Enliven Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures . Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer and Chief Operating Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer and Chief Operating Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and our board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (COSO criteria). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm because we are exempt from this requirement pursuant to rules of the Securities and Exchange Commission. Changes in Internal Control over Financial Reporting During the year ended December 31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting . Item 9B. Other Information. As previously disclosed, in order to induce Enliven to enter into the Merger Agreement, on October 13, 2022, certain of our stockholders entered into support agreements with Enliven. Pursuant to the terms of the support agreements, such stockholders agreed not to sell or transfer their shares of our common stock (or securities convertible into shares of our common stock) until the earlier of the termination of the Merger Agreement and the completion of the Merger, subject to certain exceptions. On January 27, 2023, we entered into a letter agreement, or the Letter Agreement, with Rahul Ballal, our Chief Executive Officer, Michael Gray, our Chief Financial Officer, and Enliven, pursuant to which Enliven agreed to waive the restriction on sales of our common stock with respect to certain sales by Dr. Ballal and Mr. Gray to the extent required to cover their respective statutory withholding obligations in connection with (i) any vesting prior to the closing of the Merger of any restricted stock units held by Dr. Ballal and Mr. Gray pursuant to the terms of grant and (ii) any acceleration of vesting effected by us or our board of directors consistent with the terms of the Merger Agreement. The foregoing description of the Letter Agreement is qualified in its entirety by reference to the full text of the Letter Agreement, which is attached hereto as Exhibit 10.24 and incorporated herein by reference Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 66 PART III Item 10. Directors, Executive Officers and Corporate Governance. Except to the extent provided below, the information required by this Item 10 will be included in our definitive proxy statement to be filed with the Securities and Exchange Commission, or the SEC, with respect to our 2023 Annual Meeting of Stockholders within 120 days of the end of the fiscal year to which this report relates, which information is incorporated herein by reference. Code of Business Conduct and Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code on the “Corporate Governance” section of the “Investors” section of our website, www.imaratx.com. In addition, we intend to post on our website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision of the code. 67 Item 11. Executive Compensation. The information required by this Item 11 will be included in the section captioned “Executive Compensation” in our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in the section captioned “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in the sections captioned “Related Person Transactions,” “Policies and Procedures for Related Person Transactions” and “Board Determination of Independence” in our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required by this Item 14 will be included in the section captioned “Audit Fees and Services” our definitive proxy statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates, which information is incorporated herein by reference. 68 PART IV Item 15. Exhibit and Financial Statement Schedules. (1) The financial statements listed below are filed as part of this Annual Report on Form 10-K. Report of Independent Registered Public Accounting Firm (PCAOB ID: 000 42 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 (2) All financial statement schedules have been omitted because they are not applicable, not required, or the information required is shown in the consolidated financial statements or the notes thereto. (3) The following is a list of exhibits filed as part of this Annual Report on Form 10-K Exhibit Index Exhibit Number Description 2.1 † Asset Purchase Agreement, dated September 6, 2022, between the Registrant and Cardurion Pharmaceuticals, Inc. (incorporated by reference as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2022). 2.2 Agreement and Plan of Merger, dated as of October 13, 2022, by and among the Registrant, Iguana Merger Sub, Inc. and Enliven Therapeutics, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2022) 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2020) 3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2020) 4.1 Specimen stock certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 4.2 Amended and Restated Investors’ Rights Agreement, dated as of March 15, 2019, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.1 Sales Agreement by and between the Registrant and Cantor Fitzgerald & Co. dated as of April 1, 2021 (incorporated by reference to Exhibit 1.2 to the Registrant’s universal shelf registration statement on Form S-3 filed with the SEC on April 1, 2021). 10.2# 2016 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on March 3, 2020). 10.3# Form of Incentive Stock Option Agreement under the 2016 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020). 10.4# Form of Nonstatutory Stock Option Agreement under the 2016 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020). 69 10. 5 # 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on March 3, 2020). 10.6# Form of Stock Option Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020). 10.7# Form of Restricted Stock Unit Agreement under the 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 15, 2022). 10.8# 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1/A, filed with the SEC on March 3, 2020) 10.9# Amended and Restated Letter Agreement, dated as of September 23, 2019, by and between the Registrant and Rahul D. Ballal, Ph.D. (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.10# First Amendment to the Amended and Restated Letter Agreement, dated as of November 5, 2021, by and between the Registrant and Rahul D. Ballal, Ph.D. (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2021) 10.11# Retention Agreement, dated as of May 5, 2022, by and between the Registrant and Rahul D. Ballal, Ph.D. (incorporated by reference as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 6, 2022). 10.12# Amendment to Retention Agreement, dated as of May 5, 2022, by and between the Registrant and Rahul D. Ballal, Ph.D. (incorporated by reference as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2022). 