What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-05 · 146 added, 128 removed, 286 unchanged (49% of the section changed)

3 unchanged sentences

(In thousands, except share data)

June 30, 2022

September 30, 2022

December 31, 2021

18 unchanged sentences

10,000,000 shares authorized;

no shares issued or outstanding at June 30, 2022 and December 31, 2021, respectively

no shares issued or outstanding at September 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.0001 par value;

200,000,000 shares authorized;

12,127,385 and 12,110,373 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

12,127,594 and 12,110,373 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

6 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

4 unchanged sentences

Interest income (expense), net

Deemed dividend arising from warrant modification

Net loss attributable to common stockholders

Per share information:

6 unchanged sentences

Stockholders’ equity

Balance at March 31, 2022

Share-based compensation expense

Balance at June 30, 2022

Share-based compensation expense

Exercise of stock options

Balance at September 30, 2022

Stockholders’ equity

2 unchanged sentences

Exercise of stock options

Balance at June 30, 2022

Balance at September 30, 2022

Stockholders’ equity

Balance at March 31, 2021

Sale of common stock and common stock warrants, net of $ 596 in offering costs

Balance at June 30, 2021

Sale of common stock

Share-based compensation expense

Exercise of common stock warrants

Exercise of stock options

Balance at June 30, 2021

Exercise of stock options and settlement of RSUs

Balance at September 30, 2021

Stockholders’ equity

3 unchanged sentences

Exercise of common stock warrants

Exercise of stock options

Balance at June 30, 2021

Exercise of stock options and settlement of RSUs

Balance at September 30, 2021

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

2 unchanged sentences

(In thousands)

Six Months ended June 30,

Nine Months ended September 30,

Cash flows from operating activities:

19 unchanged sentences

Proceeds from exercise of common stock warrants

Payment of offering costs

Payment of equipment loan payable

Net cash provided by financing activities

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

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

Cash and cash equivalents and restricted cash at beginning of period

2 unchanged sentences

Operating lease right-of-use asset and lease liability recorded upon adoption of ASC 842

Offering costs included in accounts payable

Purchases of property plant and equipment included in accounts payable

Offering costs included in accrued expenses and other current liabilities

Purchases of property and equipment included in accounts payable

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

1 unchanged sentence

Notes to Condensed Financial Statements

Nature of the business and basis of presentation

Nature of the business

Immunome, Inc.

(“the Company” or “Immunome”) was incorporated as a Pennsylvania corporation on March 2, 2006 and was converted to a Delaware corporation on December 2, 2015.

The Company is a biopharmaceutical company utilizing our proprietary human memory B cell platform to discover and develop first-in-class antibody therapeutics designed to change the way diseases are currently being treated.

(“the Company” or “Immunome”) is a clinical stage biopharmaceutical company.

The Company was incorporated as a Pennsylvania corporation on March 2, 2006 and was converted to a Delaware corporation on December 2, 2015.

The Company is utilizing a proprietary human memory B cell platform to discover and develop first-in-class antibody therapeutics designed to change the way diseases are currently being treated.

The Company’s primary focus areas are oncology and infectious disease, including COVID-19.

1 unchanged sentence

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, risks associated with the successful research, development and manufacturing of product candidates, uncertain results of preclinical and clinical testing, development of new technological innovations and products by competitors, dependence on key personnel and third-party vendors, protection of proprietary technology, compliance with government regulations, regulatory approval of product candidates and the ability to secure additional capital to fund operations.

The Company has incurred net losses since inception, including net losses of $ 20.6 million and $ 9.1 million for the six months ended June 30, 2022 and 2021, respectively, and it expects to generate losses from operations and negative operating cash flows for the foreseeable future primarily due to research and development costs for its potential product candidates.

As of June 30, 2022, the Company had an accumulated deficit of $ 99.7 million.

