Enliven Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer and Chief Operating Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer and Chief Operating Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. 107 Management’s Report on Internal Control Over Financial Reporting This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting . Item 9B. Other Information. None. 108 PART III Item 10. Directors, Executive Officers and Corporate Governance. Executive Officers and Directors The following table sets forth the name, age as of January 31, 2021, and position of each of our executive officers and directors. There are no family relationships among any of our directors or executive officers. Name Age Position Executive Officers Rahul D. Ballal, Ph.D. 43 President and Chief Executive Officer, Director Michael P. Gray 50 Chief Financial Officer, Chief Operating Officer Kenneth Attie, M.D. 62 Senior Vice President, Chief Medical Officer Non-Employee Directors David M. Mott ( 2)(3) 54 Chairman of the Board of Directors Mette Kirstine Agger ( 3) 55 Director David Bonita, M.D. ( 2) 44 Director Mark Chin ( 1) 38 Director Edward R. Conner, MD (3) 47 Director Barbara J. Dalton, Ph.D. (2) 66 Director Carl Goldfischer, M.D. ( 1) 61 Director Sara Nayeem, M.D. ( 1) 42 Director (1) Member of the audit committee. (2) Member of the compensation committee. (3) Member of the nominating and corporate governance committee. Executive Officers Rahul D. Ballal, Ph.D. has served as our President and Chief Executive Officer and as a member of our board of directors since June 2018. Prior to joining us, Dr. Ballal served as Chief Business Officer of Northern Biologics Inc., a biotechnology company, from May 2016 to June 2018, and as an Entrepreneur-in-Residence at Versant Ventures Management LLC, a life sciences venture capital firm, from May 2016 to June 2018. Previously, Dr. Ballal was Vice President, Business Development at Flexion Therapeutics, Inc., or Flexion, a public biopharmaceutical company, from March 2011 to May 2016. Prior to Flexion, he held a venture fellowship position at Novartis Venture Funds, a venture capital fund, as part of the Kauffman Fellowship, from June 2010 to June 2012, and overlapped in business development at the Broad Institute of Massachusetts Institute of Technology, a biomedical and genomic research center, from September 2009 to March 2011. Dr. Ballal was also the founder and CEO of Redmind LLC, a venture backed data analytics startup that was sold to Ikimbo Inc. in June 2002. Dr. Ballal received his Ph.D. in biochemistry and molecular biology from Georgetown University, his M.S. in biotechnology from Johns Hopkins University and his B.A. in biology from Brown University. We believe Dr. Ballal is qualified to serve on our board of directors based on his broad experience in the life sciences industry, including in various investment, operating and leadership roles. Michael P. Gray has served as our Chief Financial Officer and Chief Operating Officer since April 2019. Prior to joining us, Mr. Gray held various leadership positions at Arsanis, Inc., now X4 Pharmaceuticals, Inc., a public biopharmaceutical company, including President and Chief Executive Officer from November 2018 to March 2019, Chief Financial Officer from March 2016 to March 2019, Chief Operating Officer from September 2017 to November 2018, and Chief Business Officer from March 2016 to September 2017. Mr. Gray also served in various leadership positions from January 1998 through February 2016 at Curis Inc., or Curis, a public oncology drug development company. He served as Curis’ Chief Financial Officer and Chief Business Officer from February 2014 to February 2016 and as its Chief Financial Officer and Chief Operating Officer from December 2006 to February 2014. From December 2003 until December 2006, Mr. Gray served as Curis’ Vice President of Finance and Chief Financial Officer and from August 2000 until December 2003, served as its Senior Director of Finance and Controller. Previously, Mr. Gray held positions including Controller at Reprogenesis Inc., a biotechnology company focused on the development of cell therapy drug candidates, and as an audit 109 professional for the accounting and consulting firm of Ernst & Young, LLP. Mr. Gray has served on the board of directors of Therapeutics Acquisition Corporation, a special purpose acquisition corporation, since May 2020. Mr. Gray received his M.B.A. in corporate finance and entrepreneurial management from the F.W. Olin Graduate School of Business at Babson College and a B.S. in accounting from Bryant University. Kenneth Attie, M.D. has served as our Senior Vice President and Chief Medical Officer since January 2021. Prior to joining us, Dr. Attie served as Vice President of Medical Research at Acceleron Pharma Inc., a biopharmaceutical company, from November 2009 to January 2021. Prior to Acceleron, Dr. Attie held clinical development and medical affairs leadership roles of increasing responsibility at Altus Pharmaceuticals Inc., a biopharmaceutical company, from 2007 to 2009, Insmed, Inc., a biopharmaceutical company, from 2005 to 2007, and Genentech, Inc, a biotechnology company, from 1988 to 2000. Dr. Attie received his B.A in music from the University of Michigan and his M.D. from the New York University School of Medicine. Non-Employee Directors David M. Mott has served as a member of our board of directors since January 2016. Mr. Mott has been a private investor through Mott Family Capital since February 2020 and previously served as a General Partner of New Enterprise Associates, Inc., or New Enterprise Associates, an investment firm focused on venture capital and growth equity investments and, with its affiliates, a holder of more than 5% of our voting securities, from September 2008 to February 2020, where he led the healthcare investing practice. From 1992 until 2008, Mr. Mott worked at MedImmune, Inc., or MedImmune, a biotechnology company and subsidiary of AstraZeneca plc, or AstraZeneca, a public global, science-led biopharmaceutical company, and served in numerous roles during his tenure, including most recently as Chief Executive Officer from October 2000 to July 2008. During that time, Mr. Mott also served as Executive Vice President of AstraZeneca from June 2007 to July 2008 following AstraZeneca’s acquisition of MedImmune in June 2007. Mr. Mott has served on the board of directors of several public companies, including Epizyme, Inc., or Epizyme, a public late-stage biopharmaceutical company, since 2009, Ardelyx, Inc., a public specialized biopharmaceutical company, since 2009, Adaptimmune Therapeutics plc, a public clinical-stage biopharmaceutical company, since September 2014 and Mersana Therapeutics, Inc., a public life sciences company, since July 2012, and previously served on the board of Tiburio Therapeutics, Inc., a biopharmaceutical company, from December 2018 to February 2020, Nightstar Therapeutics plc, a public gene therapy company that was acquired by Biogen in June 2019, from November 2015 to June 2019, Clementia Pharmaceuticals, Inc., a clinical-stage company, from June 2015 to February 2018, and Tesaro, Inc., an oncology-focused company, from May 2010 to January 2019. Mr. Mott also serves on the boards of several private biopharmaceutical companies. Mr. Mott received his B.A. in economics and government from Dartmouth College. We believe Mr. Mott is qualified to serve on our board of directors based on his experience as an executive officer at MedImmune and his role on several public and private boards of directors as well as his leadership position in healthcare investing. Mette Kirstine Agger has served as a member of our board of directors since January 2016. Since 2009, Ms. Agger has served as a Managing Partner of Lundbeckfonden Ventures, a life science venture fund and, with its affiliates, a holder of more than 5% of our voting securities. Prior to joining Lundbeckfonden Ventures, Ms. Agger co-founded 7TM A/S, a biotech company engaged in therapeutic drug discovery and development, in 2000, and served as its Chief Executive Officer from founding to 2009. Prior to founding 7TM, Ms. Agger was part of the management team of NeuroSearch A/S, a drug research and development company. Ms. Agger served on the board of Trevi Therapeutics, Inc., a public life sciences company, from July 2017 to June 2019 and Veloxis Pharmaceuticals A/S, an emerging specialty pharmaceutical company from April 2010 to December 2019, and has served on the board of directors of scPharmaceuticals Inc., a public pharmaceutical company, since March 2014, and Tiburio Therapeutics, Inc., a biopharmaceutical company, since December 2018. She also serves on the boards of several private companies, including Cydan II, Inc., or Cydan. Ms. Agger received her M.Sc. in biology from the University of Copenhagen and received her M.B.A. from Henley Business School at the University of Reading. We believe Ms. Agger is qualified to serve on our board of directors based on her experience holding senior leadership positions within biotechnology companies and her role on public and private boards of directors, as well as her experience in investing in healthcare companies. 110 David Bonita, M.D. has served as a member of our board of directors since March 2019. Since February 2020, Dr. Bonita has been a member of OrbiMed Advisors LLC, or OrbiMed , a venture capital firm and, with its affiliates, a holder of more than 5% of our voting securities, where he previously served as a private equity partner from June 2013 to February 2020. From June 2004 to June 2013, Dr. Bonita held other positions at OrbiMed . Dr. Bonita has served on the board of directors of Tricida , Inc., a pharmaceutical company, since January 2014 , Acutus Medical Inc, an arrhythmia management company, since March 2016, Prelude Therapeutics, Inc., an oncology company, since July 2016 , and Repare Therapeutics Inc., a cancer- focussed biotechnology company, since September 2019. Dr. Bonita also previously served on the boards of directors of Clementia Pharmaceuticals Inc., a public pharmaceutical company, from April 2013 to April 2019, Loxo Oncology, Inc., a public biopharmaceutical company, from October 2013 to December 2017, Si-Bone, Inc., a public medical device company, from April 2014 to June 2019, and ViewRay Inc., a public medical device company from January 2008 to June 2018. Dr. Bonita currently serves, and has previously served, on the boards of directors of numerous private companies. Dr. Bonita worked as a corporate finance analyst in the healthcare investment banking groups of Morgan Stanley and UBS. He has published scientific articles in peer-reviewed journals based on signal transduction research performed at Harvard Medical School. He received his B.A. in biology from Harvard University and his joint M.D./M.B.A. from Columbia University. We believe that Dr. Bonita is qualified to serve on our board of directors based on his roles on several public and private boards of directors as well as his extensive experience in investing in healthcare companies. Mark Chin has served as a member of our board of directors since March 2019. Mr. Chin served as an Investment Director at Arix Bioscience plc, a life science investment company and, with its affiliates, a holder of more than 5% of our voting securities, from August 2016 to April 2020. From September 2012 to July 2016, Mr. Chin served as a Principal at Longitude Capital Management Co. LLC, a healthcare venture capital firm. From January 2011 to September 2012, Mr. Chin served as a Consultant with the Boston Consulting Group, a global management consulting firm. Mr. Chin has served on the board of Harpoon Therapeutics Inc., a public clinical-stage immunotherapy company, since May 2017, and Iterum Therapeutics plc, a public clinical-stage pharmaceutical company, since May 2017. Mr. Chin earned his B.S. in management science from the University of California, San Diego, his M.B.A. from the Wharton School at the University of Pennsylvania and his M.S. in biotechnology from the University of Pennsylvania. We believe Mr. Chin is qualified to serve on our board of directors based on his roles on several public and private boards of directors and his extensive experience in investing in healthcare companies as well as his consulting experience. Edward R. Conner, M.D. has served as a member of our board of directors since April 2020. Since July 2019, Dr. Conner has served as Senior Vice President and Chief Medical Officer at Audentes Therapeutics, Inc., an Astellas company and a genetic medicines company. From November 2016 to May 2019, he served as Senior Vice President and Chief Medical Officer at Sangamo Therapeutics, Inc., a biotechnology company. Dr. Conner served as Vice President, Clinical Development at Ultragenyx Pharmaceutical Inc., a pharmaceutical company, from January 2015 to October 2016, and in senior clinical and medical leadership positions at BioMarin Pharmaceutical Inc., a pharmaceutical company and at Genentech, Inc., a biotechnology company, prior to that. Dr. Conner earned his B.S. in Biology from Duke University and his M.D. from the University of California, San Francisco. We believe Dr. Conner is qualified to serve on our board of directors based on his significant industry experience leading medical and clinical development operations. Barbara J. Dalton, Ph.D. has served as a member of our board of directors since January 2016. Dr. Dalton is the Vice President of Venture Capital for Pfizer Ventures, the venture capital group of Pfizer Inc. and, with its affiliates, a holder of more than 5% of our voting securities, since she joined Pfizer in 2007. She serves on the board of Artios Ltd., Cydan, Ixchelsis Ltd, AMRA Medical and Second Genome, which are all private independent biopharmaceutical companies. Barbara also serves on several other Pfizer Venture Investments portfolio companies as a board observer. Dr. Dalton began her pharmaceutical career as a Research Scientist in Immunology at SmithKline Beecham Ltd. (formerly SmithKline and French Laboratories), a pharmaceutical company that merged with Glaxo Holdings to become GSK, and joined their venture capital group, SR One, Ltd., in the early 1990s. She was also a founding member and Partner with EuclidSR Partners LP, a private venture capital firm, where SmithKline was a leading limited partner. She received her Ph.D. in microbiology and immunology from The Medical College of Pennsylvania (now the Drexel University College of Medicine) and received her B.S. in General Science from Pennsylvania State University. We believe Dr. Dalton is qualified to serve on our board of directors based on her research background, her past role on several public and private boards of directors, as well as her extensive experience in venture investing in healthcare companies. Carl Goldfischer, M.D. has served as a member of our board of directors since January 2016. Dr. Goldfischer has served as an Investment Partner, Managing Director, member of the board of directors and member of the executive committee of Bay City Capital LLC, or Bay City Capital, a life sciences investment firm, since January 2000. Prior to joining Bay City Capital, Dr. Goldfischer was Chief Financial Officer and VP of Finance and Strategic Planning of ImClone Systems Inc., a biopharmaceutical company. Dr. Goldfischer has served on the board of directors of Epizyme since September 2009. He has previously served on the board of directors of EnteroMedics Inc., now ReShape Lifesciences Inc., a public medical 111 device company, from 2004 to September 2017, MAP Pharmaceuticals, Inc., a biopharmaceutical company, from 2004 to 2011 and Poniard Pharmaceuticals, Inc., a public biopharmaceutical company, from 2000 to 2012. Dr. Goldfischer received his B.A. in Liberal Arts from Sarah Lawrence College and his M.D. with honors in scientific research from Albert Einstein College of Medicine at Yeshiva University. We believe Dr. Goldfischer is qualified to serve on our board of directors based on his experience as chief financial officer at ImClone Systems and his role on several public and private boards of directors as well as his experience in investing in healthcare companies. Sara Nayeem, M.D. has served as a member of our board of directors since January 2016. Dr. Nayeem has been a partner at Avoro Capital Advisors, an investment firm, since February 2021. From October 2015 to February 2021, Dr. Nayeem served as a Partner at New Enterprise Associates, a venture capital firm and, with its affiliates, a holder of more than 5% of our voting securities. From January 2009 to October 2015, Dr. Nayeem held other positions at New Enterprise Associates. Prior to joining New Enterprise Associates, Dr. Nayeem was an Associate with Merrill Lynch and Co. Inc.’s Global Healthcare Group from August 2006 to January 2009. Dr. Nayeem previously served on the board of directors of Mersana Therapeutics, Inc., a public life sciences company, from July 2012 to June 2018. Dr. Nayeem currently serves on the board of directors of several private biopharmaceutical companies, including Centrexion Therapeutics Corp., Cydan, Cydan LLC, Complexa Inc. and Tiburio Therapeutics, Inc. Previously, she served on the boards of Vtesse, Inc. from December 2014 to April 2017, Eperia Inc. from July 2016 to December 2018, and Therachon Holding AG, a clinical stage global biotechnology company, from July 2015 to October 2016. Dr. Nayeem received her M.D. and M.B.A. from Yale University and her B.A. in biology from Harvard University. We believe Dr. Nayeem is qualified to serve on our board of directors based on her experience in healthcare investment banking, her experience in investing in healthcare companies and her role as a member of the boards of directors for several biotechnology companies. Code of Business Conduct and Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code on the “Corporate Governance” section of the “Investors” section of our website, www.imaratx.com. In addition, we intend to post on our website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision of the code. Stockholder Nomination Process Our nominating and corporate governance committee is responsible for identifying individuals qualified to serve as directors, consistent with criteria approved by our board, and recommending the persons to be nominated for election as directors, except where we are legally required by contract, law or otherwise to provide third parties with the right to nominate director candidates. Stockholders may recommend individuals to the nominating and corporate governance committee for consideration as potential director candidates. Any such proposals should be submitted to our corporate secretary at our principal executive offices and should include appropriate biographical and background material to allow the nominating and corporate governance committee to properly evaluate the potential director candidate and the number of shares of our stock beneficially owned by the stockholder proposing the candidate. If a stockholder wishes to propose a nomination of persons for election to our board of directors at an annual meeting but does not wish to have the proposal considered for inclusion in our proxy statement and proxy card, our amended and restated bylaws establish an advance notice procedure for such nominations and proposals. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely notice in proper form to our corporate secretary of the stockholder’s intention to bring such business before the meeting. The required notice must be in writing and received by our corporate secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. However, in the event that the date of the annual meeting is advanced by more than 30 days, or delayed by more than 60 days, from the first anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, a stockholder’s notice must be so received no earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. 112 Assuming that biographical and background material has been provided on a timely basis, any recommendations received from stockholders will be evaluated in the same manner as potential nominees proposed by the nominating and corporate governance committee. If our board of directors decides to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included on our proxy card for the next annual meeting. Audit Committee The members of our audit committee are Mark Chin, Carl Goldfischer and Sara Nayeem. Dr. Goldfischer is the chair of the audit committee. Our audit committee’s responsibilities include: • appointing, approving the compensation of, and assessing the independence of our registered public accounting firm; • overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from that firm; • reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures; • monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics; • overseeing our internal audit function; • overseeing our risk assessment and risk management policies; • establishing policies regarding hiring employees from our independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns; • meeting independently with our internal auditing staff, if any, our independent registered public accounting firm and management; • reviewing and approving or ratifying any related person transactions; and • preparing the audit committee report required by Securities and Exchange Commission, or SEC, rules. All audit and non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee. Our board of directors has determined that Dr. Goldfischer is an “audit committee financial expert” as defined in applicable SEC rules. The composition of our audit committee satisfies the member independence requirements under current Nasdaq and SEC rules and regulations. Our board of directors has also determined that each member of our audit committee can read and understand fundamental financial statements, in accordance with applicable requirements. In arriving at these determinations, the board of directors has examined each audit committee member’s scope of experience and the nature of their employment in the corporate finance sector. 