What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-11 · 342 added, 123 removed, 251 unchanged (65% of the section changed)

Financial Statements (Unaudited)

UNUM THERAPEUTICS INC.

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

September 30,

Current assets:

10 unchanged sentences

Accrued expenses and other current liabilities

CVR liability (Note 3)

Operating lease liability

4 unchanged sentences

Commitments and contingencies (Note 10)

Series A non-voting convertible preferred stock, $0.001 par value;

1,000,000 shares

163,325 and no shares issued and outstanding at September 30, 2020 and

December 31, 2019, respectively

Stockholders’ equity:

5 unchanged sentences

150,000,000 shares authorized;

shares and 30,663,054 shares issued and outstanding at June 30, 2020 and

shares and 7,665,763 shares issued and outstanding at September 30, 2020 and

December 31, 2019, respectively

1 unchanged sentence

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders' equity

Total stockholders’ equity (deficit)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

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

UNUM THERAPEUTICS INC.

COGENT BIOSCIENCES , INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Collaboration revenue

2 unchanged sentences

General and administrative

Acquired in-process research and development

Total operating expenses

2 unchanged sentences

Interest income

Other income, net

Gain on disposal of long-lived assets

Change in fair value of CVR liability

Total other income (expense), net

7 unchanged sentences

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

UNUM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

COGENT BIOSCIENCES , INC.

CONDENSED CONSOLIDATED STATEMENTS OF NON-VOTING CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

Series A Non-Voting

Convertible Preferred

Stockholders’

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Balances at June 30, 2020

Issuance of common stock upon exercise of

stock options

Issuance of common stock under

Employee Stock Purchase Plan

Issuance of common stock upon RSU vesting

Issuance of common stock to LPC

Issuance of Series A non-voting preferred stock

and common stock in connection with the Kiq

Issuance of Series A non-voting preferred stock, net of

issuance costs of $5,493

Dividend payable to common stockholders

Stock-based compensation expense

Balances at September 30, 2020

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

COGENT BIOSCIENCES , INC.

CONDENSED CONSOLIDATED STATEMENTS OF NON-VOTING CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

Series A Non-Voting

Convertible Preferred

Comprehensive

11 unchanged sentences

Balances at June 30, 2019

Issuance of common stock upon exercise of

stock options

Stock-based compensation expense

Unrealized gains on marketable securities

Balances at September 30, 2019

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

UNUM THERAPEUTICS INC.

COGENT BIOSCIENCES , INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

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Noncash consideration received from a customer

Noncash portion of acquired in-process research and development

Net amortization (accretion) of premiums (discounts) on marketable securities

Gain on disposal of long-lived assets

Change in fair value of CVR liability

Changes in operating assets and liabilities:

9 unchanged sentences

Purchases of property and equipment

Proceeds from sale of property and equipment

Proceeds from sale of BOXR Platform assets

Proceeds from maturities and sales of marketable securities

1 unchanged sentence

Cash flows from financing activities:

Proceeds from issuance of Series A non-voting convertible preferred stock, net of issuance costs of $5,493

Proceeds from issuance of common stock

Proceeds from issuance of common stock upon stock option exercises

5 unchanged sentences

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

UNUM THERAPEUTICS INC.

COGENT BIOSCIENCES , INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nature of the Business and Basis of Presentation

Unum Therapeutics, Inc.

(“Unum” or “the Company”) is a biopharmaceutical company focused on developing curative cell therapies for solid tumors.

Unum’s novel proprietary technology includes Bolt-On Chimeric Receptor (BOXR), designed to improve the functionality of engineered T cells by incorporating a “bolt-on” transgene to overcome resistance of the solid tumor microenvironment (TME) to T cell attack.

Unum was incorporated in March 2014 under the laws of the State of Delaware.

The Company also developed product candidates using its novel proprietary technology, Antibody-Coupled T cell Receptor (ACTR), an autologous engineered T-cell therapy that combines the cell-killing ability of T cells and the tumor-targeting ability of co-administered antibodies to exert potent antitumor immune responses.

In March 2020, the Company announced a strategic restructuring plan to shift away from ACTR, and prioritize its resources towards advancing its preclinical program, BOXR1030, for the treatment of solid tumor cancers.

On July 6, 2020 the Company, as described in Note 12 (Subsequent Events), signed and closed the acquisition of Kiq Bio LLC (formerly Kiq LLC) (“Kiq”).

Kiq is a biopharmaceutical company focused on developing a pipeline of novel therapies to treat cancer patients.

Kiq’s most advanced program, PLX9486, is a highly potent and selective KIT D816V inhibitor that is being developed to treat systemic mastocytosis and GIST patients.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, the impact of the COVID-19 coronavirus, compliance with government regulations and the ability to secure additional capital to fund operations.

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities.

Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Cogent Biosciences, Inc.

(“Cogent” or “the Company”) is a biotechnology company focused on developing precision therapies for genetically defined diseases.

Cogent’s most advanced program, PLX9486, is a highly selective tyrosine kinase inhibitor that is designed to potently inhibit the KIT D816V mutation as well as other mutations in KIT exon 17.

KIT D816V is responsible for driving a rare and serious condition called systemic mastocytosis (“SM”), and exon 17 mutations are also found in patients with advanced gastrointestinal stromal tumors (“GIST”), a type of cancer with strong dependence on oncogenic KIT signaling.

The Company was incorporated in March 2014 under the laws of the State of Delaware.

On October 2, 2020 the Company filed an amendment to its certificate of incorporation to change its name from Unum Therapeutics Inc.

to Cogent Biosciences, Inc.

The name change became effective on October 6, 2020.

In connection with the name change, the Company’s common stock began trading under the ticker symbol “COGT” and the new CUSIP for the Company’s common stock will be 19240Q 201 .

On April 1, 2019, the Company filed a shelf registration statement on Form S-3 with the SEC.

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Additionally, on April 1, 2019 and pursuant to the Form S-3, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $50.0 million through Cowen as the sales agent.

As of June 30, 2020, no shares have been sold under this Sales Agreement.

As of September 30, 2020, no shares have been sold under this Sales Agreement.

As announced on March 2, 2020, the Company initiated a reduction in force that resulted in the termination of approximately 60% of the Company’s employee workforce, or 43 employees.

These reductions were substantially completed by the end of first quarter of 2020.

The reduction in force was approved in connection with the Company’s restructuring plans to prioritize resources towards advancing its preclinical program, BOXR1030, for the treatment of solid tumor cancers.

