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2

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 001-40675

Immuneering Corporation

(Exact name of registrant as specified in its charter)

Delaware

26-1976972

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

245 Main St.

Second Floor

Cambridge, MA

02142

(Address of Principal Executive Offices)

(Zip Code)

(617) 500-8080

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading symbol

    

Name of Exchange on which registered

Class A common Stock, par value $0.001 per share

IMRX

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of May 3, 2022 the registrant had 26,385,299 shares of Class A common stock, $0.001 par value per share, issued and outstanding and 0 shares of Class B common stock, $0.001 par value per share, issued and outstanding.

Table of Contents

TABLE OF CONTENTS

    

    

Page

Part I

Financial Information

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (Unaudited)

7

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021 (Unaudited)

8

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021 (Unaudited)

9

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited)

10

Notes to Condensed Consolidated Financial Statements (Unaudited)

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

Item 4.

Controls and Procedures

33

Part II

Other Information

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

95

Item 3.

Defaults Upon Senior Securities

95

Item 4.

Mine Safety Disclosures

95

Item 5.

Other Information

95

Item 6.

Exhibits

95

Signatures

97

2

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding our plans to develop, manufacture and commercialize our product candidates, the timing or outcome of our ongoing or planned clinical trials for IMM-1-104, any of our other pipeline product candidates and any future product candidates, the clinical utility of our product candidates, the filing with, and approval by, regulatory authorities of our product candidates, the sufficiency of funds to operate the business of the Company, the ongoing impact of the pandemic related to COVID-19 and its variants on our business and operations, including manufacturing, research and development, clinical trials and employees, our cash needs and availability including our revenue streams, and the plans and objectives of management for future operations, are forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, those described in the sections of this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:

our limited operating history;
our history of operating losses;
risks related to the pandemic related to COVID-19 and its variants;
our ability to raise the substantial additional capital that will be required to finance our operations;
the difficulty of obtaining regulatory approval for any of our current or future product candidates;
our ability to file INDs (as defined below) or IND amendments or comparable documents in foreign jurisdictions in order to commence clinical trials on the timelines we expect;
our limited experience in designing clinical trials;
the risk of substantial delays in completing, if at all, the development and commercialization of our current or future product candidates;
risks related to adverse events, toxicities or other undesirable side effects caused by our current or future product candidates;
the risk of delays or difficulties in the enrollment and/or maintenance of patients in clinical trials;
our substantial reliance on the successful development of our current and future product candidates, as well as our platform, including our proprietary technologies such as DCT and Fluency;
risks related to competition in our industry;

3

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the market opportunity for our product candidates, if approved;
risks related to manufacturing;
risks related to our reliance on third parties;
risks related to our intellectual property; and
other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are described in Part II, Item 1A. “Risk Factors” section of this Quarterly Report on Form 10-Q.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Unless otherwise stated or the context requires otherwise, references to “Immuneering,” the “Company,” “we,” “us,” and “our,” refer to Immuneering Corporation and its subsidiaries.

4

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Risk Factors Summary

We are subject to numerous risks and uncertainties, including those further described below in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following are principal factors that may offset our competitive strengths or have a negative effect on our business strategy, which could materially adversely affect our business, financial conditions, results of operations, future growth prospects, or cause a decline in the price of our common stock:

We have a limited operating history, have not completed any clinical trials and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.
We have incurred significant net losses for the past several years and we expect to continue to incur significant net losses for the foreseeable future and may never attain profitability.
We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.
The regulatory approval processes of the FDA and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, or to obtain regulatory approval to treat the indications we seek to treat with our product candidates, we will be unable to generate product revenue or the level of planned product revenue and our business will be substantially harmed.
We may encounter substantial delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or other comparable foreign regulatory authorities.
Our current or future product candidates may cause adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
We are early in our development efforts. Our business is substantially dependent on the successful development of our current and future product candidates. If we are unable to advance our current or future product candidates through clinical trials, obtain marketing approval to treat the indications we seek to treat with our product candidates, and ultimately commercialize any product candidates we develop, or experience significant delays in doing so, our business will be materially harmed.
We are substantially dependent on our platform, including our proprietary technologies such as DCT and Fluency, which are supported by our information technology systems. Any failure of these or other elements of our platform will materially harm our business.
Our long-term prospects depend in part upon discovering, developing and commercializing product candidates, which may fail in development or suffer delays that adversely affect their commercial viability.
Our approach to the discovery and development of product candidates is unproven, and we may not be successful in our efforts to use and expand our DCT platform to build a pipeline of product candidates with commercial value.
We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.

