Correspondence 0001193125-23-108843 from ACELYRIN, Inc. (SLRN) (CIK 0001962918)
ACELYRIN, Inc. (SLRN) (CIK 0001962918)
Date: April 20, 2023 · CIK: 0001962918 · Accession: 0001193125-23-108843
AI Filing Summary & Sentiment
File numbers found in text: 333-271244
Referenced dates: March 15, 2023
Letter
BY EDGAR
Chadwick Mills
T: (650) 843-5654
cmills@cooley.com
*FOIA Confidential Treatment Request*
Confidential Treatment Requested by ACELYRIN, INC.
In connection with its Registration Statement on Form S-1 (File No. 333-271244)
April 20, 2023
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Life Sciences
100 F Street, N.E.
Washington, D.C. 20549
Attention: Cindy Polynice
Suzanne Hayes
Ibolya Ignat
Vanessa Robertson
Re: ACELYRIN, INC.
Registration Statement on Form S-1
Filed April 13, 2023
File No. 333-271244
Ladies and Gentlemen:
On behalf of ACELYRIN, INC. (the “Company”), we submit this supplemental letter in response to comments from the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) received by letter dated March 15, 2023 (the “Initial Comment Letter”) relating to the Company’s Registration Statement on Form S-1, originally confidentially submitted to the Commission on February 10, 2023, resubmitted to the Commission on March 24, 2023, and filed with the Commission on April 13, 2023 (the “Registration Statement”). This supplemental letter addresses comment 11 of the Initial Comment Letter.
Because of the commercially sensitive nature of certain information contained herein, this supplemental letter is accompanied by the Company’s request for confidential treatment for selected portions of this supplemental letter. The Company has filed separate correspondence with the Office of Freedom of Information and Privacy Act Operations in connection with its confidential treatment request, pursuant to Rule 83 of the Commission’s Rules on Information and Requests, 17 C.F.R. §200.83. For the Staff’s reference, we have enclosed a copy of the Company’s correspondence to the Office of Freedom of Information and Privacy Act Operations, as well as an unredacted copy of this supplemental letter, marked to show the portions redacted from the version filed via EDGAR and for which the Company is requesting confidential treatment.
For the convenience of the Staff, we have recited the prior comment from the Initial Comment Letter in italicized type and have followed the comment with the Company’s response.
11. Once you have an estimated offering price or range, please explain to us how you determined the fair value of the common stock underlying your equity issuances and the reasons for any differences between the recent valuations of your common stock leading up to the IPO and the estimated offering price. This information will help facilitate our review of your accounting for equity issuances. Please discuss with the staff how to submit your response.
FOIA Confidential Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Two
The Company’s discussion of its accounting for stock-based compensation is primarily contained within the sections of the Registration Statement entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates—Stock-Based Compensation Expense and “—Determination of Fair Value of Common Stock” appearing on pages 121 through 122 of the Registration Statement.
The Company submits the below additional information to assist the Staff in its review of the Company’s position with respect to its determination of the fair value of the shares of common stock underlying its outstanding equity awards and the reasons for the difference between the recent valuations of the common stock and the estimated offering price for its initial public offering (“IPO”).
Preliminary IPO Price Range
The Company advises the Staff that it preliminarily estimates a price range of approximately $[***] to $[***] per share (the “Preliminary Price Range”) of the Company’s common stock for its IPO. The Preliminary Price Range does not reflect the impact of a reverse stock split of its common (currently anticipated to be at a ratio of 1-for-[***]), which reverse stock split will be effected prior to the filing of and reflected in an amendment to the Registration Statement taking place before the commencement of the road show. On a post-reverse stock split basis, the Preliminary Price Range is estimated to be $[***] to $[***] per share. The Preliminary Price Range does not take into account the current lack of liquidity for the Company’s common stock and assumes a successful IPO, with no weighting attributed to any other outcome for the Company’s business, such as remaining as a privately held company or being sold in a change of control transaction.
As is typical in IPOs, the Preliminary Price Range was not derived using a formal determination of fair value, but was determined through discussions among the board of directors of the Company (the “Board”), senior management of the Company and the lead underwriters for its IPO. Among the factors that were considered in estimating the Preliminary Price Range were the following:
•
the Company’s financial position and prospects;
•
an analysis of the typical valuation ranges seen in recent IPOs for comparable companies in the Company’s industry;
•
the general conditions of the securities market and the recent market prices of, and the demand for, publicly traded common stock of comparable companies;
•
feedback from potential investors following “testing the waters” meetings that occurred in March 2023 and April 2023, which suggested that there was investor interest in the Company at a step-up in valuation; and
•
the recent financial performance of IPOs of companies in the industry in which the Company operates.
