imra-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-39247

 

IMARA INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-1523849

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

116 Huntington Avenue, 6th Floor

Boston, Massachusetts

02116

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 206-2020

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

IMRA

 

The Nasdaq Stock Market LLC

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

As of May 1, 2020, the registrant had 17,280,465 shares of common stock, $0.001 par value per share, outstanding.

 



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to those described under the “Risk Factors” section and include, among other things:

 

the impact of the recent COVID-19 pandemic and our response to it;

 

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials, including our ongoing Phase 2a clinical trial of IMR-687 in SCD and our planned Phase 2b clinical trials of IMR-687 in SCD and        β-thalassemia;

 

our estimates regarding expenses, future revenue, timing of any future revenue, capital requirements and need for additional financing;

 

our plans to develop and, if approved, subsequently commercialize IMR-687 and any other product candidates, including in combination with other drugs and therapies;

 

the timing of and our ability to submit applications for, obtain and maintain regulatory approvals for IMR-687 and any other product candidates we may identify and pursue;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and investments;

 

the potential advantages or differentiating features of IMR-687 and any other product candidates we may identify and pursue;

 

the rate and degree of market acceptance and clinical utility of IMR-687 and any other product candidates we may identify and pursue;

 

our estimates regarding the potential market opportunity for IMR-687 and any other product candidates we may identify and pursue;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our expectations regarding our ability to obtain and maintain intellectual property protection for IMR-687 and any other product candidates we may identify and pursue;

 

our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

 

the impact of government laws and regulations;

 

our competitive position and expectations regarding developments and projections relating to our competitors and any competing therapies that are or become available;

 

our ability to maintain and establish collaborations or obtain additional funding; and

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. 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. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 6.

Exhibits

68

Signatures

69

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

IMARA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)
(Unaudited)

 

 

 

March 31,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,722

 

 

$

4,936

 

Short-term investments

 

 

19,145

 

 

 

23,971

 

Prepaid expenses and other current assets

 

 

3,949

 

 

 

1,717

 

Total current assets

 

 

109,816

 

 

 

30,624

 

Property and equipment, net

 

418

 

 

 

442

 

Other assets

 

88

 

 

 

2,232

 

Total assets

 

$

110,322

 

 

$

33,298

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK & STOCKHOLDERS’

   EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,322

 

 

$

1,658

 

Accrued expenses and other current liabilities

 

 

2,627

 

 

 

2,540

 

Total current liabilities

 

 

4,949

 

 

 

4,198

 

Deferred rent

 

179

 

 

 

184

 

Total liabilities

 

 

5,128

 

 

 

4,382

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Convertible preferred stock, $0.001 par value per share; no shares authorized, issued

   or outstanding as of March 31, 2020; 70,378,661 shares authorized and 60,533,313

   shares issued and outstanding as of December 31, 2019

 

 

 

 

 

77,764

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; no shares

   issued or outstanding as of March 31, 2020; no shares authorized, issued or

   outstanding as of December 31, 2019

 

 

 

 

 

 

Common stock, $0.001 par value per share; 200,000,000 and 100,000,000 shares

   authorized as of March 31, 2020 and December 31, 2019, respectively; 16,575,465

   and 702,510 shares issued and outstanding as of March 31, 2020 and December 31,

   2019, respectively

 

17

 

 

 

1

 

Additional paid-in capital

 

 

167,161

 

 

 

5,872

 

Accumulated other comprehensive income

 

 

(16

)

 

 

32

 

Accumulated deficit

 

 

(61,968

)

 

 

(54,753

)

Total stockholders’ equity (deficit)

 

 

105,194

 

 

 

(48,848

)

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

 

$

110,322

 

 

$

33,298

 

 

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

1


IMARA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)
(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

5,793

 

 

$

3,560

 

General and administrative

 

 

1,559

 

 

 

634

 

Total operating expenses

 

 

7,352

 

 

 

4,194

 

Loss from operations

 

 

(7,352

)

 

 

(4,194

)

Total other income:

 

 

 

 