5

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We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities could be negatively impacted.
The COVID-19 pandemic and potential future pandemics could continue to adversely impact our business, including our anticipated clinical trials and their timelines, supply chain and business development activities.
We substantially rely, and expect to continue to rely, on third parties, including independent clinical investigators and contract research organizations, or CROs, to conduct certain aspects of our preclinical studies, and in the future, our clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
We contract with third parties for the manufacturing of our product candidates for preclinical studies, and expect to continue to do so for clinical trials and ultimately, for commercialization of any approved product candidate. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
The manufacture of drugs is complex and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented.
If we are unable to obtain and maintain patent and other intellectual property protection for our product candidates and technologies or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be impaired, and we may not be able to compete effectively in our market.

6

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

IMMUNEERING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

    

March 31, 2022

    

December 31, 2021

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

75,205,060

$

74,888,145

Marketable securities, current

62,565,953

74,311,203

Accounts receivable

 

279,614

 

246,040

Prepaids and other current assets

 

1,479,592

 

2,888,608

Total current assets

 

139,530,219

 

152,333,996

Marketable securities, non-current

996,560

Property and equipment, net

 

874,569

 

807,223

Goodwill

 

6,690,431

6,701,726

Intangible asset

 

430,897

439,000

Right-of-use assets, net

4,831,639

 

5,324,198

Other assets

89,579

 

102,129

Total assets

$

152,447,334

$

166,704,832

Liabilities and Stockholders' Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

1,642,364

$

1,394,340

Accrued expenses

 

1,718,804

 

3,965,447

Other liabilities, current

47,213

Lease liabilities, current

 

265,419

 

274,039

Total current liabilities

 

3,673,800

 

5,633,826

Long-term liabilities:

 

  

 

  

Other liabilities, non-current

9,898

Lease liabilities, non-current

 

4,707,526

 

5,090,897

Total liabilities

 

8,391,224

 

10,724,723

Commitments and contingencies (Note 12)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.001 par value; 10,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively; 0 shares issued or outstanding at March 31, 2022 and December 31, 2021

 

Class A common stock, $0.001 par value, 200,000,000 shares authorized at March 31, 2022 and December 31, 2021; 26,383,299 and 26,320,199 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

26,383

 

26,320

Class B common stock, $0.001 par value, 20,000,000 shares authorized at March 31, 2022 and December 31, 2021; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021

 

 

Additional paid-in capital

 

216,366,884

 

215,276,186

Accumulated other comprehensive loss

(167,395)

(49,009)

Accumulated deficit

 

(72,169,762)

 

(59,273,388)

Total stockholders' equity

 

144,056,110

 

155,980,109

Total liabilities and stockholders' equity

$

152,447,334

$

166,704,832

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

7

Table of Contents

IMMUNEERING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

Three Months Ended March 31, 

    

2022

    

2021

    

Revenue

$

183,698

$

748,200

Cost of revenue

 

90,846

 

409,163

Gross profit

 

92,852

 

339,037

Operating expenses

 

  

 

  

Research and development

 

9,058,545

 

5,391,020

General and administrative

 

3,951,866

 

1,184,023

Amortization of intangible asset

8,103

Total operating expenses

 

13,018,514

 

6,575,043

Loss from operations

 

(12,925,662)

 

(6,236,006)

Other income (expense)

 

  

 

  

Interest income

 

132,506

 

6,355

Other expense

(103,218)

Net loss

$

(12,896,374)

$

(6,229,651)

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

$

(0.49)

$

(1.26)

Weighted-average common shares outstanding, basic and diluted

 

26,359,080

 

4,950,129

Other comprehensive loss:

Unrealized losses from marketable securities

(118,386)

Comprehensive Loss

$

(13,014,760)

$

(6,229,651)

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

8

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IMMUNEERING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

Convertible Preferred Stock

Stockholders' Equity (Deficit)

Total

Additional

Accumulated other

Total

Series B

Series A

Convertible

Class A Common Stock

Class B Common Stock

Paid-In

comprehensive

Accumulated

Stockholders'

  

Shares

  

Amount

  

Shares

  

Amount

  

Preferred Stock

  

  

Shares

  

Par Value

  

Shares

  

Par Value

  

Capital

  

loss

Deficit

  

Equity (Deficit)

Balance at December 31, 2020

 

3,619,292

$

36,983,910

 

2,495,933

$

21,119,940

$

58,103,850

 

4,950,129

$

4,950

 

$

$

3,251,240

$

$

(25,737,640)

$

(22,481,450)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

182,225

 

 

 

