UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM

10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2017~~

March 31,

2021

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

For the transition period from

Commission File Number:

001-37718

~~Spring Bank Pharmaceuticals, Inc.~~

F-STAR THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

~~Delaware~~	~~52-2386345~~
Delaware		52-2386345
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~86 South Street~~ ~~Hopkinton, MA~~ Eddeva B920 Babraham Research Campus Cambridge, United Kingdom CB22 3AT	~~01748~~	N/A
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: ~~(508) 473-5993~~

+44-1223-497400

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


Title of Each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	FSTX	The Nasdaq Stock Market (Nasdaq Capital Market)

Indicate by check mark whether the ~~registrant~~Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~ YES

☒ No NO ☐

Indicate by check mark whether the ~~registrant~~Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of

Regulation S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to submit ~~and post~~ such files). ~~Yes~~

YES☒ No NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. ☒

Indicate by check mark whether the ~~registrant~~Registrant is a shell company (as defined in

Rule 12b-2

of the Exchange Act). ~~Yes~~ YES ☐ No NO ☒

The number of ~~October 31, 2017, the registrant had 12,951,033~~ shares of ~~common stock, $0.0001 par value per share, outstanding.~~

Registrant’s Common Stock outstanding as of May 12, 2021

was

19,365,931

Table of Contents~~Spring Bank Pharmaceuticals,~~

F-star

Therapeutics Inc.

INDEX

PART I. FINANCIAL INFORMATION

		~~Page~~
	~~PART I. FINANCIAL INFORMATION~~
				Page

		Forward- Looking Statements			2

Item 1.		Consolidated Financial Statements (Unaudited)			3

		~~Condensed~~ Consolidated Balance Sheets at March 31, 2021 and December 31, 2020			3

		~~Condensed~~ Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020			4

		~~Condensed~~ Consolidated Statements of Cash Flows for the three Months Ended March 31, 2021 and 2020			5

		Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020			6

		Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements	6		7

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	20		27

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	33		40

Item 4.		Controls and Procedures	33		40

		PART II. OTHER INFORMATION

Item 1.		Legal Proceedings	34		41

Item 1A.		Risk Factors	34		41

Item 5. 2		Unregistered Sales of Equity Securities and Use of Proceeds			41

Item 3		Defaults Upon Senior Securities			41

Item 4		Mine Safety Disclosures			41

Item 5		Other Information	34		41
~~Item 6.~~	~~Exhibits~~		34
Item 6.		Exhibits			41

Exhibit Index			35		42

Signatures			36		43

Table of Contents

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q

contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form

10-Q,

including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terms ~~such as~~including, but not limited to, “may,” “likely,” “will,” “should,” “would,” “design,” “expect,” “seek,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,~~” “contemplate,~~” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions.

These forward-looking statements include, but are not limited to, statements about:

our ongoing and planned preclinical studies and clinical trials;

preclinical study data and clinical trial data and the timing of results of our ongoing clinical studies and/or trials;

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

our plans to seek and enter into clinical trial collaborations and other broader collaborations;

the direct and indirect impact of the

COVID-19

pandemic on our ~~commercialization, marketing~~business operations and financial condition, including manufacturing, ~~capabilities~~research and ~~strategy;~~development costs, clinical trials, regulatory processes and

employee expenses; and

our estimates regarding prospects, strategies, expenses, operating capital requirements, results of operations and needs for additional financing.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Factors that could cause actual results or events to differ materially from the forward-looking statements that we make include, but are not limited to, the following:

•Our business currently depends substantially on the success of clinical trials for inarigivir soproxil (formerly known as SB 9200), which we refer to as inarigivir, which is still under development. If we are unable to obtain regulatory approval for, or successfully commercialize, inarigivir, our business will be materially harmed.

•We are very early in our development efforts and our product candidates may not be successful in later stage clinical trials. Results obtained in our preclinical studies and clinical trials are not necessarily indicative of results to be obtained in future clinical trials. As a result, our product candidates may never be approved as marketable therapeutics.

•We will need additional funding to complete the development of our product candidates and before we can expect to become profitable from the sales of our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

•We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates for preclinical and clinical testing. These third parties may not perform satisfactorily, which could delay our product development activities.

•If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

•We may not be able to retain key executives or to attract, retain and motivate key personnel. If we are unable to retain such key personnel, it could have a material adverse impact on our business and prospects.

We are very early in our development efforts and our product candidates may not be successful in later stage clinical trials. Results obtained in our preclinical studies and clinical trials to date are not necessarily indicative of results to be obtained in future clinical trials. As a result, our product candidates may never be approved as marketable therapeutics.

We will need additional funding to complete the development of our product candidates and before we can expect to become profitable from the sales of our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates for preclinical and clinical testing. These third parties may not perform satisfactorily, which could delay our product development activities.

If we are unable to adequately protect our proprietary technology or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

We may not be able to retain key executives or to attract, retain and motivate key personnel. If we are unable to retain such key personnel, it could have a material adverse impact on our business and prospects.

Business interruptions resulting from the coronavirus disease

(“COVID-19”)

outbreak or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business.

You should read this Quarterly Report on Form

10-Q

and the documents that we have filed as exhibits to this Quarterly Report on Form

10-Q

completely and with the understanding that our actual future results may be materially different from what we expect. You should also read carefully the factors described in ~~the section “Risk Factors” of this Quarterly Report on Form 10-Q and~~ “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020, as filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2021, to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on

Form 10-Q,

Current Reports on Form

8-K,

press releases, and our website. Any forward-looking statements that we make in this Quarterly Report on

Form 10-Q

speak only as of the date of this Quarterly Report on Form

10-Q,

and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on

Form 10-Q

or to reflect the occurrence of unanticipated events.

Table of Contents

PART I—~~FINANCI~~ALFINANCIAL INFORMATION

Item 1.

Financial Statements.

~~SPRING BANK PHARMACEUTICALS, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

F-star

Therapeutics Inc.

Consolidated Balance Sheets

(In Thousands, Except Share and Per Share ~~Data)~~

Amounts)

September 30,

December 31,

2017

2016

ASSETS

(unaudited)

Current assets:

     Cash and cash equivalents

$
17,539

$
10,684

     Marketable securities

34,640

14,046

     Prepaid expenses and other current assets

850

840

Total current assets

53,029

25,570

     Marketable securities, long-term

—

752

     Property and equipment, net

534

522

     Restricted cash

250

—

     Other assets

35

35

Total

$
53,848

$
26,879

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

     Accounts payable

$
1,773

$
1,519

     Accrued expenses and other current liabilities

2,312

1,982

Total current liabilities

4,085

3,501

     Warrant liabilities

17,807

6,333

     Other long-term liabilities

32

27

Total liabilities

21,924

9,861

Commitments and contingencies (Note 8)

Stockholders’ equity:

Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30,
     2017 and December 31, 2016; no shares issued or outstanding at September 30, 2017
     and December 31, 2016

—

—

Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30,
     2017 and December 31, 2016; 12,697,038 and 9,416,238 shares issued and outstanding
     at September 30, 2017 and December 31, 2016, respectively

1

1

Additional paid-in capital

109,682

68,559

Accumulated deficit

(77,752
)

(51,535
)
Other comprehensive loss

(7
)

(7
)
Total stockholders’ equity

31,924

17,018

Total

$
53,848

$
26,879


	March 31,			December 31
	2021			2020
	Unaudited
Assets

Current Assets:
Cash and cash equivalents	$	3,680		$	18,526
Accounts receivable		2,799			0
Prepaid expenses and other current assets		3,308			3,976
Tax incentive receivable		4,017			3,563

Total current assets		13,804			26,065
Property and equipment, net		1,063			789
Right of use asset		3,978			2,782
Goodwill		14,980			14,926
In-process research and development		19,157			18,986
Other long-term assets		454			61

Total assets	$	53,436		$	63,609

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	4,084		$	4,597
Accrued expenses and other current liabilities		7,062			9,461
Contingent value rights		2,200			2,080
Lease obligations, current		969			539
Deferred revenue		0			300

Total current liabilities		14,315			16,977
Lease obligations		3,385			2,622
Contingent value rights		320			440
Deferred tax liability		576			576

Total liabilities		18,596			20,615

Commitments and contingencies		0			0
Stockholders’ equity:
Preferred stock, $0.0001 par value; authorized, 10,000,000 shares at March 31, 2021 and December 31, 2020; 0 shares issued or outstanding at March 31, 2021 and December 31, 2020		0			0
Common Stock, $0.0001 par value; authorized 200,000,000 shares at March 31, 2021 and December 31, 2020; 9,100,320 and 9,100,117 shares issued and outstanding at March 31, 2021 and December 31, 2020		1			1
Additional paid-in capital		93,418			91,238
Accumulated other comprehensive loss		(1,542	)		(1,077	)
Accumulated deficit		(57,037	)		(47,168	)

Total stockholders’ equity		34,840			42,994

Total liabilities and stockholders’ equity	$	53,436		$	63,609

See accompanying notes to consolidated financial statements.

Table of Contents~~SPRING BANK PHARMACEUTICALS, INC.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS~~

F-star

Therapeutics Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In ~~Thousands,~~thousands, Except Share and Per Share ~~Data)~~

Amounts)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Grant revenue

$
—

$
—

$
—

$
352

Operating expenses:

Research and development

3,221

2,723

9,152

11,247

General and administrative

1,968

1,452

5,811

4,136

Total operating expenses

5,189

4,175

14,963

15,383

Loss from operations

(5,189
)

(4,175
)

(14,963
)

(15,031
)
Other income (expense):

Interest income

141

27

220

65

Change in fair value of warrant liabilities

(5,780
)

—

(11,474
)

—

Net loss

(10,828
)

(4,148
)

(26,217
)

(14,966
)
Unrealized (loss) gain on marketable securities

(10
)

(3
)

(7
)

18

Comprehensive loss

$
(10,838
)

$
(4,151
)

$
(26,224
)

$
(14,948
)
Net loss per common share – basic and diluted

$
(0.85
)

$
(0.53
)

$
(2.48
)

$
(2.18
)
Weighted-average number of shares outstanding – basic and diluted

12,696,986

7,759,630

10,555,461

6,856,876


	For the Three Months Ended March 31,
	2021			2020
License revenue	$	2,917			1,355
Operating expenses:
Research and development		7,267			3,400
General and administrative		6,429			3,189

Total operating expenses		13,696			6,589

Loss from operations		(10,779	)		(5,234	)
Other non-operating (expense) income :
Other inc ome (expense)		1,018			(1,527	)
Change in fair-value of convertible debt		0			(386	)

Loss before income taxes		(9,761	)		(7,147	)
Income tax expense		(108	)		(12	)

Net loss	$	(9,869	)	$	(7,159	)

Net loss attributable to common stockholders	$	(9,869	)	$	(7,159	)

Basic and diluted adjusted net loss per common shares	$	(1.08	)	$	(3.92	)

Weighted-average number of shares outstanding, basic and diluted		9,100,273			1,826,070

Other comprehensive loss:
Net loss	$	(9,869	)		(7,159	)
Other comprehensive gain (loss):
Foreign currency translation		(465	)		23

Total comprehensive loss	$	(10,334	)	$	(7,136	)

See accompanying notes to consolidated financial statements.

Table of Contents~~SPRING BANK PHARMACEUTICALS, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

F-star

Therapeutics Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In Thousands)

For the Nine Months Ended September 30,

2017

2016

Cash flows from operating activities:

Net loss

$
(26,217
)

$
(14,966
)
Adjustments for:

Depreciation and amortization

115

87

Change in fair value of warrant liabilities

11,474

—

Non-cash investment income (losses)

(50
)

28

Non-cash stock-based compensation

1,483

1,015

Non-cash issuance of common stock and warrants connected to license agreement

—

2,780

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(10
)

(746
)
Other assets

—

(35
)
Accounts payable

254

148

Accrued expenses and other liabilities

311

(19
)
Net cash used in operating activities

(12,640
)

(11,708
)
Cash flows from investing activities:

Purchases of marketable securities

(34,397
)

(6,693
)
Proceeds from sale of marketable securities

14,605

4,894

Purchases of property and equipment

(127
)

(156
)
Net cash used in investing activities

(19,919
)

(1,955
)
Cash flows from financing activities:

Proceeds from issuance of common stock

42,500

11,339

Payment of finance costs related to issuance of common stock

(2,928
)

(2,128
)
Proceeds from exercise of warrants

—

5,342

Proceeds from exercise of stock options

92

95

Cash provided by financing activities

39,664

14,648

Net increase in cash, cash equivalents and restricted cash

7,105

985

Cash and cash equivalents, beginning of period

10,684

4,347

Cash, cash equivalents and restricted cash, end of period

$
17,789

$
5,332

Supplemental disclosures of cash flow information:

Cash paid for taxes

$
1

$
1

Cash paid for interest

$
—

$
—

Supplemental disclosures of noncash financing activities:

Issuance of common stock warrants in connection with initial public offering

$
—

$
218


	For the Three Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(9,869	)		(7,159	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share based compensation expense		2,180			534
Foreign currency loss (gain)		(670	)		1,294
Loss on disposal of fixed assets		(9	)		(1	)
Depreciation		144			180
Interest expense		77			256
Fair-value adjustment of convertible term loan					386
Operating right of use asset expense		278			136
Changes in operating assets and liabilities:
Trade receivables		(2,805	)		0
Prepaid expenses and other current assets		701			1,389
Tax incentive receivable		(413	)		1,184
Accounts payable		(548	)		1,497
Accrued expenses and other current liabilities		(2,473	)		(1,427	)
Deferred revenue		(304	)		368
Operating lease liability		(272	)		(161	)
Other long-term asset		(395	)		0

Net cash used in by operating activities		(14,378	)		(1,524	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(267	)		0
Proceeds from sale of property, plant and equipment		15			0
Purchase of intangible assets		0			(62	)

Net cash used in investing activities		(252	)		(62	)

Cash flows from financing activities:
Proceeds from issuance of convertible notes		0			500

Net cash provided by financing activities		0			500

Net decrease in cash and cash equivalents		(14,630	)		(1,086	)
Effect of exchange rate changes on cash		(216	)		(267	)
Cash and cash equivalents at beginning of period		18,526			4,901

Cash and cash equivalents at end of period	$	3,680		$	3,548

Supplemental disclosure of cash flow information
Cash paid for income taxes	$	0		$	17
Purchases of property and equipment included in accounts payable and accrued expenses	$	97		$	0
Non-cash investing and financing activities:
Additions to ROU assets obtained from new operating lease liabilities	$	1,468		$	0

See accompanying notes to consolidated financial statements.

Table of Contents~~Spring Bank Pharmaceuticals,~~

F-star

Therapeutics Inc.

