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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-Q
_________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
o
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)
_________________________________________________
Delaware26-1976972
(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 ClassTrading symbolName of Exchange on which registered
Class A common Stock, par value $0.001 per shareIMRX
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 x No o
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 x No o
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 fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyxEmerging growth companyx
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 28, 2023 the registrant had 29,264,015 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.


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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements including 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 (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, IMM-6-415, 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, our anticipated financial performance 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;
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 submit an Investigational New Drug application, or IND, 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 and conducting clinical trials;
the timing of the initiation, progress and potential results of our ongoing and planned preclinical studies and clinical trials and our research programs, including our Phase 1/2a clinical trial of IMM-1-104;
our ability to successfully complete our Phase 1/2a clinical trial of IMM-1-104;
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 product candidate identification and screening technologies such as Disease Cancelling Technology ("DCT") and Fluency;
risks related to competition in our industry;
the market opportunity for our product candidates, if approved;
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risks related to manufacturing;
risks related to our reliance on third parties;
risks related to our intellectual property;
risks related to the pandemic related to COVID-19, its variants and future pandemics; 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.
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Risk Factors Summary
We are subject to numerous risks and uncertainties, including those further described below in Part I Item IA. “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 are a clinical-stage oncology company with a limited operating history in developing pharmaceutical products, 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 obtain 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 U.S. Food and Drug Administration, or 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.
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 will be negatively impacted.
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The COVID-19 pandemic and potential future pandemics could continue to adversely impact our business, including our current and future clinical trials, supply chain and business development activities.
We substantially rely, and expect to continue to rely, on third parties, including independent clinical investigators and CROs, to conduct certain aspects of our preclinical studies and 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 manufacture of our product candidates for preclinical studies and clinical trials, and expect to continue to do so 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.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$104,017,496 $72,636,886 
Marketable securities, current4,967,840 32,887,970 
Accounts receivable 12,417 
Prepaids and other current assets2,521,757 3,209,536 
Total current assets111,507,093 108,746,809 
Property and equipment, net1,365,741 1,369,608 
Goodwill6,690,431 6,690,431 
Intangible asset, net394,313 408,947 
Right-of-use assets, net4,194,049 4,407,785 
Other assets743,703 743,703 
Total assets$124,895,330 $122,367,283 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$2,693,000 $3,154,557 
Accrued expenses2,426,899 4,500,993 
Other liabilities, current26,333 19,796 
Lease liabilities, current332,675 378,723 
Total current liabilities5,478,907 8,054,069 
Long-term liabilities:
Lease liabilities, non-current4,312,008 4,462,959 
Total liabilities9,790,915 12,517,028 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2023 and December 31, 2022; 0 shares issued or outstanding at June 30, 2023 and December 31, 2022
  
Class A common stock, $0.001 par value, 200,000,000 shares authorized at June 30, 2023 and December 31, 2022; 29,263,028 and 26,418,732 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively
29,263 26,419 
Class B common stock, $0.001 par value, 20,000,000 shares authorized at June 30, 2023 and December 31, 2022; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022
  
Additional paid-in capital250,657,245 219,640,912 
Accumulated other comprehensive loss(2,218)(30,120)
Accumulated deficit(135,579,875)(109,786,956)
Total stockholders' equity115,104,415 109,850,255 
Total liabilities and stockholders' equity$124,895,330 $122,367,283 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Revenue$ $94,419 $ $278,117 
Cost of revenue 47,933  138,778 
Gross profit 46,486  139,339 
Operating expenses
Research and development9,452,711 7,981,075 19,663,637 17,031,517 
General and administrative4,044,960 3,704,143 8,506,291 7,664,112 
Amortization of intangible asset7,317 7,317 14,633 15,420 
Total operating expenses13,504,988 11,692,535 28,184,561 24,711,049 
Loss from operations(13,504,988)(11,646,049)(28,184,561)(24,571,710)
Other income (expense)
Interest income1,166,047 142,799 1,997,321 275,304 
Other income (expense)150,193 (24,053)394,322 (127,271)
Net loss$(12,188,748)$(11,527,303)$(25,792,918)$(24,423,677)
Net loss per share attributable to common stockholders, basic and diluted$(0.43)$(0.44)$(0.94)$(0.93)
Weighted-average common shares outstanding, basic and diluted28,647,45026,386,34327,550,92226,372,787
Other comprehensive loss:
Unrealized gains (losses) from marketable securities(2,724)(14,166)27,902 (132,552)
Comprehensive Loss$(12,191,472)$(11,541,469)$(25,765,016)$(24,556,229)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Class A Common StockClass B Common StockAdditional
Paid-In Capital
Accumulated Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders' Equity
SharesPar ValueSharesPar Value
Balance at December 31, 202126,320,199$26,320 $ $215,276,186 $(49,009)$(59,273,388)$155,980,109 
Issuance of common stock upon exercise of stock options63,10063 — 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, 202226,383,299$26,383 $ $216,366,884 $(167,395)$(72,169,762)$144,056,110 
Issuance of common stock upon exercise of stock options9,0009 — 27,775 — — 27,784 
Stock-based compensation expense— — 1,052,421 — — 1,052,421 
Net loss— — — — (11,527,303)(11,527,303)
Other comprehensive loss— — — (14,166)— (14,166)
Balance at June 30, 202226,392,299$26,392 $ $217,447,080 $(181,561)$(83,697,065)$133,594,846 
Class A Common StockClass B Common StockAdditional
Paid-In Capital
Accumulated Other
Comprehensive Loss
Accumulated
Deficit
Total
Stockholders' Equity
SharesPar ValueSharesPar Value
Balance at December 31, 202226,418,732$26,419 $ $219,640,912 $(30,120)$(109,786,956)$109,850,255 
Issuance of common stock upon exercise of stock options77,06577 — 239,332 — — 239,409 
Stock-based compensation expense— — 1,273,505 — — 1,273,505 
Net loss— — — — (13,604,171)(13,604,171)
Other comprehensive gain— — — 30,626 — 30,626 
Balance at March 31, 202326,495,797$26,496 $ $221,153,749 $506 $(123,391,127)$97,789,624 
Issuance of common stock upon exercise of stock options39,95840 — 176,106 — — 176,146 
Stock-based compensation expense— — 1,333,882 — — 1,333,882 
Issuance of common stock upon public offering, net of commissions, underwriting discounts and $203,768 in issuance costs
2,727,2732,727 — 27,993,508 — — 27,996,235 
Net loss— — — — (12,188,748)(12,188,748)
Other comprehensive loss— — — (2,724)— (2,724)
Balance at June 30, 202329,263,028$29,263 $ $250,657,245 $(2,218)$(135,579,875)$115,104,415 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2023 and 2022
(Unaudited)
Six Months Ended June 30,
20232022
Cash flows from operating activities:
Net loss$(25,792,918)$(24,423,677)
Adjustment to reconcile to net loss to net cash used in operating activities:  
Depreciation/amortization expense154,768 102,263 
Reduction in carrying amount of right-of-use assets213,737 285,302 
Intangible asset amortization14,633 15,420 
Stock-based compensation expense2,607,387 1,950,071 
Net amortization of premium (accretion of discount) on marketable securities(301,968)144,441 
Loss on disposal of fixed assets1,483  
Change in assets and liabilities:  
(Increase) decrease in:  
Accounts receivable12,417 67,615 
Prepaid expenses and other current assets687,779 2,026,298 
Other assets 12,550 
Increase (decrease) in:  
Accounts payable(499,262)(154,099)
Accrued expenses(2,074,094)(1,727,466)
Lease liability(197,000)(86,141)
Other liabilities6,537 57,111 
Net cash used in operating activities(25,166,501)(21,730,312)
Cash flows from investing activities:  
Purchases of property and equipment(114,679)(280,047)
Purchases of marketable securities (17,989,202)
Maturities of marketable securities28,250,000 52,828,000 
Net cash provided by investing activities28,135,321 34,558,751 
Cash flows from financing activities:  
Proceeds from exercise of stock options415,555 220,895 
Proceeds from public offering of common stock, net of commissions and underwriting28,200,003  
Payment of offering costs(203,768) 
Net cash provided by financing activities28,411,790 220,895 
Net increase in cash and cash equivalents31,380,610 13,049,334 
Cash and cash equivalents at beginning of period72,636,886 74,888,145 
Cash and cash equivalents at end of period$104,017,496 $87,937,479 
Supplemental disclosures of noncash information:  
Property and equipment in accounts payable/accrued expenses $37,705 $ 
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. Immuneering is a clinical-stage oncology company developing medicines for broad populations of cancer patients with an initial aim to therapeutically address universal-RAS. The Company aims to achieve universal activity through deep cyclic inhibition of the MAPK pathway, impacting cancer cells while sparing healthy cells. Immuneering’s lead product candidate, IMM-1-104, is in a Phase 1/2a study in patients with advanced solid tumors harboring RAS mutations.

