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Item 1. Financial Statements

2022-05-10 compared with 2021-11-09 · 171 added, 527 removed, 299 unchanged (70% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021

March 31, 2022

December 31, 2021

1 unchanged sentence

Cash and cash equivalents

Marketable securities

Marketable securities, current

Accounts receivable

3 unchanged sentences

Property and equipment, net

Right-of-use asset, net

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

Intangible asset

Right-of-use assets, net

Liabilities and Stockholders' Equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Lease liability, current

Other liabilities, current

Lease liabilities, current

Total current liabilities

Long-term liabilities:

Lease liability, non-current

Other liabilities, non-current

Lease liabilities, non-current

Total liabilities

Commitments and contingencies (Note 12)

Convertible preferred stock:

Series B preferred stock, $ 0.001 par value, 0 and 6,032,183 shares authorized at September 30, 2021 and December 31, 2020, 0 and 3,619,292 shares issued and outstanding at September 30, 2021 and December 31, 2020

Series A preferred stock, $ 0.001 par value, 0 and 2,495,933 shares authorized at September 30, 2021 and December 31, 2020, 0 and 2,495,933 shares issued and outstanding at September 30, 2021 and December 31, 2020

Total convertible preferred stock

Stockholders’ deficit:

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

10,000,000 and 0 shares authorized at September 30, 2021 and December 31, 2020, respectively;

No shares issued or outstanding

Class A common stock, $ 0.001 par value, 200,000,000 and 22,026,200 shares authorized at September 30, 2021 and December 31, 2020 respectively;

25,938,064 and 4,950,129 shares issued and outstanding at September 30, 2021 and December 31, 2020

Class B common stock, $ 0.001 par value, 20,000,000 and 6,032,183 shares authorized at September 30, 2021 and December 31, 2020 respectively;

0 shares issued and outstanding at September 30, 2021 and December 31, 2020

10,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively;

0 shares issued or outstanding at March 31, 2022 and December 31, 2021

Class A common stock, $ 0.001 par value, 200,000,000 shares authorized at March 31, 2022 and December 31, 2021;

26,383,299 and 26,320,199 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Class B common stock, $ 0.001 par value, 20,000,000 shares authorized at March 31, 2022 and December 31, 2021;

0 shares issued and outstanding at March 31, 2022 and December 31, 2021

Additional paid-in capital

3 unchanged sentences

( 59,273,388 )

Total stockholders' equity (deficit)

( 22,481,450 )

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

Total stockholders' equity

Total liabilities and stockholders' equity

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

2 unchanged sentences

General and administrative

Amortization of intangible asset

Total operating expenses

2 unchanged sentences

( 6,236,006 )

( 22,770,314 )

( 11,246,099 )

Other income (expense)

3 unchanged sentences

( 6,229,651 )

( 22,751,389 )

( 11,203,961 )

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

5 unchanged sentences

( 6,229,651 )

( 22,756,140 )

( 11,203,961 )

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

13 unchanged sentences

( 22,481,450 )

Issuance of Series A convertible preferred stock, net of issuance costs

Stock-based compensation expense

4 unchanged sentences

( 28,528,876 )

Stock-based compensation expense

( 3,604,162 )

Balance at June 30, 2020

( 15,502,624 )

( 12,773,506 )

Stock-based compensation expense

( 4,399,079 )

Balance at September 30, 2020

( 19,901,703 )

( 16,862,120 )

Convertible Preferred Stock

9 unchanged sentences

( 59,273,388 )

( 22,481,450 )

Stock-based compensation expense

( 6,229,651 )

Balance at March 31, 2021

( 31,967,291 )

( 28,528,876 )

Issuance of Series B convertible preferred stock, net of issuance costs

Issuance of common stock upon exercise of stock options

Issuance of common stock upon exercise of warrants

Stock-based compensation expense

1 unchanged sentence

( 12,896,374 )

( 39,954,956 )

( 35,185,780 )

Balance at June 30, 2021

Conversion of Preferred Stock into common stock

( 6,032,145 )

( 61,772,761 )

( 2,495,933 )

( 21,119,940 )

( 82,892,701 )

Issuance of common stock upon exercise of stock options

Issuance of common stock upon initial public offering, net of issuance costs ( $ 2,124,317 )

Stock-based compensation expense

( 8,534,073 )

Other comprehensive loss

Balance at September 30, 2021

Balance at March 31, 2022

( 72,169,762 )

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2021

Cash flows from operating activities:

4 unchanged sentences

Right-of-use asset amortization

Intangible asset amortization

Stock based compensation expense

4 unchanged sentences

Prepaid expenses and other current assets

( 3,122,547 )

Increase (decrease) in:

1 unchanged sentence

Accrued expenses

( 2,235,349 )

Lease liability

Other liabilities

Net cash used in operating activities

5 unchanged sentences

( 7,980,107 )

Net cash used in investing activities

( 52,808,033 )

Maturities of marketable securities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from the issuance of Series A preferred stock, net of issuance costs

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

Proceeds from initial public offering of common stock, net of commissions and underwriting

Payment of initial public offering costs

( 2,124,317 )

Proceeds from exercise of stock options

Proceeds from exercise of warrants

Net cash provided by financing activities

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Supplemental disclosures of noncash information:

Conversion of convertible Series A and B preferred stock into common stock

Reclassification of liability for Series A preferred stock

Reduction of right of use asset and lease liability in connection with lease modification

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

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Immuneering Corporation, a Delaware corporation, (“Immuneering” or the “Company”) was incorporated in 2008.

The Company is a biopharmaceutical company with an emerging pipeline focused on improving patient outcomes across a spectrum of debilitating oncologic and neurologic diseases by applying the Company’s deep knowledge of translational bioinformatics to every stage of the drug development process.

The Company has more than a decade of experience in translational bioinformatics and generating insights into drug mechanisms of action and patient treatment responses.

Building on this experience, the Company developed a disease agnostic platform that enables the Company to utilize human data, novel biology and chemistry, and translational planning to create and advance the Company’s wholly owned pipeline.

The Company aims to improve patient outcomes by advancing a unique pipeline of oncology and neuroscience product candidates developed using the Company’s translational bioinformatics platform.

The Company has more than a decade of experience applying translational bioinformatics to generate insights into drug mechanism of action and patient treatment response.

Building on this experience, the Company’s disease-agnostic discovery platform enables the Company to create product candidates based on 1) biological insights that are both counterintuitive and deeply rooted in data, and 2) novel chemistry.

On October 30, 2019, Immuneering formed a wholly owned subsidiary, Immuneering Securities Corporation (“ISC”), a Massachusetts securities corporation, for the sole purpose of buying, selling and holding securities on the Company’s behalf.

Immuneering and ISC are collectively referred to as “the Company” throughout these condensed consolidated financial statements.

Since inception, the Company has devoted substantially all of its efforts to business planning, service revenue generation, research and development, recruiting management and technical staff, and raising capital.

The Company has financed its operations through service revenues, the issuance of convertible debt and the sale of convertible preferred stock and common stock.

