Kalaris Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and our Chief Financial Officers concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(e) and Rule 15d-(e) under the Exchange Act that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies. As a result of the COVID-19 pandemic, certain employees began working remotely in March 2020. Notwithstanding these changes to the working environment, we have not identified any material changes in our internal control over financial reporting. We will continue to monitor and assess the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting. Inherent Limitations on Effectiveness of Controls Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. Item 9B. Other Information. None. 118 PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this Item 10 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of the Stockholders and is included herein by reference. Item 11. Executive Compensation. The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of the Stockholders and is included herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of the Stockholders and is included herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of the Stockholders and is included herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of the Stockholders and is included herein by reference. 119 PART IV Item 15. Exhibits, Financial Statement Schedules. (1) Consolidated Financial Statements The following documents are included this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity (Deficit) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (2) Financial Statement Schedules All financial statement schedules have been omitted because they are not applicable, not required, or the information required is shown in the consolidated financial statements or the notes thereto. (3) Exhibits The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report on Form 10-K are listed in the Exhibit Index below. The exhibits listed in the Exhibit Index are incorporated by reference herein. Exhibit Index Exhibit Number Description 3.1 Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 3.2 Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.5 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 4.1 Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its stockholders, effective as of May 8, 2019 (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 4.2* Description of the Registrant’s securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as amended. 10.1# 2018 Equity Incentive Plan, and form of award agreements thereunder (incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.2# 2020 Stock Option and Grant Plan, and form of award agreements thereunder (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.3# 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.4# Form of Indemnification Agreement between the Registrant and each of its directors (incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.5# Form of Indemnification Agreement between the Registrant and each of its executive officers (incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.6 Lease Agreement between the Registrant and Regus Management Group, LLC, dated as of January 3, 2019, as amended by the Renewal Agreement, entered into on December 10, 2019 (incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.7† Amended and Restated Exclusive License Agreement, by and between Baylor College of Medicine and the Registrant, dated as of May 11, 2020 (incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 120 10.8† Sponsored Research Agreement, by and between Baylor College of Medicine and the Registrant, dated as of June 18, 2019, as amended by the Amendment to Sponsored Research Agreement, entered into on April 7, 2020 (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.9 Asset Rental Agreement, by and between ElevateBio Management, Inc. and the Registrant, dated as of May 1, 2019 (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.10 Sublease Agreement, by and between ElevateBio Management, Inc. and the Registrant, dated as of May 1, 2019 (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.11# Consulting Agreement, by and between Juan Vera and the Registrant, dated as of October 1, 2018 (incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.12# Consulting Agreement, by and between Ann Leen and the Registrant, dated as of October 1, 2018 (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 10.13† Redeemable Preferred Stock Redemption Agreement among the Registrant and certain of its stockholders, effective as of September 17, 2018 (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.14# Amended and Restated Executive Employment Agreement, by and between the Registrant and David Hallal, dated as of October 2, 2019 (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.15# Amended and Restated Executive Employment Agreement, by and between the Registrant and Vikas Sinha, dated as of October 2, 2019 (incorporated by reference to Exhibit 10.15 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.16# Executive Employment Agreement, by and between the Registrant and Agustin Melian, dated as of March 21, 2019 (incorporated by reference to Exhibit 10.16 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-239698) filed on July 23, 2020). 10.17#* Executive Employment Agreement, by and between the Registrant and Ercem Atillasoy, dated as of July 14, 2020. 10.18†* Exclusive License Agreement, by and between Baylor College of Medicine and the Registrant, dated as of November 30, 2020. 10.19†* Research Collaboration Agreement, by and between Baylor College of Medicine and the Registrant, dated as of November 30, 2020. 10.20†* First Amendment to Amended and Restated Exclusive License Agreement by and between Baylor College of Medicine and the Registrant, dated as of November 30, 2020. 21.1 List of Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-23969) filed on July 6, 2020). 23.1* Consent of Deloitte & Touche LLP, independent registered public accounting firm. 24.1* Power of Attorney (included on signature page). 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 121 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith. # Indicates a management contract or any compensatory plan, contract or arrangement. † Portions of this exhibit (indicated by asterisks) will be omitted in accordance with the rules of the Securities and Exchange Commission. 16. Form 10-K Summary None. 122 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . ALLOVIR, INC. Date: February 12, 2021 By: /s/ David Hallal David Hallal Chief Executive Officer and Director (Principal Executive Officer) POWER OF ATTORNEY Each person whose individual signature appears below hereby authorizes and appoints David Hallal with full power of substitution and resubstitution and full power to act as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date /s/ David Hallal Chief Executive Officer and Director (Principal Executive Officer) February 12, 2021 David Hallal /s/ Vikas Sinha President, Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) February 12, 2021 Vikas Sinha /s/ Jeffrey Bornstein Director February 12, 2021 Jeffrey Bornstein /s/ Diana M. Brainard, MD Director February 12, 2021 Diana M. Brainard, MD /s/ John Wilson Director February 12, 2021 John Wilson /s/ Ansbert Gadicke, MD Director February 12, 2021 Ansbert Gadicke, MD /s/ Morana Jovan-Embiricos, PhD Director February 12, 2021 Morana Jovan-Embiricos, PhD /s/ Malcolm Brenner, MD, PhD Director February 12, 2021 Malcolm Brenner, MD, PhD /s/ Juan F. Vera, MD Director February 12, 2021 Juan F. Vera, MD 123 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019: Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of AlloVir, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of AlloVir, Inc. (formerly ViraCyte, Inc.) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and changes in stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Boston, Massachusetts February 12, 2021 We have served as the Company’s auditor since 2019. F-2 ALLOVIR, INC. CONSOLIDATED BALANCE SHEETS December 31, (in thousands, except share and per share amounts) 2020 2019 Assets Current assets: Cash and cash equivalents $ 122,661 $ 61,084 Short-term investments 233,663 64,993 Accrued interest 450 262 Unbilled grant receivables — 298 Prepaid expenses and other current assets 4,543 676 Total current assets 361,317 127,313 Property and equipment, net 812 350 Operating lease right-of-use assets 8,692 11,759 Total assets $ 370,821 $ 139,422 Liabilities, convertible preferred stock and stockholders’ equity (deficit) Current liabilities: Accounts payable $ 963 $ 630 Accrued expenses 7,530 5,163 Operating lease liability, current 3,229 3,067 Amount due to related party 572 246 Total current liabilities 12,294 9,106 Operating lease liability, long term 5,463 8,692 Total liabilities 17,757 17,798 Series B preferred stock, $0.0001 par value: 0 and 14,877,697 shares authorized, issued and outstanding at December 31, 2020 and 2019, respectively — 120,923 Series A preferred stock, $0.0001 par value: 0 and 64,520,653 shares authorized at December 31, 2020 and 2019, respectively; 0 and 44,520,653 shares issued and outstanding at December 31, 2020 and 2019, respectively — 52,204 Stockholders’ equity (deficit): Preferred stock, $0.0001 par value: 10,000,000 and 0 shares authorized at December 31, 2020 and 2019, respectively; 0 shares issued and outstanding at December 31, 2020 and 2019, respectively; — — Common stock, $0.0001 par value: 150,000,000 and 90,000,000 shares authorized at December 31, 2020 and 2019, respectively; 65,106,873 and 6,502,929 shares issued at December 31, 2020 and 2019, respectively; and 61,931,255 and 2,099,740 shares outstanding at December 31, 2020 and 2019, respectively 7 — Additional paid-in capital 478,272 3,748 Accumulated other comprehensive (loss) income (112 ) 68 Accumulated deficit (125,103 ) (55,319 ) Total stockholders’ equity (deficit) 353,064 (51,503 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 370,821 $ 139,422 The accompanying notes are an integral part of these consolidated financial statements. F-3 ALLOVIR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Years Ended December 31, (in thousands, except share and per share amounts) 2020 2019 Revenue $ — $ 165 Operating expenses: Research and development 49,663 16,248 General and administrative 21,646 10,618 Total operating expenses 71,309 26,866 Loss from operations (71,309 ) (26,701 ) Total other income, net: Interest income 1,330 2,065 Other income, net 195 797 Net loss (69,784 ) (23,839 ) Net loss per share – basic and diluted $ (2.59 ) $ (18.54 ) Weighted-average common shares outstanding – basic and diluted 26,897,390 1,285,933 Comprehensive loss: Net loss $ (69,784 ) $ (23,839 ) Other comprehensive (loss) income, net of tax: Unrealized (loss) gain on available-for-sale securities (90 ) 68 Foreign currency translation adjustment (90 ) — Total other comprehensive (loss) income (180 ) 68 Comprehensive loss $ (69,964 ) $ (23,771 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 ALLOVIR, INC. CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) Series B Preferred Stock Series A Preferred Stock Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Total Stockholders’ Equity (in thousands, except share amounts) Shares Amount Shares Amount Shares Amount Capital (Loss) Income Deficit (Deficit) Balance at December 31, 2018 — $ — 42,066,666 $ 52,204 747,231 $ — $ 858 $ 0 $ (31,480 ) $ (30,622 ) Issuance of Series B Preferred Stock, net of $330 issuance costs 14,877,697 120,923 Conversion of all Series A1 Preferred Stock to Series A3 Preferred Stock and issuance of additional shares of Series A3 Preferred Stock — — 2,453,987 — — — — — — — Stock-based compensation — — — — — — 2,890 — — 2,890 Issuance of common stock, upon vesting of restricted stock — — — — 1,352,509 — — — — — Unrealized gain on available-for-sale securities — — — — — — — 68 — 68 Net loss — — — — — — — — (23,839 ) (23,839 ) Balance at December 31, 2019 14,877,697 $ 120,923 44,520,653 $ 52,204 2,099,740 $ — $ 3,748 $ 68 $ (55,319 ) $ (51,503 ) Initial public offering, net of underwriting discounts, commissions, and offering costs — — — — 18,687,500 2 291,973 — — 291,975 Conversion of convertible preferred stock into common stock upon initial public offering (14,877,697 ) (120,923 ) (44,520,653 ) (52,204 ) 39,859,139 5 173,122 — — 173,127 Stock-based compensation — — — — — — 9,429 — — 9,429 Issuance of common stock, upon vesting of restricted stock — — — — 1,284,876 — — — — — Unrealized loss on available-for-sale securities — — — — — — — (90 ) — (90 ) Foreign currency translation adjustment — — — — — — — (90 ) — (90 ) Net loss — — — — — — — — (69,784 ) (69,784 ) Balance at December 31, 2020 — $ — — $ — 61,931,255 $ 7 $ 478,272 $ (112 ) $ (125,103 ) $ 353,064 The accompanying notes are an integral part of these consolidated financial statements. F-5 ALLOVIR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, (in thousands, except share and per share amounts) 2020 2019 Cash flows from operating activities Net loss $ (69,784 ) $ (23,839 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 73 19 Amortization and accretion of discounts on short-term investments 502 (620 ) Stock compensation expense 9,429 2,890 Changes in operating assets and liabilities: Unbilled grant receivables 298 4 Accrued interest (188 ) (262 ) Prepaid expenses and other current assets (3,867 ) (620 ) Accounts payable, accrued expenses and amount due to related party 2,726 4,936 Deferred grant revenue — (2,663 ) Net cash used in operating activities (60,811 ) (20,155 ) Cash flows from investing activities Purchase of property and equipment (235 ) (339 ) Purchase of short-term investments (300,262 ) (119,305 ) Maturities of short-term investments 131,000 55,000 Net cash used in investing activities (169,497 ) (64,644 ) Cash flows from financing activities Proceeds from issuance of Series B Preferred Stock — 121,253 Issuance costs related to the issuance of preferred stock — (330 ) Payment of initial public offering costs (3,474 ) — Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts of $22,238 295,449 — Net cash provided by financing activities 291,975 120,923 Effect of exchange rate changes on cash and cash equivalents (90 ) — Net increase in cash and cash equivalents 61,577 36,124 Cash and cash equivalents at beginning of period 61,084 24,960 Cash and cash equivalents at end of period $ 122,661 $ 61,084 Non-cash investing and financing activities Unrealized (loss) gain on available-for-sale securities $ (90 ) $ 68 Right-of-use assets obtained in exchange for operating lease liability $ — $ 13,213 Purchase of property and equipment included in AP and accrued expenses $ 300 $ 30 Issuance of Series A3 Preferred Stock related to anti-dilution rights $ — $ 3,681 Conversion of preferred stock to common stock upon initial public offering $ 173,127 — Supplemental disclosure of cash flows Cash paid for interest $ — $ 125 The accompanying notes are an integral part of these consolidated financial statements. F-6 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of the Business AlloVir, Inc. (“AlloVir” or “the Company”, formerly known as ViraCyte, Inc.) is a leading late clinical-stage cell therapy company developing highly innovative allogeneic T-cell therapies to treat and prevent devastating viral diseases. The Company’s innovative and proprietary virus-specific T-cell, or VST, therapy platform allows AlloVir to generate off-the-shelf VSTs designed to restore immunity in patients with T-cell deficiencies who are at risk from the life-threatening consequences of viral diseases. There is an urgent medical need for therapies to treat a large number of patients suffering from viral diseases who currently have limited or no treatment options. To date, the Company has generated five innovative, allogeneic, off-the-shelf VST therapy candidates targeting 12 different devastating viruses, the most advanced for which the Company has initiated a pivotal trial for the treatment of virus-associated hemorrhagic cystitis and a proof-of-concept, or POC, clinical trial for multi-virus prevention in the fourth quarter of 2020. The Company’s lead product candidate, Viralym-M, is a multi-VST cell therapy that targets five viruses: BK virus, cytomegalovirus, adenovirus, Epstein-Barr virus and human herpesvirus 6. To fully explore the clinical benefit of Viralym-M, the Company plans to initiate a total of three Phase 3 pivotal and three Phase 2 proof-of-concept trials by the end of 2021 for the treatment and prevention of life-threatening viral diseases in pediatric and/or adult patients, each representing a potential meaningful commercial opportunity. In addition, ALVR106 is the Company’s second multi-virus-targeted off-the-shelf VST product candidate targeting devastating respiratory diseases caused by RSV, influenza, PIV and/or hMPV. An Investigational New Drug, or IND, application with the FDA for ALVR106 was cleared in the fourth quarter of 2020 and the Company plans to initiate a Phase 1/2 clinical study in autologous and allogeneic HSCT patients with respiratory viral diseases in the 2021-2022 respiratory virus season. Pursuant to the sponsored research agreement with Baylor College of Medicine (“BCM”), BCM initiated a proof-of-concept trial for ALVR109, an allogeneic, off-the-shelf VST therapy designed to target SARS-CoV-2, the virus that causes the severe and life-threatening viral disease, COVID-19. ALVR109 is being developed to arrest the progression of COVID-19 by eradicating SARS-CoV-2 virus-infected cells. BCM initiated the POC clinical trial in the fourth quarter of 2020 and the trial is ongoing and actively recruiting. Lastly, the Company is advancing ALVR107 designed to target hepatitis B, or HBV, infected cells and treat chronic HBV infections and ALVR108 to treat human herpesvirus-8, or HHV-8, associated diseases including Kaposi Sarcoma, or KS, primary effusion lymphoma, or PEL, and multicentric Castleman’s disease, or MCD. The Company plans to complete pre-clinical IND enabling studies for ALVR107 and ALVR108 in the second half of 2021. The Company was formed on August 16, 2013 as a Delaware limited liability company (“LLC”) under the name AdCyte LLC and on July 29, 2014 the Company changed its name to ViraCyte LLC. On September 17, 2018, the Company converted from a Delaware LLC to a Delaware corporation (“LLC Conversion”) and changed its name to ViraCyte, Inc. On May 22, 2019, the Company changed its name to AlloVir, Inc. The Company has principal offices in Houston, Texas and Cambridge, Massachusetts. On August 8, 2019, AlloVir formed AlloVir International Designated Activity Company (“AlloVir International”), a wholly-owned subsidiary established in Ireland. On October 9, 2019, AlloVir Securities Corporation was incorporated as a Massachusetts Security Corporation, a wholly-owned subsidiary of AlloVir. On November 10, 2019, AlloVir International formed AlloVir Italia S.R.L. (“AlloVir Italia”), a wholly-owned subsidiary in Italy. On August 3, 2020, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 18,687,500 shares of its common stock, at a public offering price of $17.00 per share, resulting in gross proceeds of $317.7 million. The Company received $292.0 million in net proceeds after deducting underwriting discounts and commissions and offering costs. Upon the closing of the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 39,859,139 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding. ElevateBio LLC On September 17, 2018, the Company executed a Series A2 Preferred Stock Purchase Agreement (“Series A2 Agreement”) with ElevateBio, LLC, a Delaware LLC (“ElevateBio”) concurrent with the LLC Conversion. ElevateBio was formed on November 29, 2017 and is headquartered in Cambridge, Massachusetts with a focus on the development of a portfolio of novel cell therapy programs acquired through business development activities with biotechnology companies. ElevateBio is structured as a holding company, comprised of asset-specific subsidiaries focused on the development of pipeline assets, as well as a manufacturing subsidiary with the expertise to provide drug development and manufacturing services. As a result of the purchase of the Company’s Series A2 Preferred Stock, ElevateBio acquired an ownership interest in the Company (see Note 17 for further discussion). The Chief Executive Officer, Chief Financial Officer, and other executives of ElevateBio also serve in similar management roles with AlloVir. F-7 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Going Concern In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Through December 31, 2020, the Company has funded its operations primarily with proceeds received from the sale of common stock, research grants, and from the sale of preferred stock. The Company has incurred recurring losses since its inception, including net losses attributable to common stockholders of $69.8 million for the year ended December 31, 2020 and $23.8 million for the year ended December 31, 2019. In addition, at December 31, 2020, the Company had an accumulated deficit of $125.1 million. The Company expects to continue to generate operating losses for the foreseeable future. The Company believes that its $122.7 million of cash and cash equivalents and $233.7 million of short-term investments held at December 31, 2020, are sufficient to fund planned operations for at least twelve months from the date that these consolidated financial statements are available to be issued. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. COVID-19 Considerations The development of product candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease, such as the recent COVID-19 pandemic. The spread of COVID-19 has impacted the global economy and has impacted the Company’s operations, including the interruption of preclinical and clinical trial activities and potential interruption to the Company’s supply chain. For example, the COVID-19 pandemic has delayed clinical trials. If the disruption due to the COVID-19 pandemic continues, planned pivotal clinical trials also could be delayed due to government orders and site policies on account of the pandemic, and some patients may be unwilling or unable to travel to study sites, enroll in trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay the Company’s ability to conduct preclinical studies and clinical trials or release clinical trial results and could delay the Company’s ability to obtain regulatory approval and commercialize product candidates. Furthermore, COVID-19 could affect the Company’s employees or the employees of research sites and service providers on whom the Company relies on as well as those of companies with which the Company does business, including suppliers and contract manufacturing organizations or CMOs, thereby disrupting business operations. Quarantines and travel restrictions imposed by governments in the jurisdictions in which the Company and the companies with which it does business operate could materially impact the ability of employees to access preclinical and clinical sites, laboratories, manufacturing sites and offices. The Company has implemented work-at-home policies and only employees essential to the development and research of product candidates remain on-site at the Company’s research and manufacturing facilities; accordingly, the Company may experience limitations in employee resources. The outbreak and any other preventative or protective actions that the Company, its suppliers or other third parties with which it has business relationships, or governments may take in respect of the COVID-19 pandemic, could disrupt, delay or otherwise adversely impact the business. F-8 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company is still assessing business plans and the impact the COVID-19 pandemic may have on its ability to advance the testing, development and manufacturing of drug candidates, including as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom the Company relies on, or to raise financing to support the development of our drug candidates. No assurances can be given that this analysis will enable the Company to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or this sector in particular. The Company cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if the Company or any of the third parties on whom it relies on or with whom it conducts business, were to experience shutdowns or other business disruptions, the Company’s ability to conduct business in the manner and on the timelines presently planned could be materially and adversely impacted. 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The consolidated financial statements include the Company’s accounts and those of its wholly-owned subsidiaries. All intercompany accounts, transactions and balances have been eliminated in consolidation. Segment Information Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s singular focus is the research, development and commercialization of off-the-shelf VST therapies to prevent and treat severe viral-associated diseases. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents are short-term, highly liquid investments with original maturities of three months or less at the date of purchase. Investments qualifying as cash equivalents primarily consist of money market funds and demand deposits. Short-Term Investments Short-term investments consist of U.S. treasury securities classified as available-for-sale that have maturities of less than one year. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in other comprehensive income. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization or accretion is included in interest income. The cost of securities sold is based on the specific identification method. Interest on debt securities classified as available-for-sale are included in interest income. To determine whether an other-than-temporary impairment exists, the Company considers whether it has the ability and intent to hold the investment until a market price recovery, and whether evidence indicating the recoverability of the cost of the investment outweighs evidence to the contrary. There were no individual securities with impairments at December 31, 2020 and 2019. F-9 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Property and Equipment, Net The Company records property and equipment at cost and recognizes depreciation using the straight-line method over the estimated useful lives of the respective assets. The Company holds laboratory equipment with a useful life of five years. The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment. Expenditures for repairs and maintenance of assets are expensed as incurred. Upon retirement or sale, the cost of assets disposed and the corresponding accumulated depreciation are removed from the related accounts and any resulting gain or loss is reflected in the results of operations. Construction in progress is not depreciated until it is placed in service. Property and equipment to be disposed of are carried at fair value less costs to sell. Impairment of Long-Lived Assets The Company accounts for long-lived assets in accordance with ASC Topic 360, Property, Plant, and Equipment (“ASC 360”). ASC 360 requires companies to: (i) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and (ii) measure an impairment loss as the difference between the carrying amount and the fair value of the asset. The Company tests long-lived assets to be held and used, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of assets or asset groups may not be fully recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their fair values. The Company has not recognized any impairment losses during the years ended December 31, 2020 and 2019. Fair Value Measurements ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following: • Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. • Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Financial instruments consist of cash and cash equivalents, short-term investments, unbilled grant receivable, accounts payable and accrued expenses. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. F-10 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Deferred Offering Costs The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are presented in the consolidated balance sheets as a direct reduction from the carrying amount of the respective equity instrument issued. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss. Upon closing the IPO in August 2020, deferred offering costs were derecognized and recorded against the IPO proceeds as a debit to additional paid-in capital. At December 31, 2020 and 2019, the Company had recorded deferred offering costs of $0 and $0.1 million, respectively. Revenue Recognition The Company’s sole source of revenue in 2019 was related to a grant (“CPRIT Grant”) dated August 31, 2017 from the Cancer Research and Prevention Institute of Texas (“CPRIT”). The Company accounts for revenues under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company assesses each contract using the following approach and recognizes any revenue accordingly. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated standalone selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company identifies the goods or services promised within each agreement and assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that promised good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. The allocation of the transaction price to the performance obligations in proportion to their standalone selling prices is determined at contract inception. If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation as each performance obligation is satisfied. The Company concluded that the CPRIT Grant represents a contract with a customer and qualifies to be accounted for under ASC 606. In accordance with the grant, the performance obligations include performing a phase IIB clinical trial to establish the safety and effectiveness of Viralym-M in adults and children with a common, very severe virus infection (BK Virus) after stem cell transplant, and the granting of a non-commercial license to CPRIT. The Company has concluded that the license and research and development services should be combined into a single performance obligation as they are highly interdependent. Funds received are reflected in deferred revenue as a liability until revenue is earned. Grant revenue is recognized when qualifying costs are incurred (See Note 9 for further reference). F-11 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Other Income, Net The Company records interest expense, investment amortization and accretion and other government grants, not considered customers under ASC 606, in “other income, net” over the same period in which the qualifying costs are incurred. Proceeds received prior to the costs being incurred or the conditions of the award being met are recognized as deferred grant income until the services are performed and the conditions of the grant are met. To the extent that qualifying costs have been incurred prior to receipt of funds, the Company records an unbilled grant receivable upon recognition of those expenses. Research and Development Costs Research and development costs are charged to expense as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel-related costs, stock-based compensation, facilities, research-related overhead, clinical trial costs, contracted services, research-related manufacturing, license fees and other external costs. The Company accounts for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the services have been performed or when the goods have been received. Accrued Research and Development Expenses The Company has entered into various research and development contracts. The payments under these contracts are recorded as research and development expenses as incurred. The Company records accrued liabilities for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgements and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs. Research and Development Grants Grants are recognized as a receivable at their fair value when there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions. Grants receivable are recognized on a systematic basis as income over the periods necessary to match them with the related costs which they are intended to compensate. Grants that have been earned, other than those grants that fall under ASC 606, where the Company determined that the grantor is a customer, are presented in the consolidated statements of operations and comprehensive loss as “other income, net”. Stock-Based Compensation Expense The Company grants restricted stock and stock options to employees, consultants and directors. The Company recognizes stock-based compensation cost for awards with performance conditions if and when it concludes that it is probable that the performance conditions will be achieved. For awards with only a service condition, the Company expenses stock-based compensation on a straight-line basis over the requisite employee service period or for grants issued with performance conditions, on a graded-vesting basis over the requisite employee service period. The Company records stock-based compensation expense associated with grants of restricted stock and stock options in the consolidated statements of operations and comprehensive loss based on their estimated fair value at the date of the grant. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the grantee’s payroll costs are classified or in which the grantee’s service payments are classified. Forfeitures are accounted for as they occur. Stock-based compensation expense related to non-performance employee stock options is measured using the fair value of the underlying award at the grant date. Stock-based compensation expense for these awards is then recognized on a straight-line basis over the vesting period, which is also the requisite service period. The fair value of each stock option grant is estimated on the date of grant using the Black‑Scholes option pricing model. As there was no public market for the Company’s common stock prior to the initial public offering of its common stock in August 2020, the estimated fair value of common stock was determined by the Company’s board of directors as of the date of each option grant, with input from management, considering third-party valuations of its common stock, as well as the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant, and which may have changed from the date of the most recent third-party valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation. Following the closing of the initial public offering, the fair value of the F-12 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Company’s common stock is determined based on the quoted market price of common stock. The Company also lacks company ‑specific historical and implied volatility information for its stock. The Company estimates its expected stock price volatility based on the historical volatility of publicly traded peer 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. The expected term of the Company’s stock options has been determined utilizing the “simplified” method. The “simplified” method estimates the expected term of stock options as the mid ‑point between the weighted average time to vesting and the contractual maturity. The risk ‑free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. There is no expected dividend yield since the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-employee Share-based Payment Accounting (“ASU 2018-07”), which sets out to simplify the accounting for non-employee share-based payments. The ASU expands the scope of Topic 718, Compensation-Stock Compensation , which currently only includes share-based payments issued to employees, to also include share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees is substantially aligned. ASU 2018-07 impacts the value at which share-based payments to non-employees is recognized. Prior to the adoption of ASU 2018-07 for share-based payments granted to non-employees, including consultants, stock-based compensation expense was recognized over the period during which services were rendered by such non-employees until completed. At the end of each financial reporting period prior to completion of the service, the fair value of the unvested share-based payments was remeasured using the then-current fair value of the share-based payments. After adoption of ASU 2018-07, the measurement date for non-employee share-based payments are the date of the grant. The stock-based compensation expense for non-employees is recognized, without changes in the fair value of the share-based payments, over the requisite service period, which is the vesting period of the respective share-based payments. There was no material impact as a result of adopting this new standard. Net Loss per Share Basic and diluted net loss per share is determined by dividing net loss by the weighted‑average common stock outstanding during the period. For all periods presented, outstanding stock options, unvested restricted common stock, Series A2 Preferred Stock, Series A3 Preferred Stock, Series A4 Preferred Stock and Series B Preferred Stock, have been excluded from the calculation because their effects would be anti‑dilutive. Therefore, the weighted‑average shares used to calculate both basic and diluted loss per share are the same. Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes . Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which these temporary differences are expected to be recovered or settled. Valuation allowances are provided if based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management believes that it is more likely than not that all deferred tax assets will not be realized. The Company recognizes liabilities for potential tax payments to various tax authorities related to uncertain tax positions. The liabilities are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filing is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. Potential interest and penalties associated with such uncertain tax positions, if any, are recorded as components of income tax expense. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, the Company does not recognize a tax benefit in the consolidated financial statements. F-13 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Concentration of Credit Risk and Off-Balance Sheet Risk Financial instruments that subject the Company to credit risk consist primarily of cash, cash equivalents, restricted cash and short-term investments. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash in financial institutions that it believes have high credit quality and have not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Such deposits have and will continue to exceed federally insured limits. The Company has not experienced any losses on its cash deposits. At December 31, 2020 and 2019, the Company had no off-balance sheet risk. Foreign Currency Translation The reporting currency of the consolidated financial statements is the U.S. dollar (“USD”). The functional currency for AlloVir International and AlloVir Italia is the euro. Assets and liabilities are translated into USD at the exchange rate in effect on the balance sheet date. Equity balances, other than retained earnings, are translated at historical exchange rates. Income items and expenses are translated at the average exchange rate in effect during the period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in the consolidated balance sheets. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the functional currency are included in “other income, net” in the consolidated statements of operations and comprehensive loss. Comprehensive Loss Comprehensive loss is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources. Comprehensive loss includes net loss and certain changes in stockholder’s deficit that are excluded from net loss. The Company had a net change in available-for-sale securities and a foreign currency translation adjustment during the years ended December 31, 2020 and 2019, which met the criteria as other comprehensive income and, therefore, the Company’s comprehensive loss includes unrealized gains (losses) on those available-for-sale securities and foreign currency translation adjustments from foreign subsidiaries. Preferred Stock The Company applies the guidance enumerated in FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), when determining the classification and measurement of preferred stock. Preferred stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred stock (if any), which includes preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred stock in stockholders’ equity. Leases Effective January 1, 2019, the Company adopted and accounts for its leases under ASC 842, Leases (“ASC 842”), using the modified retrospective transition approach, as applied to the earliest comparative period presented. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. Leases with a term greater than one year are recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and current and non-current lease liabilities, as applicable. The Company has made an accounting policy election, known as the short-term lease recognition exemption, which allows the Company to not recognize ROU assets and lease liabilities that arise from short-term leases (12 months or less) for any class of underlying asset. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew or options to cancel a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew or will not cancel, respectively. The Company monitors its material leases on a quarterly basis. Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected remaining lease term. Lease cost for operating leases is recognized on a straight-line basis over the lease term as an operating expense. Certain adjustments to the ROU asset may be required for items such as lease prepayments or incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. In transition to ASC 842, the Company utilized the remaining lease term of its lease in determining the appropriate incremental borrowing rate. F-14 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company initially elected to account for lease and non-lease components together as a single component for all leases except manufacturing leases, t he Company has since updated this policy and has elected to account for the lease and non-lease components together for all existing classes of underlying assets. The transactions under the previous policy election have been immaterial historically . Subsequent Events The Company evaluates events occurring after the date of our accompanying consolidated balance sheets for potential recognition or disclosure in our consolidated financial statements. The Company did not identify any material subsequent events requiring adjustment to our accompanying consolidated financial statements (recognized subsequent events). Those items requiring disclosure (unrecognized subsequent events) in the consolidated financial statements have been disclosed accordingly. Refer to Note 19 for further details. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with certain new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. As noted below, certain new or revised accounting standards were early adopted. Recently Issued Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740) (“ASU 2019-12”), which removes certain exceptions from the guidance and simplifies the accounting for income taxes in certain areas. The new standard will be effective beginning January 1, 2021. The Company does not expect that the new standard will have a material impact to the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company’s fiscal year beginning December 15, 2022 and subsequent interim periods. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures. 3. Short-Term Investments The following table summarizes the amortized cost and estimated fair value of the Company’s marketable securities, which are considered to be available-for-sale investments and were included in short-term investments on the consolidated balance sheets: December 31, 2020 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. government treasury securities $ 233,687 $ — $ (24 ) $ 233,663 Totals $ 233,687 $ — $ (24 ) $ 233,663 December 31, 2019 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. government treasury securities $ 64,925 $ 68 $ — $ 64,993 Totals $ 64,925 $ 68 $ — $ 64,993 F-15 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the consolidated balance sheets and are not included in the tables above. At December 31, 2020 and 2019, all investments had contractual maturities within one year. 4. Fair Value Measurements The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis: December 31, 2020 (in thousands) Level 1 Level 2 Level 3 Total Cash equivalents: Money market fund $ 55,505 $ — $ — $ 55,505 U.S. government treasury securities 39,998 — — 39,998 Totals $ 95,503 $ — $ — $ 95,503 Short-term investments: U.S. government treasury securities $ 233,663 $ — $ — $ 233,663 Totals $ 233,663 $ — $ — $ 233,663 December 31, 2019 (in thousands) Level 1 Level 2 Level 3 Total Cash equivalents: Money market fund $ 46,407 $ — $ — $ 46,407 Demand deposit 10,027 — — 10,027 Totals $ 56,434 $ — $ — $ 56,434 Short-term investments: U.S. government treasury securities $ 64,993 $ — $ — $ 64,993 Totals $ 64,993 $ — $ — $ 64,993 During the years ended December 31, 2020 and 2019 , there were no transfers between levels. The Company classifies its money market fund and U.S. government treasury securities as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The carrying amounts of unbilled grants receivable, prepaid expenses and other current assets, accounts payable, amount due to related party and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. 