PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Genocea Biosciences, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share ~~amounts)~~data)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	87,625	$	40,127	Cash and cash equivalents	$	60,399	$	79,769

Prepaid expenses and other current assets	Prepaid expenses and other current assets	2,703		1,457		Prepaid expenses and other current assets	2,514		2,458
Total current assets	Total current assets	90,328		41,584		Total current assets	62,913		82,227
Property and equipment, net	Property and equipment, net	3,021		2,617		Property and equipment, net	5,214		5,123
Right of use assets		10,737		6,306
Right-of-use assets						Right-of-use assets	8,371		9,308
Restricted cash	Restricted cash	631		631		Restricted cash	631		631
Other non-current assets	Other non-current assets	1,481		1,473		Other non-current assets	254		1,204
Total assets	Total assets	$	106,198	$	52,611	Total assets	$	77,383	$	98,493

Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	567	$	553	Accounts payable	$	1,362	$	534
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	5,784		4,611		Accrued expenses and other current liabilities	6,328		7,344
Deferred revenue	Deferred revenue	1,641		0		Deferred revenue	1,641		1,641
Lease liabilities	Lease liabilities	2,080		1,117		Lease liabilities	2,218		1,614
Current portion of long-term debt	Current portion of long-term debt	13,743		—		Current portion of long-term debt	3,283		13,862
Total current liabilities	Total current liabilities	23,815		6,281		Total current liabilities	14,832		24,995
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Warrant liabilities	Warrant liabilities	53,237		2,486		Warrant liabilities	44,747		56,118
Lease liabilities, net of current portion	Lease liabilities, net of current portion	8,941		5,395		Lease liabilities, net of current portion	7,255		8,398
Long-term debt, net of current portion	Long-term debt, net of current portion	0		13,407		Long-term debt, net of current portion	6,494		0
Total liabilities	Total liabilities	85,993		27,569		Total liabilities	73,328		89,511
Commitments and contingencies (Note 6)	Commitments and contingencies (Note 6)					Commitments and contingencies (Note 6)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.001 par value; (shares authorized of 25,000,000 at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and 1,635 shares issued and outstanding at December 31, 2019)		0		701
Common stock, $0.001 par value; (shares authorized of 170,000,000 at September 30, 2020 and 85,000,000 at December 31, 2019, 51,563,631 shares issued and outstanding at September 30, 2020 and 27,452,900 shares issued and outstanding at December 31, 2019)		52		27
Preferred stock, $0.001 par value; (25,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020)						Preferred stock, $0.001 par value; (25,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020)	0		0
Common stock, $0.001 par value; (225,000,000 shares authorized at June 30, 2021 and 170,000,000 shares authorized at December 31, 2020, 57,014,243 shares issued and outstanding at June 30, 2021 and 53,018,813 shares issued and outstanding at December 31, 2020)						Common stock, $0.001 par value; (225,000,000 shares authorized at June 30, 2021 and 170,000,000 shares authorized at December 31, 2020, 57,014,243 shares issued and outstanding at June 30, 2021 and 53,018,813 shares issued and outstanding at December 31, 2020)	57		53
Additional paid-in capital	Additional paid-in capital	379,836		355,268		Additional paid-in capital	394,960		383,597
Accumulated deficit	Accumulated deficit	(359,683)		(330,954)		Accumulated deficit	(390,962)		(374,668)
Total stockholders’ equity	Total stockholders’ equity	20,205		25,042		Total stockholders’ equity	4,055		8,982
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	106,198	$	52,611	Total liabilities and stockholders’ equity	$	77,383	$	98,493

See accompanying notes to ~~unaudited~~the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30				Six Months Ended June 30
		2020		2019		2020		2019			2021		2020		2021		2020
License revenue	License revenue	$	453	$	0	$	1,359	$	0	License revenue	$	0	$	906	$	0	$	906

Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	7,548		6,826		26,123		20,135		Research and development	10,513		8,587		19,264		18,574
General and administrative	General and administrative	3,644		2,758		10,511		8,992		General and administrative	4,033		3,480		7,704		6,868
Total operating expenses	Total operating expenses	11,192		9,584		36,634		29,127		Total operating expenses	14,546		12,067		26,968		25,442
Loss from operations	Loss from operations	(10,739)		(9,584)		(35,275)		(29,127)		Loss from operations	(14,546)		(11,161)		(26,968)		(24,536)
Other income (expense):	Other income (expense):									Other income (expense):
Change in fair value of warrants	Change in fair value of warrants	10,767		2,206		11,770		289		Change in fair value of warrants	10,517		222		11,371		1,003
Interest expense, net	Interest expense, net	(377)		(154)		(1,001)		(755)		Interest expense, net	(282)		(365)		(561)		(624)
Other expense	Other expense	(4,206)		0		(4,223)		(1)		Other expense	0		(17)		(136)		(17)
Total other income (expense)	Total other income (expense)	6,184		2,052		6,546		(467)		Total other income (expense)	10,235		(160)		10,674		362
Net loss	Net loss	$	(4,555)	$	(7,532)	$	(28,729)	$	(29,594)	Net loss	$	(4,311)	$	(11,321)	$	(16,294)	$	(24,174)

Comprehensive loss	Comprehensive loss	$	(4,555)	$	(7,532)	$	(28,729)	$	(29,594)	Comprehensive loss	$	(4,311)	$	(11,321)	$	(16,294)	$	(24,174)

Net loss per share:	Net loss per share:									Net loss per share:
Basic	Basic	$	(0.08)	$	(0.28)	$	(0.76)	$	(1.62)	Basic	$	(0.06)	$	(0.39)	$	(0.24)	$	(0.84)
Diluted	Diluted	$	(0.26)	$	(0.28)	$	(1.01)	$	(1.62)	Diluted	$	(0.20)	$	(0.39)	$	(0.37)	$	(0.84)
Weighted-average number of shares used in computing net loss per share:
Weighted average number of shares used in computing net loss per share:										Weighted average number of shares used in computing net loss per share:
Basic	Basic	55,492		26,681		37,657		18,297		Basic	67,970		29,142		67,074		28,642
Diluted	Diluted	61,130		26,681		39,550		18,297		Diluted	70,202		29,142		72,467		28,642

See accompanying notes to ~~unaudited~~the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(unaudited)

(in thousands)

Preferred Shares Amount Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity
Common Shares
Shares Amount
Balance at December 31, 2019 27,453 $ 27 $ 701 $ 355,268 $ (330,954) $ 25,042
Issuance of common stock, net 187 1 — 439 — 440
Stock-based compensation expense — — — 384 — 384
Issuance of common stock under employee benefit plans 4 — — — — —
Net loss — — — — (12,853) (12,853)
Balance at March 31, 2020 27,644 $ 28 $ 701 $ 356,091 $ (343,807) $ 13,013
Issuance of common stock, net 2,287 2 — 5,797 — 5,799
Stock-based compensation expense — — — 486 — 486
Issuance of common stock under employee benefit plans 33 — — 60 — 60
Net loss — — — — (11,321) (11,321)
Balance at June 30, 2020 29,964 $ 30 $ 701 $ 362,434 $ (355,128) $ 8,037
Issuance of common stock, net 21,391 22 — 16,162 — 16,184
Stock-based compensation expense — — — 533 — 533
Issuance of common stock under employee benefit plans 4 — — 6 — 6
Conversion of preferred stock to common stock 205 — (701) 701 — —
Net loss — — — — (4,555) (4,555)
Balance at September 30, 2020 51,564 $ 52 $ 0 $ 379,836 $ (359,683) $ 20,205

Preferred Shares Amount Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity
Common Shares
Shares Amount
Balance at December 31, 2018 10,847 $ 11 $ 701 $ 298,627 $ (292,004) $ 7,335
Issuance of common stock, net 3,200 3 0 14,023 — 14,026
Stock-based compensation expense — — — 429 — 429
Issuance of common stock under employee benefit plans 3 — — 12 — 12
Net loss — — — — (15,567) (15,567)
Balance at March 31, 2019 14,050 $ 14 $ 701 $ 313,091 $ (307,571) $ 6,235
Issuance of common stock, net 12,074 12 — 38,155 — 38,167
Stock-based compensation — — — 474 — 474
Issuance of common stock under employee benefit plans 26 — — 57 — 57
Net loss — — — — (6,495) (6,495)
Balance at June 30, 2019 26,150 $ 26 $ 701 $ 351,777 $ (314,066) $ 38,438
Issuance of common stock, net — — — (23) — (23)
Stock-based compensation — — — 490 — 490
Net loss — — — — (7,532) (7,532)
Balance at September 30, 2019 26,150 $ 26 $ 701 $ 352,244 $ (321,598) $ 31,373


				Preferred		Additional				Total
	Common Stock			Stock		Paid-In		Accumulated		Stockholders’
	Shares	Amount		Amount		Capital		Deficit		Equity
Balance at December 31, 2020	53,019	$	53	$	0	$	383,597	$	(374,668)	$	8,982
Issuance of common stock, net	1,301	1		—		3,978		—		3,979
Stock-based compensation expense	—	—		—		580		—		580
Issuance of warrants	—	—		—		120		—		120
Issuance of common stock under employee benefit plans	49	—		—		84		—		84
Net loss	—	—		—		—		(11,983)		(11,983)
Balance at March 31, 2021	54,369	54		0		388,359		(386,651)		1,762
Issuance of common stock, net	2,500	3		—		5,512		—		5,515
Stock-based compensation expense	—	—		—		1,014		—		1,014
Issuance of common stock under employee benefit plans	145	—		—		75		—		75
Net loss	—	—		—		—		(4,311)		(4,311)
Balance at June 30, 2021	57,014	$	57	$	0	$	394,960	$	(390,962)	$	4,055


				Preferred		Additional				Total
	Common Stock			Stock		Paid-In		Accumulated		Stockholders’
	Shares	Amount		Amount		Capital		Deficit		Equity
Balance at December 31, 2019	27,453	$	27	$	701	$	355,268	$	(330,954)	$	25,042
Issuance of common stock, net	187	1		0		439		—		440
Stock-based compensation expense	—	—		—		384		—		384
Issuance of common stock under employee benefit plans	4	—		—		0		—		0
Net loss	—	—		—		—		(12,853)		(12,853)
Balance at March 31, 2020	27,644	28		701		356,091		(343,807)		13,013
Issuance of common stock, net	2,287	2		—		5,797		—		5,799
Stock-based compensation	—	—		—		486		—		486
Issuance of common stock under employee benefit plans	33	—		—		60		—		60
Net loss	—	—		—		—		(11,321)		(11,321)
Balance at June 30, 2020	29,964	$	30	$	701	$	362,434	$	(355,128)	$	8,037

See accompanying notes to ~~unaudited~~the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


		Nine Months Ended September 30,					Six Months Ended June 30
		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net loss	Net loss	$	(28,729)	$	(29,594)	Net loss	$	(16,294)	$	(24,174)
Adjustments to reconcile net loss to net cash used in operating activities
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of warrant liability						Change in fair value of warrant liability	(11,371)		(1,003)
Stock-based compensation						Stock-based compensation	1,594		870
Depreciation and amortization	Depreciation and amortization	867		825		Depreciation and amortization	752		556
Stock-based compensation		1,403		1,392

Change in fair value of warrant liability		(11,770)		(289)

Allocation of proceeds to transaction expenses		4,219		0
Non-cash interest expense	Non-cash interest expense	336		471		Non-cash interest expense	245		220
Asset impairment		97		0
Gain on sale of equipment		0		(19)
Other						Other	101		100
Changes in operating assets and liabilities	Changes in operating assets and liabilities	1,568		(1,534)		Changes in operating assets and liabilities	2,068		(281)
Net cash used in operating activities	Net cash used in operating activities	(32,009)		(28,748)		Net cash used in operating activities	(22,905)		(23,712)
Investing activities	Investing activities					Investing activities
Purchases of property and equipment	Purchases of property and equipment	(1,214)		(989)		Purchases of property and equipment	(1,823)		(550)
Proceeds from sale of equipment	Proceeds from sale of equipment	26		19		Proceeds from sale of equipment	65		22
Net cash used in investing activities	Net cash used in investing activities	(1,188)		(970)		Net cash used in investing activities	(1,758)		(528)
Financing activities	Financing activities					Financing activities
Repayment of long-term debt						Repayment of long-term debt	(13,960)		0
Proceeds from long-term debt						Proceeds from long-term debt	10,000		0
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	80,740		52,171		Proceeds from issuance of common stock, net	9,494		6,239
Payment of deferred financing costs						Payment of deferred financing costs	(289)		0
Proceeds from issuance of common stock under employee benefit plans	Proceeds from issuance of common stock under employee benefit plans	66		69		Proceeds from issuance of common stock under employee benefit plans	159		60
Debt prepayment costs						Debt prepayment costs	(88)		0
Payments on finance lease	Payments on finance lease	(111)		0		Payments on finance lease	(23)		(78)

Repayment of long-term debt		0		(1,919)
Net cash provided by financing activities	Net cash provided by financing activities	80,695		50,321		Net cash provided by financing activities	5,293		6,221
Net increase in cash, cash equivalents and restricted cash		$	47,498	$	20,603
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(19,370)		(18,019)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	40,758		26,677		Cash, cash equivalents and restricted cash at beginning of period	80,400		40,758
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	88,256	$	47,280	Cash, cash equivalents and restricted cash at end of period	$	61,030	$	22,739
Non-cash financing activities and supplemental cash flow information	Non-cash financing activities and supplemental cash flow information					Non-cash financing activities and supplemental cash flow information
Property and equipment included in accounts payable and accrued expenses						Property and equipment included in accounts payable and accrued expenses	$	314	$	0
Right-of-use asset obtained in exchange for lease liabilities	Right-of-use asset obtained in exchange for lease liabilities	$	5,931	$	5,385	Right-of-use asset obtained in exchange for lease liabilities	$	0	$	5,931
Cash paid in connection with operating lease liabilities	Cash paid in connection with operating lease liabilities	$	1,800	$	1,226	Cash paid in connection with operating lease liabilities	$	1,436	$	1,097
Cash paid for interest	Cash paid for interest	$	787	$	843	Cash paid for interest	$	272	$	523

Property and equipment included in accounts payable and accrued expenses		$	181	$	150

See accompanying notes to ~~unaudited~~the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

1. Organization and operations

~~The Company~~

Genocea Biosciences, Inc. ~~(the “Company”~~("Genocea" or the "Company”) is a biopharmaceutical company that was incorporated in Delaware on August 16, 2006 and has a principal place of business in Cambridge, Massachusetts. The Company ~~seeks~~is dedicated to ~~discover~~discovering and ~~develop~~developing novel cancer immunotherapies using its proprietary ATLASTM ~~proprietary discovery~~ platform. The ATLAS platform ~~profiles~~can profile each patient's CD4+ and CD8+ T cell immune responses to every potential target or “antigen” inidentified by next-generation sequencing of that patient's tumor. ~~The Company~~ATLAS zeroes in on both antigens that activate anti-tumor T cell responses and inhibitory antigens, or InhibigensTM, that drive pro-tumor immune responses. Genocea believes ~~that~~ this approach ~~optimizes antigen selection for~~ensures that cancer immunotherapies, such as ~~cancer~~cellular therapies and vaccines, ~~and cellular therapies.~~focus T cell responses on the tumor antigens most vulnerable to T cell targeting. Consequently, the Company believes that ATLAS ~~could lead to~~may enable more immunogenic and efficacious cancer immunotherapies. Genocea operates as 1 segment, which is discovering, researching, developing and commercializing novel cancer immunotherapies.

