What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-11 · 138 added, 84 removed, 365 unchanged (38% of the section changed)

Financial Statements.

CONDENSED C ONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

6 unchanged sentences

Right of use assets - operating leases

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES & STOCKHOLDERS’

Current liabilities:

9 unchanged sentences

10,000,000 shares authorized;

issued or outstanding as of March 31, 2021;

issued or outstanding as of June 30, 2021;

no shares authorized, issued or

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200,000,000 shares

authorized as of March 31, 2021 and December 31, 2020;

and 17,548,263 shares issued and outstanding as of March 31, 2021 and December 31,

authorized as of June 30, 2021 and December 31, 2020, respectively;

and 17,548,263 shares issued and outstanding as of June 30, 2021 and December 31,

2020, respectively

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

CONDENSED C ONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

Three Months Ended

Six Months Ended

Operating expenses:

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Loss from operations

Total other income:

Total other income, (net):

Interest income

Other income (expense)

Other expense

Total other income, (net)

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Weighted-average common shares outstanding—basic and diluted

Net loss per share attributable to common stockholders—basic and diluted

Net loss per share attributable to common stockholders—basic and

Comprehensive loss:

Other comprehensive loss:

Unrealized loss on investments

Other comprehensive income:

Unrealized gain (loss) on investments (net)

Comprehensive loss

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

CONDENSED CON SOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

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

(in thousands, except share and per share data)

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commissions and offering

costs of $ 3,885

Stock-based compensation

1 unchanged sentence

Balance at March 31, 2020

Initial public offering, net of

underwriting discounts,

commissions and offering

costs of $ 17

Exercise of stock options

Stock-based compensation

Unrealized gain on

Balance at June 30, 2020

COMPREHENSIVE

STOCKHOLDERS’

TOTAL STOCKHOLDERS’

INCOME (LOSS)

4 unchanged sentences

Balance at March 31, 2021

Stock-based compensation

Issuance of common stock

under ATM offering, net of issuance

costs of $ 357

Exercise of stock options and issuance of stock under the

Employee Stock Purchase Plan

Unrealized loss on

Balance at June 30, 2021

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

CONDENSED CON SOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs

Proceeds from the exercise of stock options

Proceeds from initial public offering, net of underwriting discounts and commissions

Proceeds from ATM offering, net of underwriting discounts and commissions

Payment of issuance costs

Proceeds from exercise of options

Net cash provided by financing activities

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Deferred offering costs included in accounts payable and accrued expenses

Offering costs included in accounts payable and accrued expenses

Property and equipment purchases included in accrued expenses

Unrealized loss on investments

Unrealized gain (loss) on investments

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above:

Three Months Ended

Six Months Ended

Cash and cash equivalents

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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.

The Company’s sole product candidate currently under development, IMR-687 ( t ovinontrine), 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.

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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’ over-allotment option for aggregate gross proceeds of $11.3 million.

Inclusive of the over-allotment exercise, 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.

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.

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The Company also simultaneously entered into a sales agreement with Cantor Fitzgerald & Co, LLC, as sales agent, providing for the offering, issuance and sale by the Company of up to an aggregate $ 75.0 million of its common stock from time to time in “at-the-market” offerings under the Shelf.

The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO.

As of March 31, 2021, the Company had cash, cash equivalents, and investments of $75.6 million and an accumulated deficit of approximately $106.4 million.

As of June 30, 2021, the Company had issued and sold 231,291 shares of common stock under the sales agreement, resulting in net proceeds of $ 1.3 million after deducting commissions and offering expenses.

On July 16, 2021, the Company completed a public offering of shares of its common stock.

In connection with the offering, the Company issued and sold 8,333,333 shares of common stock at a public offering price of $ 6.00 per share, resulting in net proceeds of $ 46.8 million after deducting underwriting discounts and commissions and estimated offering expenses.

The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO and subsequent common stock offerings.

As of June 30, 2021, the Company

had cash, cash equivalents, and investments of $ 66.8 million and an accumulated deficit of approximately $ 119.5 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 as of March 31, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

The Company believes its cash, cash equivalents and investments as of June 30, 2021 along with the net proceeds from its July 2021 public offering of common stock will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

The Company will need additional funding to support its planned operating activities.

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The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements, with the exception of the modified retrospective adoption of ASC 842 Leases.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of March 31, 2021, the results of its operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of June 30, 2021, the results of its operations for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020.

Such adjustments are of a normal and recurring nature.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021, or for any future period.

