LENZ 424(b)(3) 10-Q Sticker

424B3 1 lenz424b310-qsticker.htm 424B3 LENZ 424(b)(3) 10-Q Sticker


PROSPECTUS SUPPLEMENT (to Prospectus dated April 10, 2024)			Filed Pursuant to Rule 424(b)(3) Registration Statement No. 333-278393

1,297,411 Shares of Common Stock

This prospectus supplement updates and amends the prospectus dated April 10, 2024 (as supplemented to date, the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (Registration Statement No. 333-278393) originally filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2024 and declared effective by the SEC on April 10, 2024.

This prospectus relates to the resale by certain of the selling securityholders named in this prospectus (each a “selling securityholder” and, collectively, the “selling securityholders”) of 1,297,411 shares of common stock, par value $0.00001 per share (the “Common Stock”) issued in the PIPE Financing (as defined in the Prospectus). The Prospectus also covers any additional securities that may become issuable by reason of stock splits, stock dividends or other similar transactions.

This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement. This prospectus supplement updates, amends and supplements the information included or incorporated by reference in the Prospectus. If there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any amendments or supplements to it.

Quarterly Report on Form 10-Q

On May 8, 2024, we filed a Quarterly Report on Form 10-Q with the SEC. The Form 10-Q is attached hereto.

We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in the section titled “Risk Factors” beginning on page 6 of the Prospectus.

You should rely only on the information contained in the Prospectus, this prospectus supplement, or any further prospectus supplement or amendment hereto. We have not authorized anyone to provide you with different information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is May 9, 2024.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)


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

For the quarterly period ended March 31, 2024


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

For the transition period from _________ to _________

Commission File Number 001-40532

_________________________

LENZ THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

_________________________


Delaware						84-4867570
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

445 Marine View Ave., Ste. #320 Del Mar, California 92014
(Address of principal executive offices, including zip code)
(858) 925-7000
(Registrant's telephone number, including area code)

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

_________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

LENZ

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ☒

As of May 3, 2024, 25,534,458 shares of the registrant's common stock were outstanding.

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, commercial activities and costs, research and development costs, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•the likelihood of our clinical trials demonstrating safety and efficacy of our product candidates to the satisfaction of the Food and Drug Administration ("FDA"), and other positive results;

•the timing, scope and likelihood of regulatory filings and approvals for LNZ100;

•our ability to obtain and maintain regulatory approval of LNZ100;

•our plans relating to the development of LNZ100;

•the size of the market opportunity for LNZ100, including our estimates of the size of the affected population and potential adoption rate;

•our plans relating to commercializing LNZ100, if approved, including the geographic areas of focus and sales strategy;

•our competitive position and the success of competing therapies that are or may become available;

•the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of LNZ100;

•the need to hire additional personnel and our ability to attract and retain such personnel;

•our plans relating to the further development and manufacturing of LNZ100 and any future product candidates;

•the expected potential benefits of strategic collaborations with third parties and our ability to attract collaborators with development, regulatory and commercialization expertise;

•the rate and degree of market acceptance and clinical utility of LNZ100 and any other product candidates we may develop;

•the impact of existing laws and regulations and regulatory developments in the United States and other jurisdictions;

•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering LNZ100, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

•our continued reliance on third parties to conduct any additional clinical trials of LNZ100 or any future product candidates, and for the manufacture of our product candidates for any such trials;

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

•our financial performance;

•costs related to the Merger (as defined in Part I, Item I, Note 1, “Organization and Liquidity,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q);

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•our ability to recognize the anticipated benefits of the Merger;

•our expectation that our existing cash, cash equivalents, and marketable securities will be sufficient to fund the Company to positive operating cash flow subsequent to commercial launch, if LNZ100 is approved;

•our expectations regarding the period during which we will remain an emerging growth company under the JOBS Act; and

•our anticipated use of our existing resources and the proceeds from the Merger and the concurrent PIPE Financing (as defined in Part I, Item I, Note 3, “Merger and Related Transactions,” in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q).

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we undertake no obligation to update or revise any forward-looking statements contained herein to reflect events or circumstances after the date of this Quarterly Report, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

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			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations And Comprehensive Loss	3
		Condensed Consolidated Statements of Convertible Preferred and Common Stock and Stockholders’ Equity (Deficit)	4
		Condensed Consolidated Statements of Cash Flows	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
	Item 3.	Defaults Upon Senior Securities	76
	Item 4.	Mine Safety Disclosures	76
	Item 5.	Other Information	76
	Item 6.	Exhibits	76
Signatures			79

iii

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Part I. Financial Information

Item 1. Financial Statements.

LENZ THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)


	March 31, 2024		December 31, 2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	200,357	$	35,140
Marketable securities	12,922		30,654
Prepaid expenses and other current assets	3,281		1,450
Restricted cash	114		—
Total current assets	216,674		67,244
Property and equipment, net	49		54
Operating lease right-of-use asset	578		318
Deferred offering costs	—		2,739
Security deposit	21		21
Total assets	$	217,322	$	70,376
Liabilities, convertible preferred and common stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	7,131	$	5,711
Accrued liabilities	11,757		12,803
Total current liabilities	18,888		18,514
Operating lease liability, net	156		192
Other noncurrent liabilities	111		121
Preferred stock warrants liability	—		871
Total liabilities	19,155		19,698
Commitments and contingencies (Note 6)
Convertible preferred and common stock:
Series A convertible preferred stock, par value of $0.001 per share; no shares and 22,791,777 shares authorized at March 31, 2024 and December 31, 2023, respectively; no shares and 21,977,282 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	—		44,621
Series A-1 convertible preferred stock, par value of $0.001 per share; no shares and 2,950,548 shares authorized at March 31, 2024 and December 31, 2023, respectively; no shares and 2,950,548 issued and outstanding at March 31, 2024 and December 31, 2023, respectively	—		9,893
Series B convertible preferred stock, par value of $0.001 per share; no shares and 28,019,181 shares authorized at March 31, 2024 and December 31, 2023, respectively; no shares and 28,019,181 issued and outstanding at March 31, 2024 and December 31, 2023, respectively	—		82,976
Class B convertible common stock, par value of $0.001 per share; no shares and 2,744,184 shares authorized at March 31, 2024 and December 31, 2023, respectively; no shares and 2,744,184 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively	—		5,900
Total convertible preferred and common stock	—		143,390
Stockholders' equity (deficit) (1):