~~The Company’s most advanced program~~GEN-011 is GEN-009, a personalized neoantigen cancer vaccine, for which it is conducting a Phase 1/2a clinical trial. The GEN-009 program uses ATLAS to identify neoantigens, or immunogenic tumor mutations unique to each patient, for inclusion in each patient's GEN-009 vaccine. The Company is also advancing GEN-011, a neoantigen-specifican investigational adoptive T cell therapy ~~program that also relies on ATLAS. In September 2020, the Company received notice~~comprising neoantigen-targeted peripheral T cells ("NPTs"). NPTs are peripheral blood-derived T cells targeted to ATLAS-identified neoantigens. By employing ATLAS to optimize neoantigen selection and by using T cells derived from ~~the U.S. Food~~peripheral blood, Genocea believes GEN-011 will enable potential patient efficacy, accessibility and ~~Drug Administration (“FDA”) that it has accepted the Company's Investigational New Drug (“IND”) Application for GEN-011 to initiate a Phase 1/2a clinical trial.~~cost advantages over other autologous T cell therapies. The Company is ~~currently initiating sites~~conducting a first-in-human clinical trial for ~~this~~GEN-011 (the “TiTANTM trial”), and in the second quarter of 2021, Genocea dosed its first patient in the trial. GEN-009 is an investigational neoantigen vaccine delivering adjuvanted synthetic long peptides from ATLAS-identified neoantigens. Genocea reported long-term immunogenicity and clinical ~~trial.~~

response data from its GEN-009 neoantigen Phase 1 clinical trial in June 2021, and the Company continues to monitor patients to further evaluate these efficacy signals.

~~The Company~~Genocea is devoting substantially all of its efforts to product research and development, initial market development, and raising capital. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks and uncertainties common to companies in the biotech and pharmaceutical industry, including, but not limited to, the risks associated with the uncertainty of success of its preclinical and clinical trials; the challenges associated with gaining regulatory approval of product candidates; the risks associated with commercializing pharmaceutical products, if approved for marketing and sale; the potential for development by third parties of new technological innovations that may compete with ~~the Company’s~~Genocea's products; the dependence on key personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high cost of drug development; competition from other companies; the uncertainty of being able to secure additional capital when needed to fund operations; and the challenges and uncertainty associated with the outbreak of the novel coronavirus ~~or referred to as COVID-19, that have arisen in the global economy,~~("COVID-19") that could adversely impact the Company's operations, supply chain, preclinical development work, clinical trials and ability to raise capital.

~~Accounting Standards Codification (“ASC”) 205-40,~~ ~~Presentation of Financial Statements-Going Concern~~ ~~(“ASC 205-40”), requires the~~The Company ~~to evaluate~~regularly evaluates whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the financial statements are issued. As of ~~September~~June 30, ~~2020, the Company~~2021, Genocea had an accumulated deficit of ~~$359.7~~$391.0 million and anticipates that it will continue to incur significant operating losses for the foreseeable future as it continues to develop its product candidates. ~~Until such time, if ever,~~

The Company expects that its cash and cash equivalents as of June 30, 2021 of $60.4 million should be sufficient to fund operations into the third quarter of 2022. These funds may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements which raises substantial doubt about the Company’s ability to continue as a going concern. The future viability of the Company ~~can generate substantial product revenue~~beyond one year from the date of issuance of these consolidated financial statements is dependent on its ability to raise additional capital to finance its operations. If the Company is unable to raise additional funds when needed, it may be required to implement cost reduction strategies, including ceasing development of GEN-011 or other research programs and ~~achieve profitability,~~activities, including the ~~Company~~Inhibigens and COVID-19 programs. Genocea expects to finance its cash needs through a combination of equity offerings, strategic transactions, or other sources of ~~funding. If~~funding, including utilization of the Lincoln Park Capital (“LPC”) purchase agreement and the at-the-market (“ATM”) equity offering program with Cowen and Company, LLC ("Cowen"). Although management plans to pursue additional funding, there is no assurance that the Company ~~is unable~~will be successful in obtaining sufficient funding on terms acceptable to ~~raise additional funds when needed,~~ the Company ~~may be required~~ to ~~implement further cost reduction strategies, including ceasing development of GEN-009, GEN-011~~fund continuing operations, or ~~other corporate programs and activities.~~at all.

~~As reflected in the~~The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the ~~Company had available cash~~realization of assets and ~~cash equivalents~~satisfaction of ~~$87.6 million at September 30, 2020. In addition,~~liabilities in the ~~Company had cash used in operating activities~~ordinary course of ~~$32.0 million for~~business. The consolidated financial statements do not include any adjustments relating to the ~~nine months ended September 30, 2020. The Company’s available cash~~recoverability and ~~cash equivalents at September 30, 2020 are expected to fund operations to mid-2022.~~

classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

2. Summary of significant accounting policies

~~The information included~~Genocea's significant accounting policies have not changed materially from those disclosed in ~~this Quarterly Report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and the accompanying notes included in the Company's~~its Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019 (“2019 Form~~2020 (the “2020 10-K”). The Company's accounting policies are described in the “Notes to Consolidated Financial Statements” in the Company's 2019 Form 10-K and updated, as necessary, in the Company's Quarterly Reports on Form 10-Q. The December 31, 2019 condensed consolidated balance sheet data presented for comparative purposes were derived from the Company's audited financial statements but do not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Basis of presentation

The ~~accompanying unaudited~~ condensed consolidated financial statements include ~~those~~the accounts of the Company and a wholly owned ~~subsidiary after elimination of all intercompany~~subsidiary. Intercompany accounts and ~~transactions. The Company operates as 1 segment,~~transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which ~~is discovering, researching, developing~~are normal and ~~commercializing novel cancer immunotherapies.~~

~~Use of estimates~~

recurring in nature, and necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. ~~GAAP~~generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts ~~reported in the~~reported. Actual results could differ materially from those estimates. These condensed consolidated financial statements and accompanying ~~notes. On an ongoing basis,~~notes should be read in conjunction with the Company’s ~~management evaluates its estimates, which include, but are not limited to, estimates related to clinical trial accruals, estimates related to prepaid~~annual consolidated financial statements and accrued manufacturing and research and development expenses, revenue recognition, and warrant liabilities, which could change period to period based on changes in facts and circumstances. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

~~Significant accounting policies~~

~~There were no changes to significant accounting policies during the nine months ended September 30, 2020, as compared to the those disclosed~~accompanying notes included in the ~~2019 Form 10-K, except as set forth below.~~2020 10-K.

~~Foreign Currency Translation~~

Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as other (expense) income, net in the consolidated statements of operations in accordance with ASC Topic 830, ~~Foreign Currency Matters~~ ~~(“ASC 830”).~~

~~Revenue Recognition~~

Recently adopted accounting standards

In ~~accordance with ASC Topic 606,~~ ~~Revenue from Contracts with Customers~~ ~~(“ASC 606”)~~, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these goods and services. To achieve this core principle, the Company applies the following five steps: 1) identify the customer contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied.

Licensing arrangements are analyzed to determine whether the promised goods or services, which include licenses and research and development materials and services, are distinct or whether they must be accounted for as part of a combined performance obligation. If the license is considered not to be distinct, the license would then be combined with other promised goods or services as a combined performance obligation. Certain contracts contain options to obtain future goods or services at a discount, which would not be provided without entering into the contract. These options are considered material rights, and therefore, are accounted for as separate performance obligations.

The transaction price is determined based on the consideration to which the Company will be entitled. The consideration promised may include fixed amounts, variable amounts, or both. For milestone payments, the Company estimates the amount of variable consideration by using the most likely amount method. In making this assessment, the Company evaluates factors such as the clinical, commercial and other risks that must be overcome to achieve the milestone. The Company re-evaluates the probability of achievement of such variable consideration and any related constraints at each reporting period. The Company includes variable consideration in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price among the performance obligations on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation.

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations. The Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amount the Company would expect to receive for each performance obligation. The transaction price is generally allocated to each separate performance obligation on a relative standalone selling price basis.

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price allocated to that performance obligation on a relative standalone selling price basis, which excludes estimates of variable consideration that are constrained. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.

For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess whether the combined performance obligation is satisfied over time or at a point in time and the recognition pattern of non-refundable, up-front fees.

~~Contract liabilities~~

The Company records a contract liability, classified as deferred revenue on its condensed consolidated balance sheet, when it has received payment but has not yet satisfied the related performance obligations. In the event of an early termination of a contract with customer, any contract liabilities would be recognized in the period in which all Company obligations under the agreement have been fulfilled.

~~New Accounting Pronouncements~~

~~The following new accounting pronouncements were adopted by the Company on January 1, 2020:~~

~~In 2016,~~2019, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued ~~ASU 2016-13,~~ a new standard on~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(“ASU 2016-13”), which amends~~Simplifying the ~~impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables~~Accounting for Income Taxes. The new standard simplifies the accounting for income taxes and ~~available-for-sale debt securities.~~became effective beginning after December 15, 2020. The Company ~~early~~ adopted ~~the~~this standard on January 1, 2020. Based on the composition of the Company's investment portfolio, which includes only money market funds, and the insignificance of the Company's other financial assets, current market conditions, and historical credit loss activity, the2021. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

Recent accounting pronouncements

In ~~2018,~~May 2021, the FASB issued ~~ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements~~a new standard that clarifies an issuer’s accounting for ~~Fair Value Measurement~~ ~~(“ASU 2018-13”).~~certain modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The new standard ~~requires public entities to disclose certain new information and modifies some disclosure requirements. The Company adopted the standard~~is effective on ~~the required effective date of January 1, 2020. This standard did not have~~ a ~~material impact on the Company's disclosures.~~

~~In 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)~~: ~~Customer’s Accounting~~prospective basis for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~ (“ASU 2018-15”). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The Company adopted the standard on the required effective date of January 1, 2020. This standard did not have a material impact on the Company's consolidated financial statements and related disclosures.

~~The following new accounting pronouncement has been issued but is not yet effective:~~

~~In 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~ ~~("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes and will be effective~~fiscal years beginning after December 15, ~~2020.~~2021, and early adoption is permitted. The Company is currently evaluating the ~~impact~~timing of ~~ASU 2019-12 in the consolidated financial statements, including accounting policies, processes, and systems.~~adoption.

3. Revenue

In May 2020, ~~the Company~~Genocea entered into a material transfer agreement (the “MTA”) with Shionogi & Co., Ltd. (“Shionogi”) pursuant to which the Company agreed to transfer certain ~~HSV-2~~herpes simplex type 2 ("HSV-2") antigens from its GEN-003 program to Shionogi to evaluate the potential development of a novel HSV-2 vaccine. In connection with the agreement, ~~the Company~~Genocea provided Shionogi with an option to negotiate an exclusive development and commercialization license for the HSV-2 ~~antigens.~~

antigens prior to the expiration of the MTA (the "Exclusive Negotiation Period"). Under the terms of the MTA, Shionogi paid the Company a total of $3.0 million in non-refundable, creditable (with respect to the up-front fee pursuant to a development and commercialization agreement) fees. Prior to the expiration of the MTA, Shionogi has the option to negotiate a development and commercialization agreement. If executed, the terms of the development and commercialization agreement are expected to include an upfront payment, regulatory and sales milestones, and tiered royalties. Final terms of the development and commercialization agreement will be based on evaluation of the HSV-2 assets and overall diligence. If licensed, Shionogi will assume responsibility for global development and commercialization of an HSV-2 vaccine product.

~~Management~~Genocea evaluated the promised goods and services within the MTA and determined those which represented separate performance obligations. As a result, ~~management~~the Company concluded there were two separate performance obligations at the inception of the MTA: (i) a combined performance obligation consisting of a limited use research license and the delivery of the initial antigen materials and (ii) the right to negotiate a license prior to expiration of the ~~MTA, which was deemed to be a material right.~~MTA. The Company determined that the exclusive limited use research license and the delivery of the initial antigen materials should be combined as they are not capable of being distinct. A third party would not be able to provide the initial antigen materials as it contains ~~the Company’s~~Genocea’s proprietary intellectual property, and Shionogi could not benefit from the research license without the initial antigen materials. The Company determined that the option to negotiate the development and commercialization agreement prior to the expiration of the MTA is a material right. The $3.0 million fee associated with the MTA is creditable against the upfront fee for the development and commercialization agreement and represents a discount that would otherwise not be available to the customer without entering into the MTA.

~~The Company~~Genocea estimated the standalone selling price of the initial antigen materials based on the expected cost plus a margin approach. The Company developed its standalone selling price for the material right by applying a probability-weighted likelihood that Shionogi will exercise its option to license the HSV-2 assets.

At inception, the transaction price was comprised of fixed and variable consideration. In the three months ended September 30, 2020, the Company determined a constraint was no longer required. As a result, the Company revised its initial relative sales price analysis to include the variable consideration so that the total transaction price is $3.0 million.

The initial amount allocated to the limited use research license and the delivery of the initial antigen materials, or $0.9 million, was recognized upon delivery of the materials to Shionogi in the three months ended June 30, 2020. ~~In the three months ended September~~As of June 30, 2020, the Company recorded an additional $0.5 million of license revenue attributable to the variable consideration that is now included in the transaction price. In the nine months ended September 30, 2020, the Company recorded $1.4 million in license revenue related to the MTA with Shionogi. The2021, $1.6 million allocated to the material right is considered a contract liability and is recorded as deferred revenue on the Company's condensed consolidated balance sheet. ~~Revenue~~

In July 2021, Shionogi informed Genocea that their studies under the MTA were successful and demonstrated that GEN-003 antigen vaccination was protective in animal models of genital herpes. However, due to a change in Shionogi’s corporate focus, Shionogi will allow its Exclusive Negotiation Period to lapse and has elected to cease further negotiations as this time. As such, revenue associated with the material right will be recognized ~~upon either (i) the execution of a development and commercialization agreement or (ii)~~in Q3 2021 due to the termination of the MTA.

4. Fair value of financial instruments

~~The Company~~Genocea has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

•Level 1—Fair values are determined by utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;

•Level 2—Fair values are determined by utilizing quoted prices for similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves and foreign currency spot rates; and

•Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The Company's financial assets and liabilities measured at fair value consist of cash equivalents and ~~the Company's financial~~warrant liabilities, ~~consist of warrant liabilities.~~

respectively.

The fair value of ~~the Company’s~~Genocea’s cash equivalents is determined using quoted prices in active markets. The Company's cash equivalents consist of money market funds that are classified as Level 1.

The fair value of ~~the Company’s~~Genocea’s warrant liabilities is determined using a Monte Carlo simulation. See Note 9. Warrants for the assumptions ~~used~~ and methodologies ~~utilized~~used in calculating the estimated fair value. The Company’s warrant liabilities are classified as Level 3.

