to research and development expense in future periods. The Company makes significant judgements and estimates in determining the accrual and/or prepaid balance in each reporting period and changes in these estimates may result in material changes to the Company’s accruals that could materially affect the Company’s results of operations.

Stock-Based Compensation

The Company recognizes the grant-date fair value of stock-based awards issued to employees and nonemployee board members as compensation expense on a straight-line basis over the vesting period of the award while awards containing a performance condition are recognized as expense when the achievement of the performance criteria is considered probable. The Company uses the Black-Scholes option pricing model to determine the grant-date fair value of stock options. The Company adjusts expense for forfeitures in the periods they occur.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statements and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in the period that includes the enactment date. Additionally, any changes in income tax laws are immediately recognized in the year of enactment.

A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized. The deferred tax assets and liabilities are classified as noncurrent along with the related valuation allowance. Due to a lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on the technical merits, as the largest amount of benefits that is more likely than not to be realized upon the ultimate settlement. The Company’s policy is to recognize interest and penalties related to the unrecognized tax benefits as a component of income tax expense.

Net Loss Per Share

Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as redeemable convertible preferred stock, convertible notes, stock options and unvested shares of restricted stock, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

December 31,

Redeemable convertible preferred stock as converted to common stock — 7,487,151

Other Comprehensive Income (Loss)

Other comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive loss is comprised of the net loss and unrealized gains and losses on short-term investments.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the "FASB") issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. ASU 2016-13 became effective for the Company during the first quarter of 2020. The Company adopted this pronouncement and it did not have a material impact on the financial statements or related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements, which changes the fair value measurement disclosure requirements of ASC 820, Fair Value Measurement (“ASC 820”). The goal of the ASU is to improve the effectiveness of ASC 820’s disclosure requirements. The standard is applicable to the Company for the fiscal year beginning January 1, 2020, and interim periods within that year. The Company adopted this pronouncement and it did not have a material impact on the financial statements or related disclosures.

Recently Issued Accounting Pronouncements (not yet adopted)

In February 2016, the FASB issued ASU No. 2016-02, Leases which requires a lessee to record a right-of-use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. On April 8, 2020, the FASB proposed to defer the effective date of this ASU until annual periods beginning after December 15, 2021. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions to the general principles in ASC 740, Income Taxes and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year, with early adoption permitted. The Company is currently evaluating the impact of this ASU, but does not expect a material impact to the financial statements upon adoption.

3. Short-Term Investments

The following table represents the Company’s available for sale short-term investments by major security type (amounts in thousands):

AmortizedCost Gross UnrealizedLoss TotalFair Value

Short-term investments:

AmortizedCost Gross UnrealizedGain/(Loss) TotalFair Value

Short-term investments:

The Company’s short-term investment instruments and cash and cash equivalents are classified using Level 1 inputs in within the fair value hierarchy and are valued using quoted market prices, broker or dealer quotations, or alternative pricing

sources with reasonable levels of price transparency. Debt securities as of December 31, 2020 have an average maturity of 0.6 years.

4. Property and Equipment

Property and equipment consisted of the following (amounts in thousands):

December 31,

Office equipment $ 105 $ 88

Construction in progress 355 —

Accumulated depreciation and amortization (1,480) (862)

Property and equipment, net $ 3,000 $ 2,437

Depreciation and amortization expense for the years ended December 31, 2020 and 2019 was $0.6 million and $0.5 million, respectively.

5. Accrued Expenses

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

December 31,

Research and development contract costs $ 5,382 $ 2,648

Compensation and related benefits 1,551 966

6. Commitments and Contingencies

Operating Leases

Future minimum payments, by year and in aggregate, under non-cancelable operating leases consist of the following as of December 31, 2020 (amounts in thousands):

Total minimum lease payments $ 6,183

The Company recognized rent expense of $0.4 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively.

Heat License Agreement

In connection with a license agreement with Heat Biologics Inc. (“Heat”), the Company is required to make payments of up to $20.6 million in aggregate for the achievement of specified development, regulatory and commercial sales milestones for certain licensed products. The Company is required to pay Heat a percentage of upfront fees or other non-royalty payments not tied to milestone events that it receives in connection with certain sublicenses of the licensed patents. The Company is also required to pay Heat a royalty on all of its worldwide net sales, those of its affiliates and sublicenses of certain licensed patents in the low single digits. The Company has not recorded a liability for the payments aforementioned given the achievement of

specified development, regulatory and commercial sales milestones for certain licensed products is not probable as of the balance sheet date.

Litigation

From time to time, the Company may become involved in various legal actions arising in the ordinary course of business. As of December 31, 2020, management was not aware of any existing, pending, or threatened legal actions that may have a material impact on the financial position, results of operations, or cash flows of the Company.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities for which the Company cannot reasonably predict future payment. The Company’s contractual obligations result primarily from obligations for various contract manufacturing organizations and clinical research organizations, which include potential payments we may be required to make under our agreements. The contracts also contain variable costs and milestones that are hard to predict as they are based on such things as patients enrolled and clinical trial sites. The timing of payments and actual amounts paid under CMO and CRO agreements may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations. Also, these agreements are cancellable upon written notice by the Company and, therefore, not long-term liabilities.

