Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

1. Nature of the business and basis of presentation

Upstream Bio, Inc. was incorporated in April 2021, under the laws of the State of Delaware, and along with its consolidated subsidiary (collectively, the "Company" or "Upstream"), is focused on developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders. Since its inception, the Company has devoted substantially all of its efforts to raising capital and incurring research and development expenses related to advancing verekitug, a clinical-stage monoclonal antibody that targets and inhibits the Thymic Stromal Lymphopoietin receptor.

Risks and uncertainties

The global economy has experienced extreme volatility and disruptions due to the military conflict between Russia and Ukraine and the war between Israel and Hamas. These conditions have impacted, and may continue to impact, the capital and credit markets, which may reduce the Company's ability to raise additional capital through equity, equity-linked instruments or debt financings which could negatively impact the Company's short-term and long-term liquidity. Additionally, the Company's results of operations could be adversely affected by general conditions in the global economy and financial markets. A severe or prolonged economic downturn could result in a variety of risks to the Company's business, including a reduced ability to raise additional capital when needed on favorable terms, if at all. The Federal Reserve raised the federal funds interest rates during 2022 and 2023 in order to mitigate persistent inflation. During September 2024, the Federal Reserve effected a reduction to the federal funds interest rate, the impact of which is not yet clear. Higher interest rates, coupled with reduced government spending and volatility in financial markets, may increase economic uncertainty and affect consumer spending. Any of the foregoing could harm the Company's business, and it cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact its ability to raise capital, business, results of operations and financial condition.

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, the successful development of verekitug, the development of new technological innovations by competitors, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations and the ability to secure additional capital to fund operations and commercial success of verekitug. There can be no assurance that the Company's research and development will be successfully completed, that adequate protection for the Company's intellectual property will be maintained, that any therapeutic products developed will obtain required regulatory approval or that any approved or consumer products will be commercially viable. Even if the Company's development efforts are successful, it is uncertain when, if ever, the Company will generate significant product sales.

Stock split

On October 4, 2024, the Company effected a 1.049-for-one stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios of each series of the Company's preferred stock (see Notes 8 and 17). Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split and adjustment of the preferred stock conversion ratios.

Liquidity

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year from the issuance of these condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has historically financed its operations principally through the issuance and sale of Series A redeemable convertible preferred stock ("Series A Preferred Stock") and Series B redeemable convertible preferred stock ("Series B Preferred Stock"), which are collectively referred to as the "Preferred Stock." The Company has incurred recurring losses and negative cash flows from operations since its inception and expects to continue to incur losses and negative cash flows for the foreseeable future as it continues the research and development of verekitug. The Company incurred net losses of $41.6million and $8.7million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had an accumulated deficit of $169.5million.

In October 2024, the Company completed its initial public offering ("IPO") of its common stock. In connection with its IPO, the Company issued and sold 17,250,000shares of common stock, including 2,250,000shares pursuant to the full exercise of the

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

underwriters' option to purchase additional shares, at a price to the public of $17.00per share. As a result of the IPO, the Company received approximately $268.7million in net proceeds, after deducting $20.5million in underwriting discounts and commissions, and approximately $4.0million in other offering costs.

The Company expects its cash, cash equivalents and short-term investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of issuance of these condensed consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant product revenue, if ever, the Company expects to fund its operations through equity offerings or debt financings, credit or loan facilities, potentially other capital resources, or a combination of one or more of these funding sources. The terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. The Company's failure to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategies. If adequate funds are not available to the Company, the Company may be required to delay, reduce or eliminate clinical programs, obtain funds through arrangements with collaborators on terms unfavorable to the Company or pursue merger or acquisition strategies. There can be no assurances the Company will be able to obtain additional funding. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements reflect the operations of the Company. Intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial reporting and as required by Regulation S-X, Rule 10-01. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").

The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of September 30, 2024 and the results of operations for the three and nine month interim periods ended September 30, 2024 and 2023. The condensed balance sheet as of December 31, 2023was derived from audited annual financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the interim periods are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

2. Summary of Significant Accounting Policies

Other than policies noted below, there have been no significant changes from the significant accounting policies and estimates disclosed in Note 2 of the "Notes to Consolidated Financial Statements" in our audited annual financial statements included in the Company's IPO final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the Securities and Exchange Commission (the "SEC") on October 11, 2024.

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

8

Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

3. Fair value measurements

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

For the three and nine months ended September 30, 2024 and for the year ended December 31, 2023, there were notransfers between Level 1, Level 2 and Level 3.