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2021 and 2020

(Unaudited)

(In thousands, except share amounts)


	Shareholders’ Equity
For the Three Months E n ded	Common Shares				Capital in Excess of par Value		Accumulated Other Comprehensive Loss			Accumulated deficit			Total Stockholders’ Equity
March 31, 2021	Number		Value		Capital in Excess of par Value		Accumulated Other Comprehensive Loss			Accumulated deficit			Total Stockholders’ Equity

Balance at December 31, 2020		9,100,117	$	1	$	91,238	$	(1,077	)	$	(47,168	)	$	42,994
Equity adjustment from foreign currency translation								(465	)					(465	)
Stock option exercises		203		—		—								—
Share-based compensation						2,180								2,180
Net loss											(9,869	)		(9,869	)

Balance at March 31, 2021		9,100,320	$	1	$	93,418	$	(1,542	)	$	(57,037	)	$	34,840


	Shareholders’ Equity
For the Three Months Ended	Seed preferred shares		Series A preferred shares		Common Shares				Capital in Excess of par Value		Accumulated Other Comprehensive Loss			Accumulated deficit			Total Stockholders’ Equity
March 31, 2020	Number		Number		Number		Value		Capital in Excess of par Value		Accumulated Other Comprehensive Loss			Accumulated deficit			Total Stockholders’ Equity
Balance at December 31, 2019		103,611		1,441,418		4,128,441	$	1	$	31,718	$	(1,634	)	$	(21,549	)	$	8,536
Issuance of common stock for services rendered						6,720												—
Issuance of common stock in connection with at-the-market offering, net of issuance costs						10,450												—
Equity adjustment from foreign currency translation												23						23
Share-based compensation										534								534
Net loss															(7,159	)		(7,159	)

Balance at March 31, 2020		103,611		1,441,418		4,145,611	$	1	$	32,252	$	(1,611	)	$	(28,708	)	$	1,934

See accompanying notes to consolidated financial statements.

Table of Contents

F-star

Therapeutics Inc.

Notes to Consolidated Financial Statements

1. ~~NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

Nature of Business

~~Spring Bank Pharmaceuticals,~~ and Summary of Significant Accounting Policies

Nature of Business

F-star

Therapeutics, Inc. ~~(the~~

(collectively with its subsidiaries,

“F-star”

or the “Company”) is a clinical-stage biopharmaceutical company ~~engaged~~dedicated to developing next generation immunotherapies to transform the lives of patients with cancer.

F-star’s

goal is to offer patients better and more durable benefits than currently available immuno-oncology treatments by developing medicines that seek to block tumor immune evasion. Through its proprietary tetravalent, bispecific natural antibody (mAb²

™

) format,

F-star’s

mission is to generate highly differentiated medicines with monoclonal antibody-like manufacturability, good safety and tolerability. With four distinct binding sites in a natural human antibody format,

F-star

believes its proprietary technology will overcome many of the ~~discovery and development of a novel class of therapeutics using a proprietary small molecule nucleic acid hybrid (“SMNH”) chemistry platform. The Company is developing its~~ challenges facing current immuno-oncology therapies, due to the strong pharmacology enabled by tetravalent bispecific binding.

F-star’s

most advanced ~~SMNH~~ product candidate, ~~inarigivir soproxil~~FS118, is currently being evaluated in a

proof-of-concept

Phase 2 trial in

PD-1/PD-L1

quired resistance head and neck cancer patients. FS118 is a tetravalent mAb2 bispecific antibody targeting two receptors,

PD-L1

and

LAG-3,

both of which are established pivotal targets in immuno- oncology. F-star’s second product candidate, FS120, aims to improve checkpoint inhibitor and chemotherapy outcomes and is a mAb2 bispecific antibody that is designed to bind to and stimulate OX40 and CD137, two proteins found on the surface of T cells that both function to enhance T cell activity. F-star’s third product candidate, FS222, aims to improve outcomes in low PD-L1 expressing tumors and is a mAb2 bispecific antibody that is designed to target both the costimulatory CD137 and the inhibitory PD-L1 receptors, which are co-expressed in a number of tumor types. SB 11285 which F-star acquired pursuant to a business combination with Spring Bank Pharmaceuticals, Inc. (“~~inarigivir”~~Spring Bank”), is a next generation cyclic dinucleotide STimulator of INterferon Gene (“STING”) ~~(formerly known~~agonist designed to improve checkpoint inhibition outcomes as ~~SB 9200),~~an immunotherapeutic compound for the treatment of ~~viral diseases. Since inception~~selected cancers.

Share Exchange Agreement

On November 20, 2020,

F-star

Therapeutics, Inc., formerly known as Spring Bank Pharmaceuticals, Inc., completed a business combination (the “Transaction”) with

F-star

Therapeutics Limited

(“F-star

Ltd”) in ~~2002~~accordance with the terms of the Share Exchange Agreement, dated July 29, 2020 (the “Exchange Agreement”), by and among the Company,

F-star

Ltd and certain holders of capital stock and convertible notes of

F-star

Ltd (each a “Seller”, and collectively with holders of

F-star

Ltd securities who subsequently became parties to the Exchange Agreement, the “Sellers”). Pursuant to the Exchange Agreement, each ordinary share of

F-star

Ltd outstanding immediately prior to the closing of the Transaction (the “Closing”) was exchanged by the Sellers that owned such

F-star

Ltd shares for a number of duly authorized, validly issued, fully paid and

non-assessable

shares of Company common stock pursuant to the exchange ratio formula set forth in the Exchange Agreement (the “Exchange Ratio”), rounded to the nearest whole share of Company common stock (after aggregating all fractional shares of Company common stock issuable to such Seller). Also, on November 20, 2020, in connection with, and prior to completion of, the Transaction, Spring Bank effected a

1-for-4

reverse stock split of its common stock (the “Reverse Stock Split”) and, following the completion of the Transaction, changed its name to

F-star

Therapeutics, Inc. Following the completion of the Transaction, the business of the Company became the business conducted by

F-star,

which is a clinical-stage immuno-oncology company focused on cancer treatment through its proprietary tetravalent bispecific antibody programs. Unless otherwise noted, all references to share amounts in this report reflect the Reverse Stock Split.

Under the terms of the Exchange Agreement, at the Closing, Spring Bank issued an aggregate of 4,620,618 shares of its common stock to

F-star

Ltd stockholders, based on an Exchange Ratio of 0.1125 shares of Spring Bank common stock for each

F-star

Ltd ordinary share, stock option and restricted stock unit (“RSU”) outstanding immediately prior to the Closing. The Exchange Ratio was determined through arms-length negotiations between Spring Bank and

F-star

Ltd pursuant to a formula set forth in the Exchange Agreement.

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Pursuant to the Exchange Agreement, immediately prior to the Closing, certain investors in

F-star

Ltd purchased $15.0 million of

F-star

Ltd ordinary shares (the

“Pre-Closing

Financing”). These ordinary shares of

F-star

Ltd were then exchanged at the Closing for shares of the Company’s common stock in the Transaction at the same Exchange Ratio.

Pursuant to the Exchange Agreement, all outstanding options to purchase Spring Bank common stock were accelerated immediately prior to the Closing, and each outstanding option with an exercise price greater than the closing price of Spring Bank common stock on the date of the Closing (the “Closing Date”) was exercised in full, and all other outstanding options to purchase Company common stock were cancelled effective as of the Closing Date.

Immediately following the Reverse Stock Split and the Closing, there were approximately 4,449,559 shares of Spring Bank common stock outstanding. Following the Closing, the

F-star

Ltd stockholders beneficially owned approximately 53.7% of the combined Company’s common stock and the existing stockholders of Spring Bank beneficially owned approximately 46.3% of the Company’s common stock outstanding. Concurrently with the execution of the Exchange Agreement, certain officers and directors of Spring Bank and

F-star

Ltd and certain stockholders of

F-star

Ltd entered into

lock-up

agreements, pursuant to which they agreed to certain restrictions on transfers of any shares of the Company’s common stock for the

180-day

period following the Closing, other than the shares of the Company’s common stock received in exchange for ordinary shares of

F-star

Ltd subscribed for in the

Pre-Closing

Financing and pursuant to certain other limited exceptions.

In addition, at the Closing, Spring Bank,

F-star

Ltd, a representative of Spring Bank stockholders prior to the Closing, and Computershare Trust Company N.A., as the Rights Agent, entered into a STING Agonist Contingent Value Rights Agreement (the “STING Agonist CVR Agreement”). Pursuant to the Exchange Agreement and the STING Agonist CVR Agreement, each

pre-Reverse

Stock Split share of Company common stock held by stockholders as of the record date on November 19, 2020, immediately prior to the Closing, received a dividend of one contingent value right (“CVR”)(“STING Agonist CVR”), payable on a

pre-Reverse

Stock Split basis, entitling such holders to receive, in connection with certain transactions involving the proprietary STING agonist compound designated as SB 11285 occurring on or prior to the STING Agonist CVR Expiration Date (as defined below) that resulted in aggregate Net Proceeds (as defined in the STING Agonist CVR Agreement) at least equal to the Target Payment Amount (as defined below), an aggregate amount equal to the greater of (i) 25% of the Net Proceeds received from all CVR Transactions (as defined in the STING Agonist CVR Agreement) and (ii) an aggregate amount equal to the product of $1.00 and the total number of shares of Company common stock outstanding as of such record date (not to exceed an aggregate amount of $18.0 million) (the “Target Payment Amount”).

The CVR payment obligation expires on the later of 18 months following the Closing or the

one-year

anniversary of the date of the final database lock of the STING clinical trial (as defined in the STING Agonist CVR Agreement) (the “STING Agonist CVR Expiration Date”). The STING Agonist CVRs are not transferable, except in certain limited circumstances, are not certificated or evidenced by any instrument, do not accrue interest, and are not registered with the Securities and Exchange Commission (the “SEC”) or listed for trading on any exchange. Until the STING Agonist CVR Expiration Date, subject to certain exceptions, the Company is required to use commercially reasonable efforts to (a) complete the STING Trial and (b) pursue a CVR Transaction. The STING Agonist CVR Agreement became effective upon the Closing and, unless terminated earlier in accordance with its terms, will continue in effect until the STING Agonist CVR Expiration Date or all CVR payment amounts are paid pursuant to their terms.

At the Closing, Spring Bank,

F-star

Ltd, a representative of Spring Bank stockholders prior to the Closing, and Computershare Trust Company N.A., as the Rights Agent, also entered into a STING Antagonist Contingent Value Rights Agreement (the “STING Antagonist CVR Agreement”). Pursuant to the Exchange Agreement and the STING Antagonist CVR Agreement, each share of common stock held by Spring Bank stockholders as of November 19, 2020, immediately prior to the Closing, received a dividend of one CVR (“STING Antagonist CVR”) entitling such holders to receive, in connection with the execution of a potential development agreement (the “Approved Development Agreement”) and certain other transactions involving proprietary STING antagonist compound occurring on or prior to the STING Antagonist CVR Expiration Date (as defined below) equal to 80% of all net proceeds (as defined in the STING Antagonist CVR Agreement) received by the Company after the Closing pursuant to (i) the Approved Development Agreement, if any, and (ii) all CVR Transactions (as defined in the STING Antagonist CVR Agreement) entered into prior to the STING Antagonist CVR Expiration Date.

The CVR payment obligations expire on the seventh anniversary of the Closing (the “STING Antagonist CVR Expiration Date”). The STING Antagonist CVRs are not transferable, except in certain limited circumstances, are not certificated or evidenced by any instrument, do not accrue interest, and are not registered with the SEC or listed for trading on any exchange. Until the STING Antagonist CVR Expiration Date, subject to certain exceptions, the Company is required to use commercially reasonable efforts to (a) consummate the Approved Development Agreement, (b) to perform the terms of the Approved Development Agreement and (c) pursue CVR Transactions. The STING Antagonist CVR Agreement became effective upon the Closing and, unless terminated earlier in accordance with its terms, will continue in effect until the STING Antagonist CVR Expiration Date or all CVR payment amounts are paid pursuant to their terms.

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The acquisition-date fair value of the CVR liability represents the future payments that are contingent upon the achievement of sale or licensing for the product candidates. The fair value of the contingent consideration acquired of $2.5 million as of December 31, 2020 and as of March 31, 2021 is based on the Company’s probability-weighted discounted cash flow assessment that considers probability and timing of future payments. The fair value measurement is based on significant Level 3 unobservable inputs such as the probability of achieving a sale or licensing agreement, anticipated timelines, and discount rate. Changes in the fair value of the liability will be recognized in the consolidated statement of operations and comprehensive loss until settlement.

All issued and outstanding

F-star

Ltd share options

ranted under

F-star’s

three legacy equity incentive plans became exercisable in full immediately prior to the Closing. At the Closing, all issued share options and restricted stock units granted by

F-star

Ltd under the

F-star

Therapeutics Limited 2019 Equity Incentive Plan (the “2019 Plan”) were replaced by options (“Replacement Options”) and awards (“Replacement RSUs”), on the same terms (including vesting), for Company common stock, based on the Exchange Ratio.

The Company’s common stock, which was listed on the Nasdaq Capital Market, traded through the close of business on Friday, November 20, 2020 under the ticker symbol “SBPH” and continued trading on the Nasdaq Capital Market, on a post-Reverse Stock Split adjusted basis, under the ticker symbol “FSTX” beginning on Monday, November 23, 2020. Commencing on November 23, 2020, the Company’s common stock was represented by a new CUSIP number, 30315R 107. After the Transaction, the Company had approximately $

million in cash. The combined company is now headquartered out of

F-star

Ltd’s existing facilities in Cambridge, United Kingdom and office in Cambridge, MA.

The Transaction was accounted for as a business combination using the acquisition method of accounting under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 805,

Business Combinations

(“ASC 805”). The Transaction was accounted for as a reverse acquisition with

F-star

Ltd being deemed the acquiring company for accounting purposes. Under ASC 805,

F-star

Ltd, as the accounting acquirer, recorded the assets acquired and liabilities assumed of Spring Bank in the Transaction at their fair values as of the acquisition date (see Note

of the financial statements).

F-star

Ltd was determined to be the accounting acquirer based on an analysis of the criteria outlined in ASC 805 and the facts and circumstances specific to the Transaction, including the fact that immediately following the Transaction:

(1) F-star

Ltd shareholders owned the majority of the voting rights of the combined company;

(2) F-star

Ltd designated a majority (five of eight) of the initial members of the board of directors of the combined company; and

(3) F-star

Ltd senior management held the key positions in senior management of the combined company. As a result, upon consummation of the Transaction, the historical financial statements of

F-star

Ltd became the historical financial statements of the combined organization.

Liquidity

On March 30, 2021, the Company entered into a Sales Agreement (the “2021 Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”) with respect to an

“at-the-market”

offering as defined in Rule 415 of the Securities Act of 1933, as amended, under which the Company could offer and sell, from time to time in its sole discretion, shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $50.0 million through SVB Leerink as its sales agent. As of May 6, 2021, the Company had issued and sold 979,843 shares of common stock for gross proceeds of $9.5 million, resulting in net proceeds of $9.2 million after deducting sales commissions and offering expenses. On May 6, 2021, the Company terminated the 2021 Sales Agreement.

On May 6, 2021, the Company entered into an underwriting agreement with SVB Leerink, as representative of the underwriters, relating to an underwritten public offering ~~(“IPO”)~~of approximately 9.3 million shares of the Company’s common stock, par value $0.0001 per share. The underwritten public offering resulted in ~~May 2016,~~gross proceeds of $65.0 million. The Company incurred $3.9 million in issuance costs associated with the underwritten public offering, resulting in net proceeds to the Company ~~built~~of $61.1 million.