10.13# Amended and Restated Letter Agreement, dated as of September 23, 2019, by and between the Registrant and Michael P. Gray (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020) 10.14# First Amendment to the Amended and Restated Letter Agreement, dated as of November 5, 2021, by and between the Registrant and Michael P. Gray (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2021) 10.15# Amended and Restated Retention Agreement, dated as of May 18, 2022, by and between the Registrant and Michael P. Gray (incorporated by reference to Exhibit 10.4 of the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on August 3, 2022). 10.16# Amendment to Amended and Restated Retention Agreement, dated as of May 18, 2022, by and between the Registrant and Michael P. Gray (incorporated by reference as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 7, 2022). 10.19# Form of Indemnification Agreement with directors and executive officers (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1, filed with the SEC on February 14, 2020). 10.20 Form of Contingent Value Rights Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on October 13, 2022). 10.21 Form of Enliven Support Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K, filed with the SEC on October 13, 2022). 10.22 Form of Imara Support Agreement (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K, filed with the SEC on October 13, 2022). 10.23 Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K, filed with the SEC on October 13, 2022). 10.24*# Letter Agreement, dated as of January 27, 2023, by and among the Registrant, Rahul Ballal, Michael Gray and Enliven Therapeutics, Inc. 70 21.1 List of Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of the Registrant’s Registration Statement on Form S-4, filed with the SEC on November 10, 2022). 23.1 * Consent of Ernst & Young LLP, independent registered public accounting firm 31.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Presentation Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, has been formatted in Inline XBRL. * Filed herewith. # Indicates a management contract or any compensatory plan, contract or arrangement. † Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the Registrant if disclosed. Item 16. Form 10-K Summary None. 71 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . IMARA INC. Date: February 10, 2023 By: /s/ Rahul D. Ballal Rahul D. Ballal, Ph.D. President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Rahul D. Ballal President and Chief Executive Officer, Director (Principal Executive Officer) February 10, 2023 Rahul D. Ballal, Ph.D. /s/ Michael P. Gray Chief Financial Officer and Chief Operating Officer (Principal Financial and Accounting Officer) February 10, 2023 Michael P. Gray /s/ David M. Mott Chairman of the Board February 10, 2023 David M. Mott /s/ David Bonita Director February 10, 2023 David Bonita, M.D. /s/ Mark Chin Director February 10, 2023 Mark Chin /s/ Edward Conner Director February 10, 2023 Edward Conner, M.D. /s/ Barbara J. Dalton Director February 10, 2023 Barbara J. Dalton, Ph.D. /s/ Carl Goldfischer Director February 10, 2023 Carl Goldfischer, M.D. /s/ Laura Williams Director February 10, 2023 Laura Williams, M.D., MPH 72 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 00042) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of IMARA Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IMARA Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2018. Boston, Massachusetts February 10, 2023 F-2 IMARA INC. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 88,198 $ 48,309 Short-term investments — 41,969 Prepaid expenses and other current assets 1,438 2,418 Total current assets 89,636 92,696 Property and equipment, net — 250 Right of use assets - operating leases — 525 Other assets 2,323 175 Total assets $ 91,959 $ 93,646 Liabilities and stockholders' equity Current liabilities: Accounts payable 149 2,360 Accrued expenses and other current liabilities 1,681 4,604 Operating lease liability, current — 246 Total current liabilities 1,830 7,210 Operating lease liability, non-current — 406 Total liabilities $ 1,830 $ 7,616 Commitments and contingencies (Note 8) Stockholders' equity: Preferred stock, $ 0.001 par value per share; 10,000,000 shares authorized; no shares issued or outstanding as of December 31, 2022 and December 31, 2021 — — Common stock, par value of $ 0.001 per share; 200,000,000 shares authorized; 26,287,264 shares issued and outstanding as of December 31, 2022 and 2021 27 27 Additional paid-in capital 236,111 233,516 Accumulated other comprehensive (loss) income — ( 16 ) Accumulated deficit ( 146,009 ) ( 147,497 ) Total stockholders' equity 90,129 86,030 Total liabilities and stockholders’ equity $ 91,959 $ 93,646 The accompanying notes are an integral part of these consolidated financial statements. F-3 IMARA INC. Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except share and per share data) Years ended December 31, 2022 2021 Operating expenses: Research and development $ 18,940 $ 38,442 General and administrative 15,330 13,000 Total operating expenses $ 34,270 $ 51,442 Gain on Asset Sale $ 35,000 $ — Income (loss) from operations 730 ( 51,442 ) Total other income, (net): Interest income 943 233 Other income (expense) ( 97 ) ( 175 ) Total other income, (net) $ 846 $ 58 Net income (loss) before income tax provision $ 1,576 $ ( 51,384 ) Income tax provision $ ( 88 ) $ — Net income (loss) attributable to common stockholders—basic and diluted $ 1,488 $ ( 51,384 ) Net income (loss) per share applicable to common stockholders—basic and diluted $ 0.06 $ ( 2.37 ) Weighted-average common shares outstanding—basic 26,287,264 21,661,450 Weighted-average common shares outstanding—diluted 26,385,567 21,661,450 Comprehensive income (loss): Net income (loss) 1,488 ( 51,384 ) Other comprehensive income (loss): Unrealized gain (loss) on investments — ( 20 ) Realized gain (loss) on investments 16 — Comprehensive income (loss) $ 1,504 $ ( 51,404 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 IMARA INC. Consolidated Statements of Stockholders’ Equity (in thousands, except share and per share data) 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 Issuance of common stock under ATM and July 2021 offering, net of issuance costs of $ 579 8,564,624 9 48,231 — — 48,240 Exercise of stock options and issuance of stock under the Employee Stock Purchase Plan 174,377 — 914 — — 914 Stock-based compensation expense — — 3,845 — — 3,845 Unrealized loss on investments — — — ( 20 ) — ( 20 ) Net loss — — — — ( 51,384 ) ( 51,384 ) Balance at December 31, 2021 26,287,264 27 233,516 ( 16 ) ( 147,497 ) 86,030 Stock-based compensation expense — — 2,595 — — 2,595 Realized gain on investments — — — 16 — 16 Net income — — — — 1,488 1,488 Balance at