113 Item 11. Executive Compensation. The following discussion relates to the compensation of our President and Chief Executive Officer, Rahul D. Ballal, Ph.D., and our Chief Financial Officer and Chief Operating Officer, Michael P. Gray, for the years ended December 31, 2020 and 2019. We also include discussion of the compensation of our former Chief Medical Officer, Willem Scheele, for the years ended December 31, 2020 and 2019 pursuant to the requirements of the Securities Act of 1933, or the Securities Act. These three individuals are collectively referred to in this Annual Report on Form 10-K as our named executive officers. We have begun, and expect to continue in the coming months, a thorough review of all elements of our executive compensation program, including the function and design of our equity incentive programs. We have begun, and expect to continue in the coming months, to evaluate the need for revisions to our executive compensation program to ensure that our program is competitive with the companies with which we compete for executive talent and is appropriate for a public company. Summary Compensation Table The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for the years ended December 31, 2020 and 2019. Name and Principal Position Year Salary ($) Bonus ($) ( 1) Option awards ($) ( 2) All other compensation ($) Total ($) Rahul D. Ballal, Ph.D. ( 3) 2020 437,750 177,289 — 2,620 (4 ) 617,659 President and Chief Executive Officer 2019 421,806 153,000 1,446,110 5,453 (5 ) 2,026,369 Michael P. Gray ( 6) 2020 393,444 134,263 — 2,620 (7) 530,327 Chief Financial Officer and Chief Operating Officer 2019 281,458 88,659 897,219 4,403 (8) 1,271,739 Willem Scheele ( 9) 2020 110,265 — — 258,137 (10) 368,402 Former Chief Medical Officer 2019 282,386 67,900 708,330 4,578 (11) 1,063,194 (1) Amounts represent a cash bonus award paid to our named executive officers under our bonus program. (2) The amounts reported in the “Option awards” column reflect the aggregate fair value of stock-based compensation awarded during the year computed in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification, or ASC, Topic 718. See Note 11 of the notes to our consolidated financial statements in this Annual Report on Form 10-K regarding assumptions underlying the valuation of equity awards. These amounts reflect the accounting cost for these stock options and do not reflect the actual economic value that may be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options or the sale of the common stock underlying such stock options. For 2019 options subject to performance-based vesting, the amounts reflect the grant date fair value of such awards based upon the probable outcome at the time of grant, in the amounts of $353,256, $134,238 and $105,977 for Dr. Ballal, Mr. Gray and Dr. Scheele, respectively, which amounts also equal what would have been the grant date fair value of the awards assuming achievement of the highest level of performance conditions. (3) Dr. Ballal also serves as a member of our board of directors but does not receive any additional compensation for his service as a director. (4) Amount represents compensation of $1,090 from premiums paid on behalf of Dr. Ballal for life insurance and $1,530 in reimbursements for monthly parking costs. (5) Amount represents compensation of $533 from premiums paid on behalf of Dr. Ballal for life insurance and $4,920 in reimbursements for monthly parking costs. (6) Mr. Gray commenced employment with us on April 8, 2019. (7) Amount represents compensation of $1,090 from premiums paid on behalf of Mr. Gray for life insurance and $1,530 in reimbursements for monthly parking costs. (8) Amount represents compensation of $533 from premiums paid on behalf of Mr. Gray for life insurance and $3,870 in reimbursements for monthly parking costs. (9) Dr. Scheele commenced employment with us on March 15, 2019 and ceased to be an employee, effective April 22, 2020. (10) Amount represents compensation of $356 from premiums paid on behalf of Dr. Scheele for life insurance, $1,530 in reimbursements for monthly parking costs, $246,528 in severance and $9,723 in vacation paid to Dr. Scheele. (11) Amount represents compensation of $533 from premiums paid on behalf of Dr. Scheele for life insurance and $4,045 in reimbursements for monthly parking costs. Narrative to Summary Compensation Table Base Salary. In 2019, we paid Dr. Ballal an annualized base salary of $405,000 until April 1, 2019, when his annualized base salary was increased to $425,000. Effective January 1, 2020, his annualized base salary was increased to $437,750. In 2019, we paid Mr. Gray an annualized base salary of $385,000, which was pro-rated to reflect the number of days he served with our company following his hire in April 2019 and effective January 1, 2020 his annualized base salary was increased to $393,444. In 2019, we paid Dr. Scheele an annualized base salary of $355,000, which was pro-rated to reflect the number of days he served with our company following his hire in March 2019. Dr. Scheele’s annualized base salary remained $355,000 during 2020 until his cessation of service on April 22, 2020. We use base salaries to recognize the 114 experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. None of our named executive officers are currently party to an employment agreement or other agreement or arrangement that provides for automatic or scheduled increases in base salary. Annual Bonus. Our board of directors may, in its discretion, award bonuses to our executive officers, including our named executive officers, from time to time. Our letter agreements with Dr. Ballal, Mr. Gray and Dr. Scheele provide that they will be eligible for an annual discretionary bonus up to a specified percentage of their salaries based upon our achievements and their performance, as determined by our board of directors. Performance-based bonuses, which are calculated as a percentage of base salary, are designed to motivate our employees to achieve annual goals based on our strategic, financial and operating performance objectives. From time to time, our board of directors has approved discretionary annual cash bonuses to our named executive officers with respect to their prior year performance. In 2019, Dr. Ballal was eligible to receive a discretionary bonus of up to 40% of his annualized base salary. In 2020, Dr. Ballal’s annual discretionary bonus eligibility was increased up to 45% of his annualized base salary. We paid Dr. Ballal a discretionary bonus of $153,000 with respect to 2019 and $177,289 with respect to 2020. In 2019, Mr. Gray was eligible to receive a discretionary bonus of up to 35% of his annualized base salary, pro-rated to reflect the number of days he served with our company following his hire in April 2019. In 2020, Mr. Gray was eligible to receive a discretionary bonus of up to 35% of his annualized base salary. We paid Mr. Gray a discretionary bonus of $88,659 with respect to 2019 and $134,263 with respect to 2020. In 2019, Dr. Scheele was eligible to receive a discretionary bonus of up to 35% of his annualized base salary, pro-rated to reflect the number of days he served with our company following his hire in March 2019. We paid Dr. Scheele a discretionary bonus of $67,900 with respect to 2019.We did not pay Dr. Scheele a discretionary bonus with respect to 2020 due to his departure from our company. Equity Incentives. Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period. Accordingly, our board of directors periodically reviews the equity incentive compensation of our executive officers, including our named executive officers, and from time to time may grant equity incentive awards to them in the form of stock options. We granted two options to purchase an aggregate of 421,434 shares of our common stock to Dr. Ballal in May 2019: one option to purchase 321,289 shares of our common stock, which award is subject solely to time-based vesting and which we refer to as the Initial Ballal 2019 Option, and a second option to purchase 100,145 shares of our common stock, which award is subject to both time-based and performance-based vesting and which we refer to as the Ballal Milestone Option. The Initial Ballal 2019 Option vests as to 25% of the shares underlying the option on the first anniversary of the applicable vesting commencement date (which vesting commencement date is March 12, 2019) and in equal quarterly installments for three years thereafter. The Ballal Milestone Option also vests as to 25% of the shares underlying the option on February 25, 2021, the first anniversary of the closing of the second tranche of our series B preferred stock financing, and in quarterly installments for three years thereafter. All of the shares underlying the unvested portion of the Initial Ballal 2019 Option and the Ballal Milestone Option will immediately vest if, within twelve months following a change in control, Dr. Ballal’s service is terminated by us without cause or by Dr. Ballal with good reason (as each such term is defined in his letter agreement with us). We granted two options to purchase an aggregate of 262,364 shares of our common stock to Mr. Gray in May 2019: one option to purchase 224,309 shares of our common stock, which award is subject solely to time-based vesting and which we refer to as the Initial Gray 2019 Option, and a second option to purchase 38,055 shares of our common stock, which award is subject to both time-based and performance-based vesting and which we refer to as the Gray Milestone Option. The Initial Gray 2019 Option vests as to 25% of the shares underlying the option on the first anniversary of the vesting commencement date (which vesting commencement date is April 8, 2019) and in equal quarterly installments for three years thereafter. The Gray Milestone Option also vests as to 25% of the shares underlying the option on February 25, 2021, the first anniversary of the closing of the second tranche of our series B preferred stock financing, and in quarterly installments for three years thereafter. All of the shares underlying the unvested portion of the Initial Gray 2019 Option and the Gray Milestone Option will immediately vest if, within twelve months following a change in control, Mr. Gray’s service is terminated by us without cause or by Mr. Gray with good reason (as each such term is defined in his letter agreement with us). 115 We granted two options to purchase an aggregate of 207,129 shares of our common stock to Dr. Scheele in May 2019: one option to purchase 177,086 shares of our common stock, which award was subject solely to time-based vesting and which we refer to as the Initial Scheele 2019 Option, and a second option to purchase 30,043 shares of our common stock, which award was subject to both time-based and performance-based vesting and which we refer to as the Scheele Milestone Option. The Initial Scheele 2019 Option vested as to 25% of the shares underlying the option on the first anniversary of the vesting commencement date (which vesting commencement date was March 15, 2019) and ceased vesting thereafter in connection with the termination of Dr. Scheele’s employment in April 2020. No shares underlying the Scheele Milestone Option vested prior to the termination of Dr. Scheele’s employment. We did not grant equity incentive awards to any of our named executive officers during 2020. Prior to the completion of our initial public offering in March 2020, our executives were eligible to participate in our 2016 Stock Incentive Plan, as amended, or the 2016 Plan. During 2019, all stock options were granted pursuant to the 2016 Plan, and we did not grant any restricted stock awards during 2019 and 2020. Our employees and executives are now eligible to receive stock options and other stock-based awards pursuant to our 2020 Equity Incentive Plan, or the 2020 Plan. We have used stock options and restricted stock awards to compensate our executive officers in the form of initial grants in connection with the commencement of employment and also at various times, often but not necessarily annually, if we have performed as expected or better than expected. The award of stock options and restricted stock to our executive officers have historically been made by our board of directors or compensation committee. None of our executive officers is currently party to an employment agreement that provides for automatic award of stock options or restricted stock. We have granted stock options and restricted stock to our executive officers with time-based and performance-based vesting. The options and restricted stock that we have granted to our executive officers typically vest as to 25% of the shares underlying the award on the first anniversary of the grant date and in equal quarterly installments for three years thereafter. We have also granted performance-based awards tied to the achievement of milestones. Vesting rights cease upon termination of employment and exercise rights for stock options cease shortly after termination, except that vesting is fully accelerated upon certain terminations in connection with a change of control and exercisability is extended in the case of death or disability. Prior to the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such option, including no voting rights and no right to receive dividends or dividend equivalents. We have historically awarded stock options and restricted stock with exercise prices or purchase prices, as applicable, that are equal to the fair market value of our common stock on the date of grant as determined by our board of directors. Outstanding Equity Awards at Fiscal Year-End The following table sets forth information regarding all outstanding stock options held by each of our named executive officers as of December 31, 2020. Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Option exercise price ($) Option expiration date Rahul D. Ballal 163,124 100,875 (1) 3.15 10/18/2028 140,563 180,726 (2) 4.92 5/15/2029 — 100,145 (3) 4.92 5/15/2029 Michael P. Gray 82,865 140,194 (4) 4.92 5/15/2029 — 38,055 (3) 4.92 5/15/2029 Willem Scheele — — ( 5) — — (1) This option was granted on October 19, 2018, and the shares underlying the option vest and become exercisable over four years, with 25% of the shares vesting on May 29, 2019 and the remaining shares vesting in equal quarterly installments thereafter, subject to Dr. Ballal’s continuous service with us. The vesting of this stock option will be fully accelerated upon a qualifying termination of Dr. Ballal’s employment within twelve months following a change in control. (2) This option was granted on May 16, 2019, and the shares underlying the option vest and become exercisable over four years, with 25% of the shares vesting on March 12, 2020 and the remaining shares vesting in equal quarterly installments thereafter, subject to Dr. Ballal’s continuous service with us. The vesting of this stock option will be fully accelerated upon a qualifying termination of Dr. Ballal’s employment within twelve months following a change in control. (3) Options vest as to 25% of the shares underlying the option on February 25, 2021, the first anniversary of the closing of the second tranche of our series B preferred stock financing, and in quarterly installments for three years thereafter. All of the shares underlying the unvested portion of the options will immediately vest if, within twelve months following a change in control, the recipient’s service is terminated by us without cause or by the recipient with good reason (as each such term is defined in such recipient’s letter agreement with us). 116 (4) This option was granted on May 16, 2019, and the shares underlying the option vest and become exercisable over four years, with 25% of the shares vesting on April 8, 2020 and the remaining shares vesting in equal quarterly installments thereafter, subject to Mr. Gray’s continuous service with us. The vesting of this stock option will be fully accelerated upon a qualifying termination of Mr. Gray’s employment within twelve months following a change in control. (5) Dr. Scheele’s unvested options expired in connection with his cessation of service in April 2020. Employment Agreements Letter Agreement with Rahul D. Ballal, Ph.D. In connection with our initial hiring of Dr. Ballal as our President and Chief Executive Officer, we entered into a letter agreement with him dated April 17, 2018, which was amended and restated on August 12, 2019 and further amended and restated on September 23, 2019. We refer to the current amended and restated letter agreement as the Ballal letter agreement. Under the Ballal letter agreement, Dr. Ballal is an at-will employee, and his employment with us can be terminated by Dr. Ballal or us at any time and for any reason. Pursuant to the Ballal letter agreement, Dr. Ballal’s annualized base salary is $425,000, and he is eligible to receive an annual discretionary bonus of up to 40% of his annualized base salary. We will also reimburse all of Dr. Ballal’s monthly parking costs at a designated parking garage lot or his commuting costs for public transportation. Under the Ballal letter agreement, Dr. Ballal is entitled, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with certain restrictive covenants, in the event of the termination of his employment by us without cause or by him for good reason, each as defined in the Ballal letter agreement, to (i) continue receiving his then-current annual base salary for a period of twelve months following the date his employment with us is terminated, and (ii) reimbursement of COBRA premiums for health benefit coverage for a period of up to twelve months following the date that his employment with us is terminated. In the event that Dr. Ballal’s employment is terminated by us without cause or by Dr. Ballal with good reason within twelve months following a change of control, each as defined in the Ballal letter agreement, Dr. Ballal will be entitled, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with certain restrictive covenants, to (i) continue receiving his then-current annual base salary for a period of twelve months following the date his employment with us is terminated, (ii) reimbursement of COBRA premiums for health benefit coverage for a period of up to twelve months following the date that his employment with us is terminated and (iii) one hundred percent of his annual bonus target amount for the year in which the termination occurs, payable as a lump sum. In addition, Dr. Ballal will be entitled to full acceleration of vesting of the option to purchase 268,999 shares of our common stock granted to Dr. Ballal in October 2018 in connection with the commencement of his employment with us, the Initial Ballal 2019 Option and the Ballal Milestone Option. Under the Ballal letter agreement, if payments and benefits payable to Dr. Ballal in connection with a change in control are subject to Section 4999 of the Code, then such payments and benefits will either be paid in full or be reduced so that the Section 4999 excise tax does not apply, whichever results in the better after-tax result for Dr. Ballal. Letter Agreement with Michael P. Gray In connection with our initial hiring of Mr. Gray as our Chief Financial Officer and Chief Operating Officer, we entered into a letter agreement with him dated February 26, 2019, which was amended and restated on June 27, 2019 and further amended and restated on September 23, 2019. We refer to the current amended and restated letter agreement as the Gray letter agreement. Under the Gray letter agreement, Mr. Gray is an at-will employee, and his employment with us can be terminated by Mr. Gray or us at any time and for any reason. Pursuant to the Gray letter agreement, Mr. Gray’s annualized base salary is $385,000, and he is eligible to receive an annual discretionary bonus of up to 35% of his annualized base salary. We will also reimburse all of Mr. Gray’s monthly parking costs at a designated parking garage lot or his commuting costs for public transportation. Under the Gray letter agreement, Mr. Gray is entitled, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with