The following table sets forth the Company's assets and liabilities that are measured at fair value on a recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (in thousands):

Quoted prices in active markets Significant other observable inputs Significant unobservable inputs
Total (Level 1) (Level 2) (Level 3)
September 30, 2020
Assets:
Cash equivalents $ 87,278 $ 87,278 $ 0 $ 0
Total assets $ 87,278 $ 87,278 $ 0 $ 0
Liabilities:
Warrant liabilities $ 53,237 $ 0 $ 0 $ 53,237
Total liabilities $ 53,237 $ 0 $ 0 $ 53,237
December 31, 2019
Assets:
Cash equivalents $ 39,971 $ 39,971 $ 0 $ 0
Total assets $ 39,971 $ 39,971 $ 0 $ 0
Liabilities:
Warrant liabilities $ 2,486 $ 0 $ 0 $ 2,486
Total liabilities $ 2,486 $ 0 $ 0 $ 2,486


			Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2021
Assets
Cash equivalents	$	57,198	$	57,198	$	0	$	0
Total assets	$	57,198	$	57,198	$	0	$	0

Liabilities
Warrant liabilities	$	44,747	$	0	$	0	$	44,747
Total liabilities	$	44,747	$	0	$	0	$	44,747

December 31, 2020
Assets
Cash equivalents	$	76,866	$	76,866	$	0	$	0
Total assets	$	76,866	$	76,866	$	0	$	0

Liabilities
Warrant liabilities	$	56,118	$	0	$	0	$	56,118
Total liabilities	$	56,118	$	0	$	0	$	56,118

The following table reflects the change in ~~the Company’s~~Genocea’s Level 3 warrant liabilities (in thousands):


	Warrant Liabilities
Balance at December 31, ~~2019~~2020	$	~~2,486~~
~~Issuance of Warrants~~	~~62,521~~56,118
Change in fair value	~~(11,770)~~(11,371)

Balance at ~~September~~June 30, ~~2020~~2021	$	~~53,237~~44,747

5. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30, December 31,
2020 2019
Payroll and employee-related costs $ 2,429 $ 2,245
Research and development costs 2,110 1,607
Other current liabilities 1,245 759
Total $ 5,784 $ 4,611


	June 30, 2021		December 31, 2020
Research and development costs	$	3,746	$	2,592
Payroll and other headcount-related costs	1,776		2,779
Other current liabilities	806		1,973
Total	$	6,328	$	7,344

129

6. Commitments and contingencies

Operating leases

As of ~~September~~June 30, ~~2020, the Company~~2021, Genocea has a lease for ~~two~~2 floors of lab and office space in a multi-tenant building in Cambridge, ~~Massachusetts. On January 1, 2019, the Company adopted ASU 2016-02,~~ ~~Leases (Topic 842)~~, (“ASC 842”), using the required retrospective approach and utilizing the effective date as the date of initial application. The Company's lease contains both an extension of an existing lease and an expansion for additional office and lab space. Both the extension and the expansion expire inMassachusetts through February 2025. The Company's right to use and control the expansion space began in March 2020. As a result, the Company recognized an increase in the right of use (“ROU”) assets of $5.9 million and associated lease liabilities of $5.8 million in the first quarter of 2020. The CompanyGenocea has the option to extend the lease term for an additional five years, which is not included in the Company's ~~ROU~~right-of-use ("ROU") assets and associated lease liabilities as of ~~September~~June 30, ~~2020.~~2021.

In January 2021, Genocea entered into a sublease agreement for one floor of lab and office space through June 2022, with an option for the sublessee to extend the sublease for an additional two months. After the initial option, which is at the sublessee’s sole discretion, the sublease agreement contains additional options for the Company and the sublessee to mutually extend the sublease for up to an additional eighteen months. As Genocea retained its obligations under the sublease, it will record the payments received under the sublease as a reduction of lease expense. For the three and six months ended June 30, 2021, the Company recorded sublease income of $0.3 million and $0.7 million, respectively, as a reduction of lease expense.

For the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019~~the Company recorded lease expense, net of sublease income, ~~was $0.7~~of $0.3 million and ~~$0.4~~$0.8 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019~~the Company recorded lease expense, net of sublease income, ~~was $2.0~~of $0.6 million and ~~$1.1~~$1.3 million, respectively.

The weighted average remaining lease term and weighted average discount rate of the Company's operating leases are as follows:

~~September 30, 2020~~

~~Weighted average remaining lease term in years~~

~~4.42~~

~~Weighted average discount rate~~

~~8.13~~

~~Finance lease~~

In December 2019, the Company entered into an agreement to lease lab equipment for a term of 15 months. The Company determined that the agreement qualifies as a finance lease based on the criteria that the Company holds the option to purchase the asset and is reasonably certain to exercise at the end of the lease term. The ROU asset and lease liability were calculated using an incremental borrowing rate of 7.95%. Lease payments on this lease began in January 2020.


	June 30, 2021		December 31, 2020
Weighted average remaining lease term (in years)	3.66		4.17
Weighted average discount rate	8.13	%	8.12	%

The following table summarizes the presentation of leases in the Company's condensed consolidated balance ~~sheets:~~sheets (in thousands):

Leases (in thousands) Classification September 30, 2020 December 31, 2019
Assets
Operating Lease ROU asset $ 10,677 $ 6,156
Finance Lease ROU asset 60 150
Total lease assets $ 10,737 $ 6,306
Liabilities
Current
   Operating Lease liabilities $ 2,036 $ 990
   Finance Lease liabilities 44 127
Non-current
   Operating Lease liabilities, net of current portion 8,941 5,373
   Finance Lease liabilities, net of current portion 0 22
Total lease liabilities $ 11,021 $ 6,512


	Classification	June 30, 2021		December 31, 2020
Assets
Operating	Right-of-use assets	$	8,371	$	9,278
Finance	Right-of-use assets	0		30
Total lease assets		$	8,371	$	9,308

Liabilities
Current:
Operating	Lease liabilities	$	2,218	$	1,592
Finance	Lease liabilities	0		22
Non-current:
Operating	Lease liabilities, net of current portion	7,255		8,398
Total lease liabilities		$	9,473	$	10,012

The minimum lease payments related to the Company's operating ~~and finance~~ leases ~~in accordance with ASC 842~~ as of ~~September~~June 30, ~~2020~~2021 were as follows (in thousands):

Operating leases Finance lease Total
2020 $ 703 $ 22 $ 725
2021 2,871 23 2,894
2022 2,943 0 2,943
2023 3,017 0 3,017
2024 and thereafter 3,609 0 3,609
Total lease payments $ 13,143 $ 45 $ 13,188
Less imputed interest (2,166) (1) (2,167)
Total $ 10,977 $ 44 $ 11,021


Remainder of 2021	$	1,442
2022	2,943
2023	3,017
2024	3,092
2025	517
Total lease payments	11,011
Less: Imputed interest	(1,538)
Total	$	9,473

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had an outstanding letter of credit of $0.6 million with a financial institution related to a security deposit for the office and lab space lease, which is secured by cash on deposit and expires in February 2025.

Contractual obligations

~~The Company~~Genocea has entered into certain agreements with various universities, contract research organizations ~~(“CROs”)~~ and contract manufacturing organizations, ~~(“CMOs”),~~ which generally include cancellation clauses.

Harvard University ~~License Agreement~~license agreement

~~The Company~~Genocea has an exclusive license agreement with Harvard University (“Harvard”), granting the Company an exclusive, worldwide, royalty-bearing, sublicensable license to three patent families, to develop, make, have made, use, market, offer for sale, sell, have sold and import licensed products and to perform licensed services related to the ATLAS discovery platform. ~~The Company~~Genocea is also obligated to pay Harvard milestone payments up to $1.6 million in the aggregate upon the achievement of certain development and regulatory milestones. As of ~~September~~June 30, ~~2020,~~2021, the Company has paid $0.3 million in aggregate milestone payments. ~~The Company~~Genocea is obligated under this license agreement to use commercially reasonable efforts to develop, market and sell licensed products in compliance with an ~~agreed upon~~agreed-upon development plan. In addition, the Company is obligated to achieve specified development milestones, and in the event ~~the Company~~Genocea is unable to meet its development milestones for any type of product or service, absent any reasonable proposed extension or amendment thereof, Harvard has the right, depending on the type of product or service, to terminate this agreement with respect to such products or to convert the license to a non-exclusive, non-sublicensable license with respect to such products and services.

Upon commercialization of ~~our~~the Company's products covered by the licensed patent rights or discovered using the licensed methods, ~~the Company~~Genocea is obligated to pay Harvard royalties on the net sales of such products and services sold by the Company, the Company's affiliates, and the Company's sublicensees. This royalty varies depending on the type of product or service ~~but~~and is in the low single digits. The sales-based royalty due by the Company’s sublicensees is the greater of the applicable royalty rate or a percentage in the high single digits or the low double digits of the royalties ~~the Company~~Genocea receives from such sublicensee, depending on the type of product. Based on the type of commercialized product or service, royalties are payable until the expiration of the last-to-expire valid claim under the licensed patent rights or for a period of 10ten years from first commercial sale of such product or service. The royalties payable to Harvard are subject to reduction, capped at a specified percentage, for any third-party payments required to be made. In addition to the royalty payments, if the Company receives any additional revenue (cash or non-cash) under any sublicense, ~~the Company~~it must pay Harvard a percentage of such revenue, excluding certain categories of payments, varying from the low single digits to up to the low double digits depending on the scope of the license that includes the sublicense.

The license agreement with Harvard will expire on a product-by-product or service-by-service and country-by-country basis until the expiration of the last-to-expire valid claim under the licensed patent rights. The Company may terminate the agreement at any time by giving Harvard advance written notice. Harvard may also terminate the agreement (i) in the event of a material breach by the Company that remains uncured; (ii) in the event of ~~our~~the Company's insolvency, bankruptcy, or similar circumstances; (iii) or if ~~the Company~~Genocea challenges the validity of any patents licensed to ~~us.~~

it.

Oncovir ~~License~~license and ~~Supply Agreement~~supply agreement

~~In January 2018, the Company entered into~~Genocea has a ~~License~~license and ~~Supply Agreement~~supply agreement with Oncovir, Inc. (“Oncovir”)~~. The agreement provides the terms and conditions~~ under which Oncovir will manufacture and supply an immunomodulator and vaccine adjuvant, Hiltonol® (poly-ICLC) (“Hiltonol”), to the Company for use in connection with the research, development, use, sale, manufacture, commercialization and marketing of products combining Hiltonol with the Company's technology (the “Combination Product”). Hiltonol is the adjuvant component of GEN-009, which will consist of synthetic long peptides or neoantigens identified using the Company's proprietary ATLAS platform, formulated with Hiltonol.

Oncovir granted the Company a non-exclusive, assignable, royalty-bearing worldwide license, with the right to grant sublicenses through one tier, to certain of Oncovir’s intellectual property in connection with the research, development, or commercialization of Combination Products, including the use of Hiltonol, but not the use of Hiltonol for manufacturing or the use or sale of Hiltonol alone. The license will become perpetual, fully paid-up, and royalty-free on the later of January 25, 2028 or the date on which the last valid claim of any patent licensed to the Company under the agreement expires.

Under this agreement, ~~the Company~~Genocea is obligated to pay Oncovir low to mid ~~six figure~~six-figure milestone payments upon the achievement of certain clinical trial milestones for each Combination Product and the first marketing approval for each Combination Product in certain territories, as well as tiered royalties in the low-single digits on a product-by-product basis based on the net sales of Combination Products.

~~The Company~~Genocea may terminate the agreement upon a decision to discontinue the development of the Combination Product or upon a determination by the Company or an applicable regulatory authority that Hiltonol or a Combination Product is not clinically safe or effective. The agreement may also be terminated by either party due to a material uncured breach by the other party, or due to the other party’s bankruptcy, insolvency, or dissolution.

7. Debt

In April 2018, the Company entered into an amended and restated loan and security agreement with Hercules Capital, ~~Inc~~Inc. (“Hercules”), which was subsequently amended in November 2019 (as amended, the ~~“2018 Term Loan”~~“Hercules Loan Agreement”). The ~~2018 Term~~Hercules Loan ~~provides~~Agreement provided a $14.0 million secured term ~~loan. The 2018 Term Loan matures~~loan that was scheduled to mature on May 1, 2021 and ~~accrues~~that accrued interest at a floating rate per annum equal to the greater of (i) 8.00%, or (ii) the sum of 3.00% plus the prime rate. The ~~2018~~Company was also obligated to pay a final payment charge of $1.0 million at maturity.

On February 18, 2021 (the "2021 Loan Closing Date"), Genocea entered into a Loan and Security Agreement (the "2021 Loan Agreement") with Silicon Valley Bank ("SVB") for a $10.0 million secured term loan (the "2021 Term Loan"). $9.0 million of the proceeds from the 2021 Term Loan were used to repay the Company's borrowings that were outstanding at the 2021 Loan Closing Date under its previous loan and security agreement with Hercules, paying off all obligations owing under, and extinguishing, the Hercules Loan Agreement on the 2021 Loan Closing Date. The remaining proceeds from the 2021 Term Loan of $1.0 million were received by the Company for working capital and general corporate purposes.

The 2021 Term Loan will mature on September 1, 2023, which may be extended to March 1, 2024 if certain performance milestones are achieved and no event of default has occurred or is continuing. The 2021 Term Loan accrues interest at a floating per annum rate equal to the greater of (i) 6.25% or (ii) the sum of 3.0% plus the prime rate. The 2021 Term Loan provides for interest-only payments until ~~January 1, 2021.~~September 30, 2021, which may be extended to March 31, 2022 if certain performance milestones are achieved and no event of default has occurred or is continuing. Thereafter, amortization payments will ~~include~~be payable monthly in equal installments of principal and interest (subject to recalculation upon a change in prime rates) upon expiration of the interest-only period through maturity. The ~~2018~~2021 Term Loan is subject to a final payment charge of $0.5 million. The 2021 Term Loan may be prepaid in whole (but not in part), subject to a prepayment ~~charge. The Company is obligated to pay an additional end of term~~ charge of ~~$1.0 million at maturity.~~

3.0%, if prepaid in any of the first twelve (12) months following the Closing Date, 2.0%, if prepaid after twelve (12) months following the Closing Date but on or prior to twenty four (24) months following the Closing Date, and 1.0% thereafter.

The ~~2018~~2021 Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. ~~Hercules has~~

The 2021 Loan Agreement contains customary covenants and representations, including a ~~perfected first-priority security interest in certain cash, cash equivalents~~financial reporting covenant and ~~investment accounts. The 2018 Term Loan contains non-financial covenants, representations~~limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and ~~a Material Adverse Effect provision, as defined herein.~~subsidiaries. There are no financial covenants. A “Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets or condition (financial or otherwise) of the Company; (ii) the ability of the Company to perform the secured obligations in accordance with the terms of the loan documents, or the ability of agent or lender to enforce any of its rights or remedies with respect to the secured obligations; or (iii) the collateral or agent’s liens on the collateral or the priority of such liens. Any event that has a Material Adverse Effect or would reasonably be expected to have a Material Adverse Effect is an event of default under the Loan Agreement and repayment of amounts due under the Loan Agreement may be accelerated by Hercules under the same terms as an event of default. As of ~~September~~June 30, ~~2020,~~2021, the Company was in compliance with all covenants under the 2021 Loan Agreement.

The 2021 Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants, change of control and occurrence of a material adverse effect. Amounts outstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of 4.0% per annum of the ~~2018 Term Loan.~~past due amount outstanding. The ~~2018 Term Loan is automatically redeemable upon a change~~Company has determined that the risk of subjective acceleration under the material adverse effects clause was remote and therefore has classified the long-term portion of the outstanding principal in ~~control. At September 30, 2020, the entire debt balance is current based on the contractual payment terms.~~

non-current liabilities.

In connection with the ~~2018 Term~~2021 Loan Agreement, Genocea issued to SVB a warrant, dated February 18, 2021 (the "SVB Warrant") to purchase 43,478 shares of the ~~Company issued~~ common stock ~~warrants to Hercules (the “Hercules Warrant”).~~of the Company. See Note 9. Warrants.

The Company recorded the fair value of the SVB warrant as a discount on the 2021 Term Loan that will be amortized over the expected term of the loan.