7. Preferred Stock

During the year ended December 31, 2020, the Company entered into various stock purchase agreements with new and existing investors pursuant to which the Company sold an aggregate 550,571 shares of Series B redeemable convertible preferred stock (“Series B”) and 1,319,964 shares of Series B-1 redeemable convertible preferred stock (“Series B-1”) at $62.88051 per share for net proceeds of $117.0 million.

The Company’s Series A, Series B and Series B-1 redeemable convertible preferred stock converted into common stock upon the completion of the IPO and the rights, preferences, and terms are no longer applicable.

8. Collaboration Agreement - Related Party

In August 2017, the Company entered into a Collaboration Agreement with Takeda related to the development of certain ARC molecules, as amended in April 2018, October 2018 and March 2020, (the “Collaboration Agreement”). Under the Collaboration Agreement, the Company is responsible to use commercially reasonable efforts to further research and development of six molecules. At the end of the development term Takeda may elect (on a molecule-by-molecule basis) to license exclusively and obtain exclusive rights to undertake further clinical development and commercialization of up to four molecules. Additionally, Takeda was granted a right of first negotiation (“ROFN”) to enter into licenses for each molecule within a specified class of ARC molecules.

The Company received payments of $14.0 million and $8.5 million in the years ended December 31, 2020 and 2019, respectively, and has recognized total revenue of $51.9 million through December 31, 2020 under the Collaboration Agreement. The Company assessed this arrangement in accordance with ASC 606 and concluded that the Collaboration Agreement had four distinct performance obligations representing the combination of research and development services and participation in a joint development committee associated with six molecules. The Company also concluded that since the option for the exclusive license is deemed to be at fair value, the option does not provide the customer with a material right; and should be accounted for if and when the option is exercised. Finally, the Company noted that the ROFN does not guarantee that Takeda can negotiate a license for molecules at prices that are below their respective standalone selling prices and further noted that if Takeda exercises the ROFN, the license fee will be negotiated at standalone selling price for each molecule.

The Company recognizes revenue for the allocated up-front payments using a cost-based input measure. In applying the cost-based input method of revenue recognition, the Company used actual costs incurred relative to budgeted costs expected to be incurred for the combined performance obligation. Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligation over the estimated service period. The Company recognizes revenue related to the reimbursable cost as they are incurred.

9. Stock-Based Compensation

In September 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”) which, as of the adoption date, replaced the 2016 Stock Incentive Plan. As of December 31, 2020, there were no shares available for future grants under the 2016 Stock Incentive Plan. The total number of shares authorized under the 2020 Plan as of December 31, 2020 was 3,957,953. 3,730,934 shares are available for future grants as of December 31, 2020. The 2020 Plan permits the granting of

options and restricted stock. The terms of the agreements under the 2020 Plan are determined by the Company’s Board of Directors. The Company’s awards vest based on the terms in the agreements and generally vest over four years and have a term of 10 years.

The Company recorded stock-based compensation expense in the following expense categories of its accompanying audited statements of operations and comprehensive loss (amounts in thousands):

Year Ended December 31,

Research and development $ 531 $ 217

General and administrative 735 244

Total stock-based compensation $ 1,266 $ 461

The following table summarizes option activity under the 2020 Plan and the 2016 Stock Incentive Plan:

Options WeightedAverageExercise Price WeightedAverageRemaining Life(Years)

Options granted during the years ended December 31, 2020 and 2019 had weighted-average grant-date fair values of $8.93 and $1.87 per share, respectively. As of December 31, 2020, the unrecognized compensation cost was $12.4 million and will be recognized over an estimated weighted-average amortization period of 2.77 years. The aggregate intrinsic value of options exercised as of December 31, 2020 and 2019 was $49.7 million and $0.4 million, respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2020 was $42.9 million.

The fair value of each option is estimated on the date of grant using a Black-Scholes option pricing model which takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at grant date, expected term, expected stock price volatility, risk-free interest rate, and dividend yield. The fair value of stock options during the years ended December 31, 2020 and 2019 was determined using the methods and assumptions discussed below.

•The expected term of employee stock options with service-based vesting is determined using the “simplified” method, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. The expected term of nonemployee options is equal to the contractual term.

•The expected stock price volatility is based on historical volatilities of comparable public entities within the Company’s industry.

•The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the expected term.

•The expected dividend yield is 0% because the Company has not historically paid, and does not expect, for the foreseeable future, to pay a dividend on its common stock.

•Prior to the Company’s IPO, its Board of Directors periodically estimated the fair value of the Company’s common stock considering, among other things, contemporaneous valuations of its common stock prepared by an unrelated third-party valuation firm. Subsequent to the Company’s IPO, the shares are issued at no less than the market price on date of grant.

The grant date fair value of each option grant was estimated throughout the year using the Black-Scholes option-pricing model using the following weighted-average assumptions:

Year Ended December 31,

Expected term - years 5.94 5.96

Expected volatility 75.3 % 64.9 %

Risk-free interest rate 0.5 % 1.8 %

Expected dividends — —

Fair value of common stock $ 13.34 $ 3.17

For accounting purposes, the restricted shares are considered the issuance of share-based payments as opposed to the sale of stock and as such, the Company has recognized compensation expense for these awards. Twenty-five percent of the shares became immediately vested and the remaining shares vest monthly over 36 months so long as the executive remains employed by or provides service to the Company. In the event the grantee ceases to provide service, the Company has the option to repurchase any or all of the unvested shares at the original issuance price.

