IMNM US Equity☆

Item 7. 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 “Selected Financial Data” and our financial statements and the related notes included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, 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 Annual Report, our actual results could differ materially from the results described in or implied by these forward-looking statements. You should carefully read the “Risk Factors” section of this Annual Reports to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”

Overview

Since our inception in 2006, we have devoted substantially all of our resources to research and development, raising capital, building our management team and building our intellectual property portfolio. To date, we have financed our operations primarily through the sale of our common stock, Series A convertible preferred stock and warrants and convertible promissory notes. Through September 30, 2020, we raised an aggregate of $50.4 million from the sale of our Series A convertible preferred stock and warrants and convertible promissory notes and in April 2020, we received $0.5 million in cash pursuant to the Paycheck Protection Program, or the PPP, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act implemented by the U.S. Small Business Administration.

OnOctober 6, 2020, the Company closed its IPO, in which the Company issued and sold 3,250,000 shares of its common stock at a public offering price of $12.00 per share. On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of the Company’s common stock at a purchase price of $12.00 per share. The Company received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses.

We are a development stage company, and all of our programs are in a preclinical stage of development. To date, we have not generated any revenue from product sales and do not expect to generate revenue from the sale of products for the foreseeable future. Since inception we have incurred significant operating losses. Our net losses for the years ended December 31, 2020 and 2019 were $17.8 million and $10.4 million, respectively.

As of December 31, 2020, we had a cash balance of $39.8 million. We expect to continue to incur losses for the foreseeable future. We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities related to our portfolio of programs as we continue our preclinical development of product candidates; advance these product candidates toward clinical development; further develop our product candidates; perform research activities as we seek to discover and develop additional product candidates; carry out maintenance, expansion enforcement, defense, and protection of our intellectual property portfolio; and hire research and development, clinical and commercial personnel. If we cannot obtain the necessary funding, we will need to delay, scale back or eliminate some or all of our research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that we might otherwise seek to develop or commercialize independently; consider other various strategic alternatives, including a merger or sale of the Company; or cease operations. If we engage in collaborations, we may receive lower consideration upon commercialization of such products than if we had not entered into such arrangements or if we entered into such arrangements at later stages in the product development process. We currently have no sources of revenue, and our ability to continue as a going concern is dependent on our ability to raise capital to fund our future business plans. Additionally, volatility in the capital markets and general economic conditions in the United States may be a significant obstacle to raising the required funds.

We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities, particularly if and as we:

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● advance the development of our future pipeline;

● continue research activities;

● obtain, maintain, expand and protect our intellectual property portfolio;

● hire additional research and development, clinical and commercial personnel;

● pursue regulatory approvals for our product candidates;

● scale up our clinical and regulatory capabilities; and

Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

As a result of these anticipated expenditures, we will need substantial additional financing to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of any purchaser will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We expect that our cash as of December 31, 2020 will be sufficient to fund our operations through the second fiscal quarter of 2022. We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner that we currently expect. See “— Liquidity and capital resources.” Due to the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease, or COVID-19, emerged in Wuhan, Hubei Province, China. As of December 2020, COVID-19 has spread to Europe, the United States and many other countries, and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the United States, including in Pennsylvania where our headquarters are located, Europe and Asia have implemented severe travel restrictions, social distancing requirements and stay-at-home orders, among other restrictions, which, in some cases, have had the effect of delaying the commencement or continuation of various non-COVID-19-related clinical trials throughout the world. As a result, the COVID-19 pandemic

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has caused significant disruptions to the U.S., regional and global economies and has contributed to significant volatility and negative pressure in financial markets.

We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of our employees and their families and to reduce the spread of COVID-19. We have established a work-from-home policy for all employees, other than those performing or supporting business-critical operations, such as certain members of our laboratory and facilities staff. For those employees, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. We have taken these precautionary steps while maintaining business continuity so that we can continue to progress our programs. The effect of the COVID-19 pandemic on our development timelines and its effect on our preclinical research and development is uncertain.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, an evolving pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The future impact of the COVID-19 pandemic on our industry, the healthcare system and our current and future operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Risk Factors” for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

Components of our results of operations

Operating expenses

Research and development expenses

Research and development expenses consist of costs incurred in performing research and development activities, which include:

● laboratory supplies and research materials; and

We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed.

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Research and development activities are central to our business model. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and future clinical development activities.

In July 2020, we entered into an Other Transaction Authority for Prototype Agreement (the DoD Agreement) with the DoD to fund our efforts in developing Biosynthetic Convalescent Plasma (BCP) to treat COVID-19. In connection with the DoD Agreement, we record expense reimbursements received from the DoD as contra-research and development expenses in the same period the underlying expenses are incurred.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation for personnel in our executive, intellectual property, business development, and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, direct and allocated facility related expenses and other operating costs.

We anticipate that our general and administrative expenses will increase in the future to support increased research and development activities. We also expect to incur increased costs associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs and investor and public relations costs.

Change in fair value of warrant liability

Prior to the IPO, our outstanding warrants that were issued in 2020 to purchase shares of our convertible preferred stock were classified as liabilities, recorded at fair value and were subject to remeasurement at each balance sheet date until they were exercised, expired or were otherwise settled. The change in fair value of our preferred stock warrant liability reflects a non-cash charge primarily driven by changes in the fair value of our underlying Series A preferred stock. All outstanding warrants to purchase shares of our preferred stock were converted into warrants to purchase shares of our common stock upon consummation of our IPO and the warrant liability was reclassified to additional paid-in capital.

Interest expense, net

Interest expense, net consists of interest expense related to our capital lease obligations and equipment loans payable, offset by interest income earned on our cash.

Results of operations

As described above in “— COVID 19 Pandemic,” the ultimate extent of the impact of any epidemic, pandemic, outbreak or other public health crisis on our results of operations will depend on future developments, which are highly uncertain, including new information that may emerge concerning the severity of the COVID-19 pandemic or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot fully predict the extent to which our business and results of operations will be affected. Many clinical trial sites have been impacted by the pandemic, forcing them to delay enrollment in research trials and it is unclear for how long this will last. This may impact our ability to commence clinical trials in the future. Additionally, the pandemic has limited our ability to perform basic science R&D in our facilities due to government shelter-in-place orders, ultimately slowing, but not stopping, progress of our research activities.

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Comparison of the years ended December 31, 2020 and 2019

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ YEAR ENDED ​ ​ ​

​ ​ DECEMBER 31, ​ ​ ​

​ ​ (in thousands)

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Other expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Change in fair value of warrant liability ​ ​ (5,538) ​ ​ — ​ ​ (5,538)

Interest expense, net ​ (38) ​ (96) ​ 58

Total other expenses ​ ​ (5,576) ​ ​ (96) ​ ​ (5,480)

Research and development expenses

Research and development expenses were $7.5 million and $8.8 million for the years ended December 31, 2020 and 2019, respectively. Research and development expenses reflect the recognition of contra-research and development expenses related to the DoD Agreement in the amount of $1.7 million for the year ended December 31, 2020. Excluding the effect of the DoD Agreement, the increase in research and development expenses for the year ended December 31, 2020 was primarily the result of an increase of $0.5 million in personnel-related costs due to an increase in headcount and share-based compensation and an increase of $0.5 million in facility related costs, including depreciation and amortization, related to our leased facility and equipment, offset by a decrease of $0.6 million in outsourced services and other general expenses as the Company’s research and development activities were limited as a result of a decrease in available cash prior to the IPO and the COVID-19 pandemic.