On April 1, 2021, the Company, as borrower, entered into a Venture Loan and Security Agreement (the “Loan and Security Agreement”) with Horizon Technology Finance Corporation (“Horizon”), as lender and collateral agent for itself. The Loan and Security Agreement provides for 4 (4) separate and independent $

2.5

million term loans (“Loan A”, “Loan B”, “Loan C”, and “Loan D”) (with each of Loan A, Loan B, Loan C and Loan D, individually a “Term Loan” and, collectively, the “Term Loans”), whereby, upon the satisfaction of all the conditions to the funding of the Term Loans, each Term Loan will be delivered by Horizon to the Company in the following manner: (i) Loan A was to be delivered by Horizon to the Company prior to April 1, 2021, (ii) Loan B was required to be delivered by Horizon to the Company prior to April 1, 2021, (iii) Loan C is required to be delivered by Horizon to the Company prior to June 30, 2021, and (iv) Loan D is required to be delivered by Horizon to the Company prior to June 30, 2021. The Company may only use the proceeds of the Term Loans for working capital or general corporate purposes as contemplated by the Loan and Security Agreement. On April 1, 2021, the Company drew down $

million under this facility.

The Company has incurred significant losses and has an accumulated deficit of

57.0

million as of March 31, 2021.

F-star

expects to incur substantial losses in the foreseeable future as it conducts and expands its ~~technology platform~~research and ~~product candidate pipeline using a semi-virtual business model, supported by grants~~development activities and ~~direct funding~~clinical trial activities. As of May 17, 2021, the date of issuance of the consolidated financial statements, after proceeds from the ~~United States National Institutes~~ATM, Sales Agreement and drawdown of ~~Health (“NIH”) as well as~~the Term Loans, the Company’s cash of approximately

76.3

million will be sufficient to fund its current operating plan and planned capital expenditures for at least the next 12 months.

The Company may continue to seek additional funding through public equity, private ~~financings. In September 2015,~~equity, debt financing, collaboration partnerships, or other sources. There are no assurances, however, that the Company ~~formed a wholly owned subsidiary, Sperovie Biosciences, Inc. and~~will be successful in ~~December 2016, the Company formed a wholly owned subsidiary, SBP Securities Corporation.~~

raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s ~~success is dependent upon~~failure to raise future capital or enter into other such arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to ~~successfully complete clinical development and obtain regulatory approval of~~develop its product candidates, successfully commercialize approved products, generate revenue, and, ultimately, attain profitable operations. The Company’s operations to date have been limited to financing and staffing the Company and the developmentcandidates.

Table of ~~inarigivir, SB 11285 and the Company’s other product candidates.~~

Contents

Basis of Presentation ~~and Liquidity~~

The accompanying consolidated financial statements have been prepared in accordance with United States ~~(“U.S.”)~~ generally accepted accounting principles (“U.S. GAAP”).

Prior to and in connection with the Company completing its IPO in May 2016, the Company effected a 1-for-4 reverse stock split of its common stock on March 8, 2016. All share and per share amounts and the number of shares of common stock set forth in the financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.

The accompanying interim financial statements as of ~~September 30, 2017~~March 31, 2021 and for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, and related interim information contained within the notes to the financial statements, are unaudited. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of ~~September 30, 2017,~~March 31, 2021, results of operations for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, statement of stockholders’ equity for the three months ended March 31, 2021 and 2020 and its cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020. These interim financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016, as filed with the Securities and Exchange Commission (“SEC”) on February 14, 2017.~~2020. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

Principles of ~~September 30, 2017, the Company had an accumulated deficit of $77.8 million and $52.2 million~~Consolidation

The Company’s financial statements have been prepared in ~~cash, cash equivalents and marketable securities.~~

~~The Company expects~~conformity with U.S. GAAP. Any reference in these notes to ~~continue~~applicable guidance is meant to incur significant and increasing losses for the foreseeable future. The Company anticipates that its expenses will increase significantly as it continues to develop inarigivir, SB 11285 and its other product candidates. The Company does not have any committed external source of funds. As a result, the Company will need additional financing to support its continuing operations. Adequate additional funds may not be availablerefer to the ~~Company on acceptable terms, or at all. To~~authoritative U.S. GAAP as found in the ~~extent that~~ASC and Accounting Standards Updates (“ASU”) of the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish valuable rights to its technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to the Company.

~~Principles of Consolidation~~

FASB. The accompanying consolidated financial statements include the accounts of ~~the Company~~F-star Therapeutics Inc. and its wholly owned subsidiaries, Sperovie Biosciences, Inc. and SBP Securities Corporation. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, 2017. SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of September 30, 2017.subsidiaries. All intercompany balances and transactions between the consolidated companies have been eliminated in consolidation.

Use of Estimates

The preparation of ~~consolidated~~ financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of ~~revenues and~~ expenses during the reporting ~~period.~~years. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the fair value of the assets and liabilities acquired in the transaction between Spring Bank and

F-star

Ltd

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fair value of the convertible loan containing embedded derivatives, the fair value of contingent value rights, the accrual for research and development expenses, revenue recognition, fair values of acquired intangible assets and impairment review of those assets, share based compensation expense, and income taxes. The Company bases its estimates ~~and assumptions~~ on historical experience, ~~when available~~known trends and ~~on various~~other market-specific or other relevant factors that it believes to be reasonable under the circumstances. ~~Significant~~Estimates

re periodically reviewed in light of reasonable changes in circumstances, facts and experience. Changes in estimates ~~relied upon~~are recorded in ~~preparing~~ the accompanying financial statements related to the fair value of common stock and warrant liabilities, accounting for stock-based compensation, income taxes, useful lives of long-lived assets, and accounting for certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actualperiod in which they become known. Actual results ~~may~~could differ from ~~these estimates.~~

~~Cash, Cash Equivalents~~those estimates or assumptions.

Concentrations of credit risk and ~~Restricted Cash~~

~~Cash equivalents are stated at fair value and include short-term, highly liquid investments with remaining maturities~~ of ~~90 days or less at the date of purchase.~~

~~Restricted cash consists of $250,000 and is held as collateral for the Company’s credit card program. There were no restricted cash as of December 31, 2016.~~

Included in cash and cash equivalents as of September 30, 2017 and December 31, 2016 are money market fund investments of $15,164,000 and $9,507,000, respectively, which are reported at fair value (Note 5).

~~Concentration of Credit Risk~~

significant suppliers

Financial instruments that ~~subject~~potentially expose the Company to ~~significant~~ concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents ~~restricted cash and marketable securities. Substantially all of the Company’s cash is held at~~in financial institutions in amounts that ~~management believes to be of high-credit quality. Deposits with these financial institutions may~~could exceed ~~the amount of insurance provided on such deposits; however, these deposits may be redeemed upon demand and, therefore, bear minimal risk.~~

~~The Company’s one source of revenue during the three and nine months ended September 30, 2016 was grants from the NIH, representing 100% of total revenue for such periods.~~government-insured limits. The Company ~~did~~does not ~~have any sources of revenue for the three and nine months ended September 30, 2017.~~

~~Investments in Marketable Securities~~

believe it is subject to additional credit risks beyond those normally associated with commercial banking relationships.

The Company ~~invests excess cash balances~~is dependent on contract research organizations to provide its clinical trials and third-party manufacturers to supply products for research and development activities in short-term and long-term marketable securities. The Company classifies investments in marketable securities as either held-to-maturity or available-for-sale based on facts and circumstances present at the time of purchase. At each balance sheet date presented, all investments in securities are classified as available-for-sale. The Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the investment,its programs. In particular, the Company ~~considers all available evidence~~relies and expects to ~~evaluate~~continue to rely on a small number of manufacturers to supply its requirements for supplies and raw materials related to these programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the ~~extent to which the decline is “other than temporary,” including the intention to sell~~availability of raw materials.

Property, plant and ~~if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.~~

equipment

Property, ~~and Equipment, Net~~

~~Property~~plant and equipment are ~~recorded~~stated at ~~cost. Costs associated with maintenance and repairs are expensed as incurred.~~cost, less accumulated depreciation. Depreciation ~~and amortization are provided~~expense is recognized using the straight-line method over the estimated useful ~~lives:~~

lives of the respective assets as follows:

~~Asset Category~~		~~Useful Life~~
~~Equipment~~		~~5-7 years~~ Estimated Useful Economic Life
Leasehold property improvements, right of use assets		Lesser of lease term or useful life
Laboratory equipment		5 years
Furniture and ~~fixtures~~ office equipment		5 3 years
~~Leasehold improvements~~		~~Lesser of 10 years or the remaining~~ ~~term of the respective lease~~

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in

right-of-use

(“ROU”) assets, and lease obligations in the Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term to each lease. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, an impairment loss is recorded for the difference between the carrying value and fair value of the asset. ~~Through September 30, 2017, no~~ As of March 31, 2021, 0

such impairment has ~~occurred.~~

~~Deferred Rent~~

been recorded.

License and collaboration arrangements and revenue recognition

The Company’s ~~operating leases~~revenues are generated primarily through license and collaboration agreements with pharmaceutical and biotechnology companies. The terms of these arrangements may include ~~rent escalation payment terms and other incentives received from landlords. Deferred rent represents~~(i) the ~~difference between actual operating lease payments due and straight-line rent expense over~~grant of intellectual property rights (IP licenses) to therapeutic drug candidates against specified targets, developed using the ~~term of the lease, which is recorded in accrued expenses and other current liabilities. The Company had deferred aggregate rent for its~~Company’s proprietary mAb2 bispecific antibody platform, (ii) performing research and development ~~facility in Milford, Massachusetts~~services to optimize drug candidates, and ~~its headquarters in Hopkinton, Massachusetts~~(iii) the grant of ~~$35,000~~options to obtain additional research and ~~$35,000~~development services or licenses for additional targets, or to optimize product candidates, upon the payment of option fees.

The terms of these arrangements typically include payment to the Company of one or more of the following:

non-refundable,

upfront license fees; payments for research and development services; fees upon the exercise of options to obtain additional services or licenses; payments based upon the achievement of defined collaboration objectives; future regulatory and sales-based milestone payments; and royalties on net sales of future products.

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The Company has adopted FASB ASC Topic 606,

Revenue from Contracts with Customers

(“ASC 606”). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. To date, the Company has entered into License and Collaboration Agreements with Denali, and Ares (an affiliate of ~~September 30, 2017 and December 31, 2016, respectively.~~

~~Revenue Recognition~~

~~The Company~~Merck KGaA, Darmstadt, Germany) which were determined to be within the scope of ASC 606.

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized under ASC 606, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination as to whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations.

Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer. The promised goods or services in the Company’s contracts with customers primarily consist of license rights to the Company’s intellectual property for research and development, research and development services, options to acquire additional research and development services, and options to obtain additional licenses, such as a commercialization license for a potential product candidate. Promised goods or services are considered distinct when: (i) the customer can benefit from the good or service on its own or together with other readily available resources; and (ii) the promised good or service is separately identifiable from other promises in the contract.

In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own and whether the required expertise is readily available. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining promises, whether the value of the promise is dependent on the unsatisfied promises, whether there are other vendors that could provide the remaining promises, and whether it is separately identifiable from the remaining promises. The Company estimates the transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of the potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected value method to estimate variable consideration to include in the transaction price based on which method better predicts the amount of consideration expected to be received. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company

re-evaluates

the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative

catch-up

basis in the period of adjustment.

After the transaction price is determined, it is allocated to the identified performance obligations based on the estimated standalone selling price. 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, probabilities of technical and regulatory success and the estimated costs. 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 amounts the Company would expect to receive for each performance obligation.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time based on the use of an input method. The Company accounts for contract modifications as a separate contract if both of the following conditions are met:

(i)	the scope of the contract increases because of the addition of promised goods or services that are distinct; and

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(ii)	the price of the contract increases by an amount of consideration that reflects standalone selling prices of the additional promised goods or services and any appropriate adjustments to that price to reflect the circumstances of the particular contract.

If a contract modification is deemed to not be a separate contract, then the transaction price is updated and allocated to the remaining performance obligations (both from the existing contract and the modification). Previously recognized revenue for goods and services that are not distinct from the modified goods or services is adjusted based upon an updated measure of progress for the partially satisfied performance obligations.

If a contract modification is deemed to be a separate contract, any revenue recognized under the original contract is not retrospectively adjusted and any performance obligations remaining under the original contract continue to be recognized under the terms of that contract.

The Company’s collaboration revenue arrangements include the following:

Up-front

License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable,

up-front

fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from

non-refundable,

up-front

fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: The Company’s collaboration agreements may include development and regulatory milestones. The Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company

re-evaluates

the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative

catch-up

basis, which would affect collaboration revenue and net loss in the period of adjustment.

Customer Options: The Company evaluates the customer options to obtain additional items (i.e., additional license rights) for material rights, or options to acquire additional goods or services for free or at a discount. Optional future services that reflect their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations and are accounted for as separate contracts. If optional future services include a material right, they are accounted for as performance obligations. The Company determines an estimated standalone selling price of any material rights for the purpose of allocating the transaction price. The Company considers factors such as the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised or expires.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the ~~following criteria are met: there is persuasive evidence~~royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any revenue related to sales-based royalties or milestone payments based on the level of an arrangement, the fee is fixed or determinable, delivery has occurred or services have been rendered and collection of the related receivable is reasonably assured. Generally, these criteria were met and revenue from grants from the NIH, which subsidized certain of the Company’s research projects, as efforts were expended and as eligible project costs were incurred.

sales.

Research and Development ~~Costs~~

~~Research~~Services: The promises under the Company’s collaboration agreements may include research and development ~~expenses consist primarily~~services to be performed by the Company on behalf of ~~costs incurred for~~ the ~~Company’s research activities, including discovery efforts, and the development of product candidates, which include:~~

~~expenses incurred under agreements with third parties, including contract research organizations,~~partner. Payments or CROs, that conduct research, preclinical activities and clinical trials on the Company’s behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in the Company’s preclinical and clinical trials;

~~salaries, benefits and other related costs, including stock-based compensation expense, for personnel in~~reimbursements resulting from the Company’s research and development ~~functions;~~

efforts are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts.

Research and development costs

Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including compensation expense, share-based compensation and benefits, facilities costs and laboratory supplies, depreciation, amortization and impairment expense, manufacturing expenses and external costs of outside ~~consultants, including their fees, stock-based compensation~~vendors engaged to conduct preclinical development activities and ~~related travel expenses;~~

clinical trials as well as the cost of ~~laboratory supplies~~licensing technology. Typically, upfront payments and ~~acquiring, developing and manufacturing preclinical study and clinical trial materials;~~

~~costs related to compliance with regulatory requirements; and~~

~~facility-related expenses, which include direct depreciation costs and allocated expenses~~milestone payments made for ~~rent and maintenance~~the licensing of ~~facilities and other operating costs.~~

~~The Company expenses~~technology are expensed as research and development ~~costs~~in the period in which they are incurred, except for payments relating for intellectual property rights with future alternative use which will be expensed when the intellectual property is in use. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as ~~incurred.~~ prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

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Warrants

The Company recognizes external development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors and its clinical investigative sites. Paymentsaccounts for ~~these activities are~~warrants within stockholders equity or as liabilities based on the ~~terms~~characteristics and provisions of each instrument. The Company evaluates outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. If none of the ~~individual agreements, which may differ from the pattern of costs incurred, and are reflected~~criteria in the ~~Company’s consolidated financial statements as prepaid or accrued research and development expenses.~~

~~Warrants~~

~~The Company reviews~~evaluation in these standards are met, the ~~terms of all~~ warrants ~~issued and classifies the warrants~~are classified as a component of ~~permanent~~stockholders’ equity ~~if they are freestanding financial instruments that are legally detachable~~ and separately exercisable, contingently exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the warrants must require physical settlement and may not provide any guarantee of value or return. Warrants that meet these criteria are initially recorded at their grant date fair value ~~and are not subsequently remeasured.~~without subsequent remeasurement. Warrants that ~~do not~~ meet ~~this~~the criteria are classified as liabilities and remeasured to their fair value at the end of each reporting period.