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had outstanding borrowings, net of ~~$13.7~~unamortized debt issuance costs, of $9.8 million and ~~$13.4~~$13.9 million, respectively. Interest expense was $0.3 million and $0.4 million for the three months ended ~~September~~June 30, 2021 and 2020, respectively. Interest expense was $0.6 and ~~2019, and $1.1 million and $1.3~~$0.7 million for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

Future principal payments, including final payment charges, as of ~~$14.0 million, including the end of term charges,~~June 30, 2021 are ~~due in 2021.~~as follows:


	Principal Payments on Long-Term Debt
Remainder of 2021	$	1,250
2022	5,000
2023	4,250
	$	10,500

8. Stockholders' equity

Effective June ~~2, 2020,~~24, 2021, the Company increased the number of authorized shares of common stock from ~~85.0~~170.0 million shares to ~~170.0~~225.0 million shares.

~~2020 Private Placement~~

In July 2020, the Company completed a private placement (the “2020 Private Placement”) and received net cash proceeds of approximately $74.5 million. In connection with the 2020 Private Placement, the Company issued approximately 21.4 million shares of its common stock, approximately 12.2 million pre-funded warrants to purchase additional shares of its common stock (the “2020 Pre-Funded Warrants”) and warrants to purchase approximately 33.6 million shares of its common stock (the “2020 Warrants”). See ~~Note 9. Warrants~~.

In connection with the 2020 Private Placement, the Company incurred approximately $5.4 million of issuance costs. The Company allocated approximately $1.2 million of the issuance costs to the common stock and 2020 Pre-Funded Warrants within additional paid-in capital and immediately expensed approximately $4.2 million of the issuance costs allocated to the liability classified 2020 Warrants as other expenses.

Agreement with Lincoln Park Capital

~~In October 2019, the Company entered into~~Genocea has a purchase agreement with ~~Lincoln Park Capital (“LPC”)~~LPC pursuant to which, ~~LPC purchased $2.5 million of shares of the Company's common stock at a purchase price of $2.587 per share. In addition,~~ for a period of 30 months beginning in October 2019, the Company has the right, at its sole discretion, to sell up to ~~an additional $27.5~~$30.0 million of the Company's common stock to LPC based on prevailing market prices of its common stock at the time of each sale. ~~In consideration for entering into the purchase agreement, the Company issued approximately 0.3 million shares of its common stock to LPC as a commitment fee.~~ The purchase agreement limits the Company's sales of shares of common stock to LPC to approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits the Company from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of the Company's common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of the Company's common stock. ~~In the nine months ended September~~As of June 30, ~~2020,~~2021, the Company ~~sold approximately 1.5 million shares of common stock resulting in approximately $3.5 million of net proceeds. As of September 30, 2020, the Company~~ had ~~approximately~~ $24.0 million remaining under its agreement with LPC.

At-the-market equity offering program

~~In 2015, the Company entered into~~Genocea has an agreement ~~as amended,~~ with Cowen ~~and Company, LLC~~ to establish an ~~at-the-market~~ATM equity offering program ~~(“ATM”)~~ pursuant to which ~~it was~~Cowen is able to offer and sell up to $50.0 million of the Company's common stock at prevailing market prices. In the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company sold approximately ~~1.0~~3.8 million shares under the ATM ~~program~~ and received net proceeds of ~~$2.7~~$9.5 million, after deducting commissions. ~~Through September~~Cumulatively through June 30, ~~2020,~~2021, the Company has sold an aggregate of approximately ~~1.5~~6.7 million shares under the ATM and received ~~approximately $6.7~~$19.4 million in net proceeds. As of ~~September~~June 30, ~~2020,~~2021, the Company had ~~approximately $43.1~~$30.1 million in gross proceeds remaining under the ATM.

~~2019 Public Offering~~

In June 2019, the Company entered into an underwriting agreement relating to the public offering of 10.5 million shares of the Company’s common stock, at a price of $3.50 per share, for gross proceeds of approximately $36.8 million (the “2019 Public Offering”). The Company also granted the underwriters an option to purchase up to approximately an additional 1.6 million shares of common stock (“Overallotment Option”). The underwriters exercised this option in full. The Company received approximately $5.5 million in gross proceeds from the underwriters’ exercise of the Overallotment Option. In connection with the 2019 Public Offering, inclusive of the Overallotment Option, the Company received net proceeds of $38.4 million.

~~2019 Private Placement~~

In February 2019, the Company completed a private placement (the “2019 Private Placement”) and received net cash proceeds of $13.8 million. In connection with the 2019 Private Placement, the Company issued approximately 3.2 million shares of common stock, prefunded warrants to purchase approximately 0.5 million shares of common stock (the “2019 Pre-Funded Warrants”), and warrants to purchase up to approximately 0.9 million shares of common stock (the “2019 Warrants”). See ~~Note 9. Warrants~~.

The Company had the option to issue additional shares of common stock in a second closing (the “Second Closing”) for gross proceeds of up to $24.2 million. The occurrence of the Second Closing was conditioned on top-line results from Part A of the Company's Phase 1/2a clinical trial for GEN-009 and a decision by the Company's board of directors to proceed with the Second Closing. In June 2019, the Company announced top-line results from this trial but elected not to proceed with the Second Closing. In lieu of the Second Closing, the Company proceeded with the 2019 Public Offering.

9. Warrants

As of ~~September~~June 30, ~~2020,~~2021, the Company had the following potentially issuable shares of common stock related to unexercised warrants outstanding (shares in thousands):

Shares Exercise price Expiration date Classification
Hercules Warrant 41 $ 6.80 Q2 2023 Equity
2018 Warrants 3,617 $ 9.60 Q1 2023 Liability
2019 Warrants 933 $ 4.52 Q1 2024 Equity
2019 Pre-Funded Warrants 531 $ 0.08 Q1 2039 Equity
2020 Warrants 33,613 $ 2.25 Q3 2024 Liability
2020 Pre-Funded Warrants 12,223 $ 0.01 Equity
50,958


	Shares	Exercise Price		Expiration Date	Classification
Hercules Warrant	41	$	6.80	Q2 2023	Equity
2018 Warrants	3,617	$	9.60	Q1 2023	Liability
2019 Warrants	933	$	4.52	Q1 2024	Equity
2019 Pre-Funded Warrants	531	$	0.08	Q1 2039	Equity
2020 Warrants	33,613	$	2.25	Q3 2024	Liability
2020 Pre-Funded Warrants	12,223	$	0.01	N/A	Equity
SVB Warrant	43	$	3.45	Q1 2026	Equity
	51,001

Hercules Warrant

The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of common stock, subdivision or combination of the shares of common stock or certain ~~dividends~~dividend payments. ~~The Company~~Genocea determined that the Hercules Warrant should be ~~equity classified in accordance with ASC 480,~~ ~~Distinguishing Liabilities from Equity~~ ~~(“ASC 480”) for all periods presented.~~

equity-classified.

2018 Warrants

In January 2018, the Company entered into 2 underwriting agreements, the first relating to the public offering of approximately 6.7 million shares of the Company’s common stock, par value $0.001 per share, and accompanying warrants to purchase up to approximately 3.3 million shares of common stock (“2018 Warrants”). The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of common stock, subdivision or combination of the shares of common stock or certain ~~dividends~~dividend payments. In the event of an “Acquisition,” defined generally to include a merger or consolidation resulting in the sale of 50% or more of the voting securities of the Company, the sale of all, or substantially all, of the assets or voting securities of the Company, or other change of control transaction, as defined in the 2018 Warrants, ~~the Company~~Genocea will be obligated to use its best efforts to ensure that the holders of the 2018 Warrants receive new warrants from the surviving or acquiring entity (the “Acquirer”). The new warrants to purchase shares in the Acquirer shall have the same expiration date as the 2018 Warrants and a strike price that is based on the proportion of the value of the Acquirer’s stock to the Company’s common stock. If the Company is unable, despite its best efforts, to cause the Acquirer to issue new warrants in the Acquisition as described above, then, if the Company’s stockholders are to receive cash in the Acquisition, ~~the Company~~Genocea will settle the 2018 Warrants in cash and if the Company’s stockholders are to receive stock in the Acquisition, ~~the Company~~Genocea will issue shares of its common stock to each Warrant holder.

~~The~~As a result, the Company determined that the 2018 Warrants should be ~~liability classified in accordance with ASC 480.~~liability-classified. As the 2018 Warrants are liability-classified, the Company remeasures the fair value at each reporting date. ~~The Company~~Genocea initially recorded the 2018 Warrants at their estimated fair value of ~~approximately~~ $18.2 million. In connection with the Company's remeasurement of the 2018 Warrants to fair value, ~~the Company~~it recorded ~~expense~~income of ~~$0.3~~$0.4 million and ~~income of $2.2~~$0.2 million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and income of ~~$0.7~~$0.6 million and ~~$0.3~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The fair value of the warrant liability related to the 2018 Warrants is ~~approximately $1.8~~$1.0 million and ~~$2.5~~$1.7 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

The following table details the assumptions used in the Monte Carlo simulation models used to estimate the fair value of the 2018 Warrants as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively:

September 30, 2020 December 31, 2019
Stock price $ 2.29 $ 2.07
Volatility 50.0% - 98.6% 50.0% - 116.6%
Remaining term (years) 2.3 3.1
Expected dividend yield 0 0
Risk-free rate 0.15 % 1.62 %
Annual acquisition event probability 25.0 % 20.0 %


	June 30, 2021			December 31, 2020
Stock price	$	2.34		$	2.42
Volatility	50.0% - 99.2%			50.0% - 101.5%
Remaining term (in years)	1.6			2.0
Expected dividend yield	0		%	0		%
Risk-free rate	0.16		%	0.13		%
Acquisition event probability	20.0		%	25.0		%

2019 Warrants and 2019 Pre-Funded Warrants

The exercise price of the warrants is subject to ~~appropriate~~ adjustment in the event of stock dividends, subdivisions, stock splits, stock combinations, reclassifications, reorganizations or a change of control affecting ~~our~~the Company's common stock. ~~The Company~~Genocea determined that the 2019 Warrants and the 2019 Pre-Funded Warrants should be ~~equity classified in accordance with ASC Topic 815,~~ ~~Derivatives and Hedging~~ ~~(“ASC 815”) for all periods presented.~~equity-classified. The Company also determined that the 2019 Pre-Funded Warrants should be included in the determination of basic earnings per ~~share in accordance with ASC 260,~~ ~~Earnings per Share~~.

share.

2020 Warrants and 2020 Pre-Funded Warrants

~~In July 2020, in connection with the 2020 Private Placement, the Company issued common stock, 2020 Pre-Funded Warrants and 2020 Warrants.~~The exercise price of the 2020 Pre-Funded Warrants and the 2020 Warrants is subject to adjustment in the event of stock dividends, subdivisions, stock splits, stock combinations, reclassifications, reorganizations or a change of control affecting the Company's common stock. ~~The Company~~Genocea determined that the 2020 Pre-Funded Warrants should be ~~equity classified in accordance with ASC 815. The Company also determined that the 2020 Pre-Funded Warrants should~~equity-classified and be included in the determination of basic earnings per ~~share in accordance with ASC 260.~~

share.

The holders of the 2020 Warrants ~~are~~were entitled to ~~down round~~down-round protection until July 24, 2021. ~~For one year after the closing of the 2020 Private Placement, the~~The Company iswas required to obtain shareholder approval for the adjustment to the exercise price as a result of any common stock issuance at a price per share less than ~~$2.25. As a result, the Company determined that~~$2.25, which resulted in the 2020 Warrants ~~should be liability classified in accordance with ASC 815~~being liability-classified for the period from issuance through July 24, 2021. As the 2020 Warrants are liability-classified, the Company remeasures the fair value at each reporting date. ~~The Company~~Genocea initially recorded the 2020 Warrants at their estimated fair value of ~~approximately~~ $62.5 million. In connection with the Company's remeasurement of the 2020 Warrants to fair value, the Company recorded income of ~~approximately $11.1~~$10.1 million and $10.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021, respectively. The fair value of the warrant liability related to the 2020 Warrants is ~~approximately $51.4~~$43.7 million and $54.5 million as of ~~September~~June 30, ~~2020.~~

2021 and December 31, 2020, respectively. At the expiration of the down-round protection feature on July 24, 2021, the 2020 Warrants will be remeasured to fair-value and subsequently be reclassified to equity.

The following table details the assumptions used in the Monte Carlo simulation models used to estimate the fair value of the 2020 Warrants as of ~~September~~June 30, 2021 and December 31, 2020, respectively:


	June 30, 2021			December 31, 2020
Stock price	$	2.34		$	2.42
Volatility	95.4		%	119.1		%
Remaining term (in years)	3.1			3.6
Expected dividend yield	0			0
Risk-free rate	0.47		%	0.22		%
Acquisition event probability	35.0		%	40.0		%

September 30, 2020 Issuance Date
Stock price* $ 2.29 $ 2.69
Volatility 115.6 % 110.6 %
Remaining term (years) 3.8 4.0
Expected dividend yield 0 0
Risk-free rate 0.23 % 0.22 %
Annual acquisition event probability 40.0 % 40.0 %

*The stock price input at the issuance date was adjusted to reflect a discount for lack of marketability.SVB Warrant

In connection with the 2021 Loan Agreement, Genocea issued to SVB the SVB Warrant to purchase 43,478 shares of the common stock of the Company. See Note 7. Debt. The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of common stock, subdivision or combination of the shares of common stock or certain dividend payments. The Company determined that the SVB Warrant should be equity-classified.

10. Employee benefit plans

~~In June 2020,~~Genocea grants equity awards in the ~~Company’s stockholders approved an increase~~form of ~~2.8 million shares to the Company's Amended and Restated 2014 Equity Incentive Plan. As of September 30, 2020, there were approximately 2.5 million shares remaining for future issuance.~~

~~The Company issues~~ stock options and restricted stock units (“RSUs”) to employees and directors of, and consultants and advisors to, the Company through its Amended and Restated 2014 Equity Incentive Plan (the "2014 Equity Incentive Plan"). As of June 30, 2021, there were approximately 0.6 million shares remaining for future issuance under the 2014 Equity Incentive Plan.

The options have a ten-year term and were issued with an exercise price equal to the closing market price of Genocea’s common stock on the grant date. For equity awards with service-based vesting conditions, the Company recognizes compensation expense over the vesting period, which is generally ~~vest ratably~~ over a ~~four year~~four-year period. For equity awards with a market-based vesting condition, the Company recognizes compensation expense over the requisite service period. The number of shares awarded, if any, when a market-based award vests will depend on the degree of achievement of the corporate stock price metrics within the performance period of the award. The Company measures the fair value of stock options on the grant date ~~of grant~~ using the Black-Scholes option pricing model. The fair value of the service-based RSUs is the closing market price of Genocea's common stock on the grant date.

Determining the fair value of market-based RSUs

The Company measures the fair value of market-based RSUs on the grant date using a Monte Carlo simulation model. The Monte Carlo simulation requires the input of assumptions, including the Company's stock price, the volatility of its stock price, remaining term in years, expected dividend yield, and risk-free rate. In addition, the valuation model considers the Company's probability of being acquired within the term of the market-based RSUs, as an acquisition event can potentially impact the vesting. The Company uses its own trading history to calculate the expected volatility of the market-based RSUs granted. The risk-free interest rate is determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected term assumed at the grant ~~using~~date.