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Common stock, par value of $0.00001 per share; 300,000,000 and 16,017,929 shares authorized at March 31, 2024 and December 31, 2023, respectively, 25,534,451 and 2,004,783 shares issued at March 31, 2024 and December 31, 2023, respectively, and 25,500,130 and 1,969,360 shares outstanding at March 31, 2024 and December 31, 2023, respectively	—		10
Additional paid-in capital	310,061		2,517
Accumulated deficit	(111,893)		(95,245)
Accumulated other comprehensive income (loss)	(1)		6
Total stockholders’ equity (deficit)	198,167		(92,712)
Total liabilities, convertible preferred and common stock and stockholders’ equity (deficit)	$	217,322	$	70,376

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

(1)Retroactively recast for the reverse recapitalization as described in Note 3.

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LENZ THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended March 31,
	2024		2023
Operating expenses:
Research and development	$	10,537	$	10,325
Selling, general and administrative	5,551		2,291
Total operating expenses	16,088		12,616
Loss from operations	(16,088)		(12,616)
Other income (expense):
Other expense	(1,348)		(54)
Interest income	788		—
Total other income (expense), net	(560)		(54)


Net loss	$	(16,648)	$	(12,670)
Other comprehensive loss:
Unrealized loss on marketable securities	(7)		—
Comprehensive loss	$	(16,655)	$	(12,670)
Net loss per share, basic and diluted	$	(3.53)	$	(6.50)
Weighted-average common shares outstanding, basic and diluted (1)	4,717,613		1,950,653

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

(1)Retroactively recast for the reverse recapitalization as described in Note 3. See Note 2 for further information on weighted-average common shares outstanding.

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LENZ THERAPEUTICS, INC.

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

(in thousands, except share data)

(unaudited)


	Convertible Preferred and Common Stock												Stockholders' Equity (Deficit)

	Series A Convertible Preferred Stock			Series A-1 Convertible Preferred Stock			Series B Convertible Preferred Stock			Class B Convertible Common Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2023 (1)	21,977,282	$	44,621	2,950,548	$	9,893	28,019,181	$	82,976	2,744,184	$	5,900	1,969,360	$	10	$	2,517	$	(95,245)	$	6	$	(92,712)
Conversion of convertible preferred stock and Class B convertible common stock to common stock as a result of the Merger and reset to par of $0.00001	(21,977,282)	(44,621)		(2,950,548)	(9,893)		(28,019,181)	(82,976)		(2,744,184)	(5,900)		11,260,672	(10)		143,400		—		—		143,390
Issuance of common stock to Graphite stockholders as a result of the Merger	—	—		—	—		—	—		—	—		8,320,485	—		116,145		—		—		116,145
Issuance of common stock from private placement, net	—	—		—	—		—	—		—	—		3,559,565	—		49,840		—		—		49,840
Reclassification of warrant liability to equity	—	—		—	—		—	—		—	—		—	—		1,918		—		—		1,918
Merger transaction costs	—	—		—	—		—	—		—	—		—	—		(5,146)		—		—		(5,146)
Unrealized gain (loss) on marketable securities	—	—		—	—		—	—		—	—		—	—		—		—		(7)		(7)
Exercise of stock options and common warrants	—	—		—	—		—	—		—	—		383,898	—		430		—		—		430
Vesting of early exercised stock options	—	—		—	—		—	—		—	—		6,150	—		10		—		—		10
Share-based compensation	—	—		—	—		—	—		—	—		—	—		947		—		—		947
Net loss	—	—		—	—		—	—		—	—		—	—		—		(16,648)		—		(16,648)
Balance as of March 31, 2024	—	$	—	—	$	—	—	$	—	—	$	—	25,500,130	$	—	$	310,061	$	(111,893)	$	(1)	$	198,167

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

(1)Retroactively recast for the reverse recapitalization as described in Note 3.

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LENZ THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED AND COMMON STOCK AND STOCKHOLDERS’ DEFICIT (1)

(in thousands, except share data)

(unaudited)


	Convertible Preferred and Common Stock												Stockholders' Deficit

	Series A Convertible Preferred Stock			Series A-1 Convertible Preferred Stock			Series B Convertible Preferred Stock			Class B Convertible Common Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Stockholders' Deficit
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2022	21,977,282	$	44,621	2,950,548	$	9,893	—	$	—	2,744,184	$	5,900	1,946,988	$	10	$	1,098	$	(25,277)	$	—	$	(24,169)
Issuance of Series B convertible preferred stock, net of issuance costs	—	—		—	—		28,019,181	82,976		—	—		—	—		—		—		—		—

Vesting of early exercised stock options	—	—		—	—		—	—		—	—		5,593	—		19		—		—		19
Share-based compensation	—	—		—	—		—	—		—	—		—	—		142		—		—		142
Net loss	—	—		—	—		—	—		—	—		—	—		—		(12,670)		—		(12,670)
Balance as of March 31, 2023	21,977,282	$	44,621	2,950,548	$	9,893	28,019,181	$	82,976	2,744,184	$	5,900	1,952,581	$	10	$	1,259	$	(37,947)	$	—	$	(36,678)

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

(1)Retroactively recast for the reverse recapitalization as described in Note 3.