5. Leases Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected remaining lease term. The Company has elected to account for the lease and non-lease components together for existing classes of underlying assets. The Company leases an office space in Houston, Texas under an operating lease that expires in March 2021. The Company also sub-leases from ElevateBio a portion of its office space in Cambridge, Massachusetts on a month-to-month basis. Total expense recognized under short-term leases was $0.4 million during the year ended December 31, 2020, including $0.1 million non-lease costs such as utilities and cleaning, and $0.3 million during the year ended December 31, 2019, including approximately $43,000 for non-lease costs such as utilities and cleaning. On March 26, 2019, the Company entered into an interim services agreement which ultimately led to a Development and Manufacturing Services Agreement (“DMS Agreement”) with a third-party supplier on July 19, 2019. The DMS Agreement specifies a dedicated manufacturing suite with 2 production lines for the manufacture of AlloVir’s products at the facility. F-16 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The DMS Agreement will expire upon the later of: 1) two years from the Effective Date, or July 19, 2021 , and 2) the completion of services under all Statements of Work (SOWs). The term may be extended by agreement of the parties for additional two-year periods upon written notice to the supplier at least 30 days prior to expiration of the then-current term. The DMS Agreement (or any individual SOW) may be terminated earlier by AlloVir at any time by providing 190 days’ notice. The Company estimates that the exercise of one of the two-year renewal options is reasonably certain to occur, and that early termination is not reasonably certain to occur, providing for a total estimated lease term of 4.25 years expiring in July 2023 . In March 2019, at the inception of this lease, the Company recorded a ROU asset and lease liability for $ 6.9 million. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at lease commencement date based on the present value of the lease payments over the lease term. The Company uses its incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The incremental borrowing rate represents the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company estimated these rates based on prevailing market conditions, comparable company and credit analysis, the impact of collateralization, the term of each of the Company’s lease agreements and management judgment. In September 2019, the Company executed a SOW for another dedicated manufacturing suite under the DMS Agreement with substantially the same terms as the original SOW. The SOW calls for a fixed monthly payment through July 2023, with additional two-year renewal options. The use of this manufacturing suite qualifies as a lease under ASC 842, as it includes an identified asset for exclusive use by the Company at its direction. Maturities of operating lease liabilities at December 31, 2020 are as follows (in thousands): 2021 $ 3,600 2022 3,600 2023 2,100 2024 — Total lease payments 9,300 Less: interest (4.53% - 5.75%) (608 ) Total lease liability $ 8,692 Lease liability – current $ 3,229 Lease liability – long-term $ 5,463 Total lease costs were $4.0 million and $2.1 million for the years ended December 31, 2020 and 2019, respectively. Cash paid for operating leases was $3.6 million for the year ended December 31, 2020. The Company’s total variable non-lease costs, such as materials, non-fixed batch payments, storage, tech transfer and other common area maintenance fees, related to the operating leases was $4.5 million and $1.8 million for the years ended December 31, 2020 and 2019, respectively. The weighted average remaining lease term is 2.58 years at December 31, 2020. The weighted average discount rate is 5.14%. In May 2020, the Company entered into a new Development and Manufacturing Services Agreement (“2020 DMS Agreement”) with ElevateBio BaseCamp, Inc. and signed a statement of work (SOW) in November 2020. The DMS Agreement and related SOW contained an embedded lease for a dedicated manufacturing suite for the manufacture of AlloVir’s products at the facility, which had not yet commenced at December 31, 2020. In exchange for this dedicated manufacturing suite, AlloVir will pay the supplier a monthly fixed suite reservation fee, totaling $3.0 million over the two year lease term (one year lease with a one year renewal option), that covers costs associated with reserving capacity for AlloVir as well as cleaning services, utilities, handling and maintenance of the manufacturing suite. At December 31, 2020, $0.6 million of the $3.0 million was prepaid under this arrangement. 6. Property and Equipment, Net Property and equipment, net consisted of the following: December 31, (in thousands) 2020 2019 Equipment $ 368 $ 339 Construction-in-progress 536 30 Total property and equipment 904 369 Less: accumulated depreciation (92 ) (19 ) Property and equipment, net $ 812 $ 350 F-17 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Depreciation expense was $0.1 million and approximately $19,000 for the years ended December 31, 2020 and 2019, respectively. 7. Accrued Expenses Accrued expenses consisted of the following: December 31, (in thousands) 2020 2019 Employee compensation and benefits $ 3,314 $ 1,520 Professional fees 696 445 Research and development 3,347 3,051 Other 173 147 Total accrued expenses $ 7,530 $ 5,163 8. Sponsored Research, Collaboration and License Agreements Amended and Restated Exclusive License Agreement with BCM In June 2017, the Company signed a License Agreement (the “License Agreement”) with BCM, whereby the Company acquired a royalty-bearing, worldwide, exclusive license to BCM’s rights in Subject Technology and related patent rights in the field of viral infection. In May 2020, the Company amended and restated the License Agreement (the “A&R License Agreement”), pursuant to which the Company obtained (a) an exclusive worldwide license, with the right to sublicense, under certain patent rights and other intellectual property rights of BCM, to make, have made, use, market, sell, offer to sell, lease, import and export products in a particular field, except that such license is non-exclusive within a particular subfield, and in addition with respect to certain patent rights such license is limited to two particular subfields, and (b) an exclusive, worldwide sublicense, with the right to further sublicense, under all patent rights and other intellectual property rights that are exclusively licensed to BCM by a certain third party licensor, to make, have made, use, market, sell, offer to sell, lease, import and export products in the same field. The Company’s rights are subject to the rights of the U.S. government and certain rights retained by BCM. Unless earlier terminated, the A&R License Agreement will expire on a country-by-country basis with respect to a product upon the later of (a) the expiration of the last to expire valid claim of a patent or patent application covering such product in such country or (b) 10 years after the first commercial sale of such product in such country. The Company may terminate the A&R License Agreement in its entirety at any time for convenience upon a certain number of days’ written notice. BCM may terminate the A&R License Agreement in its entirety for the Company’s uncured material default. BCM maintains control of all filing, prosecution and maintenance of its patent rights licensed by the Company, and the Company is responsible for all related costs and expenses during the term of the agreement. The Company also reimbursed BCM for costs and expenses (including reasonable legal fees and expenses) incurred prior to the effective date of the agreement with respect to the filing, prosecution and maintenance of the patent rights licensed by the Company. If BCM licenses the patent rights licensed by the Company to third parties for additional fields of use, the Company’s responsibility for patent related costs and expenses will be reduced on a pro-rata basis. Under the A&R License Agreement, the Company must use commercially reasonable efforts to develop and commercialize one or more products in certain countries. As partial consideration for the rights conveyed by BCM under the original agreement executed in June 2017, the Company paid BCM a non-refundable license fee of $250,000. During the term of the A&R License Agreement, the Company is obligated to pay BCM a non-refundable annual license maintenance fee, but beginning with the fifth year after the original agreement date, license maintenance fees are fully creditable against royalty revenue due in the applicable year. The Company is required to pay certain milestone payments upon the achievement of specified clinical, regulatory, and sales milestones. In the event that the Company is able to successfully develop, launch and commercialize a product under the A&R License Agreement, total milestone payments could exceed $40.0 million. BCM is also eligible to receive tiered royalties at percentage rates ranging from less than 1% to the low single-digits, on net sales of any products that are commercialized by the Company or its sublicensees that incorporate, utilize or are made with the use of, the intellectual property licensed by the Company. To the extent the Company sublicenses its license rights under the A&R License Agreement, BCM would be eligible to receive tiered sublicense income at percentage rates in the mid-single to low double-digits. F-18 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In November 2020, the Company also entered into the First Amendment (the “License Amendment”) to the A&R License Agreement. Under the License Amendment, the Company assumed responsibility from BCM for the filing, prosecution and maintenance of the patent rights licensed by the Company from BCM under the A&R License Agreement that are in common with the License Agreement. Further, BCM also transferred to the Company the right of enforcement against third parties for any suspected infringement of any claims in such patent rights or misuse, misappropriation, theft or breach of confidence of other proprietary rights. Exclusive License Agreement with BCM In November 2020, the Company signed a second License Agreement (the “Second License Agreement) with BCM, whereby the Company acquired a royalty-bearing, worldwide, exclusive license to BCM’s rights in Subject Technology and related patent rights outside the field of viral infection (all fields other than those covered by the A&R License Agreement). Unless earlier terminated, the Second License Agreement will expire on a country-by-country basis with respect to a product upon the later of (a) the expiration of the last to expire valid claim of a patent or patent application covering such product in such country or (b) 10 years after the first commercial sale of such product in such country, provided that the Second License Agreement shall not expire later than March 25, 2040. The Company may terminate the Second License Agreement in its entirety at any time for convenience upon a certain number of days’ written notice. BCM may terminate the Second License Agreement in its entirety for the Company’s uncured material default. Under the Second License Agreement, BCM transferred to the Company control of all filing, prosecution and maintenance of the patent rights