On December 22, 2021, the Company acquired all outstanding shares of capital stock of BioArkive, Inc.

(“BioArkive”), a California corporation, which as a result became a wholly owned subsidiary.

Immuneering, ISC and BioArkive are collectively referred to as “the Company” throughout these condensed consolidated financial statements.

The Company is subject to a number of inherent risks associated with any biotechnology company that has substantial expenditures for research and development.

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Upon the closing of the IPO, all 8,528,078 shares of the Company’s convertible preferred stock then outstanding automatically converted into 11,939,281 shares of Class A common stock.

Upon the conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock (at par value) and additional paid-in capital (see Note 8).

Upon the conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock (at par value) and additional paid-in capital.

To date, the Company has funded its operations through service revenues, and with proceeds from the sale of its capital stock and convertible notes and, most recently, with proceeds from the IPO.

The Company has incurred recurring losses over the past several years and as of September 30, 2021, the Company had an accumulated deficit of $ 48,489,029 .

The Company has incurred recurring losses over the past several years and as of March 31, 2022, the Company had an accumulated deficit of $ 72,169,762 .

The Company expects to continue to generate operating losses for the foreseeable future.

3 unchanged sentences

If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations.

Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and estimates that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the interim condensed consolidated financial statements.

The full extent to

which coronavirus (“COVID-19”) pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat COVID-19 and its variants, as well as the economic impact on local, regional, national and international markets.

The full extent to which coronavirus (“COVID-19”) pandemic will directly or indirectly impact the Company’s business, results of operations and financial

condition, including expenses and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat COVID-19 and its variants, as well as the economic impact on local, regional, national and international markets.

The Company has considered potential impacts arising from the pandemic related to COVID-19 and its variants and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgements or revise the carrying values of its assets or liabilities.

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All intercompany balances and transactions have been eliminated in consolidation.

There have been no material changes to the accounting policies of the Company as those set forth in Note 2 to the audited consolidated financial statements contained in the final prospectus, dated July 29, 2021, filed with the SEC on July 30, 2021 pursuant to Rule 424(b) relating to our Registration Statement on Form S-1 (File No.

333-257791) (the “Prospectus”).

There have been no material changes to the accounting policies of the Company as those set forth in Note 2 to the audited consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal period ended December 31, 2021.

Unaudited Interim Financial Information

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Revenues and net loss for any interim period are not necessarily indicative of future or annual results.

On July 23, 2021, the Company approved a one -for-1.4 stock split which was consummated in connection with the Company’s IPO.

All information in the accompanying financial statements and notes thereto regarding share amounts of common stock, price per share of common stock and the conversion factor for Series A and Series B Preferred Stock into common stock have been adjusted to reflect the application of the stock split on a retroactive basis.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting periods.

These estimates and assumptions are based on current facts, historical experience and various other factors believe to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets liabilities and the recording of expenses that are not readily apparent from other sources.

Significant estimates reflected in these condensed consolidated financial statements included but are not limited to, the research and

development expenses, determination of fair value of stock-based awards, the valuation of common stock, and the right-to-use assets and operating lease liability.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets, liabilities and the recording of expenses that are not readily apparent from other sources.

Significant estimates reflected in these condensed consolidated financial statements included but are not limited to, the research and development expenses, determination of fair value of stock-based awards, the valuation of common stock prior to the IPO, and the right-to-use assets and operating lease liability.

Actual results may differ materially and adversely from these estimates.

Goodwill Impairment

Subsequent to December 31, 2021, the Company’s market capitalization has declined which may be an indicator of impairment.

The Company will continue to assess the impact of its market capitalization and any other indicators of potential impairment.

It is possible that if the Company’s market capitalization decline is more than temporary, or if

other indicators of impairment are identified, an interim impairment analysis may be necessary, which could result in an impairment of goodwill, intangible assets and other long-lived assets in 2022.

Recently Issued Accounting Pronouncements

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The Company elected to avail itself of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

In 2016, the FASB issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Statements.

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The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments - Overall, applied on an instrument-by-instrument basis for eligible instruments.

2016-13, Financial Instruments - Credit Losses (Topic 326) will become effective for the Company on January 1, 2023.

The Company is currently assessing the impact of the adoption of this guidance on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in the existing guidance for income taxes and making other minor improvements.

The amendments are effective for annual reporting periods beginning after December 15, 2020 with early adoption permitted.

The Company is currently assessing the impact of the adoption of this guidance on its condensed consolidated financial statements.

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) will become effective for the Company on January 1, 2023.

The Company is currently evaluating the new guidance and assessing the potential impact on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350 ) , which eliminates Step 2 from the goodwill impairment test.

Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.

Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1).

This update is effective for annual and interim impairment tests performed in periods beginning after December 15, 2022.

Early adoption of the standard is permitted.

The Company is currently evaluating the new guidance and assessing the potential impact on its condensed consolidated financial statements.

Note 3 – Marketable Securities

Our marketable securities are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities and are recorded at fair value.

Unrealized gains/(losses) are included as a component of accumulated other comprehensive loss in the condensed consolidated balance sheets and statements of convertible preferred stock and stockholders’ equity (deficit) and a component of total comprehensive loss in the condensed consolidated statements of comprehensive loss, until realized.

Unrealized gains/(losses) are included as a component of accumulated other comprehensive loss in the condensed consolidated balance sheets and statements of convertible preferred stock and stockholders’ equity and a component of total comprehensive loss in the condensed consolidated statements of comprehensive loss, until realized.

The Company assesses its available-for-sale marketable securities for impairment on a quarterly basis.

There were no impairments of the Company’s available-for-sale marketable securities measured and carried at fair value during the three and nine months ended September 30, 2021.

There were no impairments of the Company’s available-for-sale marketable securities measured and carried at fair value during the three months ended March 31, 2022 or 2021.

Realized gains and losses are included in other expense on a specific-identification basis.

There were no realized gains or losses on marketable securities for the three and nine months ended September 30, 2021 or 2020.

Marketable securities as of September 30, 2021 consisted of the following:

September 30, 2021

There were no realized gains or losses on marketable securities for the three months ended March 31, 2022 or 2021.

Marketable securities as of March 31, 2022 consisted of the following:

March 31, 2022

Amortized Cost

3 unchanged sentences

Commercial paper

Total marketable securities

Marketable securities as of December 31, 2021 consisted of the following:

December 31, 2021

Amortized Cost

Unrealized Gains

Unrealized Losses

Government securities

Commercial paper

Total Current

2 unchanged sentences

Total marketable securities

There were no marketable securities as of December 31, 2020.

Note 4 – Fair Value Measurements

5 unchanged sentences

Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of September 30, 2021:

The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of March 31, 2022:

Cash equivalents

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The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value.

After completing our validation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2021.

There have been no changes to the valuation methods during the nine months ended September 30, 2021.

We have no financial assets or liabilities that were classified as Level 3 at any point during the nine months ended September 30, 2021.

There were no marketable securities as of December 31, 2020.

After completing our valuation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2022.

There have been no changes to the valuation methods during the three months ended March 31, 2022.

