Item 1. Financial Statements
Item 1. Financial Statements.
IMARA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
March 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
36,484
$
48,309
Short-term investments
36,416
41,969
Prepaid expenses and other current assets
5,628
2,418
Total current assets
78,528
92,696
Property and equipment, net
588
250
Right of use assets - operating leases
2,311
525
Other assets
175
175
Total assets
$
81,602
$
93,646
LIABILITIES & STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
1,884
$
2,360
Accrued expenses and other current liabilities
4,831
4,604
Operating lease liability, current
508
246
Total current liabilities
7,223
7,210
Operating lease liability, non-current
1,967
406
Total liabilities
9,190
7,616
Commitments and contingencies (Note 7)
Common stock, $ 0.001 par value per share; 200,000,000 shares
authorized as of March 31, 2022 and December 31, 2021, respectively; 26,287,264
shares issued and outstanding as of March 31, 2022 and
December 31, 2021, respectively
27
27
Additional paid-in capital
234,572
233,516
Accumulated other comprehensive income
( 51
)
( 16
)
Accumulated deficit
( 162,136
)
( 147,497
)
Total stockholders’ equity
72,412
86,030
Total liabilities and stockholders’ equity
$
81,602
$
93,646
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
IMARA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended
March 31,
2022
2021
Operating expenses:
Research and development
$
11,169
$
7,115
General and administrative
3,492
3,165
Total operating expenses
14,661
10,280
Loss from operations
( 14,661
)
( 10,280
)
Total other income, (net):
Interest income
78
83
Other expense
( 56
)
( 60
)
Total other income, (net)
22
23
Net loss
$
( 14,639
)
$
( 10,257
)
Net loss attributable to common stockholders—basic and diluted
$
( 14,639
)
$
( 10,257
)
Weighted-average common shares outstanding—basic and diluted
26,287,264
17,577,454
Net loss per share attributable to common stockholders—basic and
diluted
$
( 0.56
)
$
( 0.58
)
Comprehensive loss:
Net loss
$
( 14,639
)
$
( 10,257
)
Other comprehensive income:
Unrealized loss on investments
( 35
)
( 3
)
Comprehensive loss
$
( 14,674
)
$
( 10,260
)
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
IMARA INC.
CONDENSED CONSOLIDATED STATEMENTS OF AND STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
(Unaudited)
COMMON
STOCK
$ 0.001 PAR
VALUE
ADDITIONAL
PAID-IN
ACCUMULATED
OTHER
COMPREHENSIVE
ACCUMULATED
TOTAL STOCKHOLDERS’
SHARES
AMOUNT
CAPITAL
INCOME (LOSS)
DEFICIT
EQUITY
Balance at December 31, 2020
17,548,263
$
18
$
180,526
$
4
$
( 96,113
)
$
84,435
Stock-based compensation
expense
—
—
947
—
—
947
Exercise of stock options
68,279
—
472
—
—
472
Unrealized loss on
investments
—
—
—
( 3
)
—
( 3
)
Net loss
—
—
—
—
( 10,257
)
( 10,257
)
Balance at March 31, 2021
17,616,542
$
18
$
181,945
$
1
$
( 106,370
)
$
75,594
COMMON
STOCK
$ 0.001 PAR
VALUE
ADDITIONAL
PAID-IN
ACCUMULATED
OTHER
COMPREHENSIVE
ACCUMULATED
TOTAL STOCKHOLDERS’
SHARES
AMOUNT
CAPITAL
INCOME (LOSS)
DEFICIT
EQUITY
Balance at December 31, 2021
26,287,264
$
27
$
233,516
$
( 16
)
$
( 147,497
)
$
86,030
Stock-based compensation
expense
—
—
1,056
—
—
1,056
Unrealized loss on
investments
—
—
—
( 35
)
—
( 35
)
Net loss
—
—
—
—
( 14,639
)
( 14,639
)
Balance at March 31, 2022
26,287,264
$
27
$
234,572
$
( 51
)
$
( 162,136
)
$
72,412
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
2022
2021
Cash flows from operating activities:
Net loss
$
( 14,639
)
$
( 10,257
)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
1,056
947
Depreciation expense
25
25
Amortization and accretion on investments
48
55
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
( 3,210
)
( 2,586
)
Accounts payable
( 476
)
1,030
Accrued expenses and other current liabilities
( 1
)
( 2,226
)
Operating lease assets and liabilities, net
37
( 8
)
Net cash used in operating activities
( 17,160
)
( 13,020
)
Cash flows from investing activities:
Proceeds from maturities and sales of short-term investments
5,470
22,037
Purchases of short-term investments
—
( 3,722
)
Purchases of property and equipment
( 135
)
( 12
)
Net cash provided by investing activities
5,335
18,303
Cash flows from financing activities:
Payment of issuance costs
—
( 12
)
Proceeds from exercise of options
—
472
Net cash provided by financing activities
—
460
Net increase (decrease) in cash, cash equivalents and restricted cash
$
( 11,825
)
$
5,743
Cash, cash equivalents and restricted cash, beginning of period
$
48,484
$
47,786
Cash, cash equivalents and restricted cash, end of period
$
36,659
$
53,529
Supplemental disclosure of non-cash investing and financing activities:
Deferred offering costs included in accounts payable and accrued expenses
$
—
$
208
Right of use asset obtained in exchange for lease liabilities
$
1,886
$
—
Purchases of property and equipment included in accrued expenses
$
228
$
12
Unrealized loss on investments
$
( 35
)
$
( 2
)
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
March 31,
2022
2021
Cash and cash equivalents
$
36,484
$
53,441
Restricted cash (included in other assets)
175
88
Total cash, cash equivalents and restricted cash
$
36,659
$
53,529
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IMARA INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business
IMARA Inc. (“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. 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 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. The Shelf was declared effective on April 8, 2021. 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 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. 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 offering expenses.