licensed by the Company, and the Company is responsible for all related costs and expenses during the term of the Second License Agreement. BCM also transferred to the Company the right of enforcement against third parties for any suspected infringement of any claims in the patent rights or misuse, misappropriation, theft or breach of confidence of other proprietary rights. The Company also reimbursed BCM for costs and expenses (including reasonable legal fees and expenses) incurred prior to the effective date of the Second License Agreement with respect to the filing, prosecution and maintenance of the patent rights licensed by the Company, to the extent not already paid by the Company under the A&R License Agreement. Under the Second License Agreement, the Company must use commercially reasonable efforts to develop and commercialize one or more products in certain countries. As partial consideration for the rights conveyed by BCM under the Second License Agreement, the Company paid BCM a non-refundable license fee of $125,000. During the term of the Second License Agreement, the Company is obligated to pay BCM a non-refundable annual license maintenance fee of (a) $20,000 for the first through fourth anniversary of the effective date of the Second License Agreement, and (b) $40,000 for the fifth anniversary of the effective date and continuing thereafter, but beginning with the fifth year, license maintenance fees are fully creditable against royalty revenue due in the applicable year. The Company is required to pay certain milestone payments upon the achievement of specified clinical, regulatory, and sales milestones. In the event that the Company is able to successfully develop, launch and commercialize multiple products under the Second License Agreement, total milestone payments could exceed $30.0 million. BCM is also eligible to receive tiered royalties at percentage rates ranging from less than 1% to the low single-digits, on net sales of any products that are commercialized by the Company or its sublicensees that incorporate, utilize or are made with the use of, the intellectual property licensed by the Company. To the extent the Company sublicenses its license rights under the Second License Agreement, BCM would be eligible to receive tiered sublicense income at percentage rates in the mid-single to low double-digits. Sponsored Research Agreement with BCM In June 2019, the Company entered into a sponsored research agreement (“SRA-2”) with BCM, under which the Company agreed to pay BCM for performing certain research activities related to virus specific T-cell manufacturing for a one-year period, renewable for an additional one-year term upon written consent of both parties. SRA-2 requires the Company to make payments to BCM totaling $1.0 million, payable in four equal installments. SRA-2 was amended in March 2020 to include the discovery and development of allogeneic, off-the-shelf, virus specific T-cell therapies to combat SARS-CoV-2, the virus that causes COVID-19. In June 2020, a second amendment was entered into resulting in a no cost extension through November 30, 2020, upon which the agreement terminated. Collaboration Agreement with BCM In November 2020, the Company also entered into a Research Collaboration Agreement (the “Research Agreement”) with BCM, under which the Company agreement to pay BCM for performing certain research activities under the direction of Dr. Ann Leen commencing on January 1, 2021 and continuing for a three-year period thereafter. The Research Agreement requires the Company to make payments to BCM totaling approximately $2.0 million per year, for a total of approximately $6.0 million over the term of the Research Agreement. F-19 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Collectively under the agreements above and for services provided by BCM the Company paid $ 1. 1 million and $ 0.9 million during the years ended December 31, 2020 and 2019, respectively, and the payments were classified in research and development expense in the consolidated statements of operations and comprehensive loss. Primarily all costs incurred related to services provided by BCM under the license agreements and SRA-2 discussed above qualify for reimbursement under the Company’s grant discussed in Note 10. Consideration received under the CPRIT Grant is recognized within grant revenue under ASC 606 in the consolidated statements of operations and comprehensive loss. Reimbursements for qualifying expenses incurred under all other grants are recognized within “other income, net” in the consolidated statements of operations and comprehensive loss. 9. Revenue CPRIT GRANT In August 2017, the Company was awarded a $9.0 million grant (the “CPRIT Grant”) from the Cancer Research and Prevention Institute of Texas (“CPRIT”) to perform a phase IIB clinical trial to establish the safety and effectiveness of Viralym-M, in adults and children with a common, very severe virus infection (BK Virus) after stem cell transplant. The grant period was three years beginning September 1, 2017 through August 31, 2020. This grant had a matching requirement where the Company was obligated to match 50% of the grant funds used on the project. In addition, the grant included other compliance requirements including the obligation for the Company to operate with a principal place of business in Texas. There were no costs incurred to obtain or fulfill the contract. In November 2019, the Company provided CPRIT with written notice of its intent to terminate the grant. In December 2019, the Company returned $2.6 million of grant funds received, including interest relating to these funds in the amount of $0.1 million, and decreased its deferred revenue balance to zero. The Company received acknowledgment of the termination from CPRIT in January 2020. In addition to the requirements above, the CPRIT Grant also required that the Company grant CPRIT a non-commercial license to technology developed under the grant and pay CPRIT a share of revenue on sales of commercial products developed using CPRIT funds equal to low single digits of revenue until such time as CPRIT has been paid an aggregate amount equal to 400% of the grant award proceeds. No royalty payments were made under this license agreement during the years ended December 31, 2020 and 2019, respectively. The Company accounted for the CPRIT Grant under ASC 606, as CPRIT represents a customer to the Company and the performance obligations are clearly defined within the arrangement. Revenue recognized during the year ended December 31, 2019 from amounts included in the contract liability at the beginning of the period was $0.2 million. The following table presents the changes in the Company’s contract liabilities during the year ended December 31, 2019: (in thousands) Balance at Beginning of Period Additions Deductions Balance at End of Period Contract liabilities: Deferred revenue $ 2,663 $ — $ (2,663 ) $ — 10. Funding Arrangements SBIR Grant In June 2017, the Company was awarded a Small Business Innovation Research (“SBIR”) grant by NIH in the amount of $3.0 million. This grant was effective from September 15, 2017 to March 30, 2020 and in April 2020, the Company received an extension through March 31, 2021. The grant is funded on an ongoing basis based on periodic reports of qualifying expenditures by the Company to NIH. Under this grant, the Company received $0.9 million and $1.0 million during the years ended December 31, 2020 and 2019, respectively. The Company recognized income of $0.6 million and $0.9 million on incurred expenses during the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, the Company had received the full amount awarded under the SBIR grant. The SBIR grant does not fall within the scope of ASC 606 as NIH does not meet the definition of a customer, and the grants from NIH were given for the benefit of public health rather than for monetary compensation. Accordingly, funding received under this grant is recognized in “other income, net” in the consolidated statements of operations and comprehensive loss. F-20 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 11. Convertible Preferred Stock On August 3, 2020, upon the closing of the Company’s IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 39,859,139 shares of common stock. There were no outstanding shares of preferred stock at December 31, 2020. At December 31, 2019, preferred stock consisted of the following: December 31, 2019 (in thousands, except share amounts) Preferred Stock Authorized Preferred Stock Issued and Outstanding Carrying Value Liquidation Value Common Stock Issuable Upon Conversion Series A1 Preferred Stock 20,000,000 — $ — $ — — Series A2 Preferred Stock 20,000,000 20,000,000 29,775 30,000 13,420,970 Series A3 Preferred Stock 22,453,987 22,453,987 19,364 33,681 15,067,706 Series A4 Preferred Stock 2,066,666 2,066,666 3,065 3,100 1,386,831 Series B Preferred Stock 14,877,697 14,877,697 120,923 121,253 9,983,632 Total 79,398,350 59,398,350 $ 173,127 $ 188,034 39,859,139 The holders of Series A1, A2, A3, and A4 Preferred Stock (collectively referred to as “holders of Series A Preferred Stock” unless noted) and Series B Preferred Stock, had the following rights and preferences: Voting The holders of preferred stock were entitled to the same voting rights as the holders of common stock, with a number of votes equal to the number of common stock into which such preferred stock would be converted. The holders of a majority of the then outstanding preferred stock had the right to vote upon any matter submitted to the shareholders for a vote. Except for holders of Series A4 Preferred Stock, which is non-voting. Certain matters, prior to being able to be undertaken by the Company, required the affirmative vote of the holders of preferred stock, voting separately as a single class. These matters included amending the Certificate of Incorporation, authorizing new shares of stock, liquidating the business, selling or licensing material assets, changing Board of Director composition and other matters. In addition, certain matters required the affirmative vote of the holders of Series B Preferred Stock, including the amendment of the Certificate of Incorporation or Bylaws in a manner that adversely affects the powers, preferences, rights or privileges of the Series B Preferred Stock, certain purchases or redemptions of capital stock and any changes in the number of authorized shares of Series B Preferred Stock. Conversion At the option of the holder, all preferred stock was convertible into common stock at any time after the date of issuance. The initial conversion price was equal to the original issue price per share ($1.50 for Series A Preferred Stock and $8.15 for Series B Preferred Stock) and was subject to adjustment as disclosed in Certificate of Incorporation. Each share of preferred stock automatically converted into common stock at the applicable conversion rate upon either (a) the affirmative election of the required holders or (b) the closing of an underwritten public offering on the New York Stock Exchange or NASDAQ with gross proceeds of at least $100.0 million. Dividends The holders of preferred stock were entitled to non-cumulative dividends of 8% of the original issue price, payable when, and if, declared by the Board of Directors. Dividends for Series A Preferred Stock are only paid after payment in full of dividends for Series B Preferred Stock. F-21 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Liquidation Preference