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 programs 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.
On April 20, 2023, the Company completed an underwritten follow-on equity offering, pursuant to which it issued and sold 2,727,273 shares of its Class A common stock $0.001 par value per share at an offering price of $11.00 per share. The aggregate net proceeds received by the Company from the offering were $28,200,003, after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company of $203,768.
To date, the Company has funded its operations through service revenues (which have since ceased), and with proceeds from the sale of its capital stock and convertible notes. The Company has incurred recurring losses over the past several years and as of June 30, 2023, the Company had an accumulated deficit of $135,579,875. 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 considered whether or not there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern, and concluded that there are none as it estimates that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the unaudited condensed consolidated financial statements.
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The full extent to which the coronavirus (“COVID-19”) pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat COVID-19 and its variants, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the pandemic related to COVID-19 and its variants and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgements or revise the carrying values of its assets or liabilities.
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 subsidiaries. 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 year ended December 31, 2022.
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, 2022.
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 liabilities. Actual results may differ materially and adversely from these estimates.
Goodwill
Goodwill represents the excess of the fair value of the acquiree over the recognized basis of the net identifiable assets acquired and includes the future economic benefits from other assets that could not be individually identified and separately recognized. Goodwill is not amortized, but instead is periodically reviewed for impairment and an impairment charge is recorded in the periods in which the recorded carrying value of goodwill exceeds its fair value.
On a quarterly basis, the Company performs a review of its business to determine if events or changes in circumstances have occurred which could have a material adverse effect on the fair value of the Company and its goodwill. If such events
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or changes in circumstances were deemed to have occurred, the Company would perform an impairment test of goodwill as of the end of the quarter and record any noted impairment loss.
The goodwill test is performed at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
The Company performs its annual impairment test during the fourth quarter of each fiscal year. There were no impairments identified for the year ended December 31, 2022 or the six months ended June 30, 2023.
Deferred Offering Costs
The Company capitalizes certain legal, professional, and other third-party charges related to ongoing equity financings as deferred offering costs until fully consummated. These costs are to be recorded as a reduction of the offering’s proceeds which are recorded to additional paid-in capital within stockholders’ equity. Should the Company choose not to initiate such financing, the deferred offering costs would be immediately expensed as operating expenses.
On August 10, 2022, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with Piper Sandler & Co, (the “Sales Agent”) to sell shares of the Company’s common stock, par value $0.001 per share, with aggregate gross sales proceeds of up to $50 million, from time to time, through an “at the market” equity offering program. Deferred offering costs associated with the Sales Agreement are reclassified to additional paid-in capital on a pro-rata basis when the Company completes offerings under the Sales Agreement. Any remaining deferred costs will be expensed to the statement of operations should the planned offering be abandoned. The Company had approximately $0.3 million of deferred offering costs as of both June 30, 2023 and December 31, 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”) 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) became effective for the Company on January 1, 2023. The Company adopted this effective January 1, 2023 and there was no impact to the 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 adopted this effective January 1, 2023 and there was no impact to the 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
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comprehensive loss in the condensed consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the condensed consolidated statements of comprehensive loss, until realized. The Company assesses its available-for-sale marketable securities for impairment on a quarterly basis. There were no impairments of the Company’s available-for-sale marketable securities measured and carried at fair value during the three and six months ended June 30, 2023 or 2022. Realized gains and losses are included in other expense.
Our marketable securities portfolio only contains investments in U.S. Treasury and other U.S. government-backed securities. We review our portfolio based on the underlying risk profile of the securities and have a zero loss expectation for these investments. We also regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.
During the three and six months ended June 30, 2023 and 2022, we recognized no year-to-date credit loss related to our short-term investments, and had no allowance for credit loss recorded as of June 30, 2023 or December 31, 2022.
Marketable securities as of June 30, 2023 consisted of the following:
June 30, 2023
Amortized CostUnrealized GainsUnrealized LossesFair Value
Assets:
Current:
Government securities$3,728,641 $ $(2,351)$3,726,290 
Commercial paper1,241,417 133  1,241,550 
Total marketable securities$4,970,058 $133 $(2,351)$4,967,840 
Marketable securities as of December 31, 2022 consisted of the following:
December 31, 2022
Amortized CostUnrealized GainsUnrealized LossesFair Value
Assets:
Current:
U.S. Treasuries$12,986,424 $ $(25,649)$12,960,775 
Government securities8,084,107 1,099 (12,021)8,073,185 
Commercial paper11,847,902 6,847 (739)11,854,010 
Total marketable securities$32,918,433 $7,946 $(38,409)$32,887,970 
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.
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The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of June 30, 2023:
Level 1Level 2Level 3Total
Assets:
Cash equivalents
Money market$103,742,271 $ $ $103,742,271 
Total cash equivalents103,742,271   103,742,271 
Marketable securities:
Government securities$ $3,726,290 $ $3,726,290 
Commercial paper 1,241,550  1,241,550 
Total marketable securities 4,967,840  4,967,840 
Total cash equivalents and marketable securities$103,742,271 $4,967,840 $ $108,710,111 
There have been no changes to the valuation methods during the six months ended June 30, 2023. 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 six months ended June 30, 2023.
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 June 30, 2023 and December 31, 2022.
The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2022:
Level 1Level 2Level 3Total
Assets:
Cash equivalents
Money market$19,118,892 $ $ $19,118,892 
Commercial paper 1,249,575  1,249,575 
Government securities 2,742,025  2,742,025 
Total cash equivalents19,118,892 3,991,600  23,110,492 
Marketable securities:
U.S. Treasuries$12,960,775 $ $ $12,960,775 
Government securities 8,073,185  8,073,185 
Commercial paper 11,854,010  11,854,010 
Total marketable securities12,960,775 19,927,195  32,887,970 
Total cash equivalents and marketable securities$32,079,667 $23,918,795 $ $55,998,462 
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Note 5 – Property and Equipment, net
Property and equipment, net consisted of the following:
June 30,
2023
December 31,
2022
Computer equipment$445,577 $437,346 
Furniture and fixtures91,317 91,317 
Lab equipment1,099,567 970,374 
Leasehold improvements298,941 288,908 
Total1,935,402 1,787,945 
Accumulated depreciation/amortization(569,661)(418,337)
Property and equipment, net$1,365,741 $1,369,608 
Depreciation/amortization expense totaled $78,242 and $54,560 for the three months ended June 30, 2023 and 2022, respectively. Depreciation/amortization expense totaled $154,768 and $102,263 for the six months ended June 30, 2023 and 2022, respectively.