There were no transfers between Level 1 and Level 2 and we had no financial assets or liabilities that were classified as Level 3 at any point during the three months ended March 31, 2022.

The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2021:

Cash equivalents

Commercial paper

Total cash equivalents

Marketable securities:

Government securities

Commercial paper

Total marketable securities

Total cash equivalents and marketable securities

Note 5 – Property and Equipment, net

Property and equipment, net consisted of the following:

September 30,

Computer equipment

Furniture and fixtures

Lab equipment

Leasehold improvements

Accumulated depreciation

Property and equipment, net

Depreciation expense totaled $ 11,978 and $ 5,656 for the three months ended September 30, 2021 and 2020, respectively.

Depreciation expense totaled $ 30,652 and $ 16,879 for the nine months ended September 30, 2021 and 2020, respectively.

Depreciation expense totaled $ 47,704 and $ 8,867 for the three months ended March 31, 2022 and 2021, respectively.

Note 6 – Business Combination

BioArkive Acquisition

On December 22, 2021, the Company completed the acquisition of all outstanding shares of capital stock of BioArkive, Inc., a California corporation (“BioArkive”), for a market value of $ 8.75 million.

BioArkive is a San Diego based contract research organization that has previously provided preclinical research services and biosample storage to the Company and other biotechnology companies.

BioArkive is in the process of being fully integrated into the Company to exclusively support the Company's internal preclinical research activities for its oncology pipeline.

In connection with the acquisition, the Company has assumed the obligations under BioArkive’s three lease agreements.

The purchase price was paid by Immuneering through the issuance of an aggregate of 379,635 shares of Immuneering’s Class A common stock.

The number of shares of common stock issued was calculated using a value based on the average of the daily volume weighted average prices of the common stock on the Nasdaq Stock Exchange for the 30 -trading day period ending on and including the trading day immediately prior to the closing date.

The sellers of BioArkive are restricted from selling these shares for a 6 month period from the date of the acquisition.

As such, we estimated that there was an approximate 10 % discount for the lack of marketability of the shares.

The fair value of the purchase price in the acquisition was $ 7,875,000 .

Prior to the acquistion, Brett Hall, Chief Scientific Officer of Immuneering and the Founder and Chairman of the board of directors of BioArkive, held the majority of the outstanding shares of BioArkive capital stock.

BioArkive provided contract services to the Company.

Research and development expenses in the consolidated statement of operations include the cost of services provided by BioArkive to the Company which amounted to $ 4,548,780 in 2021 through the date of the acquisition.

The results of BioArkive’s operations are included in accounts payable or accrued contract research expenses in the consolidated balance sheets.

Assets Acquired and Liabilities Assumed at Fair Value

The BioArkive acquisition has been accounted for using the acquisition method of accounting.

This method requires assets acquired and liabilities assumed in a business combination to be recognized at their fair values as of the acquisition date.

As of March 31, 2022, the purchase accounting had been finalized, and there was an immaterial measurement period adjustment related to accrued expenses and goodwill.

No other adjustments were identified.

Intangible Assets

The estimated fair value of the intangible assets was determined using the relief from royalty approach.

Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected cost savings of the combined company and assembled workforce.

One of the key factors that contributes to the recognition of goodwill, and a driver for the Company's acquisition of BioArkive, is the planned investment in the internal preclinical research activities for our oncology pipeline.

Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes.

Pro forma results are not presented for this acquisition as they are not material to the consolidated results of the Company’s operations.

Other currents assets

Other long term assets

Property, plant and equipment, net

Right of use assets

Intangible asset

Total assets acquired

Accounts payable, accrued expenses and other liabilities

Deferred tax liabilities

Lease liabilities

Net assets acquired

Note 7 – Accrued Expenses

Accrued expenses consisted of the following:

September 30,

Accrued professional services

2 unchanged sentences

Accrued other

Note 7 – Convertible Preferred Stock

Series A Preferred Stock

In September 2019, the Company authorized the sale and issuance of up to 1,987,979 shares of Series A Preferred Stock, $ 0.001 par value per share, at an original issuance price of $ 8.5514 per share.

In January 2020, the number of shares authorized for the Series A Preferred Stock was increased to 2,495,933 shares.

The Series A Preferred Stock financing was structured to be issued in rolling closes during 2019 and 2020.

On September 20, 2019, the Company issued an additional 1,122,458 shares of Series A Preferred Stock for gross cash proceeds of $ 9,598,847 and issued 785,706 shares of Series A Preferred Stock in conjunction with the conversion of the outstanding amount of the Convertible Notes.

In 2019, the Company incurred issuance costs of $ 200,587 in connection with this offering.

The Company received funds for issuance of an additional 468,315 shares of Series A Preferred Stock for gross cash proceeds of $ 4,004,975 through December 31, 2019.

Of these shares, 410,436 shares of Series A Preferred Stock for gross cash proceeds of $ 3,509,802 exceeded the authorized amount allowed by the articles of incorporation, resulting in a liability of $ 3,509,802 and a total of 1,966,043 shares of Series A Preferred Stock outstanding at December 31, 2019.

In January 2020, the shares that were previously classified as a liability as of December 31, 2019 were reclassified to temporary equity upon the approved increase to authorized shares of Series A Preferred Stock.

In January 2020, the Company issued 119,454 additional shares of Series A Preferred Stock for gross cash proceeds of $ 1,021,413 .

The Company incurred issuance costs of $ 23,610 in connection with the financing in January 2020.

Note 8 – Preferred Stock

Series B Preferred Stock

In December 2020, the Company authorized the sale and issuance of up to 6,032,183 shares of Series B Preferred Stock, $ 0.001 par value per share, at an original issuance price of $ 10.2782 per share.

The Series B Preferred Stock financing was structured to close in two tranches.

The first tranche closed in December 2020 and the Company issued 3,619,292 shares of Series B Preferred Stock for gross cash proceeds of $ 37,199,929 .

The Company incurred issuance costs of $ 216,019 in connection with the financing in December 2020.

The Company determined the right of the investors to purchase 2,412,853 shares of Series B Preferred Stock in the second tranche does not meet the definition of a freestanding financial instrument as it is not separable from the Series B Preferred Stock issued in the first tranche.

The issuance of the second tranche is subject to the Company meeting certain development milestones or at the election of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock which must include one specific shareholder (the “Requisite Holders”).

Each holder of Series B Preferred Stock may elect to purchase their requisite shares of the second tranche at any time.

As of March 31, 2021, the Company had not met these development milestones nor did the Requisite Holders elect to purchase the second tranche prior to meeting these milestones and therefore no shares of the second tranche were issued.

In April and May 2021, all 2,412,853 shares of the second tranche of Series B Preferred Stock were issued based on the voluntary election of substantially all of the holders of Series B Preferred Stock.

The Company received gross proceeds of $ 24,799,786 .

The Company incurred issuance costs of $ 10,935 in connection with the second tranche of Series B Preferred Stock.

The rights and preferences of the Series A Preferred Stock and Series B Preferred Stock (“Preferred Stock”) are as described below:

Each share of Preferred Stock may be converted at any time, at the option of the holder, into shares of Class A common stock, subject to the applicable conversion rate as determined by dividing the original issue price by the conversion price.