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LENZ THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities
Net loss	$	(16,648)	$	(12,670)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5		3
Accretion of discounts on marketable securities	(275)		—
Change in fair value of preferred stock warrants	1,047		16
Share-based compensation expense	947		142
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(518)		426
Accounts payable	(1,269)		(567)
Accrued liabilities	(7,226)		(148)
Net cash used in operating activities	(23,937)		(12,798)
Cash flows from investing activities

Proceeds from maturities of marketable securities	18,000		—
Purchases of property and equipment	—		(6)
Net cash provided by (used in) investing activities	18,000		(6)
Cash flows from financing activities
Proceeds from, issuance of Series B convertible preferred stock, net of issuance costs	—		82,976
Proceeds from issuance of common stock, net of issuance costs	53,387		—
Cash, cash equivalents, and restricted cash acquired in connection with the Merger	117,824		—
Merger transaction costs	(373)		—
Proceeds from exercises of stock options	430		203
Net cash provided by financing activities	171,268		83,179
Net increase in cash	165,331		70,375
Cash and cash equivalents, beginning of the period	35,140		44,441
Cash, cash equivalents, and restricted cash, end of the period	$	200,471	$	114,816
Supplemental cash flow information
Conversion of Series A, A-1, and B convertible preferred stock to common stock	$	137,490	$	—
Conversion of Class B convertible common stock to common stock	$	5,900	$	—
Reclassification of warrant liability to equity	$	1,918	$	—
Prepaid expenses and other current assets assumed in the Merger	$	1,313	$	—
Accounts payable and accrued liabilities assumed in the Merger	$	2,950	$	—
Common stock issuance costs included in accounts payable and accrued expenses	$	3,547	$	—
Merger transaction costs included in accounts payable and accrued expenses	$	4,815	$	—
Right-of-use assets assumed in the Merger in exchange for lease liabilities	$	293	$	—

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

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LENZ THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Liquidity

Description of the Business

LENZ Therapeutics, Inc. ("LENZ" or the "Company"), formerly known as Graphite Bio, Inc. ("Graphite"), was incorporated in Ontario, Canada in June 2017 as Longbow Therapeutics Inc., and was reincorporated in the State of Delaware in October 2019. The Company has a wholly owned subsidiary, LENZ Therapeutics Operations, Inc. ("LENZ OpCo"), previously named Lenz Therapeutics, Inc., which became a corporation in Delaware on October 28, 2020 upon the filing of a Certificate of Conversion to convert Presbyopia Therapies, LLC, a Delaware limited liability company (formed in September 2013) to a Delaware corporation. The Company is a late-stage clinical company developing innovative ophthalmic pharmaceutical products.

Reverse Merger Transaction

On March 21, 2024, Graphite and LENZ OpCo completed a merger transaction in accordance with the terms and conditions of the Agreement and Plan of Merger (the “Merger Agreement”) dated November 14, 2023, pursuant to which, among other matters, Generate Merger Sub, Inc., a wholly-owned subsidiary of Graphite, merged with and into LENZ OpCo, with LENZ OpCo surviving the merger as the surviving corporation and a wholly-owned subsidiary of Graphite (the “Merger”). Additionally, Graphite changed its name to “LENZ Therapeutics, Inc.” The Merger was accounted for as a reverse recapitalization, with LENZ OpCo being treated as the acquirer for accounting purposes. See discussions of the transactions in connection with the Merger in Note 3.

Liquidity

As of March 31, 2024, the Company has devoted substantially all of its efforts to product development and has not realized product revenues from its planned principal operations. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net losses since its inception and, as of March 31, 2024, had an accumulated deficit of $111.9 million. The Company expects to incur additional losses in the future as it continues its research and development efforts, advances its product candidate through clinical development, seeks regulatory approval, prepares for commercialization, hires additional personnel, protects its intellectual property, and grows its business. The Company may need to raise additional capital to support its continuing operations and pursue its long-term business plan, including the development and commercialization of its product candidate, if approved. Such activities are subject to significant risks and uncertainties.

As of March 31, 2024, the Company had cash, cash equivalents, and marketable securities of $213.3 million, which is available to fund future operations. The Company believes that its existing cash, cash equivalents, and marketable securities as of March 31, 2024 will be sufficient to support operations for at least the next 12 months from the issuance date of these condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements were prepared based on the accrual method of accounting in accordance with U.S. generally accepted accounting principles ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). The accompanying condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position and its results of operations and its cash flows for the periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the year ended December 31, 2023, which are contained in the Company’s Form 8-K, dated March 21, 2024, filed with the SEC on March 22, 2024. The results for interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period. All intercompany accounts and transactions have been eliminated in consolidation.

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Since LENZ OpCo was determined to be the accounting acquirer in connection with the Merger, for periods prior to the Merger, the condensed consolidated financial statements were prepared on a stand-alone basis for LENZ OpCo and did not include the combined entities activity or financial position. Subsequent to the Merger, the condensed consolidated financial statements as of and for the three months ended March 31, 2024 include Graphite’s activity from March 21, 2024 through March 31, 2024, and assets and liabilities at their acquisition date fair value. Historical share and per share figures of LENZ OpCo have been retroactively recast based on the Merger exchange ratio of 0.2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Estimates used in preparing the accompanying financial statements include, but are not limited to, estimates related to the research and development accruals, preferred stock warrants liability, and share-based compensation. Although actual results could differ from those estimates, management does not believe that such differences would be material.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company deposits its cash primarily in traditional checking and savings accounts with a financial institution. Restricted cash of $0.1 million as of March 31, 2024 relates to a security deposit in the form of a letter of credit issued in connection with one of the Company's leases.