Note 6 – Accrued Expenses
Accrued expenses consisted of the following:
June 30,
2023
December 31,
2022
Accrued professional services$205,615 $297,234 
Accrued employee expenses1,763,479 3,631,082 
Accrued contract research expenses398,796 425,846 
Accrued other59,009 146,831 
Total$2,426,899 $4,500,993 
Note 7 - Common Stock
The Company had 200,000,000 authorized shares of Class A common stock, $0.001 par value per share as of June 30, 2023 and December 31, 2022 of which 29,263,028 and 26,418,732 were issued and outstanding, respectively. The holders of Class A common stock are entitled one vote for each share of common stock. Dividends may be paid when, and if declared by the Board of Directors, subject to the limitations, powers and preferences granted to the Preferred Stockholders and on a proportionate basis with holders of Class B common stock.
As of June 30, 2023 and December 31, 2022, the following number of shares of Class A common stock have been reserved:
June 30,
2023
December 31,
2022
Exercise of common stock options5,453,3923,559,041
5,453,3923,559,041
The Company had 20,000,000 authorized shares of Class B common stock, $0.001 par value per share as of June 30, 2023 and December 31, 2022, of which no shares have been issued nor are outstanding. The holders of Class B common stock have no voting rights. Dividends may be paid when, and if, declared by the Board of Directors, subject to the limitations,
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powers and preferences granted to the preferred stockholders and on a proportionate basis with holders of Class A common stock.
IPO
On August 3, 2021, the Company completed its initial public offering pursuant to which it issued and sold 8,625,000 shares of its Class A common stock, inclusive of 1,125,000 shares of its Class A common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. 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.
On August 3, 2021 in connection with the closing of the IPO, the Company filed a restated certificate of incorporation, which amended and restated the Company’s certificate of incorporation to, among other things: (i) increase the number of authorized shares of common stock to 200,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock, par value $0.001 per share; (ii) authorize 10,000,000 shares of Preferred Stock; and (iii) authorize the Board of Directors to establish the rights, preferences and restrictions on any unissued series of Preferred Stock.
Equity Offerings
On August 10, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-266738) (the “2022 Shelf Registration Statement”) with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and/or units or any combination thereof in the aggregate amount of up to $200 million for a period of up to three years from the date of its effectiveness on August 19, 2022.
On August 10, 2022, the Company also entered into the Sales Agreement with the Sales Agent to sell shares of the Company’s Class A common stock, par value $0.001 per share, with aggregate gross sales proceeds of up to $50 million, from time to time, through an “at the market” equity offering program (the “ATM Program”) under the 2022 Shelf Registration Statement. Subject to the terms and conditions of the Sales Agreement, the Sales Agent may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act, including sales made through the Nasdaq Global Market, on any other existing trading market for the common stock, to or through a market maker, or, if expressly authorized by the Company, in privately negotiated transactions. The Company or Sales Agent may terminate the Sales Agreement upon notice to the other party and subject to other conditions. The Company will pay the Sales Agent a commission equal to 3.0% of the gross proceeds of any Common Stock sold through the Sales Agent under the Sales Agreement and has provided the Sales Agent with customary indemnification rights.
Issuance costs incurred related to the Sales Agreement are classified as long-term assets on the balance sheet at June 30, 2023. The Company had approximately $0.3 million of deferred offering costs as of both June 30, 2023 and December 31, 2022. No shares were sold pursuant to the ATM Program during the three- or six-month periods ended June 30, 2023 or June 30, 2022, respectively.
On April 20, 2023, the Company completed an underwritten follow-on equity offering, pursuant to which it issued and sold 2,727,273 shares of its Class A common stock, $0.001 par value per share, at an offering price of $11.00 per share under the 2022 Shelf Registration Statement. The aggregate net proceeds received by the Company from the offering were $28,200,003, after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company of $203,768.
Note 8 - Net Loss Per Share Attributable to Common Stockholders
Net loss per share of common stock is computed using the two-class method required for multiple classes of common stock and participating securities based upon their respective rights to receive dividends as if all income for the period has been distributed. The rights, including the liquidation and dividend rights and sharing of losses, of the Class A and Class B common stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share attributed to common stockholders is therefore the same for Class A and Class B common stock on an individual or combined basis.
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Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase.
Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. The Company has reported net losses for all periods presented, therefore diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Basic and diluted net loss per share attributable to common stockholders was calculated at June 30, 2023 and June 30, 2022 as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Numerator:
Net loss$(12,188,748)$(11,527,303)$(25,792,918)$(24,423,677)
Denominator - basic and diluted:
Weighted-average common shares outstanding, basic and diluted28,647,45026,386,34327,550,92226,372,787
Net loss per share - basic and diluted$(0.43)$(0.44)$(0.94)$(0.93)
The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares) at June 30, 2023 and June 30, 2022:
20232022
Options to purchase common stock5,453,3923,827,454
Total shares of common stock equivalents5,453,3923,827,454
Note 9 – Stock-Based Compensation
During 2015, the Company established the Long Term Incentive Plan (“Incentive Plan”), under which incentive stock options, nonqualified stock options, restricted stock or other awards may be awarded to employees, directors or consultants of the Company. The options typically vest over a four-year period. Upon the effectiveness of the Company’s 2021 Incentive Award Plan, the Company ceased granting awards under the Incentive Plan. However, the Incentive Plan continues to govern awards outstanding thereunder.
On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Incentive Award Plan (the “2021 Plan”), which became effective on July 29, 2021. The 2021 Plan provides for the grant of incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares reserved for issuance under the 2021 Plan was initially equal to 2,590,000 plus an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 4% of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors. No more than 15,350,000 shares of Class A common stock may be issued under the 2021 Plan upon the exercise of incentive stock options. Shares issued under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. If an award under the 2021 Plan expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, cancelled without having been fully exercised/settled or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2021 Plan. In addition, shares subject to stock options issued under the Incentive Plan may become available for issuance under the 2021 Plan to the extent such stock options are canceled, forfeited, exchanged, settled in cash or otherwise terminated. As of June 30, 2023, there were 1,598,585 shares available for future issuance under the 2021 Plan.
