Cogent Biosciences, Inc. 10-Q

Item 1. Financial Statements (Unaudited) COGENT BIOSCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited) September 30, December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 129,420 $ 37,424 Accounts receivable — 2,000 Prepaid expenses and other current assets 3,996 1,167 Total current assets 133,416 40,591 Operating lease, right-of-use asset 5,046 5,285 Property and equipment, net 153 1,865 Restricted cash 1,255 1,255 Other assets — 427 Total assets $ 139,870 $ 49,423 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 639 $ 3,183 Accrued expenses and other current liabilities 5,535 7,131 CVR liability (Note 3) 11,959 — Operating lease liability 1,988 1,619 Deferred revenue — 1,315 Total current liabilities 20,121 13,248 Operating lease liability, net of current portion 3,691 4,413 Total liabilities 23,812 17,661 Commitments and contingencies (Note 10) Series A non-voting convertible preferred stock, $0.001 par value; 1,000,000 shares authorized; 163,325 and no shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 138,232 — Stockholders’ equity: Preferred stock, $0.001 par value; 9,000,000 shares authorized; no shares issued or outstanding — — Common stock, $0.001 par value; 150,000,000 shares authorized; 10,677,285 shares and 7,665,763 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 11 8 Additional paid-in capital 165,177 155,646 Accumulated deficit (187,362 ) (123,892 ) Total stockholders’ equity (deficit) (22,174 ) 31,762 Total liabilities, convertible preferred stock and stockholders' equity (deficit) $ 139,870 $ 49,423 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 COGENT BIOSCIENCES , INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share amounts) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Collaboration revenue $ 312 $ 1,020 $ 7,871 $ 7,211 Operating expenses: Research and development 5,003 10,335 19,630 33,355 General and administrative 5,598 2,721 12,074 8,274 Acquired in-process research and development 46,910 — 46,910 — Total operating expenses 57,511 13,056 78,614 41,629 Loss from operations (57,199 ) (12,036 ) (70,743 ) (34,418 ) Other income (expense): Interest income 23 31 73 206 Gain on disposal of long-lived assets 7,463 82 7,470 82 Other income 239 — 239 — Change in fair value of CVR liability (509 ) — (509 ) — Total other income (expense), net 7,216 113 7,273 288 Net loss $ (49,983 ) $ (11,923 ) $ (63,470 ) $ (34,130 ) Net loss per common share, basic and diluted $ (5.07 ) $ (1.56 ) $ (7.56 ) $ (4.49 ) Weighted average common shares outstanding, basic and diluted 9,850,530 7,665,281 8,392,741 7,604,688 Comprehensive loss: Net loss $ (49,983 ) $ (11,923 ) $ (63,470 ) $ (34,130 ) Other comprehensive income: Unrealized gains on marketable securities, net of tax — — — 12 Total other comprehensive income — — — 12 Comprehensive loss $ (49,983 ) $ (11,923 ) $ (63,470 ) $ (34,118 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 2 COGENT BIOSCIENCES , INC. CONDENSED CONSOLIDATED STATEMENTS OF NON-VOTING CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share amounts) (unaudited) Series A Non-Voting Total Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Deficit) Balances at December 31, 2019 7,665,763 $ 8 $ 155,646 $ (123,892 ) $ 31,762 Issuance of common stock upon exercise of stock options — — 51,823 — 38 — 38 Issuance of common stock under Employee Stock Purchase Plan — — 14,252 — 35 — 35 Issuance of common stock, net of issuance costs — — 181,595 — 262 — 262 Acquisition and retirement of treasury stock — — (207,961 ) — (808 ) — (808 ) Stock-based compensation expense — — — — 507 — 507 Net loss — — — — — (6,094 ) (6,094 ) Balances at March 31, 2020 — $ — 7,705,472 $ 8 $ 155,680 $ (129,986 ) $ 25,702 Issuance of common stock upon exercise of stock options — — 85,012 — 62 — 62 Stock-based compensation expense — — — — 870 — 870 Net loss — — — — — (7,393 ) (7,393 ) Balances at June 30, 2020 — $ — 7,790,484 $ 8 $ 156,612 $ (137,379 ) $ 19,241 Issuance of common stock upon exercise of stock options — $ — 201,017 $ — $ 335 $ — $ 335 Issuance of common stock under Employee Stock Purchase Plan — $ — 8,293 $ — $ 13 $ — $ 13 Issuance of common stock upon RSU vesting — $ — 56,933 $ — $ — $ — $ — Issuance of common stock to LPC — $ — 1,061,583 $ 1 $ 10,669 $ — $ 10,670 Issuance of Series A non-voting preferred stock and common stock in connection with the Kiq acquisition 44,687 $ 39,325 1,558,975 $ 2 $ 5,486 $ — $ 5,488 Issuance of Series A non-voting preferred stock, net of issuance costs of $5,493 118,638 $ 98,907 — $ — $ — $ — $ — Dividend payable to common stockholders — $ — $ — $ (11,450 ) $ — $ (11,450 ) Stock-based compensation expense — $ — — $ — $ 3,512 $ — $ 3,512 Net loss — $ — — $ — $ — $ (49,983 ) $ (49,983 ) Balances at September 30, 2020 163,325 $ 138,232 10,677,285 $ 11 $ 165,177 $ (187,362 ) $ (22,174 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 COGENT BIOSCIENCES , INC. CONDENSED CONSOLIDATED STATEMENTS OF NON-VOTING CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share amounts) (unaudited) Series A Non-Voting Accumulated Convertible Preferred Stock Common Stock Additional