The following table summarizes the activity relating to these shares:

Awards

10. Income Taxes

The Company recorded no federal provision for income taxes as of December 31, 2020 and 2019 due to reported net losses since inception. A reconciliation of the expected income tax expense (benefit) computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2020 and 2019 (amounts in thousands):

Year Ended December 31,

Income tax benefit computed at federal statutory tax rate $ (7,687) $ (5,036)

State income taxes — —

Change in valuation allowance 8,717 5,291

Return to provision adjustments (745) (24)

General business credits (1,114) (672)

Other permanent differences 119 82

Change in uncertain tax position 223 359

Income tax benefit $ — $ —

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows (amounts in thousands):

December 31,

Deferred tax asset:

Net operating loss carryforwards $ 9,891 $ 2,948

Accrued expenses and other 1,345 251

Capital loss carryforwards 27 —

Deferred tax liability:

Depreciation and amortization (121) (158)

Prepaid expenses (378) (16)

Total deferred tax liability (499) (174)

Total net deferred tax asset $ — $ —

The Company has established a valuation allowance equal to the net deferred tax asset due to uncertainties regarding the realization of the deferred tax asset based on the Company’s lack of earnings history. The valuation allowance increased by $8.7 million and $5.3 million during the years ended December 31, 2020 and 2019, respectively, primarily due to continuing loss from operations, general business credit carryforwards, and deferred revenue.

As of December 31, 2020 and 2019, the Company had gross U.S. net operating loss carryforwards (“NOLs”) of $47.1 million and $14.0 million, respectively. As of December 31, 2020 and 2019, the Company had gross state net operating loss carryforwards of $0.2 million. As of December 31, 2020 and 2019, the Company had U.S. tax credit carryforwards of $4.5 million and $2.3 million, respectively. The net operating loss and tax credit carryforwards will begin to expire in 2036, if not utilized. The net operating loss and credit carryforwards are subject to Internal Revenue Service adjustments until the statute closes on the year the net operating loss or credit carryforwards are utilized.

Section 382 of the Internal Revenue Code limits the utilization of NOLs following a change of control. After the 2019 financial statements were filed, the Company completed a Section 382 study from formation through October 14, 2020. Although an ownership change occurred during 2020, no NOL carryforwards or R&D credit carryforwards which the Company has recorded a deferred tax asset for are expected to expire as a result of the limitation.

A reconciliation of the Company’s liability for unrecognized tax benefits is as follows:

Year Ended December 31,

Balance, beginning of the year $ 560 $ 201

Increase for tax positions related to the current year 223 359

Decrease for tax positions related to prior years — —

Balance, end of year $ 783 $ 560

All of the Company’s gross unrecognized tax benefits, if recognized, would affect its effective tax rate. The Company does not expect unrecognized tax benefits to decrease within the next twelve months due to the lapse of statute limitations. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2020, the Company has not accrued any interest or penalties related to unrecognized tax benefits.

The Company files income tax returns in the U.S. and state jurisdictions. The Company is subject to examination by taxing authorities in its significant jurisdictions for the 2017, 2018, and 2019 tax years. There are no federal or state income tax audits in progress.

11. Related Party

As of December 31, 2019, Takeda had a right to appoint a director to the Company’s Board of Directors and held an approximate 14% ownership interest in the Company’s outstanding shares. As a result, all revenue, accounts receivable and deferred revenue related to the Collaboration Agreement in 2019 represented related party transactions. Following the completion of the IPO in October 2020, the director appointed by Takeda resigned from the Company’s Board of Directors. As of December 31, 2020 Takeda held an approximate 5.0 % ownership interest in the Company’s outstanding shares. Considering the resignation of the Takeda director and percent ownership as of December 31, 2020, the Company no longer considers Takeda a related party. Prepaids and other current assets includes $2.6 million and none as of December 31, 2020 and 2019, respectively, of costs that are reimbursable by Takeda under the Collaboration Agreement.

12. Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through March 16, 2021, the date at which the financial statements were available to be issued, and there are no other items requiring disclosure except for the following:

In January 2021, the Company entered into a lease agreement for the Company’s office located in Austin, Texas. The lease includes approximately 8,000 square feet and has an expiration date of 6 years from commencement, which is expected in the second quarter of 2021. Total rent payments are estimated to be $1.8 million over the lease term.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures. Based on this evaluation of our disclosure controls and procedures as of December 31, 2020, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Annual Report on Internal Control Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies. Additionally, for as long as we remain an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, we intend to take advantage of the exemption permitting us not to comply with the requirement that our independent registered public accounting firm provide an attestation on the effectiveness of our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

On March 12, 2021, we entered into amendments to the employment agreements with Taylor Schreiber, Lini Pandite, Casi DeYoung, Andrew R. Neill, and Erin Ator Thomson.On March 12, the Board determined to eliminate the position of Executive Chairman effective as of April 1, 2021, on which date Josiah Hornblower’s employment with the Company will terminate. On such date, he will remain as non-executive Chairman of the Board.See Part III, Item 11. “Executive Compensation—Employment Agreements & 2020 Equity Awards” and “Executive Compensation—Post-Employment Compensation and Change in Control Payments and Benefits.”

Part III.

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

The following table sets forth certain information regarding our executive officers and directors as of March 16, 2021.

