Acumen Pharmaceuticals, Inc. 10-Q

Item 1. Financial Statements. Acumen Pharmaceuticals, Inc. Condensed Balance Sheets (in thousands, except share and per share data) March 31, 2022 December 31, 2021 (unaudited) ASSETS Current assets Cash and cash equivalents $ 108,764 $ 122,162 Marketable securities, short-term 80,326 72,075 Prepaid expenses and other current assets 3,008 4,424 Total current assets 192,098 198,661 Marketable securities, long-term 27,658 31,619 Property and equipment, net 51 36 Right-of-use asset 201 — Other assets 79 14 Total assets $ 220,087 $ 230,330 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 1,219 $ 1,088 Accrued expenses and other current liabilities 2,578 4,059 Operating lease liability, current portion 139 — Total current liabilities 3,936 5,147 Operating lease liability, net of current portion 62 — Total liabilities 3,998 5,147 Commitments and contingencies (Note 9 ) Stockholders’ equity Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized and no shares issued and outstanding as of March 31, 2022 and December 31, 202 1 — — Common stock, $ 0.0001 par value; 300,000,000 shares authorized and 40,473,270 shares issued and outstanding as of March 31, 2022 and December 31, 2021 4 4 Additional paid-in capital 353,599 352,981 Accumulated deficit ( 136,700 ) ( 127,571 ) Accumulated other comprehensive loss ( 814 ) ( 231 ) Total stockholders’ equity 216,089 225,183 Total liabilities and stockholders’ equity $ 220,087 $ 230,330 The accompanying notes are an integral part of these unaudited condensed financial statements. 1 Table of Contents Acumen Pharmaceuticals, Inc. Condensed Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) (Unaudited) Three Months Ended March 31, 2022 2021 Operating expenses Research and development $ 5,985 $ 2,578 General and administrative 3,221 1,215 Total operating expenses 9,206 3,793 Loss from operations ( 9,206 ) ( 3,793 ) Other income (expense) Interest income, net 76 4 Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability — ( 23,217 ) Other income, net 1 9 Total other income (expense) 77 ( 23,204 ) Net loss ( 9,129 ) ( 26,997 ) Other comprehensive loss Unrealized loss on marketable securities ( 583 ) — Comprehensive loss $ ( 9,712 ) $ ( 26,997 ) Net loss per common share, basic and diluted $ ( 0.23 ) $ ( 64.41 ) Weighted-average shares outstanding, basic and diluted 40,473,270 419,124 The accompanying notes are an integral part of these unaudited condensed financial statements. 2 Table of Contents Acumen Pharmaceuticals, Inc. Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands, except share data) (Unaudited) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders’ Equity Shares Amount Balance as of December 31, 2021 40,473,270 $ 4 $ 352,981 $ ( 127,571 ) $ ( 231 ) $ 225,183 Unrealized loss on marketable securities — — — — ( 583 ) ( 583 ) Share-based compensation — — 618 — — 618 Net loss — — — ( 9,129 ) — ( 9,129 ) Balance as of March 31, 2022 40,473,270 $ 4 $ 353,599 $ ( 136,700 ) $ ( 814 ) $ 216,089 Series A Series A-1 Series B Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Deficit Convertible Preferred Stock Convertible Preferred Stock Convertible Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Shares Amount Balance as of December 31, 2020 477,297 $ 1,067 7,537,879 $ 16,333 11,862,043 $ 39,253 419,124 $ — $ 8,374 $ ( 26,965 ) $ ( 18,591 ) Share-based compensation — — — — — — — — 126 — 126 Net loss — — — — — — — — — ( 26,997 ) ( 26,997 ) Balance as of March 31, 2021 477,297 $ 1,067 7,537,879 $ 16,333 11,862,043 $ 39,253 419,124 $ — $ 8,500 $ ( 53,962 ) $ ( 45,462 ) The accompanying notes are an integral part of these unaudited condensed financial statements. 3 Table of Contents Acumen Pharmaceuticals, Inc. Condensed Statements of Cash Flows (in thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net loss $ ( 9,129 ) $ ( 26,997 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 4 — Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability — 23,217 Stock-based compensation expense 618 126 Amortization of premiums and accretion of discounts on marketable securities, net 216 — Amortization of right-of-use asset 33 — Changes in operating assets and liabilities: Prepaid expenses and other current assets 1,416 ( 44 ) Other assets ( 65 ) ( 13 ) Accounts payable 121 387 Operating lease liability ( 32 ) — Accrued expenses and other current liabilities ( 1,481 ) 954 Net cash used in operating activities ( 8,299 ) ( 2,370 ) Cash flows from investing activities Purchases of marketable securities ( 9,090 ) — Proceeds from maturities and sales of marketable securities 4,000 — Purchases of property and equipment ( 9 ) — Net cash used in investing activities ( 5,099 ) — Net change in cash and cash equivalents ( 13,398 ) ( 2,370 ) Cash and cash equivalents at the beginning of the period 122,162 43,777 Cash and cash equivalents at the end of the period $ 108,764 $ 41,407 Supplemental disclosure of cash flow information Cash paid for income taxes $ — $ — Cash paid for interest $ — $ — Supplemental disclosure of noncash investing and financing activities Purchases of property and equipment in accounts payable $ 10 $ — Deferred offering costs in accrued expenses and other current liabilities $ — $ 257 The accompanying notes are an integral part of these unaudited condensed financial statements. 