The actual bona fide price range to be included in the Registration Statement has not yet been determined and remains subject to adjustment based on further discussions between the Company and the lead underwriters, developments in the Company’s business, market conditions and other factors that are outside of the Company’s control. However, the Company believes that the actual bona fide price range will be within the Preliminary Price Range. In addition, the actual bona fide price range to be included in the Registration Statement will be reflected in an amendment to the Registration Statement that will be filed before the commencement of the road show and will comply with the Staff’s interpretations regarding the permissible parameters of a bona fide price range.
FOIA Confidential Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Three
Summary of Recent Equity Awards
From January 1, 2022 to date, the Company has issued the following equity awards to its employees, consultants and members of its Board, in the form of options to purchase shares of common stock, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”):
Grant Date
Number of Shares Underlying Equity Awards
Type of Award
Exercise/ Purchase Price Per Share
Estimated Common Stock Fair Value Per Share on Date of Grant
January 20, 2022
[ ***]
Stock Options
$ [ ***]
$ [ ***]
January 20, 2022
[ ***]
RSAs
[ ***]
[ ***]
March 8, 2022
[ ***]
Stock Options
[ ***]
[ ***]
March 8, 2022
[ ***]
RSAs
[ ***]
[ ***]
March 8, 2022
[ ***]
RSUs
[ ***]
[ ***]
June 27, 2022
[ ***]
Stock Options
[ ***]
[ ***]
November 21, 2022
[ ***]
Stock Options
[ ***]
[ ***]
November 21, 2022
[ ***]
RSUs
[ ***]
[ ***]
December 1, 2022
[ ***]
Stock Options
[ ***]
[ ***]
December 5, 2022
[ ***]
Stock Options
[ ***]
[ ***]
February 28, 2023
[ ***]
Stock Options
[ ***]
[ ***]
March 23, 2023
[ ***]
Stock Options
[ ***]
[ ***]
April 7, 2023
[ ***]
Stock Options
$ [ ***]
$ [ ***]
(1) Includes options for the purchase of [***] shares of the Company’s stock that were forfeited in November 2022; no stock-based compensation expenses were recorded for this grant.
FOIA Confidential Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Four
Determination of Common Stock Fair Value Prior to IPO
As there has been no public market for the Company’s common stock prior to this offering, the estimated fair value of its common stock underlying its stock-based awards has been determined by the Board as of each grant date with input from management, considering its most recently available third-party valuations of common stock and the Board’s assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. For dates on which there was not a contemporaneous independent third-party valuation, the Board determined the estimated fair value of the Company’s common stock on the date of grant taking into consideration the immediately preceding independent third-party valuation report as well as other pertinent information available to it at the time of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).
For valuations performed prior to December 31, 2021, in accordance with the Practice Aid, the Company determined the Option Pricing Method (“OPM”) was the most appropriate method for determining the fair value of its common stock based on our stage of development and other relevant factors. Within the OPM framework, the backsolve method for inferring the total equity value implied by a recent financing transaction involves the construction of an allocation model that takes into account the Company’s capital structure and the rights, preferences and privileges of each class of stock, then assumes reasonable inputs for the other OPM variables (expected time to liquidity, volatility and risk-free rate). The total equity value is then iterated in the model until the model output value for the equity class sold in a recent financing round equals the price paid in that round. The OPM is generally utilized when specific future liquidity events are difficult to forecast (i.e., the enterprise has many choices and options available), and the enterprise’s value depends on how well it follows an uncharted path through the various possible opportunities and challenges. In determining the estimated fair value of the common stock, the Board also considered the fact that the stockholders could not freely trade the common stock in the public markets. Accordingly, the Company applied discounts to reflect the lack of marketability (the “DLOM”) to its common stock based on the weighted-average expected time to liquidity. The estimated fair value of the common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.
For valuations performed after December 31, 2021 in accordance with the Practice Aid, the Company determined the hybrid method was the most appropriate method for determining the fair value of its common stock based on its stage of development and other relevant factors. The hybrid method is a probability-weighted expected return method (“PWERM”), where the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the Company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. The DLOM is then applied to arrive at an indication of value for the common stock.