The conversion price for the Series A Preferred Stock and Series B Preferred Stock (as may be adjusted for certain customary dilutive events) is $ 6.1081 and $ 7.3416 , respectively.

The Preferred Stock automatically convert into shares of Class A common stock at the then effective conversion rate upon the closing of a public offering of the Company’s securities with gross proceeds to the Company of at least $ 75,000,000 and a share price of at least $ 7.3416 or at the election of the holders of the Requisite Holders.

Holders of Series B Preferred Stock that would beneficially own at least 9.9 % of any then outstanding class of equity securities may elect to receive a portion of their converted Series B Preferred Stock as Class B common stock upon conversion.

Upon the closing of the IPO on August 3, 2021, all 8,528,078 shares of the Company’s convertible preferred stock then outstanding automatically converted into 11,939,281 shares of Class A common stock.

Preferred Stockholders are entitled to receive per annum dividends of 7 % of the original issue price share, payable only when, as and if declared by the Board of Directors.

The right to receive these dividends is not cumulative, and therefore, if not declared in any year, the right to receive such dividends shall terminate and not carry forward into the next year.

As of September 30, 2021 and December 31, 2020, no dividends had been declared.

Voting Rights

Preferred Stock and common stock vote together as one class on an as converted basis.

Common stock voting rights on certain matters are subject to the powers, preferences, and rights of the Preferred Stock.

Preferred Stockholders are entitled to vote on all matters and shall have the number of votes equal to the number of shares of common stock into which the shares of Preferred Stock held by such holder are then convertible.

As long as 2,132,029 shares of Preferred Stock are outstanding, certain actions such as mergers, acquisition, liquidation, dissolution, wind up of business, and deemed liquidation events, must be approved by the holders of at least a majority of the then-outstanding shares of Preferred Stock.

Liquidation Preference

Upon liquidation, dissolution, or winding up of business, holders of Preferred Stock are entitled to receive a liquidation preference in priority to holders of common stock at the original respective Preferred Stock issue price for such series.

If assets available for distribution are insufficient to satisfy the liquidation payment to holders of Preferred Stock in full, assets available for distribution will be allocated among holders of Preferred Stock on a pari passu basis at an amount per share equal to the greater of the respective original Preferred Stock issue price for such series plus any declared but unpaid dividends or such amount had all shares been converted to common stock.

When holders of Preferred Stock are satisfied in full, any excess assets available for distribution will be allocated ratably among common stock holders based on their pro rata shareholdings.

Upon a deemed liquidation event, as defined in the articles of incorporation, holders have the option to redeem their shares at the liquidation payment amounts summarized above.

Other than described above, the shares of Preferred Stock are not redeemable.

Note 9 - Common Stock

The Company had 200,000,000 authorized shares of Class A common stock, $ 0.001 par value per share as of September 30, 2021 and 22,026,200 authorized shares of Class A common stock, $ 0.001 par value per share as of December 31, 2020, respectively, of which 25,938,064 and 4,950,129 were issued and outstanding , respectively.

The Company had 200,000,000 authorized shares of Class A common stock, $ 0.001 par value per share as of March 31, 2022 and December 31, 2021 of which 26,383,299 and 26,320,199 were issued and outstanding , respectively.

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

Dividends may be paid when, and if declared by the Board of Directors, subject to the limitations, powers and preferences granted to the Preferred Stockholders and on a proportionate basis with holders of Class B common stock.

As of September 30, 2021 and December 31, 2020, the following number of shares of Class A common stock have been reserved:

September 30,

Conversion of Series A Preferred

Conversion of Series B Preferred

Exercise of common stock warrants

Dividends may be paid when, and if

declared by the Board of Directors, subject to the limitations, powers and preferences granted to the Preferred Stockholders and on a proportionate basis with holders of Class B common stock.

As of March 31, 2022 and December 31, 2021, the following number of shares of Class A common stock have been reserved:

Exercise of common stock options

The Company had 20,000,000 authorized shares of Class B common stock, $ 0.001 par value per share as of September 30, 2021 and 6,032,183 authorized shares of Class B common stock, $ 0.001 par value per share as of December 31, 2020, of which no shares have been issued nor are outstanding.

The Company had 20,000,000 authorized shares of Class B common stock, $ 0.001 par value per share as of March 31, 2022 and December 31, 2021, of which no shares have been issued nor are outstanding.

The holders of Class B common stock have no voting rights.

Dividends may be paid when, and if, declared by the Board of Directors, subject to the limitations, powers and preferences granted to the preferred stockholders and on a proportionate basis with holders of Class A common stock.

Common Stock Warrants

During 2019, the Company issued warrants to purchase an aggregate of 308,308 shares of Class A common stock at an exercise price of $ 3.01 per share to several advisors, including 200,984 shares to entities related to members of the Board of Directors of the Company, in lieu of cash payments.

These warrants vested immediately upon issuance, became exercisable on January 9, 2021 and have a 10-year term set to expire on January 9, 2030.

The Company evaluated the terms of these warrants and determined that equity classification was appropriate.

As of December 31, 2020, no warrants had been exercised.

During June 2021, all warrant holders exercised their warrants to purchase an aggregate of 308,308 shares of common stock.

As of September 30, 2021, there were no warrants outstanding.

Initial Public Offering

On August 3, 2021, the Company completed its initial public offering pursuant to which it issued and sold 8,625,000 shares of its Class A common stock, inclusive of 1,125,000 shares of its Class A common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares.

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(i) increase the number of authorized shares of common stock to 200,000,000 shares of Class A common stock, 20,000,000 shares of Class B common stock, par value $ 0.001 per share, and (ii) authorize 10,000,000 shares of Preferred Stock;

and (iii) authorize the Board to establish the rights, preferences and restrictions on any unissued series of Preferred Stock.

and (iii) authorize the Board of Directors to establish the rights, preferences and restrictions on any unissued series of Preferred Stock.

Note 10 - Net Loss Per Share Attributable to Common Stockholders

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The Company has reported net losses for all periods presented, therefore diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Basic and diluted net loss per share attributable to common stockholders was calculated at September 30, 2021 and 2020 as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

( 8,534,073 )

( 4,399,079 )

Basic and diluted net loss per share attributable to common stockholders was calculated at March 31, 2022 and 2021 as follows:

Three Months Ended March 31,

( 12,896,374 )

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Net loss per share - basic and diluted

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares) at September 30, 2021 and 2020:

Series A Preferred

Series B Preferred

Warrants to purchase common stock

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The options typically vest over a four -year period.

As of September 30, 2021, the maximum number of shares available for issuance under the Incentive Plan was 2,825,173 shares.

As of September 30, 2021, the number of shares available for future grants under the Incentive Plan was 137,950 shares.

However, from and after the effectiveness of the Company’s 2021 Incentive Award Plan, no additional awards will be granted under the Incentive Plan.

As of March 31, 2022, the maximum number of shares available for issuance under the Incentive Plan was 2,825,173 shares.