On March 19, 2020, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company may elect to sell to LPC up to $25,000,000 in shares of its common stock, subject to certain limitations and conditions set forth in the Purchase Agreement.

Pursuant to the Purchase Agreement, the Company issued 726,382 shares of common stock to LPC as a commitment fee.

As of June 30, 2020, no other shares have been issued or sold under this Purchase Agreement.

The reduction in force was approved in connection with the Company’s restructuring plans to prioritize resources towards advancing its preclinical program.

On March 19, 2020, the Company entered into a Purchase Agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company may elect to sell to LPC up to $25,000,000 in shares of its common stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement.

Pursuant to the LPC Purchase Agreement, the Company issued 181,595 shares of common stock to LPC as a commitment fee.

As of September 30, 2020, 1,061,583 registered common shares have been sold to LPC under the LPC Purchase Agreement for proceeds of $10.7 million.

On March 26, 2020, the Company announced that it would be exploring strategic alternatives in order to maximize stockholder value and that the Company had engaged Ladenburg Thalmann & Co.

to act as its strategic financial advisor to assist in the strategic review process.

Subsequent to the balance sheet date, the Company successfully completed a transaction as disclosed in Note 12 (Subsequent Events).

On June 9, 2020, the Company’s stockholders approved an amendment to its certificate of incorporation, which allows the board to effect a reverse stock split of all issued and outstanding shares of its common stock, as a ratio ranging from 1-for-5 to 1-for-10.

The Company has yet to effect the reverse stock split as of June 30, 2020.

On July 9, 2020, the Company completed a private placement of 118,638 Series A Preferred Stock to new and existing investors in exchange gross proceeds of $104.4 million.

On December 31, 2019, the Company received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying it that, fo r the last 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Select Market (“Minimum Bid Price Requirement”).

In accordance with Nasda q Listing Rules, the Company had an initial period of 180 calendar days to regain compliance with the minimum bid price rule , which has been tolled as of April 16, 2020 and will restart on July 1, 2020 .

If the Company do es not regain compliance with t he Minimum Bid Price Requirement by September 11 , 2020, then , under Nasdaq Listing Rules, the Company may transfer to The Nasdaq Capital Market, provided that it meet s the continued listing requirement for the market value of publicly held shares and all o ther initial listing standards for The Nasdaq Capital Market, except for the Minim um Bid Price Requirement, and the Company would need to provide written notice to Nasdaq of its intention to cure the deficiency during the additional compliance period.

Following a transfer to The Nasdaq Capital Market , under Nasdaq Listing Rules, the Company may be eligible for an additional 180 calendar day compliance period.

The Company is activ ely monitoring its stock price and will consider any and all options available to regain compliance.

The alternatives to trading on the Nasdaq Stock Market or another national securities exchange are generally considered to be less efficient and less broad -based than the national securities exchanges and the liquidity of the Company’s common stock will likely be reduced if it fail s to regain compliance with the Minimum Bid Price Requirement.

Subsequent to the balance sheet date, the Company has received not ification from the Nasdaq that the Co mpany has regained compliance with the Nasdaq Listing Rules.

As of July 6, 2020, the Company successfully signed and closed the acquisition of Kiq Bio LLC (formerly Kiq LLC) (“Kiq”) (the “Kiq acquisition”) as disclosed in Note 6.

On July 6, 2020, the Company issued a non-transferrable contingent value right (“CVR”), which was distributed to stockholders of record as of the close of business on July 6, 2020, and prior to the issuance of any shares to acquire Kiq or sold to the PIPE investors as disclosed in Note 3.

On July 9, 2020, the Company completed a Private Investment in Public Equity (“PIPE”) of 118,638 Series A Non-Voting Convertible Preferred Stock to new and existing investors in exchange for gross proceeds of $104.4 million, or net proceeds of $98.9 million, after deducting commissions and offering costs .

On August 28, 2020 the Company sold its assets, rights and interests relating to its Bolt-on Chimeric Receptor (“ BOXR”) technology and Autologous Cell Therapy Industrial Automation (“ACTIA”) technology (collectively, the “BOXR Platform”), to Sotio LLC (“Sotio”) (the “BOXR Platform Transaction”), pursuant to an asset purchase agreement by and among the Company, Sotio and Sotio NV as Guarantor (the “BOXR Platform Purchase Agreement”) as disclosed in Note 7.

In August 2020, the Company’s board of directors unanimously approved an amendment to its certificate of incorporation, which would allow the board to effect a reverse stock split of all issued and outstanding shares of our common stock, at a ratio ranging from 1-for-4 to 1-for-8, inclusive, subject to stockholder approval.

On October 9, 2020, the Company filed a Definitive Proxy Statement which included the proposal that its stockholders approve the amendment to its certificate of incorporation to effect the reverse stock split and a proposal that the stockholders approve the conversion of the shares of Series A Preferred Stock issued in the Kiq acquisition and the PIPE .

The proposals were approved by the stockholders at a special meeting held on November 6, 2020 and the Company’s board of directors approved a ratio of 1-for-4 for the reverse stock split.

The amendment to the Company’s certificate of incorporation to effect the reverse stock split at a ratio of 1-for-4 was filed with the Delaware Secretary of State on November 6, 2020.

All disclosures of common shares, per common share data and preferred stock conversion ratios in the accompanying interim

financial statements and related notes have been adjusted to reflect the reverse stock split, but not any conversion of Series A Preferred Stock.

On December 31, 2019, the Company received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying it that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Select Market (“Minimum Bid Price Requirement”).

In accordance with Nasdaq Listing Rules, the Company had an initial period of 180 calendar days to regain compliance with the minimum bid price rule, which has been tolled as of April 16, 2020 and will restart on July 1, 2020.

On July 20, 2020, the Company received notification from the Nasdaq that the Company has regained compliance with the Nasdaq Listing Rules.

These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities.

Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

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 incurred recurring losses since inception, including a net loss of $13.5 million for the six months ended June 30, 2020.

As of June 30, 2020, the Company had an accumulated deficit of $137.4 million.

The Company has incurred recurring losses since inception, including a net loss of $63.5 million for the nine months ended September 30, 2020.

As of September 30, 2020, the Company had an accumulated deficit of $187.4 million.

The Company expects to continue to generate operating losses in the foreseeable future.

As of the issuance date of the interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents, including the $104.4 million the Company received on July 9, 2020 from the Series A Preferred Stock private placement, will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the financial statements.

As of the issuance date of the interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the financial statements.

The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.