Name Age Position

Executive Officers

Josiah Hornblower (1) 45 Executive Chairman and Director

Taylor Schreiber, M.D., Ph.D. 41 Chief Executive Officer and Director

Lini Pandite, MBChB 62 Chief Medical Officer

Casi DeYoung 50 Chief Business Officer

Erin Ator Thomson 41 General Counsel

Andrew R. Neill 35 Chief Financial Officer

Non-Employee Directors

Helen M. Boudreau (2)(3) 55 Director

Tyler Brous (2)(3) 38 Director

Neil Gibson, Ph.D. (2)(4) 64 Director

George Golumbeski, Ph.D. (3)(4) 63 Director

Michael Lee(4) 41 Director

__________

(2) Member of the audit committee.

(3) Member of the compensation committee.

(4) Member of the nominating and corporate governance committee.

Our Board is divided into three classes, with members of each class holding office for staggered three-year terms. There are currently three Class I directors (Mr. Brous, Mr. Hornblower and Mr. Lee), whose terms expire at the 2021 annual meeting of stockholders; two Class II directors (Dr. Gibson and Dr. Golumbeski), whose terms expire at the 2022 annual meeting of stockholders; and two Class III directors (Ms. Boudreau and Dr. Schreiber), whose terms expire at the 2023 annual meeting of stockholders (in all cases until their successors have been elected and qualified or until the earlier of their resignation or removal).

The following is a biographical summary of the experience of our executive officers and directors:

Executive Officers

Josiah Hornblower. Mr. Hornblower founded Shattuck with Dr. Schreiber and has served on our Board since the company’s founding. He currently serves as the Executive Chairman of our Board. He previously served as our Chief Executive Officer and President from May 2016 to January 2020. Mr. Hornblower is a private biotechnology entrepreneur and has been involved in starting and operating several biotechnology companies. He co-founded Pelican Therapeutics, Inc. in 2009 and served as its Chief Executive Officer until it was sold in 2017. He currently serves on the boards of Population Bio, Inc., a gene discovery company, and the Daniel K. Thorne Foundation, where he heads the investment committee. Mr. Hornblower earned his B.A. in Art History from Trinity College and was a member of Phi Beta Kappa.

We believe Mr. Hornblower is qualified to serve on our Board because of his extensive experience forming and building biotechnology companies.

Taylor Schreiber, M.D., Ph.D. Dr. Schreiber is a co-founder of Shattuck. He served as our Chief Scientific Officer from January 2017 until January 2020, when he became our Chief Executive Officer, and has been a member of our Board since 2017. Dr. Schreiber is the lead inventor of Shattuck’s ARC and GADLEN technology platforms. From March 2014 to July 2015, Dr. Schreiber served as Vice President of Research & Development of Heat Biologics, Inc., an immunotherapy-focused biotechnology company, and subsequently served as Chief Scientific Officer of Heat Biologics until December 2016. He was a co-inventor of significant elements of Heat Biologics’ ImPACT and ComPACT technology platforms. From January 2011 to

March 2017, he also served as Chairman of the Scientific Advisory Board of Pelican Therapeutics, Inc. and was a co-inventor of Pelican’s TNFRSF25 agonist technology. Dr. Schreiber earned his B.A. in Biology from Bucknell University and his M.D. and Ph.D. from the Sheila and David Fuente Program in Cancer Biology at the University of Miami Miller School of Medicine.

We believe Dr. Schreiber is qualified to serve on our Board because of his extensive experience in the biopharmaceutical industry.

Lini Pandite, MBChB. Dr. Pandite has served as our Chief Medical Officer since July 2017. From May 2015 to June 2017, Dr. Pandite served as Head of Global Clinical Development and Senior Vice President at Adaptimmune Therapeutics plc, a clinical-stage biopharmaceutical company, where she was responsible for clinical development of the company’s immuno-oncology pipeline. From May 2001 to April 2015, Dr. Pandite served in a number of roles at GlaxoSmithKline plc, including Vice President, Medicines Development Leader, and Head Unit Physician for Oncology. Dr. Pandite was an attending physician at Sylvester Comprehensive Cancer Center/Jackson Memorial Hospital in Miami from January 1998 to November 2000 and at Dana Farber Cancer Institute in Boston from July 1993 to August 1996, and has held academic appointments at Harvard University and the University of Miami. She earned her MBChB from The University of Liverpool, England and her M.B.A. from Duke University.

Casi DeYoung. Ms. DeYoung has served as our Chief Business Officer since December 2019. From June 2018 to December 2019, Ms. DeYoung served as Vice President and Chief Operating Officer for ImmuneSensor Therapeutics, an immunotherapy-focused biotechnology company, where she was responsible for corporate strategy, start-up operations, intellectual property, oversight of the company’s first IND filing, and the initiation of a first-in-human Phase I clinical trial. She served as Chief Business Officer at Mirna Therapeutics, Inc., an oncology-focused biopharmaceutical company, from March 2014 to June 2017, Vice President of Business Development at Reata Pharmaceuticals, Inc. from May 2008 to December 2013, Vice President of Business Development at ODC Therapy, Inc. from November 2005 to March 2008, and in various roles at EMD Pharmaceuticals, Inc. and Merck KGaA from 2000 to 2005. Ms. DeYoung earned her B.S. in Chemistry from Southwestern University and her M.B.A. from the McCombs School of Business at the University of Texas at Austin.