December 31, 2022 26,287,264 $ 27 $ 236,111 $ — $ ( 146,009 ) $ 90,129 The accompanying notes are an integral part of these consolidated financial statements. F-5 IMARA Inc. Consolidated Statements of Cash Flows (in thousands) Year ended December 31, 2022 2021 Cash flows from operating activities: Net income (loss) $ 1,488 $ ( 51,384 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Stock-based compensation expense 2,595 3,845 Depreciation expense 611 99 Amortization and accretion on investments 109 155 Non-cash lease expense ( 11 ) — Gain on Asset Sale ( 35,000 ) — Changes in operating assets and liabilities: Prepaid expenses and other current assets 980 ( 235 ) Accounts payable ( 2,213 ) 389 Accrued expenses and other current liabilities ( 4,013 ) 393 Operating lease assets and liabilities, net ( 114 ) ( 33 ) Net cash used in operating activities ( 35,568 ) ( 46,771 ) Cash flows from investing activities: Proceeds from maturities and sales of short-term investments 41,878 45,937 Proceeds from Asset Sale 35,000 — Purchases of short-term investments — ( 47,557 ) Purchases of property and equipment ( 363 ) ( 12 ) Net cash provided by (used in) investing activities 76,515 ( 1,632 ) Cash flows from financing activities: Proceeds from July 2021 Offering, net of underwriting discounts and commissions — 47,000 Proceeds from ATM offering, net of underwriting discounts and commissions — 1,819 Proceeds from exercise of options — 860 Payment of transaction costs ( 1,233 ) ( 578 ) Net cash (used in) provided by financing activities ( 1,233 ) 49,101 Net increase in cash, cash equivalents and restricted cash 39,714 698 Cash, cash equivalents and restricted cash, beginning of period 48,484 47,786 Cash, cash equivalents and restricted cash, end of period $ 88,198 $ 48,484 Supplemental disclosure of non-cash investing and financing activities: Offering costs included in accounts payable and accrued expenses $ 1,090 $ 1 Right of use asset obtained in exchange for lease liabilities $ 1,886 $ — Unrealized gain (loss) on investments $ — $ ( 20 ) Realized gain (loss) on investments $ 16 $ — The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the dates shown below: December 31, 2022 2021 Cash and cash equivalents $ 88,198 $ 48,309 Restricted cash (included in other assets) — 175 Total cash, cash equivalents and restricted cash $ 88,198 $ 48,484 The accompanying notes are an integral part of these consolidated financial statements. F-6 IMARA INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of the Business IMARA Inc. (“IMARA” or the “Company”) is a 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 Brookline, Massachusetts. On April 5, 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. The workforce reduction was completed as of September 30, 2022 and the Company incurred approximately $ 2.1 million of expenses comprised of notice and employee severance and retention payments. On September 6, 2022, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Cardurion Pharmaceuticals, Inc. (“Cardurion”), discussed further in Note 7, providing for the sale of tovinontrine and all other assets of the Company related to its PDE9 program (the “Asset Sale”) in exchange for a $ 35.0 million upfront payment and future contingent payments. The Company completed the Asset Sale on November 10, 2022. On October 13, 2022, the Company, Iguana Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), and Enliven Therapeutics, Inc., a Delaware corporation (“Enliven”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Enliven, with Enliven continuing as a wholly owned subsidiary of IMARA and the surviving corporation of the merger (the “Merger”). If the Merger is completed, the business of Enliven will continue as the business of the combined organization. Consummation of Merger Agreement is subject to customary closing conditions, including, without limitation, approval of the sale by the Company’s stockholders. Liquidity The Company has incurred recurring negative operating 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 December 31, 2022, the Company had cash and cash equivalents of $ 88.2 million and an accumulated deficit of $ 146.0 million. The Company expects to incur operating losses and negative operating cash flows to in the foreseeable future. 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 December 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. No sales were made under the sales agreement during the twelve months ended December 31, 2022. 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. As described above, the 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 F-7 IMR-261. As a result, the Company believes its cash and cash equivalents as of December 31 , 2022 will be sufficient to fund its operating expense requirements for at least twelve months from the date of filing of this Annual Report on Form 10- K . In the event that the Company does not complete the Merger, the Company (i) may elect to pursue a dissolution and liquidation of the Company, (ii) may pursue another strategic transaction or (iii) may resume research and development activities. 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. 2. Summary of Significant Accounting Policies Basis of presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the FASB. Principles of Consolidation The accompanying consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, Iguana Merger Sub, Inc., 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. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, accrued research and development expenses, 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. Cash and Cash Equivalents The Company considers all highly liquid investments that are readily convertible into cash with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks and amounts held in money market funds. Cash equivalents are stated at cost, which approximates market value. Restricted Cash Restricted cash of $ 0.2 million as of December 31, 2021 represents a letter of credit held as collateral in support of the Company’s operating lease at 116 Huntington Avenue in Boston, Massachusetts, which was terminated in July 2022. Restricted cash is included as a component of other assets on the Company’s consolidated balance sheets. Investments The Company’s investments are maintained by investment managers and consist of corporate debt securities and commercial paper with original maturities of over 90 days, all of which are considered available-for-sale securities. The Company classifies its available-for-sale securities as short-term investments on the consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed. F-8 Available-for-sale securities are carried at fair value with their unrealized gains and losses included in accumulated