certain restrictive covenants, in the event of the termination of his employment by us without cause or by him for good reason, each as defined in the Gray letter agreement, to (i) continue receiving his then-current annual base salary for a period of nine months following the date his employment with us is terminated, and (ii) reimbursement of COBRA premiums for health benefit coverage for a period of up to nine months following the date that his employment with us is terminated. In the event that Mr. Gray’s employment is terminated by us without cause or by Mr. Gray with good reason within twelve months following a change of control, each as defined in the Gray letter agreement, Mr. Gray will be entitled, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with certain restrictive 117 covenants, to ( i ) continue receiving his then-current annual base salary for a period of nine months following the date his employment with us is terminated, (ii) reimbursement of COBRA premiums for health benefit coverage for a period of up to nine months following the date that his employment with us is terminated and (iii) seventy-five percent of his annual bonus target amount for the year in which the termination occurs, payable as a lump sum. In addition, Mr. Gray will be entitled to full acceleration of vesting of the Initial Gray 2019 Option and the Gray Milestone Option. Under the Gray letter agreement, if payments and benefits payable to Mr. Gray in connection with a change in control are subject to Section 4999 of the Code, then such payments and benefits will either be paid in full or be reduced so that the Section 4999 excise tax does not apply, whichever results in the better after-tax result for Mr. Gray. The severance payments that Mr. Gray is eligible to receive under the Gray letter agreement will be reduced, but not below $1,000, by the amount of garden leave pay received by Mr. Gray under the restrictive covenant agreement he entered into with us described further under “Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreements” below. Letter Agreement with Willem H. Scheele, M.D. In connection with our initial hiring of Dr. Scheele as our Chief Medical Officer, we entered into a letter agreement with him dated March 1, 2019, which was amended and restated on June 27, 2019 and further amended and restated on September 23, 2019. We refer to the most recently amended and restated letter agreement as the Scheele letter agreement. Under the Scheele letter agreement, Dr. Scheele was an at-will employee, and his employment with us was terminable by Dr. Scheele or us at any time and for any reason. Pursuant to the Scheele letter agreement, Dr. Scheele’s annualized base salary was $355,000, and he was eligible to receive an annual discretionary bonus of up to 35% of his annualized base salary. Dr. Scheele was also entitled to reimbursement of all of his monthly parking costs at a designated parking garage lot or his commuting costs for public transportation. In connection with his cessation of service in April 2020, Dr. Scheele is received severance benefits according to the terms of the Scheele letter agreement including (i) his annual base salary as of the date of termination for a period of nine months following the date of termination and (ii) reimbursement of COBRA premiums for health benefit coverage for a period of up to nine months following the date that date of termination. Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreements Each of our executive officers has entered into a standard form of agreement with respect to non-competition, non-solicitation, confidential information and assignment of inventions. Under this agreement, each executive officer has agreed not to compete with us during his employment and for a period ranging from six months to one year after the termination of his employment, not to solicit our employees, consultants, clients or customers during his employment and for a period ranging from six months to one year after the termination of his employment, and to protect our confidential and proprietary information indefinitely. In addition, under this agreement, each executive officer has agreed that we own all inventions that are developed by such executive officer during his employment with us that are related to our business or research and development conducted or planned to be conducted by us at the time such development is created. Each executive officer also agreed to provide us with a non-exclusive, royalty-free, perpetual license to use any prior inventions that such executive officer incorporates into inventions assigned to us under this agreement. Stock Option and Other Compensation Plans In this section we describe the 2016 Plan, the 2020 Plan and our 2020 Employee Stock Purchase Plan, or the 2020 ESPP. Prior to our initial public offering in March 2020, we granted awards to eligible participants under the 2016 Plan. We currently grant awards to eligible participants under the 2020 Plan. 2016 Stock Incentive Plan The 2016 Plan was initially approved by our board of directors and stockholders in April 2016 and was subsequently amended in November 2016, May 2018, March 2019, June 2019 and December 2019, in each case solely to increase the total number of shares reserved for issuance under the 2016 Plan. The 2016 Plan provided for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, awards of restricted stock, restricted stock units and other stock-based awards. Our employees, officers, directors, consultants and advisors were eligible to receive awards under the 2016 Plan; however, incentive stock options could only be granted to our employees. The type of award granted under the 2016 Plan and the terms of such award were set forth in the applicable award agreement. Pursuant to the terms of the 2016 Plan, our board of directors (or a committee delegated by our board of directors) administered the plan and, subject to any limitations in the plan, selected the recipients of awards and determines: • the number of shares of our common stock covered by options and the dates upon which the options became exercisable; 118 • the type of options to be granted; • the duration of options, which may not be in excess of ten years; • the exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and • the number of shares of our common stock subject to and the terms of any stock appreciation rights, restricted stock awards, restricted stock units or other stock-based awards and the terms and conditions of such awards, including conditions for repurchase, measurement price, issue price and repurchase price (though the measurement price of stock appreciation rights must be at least equal to the fair market value of our common stock on the date of grant and the duration of such awards may not be in excess of ten years). The maximum number of shares of common stock authorized for issuance under the 2016 Plan was 2,091,969 shares. Our board of directors may amend, suspend or terminate the 2016 Plan at any time, except that stockholder approval may be required to comply with applicable law. Effect of Certain Changes in Capitalization. Upon the occurrence of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of our common stock other than an ordinary cash dividend, under the terms of the 2016 Plan, we are required to equitably adjust (or make substitute awards, if applicable), in the manner determined by our board of directors: • the number and class of securities available under the 2016 Plan; • the number and class of securities and exercise price per share of each outstanding option; • the share and per-share provisions and the measurement price of each outstanding stock appreciation right; • the number of shares subject to and the repurchase price per share subject to each outstanding restricted stock award or restricted stock unit award; and • the share and per-share-related provisions and the purchase price, if any, of each outstanding other stock-based award. Effect of Certain Corporate Transactions. Upon the occurrence of a merger or other reorganization event (as defined in the 2016 Plan), our board of directors may, on such terms as our board of directors determines (except to the extent specifically provided otherwise in an applicable award agreement or other agreement between the participant and us), take any one or more of the following actions pursuant to the 2016 Plan as to all or any (or any portion of) outstanding awards, other than awards of restricted stock: • provide that outstanding awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); • upon written notice to a participant, provide that all of the participant’s unexercised awards will terminate immediately prior to the consummation of the reorganization event unless exercised by the participant (to the extent then exercisable) within a specified period following the date of the notice; • provide that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon such reorganization event; • in the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to participants with respect to each award held by a participant equal to (1) the number of shares of our common stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to the reorganization event) multiplied by (2) the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such award and any applicable tax withholdings, in exchange for the termination of the award; • provide that, in connection with our liquidation or dissolution, awards will convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings); or • any combination of the foregoing. 119 Our board of directors is not obligated under the 2016 Plan to treat all awards, all awards held by a participant, or all awards of the same type, identically. In the case of certain restricted stock units, no assumption or substitution is permitted, and the restricted stock units will instead be settled in accordance with the terms of the applicable restricted stock unit agreement. Upon the occurrence of a reorganization event other than our liquidation or dissolution, the repurchase and other rights with respect to outstanding restricted stock awards will continue for the benefit of the succeeding company and will, unless our board of directors determines otherwise, apply to the cash, securities, or other property which our common stock was converted into or exchanged for in the reorganization event in the same manner and to the same extent as they applied to the common stock subject to the restricted stock award. However, our board of directors may provide for the termination or deemed satisfaction of such repurchase or other rights under the restricted stock award agreement or any other agreement between a participant and us, either initially or by amendment. Upon our liquidation or dissolution, except to the extent specifically provided to the contrary in the restricted stock award agreement or any other agreement between the plan participant and us, all restrictions and conditions on all restricted stock awards then outstanding will automatically be deemed terminated or satisfied. Our board of directors may at any time provide that any award under the 2016 Plan shall become immediately exercisable in whole or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part, as the case may be. No further awards will be made under the 2016 Plan; however, awards outstanding under the 2016 Plan will continue to be governed by their existing terms. 2020 Equity Incentive Plan Our 2020 Plan, which became effective on March 11, 2020, was adopted by our board of directors in October 2019 and approved by our stockholders in February 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares of our common stock that are reserved for issuance under the 2020 Plan is the sum of: (1) 1,220,283 shares of our common stock; plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the number of shares of our common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan on March 11, 2020 and (y) the number of shares of our common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4% of the number of shares of our common stock outstanding on the first day of such fiscal year and (ii) an amount determined by our board of directors. On January 1, 2021, 701,930 additional shares of common stock became available for future issuance under the 2020 Plan due to the first such annual increase. No more than 8,541,982 shares of common stock may be issued as incentive stock options under the 2020 Plan. Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 2020 Plan. Incentive stock options, however, may only be granted to our employees. Pursuant to the terms of the 2020 Plan, our board of directors (or a committee delegated by our board of directors) administers the 2020 Plan and, subject to any limitations in the 2020 Plan, selects the recipients of awards and determines: • the number of shares of our common stock covered by options and the dates upon which the options become exercisable; • the type of options to be granted; • the duration of options, which may not be in excess of ten years; • the exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and • the number of shares of our common stock subject to and the terms of any stock appreciation rights, restricted stock awards, restricted stock units or other stock-based awards, including conditions for repurchase, measurement price, issue price and repurchase price (though the measurement price of stock appreciation rights must be at least equal to the fair market value of our common stock on the date of grant and the duration of such awards may not be in excess of ten years). 120 If our board of directors delegates authority to one or more of our officers to grant awards under the 2020 Plan, the officers will have the power to make awards to all of our employees, except executive officers (as such terms are defined in the 2020 Plan). Our board of directors will fix the terms of the awards to be granted by any such officer, the maximum number of shares subject to awards that such officer may grant, and the time period in which such awards may be granted. The 2020 Plan contains limits on awards that may be made under the 2020 Plan to our non-employee directors. The maximum aggregate amount of cash and value (calculated based on grant date fair value for financial reporting purposes) of awards granted in any calendar year under the 2020 Plan to an individual non-employee director may not exceed $750,000, or $1,000,000 in the case of a new director during his or her first year of service. Fees paid by us on behalf of any non-employee director in connection with regulatory compliance and any amounts paid to a non-employee director as reimbursement of an expense will not count against the foregoing limit. Our board of directors may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation. Effect of Certain Changes in Capitalization. Upon the occurrence of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event or any dividend or distribution to holders of our common stock other than an ordinary cash dividend, under the terms of the 2020 Plan, we are required to equitably adjust (or make substitute awards, if applicable), in the manner determined by our board of directors: • the number and class of securities available under the 2020 Plan; • the share counting rules under the 2020 Plan; • the number and class of securities and exercise price per share of each outstanding option; • the share and per-share provisions and the measurement price of each outstanding stock appreciation right; • the number of shares and the repurchase price per share subject to each outstanding award of restricted stock; and • the share and per-share-related provisions and the purchase price, if any, of each outstanding restricted stock unit award and other stock-based award. Effect of Certain Corporate Transactions. Upon the occurrence of a merger or other reorganization event (as defined in the 2020 Plan), our board of directors may, on such terms as our board of directors determines (except to the extent specifically provided otherwise in an applicable award agreement or other agreement between the participant and us), take any one or more of the following actions pursuant to the 2020 Plan as to all or any (or any portion of) outstanding awards, other than awards of restricted stock: • provide that outstanding awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); • upon written notice to a participant, provide that all of the participant’s unvested awards will be forfeited immediately prior to the consummation of the reorganization event and/or unexercised awards will terminate immediately prior to the consummation of the reorganization event unless exercised by the participant (to the extent then exercisable) within a specified period following the date of the notice; • provide that outstanding awards will become exercisable, realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon such reorganization event; • in the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to participants with respect to each award held by a participant equal to (1) the number of shares of our common stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such reorganization event) multiplied by (2) the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such award and any applicable tax withholdings, in exchange for the termination of the award; • provide that, in connection with our liquidation or dissolution, awards will convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings); or • any combination of the foregoing. 121 Our board of directors is not obligated under the 2020 Plan to treat all awards, all awards held by a participant, or all awards of the same type, identically. In the case of certain restricted stock units, no assumption or substitution is permitted, and the restricted stock units will instead be settled in accordance with the terms of the applicable restricted stock unit agreement. Upon the occurrence of a reorganization event other than our liquidation or dissolution, our repurchase and other rights with respect to outstanding awards of restricted stock will continue for the benefit of the succeeding company (or any affiliate of the succeeding company) and will, unless our board of directors determines otherwise, apply to the cash, securities, or other property which our common stock was converted into or exchanged for pursuant to the reorganization event. However, our board of directors may provide for the termination or deemed satisfaction of such repurchase or other rights under the restricted stock award agreement or in any other agreement between a participant and us, either initially or by amendment. Upon our liquidation or dissolution, except to the extent specifically provided to the contrary in the restricted stock award agreement or any other agreement between the participant and us, all restrictions and conditions on all restricted stock awards then outstanding will automatically be deemed terminated or satisfied. At any time, our board of directors may provide that any award under the 2020 Plan will become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part, as the case may be. Except with respect to certain actions requiring stockholder approval under the Code or Nasdaq Stock Market rules, our board of directors may amend, modify or terminate any outstanding award under the 2020 Plan, including but not limited to, substituting for the award another award of the same or a different type, changing the date of exercise or realization, and converting an incentive stock option to a non-qualified stock option, subject to certain participant consent requirements. However, unless our stockholders approve such action, the 2020 Plan provides that we may not (except as otherwise permitted in connection with a change in capitalization or reorganization event): • amend any outstanding stock option or stock appreciation right granted under the 2020 Plan to provide an exercise or measurement price per share that is lower than the then-current exercise or measurement price per share of such outstanding award; • cancel any outstanding stock option or stock appreciation right (whether or not granted under the 2020 Plan) and grant a new award under the 2020 Plan in substitution for the cancelled award (other than substitute awards permitted in connection with a merger or consolidation of an entity with us or our acquisition of property or stock of another entity) covering the same or a different number of shares of our common stock and having an exercise or measurement price per share lower than the then-current exercise or measurement price per share of the cancelled award; • cancel in exchange for a cash payment any outstanding option or stock appreciation right with an exercise or measurement price per share above the then-current fair market value of our common stock (valued in the manner determined by (or in the manner approved by) our board of directors); or • take any other action that constitutes a “repricing” within the meaning of Nasdaq Stock Market rules or rules of any other exchange or marketplace on which our common stock is listed or traded. No award may be granted under the 2020 Plan on or after March 11, 2030. Our board of directors may amend, suspend or terminate the 2020 Plan at any time, except that stockholder approval may be required to comply with applicable law or stock market requirements. 