The Company has incurred net losses since inception, including net losses of $ 29.1 million and $ 16.9 million for the nine months ended September 30, 2022 and 2021, respectively, and it expects to generate losses from operations and negative operating cash flows for the foreseeable future primarily due to research and development costs for its potential product candidates.

As of September 30, 2022, the Company had an accumulated deficit of $ 108.2 million.

On October 1, 2021, the Company entered into an Open Market Sale Agreement (“ATM Agreement”) with Jefferies Group LLC, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell shares of common stock under the registration statement having an aggregate offering price of up to $ 75.0 million through Jefferies Group LLC acting as sales agent.

The Company has not yet sold any shares under the ATM Agreement.

The Company had cash and cash equivalents of $ 34.6 million at June 30, 2022.

The Company filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (“SEC”) on October 14, 2021, pursuant to which the Company may issue from time-to-time securities with an aggregate value of up to $ 200.0 million.

The Company has not yet sold any shares under the ATM Agreement or the shelf registration statement.

The Company had cash and cash equivalents of $ 27.1 million at September 30, 2022.

The Company expects that its cash will enable it to fund its operating expenses and capital expenditure requirements for at least 12 months from the filing date of this Quarterly Report on Form 10-Q;

more funding will be necessary beyond this point to fund additional research and development, clinical development and operations in order to pursue the Company’s growth strategy.

If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that it might otherwise seek to develop or commercialize independently (or enter into these collaborations sooner than it might otherwise have intended to do);

consider other various strategic alternatives, including a merger or sale of the Company;

If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs or enter into collaborations with third parties relative to potential programs, products or technologies that it might otherwise seek to progress independently (or enter into these collaborations sooner than it might otherwise have intended to);

consider various other strategic alternatives, including a possible merger or sale of the Company;

or reduce or cease operations.

If the Company engages in collaborations, it may receive lower consideration upon commercialization of such products or technologies than if it had not entered into such arrangements or if it entered into such arrangements at later stages in the research and development process.

Additionally, volatility in the capital markets and general economic conditions in the United States may be a significant obstacle to raising the required funds.

Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s product candidates become approved drugs and how significant

their market share will be, some of which are outside of the Company’s control.

If the Company engages in collaborations under these circumstances, it may receive lower consideration than if it had not entered into such arrangements or if it entered into such arrangements at later stages in the research and development process.

Additionally, volatility in the capital markets generally and the biotechnology sector specifically, as well as general economic conditions in the United States may be a significant obstacle to raising the required funds on satisfactory terms, if at all.

Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s programs and product candidates become approved drugs and how significant their market share will be, many of which are outside of the Company’s control.

The length of time and cost of developing and commercializing these product candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations.

On March 11, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic.

Although there is significant uncertainty as to the likely effects this disease may have in the future, there has not been a significant impact to the Company’s operations or financial statements to date.

The Company is also subject to risks and uncertainties as a result of the ongoing COVID-19 pandemic.

Although there is uncertainty as to the extent of the continued impact of the COVID-19 pandemic, including the continued impact to capital markets and economies worldwide in the form of economic slowdowns or recession, there has not been a significant impact to the Company’s operations or financial statements to date.

Summary of significant accounting policies

4 unchanged sentences

These unaudited condensed financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and the notes thereto included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 28, 2022.

The accompanying condensed financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 are unaudited but include all adjustments that management believes to be necessary for a fair presentation of the periods presented.

The accompanying condensed financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 are unaudited but have been prepared on the same basis as the annual audited financial statements and include all adjustments that management believes to be necessary for a fair presentation of the periods presented.

Interim results are not necessarily indicative of results for a full year.

Balance sheet amounts as of December 31, 2021 have been derived from the audited financial statements as of that date.

Condensed balance sheet amounts as of December 31, 2021 have been derived from the audited financial statements as of that date.

Use of estimates

6 unchanged sentences

Segment and geographic information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance.

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker (the “CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance.