Upon the effectiveness of the Company’s 2021 Incentive Award Plan, the Company ceased granting awards under the Incentive Plan.

However, the Incentive Plan continues to govern awards outstanding thereunder.

On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective on July 29, 2021.

The 2021 Plan provides for the grant of incentive 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 2021 Plan is initially equal to 2,590,000 plus an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 4 % of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors.

No more than 15,350,000 shares of Class A

common stock may be issued under the 2021 Plan upon the exercise of incentive stock options.

The number of shares reserved for issuance under the 2021 Plan was initially equal to 2,590,000 plus an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 4 % of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors.

No more than 15,350,000 shares of Class A common stock may be issued under the 2021 Plan upon the exercise of incentive stock options.

Shares issued under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares.

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In addition, shares subject to stock options issued under the Incentive Plan may become available for issuance under the 2021 Plan to the extent such stock options are canceled, forfeited, exchanged, settled in cash or otherwise terminated.

As of September 30, 2021, there were 2,397,232 shares available for future issuance under the 2021 Plan.

As of March 31, 2022, there were 2,431,728 shares available for future issuance under the 2021 Plan.

On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on July 29, 2021.

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The number of shares of Class A common stock that may be issued under the 2021 ESPP will automatically increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 1 % of the shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the board of directors, provided that not more than 3,340,000 shares of Class A common stock may be issued under the 2021 ESPP.

As of September 30, 2021, no shares had been issued under the 2021 ESPP.

During the three and nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $ 636,806 and $ 1,170,040 , respectively.

During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of $ 310,465 and $ 870,162 , respectively.

As of September 30, 2021, compensation expense remaining to be recognized for outstanding stock options was $ 7,990,487 and to be recognized over a weighted-average period of 3.07 years.

As of March 31, 2022, no shares had been issued under the 2021 ESPP.

During the three months ended March 31, 2022, the Company recognized stock-based compensation expense of $ 897,650 .

During the three months ended March 31, 2021, the Company recognized stock-based compensation expense of $ 182,225 .

As of March 31, 2022, compensation expense remaining to be recognized for outstanding stock options was $ 13,195,203 and to be recognized over a weighted-average period of 3.06 years.

The fair value of options granted is calculated on the grant date using the Black-Scholes option valuation model.

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Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer public companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

For the nine months ended September 30, 2021, the Company granted 1,353,662 shares of stock options at a weighted-average grant date fair value of $ 9.56 .

For the nine months ended September 30, 2020, the Company granted 336,626 shares at a weighted-average grant date fair value of $ 3.02 .

The Company used the following assumptions in its application of the Black-Scholes option pricing model for grants during the nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

For the three months ended March 31, 2022, the Company granted 942,025 shares of stock options at a weighted-average grant date fair value of $ 10.10 .

The Company used the following assumptions in its application of the Black-Scholes option pricing model for grants during the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Weighted-average risk-free interest rate

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69.01 % - 80.99 %

The following table summarizes the stock option activity during the nine months ended September 30, 2021 under the Plan:

The following table summarizes the stock option activity during the three months ended March 31, 2022 under the Plan:

Exercise Price

2 unchanged sentences

Outstanding at of December 31, 2021

Outstanding at September 30, 2021

Vested and exercisable at September 30, 2021

Vested and expected to vest at September 30, 2021

For the three and nine months ended September 30, 2021 and 2020, the Company recognized share-based compensation expense recognized on the accompanying condensed consolidated statements of operations as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Outstanding at March 31, 2022

Vested and exercisable at March 31, 2022

Vested and expected to vest at March 31, 2022

For the three months ended March 31, 2022 and 2021, the Company recognized share-based compensation expense recognized on the accompanying condensed consolidated statements of operations as follows:

Three Months Ended March 31,

Cost of revenue

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Operating Leases

The Company leases office space in Cambridge, Massachusetts, New York, New York and as of July 2021, San Francisco, California, pursuant to short-term arrangements.

The Company leases office space in Cambridge, Massachusetts, New York, New York and San Francisco, California, pursuant to short-term arrangements.

The Cambridge and San Francisco leases are on a month-to-month basis, requiring one month’s notice before termination.

The New York lease is renewable on a quarterly basis and the last renewal was on August 3, 2021 which extended the lease term until December 31, 2021.

The New York lease is renewable on a quarterly basis and the last renewal extended the lease term until March 31, 2023.

These lease agreements include payments for lease and non-lease components and the Company has elected to not separate such components and these payments were recognized as rent expense.

As of September 30, 2021, total future minimum lease payments for its short-term leases in Cambridge, Massachusetts, New York, New York and San Francisco, California was $ 23,620 due in 2021 and $ 11,040 due in 2022.

As of March 31, 2022, total future minimum lease payments for its short-term leases in Cambridge, Massachusetts, New York, New York and San Francisco, California was $ 64,920 due in 2022.

The Company leases storage space for its electronic data equipment in Somerville, Massachusetts.

This lease is renewable on an annual basis effective every March 1st.

Prior to September 30, 2021, the Company renewed the lease through March 31, 2022.

As of September 30, 2021, total future minimum lease payments for this lease were $ 5,354 due in 2021 and $ 3,569 due in 2022.

In July 2019, the Company entered into an office lease in San Diego, California (“2019 San Diego Lease”) with a lease term of 24 months with no escalations and variable costs based on additional number of employees using the facility.

This lease was cancelable upon a 30-day notice period.

Upon adoption of ASC 842 on January 1, 2020, a right-to-use asset and lease liability based on the fixed costs was recognized by the Company for $ 61,822 .

Effective September 20, 2020, the lease was terminated, and the remaining right-of-use asset and lease liability were derecognized.

No gain or loss was recognized for the termination of this lease.

In October 2020, the Company entered into an office lease in San Diego, California (“2020 San Diego Lease”) with a lease term of 67 months .

Prior to December 31, 2021, the Company renewed the lease through March 31, 2023.

As of March 31, 2022, total future minimum lease payments for this lease were $ 16,804 due in 2022.

In October 2020, the Company entered into an office lease (“Via Frontera Lease”) in San Diego, California with a lease term of 67 months .

At the lease commencement date, a right-to-use asset and lease liability was recognized by the Company for $ 637,863 .

Maturities of the lease liabilities due under the Company’s 2020 San Diego Lease as of September 30, 2021 are as follows:

In January 2022, the Company exercised its option to terminate the Via Frontera Lease 20 months early.

The lease will terminate on October 1, 2023.

This was accounted for as a lease modification which reduces the term of the existing lease and the Company adjusted the value of its right-of-use asset and operating lease liability by $ 347,739 using an incremental borrowing rate of approximately 6 % .

The modification is reflected as a non-cash operating activity in the statement of cash flows for the three months ended March 31, 2022.

The Company subsequently entered into a sublease of the Via Frontera Lease, the term of which commenced in March 2022 and continues through the full remaining obligation.

Sublease income will be accounted for as a reduction of rent expense in the statement of operations.

As part of the BioArkive acquisition, the Company assumed the obligations of three leases in San Diego, California.

