Contract analysis

I. Purpose and Summary This memorandum provides step-by-step instructions for the preparation and filing of amended federal income tax returns on Form 1120-X, Amended U.S. Corporation Income Tax Return, for tax years 2017, 2018, 2019, and 2020. The purpose of these amended returns is to implement the settlement reached between Penterra Pharmaceuticals Corp. ("PPC" or the "Company") and the Internal Revenue Service ("

II. Background — Settlement Terms A. The Closing Agreement The IRS Form 906, Closing Agreement on Final Determination Covering Specific Matters, was executed on March 29, 2024. The Closing Agreement was signed by Marcus Whitfield, Vice President, Global Tax, on behalf of PPC (Employer Identification Number: 22-3741856), and by Noreen Castañeda, IRS Appeals Officer, on behalf of the Commissioner of Internal Revenue. T

III. Forms to Be Filed A. Form 1120-X — Amended U.S. Corporation Income Tax Return A separate Form 1120-X (Amended U.S. Corporation Income Tax Return) must be prepared and filed for each of the four tax years covered by the Closing Agreement: 2017, 2018, 2019, and 2020. The Form 1120-X is the prescribed form for amending a previously filed Form 1120 and permits the reporting of changes to income, deductions, credits,

1. Form 906 Closing Agreement. A copy of the executed Form 906 Closing Agreement, or the relevant excerpts thereof referencing the specific tax year, should be attached to each Form 1120-X. Including the Closing Agreement with each return will enable the IRS Service Center to cross-reference the amended return with the Appeals settlement and expedite processing.

2. Revised Schedule M-1 or Schedule M-3. The reconciliation of income (loss) per books with income per return must be revised to reflect the additional income arising from the transfer pricing adjustment. For each tax year, the adjustment should be reflected as a book-tax difference item in the appropriate category (e.g., "Income subject to IRC § 482 adjustment — per Form 906 Closing Agreement"). PPC historically fil

3. Revised Form 5471. Revised Forms 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) should be prepared for Penterra Biopharma International DAC ("PBI"), the Irish-incorporated subsidiary that was party to the intercompany CSA and licensing arrangements at issue. To the extent applicable, any changes required to the Form 5471 reporting for Penterra Holdings Luxembourg S.à r.l. ("

4. Revised Schedule H. To the extent PPC's Forms 1120 included a Schedule H (Section 280H Limitations for a Personal Service Corporation) or any intercompany transaction schedules required under the consolidated return regulations, revised schedules should be prepared reflecting the adjusted intercompany transaction amounts.

5. Updated Section 482 Transfer Pricing Documentation Summary. A summary of the transfer pricing documentation maintained by PPC for the covered tax years should be attached, noting the existence of contemporaneous documentation and the basis for PPC's original transfer pricing positions, as well as the settlement resolution. This summary supports the penalty protection position and provides context for the IRS proce

6. Explanatory Statement. Each Form 1120-X should include a detailed explanatory statement describing the nature of the adjustments and the basis for the amended filing. The explanatory statement should reference the Form 906 Closing Agreement and the settlement resolution. Specific guidance on the content of the explanatory statement is provided in Section III.C below. C. Form 1120-X Specific Line Instructions The f

IV. Detailed Filing Steps The following steps should be followed in sequence to ensure the orderly and timely preparation, review, approval, and filing of the amended returns. Step 1: Engage Crestfield & Associates for Return Preparation PPC should contact Martin Ogilvy (Engagement Partner) and Susan Lam (Transfer Pricing Partner) at Crestfield & Associates LLP, 1200 Avenue of the Americas, New York, NY 10036, to ini

V. Impact on Related Returns and Filings A. Forms 5471 — PBI and PHL The transfer pricing adjustments reflected in the Closing Agreement will directly affect the information reported on Forms 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) filed with PPC's original Forms 1120 for each of the four covered tax years. PBI (Irish Tax Reference: 3218764T) is PPC's Irish-incorporated

VI. Financial Reporting and Disclosure Considerations A. FIN 48 / ASC 740-10 Reserve Adjustment PPC maintained a pre-settlement FIN 48 (now codified as ASC 740-10-25 and ASC 740-10-30) uncertain tax position ("UTP") reserve of $62,400,000 related to its Irish IP structure, including the intercompany CSA and licensing arrangements that were the subject of the IRS examination. This reserve reflected PPC's assessment, i