Stock-Based Compensation

The Company accounts for ~~all stock-based~~share-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”(“ASC 718”). ASC 718 requires companies to estimate the fair value of equity-based payment awards ~~granted~~on the date of grant. The value of the portion of the award that is ultimately expected to ~~employees~~vest is recognized as an expense over the requisite service period in the Company’s consolidated statements of operations and ~~nonemployees~~comprehensive loss.

The Company records the expense for option awards using a ~~fair value~~graded vesting method. The ~~Company’s stock-based payments include stock options and grants of common stock, including common stock subject~~Company accounts for forfeitures as they occur. For share-based awards granted to ~~vesting. The~~

non-employee

consultants, the measurement date for ~~employee~~

non-employee

awards is the date of ~~grant, and stock-based~~grant. The compensation ~~costs are~~expense is then recognized ~~as expense~~ over the ~~employees’~~ requisite service period, which is ~~generally~~ the vesting period of the respective award.

The Company reviews stock award modifications when there is an exchange of original award for a new award. The Company calculates for the incremental fair value based on ~~a straight-line basis. The measurement date for nonemployee awards is~~ the ~~date the services are completed, resulting in periodic adjustments to stock-based compensation during the vesting period for changes in~~difference between the fair value of the ~~awards. Stock-based~~modified award and the fair value of the original award immediately before it was modified. The Company immediately recognizes the incremental value as compensation ~~costs~~cost for ~~nonemployees are recognized as expense~~vested awards and recognizes, on a prospective basis over the ~~vesting~~remaining requisite service period, the sum of the incremental compensation cost and any remaining unrecognized compensation cost for the original award on the modification date.

The fair value of stock options (“options”) on the grant date is estimated using the Black-Scholes option-pricing model using the single-option approach. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including the option’s expected term and the price volatility of the underlying stock, to determine the fair value of the award.

Historically, given the absence of an active market for the ordinary shares of

F-star

Ltd, the board of directors determined the estimated fair value of the Company’s equity instruments based on input from management, which utilized the most recently available independent third-party valuation, and considered a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector. Each valuation methodology included estimates and assumptions that require judgment. These estimates and assumptions included a number of objective and subjective factors in determining the value of

F-star

Ltd ordinary shares at each grant date. The expected volatility for F star Ltd was calculated based on reported volatility data for a representative group of publicly traded companies for which historical information was available. The historical volatility was calculated based on a ~~straight-line basis. Stock-based~~period of time commensurate with the assumption used for the expected term. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.

F-star

Ltd used the simplified method, under which the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term.

F-star

Ltd utilized this method due to the lack of historical exercise data and the plain nature of its share-based awards.

The Company uses the remaining contractual term for the expected life of

non-employee

awards. The expected dividend yield is assumed to be zero, as the Company has never paid dividends and has no current plans to pay any dividends.

The Company classifies share-based compensation expense ~~is classified~~ in ~~the accompanying~~its consolidated statements of operations and comprehensive loss ~~based on~~in the ~~department to~~same manner in which the ~~related services~~award recipient’s payroll costs are ~~provided.~~

~~Financial Instruments~~

classified or in which the award recipient’s service payments are classified.

Fair value measurements of financial instruments

The Company’s financial instruments consist of cash, ~~equivalents, marketable securities,~~ accounts payable, CVRs and liability classified warrants. The carrying amounts of cash ~~and cash equivalents~~ and accounts payable approximate their fair value due to the short-term nature of those financial instruments. The fair value of CVRs and the ~~marketable securities and~~ liability classified warrants are remeasured to fair value each reporting ~~period~~period.

Fair value is defined as ~~described~~the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in ~~Note 5.~~

the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820,

Fair Value ~~Measurements~~

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (“ASC”) 820, ~~Fair Value Measurements and Disclosures~~ (“Measurement

(“ASC 820”), establishes a fair value hierarchy ~~of inputs used when available.~~for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ~~The~~

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ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy ~~applies only to~~that distinguishes between the ~~valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:~~

following:

Level ~~1—Valuations based on unadjusted quoted~~1 — Quoted prices in active markets for identical assets or ~~liabilities that the Company has the ability to access at the measurement date.~~

liabilities.

Level ~~2—Valuations based on~~2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or ~~for which all significant~~similar assets or liabilities, or other inputs that are observable ~~either directly~~ or ~~indirectly.~~

can be corroborated by observable market data.

Level ~~3—Valuations that require~~3 — Unobservable inputs that ~~reflect the Company’s own assumptions~~are supported by little or no market activity that are ~~both~~ significant to determining the fair value ~~measurement~~of the assets or liabilities, including pricing models, discounted cash flow methodologies and ~~unobservable.~~

similar techniques.

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

The ~~Company’s assets~~carrying amounts reflected in the consolidated balance sheets for cash and ~~liabilities measured at fair value on a recurring basis include~~ cash equivalents, ~~marketable securities~~ and ~~warrant liabilities.~~

other current assets, research and development incentives receivable, accounts payable and accrued liabilities and other current liabilities approximate their fair values, due to their short-term nature.

Net ~~Loss Per Share~~

~~Basic~~loss per share

The Company computes net loss per share ~~is computed by dividing~~in accordance with ASC Topic 260,

Earnings Per Share

(“ASC 260”) and related guidance, which requires two calculations of net (loss) income attributable to the Company’s shareholders per share to be disclosed: basic and diluted. Convertible preferred shares are considered participating securities and are included in the calculation of basic and diluted net ~~loss by~~(loss) income per share using the ~~weighted-average number of~~

two-class

method. In periods where the Company reports net losses, such losses are not allocated to the convertible preferred shares ~~of common stock outstanding~~ for the ~~period.~~ computation of basic or diluted net (loss) income.

Diluted net ~~loss~~(loss) income per share is ~~computed by dividing~~ the same as basic net (loss) income per share for the periods in which the Company had a net loss bybecause the ~~weighted-average number~~inclusion of ~~shares of common stock and dilutive~~outstanding common stock equivalents ~~outstanding~~would be anti-dilutive.

Income taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the ~~period, determined using~~expected future tax consequences of events that have been recognized in the ~~treasury-stock method and~~consolidated financial statements or in the as if-converted method, for convertible securities, if inclusion of these instruments is dilutive. As of September 30, 2017 and December 31, 2016, both methods are equivalent. Common stock, preferred stock and warrant issuances are described further in Note 7.

~~Income Taxes~~

Company’s tax returns. Deferred tax assets and liabilities are determined ~~based upon~~on the basis of the differences between the consolidated financial ~~statement carrying amounts~~statements and ~~the~~ tax basis of ~~existing~~ assets and liabilities ~~and for loss and credit carryforwards~~ using enacted tax rates ~~expected to be~~ in effect infor the ~~years~~year in which the differences are expected to reverse. ~~Deferred~~Changes in deferred tax assets and liabilities are ~~reduced by a valuation allowance if~~recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that ~~some~~all or a portion ~~or all~~ of the deferred tax ~~asset~~assets will not be ~~realized.~~

realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company ~~assesses its income tax positions and records tax benefits based upon management’s evaluation of~~accounts for uncertainty the ~~facts, circumstances and information available at~~consolidated financial statements by applying a

two-step

process to determine the ~~reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest~~ amount of tax benefit ~~with a greater than 50%~~to be recognized. First, the tax position must be evaluated to determine the likelihood ~~of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where~~that it ~~is not more likely than not that a tax benefit~~ will be sustained noupon external examination by the taxing authorities. If the tax position is deemed

more-likely-than-not

to be sustained, the tax position is then assessed to determine the amount of benefit ~~is recognized~~to recognize in the consolidated financial statements. The ~~Company classifies~~amount of the benefit that may be recognized is the largest amount that will more likely than not be realized upon ultimate settlement. Any provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and ~~penalties associated with such uncertain~~penalties.

Research and development tax ~~positions~~credits received in the United Kingdom are recorded as a ~~component of interest expense. As of September 30, 2017 and December 31, 2016, the Company has not identified any material uncertain tax positions.~~

~~Guarantees and Indemnifications~~

As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.

~~The Company leases office space in Hopkinton, Massachusetts and~~reduction to research and development ~~space~~expenses. The U.K. research and development tax credit is payable to the Company after surrendering tax losses and is not dependent on current or future taxable income. As a result, it is not reflected as part of the income tax provision If, in ~~Milford, Massachusetts,~~the future, any UK research and development tax credits generated are utilized to offset a corporate income tax liability in the United Kingdom, that portion would be recorded as a benefit within the income tax provision and any refundable portion not dependent on taxable income would continue to be recorded as a reduction to research and development expenses.

Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential loss range is probable and reasonably estimable under ~~non-cancelable operating leases.~~the provisions of the authoritative guidelines that address accounting for contingencies. The Company ~~has standard indemnification arrangements under these leases that require it~~expenses costs as incurred in relation to ~~indemnify~~such legal proceedings as general and administrative expense within the landlords against liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or nonperformance under the Company’s lease.

~~Through September 30, 2017, the Company had not experienced any losses related to these indemnification obligations~~consolidated statements of operations and ~~no material claims were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently, concluded that the fair value~~comprehensive loss.

Table of ~~these obligations is negligible, and no related reserves were established.~~

Contents

Segment Information

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision maker, the Company’s chief executive officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and does not track expenses on a

program-by-program

basis.

Recently Issued Accounting Pronouncements

In ~~November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which includes provisions intended to clarify how entities present restricted cash and restricted cash equivalents in the statement of cash flows. Companies must show the change in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The new standard is applied retrospectively and is effective for our annual periods beginning after December 15, 2017, and for interim periods within those annual periods, with early adoption permitted. The Company elected early adoption of this standard as of September 30, 2017, the first period in which the Company had restricted cash. The adoption of this standard has resulted in the presentation of the change in cash, cash equivalents and restricted cash on the statement of cash flows in the periods presented.

~~In March~~June 2016, the FASB issued ASU ~~2016-09,~~ ~~Compensation – Stock Compensation~~No.

2016-13,

Measurement of Credit Losses on Financial Instruments

(“ASU

2016-13”).

ASU

2016-13

will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and

held-to-maturity

debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. In November 2019, the FASB issued ASU No.

2019-10,

Financial Instruments — Credit Losses (Topic ~~718)~~326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): ~~Improvements~~Effective Dates

to ~~Employee Share-Based Payment Accounting~~ (“amend the effective date of ASU ~~2016-09”)~~

2016-13,

for entities eligible to ~~require changes~~be “smaller reporting companies,” as defined by the SEC, to several areas of employee stock-based compensation payment accounting in an effort to simplify stock-based compensation reporting. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, forfeitures, and intrinsic value accounting for private entities. ASU 2016-09 isbe effective for ~~annual reporting periods~~fiscal years beginning after December 15, ~~2016,~~2022, including interim ~~reporting~~ periods within ~~each annual reporting period.~~those fiscal years. Early adoption is permitted. The Company ~~adopted this standard on January 1, 2017. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, and forfeitures. Prior~~has not elected to adoption, the Company applied a 0% forfeiture rate to stock-based compensation, resulting in no cumulative effect adjustment to the opening period. Upon adoption of this standard, the Company’s accounting policy is to recognize forfeitures as they occur.

The update requires the Company to recognize the income tax effect of awards in the income statement when the awards vest or are settled. It also allows the Company to repurchase more of an employee’s shares than it could prior to the update for tax withholding purposes without triggering a liability. The income tax related items had no effect on the current period presentation and the Company maintains a full valuation allowance against its deferred tax assets.

~~In May 2014, the FASB issued~~early adopt ASU

No. ~~2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606) (“ASC 606”), which amends the guidance for revenue recognition to replace numerous industry-specific requirements. ASC 606 implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. ASC 606 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in ASC 606 are effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. In July 2015, the FASB approved the deferral of adoption by one year. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Until the Company expects material revenue to be recognized, the adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities, which amends ASC Subtopic 825-10,~~ ~~Financial Instruments - Overall~~, and includes updates on certain aspects of recognition, measurement, presentation and disclosure of financial instruments and applies to all entities that hold financial assets or owe financial liabilities. The new standard is effective for the Company for the annual period beginning after December 15, 2017, with early adoption permitted. 2016-13.

The Company is currently evaluating the potential impact that the adoption of ~~this standard may~~ASU

2016-13

will have on ~~its consolidated~~the Company’s financial ~~statements.~~

~~In February 2016,~~position and results of operations.

2. Business Combination

As described in Note 1, on November 20, 2020,

F-star

Ltd completed a business combination with Spring Bank. For accounting purposes, the ~~FASB~~purchase price was based on (i) the fair value of Spring Bank common stock as of the Transaction date of $21.5 million, which was determined based on the number of shares of common stock issued ~~ASU 2016-02,~~ ~~Leases (Topic 842), which supersedes~~in connection with the ~~current leasing guidance~~Transaction, and ~~upon adoption, will require lessees~~(ii) the portion of the fair value attributable to ~~recognize right-of-use~~

in-the-money

fully and partially vested stock options and warrants.

Under the acquisition method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and ~~lease~~assumed liabilities based on their fair values as of the acquisition date. Any excess purchase price over the fair value of assets acquired and liabilities assumed is allocated to goodwill. Acquired

in-process

research and development assets will be classified as indefinite-lived intangible assets and will be amortized over their estimated useful economic lives when put into use. The fair values of acquired

in-process

research and development assets were calculated using an income approach based on the ~~balance sheet~~expected future cash flows associated with the respective asset using an estimated discount rate of 14%. In addition, on the date of the Transaction, there were 73,337 outstanding equity classified warrants with a fair value of $0.2 million and 408,444 outstanding liability classified warrants with a fair value of $0.2 million.

Goodwill is allocated to one reporting unit. The goodwill was primarily attributable to the access

F-star

gained to a public listing on the Nasdaq Capital Market. The Company determined that the underlying goodwill and intangible assets are not deductible for ~~all leases with terms longer than 12 months.~~tax purposes.