 

 

 

 

Interest income

 

 

132

 

 

 

 

Other income

 

 

5

 

 

 

 

Total other income

 

 

137

 

 

 

 

Net loss

 

$

(7,215

)

 

$

(4,194

)

Accretion of Series B convertible preferred stock

 

 

(7,858

)

 

 

 

Net loss attributable to common stockholders—basic and diluted

 

$

(15,073

)

 

$

(4,194

)

Weighted-average common shares outstanding—basic and diluted

 

 

3,493,359

 

 

 

702,510

 

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

 

$

(4.31

)

 

$

(5.97

)

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(7,215

)

 

$

(4,194

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized loss on investments

 

 

(48

)

 

 

 

Comprehensive loss

 

$

(7,263

)

 

$

(4,194

)

 

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

 

2


 

IMARA INC.

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

(in thousands, except share and per share data)
(Unaudited)

 

 

 

CONVERTIBLE PREFERRED STOCK

 

 

 

COMMON

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SERIES SEED

$0.001 PAR

VALUE

 

 

SERIES A

$0.001 PAR

VALUE

 

 

SERIES B $0.001

PAR VALUE

 

 

 

STOCK

$0.001 PAR

VALUE

 

 

ADDITIONAL

PAID-IN

 

 

ACCUMULATED

OTHER

COMPREHENSIVE

 

 

ACCUMULATED

 

 

TOTAL

STOCKHOLDERS’

EQUITY

 

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

INCOME (LOSS)

 

 

DEFICIT

 

 

(DEFICIT)

 

Balance at December 31, 2018

 

 

2,712,960

 

 

$

1,460

 

 

 

31,499,040

 

 

$

30,729

 

 

 

 

 

$

 

 

 

 

702,510

 

 

$

1

 

 

$

4,973

 

 

$

 

 

$

(31,290

)

 

$

(26,316

)

Issuance of Series B convertible

   preferred stock, net of issuance

   costs of $274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,316,663

 

 

 

43,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

 

 

 

 

 

 

 

95

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,194

)

 

 

(4,194

)

Balance at March 31, 2019

 

 

2,712,960

 

 

$

1,460

 

 

 

31,499,040

 

 

$

30,729

 

 

 

25,316,663

 

 

$

43,825

 

 

 

 

702,510

 

 

$

1

 

 

$

5,068

 

 

$

 

 

$

(35,484

)

 

$

(30,415

)

 

 

 

CONVERTIBLE PREFERRED STOCK

 

 

 

COMMON

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SERIES SEED

$0.001 PAR

VALUE

 

 

SERIES A

$0.001 PAR

VALUE

 

 

SERIES B $0.001

PAR VALUE

 

 

 

STOCK

$0.001 PAR

VALUE

 

 

ADDITIONAL

PAID-IN

 

 

ACCUMULATED

OTHER

COMPREHENSIVE

 

 

ACCUMULATED

 

 

TOTAL

STOCKHOLDERS’

EQUITY

 

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

INCOME (LOSS)

 

 

DEFICIT

 

 

(DEFICIT)

 

Balance at December 31, 2019

 

 

2,712,960

 

 

$

1,460

 

 

 

31,499,040

 

 

$

30,729

 

 

 

26,321,313

 

 

$

45,575

 

 

 

 

702,510

 

 

$

1

 

 

$

5,872

 

 

$

32

 

 

$

(54,753

)

 

$

(48,848

)

Issuance of Series B

   convertible preferred

   stock, net of issuance

   costs of $20 and beneficial

   conversion charge

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,845,348

 

 

 

9,271

 

 

 

 

 

 

 

 

 

 

7,858

 

 

 

 

 

 

 

 

 

7,858

 

Accretion of Series B

   converted preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,858

 

 

 

 

 

 

 

 

 

 

(7,858

)

 

 

 

 

 

 

 

 

(7,858

)

Conversion of convertible

   preferred stock into

   common stock

 

 

(2,712,960

)

 

 

(1,460

)

 

 

(31,499,040

)