Research and development expenses will continue to increase as we continue our current research programs, initiate new research programs, continue our preclinical development of product candidates and conduct future clinical trials for any of our product candidates.

General and administrative expenses

General and administrative expenses increased by $3.3 million from $1.5 million for the year ended December 31, 2019 to $4.8 million for the year ended December 31, 2020. The increase was primarily a result of a $1.1 million increase in personnel related costs due to an increase in general and administrative headcount including $0.4 million of share-based compensation, and a $2.2 million increase in professional fees and consulting services to supplement our internal workforce as well as increases in insurance.

Change in fair value of warrant liability

For the year ended December 31, 2020, we recognized a non-cash charge of $5.5 million due to the change in the fair value of the convertible preferred stock warrant liability which increased as a result of an increase in the fair value of the related Series A preferred stock. The warrants were not outstanding prior to 2020.

Interest expense, net

Interest expense, net consists of interest expense related to our long-term debt, capital lease obligations and equipment loan payables offset by interest income related to our cash.

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Liquidity and capital resources

Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs. To date, we have funded our operations primarily with proceeds from the sales of common stock, preferred stock and warrants and convertible promissory notes. Through December 31, 2020, we raised an aggregate of $95.3 million in gross proceeds from sales of our common stock, Series A convertible preferred stock and warrants and issuance of convertible promissory notes and in April 2020, we received $0.5 million in cash from the PPP. As of December 31, 2020, we had $39.8 million in cash. We will need to raise additional capital before we exhaust our current cash in order to continue to fund our research and development, including our plans for clinical and preclinical trials and new product development, as well as to fund operations generally. As and if necessary, we will seek to raise additional funds through various potential sources, such as equity and debt financings or through corporate collaboration and license agreements. We can give no assurances that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

Cash flows

The following table summarizes our sources and uses of cash for the years ended December 31, 2020 and 2019:

​

​ ​ ​ ​ ​ ​ ​

​ ​ YEARS ENDED

​ ​ DECEMBER 31,

​ ​ (in thousands)

Cash used in operating activities ​ $ (12,134) ​ $ (9,600)

Cash used in investing activities ​ (586) ​ (233)

Cash provided by financing activities ​ 49,943 ​ 10,774

Net increase in cash and restricted cash ​ $ 37,223 ​ $ 941

Operating activities

Net cash used in operating activities for the year ended December 31, 2020 was $12.1 million, consisting primarily of our net loss of $17.8 million, offset by noncash charges of $6.9 for depreciation and amortization expense, share-based compensation expense and change in fair value of warrant liability and an increase in accounts payable and accrued expenses and other liabilities of $1.2 million due to our growth in expenditures. Prepaid expenses and other assets also increased by $2.4 million.

Net cash used in operating activities for the year ended December 31, 2019 was $9.6 million, consisting primarily of our net loss of $10.4 million, offset by noncash charges of depreciation and amortization expense $0.6 million, and increases in accounts payable and accrued expenses and other liabilities of $0.2 million due to our growth in expenditures.

Investing activities

During the years ended December 31, 2020 and 2019, we used $0.6 million and $0.2 million, respectively, for the purchase of property and equipment.

Financing activities

During the year ended December 31, 2020, cash provided by financing activities was $49.9 million, consisting primarily of $38.9 million of net proceeds received from our IPO, $11.0 million of net proceeds received from the issuance of our Series A convertible preferred stock and $0.5 million received from the PPP loan, offset by $0.5 million for payments related to our capital lease obligations and equipment loan payables.

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During the year ended December 31, 2019, financing activities provided $11.4 million from the sale of our convertible promissory notes and Series A convertible preferred stock, offset by $0.6 million for payments related to our capital lease obligations and equipment loan payables and $0.1 million for the payment of issuance costs related to the sale of Series A convertible preferred stock.

Funding requirements

Our operating expenses are expected to increase substantially as we continue to advance our portfolio of programs.

Specifically, our expenses will increase if and as we:

● further develop our discovery engine;

● acquire or in-license products, intellectual property, and technologies; and

● operate as a public company.

We expect that our existing cash will enable us to fund our current and planned operating expenses and capital expenditures through the second fiscal quarter of 2022. Beyond that date, the Company will need additional financing to support its continuing operations and pursue its growth strategy. We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner that we currently expect. Because of the numerous risks and uncertainties associated with the development our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Our future funding requirements will depend on many factors including:

● the costs of continuing to develop our discovery engine;

● the costs of acquiring licenses for the expansion of product development;

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● the success of our license agreements and our collaborations;

● the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of any purchaser will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Critical accounting policies and significant judgements

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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While our significant accounting policies are described in more detail in Note 2 to our audited financial statements appearing elsewhere in this Annual Report, we believe that the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial statements.

Share-based compensation

We recognize the grant-date fair value of share-based awards issued as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The fair value of stock options is estimated at the time of grant using the Black-Scholes option pricing model, which requires the use of inputs and assumptions such as the estimated fair value of the underlying common stock, exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend yield, the most critical of which is the estimated fair value of our common stock.

The inputs and assumptions used to estimate the fair value of share-based payment awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different inputs and assumptions, our share-based compensation expense could be materially different for future awards.

These subjective assumptions are estimated as follows:

Estimating the fair value of common stock

Prior to May 2020, in valuing our common and preferred stock, we determined the equity value of our business by using a net asset approach. The net asset approach is predicated on the assumption that a prudent buyer would pay no more than it would cost to purchase the assets (tangible and intangible) of a company at current market prices. This approach requires estimating the individual market values of our assets and liabilities to derive an adjusted enterprise value. The enterprise values determined by the net asset approach were then allocated to our common stock using the Option Pricing Method, or OPM.

The OPM treats common stock and preferred stock as call options on a company’s enterprise value, with exercise prices based on the liquidation preferences of the preferred stock. Therefore, the common stock has value only if the funds available for distribution to the stockholders exceed the value of the liquidation preference at the time of an assumed liquidity event such as a merger, sale or initial public offering. The common stock is modeled as a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated. The OPM uses the Black-Scholes option-pricing model to determine the price of the call option. The OPM is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

Beginning in May 2020, we used the probability-weighted expected return method to determine the value of our common stock. Under the probability-weighted expected return method, the value of an enterprise’s common stock is estimated based upon an analysis of future values assuming various possible future liquidity events, such as an initial public offering, a strategic sale or merger and remaining a private enterprise without a liquidity event. The fair market value of the stock is based upon the probability-weighted present value of expected future net cash flows as a result of distributions to stockholders considering each of the possible future events, as well as the rights and preferences of each class of stock.

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Given the absence of a public trading market for our capital stock at the time, our board of directors exercised reasonable judgment and considered a number of subjective factors to determine the best estimate of the fair value of our common stock, including:

● the lack of marketability of our preferred and common stock;

● the market performance of comparable publicly traded companies; and

● United States and global economic and capital market conditions and outlook.