For the year ended December 31, 2020, the Company incurred acquisition-related expenses of approximately $4.2 million, which are included in general and administrative expenses. The ~~new standard~~purchase price is ~~effective~~allocated to the fair value of assets and liabilities acquired as follows (in thousands, except shares of common stock and fair value per share):


Number of shares of common stock		4,449,559
Multiplied by fair value per share of common stock	$	4.84

Purchase price	$	21,536

Cash and cash equivalents	$	9,779
Marketable securities		5,000
Prepaid expenses and other assets		935
Operating lease right of use asset		2,784
Intangible assets		4,720
Goodwill		10,451
Accounts payable, accrued expenses and other liabilities		(5,453	)
CVRs		(2,520	)
Liability and equity based warrants		(422	)
Deferred tax liability		(576	)
Operating lease liability		(3,162	)

Fair value of net assets acquired	$	21,536

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A liability was recognized for the ~~Company~~CVRs assumed by the Transaction. The fair value estimate for the ~~annual period beginning after December 15, 2018,~~CVRs was estimated at $2.5 million and ~~can be early adopted by applying a modified retrospective approach for leases existing at, and entered into~~is based on the probability-weighted achieved over the estimated period. Any change in the fair value of the CVRs to the acquisition date, including changes from events after the ~~beginning~~acquisition date, such as changes in the Company’s estimate will be recognized in earnings in the period the estimated fair value changes. The Company’s estimated range of possible outcomes was up to $26.0

million. A change in fair value of the ~~earliest comparable period presented~~CVRs c

uld have a material effect on the statement of operations and financial position in the ~~financial statements. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.~~

~~In September 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230,~~ ~~Statement of Cash Flows~~, and includes provisions intended to reduce diversity in practice and provides guidance on eight specific statements of cash flows classification issues. The new standard is effective for the Company for the annual period ending after December 15, 2017, and for annual and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.

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

change in estimate.

~~2. NET LOSS PER SHARE~~

3. Net Loss Per Share

The following table summarizes the computation of basic and diluted net loss per share of the Company for such periods (in thousands, except share and per share data):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Net loss

$
(10,828
)

$
(4,148
)

$
(26,217
)

$
(14,966
)
Weighted-average number of common shares-basic and diluted

12,696,986

7,759,630

10,555,461

6,856,876

Net loss per common share-basic and diluted

$
(0.85
)

$
(0.53
)

$
(2.48
)

$
(2.18
)


	For the Three Months Ended March 31,
	2021			2020
Net loss	$	(9,869	)	$	(7,159	)
Weighted average number shares outstanding, basic and diluted		9,100,273			1,826,070
Net loss income per common, basic and diluted	$	(1.08	)	$	(3.92	)

Diluted net loss per share of common ~~share~~stock is the same as basic net loss per share of common ~~share~~stock for all periods presented.

The following potentially ~~dilutive~~

ilutive securities outstanding, prior to the use of the treasury stock method or

if-converted

method, have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact due to the losses reported:

For the Three and Nine Months Ended September 30,

2017

2016

Common stock warrants

1,798,084

153,347

Stock options

977,565

718,065


	For the Three Months Ended March 31,
	2021		2020
Convertible debt		—		179,404
Common stock warrants		93,330		—
Stock options, and RSUs		1,241,435		257,599

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3. ~~INVESTMENTS~~

~~Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity~~Property, plant and ~~preserve capital.~~

~~The following table summarizes the Company’s investments, by category, as of September 30, 2017~~equipment, net

Property, plant and ~~December 31, 2016 (in thousands):~~

September 30,

December 31,

Investments - Current:

2017

2016

Debt securities - available for sale

$
34,640

$
14,046

Total

$
34,640

$
14,046

��

Investments - Noncurrent:

Debt securities - available for sale

$
—

$
752

Total

$
—

$
752

~~A summary of the Company’s available-for-sale classified investments~~equipment, net consisted of the following (in thousands):

At September 30, 2017

Cost
Basis

Unrealized
Gains

Unrealized
Losses

Fair
Value

Investments - Current:

Commercial paper

$
14,345

$
—

$
—

$
14,345

Corporate bonds

18,309

—

(7
)

18,302

United States treasury securities

1,993

—

—

1,993

Total

$
34,647

$
—

$
(7
)

$
34,640

At December 31, 2016

Cost
Basis

Unrealized
Gains

Unrealized
Losses

Fair
Value

Investments - Current:

Agency bonds

$
452

$
—

$
—

$
452

Commercial paper

2,947

—

—

2,947

Corporate bonds

8,499

—

(7
)

8,492

United States treasury securities

2,155

—

—

2,155

Total

$
14,053

$
—

$
(7
)

$
14,046

Investments - Noncurrent:

Corporate bonds

752

—

—

752

Total

$
752

$
—

$
—

$
752


	March 31,		December 31
	2021		2020
Leasehold improvements	$	160	$	15
Laboratory equipment		1,865		1,788
Furniture and office equipment		165		169

		2,190		1,972
Less: Accumulated depreciation		1,127		1,183

	$	1,063	$	789

Depreciation expense for the three months ended March 31, 2021 and 2020 was $0.1 million and $0.2 million, respectively

4. Fair Value Measurements

The ~~amortized cost~~following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):


	Fair Value Measurements as of March 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Contingent value rights	$	—	$	—	$	2,520	$	2,520
Warrants		—		—		11		11

	$	—	$	—	$	2,531	$	2,531


	Fair Value Measurements as of December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Contingent value rights	$	—	$	—	$	2,520	$	2,520
Warrants		—		—		37		37

	$	—	$	—	$	2,557	$	2,557

There was 0 change in fair value of the ~~Company’s available-for-sale investments, by contract maturity, as of September 30, 2017 consisted of the following (in thousands):~~

Amortized Cost

Fair Value

Due in one year or less

$
34,647

$
34,640

Due after one year through two years

—

—

Total

$
34,647

$
34,640

~~4. PROPERTY AND EQUIPMENT, NET~~

~~Property and equipment as of September 30, 2017 and December 31, 2016 consisted of the following (in thousands):~~

September 30,

December 31,

2017

2016

Equipment

$
683

$
576

Furniture and fixtures

144

140

Leasehold improvements

149

133

Total property and equipment

976

849

Less: accumulated depreciation and amortization

(442
)

(327
)
Property and equipment, net

$
534

$
522

~~Depreciation and amortization expense~~contingent value rights for the three ~~and nine~~ months ended ~~September 30, 2017 was $39,000 and $115,000, respectively. Depreciation and amortization expense for the three and nine months ended September 30, 2016 was $30,000 and $87,000, respectively.~~

~~5. FAIR VALUE MEASUREMENTS~~

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its commercial paper and fixed income securities within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.

~~A summary of the assets and liabilities that are measured at fair value as of September 30, 2017 and December~~March 31, ~~2016 is as follows (in thousands):~~

Fair Value Measurement at
September 30, 2017

Carrying
Value

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:

Money market funds ⁽¹⁾

$
15,164

$
15,164

$
—

$
—

Fixed income securities

34,640

—

34,640

—

Total

$
49,804

$
15,164

$
34,640

$
—

Liabilities:

Warrant liabilities

$
17,807

$
—

$
—

$
17,807

Total

$
17,807

$
—

$
—

$
17,807

Fair Value Measurement at
December 31, 2016

Assets:

Carrying
Value

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Money market funds ⁽¹⁾

$
9,507

$
9,507

$
—

$
—

Fixed income securities

14,798

—

14,798

—

Total

$
24,305

$
9,507

$
14,798

$
—

Liabilities:

Warrant liabilities

$
6,333

$
—

$
—

$
6,333

Total

$
6,333

$
—

$
—

$
6,333

~~(1)~~

~~Money market funds are included within cash and cash equivalents in the accompanying consolidated balance sheets are recognized at fair value.~~

2021. The following table reflects the change in the Company’s Level 3 liabilities, which consists ~~of the~~ warrants, ~~issued in a private placement in November 2016 (see Note 7),~~ for the period ended ~~September 30, 2017~~March 31, 2021 (in thousands):

November Private
Placement Warrants

Balance at December 31, 2015

$
—

     Issuance of warrants

8,275

     Change in fair value

(1,942
)
Balance at December 31, 2016

6,333

     Change in fair value

11,474

Balance at September 30, 2017

$
17,807


	November 2016 Private
	Placement Warrants
Balance at December 31, 2020	$	37
Warrants exercised		26

Balance at March 31, 2021	$	11

Table of Contents~~6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES~~

5. Accrued Expenses and other Current Liabilities

Accrued expenses as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 consisted of the following (in thousands):

September 30,

December 31,

2017

2016

Clinical

$
1,159

$
738

Compensation and benefits

750

901

Accounting and legal

281

279

Other

122

64

Total accrued expenses

$
2,312

$
1,982

~~7. STOCKHOLDERS’ EQUITY~~

~~Common and Preferred Stock~~

~~Effective February 1, 2016, the Company amended and restated its license agreement with BioHEP Technologies Ltd. (“BioHEP”).~~


	March 31,		December 31
	2021		2020
Clinical Trial Costs	$	2,482	$	3,394
Severance		1,692		1,953
Compensation and Benefits		1,147		1,361
Professional Fees		1,418		1,593
Other		323		1,160

	$	7,062	$	9,461

6. Warrants

In connection with Spring Bank’s initial public offering (“IPO”) in 2016, there was an issuance of warrants to the ~~amendment and restatement, the Company issued 125,000~~sole book-running manager to purchase 7,087 shares of ~~its~~ common ~~stock to BioHEP and granted to BioHEP a warrant to purchase an additional 125,000 shares of its common stock~~stock. The warrants were exercisable at an exercise price of ~~$16.00~~$60.00 per share ~~which warrant will expire~~and expired on ~~August 1, 2018.~~May 5, 2021. The ~~fair value~~Company evaluated the terms of the ~~common stock as of the date of issuance, $2.0 million, was expensed as research~~warrants and ~~development costs.~~

~~In May~~concluded that they should be equity-classified. At March 31, 2021 there were 7,087 warrants outstanding.

During 2016, the Company issued and sold in its IPO an aggregate of 944,900 shares of its common stock at $12.00 per share, which included 24,900 shares that represented the exercise of an option to purchase additional shares granted to the underwriters in connection with the IPO. The offering resulted in $8.2 million of net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses payable by the Company. Upon the closing of the Company’s IPO, the Company filed an amended and restated certificate of incorporation, which authorized the Company to issue 200,000,000 shares of common stock and 10,000,000 shares of preferred stock. In connection with the closing of the IPO, the Company received approximately $5.3 million in proceeds upon the exercise of previously issued warrants to purchase 641,743 shares of common stock of the Company.

~~Upon the closing of the Company’s IPO, all outstanding shares of the Company’s preferred stock automatically converted into 250,000 shares of the Company’s common stock.~~

~~In November 2016, the Company~~Spring Bank entered into a definitive agreement with respect to the private placement of ~~1,644,737~~411,184 shares of common stock and warrants to purchase ~~1,644,737~~411,184 shares of common stock (the “November 2016 Private Placement Warrants”) to a group of accredited ~~investors (the “November Private Placement”). These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock.~~investors. The November 2016 Private Placement Warrants are exercisable at an exercise price of $10.79 per share and expire on November 23, 2021. The Company completed the November Private Placement on November 23, 2016, resulting in $13.7 million in net proceeds to the Company, after deducting placement agent fees and other offering expenses payable by the Company.

In June 2017, the Company issued and sold in an underwritten public offering an aggregate of 3,269,219 shares of its common stock at $13.00 per share, which included 384,604 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The offering resulted in $39.6 million of net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

~~In August 2017, the Company entered into a Controlled Equity Offering~~Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may offer and sell, from time to time through Cantor, shares of the Company’s common stock having an ~~aggregate~~ ~~offering price of up to $50.0 million. The Company will pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale.~~

~~Warrants~~

In connection with the amendment and restatement of a license agreement with BioHEP, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to BioHEP (the “BioHEP Warrant”), effective February 1, 2016. The Company evaluated the terms of the warrant and concluded that it should be equity-classified. The fair value of the warrant, $0.8 million, was estimated on the issuance date using a Black Scholes pricing model based on the following assumptions: an expected term of two and a half years, expected stock price volatility of 71%, a risk free rate of 1.01%, and a dividend yield of 0%. The fair value was expensed as research and development costs.

In connection with the Company’s IPO, the Company issued to the sole book-running manager for the IPO a warrant to purchase 27,600 shares of common stock in May 2016 and a warrant to purchase 747 shares of common stock in June 2016 (together, the “IPO Warrants”). The IPO Warrants are exercisable at an exercise price of $15.00 per share and expire on May 5, 2021. The Company evaluated the terms of the IPO Warrants and concluded that they should be equity-classified. The fair value of the May 2016 IPO Warrants was estimated on the applicable issuance dates using a Black Scholes pricing model based on the following assumptions: an expected term of 4.99 years; expected stock price volatility of 87%; a risk free rate of 1.20%; and a dividend yield of 0%. The fair value of the June 2016 IPO Warrants was estimated on the applicable issuance dates using a Black Scholes pricing model based on the following assumptions: an expected term of 4.92 years; expected stock price volatility of 87%; a risk free rate of 1.23%; and a dividend yield of 0%. The aggregate fair value of the IPO Warrants was $0.2 million.

The Company received approximately $5.3 million in proceeds upon the exercise of warrants to purchase 641,743 shares of its common stock of the Company, which were exercised in connection with the closing of the IPO. Upon the closing of the Company’s IPO, all of the outstanding warrants that were not exercised, except the BioHEP warrant and the IPO Warrants, terminated in accordance with their original terms.

In connection with the November Private Placement, the Company issued the November Private Placement Warrants to purchase 1,644,737 shares of common stock in November 2016 to a group of accredited investors. The November Private Placement Warrants are exercisable at an exercise price of $10.79$43.16 per share and expire on November 23, 2021. The Company evaluated the terms of these warrants and concluded that they are liability-classified. ~~In November 2016, the Company recorded the fair value of these warrants of approximately $8.3 million using a Black Scholes pricing model.~~ The Company must recognize any change in the value of the warrant liability each reporting period in the statement of ~~operations.~~operations and comprehensive loss. As of ~~December~~March 31, ~~2016 and September 30, 2017,~~2021, the fair value of the November 2016 Private Placement Warrants was approximately ~~$6.3 million~~$11,000 and ~~$17.8 million, respectively (see Note 5).~~

~~A summary~~388,451 warrants have been exercised to date. At March 31, 2021, there were 19,993 warrants outstanding.

During 2019, Spring Bank entered into a loan agreement with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., pursuant to which Spring Bank issued to the lenders warrants to purchase 62,500 shares of common stock (the “Pontifax Warrants”). The Pontifax Warrants are exercisable at $8.32 per share and expire on September 19, 2025. The Company evaluated the ~~Black Scholes pricing model assumptions used to record the fair value~~terms of the warrants ~~is as follows:~~

and concluded that they should be equity-classified. At March 31, 2021, there were 62,500 warrants outstanding.

September 30, 2017

December 31, 2016

Risk-free interest rate

1.8
%

1.9
%
Expected term (in years)

4.1

4.9

Expected volatility

70.0
%

65.5
%
Expected dividend yield

0
%

0
%

During 2019, Spring Bank issued warrants to a service provider to purchase 3,750 shares of common stock (the “September 2019 Warrants”). The ~~following table summarizes~~September 2019 Warrants are exercisable at an exercise price of $16.84 per share and expire on September 19, 2021. The Company evaluated the terms of the warrants and concluded that they should be equity-classified. At March 31, 2021, there were 3,750 warrants outstanding.