Marketable Securities

The Company classifies marketable securities as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all marketable securities with maturity dates beyond three months at the date of purchase as current assets in the accompanying balance sheets. As of March 31, 2024, the Company had no intent to sell any marketable securities prior to maturity. Marketable securities classified as available-for-sale are carried at fair value with the unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ deficit until realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income as an adjustment to yield over the life of the instrument. Realized gains and losses are calculated using the specific identification method and recorded as interest income or expense. The Company invests in available-for-sale securities consisting of money market funds, commercial paper, U.S. Treasury securities and U.S. agency securities. Available-for-sale securities are classified as either cash, cash equivalents or marketable securities on the Company's condensed consolidated balance sheets.

Allowance for Credit Losses

For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, market conditions, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive income (loss) on the condensed consolidated balance sheets.

The Company excludes the applicable accrued interest from both the fair value and amortized cost basis of available-for-sale securities for purposes of identifying and measuring an impairment. Accrued interest receivable on available-for-sale securities is recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets. The

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Company’s accounting policy is to not measure an allowance for credit loss for accrued interest receivable and to write-off any uncollectible accrued interest receivable as a reversal of interest income in a timely manner, which is considered to be in the period in which it’s determined the accrued interest will not be collected.

Leases

The Company determines if an arrangement is or contains a lease at inception by assessing whether it conveys the right to control the use of an identified asset in exchange for consideration. If a lease is identified, classification is determined at lease commencement. To date, all of the Company’s leases have been determined to be operating leases. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company’s leases do not provide an implicit interest rate and therefore the Company estimates its incremental borrowing rate to discount lease payments. The incremental borrowing rate reflects the estimated interest rate that the Company would have to pay to borrow on a collateralized basis, an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use ("ROU") assets are determined based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs, and lease incentives. The operating lease ROU asset also includes impairment charges if the Company determines the ROU asset is impaired. The Company considers a lease term to be the noncancelable period that it has the right to use the underlying asset, including any periods where it is reasonably assured the Company will exercise the option to extend the contract. Operating lease expenses are recognized, and the ROU assets are amortized on a straight-line basis over the lease term. Sublease income, if any, is recognized on a straight-line basis over the sublease term as a reduction to the Company's operating lease cost within general and administrative expenses in our condensed consolidated statements of operations. The Company has elected not to separate lease and non-lease components for its leased assets and accounts for all lease and non-lease components of its agreements as a single lease component. The Company has elected not to recognize leases with terms of one year or less on the condensed consolidated balance sheets.

Deferred Offering Costs

The Company capitalizes costs that are directly associated with equity financings until such financings are consummated, at which time such costs are recorded against the gross proceeds of the offering. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss. The Company had capitalized deferred offering costs of $2.7 million as of December 31, 2023 related to the Merger.

Research and Development Expenses and Related Prepaid Assets and Accrued Liabilities

Research and development costs are expensed as incurred. Research and development expenses primarily consist of internal research and development expense, including personnel-related expenses (such as salaries, benefits and noncash stock-based compensation) and external research and development expenses incurred under arrangements with vendors conducting research and development services on its behalf, such as contract research organizations ("CROs") and contract manufacturing organizations ("CMOs").

Payments made prior to the receipt of goods or services to be used in research and development are capitalized, evaluated for current or long-term classification, and included in prepaid expenses and other current assets or other assets in the balance sheets based on when the goods are received or the services are expected to be received or consumed, and recognized in research and development expenses when they are realized.

The Company is required to estimate expenses resulting from its obligations under contracts with vendors, service providers and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in cash flows that do not match the periods over which materials or services are provided. The Company estimates and records accrued expenses for the related research and development activities based on the level of services performed but not yet invoiced pursuant to agreements established with its service providers, according to the progress of clinical trials or related activities, and discussions with applicable personnel and service providers as to the progress or state of consummation of goods and services.

During the course of a clinical trial, the rate of expense recognition is adjusted if actual results differ from the Company’s estimates. Management estimates accrued expenses as of each balance sheet date in its financial statements based on the facts and circumstances known at that time. The clinical trial accrual is dependent in part upon the timely and accurate reporting of CROs, CMOs and other third-party vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its estimates may vary from the actual results. To date, the Company has not experienced material differences between its accrued expenses and actual expenses.

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Preferred Stock Warrants Liability

The Company had issued freestanding warrants to purchase shares of its Series A convertible preferred stock (Series A Convertible Preferred). Prior to the Merger, the Company revalued the warrants at each balance sheet date utilizing an option pricing method that back solved the fair value of the warrants based on recent financing transactions and also considered the enterprise value of the Company when considering potential exit events. The warrants’ estimated fair value as of the Merger date utilized the Black-Scholes-Merton ("Black-Scholes") model and the following input assumptions: risk free interest rate (4.3% - 4.4%), expected term (3.6 - 4.1 years), dividend yield (0%), volatility (103.0% - 104.0%) and exercise price ($10.64 per common share). Changes in fair value were recognized as increases or reductions to other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The fair value of these warrants was classified as a non-current liability in the condensed consolidated balance sheet since the underlying Series A Convertible Preferred stock is potentially redeemable. Pursuant to the Merger Agreement, the Series A Convertible preferred stock warrants became warrants to purchase shares of the Company's common stock. As a result of the Merger, the warrants no longer meet the requirements for liability accounting and, as such, the Company adjusted the value of the warrants to the estimated fair value as of the Merger date and reclassified them to stockholders' equity.

Share-Based Compensation

The Company maintains equity incentive plans as a long-term incentive for employees, directors, and non-employee service providers. All share-based payments to employees and directors, including grants of incentive stock options, nonqualified stock options, restricted stock awards, unrestricted stock awards, or restricted stock units, are recognized as expense based on their grant date fair values. The Company recognizes expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. Stock-based compensation is classified in the condensed consolidated statements of operations and comprehensive loss based on the function to which the related services are provided. The Company has elected to account for forfeitures as they occur.