One is for 38,613 square feet of office and laboratory space, under a lease that terminates on April 30, 2032, the second is for a 6,100 square feet of office and laboratory space under a lease that terminates on December 31, 2022 (the “Site 2 Lease”), and the third is for a lease for 4,760 square feet of office and laboratory space under a lease that terminates on March 31, 2024.

As a result, the Company recorded right-to-use assets and lease liabilities of $ 4,824,700 on the acquisition date of December 22, 2021 .

In February 2022, the Company entered into a sublease of the Site 2 Lease, the term of which continues through the remaining term of the Site 2 Lease.

Future minimum lease payments for operating leases with initial or remaining terms in excess of one year at March 31, 2022 were as follows:

Remainder of 2022

1 unchanged sentence

Imputed interest

( 3,067,891 )

Total lease liabilities

2 unchanged sentences

Total lease liability

Quantitative information regarding the Company’s leases for the nine months ended September 30, 2021 and 2020 is as follows:

September 30,

Quantitative information regarding the Company’s leases for the three months ended March 31, 2022 and 2021 is as follows:

Operating lease cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease costs

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These contracts generally provide for termination with a 30 -day notice.

Note 12 – Related Party Transactions

An officer of the Company is a board member of a contract research organization (“CRO”) that provides contract services to the Company.

Research and development expenses in the accompanying condensed consolidated statement of operations include the cost of services provided by the CRO to the Company which amounted to $ 3,274,393 and $ 1,950,415 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, $ 458,660 and $ 279,153 , respectively, was owed to the CRO and is included in accounts payable or accrued contract research expenses in the accompanying condensed consolidated balance sheets.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our final prospectus for our initial public offering filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or SEC, on July 30, 2021 (the “Prospectus”).

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a biopharmaceutical company with an emerging pipeline focused on improving patient outcomes across a spectrum of debilitating oncologic and neurologic diseases by applying our deep knowledge of translational bioinformatics to every stage of the drug development process.

We have more than a decade of experience in translational bioinformatics and generating insights into drug mechanisms of action and patient treatment responses.

Building on this experience, we developed a disease agnostic platform that enables us to utilize human data, novel biology and chemistry, and translational planning to create and advance our wholly owned pipeline.

Our current development programs in oncology are focused on providing treatments for patients with solid tumors caused by mutations of the RAS/RAF/MEK/ERK pathway and other oncologic signaling pathways.

Our lead product candidate, IMM-1-104, is designed to be a highly selective dual-MEK inhibitor that further disrupts the kinase suppressor of RAS 1 and 2 for the treatment of advanced solid tumors in patients harboring RAS mutant tumors.

We plan to submit an Investigational New Drug, or IND, for IMM-1-104 to the U.S.

Food and Drug Administration (“FDA”), in the first quarter of 2022.

In addition, we anticipate filing at least two additional INDs for our other oncology programs, one in each of 2023 and 2024.

For the period from inception through 2017, we devoted substantially all of our efforts to business planning, service revenue generation, developing tools to aid in drug discovery, and recruiting management and technical staff.

Since 2018, we have also focused significant effort on our own internal research and development programs.

We have financed our operations through service revenues, the issuance of convertible debt and the sale of convertible preferred stock and common stock.

Our operations have been financed primarily by service revenues and aggregate net proceeds of approximately $81.4 million from the issuance of convertible notes payable, convertible preferred stock including gross proceeds of approximately $24.8 million from the issuance of shares in the second tranche of Series B Preferred in April and May 2021, common stock, exercise of stock options and most recently, with proceeds from our completed initial public offering (“IPO”).

On August 3, 2021, we completed our IPO pursuant to which we issued and sold 8,625,000 shares of Class A common stock, inclusive of 1,125,000 shares sold by us pursuant to the full exercise of the underwriters’ option to purchase additional shares.

We received aggregate net proceeds of approximately $120.3 million from the IPO, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us, which were $2.1 million.

Since inception, we have had significant annual operating losses.

Our net loss was approximately $22.8 million, for the nine months ended September 30, 2021 and $17 million for the year ended December 31, 2020.

As of September 30, 2021, we had an accumulated deficit of approximately $48.5 million and approximately $159.6 million in cash and cash equivalents and marketable securities.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses.

We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase.

In particular, we expect our expenses to increase as we continue our development of, and seek

regulatory approvals for, our internally developed product candidates as well as add operational, financial and management informational systems and personnel to support our product development as well as support our transition to a public company.

In addition, if and when we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

Based upon our current business plans, we believe that our existing cash and cash equivalents and marketable securities will be sufficient to fund our development activities and other operations into 2024.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

To finance our operations beyond that point we will need to raise additional capital, which cannot be assured.

We have not had any internally developed products approved for sale.

We do not expect to generate any product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our internally developed product candidates.

If we obtain regulatory approval for any of our internally developed product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through service revenue, equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements.

However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all.

Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities.

If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

In particular, the ongoing pandemic related to COVID-19 and its variants has resulted in federal, state and local governments and private entities mandating various restrictions, including travel restrictions, access restrictions, restrictions on public gatherings, and stay at home orders.

The effect of these orders, government imposed quarantines and measures we have taken, such as implementing work-at-home policies, may negatively impact productivity, disrupt our business and/or could adversely affect our development plans and results.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including personnel at third-party manufacturing facilities and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timeline presently planned could be materially and adversely impacted.

It is unknown how long these conditions will last and what the complete effect will be on us.

While to date we have been able to continue to execute our overall business plan, some of our business activities have been slowed and taken longer to complete, particularly with respect to our process for recruiting new employees, and we continue to adjust to the challenges of operating in a largely remote setting with our employees.

Overall, we recognize the challenges the pandemic may pose to our business, will continue to closely monitor events as they develop and plan for alternative and mitigating measures that we can implement if needed.

Components of Our Results of Operations

Our revenue is generated by providing computational biology professional services to pharmaceutical and biotechnology companies.

We charge an agreed upon rate per hour based on the aggregate level of personnel assigned to work on the project or a fixed fee for a defined scope of work.

Our contracts specify the period of time over which these professional services will be provided.

We recognize revenue over time by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress, which depicts the performance in transferring control of the associated services to the customer.

We use input methods to measure the progress toward the complete satisfaction of performance obligations and evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.

We expect revenue to remain similar to prior years in the near-term as we continue to provide services to our existing customers and these revenues could decrease as we have deprioritized new services work in order to focus on developing our wholly owned pipeline.

Cost of Revenue

Our cost of revenue expenses consists primarily of costs related to providing professional services to our customers.

These costs include salaries, bonuses, benefits, and equity-based compensation expense, depreciation, facilities, and other outside services.

Operating Expenses

Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.

Research and Development

Research and development expenses account for a significant portion of our operating expenses.

Our research and development expenses consist primarily of direct and indirect costs incurred in connection with the development of our research platform, product candidates, discovery efforts and preclinical studies related to our program pipeline.