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The consolidated balance sheet at December 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial statements.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K on file with the SEC.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2020 and results of operations for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019 have been made.

The Company’s results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of September 30, 2020 and results of operations for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019 have been made.

The Company’s results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

Principles of Consolidation

The accompanying condensed consolidated financial statements include those of the Company and its wholly-owned subsidiary, Mono, Inc.

The accompanying condensed consolidated financial statements include those of the Company and its wholly-owned subsidiaries, Mono, Inc.

and Utah Merger Sub 2 LLC.

All intercompany balances and transactions have been eliminated.

Risks and Uncertainties - Impact of the COVID-19 Coronavirus

Risk s and Uncertainties - Impact of the COVID-19 Coronavirus

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

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Potential impacts to the Company’s business include temporary closures of its facilities or those of its vendors, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing laboratory experiments and operations and the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, and its ability to raise capital.

As of June 30, 2020, there have been no material impacts to the Company.

As of September 30, 2020, there have been no material impacts to the Company.

As the impacts of COVID-19 continue to unfold, the Company will continually assess the impacts, as the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations in the future is uncertain.

Convertible Preferred Stock

The Company records shares of convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs.

The Company has applied the guidance in ASC 480-10-S99-3A, SEC Staff Announcement:

Classification and Measurement of Redeemable Securities, and has therefore classified the Series A Preferred Stock outside of shareholders’ equity (deficit) because, if conversion to common stock is not approved by the shareholders, the Series A Preferred Stock will be redeemable at the option of the holders for cash equal to the closing price of the common stock on last trading day prior to the holder’s redemption request.

Business Combinations

In determining whether an acquisition should be accounted for as a business combination or asset acquisition, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business, and is instead deemed to be an asset.

If this is not the case, the Company then further evaluates whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

If so, the Company concludes that the single identifiable asset or group of similar identifiable assets and activities is a business.

The Company accounts for business combinations using the acquisition method of accounting.

Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually.

Acquired in-process research and development (“IPR&D”) is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use.

Transaction costs related to business combinations are expensed as incurred.

Determining the fair value of assets acquired and liabilities assumed in a business combination requires management to use significant judgment and estimates, especially with respect to intangible assets.

During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill.

After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or income.

To date, the Company has not recorded any asset acquisitions as a business combination.

Asset Acquisitions

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs.

Goodwill is not recognized in asset acquisitions.

In an asset acquisition, the cost allocated to acquire IPR&D with no alternative future use is charged to expense at the acquisition date.

Research Contract Costs and Accruals

The Company has entered into various research and development contracts with companies both inside and outside of the United States.

These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred.

The Company records accruals for estimated ongoing research costs.

When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.

Actual results could differ from the Company’s estimates.

During the three and nine months ended September 30, 2020, in the course of completing the ACTR clinical trials, the Company adjusted the estimates used to determine the clinical accruals based on the best available information at that date, resulting in reductions to the accrued expenses and the related research and development expense of $0.8 million.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses and the valuation of stock-based awards.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

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The extent to which the COVID-19 pandemic may directly or indirectly impact its business, financial condition, and results of operations is highly uncertain and subject to change.

The Company considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there is not a material impact to its condensed consolidated financial statements as of and for the three and six months ended June 30, 2020;

however, actual results could differ from those estimates and there may be changes to its estimates in future periods.

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The Company does not expect that this standard will have a material effect on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity's own equity.

The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible in struments and the settlement assessment for contracts in an entity's own equity.

This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is currently evaluating the impact that this standard will have on its condensed consolidated financial statements.

Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis (in thousands) :

Fair Value Measurements at June 30, 2020 Using:

Fair Value Measurements at September 30, 2020 Using:

Cash equivalents:

Money market funds

CVR Liability

Total Liabilities

Fair Value Measurements at December 31, 2019 Using:

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Money market funds

The Company evaluates transfers between levels at the end of each reporting period.

The Company has no financial assets or liabilities that were classified as Level 3 at any point during the three and six months ended June 30, 2020.

On July 6, 2020, the Company issued a non-transferrable CVR, which was distributed to stockholders of record as of the close of business on July 6, 2020, and prior to the issuance of any shares to acquire Kiq or sold to the PIPE investors.

Holders of the CVR are entitled to receive certain stock and/or cash payments from proceeds received by the Company, if any, related to the disposition of its legacy cell therapy assets for a period of three years from July 2020.

On August 28, 2020, the Company sold the BOXR Platform and subsequently sold additional fixed assets, triggering the CVR payment and, per the terms of the CVR agreement, the payment will be made in shares.

The Company classifies the CVR as a liability on its condensed consolidated balance sheet.

The fair value of the CVR liability was determined using the probability weighted discounted cash flow method to estimate future cash flows associated with the sale of the legacy cell therapy assets, including the BOXR platform, ACTR platform and other fixed assets based on assumptions at the date of the CVR issuance and as of September 30, 2020 less certain permitted deductions.

The number of shares is determined by dividing the proceeds by the closing price of the Company’s stock on July 6, 2020 of $8.80.

The closing price of the Company’s common stock at each measurement date was used to determine the fair value of the CVR liability.

The liability measured at the date of issuance was recorded as a common stock dividend, returning capital to the legacy stockholders of record as of the close of business on July 6, 2020.

Changes in fair value of the liability are recognized as a component of Other income (expense) in the condensed consolidated statement of operations and comprehensive loss for the three and nine month periods ended September 30, 2020.

The liability was valued based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

For the year ended December 31, 2019, the Company had no financial liabilities outstanding measured at fair value.

The following table sets forth a summary of the changes in the fair value of the Company’s CVR liability:

September 30,

Beginning balance

Fair value at CVR issuance

Change in fair value

Ending balance

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands) :

September 30,

Accrued employee compensation and benefits

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Pursuant to the terms of the Collaboration Agreement, the Company and Seattle Genetics agreed to jointly develop two product candidates incorporating its ACTR platform and Seattle Genetics’ antibodies.

Under the Collaboration Agreement, the Company conducts preclinical research and clinical development activities related to the two specified product candidates through Phase 1 clinical development, and Seattle Genetics provides the funding for those activities.

Seattle Genetics will continue development activities of the two specified product candidates in collaboration with the Company unless it exercises one of its two options to opt-out from further development and commercialization activities for each of the two product candidates during specified periods subsequent to Phase 1 clinical development.

In addition, the Company has an option to opt-out from further development and commercialization activities for each of the two product candidates, exercisable during a specified period subsequent to Phase 2 clinical development.