2020 Employee Stock Purchase Plan Our 2020 ESPP, which became effective on March 11, 2020, was adopted by our board of directors in October 2019 and approved by our stockholders in February 2020. The 2020 ESPP is administered by our board of directors or by a committee appointed by our board of directors. The 2020 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 193,216 shares of our common stock. The number of shares of our common stock reserved for issuance under the 2020 ESPP will automatically increase on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2021 and continuing until, and including, the fiscal year commencing on January 1, 2031, in an amount equal to the lowest of (i) 386,432 shares of our common stock, (ii) 1% of the number of shares of our common stock outstanding on the first day of such fiscal year and (iii) an amount determined by our board of directors. 122 All of our employees and employees of any designated subsidiary, as defined in the 2020 ESPP, are eligible to participate in the 2020 ESPP, provided that: • such person is customarily employed by us or a designated subsidiary for more than 20 hours a week and for more than five months in a calendar year; and • such person was our employee or an employee of a designated subsidiary on the first day of the applicable offering period under the 2020 ESPP. We retain the discretion to determine which eligible employees may participate in an offering under applicable regulations. We expect to make one or more offerings to our eligible employees to purchase stock under the 2020 ESPP, with the first such offering having commenced on June 15, 2020 and the first purchase having occurred on December 14, 2020. Each offering will consist of a six-month offering period during which payroll deductions will be made and held for the purchase of our common stock at the end of the offering period. Our board of directors or a committee designated by the board of directors may, at its discretion, choose a different period of not more than 27 months for offerings. On each offering commencement date, each participant will be granted the right to purchase, on the last business day of the offering period, up to a number of shares of our common stock determined by multiplying $2,083 by the number of full months in the offering period and dividing that product by the closing price of our common stock on the first day of the offering period. No employee may be granted an option under the 2020 ESPP that permits the employee’s rights to purchase shares under the 2020 ESPP and any other employee stock purchase plan of ours or of any of our subsidiaries to accrue at a rate that exceeds $25,000 of the fair market value of our common stock (determined as of the first day of each offering period) for each calendar year in which the option is outstanding. In addition, no employee may purchase shares of our common stock under the 2020 ESPP that would result in the employee owning 5% or more of the total combined voting power or value of our stock or the stock of any of our subsidiaries. Each eligible employee may authorize up to a maximum of 15% of his or her compensation to be deducted by us during the offering period. Each employee who continues to be a participant in the 2020 ESPP on the last business day of the offering period will be deemed to have exercised an option to purchase from us the number of whole shares of our common stock that his or her accumulated payroll deductions on such date will pay for, not in excess of the maximum numbers set forth above. Under the terms of the 2020 ESPP, the purchase price shall be determined by our board of directors or the committee for each offering period and will be at least 85% of the applicable closing price of our common stock. If our board of directors or the committee does not make a determination of the purchase price, the purchase price will be 85% of the lesser of the closing price of our common stock on the first business day of the offering period or on the last business day of the offering period. An employee may at any time prior to the close of business on the fifteenth business day prior to the end of an offering period (or such other number of days as is determined by us), and for any reason, permanently withdraw from participating in an offering and permanently withdraw the balance accumulated in the employee’s account. Partial withdrawals are not permitted. If an employee elects to discontinue his or her payroll deductions during an offering period but does not elect to withdraw his or her funds, funds previously deducted will be applied to the purchase of common stock at the end of the offering period. If a participating employee’s employment ends before the last business day of an offering period, no additional payroll deductions will be taken and the balance in the employee’s account will be paid to the employee. We will be required to make equitable adjustments to the extent determined by our board of directors or a committee thereof to the number and class of securities available under the 2020 ESPP, the share limitations under the 2020 ESPP, and the purchase price for an offering period under the 2020 ESPP to reflect stock splits, reverse stock splits, stock dividends, recapitalizations, combinations of shares, reclassifications of shares, spin-offs and other similar changes in capitalization or events or any dividends or distributions to holders of our common stock other than ordinary cash dividends. 123 In connection with a merger or other reorganization event, as defined in the 2020 ESPP, our board of directors or a committee of our board of directors may take any one or more of the following actions as to outstanding options to purchase shares of our common stock under the 2020 ESPP on such terms as our board of directors or committee thereof determines: • provide that options will be assumed, or substantially equivalent options will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); • upon written notice to employees, provide that all outstanding options will be terminated immediately prior to the consummation of such reorganization event and that all such outstanding options will become exercisable to the extent of accumulated payroll deductions as of a date specified by our board of directors or committee thereof in such notice, which date shall not be less than ten days preceding the effective date of the reorganization event; • upon written notice to employees, provide that all outstanding options will be cancelled as of a date prior to the effective date of the reorganization event and that all accumulated payroll deductions will be returned to participating employees on such date; • in the event of a reorganization event under the terms of which holders of our common stock will receive upon consummation thereof a cash payment for each share surrendered in the reorganization event, change the last day of the offering period to be the date of the consummation of the reorganization event and make or provide for a cash payment to each employee equal to (1) the cash payment for each share surrendered in the reorganization event times the number of shares of our common stock that the employee’s accumulated payroll deductions as of immediately prior to the reorganization event could purchase at the applicable purchase price, where the cash payment for each share surrendered in the reorganization event is treated as the fair market value of our common stock on the last day of the applicable offering period for purposes of determining the purchase price and where the number of shares that could be purchased is subject to the applicable limitations under the 2020 ESPP minus (2) the result of multiplying such number of shares by the purchase price; and/or • provide that, in connection with our liquidation or dissolution, options will convert into the right to receive liquidation proceeds (net of the purchase price thereof). Our board of directors may at any time, and from time to time, amend or suspend the 2020 ESPP or any portion of the 2020 ESPP. We will obtain stockholder approval for any amendment if such approval is required by Section 423 of the Code. Further, our board of directors may not make any amendment that would cause the 2020 ESPP to fail to comply with Section 423 of the Code. The 2020 ESPP may be terminated at any time by our board of directors. Upon termination, we will refund all amounts in the accounts of participating employees. 401(k) Plan We maintain a defined contribution employee retirement plan for our employees, including our named executive officers. The plan is intended to qualify as a tax-qualified 401(k) plan so that contributions to the 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan (except in the case of contributions under the 401(k) plan designated as Roth contributions). Under the 401(k) plan, each employee is fully vested in his or her deferred salary contributions and any qualified nonelective contributions made by us. Employee contributions are held and invested by the plan’s trustee as directed by participants. The 401(k) plan provides us with the discretion to match employee contributions. Limitation of Liability and Indemnification Our certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law, or the DGCL, and provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors: • for any breach of the director’s duty of loyalty to us or our stockholders; • for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; • for voting for or assenting to unlawful payments of dividends, stock repurchases or other distributions; or • for any transaction from which the director derived an improper personal benefit. Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or repeal. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the DGCL. 124 In addition, our certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions. We maintain a general liability insurance policy that covers specified liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers. In addition, we entered into new indemnification agreements with all of our directors and executive officers prior to the completion of our initial public offering. These indemnification agreements may require us, among other things, to indemnify each such executive officer or director for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him or her in any action or proceeding arising out of his or her service as one of our executive officers or directors. Some of our non-employee directors may, through their relationships with their employers, be insured or indemnified against specified liabilities incurred in their capacities as members of our board of directors. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Rule 10b5-1 Plans Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. In addition, our directors and executive officers may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. Director Compensation The table below shows all compensation to our non-employee directors during the year ended December 31, 2020. Name Fees earned or paid in cash ($) Option awards ($) ( 1)(2) Total ($) David M. Mott 62,648 155,961 218,609 Mette Kirstine Agger ( 3) 34,099 155,961 190,060 Carl Goldfischer, M.D. 39,651 155,961 195,612 Barbara J. Dalton, Ph.D. 31,720 155,961 187,681 James McArthur, Ph.D. ( 4) 4,061 155,961 160,022 Sara Nayeem, M.D. 33,703 155,961 189,664 David Bonita, M.D. 31,720 155,961 187,681 Mark Chin 33,703 155,961 189,664 Edward R. Conner 26,975 159,980 186,955 (1) The amounts reported in the “Option awards” column reflect the aggregate fair value of stock-based compensation awarded during the year computed in accordance with the provisions of ASC 718. See Note 11 of the notes to our consolidated financial statements in this Annual Report on Form 10-K regarding assumptions underlying the valuation of equity awards. These amounts reflect the accounting cost for these stock options and do not reflect the actual economic value that may be realized by the directors upon the vesting of the stock options, the exercise of the stock options or the sale of the common underlying such stock options. (2) As of December 31, 2020, the aggregate number of shares of our common stock subject to outstanding option awards for each non-employee director was as follows: Mr. Mott, 15,457 shares; Ms. Agger, 0 shares; Dr. Goldfischer, 15,457 shares; Dr. Dalton, 15,457 shares; Dr. McArthur, 126,544 shares; Dr. Nayeem, 15,457 shares; Dr. Bonita, 15,457 shares; Mr. Chin, 15,457 shares; and Mr. Conner, 15,457 shares. (3) Ms. Agger earned $34,099 in fees related to her service as a director of the company and was granted an option on March 11, 2020, each of which Ms. Agger decided to voluntarily forego. Ms. Agger voluntarily surrendered her option in full on June 30, 2020 pursuant to a stock option termination agreement. (4) Dr. McArthur resigned from our board of directors in April 2020. Upon his resignation, the board amended Dr. McArthur’s stock option award agreement to extend the exercise period of any vested options to September 22, 2021. All unvested options expired in connection with his resignation. Dr. Ballal, one of our directors who also serves as our President and Chief Executive Officer, does not receive any additional compensation for his service as director. Dr. Ballal is one of our named executive officers and, accordingly, the compensation that we pay to Dr. Ballal is discussed under “—Summary Compensation Table” and “—Narrative to Summary Compensation Table.” 125 In October 2019, our board of directors approved a director compensation program that became effective on March 11, 2020. Under this director compensation program, we pay our non-employee directors a cash retainer for service on the board of directors and for service on each committee on which the director is a member. The chairman of the board and the chairman of each committee will receive higher retainers for such service. These fees are payable in arrears in four equal quarterly installments on the last day of each quarter, provided that the amount of such payment will be prorated for any portion of such quarter that the director is not serving on our board of directors, on such committee or in such position. The fees paid to non-employee directors for service on the board of directors and for service on each committee of the board of directors on which the director is a member are as follows: Member Annual Fee Chairman Incremental Annual Fee Board of Directors $ 35,000 $ 3,000 (1) Audit Committee $ 7,500 $ 15,000 Compensation Committee $ 5,000 $ 10,000 Nominating and Corporate Governance Committee $ 4,000 $ 8,000 (1) $15,000 for a lead independent director, if any. Notwithstanding the foregoing, each of our non-employee directors may elect, no later than December 31 of each year, to receive his or her annual base fees for service on the board of directors in the form of an option to purchase our common stock, which option will be granted on January 2 of the following year, have a Black- Scholes value equal to the annual base board of directors fees that are anticipated to be payable to the director for the entire calendar year, have an exercise price equal to the closing price of our common stock on the date of grant of the award, vest in four equal quarterly installments on the last day of each quarter, subject to the director’s continued service as a director through each applicable vesting date (with such vesting prorated for any portion of the quarter that the director is not serving on our board of directors) and have a term of ten years from the date of grant. No such election may be made with respect to fees for serving as chairman (or lead independent director) of the board of directors, or as a member or chairman of a committee of our board of directors. We also reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending meetings of our board of directors and any committee of our board of directors on which he or she serves. In addition, under our director compensation program, each non-employee director receives under the 2020 Plan, upon his or her initial election or appointment to our board of directors, or in the case of our directors serving at the time of our initial public offering, received upon completion of our initial public offering, an option to purchase 15,457 shares of our common stock. Each of these options vest as to 33.3333% of the shares underlying such award on each of the first, second and third anniversaries of the date of grant of the award, subject to the non-employee director’s continued service as a director, employee or consultant. Further, on the dates of each of our annual meetings of stockholders, each non-employee director that has served on our board of directors will receive, under the 2020 Plan, an option to purchase 7,728 shares of our common stock, provided that for a non-employee director who was initially elected to our board of directors within the 12 months preceding the annual meeting of stockholders, the number of shares subject to such option will be pro-rated on a monthly basis for time in service. Each of these options will vest on the twelve-month anniversary of the date of the date of grant of the award (or, if earlier, the date of the next annual meeting of stockholders following the date of grant of the award), subject to the non-employee director’s continued service as a director, employee or consultant. All options issued to our non-employee directors under our director compensation program are issued at exercise prices equal to the fair market value of our common stock on the date of grant, will have a term of ten years and will become exercisable in full upon a change in control of our company. Prior to our initial public offering in March 2020, we paid cash fees and granted shares of restricted stock to certain of our non-employee directors for their service on our board of directors; however, we did not have a written agreement with any of our directors or a formal non-employee director compensation policy. 126 Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters. The following table sets forth information with respect to the beneficial ownership of our common stock as of January 15, 2021 by: • each of our directors; • each of our named executive officers; • all of our directors and executive officers as a group; and • each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Shares of our common stock that an individual has a right to acquire within 60 days after January 15, 2021 are considered outstanding and beneficially owned by the person holding such right for the purpose of calculating the percentage ownership of that person but not for the purpose of calculating the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers. Except as otherwise noted, the persons and entities in this table have sole voting and investing power with respect to all of the shares of our common stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of each beneficial owner is c/o IMARA Inc., 116 Huntington Avenue, 6th Floor, Boston, Massachusetts 02116. Name of Beneficial Owner Shares Beneficially Owned Percentage of Shares Beneficially Owned (%) Entities affiliated with New Enterprise Associates 14, L.P. ( 1) 4,017,170 22.9 % OrbiMed Private Investments VII, LP ( 2) 2,719,902 15.5 % FMR LLC ( 3) 2,611,116 14.9 % Entities affiliated with Pfizer Ventures (US) LLC ( 4) 1,557,722 8.9 % Entities affiliated with RA Capital Healthcare Fund, L.P. ( 5) 1,454,348 8.3 % Lundbeckfond Invest A/S ( 6) 1,432,722 8.2 % Arix Bioscience Holdings Limited ( 7) 1,068,255 6.1 % Directors and Named Executive Officers: Sara Nayeem, M.D. ( 1)(11) 4,022,321 22.9 % David Bonita, Ph.D. ( 2)(11) 2,725,053 15.5 % Barbara J. Dalton, Ph.D. (4)(11) 1,562,873 8.9 % Mette Kirstine Agger ( 6) 1,432,722 8.2 % Carl Goldfischer, M.D. ( 8)(11) 708,531 4.0 % Rahul D. Ballal, Ph.D. ( 9) 365,616 2.0 % Michael P. Gray ( 10) 106,398 * David M. Mott ( 11) 5,151 * Mark Chin ( 11) 5,151 * Edward R. Conner — * All current executive officers and directors as a group(11 persons) (12) 10,933,816 62.3 % * Less than one percent. (1) Consists of (i) 4,013,995 shares of common stock held by New Enterprise Associates 14, L.P., or NEA, and (ii) 3,175 shares of common stock held by NEA Ventures 2016, L.P., or NEA Ventures. The shares held by NEA are indirectly held by NEA Partners 14, L.P., or NEA Partners, the sole general partner of NEA, NEA 14 GP, LTD, or NEA GP, the sole general partner of NEA Partners and each of the individual directors of NEA GP. The individual directors, or the Directors, of NEA GP are Forest Baskett, Anthony A. Florence, Jr., Patrick J. Kerins, Peter Sonsini and Scott Sandell. NEA, NEA Partners, NEA GP and the Directors share voting and dispositive power with regard to the shares directly held by NEA. With regard to the shares directly held by NEA Ventures, Mr. Mott and Dr. Nayeem have neither voting nor dispositive power, and disclaim beneficial ownership of such shares, except to the extent of their pecuniary interests therein, if any. With regard to the shares directly held by NEA, Dr. Nayeem has no voting or dispositive power over any of such shares directly held by NEA and disclaims beneficial ownership of such shares, except to the extent of her pecuniary interest therein, if any. Mr. Mott and Dr. Nayeem are also members of our board of directors. The address for NEA is 1954 Greenspring Drive, Suite 600, Timonium, MD 21093. (2) Based solely on a Schedule 13D filed with the SEC on March 20, 2020. Consists of (i) 2,532,402 shares of common stock held by OrbiMed Private Investments VII, LP, or OPI VII and (ii) 187,500 shares of common stock held by The Biotech Growth Trust PLC, or BIOG. OrbiMed Capital GP VII LLC, or OrbiMed GP, is the general partner of OPI VII and OrbiMed Advisors LLC, or OrbiMed Advisors, is the managing member of OrbiMed GP. As a result, OrbiMed Advisors and OrbiMed GP share power to direct the vote and disposition of the shares held by OPI VII and may be deemed to be 127 the beneficial owners of the shares held by OPI VII. OrbiMed Advisors exercises this investment and voting power through a management committee comprised of Carl L. Gordon, Sven H. Borho and Jonathan T. Silverstein, each of whom disclaims beneficial ownership of the Shares held by OPI VII. OrbiMed Capital LLC, or OrbiMed Capital, is the investment advisor of BIOG. As a result, OrbiMed Capital has the power to direct the vote and disposition of the shares held by BIOG and may be deemed to be the beneficial owner of the shares held by BIOG. OrbiMed Capital disclaims any beneficial ownership over the shares. OrbiMed Capital exercises this investment and voting power through a management committee comprised of Carl L. Gordon, Sven H. Borho and Jonathan T. Silverstein, each of whom disclaims beneficial ownership of the Shares held by BIOG. The business address for OPI VII is c/o OrbiMed Advisors LLC, 601 Lexington Avenue 54th Floor, New York, NY 10022. (3) Based solely on a Schedule 13G/A filed with the SEC on February 8, 2021. Consists of 2,611,116 shares of common stock held by FMR LLC. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act, or Fidelity Funds, advised by Fidelity Management & Research Company LLC, or FMR Co. LLC, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. FMR Co. LLC carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. (4) Based solely on a Schedule 13G filed with the SEC on March 26, 2020. Consists of (i) 1,481,719 shares of common stock held by Pfizer Ventures (US) LLC, or Pfizer Ventures, and (ii) 76,003 shares of common stock held by Pfizer Inc., or Pfizer. Pfizer Ventures is a wholly-owned subsidiary of Pfizer and Pfizer may be deemed to beneficially own the shares directly owned by Pfizer Ventures. The address of Pfizer and Pfizer Ventures is 235 East 42nd Street, New York, New York 10017. (5) Consists of (i) 1,151,230 shares of common held by RA Capital Healthcare Fund, L.P., or RA Capital, (ii) 108,083 shares of common stock held by RA Capital Nexus Fund, L.P. and (iii) 195,035 shares of common stock held by a separately managed account, or the Account. Dr. Peter Kolchinsky is the managing member of RA Capital Management, L.P., the general partner of RA Capital and the investment advisor of the Account. Dr. Kolchinsky and RA Capital Management, L.P. may be deemed to beneficially own the shares held by RA Capital and the Account. Dr. Kolchinsky and RA Capital Management, L.P. disclaim beneficial ownership of all applicable shares except to the extent of their actual pecuniary interest therein. The address for the entities listed above is 200 Berkeley Street, 18th Floor, Boston, MA 02116. (6) Consists of 1,432,722 shares of common stock held by Lundbeckfond Invest A/S, or Lunbeckfonden. The board of directors of Lundbeckfonden consists of Jørgen Huno Rasmussen, Steffen Kragh, Lars Holmqvist, Susanne Krüger Kjær, Michael Kjær, Peter Schütze, Gunhild Waldemar, Ludovic Tranholm Otterbein, Vagn Flink Møller Pedersen, Henrik Villsen Andersen and Peter Adler Würtzen. No individual member of the Lunbeckfonden board of directors is deemed to hold any beneficial ownership or reportable pecuniary interest in the shares held by Lunbeckfonden. The board of directors of Lunbeckfonden and Lene Skole, the chief executive officer of Lunbeckfonden, may be deemed to share voting and investment authority over the shares held by Lundbeckfonden. Mette Kirstine Agger, a member of our board of directors, is a Managing Partner at Lundbeckfon Ventures, which is an affiliate of Lundbeckfonden. The address of Lundbeckfonden and the above-mentioned persons is Scherfigsvej 7, DK-2100 Copenhagen, Denmark. (7) Based solely on a Schedule 13D/A filed with the SEC on January 8, 2021. Consists of 1,068,255 shares of common stock held by Arix Bioscience Holdings Limited, or Arix Ltd. Arix Bioscience Plc, or Arix Plc, is the sole owner and parent of Arix Ltd. and may be deemed to indirectly beneficially own the shares held by Arix Ltd. The address for Arix Ltd. And Arix Plc is 20 Berkeley Square, London, W1J 6EQ, United Kingdom. (8) Consists of (i) 690,232 shares of common stock held by Bay City Capital Fund V, L.P., or Bay City Capital Fund V, and (ii) 13,148 shares of common stock held by Bay City Capital Fund V Co-Investment Fund, L.P., or Bay City Capital Fund V Co-Investment. Bay City Capital Management V, or GP V, is the General Partner of Bay City Capital Fund V and Bay City Capital Fund V Co-Investment, or collectively, BCC V. Bay City Capital LLC, or BCC LLC, is the Manager of GP V. BCC V has shared voting and dispositive power with respect to the shares held by BCC V. GP V has sole voting and dispositive power with respect to the shares held by BCC V. GP V disclaims beneficial ownership of these shares, except to the extent of its pecuniary interest therein. BCC LLC has sole voting and dispositive power with respect to the shares held by BCC V. BCC LLC disclaims beneficial ownership of these shares, except to the extent of its pecuniary interest therein. Carl Goldfischer and Fred Craves are managing directors of Bay City Capital LLC and have voting and dispositive power with respect to shares held by Bay City Capital Funds. Dr. Goldfischer disclaims beneficial ownership of these shares, except to the extent of its pecuniary interest therein. The address for Bay City Capital Fund V is 750 Battery Street, Suite 400, San Francisco, CA 94111. (9) Consists of 365,616 shares of common stock issuable upon the exercise of options that are exercisable as of January 15, 2021 or will become exercisable within 60 days after such date. (10) Consists of 106,398 shares of common stock issuable upon the exercise of options that are exercisable as of January 15, 2021 or will become exercisable within 60 days after such date. (11) Includes 5,151 shares of common stock issuable upon the exercise of options that are exercisable as of January 15, 2021 or will become exercisable within 60 days after such date. (1 2 ) Consists of 10,430,896 shares of common stock and 502,920 shares of common stock issuable upon the exercise of options that are exercisable as of January 15, 2021 or will become exercisable within 60 days after such date . 128 Securities Authorized for Issuance under Equity Compensation Plans The following table contains information about our equity compensation plans as of December 31, 2020 : Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders 2016 Stock Incentive Plan 1,274,312 $ 4.49 — 2020 Equity Incentive Plan (1) 661,320 20.18 1,110,675 2020 Employee Stock Purchase Plan (2) — — 191,363 Equity compensation plans not approved by security holders — — — Total 1,935,632 $ 24.67 1,302,038 (1) Our 2020 Equity Incentive Plan, or 2020 Plan, has an evergreen provision that allows for an annual increase in the number of shares available for issuance under the 2020 Plan to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2030, equal to the least of (i) 4% of the outstanding shares on such date and (ii) an amount determined by our board of directors. On January 1, 2021, 701,930 additional shares were reserved for issuance under the 2020 Plan pursuant to this provision. (2) Our 2020 Employee Stock Purchase Plan, or 2020 ESPP, has an evergreen provision that allows for an annual increase in the number of shares available for issuance under the 2020 Plan to be added on the first day of each fiscal year, commencing on January 1, 2021 and ending on January 1, 2031, equal to the least of (i) 386,432 shares of common stock, (ii) 1% of the outstanding shares on such date and (iii) an amount determined by the Board . Item 13. Certain Relationships and Related Transactions, and Director Independence. Since January 1, 2019, we have engaged in the following transactions in which the amounts involved exceeded $120,000 and any of our directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties. Cydan Business Services Agreement In January 2016, we entered into a Business Services Agreement with Cydan, or the Business Services Agreement, pursuant to which Cydan provided office space, personnel assistance, and other business services to us on an as-needed basis. At the time the agreement was signed, Cydan was a holder of more than 5% of our capital stock, Dr. McArthur was our founder, President and Chief Executive Officer, a member of our board of directors and a holder of more than 5% of our capital stock and the Chief Scientific Officer of Cydan; Dr. Adams was our Treasurer and Secretary, a member of our board of directors and a holder of more than 5% of our capital stock and the Chief Executive Officer of Cydan; Dr. Bisker-Leib was a holder of more than 5% of our capital stock and the Chief Business Officer of Cydan; and certain other members of our board of directors, including Ms. Agger, Dr. Dalton, Mr. Mott and Dr. Nayeem, were also members of the board of directors of Cydan and continue to serve on both our board of directors and the board of directors of Cydan. We paid Cydan $1.0 million in 2017, $0.7 million in 2018 and $0.3 million in 2019, related to these services under the Business Services Agreement. We agreed with Cydan to terminate the Business Services Agreement and all related services rendered by Cydan to us effective as of August 17, 2019. Lundbeck Exclusive License Agreement In April 2016, we entered into an exclusive license agreement with H. Lundbeck A/S, or Lundbeck, pursuant to which Lundbeck granted us a worldwide license under certain patent rights and certain know-how owned or otherwise controlled by Lundbeck within the field of prevention, treatment or diagnosis of hemoglobinopathy disorders and/or diseases or disorders, including those directly or indirectly related to hemoglobinopathies. As partial consideration for the licenses granted under 129 the agreement, we issued 167,523 shares of our common stock to Lundbeck in April 2016. We issued 127,002 shares of our common stock to Lundbeck in December 2016 and 148,746 shares of our common stock in August 2017 as a result of antidilution provisions contained in the exclusive license agreement triggered by subsequent closings of our series A preferred stock, described below. In addition, pursuant to this exclusive license agreement, we have made cash payments to Lundbeck of $1.8 million to date consisting of an upfront payment and ongoing milestone payments. See “Business—Exclusive License Agreement” for additional information regarding the exclusive license agreement. Ms. Agger, a member of our board of directors, is also the Managing Partner of Lundbeckfond Invest A/S, the majority stockholder of Lundbeck. Lundbeckfond Invest A/S owns more than 5% of our capital stock. Series B Preferred Stock Financing Between March 2019 and February 2020, we issued and sold an aggregate of 36,166,661 shares of series B preferred stock, at a price per share of $1.7419 in cash, for an aggregate purchase price of $63.0 million. The following table sets forth the aggregate number of shares of series B preferred stock that we issued and sold to our directors and 5% stockholders and their affiliates and the aggregate purchase price for such shares: Purchaser ( 1) Shares of Series B Preferred Stock Aggregate Purchase Price New Enterprise Associates 14, L.P. ( 2) 5,625,926 $ 9,799,800 OrbiMed Private Investments VII, LP ( 3) 10,046,294 17,499,640 Arix Bioscience Holdings Limited ( 4) 8,611,110 14,999,693 Entities affiliated with RA Capital Healthcare Fund, L.P. ( 5) 5,224,073 9,099,813 Pfizer Ventures (US) LLC ( 6) 1,894,444 3,299,932 Lundbeckfond Invest A/S ( 7) 1,894,444 3,299,932 Entities affiliated with Bay City Capital ( 8) 861,111 1,499,969 (1) See “Principal Stockholders” for additional information about shares held by certain of these entities. (2) David M. Mott, the chairman of our board of directors, was a general partner of New Enterprise Associates and Sara Nayeem, M.D., a member of our board of directors, is a partner of New Enterprise Associates. (3) David Bonita, M.D., a member of our board of directors, is a Partner of OrbiMed Advisors. (4) Mark Chin, a member of our board of directors, was an Investment Director at Arix Bioscience until April 2020. (5) RA Capital Healthcare Fund, L.P. is a 5% stockholder. (6) Barbara J. Dalton, Ph.D., a member of our board of directors, is Vice President of Venture Capital of Pfizer, Inc., an affiliate of Pfizer Ventures (US) LLC. (7) Mette Kirstine Agger, a member of our board of directors, is the Managing Partner of Lundbeckfonden Ventures. (8) Carl Goldfischer, M.D., a member of our board of directors, is the Managing Director of Bay City Capital. The series B preferred stock converted into common stock on a 6.299-for-1 basis upon the closing of our initial public offering on March 16, 2020. 130 Initial Public Offering In March 2020, we closed our initial public offering, pursuant to which we issued and sold 4,700,000 shares of our common stock. In April 2020, we issued and sold an additional 705,000 shares of common stock pursuant to the full exercise of the underwriters’ over-allotment option. The following table sets forth the aggregate number of shares of our common stock that we issued and sold to our directors and 5% stockholders and their affiliates and the aggregate purchase price for such shares. Such purchases were made through the underwriters at the initial public offering price of $16.00 per share. Purchaser ( 1) Shares of Common Stock Aggregate Purchase Price New Enterprise Associates 14, L.P. ( 2) 475,000 $ 7,600,000 OrbiMed Private Investments VII, LP ( 3) 1,125,000 18,000,000 Arix Bioscience Holdings Limited ( 4) 187,500 3,000,000 Entities affiliated with RA Capital Healthcare Fund, L.P. ( 5) 625,000 10,000,000 Pfizer Ventures (US) LLC ( 6) 312,500 5,000,000 Lundbeckfond Invest A/S ( 7) 187,500 3,000,000 (1) See “Principal Stockholders” for additional information about shares held by these entities. (2) David M. Mott, the chairman of our board of directors, was a general partner of New Enterprise Associates and Sara Nayeem, M.D., a member of our board of directors, is a partner of New Enterprise Associates. (3) David Bonita, M.D., a member of our board of directors, is a Partner of OrbiMed Advisors. (4) Mark Chin, a member of our board of directors, was an Investment Director at Arix Bioscience until April 2020. (5) RA Capital Healthcare Fund, L.P. and its affiliates is a 5% stockholder. (6) Barbara J. Dalton, Ph.D., a member of our board of directors, is Vice President of Venture Capital of Pfizer, Inc., an affiliate of Pfizer Ventures (US) LLC. (7) Mette Kirstine Agger, a member of our board of directors, is the Managing Partner of Lundbeckfonden Ventures. Registration Rights We are a party to an investors’ rights agreement with certain holders of our common stock, including our 5% stockholders and their affiliates and entities affiliated with some of our directors. This investors’ rights agreement provides these stockholders the right, subject to certain conditions, to demand that we file a registration statement or to request that their shares be covered by a registration statement that we are otherwise filing. See “Description of Capital Stock—Registration Rights” for additional information regarding these registration rights. Indemnification Agreements Our certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, we entered into indemnification agreements with all of our directors and executive officers in connection with our initial public offering. These indemnification agreements may require us, among other things, to indemnify each such director or executive officer for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him or her in any action or proceeding arising out of his or her service as one of our directors or executive officers. Employment Arrangements We have entered into employment agreements with certain of our executive officers. For more information regarding the agreements with Dr. Ballal and Mr. Gray, see “Executive Compensation.” Policies and Procedures for Related Person Transactions Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders or their immediate family members, each of whom we refer to as a “related person,” has a direct or indirect material interest. If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our chief financial officer. The 131 policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually. A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider: • the related person’s interest in the related person transaction; • the approximate dollar value of the amount involved in the related person transaction; • the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; • whether the transaction was undertaken in the ordinary course of our business; • whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party; • the purpose of, and the potential benefits to us of, the transaction; and • any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. Our audit committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate. In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy: • interests arising solely from the related person’s position as an executive officer of another entity, whether or not the person is also a director of the entity, that is a participant in the transaction where the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and • a transaction that is specifically contemplated by provisions of our certificate of incorporation or bylaws. The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by our compensation committee in the manner specified in the compensation committee’s charter. The transactions described in this section occurred prior to the adoption of the policy. 132 Director Independence The Nasdaq Stock Market LLC, or Nasdaq, Marketplace Rules, or the Nasdaq Listing Rules, require a majority of a listed company’s board of directors to be composed of independent directors within one year of listing. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under the Nasdaq Listing Rules, a director will only qualify as an “independent director” if, in the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director; and (2) whether the director is affiliated with the company or any of its subsidiaries or affiliates. In October 2019, our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each director and in April 2020 undertook this review with respect to Edward Conner upon his appointment to our board of directors. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that each of our directors, with the exception of Rahul D. Ballal, are “independent directors” as defined under the Nasdaq Listing Rules. Our board of directors had also previously determined that James McArthur, a former director who served during the year ended December 31, 2019, was not an independent director as defined under applicable Nasdaq rules prior to his resignation from our board of directors in 2020. In making such determinations, our board of directors considered the relationships that each such director has with our company and all other facts and circumstances that our board of directors deemed relevant in determining his or her independence, including the beneficial ownership of our capital stock by each director. Dr. Ballal is not an independent director under these rules because he is our President and Chief Executive Officer. Dr. McArthur was not an independent director under these rules because he served as our President and Chief Executive Officer until May 2018. 