Erin Ator Thomson. Ms. Thomson has served as our General Counsel since October 2017. From 2007 to 2017, she was an Associate, and later Counsel, at the law firm of Vinson & Elkins LLP in Austin, Texas, where she advised both early-stage biotech and pharma clients on a wide range of intellectual property and other legal issues, including strategic transactions, in-bound and out-bound licenses, collaborations, mergers and acquisitions, freedom-to-operate analyses, due diligence, assessment of IP portfolios, patent litigation, and licensing disputes. Ms. Thomson earned her B.S. in Biology from Pepperdine University and her J.D. from Baylor University, where she graduated summa cum laude. She conducted post-graduate research at the University of California, San Francisco and clerked for Chief Justice Wallace Jefferson of the Supreme Court of Texas. She is admitted to practice law in Texas and is a registered U.S. patent attorney.

Andrew R. Neill. Mr. Neill has served as our Chief Financial Officer since March 2021. He previously served as our Vice President of Finance and Corporate Strategy from July 2020 to March 2021 and as our Vice President of Corporate Development and Strategy from May 2017 to July 2020. From August 2010 to August 2016, Mr. Neill was the co-founder of Lumos Pharma, Inc., a biopharmaceutical company focused on developing therapeutics for genetic rare diseases. From March 2009 to February 2014, Mr. Neill served as Analyst at Innovations in Drug Development, LLC, a pharmaceutical and biotechnology research management consulting company. Mr. Neill earned his B.B.A. from Texas Christian University and his M.B.A. with majors in Health Care Management and Finance from The Wharton School at the University of Pennsylvania, where he was a Kaiser Fellow.

Non-employee Directors

Helen M. Boudreau. Ms. Boudreau has served as a member of our Board since July 2020. Ms. Boudreau has 30 years of experience across the biotechnology, pharmaceutical, consulting and banking industries. Most recently, from June 2018 to June 2019, she was Chief Operating Officer of the Bill & Melinda Gates Medical Research Institute, a non-profit biotechnology company. Previously, she served as Chief Financial Officer from July 2017 to June 2018 and board member from February 2016 to July 2017 for Proteostasis Therapeutics, Inc., a clinical-stage biopharmaceutical company. From October 2014 to June 2017, she served as Chief Financial Officer for FORMA Therapeutics, Inc., a clinical-stage biopharmaceutical company. Ms. Boudreau spent 16 years at Novartis and Pfizer in progressively senior finance and strategy roles, and worked earlier in her career at McKinsey & Company and Bank of America. She is currently a member of the board of directors of Premier, Inc., a healthcare improvement company, Field Trip Health, Evaxion Biotech, and Rallybio, a biotechnology company. Ms. Boudreau earned her B.A. in Economics from the University of Maryland, where she graduated summa cum laude, and her M.B.A. from the Darden Graduate School of Business at the University of Virginia.

We believe Ms. Boudreau is qualified to serve on our Board because of her financial expertise and extensive experience with biotechnology companies.

Tyler Brous. Mr. Brous has served on our Board since September 2016. He has worked at Lennox Capital Partners, a private equity firm, since 2011, and currently serves as its Managing Director and Portfolio Manager. From 2014 to 2016, Mr. Brous worked at Arog Pharmaceuticals, an oncology-focused pharmaceutical company, in various roles, including the acting Chief Financial Officer, leading their capital markets and business development efforts. Prior to joining Lennox Capital Partners, Mr. Brous worked as a senior analyst at YX Funds, a hedge fund in Dallas, from 2007 to 2011. Mr. Brous started his career in the M&A group of Citigroup in New York. He has served on the board of directors of ColdQuanta, Inc since 2020 and previously served on the board of CerSci Therapeutics, Inc. from 2018 until its sale in 2020. Mr. Brous earned his B.S. in Finance and Business Honors from the University of Texas, where he graduated summa cum laude.

We believe Mr. Brous is qualified to serve on our Board because of his extensive experience investing in, guiding, and leading biotech companies.

Neil Gibson, Ph.D. Dr. Gibson has served as a member of our Board since November 2016. Dr. Gibson has served as President and Chief Executive Officer of Adanate, a COI Pharmaceuticals, Inc. company focused on immunotherapies, since 2017, where he is responsible for the creation of novel drug discovery companies based on innovative and disruptive technologies. Dr. Gibson has held various senior positions within the biotechnology and pharmaceutical industry, including President and Chief Executive Officer of PDI Therapeutics from 2017 to 2020; Senior Vice President of BioAtla, Inc. from 2015 to 2016; Chief Scientific Officer of Regulus Therapeutics from 2011 to 2015; and Chief Scientific Officer and Oncology Therapeutic Area Head of Pfizer Oncology from 2007 to 2011. While at Pfizer, Dr. Gibson was also a member of the Pfizer Oncology Business Unit Executive team. Dr. Gibson has served on the board of TCR2 and Causeway Therapeutics since 2017 and previously served on the board of Cytosen Therapeutics from 2016 to 2019. Dr. Gibson earned his B.Sc. in Pharmacy from the University of Strathclyde in Glasgow, Scotland and his Ph.D. from the University of Aston in Birmingham, England.

We believe Dr. Gibson is qualified to serve on our Board because of his extensive experience as an executive officer in the biopharmaceutical industry.