The CODM is the Company’s Chief Executive Officer.

The Company views its operations as and manages its business in one operating segment operating exclusively in the United States.

The Company views its operations as, and manages its business in, one operating segment operating exclusively in the United States of America.

Fair value of financial instruments

ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.

Observable inputs are inputs that market participants would use in pricing the asset

or liability based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the assets or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market

participants at the measurement date.

ASC 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered value hierarchy that distinguishes between the following:

7 unchanged sentences

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.

Cash and cash equivalents are Level 1 assets as of June 30, 2022 and December 31, 2021.

Cash and cash equivalents and restricted cash are Level 1 assets as of September 30, 2022 and December 31, 2021.

Restricted cash

Restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities.

This lease expires in 2024 at which time the cash will be released from restriction.

Restricted cash was $ 100,000 at both June 30, 2022 and 2021, respectively.

The following table provides a reconciliation of the components of cash and cash equivalents and restricted cash reported in the Company’s condensed balance sheets to the total of the amount presented in the condensed statements of cash flows:

Cash will be released from restriction upon termination of the lease.

Restricted cash was $ 100,000 at both September 30, 2022 and 2021, respectively.

The following table provides a reconciliation of the components of cash and cash equivalents and restricted cash presented in the condensed statements of cash flows:

(in thousands)

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Cash and cash equivalents

1 unchanged sentence

Equity issuance costs

The Company capitalizes costs that are directly associated with the ATM Agreement until such financings are consummated, at which time such costs are recorded against the gross proceeds from the applicable financing.

The Company capitalized costs that were directly associated with establishing the ATM Agreement and shelf registration statement in 2021.

These costs will remain capitalized until such financings are consummated, at which time such costs will be recorded against the gross proceeds from the applicable financing.

If a financing is abandoned, deferred offering costs are expensed.

Ongoing costs that are directly associated with the ATM Agreement are expensed as incurred.

Deferred offering costs were $ 0.3 million and $ 0.3 million as of June 30, 2022 and December 31, 2021, respectively, on the condensed balance sheet.

Deferred offering costs were $ 0.3 million as of each of September 30, 2022 and December 31, 2021, respectively, on the condensed balance sheet.

Government assistance programs

5 unchanged sentences

Research and development costs are charged to expense as incurred.

Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based

compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, preclinical and clinical development expenses, including manufacture and testing of clinical supplies, consulting and other contracted services.

Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, preclinical and clinical development expenses, including manufacture and testing of clinical supplies, consulting and other contracted services.

Additionally, under the terms of the license agreements described in Note 7, the Company is obligated to make future payments should certain development and regulatory milestones be achieved.

Costs for certain research and development activities are recognized based on the terms of the individual arrangements, which may differ from the timing of receipt of invoices and payment of invoices and are reflected in the financial statements as a prepaid or accrued expense.

Share-based compensation

The Company’s share-based compensation program allows for grants of stock options and restricted stock awards.

Grants are awarded to employees and non-employees, including directors.

The Company accounts for its share-based compensation awards granted to employees and nonemployees based on the estimated fair value on the date of grant and recognized compensation expense of those awards over the requisite service period, which is the vesting period of the respective award.

The Company accounts for forfeitures as they occur.

For share-based awards with service-based vesting conditions, the Company recognized compensation expense on a straight-line basis over the service period.

The Company classified share-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

The Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends.

Due to the lack of Company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and biopharmaceutical industry focus.

The historical volatility is calculated based on a period of time commensurate with the expected term assumption.

The Company uses the simplified method to calculate the expected term for options granted to employees and non-employees whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its lack of sufficient historical data.

The risk-free interest rate is based on U.S.

Treasury securities with a maturity date commensurate with the expected term of the associated award.

The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

The exercise price is the fair value of the common stock as of the measurement date.

Net loss per share

Basic net loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding for the period.

Diluted net loss per share of common stock is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities.