other comprehensive income within stockholders ’ equity (deficit) , until such gains and losses are realized in other income (expense) within the consolidated statements of operations and comprehensive loss or until an unrealized loss is considered other-than-temporary. The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions. If the Company determines from this analysis that it does not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, the impairment is considered other-than-temporary and is recognized in the consolidated statements of operations and comprehensive loss. Offering Costs The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss. There were $ 2.3 million of deferred offering costs capitalized and included in other assets on our consolidated balance sheet as of December 31, 2022. No deferred offering costs were capitalized as of December 31, 2021. Concentrations of Credit Risk and Off-Balance Sheet Risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and have not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Such deposits have and will continue to exceed federally insured limits. The Company has not experienced any losses on its cash deposits. The Company’s available-for-sale investments primarily consist of high-grade corporate debt and commercial paper, and potentially subject the Company to concentrations of credit risk. The Company has adopted an investment policy that limits the amounts the Company may invest in any one type of investment and requires all investments held by the Company to be highly rated, thereby reducing credit risk exposure. As of December 31, 2022 and 2021, the Company had no off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements. Comprehensive Income (Loss) Comprehensive income (loss) includes net loss and certain changes in stockholders’ equity that are excluded from net loss. For the years ended December 31, 2022 and 2021, as a result of the Company’s investments in available-for-sale securities, the Company’s comprehensive income (loss) includes unrealized losses on those available-for-sale securities. Fair Value Measurements Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Quoted prices in active markets for identical assets or liabilities. F-9 • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. An entity may choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. The carrying amounts reflected in the consolidated balance sheets for prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term nature of these assets and liabilities. Property and Equipment, Net Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which are as follows: Estimated Useful Life Computer equipment and software 3 years Furniture and fixtures 5 years Laboratory equipment 5 years Leasehold improvements Shorter of useful life or remaining lease term Purchased assets that are not yet in service are recorded to construction-in-process and no depreciation expense is recorded. Once they are placed in service they are reclassified to the appropriate asset class. Upon the retirement or sale of an asset, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is recorded to other income (expense), net. Expenditures for maintenance and repairs are expensed as incurred. Leases 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 on their balance sheets right-of-use assets and lease liabilities 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: ASU No. 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 F-10 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. As further discussed in Note 8, the Company terminated its sole office lease, effective August 7, 2022. Prior to such termination, the Company’s operating leases were 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 December 31, 2021 did not include any material lease incentives. Prior to the termination of the office lease, the lease expense for future lease payments was recognized on a straight-line basis over the lease term. Research and Development Expenses Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries, stock-based compensation and benefits, facilities costs, depreciation, third-party license fees, and external costs of outside vendors engaged to conduct preclinical development activities and clinical trials as well as to manufacture research and development materials. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are expensed as the goods are delivered or the related services are performed or until it is no longer expected that the goods will be delivered, or the services rendered. Costs incurred in obtaining technology licenses are recognized as research and development expense as incurred if the technology licensed has not reached technological feasibility and has no alternative future uses. As of December 31, 2022, the Company had discontinued its research and development efforts while undertaking a comprehensive assessment of its strategic options to maximize stockholder value. Accrued Research and Development Expenses The Company has entered into various research and development related contracts with parties both inside and outside of the United States, including contracts with third-party contract research organizations and contract manufacturing organizations. These agreements are cancelable, and related payments are recognized as research and development expenses as incurred. The Company records accrued liabilities for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes the progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. To date, the Company’s historical accrual estimates have not been materially different from the actual costs. Patent Costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure and are classified as general and administrative expenses. Following the completion of the Asset Sale and discontinuation of IMR-261, as of December 31, 2022 the Company had ceased active prosecution of patents and patent applications. Stock-Based Compensation The Company accounts for all stock-based awards granted to employees and non-employees as stock-based compensation expense at fair value. For stock-based awards issued to employees and members of the Company’s board of directors (the “Board”) for their services as a member of the Board, the Company measures the estimated fair value of the stock-based award on the date of grant. Since the Company’s initial public offering in March 2020, the fair value of the common stock has been determined based on the closing price of the Company’s stock o n the Nasdaq Global Select Market on the date of grant. Prior to the Company’s initial public offering, the Company determined the fair value of the underlying common stock based on input from management and approved by the Board, which utilized the valuation of the Company’s enterprise value determined utilizing various methods including the back-solve method, the option-pricing method (“OPM”) or a hybrid of the probability-weighted expected return method (“PWERM”) and the OPM. The total enterprise value was then allocated to the various outstanding equity instruments, including the underlying common stock, utilizing the OPM. F-11 For employee and non-employee awards, the Company recognizes compensation expense over the requisite service period, which is generally the vesting period of the respective award based on the grant date fair value of the award. For awards that include performance-based vesting conditions expense is recognized using the accelerated attribution method when the performance condition is deemed to be probable. The Company accounts for forfeitures as they occur. The Company determines the fair value of restricted stock awards in reference to the fair value of its common stock less any applicable purchase price. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and the Company’s expected dividend yield. The fair value of each restricted stock award is determined on the date of grant based on the fair value of the Company’s common stock on that same date. Given the Company’s limited trading history as a public company, the Company determines the volatility for awards granted based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. The expected volatility has been determined using a weighted-average of the historical volatility measures of this group of guideline companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. Under the simplified method, the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The Company utilizes this method due to lack of historical exercise data and the plain nature of its stock-based awards. Prior to the Company’s IPO, the expected term of stock options granted to non-employees also used the “simplified” method. Following the Company’s IPO, the expected term of options granted to non-employees is determined by contractual term. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s cash compensation costs are classified. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or the Company’s tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established. The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. Net Income (Loss) per Share Basic net income (loss) per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. Net income (loss) per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. Net income (loss) attributable to common stockholders and participating preferred shares are allocated to each share on an as-converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share in losses of the Company and are not included in the calculation of net loss per share in the periods in which a net loss is recorded. F-12 Diluted net income ( loss ) per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. The Company allocates earnings first to preferred stockholders based on dividend rights and then to common and preferred stockholders based on ownership interests. The weighted-average number of common shares included in the computation of diluted net income ( loss ) effect to all potentially dilutive common equivalent shares, including outstanding stock options and Preferred Stock. Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net income ( loss ) attributable to common stockholders, diluted net income ( loss ) per share attributable to common stockholders is generally the same as basic net income ( loss ) per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Recently Issued Accounting Pronouncements In 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. 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 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): December 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 $ 53,511 $ 53,511 $ — $ — Total financial assets $ 53,511 $ 53,511 $ — $ — 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 financial assets $ 66,767 $ 24,798 $ 41,969 $ — As of December 31, 2022 and 2021, the Company’s cash equivalents consisted of money market funds, classified as Level 1 financial assets, as these assets are valued using quoted market prices in active markets without any valuation adjustment. The financial assets valued based on Level 2 inputs as of December 31, 2021 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 F-13 which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances. During the years ended December 31, 2022 and 2021, there were no transfers between fair value measurement levels. 4. Investments As of December 31, 2022, the Company held no investments. As of 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 consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed. The following table summarizes the Company’s investments as of December 31, 2021 (in thousands): 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 o f 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 held these securities until their final maturity date and determined there was no other-than-temporary impairment as of December 31, 2022 and 2021. 5. Property and Equipment, net Property and equipment, net consisted of the following (in thousands): December 31, 2022 December 31, 2021 Property and equipment: Leasehold improvements $ 376 $ 336 Furniture and fixtures 464 143 Property and equipment $ 840 $ 479 Less: accumulated depreciation ( 840 ) ( 229 ) Property and equipment, net $ — $ 250 Depreciation expense was $ 0.6 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively. In July 2022, the Company entered into a second amendment and termination of office lease agreement (the “Termination Agreement”) to terminate the lease under the May 2019 Lease Agreement, as amended by the June 2021 Amended Lease Agreement. The Company revised the estimated useful lives of the existing leasehold improvements and furniture placed in service at its premises, which are included as component of property and equipment, net on its consolidated balance sheets and are fully depreciated as of December 31, 2022. F-14 6. Accrued Expenses Accrued expenses consisted of the following (in thousands): December 31, 2022 December 31, 2021 Accrued research and development expenses $ 85 $ 2,288 Accrued compensation and benefits 127 2,024 Accrued professional services 1,100 249 Accrued other 369 43 Total accrued expenses $ 1,681 $ 4,604 7. License and Purchase Agreements Tovinontrine (IMR-687) – Exclusive License Agreement with Lundbeck In April 2016, the Company entered into a license agreement with Lundbeck (the “Lundbeck Agreement”) pursuant to which Lundbeck, among other things, granted the Company an exclusive, royalty-bearing license to certain patent rights and certain