If neither party exercises its options to opt-out from further development and commercialization activities for each product candidate, the parties will work together to co-develop and fund each product candidate after Phase 1 clinical development and Seattle Genetics will pay the Company specified collaboration and milestone payments upon the occurrence of specified events related to each product candidate of up to an aggregate of $400.0 million across the two active product candidates, consisting of $100.0 million of aggregate collaboration payments, $100.0 million of aggregate regulatory milestone payments and $200.0 million of aggregate commercial milestone payments.

The individual collaboration payments are payable upon the occurrence of specified clinical development events and range up to $30.0 million per product candidate.

The individual regulatory milestone payments are payable upon the first regulatory approval of each product in the United States and the first regulatory approval of each product in specified territories outside the United States and range up to $35.0 million per product.

The individual commercial milestone payments are payable upon the achievement of specified aggregate annual net sales for each product and range up to $60.0 million per product.

Through December 31, 2019, no milestones had been achieved or paid.

On January 16, 2020, the Company and Seattle Genetics entered into an agreement to terminate the Collaboration Agreement (the “Termination Agreement”) effective as of January 16, 2020 (the “Termination Effective Date”), pursuant to which the Parties will cease all research, development, manufacturing and other exploitations of any and all research candidates and development candidates under the Collaboration Agreement, including, without limitation, the development candidate ACTR-BCMA and a research candidate.

On January 16, 2020, the Company and Seattle Genetics entered into an agreement to terminate the Collaboration Agreement (the “Termination Agreement”) effective as of January 16, 2020 (the “Termination Effective Date”), pursuant to which the Parties ceased all research, development, manufacturing and other exploitations of any and all research candidates and development candidates under the Collaboration Agreement, including, without limitation, the development candidate ACTR-BCMA and a research candidate.

Pursuant to terms of the Termination Agreement, among other things, (i) Seattle Genetics paid the Company $5.75 million, (ii) Seattle Genetics surrendered, assigned and transferred to the Company all of its right, title and interest in the 207,961 shares of the Company’s common stock owned by Seattle Genetics, (iii) the Company will continue to pay all expenses for the wind-down of the ACTR-BCMA trial and (iv) Seattle Genetics paid all research and development costs incurred through the Termination Effective Date.

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In considering all facts, including the suspension of the ATTCK-17-01 clinical trial as announced in November 2019 and the expected termination of the Collaboration Agreement in January 2020, as of December 31, 2019, the Company adjusted the estimated transaction price to be the $25.0 million upfront payment from 2015 and the total payments to be earned for preclinical research and clinical development activities through the Termination Date.

During the six months ended June 30, 2020, the Company adjusted the transaction price to include the Termination Payment of $5.75 million as well as the aggregate fair value of $0.8 million as of January 16, 2020 of the 831,847 shares of common stock received.

During the nine months ended September 30, 2020, the Company adjusted the transaction price to include the Termination Payment of $5.75 million as well as the aggregate fair value of $0.8 million as of January 16, 2020 of the 207,961 shares of common stock received.

The aggregate fair value of common stock received has been included as a noncash adjustment to reconcile net loss to net cash used in operating activities within the condensed consolidated statement of cash flows.

The Company also adjusted the costs to complete the remaining performance obligations to represent its best estimate as of June 30, 2020.

Under the Collaboration Agreement and Termination Agreement, the Company recognized revenue of $0.5 million and $3.1 million for the three months ended June 30, 2020 and 2019, respectively, and $7.6 million and $6.2 million for the six months ended June 30, 2020 and 2019.

As of June 30, 2020 and December 31, 2019, deferred revenue of $0.3 million and $1.3 million, respectively, was recorded related to these agreements.

As of June 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligation for clinical development activities related to closing the study is estimated to be approximately $0.3 million, which is expected to be recognized as revenue through fiscal 2020.

Loan and Security Agreement

The Company has a loan and security agreement (the “Loan Agreement”) with Pacific Western Bank (“PWB”), entered into in 2017, which provided for term loan borrowings of up to $15.0 million through January 19, 2019.

Borrowings under the Loan Agreement bear interest at a variable annual rate equal to the greater of (i) the prime rate plus 0.25% or (ii) 3.75%, and were payable over an interest-only period until January 19, 2019, followed by a 24-month period of equal monthly payments of principal and interest.

All amounts outstanding as of the maturity date of January 19, 2021 become immediately due and payable.

In January 2019, the Company amended the Loan Agreement to extend the available date for borrowings from January 19, 2019 to June 30, 2019 and extend the interest only period from January 19, 2019 to June 30, 2020, with the possibility of further extension to March 31, 2021 if certain equity financing considerations are met.

Additionally, the loan repayment period will be over a 24-month period following the end of the interest-only period.

In June 2019, the Company further amended the Loan Agreement to extend the available date for borrowings from June 30, 2019 to June 30, 2020.

On July 31, 2019, the Company amended the Loan Agreement to provide for changes to the primary depository requirements with PWB.

In connection with the Loan Agreement, the Company agreed to enter into warrant agreements with PWB pursuant to which warrants will be issued to purchase a number of shares of the Company’s capital stock equal to 1% of the amount of each term loan borrowing under the Loan Agreement, divided by the applicable exercise price.

Potential borrowings under the Loan Agreement are collateralized by substantially all of the Company’s assets, except for its intellectual property.

Under the Loan Agreement, the Company has agreed to affirmative and negative covenants to which it will remain subject until maturity.

These covenants include limitations on the Company’s ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses.

There are no financial covenants associated with the Loan Agreement.

Events of default under the Loan Agreement include failure to make payments when due, insolvency events, failure to comply with covenants and material adverse effects with respect to the Company.

No amounts have been borrowed as term loans under the Loan Agreement as of June 30, 2020 and the Loan Agreement expired on June 30, 2020.

Under the Collaboration Agreement and Termination Agreement, the Company recognized revenue of $0.3 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $7.9 million and $7.2 million for the nine months ended September 30, 2020 and 2019.

All remaining performance obligations have been completed and all revenue has been recognized under the Collaboration Agreement.

There is no remaining deferred revenue balance as of September 30, 2020.

Kiq LLC Acquisition

On July 6, 2020, the Company completed its asset acquisition of Kiq, in accordance with the terms of the Agreement and Plan of Merger (the “Merger Agreement”), signed and closed on July 6, 2020.

Under the terms of the Merger Agreement, at the closing of the Merger, the Company issued the securityholders of Kiq 1,558,975 shares of common stock and 44,687 shares of Series A Preferred Stock.