Basic net loss per share of common stock is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net loss per share of common stock is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net loss per share of common stock is computed by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

The following potentially dilutive securities outstanding as of June 30, 2022 and 2021 have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

The following potentially dilutive securities outstanding as of September 30, 2022 and 2021 have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

September 30,

Stock options (1)

2 unchanged sentences

In periods in which the Company reports a net loss per share of common stock, diluted net loss per share of common stock is the same as basic net loss per share of common stock since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company reported a net loss per share of common stock for the three and six months ended June 30, 2022 and 2021.

The Company reported a net loss per share of common stock for the three and nine months ended September 30, 2022 and 2021.

Effective January 1, 2022, the Company adopted ASU No.

5 unchanged sentences

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

The Company has elected the practical expedient to not to recognize leases with a term of 12 months or less.

The Company does not have any financing leases as of June 30, 2022.

The Company has elected the practical expedient to not recognize leases with a term of 12 months or less.

The Company does not have any financing leases as of September 30, 2022.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on their present value of lease payments over the remaining lease term.

Options to extend the lease term are included in the Company’s assessment of the lease term only if there is a reasonable assessment that the Company will renew.

Leases are discounted to its present value using either the interest rate implicit in the Company’s lease or its incremental borrowing rate, which

reflects the fixed rate in which the Company could borrow on a collateralized basis the amount of lease payments in the same currency, for a similar term, in a similar economic environment.

Leases are discounted to its present value using either the interest rate implicit in the Company’s lease or its incremental borrowing rate, which reflects the fixed rate in which the Company could borrow on a collateralized basis the amount of lease payments in the same currency, for a similar term, in a similar economic environment.

Recently adopted accounting standards

2 unchanged sentences

The Company adopted ASC 842 using the modified retrospective approach.

The Company elected the package of practical expedients available for existing contracts, which allowed the Company to carry forward our historical assessments of lease identification, lease classification, and initial direct costs.

The Company also elected a policy to not apply the recognition requirements of ASC 842 for short-term leases with a term of 12 months of less.

The Company elected the package of practical expedients available for existing contracts, which allowed the Company to carry forward its historical assessments of lease identification, lease classification, and initial direct costs.

The Company also elected a policy to not apply the recognition requirements of ASC 842 for short-term leases with a term of 12 months or less.

As of January 1, 2022, the effective date, the Company identified one operating lease arrangement relating to the Company’s headquarters facility and one short-term lease relating to laboratory equipment.

The adoption of ASC 842 resulted in a recognition of an ROU asset and lease liability of $ 0.2 million on the Company’s balance sheet relating to the leases as of January 1, 2022.

The adoption of ASC 842 resulted in a recognition of an ROU asset and lease liability of $ 0.2 million on the Company’s condensed balance sheet

relating to the leases as of January 1, 2022.

The adoption of the standard did not have a material effect on the Company’s condensed statements of operations and condensed statements of cash flows (Note 8).

6 unchanged sentences

DoD expense reimbursement contract

In July 2020, the Company entered into an Other Transaction Authority for Prototype Agreement (the “OTA Agreement”) with the DoD to fund the Company’s efforts in developing an antibody cocktail therapeutic to treat COVID-19.

The amount of funding originally made available to the Company under this expense reimbursement contract was $ 13.3 million.

In July 2020, the Company entered into an Other Transaction Authority for Prototype Agreement (as amended, the “OTA Agreement”) with the DoD to fund the Company’s efforts in developing an antibody cocktail therapeutic to treat COVID-19.

The amount of funding originally made available to the Company under the OTA Agreement was $ 13.3 million.

In May 2021, the Company and the DoD amended the OTA Agreement, pursuant to which the DoD award was increased from $ 13.3 million to $ 17.6 million.

Under the OTA Agreement, the DoD is required to pay the Company, upon submission of proper invoices, within 30 calendar days of receipt of request for payment.