The following table details the ~~underlying common stock~~assumptions used in the Monte Carlo simulation model used to estimate the fair ~~value.~~value of the market-based RSUs granted during the six months ended June 30, 2021:


	Six Months Ended June 30
	2021
Stock price	$	3.01
Volatility	97.65		%
Remaining term (in years)	2.8
Risk-free rate	0.29		%
Annual acquisition event probability	33.0		%

Stock-based compensation expense

Total stock-based compensation expense recognized for stock options and RSUs is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Research and development $ 222 $ 182 $ 600 $ 534
General and administrative 311 308 803 858
Total $ 533 $ 490 $ 1,403 $ 1,392


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Research and development	$	425	$	218	$	683	$	378
General and administrative	589		268		911		492
Total	$	1,014	$	486	$	1,594	$	870

Stock options

The following table summarizes stock option activity ~~(in~~(shares and aggregate intrinsic value in thousands):


		Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value			Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2019		1,323	$	11.65		$	0
Outstanding at December 31, 2020								Outstanding at December 31, 2020	2,329	$	7.05		$	505
Granted	Granted	1,322	$	2.09				Granted	1,699	$	2.98
Exercised	Exercised	(4)	$	1.66				Exercised	(39)	$	2.21
Forfeited/cancelled	Forfeited/cancelled	(256)	$	3.72				Forfeited/cancelled	(124)	$	8.14
Outstanding at September 30, 2020		2,385	$	7.21	8.3	$	404
Exercisable at September 30, 2020		829	$	14.70	6.7	$	39
Outstanding at June 30, 2021								Outstanding at June 30, 2021	3,865	$	5.28	8.6	$	422
Exercisable at June 30, 2021								Exercisable at June 30, 2021	1,210	$	10.40	7.2	$	121

RSUs

The following table summarizes RSU activity (shares in thousands):


		Shares	Weighted-Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2019		0	$	0
Outstanding as of December 31, 2020					Outstanding as of December 31, 2020	550	$	2.13
Granted(1)	Granted(1)	601	$	2.11	Granted(1)	1,980	$	2.52
Vested	Vested	0	$	0	Vested	(119)	$	2.06
Forfeited/cancelled	Forfeited/cancelled	(56)	$	1.89	Forfeited/cancelled	(35)	$	2.46
Outstanding as of September 30, 2020		545	$	2.13
Outstanding as of June 30, 2021					Outstanding as of June 30, 2021	2,376	$	2.45

_________________________

1.The number granted represents the number of shares issuable upon vesting of service-based and market-based RSUs, assuming the Company achieves its corporate stock price metrics at the target achievement level.

Employee stock purchase plan

~~In February 2014, the Company’s board of directors adopted the~~The 2014 Employee Stock Purchase Plan, ~~and subsequently~~as amended ~~the plan in June 2018~~ (the ~~“ESPP”~~"ESPP")~~. The ESPP authorizes the issuance of up to approximately 0.3 million~~, issues shares of common stock to participating eligible employees ~~and provides for~~during two six-month offering ~~periods.~~periods each year. As of ~~September~~June 30, ~~2020,~~2021, there were approximately ~~0.2~~0.1 million shares remaining for future issuance under the ~~plan.~~

ESPP.

11. Net loss per share

Basic and diluted net loss per share was calculated as follows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands, except per share amounts):

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Numerator:
Net loss $ (4,555) $ (7,532) $ (28,729) $ (29,594)
Add: remeasurement to fair value of the warrant liability of 2020 Warrants (11,092) 0 (11,092) 0
Adjusted net loss $ (15,647) $ (7,532) $ (39,821) $ (29,594)
Denominator:
Weighted average common stock outstanding – basic 55,492 26,681 37,657 18,297
Dilutive effect of shares of common stock equivalents resulting from warrants 5,638 0 1,893 0
Weighted average common stock outstanding – diluted 61,130 26,681 39,550 18,297
Net loss per share:
Basic $ (0.08) $ (0.28) $ (0.76) $ (1.62)
Diluted $ (0.26) $ (0.28) $ (1.01) $ (1.62)


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Numerator
Net loss	$	(4,311)	$	(11,321)	$	(16,294)	$	(24,174)
Less: Change in fair value of 2020 Warrants	10,084		0		10,756		0
Adjusted net loss	$	(14,395)	$	(11,321)	$	(27,050)	$	(24,174)

Denominator
Weighted average common stock outstanding – basic	67,970		29,142		67,074		28,642
Dilutive effect of common stock issuable from assumed exercise of warrants	2,232		0		5,393		0
Weighted average common stock outstanding – diluted	70,202		29,142		72,467		28,642

Net loss per share
Basic	$	(0.06)	$	(0.39)	$	(0.24)	$	(0.84)
Diluted	$	(0.20)	$	(0.39)	$	(0.37)	$	(0.84)

The following potential common shares were excluded from the calculation of net loss per share due to their anti-dilutive effect for the ~~three and nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (in thousands):

Nine Months Ended September 30,
2020 2019
Warrants 4,591 4,600
Stock options 2,385 1,398
RSUs 545 0
Total 7,521 5,998


	Six Months Ended June 30
	2021	2020
Warrants	4,623	4,591
Stock options	3,865	2,515
RSUs	2,376	533
Total	10,864	7,639

The 2020 Warrants have been included in the calculation of diluted net loss per share for the three and six months ended June 30, 2021 as the warrants are both liability-classified and in-the-money. The Company used the treasury stock method to determine the number of dilutive shares.

2016

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “should”, “target”, “will”, “would”, or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 10-K") and other filings with the Securities Exchange Commission (the “SEC”), including the following:

•the timing and amount of funds we require to conduct clinical trials for GEN-011 and to perform research in support of pipeline development;

•the progress, timing and costs of manufacturing GEN-011;

•the timing of GEN-011 patient enrollment and dosing;

•the availability of GEN-011 third-party manufacturing capacity;

•future expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•the timing of, and our ability to obtain and maintain, regulatory approvals for our product candidates;

•the effect of the novel coronavirus ("COVID-19") pandemic on the economy generally and on our business and operations specifically, including our research and development efforts, our clinical trials and our employees, and the potential disruptions in supply chains and to our third-party manufacturers, including the availability of materials and equipment;

•the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements;

•our ability to obtain and maintain intellectual property protection for our manufacturing methods and product candidates;

•the rate and degree of market acceptance and clinical utility of any approved product candidate;

•our ability to quickly and efficiently identify and develop product candidates; and

•our commercialization, marketing and manufacturing capabilities and strategy.

These factors are discussed more fully in our 2020 10-K and elsewhere in this and other reports we file with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and investors should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~The following information~~Management's discussion and analysis of our financial condition and results of operations should be read in conjunction with ~~the~~our 2020 10-K and our unaudited condensed consolidated financial ~~information~~statements and ~~the~~accompanying notes ~~thereto~~and other disclosures included in this Quarterly Report on Form 10-Q. The following disclosure contains forward-looking statements that involve risk and uncertainties. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in our Annual Report on Form 10-K.

Overview

We are a biopharmaceutical company ~~that seeks~~dedicated to ~~discover~~discovering and ~~develop~~developing novel cancer immunotherapies using our proprietary ATLASTM ~~proprietary discovery~~ platform. The ATLAS platform ~~profiles~~can profile each patient's CD4+and CD8+ T cell immune responses to every potential target or “antigen” inidentified by next-generation sequencing of that patient's tumor. ATLAS zeroes in on both antigens that activate anti-tumor T cell responses and inhibitory antigens, or InhibigensTM, that drive pro-tumor immune responses. We believe ~~that~~ this approach ~~optimizes antigen selection for~~ensures that cancer immunotherapies, such as ~~cancer vaccines and~~ cellular therapies ~~by identifying~~and vaccines, focus T cell responses on the tumor antigens most vulnerable to ~~which the patient can respond.~~T cell targeting. Consequently, we believe that ATLAS ~~could lead to~~may enable more immunogenic and efficacious cancer immunotherapies.

~~Our most advanced program~~GEN-011 is GEN-009, a personalized neoantigen cancer vaccine, for which we are conducting a Phase 1/2a clinical trial. The GEN-009 program uses ATLAS to identify neoantigens, or immunogenic tumor mutations unique to each patient, for inclusion in each patient's GEN-009 vaccine. We are also advancing GEN-011, a neoantigen-specifican investigational adoptive T cell therapy ~~program that also relies on ATLAS. In September 2020,~~comprising neoantigen-targeted peripheral cells ("NPTs"). NPTs are peripheral blood-derived T cells targeted to ATLAS-identified neoantigens. By employing ATLAS to optimize neoantigen selection and by using T cells derived from peripheral blood, we ~~received notice from the U.S. Food~~believe GEN-011 will enable potential patient efficacy, accessibility and ~~Drug Administration (“FDA”~~cost advantages over other autologous T cell therapies. We are conducting a first-in-human clinical trial (the “TiTANTM trial”) ~~that it has accepted our Investigational New Drug (“IND”) Application~~ for GEN-011, and in the second quarter of 2021, we dosed our first patient in the trial. GEN-009 is an investigational neoantigen vaccine delivering adjuvanted synthetic long peptides from ATLAS-identified neoantigens. We reported long-term immunogenicity and clinical response data from our GEN-009 neoantigen vaccine Phase 1 clinical trial in June 2021, and we continue to ~~initiate a Phase 1/2a clinical trial. We are currently initiating clinical sites for our GEN-011 program.~~

monitor patients to further evaluate these efficacy signals.

ATLAS ~~Platform~~

platform

Harnessing and directing ~~the~~ T ~~cell arm of the immune system~~cells to kill tumor cells is increasingly viewed as having potential ~~in the treatment of~~to treat many cancers. ~~This approach has been effective against hematologic malignancies and, more recently, certain solid tumors. Vaccines~~Cellular therapies or ~~cellular therapies~~vaccines employing this approach ~~must target~~may be most effective when targeting specific differences from normal tissue present in ~~a tumor,~~the patient, such as antigens arising from genetic ~~mutations.~~mutations or cancer-causing viruses. However, the discovery of optimal antigens for such immunotherapies has been particularly challenging for two reasons. First, ~~the genetic diversity of human T cell responses means that effective antigens vary from person to person. Second,~~ the number of candidate antigens can be very large, with up to thousands of candidates per patient in some cancers. Second, the genetic diversity of human T cell responses means that effective antigens may vary from person to person. An effective antigen selection system must therefore account both for each patient's tumor and for their T cell repertoire.

ATLAS ~~achieves effective antigen selection by employing components of the~~selects antigens through an ex vivo assay that unveils CD4+ and CD8+ T cell ~~arm of the human~~ immune ~~system from~~responses each ~~patient. Using ATLAS, we can measure each patient's T cell responses~~patient has made to ~~a comprehensive set of~~nearly any possible tumor-specific antigen, including candidate neoantigens, tumor-associated antigens and tumor-associated viral ~~antigens for their own cancer, allowing us to select those targets associated with the anti-tumor T cell responses that may kill that individual's cancer. We~~antigens. In doing so, we believe that ATLAS ~~represents~~provides the most comprehensive and accurate system for ~~antigen discovery. Further, we believe ATLAS identifies a novel candidate antigen profile, that of inhibitory T cell responses.~~identifying the right and wrong antigens for cancer immunotherapies. Previously, all candidate antigens were thought either to be targets of effective anti-tumor responses (stimulatory), or irrelevant. However, using ATLAS, we have identified ~~inhibitory antigens we call~~ InhibigensTM~~, which are shown to promote tumor progression~~ and demonstrated, in preclinical ~~studies.~~studies, that such antigens can promote rapid tumor growth, reduce or eliminate the protection of an otherwise effective vaccine, and dampen or reverse the effects of checkpoint inhibitors ("CPI"). We have also ~~discovered~~demonstrated that anclassical antigen ~~can~~prediction methodologies often mischaracterize Inhibigens as stimulatory. We therefore believe that both by identifying the optimal antigens and by excluding Inhibigens, ATLAS enables differentiated immune responses and clinical efficacy.

We believe ATLAS could have beneficial uses beyond cancer. We have previously demonstrated its effectiveness in identifying novel protective antigens for infectious disease therapies, and we believe it also could provide benefits in autoimmune and other disease therapies. While we believe Inhibigens should be ~~stimulatory~~avoided in ~~one patient~~cancer immunotherapies, they could prove to be beneficial in other therapies. ATLAS could be a key tool in optimizing antigen selection for therapies across a number of diseases.

Intellectual property

Our ATLAS and ~~inhibitory in another, reinforcing the importance of selecting each patient's potentially immunogenic antigens.~~

~~The ATLAS~~immuno-oncology intellectual property portfolio comprises ~~seven~~eight patent families and ~~potentially two~~one additional pending patent ~~families.~~family, all but one of which are wholly owned by us. The first ~~two families are~~patent family, in-licensed from Harvard University, is directed to one arm of the ATLAS method for identifying antigens. This patent family is comprised of issued United States ("U.S.") patents, with patent terms ranging from 2027 to 2031, as well as granted foreign patents. The second family is directed to expanded ATLAS methods for identifying antigens, as currently practiced by us. This family is comprised of issued U.S. patents, with patent terms ~~until at least~~ranging from 2029 to 2030, as well as granted foreign patents and pending U.S. and foreign applications. The third family is directed to ATLAS-based methods for selecting or deselecting Inhibigens and stimulatory antigens, cancer diagnosis, prognosis and patient selection, as well as related compositions. This patent family is comprised of an issued U.S. patent with a patent term to 2038, pending applications in eleven foreign jurisdictions, and ~~an allowed~~a pending U.S. application. Additional patents issuing from these applications are expected to have patent terms until at least 2038. The fourth, fifth and sixth families are directed to various methods using ATLAS-identified antigens. These families comprise pending U.S. and foreign applications. Patents issuing from these applications are expected to have a patent ~~term~~terms until at least ~~2038.~~2039. The ~~four~~two further families and ~~two~~one potential additional ~~families~~family currently comprise ~~PCT~~Patent Cooperation Treaty ("PCT") applications or U.S. provisional applications and are directed to ~~various~~further methods using ATLAS-identified antigens, to dose ~~regimen~~regimens for GEN-009, and to our cell-based therapy GEN-011.

2118

~~Our Immuno-Oncology Programs~~Immuno-oncology programs

GEN-011

Our cancer immunotherapies include a vaccine that is designed to educate T cells to recognize and attack specific cancer targets, and a cellular therapy intended to introduce T cells that have been educated to attack these targets. We believe that ~~neoantigen vaccines could be used in combination with existing treatment approaches for cancer to potentially direct and enhance an individual’s~~GEN-011 represents a new category of adoptive T cell ~~response to his or her cancer, thereby potentially effecting better clinical outcomes. We also believe that isolating and expanding~~therapy for solid tumors, NPTs. The first neoantigen-targeted T cell ~~populations targeting~~therapy to demonstrate clinical efficacy in patients with solid tumors is tumor-infiltrating lymphocyte ("TIL") therapy. TILs consist of a subset of lymphocytes that have invaded a tumor but, importantly, are not all necessarily specific for tumor antigens. TIL therapy requires a fresh, uncontaminated, viable tumor resection from each patient, from which TILs will be obtained. These TILs are then non-specifically expanded ex vivo in the presence of high dose interleukin-2 ("IL-2") and infused into that same patient, who has undergone lymphodepletion preconditioning, followed by high dose IL-2 treatment. In certain patients with solid tumors resistant to CPI therapy, TIL therapy has resulted in durable clinical responses. TIL therapy has some drawbacks: it is infeasible to get sufficient tumor or TILs from some patients, the need for fresh tumor adds time and cost to the therapy, and the therapy – particularly because of the high dose IL-2 – may cause serious adverse events.

GEN-011 differs from TIL therapy in two critical ways. First, we use ATLAS to design the product to be highly specific for the antigens of anti-tumor T cell responses. Second, we rely on T cells extracted from peripheral blood, which are readily available and we believe have greater potential for proliferation and activity than TILs. We believe these differences may result in GEN-011, if approved, offering efficacy, patient accessibility and cost advantages over other neoantigen-targeting solid tumor T cell therapies.

The potential efficacy advantages derive from the following product features:

•Targeting up to 30 tumor-specific antigens simultaneously to limit tumor escape, with minimal bystander, non-tumor-specific T cells;

•Avoiding T cells specific for Inhibigens that may be detrimental to clinical response;

•Including both CD4+ and CD8+ tumor antigen-specific T cells; and

•Using peripheral blood-derived T cells, which are believed to have potential for superior activity and persistence when compared to TILs.