Stock Options

The Company estimated the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions. A discussion of management’s methodology for developing the assumptions used in the valuation model follows:

Fair Value of Common Stock—Prior to the Merger, there was no public market for LENZ OpCo’s common stock. The fair value of LENZ OpCo’s common stock was determined by the board of directors with input from management and consideration of third-party valuation reports. In the absence of a public trading market, and as a clinical-stage company with no significant revenues, LENZ OpCo believed that it was appropriate to consider a range of factors to determine the fair market value of the common stock at each grant date. In determining the fair value of its common stock, LENZ OpCo used methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants’ ("AICPA") Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation. In addition, LENZ OpCo considered various objective and subjective factors, along with input from the independent third-party valuation firm. The factors included (1) the achievement of clinical and operational milestones by LENZ OpCo; (2) the significant risks associated with LENZ OpCo's stage of development; (3) capital market conditions for life science companies, particularly similarly situated, privately held, early-stage life science companies; (4) LENZ OpCo's available cash, financial condition, and results of operations; (5) the most recent sales of LENZ OpCo's convertible preferred stock; and (6) the preferential rights of LENZ OpCo's outstanding convertible preferred stock and Class B convertible common stock.

Subsequent to the Merger, the Company uses the closing stock price on the grant date to determine the grant date fair value, adjusted for special dividends, if any.

Expected Dividend Yield—The expected dividend yield is based on the Company’s historical and expected dividend payouts. The Company has historically paid no dividends, other than the special dividend paid by Graphite immediately prior to the close of the Merger, and does not anticipate dividends to be paid in the future.

Expected Equity Volatility—Due to the lack of a public market for LENZ OpCo’s common stock and the lack of company-specific historical and implied volatility data, LENZ OpCo based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics (e.g., public entities of similar size, complexity, stage of development, and industry focus). The historical volatility is calculated based on a period of time commensurate with the expected term assumption.

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Subsequent to the Merger, the Company uses an average volatility for comparable publicly-traded biopharmaceutical companies over a period equal to the expected term of the stock award grant as the Company does not yet have sufficient historical trading history for its own stock.

Risk-Free Interest Rate—The risk-free interest rate is based on a United States Treasury instrument whose term is consistent with the expected term of the stock options.

Expected Term—The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets where, based upon the available evidence, the Company concludes that it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In evaluating its ability to recover deferred tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Because of the uncertainty of the realization of deferred tax assets, the Company has recorded a valuation allowance against its net deferred tax assets.

Liabilities are provided for tax benefits for which realization is uncertain. Such benefits are only recognized when the underlying tax position is considered more-likely-than-not to be sustained on examination by a taxing authority, assuming they possess full knowledge of the position and facts. Interest and penalties related to uncertain tax positions are recognized in the provision of income taxes. As of March 31, 2024 and December 31, 2023, the Company had incurred no interest or penalties related to uncertain income tax benefits.

The Company’s policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense. The Company has no accruals for interest or penalties in the balance sheets as of March 31, 2024 and December 31, 2023 and has not recognized interest or penalties in the condensed consolidated statements of operations for the three months ended March 31, 2024 or 2023.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss attributed to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Prior to the Merger, the convertible preferred stock and Class B convertible common stock were not participating securities, because they did not participate in losses. Stock options, preferred stock warrants, Class A warrants, Class B convertible common stock, and convertible preferred stock were considered potentially dilutive common stock. The Company computes diluted net loss per share attributable to common stockholders after giving consideration to all potentially dilutive common stock outstanding during the period, determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Prior to the Merger, the Company made adjustments to diluted net loss attributed to common stockholders to reflect the reversal of gains on the change in the value of preferred stock warrants liability, assuming conversion of warrants to acquire convertible preferred stock at the beginning of the period or at time of issuance, if later, to the extent that those preferred stock warrants are dilutive. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

For the three months ended March 31, 2024, net loss per share included the weighted-average shares outstanding as a result of the Merger and shares issued in conjunction with the PIPE Financing (as defined in Note 3).

Other Comprehensive Income (Loss)

Other comprehensive income (loss) represents the change in the Company’s stockholders’ equity (deficit) from all sources other than investments by or distributions to stockholders. The Company’s other comprehensive income (loss) is the result of unrealized gains and losses on marketable securities.

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Segment Reporting

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker ("CODM"), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer acts as the CODM. The CODM views the Company’s operations and manages its business as one operating segment operating exclusively in the United States. The Company’s singular focus is on developing innovative ophthalmic pharmaceutical products, and has generated limited revenue since inception.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The update requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign jurisdictions if the amount is at least 5% of total income tax payments, net of refunds received. Adoption of the ASU allows for either the prospective or retrospective application of the amendment and is effective for the Company for annual periods beginning after December 15, 2025, with early adoption permitted. The Company has not yet completed its assessment of the impact of ASU 2023-09 on the Company’s financial statements.

3. Merger and Related Transactions

As described in Note 1, LENZ OpCo merged with a wholly owned subsidiary of Graphite on March 21, 2024. The Merger was accounted for as a reverse recapitalization under GAAP. LENZ OpCo was considered the accounting acquirer for financial reporting purposes. This determination is based on the facts that, immediately following the Merger: former LENZ OpCo stockholders owned a substantial majority of the voting rights of the combined company; LENZ OpCo designated a majority (five of seven) of the initial members of the board of directors of the combined company; and no members of Graphite's senior management hold key positions in senior management of the combined company. The transaction was accounted for as a reverse recapitalization of Graphite by LENZ OpCo similar to the issuance of equity for the net assets of Graphite, which were primarily cash and cash equivalents and other non-operating assets. It was concluded that any in-process research and development assets that remained as of the Merger were immaterial.

Under reverse recapitalization accounting, the assets and liabilities of Graphite were recorded at their fair value, which approximated book value due to their short-term nature. The Company's condensed consolidated financial statements reflect the issuance of 8,670,653 shares and options to the former stockholders and option holders of Graphite.