182,225

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(6,229,651)

 

(6,229,651)

Balance at March 31, 2021

 

3,619,292

$

36,983,910

 

2,495,933

$

21,119,940

$

58,103,850

 

4,950,129

$

4,950

 

$

$

3,433,465

$

$

(31,967,291)

$

(28,528,876)

Convertible Preferred Stock

Stockholders' Equity (Deficit)

Total

Additional

Accumulated other

Total

Series B

Series A

Convertible

Class A Common Stock

Class B Common Stock

Paid-In

comprehensive

Accumulated

Stockholders'

Shares

  

Amount

  

Shares

  

Amount

  

Preferred Stock

  

  

Shares

  

Par Value

  

Shares

  

Par Value

  

Capital

  

loss

Deficit

  

Equity (Deficit)

Balance at December 31, 2021

 

 

$

$

$

26,320,199

$

26,320

 

 

$

$

215,276,186

$

(49,009)

$

(59,273,388)

$

155,980,109

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

63,100

 

63

 

 

 

193,048

 

 

 

193,111

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

897,650

 

 

 

897,650

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(12,896,374)

 

(12,896,374)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

(118,386)

(118,386)

Balance at March 31, 2022

 

$

 

$

$

 

26,383,299

$

26,383

 

$

$

216,366,884

$

(167,395)

$

(72,169,762)

$

144,056,110

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

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IMMUNEERING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2021

(Unaudited)

    

2022

    

2021

Cash flows from operating activities:

 

  

 

  

Net loss

$

(12,896,374)

$

(6,229,651)

Adjustment to reconcile to net loss to net cash used in operating activities:

 

 

  

Depreciation expense

 

47,704

 

8,867

Right-of-use asset amortization

144,821

25,027

Intangible asset amortization

 

8,103

 

Stock based compensation expense

 

897,650

 

182,225

Net amortization of premium (accretion of discount) on marketable securities

103,531

Change in assets and liabilities:

 

 

  

(Increase) decrease in:

 

 

  

Accounts receivable

 

(33,573)

 

7,705

Prepaid expenses and other current assets

 

1,409,016

 

(615,645)

Other assets

12,550

Increase (decrease) in:

 

 

  

Accounts payable

 

248,022

 

(111,742)

Accrued expenses

 

(2,235,349)

 

611,871

Lease liability

 

(44,252)

 

(18,497)

Other liabilities

57,112

Net cash used in operating activities

 

(12,281,039)

(6,139,840)

Cash flows from investing activities:

 

  

 

  

Purchases of property and equipment

 

(115,050)

 

(16,564)

Purchases of marketable securities

(7,980,107)

Maturities of marketable securities

20,500,000

Net cash provided by (used in) investing activities

 

12,404,843

 

(16,564)

Cash flows from financing activities:

 

  

 

  

Proceeds from exercise of stock options

 

193,111

 

Net cash provided by financing activities

 

193,111

 

Net increase (decrease) in cash and cash equivalents

 

316,915

 

(6,156,404)

Cash and cash equivalents at beginning of period

 

74,888,145

 

37,090,151

Cash and cash equivalents at end of period

$

75,205,060

$

30,933,747

Supplemental disclosures of noncash information:

 

  

 

  

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

$

347,739

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

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IMMUNEERING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization and Nature of Business

Immuneering Corporation, a Delaware corporation, (“Immuneering” or the “Company”) was incorporated in 2008. The Company aims to improve patient outcomes by advancing a unique pipeline of oncology and neuroscience product candidates developed using the Company’s translational bioinformatics platform. The Company has more than a decade of experience applying translational bioinformatics to generate insights into drug mechanism of action and patient treatment response. Building on this experience, the Company’s disease-agnostic discovery platform enables the Company to create product candidates based on 1) biological insights that are both counterintuitive and deeply rooted in data, and 2) novel chemistry.

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

On December 22, 2021, the Company acquired all outstanding shares of capital stock of BioArkive, Inc. (“BioArkive”), a California corporation, which as a result became a wholly owned subsidiary.  

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

The Company is subject to a number of inherent risks associated with any biotechnology company that has substantial expenditures for research and development. These risks include, but are not limited to, the need to obtain adequate additional funding, possible failure of clinical trials or other events demonstrating lack of clinical safety or efficacy of its product candidates, dependence on key personnel, reliance on third-party service providers for manufacturing drug product and conducting clinical trials, the ability to successfully secure its proprietary technology, and risks related to the regulatory approval and commercialization of a product candidate. There can be no assurance that the Company’s research and development program will be successful. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees, advisors, and consultants.