A summary of the warrant activity for the ~~year ended December 31, 2016 and for the nine~~three months ended ~~September 30, 2017:~~

March 31, 2021 is as follows:

	~~Warrants~~
	Warrants
Outstanding at December 31, ~~2015~~ 2020		~~1,181,776~~ 144,384
~~Grants~~ Exercises		~~1,798,084~~ (51,054	)
~~Exercises~~		~~(641,743~~	)
~~Expirations/cancellations~~ Outstanding at March 31, 2021		~~(540,033~~ 93,330	)
~~Outstanding at December 31, 2016~~		~~1,798,084~~
~~Grants~~		—
~~Exercises~~		—
~~Expirations/cancellations~~		—
~~Outstanding at September 30, 2017~~		~~1,798,084~~

~~2014~~

7.	Stock Option Plans

Incentive Plans

On June 14, 2019, as part of a group restructuring, the

F-star

Ltd board of directors and shareholders approved the 2019 Plan. The initial maximum number of ordinary shares that could be issued under the 2019 Plan was 2,327,736. This number consisted of 1,922,241 new ordinary shares and 405,495 new ordinary shares as replacements for grants under the previous

F-star

group entities’ legacy share option schemes (the

F-star

Alpha Limited Share Option Scheme, the

F-star

Beta Share Option Scheme and the GmbH

F-star

EMI Share Option Scheme). In addition, the GmbH Employee Share Option Plan was transferred to

F-star

Ltd from GmbH. This plan grants the beneficiaries participation rights only, beneficiaries would receive a proportion of the exit proceeds realized by shareholders, but the plan does not grant the right to purchase shares. The transfer of the participation rights occurred at the same exchange ratio as used for the exchange of GmbH shares for shares issued by

F-star

Ltd.

Table of Contents

Awards granted under the 2019 Plan generally vest over a

four-year service period with 28% of the award vesting on the first anniversary of the commencement date and the balance vesting monthly over the remaining three years. Awards generally expire 10 years from the date of the grant. For certain senior members of management and directors, the board of directors approved an alternative vesting schedule.

As result of the Transaction, the share reserve automatically increased on January 1

of the year following the year in which a Nasdaq listing occurred, in an amount equal to 4% of the total number of shares outstanding as of December 31 of the preceding year. As a result, there were additional 364,005 shares to be issued for the 2019 plan. As of March 31, 2021, there were 67,986 shares available for issuance under the 2019 Plan.

In conjunction with the Transaction, all issued and outstanding

F-star

Ltd share options granted under the three

F-star

Ltd legacy equity incentive plans became exercisable in full immediately prior to the Closing. At the Closing, all issued share options and RSUs granted by

F-star

Ltd under the 2019 Plan were replaced by the Replacement Options and Replacement RSUs on the same terms (including vesting), for Company common stock, based on the Exchange Ratio. The Company determined that the exchange of

F-star

Ltd awards for the Company awards would be accounted for as a modification of awards under ASC 718. The Company concluded that the modification would not affect the number of awards expected to vest or the service period over which compensation expense related to awards would be recognized, since the vesting schedule applicable to each Replacement Option would be the same as the vesting schedule applicable to the original option that it replaced. In addition, the Replacement RSUs and Replacement Options are subject to substantially the same terms and conditions as the original RSUs and original options, respectively, and did not provide holders of the Replacement Options or Replacement RSUs with any additional benefits that the holders did not have under their original options or original RSUs. In addition, the fair value of an award tranche immediately after modification was less than the fair value of that award tranche immediately before modification. Therefore, total compensation cost recognized for the Replacement RSUs and Replacement Options equaled the grant-date fair value of the original awards, and the Company continues to recognize the grant date fair values of the modified awards over their respective service periods.

Amended and Restated 2015 Stock Incentive Plan

In ~~April 2014,~~March 2018, the ~~Company’s Board~~Spring Bank board of ~~Directors~~directors approved Spring Bank’s Amended and Restated 2015 Stock Incentive Plan (the “Amended and Restated 2015 Plan” and, together with the Spring Bank’s 2014 Stock Incentive Plan (the “2014 ~~Plan”~~Plan), the “Stock Incentive Plans”). ~~The Company’s 2014 Plan provides for the issuance~~Upon receipt of common stock, stock options and other stock-based awards to employees, officers, directors, consultants, and advisors. As of September 30, 2017, the Board had authorized 750,000 shares of common stock to be issued under the 2014 Plan. The Company’sstockholder approval at Spring Bank’s 2018 annual meeting in June 2018, Spring Bank’s 2015 Stock Incentive Plan ~~(the “2015 Plan”) became effective immediately prior to~~was amended and restated in its entirety, increasing the closing of the Company’s IPO on May 11, 2016. Upon the effectiveness of the 2015 Plan, 116,863 shares of common stock that remained available for grant under the 2014 Plan became available for grant under the 2015 Plan, and no further awards were available to be issued under the 2014 Plan.

~~2015 Stock Incentive Plan~~

The 2015 Plan provides for the issuance of common stock, stock options and other stock-based awards to employees, officers, directors, consultants and advisors of the Company. The number of shares reserved for issuance under the 2015 Plan is the sum of 750,000 shares of common stock, plus the number of shares equal to the sum of (i) 116,863 shares of common stock, which was the number of shares reserved for issuance under the 2014 Plan that remained available for grant under the 2014 Plan immediately prior to the closing of the Company’s IPO, and (ii) theauthorized number of shares of common stock ~~subject~~reserved for issuance by 800,000 shares. Pursuant to the Amended and Restated 2015 Plan, there are 1,666,863 shares authorized for issuance. In addition, to the extent any outstanding awards under the 2014 Plan ~~that~~ expire, terminate, or are otherwise surrendered, cancelled or ~~forfeited.~~forfeited after the closing of Spring Bank’s IPO, those shares are added to the authorized shares under the Amended and Restated 2015 Plan. The total number of shares authorized for issuance under both the 2014 Plan and the Amended and Restated 2015 Plan is 2,300,000.

Pursuant to the Exchange Agreement, all outstanding options to purchase Company common stock were accelerated immediately prior to the Closing and each outstanding option with an exercise price ~~of stock options cannot be~~ less than the ~~fair value~~trading price of the Company common stock as of the close of trading on the ~~date~~Closing Date was exercised in full and all other outstanding options to purchase Company common stock were cancelled effective as of ~~grant. Stock options awarded under~~ the ~~2015 Plan expire 10 years after the grant date, unless the Board sets a shorter term.~~Closing Date. As of ~~September 30, 2017,~~March 31, 2021, the Company had ~~472,087~~268,363 shares available for issuance under the Amended and Restated 2015 Plan.

~~The following table summarizes the~~

Stock option ~~activity for the nine months ended September 30, 2017, under the 2014 Plan and the 2015 Plan (collectively the “Plans”):~~

valuation

Options

Weighted-Average
Exercise Price
Per Share

Aggregate
Intrinsic
Value

Options outstanding at December 31, 2015

610,481

$
11.99

$
—

     Granted

128,334

10.41

—

     Exercised

(10,247
)

9.28

29,550

     Cancelled

(24,253
)

9.89

—

Outstanding at December 31, 2016

704,315

$
11.82

—

     Granted

286,500

8.20

—

     Exercised

(10,000
)

9.28

11,228

     Cancelled

(3,250
)

12.44

—

Options outstanding at September 30, 2017

977,565

$
10.78

$
5,923,320

Options exercisable at September 30, 2017

390,417

$
11.67

$
2,019,924

~~As of September 30, 2017, all options granted are expected to vest and the weighted-average remaining contractual life of all options is 8.4 years.~~

The ~~weighted-average~~ fair value of ~~all~~ stock ~~options granted~~option grants is estimated using the Black-Scholes option-pricing model with the following assumptions:


	March 31,			December 31
	2021			2020

Risk-free interest rate		0.36	%	0.17%-0.42%
Expected volatility		87.8	%	82.8%-98.3%
Expected dividend yield		0	%	0%
Expected life (in years)		5.1		5.1

Expected Term

—The expected term represents management’s best estimate for the ~~nine months ended September 30, 2017~~options to be exercised by option holders.

Volatility

—Since

F-star

Ltd did not have a trading history for its common stock, the expected volatility was ~~$5.67. Intrinsic value at September 30, 2017 is based on~~derived from the ~~closing price~~historical stock volatilities of comparable peer public companies within its industry, whose businesses were considered to be comparable to that of

F-star

Ltd, over a period equivalent to the expected term of the share-based awards. After the Closing of the Transaction, the volatility of the Company’s ~~common stock of $16.84 per share.~~

~~Prior~~Common Stock is used to ~~the Company’s IPO on May 11, 2016, the Board determined the estimated fair value~~determine volatility of the ~~Company’s common stock on the date of~~share-based awards at grant based on a number of objective and subjective factors, including third party valuations. Since the IPO, the fair value of the Company’s common stock on the date of the grant is based on the closing price per share of the common stock on the NASDAQ Capital Market on the date of grant. date.

Risk-Free Interest Rate

—The computation of expected volatility is based on the historical volatilities of peer companies. The peer companies include organizations that are in the same industry, with similar size and stage of growth. The Company estimates that the expected life of the options granted using the simplified method allowable under the SEC’s Staff Accounting Bulletin No. 107, ~~Share Based Payments. The~~risk-free interest rate is based on the U.S. Treasury ~~bill rates~~yield curve in effect at the date of grant for

zero-coupon

U.S. ~~treasury bills~~Treasury notes with ~~terms commensurate~~maturities approximately equal to the share-based awards’ expected term.

Dividend Rate

—The expected dividend is zero, as the Company has not paid nor does it anticipate paying any dividends on its common stock in the foreseeable future.

Table of Contents

Fair Value of Common Stock

— Prior to the Transaction,

F-star

Ltd estimated fair value used three different methodologies: the income approach, the market approach, and cost approach. The income approach uses the estimated present value of economic benefits. The market approach exams observable market values for similar assets or securities. The cost approach uses the concept of replacement cost as an indicator of value and the notion that an investor would pay no more for an asset that what it would cost to replace the asset with one of equal utility. After the ~~expected term~~Closing of the ~~option grants on the grant date of the option. The Company accounts for stock option forfeitures when they occur.~~

~~There were no stock options granted prior to 2015. The assumptions the Company used to determine~~Transaction, the fair value of ~~stock~~the Company’s Common Stock is used to estimate the fair value of the share-based awards at grant date.


	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)

Outstanding as of December 31, 2020		533,559		$	3.33		9.30	$	8,494
Granted		444,186			7.93		—		—
Exercised		(203	)		0.12		—		—
Forfeited		(14,188	)		0.12		—		—

Outstanding as of March 31, 2021		963,354		$	5.50		9.19	$	6,863

Options exercisable at March 31, 2021		139,916		$	8.29		7.35	$	1,648

The weighted average grant date fair value of options granted during the three months ended March 31, 2021 and the year ended December 31, 2020, was $6.70 and $14.45 per share, respectively. The total fair value of options vested during the three months ended March 31, 2021 and the year ended December 31, 2020, was $2.8 million and $2.0 million, respectively.

Restricted Stock Units

Time-Based Restricted Stock Units

In February 2021, the Company issued 310,385 time-based RSUs to employees and directors under the Amended and Restated 2015 Plan. The weighted average grant date fair value of the time-based RSUs was $8.57 for the three months ended March 31, 2021. The vesting for the time-based RSUs occurs either immediately, after one year or after four years. For the three months ended March 31, 2021, the Company recognized approximately $0.9 million in ~~2017 and 2016 are as follows, presented on a weighted-average basis.~~

Nine Months Ended September 30,

2017

2016

Risk-free interest rate

2.0
%

1.4
%
Expected term (in years)

6.0

6.1

Expected volatility

79.8
%

77.6
%
Expected dividend yield

0
%

0
%
expenses related to the time-based RSUs.

The following table ~~summarizes~~is a rollforward of all RSU activity under the ~~stock-based compensation expense~~Stock Incentive Plans for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020:


			Weighted- Average
	Restricted		Grant Date
	Stock Units		Fair Value
Total nonvested units at December 31, 2020		69,749	$	11.73
Granted		310,385		8.57

Total nonvested units at March 31, 2021		380,134	$	9.27

Share-based compensation

The Company recorded share-based compensation expense in the following expense categories for the year ended March 31, 2021 and ~~2016, under the Plans~~2020 of its consolidated statements of operations and comprehensive loss (in thousands):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Stock-based compensation:

Research and development

$
121

$
104

$
402

$
286

General and administrative

389

274

1,081

729

Total Stock-based compensation

$
510

$
378

$
1,483

$
1,015

~~The fair value of stock options vested during the nine months ended September 30, 2017 was $1,275,000.~~


	March 31,		March 31,
	2021		2020
Research and development expenses	$	414	$	124
General and administrative expenses		1,766		410

	$	2,180	$	534

At ~~September 30, 2017,~~March 31, 2021, there was ~~$3,875,000~~$8.5 million of unrecognized stock-based compensation expense relating to stock options granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of ~~2.3~~3.5 years.

~~Reserved Shares~~

At March 31, 2021, there was $2.4 million of unrecognized stock-based compensation expense relating to the time-based RSUs granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of 3.44 years.

Table of Contents

8. Significant agreements

License and Collaboration agreements

For the three months ended March 31, 2021 and 2020, the Company had License and Collaboration agreements (“LCAs”) with Denali and Ares. The following table summarizes the revenue recognized in the Company’s consolidated statements of operations and comprehensive loss from these arrangements, (in thousands):


	Three Months Ended March 31,
	2021		2020
Revenue by collaboration partner
Ares	$	2,800	$	895
Denali		117		460

Total	$	2,917	$	1,355

License and collaboration agreement with Denali Therapeutics Inc.

Summary

In August 2016, Biotechnology,

F-star

Gamma Limited (a related party until May 30, 2018)

(“F-star

Gamma”), and GmbH entered into a license and collaboration agreement (the “Denali LCA”) with Denali. The goal of the collaboration was the development of certain constant Fc domains of an antibody with

non-native

antigen binding activity (“Fcabs”), to enhance delivery of therapeutics across the blood brain barrier into the brain. The collaboration was designed to leverage

F-star

Gamma’s modular antibody technology and Denali’s expertise in the development of therapies for neurodegenerative diseases. In connection with the entry into the collaboration agreement, Denali also purchased from the

F-star

Gamma shareholders an option, which was referred to as the

buy-out-option,

to acquire all of the outstanding shares of

F-star

Gamma pursuant to a

pre-negotiated

share purchase agreement.

On May 30, 2018, Denali exercised such

buy-out

option and entered into a share purchase agreement (the “Purchase Agreement”) with the shareholders of

F-star

Gamma and Shareholder Representative Services LLC, pursuant to which Denali acquired all of the outstanding shares of

F-star

Gamma (the “Acquisition”).