 

 

(30,729

)

 

 

(36,166,661

)

 

 

(62,704

)

 

 

 

11,172,955

 

 

 

11

 

 

 

94,882

 

 

 

 

 

 

 

 

 

94,893

 

Initial public offering, net of

   underwriting discounts,

   commissions and offering

   costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,700,000

 

 

 

5

 

 

 

66,047

 

 

 

 

 

 

 

 

 

66,052

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

360

 

 

 

 

 

 

 

 

 

360

 

Unrealized loss on

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48

)

 

 

 

 

 

(48

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,215

)

 

 

(7,215

)

Balance at March 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

16,575,465

 

 

$

17

 

 

$

167,161

 

 

$

(16

)

 

$

(61,968

)

 

$

105,194

 

 

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

 

3


 

IMARA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(7,215

)

 

$

(4,194

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

360

 

 

 

95

 

Depreciation expense

 

 

24

 

 

 

 

Amortization and accretion on investments

 

 

5

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(2,232

)

 

 

161

 

Accounts payable

 

 

179

 

 

 

931

 

Accrued expenses and other current liabilities

 

 

(643

)

 

 

600

 

Deferred rent

 

 

(5

)

 

 

 

Net cash used in operating activities

 

 

(9,527

)

 

 

(2,407

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from maturities and sales of short-term investments

 

 

4,772

 

 

 

 

Purchases of property and equipment

 

 

(15

)

 

 

 

Net cash provided by investing activities

 

 

4,757

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

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

 

 

17,150

 

 

 

43,927

 

Proceeds from initial public offering, net of underwriting discounts, commissions and

   offering costs

 

 

69,406

 

 

 

 

Net cash provided by financing activities

 

 

86,556

 

 

 

43,927

 

Net increase in cash, cash equivalents and restricted cash

 

$

81,786

 

 

$

41,520

 

Cash, cash equivalents and restricted cash, beginning of period

 

$

5,024

 

 

$

7,382

 

Cash, cash equivalents and restricted cash, end of period

 

$

86,810

 

 

$

48,902

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Conversion of convertible preferred stock into common stock

 

$

94,893

 

 

$

 

Accretion of redeemable convertible preferred stock to redemption value

 

$

7,858

 

 

$

 

Reclassification of deferred offering costs from other assets to additional paid-in capital

 

$

2,144

 

 

$

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

1,231

 

 

$

102

 

Property and equipment purchases included in accrued expenses

 

$

15

 

 

$

 

Unrealized loss on investments

 

$

(48

)

 

$

 

 

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above:

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

86,722

 

 

$

48,902

 

Restricted cash (included in other assets)

 

 

88

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

86,810

 

 

$

48,902

 

 

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

4


 

IMARA INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of the Business

IMARA Inc. (“IMARA” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to developing and commercializing novel therapeutics to treat rare inherited genetic disorders of hemoglobin, known as hemoglobinopathies, which have significant unmet medical need. The Company was incorporated in January 2016 under the laws of the State of Delaware, and its principal offices are in Boston, Massachusetts.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. The Company’s sole product candidate currently under development, IMR-687, as well as any other product candidates the Company may develop, will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

In February 2020, the Company effected a 1-for-6.299 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each of the Company’s outstanding series of preferred stock. All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the change in par value of common stock to additional paid-in capital.

On February 25, 2020, the Company issued and sold 1,562,994‬ shares of Series B convertible preferred stock (“Series B Preferred Stock”), at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by holders of Series B Preferred Stock, and raised approximately $17.1 million in net proceeds after deducting less than $0.1 million of issuance costs.

On March 16, 2020, the Company completed an initial public offering (“IPO”) of its common stock and issued and sold 4,700,000 shares of common stock at a public offering price of $16.00 per share, resulting in gross proceeds of $75.2 million. On April 13, 2020, the Company issued and sold an additional 705,000 shares of common stock pursuant to the exercise of the underwriters’ over-allotment option for aggregate gross proceeds of $11.3 million. Inclusive of the over-allotment exercise, the Company received approximately $76.5 million in net proceeds from the IPO after deducting $10.0 million of underwriting discounts and commissions and offering expenses.