Warrant liability

The Company issued warrants to purchase shares of Series A convertible preferred stock in connection with the June 2020 Series A convertible preferred stock sale. The warrants were classified as a liability as the underlying Series A convertible preferred stock was contingently redeemable and outside of the Company’s control (see Note 12, Common stock and convertible preferred stock). The fair value of the warrants on the date of issuance was recorded as a reduction of the carrying value of the Series A convertible preferred stock and as a long-term liability in the balance sheet. The warrants were subsequently remeasured to fair value at each balance sheet date with the changes in the fair values of the warrants recognized as other income or expense in the statements of operations. The change in fair value of the warrants during the year ended December 31, 2020 was $5.5 million. Upon completion of the IPO on October 6, 2020, the warrants became exercisable for shares of the Company’s common stock and were reclassified to additional paid-in capital in October 2020 upon the consummation of the IPO. As a result, the warrants will no longer be remeasured to fair value.

The Company used the Black Scholes option pricing model, which incorporated assumptions and estimates, to value the Series A convertible preferred stock warrants. Estimates and assumptions impacting the fair value measurement of the warrants included the fair value per share of the underlying Series A convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying Series A convertible preferred stock. The Company determined the fair value per share of the underlying Series A convertible preferred stock by taking into consideration the most recent sales of its Series A convertible preferred stock, results obtained from third party valuations and additional factors that were deemed relevant. The Company historically had been a private company and lacked company specific historical and implied volatility information of its stock. Therefore, it estimated the expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants at the time. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. Expected dividend yield was determined based on the fact that the Company had never paid cash dividends and did not expect to pay any cash dividends in the foreseeable future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 8. Financial Statements and Supplementary Data

The information required by this Item is set forth on pages 105 through 128 hereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report. 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. Based on such evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that, as of the end of December 31, 2020, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective due to the material weaknesses described below.

Management’s Report on Internal Control Over Financial Reporting

This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Discussion of Material Weaknesses

In connection with our preparation and the audits of our financial statements as of and for the years ended December 31, 2020 and 2019, we identified material weaknesses as defined under the Exchange Act and by the Public Company Accounting Oversight Board (United States) in our internal control over financial reporting. The material weaknesses relate to the design of our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

The material weaknesses that we identified related to the lack of review of journal entries, lack of timely and effective review of financial statement account balances and our lack of maintaining a sufficient complement of personnel commensurate with our accounting and reporting requirements.

Remediation Activities

We are currently in the process of remediating the material weaknesses and have taken and will continue to take steps that we believe will address the underlying causes of the material weaknesses. The remediation efforts include (i) implementing a monthly financial statement close process that includes formal review of financial statement account balances and journal entries, (ii) creating a disclosure committee consisting of key executives and accounting personnel who review the Company’s financial statements and related disclosures and (iii) actively recruiting for open positions and anticipate hiring additional qualified accounting and financial reporting personnel in 2021. While significant progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing, documenting and testing these processes, procedures and controls. We will continue to devote significant

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time and attention to these remediation efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Notwithstanding the material weaknesses, management has concluded that the financial statements included elsewhere in this Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP.

Changes in Internal Control Over Financial Reporting

Other than as described above under “Remediation Activities,” there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(f) of the Exchange Act that occurred during the quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

The information required by Item 10 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2021 annual meeting of stockholders.

Item 11. Executive Compensation

The information required by Item 11 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2021 annual meeting of stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2021 annual meeting of stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2021 annual meeting of stockholders.

Item 14. Principal Accountant’s Fees and Services

The information required by Item 14 of Form 10-K is incorporated by reference to the information contained in our definitive proxy statement for the 2021 annual meeting of stockholders.

Part IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

See Index to the Consolidated Financial Statements on page 105 of this Annual Report.

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(a)(2) Financial Statement Schedules

None, as all information required in these schedules is included in the Notes to the Consolidated Financial Statements.

(a)(3) Exhibits

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Immunome, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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​ ​

​ Page

​ ​

Report of Independent Registered Public Accounting Firm 106

Statements of Operations for the years ended December 31, 2020 and 2019 108

Statements of Cash Flows for the years ended December 31, 2020 and 2019 110

Notes to Financial Statements 111

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Report of independent registered public accounting firm

To the Stockholders and the Board of Directors of Immunome, Inc.

Opinion on the financial statements

We have audited the accompanying balance sheets of Immunome, Inc. (the “Company”) as of December 31, 2020 and 2019, the related statements of operations, changes in convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the two years ended December 31, 2020 and 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 25, 2021

We have served as the Company’s auditor since 2019.

​

​

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Immunome, Inc.

Balance sheets

(in thousands, except share and per share amounts)

​ ​ ​ ​ ​ ​ ​

​ December 31,

Assets ​ ​ ​ ​

Current assets: ​ ​ ​

Prepaid expenses and other current assets ​ 3,128 ​ 579

Property and equipment, net ​ 1,531 ​ 1,700

Other assets ​ — ​ 138

Liabilities, convertible preferred stock, and stockholders’ equity (deficit) ​ ​

Current liabilities: ​ ​

Current portion of capital lease obligations ​ $ — ​ $ 239

Current portion of long-term debt ​ 366 ​ —

Current portion of equipment loan payable ​ ​ 113 ​ ​ 212

Accrued expenses and other current liabilities ​ 1,372 ​ 666

Total current liabilities ​ 3,038 ​ 1,665

Equipment loan payable, net of current portion ​ — ​ 113

Long-term debt, net of current portion ​ 134 ​ —

Deferred rent ​ 8 ​ 18

Commitments and contingencies (Note 10) ​ ​

Stockholders’ equity (deficit): ​ ​ ​

Additional paid-in capital ​ 95,738 ​ 927

Total stockholders’ equity (deficit) ​ 41,345 ​ (35,630)

​

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

​

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Immunome, Inc.

Statements of operations

(in thousands, except share and per share amounts)

​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

Operating expenses: ​ ​

Research and development ​ $ 7,486 ​ $ 8,823

General and administrative ​ 4,775 ​ 1,525

Other expenses: ​ ​ ​ ​ ​ ​

Change in fair value of warrant liability ​ ​ (5,538) ​ ​ —

Interest expense, net ​ (38) ​ (96)

Total other expenses ​ ​ (5,576) ​ ​ (96)

Per share information: ​ ​

Net loss per share of common stock, basic and diluted ​ $ (5.26) ​ $ (9.55)

​

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

​

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Immunome Inc.

Statements of changes in convertible preferred stock and stockholders’ equity (deficit)

(in thousands, except share amounts)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Convertible preferred stock ​ Stockholders’ equity (deficit)

​ ​ Series A ​ ​ Common stock ​ Additional ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ paid-in ​ Accumulated ​ ​

​ Shares Amount ​ Shares Amount capital deficit Total

Share-based compensation expense — ​ — ​ — ​ — ​ 14 ​ — ​ 14

Exercise of stock options — ​ — ​ 11,449 ​ — ​ 5 ​ — ​ 5

Share-based compensation expense — ​ — ​ — ​ — ​ 621 ​ — ​ 621

Exercise of stock options — ​ — ​ 127,291 ​ — ​ 20 ​ — ​ 20

​

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

​

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Immunome Inc.