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On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on July 29, 2021. A total of 250,000 shares of Class A common stock were initially reserved for issuance under this plan. The number of shares of Class A common stock that may be issued under the 2021 ESPP will automatically increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 1% of the shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors, provided that not more than 3,340,000 shares of Class A common stock may be issued under the 2021 ESPP. As of June 30, 2023, no shares had been issued under the 2021 ESPP.
The Company recognized stock-based compensation expense of $1,333,882 and $2,607,387 during the three and six months ended June 30, 2023, respectively. During the three and six months ended June 30, 2022, the Company recognized stock-based compensation expense of $1,052,421 and $1,950,071, respectively. As of June 30, 2023, compensation expense remaining to be recognized for outstanding stock options was $13,650,381 and to be recognized over a weighted-average period of 2.80 years.
The fair value of options granted is calculated on the grant date using the Black-Scholes option valuation model. Prior to the Company's IPO on August 3, 2021, the Company was a private company thus lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own publicly traded stock price. For the six months ended June 30, 2023, the Company granted 2,222,610 shares of stock options at a weighted-average grant date fair value of $5.23.
The Company used the following assumptions in its application of the Black-Scholes option pricing model for grants during the six months ended June 30, 2023 and 2022:
Six Months Ended June 30,
20232022
Weighted-average risk-free interest rate
3.46% - 4.07%
1.35% - 3.31%
Expected term (in years)
5.00 - 10.00
5.00 - 10.00
Expected dividend yield0%0%
Expected volatility
64.86% - 70.50%
65.24% - 78.12%
The following table summarizes the stock option activity during the six months ended June 30, 2023:
Number of
Options
Weighted-
Average
Exercise Price
per Share
Weighted
Average
Remaining
Contractual
Term (in Years)
Aggregate
Intrinsic Value
Outstanding at December 31, 20223,559,041$7.36 
Granted2,222,6105.23 
Exercised(117,023)3.55 
Cancelled(211,236)9.38 
Outstanding at June 30, 20235,453,392$6.49 8.12$22,004,455 
Vested and exercisable at June 30, 20232,270,279$5.70 6.70$10,828,574 
Vested and expected to vest at June 30, 20235,453,392$6.49 8.12$22,004,455 
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For the three and six months ended June 30, 2023 and 2022, the Company recognized share-based compensation expense recognized on the accompanying condensed consolidated statements of operations as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cost of revenue$ $4,014 $ $8,644 
Research and development615,975 504,938 1,206,810 937,657 
General and administrative717,907 543,469 1,400,577 1,003,770 
Total$1,333,882 $1,052,421 $2,607,387 $1,950,071 
Note 10 – Commitments and Contingencies
Operating Leases
In October 2020, the Company entered into an office lease (“Via Frontera Lease”) in San Diego, California with a lease term of 67 months. At the lease commencement date, a right-to-use asset and lease liability was recognized by the Company for $637,863. In January 2022, the Company exercised its option to terminate the Via Frontera Lease 20 months early. The lease will terminate on October 1, 2023. This was accounted for as a lease modification which reduces the term of the existing lease and the Company adjusted the value of its right-of-use asset and operating lease liability by $347,739 using an incremental borrowing rate of approximately 6%.
The modification is reflected as a non-cash operating activity in the statement of cash flows for the six months ended June 30, 2022.
The Company subsequently entered into a sublease of the Via Frontera Lease, the term of which commenced in March 2022 and continues through the full remaining obligation. As part of the BioArkive acquisition, the Company assumed the obligations of three leases in San Diego, California. One is for 38,613 square feet of office and laboratory space, under a lease that terminates on April 30, 2032, the second is for a 6,100 square feet of office and laboratory space under a lease that terminated on December 31, 2022, and the third is for a lease for 4,760 square feet of office and laboratory space under a lease that terminates on March 31, 2024. As a result, the Company recorded right-to-use assets and lease liabilities of $4,824,700 on the acquisition date of December 22, 2021. Sublease income will be accounted for as a reduction of rent expense in the statement of operations.
The Company currently leases office space in Cambridge, Massachusetts and New York, New York pursuant to short-term arrangements. The Cambridge lease is on a month-to-month basis, requiring one month’s notice before termination. The New York lease is renewable on a yearly basis and the most recent renewal extended the lease term until February 28, 2024. The Company also previously leased office space in San Francisco, California, pursuant to a short-term rental arrangement with a lease term that ended on July 31, 2023 and the Company chose not to renew. These lease agreements include or included payments for lease and non-lease components. The Company has elected to not separate such components and these payments were recognized as rent expense.
As of June 30, 2023, total future minimum lease payments for its short-term leases in Cambridge, Massachusetts, New York, New York and San Francisco, California was $43,902 due in 2023 and $13,840 due in 2024.
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Future minimum lease payments for operating leases with initial or remaining terms in excess of one year at June 30, 2023 were as follows:
Amount
Remainder of 2023$409,704 
2024732,546 
2025739,689 
2026761,877 
2027784,737 
Thereafter3,682,509 
Total future lease payments7,111,062 
Less: Imputed interest(2,466,379)
Total lease liabilities$4,644,683 
Current portion lease liabilities$332,675 
Lease liabilities, noncurrent4,312,008 
Total lease liabilities$4,644,683 
Quantitative information regarding the Company’s leases for the six months ended June 30, 2023 and 2022 is as follows:
June 30,
2023
June 30,
2022
Lease costs:
Operating lease cost$450,496 $527,413 
Short-term lease cost108,586 164,373 
Sublease income(84,074)(95,470)
Total lease costs$475,008 $596,316 
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash flows from operating leases$433,759 $328,250 
Operating cash flows from short-term leases108,586 164,373 
$542,345 $492,623 
Weighted-average remaining lease term - operating leases8.75 years9.49 years
Weighted-average discount rate - operating leases9.1 %9.3 %
As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.
Litigation
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities and may be exposed to litigation in connection with its products and operations. The Company’s policy is to assess the likelihood of any adverse judgments or outcomes related to legal matters, as well as ranges of probable losses. When it is probable that future expenditures will be made and can be reasonably estimated the Company will accrue a liability for such matters. Significant judgement is required to determine both probability and estimated amount. The Company is not aware of any material legal matters.
Clinical Research Contracts
The Company may enter into contracts in the normal course of business with clinical research organizations for clinical trials, with contract manufacturing organizations for clinical supplies, and with other vendors for preclinical studies, supplies and other services for our operating purposes. These contracts generally provide for termination with a 30-day notice.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, including the audited consolidated financial statements and notes thereto. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage oncology company developing medicines for broad populations of cancer patients. Our initial aim is to develop a universal-RAS therapy, an approach designed to include patients with solid tumors driven by any mutation in KRAS, NRAS or HRAS. Our inclusive approach differentiates us from narrowly targeted precision therapies, which are limited to patients with tumors harboring select mutations.