Graphite assumed each outstanding and unexercised option to purchase LENZ OpCo’s common stock, whether vested or not vested, and assumed each outstanding and unexercised warrant to purchase LENZ OpCo’s common stock or preferred stock, which became options and warrants to purchase shares of Graphite common stock. At the closing of the Merger, each outstanding share of LENZ OpCo’s common stock and preferred stock, and options and warrants to purchase LENZ OpCo’s common stock and preferred stock were converted into the right to receive or purchase 0.2022 shares of Graphite’s common stock, which resulted in the issuance by Graphite of an aggregate of 15,409,102 shares of, and options and warrants to purchase, Graphite common stock to the stockholders, option holders, and warrant holders of LENZ OpCo.

In connection with the Merger Agreement, the Company concurrently entered into a subscription agreement (the “Subscription Agreement”) with certain institutional investors (the “PIPE investors”) pursuant to which, among other things, the Company agreed to issue to the PIPE investors shares of LENZ common stock immediately following the Merger in a private placement transaction for an aggregate purchase price of $53.5 million (the “PIPE Financing”). Immediately following the consummation of the Merger and PIPE Financing, LENZ OpCo, Graphite stockholders, and the PIPE investors collectively owned approximately 56%, 31%, and 13% of the Company, respectively, on a fully diluted basis.

As part of the reverse recapitalization, LENZ OpCo received $112.6 million of cash and cash equivalents, net of transaction costs. LENZ OpCo also acquired assets, primarily prepaid and other current assets, of approximately $1.5 million and assumed payables and accruals of approximately $3.2 million. LENZ OpCo also incurred transaction costs of approximately $5.2 million, which was recorded as a reduction to additional paid-in capital in the accompanying condensed consolidated statements of convertible preferred and common stock and stockholders' equity. The Company also recorded a one-time charge of $0.3 million for the acceleration of the Graphite stock awards that is recorded in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024.

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4. Fair Value of Financial Instruments

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs such as quoted prices in active markets.

Level 2—Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

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

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value of the instrument. The carrying amounts of the Company’s financial instruments, including cash equivalents classified within the Level 1 designation, prepaid and other current assets, accounts payable, and accrued liabilities approximate fair value due to their short maturities. Cash equivalents, marketable securities, and the preferred stock warrants liability are recorded at fair value on a recurring basis.

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis.

Assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):


	Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
At March 31, 2024:
Cash equivalents
Money market funds	$	123,466	$	123,466	$	—	$	—
Total cash equivalents measured at fair value	$	123,466	$	123,466	$	—	$	—
Marketable securities
Commercial paper	$	9,942	$	—	$	9,942	$	—
U.S. treasury securities	1,991		1,991		—		—
U.S. government agency securities	989		—		989		—
Total marketable securities measured at fair value	$	12,922	$	1,991	$	10,931	$	—

At December 31, 2023:
Cash equivalents
Money market funds	$	7,962	$	7,962	$	—	$	—
Total cash equivalents measured at fair value	$	7,962	$	7,962	$	—	$	—
Marketable securities
Commercial paper	$	18,751	$	—	$	18,751	$	—
U.S. government agency securities	9,925		—		9,925		—
U.S. treasury securities	1,978		1,978		—		—
Total marketable securities measured at fair value	$	30,654	$	1,978	$	28,676	$	—
Liabilities
Convertible preferred stock warrants	$	871	$	—	$	—	$	871
Total liabilities measured at fair value	$	871	$	—	$	—	$	871

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Marketable securities consisted of the following (in thousands):


	March 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Commercial paper	$	9,941	$	1	$	—	$	9,942
U.S. treasury securities	1,991		—		—		1,991
U.S. government agency securities	990		—		(1)		989
Totals	$	12,922	$	1	$	(1)	$	12,922


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Commercial paper	$	18,742	$	9	$	—	$	18,751
U.S. government agency securities	9,927		1		(3)		9,925
U.S. treasury securities	1,977		1		—		1,978
Totals	$	30,646	$	11	$	(3)	$	30,654

As of March 31, 2024, three of the Company's marketable securities with a fair market value of $4.5 million were in an aggregate gross unrealized loss position of $1,000; these three marketable securities have all been in a gross unrealized loss position for less than one year. When evaluating an investment for impairment, management reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, intent to sell or the likelihood that the Company would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. Based on a review of these marketable securities, the Company believes none of the unrealized loss is the result of a credit loss as of March 31, 2024, because the Company does not intend to sell these securities, and it is not more-likely-than-not that the Company will be required to sell these securities before the recovery of their amortized cost basis. As of March 31, 2024, all marketable securities had contractual maturities of less than one year.

The Company did not transfer any assets measured at fair value on a recurring basis between levels during the three months ended March 31, 2024 and 2023.

The following table presents activity for the preferred stock warrants liability during the three months ended March 31, 2024 (in thousands):


	Preferred Stock Warrants Liability
Balance at December 31, 2023	$	871
Change in fair value	1,047
Conversion of preferred stock warrants liability to equity	(1,918)
Balance at March 31, 2024	$	—

No fair value liabilities exist as of March 31, 2024. Upon completion of the Merger, the preferred stock warrants became exercisable into shares of common stock and will no longer continue to be remeasured at each reporting date. Refer to Note 2 for further discussion on the valuation of the preferred stock warrants liability.

5. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	March 31, 2024		December 31, 2023
Research and development accrued expense	$	3,703	$	10,289
Accrued transaction costs	5,134		—
Accrued payroll and related	816		1,998
Accrued insurance premiums	777		—

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Operating lease liability, current portion	433		137
Other accrued liabilities	894		379
Total accrued liabilities	$	11,757	$	12,803

6. Commitments and Contingencies

Operating Leases

Commencing on April 1, 2022, LENZ OpCo entered into a lease agreement for office space in Del Mar, California, which was subsequently amended to expand the office space leased and extend the term (the "Del Mar lease"). As of March 31, 2024, the remaining lease term was 2.0 years, and the discount rate used to determine the right-of-use assets and corresponding operating lease liabilities was 7.0%. Cash paid for operating leases approximated rent expense for the periods presented.