In addition to considering the results of independent third-party valuations, the Board considered various objective and subjective factors to determine the fair value of its common stock as of each grant date, including:
•
the prices at which the Company sold shares of its preferred stock and the superior rights, preferences and privileges of its preferred stock relative to those of its common stock at the time of each grant;
FOIA Confidential Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Five
•
the progress of the Company’s research and development programs, including the status of preclinical studies and clinical trials for its product candidates;
•
the Company’s stage of development and its business strategy, and material risks related to its business;
•
external market conditions affecting the biotechnology industry and trends within the biotechnology industry;
•
the competitive landscape for the Company’s product candidates;
•
the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating results;
•
the lack of an active public market for the Company’s common stock and its preferred stock;
•
the likelihood of achieving a liquidity event, such as an IPO or a sale of the Company, given prevailing market conditions; and
•
the economy in general.
Independent third-party valuations were performed at the following dates:
•
October 31, 2021;
•
September 9, 2022;
•
January 4, 2023;
•
March 3, 2023 and
•
March 27, 2023.
October 31, 2021 Valuation
The Company, with the assistance of a third-party valuation firm, performed a valuation of the Company’s shares of common stock as of October 31, 2021. In considering valuation approaches, the Company relied on the OPM backsolve method to determine the implied equity value of the Company. Given the proximity of the Series B preferred stock financing to the valuation date, as well as the specific facts and circumstances surrounding the transaction and the Company’s stage of development, the OPM backsolve method was deemed an appropriate methodology to use in estimating the equity value of the Company. The Series B preferred stock financing closed on October 19, 2021 and on February 4, 2022 in two equal tranches. New and existing investors participated in Series B preferred stock financing. The Company used the OPM backsolve method to allocate equity value to outstanding equity securities. The Company selected [***] years expected time to liquidity, [***]% risk-free rate, and [***]% volatility based on the annual volatilities for the guideline public companies. The Company’s equity value was an estimated $[***] million on a marketable basis, including cash proceeds from both Series B redeemable convertible preferred stock tranches of $[***] million. As the Company’s shares were not freely tradeable, the Company estimated a DLOM of [***]% using the Finnerty Put Analysis, Protective and Asian Put Option Analysis, which was then applied to the common stock, resulting in a fair value of $[***] per share (the “October 2021 Valuation”).
January, March and June 2022 Grants
In January, March a
Show Raw Text
CORRESP
1
filename1.htm
CORRESP
BY EDGAR
Chadwick
Mills
T: (650) 843-5654
cmills@cooley.com
*FOIA Confidential
Treatment Request*
Confidential Treatment Requested by ACELYRIN, INC.
In connection with its Registration Statement on Form S-1 (File
No. 333-271244)
April 20, 2023
U.S. Securities and Exchange Commission
Division of Corporation
Finance
Office of Life Sciences
100 F Street, N.E.
Washington, D.C. 20549
Attention: Cindy Polynice
Suzanne Hayes
Ibolya Ignat
Vanessa Robertson
Re:
ACELYRIN, INC.
Registration Statement on Form S-1
Filed April 13, 2023
File No. 333-271244
Ladies and Gentlemen:
On behalf of ACELYRIN,
INC. (the “Company”), we submit this supplemental letter in response to comments from the staff (the “Staff”) of the U.S. Securities and Exchange Commission (the “Commission”) received by letter dated March 15,
2023 (the “Initial Comment Letter”) relating to the Company’s Registration Statement on Form S-1, originally confidentially submitted to the Commission on February 10, 2023, resubmitted to
the Commission on March 24, 2023, and filed with the Commission on April 13, 2023 (the “Registration Statement”). This supplemental letter addresses comment 11 of the Initial Comment Letter.
Because of the commercially sensitive nature of certain information contained herein, this supplemental letter is accompanied by the
Company’s request for confidential treatment for selected portions of this supplemental letter. The Company has filed separate correspondence with the Office of Freedom of Information and Privacy Act Operations in connection with its
confidential treatment request, pursuant to Rule 83 of the Commission’s Rules on Information and Requests, 17 C.F.R. §200.83. For the Staff’s reference, we have enclosed a copy of the Company’s correspondence to the Office of
Freedom of Information and Privacy Act Operations, as well as an unredacted copy of this supplemental letter, marked to show the portions redacted from the version filed via EDGAR and for which the Company is requesting confidential treatment.
For the convenience of the Staff, we have recited the prior comment from the Initial Comment Letter in italicized type and have followed the
comment with the Company’s response.
11.
Once you have an estimated offering price or range, please explain to us how you determined the fair value
of the common stock underlying your equity issuances and the reasons for any differences between the recent valuations of your common stock leading up to the IPO and the estimated offering price. This information will help facilitate our review of
your accounting for equity issuances. Please discuss with the staff how to submit your response.