4 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Acumen Pharmaceuticals, Inc. (“Acumen” or the “Company”) was incorporated in 1996 in the state of Delaware. Acumen is a clinical-stage biopharmaceutical company developing a novel disease-modifying approach to target what the Company believes to be a key underlying cause of Alzheimer’s disease (“AD”). Acumen’s sole drug candidate, ACU193, is a humanized monoclonal antibody which selectively targets amyloid-beta oligomers. The Company is subject to the uncertainty of whether the Company’s intellectual property will develop into successful commercial products. June 2021 Reverse Stock Split The Company’s Board of Directors (“Board”) approved a reverse split of shares of the Company’s common stock and convertible preferred stock on a 1-for-1.49 basis (the “June 2021 Reverse Stock Split”), which was effected on June 23, 2021. The par value and the number of authorized shares of the convertible preferred stock and common stock were not adjusted in connection with the June 2021 Reverse Stock Split. All references to common stock, convertible preferred stock, warrants to purchase common stock, warrants to purchase convertible preferred stock, options to purchase common stock, share data, per share data and related information contained in the financial statements have been retrospectively adjusted to reflect the effect of the June 2021 Reverse Stock Split for all periods presented. No fractional shares of the Company’s common stock were issued in connection with the June 2021 Reverse Stock Split. Any fractional share resulting from the June 2021 Reverse Stock Split was rounded down to the nearest whole share, and any stockholder entitled to a fractional share as a result of the June 2021 Reverse Stock Split received a cash payment in lieu of receiving fractional shares. Initial Public Offering On July 6, 2021, the Company issued 9,999,999 shares of common stock in an initial public offering (“IPO”), and on July 8, 2021, the Company issued an additional 1,499,999 shares of common stock that were purchased by the underwriters pursuant to the underwriters’ option to purchase additional shares at the public offering price less underwriting discounts and commissions. The price to the public for each share was $ 16.00 . The aggregate net proceeds from the Company’s IPO, after underwriting discounts and commissions and other offering expenses of $ 15.4 million, were $ 168.6 million. On July 6, 2021, in connection with the closing of the IPO, 477,297 shares of Series A, 7,985,305 shares of Series A-1, and 19,770,070 shares of Series B convertible preferred stock, respectively, automatically converted into an equal number of shares of common stock. Warrants to purchase shares of common stock were automatically net exercised for the purchase of an aggregate of 178,847 shares of common stock. As a result of the IPO, the underwriters’ exercise of their option, the conversions of the Series A, A-1 and B convertible preferred stock, and the exercise of the warrants, the Company’s total number of outstanding common shares increased by 39,911,517 immediately following the closing of the IPO. Liquidity and Capital Resources The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2022 and December 31, 2021, the Company had an accumulated deficit of $ 136.7 million and $ 127.6 million, respectively, and working capital of $ 188.1 million and $ 193.5 million, respectively. Management believes that its existing financial resources are sufficient to continue operating activities at least through 2025. Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of the Company’s products. The Company may need to obtain additional financing to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. Until such time, if ever, the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that such financing will be available on terms acceptable to the Company, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation of other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts. The Company initiated a Phase 1 clinical trial of ACU193 in 2021, which the Company named “INTERCEPT-AD.” In October 2021, the Company announced the initial dosing of the first patient in the INTERCEPT-AD trial and the subsequent successful sentinel safety review of the first two patients. Due to delays in clinical trial site activation and patient enrollment that the Company believes are principally related to effects of the coronavirus (“COVID-19”) pandemic, the Company is expanding the anticipated number of trial sites to support its enrollment objectives and anticipated timelines. Clinical trial site activation and patient recruitment and enrollment is ongoing. Based on current site activations and enrollment rates, the Company anticipates reporting its topline data from this trial in the first half of 2023. The ultimate impact of the COVID-19 pandemic on the Company’s business, results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 pandemic, and the ongoing military conflict between Russia and Ukraine and related sanctions against Russia, on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. 5 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) NOTE 2. BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. A description of the Company’s significant accounting policies is included in the Company’s annual report on Form 10-K. Other than as described below, there have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 28, 2022. Use of Estimates The preparation of financial statements in conformity with U.S. 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 unaudited condensed financial statements, as well as the reported amounts of expenses during the reporting periods. These estimates and assumptions are based on the Company’s historical experience, and on various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Leases The Company accounts for its leases under Accounting Standards Codification (“ASC”) 842, Leases . Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and a lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and right-of-use assets are amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset results in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred and not included in the measurement of right-of-use assets and lease liabilities. ASC 842 provides practical expedients for an entity’s ongoing accounting. In calculating right-of-use assets and lease liabilities, the Company has elected to combine lease and non-lease components. Additionally, the Company has elected to apply the practical expedient related to short-term leases (i.e., leases having initial terms of 12 months or less at commencement date) as an accounting policy election. For short-term leases, the Company will not recognize a right-of-use asset or lease liability, but instead will recognize lease payments as an expense on a straight-line basis over the lease term. 6 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) Recently Adopted Accounting Pronouncements ASC 842 requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheet and also requires lessees and lessors to disclose key information about their leasing transactions. The Company adopted this guidance on January 1, 2022, using the modified retrospective method and the Company elected the package of practical expedients upon transition, which retained the lease classification for leases that existed prior to the adoption of this guidance. The Company recorded both a right-of-use asset and a lease liability of approximately $ 0.2 million on its condensed balance sheet upon the adoption of ASC 842. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted this guidance on January 1, 2022 with no material impact to the Company’s financial statements upon adoption. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which was codified with its subsequent amendments as ASC 326. ASC 326 seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updated guidance is effective for the Company for annual reporting periods beginning after December 15, 2022, and early adoption is permitted. The Company’s marketable securities portfolio consists entirely of debt securities and, as such, it does not expect this guidance to have a material impact on its financial statements and disclosures upon adoption. NOTE 3. MARKETABLE SECURITIES Marketable securities consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available-for-sale securities, short-term Commercial paper $ 47,961 $ — $ — $ 47,961 Corporate debt securities 15,373 — ( 117 ) 15,256 Asset-backed securities 8,077 — ( 45 ) 8,032 U.S. treasury securities 9,093 — ( 16 ) 9,077 Total available-for-sale securities, short-term 80,505 — ( 178 ) 80,326 Available-for-sale securities, long-term Corporate debt securities 9,275 — ( 227 ) 9,048 Asset-backed securities 7,033 — ( 107 ) 6,926 U.S. treasury securities 11,985 — ( 302 ) 11,684 Total available-for-sale securities, long-term 28,294 — ( 636 ) 27,658 Total available-for-sale securities $ 108,798 $ — $ ( 814 ) $ 107,984 7 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) December 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available-for-sale securities, short-term Commercial paper $ 47,939 $ — $ — $ 47,939 Corporate debt securities 7,992 — ( 11 ) 7,981 Asset-backed securities 16,177 — ( 22 ) 16,155 Total available-for-sale securities, short-term 72,108 — ( 33 ) 72,075 Available-for-sale securities, long-term Corporate debt securities 16,816 — ( 103 ) 16,713 Asset-backed securities 3,013 — ( 25 ) 2,988 U.S. treasury securities 11,988 — ( 70 ) 11,918 Total available-for-sale securities, long-term 31,817 — ( 198 ) 31,619 Total available-for-sale securities $ 103,925 $ — $ ( 231 ) $ 103,694 As of March 31, 2022, the Company’s available-for-sale securities classified as short-term mature in one year or less and the Company’s available-for-sale securities classified as long-term mature in less than two years . All of the Company’s available-for-sale marketable securities in an unrealized loss position as of March 31, 2022 were in a loss position for less than twelve months. Unrealized losses on available-for-sale securities as of March 31, 2022 were not significant and were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. Accordingly, no other-than-temporary impairment was recorded for the three months ended March 31, 2022. 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 the investments before recovery of their amortized cost bases, which may be at maturity. NOTE 4. FAIR VALUE MEASUREMENTS The Company’s financial assets and liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows (in thousands): Fair value measurements at reporting date using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at March 31, 2022 Assets included in: Cash and cash equivalents Money market securities $ 108,086 $ — $ — $ 108,086 Marketable securities Commercial paper — 47,961 — 47,961 Corporate debt securities — 24,304 — 24,304 Asset-backed securities — 14,958 — 14,958 U.S. treasury securities — 20,761 — 20,761 Total fair value $ 108,086 $ 107,984 $ — $ 216,070 8 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) Fair value measurements at reporting date using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value at December 31, 2021 Assets included in: Cash and cash equivalents Money market securities $ 121,162 $ — $ — $ 121,162 Marketable securities Commercial paper — 47,939 — 47,939 Corporate debt securities — 24,694 — 24,694 Asset-backed securities — 19,143 — 19,143 U.S. treasury securities — 11,918 — 11,918 Total fair value $ 121,162 $ 103,694 $ — $ 224,856 The carrying values reported in the Company’s condensed balance sheets for cash (excluding cash equivalents which are recorded at fair value on a recurring basis), accounts payable and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items. The fair value of the Company’s money market funds is determined using quoted market prices in active markets for identical assets. The fair value for the available-for-sale marketable securities is determined based on valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures. NOTE 5. SUPPLEMENTAL FINANCIAL INFORMATION Prepaid expenses and other current assets consisted of the following (in thousands): March 31, 2022 December 31, 2021 Research and development service agreements $ 1,653 $ 2,591 Prepaid insurance 749 1,514 Dues and subscriptions 158 96 Prepaid raw materials 333 83 Other 115 140 Total prepaid expenses and other current assets $ 3,008 $ 4,424 Accrued expenses and other current liabilities consisted of the following (in thousands): March 31, 2022 December 31, 2021 Research and development $ 1,638 $ 2,623 Bonuses and other employee liabilities 541 1,102 Legal 294 130 Professional fees 6 — Other 99 204 Total accrued expenses and other current li a bilities $ 2,578 $ 4,059 9 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) NOTE 6. STOCKHOLDERS’ EQUITY Authorized Shares The total number of shares of all classes of capital stock authorized to be issued is 310,000,000 , with 10,000,000 shares designated as preferred stock with a par value of $ 0.0001 , and 300,000,000 shares designated as common stock with a par value of $ 0.0001 . Common Stock As of March 31, 2022, the Company’s Amended and Restated Certificate of Incorporation authorized the issuance of 300,000,000 shares of common stock, $ 0.0001 par value per share. Each share of common stock is entitled to one voting right. NOTE 7 . STOCK-BASED COMPENSATION 2021 Equity Incentive Plan The 2021 Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options to employees, and the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants, became effective on June 30, 2021. The 2021 Plan is a successor to the Company’s Amended and Restated Stock Performance Plan that was adopted by the Board and stockholders on April 8, 2013 (as amended from time to time, most recently on November 20, 2020, the “2013 Plan”). Following the effectiveness of the 2021 Plan, no further grants may be made under the 2013 Plan; however, any outstanding equity awards granted under the 2013 Plan continue to be governed by the terms of the 2013 Plan. Initially, the maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan was 7,698,282 shares, which is the sum of (1) 3,550,000 new shares, plus (2) 667,104 shares that remained available for issuance under the Company’s 2013 Plan at the time the 2021 Plan became effective, plus (3) any shares subject to outstanding stock options or other stock awards that were granted under the 2013 Plan that, on or after the 2021 Plan became effective, terminate or expire prior to exercise or settlement, are settled in cash, are forfeited or repurchased because of the failure to vest, or are reacquired or withheld to satisfy a tax withholding obligation or the purchase or exercise price in in accordance with the terms of the 2013 Plan. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to 5 % of the total number of shares of the Company’s common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or a lesser number of shares determined by the Board prior to the applicable January 1. On January 1, 2022, the Board increased the number of shares of common stock reserved for issuance under the 2021 Plan by 2,023,663 shares. The maximum number of shares of the Company’s common stock that may be issued upon the exercise of incentive stock options under the 2021 Plan is 12,000,000 . As of March 31, 2022, 9,721,945 shares were authorized for issuance under the 2021 Plan and 4,794,743 shares remained available for issuance under the 2021 Plan. 10 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) Stock Options The Black-Scholes option-pricing model was used to estimate the fair value of stock options granted during the three months ended March 31, 2022 and 2021 with the following weighted average assumptions: Three Months Ended March 31, 2022 2021 Risk-free interest rate 1.71 % 0.4 % - 0.5 % Expected term (in years) 6.1 5.3 - 6.1 Expected volatility 90 % 90 % Expected dividend yield 0 % 0 % The weighted average grant date fair value of options granted during the three months ended March 31, 2022 and 2021, was $ 3.87 per share and $ 0.57 per share, respectively. Prior to its IPO, the fair value of the Company’s common stock underlying the stock options has historically been determined by the Board with assistance from management and, occasionally with input from an independent third-party valuation firm. For the year ended December 31, 2020, management engaged an independent third-party valuation firm to provide an estimate of the fair value of its common stock, which was utilized as an input to the Company’s Black-Scholes option pricing model for stock options awarded during the three months ended March 31, 2021. Stock options granted after December 31, 2017 vest monthly over a range of 12 to 36 months or vest monthly over a total of 48 months following a one-year cliff and all have a ten-year contractual term. Stock options granted prior to December 31, 2017 were either fully vested upon grant or generally vested monthly over a range of three to 24 months and have a ten-year term. The Company became publicly traded in July 2021 and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined using the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero 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. The following table reflects summarized stock option activity: Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2021 3,835,618 $ 2.51 Granted 1,104,550 5.19 Forfeited ( 18,149 ) 1.19 Outstanding at March 31, 2022 4,922,019 $ 3.11 8.6 $ 9,562 Vested and exercisable at March 31, 2022 1,755,794 $ 1.54 7.5 $ 4,805 As of March 31, 2022, total unrecognized compensation costs related to unvested stock option awards granted was approximately $ 8.4 million, which the Company expects to recognize over a weighted-average period of approximately 3.1 years. 11 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) The Company recorded stock-based compensation expense related to stock options in the following expense categories of its condensed statements of operations for the periods shown (in thousands): Three Months Ended March 31, 2022 2021 General and administrative $ 453 $ 79 Research and development 166 47 Total stock-based compensation $ 618 $ 126 Employee Stock Purchase Plan The 2021 Employee Stock Purchase Plan (the “ESPP”), which permits employees to purchase shares of the Company’s common stock, became effective on June 30, 2021. A total of 375,000 shares of the Company’s common stock were initially reserved for sale under the ESPP. The number of shares of the Company’s common stock reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2022 through January 1, 2031, by the lesser of (1) 1 % of the total number of shares of the Company’s common stock outstanding on the last day of the fiscal year before the date of the automatic increase, and (2) 800,000 shares; provided that before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (1) and (2). On January 1, 2022, the Board increased the number of shares of common stock reserved for issuance under the ESPP by 404,732 shares. As of March 31, 2022, there are 779,732 shares authorized for issuance under the ESPP and there have been no purchases of shares under the ESPP. NOTE 8 . LEASES The Company has been subleasing space in Indiana since March 1, 2020. The Company executed a new sublease for this space that was effective on February 1, 2021 and expires on August 30, 2023. The sublease does not provide the Company with any renewal options. The Company allows others to sublease a portion of the space from the Company for less than a one-year period. The following table summarizes quantitative information about the Company’s operating leases for the period indicated (in thousands): Three Months Ended March 31, 2022 Operating leases Operating lease cost $ 38 Less: sublease income ( 16 ) Operating lease expense 22 Short-term lease rent expense 5 Total rent expense $ 27 Supplemental information related to the Indiana lease was as follows (dollar amounts in thousands): Three Months Ended March 31, 2022 Operating cash flows from operating leases $ 38 Right-of-use assets obtained in exchange for operating lease liabilities $ 233 Weighted-average remaining lease term – operating leases 1.4 Weighted-average discount rate – operating leases 10.0 % 12 Table of Contents Acumen Pharmaceuticals, Inc. Notes to Condensed Financial Statements (Unaudited) As of March 31, 2022, the present value of maturities of the Company’s operating lease liabilities were as follows: Remaining Period Ended December 31, 2022 $ 115 Year Ended December 31, 2023 102 Total 217 Less: present value discount ( 16 ) Operating lease liabilities $ 201 The Company recognizes sublease income in other income, net on its condensed statements of operations and comprehensive loss. The Company expects to recognize approximately $ 16,000 in sublease income for the remainder of 2022. Prior to the adoption of ASC 842, and for the three months ended March 31, 2021, the Company recognized rent expense on a straight-line basis over the lease period and recorded deferred rent expense for rent expense incurred but not yet paid. During the three months ended March 31, 2021, the Company recognized total rent expense of approximately $ 27,000 and recognized sublease income of approximately $ 9,000 . Disclosures related to periods prior to adoption of ASC 842 included approximate future minimum rental payments due under the Company’s leases as of December 31, 2021 as follows: Year ended December 31, 2022 $ 153 Year ended December 31, 2023 102 Total $ 255 NOTE 9 . COMMITMENTS AND CONTINGENCIES The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities. NOTE 10 . NET LOSS PER SHARE The Company computes loss per common share using the two-class method required for participating securities. Basic and diluted loss per share was the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive. The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per common share because to do so would be anti-dilutive: Three Months Ended March 31, 2022 2021 Shares issuable upon exercise of stock options 4,922,019 3,481,178 Shares issuable upon conversion of Series A Preferred Stock — 477,297 Shares issuable upon conversion of Series A-1 Preferred Stock — 7,537,879 Shares issuable upon conversion of Series B Preferred Stock — 11,862,043 Shares issuable upon exercise of common stock warrants — 385,693 Shares issuable upon exercise of preferred stock warrant — 447,426 Total 4,922,019 24,191,516 13 Table of Contents