133 Item 14. Principal Accoun t ant Fees and Services. The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed us for each of the last two fiscal years (in thousands) : Year Ended December 31, 2020 2019 Audit Fees (1) $ 556 $ 1,046 Audit-Related Fees — — Tax Fees (2) 12 10 All Other Fees 4 — $ 572 $ 1,056 (1) Audit fees consist of fees billed for professional services by Ernst & Young LLP for audit and quarterly review of our consolidated financial statements and review of the registration statement on Form S-1 for our IPO, and related services that are normally provided in connection with statutory and regulatory filings or engagements. (2) Tax fees consist of fees for professional services performed by Ernst & Young LLP with respect to tax compliance, tax advice and tax planning. Pre-Approval Policies and Procedures The audit committee of our board of directors has adopted policies and procedures for the pre-approval of audit and non-audit services for the purpose of maintaining the independence of our independent auditor. We may not engage our independent auditor to render any audit or non-audit service unless either the service is approved in advance by the audit committee, or the engagement to render the service is entered into pursuant to the audit committee’s pre-approval policies and procedures. Notwithstanding the foregoing, pre-approval is not required with respect to the provision of services, other than audit, review or attest services, by the independent auditor if the aggregate amount of all such services is no more than 5% of the total amount paid by us to the independent auditor during the fiscal year in which the services are provided, such services were not recognized by us at the time of the engagement to be non-audit services and such services are promptly brought to the attention of the audit committee and approved prior to completion of the audit by the audit committee . From time to time, our audit committee may pre-approve services that are expected to be provided to us by the independent auditor during the following 12 months. At the time such pre-approval is granted, the audit committee must identify the particular pre-approved services in a sufficient level of detail so that our management will not be called upon to make a judgment as to whether a proposed service fits within the pre-approved services and, at each regularly scheduled meeting of the audit committee following such approval, management or the independent auditor shall report to the audit committee regarding each service actually provided to us pursuant to such pre-approval . The audit committee has delegated to its chairman the authority to grant pre-approvals of audit or non-audit services to be provided by the independent auditor. Any approval of services by the chairman of the audit committee is reported to the committee at its next regularly scheduled meeting . 134 PART IV Item 15. Exhibit and Financial Statement Schedules. (1) The financial statements listed below are filed as part of this Annual Report on Form 10-K. Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 (2) All financial statement schedules have been omitted because they are not applicable, not required, or the information required is shown in the consolidated financial statements or the notes thereto. (3) The following is a list of exhibits filed as part of this Annual Report on Form 10-K Exhibit Index Exhibit Number Description 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2020) 3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2020) 4.1 Specimen stock certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 4.2 Amended and Restated Investors’ Rights Agreement, dated as of March 15, 2019, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 4.3 Description of Securities of the Registrant* 10.1# 2016 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on March 3, 2020) 10.2# Form of Incentive Stock Option Agreement under the 2016 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.3# Form of Nonstatutory Stock Option Agreement under the 2016 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.4# 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on March 3, 2020) 10.5# Form of Stock Option Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.6# 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on March 3, 2020) 10.7† Exclusive License Agreement, dated as of April 11, 2016, by and between H. Lundbeck A/S and the Registrant, as amended (incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 135 10.8# Amended and Restated Letter Agreement, dated as of September 23, 2019, by and between the Registrant and Rahul D. Ballal, Ph.D. (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.9# Amended and Restated Letter Agreement, dated as of September 23, 2019, by and between the Registrant and Willem H. Scheele, M.D. ((incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.10# Amended and Restated Letter Agreement, dated as of September 23, 2019, by and between the Registrant and Michael P. Gray (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.11 Form of Indemnification Agreement with directors and executive officers (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.12 Office Lease Agreement, dated as of May 20, 2019, by and between Columbia REIT – 116 Huntington, LLC and the Registrant (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.13# Form of Restricted Stock Unit Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.14# Separation and Release of Claims Agreement, dated as of May 1, 2020, by and between the Registrant and Willem H. Scheele, M.D. (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2020) 21.1 List of Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 23.1 * Consent of Ernst & Young LLP, independent registered public accounting firm 31.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith. # Indicates a management contract or any compensatory plan, contract or arrangement. † Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the Registrant if disclosed. Item 16. Form 10-K Summary None. 136 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . IMARA INC. Date: March 5, 2021 By: /s/ Rahul D. Ballal Rahul D. Ballal, Ph.D. President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Rahul D. Ballal President and Chief Executive Officer, Director (Principal Executive Officer) March 5, 2021 Rahul D. Ballal, Ph.D. /s/ Michael P. Gray Chief Financial Officer and Chief Operating Officer (Principal Financial and Accounting Officer) March 5, 2021 Michael P. Gray /s/ David M. Mott Chairman of the Board March 5, 2021 David M. Mott /s/ Mette Kirstine Agger Director March 5, 2021 Mette Kirstine Agger /s/ David Bonita Director March 5, 2021 David Bonita, M.D. /s/ Mark Chin Director March 5, 2021 Mark Chin /s/ Edward Conner Director March 52021 Edward Conner /s/ Carl Goldfischer Director March 5, 2021 Carl Goldfischer, M.D. /s/ Barbara J. Dalton Director March 5, 2021 Barbara J. Dalton, Ph.D. /s/ Sara Nayeem Director March 5, 2021 Sara Nayeem, M.D. 137 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of IMARA Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IMARA Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion . /s/ Ernst & Young LLP We have served as the Company’s auditor since 2018. Boston, Massachusetts March 5, 2021 F-2 IMARA INC. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 47,698 $ 4,936 Short-term investments 40,524 23,971 Prepaid expenses and other current assets 2,183 1,717 Total current assets 90,405 30,624 Property and equipment, net 349 442 Other assets 88 2,232 Total assets $ 90,842 $ 33,298 Liabilities, convertible preferred stock and stockholders' equity (deficit) Current liabilities: Accounts payable 1,971 1,658 Accrued expenses and other current liabilities 4,276 2,540 Total current liabilities 6,247 4,198 Deferred rent 160 184 Total liabilities $ 6,407 $ 4,382 Commitments and contingencies (Note 8) Series Seed convertible preferred stock, par value of $0.001 per share; no shares and 2,712,960 shares authorized, issued and outstanding as of December 31, 2020 and 2019, respectively; liquidation value of $0 December 31, 2020 — 1,460 Series A convertible preferred stock, par value of $0.001 per share; no shares and 31,499,040 shares authorized, issued and outstanding as of December 31, 2020 and 2019, respectively — 30,729 Series B convertible preferred stock, par value of $0.001 per share; no shares, issued and outstanding as of December 31, 2020; 36,166,661 shares authorized and 26,321,313 shares issued and outstanding as of December 31, 2019 — 45,575 Stockholders' equity (deficit): Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; no shares issued or outstanding as of December 31, 2020; no shares authorized, issued or outstanding as of December 31, 2019 — — Common stock, par value of $0.001 per share; 200,000,000 and 100,000,000 shares authorized as of December 31, 2020 and 2019, respectively; 17,548,263 and 702,510 shares issued and outstanding as of December 31, 2020 and 2019, respectively 18 1 Additional paid-in capital 180,526 5,872 Accumulated other comprehensive income 4 32 Accumulated deficit (96,113 ) (54,753 ) Total stockholders' equity (deficit) 84,435 (48,848 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 90,842 $ 33,298 The accompanying notes are an integral part of these consolidated financial statements. F-3 IMARA INC. Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share data) Years ended December 31, 2020 2019 Operating expenses: Research and development $ 32,154 $ 19,009 General and administrative 9,544 5,107 Total operating expenses $ 41,698 $ 24,116 Loss from operations (41,698 ) (24,116 ) Total other income: Interest income 483 578 Other income (expense) (145 ) 75 Total other income, net $ 338 $ 653 Net loss $ (41,360 ) $ (23,463 ) Accretion of Series B convertible preferred stock (7,858 ) — Net loss attributable to common stockholders—basic and diluted $ (49,218 ) $ (23,463 ) Net loss per share applicable to common stockholders—basic and diluted $ (3.53 ) $ (33.40 ) Weighted-average common shares outstanding—basic and diluted $ 13,924,730 $ 702,455 Comprehensive loss: Net loss (41,360 ) (23,463 ) Other comprehensive loss: Unrealized gain (loss) on investments, net (28 ) 32 Comprehensive loss $ (41,388 ) $ (23,431 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 IMARA INC. Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands, except share and per share data) CONVERTIBLE PREFERRED STOCK SERIES SEED $0.001 PAR VALUE SERIES A $0.001 PAR VALUE SERIES B $0.001 PAR VALUE COMMON STOCK $0.001 PAR VALUE ADDITIONAL PAID-IN ACCUMULATED OTHER COMPREHENSIVE ACCUMULATED TOTAL STOCKHOLDERS’ EQUITY SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME DEFICIT (DEFICIT) Balance at December 31, 2018 2,712,960 $ 1,460 31,499,040 $ 30,729 — $ — 702,510 $ 1 $ 4,973 $ — $ (31,290 ) $ (26,316 ) Issuance of Series B convertible preferred stock, net of issuance costs of $274 — — — — 26,321,313 45,575 — — — — — — Stock-based compensation expense — — — — — — — — 899 — — 899 Unrealized gain on investments — — — — — — — — — 32 — 32 Net loss — — — — — — — — — — (23,463 ) (23,463 ) Balance at December 31, 2019 2,712,960 $ 1,460 31,499,040 $ 30,729 26,321,313 $ 45,575 702,510 $ 1 $ 5,872 $ 32 $ (54,753 ) $ (48,848 ) Issuance of Series B convertible preferred stock, net of issuance costs of $20 and beneficial conversion charge — — — — 9,845,348 9,271 — — 7,858 — — 7,858 Accretion of Series B converted preferred stock — — — — — 7,858 — — (7,858 ) — — (7,858 ) Conversion of convertible preferred stock into common stock (2,712,960 ) (1,460 ) (31,499,040 ) (30,729 ) (36,166,661 ) (62,704 ) 11,172,955 11 94,882 — — 94,893 Initial public offering, net of underwriting discounts, commissions and offering costs of $3,902 — — — — — — 5,405,000 6 76,520 — — 76,526 Exercise of stock options and issuance of stock under the Employee Stock Purchase Plan — — — — — — 267,798 — 1,021 — 1,021 Stock-based compensation expense — — — — — — — — 2,231 — — 2,231 Unrealized loss on investments — — — — — — — — — (28 ) — (28 ) Net loss (41,360 ) (41,360 ) Balance at December 31, 2020 — — — — — — 17,548,263 $ 18 $ 180,526 $ 4 $ (96,113 ) $ 84,435 The accompanying notes are an integral part of these consolidated financial statements. F-5 IMARA Inc. Consolidated Statements of Cash Flows (in thousands) Year ended December 31, 2020 2019 Cash flows from operating activities: Net loss $ (41,360 ) $ (23,463 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 2,231 899 Depreciation expense 97 33 Amortization and accretion on investments 122 (19 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets (465 ) (1,394 ) Other assets (60 ) (88 ) Accounts payable 313 750 Accrued expenses and other current liabilities 1,748 1,305 Deferred rent (24 ) 100 Net cash used in operating activities (37,398 ) (21,877 ) Cash flows from investing activities: Proceeds from maturities and sales of short-term investments 47,500 — Purchases of short-term investments (64,203 ) (23,920 ) Purchases of property and equipment (18 ) (140 ) Net cash used in investing activities (16,721 ) (24,060 ) Cash flows from financing activities: Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs 80,427 — Proceeds from issuance of Series B convertible preferred stock, net of issuance costs 17,150 45,575 Proceeds from exercise of options 1,022 — Payment of issuance costs (1,718 ) (1,996 ) Net cash provided by financing activities 96,881 43,579 Net increase in cash, cash equivalents and restricted cash 42,762 (2,358 ) Cash, cash equivalents and restricted cash, beginning of period 5,024 7,382 Cash, cash equivalents and restricted cash, end of period $ 47,786 $ 5,024 Supplemental disclosure of non-cash investing and financing activities: Conversion of convertible preferred stock into common stock $ 94,893 $ — Accretion of redeemable convertible preferred stock to redemption value $ (7,858 ) $ — Reclassification of deferred offering costs from other assets to additional paid-in capital $ (2,144 ) $ — Deferred offering costs included in accounts payable and accrued expenses $ — $ 60 Property and equipment purchases included in accrued expenses $ 12 $ 335 Unrealized loss on investments $ (28 ) $ — The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the dates shown below: December 31, 2020 2019 Cash and cash equivalents $ 47,698 $ 4,936 Restricted cash (included in other assets) 88 88 Total cash, cash equivalents and restricted cash $ 47,786 $ 5,024 The accompanying notes are an integral part of these consolidated financial statements. F-6 IMARA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of the Business IMARA Inc. (“IMARA” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to developing and commercializing novel therapeutics to treat rare inherited genetic disorders of hemoglobin, known as hemoglobinopathies, which have significant unmet medical need. The Company was incorporated in January 2016 under the laws of the State of Delaware, and its principal offices are in Boston, Massachusetts. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. The Company’s sole product candidate currently under development, IMR-687, as well as any other product candidates the Company may develop, will require significant additional research and development efforts, including 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 product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. In February 2020, the Company effected a 1-for-6.299 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each of the Company’s outstanding series of Series Seed convertible preferred stock (“Series Seed Preferred Stock”), Series A convertible preferred stock (“Series A Preferred Stock”), Series B convertible preferred stock (“Series B Preferred Stock”), collectively referred to as “Preferred Stock.”. All share and per share amounts in the consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the change in par value of common stock to additional paid-in capital. On February 25, 2020, the Company issued and sold 1,562,994‬ shares of Series B Preferred Stock at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by holders of Series B Preferred Stock, and raised approximately $17.1 million in net proceeds after deducting less than $0.1 million of issuance costs. On March 16, 2020, the Company completed an initial public offering (“IPO”) of its common stock and issued and sold 4,700,000 shares of common stock at a public offering price of $16.00 per share, resulting in gross proceeds of $75.2 million. On April 13, 2020, the Company issued and sold an additional 705,000 shares of common stock pursuant to the exercise of the underwriters’ option to purchase additional shares for aggregate gross proceeds of $11.3 million. Inclusive of the exercise by the underwriters of their option to purchase additional shares, the Company received approximately $76.5 million in net proceeds from the IPO after deducting $10.0 million of underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all 70,378,661 shares of outstanding Preferred Stock automatically converted into 11,172,955 shares of common stock. Upon conversion of the convertible Preferred Stock, the Company reclassified the carrying value of the convertible Preferred Stock to common stock and additional paid-in capital. Liquidity The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of Preferred Stock. As of December 31, 2020, the Company had cash, cash equivalents, and investments of $88.2 million and an accumulated deficit of $96.1 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts. The Company believes its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Annual Report on Form 10-K. The Company will need additional funding to support its planned operating activities. There can be no assurances, however, that F-7 the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects . 2. Summary of Significant Accounting Policies Basis of presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”). Principles of Consolidation The accompanying consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U. Limited. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, accrued research and development expenses, stock-based compensation expense, the fair value of the common stock and Preferred Stock and income taxes. Actual results could differ materially from those estimates. Segments Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States. Cash and Cash Equivalents The Company considers all highly liquid investments that are readily convertible into cash with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money market funds. Cash equivalents are stated at cost, which approximates market value. Restricted Cash Restricted cash of less than $0.1 million as of December 31, 2020 and December 31, 2019, represents a letter of credit held as collateral in support of the Company’s facility lease. Restricted cash is included as a component of other assets on the Company’s consolidated balance sheets. Investments The Company’s investments are maintained by investment managers and consist of corporate debt securities and commercial paper with original maturities of over 90 days, all of which are considered available-for-sale securities. The Company classifies its available-for-sale securities as short-term investments on the consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed. Available-for-sale securities are carried at fair value with their unrealized gains and losses included in accumulated other comprehensive income within stockholders’ equity (deficit), until such gains and losses are realized in other income (expense) within the consolidated statements of operations and comprehensive loss or until an unrealized loss is considered other-than-temporary. F-8 The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions. If the Company determines from this analysis that it does not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, the impairment is considered other-than-temporary and is recognized in the consolidated statements of operations and comprehensive loss. Deferred Offering Costs The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss. On March 16, 2020, the Company completed its IPO; accordingly, the Company recognized the deferred offering costs of approximately $3.9 million as a reduction from gross proceeds associated with the IPO through additional paid-in capital in the accompanying consolidated balance sheet. Deferred offering costs classified in other assets on the accompanying consolidated balance sheet as of December 31, 2019 were $2.1 million. There were no deferred offering costs as of December 31, 2020. Concentrations of Credit Risk and Off-Balance Sheet Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and have not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Such deposits have and will continue to exceed federally insured limits. The Company has not experienced any losses on its cash deposits. The Company’s available-for-sale investments primarily consist of high-grade corporate debt and commercial paper, and potentially subject the Company to concentrations of credit risk. The Company has adopted an investment policy that limits the amounts the Company may invest in any one type of investment and requires all investments held by the Company to be highly rated, thereby reducing credit risk exposure. As of December 31, 2020 and 2019, the Company had no off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements. Comprehensive Loss Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss. For the years ended December 31, 2020 and 2019, as a result of the Company’s investments in available-for-sale securities, the Company’s comprehensive loss includes unrealized gains and losses on those available-for-sale securities. Fair Value Measurements Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. F-9 • Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. An entity may choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. The carrying amounts reflected in the consolidated balance sheets for prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term nature of these assets and liabilities. Property and Equipment, Net Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which are as follows: Estimated Useful Life Computer equipment and software 3 years Furniture and fixtures 5 years Laboratory equipment 5 years Leasehold improvements Shorter of useful life or remaining lease term Purchased assets that are not yet in service are recorded to construction-in-process and no depreciation expense is recorded. Once they are placed in service they are reclassified to the appropriate asset class. Upon the retirement or sale of an asset, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is recorded to other income (expense), net. Expenditures for maintenance and repairs are expensed as incurred. Deferred Rent Deferred rent consists of rent escalation payment terms, tenant improvement allowances and other incentives received from landlords related to the Company’s operating leases. Rent escalation represents the difference between actual operating lease payments due and straight-line rent expense, which is recorded by the Company over the term of the lease. Tenant improvement allowances and other incentives are recorded as deferred rent and amortized as a reduction of periodic rent expense, over the term of the applicable lease. Research and Development Expenses Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries, stock-based compensation and benefits, facilities costs, depreciation, third-party license fees, and external costs of outside vendors engaged to conduct preclinical development activities and clinical trials as well as to manufacture research and development materials. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are expensed as the goods are delivered or the related services are performed or until it is no longer expected that the goods will be delivered, or the services rendered. Costs incurred in obtaining technology licenses are recognized as research and development expense as incurred if the technology licensed has not reached technological feasibility and has no alternative future uses. F-10 Accrued Research and Development Expenses The Company has entered into various research and development related contracts with parties both inside and outside of the United States, including contracts with third-party contract research organizations and contract manufacturing organizations. These agreements are cancelable, and related payments are recognized as research and development expenses as incurred. The Company records accrued liabilities for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes the progress of the studies or clinical 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. To date, the Company’s historical accrual estimates have not been materially different from the actual costs. Patent Costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure and are classified as general and administrative expenses. Stock-Based Compensation The Company accounts for all stock-based awards granted to employees and non-employees as stock-based compensation expense at fair value. For stock-based awards issued to employees and members of the Company’s board of directors (the “Board”) for their services as a member of the Board, the Company measures the estimated fair value of the stock-based award on the date of grant. Since the Company’s initial public offering in March 2020, the fair value of the common stock has been determined based on the closing price of the Company’s stock on the date of grant. Prior to the Company’s initial public offering, the Company determined the fair value of the underlying common stock based on input from management and approved by the Board, which utilized the valuation of the Company’s enterprise value determined utilizing various methods including the back-solve method, the option-pricing method (“OPM”) or a hybrid of the probability-weighted expected return method (“PWERM”) and the OPM. The total enterprise value was then allocated to the various outstanding equity instruments, including the underlying common stock, utilizing the option-pricing model. For employee and non-employee awards, the Company recognizes compensation expense over the requisite service period, which is generally the vesting period of the respective award based on the grant date fair value of the award. For awards that include performance-based vesting conditions expense is recognized using the accelerated attribution method when the performance condition is deemed to be probable. The Company accounts for forfeitures as they occur. The Company determines the fair value of restricted stock awards in reference to the fair value of its common stock less any applicable purchase price. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and the Company’s expected dividend yield. The fair value of each restricted stock award is determined on the date of grant based on the fair value of the Company’s common stock on that same date. Given the Company’s limited trading history as a public company, the Company determines the volatility for awards granted based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. The expected volatility has been determined using a weighted-average of the historical volatility measures of this group of guideline companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. Under the simplified method, the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The Company utilizes this method due to lack of historical exercise data and the plain nature of its stock-based awards. Prior to the Company’s IPO, the expected term of stock options granted to non-employees also used the “simplified” method. Following the Company’s IPO, the expected term of options granted to non-employees is determined by contractual term. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s cash compensation costs are classified. F-11 Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or the Company’s tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established. The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. Net loss per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. The Company’s Preferred Stock contained participation rights in any dividend paid by the Company and is deemed to be a participating security. Net loss attributable to common stockholders and participating preferred shares are allocated to each share on an as-converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share in losses of the Company and are not included in the calculation of net loss per share in the periods in which a net loss is recorded. Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. The weighted-average number of common shares included in the computation of diluted net loss effect to all potentially dilutive common equivalent shares, including outstanding stock options and Preferred Stock. Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize an obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Expenses are recognized in the consolidated statement of operations in a manner similar to current accounting guidance. The Company expects to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. The standard is effective for fiscal years beginning after December 15, 2021. The Company will early adopt the accounting standard effective January 1, 2021 using a modified retrospective approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. The Company is finalizing its evaluation of the impacts that the adoption of this accounting guidance will have on the consolidated financial statements and estimates approximately $1 million of right-to-use assets and lease liabilities will be recognized in the balance sheet upon adoption. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. For public business entities that meet the definition of a United States Securities and Exchange Commission (“SEC”) filer, F-12 excluding entities eligible to be smaller reporting companies as defined by the SEC, the standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2016-13 to be material. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”) . Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. The amendments in Part I of this update became effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The adoption had no material impact on the Company’s financial position, results of operations or cash flows. The amendments in Part II of this update do not require any transition guidance because those amendments do not have an accounting effect. On August 5, 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU-2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models in ASC 470-20 that require separate accounting for embedded conversion features from convertible instruments. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Additionally, the guidance simplifies the evaluation of whether a contract in the issuer’s own equity can be classified in equity or an embedded feature qualifies for the derivative scope exception. Although the guidance is not effective until 2022, early adoption of ASU 2020-06 is permitted for all entities for fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures. 3. Fair Value of Financial Assets and Liabilities The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands): December 31, 2020 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Observable Inputs Description Total (Level 1) (Level 2) (Level 3) Assets: Money market funds, included in cash and cash equivalents $ 41,208 $ 41,208 $ — $ — Marketable securities: Corporate debt securities 14,807 — 14,807 — Commercial paper 25,717 — 25,717 — Total financial assets $ 81,732 $ 41,208 $ 40,524 $ — F-13 December 31, 2019 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Observable Inputs Description Total (Level 1) (Level 2) (Level 3) Assets: Money market funds, included in cash and cash equivalents $ 4,477 $ 4,477 $ — $ — Marketable securities: Corporate debt securities 5,772 — 5,772 — Commercial paper 18,199 — 18,199 — Total financial assets $ 28,448 $ 4,477 $ 23,971 $ — As of December 31, 2020 and 2019, the Company’s cash equivalents consisted of money market funds, classified as Level 1 financial assets, as these assets are valued using quoted market prices in active markets without any valuation adjustment. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade securities. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances. During the years ended December 31, 2020 and 2019, there were no transfers between fair value measurement levels. 4. Investments As of December 31, 2020, the Company had short-term investments consisting of corporate debt securities and commercial paper, which are considered to be available-for-sale investments. These are included in short-term investments on the consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed. The following table summarizes the Company’s investments as of December 31, 2020 and 2019 (in thousands): December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Current: Commercial paper $ 25,716 $ 1 $ — $ 25,717 Corporate debt securities 14,804 3 — 14,807 Total $ 40,520 $ 4 $ — $ 40,524 December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Current: Commercial paper $ 18,167 $ 32 $ — $ 18,199 Corporate debt securities 5,772 — — 5,772 Total $ 23,939 $ 32 $ — $ 23,971 As of December 31, 2020 and 2019, the Company had no available-for-sale securities in unrealized loss positions. The Company determined that there was no material change in the credit risk of its investments. As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of December 31, 2020 and 2019. F-14 5. Property and Equipment, net Property and equipment, net consisted of the following (in thousands): December 31, 2020 December 31, 2019 Property and equipment: Leasehold improvements $ 336 $ 339 Furniture and fixtures 143 136 Property and equipment $ 479 $ 475 Less: accumulated depreciation (130 ) (33 ) Property and equipment, net $ 349 $ 442 Depreciation expense was $0.1 million and less than $0.1 million for the years ended December 31, 2020 and 2019, respectively. 6. Accrued Expenses Accrued expenses consisted of the following (in thousands): December 31, 2020 December 31, 2019 Accrued research and development expenses $ 2,732 $ 1,106 Accrued compensation and benefits 1,090 802 Accrued professional services 355 330 Accrued other 99 302 Total accrued expenses $ 4,276 $ 2,540 7. License Agreements Agreement with Lundbeck In April 2016, the Company entered into a license agreement with Lundbeck (the “Lundbeck Agreement”) pursuant to which Lundbeck granted the Company the following licenses within the field of prevention, treatment or diagnosis of hemoglobinopathy disorders and/or other diseases or disorders, including those directly or indirectly related to hemoglobinopathies: (1) an exclusive, royalty-bearing license to certain patent rights and certain know-how owned or otherwise controlled by Lundbeck (“Licensed Technology”) to research, develop, make, use, sell, and commercialize products (“Licensed Products”) from PDE9 inhibitors, which included IMR-687 (“Licensed Compounds”); (2) a non-exclusive license to the Licensed Technology to make, research, develop, and use such Licensed Technology to enable research and development, with certain restrictions; and (3) a sublicensing right that allows the Company to grant sublicenses to third parties to use the Licensed Technology subject to the certain terms detailed in the Lundbeck Agreement. Under the Lundbeck Agreement, the Company is subject to certain achievement dates for development milestones as defined in the agreement. The regulatory milestones due under the Lundbeck Agreement depend on the products being developed. Development milestones due under the Lundbeck Agreement with respect to the Licensed Compounds total up to $23.5 million, and, for any products that contain PDE9 inhibitors other than Licensed Compounds, total up to $11.8 million. The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages. To date, pursuant to the license agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments, which are recorded as research and development expense. No payments were made during the year ended December 31, 2020. As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck in 2016, which represented 8.0% of the Company’s then outstanding equity pursuant to a restricted stock agreement. The shares were fully vested on the date of issuance. The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice. The Company or Lundbeck may terminate the agreement by written notice within a specified period of time in the event of a material breach. F-15 8. Commitments and Contingencies Lease Agreements In 2016, the Company entered into an agreement for office space located in Cambridge, Massachusetts, which was a month-to-month lease, with a related party (see Note 14). The Company recorded rent expense of $0.2 million and $0.2 million during the years ended December 31, 2020 and 2019, respectively. In May 2019, the Company entered into a new operating lease agreement for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62-month term. The lease includes a rent escalation clause which results in cash rental payments of approximately $0.3 million annually. Rent expense is being recognized on a straight-line basis over the lease term. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the Lease Agreement. The Company provided a security deposit of approximately $0.1 million during the year ended December 31, 2019, which is included as a component of other assets on the Company’s consolidated balance sheets. The Company occupied the space in August 2019 and commenced recognition of rent expense. The following table summarizes the future minimum lease payments due under the Company’s operating leases as of December 31, 2020 exclusive of amounts prepaid by the Company (in thousands): December 31, 2020 2021 273 2022 278 2023 284 2024 229 $ 1,064 Legal Proceedings The Company may from time to time be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the years ended December 31, 2020 and 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened. Indemnification Agreements The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the indemnification agreements, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. 9. Convertible Preferred Stock Prior to the sale of common stock in connection with its IPO, the Company had funded its operations primarily with proceeds from the sale of Preferred Stock. In March 2019, the Company issued Series B Preferred Stock and, in connection with such issuance, restated its certificate of incorporation (the “Second Amended and Restated Certificate of Incorporation” or “Second A&R COI”) such that as of December 31, 2019, the authorized capital stock of the Company included 70,378,661 shares of $0.001 par value Preferred Stock, of which 36,166,661 are designated as Series B Preferred Stock, 31,499,040 have been designated as Series A Preferred Stock, and 2,712,960 have been designated as Series Seed Preferred Stock. In March 2019, the Company issued and sold 25,316,663 shares of Series B Preferred Stock, at a price of $1.7419 per share. The terms of the Series B Preferred Stock Purchase Agreement included the obligation of the investors to purchase, and the Company to sell, 10,849,998 additional shares of Series B Preferred Stock at a purchase price of $1.7419 per share, contingent upon the achievement of a specified pre-designated milestone event. The Company concluded that the tranche F-16 feature is not a freestanding financial instrument as the right to purchase the future tranche is not legally detachable from the shares of Series B Preferred Stock. The pre-designated milestone event was not achieved and as such, the milestone tranche closing may take place within 18 months of the initial closing upon a waiver from the holders of a majority of the shares purchased at the initial closing. In addition, any Series B Preferred Stock investor has an option to purchase all or some of its milestone shares prior to any waiver of the milestone conditions. In May 2019, one of the investors exercised this option to purchase 1,004,650 of its milestone shares prior to the milestone closing, at a purchase price of $ 1.7419 per share. At initial issuance and subsequent closing, the Company concluded that no beneficial conversion features were present. On February 25, 2020, the Company raised $17.1 million in net proceeds from the sale of 1,562,994‬ shares of Series B Preferred Stock, at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by the holders of Series B Preferred Stock. Upon issuance, each share of Series B Preferred Stock included an embedded beneficial conversion feature as the estimated fair value of the Company’s common stock on the date of issuance of the Series B Preferred Stock was higher than the effective conversion price of the Series B Preferred Stock of $10.9722 per share. Given the proximity of the issuance to the Company’s public offering, the Company utilized the $16.00 public offing price of its common stock to determine the intrinsic value of the beneficial conversion feature. As a result, the Company recorded the intrinsic value of the beneficial conversion feature of $7.9 million as a discount on the Series B Preferred Stock at issuance. Because the Series B Preferred Stock was immediately convertible upon issuance and did not include mandatory redemption provisions, the discount on the Series B Preferred Stock was immediately accreted. Upon the completion of the IPO on March 16, 2020, all 70,378,661 shares of outstanding Preferred Stock automatically converted into 11,172,955 shares of common stock. As of December 31, 2019, convertible preferred stock consisted of the following (in thousands, except share data): December 31, 2019 Preferred Stock Authorized Preferred Stock Issued and Outstanding Carrying Value Liquidation Value Common stock Issuable Upon Conversion Series Seed Preferred Stock 2,712,960 2,712,960 $ 1,460 $ 2,713 430,693 Series A Preferred Stock 31,499,040 31,499,040 30,729 31,499 5,000,623 Series B Preferred Stock 36,166,661 26,321,313 45,575 45,849 4,178,645 70,378,661 60,533,313 $ 77,764 $ 80,061 9,609,961 Liquidation Rights In the event of any voluntary or involuntary liquidation event, dissolution, winding up of the Company or upon the occurrence of certain other deemed liquidation events described in the Company’s charter, each holder of the then outstanding Series B Preferred Stock was entitled to receive, prior and in preference to any distributions to the holders of Series A Preferred Stock, Series Seed Preferred Stock and common stock, an amount equal to $1.7419 per share (adjusted in the event of any stock dividend, stock split, combination or other similar recapitalization) plus any declared but unpaid dividends thereon. After the payment of all preferential amounts to the holders of Series B Preferred Stock, each holder of the then outstanding Series A Preferred Stock was entitled to receive, prior and in preference to any distributions to the holders of Series Seed Preferred Stock and common stock, an amount equal to $1.00 per share (adjusted in the event of any stock dividend, stock split, combination or other similar recapitalization) plus any declared but unpaid dividends thereon. After the payment of all preferential amounts to the holders of Series A Preferred Stock, each holder of the then outstanding Series Seed Preferred Stock was entitled to receive, prior and in preference to any distributions to the holders of common stock, an amount equal to $1.00 per share (adjusted in the event of any stock dividend, stock split, combination or other similar recapitalization) plus any declared but unpaid dividends thereon. After payments were made in full to the holders of the Preferred Stock, then, to the extent available, the remaining amounts would have been distributed among the holders of the shares of common stock, Series A Preferred Stock and Series B Preferred Stock, pro rata based on the number of shares held by each holder (determined on an as-converted basis). F-17 Conversion Pursuant to the Second A&R COI, each share of Preferred Stock is convertible into common stock, at any time, at the option of the holder, and without the payment of additional consideration, at the applicable conversion ratio then in effect for each series of Preferred Stock. In addition, each share of Preferred Stock will be automatically converted into common stock at the applicable conversion ratio then in effect for each series of Preferred Stock upon either (i) the closing of a firm commitment underwritten public offering of its common stock at a price per share of at least $2.6129 per share (subject to adjustment for any stock split, combination or similar recapitalization) resulting in $60.0 million or more of gross offering proceeds to the Company, or (ii) the date and time, or the occurrence of an event, specified by vote or written consent of the requisite holders of Preferred Stock. Redemption Upon certain change in control events that are outside of the Company’s control, including liquidation, sale or transfer of control of the Company, holders of the Preferred Stock could have caused redemption of the Preferred Stock. Shares of Preferred Stock must be redeemed by the Company in an amount equal to the liquidation preference for each series of Preferred Stock. 