We are currently evaluating our lead product candidate, IMM-1-104, in a Phase 1/2a clinical trial in patients with advanced solid tumors harboring RAS mutations. IMM-1-104 is being developed as a once-daily oral monotherapy that aims to achieve universal-RAS activity through deep cyclic inhibition of the MAPK pathway. Deep cyclic inhibition is a novel mechanism that aims to deprive tumor cells of the sustained proliferative signaling required for rapid growth, while sparing healthy cells through a cadenced, normalized level of signaling. This mechanism was engineered using our proprietary informatics-based discovery platform. The development of our pipeline is translationally guided by our proprietary, human-aligned 3D tumor modeling platform that we combine with bioinformatics-driven patient profiling, which we believe has the potential to increase the probability of success in clinical development versus traditional drug development approaches. Our second product candidate, IMM-6-415, aims to achieve universal-MAPK activity with an accelerated twice-daily oral dosing cadence, also through deep cyclic inhibition of the MAPK pathway. IMM-6-415 is currently in IND-enabling studies. Our pipeline also includes Trifecta MEK, RAS modulators and other small molecule drug discovery programs.

In April 2023, we announced initial pharmacokinetic, or PK, pharmacodynamic, or PD, and safety data from the ongoing Phase 1 portion of our Phase 1/2a clinical trial of IMM-1-104 in patients with advanced solid tumors harboring RAS mutations.

In June 2023, we announced the completion of the dose-escalation portion of the Phase 1/2a clinical trial of IMM-1-104. The trial’s Safety Review Committee (SRC) completed its evaluation and observed that doses up to and including 320 mg once daily were tolerable with no dose limiting toxicities observed. We have subsequently commenced enrollment in the Phase 1b dose evaluation portion of the trial, which is designed to evaluate two dosing cohorts of approximately 12 patients each at an oral dose of 240mg or 320 mg once daily. Subject to the completion and results of the Phase 1b portion of the trial, we plan to announce the recommended IMM-1-104 Phase 2 dose in early 2024. In addition, we plan to submit an IND for IMM-6-415 to the U.S. Food and Drug Administration, or FDA, in the fourth quarter of 2023.

For the period from inception through 2017, we devoted substantially all of our efforts to business planning, service revenue generation, developing tools to aid in drug discovery, and recruiting management and technical staff. Since 2018, we have also focused significant effort on our own internal research and development programs. We have financed our operations through service revenues, the issuance of convertible debt and the sale of convertible preferred stock and common stock.

On December 22, 2021, we 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 us and other biotechnology companies. BioArkive was fully integrated into our operations following the acquisition and exclusively supports our internal preclinical research activities for our oncology pipeline. In connection with the acquisition, we assumed the obligations under BioArkive’s three lease agreements.
On April 20, 2023, we completed an underwritten offering, pursuant to which we issued and sold 2,727,273 shares of our Class A common stock at an offering price of $11.00 per share. The aggregate net proceeds received from the offering was
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$28.2 million, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us, which were $0.2 million.
Since inception, we have had significant annual operating losses. Our net loss was approximately $25.8 million, for the six months ended June 30, 2023 and $50.5 million for the year ended December 31, 2022. As of June 30, 2023, we had an accumulated deficit of approximately $135.6 million and approximately $109.0 million in cash, cash equivalents and marketable securities.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our internally developed product candidates as well as add operational, financial and management informational systems and personnel to support our product development. In addition, if and when we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Based on our current business plans, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our development activities and other operations into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured.
We have not had any internally developed products approved for sale. We do not expect to generate any product sales unless and until we successfully complete development of, obtain regulatory approval for, and successfully bring to market one or more of our internally developed product candidates. If we obtain regulatory approval for any of our internally developed product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including without limitation potential collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.
Components of Our Results of Operations
Revenue
Our revenue has historically been generated by providing computational biology professional services to pharmaceutical and biotechnology companies. We charged an agreed upon rate per hour based on the aggregate level of personnel assigned to work on the project or a fixed fee for a defined scope of work. Our contracts specified the period of time over which these professional services would be provided. We recognized revenue over time by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress, which depicts the performance in transferring control of the associated services to the customer. We used input methods to measure the progress toward the complete satisfaction of performance obligations and evaluate the measure of progress each reporting period and, if necessary, adjusted the measure of performance and related revenue recognition. Any such adjustments were recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.

We have ceased accepting new services contracts in order to focus on developing our wholly-owned internal pipeline. In September 2022, we completed our last remaining services contract associated with the computational biology professional services business.

We have also discontinued our biosample storage business, which was acquired through the BioArkive transaction, to external parties. In December 2022, we completed our last remaining storage contract. The revenue earned associated with the biosample storage business for the year ended December 31, 2022 is immaterial to the financial statements.

At this time, we do not anticipate entering into any new service or storage contracts or agreements.
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Cost of Revenue

Historically, our cost of revenue has primarily consisted of expenses related to providing professional services to our customers. These costs include salaries, bonuses, benefits, stock-based compensation expense, depreciation, facilities, and other outside services. As a result of the discontinued service contracts and bio-sample storage business, the cost of revenue incurred for the year ended December 31, 2022 is immaterial to the financial statements.

Operating Expenses

Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.
Research and Development
Research and development expenses account for a significant portion of our operating expenses. Our research and development expenses consist primarily of direct and unallocated costs incurred in connection with the development of our research platform, product candidates, discovery efforts and preclinical and clinical activities related to our program pipeline.
Our direct costs include:
expenses incurred under agreements with third-party contract research organizations, or CROs, and other vendors that conduct our preclinical and clinical activities on our behalf, including clinical trial sites that conduct research and development activities on our behalf;
laboratory expenses related to the execution of discovery programs, preclinical studies and clinical trials; and
costs related to production of clinical and preclinical materials, including fees paid to contract manufacturers.
Our unallocated costs include:
personnel-related expenses, consisting of employee salaries, bonuses, benefits and stock-based compensation expense, and recruiting costs for personnel engaged in research and development activities;
contractor and consulting fees related to the preparation and ongoing support of clinical trials; and
facility and equipment related expenses, consisting of indirect and allocated expenses for rent, depreciation, maintenance of facilities, insurance, and other supplies.
We expense research and development costs in the periods in which they are incurred.

Our direct research and development expenses are tracked on a program-by-program basis once they are in Phase 1 clinical trials and consist of external costs and fees paid to contract manufacturing organizations, or CMOs, and CROs in connection with our preclinical and clinical development and manufacturing activities. Such program costs also include the external costs of laboratory and consumable materials and costs of raw materials that are directly attributable to and incurred for any single program. We do not allocate employee costs, contractor/consultant fees, costs associated with our platform development and discovery efforts, payments made under third-party licensing agreements, costs of laboratory supplies and consumable materials that are not directly attributable to any single program, and facilities expenses, including rent, depreciation and other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.

Due to the inherently unpredictable nature and numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs. We are also unable to predict if, when, or to what extent we will obtain approval and generate revenues from the commercialization and sale of any of our product candidates.

The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, such as:
successful completion of preclinical studies and initiation of clinical trials for future product candidates;
successful enrollment and completion of clinical trials for our current product candidates;
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data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended patient populations;
acceptance by the FDA or other applicable regulatory agencies of IND applications, clinical trial applications and/or other regulatory filings for our product candidates;
expansion and maintenance of a workforce of experienced scientists and others to continue to develop our product candidates;
successful application for and receipt of marketing approvals from applicable regulatory authorities;
obtainment and maintenance of intellectual property protection and regulatory exclusivity for our product candidates;
making of arrangements with contract manufacturing organizations for, or establishment of, commercial manufacturing capabilities;
establishment of sales, marketing and distribution capabilities and successful launch of commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;
acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors;
effective competition with other therapies;
obtainment and maintenance of coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;
maintenance, enforcement, defense and protection of our rights in our intellectual property portfolio;
avoidance of infringement, misappropriation or other violations with respect to others’ intellectual property or proprietary rights; and
maintenance of a continued acceptable safety profile of our product candidates following receipt of marketing approvals, if any.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors.

We may never succeed in achieving regulatory approval for any of our product candidates. Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product candidates’ development, which could increase our research and development expense. We may obtain unexpected results from our preclinical studies and clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.