FOIA Confidential
Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Two
The Company’s discussion of its accounting for stock-based compensation is primarily
contained within the sections of the Registration Statement entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and
Estimates—Stock-Based Compensation Expense and “—Determination of Fair Value of Common Stock” appearing on pages 121 through 122 of the Registration Statement.
The Company submits the below additional information to assist the Staff in its review of the Company’s position with respect to its
determination of the fair value of the shares of common stock underlying its outstanding equity awards and the reasons for the difference between the recent valuations of the common stock and the estimated offering price for its initial public
offering (“IPO”).
Preliminary IPO Price Range
The Company advises the Staff that it preliminarily estimates a price range of approximately $[***] to $[***] per share (the “Preliminary
Price Range”) of the Company’s common stock for its IPO. The Preliminary Price Range does not reflect the impact of a reverse stock split of its common (currently anticipated to be at a ratio of 1-for-[***]), which reverse stock split will be effected prior to the filing of and reflected in an amendment to the Registration Statement taking place before the commencement of the road show. On a
post-reverse stock split basis, the Preliminary Price Range is estimated to be $[***] to $[***] per share. The Preliminary Price Range does not take into account the current lack of liquidity for the Company’s common stock and assumes a
successful IPO, with no weighting attributed to any other outcome for the Company’s business, such as remaining as a privately held company or being sold in a change of control transaction.
As is typical in IPOs, the Preliminary Price Range was not derived using a formal determination of fair value, but was determined through
discussions among the board of directors of the Company (the “Board”), senior management of the Company and the lead underwriters for its IPO. Among the factors that were considered in estimating the Preliminary Price Range were the
following:
•
the Company’s financial position and prospects;
•
an analysis of the typical valuation ranges seen in recent IPOs for comparable companies in the Company’s
industry;
•
the general conditions of the securities market and the recent market prices of, and the demand for, publicly
traded common stock of comparable companies;
•
feedback from potential investors following “testing the waters” meetings that occurred in March 2023
and April 2023, which suggested that there was investor interest in the Company at a step-up in valuation; and
•
the recent financial performance of IPOs of companies in the industry in which the Company operates.
The actual bona fide price range to be included in the Registration Statement has not yet been determined and remains
subject to adjustment based on further discussions between the Company and the lead underwriters, developments in the Company’s business, market conditions and other factors that are outside of the Company’s control. However, the Company
believes that the actual bona fide price range will be within the Preliminary Price Range. In addition, the actual bona fide price range to be included in the Registration Statement will be reflected in an amendment to the Registration Statement
that will be filed before the commencement of the road show and will comply with the Staff’s interpretations regarding the permissible parameters of a bona fide price range.
FOIA Confidential
Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Three
Summary of Recent Equity Awards
From January 1, 2022 to date, the Company has issued the following equity awards to its employees, consultants and members of its Board,
in the form of options to purchase shares of common stock, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”):
Grant Date
Number of
Shares
Underlying
Equity Awards
Type of
Award
Exercise/
Purchase
Price
Per Share
Estimated Common
Stock Fair Value
Per Share
on Date of Grant
January 20, 2022
[
***]
Stock
Options
$
[
***]
$
[
***]
January 20, 2022
[
***]
RSAs
[
***]
[
***]
March 8, 2022
[
***]
Stock
Options
[
***]
[
***]
March 8, 2022
[
***]
RSAs
[
***]
[
***]
March 8, 2022
[
***]
RSUs
[
***]
[
***]
June 27, 2022
[
***]
Stock
Options
[
***]
[
***]
November 21, 2022
[
***]
Stock
Options
[
***]
[
***]
November 21, 2022
[
***]
RSUs
[
***]
[
***]
December 1, 2022
[
***]
Stock
Options
[
***]
[
***]
December 5, 2022
[
***]
Stock
Options
[
***]
[
***]
February 28, 2023
[
***]
Stock
Options
[
***]
[
***]
March 23, 2023
[
***]
Stock
Options
[
***]
[
***]
April 7, 2023
[
***]
Stock
Options
$
[
***]
$
[
***]
(1)
Includes options for the purchase of [***] shares of the Company’s stock that were forfeited in November
2022; no stock-based compensation expenses were recorded for this grant.