In the event of a liquidation of the Company, the holders of Series B Preferred Stock were entitled to be paid, in preference to Series A Preferred Stock and common stock, the greater of 1) the Series B Preferred Stock original issue price of $8.15 per share, plus any dividends declared but unpaid or 2) the amount per share that would have been payable had all shares of Series B Preferred Stock been converted into common stock at the time of the liquidation (the “Series B Liquidation Preference”). If amounts upon liquidation were insufficient to pay the Series B Preferred Stock, the holders of Series B Preferred Stock would share ratably in the distribution of the assets based on the distribution that would have otherwise been paid in full. In the event of a liquidation of the Company, after payment of the Series B Liquidation Preference, the holders of Series A Preferred Stock were entitled to be paid, in preference to common stock, the greater of 1) the Series A Preferred Stock original issue price of $1.50 per share, plus any dividends declared but unpaid or 2) the amount per share that would have been payable had all shares of Series A Preferred Stock been converted into common stock at the time of the liquidation (the “Series A Liquidation Preference”). If amounts upon liquidation were insufficient to pay the Series A Preferred Stock, the holders of Series A Preferred Stock would share ratably in the distribution of the assets based on the distribution that would have otherwise been paid in full. Redemption The Company determined that all series of preferred stock were redeemable, based on the Certificate of Incorporation that states upon the occurrence of a deemed liquidation event, the holders of preferred stock were entitled to receive cash or other assets. Additionally, the deemed liquidation events are not in the sole control of the Company and the preferred stock does not meet any limited exceptions under ASC 480, Distinguishing Liabilities From Equity . As such, the Company classified its preferred stock outside of permanent equity and into mezzanine equity. Covenant to Purchase Crossover Securities Upon the occurrence of a decrease in the Company’s cash or on the occurrence of a crossover round, the Company would have been required to issue additional preferred stock and ElevateBio would have been required to purchase such shares with an aggregate purchase price of $20.0 million, with the number of shares imputed based on the estimated fair value per share at that time. The Company evaluated whether this feature represented an embedded derivative or a freestanding financial instrument and concluded that the obligation to issue additional shares represented a contingent forward that should be accounted for at fair value. The Company concluded that the fair value at issuance and at December 31, 2018 was de minimis based on the probabilities of such events occurring at such dates. The contingent forward was settled on May 8, 2019 in conjunction with the issuance of Series B Preferred Stock. Make Whole Provisions The preferred stock agreements contained various make whole provisions upon the occurrence of certain events, such as stock splits, recapitalizations, etc. The Company evaluated whether these features represent embedded derivatives or free-standing financial instruments and concluded that the features represent a derivative embedded within the agreement which requires bifurcation and to be recorded at fair value. At issuance and August 3, 2020, upon conversion to common stock at completion of our IPO, the Company concluded that the fair value was de minimis based on the probabilities of such events occurring at such dates. 12. Stockholder’s Equity (Deficit) On August 3, 2020, in connection with the closing of the Company’s IPO, the Company filed its amended and restated certificate of incorporation, which authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.0001 par value per share. There are no shares of preferred stock issued or outstanding at December 31, 2020. At December 31, 2020, the Company’s amended and restated certificate of incorporation authorized the Company to issue 150,000,000 shares of common stock at a par value of $0.0001 per share. In conjunction with the Company's IPO closing on August 3, 2020, the Company issued and sold 18,687,500 shares of its common stock, including 2,437,500 shares pursuant to the full exercise of the underwriters' option to purchase additional shares, at a public offering price of $17.00 per share, for aggregate net proceeds of $292.0 million after deducting underwriting discounts and commissions and offering costs. In connection with the Company’s IPO, all outstanding shares of preferred stock converted into 39,859,139 shares of common stock. The following is a summary of the rights and privileges of the holders of the Company’s common stock at December 31, 2020 and 2019: F-22 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Voting Rights The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders (and written actions in lieu of meetings), and there are not any cumulative voting rights. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company; however, the issuance of common stock may be subject to the vote of the holders of one or more series of preferred stock that may be required by terms of the Third Amended and Restated Certificate of Incorporation. Dividends Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the Board out of legally available funds. At December 31, 2020, no cash dividends have been declared or paid. Liquidation Preference In the event of a liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all debts and other liabilities and the satisfaction of any liquidation preference granted to the then-outstanding shares of preferred stock. Rights and Preferences Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate in the future. The Company has reserved shares of common stock for issuance as follows: December 31, 2020 2019 Preferred stock — 39,859,139 Unvested restricted stock 3,410,979 4,403,148 Options to purchase common stock 3,972,909 44,960 Stock available for grant under the 2018 Equity Incentive Plan — 486,082 Stock available for grant under the 2020 Stock Option and Grant Plan 3,895,961 — Total 11,279,849 44,793,329 13. Stock-Based Compensation 2018 Equity Incentive Plan The Company’s 2018 Plan provided for the Company to issue restricted stock, restricted stock units, incentive stock options, and non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company. The 2018 Plan was most recently amended in July 2020. The awards granted under this plan generally vest over a four-year period and have a 10-year contractual term. At December 31, 2020, the Company had granted 6,715,415 shares of common stock under the 2018 Plan, including an aggregate of 98,643 shares of common stock issuable upon the exercise of outstanding options under the 2018 Plan. Of the awards granted, 6,710 have been forfeited or cancelled. No shares remained available for future issuance under the 2018 Plan. Any options or awards outstanding under the 2018 Plan remain outstanding and effective. F-23 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 2020 Stock Option and Grant Plan On July 2, 2020, the Company’s Board of Directors adopted and in July 2020 the stockholders approved the 2020 Stock Option and Grant Plan (the “2020 Plan”) which became effective on July 28, 2020, the date immediately prior to the date on which the registration statement related to the IPO was declared effective, and as a result no further awards will be made under the 2018 Plan thereafter. Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2020 Plan will be 8,008,734 shares. The number of shares of our common stock reserved for issuance under the 2020 Plan shall be cumulatively increased on January 1, 2021 and each January 1 thereafter by 5% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors. Unless our board of directors elects not to increase the number of shares available for future grant each year, our stockholders may experience additional dilution, which could cause our stock price to fall. Accordingly, on January 1, 2021, 3,255,343 shares were added to the number of available shares under the 2020 Plan. The awards granted under this plan generally vest over a four-year period and have a 10-year contractual term. At December 31, 2020, there were an aggregate of 3,874,266 shares of common stock issuable upon the exercise of outstanding options under the 2020 Plan and 238,507 shares of restricted common stock granted under the 2020 Plan. Additionally, there were an aggregate of 3,895,961 shares reserved for future issuance under the 2020 Plan. Restricted Common Stock The Company granted 315,023 shares of restricted stock to employees in 2020. Stock-based compensation expense for restricted stock was $3.6 million for the year ended December 31, 2020. The Company granted 2,434,515 shares of restricted common stock to employees in 2019. Stock-based compensation expense for restricted stock was $2.9 million for the year ended December 31, 2019. Under the 2018 Plan the Company granted restricted common stock awards with service conditions. In May 2020, two employees grants were modified to include both a service and performance condition. Stock compensation is recognized over the vesting period based on the probability of achievement of the performance condition. The performance condition was based on the Company’s completion of its IPO, which was consummated on August 3, 2020. The awards earned upon satisfaction of the performance condition will become fully vested on the fourth anniversary of the vesting commencement date of the award (i.e. continued service is required beyond the satisfaction of the performance condition prior to vesting). At December 31, 2020, the performance condition was met and compensation expense of $1.7 million related to these performance-based awards has been recorded. The following table summarizes restricted common stock activity for the year ended December 31, 2020: Shares Weighted Average Grant Date Fair Value Unvested at January 1, 2020 4,403,148 $ 1.87 Granted 315,023 21.07 Forfeited (22,316 ) 19.25 Vested (1,284,876 ) 1.84 Unvested at December 31, 2020 3,410,979 $ 3.55 The weighted average grant date fair value of restricted stock granted in 2019 was $2.93 per share and the weighted average grant date fair value of restricted stock vested in 2019 was $1.80. At December 31, 2020, there was $10.4 million of unrecognized stock-based compensation cost related to the restricted stock, which is expected to be recognized over a weighted average period of 3.02 years. F-24 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Stock Options The following table summarizes stock option activity (in thousands, except share and per share data): Shares Weighted Average Exercise Price Weighted Average Contractual Life Aggregate Intrinsic Value Options outstanding at January 1, 2020 44,960 $ 3.01 9.5 $ — Granted 3,952,949 18.08 — Forfeited (25,000 ) 27.97 226 Exercised — — — Options outstanding at December 31, 2020 3,972,909 $ 17.84 9.6 $ 81,822 Options vested and exercisable at December 31, 2020 20,609 $ 5.56 8.9 $ 678 The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period. The weighted average grant-date fair value of stock options granted in 2020 and 2019 was $13.77 per share and $2.17 per share, respectively. At December 31, 2020, there was $48.1 million of unrecognized stock-based compensation expense related to unvested stock options, which is being recognized over a period of 3.53 years. The fair value was estimated on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions: Year Ended December 31, 2020 2019 Expected term (in years) 6.08 6.25 Expected volatility 95 % 84 % Risk-free interest rate 0.36 % 1.65 % Expected dividend yield — — Fair value of common stock $ 18.08 $ 3.01 Stock-Based Compensation Expense Stock-based compensation expense was as follows: Years Ended December 31, (in thousands) 2020 2019 Research and development $ 3,571 $ 547 General and administrative 5,858 2,343 Total stock-based compensation expense $ 9,429 $ 2,890 2020 Employee Stock Purchase Plan In July 2020, the 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was also adopted by the Board of Directors and approved by the stockholders. The purpose of the 2020 ESPP is to provide eligible employees of the Company and other designated companies, with opportunities to purchase shares of the Company’s common stock, par value $0.0001 per share. 