We expect that our research and development expenses will substantially increase for the foreseeable future as we continue to implement our business strategy, which includes advancing our product candidates through clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, and seeking regulatory approvals for our product candidates that successfully complete clinical trials. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development. As of the date of this Quarterly Report on Form 10-Q, we cannot reasonably determine or accurately project total program-specific expenses through commercialization, if such was to occur. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
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General and Administrative
Our general and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, stock-based compensation, and recruiting costs for personnel in executive, finance, and other administrative functions. Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services, insurance costs, travel expenses and facility related expenses not otherwise included in research and development expenses.
We expect our general and administrative expenses will substantially increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities, as well as to support our operations generally. As we expand our operations, we also expect to incur increased expenses associated with operating as a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and rules and regulations of the Securities and Exchange Commission (“SEC”), Sarbanes-Oxley Act, director and officer insurance costs, and investor and public relations costs.
Amortization of intangible asset
Amortization of intangible asset relates to the technology acquired in the BioArkive acquisition.
Other Income (Expense)
Interest income

Interest income consists of interest earned on our cash and cash equivalents balances and our marketable securities. The primary objective of our investment policy is capital preservation.

Other income (expense)

Other income (expense) consists of the amortization of premiums or accretion of discounts related to our marketable securities.
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Results of Operations
Comparison of the Three Months Ended June 30, 2023 and 2022
The following table summarizes our results of operations for the periods indicated:
Three Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Revenue$— $94 $(94)(100.0)%
Cost of revenue— 48 (48)(100.0)%
Gross profit— 46 (46)(100.0)%
Operating expenses
Research and development9,453 7,981 1,472 18.4 %
General and administrative4,045 3,704 341 9.2 %
  Amortization of intangible asset(1)(12.5)%
Total operating expenses13,505 11,693 1,812 15.5 %
Loss from operations(13,505)(11,647)(1,858)16.0 %
Other income (expense)
Interest income1,166 143 1,023 715.4 %
Other income (expense)150 (24)174 (725.0)%
Net loss$(12,189)$(11,528)$(661)5.7 %
Revenue
The following table summarizes the revenue recognized for the periods indicated:
Three Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Revenue$— $94 $(94)(100.0)%
Revenue decreased by approximately $94 thousand, or 100.0%, to $0 for the three months ended June 30, 2023 compared to approximately $94 thousand for the three months ended June 30, 2022. The decrease in revenue was due to the completion of the remaining services contracts associated with the computational biology professional services business in September 2022, in addition to fulfilling the final bio-sample storage contract in December 2022.
Cost of Revenue
Cost of revenue decreased by approximately $48 thousand, or 100.0%, to $0 for the three months ended June 30, 2023 compared to approximately $48 thousand for the three months June 30, 2022. The decrease was primarily due to decreased employee-related costs related to services contracts that were discontinued as of September 2022.
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Research and Development
The following table summarizes the components of our research and development expenses for the periods indicated:
Three Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Direct research and development expenses by program:
IMM-1-104$984 $435 $549 126.2 %
Other programs4,392 3,640 752 20.7 %
Unallocated research and development expenses:
Employee-related costs3,058 3,239 (181)(5.6)%
Stock-based compensation expense616 505 111 22.0 %
Facilities and other expenses347 123 224 182.1 %
Depreciation/amortization56 39 17 43.6 %
Total research and development$9,453 $7,981 $1,472 18.4 %

Research and development expenses increased by approximately $1.5 million, or 18.4%, to approximately $9.5 million for the three months ended June 30, 2023 as compared to approximately $8.0 million for the three months ended June 30, 2022. The increase of approximately $1.5 million was primarily due to an increase of approximately $1.3 million related to direct research and development expenses, of which $0.5 million related to IMM-1-104 and an increase of $0.8 million for earlier stage programs. The remaining increase was driven by unallocated research and development costs of approximately $0.2 million, which was primarily driven by the increase of $0.2 million in depreciation/amortization, facilities, and other expenses in the aggregate, and $0.1 million related to stock-based compensation expense. This increase was offset by a decrease of $0.2 million in employee-related costs.
General and Administrative
The following table summarizes the components of our general and administrative expenses for the periods indicated:
Three Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Employee-related costs$2,048 $2,057 $(9)(0.4)%
Stock-based compensation expense718 543 175 32.2 %
Professional fees928 561 367 65.4 %
Facilities and other allocated expenses71 345 (274)(79.4)%
Other280 198 82 41.4 %
Total general and administrative$4,045 $3,704 $341 9.2 %
General and administrative expenses increased by approximately $0.3 million, or 9.2%, to approximately $4.0 million for the three months ended June 30, 2023 compared to approximately $3.7 million for the three months ended June 30, 2022. The increase of approximately $0.3 million was primarily due to increased professional fees for accounting, auditing and legal services of $0.4 million, increased stock-based compensation expense of $0.2 million, and approximately $0.1 million in other expenses, offset by a decrease in employee-related costs of approximately $9 thousand, and decreased facilities and allocated expenses of approximately $0.3 million.
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Amortization of Intangible Asset
Amortization of intangible asset was $7,317 in the three months ended June 30, 2023, compared to $7,317 in the three months ended June 30, 2022. This amortization related to the technology acquired for the BioArkive acquisition completed in December 2021.
Other Income (Expense)
Interest income increased by approximately $1.0 million due to the interest earned on our cash, cash equivalents and marketable securities balances as a result of an increase in interest rates.
Other income was approximately $0.2 million for the three months ended June 30, 2023, primarily as a result of the increase in the accretion of premiums related to our marketable securities.
Comparison of the Six Months Ended June 30, 2023 and 2022
The following table summarizes our results of operations for the periods indicated:
Six Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Revenue$$278$(278)(100.0)%
Cost of revenue139(139)(100.0)%
Gross profit139(139)(100.0)%
Operating expenses
Research and development19,66417,0322,63215.5%
General and administrative8,5067,66484211.0%
  Amortization of intangible asset1515—%
Total operating expenses28,18524,7113,47414.1%
Loss from operations(28,185)(24,572)(3,613)14.7%
Other income (expense)
Interest income1,9972751,722626.2%
Other income (expense)394 (127)521(410.2)%
Net loss$(25,794)$(24,424)$(1,370)5.6 %

Revenue
The following table summarizes the revenue recognized for the periods indicated:
Six Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Revenue$— $278 $(278)(100.0)%
Revenue decreased by approximately $0.3 million, or 100.0%, to $0 for the six months ended June 30, 2023 compared to approximately $0.3 million for the six months ended June 30, 2022. The decrease in revenue was due to the completion of the remaining services contracts associated with the computational biology professional services business in September 2022, in addition to fulfilling the final bio-sample storage contract in December 2022.
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Costs of Revenue
Costs of revenue decreased by approximately $0.1 million, or 100.0%, to $0 for the six months ended June 30, 2023 compared to approximately $0.1 million for the six months ended June 30, 2022. The decrease was primarily due to decreased employee-related costs related to services contracts that were discontinued as of September 2022.
Research and Development
The following table summarizes the components of research and development expenses for the periods indicated:
Six Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Direct research and development expenses by program:
IMM-1-104$3,066 $1,325 $1,741 131.4 %
Other programs7,644 7,766 (122)(1.6)%
Unallocated research and development expenses:
Employee-related costs6,971 6,724 247 3.7 %
Stock-based compensation expense1,207 938 269 28.7 %
Facilities and other allocated expenses668 219 449 205.0 %
Depreciation/amortization108 60 48 80.0 %
Total research and development$19,664 $17,032 $2,632 15.5 %