George Golumbeski, Ph.D. Dr. Golumbeski has served as a member of our Board since January 2018 and has more than 25 years of experience in the biotechnology industry. From August 2018 to August 2019, he served as President of GRAIL, Inc., an oncology-focused healthcare company. From March 2009 to April 2018, Dr. Golumbeski served as the Executive Vice President of Business Development of Celgene Corporation, an oncology and immunology-focused pharmaceutical company, where he was responsible for forging collaborations with biotechnology companies seeking to bring breakthrough medications to people suffering from cancer and chronic inflammation. He currently serves on the board of directors of several biotechnology companies, including MorphoSys AG, Sage Therapeutics, Inc., and Carrick Therapeutics. Dr. Golumbeski earned his B.S. in Biology from the University of Virginia and his Ph.D. in Genetics from the University of Wisconsin-Madison, and conducted his post-doctoral research in molecular biology at the University of Colorado-Boulder.

We believe Dr. Golumbeski is qualified to serve on our Board because of his extensive management experience and service on the boards of directors of numerous biotech companies.

Michael Lee. Mr. Lee has served as a member of our Board since June 2020. Mr. Lee has served as Co-Founder and Portfolio Manager at Redmile Group, LLC, a health care-focused investment firm based in San Francisco and New York, since 2007. Prior to Redmile, he worked as a biotechnology investor at Steeple Capital, Welch Capital Partners and Prudential Equity Group. Mr. Lee currently serves on the board of directors of Fate Therapeutics, Inc. and IGM Biosciences, Inc. Mr. Lee earned his B.S. in Molecular and Cellular Biology from the University of Arizona.

We believe Mr. Lee is qualified to serve on our Board because of his long industry experience and experience as an investor in biotechnology companies.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Code of Conduct

We have adopted a Code of Conduct and Ethics that establishes the standards of ethical conduct applicable to all our directors, officers and employees. It addresses, among other matters, compliance with laws and policies, conflicts of interest, corporate opportunities, regulatory reporting, external communications, confidentiality requirements, insider trading, proper use of assets, and how to report compliance concerns. A copy of the code is available on the Corporate Governance section of our website, which is located at https://ir.shattucklabs.com/corporate-governance/documents-and-charters. We intend to disclose any amendments to the Code of Conduct and Ethics, or any waivers of its requirements, on our website to the extent required by applicable rules. The Audit Committee is responsible for applying and interpreting our Code of Conduct and Ethics in situations where questions are presented to it.

Audit Committee and Audit Committee Financial Expert

We have a separately designated standing Audit Committee. The members of our Audit Committee are Helen M. Boudreau, Tyler Brous, and Neil Gibson, each of whom qualifies as an “independent” director for audit committee purposes, as defined under SEC and Nasdaq listing rules and has sufficient knowledge in financial and auditing matters to serve on the audit committee. Ms. Boudreau chairs the Audit Committee. Additionally, Ms. Boudreau qualifies as an “audit committee financial expert” as defined under SEC rules.

Item 11. Executive Compensation

Our named executive officers, or NEOs, for 2020, which consist of our principal executive officers in 2020 and our two other most highly compensated executive officers who served during the year ended December 31, 2020, are:

•Dr. Taylor Schreiber, our Chief Executive Officer;

•Josiah Hornblower, our Executive Chairman and former Chief Executive Officer(1);

•Arundathy Nirmalini (Lini) Pandite, our Chief Medical Officer; and

•Casi DeYoung, our Chief Business Officer.

2020 Summary Compensation Table

The following table summarizes the compensation awarded to, earned by or paid to our NEOs for the years ended December 31, 2020 and 2019.Dr. Schreiber and Ms. DeYoung were not NEOs for 2019 and thus only their compensation for the year ended December 31, 2020 is included.

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Outstanding Equity Awards at 2020 Fiscal-Year End

The following table sets forth information regarding outstanding equity awards as of December 31, 2020 for each of our NEOs. These awards have been adjusted to reflect our 6.85 for 1 stock split that occurred effective October 1, 2020.

Option Awards(1) Stock Awards(2)

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All company equity awards currently outstanding, including stock options and stock awards held by our named executive officers, that were granted prior to the completion of our IPO in October 2020 were granted under the Shattuck Labs, Inc. 2016 Stock Incentive Plan. Such plan was discontinued in connection with the IPO and outstanding awards thereunder were cancelled and replaced with equivalent awards under our 2020 Stock Incentive Plan. All equity awards granted following October 2020 were granted under the Shattuck Labs, Inc. 2020 Equity Incentive Plan.

Employment Agreements & 2020 Equity Awards

Taylor Schreiber

We are party to an employment agreement with Dr. Taylor Schreiber, effective as of December 5, 2019.On March 27, 2020, Dr. Schreiber’s employment agreement was amended to reflect his transition to serve as the Chief Executive Officer as of January 29, 2020, and this agreement was further amended on March 12, 2021. The agreement provides for his base salary, eligibility to receive an annual performance bonus with a target bonus amount of 30% of his base salary and eligibility to participate in the company’s employee benefit plans. The agreement provides for employment on an at-will basis and thus either party may terminate at any time for any or no reason, subject to 30 days’ notice for Dr. Schreiber and the severance provisions described below in the section titled “Post-Employment Compensation and Change in Control Payments and Benefits.” Dr. Schreiber’s base salary was increased to $400,000 effective as of January 29, 2020, and increased to $525,000 effective as of January 1, 2021 with a target bonus amount of 50%.