Maturities of the operating lease liability as of March 31, 2024 for the Del Mar lease are as follows (in thousands):


2024	$	117
2025	161
2026	41
Total undiscounted lease payments	319
Less: present value adjustment	(23)
Operating lease liabilities	$	296

Legal Proceedings

From time to time, the Company may be subject to various litigation and related matters arising in the ordinary course of business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.

In connection with the Merger, one complaint was filed in the United States District Court for the Northern District of California captioned Glen Chew v. Graphite Bio, Inc. et al., Case No. 3:24-cv-00613 (filed February 1, 2024) (the “Chew Complaint”) and one complaint was filed in the United States District Court for the District of Delaware captioned Kevin Turner v. Graphite Bio, Inc. et al., Case No. 1:24-cv-00241-UNA (filed February 22, 2024) (the “Turner Complaint” and collectively, the “Complaints”). The Complaints generally alleged that the definitive proxy statement/prospectus (the “Proxy Statement/Prospectus”) included in Graphite’s Registration Statement on Form S-4 (File No. 333-275919), filed with the Securities and Exchange Commission (the “SEC”), misrepresents and/or omits certain purportedly material information relating to the Company's financial projections, the analyses performed by the financial advisor to Graphite’s Board of Directors in connection with the Merger, potential conflicts of interest of the financial advisor to Graphite’s Board of Directors, potential conflicts of interest of Graphite’s officers, and Graphite’s liquidation analysis. The Complaints asserted violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder against all defendants (Graphite, its Board of Directors and certain officers) and violations of Section 20(a) of the Exchange Act against Graphite’s directors and officers. The Complaints sought orders rescinding the Merger or awarding rescissory damages, as well as costs, including attorneys’ and experts’ fees. On March 22, 2024, the Chew Complaint was voluntarily dismissed and on April 17, 2024, the Turner Complaint was voluntarily dismissed.

Graphite also received twelve demand letters by purported Graphite stockholders from December 14, 2023 to March 20, 2024 seeking additional disclosures in the Proxy Statement/Prospectus (the “Demands”).

The Company cannot predict the outcome of any litigation or the Demands. The Company and the individual defendants intend to vigorously defend against the Demands and any subsequently filed similar actions. It is possible additional lawsuits may be filed or additional demand letters may be received arising out of the Merger.

Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. Its exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To the extent permitted under Delaware law, the Company has agreed to indemnify its

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directors and officers for certain events or occurrences while the director or officer is, or was serving, at a request in such capacity. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of March 31, 2024 and December 31, 2023, the Company did not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

7. Stockholders' Equity

Convertible Preferred Stock

Immediately prior to the closing of the Merger and as of December 31, 2023, LENZ OpCo had authorized 53,761,506 shares of preferred stock with a par value of $0.001. Immediately prior to the closing of the Merger and as of December 31, 2023, there were 21,977,282 shares of Series A, 2,950,548 shares of Series A-1, and 28,019,181 shares of Series B Convertible Preferred Stock (Series B) issued and outstanding. Immediately prior to the closing of the Merger and as of December 31, 2023, the total liquidation preference of issued and outstanding Series A, Series A-1, and Series B was $47.3 million, $10.0 million, and $83.5 million, or $2.15 per share, $3.3892 per share, and $2.9801 per share, respectively.

At the closing of the Merger, the 52,947,011 shares of LENZ OpCo preferred stock were exchanged for 10,705,829 shares of Graphite’s common stock.

Common Stock

As of December 31, 2023, LENZ OpCo had authorized two series of common stock, designated Class A common stock and Class B convertible common stock. Immediately prior to the closing of the Merger and as of December 31, 2023, there were 11,838,624 and 9,915,013 shares of Class A common stock issued, respectively, and 11,668,867 and 9,739,818 shares of Class A common stock outstanding, respectively. Immediately prior to the closing of the Merger and as of December 31, 2023, there were 2,744,184 shares of Class B convertible common stock issued and outstanding. At the closing of the Merger, 11,838,624 and 11,668,867 issued and outstanding shares of Class A common stock, respectively, were exchanged for 2,393,729 and 2,359,408 shares of issued and outstanding shares of Graphite's common stock, respectively. Additionally, at the closing of the Merger, 2,744,184 shares of Class B convertible common stock were exchanged for 554,843 shares of Graphite's common stock.

At the closing of the Merger on March 21, 2024, legacy Graphite stockholders held 8,320,485 shares of common stock.

Concurrent with the closing of the Merger on March 21, 2024, the Company completed the PIPE Financing of 3,559,565 shares for an aggregate purchase price of $53.5 million.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Other than the special dividend paid by Graphite immediately prior to the close of the Merger, no dividends have been declared or paid by the Company through March 31, 2024, and any such dividends are not cumulative.

Common stock reserved for future issuance consist of the following:


			March 31, 2024
Common stock warrants			164,676
Common stock options granted and outstanding			3,265,986
Shares available for issuance under incentive plans			1,686,148
Shares available under the 2024 Employee Stock Purchase Plan			250,995

Warrants

LENZ OpCo had issued warrants to acquire Class A common stock and Series A convertible preferred stock.

The warrants to purchase 470,000 shares of Class A common stock had an exercise price of $0.21 per share and were issued in December 2020 with an expiration date in February 2024. In February 2024, prior to expiration, the holder exercised 470,000 warrants, resulting in $0.1 million of proceeds. These shares were subsequently exchanged for 95,034 shares of common stock at the closing of the Merger.

The Series A preferred stock warrants had an exercise price of $2.15 per share and were issued in October 2020 with an expiration date in October 2027. There were no exercises of the Series A preferred stock warrants for any of the periods presented.