611,354 shares of common stock in the aggregate have been approved and reserved for this purpose, plus on January 1, 2021 and each January 1 thereafter until January 1, 2030, the number of shares of common stock reserved and available for issuance under the Plan shall be cumulatively increased by the least of (i) 1,222,707 shares of common stock, (ii) 1% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (iii) such number of shares of common stock as determined by the Administrator. The Board of Directors elected not to increase the number of available shares as of January 1, 2021. F-25 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 14. Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which these temporary differences are expected to be recovered or settled. Valuation allowances are provided if based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management believes that it is more likely than not that all deferred tax assets will not be realized. The Company recognizes liabilities for potential tax payments to various tax authorities related to uncertain tax positions. The liabilities are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filing is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. Potential interest and penalties associated with such uncertain tax positions, if any, are recorded as components of income tax expense. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available as of the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, the Company does not recognize a tax benefit in the consolidated financial statements. Income (loss) before provision for income taxes consisted of the following: Year Ended December 31, (in thousands) 2020 2019 Federal (68,356 ) (23,839 ) Foreign (1,428 ) — Loss before provision for income taxes $ (69,784 ) $ (23,839 ) The Company’s income tax expense (benefit) for the years ended December 31, 2020 and 2019 relating to federal and state tax jurisdictions differs from the amounts determined by applying the statutory federal income tax rate based on the following: Years Ended December 31, (in thousands) 2020 2019 Benefit at the federal rate $ (14,655 ) 21.0 % $ (5,006 ) 21.0 % Increase (decrease) resulting from: State taxes, net of federal benefit (1,943 ) 2.8 % (565 ) 2.4 % Change in valuation allowance 17,756 (25.4 %) 6,354 (26.7 %) R&D tax credits (1,220 ) 1.7 % (753 ) 3.2 % Other 62 (0.1 )% (30 ) 0.1 % Total Income Tax Expense/(Benefit) $ — — $ — — F-26 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Components of deferred income taxes consist of the following: December 31, (in thousands) 2020 2019 Deferred tax assets: Net operating loss carryforwards $ 20,866 $ 7,604 Operating lease liabilities 2,244 2,747 Non-qualified stock compensation 1,326 — R&D tax credits 2,215 753 Other 910 183 Total deferred tax assets 27,561 11,287 Valuation allowance (24,555 ) (6,799 ) Net deferred tax asset (liability) $ 3,006 $ 4,488 Deferred tax liabilities: Operating lease right-of-use assets (2,244 ) (2,747 ) Restricted stock compensation (629 ) (1,650 ) Depreciation (65 ) (75 ) Other (68 ) (16 ) Total deferred tax liabilities (3,006 ) (4,488 ) Net deferred tax asset (liability) $ — $ — The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At December 31, 2020 and 2019, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying consolidated balance sheets. For the year ended December 31, 2020, the valuation allowance for deferred tax assets increased by $17.8 million, which was principally due to the net operating loss. At December 31, 2020 and 2019, the Company had unused federal net operating loss carryforwards of $88.6 million and $32.8 million, respectively. The federal net operating loss carryforwards have no expiration. The CARES Act temporarily allows the Company to carryback net operating losses arising in 2018, 2019 and 2020 to the five prior tax years. In addition, net operating losses generated in these years could fully offset prior year taxable income without the 80% of the taxable income limitation under the TCJA which was enacted on December 22, 2017. The Company has been generating losses since its inception, as such the net operating loss carryback provision under the CARES Act is not applicable to the Company. At December 31, 2020 and 2019, the Company had unused state net operating loss carryforwards of $31.7 million and $11.4 million, respectively. The state net operating loss carryforwards expire in 2039. At December 31, 2020 and 2019, the Company had $1.8 million and $0.6 million of research and development tax credit carryforwards that may be available to offset future federal income taxes through 2040. At December 31, 2020 and 2019, the Company also had $0.5 million and $0.2 million of research and development tax credit carryforwards that may be available to offset future state income taxes in the state of Massachusetts through 2035. Utilization of net operating loss and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development tax credit carryforwards that can be utilized annually to offset future taxable income and tax expense, respectively. The Company has completed several financings since its inception which may result in a change of control as defined in Section 382 of the Internal Revenue Code or could result in a change in control in the future. The Company complies with the provisions of ASC 740 in accounting for its uncertain tax positions. ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely that not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. At December 31, 2020 and 2019, the Company had no uncertain tax positions. F-27 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company had no accruals for interest and penalties at December 31, 20 20 and 201 9 . The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The statute of limitations for assessment by the Internal Revenue Service and state tax authorities remains open for the tax years December 31, 2018 through December 31, 2020 as the Company was incorporated in September 2018. There are currently no federal or state income tax audits in progress. The resolution of tax matters is not expected to have a material effect on the Company's consolidated financial statements. 15. Net Loss per Share The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company: Years Ended December 31, (in thousands, except share and per share data) 2020 2019 Numerator: Net loss – basic and diluted $ (69,784 ) $ (23,839 ) Denominator: Weighted-average common shares outstanding – basic and diluted 26,897,390 1,285,933 Net loss per share – basic and diluted $ (2.59 ) $ (18.54 ) Based on the amounts outstanding at December 31, 2020 and 2019, the Company excluded the following potential shares of common stock from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2020 and 2019, because including them would have had an anti-dilutive effect. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. Years Ended December 31, 2020 2019 Series A2 Preferred Stock — 13,420,970 Series A3 Preferred Stock — 15,067,706 Series A4 Preferred Stock — 1,386,831 Series B Preferred Stock — 9,983,632 Options to purchase common stock 3,972,909 44,960 Unvested restricted stock 3,410,979 4,403,148 16. Commitments and Contingencies Leases The Company leases an office space in Houston, Texas under an operating lease that expires in March 2021. The Company also sub-leases from ElevateBio a portion of its office space in Cambridge, Massachusetts on a month-to-month basis. See Note 5 for additional information. Purchase Obligation The Company has entered into a DMS Agreement (see Note 5) whereby the Company is required to purchase at least one batch of product per month for both dedicated manufacturing suites, totaling $0.3 million per month, regardless of the Company’s demand. The monthly batch product purchases related to the DMS Agreement will cease in July 2023. Legal Proceedings From time to time, in the ordinary course of business, the Company is subject to litigation and regulatory examinations as well as information gathering requests, inquiries and investigations. At December 31, 2020, there were no matters which would have a material impact on the Company’s financial results. F-28 ALLOVIR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 17. Related Party Transactions The Company entered into an agreement with ElevateBio that provides for ongoing services to the Company in areas such as accounting operations, public relations, information technology, human resources and administration management, finance and risk management, marketing services, facilities, procurement and travel and corporate development and strategy (the “Shared Services Agreement”). The Company was billed quarterly for such services at cost, with mark-up for profit on specific services, but including reasonable allocations of employee benefits, facilities and other direct or fairly allocated indirect costs that relate to the associates providing the services. The Company also subleases office space, which includes payment for common area charges. The Company also has a SOW to receive manufacturing and project management consulting services from ElevateBio. During the year ended December 31, 2020, the Company recorded expenses of $7.3 million, including a prepaid of $0.9 million related to services provided to the Company by ElevateBio and affiliates. During the year ended December 31, 2019, the Company recorded expenses of $3.2 million related to services provided to the Company by ElevateBio and affiliates. The Company owed ElevateBio $0.6 million and $0.2 million at December 31, 2020 and 2019, respectively, which is recorded in “Amount due to related party” on the consolidated balance sheets. Members of the Company’s management received a total of $0.6 million and $0.4 million in consulting fees during the years ended December 31, 2020 and 2019 respectively. 18. Employee Benefit Plans Effective January 1, 2019, the Company adopted a 401(k) Plan for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. The Company made matching contributions of $0.1 million for the years ended December 31, 2020 and 2019. 19. Subsequent Events For the financial statements at December 31, 2020 and for the year then ended , the Company has evaluated all subsequent events through February 12, 2021, the date the consolidated financial statements were available to be issued, noting there were no events or matters identified that require additional disclosure. F-29