JosiahHornblower

We are party to an employment agreement with Josiah Hornblower, effective as of December 5, 2019.On March 27, 2020, Mr. Hornblower’s employment agreement was amended to reflect his transition to the Executive Chairman role effective as of January 29, 2020. The agreement provides for his base salary, eligibility to receive an annual performance bonus with a target bonus amount of 30% of his base salary and eligibility to participate in the company’s employee benefit plans. The agreement provides for employment on an at-will basis and thus either party may terminate at any time for any or no reason, subject to 30 days’ notice for Mr. Hornblower. Mr. Hornblower’s base salary was increased to $368,000 effective as of January 1, 2021. In connection with the Board’s decision to eliminate the role of Executive Chairman, Mr. Hornblower will step down from employment with the Company effective as of April 1, 2021. Such separation will be treated as a termination of employment without cause and Mr. Hornblower will be entitled to severance pursuant to the terms of his employment agreement. Such severance benefits are described below in the section titled “Post-Employment Compensation and Change in Control Payments and Benefits.”

LiniPandite

We are party to an employment agreement with Lini Pandite, effective as of December 5, 2019, pursuant to which she serves as our Chief Medical Officer. This agreement was amended on March 12, 2021. The agreement provides for her base salary, eligibility to receive an annual performance bonus with a target bonus amount of 35% of base salary and eligibility to participate in the company’s employee benefit plans. The agreement provides for employment on an at-will basis and thus either party may terminate at any time for any or no reason, subject to 30 days’ notice for Dr. Pandite and the severance provisions described below in the section titled “Post-Employment Compensation and Change in Control Payments and Benefits.” Dr. Pandite’s base salary was increased to $435,000 effective as of July 15, 2020 and increased to $465,000 effective as of January 1, 2021 with a target bonus amount of 40%.

Casi DeYoung

We are party to an employment agreement with Casi DeYoung, effective as of December 9, 2019, pursuant to which she serves as our Chief Business Officer. This agreement was amended on March 12, 2021. The agreement provides for her base salary, eligibility to receive an annual performance bonus with a target bonus amount of 30% of base salary and eligibility to participate in the company’s employee benefit plans. The agreement provides for employment on an at-will basis and thus either party may terminate at any time for any or no reason, subject to 30 days’ notice for Ms. DeYoung and the severance provisions described below in the section titled “Post-Employment Compensation and Change in Control Payments and Benefits.” Ms. DeYoung’s base salary was increased to $380,000 effective as of January 1, 2021 with a target bonus amount of 40%.

2020 Annual Bonus Program

At the beginning of 2020, the Compensation Committee of our Board established overall corporate performance goals and a methodology by which employees, including each of our NEOs, would be awarded an annual bonus based on achievement of the corporate performance goals. In addition, the Compensation Committee established that each of our NEOs would be eligible for bonus awards of up to the following target bonus amounts: Dr. Schreiber-$120,000, Mr. Hornblower-$97,500, Dr. Pandite-$152,250, and Ms. DeYoung-$102,000. The corporate performance goals included key milestones with respect to company products, financing, manufacturing, and research and development. Personal responsibility for achievement of, and individual performance in support of, the enumerated corporate goals was also evaluated by the Compensation Committee in assessing final performance for the year. Following its assessment of the level of achievement of the corporate goals in December of 2020, the Compensation Committee approved final bonus payments to the NEOs at 97% of target as follows: Dr. Schreiber-$116,400, Mr. Hornblower-$94,575, Dr. Pandite-$147,683, and Ms. DeYoung-$98,940. Such bonus payments were made in early 2021.

Post-Employment Compensation and Change in Control Payments and Benefits

Employment Agreements

Pursuant to the terms of the employment agreements with each of the NEOs, upon a termination without cause or resignation with good reason not in connection with a change in control, the NEO will receive, subject to his execution and non-revocation of a release of claims in favor of the company, or the Release Condition, and continued compliance with restrictive covenants, (i) severance payments equal to one times, or the Severance Multiplier, the sum of (a) the NEO’s annual base salary and (b) target bonus, payable in equal installments in accordance with the company’s normal payroll practices for 12 months, (ii) a pro-rata annual bonus based on actual performance, (iii) accelerated vesting of all unvested equity awards (with performance-based awards earned at the target level of performance) and (iv) payment of COBRA premiums for up to twelve months, or, if sooner, until eligible for similar coverage through another employer (we refer to (i) through (iv) collectively as the Severance Payments).

If the NEO is terminated without cause or resigns for good reason within 30 days prior to, or 2 years following, a change in control, then, subject to the Release Condition, the NEO will also be entitled to the Severance Payments; provided, however, the Severance Multiplier will be 2.0x.

The March 12, 2021 amendments to Dr. Schreiber’s, Ms. DeYoung’s and Dr. Pandite’s employment agreements each provided for a modest cash bonus of $7,500, in exchange for the NEO’s agreement to revised severance entitlements designed to better reflect market practices among our public company peer group. In the event of a termination without cause or a resignation with good reason not in connection with a change in control, each NEO will now receive (i) severance payments equal to 1.0 times the NEO’s annual base salary, (ii) any earned but unpaid prior year annual bonus and a pro-rata annual bonus for the year of termination based on actual performance, (iii) accelerated vesting of all unvested equity awards granted on or prior to December 1, 2020 (with performance-based awards earned at the target level of performance) and (iv) payment of COBRA premiums for up to 12 months, or, if sooner, until eligible for similar coverage through another employer.If the NEO is terminated without cause or resigns for good reason within 30 days prior to, or 12 months (reduced from 2 years) following, a change in control, then the NEO severance multiplier will be increased from one to 1.5 and will apply to both the executive’s annual base salary and target annual bonus, all outstanding equity awards will fully accelerate regardless of grant date, and the maximum COBRA premium payment period will be extended from 12 to 18 months. Severance payments remain subject to the Release Condition and compliance with restricted covenants.