The Company recorded contra-research and development expense related to the OTA Agreement of $ 0.01 million and $ 0.6 million for the three and six months ended June 30, 2022, respectively, in the condensed statements of operations.

The Company recorded contra-research and development expense related to the OTA Agreement of $ 4.1 million and $ 8.1 million for the three and six months ended June 30, 2021, respectively, in the condensed statements of operations.

The Company had an expense reimbursement receivable balance of $ 0.2 million and $ 2.7 million due from the DoD in prepaid expenses and other current assets as of June 30, 2022 and December 31, 2021, respectively, in the accompanying condensed balance sheets.

The Company recorded contra-research and development expense related to the OTA Agreement of $ 0.0 million and $ 5.3 million for the three months ended September 30, 2022 and 2021, respectively, and $ 0.6 million and $ 13.4 million for the nine months ended September 30, 2022 and 2021, respectively, in the condensed statements of operations.

The Company had an expense reimbursement receivable balance of $ 0.2 million and $ 2.7 million due from the DoD in prepaid expenses and other current assets as of September 30, 2022 and December 31, 2021, respectively, in the accompanying condensed balance sheets.

Costs that have been reimbursed by the DoD but not yet expensed by the Company are recorded as a deferred research obligation liability for the period.

The Company has a deferred research obligation liability of $ 0.01 million and $ 2.0 million as of June 30, 2022 and December 31, 2021, respectively.

The Company has a deferred research obligation liability of $ 0.0 million and $ 2.0 million as of September 30, 2022 and December 31, 2021, respectively.

This amount is included in accrued expenses and other liabilities in the accompanying condensed balance sheets.

DoD reimbursable services that have been performed but not yet billed are recorded as an unbilled receivable in prepaid expenses and other current assets in the accompanying

condensed balance sheets.

The Company had an unbilled receivable from the DoD of $ 0 and $ 1.6 million as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022, the Company has received $ 17.4 million in expense reimbursement from the DoD under the OTA Agreement.

Department of Treasury CARES Act employee retention credit

DoD reimbursable services that have been performed but not yet billed are recorded as an unbilled receivable in prepaid expenses and other current assets in the accompanying condensed balance sheets.

The Company had an unbilled receivable from the DoD of $ 0.0 and $ 1.6 million as of September 30, 2022 and December 31, 2021, respectively.

As of September 30, 2022, the Company has received $ 17.4 million in expense reimbursement from the DoD under the OTA Agreement.

CARES Act employee retention credit

Under the CARES Act, the Company met eligibility criteria for a $ 0.8 million refundable employee retention credit.

The Company recorded contra-expense to personnel related costs within research and development expense of $ 0.6 million and contra-general administrative expense of $ 0.2 million for the three and six months ended June 30, 2022, respectively, in the condensed statements of operations.

No such amounts were recognized for the three and six months ended June 30, 2021.

The Company recorded contra-expense to personnel related costs within research and development expense and general and administrative expense of $ 0.0 for the three months ended September 30, 2022 and contra-expense to research and development expense of $ 0.6 million and general administrative expense of $ 0.2 million for the nine months ended September 30, 2022, respectively, in the condensed statements of operations.

No such amounts were recognized for the three and nine months ended September 30, 2021.

The Company had an employee retention credit receivable balance due from the U.S.

Department of Treasury of $ 0.8 million and $ 0 in prepaid expenses and other current assets as of June 30, 2022 and December 31, 2021, respectively, in the accompanying condensed balance sheets.

Department of Treasury of $ 0.8 million and $ 0.0 in prepaid expenses and other current assets as of September 30, 2022 and December 31, 2021, respectively, in the accompanying condensed balance sheets.