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In connection with the Merger, the Series A preferred stock warrants were converted to 164,676 common stock warrants of the Company at an exercise price of $10.64, and were subsequently reclassified to stockholders’ equity at their fair value of $1.9 million.

Share-Based Compensation

Share-based compensation expense was as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Selling, general and administrative	$	753	$	104
Research and development	194		38
Total	$	947	$	142

8. Net Loss Per Share

The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders for the period indicated because including them would have had an anti-dilutive effect:


	As of March 31,
	2024	2023
Convertible preferred stock	—	10,705,829
Class B convertible common stock	—	554,843
Preferred stock warrants	—	164,676
Common stock options granted and outstanding	3,265,986	1,065,984
Warrants to purchase common stock	164,676	95,034
Total	3,430,662	12,586,366

9. License Agreements

In April 2022, the Company entered into a license and collaboration agreement providing an exclusive license (the "Ji Xing License") to certain of the Company’s intellectual property ("IP") for use in the treatment of presbyopia in humans in mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan (collectively, “Greater China”). The Company also agreed to negotiate a separate agreement for the purchase of clinical and commercial supply of IP for clinical and commercial requirements at cost plus a negotiated percentage and granted a right of first negotiation to obtain a regional license on other products the Company might develop outside the field of presbyopia for commercialization in Greater China.

The Company received nonrefundable, non-creditable upfront payments totaling $15.0 million as initial consideration under the Ji Xing License, which represents the transaction price at inception. In addition, the Company is also eligible to receive up to $95.0 million of regulatory and sales milestones, as well as tiered mid single-digit to low double-digit royalties on net sales of IP in Greater China. Additional consideration to be paid to the Company upon reaching regulatory and sales milestones is excluded from the transaction price. Future milestone payments are fully contingent as the risk of significant revenue reversal will only be resolved depending on future regulatory approval and sales level outcomes. The sales-based royalty fee qualifies for the royalty constraint exception and does not require an estimate of the future transaction price. The sales-based royalty fee is considered variable consideration and will be recognized as revenue as such sales occur, if any.

The Company assessed the promises made under the Ji Xing License and concluded the Ji Xing License comprises a single performance obligation providing the right to use functional intellectual property. The $15.0 million transaction price allocated to that single performance obligation was recognized on completion of the transfer of the Ji Xing License during the year ended December 31, 2022. No contractual milestones were met under the Ji Xing License during the three months ended March 31, 2024 or 2023.

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10. Related Party Transactions

In March 2023, LENZ OpCo issued 22,146,905 shares of its Series B preferred stock for total cash proceeds of $66.0 million to investors that included significant shareholders that had designated members on LENZ OpCo’s board of directors and are considered to be related parties.

Through the Subscription Agreement and PIPE Financing executed as part of the Merger, the Company issued 3,343,330 shares to investors that the Company considers to be related parties. Two of these investors also have designated members on the Company's board of directors.

A member of the Company’s Board of Directors currently serves as a member of the board of directors of one of the Company’s vendors, and has served in that capacity since 2023. LENZ OpCo entered into a Master Services Agreement with this vendor in September 2023 to provide manufacturing services. Accordingly, the Company considers the vendor to be a related party. For the three months ended March 31, 2024, fees incurred for services performed by the vendor were $0.1 million, and were charged to research and development expenses. The Company had no amounts due to the vendor within accounts payable as of March 31, 2024.

11. Subsequent Events

Lomas Lease

In April 2024, the Company entered into an agreement to lease 9,795 square feet of office space in Solana Beach, California, with a 39 months term commencing on July 1, 2024. The monthly base rent is approximately $37,000 and will increase approximately 4% every twelve months over the life of the lease.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of LENZ’ consolidated results of operations and financial condition. The discussion should be read together with the condensed consolidated financial statements and the accompanying notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements for the year ended December 31, 2023 and the related notes included in the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2024. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. LENZ’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” as set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Unless otherwise indicated or the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to “LENZ OpCo,” “LENZ,” “the Company,” “we,” “us,” “our” and other similar terms refer to the business and operations of LENZ OpCo prior to the Merger and to LENZ and its consolidated subsidiary following the Merger.

While the legal acquirer in the Merger was Graphite, for financial accounting and reporting purposes under GAAP, LENZ OpCo was the accounting acquirer and the Merger was accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving the issuance of stock by Graphite for LENZ OpCo’s stock) does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the consolidated financial statements of LENZ OpCo in many respects. Accordingly, the consolidated assets, liabilities and results of operations of LENZ OpCo became the historical consolidated financial statements of the combined company, and Graphite’s assets, liabilities and results of operations were consolidated with those of LENZ OpCo beginning on the acquisition date. Operations prior to the Merger will be presented as those of LENZ OpCo in future reports. Graphite’s assets and liabilities were measured and recognized at their fair values as of the closing of the Merger.

Overview

We are a late-stage biopharmaceutical company focused on developing and commercializing innovative therapies to improve vision. Our initial focus is the treatment of presbyopia, the inevitable loss of near vision that impacts the daily lives of nearly all people over 45. In the United States, the estimated addressable population who suffer from this condition, known as presbyopes, is 128 million, almost four times the number of individuals suffering from dry eye disease and three times the number of individuals suffering from childhood myopia, macular degeneration, diabetic retinopathy and glaucoma combined. We believe that a once-daily pharmacological eye drop that can effectively and safely improve near vision throughout the full workday, without the need for reading glasses, will be a highly attractive commercial product with an estimated U.S. market opportunity in excess of $3 billion. It is our goal to develop and commercialize such a product, and we have assembled an executive team with extensive clinical and commercial experience to execute this goal and become the category leader.

Our lead product candidate LNZ100 is a preservative-

SEC Form 424B3 filed by Graphite Bio Inc.