VII. Filing Timeline and Deadlines Recommended Target Filing Date: May 31, 2024. There is no statutory deadline for filing the amended returns in connection with a Closing Agreement; Form 1120-X may generally be filed at any time within the statute of limitations period. However, prompt filing is strongly advisable for the following reasons: • Minimize additional interest accrual. Federal underpayment interest contin

VIII. Documentation and Record Retention PPC should ensure that the following documents are retained in its permanent tax files in connection with the IRS examination, settlement, and amended return filings:

1. Executed Form 906 Closing Agreement (March 29, 2024), including all schedules and exhibits.

2. Forms 1120-X — filed copies of all four amended returns (TY 2017–2020), with proof of mailing or filing (certified mail receipts, return receipt cards, or electronic filing confirmation).

3. Revised Forms 5471 for PBI, as filed with the amended returns.

4. Notice of Proposed Adjustment (NOPA) dated October 12, 2023, issued by Revenue Agent Patricia Dunleavy. 5. 30-Day Letter dated November 8, 2023, issued by the IRS following the NOPA.

6. Formal Protest filed by C&H on behalf of PPC, dated December 22, 2023, requesting Appeals consideration.

7. All IDR responses. During the examination, the IRS issued a total of 47 Information Document Requests (IDRs) between June 2022 and September 2023. Copies of all IDR requests and PPC's corresponding responses should be retained.

8. Contemporaneous transfer pricing documentation for TY 2017–2020, originally prepared by Crestfield, including benchmark studies, functional analyses, and economic analyses.

9. Whitmore Valuation Group economic analyses, including the comparable uncontrolled transaction ("CUT") analysis, the comparable profits method / transactional net margin method ("CPM/TNMM") analysis, and the platform contribution transaction ("PCT") valuation/Discounted cash flow ("DCF") analysis.

10. C&H correspondence with the IRS throughout the examination and Appeals process, including written submissions, position papers, and conference materials.

11. IRS correspondence, including the initial Letter 2205-A (notification of examination) dated May 16, 2022, and all subsequent IRS correspondence.

12. Payment records, including EFTPS confirmation numbers and bank records documenting the payment of additional tax. Retention Period. At a minimum, all records should be retained until the later of: (a) The expiration of the statute of limitations for assessment for all four tax years (including any extensions executed on Forms 872), plus three years; or (b) The final resolution of any related state income tax proc

IX. Coordination with Calderwood & Harkness Garrett Simmons will serve as the primary C&H contact for all matters relating to the preparation, review, and filing of the amended returns. Please direct all questions, correspondence, and draft return transmissions to: Garrett Simmons Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 In addition, the following C&H personnel remain available

X. Action Items Summary The following table summarizes the key action items, responsible parties, and target dates for the amended return filing process: PPC and C&H should hold a brief status call on or about April 12, 2024, to confirm that all materials have been transmitted to Crestfield and that the return preparation process is on track.

XI. Closing This memorandum is provided as a privileged and confidential attorney-client communication in connection with Calderwood & Harkness LLP's representation of Penterra Pharmaceuticals Corp. in the defense of the IRS examination for tax years 2017–2020 (IRS Exam Team ID: LB&I-NE-TP-2022-00641) and the implementation of the settlement memorialized in the Form 906 Closing Agreement dated March 29, 2024. This me

1. Executed Form 906 Closing Agreement (March 29, 2024) — enclosed

2. Settlement Financial Impact Analysis Workbook — enclosed

3. Year-by-Year Adjustment Schedule (allocation of $47,600,000 across TY 2017–2020) — enclosed

4. Interest Computation Workpaper (estimated underpayment interest of approximately $2,840,000) — enclosed

5. State Tax Impact Analysis Memorandum (Leila Nazari, dated April 10, 2024) — forthcoming; to be circulated upon completion

6. GILTI/BEAT Impact Analysis Memorandum (Leila Nazari, dated October 2022) — available in C&H matter files

7. Hargrove Credit Facility Tax Covenant Analysis (Leila Nazari, dated November 2023) — available in C&H matter files

8. Post-Settlement FIN 48 / ASC 740-10 Analysis (March 2024) — previously transmitted to Crestfield & Associates PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT CALDERWOOD & HARKNESS LLP — MATTER NO. 1018-00009 Tax Year | Adjustment Amount 2017 | $11,200,000 2018 | $12,400,000 2019 | $12,800,000 2020 | $11,200,000 Total | $47,600,000 Proposed Adjustment Category | Amount CSA cost-s