The Company concluded the arrangement did not result in the acquisition of a business, as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, the exclusive license agreement with Plexxikon Inc.

for PLX9486 and PLX0206.

In addition, the Company did not obtain any substantive processes or any employees in connection with the acquisition and Ki q was not generating revenue at the time the Merger Agreement was executed.

The Company determined that the cost to acquire the assets was $46.9 million, based on the fair value of the consideration issued consisting of the 44 ,687 shares of Series A Preferred Stock and 1,558,975 shares of common stock valued at $3.52 per share and direct costs of the acquisition of $2.1 million.

The acquisition cost was allocated entirely to acquired IPR&D as no other assets or liabilities were acquired.

As the assets had not yet received regulatory approval in any territory, the cost attributable to the license agreement was expensed in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2020 as the acquired IPR&D had no alternative future use, as determined by the Company in accordance with GAAP.

Sale of BOXR Assets

On August 28, 2020 the Company, sold its assets, rights and interests relating to its BOXR Platform, to Sotio, pursuant to the BOXR Platform Purchase Agreement.

Pursuant to the BOXR Platform Purchase Agreement, Sotio has agreed to pay the Company total cash consideration of up to $11.5 million, consisting of an upfront payment of $8.1 million ($1.73 million of which was placed in escrow for 90 days related to general representations and warranties) on the Closing Date and potential milestone payments of up to $3.4 million in the aggregate upon the achievement of certain milestones related to the issuance of Specified Claims (as described in the BOXR Platform Purchase Agreement) by the U.S.

Patent and Trademark Office and the European Patent Office.

Pursuant to ASC 205-20, Presentation of Financial Statements— Discontinued Operations, the BOXR platform did not meet the criteria of a discontinued operation as it was not considered a component of an entity that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company, nor did it represent a strategic shift with a material effect on the Company’s operations and financial results.

The Company accounted for the sale of the BOXR Platform as the sale of a business and recognized a gain of $7.4 million as a component of Other income (expense) on the Company’s condensed consolidated statements of operations and comprehensive loss.

The amounts to be released from escrow of $1.73 are included within other current assets on the Company’s condensed consolidated balance sheet as of September 30, 2020.

No amounts related to the future milestone payments have been recognized as of September 30, 2020.

Preferred Stock, Series A Non-Voting Convertible Preferred Stock and Common Stock

Our authorized capital stock consists of 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, 1,000,000 of which are designated as Series A Preferred Stock and 9,000,000 of which shares of preferred stock are undesignated.

Series A Non-Voting Convertible Preferred Stock

On July 6, 2020, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock (“Series A Preferred Stock”) with the Secretary of State of the State of Delaware (the “Certificate of Designation”) in connection with the Merger and the PIPE.

The Certificate of Designation provides for the issuance of shares of Series A Preferred Stock, par value $0.001 per share.

Holders of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock equal, on an as-if-converted-to-Common-Stock basis, and in the same form as dividends actually paid on shares of the Common Stock.

Except as otherwise required by law, the Series A Preferred Stock does not have voting rights.

However, as long as any shares of Series A Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Preferred Stock, (d) increase the number of authorized shares of Series A Preferred Stock, (e) prior to the stockholder approval of the Conversion Proposal or at any time while at least 40% of the originally issued Series A Preferred Stock remains issued and outstanding, consummate a Fundamental Transaction (as defined in the Certificate of Designation) or (f) enter into any agreement with respect to any of the foregoing.

The Series A Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.

The Company has agreed to hold a stockholders’ meeting to submit the approval of the conversion of the Series A Preferred Stock into shares of common stock, the approval of an amendment to the certificate of incorporation of the Company to authorize sufficient shares of Common Stock for the conversion of the Series A Preferred Stock issued and the approval of a reverse stock split of al l outstanding shares of common stock for the purpose of maintaining compliance with Nasdaq listing standards.

The stockholder meeting and reverse split have not occurred as of September 30, 2020.

The convertible preferred stock is recorded outside of stock holders’ deficit because, if conversion to common stock is not approved by the shareholders, the convertible preferred stock will be redeemable at the option of the holders for cash equal to the closing price of the common stock on last trading day prior t o the holder’s redemption request.

The conversion was approved at the stockholders’ meeting on November 6, 2020 (Note 15).

Upon approval of the conversion of the Series A Preferred Stock into shares of common stock, each share of Series A Preferred Stock is convertible into shares of Common Stock at any time at the option of the holder thereof, into 250 shares of Common Stock, subject to certain limitations, including that a holder of Series A Preferred Stock is prohibited from converting shares of Series A Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 4.9% and 19.9%) of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion.

On July 9, 2020 the Company also completed a private placement of 118,638 Series A Preferred Stock to new and existing investors in exchange gross proceeds of $104.4 million, or net proceeds of $98.9 million, after deducting commissions and offering costs.

The Company analyzed the conversion provision related to the Series A Preferred Stock and determined the PIPE holders received a contingent beneficial conversion feature (“BCF”) equal to $104.4 million.

This amount represents the difference between the Company’s closing stock price at the July 9, 2020 commitment date ($12.04) and the $3.52 conversion price, limited by the actual gross proceeds received.

As the conversion provision is contingent on stockholder approval, the BCF will not be recognized until the contingency is resolved.

Upon obtaining stockholder approval, the $104.4 million BCF will be recognized in additional paid-in capital and reflected as a deemed preferred stock dividend, increasing the net loss attributable to common stockholders and increasing basic net loss per share.

No other classes of preferred stock have been designated and no other preferred shares have been issued or are outstanding as of September 30, 2020.

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 not entitled to receive dividends, unless declared by the board of directors.

In the event of our liquidation, dissolution, or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock.

The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and non-assessable.

On April 1, 2019, the Company filed a shelf registration statement on Form S-3 with the SEC.

The shelf registration statement allows the Company to sell from time-to-time up to $150 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for its own account in one or more offerings.

The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

As of September 30, 2020, no shares have been sold under this Sales Agreement.

On March 19, 2020, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company may elect to sell to LPC up to $25,000,000 in shares of its common stock, subject to certain limitations and conditions set forth in the Purchase Agreement.

Pursuant to the Purchase Agreement, the Company issued 181,595 shares of common stock to LPC as a commitment fee.

As of September 30, 2020, 1,061,583 registered common shares have been sold to LPC under the Purchase Agreement for proceeds of $10.7 million.