Prepaid expenses and other assets

1 unchanged sentence

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

CARES Act employee retention credit receivable

Prepaid insurance

Research and development advance payments

1 unchanged sentence

Reimbursement receivable from DoD

Prepaid insurance

Unbilled reimbursement receivable from DoD

2 unchanged sentences

(in thousands)

June 30, 2022

September 30, 2022

December 31, 2021

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The Company assumes all administrative costs of the 401(k) Plan and makes matching contributions as defined in the 401(k) Plan document.

The Company made matching contributions of $ 0.1 million to the 401(k) Plan for each of the three and six months ended June 30, 2022 and 2021, respectively.

The Company made matching contributions of $ 0.1 million to the 401(k) Plan for each of the three months ended September 30, 2022 and 2021, respectively, and $ 0.2 million and $ 0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Legal proceedings

4 unchanged sentences

The Company may need to pay developmental and regulatory milestone payments of up to approximately $ 2.6 million.

In addition, the Company may need to pay royalty rates on net product sales and certain commercial milestone payments of up to approximately $ 1.5 million, if any.

The Company recorded $ 0.1 million milestone payments during the three and six months ended June 30, 2022, respectively, in research and development expenses in the condensed statements of operations.

No such costs were recorded during the three and six months ended June 30, 2021, respectively.

Effective January 1, 2022, the Company adopted ASC 842 using the modified retrospective approach by applying the new standard to all leases existing on the adoption date.

The results for reporting periods beginning after January 1, 2022 are presented in accordance with ASC 842, while prior period amounts are not adjusted and continue to be reported under the accounting standards that were in effect prior to January 1, 2022.

The Company elected the practical expedient to recognize short-term leases under ASC 840.

In addition, the Company may need to pay royalty rates on net product sales, a portion of certain sublicense and collaboration payments, and certain commercial milestone payments of up to approximately $ 1.5 million, if any.

The Company recorded $ 0.0 million and $ 0.1 million in milestone payments during the three and nine months ended September 30, 2022, respectively, in research and development expenses in the condensed statements of operations.

No such costs were recorded during the three and nine months ended September 30, 2021, respectively.

In May 2017, the Company entered into a 62-month office and laboratory space lease commencing on July 1, 2017 for approximately 11,000 square feet of space in Exton, Pennsylvania.

3 unchanged sentences

In April 2022, the Company terminated the agreement through exercising the option to purchase the leased laboratory equipment under the lease agreement.

Supplemental balance sheet information related to leases as of June 30, 2022 was as follows (in thousands):

Supplemental condensed balance sheet information related to leases as of September 30, 2022 was as follows (in thousands):

Operating leases:

4 unchanged sentences

Operating lease liability and operating lease liability, net of current portion is included in accrued expenses and other current liabilities and other long-term liabilities, respectively, in the accompanying condensed balance sheets.

Supplemental lease expense related to leases was as follows:

Lease Cost (in thousands)

Statements of Operations Classification

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

Operating lease cost

General and administrative

Research and development

Short-term lease cost

Operating lease expense recorded as research and development and general and administrative expenses in the condensed statements of operations is as follows (in thousands):

Operating lease cost (in thousands)

Three Months Ended September 30, 2022

Nine Months Ended September 30, 2022

General and administrative

1 unchanged sentence

Total lease expense

Under ASC 840, rent expense was $ 0.1 million for each of the three and six months ended June 30, 2021, respectively.

Short term lease expense recorded as research and development expense in the condensed statements of operations for the three and nine months ended September 30, 2022 was $ 0.0 and $ 0.1 million, respectively.

Under ASC 840, lease expense was $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2021, respectively.

Other information related to the operating lease where the Company is the lessee was as follows:

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Weighted-average remaining lease term (in years)

1 unchanged sentence

Supplemental cash flow information related to the operating lease was as follows (in thousands):

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Cash paid for operating lease liability

As of June 30, 2022, minimum rental commitments under the operating lease were as follows (in thousands):

As of September 30, 2022, minimum rental commitments under the operating lease were as follows (in thousands):

Years ending December 31,

2022 (represents remaining six months in 2022)

2022 (represents remaining three months in 2022)

Total lease payments

2 unchanged sentences

The holders of common stock are entitled to one vote for each share of common stock.