The potential patient accessibility and cost advantages derive from the fact that:

•No extra surgery or viable tumor is required as starter material;

•GEN-011 can treat any patient, while some adoptive T cell therapies engineer T cells for applicability to certain human leukocyte antigen types, often limiting their clinical utility to certain subsets of western Caucasians; and

•The GEN-011 cell expansion process does not require T cell receptor ("TCR") vector design or transduction.

Across more than 15 development and engineering runs in blood derived from cancer patients and healthy donors, we have demonstrated that GEN-011 NPTs:

•Are 99% T cells made up of both CD4+ and CD8+ T cells with the desired T cell phenotype (>98% central and effector memory, on average);

•Highly neoantigen-specific (96% neoantigen-specific, with activity against 89% of target neoantigens ~~through adoptive~~on average);

•Powerfully cytolytic against their targets with no off-target cytotoxicity in vitro;

•Polyfunctional, secreting effector, stimulatory and chemoattractive mediators; and

•Highly active and potent.

We are conducting the TiTAN trial, treating patients with GEN-011 as monotherapy for tumors that have not achieved an adequate response after CPI therapy. Our target indications include melanoma, non-small cell ~~therapy could provide meaningful~~lung cancer, small cell lung cancer, squamous cell carcinoma of the head and neck, urothelial carcinoma, renal cell carcinoma, cutaneous squamous cell carcinoma, and anal squamous cell carcinoma. In the second quarter of 2021, we dosed our first patient.

The TiTAN trial will contain two patient cohorts:

•Cohort A patients will receive GEN-011 in a repeated lower dose regimen with no lymphodepletion and an intermediate dose of IL-2 after each GEN-011 dose;

•Cohort B patients will receive GEN-011 as a single high dose with both lymphodepletion and high dose IL-2.

The TiTAN trial’s objectives are safety, clinical ~~benefit.~~activity including overall response rate and duration of response, and GEN-011’s proliferation and persistence as well as tumor T cell penetration. We expect to have initial data from a small subset of patients late in the fourth quarter of 2021 or the first quarter of 2022. However, patient accrual to clinical trials and subsequent dosing and trial participation are dependent upon both patient choice and health, and investigator decisions. Predictions of data availability and release of results may be affected by individual patient events among other factors.

~~The following describes our active immuno-oncology programs in development:~~

~~Discovery~~

~~Pre-IND~~

~~Phase 1/2a~~

~~Pivotal~~

~~Status & Anticipated Milestones~~

GEN-009

~~Neoantigen vaccine~~

~~• ASCO 2019 Top 10 IO abstract~~

~~• Remaining patients data expected in Q4 2020~~

~~GEN-011~~

~~Neoantigen cell therapy~~

~~• Initiated phase I/IIa clinical trial~~

~~Toolbox of~~ ~~novel~~ ~~assets to enable additional programs~~

~~Shared neoantigens~~

~~Tumor-associated antigens~~

~~Viral cancer antigens~~

~~Our lead program,~~ GEN-009 is ana neoantigen vaccine candidate delivering adjuvanted neoantigen peptide vaccine candidate. Using ATLAS to identify specific neoantigens, we manufacture a personalized vaccine for each patient using only those neoantigens determined by ATLAS to be stimulatory to that patient'ssynthetic long peptides spanning ATLAS-identified anti-tumor ~~immune responses.~~neoantigens. We are ~~currently~~ conducting a Phase 1/2a clinical trial for GEN-009 across a range of solid tumor ~~types:~~

•types. Part A of the trial is assessing the monotherapy GEN-009 for safety, immunogenicity and ~~immunogenicity of GEN-009 as monotherapy~~ability to prevent disease relapse in certain cancer patients with no ~~evidence~~detectable tumor at the time of ~~disease; and~~

•vaccination but with a risk of relapse. Part B of the trial is assessing the safety, immunogenicity and preliminary ~~antitumor~~anti-tumor activity of GEN-009 in combination with ~~ICI~~CPI therapy in patients with advanced or metastatic tumors.

We have observed the following from our data, most recently presented at the American Society of Clinical Oncology Annual Meeting in June 2021:

~~The patients in~~In Part A of the trial, ~~had little to no detectable tumor at~~we have observed the ~~time of vaccination with GEN-009, but were still at risk of relapse. In the data from~~following in the eight dosed ~~patients we observed the following:~~

patients:

•100% of patients had measurable CD4+~~and~~ and/or CD8+ T cell responses to their GEN-009 vaccine;

•Responses were detected against 99% of the administered vaccine neoantigens (N=88 administered antigens), a response rate in excess of that which has been reported previously by others in response to candidate neoantigen vaccines;

•GEN-009 ~~elicited CD8~~+ ~~T cell responses~~ ~~ex vivo, which is a measure of T cell effector function, for 41% of vaccine neoantigens and CD4~~+ ~~T cell responses to 51% of neoantigens;~~

•~~GEN-009 elicited broad immune responses using an~~ ~~in vitro~~ ~~stimulation assay, which is a measure of central memory responses, with 87% of neoantigens eliciting a CD4~~+ ~~response and 57% of neoantigens eliciting a CD8~~+ ~~response;~~

•~~GEN-009~~ was well tolerated, with no dose-limiting toxicities observed; and

•~~Through October 8, 2020, only one~~Only two of the eight vaccinated patients ~~has~~have developed a recurrence of their targeted tumor.

In Part B of the ~~GEN-009~~ trial, we continue to ~~see~~evaluate immune responses ~~including:~~and efficacy in two cohorts of patients, those who are checkpoint-sensitive and those who are checkpoint-resistant.

•In the checkpoint-sensitive cohort, we believe we have shown compelling signals of response.

◦Of the nine checkpoint-sensitive patients, four have independent RECIST criteria responses that appear to be attributable to GEN-009.

◦Of those four patients, one patient achieved a complete response and three patients achieved a partial response after vaccination.

•~~Antigen-specific CD4~~+ ~~and CD8~~+ ~~T cell responses;~~In the checkpoint-resistant cohort, we believe that GEN-009 has shown early evidence of stabilization of disease.

•◦~~Responses~~This group of seven patients initially started their CPI therapy but quickly progressed and transitioned to ~~multiple antigens in each patient, measured through both~~ ~~ex vivo~~ ~~and~~ ~~in vitro~~ ~~stimulation assays; and~~standard-of-care therapy which generally consists of radiation and/or chemotherapy. After completing the standard-of-care therapy, these patients received GEN-009 vaccination.

•◦~~Strong magnitude of response.~~

Of the seven patients, one patient achieved a partial response and two achieved prolonged disease stabilization.

We believe the ~~above~~GEN-009 data ~~confirms~~confirm the potential antigen selection advantages of ~~ATLAS.~~ATLAS and suggest a differentiating advantage for GEN-011.

Other research activities

In addition to our two clinical programs, we are conducting research in several areas:

•

~~We also disclosed Part B data demonstrating evidence that GEN-009 can~~Exploring the potential for novel antigens of protective T cell responses to SARS-CoV-2, or COVID-19, to provide ~~clinical benefit to patients taking checkpoint inhibitor (CPI) therapy.Among~~effectiveness against multiple virus strains, partly in collaboration with the ~~first five patients for whom post-vaccination tumor scans were available, three patients’ tumors achieved independent RECIST™ criteria responses.We believe this novel signal is consistent with a GEN-009-driven benefit to patients receiving CPIs.We intend to report longer-term data from these patients and initial data from a larger patient cohort during the fourth quarter~~University of ~~2020.~~Massachusetts Medical School;

•Identifying TCRs to ATLAS-identified shared neoantigens, in collaboration with the University of Minnesota;

We have completed initial enrollment in our GEN-009 Part B trial. We believe that the current patients enrolled are sufficient to determine whether a preliminary clinical signal can be seen. Therefore, we have paused enrollment in our GEN-009 Part B trial. Upon review of the clinical results, including longer term follow-up, we will consider whether it is appropriate to continue the study.

•

~~We also are advancing GEN-011, an adoptive~~Exploring T cell ~~therapy specific for neoantigens identified by ATLAS. Adoptive T cell therapies offer an alternative treatment in solid tumors. GEN-011 extracts~~responses to oncoviruses associated with certain cancers such as Epstein-Barr virus and specifically expands ATLAS-identified neoantigen-specific T cells from each patient's peripheral blood. In September 2020, we received notice from the FDA that it has accepted our IND Application for GEN-011 to initiate a Phase 1/2a clinical trial. We are currently initiating sites for this clinical trial.

human papilloma virus;

~~We continue to conduct~~•Identifying shared antigen immunotherapies encompassing shared neoantigens and non-mutated tumor-associated antigens;

•Exploring Inhibigen biology; and

•Further optimizing ATLAS.

Since these other research ~~principally to explore Inhibigen~~TM ~~biology and ways to further strengthen ATLAS. We also continue to explore additional program opportunities. The COVID-19 pandemic has affected our ability to continue such efforts, however, so~~activities are early stage, we cannot provide specific timelines for if, or when, these ~~efforts to translate into~~activities may result in new clinical candidates, which might include non-personalized cancer immunotherapies targeting shared neoantigens, non-mutated tumor-associated antigens, cancers of viral origin such as cancers driven by Epstein-Barr virus infection and Inhibigens.

candidates.

Business ~~Update Regarding~~update regarding COVID-19

The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly affect our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we have been able to continue our operations and do not anticipate any material interruptions for the foreseeable future. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including our expenses, supply chain and ~~pre-clinical~~preclinical and clinical trials. ~~Our office-based employees have been working from home since mid-March 2020 and will continue to do so for the foreseeable future.~~

Our third-party contract manufacturing partners continue to operate their manufacturing facilities at or near normal levels. While we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on ~~our~~us and/or our third-party suppliers and contract manufacturing partners' ability to manufacture our products or the products of our partners.

Financing and business operations

We commenced business operations in August 2006. To date, our operations have been limited to organizing and staffing our company, acquiring and developing our proprietary ATLAS technology, identifying potential product candidates, and undertaking preclinical studies and clinical trials for our product candidates. We have not generated any product revenue and do not expect to do so for the foreseeable future. We have financed our operations primarily through the issuance of our equity securities and through debt ~~financings, and amounts received through grants.~~financings. As of ~~September~~June 30, ~~2020,~~2021, we had received an aggregate of ~~$485.8~~$453.1 million in ~~gross~~net proceeds from the issuance of equity securities, ~~and gross proceeds from debt facilities and an aggregate~~we had outstanding borrowings of ~~$7.9~~$10.5 million, ~~from grants. At September 30, 2020,~~and our cash and cash equivalents were ~~$87.6~~$60.4 million.

Since inception, we have incurred significant operating losses. We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year. We will need to generate significant revenue to achieve profitability, and we may never do so.

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the three and nine months ended September 30, 2020 were from the material transfer agreement (“MTA”) with a strategic partner, Shionogi & Co. Ltd (“Shionogi”). See “Note 3 – Revenue” to the notes to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

In ~~July 2020,~~January 2021, we entered into a ~~private placement financing transaction in~~sublease agreement for one floor of lab and office space through June 2022, with an option for the sublessee to extend the sublease for an additional two months. After the initial option, which is at the sublessee’s sole discretion, the sublease agreement contains additional options for us and the sublessee to mutually extend the sublease for up to an additional eighteen months. As we ~~issued shares~~retained our obligations under the sublease, we are recording the payments received from the sublease as a reduction of lease expense. Sublease income of $0.3 million and $0.7 million was recorded as a reduction of lease expense during the three and six months ended June 30, 2021, respectively.

On February 18, 2021 (the "2021 Loan Closing Date"), we entered into a Loan and Security Agreement (the "2021 Loan Agreement") with Silicon Valley Bank ("SVB") for a $10 million secured term loan (the "2021 Term Loan"). $9.0 million of the proceeds from the 2021 Term Loan were used to repay our ~~common stock, pre-funded warrants to purchase shares~~borrowings that were outstanding at the 2021 Loan Closing Date under our previous loan and security agreement with Hercules Capital, Inc. (“Hercules”), paying off all obligations owing under, and extinguishing, the previous loan and security agreement with Hercules on the 2021 Loan Closing Date. The remaining proceeds from the 2021 Term Loan of ~~our common stock, and warrants to purchase shares of our common stock for aggregate gross cash proceeds of approximately $79.9~~$1.0 million ~~before deducting fees to the placement agent and other offering expenses payable~~were received by us ~~(the “2020 Private Placement”).~~ for working capital and general corporate purposes.

We ~~incurred approximately $5.4 million of offering-related expenses, resulting in total net proceeds of approximately $74.5 million.~~

In the nine months ended September 30, 2020, we sold approximately 1.0 million shares under our ATM program and received net proceeds of $2.7 million, after deducting commissions. For the nine months ended September 30, 2019, we sold no shares under the ATM program. As of September 30, 2020, we had approximately $43.1 million in gross proceeds remaining under the ATM.

~~In October 2019, we entered into~~have a purchase agreement with Lincoln Park Capital (“LPC”) pursuant to which, ~~LPC purchased $2.5 million of shares of our common stock at a purchase price of $2.587 per share. In addition,~~ for a period of 30 months beginning in October 2019, we have the right, at our sole discretion, to sell up to ~~an additional $27.5~~$30.0 million of our common stock to LPC based on prevailing market prices of our common stock at the time of each sale. ~~In consideration for entering into the purchase agreement, we issued approximately 0.3 million shares of our common stock to LPC as a commitment fee.~~ The purchase agreement limits our sales of shares of common stock to LPC to approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of our common stock. ~~In the nine months ended September 30, 2020, we sold 1.5 million shares of common stock to LPC, for net proceeds of approximately $3.5 million.~~ As of ~~September~~June 30, ~~2020,~~2021, we had ~~approximately~~ $24.0 million remaining under our agreement with LPC.

~~In June 2019, we completed~~We have an ~~underwritten public~~agreement with Cowen and Company, LLC ("Cowen") to establish an at-the-market (“ATM”) equity offering inprogram pursuant to which ~~we sold 10.5~~Cowen is able to offer and sell up to $50.0 million ~~shares~~ of our common stock at ~~a price of $3.50 per share, for gross proceeds of~~prevailing market prices. In the six months ended June 30, 2021, we sold approximately ~~$36.8 million. We also granted the underwriters an option to purchase up to approximately an additional 1.6~~3.8 million shares of common stock. The underwriters exercised this option in full. This generated additional gross proceeds of $5.5 million. We incurred approximately $3.9 million of offering-related expenses, resulting in totalunder our ATM and received net proceeds of ~~$38.4 million.~~

~~In February 2019,~~$9.5 million, after deducting commissions. Through June 30, 2021, we completed a private placement financing transaction in which we issued shares of our common stock, pre-funded warrants to purchase shares of our common stock, and warrants to purchase shares of our common stock for gross cash proceeds of $15.0 million. We incurred $1.2 million of offering-related expenses, resulting in total net proceedshave sold an aggregate of approximately ~~$13.8 million.~~

6.7 million shares under the ATM and received $19.4 million in net proceeds. As of June 30, 2021, we had $30.1 million in gross proceeds remaining under the ATM.