On August 3, 2021, the Company completed its initial public offering (“IPO”) pursuant to which it issued and sold 8,625,000 shares of its Class A common stock, inclusive of 1,125,000 shares of its Class A common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $120,318,750, after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company, which were $2,124,317. Upon the closing of the IPO, all 8,528,078 shares of the Company’s convertible preferred stock then outstanding automatically converted into 11,939,281 shares of Class A common stock. Upon the conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock (at par value) and additional paid-in capital.

To date, the Company has funded its operations through service revenues, and with proceeds from the sale of its capital stock and convertible notes and, most recently, with proceeds from the IPO. The Company has incurred recurring losses over the past several years and as of March 31, 2022, the Company had an accumulated deficit of $72,169,762. The Company expects to continue to generate operating losses for the foreseeable future. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations. Management considers that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern and estimates that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the consolidated financial statements. The full extent to which coronavirus (“COVID-19”) pandemic will directly or indirectly impact the Company’s business, results of operations and financial

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condition, including expenses and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat COVID-19 and its variants, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the pandemic related to COVID-19 and its variants and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgements or revise the carrying values of its assets or liabilities.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (“FASB”). The FASB sets generally accepted accounting principles (“GAAP”) to ensure the condensed consolidated financial statements are consistently reported. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codifications (“ASC”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.

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

Unaudited Interim Financial Information

The unaudited interim condensed consolidated financial statements of the Company have been prepared, without audit, in accordance with GAAP and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted from the unaudited interim condensed consolidated financial statements, as is permitted by such rules and regulations. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2021.

It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, operating results and cash flows. Revenues and net loss for any interim period are not necessarily indicative of future or annual results.

Use of Estimates 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting periods. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets, liabilities and the recording of expenses that are not readily apparent from other sources. Significant estimates reflected in these condensed consolidated financial statements included but are not limited to, the research and development expenses, determination of fair value of stock-based awards, the valuation of common stock prior to the IPO, and the right-to-use assets and operating lease liability. Actual results may differ materially and adversely from these estimates.

Goodwill Impairment

Subsequent to December 31, 2021, the Company’s market capitalization has declined which may be an indicator of impairment. The Company will continue to assess the impact of its market capitalization and any other indicators of potential impairment. It is possible that if the Company’s market capitalization decline is more than temporary, or if

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

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (“JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to avail itself of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements. The new standard, as amended, requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments - Overall, applied on an instrument-by-instrument basis for eligible instruments. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) will become effective for the Company on January 1, 2023. The Company is currently evaluating the new guidance and assessing the potential impact on its condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), which eliminates Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). This update is effective for annual and interim impairment tests performed in periods beginning after December 15, 2022. Early adoption of the standard is permitted. The Company is currently evaluating the new guidance and assessing the potential impact on its condensed consolidated financial statements.

Note 3 – Marketable Securities

Our marketable securities are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities and are recorded at fair value. Unrealized gains/(losses) are included as a component of accumulated other comprehensive loss in the condensed consolidated balance sheets and statements of convertible preferred stock and stockholders’ equity and a component of total comprehensive loss in the condensed consolidated statements of comprehensive loss, until realized. The Company assesses its available-for-sale marketable securities for impairment on a quarterly basis. There were no impairments of the Company’s available-for-sale marketable securities measured and carried at fair value during the three months ended March 31, 2022 or 2021. Realized gains and losses are included in other expense on a specific-identification basis. There were no realized gains or losses on marketable securities for the three months ended March 31, 2022 or 2021.

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

March 31, 2022

    

Amortized Cost

    

Unrealized Gains

    

Unrealized Losses

    

Fair Value

Assets:

Current:

U.S. Treasuries

$

27,558,207

$

-

$

(86,602)

$

27,471,605

Government securities

19,191,856

-

(43,968)

19,147,888

Commercial paper

15,983,285

-

(36,825)

15,946,460

Total marketable securities

$

62,733,348

$

-

$

(167,395)

$

62,565,953

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

December 31, 2021

    

Amortized Cost

    

Unrealized Gains

    

Unrealized Losses

    

Fair Value

Assets:

Current:

U.S. Treasuries

$

42,147,385

$

-

$

(28,575)

$

42,118,810

Government securities

19,218,057

-

(13,689)

19,204,368

Commercial paper

12,992,165

57

(4,197)

12,988,025

Total Current

74,357,607

57

(46,461)

74,311,203

Non-current:

U.S. Treasuries

999,186

-

(2,626)

996,560

Government securities

-

-

-

-

Total Non-current

999,186

-

(2,626)

996,560

Total marketable securities

$

75,356,793

$

57

$

(49,087)

$

75,307,763

Note 4 – Fair Value Measurements

We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability.