know-how owned or otherwise controlled by Lundbeck to research, develop, make, use, sell, and commercialize products from PDE9 inhibitors, which included tovinontrine. In November 2022, the Lundbeck Agreement was assigned to Cardurion in connection with the Asset Sale. Prior to the assignment to Cardurion, the Company made cash payments to Lundbeck of $ 2.0 million consisting of an upfront payment and ongoing milestone payments of which $ 0.3 million was paid during the year ended December 31, 2022. Such payments were recorded as research and development expense. No payments were made during the year ended December 31, 2021. As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck in 2016, which represented 8.0 % of the Company’s then outstanding equity pursuant to a restricted stock agreement. The shares were fully vested on the date of issuance. Sale of Tovinontrine (IMR-687) and the PDE9 program In November 2022, the Company completed the Asset Sale to Cardurion pursuant to the Asset Purchase Agreement entered into in September 2022. In advance of executing the Asset Purchase Agreement, Cardurion paid the Company $ 0.3 million upon the execution of a non-binding term sheet as a reimbursement to the Company for fees it paid to Lundbeck related to its license agreement with Lundbeck. In accordance with the Asset Purchase Agreement the Company sold the license, know-how, patent rights, clinical research organization and clinical manufacturing organization contracts, inventory for its research and development, and other intangible assets related to tovinontrine and its PDE9 program to Cardurion in exchange for an up-front cash payment of $ 34.8 million. In addition, the Asset Purchase Agreement includes future milestone payments if Cardurion achieves a proof-of-concept milestone and if Cardurion achieves a regulatory and/or commercial milestone. Specifically, if Cardurion achieves the proof-of-concept milestone it will pay the Company a $ 10.0 million milestone payment, and if Cardurion achieves the regulatory and/or commercial milestone it will pay the Company a $ 50.0 million milestone payment. These milestone payments are a form of contingent consideration as the Company’s receipt of these payments is contingent upon the achievement of the future milestones. The Company has excluded these payments from the transaction price at closing, and will recognize a gain contingency when the milestones are achieved. As a result of the Asset Sale, the Company recognized a gain on the Asset Sale equal to $ 35.0 million, which is included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2022. Additionally, as part of the asset sale process, the Company incurred costs of $ 2.5 million for legal, accounting and transaction services. $ 2.0 million of these costs were incurred during the third quarter 2022, and the remaining $ 0.5 million were incurred in the fourth quarter 2022. The Company recognized these costs within the General and administrative line of the Condensed Consolidated Statements of Operations and Comprehensive loss for the periods ended September 30, 2022, and the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2022. 8. Commitments and Contingencies Lease Agreements In May 2019, the Company entered into a new operating lease agreement for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62 -month term (the “May 2019 Lease Agreement). The lease included a rent escalation clause which resulted in cash rental payments of approximately $ 0.3 million annually. Rent expense was recognized on a straight-line basis over the expected lease term. In addition to the base rent, the Company was 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 during the year ended December 31, 2019, which was included as a component of other assets on the Company’s consolidated balance sheets for the year ended December 31, 2021. F-15 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 leased premises 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, prior to the early termination of the lease discussed below, was set to expire on March 31, 2027. Upon commencement of the term of the June 2021 Amended Lease Agreement, the annual base rent obligation was 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 was 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. In July 2022, the Company entered into a second amendment and termination of office lease agreement (the “Termination Agreement”) to terminate the lease under the May 2019 Lease Agreement, as amended by the June 2021 Amended Lease Agreement. The termination of the lease became effective on August 7, 2022 as a result of the landlord entering into a new lease agreement with a third-party tenant for the premises covered by the lease. As part of the Termination Agreement the Company paid a lease termination fee of $ 0.3 million, which was comprised of forfeiture of its $ 0.2 million security deposit and an additional fee of $ 0.1 million. In connection with this termination the Company remeasured its right of use assets and operating lease liabilities and recorded a gain of less than $ 0.1 million. The Company revised the estimated useful lives of the existing leasehold improvements and furniture placed in service at its premises, which are included as component of property and equipment, net on its consolidated balance sheets and are fully depreciated as of December 31, 2022. The Company recorded rent expense of approximately $ 0.5 million and $ 0.3 million during the years ended December 31, 2022 and 2021, respectively. There are no future lease payments due under the June 2021 Amended Lease Agreement following termination. Legal Proceedings The Company may from time to time be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the years ended December 31, 2022 and 2021, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened. Indemnification Agreements The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the indemnification agreements, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. 9. Stockholders’ Equity (Deficit) On August 13, 2019, the Company’s board of directors, and on February 26, 2020, the Company’s stockholders, approved the Company’s restated certificate of incorporation, which became effective upon closing of the IPO on March 16, 2020, to authorize 10,000,000 shares of undesignated preferred stock, $ 0.001 per share par value, and to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000 shares, $ 0.001 per share par value. Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding. Through December 31, 2022, no cash dividends have been declared or paid. F-16 As of December 31, 2022, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding. As of December 31, 2022 and December 31, 2021, the Company has reserved for future issuance the following shares of common stock: December 31, 2022 December 31, 2021 Shares reserved for future issuance under the 2020 Equity Incentive Plan 2,627,945 1,216,532 Shares reserved for future issuance under the 2020 Employee Stock Purchase Plan 438,539 175,667 3,066,484 1,392,199 10. 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, no shares remained available for future issuance under the 2016 Plan. Any options or awards outstanding under the 2016 Plan remained 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 Equity Incentive Plan (the “2020 Plan”), which became effective on March 11, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares reserved for issuance under the 2020 Plan is the sum of: (1) 1,220,283 shares of the Company’s common stock; plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. The number of shares reserved shall be annually increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4 % of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) an amount determined by the Company’s board of directors. 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 December 31, 2022, there were 2,627,945 shares available for future issuance under the 2020 Plan. F-17 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 501,839 1.35 Exercised - Forfeited ( 1,075,205 ) 10.00 Outstanding as of December 31, 2022 1,799,658 $ 7.10 7.17 $ 1,006 Options vested and exercisable as of December 31, 2022 1,291,257 $ 7.03 6.79 $ 428 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period. The weighted-average grant date fair value of the Company’s stock options granted during the years ended December 31, 2022 and 2021 was $ 1.02 and $ 7.00 , respectively. The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the years ended December 31, 2022 and 2021 were as follows, presented on a weighted-average basis : Year Ended December 31, 2022 2021 Expected term (in years) 6.16 6.20 Expected volatility 91.18 % 81.0 % Expected dividend yield 0.00 % 0.00 % Risk-free interest rate 1.83 % 0.81 % 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 ( 211,846 ) 1.38 Unvested as of December 31, 2022 213,443 $ 1.38 Performance-based awards The Company granted stock options to purchase an aggregate of 220,928 shares of common stock to certain employees, officers and consultants and advisors of the Company on May 16, 2019, June 5, 2019 and June 21, 2019, which contain performance-based vesting criteria. Vesting of these options was contingent on the closing of the second tranche of Series B Preferred Stock financing. Stock-based compensation expense associated with performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates. As a result of the performance condition being met on February 25, 2020, these options vested as to 25 % of the shares underlying each option on February 25, 2021 and vest as to the remainder of the shares in equal quarterly installments for F-18 three years thereafter. The Company recognized stock-based compensation expense of less than $ 0.1 million and $ 0.2 million for these options during the year s ended December 31, 202 2 and December 31, 202 1 , respectively . Stock-Based Compensation Stock-based compensation expense included in the Company’s consolidated statements of operations and comprehensive loss is as follows (in thousands): Year Ended December 31, 2022 2021 General and administrative $ 2,398 $ 2,441 Research and development 197 1,404 Total stock-based compensation expense $ 2,595 $ 3,845 As of December 31, 2022, total unrecognized compensation cost related to the unvested stock-based awards was $ 2.3 million, to be recognized over a weighted-average period of 1.89 years. 2020 Employee Stock Purchase Plan On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on March 11, 2020. The 2020 ESPP permits eligible employees who elect to participate, in six-month offering periods, to purchase shares of common stock through payroll deductions at a price equal to 85 % of the fair market value of the common stock on the first or last business day of each applicable six-month offering period, whichever is lower. Purchase dates under the ESPP occur on or about June 14 and December 14 each year. The 2020 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 193,216 shares of the Company’s common stock. The number of shares of the Company’s common stock reserved for issuance under the 2020 ESPP will automatically increase on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2021 and continuing until, and including, the fiscal year commencing on January 1, 2031, in an amount equal to the lowest of (i) 386,432 shares of the Company’s common stock, (ii) 1 % of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (iii) an amount determined by the Company’s board of directors. 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. The Company did no t withhold any amount from employees during the year ended December 31, 2022 and did no t issue any shares. During the year ended December 31, 2021, less than $ 0.1 million was withheld from employees, on an after-tax basis, in order to purchase 15,696 shares of the Company’s common stock. The Company recorded no stock-based compensation expense related to the 2020 ESPP for the year ended December 31, 2022 and less than $ 0.1 million for the year ended December 31, 2021. As of December 31, 2022, 438,539 shares of the Company’s common stock remained available for issuance under the 2020 ESPP. 11. Income Taxes For the year ended December 31, 2022, the Company recorded pre-tax book income of approximately $ 1.6 million, due substantially to the Asset Sale discussed in Note 7 above. As a result, the Company recorded tax expense of approximately $ 88.0 thousand in 2022, as the Company’s taxable income for the year is not able to be fully offset with current and prior year tax attributes. In 2021, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company. The Company’s income and losses before income taxes consist solely of income and losses from domestic operations. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The F-19 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, in its consolidated statements of operations. A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the consolidated financial statements is as follows: 2022 2021 Income taxes at U.S. statutory rate 21 % 21 % State income taxes 15.0 6 Permanent items - 3.2 0 Tax Credit - 142.9 5 Equity Compensation 70.9 0 Other 0.1 0 Change in valuation allowance 44.7 ( 32 ) Total provision for income taxes 5.6 % 0 % F-20 Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 are comprised of the following (in thousands): Year Ended December 31, 2022 2021 Deferred tax assets Net operating loss carryforwards $ 32,931 $ 37,411 Tax credits carryforwards 8,930 6,968 Capitalized Sec. 174 Costs 4,591 — Stock-based compensation 673 1,268 Amortization 323 493 Accruals — 545 Lease incentive liability — — Lease liability — 175 Unrealized gains/losses on investments — 4 Other 5 31 Total deferred tax assets 47,453 46,895 Valuation allowance ( 47,453 ) ( 46,742 ) Net deferred tax assets — 153 Deferred tax liabilities Tenant improvement allowance — ( 12 ) Unrealized gains/losses on investments — — Right of Use Asset — ( 141 ) Less Valuation Allowance — — Total deferred tax liabilities — ( 153 ) Net deferred taxes $ — $ — The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily of net operating loss carryforwards and tax credits. Management has considered the Company’s history of cumulative net losses in the United States, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its U.S. federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2022 and 2021, respectively. The Company reevaluates the positive and negative evidence at each reporting period. The Company’s valuation allowance increased during 2022 by approximately $ 0.7 million primarily due to capitalized section 174 costs that were generated in the current year partially offset by utilization of net operating losses because of current year taxable income. As of December 31, 2022 and 2021, the Company had U.S. federal net operating loss carryforwards of $ 122.8 million and $ 139.2 million, respectively, which may be available to offset future income tax liabilities. The 2017 Tax Cuts and Jobs Act (“TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely but will generally limit the net operating loss deduction to the lesser of the net operating loss carryover or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s net operating loss carryover or 100% of a corporation’s taxable income and be available for twenty years from the period the loss was generated. The Company has federal net operating losses generated following 2017 of $ 115.9 million, which do not expire. The federal net operating losses generated prior to 2018 of $ 7.9 million will expire at various dates through 2037 .With the exception of the current year, the Company has been generating losses since its inception. As of December 31, 2022 and 2021, the Company also had U.S. state net operating loss carryforwards of $ 113 million and $ 129.4 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2041 . As of December 31, 2022 and 2021, the Company had federal tax credit carryforwards of approximately $ 8.3 million and $ 6.5 million, respectively, available to reduce future tax liabilities which expire at various dates through 2042 . As of December 31, 2022 and 2021, the Company had state research and development tax credit carryforwards of approximately $ 0.8 million and $ 0.6 million, respectively, available to reduce future tax liabilities which expire at various dates through 2037 . F-21 The utilization of our net operating loss carryforwards and research tax credit carryovers are subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state tax provisions, due to ownership change limitations that have occurred previously and that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has conducted an analysis of an ownership change under section 382. The impact of the Company's Section 382 study, which was conducted this year, has resulted in a reduction of the amount of tax attributes available to the Company to offset taxable income and income tax liabilities. The Company has not, as of yet, conducted a study of research and development and orphan drug credit carryovers. Such a study, once undertaken by the Company, may result in an adjustment to the Company's research and development and orphan drug credit carryovers; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company's research and development and orphan drug credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations if an adjustment were required At December 31, 2022 and December 31, 2021, the Company did no t have any significant uncertain tax positions. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months. The Company files tax returns in the United States and Massachusetts. The Company is subject to U.S. federal and state examinations by tax authorities for years 2018 through the present. In addition, all of the Company’s tax years will remain open for examination by the federal and state taxing authorities to the extent that the Company's tax attributes are utilized in future years to offset income or income taxes. 12. Net Income (Loss) Per Share The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share for the years ended December 31, 2022 and 2021 (in thousands, except share and per share amounts): Year Ended December 31, 2022 2021 Numerator: Net income (loss) attributable to common stockholders—basic and diluted $ 1,488 $ ( 51,384 ) Denominator: Weighted-average common shares outstanding—basic 26,287,264 21,661,450 Weighted-average common shares outstanding—diluted 26,385,567 21,661,450 Net income (loss) per share applicable to common stockholders—basic $ 0.06 $ ( 2.37 ) Net income (loss) per share applicable to common stockholders—diluted $ 0.06 $ ( 2.37 ) The Company excluded the following potential common shares from the computation of diluted net income (loss) per share attributable to common stockholders for the years ended December 31, 2022 and 2021 because including them would have had an anti-dilutive effect : Year Ended December 31, 2022 2021 Options to purchase common stock 1,740,158 2,373,024 Unvested restricted shares 124,768 — Shares reserved for future issuance under the ESPP — 175,667 F-22 13. Related Party Transactions Lundbeck Lundbeckfond Invest A/S is one of the Company’s stockholders and participated in all tranches of the Series A convertible preferred stock (“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 convertible 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 5.1 % and a 5.0 % ownership interest on a fully diluted basis as of December 31, 2022 and 2021, respectively. Mette Kirstine Agger, who was a member of the Company’s 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 7). All shares of preferred stock converted into shares of common stock upon closing of the IPO. This reflects a 1.9 % and a 1.8 % ownership interest on a fully diluted basis as of December 31, 2022 and 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 $ 2.0 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense . 14. Benefit Plans The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code effective as of January 2019. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Board. The Company contributed a match of $ 0.1 million and $ 0.2 million to the plan during the years ended December 31, 2022 and 2021, respectively. F-23