Principles of Consolidation

The accompanying condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U.

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U.

All intercompany transactions and balances have been eliminated in consolidation.

Limited was dissolved in July 2021, however the Company does not expect any material accounting implication related to this dissolution.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Annual Report.

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021, with the exception of the modified retrospective adoption of ASC 842 Leases.

There have been no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2021, with the exception of the modified retrospective adoption of ASC 842 Leases.

Use of Estimates

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The Company’s operating leases are reflected in operating lease right-of-use assets and in current operating lease liabilities and long-term operating lease liabilities in its consolidated balance sheets.

The Company’s operating lease right-of-use asset as of March 31, 2021 did not include any material lease incentives.

The Company’s operating lease right-of-use asset as of June 30, 2021 did not include any material lease incentives.

Lease expense for future lease payments is recognized on a straight-line basis over the lease term.

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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.

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 unaudited condensed consolidated statement of operations and comprehensive loss.

Deferred offering costs classified in other assets on the accompanying unaudited condensed consolidated balance sheet as of March 31, 2021 were $0.2 million.

There were no deferred offering costs as of December 31, 2020.

There were no deferred offering costs as of June 30, 2021 and December 31, 2020 .

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity that are excluded from net loss.

The Company’s comprehensive loss includes unrealized losses on available-for-sale securities for the three months ended March 31, 2021 and 2020.

The Company’s comprehensive loss includes unrealized gains and losses (net) on available-for-sale debt securities for the three and six months ended June 30, 2021 and 2020.

Recently Issued Accounting Pronouncements

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Early adoption is permitted for all entities, including adoption in an interim period.

The Company adopted this new standard on January 1, 2021, which did not result in any material impact on the Company’s financial statements.

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.

In March 2020, the FASB issued “ASU 2020-03”, Codification Improvements to Financial Instruments, (“ASU 2020-03”) which addressed, among other topics, Amendments related to ASU 2016-13 Financial Instruments—Credit Losses (Topic 326):

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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):

March 31, 2021

June 30, 2021

Quoted Prices in

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Marketable securities:

Corporate debt securities

Commercial paper

Corporate debt securities

Total financial assets

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Total financial assets

As of March 31, 2021 and December 31, 2020, 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.

As of June 30, 2021 and December 31, 2020, the Company’s Level 1 financial assets consisted of cash equivalents held in money market funds, which 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.

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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 three months ended March 31, 2021 and the year ended December 31, 2020, there were no transfers between fair value measurement levels.

During the three and six months ended June 30, 2021 and the year ended December 31, 2020, there were no transfers between fair value measurement levels.

The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

As of March 31, 2021 and 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.

As of June 30, 2021 and 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 condensed 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 (in thousands):

March 31, 2021

June 30, 2021

Amortized Cost

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Corporate debt securities

As of March 31, 2021, the Company had one available-for-sale security of approximately $1.2 million in an unrealized loss position for less than twelve months.

As of June 30, 2021, the Company held one available-for-sale security with an aggregate value of approximately $ 2.0 million in an immaterial unrealized loss position for less than twelve months.

As of December 31, 2020, the Company had no available-for-sale securities in unrealized loss positions.

1 unchanged sentence

The Company determined that there was no material change in the credit risk of these investments .

As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of March 31, 2021 and December 31, 2020.

As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of June 30, 2021 and December 31, 2020.

Accrued Expenses

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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, or for the three months ended March 31, 2021.

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 were recorded as research and development expenses.

No payments were made during the year ended December 31, 2020, or for the three and six months ended June 30, 2021.

As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which represented 8.0 % of the Company’s then outstanding equity pursuant to a restricted stock agreement.

5 unchanged sentences

Lease Agreements

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.

In 2016, the Company entered into an agreement for office space located in Cambridge, Massachusetts, which was a month-to-month lease.

The agreement for this space terminated on August 17, 2019 .

In May 2019, the Company entered into a new operating lease agreement (the “May 2019 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 in May 2019, which is included as a component of other assets on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2021 and consolidated balance sheet as of December 31, 2020.

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 May 2019 Lease Agreement.

The Company provided a security deposit of approximately $ 0.1 million in May 2019, which is included as a component of other assets on the Company’s unaudited condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020.

The Company occupied the space in August 2019 and commenced recognition of rent expense.

The Company recorded rent expense of approximately $0.1 million during the three months ended March 31, 2021.

The following table summarizes the future lease payments due under the Company’s operating lease agreement (in thousands):

The Company recorded rent expense of less than $ 0.1 million during the three months ended June 30, 2021, and approximately $ 0.1 million during the six months ended June 30, 2021.