Research and development expenses increased by approximately $2.6 million, or 15.5%, to approximately $19.7 million for the six months ended June 30, 2023 as compared to approximately $17.0 million for the six months ended June 30, 2022. The increase of approximately $2.6 million was primarily due to an increase of approximately $1.6 million related to direct research and development expenses, of which there was a $1.7 million increase related to IMM-1-104, offset by a $0.1 million decrease for earlier stage programs. The remaining increase was driven by unallocated research and development costs of approximately $1.0 million, of which $0.2 million related to additional employee-related costs and $0.3 million related to stock-based compensation expense. Depreciation/amortization, facilities and other allocated expense also increased by approximately $0.5 million in the aggregate.
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General and Administrative
The following table summarizes the components of general and administrative expenses for the periods indicated:
Six Months Ended June 30,Change
20232022$%
(in thousands, except percentages)
Employee-related costs$4,394 $4,227 $167 4.0 %
Stock-based compensation expense1,401 1,004 397 39.5 %
Professional fees1,846 1,254 592 47.2 %
Outside consultants— 68 (68)(100.0)%
Facilities and other allocated expenses210 701 (491)(70.0)%
Other655 410 245 59.8 %
Total general and administrative$8,506 $7,664 $842 11.0 %

General and administrative expenses increased by approximately $0.8 million, or 11.0%, to approximately $8.5 million for the six months ended June 30, 2023 compared to approximately $7.7 million for the six months ended June 30, 2022. The increase of approximately $0.8 million was primarily due an increase in professional fees incurred for accounting, auditing, legal and tax services of approximately $0.6 million, increased stock-based compensation expense of approximately $0.4 million, increased employee-related costs of $0.2 million, and an increase of $0.2 million in other expenses, offset by a decrease of $0.5 million for facilities and other allocated expense and $68 thousand for outside consultants.
Amortization of Intangible Asset
Amortization of intangible asset was $14,633 in the six months ended June 30, 2023, compared to $15,420 in the six months ended June 30, 2022. This amortization is related to the technology acquired for the BioArkive acquisition completed in December 2021.
Other Income (Expense)
Interest income increased by approximately $1.7 million due to the interest earned on our cash, cash equivalents and marketable securities balances as a result of an increase in interest rates.
Other income was approximately $0.4 million for the six months ended June 30, 2023, primarily a result of the increase in the accretion of premiums related to our marketable securities.
Liquidity and Capital Resources
Sources of Liquidity
We finance our operations through the issuance of convertible notes payable, convertible preferred stock, common stock, and the exercise of stock options. As of June 30, 2023, we had an accumulated deficit of $135.6 million and $109.0 million in cash, cash equivalents and marketable securities. Cash and cash equivalents are comprised of deposits at major financial banking institutions and highly liquid investments with an original maturity of three months or less at the date of purchase. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, reflected in the change in our outstanding accounts payable and accrued expenses.

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates, and we do not expect to generate revenue from sales of any product candidates for the next several years, if at all. To date, our operations have been financed primarily by service revenues and proceeds from sales of our debt and equity securities.
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On August 10, 2022, we entered into an Equity Distribution Agreement, or the Sales Agreement, with Piper Sandler & Co, or the Sales Agent, to sell shares of our common stock with aggregate gross proceeds of up to $50 million, from time to time, through an “at the market” equity offering program ("ATM Program"). During the six months ended June 30, 2023, we did not sell any shares of common stock pursuant to the Sales Agreement under the ATM Program.
On April 20, 2023, we completed an underwritten follow-on equity offering, pursuant to which we issued and sold 2,727,273 shares of our Class A common stock at an offering price of $11.00 per share. The aggregate net proceeds received from the offering was $28.2 million, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us, which were $0.2 million.

As of June 30, 2023, we have contractual obligations related to various leases of $0.4 million for 2023, $0.7 million for 2024, $0.7 million for 2025, $0.8 million for 2026, $0.8 million for 2027 and $3.7 million for the periods thereafter.