Paid-in Other Comprehensive Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Loss Deficit Equity Balances at December 31, 2018 7,514,492 $ 8 $ 152,297 $ (12 ) $ (92,059 ) $ 60,234 Issuance of common stock upon exercise of stock options — — 15,213 — 11 — — 11 Stock-based compensation expense — — — — 726 — — 726 Unrealized gains on marketable securities — — — — — 10 — 10 Net loss — — — — — — (11,691 ) (11,691 ) Balances at March 31, 2019 — $ — 7,529,705 $ 8 $ 153,034 $ (2 ) $ (103,750 ) $ 49,290 Issuance of common stock upon exercise of stock options — — 135,433 — 97 — — 97 Stock-based compensation expense — — — — 885 — — 885 Unrealized gains on marketable securities — — — — — 2 — 2 Net loss — — — — — — (10,516 ) (10,516 ) Balances at June 30, 2019 — $ — 7,665,138 $ 8 $ 154,016 $ — $ (114,266 ) $ 39,758 Issuance of common stock upon exercise of stock options — — 625 — — — — — Stock-based compensation expense — — — — 788 — — 788 Unrealized gains on marketable securities — — — — — — — — Net loss — — — — — — (11,923 ) (11,923 ) Balances at September 30, 2019 — $ — 7,665,763 $ 8 $ 154,804 $ — $ (126,189 ) $ 28,623 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 COGENT BIOSCIENCES , INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net loss $ (63,470 ) $ (34,130 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 703 979 Stock-based compensation expense 5,151 2,399 Realized loss on sales of marketable securities — 2 Noncash consideration received from a customer (808 ) — Noncash portion of acquired in-process research and development 44,812 — Net amortization (accretion) of premiums (discounts) on marketable securities — (55 ) Gain on disposal of long-lived assets (7,470 ) (82 ) Change in fair value of CVR liability 509 — Changes in operating assets and liabilities: Accounts receivable 2,000 788 Prepaid expenses and other current assets (2,769 ) (476 ) Operating lease, right-of-use asset 239 1,016 Other assets 427 (428 ) Accounts payable (2,544 ) 75 Accrued expenses and other current liabilities (1,596 ) 1,167 Operating lease liability (353 ) (1,092 ) Deferred revenue (1,315 ) (3,232 ) Net cash used in operating activities (26,484 ) (33,069 ) Cash flows from investing activities: Purchases of property and equipment — (20 ) Proceeds from sale of property and equipment 320 204 Proceeds from sale of BOXR Platform assets 8,100 — Proceeds from maturities and sales of marketable securities — 22,988 Net cash provided by investing activities 8,420 23,172 Cash flows from financing activities: Proceeds from issuance of Series A non-voting convertible preferred stock, net of issuance costs of $5,493 98,907 — Proceeds from issuance of common stock 10,670 — Proceeds from issuance of common stock upon stock option exercises 435 108 Proceeds from issuance of stock from employee stock purchase plan 48 — Net cash provided by financing activities 110,060 108 Net (decrease) increase in cash, cash equivalents and restricted cash 91,996 (9,789 ) Cash, cash equivalents and restricted cash at beginning of period 38,679 56,926 Cash, cash equivalents and restricted cash at end of period $ 130,675 $ 47,137 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 COGENT BIOSCIENCES , INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Nature of the Business and Basis of Presentation 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. 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. 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 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. 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. Inc. to act as its strategic financial advisor to assist in the strategic review process. 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 6 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. 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. 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 $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 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. The Company expects that it will continue to incur significant expenses in connection with its ongoing business activities. The Company will need to seek additional funding through equity offerings, debt financings, collaborations, licensing arrangements and other marketing and distribution arrangements, partnerships, joint ventures, combinations or divestitures of one or more of its businesses. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborative arrangements or divest its assets. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Arrangements with collaborators or others may require the Company to relinquish rights to certain of its technologies or product candidates. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). 2. Summary of Significant Accounting Policies Unaudited Interim Financial Information 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 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 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 subsidiaries, Mono, Inc. and Utah Merger Sub 2 LLC. All intercompany balances and transactions have been eliminated. 