Statements of cash flows

(in thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

Cash flows from operating activities: ​ ​ ​

Depreciation and amortization ​ 755 ​ 615

Share-based compensation ​ 621 ​ 14

Change in fair value of warrant liability ​ ​ 5,538 ​ ​ —

Deferred rent ​ (2) ​ 3

Changes in operating assets and liabilities: ​ ​ ​ ​

Prepaid expenses and other assets ​ (2,411) ​ (53)

Accounts payable ​ 504 ​ 75

Accrued expenses and other current liabilities ​ 698 ​ 190

Net cash used in operating activities ​ (12,134) ​ (9,600)

Cash flows from investing activities: ​ ​

Purchases of property and equipment ​ (586) ​ (233)

Net cash used in investing activities ​ (586) ​ (233)

Cash flows from financing activities: ​ ​

Proceeds from convertible promissory notes ​ — ​ 6,800

Proceeds from exercise of stock options ​ 20 ​ 5

Proceeds from long-term debt ​ 500 ​ —

Proceeds from the sale of common stock in connection with IPO ​ 44,850 ​ —

Payment of IPO costs ​ ​ (5,973) ​ ​ —

Proceeds from the sale of Series A convertible preferred stock ​ 11,046 ​ 4,616

Payment of Series A convertible preferred stock issuance costs ​ (49) ​ (35)

Payment of equipment loan payable ​ (212) ​ (225)

Payment of capital lease obligations ​ (239) ​ (387)

Net cash provided by (used in) financing activities ​ 49,943 ​ 10,774

Net increase (decrease) in cash and restricted cash ​ 37,223 ​ 941

Cash and restricted cash at beginning of year ​ 2,643 ​ 1,702

Cash and restricted cash at end of year ​ $ 39,866 ​ $ 2,643

Supplemental disclosures of cash flow information: ​ ​

Cash paid for interest ​ $ 29 ​ $ 106

Supplemental disclosures of non-cash investing and financing activities: ​ ​ ​ ​

Conversion of Series A convertible preferred stock upon IPO ​ $ 48,369 ​ $ —

IPO costs included in accounts payable ​ $ 135 ​ $ —

Conversion of liability-classified warrants upon IPO ​ $ 7,060 ​ $ —

​

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

​

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Immunome, Inc.

Notes to financial statements

1. Nature of the business and basis of presentation

Organization

Immunome, Inc. (the Company or Immunome) was incorporated as a Pennsylvania corporation on March 2, 2006 and was converted to a Delaware corporation on December 2, 2015. The Company is a biotechnology company focused on identifying novel cancer immunotherapies utilizing a patented process to immortalize human B cells.

Since its inception, the Company has devoted substantially all of its resources to research and development, raising capital, building its management team and building its intellectual property portfolio. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to; technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenues from product sales.

Liquidity

The Company has incurred net losses since inception, including net losses of $17.8 million and $10.4 million for the years ended December 31, 2020 and 2019, respectively, and it expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its potential product candidates. As of December 31, 2020 and 2019, the Company had an accumulated deficit of $54.4 million and $36.6 million, respectively. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

OnOctober 6, 2020, the Company closed its IPO, in which the Company issued and sold 3,250,000 shares of its common stock at a public offering price of $12.00 per share. On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of the Company’s common stock at a purchase price of $12.00 per share. The Company received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses.

The Company expects that its cash as of December 31, 2020 will be sufficient to fund its operations through the second fiscal quarter of 2022. Beyond that date, the Company will need additional financing to support its continuing operations and pursue its growth strategy.

If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that it might otherwise seek to develop or commercialize independently; consider other various strategic alternatives, including a merger or sale of the Company; or cease operations. If the Company engages in collaborations, it may receive lower consideration upon commercialization of such products than if it had not entered into such arrangements or if it entered into such arrangements at later stages in the product development process. Additionally, volatility in the capital markets and general economic conditions in the United States may be a significant obstacle to raising the required funds.

Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s product candidates become approved drugs and how significant their market share will be, some of which are outside of the Company’s control. The length of time and cost of developing and commercializing these product candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations. On March 11, 2020, the World

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Health Organization characterized the novel COVID-19 virus as a global pandemic. Although there is significant uncertainty as to the likely effects this disease may have in the future, to date there has not yet been a significant impact to the Company’s operations or financial statements.

2. Summary of significant accounting policies

Basis of presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted (GAAP) in the United States. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB).

Reverse stock split

The Company’s board of directors approved a one-for-six reverse stock split of its issued and outstanding common stock, stock options, convertible preferred stock and convertible preferred stock warrants legally effective as of September 22, 2020. Accordingly, all convertible preferred shares and common stock shares, common stock warrants, per share amounts, and additional paid-in capital amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split.

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 and expenses. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the fair value of the Company’s common stock in connection with share-based compensation arrangements and the fair value of the warrant liability. Actual results could differ from these estimates.

Cash

Cash consists of standard checking accounts and a money market account. The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. There are no cash equivalents as of December 31, 2020 and 2019.

Restricted cash

Restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities. This lease expires in 2022 at which time the cash will be released from restriction. Restricted cash was $100,000 at both December 31, 2020 and 2019. For purposes of the cash flow statements, this restricted cash is combined with cash at December 31, 2020 and 2019.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and restricted cash. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality, and the Company has not experienced any losses on these deposits.

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Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

​

​ ​ ​

Asset category Estimates useful life

Lab equipment ​ 5 years

Leasehold improvements ​ Lesser of lease term or 5 years

Computer equipment ​ 3 years

Office equipment ​ 5 years

Furniture and fixtures ​ 5 years

​

Expenditures for repairs and maintenance of assets are charged to expense as incurred, while major betterments are capitalized. Upon retirement or sale, the cost and related accumulated depreciation and amortization of assets disposed of are removed from the accounts and any resulting gain or loss is included in the statements of operations.

Impairment of long-lived assets

The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no impairment losses recognized during the years ended December 31, 2020 and 2019.

Equity issuance costs

The Company capitalized incremental legal, professional, accounting and other third-party fees that were directly associated with the IPO as other noncurrent assets until the IPO was consummated. After consummation of the IPO in October 2020, these costs were recorded in stockholders’ deficit as a reduction of additional paid-in-capital generated as a result of the IPO. As of December 31, 2020, there were no deferred offering costs.

Preferred stock

The Company had classified the Series A Preferred as temporary equity in the accompanying balance sheet at December 31, 2019 because it became redeemable due to certain deemed liquidation events, as defined in the Company’s articles of incorporation, that were outside of the Company’s control. The Company accreted the Series A Preferred to redemption when such deemed liquidation events were probable. No accretion has been recognized during the years ended December 31, 2020 and 2019 as redemption was not probable. The Series A Preferred converted into common stock in connection with the IPO (see Note 1) and was reclassified to stockholders’ equity in October 2020.

Government contract funding

The Company accounts for amounts received under its U.S. Department of Defense expense reimbursement contract as contra-research and development expenses in the statements of operations.