Upon the closing of the IPO, all 70,378,661 shares of outstanding preferred stock automatically converted into 11,172,955 shares of common stock. Upon conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock and additional paid-in capital.

Liquidity

The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO. As of March 31, 2020, the Company had cash, cash equivalents, and investments of $105.9 million and an accumulated deficit of approximately $62.0 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.

The Company previously identified conditions and events that raise substantial doubt about its ability to continue as a going concern. As a result of the sale and issuance of the remaining shares in the second tranche of the Series B Preferred Stock and completion of the IPO, the Company believes that that the net proceeds the Series B Preferred Stock and IPO, together with its cash, cash equivalents and investments as of March 31, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. The Company will need additional funding to support its planned operating activities. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects.

5


 

2. Summary of Significant Accounting Policies

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019 and notes thereto, included in the Company’s Registration Statement on Form S-1/A,  filed with the Securities Exchange Commission (“SEC”) on March 10, 2020. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of March 31, 2020, the results of its operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019. Such adjustments are of a normal and recurring nature. The results for the three months ended March 31, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

Principles of Consolidation

The accompanying condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U. Limited. All intercompany transactions and balances have been eliminated in consolidation.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2020. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2020.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, accrued research and development expenses, stock-based compensation expense, the fair value of the common stock and the intrinsic value of the beneficial conversation feature present in the second tranche of the Series B Preferred Stock issued in February of 2020. Actual results could differ materially from those estimates.

Segments

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. All of the Company’s long-lived assets are held in the United States.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss. On March 16, 2020, the Company completed the IPO; accordingly, the Company recognized the deferred offering costs of approximately $3.9 million as a reduction from gross proceeds associated with the IPO through additional paid-in capital in the accompanying condensed consolidated balance sheet. Accordingly, there were no deferred offering costs as of March 31, 2020. Deferred offering costs classified in other assets on the accompanying condensed consolidated balance sheet as of December 31, 2019 was $2.1 million.

6


 

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss. The Company’s comprehensive loss was equal to net loss for the year ended December 31, 2018. For the year ended December 31, 2019, as a result of the Company’s investments in available-for-sale securities, the Company’s comprehensive loss includes unrealized gains and unrealized losses on those available-for-sale securities.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 supersedes the previous leases standard, ASC 840, Leases. For public entities, not-for-profit entities and an employee benefit plan that files financial statements with the SEC, the standard is effective for public entities for annual periods beginning after December 15, 2018 including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company anticipates that the adoption of this standard will have an impact on its balance sheet due to the recognition of right-of-use assets and lease liabilities; however, the Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. For public entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. The Company is currently evaluating the impact that the adoption of ASU 2017-11 will have on its consolidated financial statements.

In March 2020, the FASB issued (“ASU 2020-03”), Codification Improvements to Financial Instruments, which addressed, among other topics, Amendments related to ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13”). The amendments align the contractual term under Topic 326 and Topic 842 (Leases) to be consistent, and also clarifies when an entity should record an allowance for credit losses in accordance with Topic 326. For public business entities that meet the definition of a United States Securities and Exchange Commission (“SEC”) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2020-03 or 2016-13 to be material.

7


 

3. Fair Value of Financial Assets and Liabilities

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

 

 

March 31, 2020

 

 

 

 

 

 

 

Quoted Prices in

Active Markets

for Identical

Assets

 

 

Significant Other

Observable

Inputs

 

 

Significant Other

Observable

Inputs

 

Description

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds, included in cash and cash equivalents

 

$

5,378

 

 

$

5,378

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

16,950

 

 

 

 

 

 

16,950

 

 

 

 

Commercial paper

 

 

2,195

 

 

 

 

 

 

2,195

 

 

 

 

Total financial assets

 

$

24,523

 

 

$

5,378

 

 

$

19,145

 

 

$

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

Quoted Prices in

Active Markets

for Identical

Assets

 