In June 2021, the Company entered into an amendment to the May 2019 Lease Agreement (the “June 2021 Amended Lease Agreement”).

Under the terms of the June 2021 Amended Lease Agreement, the Company will expand its current premises in Boston, Massachusetts by an additional 5,026 square feet, bringing the total office space to 9,236 square feet.

The term of the June 2021 Amended Lease Agreement commences upon completion of the buildout of the additional space, which is expected to be on or about January 1, 2022 and expires on March 31, 2027 .

The Company has the option to extend the term for one additional five-year period upon the Company’s written notice to the landlord at least 12 months and no more than 15 months in advance of the extension period.

Upon commencement of the term of the June 2021 Amended Lease Agreement, the annual base rent obligation will be approximately $ 0.6 million, with a total cash obligation for base rent over the initial five-year term of the lease of approximately $ 3.8 million.

In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes.

Upon execution of the June 2021 Amended Lease Agreement, the Company provided an additional security deposit in the amount of $ 0.1 million, with security deposits under the May 2019 Lease Agreement and June 2021 Amended Lease Agreement totaling $ 0.2 million.

The following table summarizes the future lease payments due under the May 2019 Lease Agreement only, as the term of the June 2021 Amended Lease Agreement has not yet commenced (in thousands):

Total Lease Payments

Less Imputed Interest

Present value of operating lease liabilities

Operating cash flows used for operating leases

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Under the prior lease accounting guidance, minimum rental commitments under non-cancelable leases as of December 31, 2020 were as follows (in thousands):

Minimum Lease Payments

Minimum Lease

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 three months ended March 31, 2021 and year ended December 31, 2020, 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.

The Company was not subject to any material legal proceedings during the three and six months ended June 30, 2021 and year ended December 31, 2020, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Indemnification Obligations

The Company agrees to standard indemnification obligations as part of entering into agreements in the ordinary course of business.

Pursuant to the indemnification provisions, 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 matters specified in the applicable provision, which may include any U.S.

patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products or product liability claims by any third-party with respect to the Company’s products.

The term of these indemnification obligations is generally perpetual any time after execution of the agreement.

The potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited.

The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification obligations.

Convertible Preferred Stock

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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.

Prior to the conversion, the holders of the preferred stock were entitled to receive noncumulative dividends of 8 % per annum of the Series B issuance price only when and if declared by the Company’s b oard of d irectors.

No dividends have been declared by the Company’s b oard of d irectors since inception .

No dividends have been declared by the Company’s board of directors since inception.

Stockholders’ Equity

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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 March 31, 2021, no cash dividends have been declared or paid.

As of March 31, 2021, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of March 31, 2021 and December 31, 2020, the Company has reserved for future issuance the following shares of common stock:

Through June 30, 2021, no cash dividends have been declared or paid.

As of June 30, 2021, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of June 30, 2021 and December 31, 2020, the Company has reserved for future issuance the following shares of common stock:

Shares reserved for future issuance under the 2020 Equity Incentive Plan

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2016 Stock Incentive Plan

The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provides for the Company to issue 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 the effective date of the 2020 Equity Incentive Plan (the “2020 Plan”) on March 11, 2020, and as of March 31, 2021, no shares remained available for future issuance under the 2016 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 the effective date of the 2020 Equity Incentive Plan (the “2020 Plan”) on March 11, 2020, and as of June 30, 2021, no shares remained available for future issuance under the 2016 Plan.

Any options or awards outstanding under the 2016 Plan remain outstanding and effective

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(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) the number of shares of 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.

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 will 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.

On January 1, 2021, 701,930 additional shares were reserved for issuance under the 2020 Plan pursuant to this provision.

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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 March 31, 2021, there were 1,487,494 shares available for future issuance under the 2020 Plan.

As of June 30, 2021, there were 1,386,319 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:

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Outstanding as of December 31, 2020

Outstanding as of March 31, 2021

Options vested and exercisable as of March 31, 2021

Outstanding as of June 30, 2021

Options vested and exercisable as of June 30, 2021

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 three months ended March 31, 2021 and 2020 was $9.28 and $10.11, respectively.

The weighted-average grant date fair value of the Company’s stock options granted during the three and six months ended June 30, 2021 was $ 5.32 and $ 8.36 , respectively.

The weighted-average grant date fair value of the Company’s stock options granted during each of the three and six months ended June 30, 2020 was $ 10.36 and $ 10.16 , respectively.