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

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

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Level 1

Level 2

Level 3

Total

Assets:

Cash equivalents

Money market

$

36,515,479

$

-

$

-

$

36,515,479

Commercial paper

-

-

-

-

Total cash equivalents

36,515,479

-

-

36,515,479

Marketable securities:

U.S. Treasuries

$

27,471,605

$

-

$

-

$

27,471,605

Government securities

-

19,147,888

-

19,147,888

Commercial paper

-

15,946,460

-

15,946,460

Total marketable securities

27,471,605

35,094,348

-

62,565,953

Total cash equivalents and marketable securities

$

63,987,084

$

35,094,348

$

-

$

99,081,432

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently, at the end of each reporting period, valued utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value. After completing our valuation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2022.

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

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

Level 1

Level 2

Level 3

Total

Assets:

Cash equivalents

Money market

$

33,961,344

$

-

$

-

$

33,961,344

Commercial paper

-

2,000,000

-

2,000,000

Total cash equivalents

33,961,344

2,000,000

-

35,961,344

Marketable securities:

U.S. Treasuries

$

43,115,370

$

-

$

-

$

43,115,370

Government securities

-

19,204,368

-

19,204,368

Commercial paper

-

12,988,025

-

12,988,025

Total marketable securities

43,115,370

32,192,393

-

75,307,763

Total cash equivalents and marketable securities

$

77,076,714

$

34,192,393

$

-

$

111,269,107

Note 5 – Property and Equipment, net

Property and equipment, net consisted of the following:

    

March 31, 

    

December 31, 

2022

2021

Computer equipment

$

302,150

$

281,666

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Furniture and fixtures

 

84,477

 

84,477

Lab equipment

542,247

463,182

Leasehold improvements

167,618

152,117

Total

 

1,096,492

 

981,442

Accumulated depreciation

 

(221,923)

 

(174,219)

Property and equipment, net

$

874,569

$

807,223

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

Note 6 – Business Combination

BioArkive Acquisition

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

BioArkive is a San Diego based contract research organization that has previously provided preclinical research services and biosample storage to the Company and other biotechnology companies. BioArkive is in the process of being fully integrated into the Company to exclusively support the Company's internal preclinical research activities for its oncology pipeline.

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

The purchase price was paid by Immuneering through the issuance of an aggregate of 379,635 shares of Immuneering’s Class A common stock. The number of shares of common stock issued was calculated using a value based on the average of the daily volume weighted average prices of the common stock on the Nasdaq Stock Exchange for the 30-trading day period ending on and including the trading day immediately prior to the closing date. The sellers of BioArkive are restricted from selling these shares for a 6 month period from the date of the acquisition. As such, we estimated that there was an approximate 10% discount for the lack of marketability of the shares. The fair value of the purchase price in the acquisition was $7,875,000.

Prior to the acquistion, Brett Hall, Chief Scientific Officer of Immuneering and the Founder and Chairman of the board of directors of BioArkive, held the majority of the outstanding shares of BioArkive capital stock. BioArkive provided contract services to the Company. Research and development expenses in the consolidated statement of operations include the cost of services provided by BioArkive to the Company which amounted to $4,548,780 in 2021 through the date of the acquisition. The results of BioArkive’s operations are included in accounts payable or accrued contract research expenses in the consolidated balance sheets.

Assets Acquired and Liabilities Assumed at Fair Value

The BioArkive acquisition has been accounted for using the acquisition method of accounting. This method requires assets acquired and liabilities assumed in a business combination to be recognized at their fair values as of the acquisition date. As of March 31, 2022, the purchase accounting had been finalized, and there was an immaterial measurement period adjustment related to accrued expenses and goodwill. No other adjustments were identified.

Intangible Assets

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

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Goodwill

Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected cost savings of the combined company and assembled workforce. One of the key factors that contributes to the recognition of goodwill, and a driver for the Company's acquisition of BioArkive, is the planned investment in the internal preclinical research activities for our oncology pipeline. Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes.

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

    

Preliminary
Valuation

Measurement
Period
Adjustment

Final
Valuation

Weighted
Average
Life

Cash

$

70,348

$

$

70,348

Other currents assets

225,790

225,790

Other long term assets

87,796

87,796

Property, plant and equipment, net

727,539

727,539

Right of use assets

4,824,700

4,824,700

Intangible asset

-

Technology

439,000

439,000

15 years

Goodwill