Liquidity
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 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
5
will be available on terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects .
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. 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. 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 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.
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 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, and stock-based compensation expense. Actual results could differ materially from those estimates.
Segments
Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States.
6
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 months ended March 31, 2022 and 2021.
Recently Issued Accounting Pronouncements
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): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13”). 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. 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.
3. Fair Value of Financial Assets and Liabilities
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):
March 31, 2022
Quoted Prices in
Active Markets
for Identical
Assets
Significant Other
Observable
Inputs
Significant Other
Observable
Inputs
Description
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Money market funds, included in cash and cash equivalents
$
30,338
$
30,338
$
—
$
—
Marketable securities:
Commerical paper
22,745
—
22,745
—
Corporate debt securities
13,671
—
13,671
—
Total
$
66,754
$
30,338
$
36,416
$
—
December 31, 2021
Quoted Prices in
Active Markets
for Identical
Assets
Significant Other
Observable
Inputs
Significant Other
Observable
Inputs
Description
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Money market funds, included in cash and cash equivalents
$
24,798
$
24,798
$
—
$
—
Marketable securities:
Commercial paper
26,131
—
26,131
—
Corporate debt securities
15,838
—
15,838
—
Total
$
66,767
$
24,798
$
41,969
$
—
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. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.
During the three months ended March 31, 2022 and the year ended December 31, 2021, there were no transfers between fair value measurement levels.
7
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.
4. 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):
March 31, 2022
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Loss
Fair Value
Current:
Commercial paper
$
22,745
$
—
$
—
$
22,745
Corporate debt securities
13,722
—
( 51
)
$
13,671
Total
$
36,467
$
—
$
( 51
)
$
36,416
December 31, 2021
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Loss
Fair Value
Current:
Commercial paper
$
26,131
$
—
$
—
$
26,131
Corporate debt securities
15,854
$
—
( 16
)
15,838
Total
$
41,985
$
—
$
( 16
)
$
41,969
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 March 31, 2022 and December 31, 2021.
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
March 31,
2022
December 31,
2021
Accrued research and development expenses
$
3,172
$
2,288
Accrued compensation and benefits
1,127
2,024
Accrued professional services
272
249
Accrued other
260
43
Total accrued expenses
$
4,831
$
4,604
6. License Agreements
Agreement with Lundbeck
In April 2016, the Company entered into a license agreement with Lundbeck A/S (“Lundbeck” and the “Lundbeck Agreement”) pursuant to which Lundbeck granted the Company the following licenses within the field of prevention, treatment or diagnosis of hemoglobinopathy disorders and/or other diseases or disorders, including those directly or indirectly related to hemoglobinopathies: (1) an exclusive, royalty-bearing license to certain patent rights and certain know-how owned or otherwise controlled by Lundbeck (“Licensed Technology”) to research, develop, make, use, sell, and commercialize products (“Licensed Products”) from PDE9 inhibitors, which included tovinontrine (“Licensed Compounds”); (2) a non-exclusive license to the Licensed Technology to make, research, develop, and use such Licensed Technology to enable research and development, with certain restrictions; and (3) a sublicensing right that allows the Company to grant sublicenses to third parties to use the Licensed Technology subject to the certain terms detailed in the Lundbeck Agreement. Under the Lundbeck Agreement, the Company is subject to certain achievement dates for
8
development milestones as defined in the agreement. The regulatory milestones due under the Lundbeck Agreement depend on the products being developed. Development milestones due under the Lundbeck Agreement with respect to the Licensed Compounds total up to $ 23.5 million, and, for any products that contain PDE9 inhibitors other than Licensed Compounds, total up to $ 11.8 million. The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages.
To date, pursuant to the 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, 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. The shares were fully vested on the date of issuance. The Company also allowed Lundbeck to participate in the fourth tranche of its Series A preferred stock financing in November 2018 at $ 1.00 per share.