As reflected in our condensed consolidated financial statements, we used cash of $22.9 million to fund operating activities ~~of $32.0 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and had ~~$87.6~~$60.4 million available in cash and cash equivalents at ~~September~~June 30, ~~2020.~~2021. In addition, we had an accumulated deficit of ~~$359.7~~$391.0 million and we anticipate that we will continue to incur significant operating losses for the foreseeable future as we continue to develop our product candidates. Until such time, if ever, as we attempt to generate substantial product revenue and achieve profitability, we expect to finance our cash needs through a combination of equity offerings and strategic transactions, and other sources of funding. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies, including ceasing development of ~~GEN-009,~~ GEN-011 ~~and~~or other corporate programs and ~~activities. Our~~activities, including our Inhibigens and COVID-19 programs. We expect that our available cash and cash equivalents at ~~September~~June 30, ~~2020 are expected~~2021 should be sufficient to fund operations ~~to mid-2022.~~into the third quarter of 2022.

Costs related to clinical trials can be unpredictable, and there can be no guarantee that our current balances of cash and cash equivalents, combined with proceeds received from other sources, will be sufficient to fund our trials or operations through this period. These funds will not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for, or commercially launch GEN-011, GEN-009 ~~GEN-011~~ or any other product candidate. Accordingly, we will be required to obtain further funding through public or private equity offerings, collaboration and licensing arrangements, or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all, which could result in a decision to pause or delay development or advancement of clinical trials for one or more of our product candidates. Similarly, we may decide to pause or delay development or advancement of clinical trials for one or more of our product candidates if we believe that such development or advancement is imprudent or impractical.

Financial Overview

Revenues

We have not generated any revenues from product sales to date, and we do not expect to generate revenues from product sales for the foreseeable future. Our license revenue in the three and six months ended June 30, 2020 was derived from a material transfer agreement (the “MTA”) with Shionogi & Co., Ltd. (“Shionogi”) which did not recur in the ~~MTA with Shionogi. For additional information about our revenue recognition policy, see “Note 2-Summary of significant accounting policies” to~~three and six months ended June 30, 2021. See Note 3. Revenue within the notes to the ~~unaudited condensed~~ consolidated financial statements in this Quarterly Report on Form 10-Q.

Research and development expenses

Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

•~~salary~~payroll and ~~related~~other headcount-related expenses;

•expenses incurred under agreements with contract research organizations, ~~(“CROs”),~~ contract manufacturing organizations, ~~(“CMOs”),~~ consultants, and other vendors that conduct our clinical trials and preclinical activities;

•costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies; and

•facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.

We expense internal research and development costs as incurred. Nonrefundable advanced payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received.

The following table identifies research and development expenses for our product candidates as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30				Six Months Ended June 30
		2020		2019		2020		2019			2021		2020		2021		2020
Phase 1/2a programs										Phase 1/2a programs	$	7,475	$	3,616	$	13,251	$	8,409
Discovery and pre-IND	Discovery and pre-IND	$	3,722	$	2,289	$	11,075	$	4,797	Discovery and pre-IND	1,678		3,536		3,464		7,345
Phase 1/2a programs		2,135		3,768		10,544		13,076

Other research and development	Other research and development	1,691		769		4,504		2,262		Other research and development	1,360		1,435		2,549		2,820
Total research and development	Total research and development	$	7,548	$	6,826	$	26,123	$	20,135	Total research and development	$	10,513	$	8,587	$	19,264	$	18,574

Phase 1/2a programs are Phase 1 or Phase 2 development activities. Discovery and pre-IND includes costs incurred to support our discovery research and translational science efforts up to the initiation of Phase 1 development. ~~Phase 1/2a programs are Phase 1 or Phase 2 development activities.~~ Other research and development include costs that are not specifically allocated to active programs, including ~~facilities~~facility costs, depreciation expense, and other costs.

General and administrative expenses

General and administrative expenses consist primarily of ~~salaries~~payroll and ~~related~~other headcount-related expenses for ~~personnel in~~ executive and other administrative functions. Other general and administrative expenses include facility costs, professional fees associated with consulting, corporate and intellectual property legal expenses, and accounting services.

Other income (expense)

Other ~~income/(expense)~~

~~Other income/~~income (expense) consists of the change in the fair value of the warrant liability, transaction expenses, interest expense, net of interest income, gains and losses on sale and disposal of assets, and gains and losses on foreign currency.

Critical Accounting Policies and Significant Judgments and Estimates

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management makes estimates and exercises judgement in revenue recognition, prepaid and accrued research and development expenses and the fair value of our warrant liability, which could change period to period based on changes in facts and circumstances. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions. TheseOur critical accounting policies ~~are~~have not changed from those described in ~~our Annual Report on Form 10-K for~~ the fiscal year ended December 31, 2019, and there have been no changes to such policies, except for our policy related to revenue recognition noted below. It is important that the discussion of our operating results that follow be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on February 13, 2020.2020 10-K.

~~Revenue Recognition~~

~~In applying ASC Topic 606~~ ~~Revenue from Contracts with Customers~~, management must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. We also utilize judgement in assessing whether or not variable consideration is constrained or if it can be allocated specifically to one or more performance obligations in the arrangement.

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price that is allocated to that performance obligation on a relative standalone selling price basis, excluding estimates of variable consideration that are constrained. For performance obligations consisting of licenses and other promises, we utilize judgment to assess whether the combined performance obligation is satisfied over time or at a point in time and the recognition pattern for the portion of the transaction price allocated to the performance obligation.

Results of Operations

Comparison of the three and six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~

Three Months Ended September 30, Increase
(in thousands) 2020 2019 (Decrease)
License revenue $ 453 $ — $ 453
Operating expenses:
Research and development 7,548 6,826 722
General and administrative 3,644 2,758 886
Total operating expenses 11,192 9,584 1,608
Loss from operations (10,739) (9,584) (1,155)
Other income (expense):
Change in fair value of warrants 10,767 2,206 8,561
Interest expense, net (377) (154) (223)
Other expense (4,206) — (4,206)
Total other income 6,184 2,052 4,132
Net loss $ (4,555) $ (7,532) $ 2,977

2020

License revenue


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
	(in thousands)
License revenue	$	—	$	906	$	—	$	906

License revenue decreased $0.9 million in both the three and six months ended June 30, 2021, as compared to the three and six months ended June 30, 2020. The ~~$0.5~~decrease relates to revenue recognized in the three and six months ended June 30, 2020 in connection with the MTA with Shionogi that did not recur in the three and six months ended June 30, 2021.

Research and development expenses


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
	(in thousands)
Research and development	$	10,513	$	8,587	$	19,264	$	18,574

Research and development expenses increased $1.9 million ~~increase in revenue~~ in the three months ended ~~September~~June 30, ~~2020~~2021, as compared to the three months ended ~~September~~June 30, ~~2019 relates~~2020. The increase was largely due to ~~revenue recognized in connection with the MTA with Shionogi.~~

~~Research~~higher headcount and ~~development expenses~~

headcount-related costs of $0.8 million, and higher manufacturing and clinical costs of $0.9 million.

Research and development expenses increased $0.7 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase was largely due to higher headcount and headcount-related costs of $1.4 million, partially offset by lower manufacturing costs of $0.8 million due to the timing of GEN-011 development, engineering and clinical manufacturing costs.

General and administrative expenses


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
	(in thousands)
General and administrative	$	4,033	$	3,480	$	7,704	$	6,868

General and administrative expenses increased $0.6 million in the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the three months ended ~~September~~June 30, ~~2019.~~2020. The increase was ~~largely~~primarily due to ~~an increase in~~higher headcount and headcount-related costs of ~~approximately $0.8~~$0.9 million, partially offset by ~~a decrease in external manufacturing~~lower facilities costs, net of ~~approximately $0.1~~sublease income, of $0.8 million.

~~General and administrative expenses~~

General and administrative expenses increased ~~$0.9~~$0.8 million in the ~~three~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to the ~~three~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase was primarily due to ~~an increase in legal, consulting,~~higher headcount and ~~professional services~~headcount-related costs of ~~approximately $0.5~~$1.3 million, ~~and an increase in rent expense~~partially offset by lower facilities costs, net of ~~approximately $0.4~~sublease income, of $1.2 million.

Change in fair value of warrants


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
	(in thousands)
Change in fair value of warrants	$	10,517	$	222	$	11,371	$	1,003

Change in fair value of warrants reflects the non-cash change in the fair value of the 2020 Warrants and the 2018 Warrants, which ~~are~~were recorded at their fair value on the date of issuance and ~~then~~are remeasured at the end of each reporting period. InThe increase in both the three and six months ended ~~September~~June 30, 2021, as compared to the three and six months ended June 30, 2020, ~~the increase in the change in the fair value of warrants was primarily attributed~~is due to the ~~decrease in our stock price between the initial valuation~~July 2020 issuance of liability-classified warrants for 33.6 million shares of our common stock in connection with our 2020 ~~Warrants and the remeasurement at September 30, 2020.~~private placement.

Interest expense, net


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
	(in thousands)
Interest expense, net	$	282	$	365	$	561	$	624

Interest expense, net, consists primarily of interest expense on our long-term debt facilities, partially offset by interest earned on our cash equivalents.

Other expense


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
	(in thousands)
Other expense	$	—	$	17	$	136	$	17

Other expense during the six months ended June 30, 2021 consists primarily of ~~transaction costs incurred in connection with the 2020 Private Placement.~~

~~Comparison of the nine months ended September 30, 2020~~debt prepayment and ~~2019~~

Nine Months Ended September 30, Increase
(in thousands) 2020 2019 (Decrease)
License revenue $ 1,359 $ — $ 1,359
Operating expenses:
   Research and development 26,123 20,135 5,988
   General and administrative 10,511 8,992 1,519
   Total operating expenses 36,634 29,127 7,507
Loss from operations (35,275) (29,127) (6,148)
Other income (expense):
   Change in fair value of warrants 11,770 289 11,481
   Interest expense, net (1,001) (755) (246)
   Other expense (4,223) (1) (4,222)
Total other income (expense) 6,546 (467) 7,013
Net loss $ (28,729) $ (29,594) $ 865

~~License revenue~~

The $1.4 million increase in revenue in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 relates to revenue recognized in connection with the MTA with Shionogi.

~~Research and development expenses~~

Research and development expenses increased $6.0 million in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The increase was largely due to an increase in external development costs of approximately $2.7 million, an increase in headcount-related costs of approximately $2.4 million, and an increase in clinical costs of approximately $0.8 million.

~~General and administrative expenses~~

General and administrative expenses increased $1.5 million in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The increase was primarily due to an increase in rent expense of approximately $1.2 million, an increase in legal, consulting and professional services expenses of approximately $0.7 million, and an increase in insurance expense of approximately $0.3 million, partially offset by a decrease in headcount-related costs of approximately $0.8 million.

~~Change in fair value of warrants~~

Change in fair value of warrants reflects the non-cash change in the fair value of the 2020 Warrants and the 2018 Warrants, which are recorded at their fair value on the date of issuance and then remeasured at the end of each reporting period. In the nine months ended September 30, 2020, the increase in the change in the fair value of warrants was primarily attributed to the decrease in our stock price between the initial valuation of our 2020 Warrants and the remeasurement at September 30, 2020.

~~Interest expense, net~~

~~Interest expense, net, consists primarily of interest expense on our long-term debt facilities, offset by interest earned on our cash equivalents.~~

~~Other expense~~

~~Other expense consists primarily of transaction costs incurred in connection with the 2020 Private Placement.~~

extinguishment costs.

Liquidity and Capital Resources

Overview

Since our inception in 2006, we have funded operations primarily through proceeds from issuances of common stock and long-term debt.

As of ~~September~~June 30, ~~2020,~~2021, we had ~~approximately $87.6~~$60.4 million in cash and cash equivalents.

In April 2018, we entered into an amended and restated loan and security agreement, ~~with Hercules Capital, Inc. ("Hercules"),~~ which was subsequently amended in November 2019 (as amended, the ~~“2018 Term Loan”~~“Hercules Loan Agreement”)., with Hercules. The ~~2018 Term~~Hercules Loan ~~provides~~Agreement provided a $14.0 million secured term ~~loan. The 2018 Term Loan will~~loan that was scheduled to mature on May 1, 2021 and ~~accrues~~that accrued interest at a floating rate per annum equal to the greater of (i) 8.00%, or (ii) the sum of 3.00% plus the prime rate. The 2018 Term Loan provides for interest-only payments until January 1, 2021. Thereafter, payments will include equal installments of principal and interest through maturity. The 2018 Term Loan may be prepaid subject to a prepayment charge. We ~~are~~were also obligated to pay ~~an end of term~~a final payment charge of $1.0 million at maturity. As

On the 2021 Loan Closing Date, we entered into the 2021 Loan Agreement with SVB for the $10 million 2021 Term Loan. $9.0 million of ~~September 30, 2020, we had~~the proceeds from the 2021 Term Loan were used to repay our borrowings that were outstanding ~~borrowings~~at the 2021 Loan Closing Date under the Hercules Loan Agreement, paying off all obligations owing under, and extinguishing, the Hercules Loan Agreement, on the 2021 Loan Closing Date. The remaining proceeds from the 2021 Term Loan of ~~$13.7 million.~~

$1.0 million were received by us for working capital and general corporate purposes.

We have not generated any revenues from product sales to date, and we do not expect to generate revenues from product sales for the foreseeable future. ~~Our revenues for the nine months ended September 30, 2020 and 2019 were primarily from the MTA with Shionogi.~~

In July 2020, we completed the 2020 Private Placement and received net cash proceeds of approximately $74.5 million. In connection with the 2020 Private Placement, we issued approximately 21.4 million shares of our common stock, approximately 12.2 million pre-funded warrants to purchase additional shares of our common stock and warrants to purchase approximately 33.6 million shares of our common stock.

~~In October 2019, we entered into~~We have a purchase agreement with LPC pursuant to which, ~~LPC purchased $2.5 million of shares of our common stock at a purchase price of $2.587 per share. In addition,~~ for a period of 30 months beginning in October 2019, we have the right, at our sole discretion, to sell up to ~~an additional $27.5~~$30.0 million of our common stock to LPC based on prevailing market prices of our common stock at the time of each sale. ~~In consideration for entering into the purchase agreement, we issued approximately 0.3 million shares of our common stock to LPC as a commitment fee.~~ The purchase agreement limits our sales of shares of common stock to LPC to approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of our common stock. As of June 30, 2021, we had $24.0 million remaining under our agreement with LPC.

We have an agreement with Cowen to establish an ATM equity offering program pursuant to which Cowen is able to offer and sell up to $50.0 million of our common stock at prevailing market prices. In the ~~nine~~six months ended ~~September~~June 30, 2021, we sold approximately 3.8 million shares under our ATM and received net proceeds of $9.5 million, after deducting commissions. Cumulatively through June 30, 2021, we have sold an aggregate of approximately 6.7 million shares under the ATM and received $19.4 million in net proceeds. As of June 30, 2021, we had $30.1 million in gross proceeds remaining under the ATM.

Cash flows from operating activities

Cash flows from operating activities consist of our net loss adjusted for various non-cash items, changes in working capital and changes in certain other balance sheet accounts. Cash used in operating activities for the six months ended June 30, 2021 and 2020 was $22.9 million and $23.7 million, respectively. Cash used in operating activities for the six months ended June 30, 2021 decreased by $0.8 million when compared to the six months ended June 30, 2020. This decrease was primarily due to a comparative working capital benefit from an increase in operating liabilities, partially offset by increased research and development expenses for GEN-011 and growth of our corporate infrastructure.

Cash flows from investing activities

Investing activities used $1.8 million and $0.5 million of cash in six months ended June 30, 2021 and 2020, respectively. Cash used by investing activities was primarily for purchases of property and equipment in both of the six months ended June 30, 2021 and 2020.