As a result of ~~September 30,~~the Acquisition,

F-star

Gamma has become a wholly owned subsidiary of Denali and Denali changed the entity’s name to Denali BBB Holding Limited. In addition, Denali became a direct licensee of certain of

F-star’s

intellectual property (by way of Denali’s assumption of

F-star

Gamma’s license agreement with Biotechnology (the

“F-star

Gamma License”)). Denali made initial exercise payments to Biotechnology and the former shareholders of

F-star

Gamma under the Purchase Agreement and the

F-star

Gamma License, in the aggregate, of $18.0 million, less the net liabilities of

F-star

Gamma, which were approximately $0.2 million. $4.0 million was payable to the Company. In addition, Denali is required to make future contingent payments, to the Company and the former shareholders of

F-star

Gamma, with a maximum aggregate of $437.0 million upon the achievement of certain defined preclinical, clinical, regulatory, and commercial milestones. Of this total, a maximum of $91.4 million is payable to the Company. The total amount of the contingent payments varies, based on whether the Company delivers an Fcab that meets

pre-defined

criteria and whether the Fcab has been identified solely by the Company or solely by Denali or jointly by the Company and Denali.

Under the terms of the Denali LCA, Denali was granted the right to nominate up to three Fcab targets for approval (“Accepted Fcab Targets”), within the first three years of the date of the agreement. Upon entering into the Denali LCA, Denali had selected transferrin receptor as the first Accepted Fcab Target and paid an upfront fee of $5.5 million to

F-star

Gamma, which included selection of the first Accepted Fcab Target. In May 2018, Denali exercised its right to nominate two additional Fcab targets and identified a second Accepted Fcab Target. Denali made a

one-time

payment to the

F-star

group for the two additional Accepted Fcab Targets of $6.0 million and extended the time period for its selection of the third Accepted Fcab Target until August 2020.

Denali also agreed to be responsible for certain research costs incurred by

F-star

in conducting activities under each agreed development plan for up to 24 months.

Under the terms of the Denali LCA,

F-star

Gamma was prohibited from developing, commercializing and manufacturing any antibody or other molecule that incorporated any Fcab directed to an Accepted Fcab Target, or any such Fcab as a standalone product, and from authorizing any third party to take any such action.

Revenue recognition

The Company has considered the performance obligations identified in the contracts and concluded that the grant of intellectual property rights is not distinct from the provision of R&D services, as the R&D services are expected to significantly modify the early-stage intellectual property. As a result, the grant of intellectual property rights and the provision of R&D services has been combined into a single performance obligation for this contract.

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The initial transaction price for first Accepted Fcab Target was deemed to be $7.1 million consisting of $5.0 million for the grant of intellectual property rights and $2.1 million for R&D services, and $5.1 million for the second Accepted Fcab Target consisting of $3.0 million for the grant of intellectual property rights and $2.1 million for R&D services. During the year ended December 31, 2019, the transaction price for the first Accepted Fcab was increased to $6.6 million due to achievement of a $1.5 million milestone that on initial recognition of the contract was not included in the transaction price, as it was not deemed probable that a reversal would not occur in a future reporting period.

All performance obligations in respect of the first Accepted Fcab Target identified in the contract were deemed to have been fully satisfied during the year ended December 31, 2019.

During the three months ended March 31, 2021 and 2020, the Company recognized $0.1 million and $0.5 million, respectively, over time in respect of the second Accepted Fcab target.

2019 License and collaboration agreement with Ares Trading S.A.

In June 2017, Delta entered into an LCA and ~~2016,~~an Option Agreement with Ares (the “Ares LCA”). The purpose of the Ares LCA was for the companies to collaborate on the development of tetravalent bispecific antibodies against five drug target pairs. The Option Agreement granted Ares a call option to acquire the entire issued share capital of Delta. Under the Ares LCA, Delta was obligated to use commercially reasonable efforts to perform research and development activities on the five selected target pairs, under mutually agreed research plans. The activities were governed by a joint steering committee formed by an equal number of representatives from both parties.

On May 14, 2019, the Ares LCA agreement with Ares was amended and restated to convert the existing purchase option over the entire share capital of Delta to an intellectual property licensing arrangement that included the exclusive grant of development and exploitation rights to one tetravalent bispecific antibody directed against immuno-oncology targets and the option to acquire the exclusive right to an additional antibody. As part of the amended Ares LCA, Delta gained exclusive rights to FS118, now

F-star’s

lead product candidate, which is currently in a

proof-of-concept

clinical trial. As discussed further below, this amended and restated Ares LCA was accounted for a separate contract, rather than a contract amendment.

For the exclusive rights granted in relation to the first molecule, an option fee of $11.1 million was paid by Ares to Delta. Following receipt of the option fee, Ares becomes responsible for the development of the molecule and development, regulatory and sales-based royalties become payable to Company upon achievement of specified events. Delta is eligible to receive $71.6 million in development milestones and $83.9 million in regulatory milestones.

For the second antibody included within the amended and restated agreement, Delta is obliged to perform research activities under plans agreed by both parties. Ares will pay for all R&D costs half-yearly in advance until the company delivers the data package specified in the research plan. Ares can then elect to pay a fee of $14.0 million to exercise their option to take an exclusive intellectual property license, which allows them to control the development and exploitation of the molecule. Following receipt of the option fee, Ares is responsible for the development of the molecule and development, regulatory and sales-based royalties become payable to Delta upon achievement of specified events. Delta is eligible to receive $48.7 million in development milestones and $61.6 million in regulatory milestones.

Development milestone payments are triggered upon achievement by each product candidate of a defined stage of clinical development and regulatory milestone payments are triggered upon approval to market a product candidate by the U.S. Food and Drug Administration or other global regulatory authorities. Sales-based milestones are payable based upon aggregate annual worldwide net sales in all indications of all licensed products. Delta is eligible to receive $168.0 million in sales-based milestones. In addition, to the extent that any product candidates covered by the exclusive licenses granted to Ares are commercialized, Delta will be entitled to receive a single digit royalty based on a percentage of net sales on a

country-by-country

basis.

On July 15, 2020, a deed of amendment (the “2020 Amendment”) was enacted in respect of the May 13, 2019, amendment to the Ares LCA. The 2020 Amendment had two main purposes (i) to grant additional options to acquire intellectual property rights for a further two molecules; and (ii) to allow Ares to exercise its option early to acquire intellectual property rights to the second molecule included in the agreement as well as to terminate the R&D services.

Revenue recognition

Management has considered the performance obligations identified in the contracts and concluded that the option for the grant of intellectual property rights is not distinct from the provision of R&D services in the agreements, as the R&D services are expected to significantly modify the early-stage intellectual property. As a result, the option for the grant of intellectual property rights and the provision of R&D services has been combined into a single performance obligation for all molecules under the original contract and each individual molecule included in the May 13, 2019 amendment to the Ares LCA. The Company recognizes revenue using the

cost-to-cost

method, which it believes best depicts the transfer of control of the services to the customer. Under the

cost-to-cost

method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation.

All performance obligations in the original Ares LCA were deemed to have been fully satisfied on termination of the original Ares LCA on May 13, 2019, and no further revenue is expected to be recognized. The total transaction price for the Ares LCA, as amended, was initially determined to be $15.4 million, consisting of the upfront payment and research and development funding for the research term. Variable consideration to be paid to the company upon reaching certain milestones had been excluded from the calculation, as at the inception of the contract, it was not probable that a significant reversal of revenue recognized would not occur in a subsequent reporting period.

Table of Contents

There were two components identified in the 2020 Amendment, each of which was accounted for as a separate performance obligation. The grant of the additional options to acquire intellectual property rights was deemed to be distinct, as the customer can benefit from it on its own, and it is independent of the delivery of other performance obligations in the original contract. Additionally, as the amount of consideration reflects a standalone selling price, the Company determined that the second component is accounted for as a separate contract.

In the three months ended March 31, 2021, $0.9 million was recognized in relation to the first antibody included in the 2020 Amendment.

The second component that allows the customer to exercise its option to acquire intellectual property rights early is considered to be a modification of the original contract, as the option is not independent of the R&D services provided under the original contract, and therefore the goods and services are not distinct. The Company updated the transaction price and measure of progress for the performance obligation relating to this molecule.

As a result of the 2020 Amendment, the maximum amount payable by Ares on the achievement of certain development and regulatory milestones in the aggregate was increased to $479.3 million, and the maximum amount payable on the achievement of certain commercial milestones was increased to $295.7 million.

In the three months ended March 31, 2021, Ares provided notice of its intention to exercise its option granted under the 2020 Amendment to acquire the intellectual property rights for an additional molecule. $2.7 million was recognized at a point in time in respect of the option exercise.

Summary of Contract Assets and Liabilities

Up-front

payments and fees are recorded as deferred revenue upon receipt or when due until such time as the Company satisfies its performance obligations under these arrangements. A contract asset is a conditional right to consideration in exchange for goods or services that the Company has ~~reserved~~transferred to a customer. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

The following table presents changes in the balances of the Company’s contract assets and liabilities (in thousands):


Three Months Ended March 31, 2021	Balance at December 31, 2020		Recognized			Impact of exchange rates			Balance at March 31, 2021
Contract liabilities:
Ares collaboration	$	37	$	(37	)	$	0		$	0
Denali collaboration		263		(117	)		(146	)		0

Total deferred revenue	$	300	$	(154	)	$	(146	)	$	0

During the three months ended March 31, 2021, all revenue recognized by the Company as a result of changes in the contract liability balances in the respective periods was based on proportional performance.

9. Commitments and Contingencies

Lease Obligations

On January 27, 2021, the Company signed an operating lease for three years for its corporate headquarters in Cambridge, United Kingdom. The Company also has leases for the former Spring Bank headquarters and laboratory space in Hopkinton, Massachusetts, which are being subleased. The Company’s leases have remaining lease terms of approximately 7.6 years for its former principal office and laboratory space, which includes an option to extend the lease for up to five years, and approximately 0.2 years for its former headquarters. The Company’s former locations are being subleased through the remainder of the lease term.

Operating lease costs under the leases for the three months ended March 31, 2021 were approximately $0.2 million. Total operating lease costs for the three months ended March 31, 2021, were offset by an immaterial amount for sublease income.

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The following table summarizes the Company’s maturities of operating lease liabilities as of March 31, 2021 (in thousands):


Periods
For the period April 1, 2021 to December 31, 2021	$	801
2022		843
2023		854
2024		474
2025		486
Thereafter		1,444

Total lease payments	$	4,902

Sublease

The Company subleases two former Spring Bank

ffices in Hopkinton, Massachusetts. Operating sublease income under operating lease agreements for the year ended December 31, 2020 was immaterial. Operating sublease income under operating lease agreements for the three months ended March 31, 2021 was an immaterial amount. These subleases have remaining lease terms of 0.1 years and 7.3 years. Future expected cash receipts from subleases as of March 31, 2021 is as follows (in thousand):


Period
For the period April 1, 2021 to December 31, 2021	$	56
2022		462
2023		474
2024		486
2025		498
Thereafter		1,481

Total sublease receipts	$	3,457

Service Agreements

As of March 31, 2021 and December 31, 2020, the Company had contractual commitments of $3.6 million and $4.7 million, respectively, with a contract manufacturing organization (“CMO”) for activities that are ongoing or are scheduled to start between three and nine months of the date of the statement of financial position. Under the terms of the agreement with the CMO, the Company is committed to pay for some activities if those activities are cancelled up to three, six or nine months prior to the commencement date.

11. Subsequent Events

Loan and Security Agreement

On April 1, 2021, the Company entered into the Loan and Security Agreement with Horizon Technology Finance Corporation as lender and collateral agent for itself. The Loan and Security Agreement provides

for

(4) separate and independent $

2.5

million term loans (“Loan A”, “Loan B”, “Loan C”, and “Loan D”) (with each of Loan A, Loan B, Loan C and Loan D, individually a “Term Loan” and, collectively, the “Term Loans”), whereby, upon the satisfaction of all the conditions to the funding of the Term Loans, each Term Loan would be delivered by Horizon to the Company in the following manner: (i) Loan A was to be delivered by Horizon to the Company prior to April 1, 2021, (ii) Loan B was required to be delivered by Horizon to the Company prior to April 1, 2021, (iii) Loan C is required to be delivered by Horizon to the Company prior to June 30, 2021, and (iv) Loan D is required to be delivered by Horizon to the Company prior to June 30, 2021. The Company may only use the proceeds of the Term Loans for working capital or general corporate purposes as contemplated by the Loan and Security Agreement. The Company drew down $

million on April 1, 2021.

The term note matures on the

48-month

anniversary following the funding date. The principal balance the Term Loan bears a floating interest. The interest rate is calculated initially and, thereafter, each calendar month as the sum of (a) the per annum rate of interest from time to time published in The Wall Street Journal as contemplated by the Loan and Security Agreement, or any successor publication thereto, as the “prime rate” then in effect, plus (b) 6.25%; provided that, in the event such rate of interest is less than 3.25%, such rate shall be deemed to be 3.25% for purposes of calculating the interest rate. Interest is payable on a monthly basis based on each Term Loan principal amount outstanding the preceding month.

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The Company may, at its option upon at least five business days’ written notice to Horizon, prepay all or any portion of the outstanding Term Loan by simultaneously paying to Horizon an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Term Loan so prepaid; plus (ii) an amount equal to (A) if such Term Loan is prepaid on or before the Loan Amortization Date (as defined in the Loan and Security Agreement) applicable to such Term Loan, three percent of the then outstanding principal balance of such Term Loan, (B) if such Term Loan is prepaid after the Loan Amortization Date applicable to such Term Loan, but on or before the date that is 12 months after such Loan Amortization Date, two percent of the then outstanding principal balance of such Term Loan, or (C) if such Term Loan is prepaid more than 12) months after the Loan Amortization Date applicable to such Term Loan, one percent of the then outstanding principal balance of such Term Loan; plus (iii) the outstanding principal balance of such Term Loan; plus (iv) all other sums, if any, that had become due and payable under the Loan and Security Agreement.

In connection with the entry into the Loan and Security Agreement, the Company has issued to Horizon warrants (each, individually, a “Warrant” and, collectively, the “Warrants”) to purchase an aggregate number of shares of the Company’s common stock in an amount equal to $100,000 divided by the price for ~~potential conversion~~each respective Warrant. If at any time the Company files a registration statement relating to an offering for its own account, or the account of others, of any of its equity securities, the Company has agreed to include such number of shares underlying the Warrants in such registration statement as requested by the holder.

The Warrants, which are exercisable for an aggregate of 42,236 shares, will be exercisable for a period of seven years at a

per-share

exercise price of $9.47, which is equal to the

10-day

average closing price prior to January 15, 2021, the date on which the term sheet relating to the Loan and Security Agreement was entered into, subject to certain adjustments as specified in the Warrant.

Sales Agreement

On March 30, 2021, the Company entered into the 2021 Sales Agreement with SVB Leerink with respect to an

”at-the-market”

(“ATM”) offering program under which the Company could offer and sell, from time to time at its sole discretion, shares of its common stock, par value

$0.0001 per share, having an aggregate offering price of up to $50.0 million (the “Placement Shares”) through SVB Leerink as its sales agent.

Upon delivery of a placement notice in April 2021, and subject to the terms and conditions of the ~~exercise~~2021 Sales Agreement, SVB Leerink began to sell the Placement Shares. Under the 2021 Sales Agreement, the Company agreed to pay SVB Leerink a commission equal to three percent of ~~warrants~~the gross sales proceeds of any Placement Shares, and ~~outstanding options~~also provided SVB Leerink with customary indemnification and ~~issuance~~contribution rights. As of May 6, 2021, the Company had issued and sold 979,843 shares, ~~available~~ for ~~grant under~~gross proceeds of $9.5 million, resulting in net proceeds of $9.2 million after deducting sales commissions.