Subject to the approval of the holders of a majority in interest of the Company’s stockholders entitled to vote thereon, the holders of common stock shall be entitled to receive dividends out of legally available funds.

Subject to the approval of the holders of a majority in interest of the Company’s stockholders entitled to vote thereon, the holders of common stock are entitled to receive dividends out of legally available funds.

In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share ratably in the remaining assets of the Company available for distribution.

On August 4, 2021, the Company sold 14,115 shares of the Company’s common stock for $ 15.94 per share to a purchaser in accordance with the Stock Purchase Agreement.

On April 28, 2021, the Company sold 1,000,000 units, each unit comprising one share of the Company’s common stock and one Series B Warrant (each, a “Series B Warrant”) to purchase one-half of a share of common stock.

4 unchanged sentences

The significant assumptions used in preparing the option pricing model for valuing the Company's warrants to purchase shares of common stock as of April 28, 2021 included (i) volatility of 82.7 %, (ii) risk free interest rate of 0.35 %, (iii) strike price of $ 45.00 per share, (iv) fair value of common stock of $ 28.70 per share, and (v) expected life of three years.

The Series B Warrants are callable by the Company in certain circumstances.

As described below, in September 2022, the Series B Warrants were modified to reduce the strike price to $ 10.00 per share and to remove the Company’s call right.

Warrants to acquire shares of common stock

At June 30, 2022, common stock warrants outstanding were as follows:

On September 2, 2022, the Company notified holders of the Company’s Series B Warrants (the “Holders”) of the Company’s agreement to permit Holders to exercise the Series B Warrants at an exercise price of $ 10.00 per share (reduced from the previous exercise price of $ 45.00 per share) at any time prior to the expiration date of the Series B Warrants.

The Company recognized a deemed dividend of $ 0.6 million, which represents the incremental fair value of the outstanding warrants as a result of the modification.

This deemed dividend is recorded in the Company's consolidated statement of operations as an increase to the net loss attributable to common stockholders for purposes of computing net loss per share, basic and diluted.

The net impact to the condensed statements of changes in stockholders’ equity was zero because the warrants were equity classified before and after the modification.

At September 30, 2022, common stock warrants outstanding were as follows:

Warrants Outstanding

Exercise Price per Share

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April 28, 2024

During the six months ended June 30, 2022, no warrants were exercised.

During the six months ended June 30, 2021, 100,695 warrants were exercised, and the Company received proceeds of $ 0.9 million and 100,695 shares of the Company’s common stock were issued.

Additionally, 72,320 warrants were cashless exercised during the six months ended June 30, 2021 and 45,322 shares of the Company’s common stock were issued.

During nine months ended September 30, 2022, no warrants were exercised.

During the nine months ended September 30, 2021, 148,653 warrants exercisable for $ 9.00 per share were exercised, and the Company received proceeds of $ 1.3 million and 148,653 shares of the Company’s common stock were issued.

Additionally, 72,320 warrants exercisable for $ 9.00 per share were exercised in cashless transactions during the nine months ended September 30, 2021 and 45,322 shares of the Company’s common stock were issued.

Share-based compensation

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Additionally, the number of shares of our common stock reserved for issuance under the 2020 Plan will automatically increase on January 1 of each year, beginning on January 1, 2021 and continuing through and including January 1, 2030, by 4 % of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors.

As of June 30, 2022, there were 1,313,412 shares available for future issuance under the 2020 Plan.

The Company also adopted the 2020 Employee Stock Purchase Plan (“ESPP”) on September 18, 2020 which provides for the grant of purchase rights to purchase shares of the Company’s common stock to eligible employees, as

defined by the ESPP.

As of September 30, 2022, there were 1,336,088 shares available for future issuance under the 2020 Plan.