On September 22, 2020, the Company filed a registration statement on Form S-3 for the registration of (i) 1,558,975 shares of common stock issued in the acquisition of Kiq (ii) 11,171,750 shares of common stock issuable upon the conversion of 44,687 shares of the Series A Preferred Stock issued in the acquisition of Kiq and (iii) 29,659,500 shares of common stock issuable upon the conversion of 118,638 shares of the Series A Preferred Stock issued in the PIPE, for a total of 42,390,225 shares of common stock.

Stock-Based Compensation

6 unchanged sentences

The number of authorized shares reserved for issuance under the 2018 Plan was increased by 306,625 shares effective as of January 1, 2020.

As of June 30, 2020, 4,254,405 shares remained available for future issuance under the 2018 Plan.

As of September 30, 2020, 983,251 shares remained available for future issuance under the 2018 Plan.

2018 Employee Stock Purchase Plan

3 unchanged sentences

The first six month offering period was initiated on July 1, 2019.

As of June 30, 2020, 57,011 shares have been issued under the ESPP and 864,200 shares remain available for issuance.

As of September 30, 2020, 22,545 shares have been issued under the ESPP and 216,050 shares remain available for issuance.

Stock Option Issuances

During the six months ended June 30, 2020, the Company granted service-based options to participants for the purchase of 4,491,663 shares of common stock with a weighted average exercise price of $0.59 per share and a weighted average grant-date fair value of $0.46 per share.

During the nine months ended September 30, 2020, the Company granted service-based options to participants for the purchase of 1,235,082 shares of common stock with a weighted average exercise price of $2.80 per share and a weighted average grant-date fair value of $1.96 per share.

Stock-Based Compensation

The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss (in thousands) :

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development expenses

General and administrative expenses

On April 8, 2020, the Company launched a tender offer to certain employee optionholders, subject to specified conditions, to exchange some or all of their outstanding options to purchase shares of common stock, par value $0.001 per share, for equivalent number of new options to purchase shares of the Company’s common stock.

On April 8, 2020, the Company launched a tender offer to certain employee option holders, subject to specified conditions, to exchange some or all of their outstanding options to purchase shares of common stock, par value $0.001 per share, for equivalent number of new options to purchase shares of the Company’s common stock.

Pursuant to the exchange offer, all eligible employees elected to exchange outstanding options, and the Company accepted for cancellation options to purchase an aggregate of 542,418 shares of the Company’s common stock.

2 unchanged sentences

No other terms of the exchanged stock options were modified, and the stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates.

The Company accounted for the exchange offer as an option modification and as a result, recorded $0.2 million in incremental stock-based compensation expense during the three and six months ended June 30, 2020.

As of June 30, 2020, total unrecognized compensation cost related to the unvested stock-based awards was $2.8 million, of which $1.7 million is expected to be recognized in the quarter ending September 30, 2020 in connection with the Kiq acquisition as described in Note 12 (Subsequent Events).

The Company accounted for the exchange offer as an option modification and as a result, recorded $0.2 million in incremental stock-based compensation expense during the nine months ended September 30, 2020.

On July 6, 2020, the Board accelerated the vesting for all outstanding stock options in connection with the Kiq acquisition, resulting in acceleration of stock compensation expense of $2.

9 million , which was recognized in the three and nine months ended September 30, 2020.

As of September 30, 2020, total unrecognized compensation cost related to the unvested stock-based awards granted in the three months ended September 30, 2020 was $0.5 million.

The remaining is to be recognized over a weighted average period of 3.63 years.

Commitments and Contingencies

Operating Leases

The Company leases office and laboratory space under a non-cancelable operating lease that expires in April 2023 with the Company’s option to extend for an additional five-year term.

The lessee has the right to terminate the lease in the event of the inability to use the space due to substantial damage while the lessor has the right to terminate the lease for tenant’s default of lease financial obligations.

Per the terms of the lease agreement, the Company does not have any residual value guarantees.

This extension has not been considered in the determination of the lease liability as the Company is not obligated to exercise their option and it is not reasonably certain that the option will be exercised.

The lease payments include fixed lease payments that escalate over the term of the lease on an annual basis.

The Company’s real estate lease in Cambridge is a net lease, as the non-lease components (i.e.

common area maintenance) are paid separately from rent based on actual costs incurred.

Therefore, the non-lease component and related payments are not included in the right-of-use asset and liability and are reflected as an expense in the period incurred.

The discount rate used in determining the lease liability represents the Company’s incremental borrowing rate as the rate implicit in the lease could not be readily determined.

On August 28, 2020, the Company amended this operating lease resulting in increased annual rent payments.

No other terms of the lease were changed.

The Company determined that the lease modification did not grant an additional right of use and concluded that the modification was not a separate new lease, but rather that it should reassess and remeasure the right-of-use asset and lease liability on the effective date of the modification.

The Company increased the right-of-use asset and operating lease liabilities by $0.9 million, respectively.

Concurrent with the lease amendment and the BOXR sale, the Company entered into a sublease with Sotio for the remaining term of the lease.

Under the terms of the sublease agreement, Sotio will lease approximately 70% of the facility and will be responsible for the corresponding percentage of operating lease costs and variable lease costs.

Variable lease costs include common area maintenance and other operating charges.

The elements of the lease expense, net of sublease income, were as follows (in thousands):

Nine Months Ended

September 30,

Operating lease cost

Variable lease cost

Sublease Income

Total lease cost

Other information

Cash paid for amounts included in the measurement of

lease liabilities

Remaining lease term

Discount rate

Future minimum lease payments under the operating lease as of September 30, 2020 are as follows (in thousands):

Year Ending December 31,

Total future minimum lease payments

imputed interest

Total operating lease liability

Included in the consolidated balance sheet:

Current operating lease liability

Operating lease liability, net of current portion

Total operating lease liability

Under the terms of the lease, the Company obtained a $1.3 million letter of credit as collateral for its leased facility.

The underlying cash collateralizing this letter of credit has been classified as non-current restricted cash in the accompanying condensed consolidated balance sheets.

This is a refundable deposit and not a lease payment.

Under the terms of the sublease agreement with Sotio, Sotio obtained a letter of credit for $1.3 million for the benefit of the Company.

This has been excluded from the undiscounted cash flows above.

Plexxikon License Agreement

In July 2020, with the closing of the Kiq acquisition, the Company obtained an exclusive, sublicensable, worldwide license (the “License Agreement”) to certain patents and other intellectual property rights to research, develop, and commercialize PLX9486 and PLX0206.