The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice. The Company or Lundbeck may terminate the agreement by written notice within a specified period of time in the event of a material breach.
7. Commitments and Contingencies
Lease Agreements
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. 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 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 March 31, 2022 and consolidated balance sheet as of December 31, 2021. The Company occupied the space in August 2019 and commenced recognition of rent expense.
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 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 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 Company recorded rent expense of approximately $ 0.1 million during both the three months ended March 31, 2021 and March 31, 2022.
9
The following table summarizes the future lease payments due under the June 2021 Amended Lease Agreement (in thousands):
March 31,
2022
2022
410
2023
622
2024
634
2025
647
2026
660
2027
167
Total Lease Payments
$
3,140
Less Imputed Interest
( 663
)
Present value of operating lease liabilities
$
2,477
Operating cash flows used for operating leases
$
69
Weighted-average remaining lease term (years)
5.00
Weighted-average discount rate
8
%
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, 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
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.
8 . Stockholders’ Equity
On August 13, 2019, the Company’s board of directors, and on February 26, 2020, the Company’s stockholders, approved the Company’s restated certificate of incorporation, which became effective upon closing of the IPO on March 16, 2020, to authorize 10,000,000 shares of undesignated preferred stock, $ 0.001 per share par value, and to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000 shares, $ 0.001 per share par value.
Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding. Through 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:
March 31,
2022
December 31,
2021
Shares reserved for future issuance under the 2020 Equity Incentive Plan
1,431,045
1,216,532
Shares reserved for future issuance under the 2020 Employee Stock Purchase Plan
438,539
175,667
1,869,584
1,392,199
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9. Stock-Based Compensation
2016 Stock Incentive Plan
The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provided for the grant of restricted stock, restricted stock units, stock appreciation rights, incentive stock options, non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company.
As of 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.
2020 Equity Incentive Plan
On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020 the Company’s stockholders approved, the 2020 Plan, which became effective on March 11, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares reserved for issuance under the 2020 Plan is the sum of: (1) 1,220,283 shares of the Company’s common stock; plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. The number of shares reserved 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. 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 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:
Number of
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding as of December 31, 2021
2,373,024
$
9.63
8.19
$
—
Granted
442,339
1.38
Exercised
—
—
Forfeited
( 30,651
)
8.12
Outstanding as of March 31, 2022
2,784,712
$
8.34
8.27
$
219
Options vested and exercisable as of March 31, 2022
1,106,407
$
8.04
7.35
$
—
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, 2022 and 2021 was $ 1.04 and $ 9.28 , respectively.
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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:
Number of
Shares
Weighted-
Average
Grant Date Fair Value
Unvested as of December 31, 2021
—
$
—
Granted
425,289
1.38
Vested
—
—
Forfeited
—
—
Unvested as of March 31, 2022
425,289
$
1.38
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
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 September 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 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 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 March 31,
2022
2021
Research and development
$
379
$
378
General and administrative
677
569
Total stock-based compensation expense
$
1,056
$
947
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
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. 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. On January 1, 2022, 262,872 additional shares were reserved for issuance under the 2020 ESPP pursuant to this provision.
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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 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.
10. Income Taxes
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. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs.
The 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 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 $ 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.
11. 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. 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.
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The Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended
March 31,
2022
2021
Options to purchase common stock
2,784,612
2,192,464
Unvested restricted stock units
425,289
—
Shares reserved for future issuance under the ESPP
438,539
191,363
12. Related Party Transactions
Lundbeck
Lundbeckfond Invest A/S is one of the Company’s stockholders and participated in all tranches of the Series A preferred stock financing and both tranches of the Series B preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeckfond Invest A/S owned 5,470,492 shares of Series A Preferred Stock as of December 31, 2019, and 478,749 shares of Series Seed Preferred Stock as of December 31, 2019. Lundbeckfond Invest A/S owned 1,326,111 shares of Series B Preferred Stock as of December 31, 2019. All shares of preferred stock converted into shares of common stock upon closing of the IPO. Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO. This reflects a 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.
Lundbeck, an affiliate of Lundbeckfond Invest A/S, is also one of the Company’s stockholders and participated in the fourth tranche of the Company’s Series A preferred stock financing. Prior to the conversion of the Company’s preferred stock, Lundbeck owned 499,069 shares of Series A Preferred Stock as of December 31, 2019, as well as 443,271 shares of common stock issued in conjunction with the Lundbeck Agreement (See Note 6). All shares of preferred stock converted into shares of common stock upon closing of the IPO. 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.
To date, pursuant to the Lundbeck Agreement, the Company has made cash payments to Lundbeck of $ 1.8 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense.
13. Benefit Plans
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code effective as of January 2019. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Board. The Company 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.
14. 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.
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