The maximum number of shares of common stock that may be issued under the ESPP will not exceed 125,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1 of each calendar year for a period of up to ten years , commencing on the first January 1 following the year in which an IPO occurs and ending on, and including, January 1, 2030, in an amount equal to the lesser of (i) 1 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, and (ii) 1,000,000 shares of common stock.

No shares of common stock have been issued under the ESPP as of June 30, 2022.

As of September 30, 2022, there were 352,446 shares available under the ESPP.

No shares of common stock have been issued under the ESPP as of September 30, 2022.

The 2020 Plan and the ESPP are administered by the Board of Directors subject to the Board’s right to delegate to a committee.

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Share-based compensation expense recorded as research and development and general and administrative expenses in the condensed statements of operations is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

General and administrative

Unrecognized compensation cost related to unvested options was $ 12.1 million as of June 30, 2022 and will be recognized over an estimated weighted average period of 3.5 years.

Unrecognized compensation cost related to unvested options was $ 10.5 million as of September 30, 2022 and will be recognized over an estimated weighted average period of 3.1 years.

Stock options

The weighted average assumptions used in the Black-Scholes option-pricing model for stock options granted were:

Six Months Ended June 30,

Nine Months Ended September 30,

Expected volatility

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Fair value of common stock

A summary of option activity under the Plans and 2020 Plan during the six months ended June 30, 2022 is as follows:

A summary of option activity under the Plans and 2020 Plan during the nine months ended September 30, 2022 is as follows:

exercise price

Outstanding at January 1, 2022

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Vested or expected to vest at June 30, 2022

The weighted-average grant date fair value per share of stock options granted during the six months ended June 30, 2022 and 2021 was $ 2.65 and $ 18.00 , respectively.

The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2022 was $ 0.1 million.

The aggregate intrinsic value of stock options outstanding at June 30, 2022 is $ 1.8 million.

Outstanding at September 30, 2022

Exercisable at September 30, 2022

The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2022 and 2021 was $ 2.65 and $ 17.77 , respectively.

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2022 was $ 0.1 million.

The aggregate intrinsic value of stock options outstanding at September 30, 2022 is $ 3.4 million.

Restricted stock awards

During August 2021, the Company granted 13,500 fully vested restricted stock awards.

The Company recorded stock-based compensation expense of $ 0.2 million for the three and nine months ended September 30, 2021 related to the restricted stock awards granted.

No such transaction occurred for the three and nine months ended September 30, 2022.

Related party transactions

License agreements

The Company has entered into license agreements with certain stockholders of the Company.

Expenses with these related parties were de minimis for the three and six months ended June 30, 2022 and 2021, respectively.

In addition, amounts owed to these related parties were de minimis as of June 30, 2022 and December 31, 2021.

Broadband services agreement

In November 2015, the Company entered into a management services agreement (the “Broadband MSA”) with BCM Advisory Partners LLC and Broadband Capital Partners LLC (collectively “Broadband Capital”).

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In June 2021, the Company extended the Broadband MSA to continue through June 2022.

The Company recorded $ 0.1 million during each of the three and six months ended June 30, 2022 and 2021, respectively, related to the Broadband MSA, which is included in general and administrative expenses in the condensed statements of operations.

Amounts due to Broadband Capital were $ 0.1 million and $ 0 as of June 30, 2022 and December 31, 2021, respectively.

The Broadband MSA expired in June 2022.

The Company recorded $ 0.0 million and $ 0.1 million during the three months ended September 30, 2022 and 2021, respectively, and $ 0.1 million and $ 0.2 million during the nine months ended September 30, 2022 and 2021, respectively, related to the Broadband MSA, which is included in general and administrative expenses in the condensed statements of operations.

Amounts due to Broadband Capital were $ 0.1 million and $ 0 as of September 30, 2022 and December 31, 2021, respectively.

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

What changed 10-Q

Item 1. Financial Statements