 

Significant Other

Observable

Inputs

 

 

Significant Other

Observable

Inputs

 

Description

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds, included in cash and cash equivalents

 

$

4,477

 

 

$

4,477

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

5,772

 

 

 

 

 

 

5,772

 

 

 

 

Commercial paper

 

 

18,199

 

 

 

 

 

 

18,199

 

 

 

 

Total financial assets

 

$

28,448

 

 

$

4,477

 

 

$

23,971

 

 

$

 

 

As of March 31, 2020 and December 31, 2019, the Company’s cash equivalents consisted of money market funds, classified as Level 1 financial assets, as these assets are valued using quoted market prices in active markets without any valuation adjustment. The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade securities. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

During the three months ended March 31, 2020 and the year ended December 31, 2019, there were no transfers between fair value measurement levels.

The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

8


 

4. Investments

As of March 31, 2020 and December 31, 2019, the Company had short-term investments consisting of corporate debt securities and commercial paper, which are considered to be available-for-sale investments. These are included in short-term investments on the condensed consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed. The following table summarizes the Company’s investments (in thousands):

 

 

 

March 31, 2020

 

 

 

Amortized Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Loss

 

 

Fair Value

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

2,195

 

 

$

 

 

$

 

 

$

2,195

 

Corporate debt securities

 

 

16,966

 

 

 

6

 

 

 

(22

)

 

 

16,950

 

Total

 

$

19,161

 

 

$

6

 

 

$

(22

)

 

$

19,145

 

 

 

 

December 31, 2019

 

 

 

Amortized Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Loss

 

 

Fair Value

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

18,167

 

 

$

32

 

 

$

 

 

$

18,199

 

Corporate debt securities

 

 

5,772

 

 

 

 

 

 

 

 

 

5,772

 

Total

 

$

23,939

 

 

$

32

 

 

$

 

 

$

23,971

 

 

As of March 31, 2020, the Company had 11 available-for-sale securities of approximately $13.2 million in unrealized loss positions for less than twelve months. As of December 31, 2019, the Company had no available-for-sale securities in unrealized loss positions The Company has the intent and ability to hold such securities until recovery. The Company determined that there was no material change in the credit risk of these investments. As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of March 31, 2020 and December 31, 2019.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Accrued research and development expenses

 

$

1,052

 

 

$

1,106

 

Accrued compensation and benefits

 

 

400

 

 

 

802

 

Accrued professional services

 

 

1,113

 

 

 

330

 

Accrued other

 

 

62

 

 

 

302

 

Total accrued expenses

 

$

2,627

 

 

$

2,540

 

 

6. License Agreements

Agreement with Lundbeck

In April 2016, the Company entered into a license agreement with Lundbeck A/S (“Lundbeck” and the “Lundbeck Agreement”) pursuant to which Lundbeck granted the Company the following licenses within the field of prevention, treatment or diagnosis of hemoglobinopathy disorders and/or other diseases or disorders, including those directly or indirectly related to hemoglobinopathies: (1) an exclusive, royalty-bearing license to certain patent rights and certain know-how owned or otherwise controlled by Lundbeck (“Licensed Technology”) to research, develop, make, use, sell, and commercialize products (“Licensed Products”) from PDE9 inhibitors, which included IMR-687 (“Licensed Compounds”); (2) a non-exclusive license to the Licensed Technology to make, research, develop, and use such Licensed Technology to enable research and development, with certain restrictions; and (3) a sublicensing right that allows the Company to grant sublicenses to third parties to use the Licensed Technology subject to the certain terms detailed in the Lundbeck Agreement. Under the Lundbeck Agreement, the Company is subject to certain achievement dates for development milestones as defined in the agreement. The regulatory milestones due under the Lundbeck Agreement depend on the products being developed. Development milestones due under the Lundbeck Agreement with respect to the Licensed Compounds total up to $23.5 million, and, for any products that contain PDE9 inhibitors other than Licensed Compounds, total up to $11.8 million. The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages.

9


 

To date, pursuant to the license agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments, which are recorded as research and development expense. No payments were made during the year ended December 31, 2019, or for the three months ended March 31, 2020. As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which represented 8.0% of the Company’s then outstanding equity pursuant to a restricted stock agreement. The shares were fully vested on the date of issuance. The Company also allowed Lundbeck to participate in the fourth tranche of its Series A preferred stock financing in November 2018 at $1.00 per share.

The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice. The Company or Lundbeck may terminate the agreement by written notice within a specified period of time in the event of a material breach.

7. Commitments and Contingencies

Lease Agreements

In 2016, the Company entered into an agreement for office space located in Cambridge, Massachusetts, which was a month-to-month lease, with a related party (see Note 13). The agreement for this space terminated on August 17, 2019. The Company recorded rent expense of less than $0.1 million during the three months ended March 31, 2019.

In May 2019, the Company entered into a new operating lease agreement for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62-month term. The lease includes a rent escalation clause which results in cash rental payments of approximately $0.3 million annually. Rent expense is being recognized on a straight-line basis over the lease term. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the Lease Agreement. The Company provided a security deposit of approximately $0.1 million in May 2019, which is included as a component of other assets on the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019. The Company occupied the space in August 2019 and commenced recognition of rent expense. The Company recorded rent expense of approximately $0.1 million during the three months ended March 31, 2020.

The following table summarizes the future minimum lease payments due under the Company’s operating lease (in thousands):

 

 

 

March 31,

2020

 

2020

 

$

201

 

2021

 

 

273

 

2022

 

 

278

 

2023

 

 

284

 

Thereafter

 

 

229

 

 

 

$

1,265

 

 

Legal Proceedings

The Company may from time to time be party to litigation arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three months ended March 31, 2020 and year ended December 31, 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Indemnification Agreements

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the indemnification agreements, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

10


 

8. Convertible Preferred Stock

On February 25, 2020, the Company raised $17.1 million in net proceeds from the sale of 1,562,994‬ shares of Series B Preferred Stock, at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by the holders of Series B Preferred Stock. Upon issuance, each share of Series B Preferred Stock included an embedded beneficial conversion feature as the estimated fair value of the Company’s common stock on the date of issuance of the Series B Preferred Stock was higher than the effective conversion price of the Series B Preferred Stock of $10.9722 per share. Given the proximity of the issuance to the Company’s public offering, the Company utilized the public offing price of their common stock, $16.00 to determine the intrinsic value of the beneficial conversion feature. As a result, the Company recorded the intrinsic value of the beneficial conversion feature of $7.9 million as a discount on the Series B Preferred Stock at issuance. Because the Series B Preferred Stock was immediately convertible upon issuance and did not include mandatory redemption provisions, the discount on the Series B Preferred Stock was immediately accreted.

Upon the completion of the IPO on March 16, 2020, all 70,378,661 shares of outstanding preferred stock automatically converted into 11,172,955 shares of common stock. Prior to the conversion, the holders of the preferred stock were entitled to receive noncumulative dividends of 8% per annum of the Series B issuance price only when and if declared by the Company’s Board of Directors. No dividends have been declared by the Company’s Board of Directors since inception.

As of December 31, 2019, preferred stock consisted of the following (in thousands, except share data):

 

 

 

December 31, 2019

 

 

 

Preferred

Stock

Authorized

 

 

Preferred

Stock

Issued and

Outstanding

 

 

Carrying

Value

 

 

Liquidation

Value

 

 

Common

stock

Issuable

Upon

Conversion

 

Series Seed Preferred Stock

 

 

2,712,960

 

 

 

2,712,960

 

 

$

1,460

 

 

$

2,713

 

 

 

430,693

 

Series A Preferred Stock

 

 

31,499,040

 

 

 

31,499,040

 

 

 

30,729

 

 

 

31,499

 

 

 

5,000,623

 

Series B Preferred Stock

 

 

36,166,661

 

 

 

26,321,313

 

 

 

45,575

 

 

 

45,849