Our direct costs include:

● expenses incurred under agreements with CROs and other vendors that conduct our preclinical activities on our behalf;

including laboratory expenses related to the execution of preclinical studies on our behalf;

● expenses associated with the manufacturing of our product candidates and preclinical material, including fees paid to contract manufacturers;

● consulting fees and expenses related to preparation of initiation of clinical trials

Our indirect costs include:

● personnel-related expenses, consisting of employee salaries, bonuses, benefits and equity-based compensation expense and recruiting costs for personnel engaged in research and development activities;

● facility and equipment related expenses, consisting of indirect and allocated expenses for rent, depreciation, maintenance of facilities, insurance, and other supplies.

We expense research and development costs as incurred.

Our direct research and development expenses are not currently tracked on a program-by-program basis, but we anticipate tracking costs on a program-by-program basis at the time IMM-1-104 enters clinical trials, which we expect to occur in the first half of 2022, assuming our IND application is accepted.

We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates.

Due to the inherently unpredictable nature and numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs.

We are also unable to predict if, when, or to what extent we will obtain approval and generate revenues from the commercialization and sale of any of our product candidates.

The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, such as:

● successful completion of preclinical studies and initiation of clinical trials for future product candidates;

● successful enrollment and completion of clinical trials for our current product candidates;

● data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended patient populations;

● acceptance by the FDA or other applicable regulatory agencies of IND applications, clinical trial applications and/or other regulatory filings for our product candidates;

● expansion and maintenance of a workforce of experienced scientists and others to continue to develop our product candidates;

● successful application for and receipt of marketing approvals from applicable regulatory authorities;

● obtainment and maintenance of intellectual property protection and regulatory exclusivity for our product candidates;

● making of arrangements with contract manufacturing organizations for, or establishment of, commercial manufacturing capabilities;

● establishment of sales, marketing and distribution capabilities and successful launch of commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;

● acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors;

● effective competition with other therapies;

● obtainment and maintenance of coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;

● maintenance, enforcement, defense and protection of our rights in our intellectual property portfolio;

● avoidance of infringement, misappropriation or other violations with respect to others ’ intellectual property or proprietary rights;

● maintenance of a continued acceptable safety profile of our products following receipt of any marketing approvals.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming.

The actual probability of success for our product candidates may be affected by a variety of factors.

We may never succeed in achieving regulatory approval for any of our product candidates.

Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product candidates’ development, which could increase our research and development expense.

We may obtain unexpected results from our preclinical studies and clinical trials.

We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others.

A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates.

For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.

We expect that our research and development expenses will substantially increase for the foreseeable future as we continue to implement our business strategy, which includes advancing our product candidates through clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, and seeking regulatory approvals for our product candidates that successfully complete clinical trials.

In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

As a result, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development.

As of the date of this Quarterly Report on Form 10-Q, we cannot reasonably determine or accurately project total program-specific expenses through commercialization.

There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

General and Administrative

Our general and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, equity-based compensation, and recruiting costs for personnel in executive, finance, and other administrative functions.

Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services, insurance costs, travel expenses and facility related expenses not otherwise included in research and development expenses.

We expect our general and administrative expenses will substantially increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities, as well as to support our operations generally.

As we expand our operations, we also expect to incur increased expenses associated with operating as a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and rules and regulations of the SEC, Sarbanes-Oxley Act, director and officer insurance costs, and investor and public relations costs.

Other Income (Expense)

Interest income

Interest income consists of interest earned on our cash and cash equivalents balances and our marketable securities.

The primary objective of our investment policy is capital preservation.

Other expense

Other expense consists of the amortization of premiums or accretion of discounts related to our marketable securities.

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the periods indicated:

Three Months Ended September 30,

(in thousands, except percentages)

Cost of revenue

Operating expenses

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Other expense

N/M – Not meaningful

The following table summarizes the revenue recognized for the periods indicated:

Three Months Ended September 30,

(in thousands, except percentages)

Revenue decreased by approximately $0.2 million, or 29.4%, to approximately $0.5 million for the three months ended September 30, 2021 compared to approximately $0.7 million for the three months ended September 30, 2020.

The decrease in revenue was due to approximately $0.2 million received from customer agreements that were completed in 2020, offset by a $0.1 million decrease in existing customers in the three months ended September 30, 2020, further offset by a $0.1 million increase in new customers in the three months ended September 30, 2021.

Cost of Revenue

The following table summarizes the components of cost of revenue expenses for the periods indicated:

Three Months Ended September 30,

(in thousands, except percentages)

Employee related costs

Equity-based compensation expense

Facilities and other allocated expenses

Total cost of revenue

Cost of revenue decreased by approximately $0.1 million, or 30.5%, to approximately $0.2 million for the three months ended September 30, 2021 compared to approximately $0.3 million for the three months September 30, 2020.

The decrease was primarily due to decreased employee related costs of approximately $0.1 million.

Research and Development

The following table summarizes the components of our research and development expenses for the periods indicated:

Three Months Ended September 30,

(in thousands, except percentages)

Employee related costs

Equity-based compensation expense

Outside contract research services

Facilities and other allocated expenses

Total research and development

Research and development expenses increased by approximately $2.1 million, or 52.5%, to approximately $6.2 million for the three months ended September 30, 2021 compared to approximately $4.1 million for the three months ended September 30, 2020.

The increase of approximately $2.1 million was primarily due to approximately $1.5 million of

outside contract research services for our preclinical candidates resulting from an increased number of discovery programs and increased spending on later stage preclinical efforts.

The increase also includes approximately $0.5 million of additional employee-related costs, primarily due to an increase in headcount and approximately $0.2 million increase for equity-based compensation expense.

General and Administrative

The following table summarizes the components of our general and administrative expenses for the periods indicated:

Three Months Ended September 30,

(in thousands, except percentages)

Employee related costs

Equity-based compensation expense

Professional fees

Public relations

Outside consultants

Facilities and other allocated expenses

Total general and administrative

General and administrative expenses increased by approximately $1.9 million, or 271.8%, to approximately $2.6 million for the three months ended September 30, 2021 compared to approximately $0.7 million for the three months ended September 30, 2020.

The increase of approximately $1.9 million was primarily due to increased employee related costs of approximately $1.2 million, increased professional fees incurred for accounting, auditing, legal, public relations and tax services of approximately $0.5 million, increased facilities expenses of approximately $0.1 million and approximately $0.1 million increase in equity-based compensation expense.

Other Income (expense)

Interest income increased by approximately $16,250 due to the interest earned on our cash and cash equivalents and marketable securities balances due to the higher balances as a result of the IPO proceeds.

Other expense increased by $8,089 as a result of the amortization of premiums related to our marketable securities.

Comparison of the Nine Months September 30, 2021 and 2020

The following table summarizes our results of operations for the periods indicated:

Nine Months Ended September 30,

(in thousands, except percentages)

Cost of revenue

Operating expenses

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Other income (expense)

N/M – Not meaningful

The following table summarizes the revenue recognized for the periods indicated:

Nine Months Ended September 30,

(in thousands, except percentages)

Revenue increased by approximately $0.2 million, or 14.8%, to approximately $1.9 million for the nine months ended September 30, 2021 compared to approximately $1.7 million for the nine months ended September 30, 2020.