A similar employment agreement amendment was entered into on March 12, 2021 with Andrew R. Neill, which, in addition to the above severance revisions also provided for his promotion to the role of Chief Financial Officer, an increase in his base salary from $350,000 to $390,000 and an increase in his target annual incentive opportunity from 30% to 40% of base salary. A similar employment agreement amendment was also entered into with our General Counsel, Erin Ator Thomson that made only the severance changes noted above.

“Good Reason” under each of the NEO employment agreements generally means the occurrence of any of the following events, without the executive’s consent, provided, in each case, that such event is not cured within 30 days after the company receives notice from the executive specifying in reasonable detail the event constituting Good Reason: (i) failure to pay the annual base salary or annual bonus when due, (ii) a reduction in the annual base salary or annual bonus, (iii) any diminution in the executive’s title or any substantial and sustained diminution in the executive’s duties or (iv) a required relocation of the executive’s primary work location by more than 25 miles.

“Cause” under each of the NEO employment agreements generally means: (i) indictment for, conviction of, or a plea of nolo contendere to, (x) a felony (other than traffic-related) under the laws of the United States or any state thereof or any similar criminal act in a jurisdiction outside the United States or (y) a crime involving moral turpitude that could be injurious to the company or its reputation, (ii) willful malfeasance or willful misconduct which is materially and demonstrably injurious to the company, (iii) any act of fraud in the performance of executive’s duties or (iv) a material breach of any agreement with the company or any of the company’s material policies.

“Change in Control” under each of the NEO employment agreements generally means the occurrence of one or more of the following events: (i) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) or “group” (as such term is used in Section 13(d)(3) of the Exchange Act), other than the company or its subsidiaries or any benefit plan of the company or its subsidiaries is or becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the voting stock of the company; (ii) the company transfers all or substantially all of its assets (unless the stockholders of the company immediately prior to such transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the voting stock of the company, all of the voting stock or other ownership interests of the entity or entities, if any, that succeed to the business of the company or the company’s ultimate parent company if the company is a subsidiary of another corporation); or (iii) any merger, reorganization, consolidation or similar transaction unless, immediately after consummation of such transaction, the stockholders of the company immediately prior to the transaction hold, directly or indirectly, more than 50% of the voting stock of the company or the company’s ultimate parent company if the company is a subsidiary of another corporation.

Each employment agreement provides that, to the extent that any payments would be subject to the excise tax imposed under Section 4999 of the Code, each executive will be entitled to receive either (a) the full amount of payments and benefits in connection with their employment with the company or (b) a portion of the payments and benefits having a value equal to $1 less than three times the NEO’s “base amount” (as defined in Section 280G(b)(3)(A) of the Code), whichever results in the receipt of the greater amount on an after-tax basis.

Director Compensation

Prior to our initial public offering during 2020, each of our non-employee directors received cash fees of $5,000 per meeting attended to compensate them for their services on the Board.

Our Board has adopted a non-employee director compensation policy, which became effective upon completion of our initial public offering. Under this policy, each non-employee director is paid cash compensation as set forth below:

Annual retainer for Board membership (other than the Chairman) $ 35,000

Annual retainer for Non-Executive Chairman of the Board (if applicable) $ 65,000

Annual retainer for Lead Independent Director (if applicable) $ 60,000

Additional annual retainers

• Chair of the Audit Committee $ 15,000

• Chair of the Compensation Committee $ 10,000

• Chair of the Nominating and Corporate Governance Committee $ 8,000

• Member of the Audit Committee (other than Chair) $ 7,500

• Member of the Compensation Committee (other than Chair) $ 5,000

In addition to the annual retainers, each of our non-employee directors is granted equity awards consisting of (i) an initial, one-time award of stock options, restricted stock or restricted stock units, as determined in the discretion of the Compensation Committee, to each new non-employee director upon his or her election to the Board, with a grant date fair value equal to $140,000 that vests over a three-year period, subject to such director’s continued service; and (ii) an annual award of stock options, restricted stock or restricted stock units, as determined in the discretion of the Compensation Committee, with a grant date fair value equal to $70,000 that vests on the first anniversary of the date of grant (or if sooner, immediately prior to the next annual meeting of the Company’s stockholders).

The total amount of cash retainers paid and equity awards (valued based on the grant date fair value) granted by the Company to any director for his or her service on the Board will not exceed $750,000 in any fiscal year.

The Board periodically reviews the non-employee director compensation policy and may revise the compensation arrangements for our directors from time to time.

STTK US Equity

STTK · 10-K · period ended 2020-12-31

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

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

Item 8. Audited Financial Statements

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

STTK US Equity☆

STTK · 10-K · period ended 2020-12-31

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

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

Item 8. Audited Financial Statements

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

STTK US Equity