10. Stockholders’ Equity (Deficit) On August 13, 2019, the Company’s board of directors, and on February 26, 2020, the Company’s stockholders, approved the Company’s restated certificate of incorporation, which became effective upon closing of the IPO on March 16, 2020, to authorize 10,000,000 shares of undesignated preferred stock, $0.001 per share par value, and to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000 shares, $0.001 per share par value. Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding. Through December 31, 2020, no cash dividends have been declared or paid. As of December 31, 2020, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding. As of December 31, 2020 and December 31, 2019, the Company has reserved for future issuance the following shares of common stock: December 31, 2020 December 31, 2019 Conversion of outstanding preferred stock — 9,609,961 Shares reserved for future issuance under the 2016 Stock Incentive Plan — 228,852 Shares reserved for future issuance under the 2020 Equity Incentive Plan 1,110,675 — Shares reserved for future issuance under the 2020 Employee Stock Purchase Plan 191,363 — 1,302,038 9,838,813 11. Stock-Based Compensation 2016 Stock Incentive Plan The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provided for the grant of restricted stock, restricted stock units, stock appreciation rights, incentive stock options, non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company. As of December 31, 2019, the number of shares of common stock authorized to be issued under the 2016 Plan was 2,091,969, of which 228,852 shares remained available for future grants as of December 31, 2019. As of the effective date of the 2020 Equity Incentive Plan, no shares remained available for future issuance under the 2016 Plan. Any options or awards outstanding under the 2016 Plan remain outstanding and effective. F-18 20 20 Equity Incentive Plan On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020 the Company’s stockholders approved, the 2020 Equity Incentive Plan (the “2020 Plan”), which became effective on March 11, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares reserved for issuance under the 2020 Plan is the sum of: (1) 1,220,283 shares of the Company’s common stock; plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. The number of shares reserved shall be annually increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) an amount determined by the Company’s board of directors. No more than 8,541,982 shares of common stock may be issued as incentive stock options under the 2020 Plan. The shares of common stock underlying any awards that expire, terminate, or are otherwise surrendered, cancelled, forfeited or repurchased by the Company under the 2016 Plan or the 2020 Plan will be added back to the shares of common stock available for issuance under the 2020 Plan. As of December 31, 2020, there were 1,110,675 shares available for future issuance under the 2020 Plan. For financial reporting purposes, the Company performed common stock valuations with the assistance of a third-party specialist through October 23, 2019 to determine stock-based compensation expense for stock options. Upon completion of the IPO, the fair value of the common stock on the grant date was based on the closing price of the stock on the Nasdaq Global Select Market on the date of grant. The following table summarizes the Company’s stock option activity: Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding as of December 31, 2019 1,863,117 $ 4.60 8.90 $ 15,151 Granted 759,139 19.80 Exercised (265,945 ) 4.34 Forfeited (420,679 ) 8.02 Outstanding as of December 31, 2020 1,935,632 $ 9.85 8.14 $ 24,260 Options vested and exercisable as of December 31, 2020 602,986 $ 4.34 6.42 $ 10,678 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period. The weighted-average grant date fair value of the Company’s stock options granted during the years ended December 31, 2020 and 2019 was $12.95 and $3.46, respectively. The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the years ended December 31, 2020 and 2019 were as follows, presented on a weighted-average basis : Year Ended December 31, 2020 2019 Expected term (in years) 6.17 6.11 Expected volatility 74.7 % 69.3 % Expected dividend yield 0.00 % 0.00 % Risk-free interest rate 0.52 % 2.18 % F-19 Performance-based awards The Company granted stock options to purchase an aggregate of 220,928 shares of common stock to certain employees, officers and consultants and advisors of the Company on May 16, 2019, June 5, 2019 and June 21, 2019, which contain performance-based vesting criteria. Vesting of these options was contingent on the closing of the second tranche of Series B Preferred Stock financing. Stock-based compensation expense associated with performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates. As a result of the performance condition being met on February 25, 2020, these options will vest as to 25% of the shares underlying each option on February 25, 2021 and as to the remainder of the shares in equal quarterly installments for three years thereafter. The Company recognized stock-based compensation expense of $0.3 million for these options during the year ended December 31, 2020. Stock-Based Compensation Stock-based compensation expense included in the Company’s consolidated statements of operations and comprehensive loss is as follows (in thousands): Year Ended December 31, 2020 2019 Research and development $ 1,490 $ 301 General and administrative 741 598 Total stock-based compensation expense $ 2,231 $ 899 As of December 31, 2020, total unrecognized compensation cost related to the unvested stock-based awards was $9.5 million, to be recognized over a weighted-average period of 3.22 years. 2020 Employee Stock Purchase Plan On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on March 11, 2020. The 2020 ESPP permits eligible employees who elect to participate, in six-month offering periods, to purchase shares of common stock through payroll deductions at a price equal to 85% of the fair market value of the common stock on the first or last business day of each applicable six-month offering period, whichever is lower. Purchase dates under the ESPP occur on or about June 14 and December 14 each year. The 2020 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 193,216 shares of the Company’s common stock. The number of shares of the Company’s common stock reserved for issuance under the 2020 ESPP will automatically increase on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2021 and continuing until, and including, the fiscal year commencing on January 1, 2031, in an amount equal to the lowest of (i) 386,432 shares of the Company’s common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (iii) an amount determined by the Company’s board of directors. During the year ended December 31, 2020, less than $0.1 million was withheld from employees, on an after-tax basis, in order to purchase 1,853 shares of the Company’s common stock. The Company recorded stock-based compensation expense related to the 2020 ESPP of less than $0.1 million. As of December 31, 2020, 191,363 shares of the Company’s common stock remained available for issuance under the 2020 ESPP. As of December 31, 2020, there was less than $0.1 million of total unrecognized stock-based compensation expense related to the ESPP. The expense is expected to be recognized over a period of 5.5 months. F-20 12. Income Taxes For the years ended December 31, 2020 and 2019, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company. The Company’s losses before income taxes consist solely of losses from domestic operations. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. The Company considered the provisions under the CARES Act and elected not to take advantage of the provisions of CARES Act as the effect of such provisions was not expected to have a material impact on the Company’s results of operations, cash flows and consolidated financial statements. A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the consolidated financial statements is as follows: 2020 2019 Income taxes at U.S. statutory rate 21 % 21 % State income taxes 6 6 Tax Credit 7 3 Other 2 (1 ) Change in valuation allowance (36 ) (29 ) Total provision for income taxes 0 % 0 % Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2020 and 2019 are comprised of the following (in thousands): Year Ended December 31, 2020 2019 Deferred tax assets Net operating loss carryforwards $ 24,657 $ 13,284 Tax credits carryforwards 3,948 1,020 Stock-based compensation 686 246 Amortization 545 611 Accruals 272 200 Lease incentive liability 17 21 Other 42 31 Total deferred tax assets 30,167 15,413 Valuation allowance (30,149 ) (15,385 ) Net deferred tax assets 18 28 Deferred tax liabilities Tenant improvement allowance (17 ) (21 ) Unrealized gains/losses on investments (1 ) (7 ) Total deferred tax liabilities (18 ) (28 ) Net deferred taxes $ — $ — The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily of net operating loss carryforwards and tax credits. Management has considered the Company’s history of cumulative net losses in the United States, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its U.S. federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against these net F-21 deferred tax assets as of December 31, 20 20 and 20 19 , respectively. The Company reevaluates the positive and negative evidence at each reporting period. The Company’s valuation allowance increased during 20 20 by approximately $ 1 4 . 8 million primarily due to the generation of net operating loss and tax credit carryforwards. As of December 31, 2020 and 2019, the Company had U.S. federal net operating loss carryforwards of $91.7 million and $48.6 million, respectively, which may be available to offset future income tax liabilities. The 2017 Tax Cuts and Jobs Act (“TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely but will generally limit the net operating loss deduction to the lesser of the net operating loss carryover or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s net operating loss carryover or 100% of a corporation’s taxable income and be available for twenty years from the period the loss was generated. The Company has federal net operating losses generated following 2017 of $74.5 million, which do not expire. The federal net operating losses generated prior to 2018 of $17.2 million will expire at various dates through 2037. The CARES Act temporarily allows the Company to carryback net operating losses arising in 2018, 2019 and 2020 to the five prior tax years. In addition, net operating losses generated in these years could fully offset prior year taxable income without the 80% taxable income limitation under the TCJA. The Company has been generating losses since its inception. As such, the net operating loss carryback provision under the CARES Act is not applicable to the Company. As of December 31, 2020 and 2019, the Company also had U.S. state net operating loss carryforwards of $85.5 million and $48.9 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2040. As of December 31, 2020 and 2019, the Company had federal tax credit carryforwards of approximately $3.6 million and $0.9 million, respectively, available to reduce future tax liabilities which expire at various dates through 2040. As of December 31, 2020 and 2019, the Company had state research and development tax credit carryforwards of approximately $0.4 million and $0.1 million, respectively, available to reduce future tax liabilities which expire at various dates through 2035. Utilization of the U.S. federal and state net operating loss and research and development and orphan drug credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, 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 net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development and orphan drug credit carryforwards before utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position. The Company has not, as of yet, conducted a study of research and development and orphan drug credit carryforwards. Such a study, once undertaken by the Company, may result in an adjustment to the Company’s research and development and orphan drug credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development and orphan drug credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations if an adjustment is required. The Company files tax returns in the United States and Massachusetts. The Company is subject to U.S. federal and state tax examinations by tax authorities for years 2017 through present. As of December 31, 2020 and 2019, the Company has recorded no liability for unrecognized tax benefits, interest, or penalties related to federal and state income tax matters and there currently no pending tax examinations. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. F-22 13. Net Loss Per Share The following table sets forth the computation of the Company’s basic and diluted net loss per share for the years ended December 31, 2020 and 2019 (in thousands, except share and per share amounts): Year Ended December 31, 2020 2019 Numerator: Net loss attributable to common stockholders—basic and diluted $ (49,218 ) $ (23,463 ) Denominator: Weighted-average number of common shares used in net loss per share—basic and diluted 13,924,730 702,455 Net loss per share—basic and diluted $ (3.53 ) $ (33.40 ) As of December 31, 2020 and 2019, the Company’s potentially dilutive securities were Preferred Stock, shares reserved for issuance under the ESPP and stock options, which have been excluded from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2020 and 2019, as the effect would be to reduce the net loss per share. All the Company’s restricted stock was vested as of December 31, 2019. Net loss applicable to common stockholders for the year ended December 31, 2020 did not equal net loss due to the accretion of the beneficial conversion feature of Series B Preferred Stock in the amount of $7.9 million. The beneficial conversion feature was initially recorded as a discount on the Series B Preferred Stock with a corresponding amount recorded to Additional Paid-in Capital. The discount on the Series B Preferred Stock was then immediately written off as a deemed dividend as the Series B Preferred Stock does not have a stated redemption date and is immediately convertible at the option of the holder. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including convertible preferred stock and options to purchase common stock during the period determined using the if-converted method, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same. The Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2020 and 2019 because including them would have had an anti-dilutive effect : Year Ended December 31, 2020 2019 Series Seed Preferred Stock — 430,693 Series A Preferred Stock — 5,000,623 Series B Preferred Stock — 4,178,645 Options to purchase common stock 1,935,632 1,863,117 Shares reserved for future issuance under the ESPP 191,363 — 14. Related Party Transactions Lundbeck Lundbeckfond Invest A/S is one of the Company’s stockholders and participated in all tranches of the Series A preferred stock financing and both tranches of the Series B preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeckfond Invest A/S owned 5,470,492 shares of Series A Preferred Stock as of December 31, 2019, and 478,749 shares of Series Seed Preferred Stock as of December 31, 2019. Lundbeckfond Invest A/S owned 1,326,111 shares of Series B Preferred Stock as of December 31, 2019. All shares of Preferred Stock converted into shares of common stock upon closing of the IPO. Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO. This reflects a 7.4% and a 9.3% ownership interest on a fully diluted basis as of December 31, 2020 and 2019, respectively. Mette Kirstine Agger, a member of the Company’s board of directors, is a Managing Partner at Lundbeckfonden Ventures, which is an affiliate of Lundbeckfond Invest A/S. Lundbeck, an affiliate of Lundbeckfond Invest A/S, is also one of the Company’s stockholders and participated in the fourth tranche of the Company’s Series A Preferred Stock financing. Prior to the conversion of the Company’s Preferred Stock, Lundbeck owned 499,069 shares of Series A Preferred Stock as of December 31, 2019, as well as 443,271 shares of F-23 common stock issued in conjunction with the Lundbeck Agreement (See Note 7). All shares of P referred S tock converted into shares of common stock upon closing of the IPO. This reflects a 2.7 % and a 4.2 % ownership interest on a fully diluted basis as of December 31, 2020 and 2019, respectively. Lundbeck did not participate in the Series B Preferred Stock financing. To date, pursuant to the Lundbeck Agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense . Cydan Development, Inc. In January 2016, the Company entered into a Business Services Agreement with Cydan Development, Inc., or Cydan, pursuant to which Cydan provided office space, personnel assistance, and other business services to the Company on an as-needed basis. At the time the agreement was signed, Cydan was considered a related party because Cydan was a holder of more than 5% of the Company’s capital stock and Dr. James McArthur was the Company’s founder, President and Chief Executive Officer, a member of the Company’s board of directors and a holder of more than 5% of the Company’s capital stock and the Chief Scientific Officer of Cydan. As of June 30, 2020, Cydan was no longer considered a related party. The Company paid Cydan less than $0.3 million during the year ended December 31, 2019 related to the Business Services Agreement, all of which was recorded as research and development expense. The Company agreed with Cydan to terminate the Business Services Agreement and all related services rendered by Cydan to the Company effective as of August 17, 2019. Accordingly, there were no amounts due to Cydan as of December 31, 2020 and 2019, respectively . 15. Benefit Plans The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code effective as of January 2019. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Board. The Company contributed a match of $0.1 million to the 401(k) plan during the year ended December 31, 2020. The Company did not make any contributions to the plan in 2019. F-24