Performance-based awards

The Company granted stock options to purchase an aggregate of 220,928 shares of common stock to certain employees, officers, consultants and advisors of the Company on May 16, 2019, June 5, 2019 and June 21, 2019, which contain performance-based vesting criteria.

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 contained 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 these performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates.

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 vested as to 25 % of the shares underlying each option on February 25, 2021 and will vest as to the remainder of the shares in equal quarterly installments for three years thereafter.

The Company recognized stock-based compensation expense of less than $0.1 million for these options during the three months ended March 31, 2021.

The Company recognized stock-based compensation expense of less than $ 0.1 million and $ 0.1 million for these options during the three and six months ended June 30, 2021, respectively.

Stock-Based Compensation

Stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

1 unchanged sentence

Total stock-based compensation expense

As of March 31, 2021 and December 31, 2020, total unrecognized compensation cost related to the unvested stock-based awards was $11.7 million and $9.5 million, respectively, which is expected to be recognized over a weighted-average period of 3.23 and 3.22 years, respectively.

As of June 30, 2021 and December 31, 2020, total unrecognized compensation cost related to the unvested stock-based awards was $ 11.3 million and $ 9.5 million, respectively, which is expected to be recognized over a weighted-average period of 2.99 and 3.22 years, respectively.

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 a 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on March 11, 2020.

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 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.

In 2021, the Company’s compensation committee elected not to increase the number of shares of the Company’s common stock reserved for issuance under the 2020 ESPP pursuant to this provision.

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 .

The Company’s board of directors decided not to increase the number of shares of the Company’s common stock reserved for issuance under the 2020 ESPP for the 2021 fiscal year.

During the six months ended June 30, 2021, less than $ 0.1 million was withheld from employees, on an after-tax basis, in order to purchase 4,154 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 June 30, 2021, 187,209 shares of the Company’s common stock remained available for issuance under the 2020 ESPP.

As of June 31, 2021, 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.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates.

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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.

The CARES Act provided for an Employee Retention Credit (“ERC”), which is a refundable payroll tax credit that encouraged businesses to keep employees on the payroll during the COVID-19 pandemic.

Eligible employers could qualify for up to $ 5,000 of credit for each employee based on certain wages paid after March 12, 2020 and before January 1, 2021.

The ERC was subsequently amended by the Consolidated Appropriation Act (“CAA”) of 2021 and the American Rescue Plan Act (“ARPA”) of 2021.

Under CAA and ARPA amendments, employers can claim a refundable tax credit against the employer share of social security tax equal to 70 % of the qualified wages (including certain health care expenses) paid to employees after December 31, 2020 through December 31, 2021.

Qualified wages are limited to $ 10,000 per employee per calendar quarter in 2021 so the maximum ERTC available is $ 7,000 per employee per calendar quarter.

Based on the Company’s evaluation of this provision and pandemic-related impact on its operations in 2020 and 2021, it was determined that the Company qualified to claim ERC in the second, third and fourth calendar quarters of 2020, as well as in both the first and second calendar quarters of 2021.

Upon filing for the refund in July 2021, the Company recognized an ERC of approximately $ 0.7 million as an offset to payroll tax expenses for the three and six months ended June 30, 2021 in its consolidated statements of operations.

The Company will continue to assess its eligibility to claim ERC for the third and fourth quarters of 2021.

Net Loss Per Share

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Three Months Ended

Six Months Ended

Options to purchase common stock

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Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO.

This reflects a 7.2% and a 7.4% ownership interest on a fully diluted basis as of March 31, 2021 and December 31, 2020, respectively.

Mette Kirstine Agger, a member of our board of directors, is a Managing Partner at Lundbeckfonden Ventures, which is an affiliate of Lundbeckfond Invest A/S.

This reflects a 7.1 % and a 7.4 % ownership interest on a fully diluted basis as of June 30, 2021 and December 31, 2020, respectively.

Mette Kirstine Agger, who was a member of our board of directors until June 29, 2021, 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.

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All shares of preferred stock converted into shares of common stock upon closing of the IPO.

This reflects a 2.6% and a 2.7% ownership interest on a fully diluted basis as of March 31, 2021, and December 31, 2020, respectively.

This reflects a 2.6 % and a 2.7 % ownership interest on a fully diluted basis as of June 30, 2021 and December 31, 2020, respectively.

Lundbeck did not participate in the Series B Preferred Stock financing.

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

What changed 10-Q

Item 1. Financial Statements