As initial consideration for the license, Kiq directly paid Plexxikon Inc.

an upfront payment of $1.0 million in cash, which was paid prior to the closing of the Kiq acquisition.

Under the terms of the License Agreement, the Company is required to pay Plexxikon aggregate payments of up to $7.5 million upon the satisfaction of certain clinical milestones and up to $25 million upon the satisfaction of certain regulatory milestones.

The Company is also required to pay Plexxikon tiered royalties ranging from a low-single digit percentage to a high-single digit percentage on annual net sales of products.

These royalty obligations last on a product-by-product basis and country-by-country basis until the latest of (i) the date on which there is no validate claim of a licensed Plexxikon Inc.

patent covering a subject product in such country or (ii) the 10 th anniversary of the date of the first commercial sale of the product in such country.

In addition, if the Company sublicenses the rights under the License Agreement, the Company is required to pay a certain percentage of the sublicense revenue to Plexxikon Inc ranging from mid-double digit percentages to mid-single digit percentages, depending on whether the sublicense is entered into prior to or after certain clinical trial events.

The license agreement will expire on a country-by-country and licensed product-by-licensed product basis until the later of the last to expire of the patents covering such licensed products or services or the 10-year anniversary of the date of first commercial sale of the licensed product in such country.

The Licensors may terminate the license agreement within 30 days after written notice in the event of a breach of contract.

The Licensors may also terminate the agreement upon written notice in the event of the Company’s bankruptcy, liquidation, or insolvency.

In addition, the Company has the right to terminate this agreement in its entirety at will upon 90 days’ advance written notice to Plexxikon.

National University of Singapore and St.

Jude Children’s Research Hospital, Inc.

License Agreement

2 unchanged sentences

(collectively the “Licensors”) entered into in 2014, the Company is obligated to pay license maintenance fees on each anniversary of the effective date of the agreement that escalate from less than $0.1 million for each of the first seven years to $0.1 million on the eighth anniversary and each year thereafter.

The Company is also obligated to make aggregate milestone payments of up to 5.5 million Singapore dollars (equivalent to approximately $3.9 million as of June 30, 2020) upon the achievement of specified clinical and regulatory milestones and to pay tiered royalties ranging in the low single-digit percentages on annual net sales of licensed products sold by the Company or its sublicensees.

The Company is also obligated to make aggregate milestone payments of up to 5.5 million Singapore dollars (equivalent to approximately $4.0 million as of September 30, 2020) upon the achievement of specified clinical and regulatory milestones and to pay tiered royalties ranging in the low single-digit percentages on annual net sales of licensed products sold by the Company or its sublicensees.

The royalties are payable on a product-by-product and country-by-country basis and may be reduced in specified circumstances.

Additionally, under certain circumstances, the Company is obligated to pay the Licensors a percentage of amounts received from sublicensees.

The license agreement will expire on a country-by-country basis until the last to expire of the patents and patent applications covering such licensed product or service.

The license agreement will expire on a countr y-by-country basis until the last to expire of the patents and patent applications covering such licensed product or service.

The Licensors may terminate the license agreement within 60 days after written notice in the event of a breach of contract.

The Licensors may also terminate the agreement upon written notice in the event of the Company’s bankruptcy, liquidation, or insolvency.

In addition, the Company has the right to terminate this agreement in its entirety at will upon 90 days’ advance written notice to the Licensors.

The Li censors may also terminate the agreement upon written notice in the event of the Company’s bankruptcy, liquidation, or insolvency.

In addition, the Company has the right to terminate this agreement in its entirety at will upon 90 days’ advance written noti ce to the Licensors.

However, if the Company has commenced the commercialization of licensed products, the Company can only terminate at will if it ceases all development and commercialization of licensed products.

As of June 30, 2020, no milestones had been met.

As of September 30, 2020 , no milestones h ad been met.

On October 1 4, 2020, the Company provided notice of termination of the license agreement with National University of Singapore and St.

Jude Ch ildren’s Research Hospital, Inc .

The termination will be effective in 90 days on January 12, 2021.

Indemnification Agreements

3 unchanged sentences

To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company is not aware of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of June 30, 2020 or its consolidated financial statements as of December 31, 2019.

The Company is not aware of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of September 30, 2020 or its consolidated financial statements as of December 31, 2019.

Legal Proceedings

2 unchanged sentences

The Company expenses as incurred the costs related to such legal proceedings.

Since our inception, we have not recorded any current or deferred tax benefit for the net losses we have incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2019.

We reevaluate the utilization of net operating loss carryforwards and tax credits at each reporting period.

As of December 31, 2019, the Company had U.S.

federal and state net operating loss carryforwards of $109.8 million and $110.8 million, respectively and the Company also had U.S.

federal and state research and development tax credit carryforwards of $5.3 million and $1.6 million, respectively.

Utilization of the U.S.

federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future.

These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

As a result of the shares issued in July 2020 related to the acquisition of Kiq and the sale of Series A convertible preferred stock, the Company has likely experienced a change of control, as defined by Section 382.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the federal and state net operating loss carryforwards or research and development tax credit carryforwards would be subject to annual limitation under Section 382.

Under Section 382, the annual limitation is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

The Company is completing a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception, as well as the resulting amount of the limitation on the Company's net operating loss carryforwards and research and development tax credit carryforwards.

Net Loss Per Share

Basic and diluted net loss per common share was calculated as follows (in thousands, except share and per share amounts) :

Three Months Ended June 30,

Six Months Ended June 30,

Weighted average common

shares outstanding, basic

Three Months Ended September 30,

Nine Months Ended September 30,

Net loss attributable to common stockholders

Weighted average common shares outstanding, basic

Net loss per common share, basic and diluted

1 unchanged sentence

The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated above because including them would have had an anti-dilutive effect:

September 30,

Stock options to purchase common stock

Unvested restricted common stock units

Series A Preferred Stock

The conversion of the Series A Preferred Stock was approved by the Company’s stockholders at the special meeting on November 6, 2020, as further disclosed in Note 15 Subsequent Events.

Retirement Plan

2 unchanged sentences

As currently established, the Company is not required to make and to date has not made any contributions to the 401(k) Plan.

The Company did not make any matching contributions during the three and six months ended June 30, 2020 and 2019.

The Company did not make any matching contributions during the three and nine months ended September 30, 2020 and 2019.

Restructuring

On March 2, 2020, the Company announced the board of directors approved plans to reduce workforce and prioritize resources towards advancing the Company’s preclinical program, BOXR1030, for the treatment of solid tumor cancers.