Cash flows from financing activities

Financing activities provided $5.3 million and $6.2 million in the six months ended June 30, 2021 and 2020, respectively. In the six months ended June 30, 2021, we repaid $14.0 million in long-term debt and paid deferred financing charges of $0.3 million, partially offset by the issuance of long-term debt for proceeds of $10.0 million and the issuance of shares of our common stock under our ATM program for net proceeds of $9.5 million. In the six months ended June 30, 2020, we ~~sold approximately 1.5 million~~issued shares of common stock to LPC for net proceeds of ~~approximately~~ $3.5 ~~million. As of September 30, 2020, we had approximately $24.0~~ million, ~~remaining under our agreement with LPC.~~

In June 2019, we entered into an underwriting agreement relating to the underwritten public offering of 10.5 million shares of our common stock, par value $0.001 per share, at a price to the public of $3.50 per share, for gross proceeds of approximately $36.8 million (the “2019 Public Offering”). We also granted the underwriters an option to purchase up to an additional approximately 1.6 million shares of common stock. In June 2019, the underwriters exercised this option in full. We received approximately $5.5 million in gross proceeds from the underwriters’ exercise of their option to purchase additional shares (the “Overallotment Option”). In connection with the 2019 Public Offering, inclusive of the Overallotment Option, we incurred approximately $3.9 million of offering-related expenses, resulting in total net proceeds of $38.4 million.

~~In February 2019, we completed a private placement (the “2019 Private Placement”)~~ and ~~received net cash proceeds of $13.8 million. In connection with the 2019 Private Placement,~~ we issued ~~approximately 3.2 million~~ shares of common stock ~~pre-funded warrants to purchase approximately 0.5 million shares of common stock and warrants to purchase up to approximately 0.9 million shares of common stock.~~

~~Cash Flows~~

~~The following table summarizes~~under our ~~sources and uses of cash for the nine months ended September 30, 2020 and 2019 (in thousands):~~

Nine Months Ended September 30,
2020 2019
Net cash used in operating activities $ (32,009) $ (28,748)
Net cash used in investing activities (1,188) (970)
Net cash provided by financing activities 80,695 50,321
Net increase in cash and cash equivalents $ 47,498 $ 20,603

~~Operating Activities~~

Net cash used in operating activities increased $3.3 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The increase in cash used in operations is attributed to an increase in our research and development expenses due to the advancement of GEN-009 and GEN-011.

~~Investing activities~~

~~Net cash used by investing activities was for the purchases of property and equipment in both periods ending September 30, 2020 and 2019, respectively.~~

~~Financing Activities~~

Net cash provided by financing activities increased $30.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. In the nine months ended September 30, 2020, the 2020 Private Placement generated net proceeds of $74.5 million, we sold shares of common stock to LPCATM program for net proceeds of ~~approximately $3.5 million and we sold shares under our ATM program and received net proceeds of approximately~~ $2.7 million. In the nine months ended September 30, 2019, the 2019 Private Placement generated net proceeds of $13.8 million and the 2019 Public Offering generated net proceeds of $38.4 million, offset by the repayment of long-term debt of $1.4 million.

Operating ~~Capital Requirements~~

capital requirements

Our primary uses of capital are for ~~salaries and related expenses for personnel,~~headcount-related costs, manufacturing costs for preclinical and clinical materials, third-party clinical trial services, laboratory and related supplies, legal and other regulatory expenses, facilities and general overhead costs. We expect these costs will continue to be the primary operating capital requirements for the near future.

We expect that our ~~existing~~ cash and cash equivalents ~~are~~as of June 30, 2021 of $60.4 million should be sufficient to ~~support~~fund operations into the third quarter of 2022. These funds may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements which raises substantial doubt about our ability to continue as a going concern. Our future viability beyond one year from the date of issuance of the consolidated financial statements is dependent on our ability to raise additional capital to finance its operations. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies, including ceasing development of GEN-011 or other research programs and activities, including our Inhibigens and COVID-19 programs. We expect to finance our cash needs through a combination of equity offerings, strategic transactions, or other sources of funding, including utilization of our purchase agreement with LPC and our ATM with Cowen. We expect that our operating plan, which includes these funding sources, extends operations to ~~mid-2022.~~ the end of 2022. Although we plan to pursue additional funding, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, or at all.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products coupled with the global economic uncertainty that has arisen with the outbreak of ~~the coronavirus, or referred to as~~ COVID-19, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

•the timing and costs of our planned clinical trials for ~~GEN-009 and GEN-011;~~GEN- 011;

•the progress, timing, and costs of manufacturing ~~GEN-009~~GEN-011;

•the timing of GEN-011 patient enrollment and dosing;

•the availability of GEN-011 ~~for planned clinical trials;~~third-party manufacturing capacity;

•the initiation, progress, timing, costs, and results of preclinical studies and clinical trials for our ~~other product candidates and~~ potential product candidates;

•the terms and timing of any future collaborations, grants, licensing, consulting, or other arrangements that we may establish;

•the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone payments, royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;

•the costs of preparing, filing, and prosecuting patent applications, maintaining and protecting our intellectual property rights, and defending against intellectual property related claims;

•the extent to which we in-license or acquire other products and technologies;

•the ~~receipt of marketing approval;~~costs to manufacture material for clinical trials;

•the costs ~~of commercialization activities~~to seek regulatory approvals for ~~GEN-009, GEN-011 and other~~any product candidates ~~if we receive marketing approval, including~~ that successfully complete clinical trials;

•the costs to attract and ~~timing of establishing product sales, marketing, distribution, and manufacturing capabilities;~~retain skilled personnel; and

•~~revenue received from commercial sales of~~the costs to create additional infrastructure to support our operations as a public company and our product ~~candidates.~~development and planned future commercialization efforts.

We will need to obtain substantial additional funding in order to complete clinical trials and receive regulatory approval for GEN-011, GEN-009 ~~GEN-011~~ and our other product candidates. To the extent that we raise additional capital through the sale of our common stock, convertible securities, or other equity securities, the ownership interests of our existing stockholders may be materially diluted, and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back, or discontinue the development of GEN-011, GEN-009 ~~GEN-011~~ or our other product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to GEN-011, GEN-009 ~~GEN-011~~ or our other product candidates that we otherwise would seek to develop or commercialize ourselves.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

We had cash and cash equivalents of ~~approximately $87.6~~$60.4 million as of ~~September~~June 30, ~~2020.~~2021. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk relates to fluctuations in interest rates, which are affected by changes in the general level of U.S. interest ~~rates, including interest rate changes resulting from the impact of the COVID-19 pandemic.~~rates. Given the short-term nature of our cash and cash equivalents, we believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations. We do not own any derivative financial instruments.

We do not believe that our cash and cash equivalents ~~and marketable securities~~ have significant risk of default or illiquidity. While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents ~~and marketable securities~~ at one or more financial institutions that are in excess of federally insured limits.

We currently do not have significant exposure to foreign currencies as we hold no foreign exchange contracts, option contracts, or other foreign hedging arrangements. Further, our operations are primarily denominated in U.S. dollars. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our results of operations during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~

2021.

Item 4.Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2020~~2021 (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended)~~Act). Our 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. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of ~~September~~June 30, ~~2020,~~2021, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the three months ended ~~September~~June 30, ~~2020,~~2021, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the ~~Securities~~ Exchange Act ~~of 1934, as amended,~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3126

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. We do not believe we are currently party to any pending legal action, arbitration proceeding or governmental proceeding, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business or operating results. We are not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.

Item 1A.Risk Factors

There have been no material changes from the risk factors set forth in ~~the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020, except as set forth below.

We require additional financing to execute our operating plan and continue to operate as a going concern.

We expect that our cash and cash equivalents as of June 30, 2021 of $60.4 million should be sufficient to fund operations into the third quarter of 2022. These funds may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements which raises substantial doubt about our ability to continue as a going concern. Our future viability beyond one year from the date of issuance of these consolidated financial statements is dependent on our ability to raise additional capital to finance our operations. If we are unable to raise additional funds when needed, we may be required to implement cost reduction strategies, including ceasing development of GEN-011 or other research programs and activities, including our Inhibigens and COVID-19 programs. We expect to finance our cash needs through a combination of equity offerings, strategic transactions, or other sources of funding, including utilization of the Lincoln Park Capital purchase agreement and the ~~Company's Quarterly Report Form 10-Q~~at-the-market equity offering program with Cowen and Company, LLC. We expect that our operating plan, which includes these funding sources, extends operations to the end of 2022. Although management plans to pursue additional funding, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, or at all.

We believe that we will continue to expend substantial resources for the ~~quarter ended March 31, 2020.~~foreseeable future developing GEN-011. These expenditures will include costs associated with research and development, manufacturing, clinical trials, potentially acquiring new technologies, and potentially obtaining regulatory approvals. In addition, other unanticipated costs may arise. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development of our product candidates. Furthermore, because of the significant expense associated with conducting clinical trials, we cannot be certain we will have sufficient capital to complete such trials for a given product candidate.

Our future capital requirements depend on many factors, including:

•the timing and costs of our planned clinical trials for GEN- 011;

•the progress, timing, and costs of manufacturing GEN-011;

•the timing of GEN-011 patient enrollment and dosing;

•the availability of GEN-011 third-party manufacturing capacity;

•the initiation, progress, timing, costs, and results of preclinical studies and clinical trials for our potential product candidates;

•the terms and timing of any future collaborations, grants, licensing, consulting, or other arrangements that we may establish;

•the costs of preparing, filing, and prosecuting patent applications, maintaining and protecting our intellectual property rights, and defending against intellectual property related claims;

•the extent to which we in-license or acquire other products and technologies;

•the costs to manufacture material for clinical trials;

•the costs to seek regulatory approvals for any product candidates that successfully complete clinical trials;

•the costs to attract and retain skilled personnel; and

•the costs to create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.

Our operating plan may change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us when needed, we would be required to delay, limit, reduce or terminate non-clinical studies, clinical trials or other development activities for one or more of our product candidates or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.

3228

Item 6.Exhibits


Exhibit Number						Exhibit
3.1						~~Fifth Amended and~~ Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on June 24, 2021)

3.2						Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on February 12, 2014)

~~3.2~~31.1*						~~Certificate~~Rule 13a-14(a) / 15d-14(a) Certification of ~~Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on June 25, 2018)~~Principal Executive Officer

~~3.3~~31.2*						~~Certificate~~Rule 13a-14(a) / 15d-14(a) Certification of ~~Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on May 21, 2019)~~Principal Financial Officer

~~3.4~~32**						~~Certificate~~Section 1350 Certifications of ~~Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on June 2, 2020)~~Principal Executive Officer and Principal Financial Officer

~~3.5~~						~~Certificate of Correction to the Certificate of Amendment to the Restated Certificate of Incorporation of Genocea Biosciences, Inc.(incorporated by reference to Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q, File No. 001-36289, filed on July 23, 2020)~~

~~4.1~~						~~Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current report on Form 8-K, File No. 001-36289, filed on July 22, 2020)~~

~~4.2~~						~~Form of Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current report on Form 8-K, File No. 001-36289, filed on July 22, 2020)~~

~~31.1~~						~~Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Executive Officer~~

~~31.2~~						~~Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Financial Officer~~

~~32.1~~						~~Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Executive Officer~~

~~32.2~~						~~Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Financial Officer~~

101.INS*						Inline XBRL Instance Document ~~(the~~– the instance document does not appear in the Interactive Data File because ~~its~~ XBRL tags are embedded within the Inline XBRL ~~document)~~document

101.SCH*						Inline XBRL Taxonomy Extension Schema Document.

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*						Cover Page Interactive Date File ~~(formatted as~~(embedded within the Inline XBRL ~~with applicable taxonomy extension information contained in Exhibits 101)~~document)

_________________________

*Filed herewith

** Furnished herewith

3329

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Genocea Biosciences, Inc.

~~Date: October 29, 2020~~	~~By:~~	~~/s/ WILLIAM D. CLARK~~
		~~William D. Clark~~
		~~President and Chief Executive Officer and Director~~
		~~(Principal Executive Officer)~~

Date: ~~October~~July 29, ~~2020~~2021	By:	/s/ DIANTHA DUVALL
		Diantha Duvall
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

3430


Delaware						51-0596811
(State or Other Jurisdiction of Incorporation or Organization)						(~~IRS~~I.RS. Employer Identification No.)


~~100 Acorn Park Drive~~
~~Cambridge,~~	~~Massachusetts~~	~~02140~~
~~(Address of Principal Executive Offices)~~		~~(Zip Code)~~


				Preferred Shares Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Common Shares
	Shares	Amount
Balance at December 31, 2019	27,453	$	27	$	701	$	355,268	$	(330,954)	$	25,042
Issuance of common stock, net	187	1		—		439		—		440
Stock-based compensation expense	—	—		—		384		—		384
Issuance of common stock under employee benefit plans	4	—		—		—		—		—
Net loss	—	—		—		—		(12,853)		(12,853)
Balance at March 31, 2020	27,644	$	28	$	701	$	356,091	$	(343,807)	$	13,013
Issuance of common stock, net	2,287	2		—		5,797		—		5,799
Stock-based compensation expense	—	—		—		486		—		486
Issuance of common stock under employee benefit plans	33	—		—		60		—		60

Net loss	—	—		—		—		(11,321)		(11,321)
Balance at June 30, 2020	29,964	$	30	$	701	$	362,434	$	(355,128)	$	8,037
Issuance of common stock, net	21,391	22		—		16,162		—		16,184
Stock-based compensation expense	—	—		—		533		—		533
Issuance of common stock under employee benefit plans	4	—		—		6		—		6
Conversion of preferred stock to common stock	205	—		(701)		701		—		—
Net loss	—	—		—		—		(4,555)		(4,555)
Balance at September 30, 2020	51,564	$	52	$	0	$	379,836	$	(359,683)	$	20,205


	September 30,		December 31,
	2020		2019
Payroll and employee-related costs	$	2,429	$	2,245
Research and development costs	2,110		1,607
Other current liabilities	1,245		759
Total	$	5,784	$	4,611


Leases (in thousands)	Classification	September 30, 2020		December 31, 2019
Assets
Operating	Lease ROU asset	$	10,677	$	6,156
Finance	Lease ROU asset	60		150
Total lease assets		$	10,737	$	6,306
Liabilities
Current
Operating	Lease liabilities	$	2,036	$	990
Finance	Lease liabilities	44		127
Non-current
Operating	Lease liabilities, net of current portion	8,941		5,373
Finance	Lease liabilities, net of current portion	0		22
Total lease liabilities		$	11,021	$	6,512


	Operating leases		Finance lease		Total
2020	$	703	$	22	$	725
2021	2,871		23		2,894
2022	2,943		0		2,943
2023	3,017		0		3,017
2024 and thereafter	3,609		0		3,609
Total lease payments	$	13,143	$	45	$	13,188
Less imputed interest	(2,166)		(1)		(2,167)
Total	$	10,977	$	44	$	11,021


	September 30, 2020			Issuance Date
Stock price*	$	2.29		$	2.69
Volatility	115.6		%	110.6		%
Remaining term (years)	3.8			4.0
Expected dividend yield	0			0
Risk-free rate	0.23		%	0.22		%
Annual acquisition event probability	40.0		%	40.0		%


	Three Months Ended September 30,				Increase
(in thousands)	2020		2019		(Decrease)
License revenue	$	453	$	—	$	453

Operating expenses:
Research and development	7,548		6,826		722
General and administrative	3,644		2,758		886
Total operating expenses	11,192		9,584		1,608
Loss from operations	(10,739)		(9,584)		(1,155)
Other income (expense):
Change in fair value of warrants	10,767		2,206		8,561
Interest expense, net	(377)		(154)		(223)
Other expense	(4,206)		—		(4,206)
Total other income	6,184		2,052		4,132
Net loss	$	(4,555)	$	(7,532)	$	2,977