Warrant liability

The Company issued warrants to purchase shares of Series A convertible preferred stock in connection with the June 2020 Series A convertible preferred stock sale. The warrants were initially classified as a liability on the balance sheet at September 30, 2020 as the underlying Series A convertible preferred stock is contingently redeemable and outside of the Company’s control (see Note 12, Common stock and convertible preferred stock). The fair value of the warrants on the date of issuance was recorded as a reduction of the carrying value of the Series A convertible preferred stock and as a long-term liability in the balance sheets. The warrants were subsequently remeasured to fair value at each

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balance sheet date with changes in the fair value of the warrants recognized as other income or expense in the statements of operations. The change in fair value of the warrants during the year ended December 31, 2020 was $5.5 million. Upon completion of the IPO on October 6, 2020, the warrants became exercisable for shares of the Company’s common stock and were reclassified to additional paid-in capital in October 2020 upon the consummation of the IPO.

The Company used the Black-Scholes option pricing model, which incorporated assumptions and estimates, to value the Series A convertible preferred stock warrants until the conversion of the Series A Preferred to stockholders’ equity in October 2020. Estimates and assumptions impacting the fair value measurement of the warrants included the fair value per share of the underlying Series A convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying Series A convertible preferred stock. The Company historically determined the fair value per share of the underlying Series A convertible preferred stock by taking into consideration the most recent sales of its Series A convertible preferred stock, results obtained from third party valuations and additional factors that were deemed relevant. The Company historically had been a private company and lacked company specific historical and implied volatility information of its stock. Therefore, it estimated the expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants at the time. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. Expected dividend yield was determined based upon the Company’s history of not paying cash dividends and its expectation that it will not pay any cash dividends in the foreseeable future.

Research and development costs

Research and development costs are charged to expense as incurred. Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, preclinical expenses, consulting and other contracted services. Additionally, under the terms of the license agreements (see Note 10, License Agreements), the Company is obligated to make future payments should certain development and regulatory milestones be achieved. No such costs have been incurred for the years ended December 31, 2020 and 2019. Costs for certain research and development activities are recognized based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as a prepaid or accrued expense.

Share-based compensation

The Company’s share-based compensation program allows for grants of stock options and restricted stock awards. Grants are awarded to employees and non-employees, including directors.

The Company accounts for its share-based compensation in using the fair value method and all share-based payments to employees, non-employees and directors, are recognized as expense in the statements of operations based on their fair values. The Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees.

The Company’s share-based compensation awards are subject to service-based vesting conditions. Compensation expense related to awards to employees, directors and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of Company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with expected term assumption. The Company uses the simplified method to calculate the expected term for options granted to employees and non-employees whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its

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lack of sufficient historical data. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

Prior to the adoption of Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07), the measurement date for non-employee awards was generally the date the services are completed, resulting in financial reporting period adjustments to share-based compensation during the vesting terms for changes in the fair value of the awards. After the adoption of ASU 2018-07 on January 1, 2018, the measurement date for non-employee awards is the date of grant without changes in the fair value of the award.

In determining the exercise prices for options granted, the Company has considered the estimated fair value of the common stock as of the measurement date. Prior to the IPO, the estimated fair value of the common stock had been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, the effect of the rights and preferences of the preferred stockholders, and the prospects of a liquidity event. Among other factors were the Company’s financial position and historical financial performance, the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluation or benchmark of the Company’s competition, and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date. Following the closing of the IPO, the fair value of common stock was the closing price of the Company's common stock on the Nasdaq Global Market as reported on the date of the grant.

Patent costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses in the accompanying statements of operations.

Rent expense

The Company’s real estate operating lease provides for scheduled annual rent increases throughout the lease term. The Company recognizes the effects of the scheduled rent increases on a straight-line basis over the full term of the lease.

Income taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted tax rates expected to be in effect in the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes.

Fair value of financial instruments

ASC Topic 820, Fair Value Measurement (ASC 820), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the assets or

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liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered value hierarchy that distinguishes between the following:

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Net loss per share

The Company follows the two-class method when computing net loss per share, as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share of common stock is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share of common stock is computed by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

​ ​ ​ ​ ​

​ ​ Year ended December 31,

Convertible preferred stock(1) ​ — ​ 4,443,260

(1) Represents common stock equivalents

The Company’s Series A Preferred had contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses were not allocated to participating securities. In periods in which the Company reports a net loss per share of common stock, diluted net loss per share of common stock is the same as basic net loss per share of common stock since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss per share of common stock for the years ended December 31, 2020 and 2019.

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Segment and geographic information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. The CODM is the Company’s Chief Executive Officer. The Company views its operations as and manages its business in one operating segment operating exclusively in the United States.

Recent accounting pronouncements

The Jumpstart Our Business Startups Act of 2012 permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. As an emerging growth company, the Company has elected to take advantage of this extended transition period.

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842) which requires a lessee to record a right-of-use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. As the Company has elected to use the extended transition period for complying with new or revised accounting standards as available under the JOBS Act, the standard is effective for the Company beginning January 1, 2022, with early adoption permitted. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

3. Fair value measurement

A reconciliation of the change in the fair value of the warrant liability for the year ended December 31, 2020 is as follows (in thousands).

​ ​ ​ ​

​ ​ Fair Value

​ ​ Measurements

​ ​ Using Significant

​ ​ Unobservable

​ ​ Inputs

​ (Level 3)

Balance, December 31, 2019 ​ $ —

Issuance of warrants on June 2, 2020 ​ ​ 1,522

Change in fair value of warrant liability ​ ​ 5,538

Reclass of warrant liability to additional paid-in capital upon IPO ​ ​ (7,060)

Warrant liability, December 31, 2020 ​ $ —

​

A summary of the inputs used in the Black-Scholes pricing model to fair value the warrants are disclosed in Note 12.

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4. Property and equipment, net

Property and equipment consisted of the following:

​ ​ ​ ​ ​ ​ ​

​ December 31,

Leasehold improvements ​ 185 ​ 184

Computer equipment ​ 96 ​ 76

Office equipment and furniture and fixtures ​ 18 ​ 17

Less accumulated depreciation and amortization ​ (2,274) ​ (1,519)

Property and equipment, net ​ $ 1,531 ​ $ 1,700

​

Depreciation and amortization expense for the years ended December 31, 2020 and 2019 was $0.8 million and $0.6million, respectively. There were no assets under capital leases as of December 31, 2020. At December 31, 2019, the Company had $1.1 million of laboratory equipment under capital leases.

5. Department of Defense (DoD) expense reimbursement contract

In July 2020, the Company entered into an Other Transaction Authority for Prototype Agreement (the DoD Agreement) with the DoD to fund the Company’s efforts in developing Biosynthetic Convalescent Plasma (BCP) to treat COVID-19. Under the DoD Agreement, the Company intends to develop BCP for use in the U.S. military population and the U.S. population as a whole, subject to approval by the U.S. Food and Drug Administration (FDA). The amount of funding being made available to the Company under this expense reimbursement contract is $13.3 million which, based on the Company’s anticipated expenditures, is expected to be received through mid-2021. The Company recorded contra-research and development expense of $1.7 million for the year ended December 31, 2020 in the statements of operations. As of December 31, 2020, the Company had an expense reimbursement receivable balance of $0.9 million due from the DoD in prepaid expenses and other current assets on the balance sheet.

6. Accrued expenses

Accrued expenses consisted of the following:

​ ​ ​ ​ ​ ​ ​

​ December 31,

Compensation and related benefits ​ $ 845 ​ $ 426

Professional fees, contractors and other ​ 527 ​ 240

​

​

7. Convertible promissory notes

From January 2019 through July 2019, the Company issued $6.8 million of non-interest bearing convertible promissory notes to several existing Series A Preferred shareholders and new investors. The notes were to mature on February 2, 2020, if not converted or otherwise settled prior to maturity. Upon completion of a qualified equity financing event, as defined in the note agreement, the notes were to automatically convert into shares of the stock sold in such a qualified financing and at a price equal to 80% of the subscription price. In the event that the Company were to sell additional shares of Series A Preferred prior to a qualified financing event, the notes were to automatically convert into shares of Series A Preferred at a discount to the $9.00 per share subscription price. The discount was equal to 1% for each month that has lapsed from the initial note issuance date to the date in which the extended sale of Series A Preferred is consummated.

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In November 2019, the Company completed the sale of its Series A Preferred and the notes automatically converted into 821,657 shares of Series A Preferred. The effective conversion price of the notes was less than the fair value of the Series A Preferred and therefore, no beneficial conversion feature was recorded for the discount.

The Company accounted for the conversion upon a qualified financing event as a bifurcated redemption feature as settlement under this feature would be in a variable number of shares and at a substantial discount. At issuance and over the term of the note, the Company determined the probability of settlement pursuant to the qualified financing event to be remote. As such, the estimated fair value of the redemption feature was de minimis.

8. Equipment loan payables

The Company entered into various equipment financing agreements (the Agreements) to purchase laboratory equipment. The Agreements provide for 36 to 38monthly payments ranging from $1,000 to $8,000. Interest rates for the Agreements range from 9.03% to 12.08%, and interest expense related to the equipment financing agreements was $21,000 and $46,000 for the years ended December 31, 2020 and 2019, respectively.

Future payments for the Company’s Agreements are as follows (in thousands):

​ ​ ​ ​

Year ending December 31, Amount

Less amounts representing interest ​ (4)

Total equipment loan payable ​ $ 113

​

​

9. Long-term debt

On April 30, 2020, the Company entered into a loan agreement with Silicon Valley Bank as the lender (Lender) for a loan in an aggregate principal amount of $0.5 million (the Loan) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and implemented by the U.S. Small Business Administration (“SBA”). The Company is using the proceeds of the Loan for payroll and other qualifying expenses. The Company may apply for forgiveness of amounts due under the Loan, with the amount of potential loan forgiveness to be calculated in accordance with the requirements of the PPP based on payroll costs, any mortgage interest payments, any covered rent payments and any covered utilities payments during the 8 or 24-week period after the origination date of the Loan. The Loan matures in two years and bears interest at a rate of 1% per year, with all payments deferred through the six-month anniversary of the date of the Loan or until a conclusion has been reached as to whether the Loan will be forgiven. In January 2021, the Company applied to the SBA for forgiveness and is awaiting a decision. While the Company believes that its use of the Loan proceeds will meet the conditions of forgiveness of the Loan, it cannot be assured that actions taken could cause the Company to be ineligible for forgiveness of the Loan, in whole or in part. Proceeds received are recorded as long-term debt. In the event the debt is forgiven in a future period, the Company will recognize a gain on extinguishment in the statement of operations. Interest expense for the year ended December 31, 2020 was de minimis.

​

​ ​ ​ ​

Years ending December 31, Amount

Less current portion of long-term debt ​ (366)

Long-term debt, net of current portion ​ $ 134

​

​

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10. Commitments and contingencies

Operating leases

In May 2017, the Company entered into a 62-month office and laboratory space lease commencing on July 1, 2017 for approximately 11,000 square feet of space in Exton, Pennsylvania. The Company has an option to extend the lease for two additional five-year terms. The lease is subject to fixed rate escalation increases and the landlord waived the Company’s rent obligation for the first two months of the lease. Deferred rent is $16,000 and $18,000 as of December 31, 2020 and 2019, respectively, and is being amortized as a reduction in rent expense over the term of the lease. The Company recognizes rent expense on a straight-line basis over the expected lease term.

In August 2020, the Company entered into a one-year operating lease for laboratory equipment that expires in July 2021 and has fixed monthly payments of $18,000.

Future minimum lease payments for the Company’s operating leases are as follows (in thousands):

​ ​ ​ ​

Years ending December 31, Amount

​

Rent expense for the years ended December 31, 2020 and 2019 was $0.4 million and $0.3 million, respectively.

Capital leases

During 2016 and 2017, the Company entered into multiple capital leases (the leases) for laboratory equipment. All of the leases expired during 2020. Interest expense related to the leases was $7,000 and $60,000 for the years ended December 31, 2020 and 2019, respectively.

Employment agreements

The Company entered into offer letter agreements (the Employment Agreements) with key personnel providing for compensation and severance in certain circumstances, as defined in the respective Employment Agreements. The Employment Agreements may be terminated by either the Company or the employees in accordance with the Employment Agreements and provide for annual pay increases and bonuses at the discretion of the Board of Directors.

Employee benefit plan

The Company maintains a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company assumes all administrative costs of the 401(k) Plan and makes matching contributions as defined in the 401(k) Plan document. The Company made matching contributions of $74,000 and $61,000 to the 401(k) Plan for the years ended December 31, 2020 and 2019, respectively.

Legal proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.

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11. Licensing arrangements

2009 license agreement

In June 2009, the Company entered into and subsequently amended a license agreement (the 2009 License Agreement) with two research institutions (the 2009 Licensors) for certain base editing technology pursuant to which the Company received an exclusive, worldwide, sublicensable, royalty-bearing license under specified patent rights to develop and commercialize licensed products and a nonexclusive, worldwide, sublicensable, royalty-bearing license under certain patent rights to research and develop licensed products. The Company agreed to use commercially reasonable efforts to develop licensed products in accordance with the development plan, to introduce any licensed products that gain regulatory approval into the commercial market, to market licensed products that have gained regulatory approval following such introduction into the market, and to make licensed products that have gained regulatory approval reasonably available to the public. The license term extends until the later of the expiration of (i) the last to expire licensed patent covering a licensed product, (ii) the period of exclusivity associated with a licensed product or (iii) a certain period after the first commercial sale of a licensed product, unless terminated earlier by either party under certain provisions. The 2009 License Agreement was subsequently amended in December 2009, March 2013, August 2017 and July 2020.

The Company agreed to pay to the 2009 Licensors an annual license maintenance fee in the mid five figures. The Company is responsible for the payment of certain patent prosecution and maintenance costs incurred by the 2009 Licensors related to licensed patents. To the extent achieved, the Company is obligated to pay $0.7 million in the aggregate for certain development, regulatory and commercial milestones and $0.3 million for each product or derivative that the Company discovers using the licensed product or processes. To the extent there are sales of a licensed product, the Company is required to pay low single digit royalties on net sales. If the Company sublicenses its rights to develop or commercialize a licensed product under the 2009 License Agreement to a third party and the Company receives non-royalty sublicense income, then the 2009 Licensors are entitled to a percentage of such consideration, ranging from the high single digits to low double digits depending on the date in which such sublicense agreement is executed and the stage of development of the Company’s licensed products at such time.

The Company concluded that the licensing rights acquired from the 2009 Licensors did not meet the accounting definition of a business as inputs, but no processes or outputs were acquired with the license. As the inputs that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. As of the date of the 2009 License Agreement, the assets acquired had no alternative future use as the assets had not reached a stage of technological feasibility. As a result, all share-based and cash payment obligations have been recorded as research and development expense in the statements of operations.

The Company is monitoring the development and regulatory milestone payments for this arrangement on an ongoing basis. The achievement of these milestone payments was not considered probable as of the acquisition date through December 31, 2020, as such, no expense has been recorded for these milestones for the years ended December 31, 2020 and 2019. To the extent products are commercialized under the 2009 License Agreement, the Company will accrue royalty expense and sublicense nonroyalty payments, as applicable, for the amount it is obligated to pay, with adjustments as sales are made.

2012 license agreement

In June 2012, the Company entered into a license agreement (the 2012 License Agreement) with a medical institution (the 2012 Licensor) for certain patent rights, know-how, and materials pursuant to which the Company received an exclusive, worldwide, sublicensable (with certain restrictions), royalty-bearing license under specified patent rights to develop and commercialize licensed products. The Company agreed to use commercially reasonable efforts to develop licensed products in accordance with the development plan, to introduce any licensed products that gain regulatory approval into the commercial market, to market licensed products that have gained regulatory approval following such introduction into the market, and to make licensed products that have gained regulatory approval reasonably available to the public. The license term extends until the last patent or patent application has expired or been abandoned or unless terminated earlier by either party under certain provisions. The 2012 License Agreement was

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amended in October 2017 to change the terms of the royalty and milestone payments and was further amended in July 2020.

The Company is responsible for the payment of certain patent prosecution and maintenance costs incurred by the 2012 Licensor related to licensed patents. To the extent achieved, the Company is obligated to pay up to an aggregate of $1.0 million in product development and regulatory approval milestones. To the extent there are sales of a licensed product, the Company is required to pay low single digit royalties on net sales. If the Company sublicenses its rights to develop or commercialize a licensed product under the 2012 License Agreement to a third party and the Company receives non-royalty sublicense income, then the 2012 Licensor is entitled to a percentage of such consideration.

The Company concluded that the licensing rights acquired from the 2012 Licensor did not meet the accounting definition of a business as inputs, but no processes or outputs were acquired with the license. As the inputs that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. As of the date of the 2012 License Agreement, the assets acquired had no alternative future use as the assets had not reached a stage of technological feasibility.

The Company is monitoring the development and regulatory milestone payments for this arrangement on an ongoing basis. The achievement of these milestone payments was not considered probable as of the acquisition date through December 31, 2020, and as such, no expense has been recorded for these milestones for the years ended December 31, 2020 and 2019. To the extent products are commercialized under the 2012 License Agreement, the Company will accrue royalty expense and sublicense nonroyalty payments, as applicable, for the amount it is obligated to pay, with adjustments as sales are made.

2019 license agreement

In June 2019, the Company entered into an exclusive license agreement (the 2019 License Agreement) with a company (the 2019 Licensor) for certain methods and apparatus for substrate handling and printing technology pursuant to which the Company received an exclusive, worldwide, sublicensable, royalty-bearing license under specified patent rights and know-how to research, develop, make, have made, use, sell, offer for sale, market, and otherwise commercialize licensed products. The Company agreed to use commercially reasonable efforts to develop licensed products in accordance with the development plan, to introduce any licensed products that gain regulatory approval into the commercial market, to market licensed products that have gained regulatory approval following such introduction into the market, and to make licensed products that have gained regulatory approval reasonably available to the public. The license term extends until the last patent or patent application has expired or been abandoned or unless terminated earlier by either party under certain provisions.

As part of the 2019 License Agreement, the Company is required to pay an exclusivity fee in the low six figures. The Company is also responsible for the payment of certain patent prosecution and maintenance costs incurred by the 2019 Licensor related to licensed patents. To the extent there are sales of a licensed product, the Company is required to pay low single digit royalties on net sales. If the Company sublicenses its rights to develop or commercialize a licensed product under the 2019 License Agreement to a third party and the Company receives non-royalty sublicense income, then the 2019 Licensor is entitled to a percentage of such consideration.

The Company concluded that the licensing rights acquired from the 2019 Licensor did not meet the accounting definition of a business as inputs, but no processes or outputs were acquired with the license. As the inputs that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset acquisition. As of the date of the 2019 License Agreement, the assets acquired had no alternative future use as the assets had not reached a stage of technological feasibility. As a result, all cash payment obligations have been recorded as research and development expense in the statement of operations.

The Company pays an annual exclusivity fee related to the 2019 License Agreement and recognized $175,000 and $63,000 as license fee expense in research and development for the years ended December 31, 2020 and 2019, respectively. Annual patent costs will be expensed as incurred. To the extent products are commercialized under the 2019 License Agreement, the Company will accrue royalty expense and sublicense nonroyalty payments, as applicable, for the amount it is obligated to pay, with adjustments as sales are made.

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12. Common stock and convertible preferred stock

Common stock

The holders of common stock are entitled to one vote for each share of common stock. Subject to the approval of the majority of shareholders, the holders of common stock shall be entitled to receive dividends out of funds legally available. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution.

In October 2020, the Company closed its IPO in which the Company issued and sold 3,757,500 shares of its common stock at a public offering price of $12.00 per share, including 487,500 shares of the Company’s common stock sold pursuant to the underwriters’ option to purchase additional shares. The Company received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses. The Company’s common stock is listed on the Nasdaq Capital Market under the trading symbol “IMNM.” On October 6, 2020, the Company filed an amended and restated certificate of incorporation to, among other things, increase the number of shares of common stock, $0.0001 par value per share, authorized for issuance to 200,000,000 and authorize the Company’s board of directors to issue up to 10,000,000 shares of “blank check” preferred stock, $0.0001 par value per share.

Series A convertible preferred stock

Prior to the IPO, all of the Company’s convertible preferred stock was classified outside of stockholders’ deficit because the shares contained certain redemption features that were not solely within the control of the Company. At the time of issuance, the redeemable convertible preferred stock was recorded at its issuance price, less issuance costs.

During the year ended December 31, 2019, the Company sold 512,826 shares of its Series A Preferred at $9.00 per share in exchange for $4.6 million in gross proceeds and incurred $35,000 of related issuance costs. In November 2019, the Company issued 821,657 shares of Series A Preferred in connection with the conversion of the promissory notes of $6.8 million (see Note 7, Convertible Promissory Notes). In June 2020, the Company completed the sale of an additional 1,226,925 shares of Series A Preferred at $9.00 per share, resulting in gross cash proceeds of $11.0 million. In addition to the shares of Series A Preferred, the Company issued 1,035,196 warrants to purchase shares of the Company’s Series A Preferred with a fair value of $1.5 million. The warrants were exercisable at any time and had an exercise price of $9.00 per share and were to terminate at the earlier of (i) three years from the date of issuance, (ii) upon liquidation of the Company and (iii) upon the Company’s securities trading at $27.00 per share for at least 10 days out of a consecutive 20-day trading period beginning after the first anniversary of the IPO.

In connection with the Company’s sale of its Series A Preferred in 2015, a future milestone closing provision (the Future Milestone) was included requiring the Company to sell, on the same terms and conditions as the initial offering, an aggregate of $3.5 million of additional Series A Preferred upon achievement of certain development and strategic milestones, as defined in the purchase agreement and at $9.00 per share, or 388,888 shares of Series A Preferred. The Future Milestone was not achieved and the Company’s obligations under this right terminated upon completion of the Company’s IPO.

The Company determined that the future tranche right related to the Future Milestone did not meet the definition of a freestanding financial instrument as it was not legally detachable. The future tranche right was also evaluated as an embedded derivative and the Company determined it did not meet the definition of a derivative instrument for which bifurcation would be required.

In connection with the IPO, all of the Series A Preferred converted into 5,670,184 shares of common stock and all of the outstanding warrants to purchase convertible preferred stock converted into warrants to purchase common stock.

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Warrants to acquire shares of common stock

At December 31, 2020 there are 1,035,196 warrants outstanding to acquire shares of the Company’s common stock. The warrants were issued in connection with the June 2020 sale of the Company’s Series A convertible preferred stock and originally entitled the holders to acquire shares of the Company’s Series A Preferred. These warrants were originally liability-classified as the underlying Series A convertible preferred stock was contingently redeemable and outside of the Company’s control. The warrants had a grant date fair value of $1.5 million and a warrant liability was recorded in the balance sheet upon issuance. Upon completion of the IPO on October 6, 2020, the warrants became exercisable for shares of the Company’s common stock and the $7.1 million warrant liability was reclassified to additional paid-in capital (see Note 3).

The fair value of the warrants was estimated using a Black-Scholes pricing model with the following inputs:

​

​ ​ ​ ​ ​ ​ ​ ​

Volatility rate ​ 79.0 % ​ 82.0 %

Risk-free interest rate ​ 0.2 % ​ 0.2 %

Expected term (in years) ​ 3.0 ​ 2.7 ​

Strike price (per share) ​ $ 9.00 ​ $ 9.00 ​

Fair value of Series A convertible preferred stock ​ $ 4.44 ​ $ 12.00 ​

​

​

13. Share-based compensation

In July 2008 the board of directors adopted the 2008 Equity Incentive Plan (the 2008 Plan) which provided for the grant of qualified incentive stock options and nonqualified stock options, restricted stock or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the issuance or purchase of shares of the Company’s common stock. The 2008 Plan was replaced in July 2018 with the Immunome, Inc. 2018 Equity Incentive Plan (the 2018 Plan and collectively with the 2008 Plan, the Plans). At the time that the 2008 Plan was terminated, there were 388,748 shares available for grant that were transferred to the 2018 Plan. Any additional shares that become available for grant under the 2008 Plan are automatically transferred to and made available for grant under the 2018 Plan. On September 24, 2020, the Plans were terminated and replaced with the 2020 Equity Incentive Plan (the 2020 Plan). The remaining 298,277 shares available for grant under the Plans are available for issuance under the 2020 Plan and an additional 1,701,723 shares were authorized under the 2020 Plan.

The Company also adopted the 2020 Employee Stock Purchase Plan (the ESPP Plan) on September 18, 2020 which provides for the grant of purchase rights to purchase shares of the Company’s common stock to eligible employees, as defined by the ESPP Plan. The maximum number of shares of common stock that may be issued under the ESPP Plan will not exceed 125,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1st of each calendar year for a period of up to ten years, commencing on the first January 1 following the year in which an IPO occurs and ending on, and including, January 1, 2030, in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (ii) 1,000,000 shares of common stock. No awards have been granted under the ESPP Plan as of December 31, 2020.

The 2020 Plan and the ESPP Plan are administered by the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors. Stock options awarded under the Plans generally expire 10 years after the grant date unless the board of directors sets a shorter term. Vesting periods for awards under the Plans and the 2020 Plan are determined at the discretion of the board of directors. Incentive stock options and non-statutory stock options granted to employees, officers, members of the board of directors and consultants of the Company typically vest over two to four years. Certain options provide for accelerated vesting if there is a change in control, as defined in the Plans and the 2020 Plan.

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Share-based compensation expense recorded as research and development and general and administrative expenses in the statements of operations is as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

General and administrative ​ $ 441 ​ $ 5

Research and development ​ 180 ​ 9

​

Unrecognized compensation cost related to unvested options was $3.6 million as of December 31, 2020 and will be recognized over an estimated weighted average period of 3.88 years.

Stock options

The weighted average assumptions used in the Black-Scholes option-pricing model for stock options granted were:

​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

Expected volatility ​ 83.0 % ​ 73.7 %

Risk-free interest rate ​ 0.6 % ​ 2.5 %

Expected term (in years) ​ 6.1 ​ 5.3 ​

Expected dividend yield ​ — ​ — ​

Fair value of common stock ​ $ 5.30 ​ $ 0.36 ​

​

A summary of option activity under the Plans during the year ended December 31, 2020 is as follows:

​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ Weighted

​ ​ ​ ​ Weighted ​ average

​ ​ ​ ​ average ​ remaining

​ ​ Number of ​ exercise price ​ contractual

​ shares per share term (years)

​

The weighted-average grant date fair value per share of stock options granted during the years ended December 31, 2020 and 2019 was $3.71 and $0.24, respectively. The aggregate intrinsic value of stock options exercised during the year ended December 31, 2020 was $1.2 million and for the year ended December 31, 2019 was de minimis. The aggregate intrinsic value of stock options outstanding at December 31, 2020 and 2019 is $10.1 million and $0.2 million, respectively.

In August 2020, the Company granted a total of 92,169 stock options to two of its officers, which option awards included both performance-based and service-based vesting conditions. These option awards were subsequently modified in September 2020 to eliminate the performance-based criteria. As a result of the modification, only service-based vesting conditions remained. All other terms and conditions of these option awards remain unchanged. Since the performance condition was not considered probable of being achieved prior to the modification, no share-based compensation expense was recorded prior to the modification. At the time of the modification, the fair value of these options awards was recalculated at $8.69 per option.

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14. Income taxes

A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:

​ ​ ​ ​ ​ ​

​ Year ended ​

​ December 31, ​

Federal tax benefit at statutory rate ​ 21.0 % 21.0 %

State tax, net of federal benefit ​ 5.8 ​ 7.9 ​

Research and development credits ​ 0.9 3.8 ​

Permanent differences ​ (6.8) (0.1) ​

Change in valuation allowance ​ (20.9) (32.6) ​

​ ​ — % — %

​

The components of the Company’s deferred taxes are as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ December 31,

Deferred tax assets: ​ ​ ​

Net operating loss carryforwards ​ $ 13,693 $ 10,202

Research and development credits ​ ​ 1,560 ​ 1,355

Share-based compensation ​ ​ 82 ​ 194

Amortization ​ ​ 2 ​ 3

Net deferred tax asset ​ ​ 103 ​ 163

Deferred tax liability ​ ​ ​