7 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. The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 100 countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. The spread of COVID-19 has caused the Company to modify its business practices, including implementing a work-from-home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and it expects to continue to take actions as may be required or recommended by government authorities or as the Company determines are in the best interests of its employees, the patients it serves and other business partners in light of COVID-19. 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 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. 8 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, the valuation of the contingent value right (“CVR”) liability 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. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. 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 nine months ended September 30, 2020; however, actual results could differ from those estimates and there may be changes to its estimates in future periods. Recently Adopted 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 requires certain financial assets measured at amortized cost be presented at the net amount expected to be collected. The Company adopted ASU 2016-13 on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements. In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 . The main provisions of ASU 2018-18 include: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and (ii) precluding the presentation of transactions with collaborative arrangement participants that are not directly related to sales to third parties together with revenue. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption is permitted. The guidance per ASU 2018-18 is to be adopted retrospectively to the date of initial application of Topic 606. The Company adopted ASU 2018-18 on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , (“ASU 2018-13”). The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement. The new standard became effective on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12 Simplifying the Accounting for Income Taxes , which eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not expect that this standard will have a material effect on its condensed consolidated financial statements. 9 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. 3. 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 September 30, 2020 Using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ — $ 487 $ — $ 487 Total Assets $ — $ 487 $ — $ 487 Liabilities: CVR Liability $ — $ — $ 11,959 $ 11,959 Total Liabilities $ — $ — $ 11,959 $ 11,959 Fair Value Measurements at December 31, 2019 Using: Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ — $ 485 $ — $ 485 $ — $ 485 $ — $ 485 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: For the nine months ended September 30, 2020 Beginning balance $ — Fair value at CVR issuance 11,450 Change in fair value 509 Ending balance $ 11,959 10 4. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands) : September 30, 2020 December 31, 2019 Accrued employee compensation and benefits $ 1,098 $ 2,500 Accrued external research and development expense 2,310 2,987 Accrued external manufacturing costs 284 750 Other 1,843 894 $ 5,535 $ 7,131 5. Collaboration Agreement In June 2015, the Company entered into a Collaboration Agreement with Seattle Genetics (the “Collaboration Agreement”). 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. 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. In addition, the exclusivity provisions in the Collaboration Agreement terminate and each party will be free to research, develop and commercialize its individual intellectual property either by themselves or with third parties, subject to the intellectual property rights of the other party. 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 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. 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. 11 6. 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. 7. 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. 8. 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. 12 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. Common Stock Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are 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. 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 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. 13 9. Stock-Based Compensation 2018 Stock Option and Incentive Plan The Company’s 2018 Stock Option and Incentive Plan, (the “2018 Plan”), which became effective on March 27, 2018 provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights. The number of shares initially reserved for issuance under the 2018 Plan was 700,180. Additionally, the shares of common stock that remained available for issuance under the previously outstanding 2015 Stock Incentive Plan (the “2015 Plan”) became available under the 2018 Plan. The number of shares reserved for the 2018 Plan automatically increase on each January 1 by 4% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or a lesser number of shares determined by the Company’s board of directors. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2018 Plan or the 2015 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan. 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 September 30, 2020, 983,251 shares remained available for future issuance under the 2018 Plan. 2018 Employee Stock Purchase Plan The Company’s 2018 Employee Stock Purchase Plan (the “ESPP”) became effective on March 28, 2018 at which time a total of 78,500 shares of common stock were reserved for issuance. In addition, the number of shares of common stock that may be issued under the ESPP automatically increase on each January 1 through January 1, 2027, by the least of (i) 125,000 shares of common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or (iii) such lesser number of shares as determined by the ESPP administrator. The number of authorized shares reserved for issuance under the ESPP was increased by 76,657 shares effective as of January 1, 2020. The first six month offering period was initiated on July 1, 2019. 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 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Research and development expenses $ 1,876 $ 505 $ 2,579 $ 1,692 General and administrative expenses 1,636 283 2,572 707 Total $ 3,512 $ 788 $ 5,151 $ 2,399 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. On May 7, 2020, immediately following the expiration of the exchange offer, the Company granted new options to purchase 542,418 shares of common stock, pursuant to the terms of the exchange offer and the Company’s 2018 Plan. As a result, the exercise price was determined to be $1.68, the fair value of the Company’s closing stock price on the grant date. 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 nine months ended September 30, 2020. 14 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. 10. 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, Lease cost Operating lease cost $ 1,366 Variable lease cost 693 Sublease Income (239 ) Total lease cost $ 1,820 Other information Cash paid for amounts included in the measurement of lease liabilities $ 2,137 Remaining lease term 2.58 Discount rate 9.50 % 15 Future minimum lease payments under the operating lease as of September 30, 2020 are as follows (in thousands): Year Ending December 31, 2020 $ 594 2021 2,424 2022 2,497 2023 841 Total future minimum lease payments 6,356 Less: imputed interest 677 Total operating lease liability $ 5,679 Included in the consolidated balance sheet: Current operating lease liability $ 1,988 Operating lease liability, net of current portion 3,691 Total operating lease liability $ 5,679 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 Under its license agreement with National University of Singapore and St. Jude Children’s Research Hospital, Inc. (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 $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. 16 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 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 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 In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. 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 September 30, 2020 or its consolidated financial statements as of December 31, 2019. Legal Proceedings The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings. 11. Income Taxes 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. 17 12 . 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Numerator: Net loss $ (49,983 ) $ (11,923 ) $ (63,470 ) $ (34,130 ) Net loss attributable to common stockholders $ (49,983 ) $ (11,923 ) $ (63,470 ) $ (34,130 ) Denominator: Weighted average common shares outstanding, basic and diluted 9,850,530 7,665,281 8,392,741 7,604,688 Net loss per common share, basic and diluted $ (5.07 ) $ (1.56 ) $ (7.56 ) $ (4.49 ) The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive and would result in a reduction to net loss per share. 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, 2020 2019 Stock options to purchase common stock 668,360 1,165,997 Series A Preferred Stock 40,831,250 — 41,499,610 1,165,997 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. 13. Retirement Plan The Company has a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. 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 nine months ended September 30, 2020 and 2019. 14. 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. 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 September 30, 2020 is as follows (in thousands) : Balance at Balance at December 31, 2019 Charges Less: Payments September 30, 2020 Severance, benefits and relates costs $ — $ 2,676 $ (2,603 ) $ 73 Total $ — $ 2,676 $ (2,603 ) $ 73 These amounts are included in accounts payable, accrued expenses and other current liabilities in the September 30, 2020 condensed consolidated balance sheet. 18 15. Subsequent Events 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 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 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). 19