As a result, the Company reduced its headcount by approximately 60% during the six months ended June 30, 2020.

The Company recognized restructuring expenses consisting of one-time severance payments and other employee related costs of $0.1 million and $1.8 million during the three and six months ended June 30, 2020.

Cash payments for employee related restructuring charges of $1.8 million were paid as of June 30, 2020.

On March 2, 2020, the Company announced the board of directors approved plans to reduce workforce and prioritize resources towards advancing the Company’s preclinical program.

As a result, the Company reduced its headcount by approximately 60% during the three months ended March 31, 2020.

The Company recognized restructuring expenses consisting of one-time severance payments and other employee related costs of $0.9 million and $2.7 million during the three and nine months ended September 30, 2020.

Cash payments for employee related restructuring charges of $2.6 million were paid as of September 30, 2020.

The Company recorded these restructuring charges based on each employee’s role to the respective research and development and general and administrative operating expense categories of $1.7 million and $1.0 million, respectively, on its condensed consolidated statements of operations and comprehensive loss.

A summary of the charges related to the restructuring activities as of June 30, 2020 is as follows (in thousands) :

A summary of the charges related to the restructuring activities as of September 30, 2020 is as follows (in thousands) :

December 31, 2019

June 30, 2020

September 30, 2020

Severance, benefits and relates costs

These amounts are included in accounts payable, accrued expenses and other current liabilities in the June 30, 2020 condensed consolidated balance sheet.

These amounts are included in accounts payable, accrued expenses and other current liabilities in the September 30, 2020 condensed consolidated balance sheet.

Subsequent Events

On July 6, 2020, the Company completed its asset acquisition of Kiq, in accordance with the terms of the Agreement and Plan of Merger, signed and closed on July 6, 2020 (the “Merger Agreement”).

Under the terms of the Merger Agreement, at the closing of the Merger, the Company issued the securityholders of Kiq 6,235,903 shares of the common stock and 44,687 shares of Series A non-voting convertible Preferred Stock (“Series A Preferred Stock”).

The Series A Preferred Stock is non-voting and is contingently convertible to common stock subject to stockholder approval.

Following stockholder approval, each share of Series A Preferred Stock is convertible into 1,000 shares of common stock at any time at the option of the holder thereof, subject to certain limitations.

The estimated consideration for the transaction was approximately $44 million.

The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, the license rights.

The Company has agreed to hold a stockholders’ meeting to submit the approval of the conversion of the Series A Preferred Stock into shares of common stock, the approval of an amendment to the certificate of incorporation of the Company to authorize sufficient shares of Common Stock for the conversion of the Series A Preferred Stock issued and the approval of a reverse stock split of all outstanding shares of common stock for the purpose of maintaining compliance with Nasdaq listing standards.

In connection with the Kiq merger, on July 9, 2020, the Company also completed a private placement of 118,638 Series A Preferred Stock to new and existing investors in exchange gross proceeds of $104.4 million.

In connection with the transactions, a non-transferrable contingent value right (a "CVR") will be distributed to Unum stockholders of record as of the close of business on July 6, 2020, and prior to the issuance of any shares to Kiq or the PIPE investors.

Holders of the CVR will be entitled to receive certain stock and/or cash payments from proceeds received by the Company, if any, related to the disposition of its legacy cell therapy assets for a period of three years following the closing of the transaction.

The CVR is expected to be distributed to eligible stockholders approximately 30 days from the closing of the Kiq acquisition.

Sales of common stock

Subsequent to September 30, 2020, the Company sold an additional 649,823 shares to LPC under the LPC Purchase Agreement for net proceeds of $7.2 million.

Conversion of Series A Preferred Stock and Reverse Stock Split

On October 9, 2020, the Company filed a Definitive Proxy Statement which included the proposal that our stockholders approve the amendment to its certificate of incorporation to effect the reverse stock split and a proposal that the stockholders approve the conversion of the shares of Series A Preferred Stock issued in the Kiq acquisition and the PIPE .

The proposals were approved by the stockholders at a special meeting held on November 6, 2020 and the Company’s board of directors approved a ratio of 1-for-4 for the reverse stock split.

The amendment to the Company’s certificate of incorporation to effect the reverse stock split at a ratio of 1-for-4 was filed with the Delaware Secretary of State on November 6, 2020.

All disclosures of common shares, per common share and preferred stock conversion ratio data in the accompanying interim financial statements and related notes have been adjusted to reflect the reverse stock split, but not any conversion of Series A Preferred Stock.

Inducement Plan

On October 22, 2020, the board of directors adopted the Cogent Biosciences, Inc.

2020 Inducement Plan (the “Inducement Plan”).

The board of directors also adopted a form of a form of non-qualified stock option agreement for use with the Inducement Plan.

A total of 3,750,000 shares of common stock of Cogent have been reserved for issuance under the Inducement Plan, subject to adjustment for stock dividends, stock splits, or other changes in Cogent’s common stock or capital structure.

On November 5, 2020, the Company filed a Registration on Form S-8 related to the 3,750,000 shares of its common stock to be issued pursuant to the Inducement Plan.

Resignation of current Chief Executive Officer, President, Principal Executive Officer and Director

On October 26, 2020, the Company announced that, on October 22, 2020, Charles Wilson, Ph.D.

resigned from his positions as Chief Executive Officer, President, and Principal Executive Officer of the Company, effective as of October 23, 2020, subject to a transition period from October 23, 2020 until October 30, 2020 (the “Separation Date”).

Pursuant to the Separation Agreement, Dr.

Wilson will be entitled to receive a payment related to severance and change of control of $1.3 million and other health benefits.

Additionally, all equity awards held by Dr.

Wilson will become vested and exercisable or non-forfeitable as of the Separation Date.

Appointment of new Chief Executive Officer, Principal Executive Officer, and Director

On October 23, 2020, the Board appointed Andrew Robbins as the Company’s Chief Executive Officer, President, and Principal Executive Officer, effective as of October 23, 2020 (the “Commencement Date”).

Additionally, the Board appointed Mr.

Robbins as a Class III director of the Company, effective as of October 23, 2020.

Pursuant to the terms of his employment agreement, and as approved by the Board on October 23, 2020 (the “Grant Date”), Mr.

Robbins was granted a non-qualified stock option “inducement award” to purchase 1,860,605 shares of the Company’s common stock pursuant to the terms of a stock option award agreement under the Inducement Plan as an inducement material to Mr.

Robbins becoming an employee of the Company in accordance with Nasdaq Listing Rule 5635(c)(4).

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements