What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-06 compared with 2021-11-09 · 103 added, 231 removed, 294 unchanged (53% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

11 unchanged sentences

Total current liabilities

Deferred rent

Operating lease liability, non-current

1 unchanged sentence

Commitments and contingencies (Note 7)

Preferred stock, $ 0.001 par value per share;

10,000,000 shares authorized;

issued or outstanding as of September 30, 2021;

no shares authorized, issued or

outstanding as of December 31, 2020

Common stock, $ 0.001 par value per share;

200,000,000 shares

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

and 17,548,263 shares issued and outstanding as of September 30, 2021 and

authorized as of March 31, 2022 and December 31, 2021, respectively;

shares issued and outstanding as of March 31, 2022 and

December 31, 2021, respectively

8 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

7 unchanged sentences

Total other income, (net)

Accretion of Series B convertible preferred stock

Net loss attributable to common stockholders—basic and diluted

6 unchanged sentences

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

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

CONDENSED CONSOLIDATED STATEMENTS OF AND STOCKHOLDERS’ EQUITY

(in thousands, except share and per share data)

CONVERTIBLE PREFERRED STOCK

SERIES B $ 0.001

COMPREHENSIVE

STOCKHOLDERS’

TOTAL STOCKHOLDERS’

INCOME (LOSS)

Balance at December 31, 2020

Issuance of Series B convertible

preferred stock, net of issuance

costs of $ 20 and beneficial

conversion charge

Accretion of Series B

converted preferred stock

Conversion of convertible

preferred stock into

Initial public offering, net of

underwriting discounts,

commissions and offering

costs of $ 3,885

Stock-based compensation

Unrealized loss on

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

Exercise of stock options

Stock-based compensation

Unrealized loss on

Balance at September 30, 2020

Balance at March 31, 2021

COMPREHENSIVE

3 unchanged sentences

Stock-based compensation

Exercise of stock options

Unrealized loss on

Balance at March 31, 2022

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

Stock-based compensation

Issuance of common stock

under ATM and July 2021 offering, net of issuance

costs of $ 210

Exercise of stock options

Unrealized loss on

Balance at September 30, 2021

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

1 unchanged sentence

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

7 unchanged sentences

Accrued expenses and other current liabilities

Deferred rent

Operating lease assets and liabilities, net

6 unchanged sentences

Cash flows from financing activities:

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

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

Proceeds from July 2021 offering, net of underwriting discounts and commissions

Proceeds from ATM offering, net of underwriting discounts and commissions

Payment of issuance costs

1 unchanged sentence

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

1 unchanged sentence

Supplemental disclosure of non-cash investing and financing activities:

Conversion of convertible preferred stock into common stock

Accretion of redeemable convertible preferred stock to redemption value

Reclassification of deferred offering costs from other assets to additional paid-in capital

Deferred offering costs included in accounts payable and accrued expenses

Property and equipment purchases included in accrued expenses

Right of use asset obtained in exchange for lease liabilities

Purchases of property and equipment included in accrued expenses

Unrealized 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:

Nine Months Ended

September 30,

Three Months Ended

Cash and cash equivalents

4 unchanged sentences

Nature of the Business

(“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.

(“IMARA” or the “Company”) is a biopharmaceutical company that has been dedicated to developing and commercializing novel therapeutics to treat patients suffering from serious diseases.

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 lead product candidate currently under development, t ovinontrine (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.

If the Company decides to pursue any future product development efforts, any product candidates 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 preferred stock.

All share and per share amounts in the unaudited condensed 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 convertible preferred stock (“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.

In April 2022, the Company announced the results from interim analyses of its Ardent Phase 2b clinical trial of tovinontrine (IMR-687) in patients with sickle cell disease (“SCD”) and Forte Phase 2b clinical trial of tovinontrine in patients with ß-thalassemia.

Based on the data generated by these interim analyses, the Company decided to discontinue the Ardent and Forte trials as well as the further development of tovinontrine in SCD and ß-thalassemia.

The Company also decided to discontinue development of tovinontrine in heart failure with preserved ejection fraction, as well as its development plans with respect to IMR-261.

In connection with these events, the Company’s Board of Directors approved a reduction in workforce designed to substantially reduce the Company’s operating expenses while it undertakes a comprehensive assessment of its strategic options to maximize stockholder value .

To date, the Company has funded its operations primarily through the sale of common stock and the sale of convertible preferred stock.

On April 1, 2021, the Company filed a Registration Statement on Form S-3 (the “Shelf”) with the SEC in relation to the registration and potential future issuance of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $ 200.0 million.

1 unchanged sentence

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.

As of September 30, 2021, the Company had issued and sold 231,291 shares of common stock under the sales agreement, resulting in net proceeds of $ 1.5 million after deducting commissions and offering expenses.

As of March 31, 2022, the Company had issued and sold 231,291 shares of common stock under the sales agreement, resulting in net proceeds of $ 1.4 million after deducting commissions and offering expenses.

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

1 unchanged sentence

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 September 30, 2021, the

Company had cash, cash equivalents and investments of $ 102.8 million and an accumulated deficit of approximately $ 133.2 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 September 30, 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 will need additional funding to support its planned operating activities.

There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.

As of March 31, 2022 the Company had cash, cash equivalents and investments of $ 72.9 million and an accumulated deficit of approximately $ 162.1 million.

The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future.

The Company previously identified conditions and events that raise substantial doubt about its ability to continue as a going concern.

As described above, t he Company made the decision to discontinue development of tovinontrine in sickle cell disease, β-thalassemia and heart failure with preserved ejection fraction, as well to discontinue its development plans with respect to IMR-261 .

As a result, the Company believes its cash, cash equivalents and investments as of March 31, 2022 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.

If the Company decides to pursue any future product development efforts, it will need additional funding to support its planned operating activities.

There can be no assurances, however, that 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 .

6 unchanged sentences

Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021 and notes thereto, included in the Company’s Annual Report on Form 10-K (the “Annual Report”), filed with the SEC on March 15, 2022.

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 September 30, 2021, the results of its operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020.

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements.

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, 2022, the results of its operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021.

Such adjustments are of a normal and recurring nature.

The results for the three and nine months ended September 30, 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 months ended March 31, 2022 are not necessarily indicative of the results for the year ending December 31, 2022, or for any future period.

Principles of Consolidation

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.

Limited, the latter of which was dissolved in July 2021.

All intercompany transactions and balances have been eliminated in consolidation.

Limited was dissolved in July 2021 and the dissolution of the subsidiary did not have any material accounting implications on the Company’s unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021.

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, 2021 included in the Company’s Annual Report.

There have been no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 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 months ended March 31, 2022.

Use of Estimates

The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting periods.

Significant estimates and assumptions reflected in these condensed 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 the intrinsic value of the beneficial conversation feature present in the second tranche of the Series B Preferred Stock issued in February of 2020.

Actual results could differ materially from those estimates.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”).

This standard established a right-of-use model that requires all lessees to recognize right-of-use assets and lease liabilities on their balance sheet that arise from leases as well as provide disclosures with respect to certain qualitative and quantitative information related to a company’s leasing arrangements to meet the objective of allowing users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date:

2018-01, Leases (Topic 842):

Land Easement Practical Expedient for Transition to Topic 842, ASU No.

2018-10, Codification Improvements to Topic 842, Leases, ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements, ASU No.

2018-20, Narrow-Scope Improvement for Lessors, and ASU No.

2019-01, Leases (Topic 842):

Codification Improvements.

The Company early adopted these amendments with ASU 2016-02 (collectively, the “new leasing standards”), effective January 1, 2021.

The Company adopted the new leasing standards using the modified retrospective transition approach, with no restatement of prior periods and there was no cumulative adjustment to retained earnings.

Upon adoption, the Company elected the package of transition practical expedients, which allowed the Company to not reassess the following:

(i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) the treatment of initial direct costs for existing leases.

The Company made an accounting policy election to not recognize short-term leases with an initial term of twelve months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of operations over the lease term.

Upon adopting the new leasing standards, the Company recognized an operating lease right-of-use asset of $ 0.7 million and a corresponding current and non-current operating lease liability of $ 0.3 million and $ 0.6 million, respectively, which are included in its consolidated balance sheets.

The adoption of the new leasing standards did not have a material impact on the Company’s consolidated statements of operations.

The Company determines if an arrangement is a lease at contract inception.

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease.

Operating right-of-use assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term.

When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

The Company uses the implicit rate when readily determinable and uses its incremental borrowing rate when the implicit rate is not readily determinable, based upon the information available at the commencement date in determining the present value of the lease payments.

The incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease.

The lease payments used to determine operating lease right-of-use assets may include lease incentives and stated rent increases.

The Company’s lease agreements may include both lease and non-lease components, which the Company accounts for as a single lease component when the payments are fixed, for all classes of underlying assets.

Variable payments included in the lease agreement are expensed as incurred.

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 September 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.

Prior to the adoption of the new leasing standards, the Company recognized lease costs on a straight-line basis once it gained control of the space, without regard to deferred payment terms, such as rent holidays, that would defer the commencement date of required payments or escalating payment amounts.

Any lease incentives received were treated as a reduction of costs over the term of the lease agreement, as they were considered an inseparable part of the lease agreement.

The difference between required lease payments and rent expense was recorded as deferred rent, which was reflected as deferred rent in the December 31, 2020 consolidated balance sheet.

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.

2 unchanged sentences

All of the Company’s long-lived assets are held in the United States.

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 unaudited condensed consolidated statement of operations and comprehensive loss.

There were no deferred offering costs as of September 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 debt securities for the three and nine months ended September 30, 2021 and 2020.

The Company’s comprehensive loss includes unrealized losses on available-for-sale debt securities for the three months ended March 31, 2022 and 2021.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively.

A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today.

ASU 2016-02 supersedes the previous leases standard, ASC 840, Leases.

For additional information on the adoption of the new leasing standards, please read the Company’s policy above entitled Leases, and Note 7, Commitments and Contingencies, to these condensed consolidated financial statements.

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.

For public entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

For all other entities, the amendments in Part I of this update are effective for 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.

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):

1 unchanged sentence

The amendments align the contractual term under Topic 326 and Topic 842 (Leases) to be consistent, and also clarifies when an entity should record an allowance for credit losses in accordance with Topic 326.

For public business entities that meet the definition of a SEC filer, 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 standard is effective for the Company on January 1, 2023, with early adoption 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 2020-03 or ASU 2016-13 to be material.

1 unchanged sentence

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):

September 30, 2021

March 31, 2022

Quoted Prices in

5 unchanged sentences

Marketable securities:

Commerical paper

Corporate debt securities

Commercial paper

Total financial assets

December 31, 2021

6 unchanged sentences

Marketable securities:

Corporate debt securities

Commercial paper

Total financial assets

As of September 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.

Corporate debt securities

As of March 31, 2022 and December 31, 2021, 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.

3 unchanged sentences

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 and nine months ended September 30, 2021 and the year ended December 31, 2020, there were no transfers between fair value measurement levels.

During the three months ended March 31, 2022 and the year ended December 31, 2021, 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 September 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.

As of March 31, 2022 and December 31, 2021, 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):

September 30, 2021

March 31, 2022

Amortized Cost

9 unchanged sentences

Corporate debt securities

As of September 30, 2021, the Company held two available-for-sale securities with an aggregate value of approximately $ 4.5 million in an 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.

As of March 31, 2022, the Company held six available-for-sale securities with an aggregate value of approximately $ 13.7 million in an unrealized loss position for less than twelve months.

As of December 31, 2021, the Company held seven available-for-sale securities with an aggregate value of approximately $ 15.8 million in an unrealized loss position for less than twelve months.

The Company has the intent and ability to hold such securities until recovery.

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 September 30, 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 March 31, 2022 and December 31, 2021.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

September 30,

Accrued research and development expenses

9 unchanged sentences

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.

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.

2 unchanged sentences

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 nine months ended September 30, 2021.

No payments were made during the year ended December 31, 2021, or for the three months ended March 31, 2022.

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 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.

In May 2019, the Company entered into an 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.

1 unchanged sentence

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 September 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 less than $ 0.1 million during the three months ended September 30, 2021, and approximately $ 0.2 million during the nine months ended September 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 .

Under the terms of the June 2021 Amended Lease Agreement, the Company expanded 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 commenced in February 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.

Upon commencement of the term of the June 2021 Amended Lease Agreement, the annual base rent obligation increased to approximately $ 0.6 million, with a total cash obligation for base rent over the initial five-year term of the lease of approximately $ 3.1 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):

September 30,

The Company recorded rent expense of approximately $ 0.1 million during both the three months ended March 31, 2021 and March 31, 2022.

The following table summarizes the future lease payments due under the June 2021 Amended Lease Agreement (in thousands):

Total Lease Payments

4 unchanged sentences

Weighted-average discount rate

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

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 and nine months ended September 30, 2021 and year ended December 31, 2020, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

The Company was not subject to any material legal proceedings during the three months ended March 31, 2022 and year ended December 31, 2021, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Indemnification Obligations

5 unchanged sentences

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

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.

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 offering 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.

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 board of directors.

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

Stockholders’ Equity

1 unchanged sentence

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

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

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

September 30,

Through March 31, 2022, no cash dividends have been declared or paid.

As of March 31, 2022, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of March 31, 2022 and December 31, 2021, the Company has reserved for future issuance the following shares of common stock:

Shares reserved for future issuance under the 2020 Equity Incentive Plan

3 unchanged sentences

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 September 30, 2021, no shares remained available for future issuance under the 2016 Plan.

As of the effective date of the 2020 Equity Incentive Plan (the “2020 Plan”) on March 11, 2020, and as of March 31, 2022, no shares remained available for future issuance under the 2016 Plan.

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

7 unchanged sentences

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

On January 1, 2022, a further 1,051,490 shares were reserved for future under the 2020 Plan pursuant to this provision.

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 September 30, 2021, there were 1,276,472 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.

As of March 31, 2022, there were 1,431,045 shares available for future issuance under the 2020 Plan.

The following table summarizes the Company’s stock option activity:

3 unchanged sentences

Outstanding as of December 31, 2021

Outstanding as of September 30, 2021

Options vested and exercisable as of September 30, 2021

Outstanding as of March 31, 2022

Options vested and exercisable as of March 31, 2022

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 and nine months ended September 30, 2021 was $ 3.66 and $ 7.44 , respectively.

The weighted-average grant date fair value of the Company’s stock options granted during each of the three and nine months ended September 30, 2020 was $ 12.99 and $ 11.30 , respectively.

The weighted-average grant date fair value of the Company’s stock options granted during the three months ended March 31, 2022 and 2021 was $ 1.04 and $ 9.28 , respectively.

Restricted Stock Units

In January 2022, the Company granted 425,289 restricted stock units to employees under the 2020 Plan, which will vest over a four year term.

A summary of the restricted stock unit ("RSU") activity and related information is as follows:

Grant Date Fair Value

Unvested as of December 31, 2021

Unvested as of March 31, 2022

In connection with the grant of RSUs, the Company recognized stock-based compensation expense of less than $ 0.1 million during the first quarter of 2022.

Total unrecognized compensation cost related to the unvested RSUs was $ 0.6 million, which is expected to be recognized over a period of 3.83 years.

Performance-based awards

3 unchanged sentences

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 and $ 0.1 million for these options during the three and nine months ended September 30, 2021, respectively.

The Company recognized stock-based compensation expense of less than $ 0.1 million and $ 0.1 million for these options during the three months ended March 31, 2022 and 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Research and development

1 unchanged sentence

Total stock-based compensation expense

As of September 30, 2021 and December 31, 2020, total unrecognized compensation cost related to the unvested stock-based awards was $ 10.3 million and $ 9.5 million, respectively, which is expected to be recognized over a weighted-average period of 2.79 and 3.22 years, respectively.

As of March 31, 2022 and December 31, 2021, total unrecognized compensation cost related to the unvested stock-based awards was $ 9.3 million and $ 9.4 million, respectively, which is expected to be recognized over a weighted-average period of 2.58 and 2.65 years, respectively.

2020 Employee Stock Purchase Plan

1 unchanged sentence

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 .

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.

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 nine months ended September 30, 2021, $ 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.

No shares were purchased during the three months ended September 30, 2021.

On January 1, 2022, 262,872 additional shares were reserved for issuance under the 2020 ESPP pursuant to this provision.

No shares were purchased during the three months ended March 31, 2022 .

The Company recorded stock-based compensation expense related to the 2020 ESPP of less than $ 0.1 million.

As of September 30, 2021, 187,209 shares of the Company’s common stock remained available for issuance under the 2020 ESPP.

As of September 30, 2021, there was less than $ 0.1 million of total unrecognized stock-based compensation expense related to the ESPP.

As of March 31, 2022 , 438,539 shares of the Company’s common stock remained available for issuance under the 2020 ESPP.

As of March 31, 2022, 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 2.5 months.

6 unchanged sentences

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.

Eligible employers are entitled to a refundable tax credit equal to 50 % of qualified wages paid to employees between March 13, 2020, and December 31, 2020, up to a maximum of $ 5,000 credit per employee.

In late December 2020 Congress expanded and amended the CARES Act by enacting Public Law 116-260.

Per the amendment to the CARES Act, eligible employers are entitled to a refundable tax credit equal to 70 % of the qualified wages paid to employees between January 1, 2021, and June 30, 2021, up to a maximum of $ 10,000 of wages per employee per quarter, with a maximum of $ 7,000 per employee per calendar quarter.

Congress further extended the credit with the American Rescue Plan signed into law on March 11, 2021;

the American Rescue Plan extended the credit for the period July 1, 2021 to December 31, 2021 with the same limitations as the prior amendment (i.e., tax credit equal to 70 % of qualified wages up to a maximum of $ 10,000 of wages per employee per quarter).

However, on November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act which redacted the credit for calendar quarter 4 of 2021.

Qualified Wages must be paid on or after March 13, 2020 and before October 1, 2021, and may include wages paid to employees, as well as so much of the employer’s qualified health plan expenses as are properly allocable to such wages, not to exceed $ 10,000 per employee for calendar year 2020 or $ 10,000 per employee per calendar quarter in quarter 1, 2, or 3 of 2021 (“2021 Eligible Quarter”).

The Retention Credit may be claimed for up to $ 5,000 per employee for calendar year 2020 (i.e., 50 % of the $ 10,000 maximum in Qualified Wages for calendar year 2020) or $ 7,000 per employee per 2021 Eligible Quarter (i.e., 70 % of the $ 10,000 maximum in Qualified Wages per 2021 Eligible Quarter).

Therefore, the maximum Retention Credit per employee in 2020 is $ 5,000 and in 2021 is $ 21,000 .

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, second, and third calendar quarters of 2021.

The Company recognized an ERC of approximately $ 0.3 million and $ 1.0 million as an offset to payroll tax expenses for the three and nine months ended September 30, 2021, respectively, in its consolidated statements of operations.

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

The Company recognized an ERC of approximately $ 1.0 million as an offset to payroll tax expenses for the year ended December 31, 2021.

The Company did no t recognize an ERC for the three months ended March 31, 2022.

Net Loss Per Share

Basic and diluted net loss per share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period.

In 2020, the net loss applicable to common stockholders 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.

The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including convertible preferred stock (if any such convertible preferred stock were outstanding), 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.

1 unchanged sentence

Three Months Ended

September 30,

Nine Months Ended

September 30,

Options to purchase common stock

Unvested restricted stock units

Shares reserved for future issuance under the ESPP

5 unchanged sentences

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

This reflects a 5.0 % and a 7.4 % ownership interest on a fully diluted basis as of September 30, 2021 and December 31, 2020, respectively.

This reflects a 4.9 % and a 5.0 % ownership interest on a fully diluted basis as of March 31, 2022 and December 31, 2021, 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.

2 unchanged sentences

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

This reflects a 1.8 % and a 2.7 % ownership interest on a fully diluted basis as of September 30, 2021 and December 31, 2020, respectively.

This reflects a 1.8 % and a 1.8 % ownership interest on a fully diluted basis as of March 31, 2022 and December 31, 2021, respectively.

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

4 unchanged sentences

Matching contributions to the plan may be made at the discretion of the Board.

The Company has made $ 0.1 million of contributions to the plan to date.

The Company made no contributions for the three months ended March 31, 2022 and 2021, and has made $ 0.3 million of contributions to the plan to date.

Subsequent Events

On April 12, 2022, the Company’s Board of Directors approved a reduction of the Company’s workforce (the “Workforce Reduction”) by approximately 83 % across all areas of the Company, to a total of six remaining full-time employees.

The Workforce Reduction follows the Company’s decision to discontinue development of tovinontrine, as well to discontinue its development plans with respect to IMR-261.

The Workforce Reduction is expected to be substantially completed by the end of the second quarter of 2022.

The Workforce Reduction is designed to substantially reduce the Company’s operating expenses while the Company undertakes a comprehensive assessment of its strategic options to maximize stockholder value .

In connection with the Workforce Reduction, the Company expects to record a one-time restructuring charge of approximately $ 2.0 million to $ 2.2 million primarily related to severance, healthcare coverage and other employee termination-related costs in the second quarter of 2022.

The Company expects to incur additional costs in connection with the termination of the Ardent and Forte Phase 2b clinical trials of tovinontrine and its decision to discontinue development of tovinontrine, however the amount of such costs are not determinable as of the date of this Quarterly Report on Form 10-Q.

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