FOIA Confidential
Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Four
Determination of Common Stock Fair Value Prior to IPO
As there has been no public market for the Company’s common stock prior to this offering, the estimated fair value of its common stock
underlying its stock-based awards has been determined by the Board as of each grant date with input from management, considering its most recently available third-party valuations of common stock and the Board’s assessment of additional
objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. For dates on which there was not a contemporaneous independent third-party
valuation, the Board determined the estimated fair value of the Company’s common stock on the date of grant taking into consideration the immediately preceding independent third-party valuation report as well as other pertinent information
available to it at the time of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).
For valuations performed prior to
December 31, 2021, in accordance with the Practice Aid, the Company determined the Option Pricing Method (“OPM”) was the most appropriate method for determining the fair value of its common stock based on our stage of development and
other relevant factors. Within the OPM framework, the backsolve method for inferring the total equity value implied by a recent financing transaction involves the construction of an allocation model that takes into account the Company’s capital
structure and the rights, preferences and privileges of each class of stock, then assumes reasonable inputs for the other OPM variables (expected time to liquidity, volatility and risk-free rate). The total equity value is then iterated in the model
until the model output value for the equity class sold in a recent financing round equals the price paid in that round. The OPM is generally utilized when specific future liquidity events are difficult to forecast (i.e., the enterprise has many
choices and options available), and the enterprise’s value depends on how well it follows an uncharted path through the various possible opportunities and challenges. In determining the estimated fair value of the common stock, the Board also
considered the fact that the stockholders could not freely trade the common stock in the public markets. Accordingly, the Company applied discounts to reflect the lack of marketability (the “DLOM”) to its common stock based on the
weighted-average expected time to liquidity. The estimated fair value of the common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a
future liquidity event.
For valuations performed after December 31, 2021 in accordance with the Practice Aid, the Company determined
the hybrid method was the most appropriate method for determining the fair value of its common stock based on its stage of development and other relevant factors. The hybrid method is a probability-weighted expected return method
(“PWERM”), where the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the Company,
assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future
value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. The DLOM is then applied to arrive
at an indication of value for the common stock.
In addition to considering the results of independent third-party valuations, the Board
considered various objective and subjective factors to determine the fair value of its common stock as of each grant date, including:
•
the prices at which the Company sold shares of its preferred stock and the superior rights, preferences and
privileges of its preferred stock relative to those of its common stock at the time of each grant;
FOIA Confidential
Treatment Requested by ACELYRIN, INC.
Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111-4004
t: +1 415 693 2000 f: +1 415 693 2222 cooley.com
U.S. Securities and Exchange Commission
April 20, 2023
Page Five
•
the progress of the Company’s research and development programs, including the status of preclinical studies
and clinical trials for its product candidates;
•
the Company’s stage of development and its business strategy, and material risks related to its business;
•
external market conditions affecting the biotechnology industry and trends within the biotechnology industry;
•
the competitive landscape for the Company’s product candidates;
•
the Company’s financial position, including cash on hand, and its historical and forecasted performance and
operating results;
•
the lack of an active public market for the Company’s common stock and its preferred stock;
•
the likelihood of achieving a liquidity event, such as an IPO or a sale of the Company, given prevailing market
conditions; and
•
the economy in general.
Independent third-party valuations were performed at the following dates:
•
October 31, 2021;
•
September 9, 2022;
•
January 4, 2023;
•
March 3, 2023 and
•
March 27, 2023.
October 31, 2021 Valuation
The Company, with the assistance of a third-party valuation firm, performed a valuation of the Company’s shares of common stock as of
October 31, 2021. In considering valuation approaches, the Company relied on the OPM backsolve method to determine the implied equity value of the Company. Given the proximity of the Series B preferred stock financing to the valuation date, as
well as the specific facts and circumstances surrounding the transaction and the Company’s stage of development, the OPM backsolve method was deemed an appropriate methodology to use in estimating the equity value of the Company. The Series B
preferred stock financing closed on October 19, 2021 and on February 4, 2022 in two equal tranches. New and existing investors participated in Series B preferred stock financing. The Company used the OPM backsolve method to allocate equity
value to outstanding equity securities. The Company selected [***] years expected time to liquidity, [***]% risk-free rate, and [***]% volatility based on the annual volatilities for the guideline public companies. The Company’s equity value
was an estimated $[***] million on a marketable basis, including cash proceeds from both Series B redeemable convertible preferred stock tranches of $[***] million. As the Company’s shares were not freely tradeable, the Company estimated a
DLOM of [***]% using the Finnerty Put Analysis, Protective and Asian Put Option Analysis, which was then applied to the common stock, resulting in a fair value of $[***] per share (the “October 2021 Valuation”).
January, March and June 2022 Grants
In
January, March a