The Company classifies its U.S. treasury bills and U.S. government agency bonds as short-term based on each instrument's availability for use in current operations. The fair value of the Company's U.S. treasury bills and U.S. government agency bonds are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.

Valuation of preferred stock tranche right liabilities

As of December 31, 2023, the preferred stock tranche right liability in the table above is composed of the fair value of the obligation to issue Series B Preferred Stock (Note 8). The fair value of the preferred stock tranche right liabilities was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

Series A preferred stock tranche right liability

In February 2023, upon satisfaction of certain conditions, the second closing of the Series A Preferred Stock was completed. The Company issued and sold 8,000,000shares of Series A Preferred Stock at a price of $10.00per share, which resulted in the settlement of the associated Series A preferred stock tranche right liability. The fair value of Series A Preferred Stock was $10.04per share upon the second closing.

Series B preferred stock tranche right liability

The fair value of the Series B preferred stock tranche right liability was determined using an option pricing model as it represents an option for the Series B Option Shares (as defined in Note 8). The valuation considered as inputs the estimated fair value of the Series B Preferred Stock as of each valuation date, the risk-free interest rate, volatility, expected dividends, and estimated time to the tranche closing.

The most significant assumption in the valuation model impacting the fair value of the preferred stock tranche right liability is the fair value of the Company's Series B Preferred Stock as of each measurement date. The Company determined the fair value per share of the underlying Series B Preferred Stock by taking into consideration the most recent sales of its Series B Preferred Stock, results obtained from third-party valuations and additional factors the Company deemed relevant. In June 2023, the initial tranche of the Series B Preferred Stock closed with a fair value of $13.00per share. As of December 31, 2023, the fair value of Series B Preferred Stock was $15.86per share. In April 2024, upon satisfaction of certain conditions, the Company issued and sold 8,823,523shares of Series B Preferred Stock at a price of $17.00per share, which resulted in the settlement of the associated Series B preferred stock tranche right liability. The fair value of Series B Preferred Stock was $17.002 per share upon the closing. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining estimated time to the tranche closing. The volatility is based on the historical volatility of publicly traded peer companies adjusted for the seniority of the Series B Preferred Stock. The expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Changes in these inputs can have a significant impact on the fair value of the preferred stock tranche right liability.

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

The following table presents a roll-forward of the fair value of the Series A and Series B preferred stock tranche right liabilities during the nine months ended September 30, 2023, for which fair value is determined using Level 3 inputs (in thousands):

4. Prepaid expenses and other current assets

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

5. Property and equipment, net

Depreciation and amortization expense related to property and equipment, net was less than $0.1million for each of the three and nine months ended September 30, 2024 and 2023.

6. Accrued expenses and other current liabilities

7. Leases

As of December 31, 2023, the Company was a party to a lease related to commercial real estate under a non-cancelable lease term and a short-term lease related to commercial real estate.

In July 2024, the Company entered into an operating lease agreement for office space located at 890 Winter Street in Waltham, Massachusetts. The lease commenced in September 2024 and the Company began paying monthly rent starting one month after the lease commenced. The Company occupies approximately 16,801square feet of space under a three-yearagreement expiring in October 2027. Initial base rent is approximately $0.7million for the first year and approximately $0.8million for the second and third year.

The Company previously had an operating lease for office space at 460 Totten Pond Road, Waltham, Massachusetts, for which it provided notice of termination in July 2024. This notice became effective on October 9, 2024, after which the Company's rights and obligations under this lease ceased. The lease expired on June 30, 2024, after which the Company continued to pay rent on a month-to-month basis until October 9, 2024.

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

8. Redeemable convertible preferred stock

The Company has issued Series A Preferred Stock and Series B Preferred Stock, which are collectively referred to as the Preferred Stock. As of September 30, 2024 and December 31, 2023, the Company authorized the issuance of 31,764,693shares of Preferred Stock, par value of $0.001per share, of which 20,000,000have been designated Series A Preferred Stock and 11,764,693have been designated Series B Preferred Stock.

Immediately prior to the closing of the Company's IPO on October 15, 2024, pursuant to the stock split and a proportional adjustment to the existing conversion ratios of each series of the Company's Preferred Stock as discussed further below, all of the Company's outstanding shares of convertible preferred stock were converted into an aggregate of 33,321,149shares of common stock.

Issuance and sale of Series A redeemable convertible preferred stock

In October 2021, the Company issued and sold 11,000,000shares of Series A Preferred Stock at $10.00per share. Pursuant to the Series A Preferred Stock Purchase Agreement (the "Series A Agreement"), the Company was obligated to issue and the Series A investors were obligated to purchase an additional 9,000,000shares of Series A Preferred Stock ("Milestone Shares") at the same purchase price of $10.00per share (the "Series A preferred stock tranche right"), after the initial closing and upon the satisfaction of certain conditions at a date which would occur at the earlier of (i) immediately prior to the Company's first underwritten public offering of its common stock under the Securities Act; (ii) the resolution of the board of directors that the pharmacokinetics, pharmacodynamics, immunogenicity and safety profile of verekitug (formerly referred to as ASP7266), when administered as multiple ascending doses, supports further clinical development ("Second Closing Milestone") has been achieved; or (iii) the written consent of the purchasers holding a majority of the Series A Preferred Stock that the Second Closing Milestone has been waived (collectively, the "Second Closing").

The board of directors may determine at any time prior to the Second Closing to issue and sell up to 1,000,000of the Milestone Shares at a price of $10.00per share for gross cash proceeds of $10.0million ("Interim Second Closing") and the number of Milestone Shares to be issued in the Second Closing will be reduced accordingly. In October 2022, the Interim Second Closing was completed and 1,000,000of the Milestone Shares on a pro-rata basis to the purchasers of the Series A Preferred Stock were issued at a price of $10.00per share.

In February 2023, upon the satisfaction of the Second Closing Milestone, the remaining 8,000,000of the Milestone Shares on a pro-rata basis to the purchasers of the Series A Preferred Stock were issued at a price of $10.00per share, which resulted in gross cash proceeds of $80.0million. As a result of this issuance, the Series A preferred stock tranche right liability of $0.3million was settled and the Series A Preferred Stock was recorded at its fair value of $80.3million.

Issuance and sale of Series B redeemable convertible preferred stock

In June 2023, the Company executed the Series B Stock Preferred Purchase Agreement (the "Series B Agreement") to issue and sell up to 11,764,693shares of Series B Preferred Stock at a price of $17.00per share. In the initial closing in June 2023, the Company issued 2,941,170shares of Series B Preferred Stock resulting in gross cash proceeds of $50.0million and incurred $0.6million of issuance costs, of which $0.1million was allocated to the preferred stock tranche right liability and recognized in the condensed consolidated statement of operations and comprehensive loss as general and administrative expense. Pursuant to the Series B Agreement, the Company has the right ("Series B Option") to issue and sell an additional 8,823,523shares of Series B

Preferred Stock ("Series B Option Shares") at the same price of $17.00per share after the initial closing but prior to March 31, 2024 upon approval of at least six (6) board of directors of which at least one (1) has to be appointed by the holders of Series B Preferred Stock. If the Company does not exercise the Series B Option prior or at a date which would occur at the earlier of (i) March 31, 2024 or (ii) the closing of an acquisition agreement signed prior to March 31, 2024, the holders of Series B Preferred Stock will have the right but not obligation to require the Company to issue and sell the Series B Option Shares at the same purchase price of $17.00per share (the "Series B preferred stock tranche right"). Upon the initial closing of the Series B Preferred Stock, the Company recorded a preferred stock tranche right liability of $11.8million and a corresponding reduction to the carrying value of the Series B Preferred Stock. The fair value of the Series B preferred stock tranche right was allocated from the gross cash proceeds of $50.0million of the Series B Preferred Stock issuance, and the residual value was then allocated to the Series B Preferred Stock.

In April 2024, pursuant to the satisfaction of the Series B Option contemplated in the Series B Agreement, the Company issued and sold 8,823,523shares of Series B Preferred Stock at a price of $17.00per share, which resulted in gross cash proceeds of $150.0

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

million. As a result of this issuance, the Series B preferred stock tranche right liability of less than $0.1million was settled and the Series B Preferred Stock was recorded at its fair value of $150.0million. The Company incurred less than $0.1million of issuance costs in connection with the Series B Option closing.

Upon issuance of the Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities and determined that such features did not require the Company to separately account for these features.

The holders of the Preferred Stock have the following rights and preferences:

Dividends

The holders of Preferred Stock are entitled to a cumulative dividend from and after the date of the share issuance at the rate per annum of 5% of the Original Issue Price (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock), provided that the total accrued amount will not exceed 15% of the Original Issue Price in aggregate (the "Accruing Dividend"). Such dividends shall be accrued, whether or not declared.

In the event of any dividend being payable to common stockholders, the holders of Preferred Stock shall be entitled to receive, prior to any such dividend being paid to the common stockholders, the greater of (i) the Accruing Dividend then accrued and not previously paid, and (ii) the amount of any dividend being paid to the common stockholders (determined on an as-converted basis with respect to the holders of Preferred Stock).

Voting rights

The holders of the Preferred Stock are entitled to vote together with all other classes and series of stock as a single class on all matters, except those matters requiring a separate class vote, and are entitled to the number of votes equal to the number of shares of common stock into which each share of the applicable series of Preferred Stock is then convertible. The holders of Series A Preferred Stock as a separate class are entitled to elect four (4) board of directors, and the holders of Series B Preferred Stock as a separate class are entitled to elect two (2) board of directors.

Liquidation preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or in the event of a Deemed Liquidation Event ("DLE") which is defined as a merger or consolidation in which the Company issues shares of its capital stock (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation), and the sale, lease, transfer, exclusive license or other disposition of substantially all of the Company's assets,

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders or consideration payable to stockholders in such DLE or out of the available proceeds as follows:

The "Original Issue Price" is defined as (i) with respect to the Series A Preferred Stock, $10.00per share, and (ii) with respect to the Series B Preferred Stock, $17.00per share.

Conversion

Optional conversion

Each share of Preferred Stock is convertible at the option of the holder and at any time into common stock as determined by dividing the Preferred Stock Original Issue Price by the Preferred Stock Conversion Price."Conversion Price" is defined as initially the applicable Original Issue Price for the applicable series of Preferred Stock, subject to certain adjustments in the event of any down round, stock dividend, stock split, combination or other similar recapitalization.

Mandatory conversion

Each share of Preferred Stock will automatically be converted into shares of common stock, at the conversion ratio of dividing the Original Issue Price by the Preferred Stock Conversion Price, upon either (a) the closing of the sale of shares of common stock to the public at a price of at least $21.07per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock) in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $100.0million of gross proceeds to the Company and after which the common stock is listed on the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange or (b) the date and time, or the occurrence of an event specified by vote or written consent of the Requisite Holders (which is defined as at least a majority of the outstanding shares of Preferred Stock, voting together as a single class on an as converted to common stock basis, which majority must include holders of at least a majority of the outstanding shares of Series B Preferred Stock) voting together as a single class on an as converted to common stock basis, then all outstanding shares of Preferred Stock will automatically be converted into shares of common stock, at the then effective conversion rate and such shares of Preferred Stock may not be reissued by the Company.

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

Special mandatory conversion

Pursuant to the terms of the Series A Agreement, if a Series A Preferred Shareholder fails to purchase all of the Milestone Shares allocated to such shareholder at or prior to the Second Closing Milestone or breaches its obligations set forth in the Series A Agreement, then such investor will be deemed a Defaulting Purchaser. As of December 31, 2023, all of the Milestone Shares had been issued without triggering the special mandatory conversion provision under the Series A Agreement.

Pursuant to the terms of the Series B Agreement, if a Series B Preferred Shareholder fails to purchase all of the Series B Option Shares allocated to such shareholder at or prior to the closing of the Series B Option or breaches its obligations set forth in the Series B Agreement, then such investor will be deemed a Defaulting Purchaser. Each ten shares of Preferred Stock held by the Defaulting Purchaser will automatically, and without any further action on the part of such holder, be converted into oneshare of common stock. In April 2024, all of the Series B Option Shares had been issued without triggering the special mandatory conversion provision under the Series B Agreement.

Modification to Series A preferred stock

In June 2023, in connection with the issuance of the Company's Series B Preferred Stock, the rights of the Company's Series A Preferred Stock were amended to entitle holders to a cumulative dividend from and after the date of the share issuance at the rate per annum of 5% of the Original Issue Price (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock), provided that the total accrued amount will not exceed 15% of the Original Issue Price in aggregate. The dividend replaced the original accrued return definition within the liquidation preference terms of the Series A Preferred Stock. Previously, holders were entitled to a liquidation preference per share equal to the greater of (a) the Original Issue Price, plus an accrued return of 5% of the Original Issue Price per annum, provided that the total of such accrued return shall not exceed 15% of the Original Issue Price in the aggregate, or (b) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted in common stock.

The changes to the rights of the Company's Series A Preferred Stock were not considered to be a significant change to the contractual terms of the Company's Series A Preferred Stock because the accrued return of the liquidation preference and the cumulative dividend definitions will result in the same amount to be received in a liquidation event, and accordingly, the Company accounted for the change as a modification.

9. Common stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company's stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the Preferred Stock. When dividends are declared on shares of common stock, the Company must declare at the same time a dividend payable to the holders of Preferred Stock equivalent to the dividend amount they would receive if each share of Preferred Stock were converted into common stock. The Company may not pay dividends to common stockholders until all dividends accrued or declared but unpaid on the Preferred Stock have been paid in full. As of September 30, 2024 and December 31, 2023, nodividends were declared.

As of September 30, 2024 and December 31, 2023, the Company's amended and restated certificate of incorporation authorized the issuance of 40,684,346and 40,664,346shares, respectively, of $0.001par value common stock. As of September 30, 2024 and December 31, 2023, there were 3,025,452shares and 2,992,479shares of common stock issued and outstanding, respectively.

As of September 30, 2024 and December 31, 2023, the Company had reserved 39,614,500and 38,051,952shares of common stock, respectively, for the conversion of shares of Preferred Stock into common stock (including committed but unissued shares under future tranche obligations for the Preferred Stock as of December 31, 2023), the exercise of outstanding stock options for common stock, and the issuance of common stock options remaining available for grant under its equity incentive plan.

On October 4, 2024, the Company's stockholders approved the third amended and restated certificate of incorporation, which was filed immediately prior to the closing of the IPO on October 15, 2024 and which, among other things, increased the number of shares of common stock authorized for issuance from 40,684,346to 500,000,000shares of common stock.

In October 2024, the Company completed its IPO of its common stock. In connection with its IPO, the Company issued and sold 17,250,000shares of common stock, including 2,250,000shares sold pursuant to the full exercise of the underwriters' option to purchase additional shares, at a price to the public of $17.00per share. As a result of the IPO, the Company received approximately

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

$268.7million in net proceeds, after deducting $20.5million in underwriting discounts and commissions, and approximately $4.0million in other offering costs.

10. Stock-based compensation

Stock incentive plan

The Company's 2021 Stock Option and Grant Plan (the "2021 Plan") provides for the Company to grant incentive stock options, nonqualified stock options, restricted stock awards, unrestricted stock awards and restricted stock units (collectively, the "Awards") to among others, members of the board of directors, employees, consultants and other key persons to the Company and its affiliates. The 2021 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board.

As of September 30, 2024 and December 31, 2023, the total number of shares of common stock reserved for issuance under the 2021 Plan was 6,360,626shares and 4,765,105shares, respectively. In April 2024, upon the satisfaction of the Series B Option contemplated in the Series B Agreement, the Company's board of directors increased the number of shares of common stock reserved for issuance under the plan from 4,765,105to 6,360,626shares. As of September 30, 2024 and December 31, 2023, 55,379shares and 564,696shares remain available for future grants, respectively. Shares of unused common stock underlying any Awards that are forfeited, canceled or reacquired by the Company prior to vesting will again be available for the grant of awards under the 2021 Plan. Shares underlying any awards that are forfeited, canceled, or reacquired by the Company prior to vesting, satisfied without the issuance of stock or otherwise terminated and shares that are withheld upon exercise of an option of settlement of an award to cover the exercise price or tax withholding shall be added back to the shares available for issuance under the 2021 Plan.

2024 Stock option and incentive plan

On August 19, 2024, the Company's board of directors adopted, and on October 4, 2024 its stockholders approved, the 2024 Stock Option and Incentive Plan (the "2024 Plan"), which became effective upon the date immediately preceding the date on which the IPO registration statement was declared effective by the SEC. The 2024 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors, and consultants. The 2024 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, restricted shares of common stock and other stock-based awards. The number of shares initially reserved for issuance under the 2024 Plan is 3,180,000shares. The number of shares reserved under the 2024 Plan is subject to adjustment in the event of a stock split, stock dividend or other change in the Company's capitalization. In addition, the number of shares reserved and available for issuance under the 2024 Plan will automatically increase on January 1, 2025 and each January 1 thereafter, by fivepercent of the outstanding number of shares of its common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company's compensation committee.

The shares of common stock underlying any awards under the 2024 Plan and the 2021 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2024 Plan.

2024 Employee stock purchase plan

On August 19, 2024, the Company's board of directors adopted, and on October 4, 2024 its stockholders approved, the 2024 Employee Stock Purchase Plan (the "2024 ESPP"), which became effective on the date immediately preceding the date on which the IPO registration statement was declared effective by the SEC. A total of 488,467shares of common stock were initially reserved for issuance to participating employees under this plan. The 2024 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2025 and each January 1 thereafter through January 1, 2034, by the least of (i) 976,934shares of common stock, (ii) onepercent of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2024 ESPP. The number of shares reserved under the 2024 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company's capitalization.

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Upstream Bio, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

Fair value inputs