The increase in revenue was due to an increase by approximately $0.3 million from new customers during 2021 and, a $0.2 million increase in existing customers partially offset by an approximately $0.3 million decrease due to customer agreements that were completed in 2020.

Costs of Revenue

The following table summarizes the components of cost of revenue expenses for the periods indicated:

Nine Months Ended September 30,

(in thousands, except percentages)

Employee related costs

Equity-based compensation expense

Facilities and other allocated expenses

Total cost of revenue

Cost of revenue increased by approximately $0.1 million, or 17.3%, to approximately $0.9 million for the nine months ended September 30, 2021 compared to approximately $0.8 million for the nine months ended September 30, 2020.

The increase was primarily due to increased employee related costs of approximately $0.2 million, partially offset by decreases in facilities expenses.

Research and Development

The following table summarizes the components of research and development expenses for the periods indicated:

Nine Months Ended September 30,

(in thousands, except percentages)

Employee related costs

Equity-based compensation expense

Outside contract research services

Facilities and other allocated expenses

Total research and development

Research and development expenses increased by approximately $8.5 million, or 83.8%, to approximately $18.6 million for the nine months ended September 30, 2021 as compared to approximately $10.1 million for the year ended September 30, 2020.

The increase of approximately $8.5 million was primarily due to approximately $6.3 million of outside contract research services for our preclinical candidates due to an increased number of discovery programs and increased spending on later stage preclinical efforts.

The increase also includes approximately $1.9 million of additional employee related costs, primarily due to higher headcount and increased equity-based compensation and facilities and other allocated expense of approximately $0.3 million.

General and Administrative

The following table summarizes the components of general and administrative expenses for the periods indicated:

Nine Months Ended September 30,

(in thousands, except percentages)

Employee related costs

Equity-based compensation expense

Professional fees

Public relations

Outside consultants

Facilities and other allocated expenses

Total general and administrative

General and administrative expenses increased by approximately $3.1 million, or 159.8%, to approximately $5.1 million for the nine months ended September 30, 2021 compared to approximately $2.0 million for the nine months ended September 30, 2020.

The increase of approximately $3.1 million was primarily due to increased employee related costs of approximately $1.8 million, increased professional fees incurred for accounting, auditing, legal, and tax services of approximately $1.0 million, increased public relation costs, equity-based compensation, outside consultants, facilities and other allocated expenses and other costs of approximately $0.3 million.

Other Income (expense)

Interest income decreased by approximately $15,124 due to the lower interest rates and lower cash balance up until the Company’s IPO in July.

Other expense increased by $8,089 as a result of the amortization of premiums related to our marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have financed our operations through service revenues, the issuance of convertible notes payable, convertible preferred stock, common stock, and the exercise of stock options.

As of September 30, 2021, we had an accumulated deficit of $48.5 million and $159.5 million in cash and cash equivalents and marketable securities.

Cash and cash equivalents are comprised of deposits at major financial banking institutions and highly liquid investments with an original maturity of three months or less at the date of purchase.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, reflected in the change in our outstanding accounts payable and accrued expenses.

Since our inception, we have incurred significant operating losses.

We have not yet commercialized any of our product candidates, and we do not expect to generate revenue from sales of any product candidates for the next several years, if at all.

To date, our operations have been financed primarily by service revenues and aggregate net proceeds of approximately $81.4 million from the issuance of convertible notes payable, convertible preferred stock including gross proceeds of approximately $24.8 million from the issuance of shares in the second tranche of Series B Preferred in April and May 2021, common stock, the exercise of stock options and most recently, the proceeds from our IPO.

In August, 2021, we completed our IPO pursuant to which we issued and sold 8,625,000 shares of Class A common stock, inclusive of 1,150,000 shares sold by us pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The following table summarizes our sources and uses of cash for the periods indicated:

Nine Months Ended September 30,

(in thousands)

Net cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Net Cash Used in Operating Activities

During the nine months ended September 30, 2021, operating activities used approximately $21.6 million of cash, primarily resulting from our net loss of approximately $22.8 million and cash provided by changes in our operating assets and liabilities of approximately $0.1 million, partially offset by equity-based compensation expense of approximately $1.2 million.

During the nine months ended September 30, 2020, operating activities used approximately $9.2 million of cash, primarily resulting from our net loss of approximately $11.2 million, partially offset by equity-based compensation expense of

approximately $0.9 million and cash provided by changes in our operating assets and liabilities of approximately $1.0 million.

Net Cash Used in Investing Activities

During the nine months ended September 30, 2021 and 2020, investing activities used approximately $52.8 million, and $15,357 respectively primarily resulting for the purchases of marketable securities in 2021 of approximately $52.8 million and for the purchases of property and equipment of $15,357 in 2020.

Net Cash Provided by Financing Activities

During the nine months ended September 30, 2021, net cash provided by financing activities was approximately $144.3 million, consisting primarily of approximately $24.8 million in net proceeds received from the issuance of Series B preferred stock, approximately $118.2 million from the proceeds from our initial public offering, approximately $1.0 million in net proceeds from the exercise of warrants and approximately $0.3 million from the exercise of stock options.

During the nine months ended September 30, 2020, net cash provided by financing activities was approximately $1.0 million, consisting primarily of proceeds received from the issuance of Series A preferred stock, net of issuance costs.

Future Funding Requirements

We expect that our expenses will increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development.

The timing and amount of our operating and capital expenditures will depend largely on:

● the impacts of the pandemic related to COVID-19 and its variants and potential future pandemics;

● the costs and results of our potential future clinical trials for our other product candidates;

● the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for our other product candidates;

● the costs, timing and outcome of regulatory review of our product candidates;

● our ability to enter into contract manufacturing arrangements for supply of active pharmaceutical ingredient, or API, and manufacture of our product candidates and the terms of such arrangements;

● the payment or receipt of milestones and receipt of other collaboration-based revenues, if any;

● the costs and timing of any future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we may receive marketing approval;

● the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property related claims;

● the extent to which we acquire or in-license other products, product candidates, technologies or data referencing rights;

● our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;

● our ability to access the private and public capital markets or to obtain financing at commercially reasonable rate;

● the ability to receive additional non-dilutive funding, including grants from organizations and foundations;

● the costs of operating as a public company.

We believe that our existing cash, cash equivalents and marketable securities, will enable us to fund our operating expenses and capital expenditure requirements into 2024.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Contractual Obligations and Commitments

There have been no material changes from the contractual commitments and obligations previously disclosed in the Prospectus.

Critical Accounting Policies and Use of Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Prospectus.

If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.

There have been no significant changes to our critical accounting policies from those described in the Prospectus.

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Off-balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Emerging Growth Company Status

As an emerging growth company, or EGC, under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies.

Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited consolidated financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board, and less extensive disclosure about our executive compensation arrangements.

In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards.

This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies.

We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We may remain classified as an EGC until the end of the fiscal year following the fifth anniversary of our IPO, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of September 30 of any year before that time, or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year.

We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.

Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, we are not required to provide this information.

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