We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Cash Flows
The following table summarizes our sources and uses of cash for the periods indicated:
Six Months Ended June 30,
20232022
(in thousands)
Net cash (used in) provided by:
Operating activities$(25,167)$(21,730)
Investing activities28,135 34,558 
Financing activities28,412 221 
Net increase in cash and cash equivalents$31,380 $13,049 
Net Cash Used in Operating Activities
During the six months ended June 30, 2023, operating activities used approximately $25.2 million of cash, primarily resulting from our net loss of approximately $25.8 million and changes in assets and liabilities of $2.1 million, partially offset by stock-based compensation expense of approximately $2.6 million and the reduction in carrying amount of right-of-use assets of $0.2 million.
During the six months ended June 30, 2022, operating activities used approximately $21.7 million of cash, primarily
resulting from our net loss of approximately $24.4 million, partially offset by the reduction in carrying amount of right-of-use assets amortization of $0.3 million and stock-based compensation expense of approximately $2.0 million.
Net Cash Provided by Investing Activities
During the six months ended June 30, 2023, investing activities provided approximately $28.1 million of cash, primarily resulting from the maturities of marketable securities of approximately $28.3 million, partially offset by purchases of property and equipment of $0.1 million.
During the six months ended June 30, 2022, investing activities provided approximately $34.6 million, primarily resulting from the maturities of marketable securities of approximately $52.8 million, partially offset by purchases of marketable securities for $18.0 million and purchases of property and equipment of $0.3 million.
Net Cash Provided by Financing Activities
During the six months ended June 30, 2023, net cash provided by financing activities was approximately $28.4 million, primarily driven by net proceeds of approximately $28.2 million from the Company's underwritten follow-on equity
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offering, after deducting commissions and underwriting fees, in addition to $0.4 million from the exercise of stock options. This was partially offset by $0.2 million in payments of costs related to the public offering.
During the six months ended June 30, 2022, net cash provided by financing activities was approximately $0.2 million, consisting of approximately $0.2 million from the exercise of stock options.
Future Funding Requirements
We expect that our expenses will increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development. The timing and amount of our operating and capital expenditures will depend largely on:
the costs and results of our ongoing clinical trial for IMM-1-104 and potential future clinical trials for our other product candidates;
the scope, progress, results and costs of discovery research, preclinical development, laboratory testing and clinical trials for our other product candidates;
the costs, timing and outcome of regulatory review of our product candidates;
our ability to enter into contract manufacturing arrangements for supply of active pharmaceutical ingredient, or API, and manufacture of our product candidates and the terms of such arrangements;
the payment or receipt of milestones and receipt of other collaboration-based revenues, if any;
the costs and timing of future commercialization activities, if any, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we may receive marketing approval;
the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property related claims;
the extent to which we acquire or in-license other products, product candidates, technologies or data referencing rights;
our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such arrangements;
our ability to access the private and public capital markets or to obtain financing at commercially reasonable rate;
the ability to receive additional non-dilutive funding, including grants from organizations and foundations;
the costs of operating as a public company; and
the impacts of the pandemic related to COVID-19 and its variants and potential future pandemics.
Based on our current business plans, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our development activities and other operations into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Critical Accounting Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and
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Results of Operations—Critical Accounting Policies and Use of Estimates” in our Annual Report on 10-K for the fiscal year ending December 31, 2022. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. There have been no significant changes to our critical accounting policies from those described in our Annual Report on 10-K for the fiscal year ending December 31, 2022.
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Emerging Growth Company Status
As an emerging growth company, or EGC, under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited consolidated financial statements in a registration statement for an IPO, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board, and less extensive disclosure about our executive compensation arrangements.
In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We may remain classified as an EGC until the end of the fiscal year following the fifth anniversary of our IPO, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of the second fiscal quarter of any year before that time, or if we have annual gross revenues of $1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, we are not required to provide this information.
Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2023. Based on that evaluation, our Chief Executive Officer and our Chief Accounting Officer and Treasurer concluded that, as of June 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
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Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. We are not currently party to any material legal proceedings
Item 1A. Risk Factors
Our future operating results could differ materially from the results described in this Quarterly Report on Form 10-Q due to the risks and uncertainties described below, elsewhere in this document and in our other reports filed with the SEC. You should consider carefully the following information about risks below in evaluating our business. If any of the following risks actually occur, our business, financial conditions, results of operations and future growth prospects would likely be materially and adversely affected. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. In these circumstances, the market price of our Class A common stock would likely decline. In addition, we cannot assure investors that our assumptions and expectations will prove to be correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. See “Forward Looking Statements” for a discussion of some of the forward-looking statements that are qualified by these risk factors. Factors that could cause or contribute to such differences include those factors discussed below.
Risks Related to Our Financial Condition and Capital Requirements
We are a clinical-stage oncology company with a limited operating history in developing pharmaceutical products, 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.
Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are a clinical-stage oncology company with a limited operating history in developing pharmaceutical products which makes it difficult to evaluate our business and prospects in future product development. We have no products approved for commercial sale and have not generated any revenue from product sales. To date, we have devoted substantially all of our resources and efforts to providing computational biology services to pharmaceutical and biotechnology companies, organizing and staffing our company, business planning, executing partnerships, raising capital, discovering, identifying and developing potential product candidates, securing related intellectual property rights and undertaking research and preclinical studies and clinical trials of our product candidates, including our ongoing Phase 1/2a clinical trial of IMM-1-104 for the treatment of advanced solid tumors in patients harboring RAS mutant tumors. We have not yet demonstrated our ability to successfully complete any clinical trials, obtain marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. As a result, it may be more difficult for you to accurately predict our future success or viability to develop new pharmaceutical products than it could be if we had a longer operating history.
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by biopharmaceutical companies developing products in rapidly evolving fields. We also may need to transition from a company with a research and development focus to a company capable of supporting commercial activities. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.
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 obtain profitability.
We have incurred net losses in each reporting period for the past several years, have not generated any revenue from product sales to date and have financed our operations principally through our computational biology services to
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pharmaceutical and biotechnology companies, the issuance of convertible debt and the sale of our convertible preferred stock and Class A common stock. We have incurred net losses of approximately $25.8 million and $50.5 million for the six months ended June 30, 2023 and year ended December 31, 2022 respectively. As of June 30, 2023, we had an accumulated deficit of approximately $135.6 million. Our losses have resulted principally from expenses incurred in research and development of our product candidates, from management and administrative costs and other expenses that we have incurred while building our business infrastructure. We are currently conducting an ongoing Phase 1/2a clinical trial for our lead product candidate, IMM-1-104, for the treatment of advanced solid tumors in patients harboring RAS mutant tumors. Our other product candidates are in earlier stages of drug development. As a result, we expect that it will be several years, if ever, before we have a commercialized product and generate revenue from product sales. Even if we succeed in receiving marketing approval for and commercializing one or more of our product candidates, we expect that we will continue to incur substantial research and development and other expenses as we discover, develop and market additional potential product candidates.
We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:
advance the development of our lead product candidate, IMM-1-104, and our other product candidates, including IMM-6-415, through preclinical and clinical development, and, if approved by the FDA or other comparable foreign regulatory authorities, commercialization;
incur manufacturing costs for our product candidates;
seek regulatory approvals for any of our product candidates that successfully complete clinical trials;
increase our research and development activities to identify and develop new product candidates;
hire additional personnel;
expand our operational, financial and management systems;
invest in measures to protect and expand our intellectual property;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize;
expand our manufacturing and develop our commercialization efforts, if any; and
operate as a public company.
The net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our working capital and our ability to achieve and maintain 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.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception, and we expect our expenses to increase in connection with our ongoing activities, particularly as we initiate and conduct clinical trials, and seek marketing approval for our current and any future product candidates. Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA or other comparable foreign regulatory authorities to perform clinical trials or preclinical studies in addition to those that we currently anticipate. Other unanticipated costs may also arise. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to drug sales, marketing, manufacturing and distribution. Because the design and outcome of our current and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of any product candidate we develop. We also expect to incur additional costs
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associated with operating as a public company. Accordingly, it is likely that we will need to obtain substantial additional funding in order to maintain our continuing operations in the future.
As of June 30, 2023, we had approximately $109.0 million in cash, cash equivalents and marketable securities. Based on our current business plans, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our development activities and other operations into 2025. Our estimate as to how long we expect our existing cash, cash equivalents and marketable securities to be able to continue to fund our operating expenses and capital expenditures requirements is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
Our future funding requirements will depend on many factors, including, but not limited to:
the initiation, progress, timeline, cost and results of our clinical trials for our product candidates;
the initiation, progress, timeline, cost and results of additional research and preclinical studies related to pipeline development and other research programs we initiate in the future;
the cost and timing of manufacturing activities as we advance our product candidates through preclinical and clinical development, and possibly commercialization;
the potential expansion of our current development programs to seek new indications;
the negative impact of the COVID-19 pandemic or future pandemics on our business;
the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, in-licensed or otherwise;
the effect of competing technological and market developments;
the payment of licensing fees, potential royalty payments and potential milestone payments;
the cost of general operating expenses;
the cost and timing of completion of commercial-scale manufacturing activities;
the cost of establishing sales, marketing, and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own; and
the cost of operating as a public company.
Advancing the development of our product candidates will require a significant amount of capital. Our existing cash, cash equivalents and marketable securities will not be sufficient to fund all of the activities that are necessary to complete the development of our product candidates.
We will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources, which may dilute our stockholders or restrict our operating activities. We do not have any committed external source of funds. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, in 2022, due to macroeconomic conditions including inflation and higher interest rates, the stock price of biotech companies, including ours, has generally declined, which makes fundraising in our industry more difficult and on less favorable terms. Furthermore, additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and potentially commercialize our product candidates. Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our research-stage programs, clinical trials or future commercialization efforts.
We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at certain of these institutions exceed insured limits. Market conditions have in the past
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impacted and may in the future impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms to us.
We may seek additional capital through a variety of means, including through public or private equity offering made pursuant to the Sales Agreement or otherwise, debt financings or other sources, including up-front payments and milestone payments from strategic collaborations. To the extent that we raise additional capital through the sale of equity or convertible debt or equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Such financing may result in dilution to stockholders, imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect our business. If we raise additional funds through up-front payments or milestone payments pursuant to strategic collaborations with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Our ability to use our net operating losses and other tax attributes may be limited.
As of December 31, 2022, we had approximately $77.0 mill