On May 6, 2021, the ~~2015 Plan:~~

Company terminated the 2021 Sales Agreement.

September 30,

2017

2016

2016 BioHEP warrants

125,000

125,000

2016 IPO warrants

28,347

28,347

November Private Placement warrants

1,644,737

—

2014 and 2015 Stock incentive plans

1,449,652

1,475,000

Total

3,247,736

1,628,347

~~8. COMMITMENTS AND CONTINGENCIES~~

~~Leases~~

~~In April 2015,~~

On May 6, 2021, the Company entered into an ~~amendment to the lease for its research and development facility in Milford, Massachusetts to extend the term~~underwriting agreement with SVB Leerink, as representative of the ~~lease through March 31, 2018 and expand the leased laboratory space.~~

~~In March 2016, the Company entered into a new operating lease for its headquarters in Hopkinton, Massachusetts with a lease term through May 31, 2021. The total payments due during the term~~underwriters, relating to an underwritten public offering of approximately 9.3 million shares of the ~~lease are approximately $771,000.~~

Rent paid for the three and nine months ended September 30, 2017 was $59,000 and $174,000, respectively. Rent paid for the three and nine months ended September 30, 2016 was $56,000 and $110,000, respectively.

~~Future minimum commitments due under all leases at September 30, 2017 are as follows (in thousands):~~

Year

2017

$
59

2018

174

2019

157

2020

164

Thereafter

70

Total minimum lease payments

$
624

~~See subsequent events (Note 10) regarding a new lease commitment that the Company entered into after September 30, 2017.~~Company’s common stock, par value $0.0001 per share. The ~~commitments under the new lease agreement are not included~~underwritten public offering resulted in ~~the table above.~~

~~BioHEP Technologies Ltd. License Agreement~~

~~In January 2016, the Company entered into an amended and restated license agreement with BioHEP, which became effective on February 1, 2016.~~

Under the amended and restated license agreement, the Company agreed to pay BioHEP up to $3.5 million in development and regulatory milestone payments for disease(s) caused by each distinct virus for which the Company develops licensed product(s). BioHEP is also eligible to receive tiered royalties in the low-to-mid single-digits on net product salesgross proceeds of licensed products by the Company and its affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues the Company and its affiliates receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses.

~~Contingencies~~

The Company accrues for contingent liabilities to the extent that the liability is probable and estimable. There are no accruals for contingent liabilities in these consolidated financial statements.

During May 2015, the Company entered into a transition agreement with the Company’s former President and Chief Executive Officer. Under the transition agreement, he continued to serve as the Company’s president and chief executive officer for a transition period that ended on August 17, 2015. Following the transition period, the Company made 18 monthly payments totaling $464,000 and also provided benefits consistent with the coverage that was provided prior to the execution of the transition agreement. There was no remaining unpaid balance relating to this obligation at September 30, 2017.

~~9. RELATED PARTY TRANSACTIONS~~

During the nine months ended September 30, 2016, the Company reimbursed BioHEP, a greater than five percent stockholder as of September 30, 2016, $14,000 for legal expenses that BioHEP incurred in connection with entering into the amended and restated license agreement.$65.0 million. The Company incurred ~~no such payments during~~$3.9 million in issuance costs associated with the ~~nine months ended September 30, 2017.~~

~~10. SUBSEQUENT EVENTS~~

underwritten public offering, resulting in net proceeds to the Company of $61.1 million.

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Item 2.

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

The ~~Company has evaluated subsequent events through~~following information should be read in conjunction with the ~~date~~unaudited financial information and the notes thereto included in this Quarterly Report on ~~which the consolidated financial statements were issued, to ensure that this submission includes appropriate disclosure of events both recognized in~~Form

10-Q

and the consolidated financial statements and ~~events which occurred subsequently but were not recognized in the consolidated financial statements.~~

On October 4, 2017, the Company entered into a lease agreement (the “New Lease”) in Hopkinton, Massachusetts. The premises covered by the New Lease will serve as the Company’s new principal office and laboratory space. The initial term of the New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations to the premises covered by the New Lease. The Company has the option to extend the New Lease one time for an additional 5-year period. Following an eleven-month rent abatement period, the Company will be obligated to make monthly rent payments in the amount of $34,533, which is subject to increase by approximately 3% annuallynotes thereto for the ~~first five years~~year ended December 31, 2020, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K filed with the ~~New Lease~~SEC on March 30, 2021.

Our actual results and ~~by approximately 2.5% annually thereafter. The total lease payments~~the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements due ~~during the term of the lease are approximately $4.4 million. In addition, the Company is responsible~~to various important factors, risks and uncertainties, including, but not limited to, those set forth under ~~the New Lease for specified costs and charges, including certain operating expenses, utilities, taxes and insurance.~~

~~Item 2.~~

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

~~You should read the following discussion and analysis of financial condition and results of operations together with Part I, Item 1“Financial~~“Forward-Looking Statements” ~~and related notes~~ included elsewhere in this Quarterly Report on Form ~~10-Q.~~

~~Overview~~

~~We are a clinical-stage biopharmaceutical company engaged~~

10-Q

or under “Risk Factors” in the discovery and development of a novel class of therapeutics using our proprietary small molecule nucleic acid hybrid, or SMNH, chemistry platform. Our SMNH compounds are small segments of nucleic acids that we design to selectively target and modulate the activity of specific proteins implicated in various disease states. We are developing our most advanced SMNH product candidate, inarigivir soproxil (formerly known as SB 9200), which we refer to as inarigivir, for the treatment of certain viral diseases. We have designed inarigivir to selectively activate within infected cells the cellular proteins, retinoic acid-inducible gene 1 (RIG-I) and nucleotide-binding oligomerization domain-containing protein 2 (NOD2), to inhibit viral replication and to cause the induction of intracellular interferon signaling pathways for antiviral defense. We believe that inarigivir may play an important role in antiviral therapy by modulating the body’s immune response through its mechanisms of action to fight viral infections. We are also developing other SMNH product candidates, including SB 11285, an immunotherapeutic agent for the treatment of selected cancers through the activation of the STimulator of INterferon Genes, or STING, pathway.

~~RIG-I Product Candidates~~

~~We are currently developing inarigivir for the treatment of chronic hepatitis B virus, or HBV. We are conducting~~ Part AI, Item 1A of our Phase 2 ACHIEVE multi-center clinical trial of inarigivir in Canada, Hong Kong, Korea and Taiwan. Part A of the Phase 2 ACHIEVE trial is a randomized, placebo-controlled, multiple ascending dose trial in up to 80 non-cirrhotic patients infected with chronic HBV using doses of 25 mg, 50 mg, 100 mg and 200 mg of inarigivir as a monotherapy administered daily for 12 weeks. Following this treatment, all patients will receive treatment with the oral antiviral agent tenofovir disoproxil fumarate (marketed by Gilead Sciences, Inc., or Gilead, as Viread®), which we refer to as Viread, as a monotherapy for 12 weeks. Patients will be sequentially enrolled into one of the four dose cohorts and randomized between the inarigivir dose group or placeboAnnual Report on a 4:1 basis. Patients are stratified based on HBeAg positive (+) or negative (–) status. HBeAg is a non-structural protein which is secreted by the virus and whose presence in blood, or HBeAg–positive, is indicative of wild type or non-mutated virus with high levels of viral replication. The loss of HBeAg occurs secondary to mutations in the virus and results in a patient becoming HBeAg negative with a resulting lower level of actively replicating virus. The primary endpoints of Part A of the Phase 2 ACHIEVE clinical trial are safety and antiviral activity, as measured by the change in HBV DNA at week 12 from baseline. Multiple exploratory secondary endpoints include reduction or loss of hepatitis B surface antigen, or HBsAg, and HBeAg, quantitative HBV RNA as a marker for control of virus production and studies of immune activity.

In May 2017, we reported top-line results from the first inarigivir monotherapy dosing cohort of Part A of the Phase 2 ACHIEVE clinical trial indicating that a low dose (25mg) of inarigivir alone showed a favorable safety profile and antiviral activity against HBV DNA and HBsAg. The first inarigivir monotherapy dosing cohort consisted of 11 HBeAg-positive and 9 HBeAg–negative patients, of which 80% were genotype B/C, the most common Asian genotypes. Administration of inarigivir resulted in a statistically ~~significant reduction in HBV DNA at week 12 (unpaired t-test 2.85, p=0.01) compared to placebo, with a mean reduction of 0.6 log~~₁₀ ~~(range 0 to 1.87 log~~₁₀~~) in the inarigivir treatment group. For the secondary endpoint of reduction or loss of HBsAg, 5 of 16 patients (31%) in the inarigivir treatment group had a greater than 0.5 log~~₁₀ ~~reduction at any time point (range 0.52 to 1.01 log~~₁₀~~), compared to none in the placebo group. The 7 HBeAg–negative patients in the inarigivir treatment group had the greatest mean reduction in HBV DNA at 0.9 log~~₁₀~~, and 3 of these 7 patients also had a greater than 0.5 log~~₁₀ reduction in HBsAg. The overall safety profile of inarigivir was favorable with no serious adverse events observed during the 12 week study. Treatment-emergent adverse events ranged from mild to moderate in severity with no interferon-like side effects and were comparable to patients on placebo.

In October 2017, we reported additional results from the first cohort of Part A of the Phase 2 ACHIEVE clinical trial consisting of patient data from 12 weeks of Viread monotherapy treatment that followed 12 weeks of inarigivir (25mg) monotherapy treatment. Treatment with Viread monotherapy during weeks 12-24 of the first cohort induced potent suppression of HBV DNA in all patients including placebo, and 6 of 16 patients (38%) in the inarigivir treatment group had a greater than 0.5 log₁₀ ~~reduction in HBsAg at week 24, which included 3 HBeAg-positive patients. An associated greater than 0.75 log~~₁₀ reduction in HBeAg was seen in 4 of 9 (44%) HBeAg-positive patients in the inarigivir treatment group, compared to zero of four (0%) in the placebo group. We believe this data suggests an enhanced effect of Viread in the inarigivir treated patients and is supportive of the proposed combination strategy that will be evaluated in Part B of the Phase 2 ACHIEVE trial, as discussed below.

Form 10-K

We expect to report top-line results from the second inarigivir monotherapy dosing cohort (50mg) of Part A of the Phase 2 ACHIEVE clinical trial in the fourth quarter of 2017, and to report top-line monotherapy results for all patients treated with inarigivir alone in the second half of 2018.

~~Part B of the Phase 2 ACHIEVE clinical trial, which we expect to initiate in the second half of 2018, will consist of 12 weeks of combination treatment with inarigivir (100mg) and Viread. Following this treatment, all patients will receive treatment with Viread as a monotherapy for 12 weeks.~~ We expect to initiate Part B of this clinical trial in the second half of 2018. Both Parts A and B of the Phase 2 ACHIEVE clinical trial are being conducted under our clinical trial supply and collaboration agreement with Gilead.

We have entered into multiple collaborations and seek to enter into additional collaborations with third parties that are investigating and/or developing compounds for the treatment of chronic HBV with different pharmacological mechanisms of action than inarigivir. Pursuant to this strategy, in 2016, we entered into an agreement with Arrowhead Pharmaceuticals, Inc., or Arrowhead, to collaborate on the study of the combined use of inarigivir and Arrowhead’s small interfering ribonucleic acid, or siRNA, product pipeline for the treatment of chronic HBV. Under this collaboration with Arrowhead, we agreed first to study the co-administration of both agents in preclinical models, with the potential to be added to a clinical study. We have also entered into a material transfer agreement with a third party to conduct preclinical experiments examining the co-administration of inarigivir with a capsid inhibitor for the potential treatment of patients infected with chronic HBV. Additionally, in July 2017, we entered into a clinical trial collaboration with Gilead under which Gilead will fund and conduct a Phase 2 trial examining the co-administration of inarigivir and tenofovir alafenamide (marketed by Gilead as Vemlidy®) in patients infected with chronic HBV. ~~The protocol for this Phase 2~~ ~~clinical~~ ~~trial provides that treatment will consist of 12 weeks of combination therapy with inarigivir (50mg) and Vemlidy. Following this treatment, all patients will receive treatment with Vemlidy as a monotherapy for 12 weeks. We anticipate that Gilead will initiate this clinical trial in the first quarter of 2018.~~

~~We are also pursuing the development of the co-formulation of inarigivir with Viread and with entecavir (marketed as Baraclude®), which we refer to~~ as Baraclude, as potential fixed-dose combination products for the treatment of patients with chronic HBV who may benefit from the combined use of inarigivir as a potential immunomodulatory agent, and Baraclude or Viread, as the antiviral agent. We anticipate that the fixed-dose combination product(s) could result in enhanced patient compliance and potentially allow for a more favorable safety profile. We have conducted early development work on a co-formulation of inarigivir with Viread and believe that inarigivir with Viread is compatible in the same formulation. We believe that the immunomodulatory activity provided by inarigivir could become a key component of a future combinatorial treatment of patients infected with chronic HBV, which could increase the percentage of chronic HBV patients who achieve a functional cure.

~~STING Agonist Product Candidates~~

~~We are developing~~ SB 11285, a novel proprietary STING agonist, as a potential immunotherapeutic agent for the treatment of selected cancers. Recent published scientific literature indicates that the activation of the STING pathway can result in the induction of cellular interferons and cytokines and promote an aggressive and strong anti-tumor response through the induction of innate and adaptive immune response. In our preclinical studies performed in ~~in vitro~~ ~~systems, SB 11285 has been observed to cause the induction of interferon and other cytokines, as well as cell death, or apoptosis, of multiple tumor-derived cell lines.~~

~~We continue to conduct preclinical studies of SB 11285 in multiple~~ ~~in vivo~~ ~~cancer models. In 2017, we have presented data from~~ ~~in vivo~~ studies in the A20 lymphoma, CT26 colon carcinoma, B16 melanoma and orthotopic4T1 breast cancer syngeneic mouse models at various industry conferences, including the March 2017 Cancer Immunology and Immunotherapy Keystone Symposia, the June 2017 American Society of Clinical Oncology (ASCO) Annual Meeting and the October 2017 American Association for Cancer Research (AACR) Conference on Tumor Immunology and Immunotherapy.~~SB 11285 was evaluated~~ ~~for~~ tumor growth inhibition and tumor growth delay and has shown that it is highly potent and has a durable anti-tumor response when administered intravenously, intratumorally and intraperitoneally across different tumor models. The induction of immune-memory, tumor growth inhibition and abscopal anti-tumor activity upon intra-tumoral administration of SB 11285 has been observed in the A20 lymphoma model. In addition, in the CT26 colon cancer syngeneic mouse model, SB 11285 has exhibited dose-dependent, potent tumor growth inhibition and durable anti-tumor response upon intra-tumoral, intraperitoneal and intravenous routes of administration. In the B16 melanoma model, intravenous and intraperitoneal administration of SB 11285 showed significant inhibition of tumor growth. In the orthotopic 4T1 breast cancer model, intraperitoneal administration of SB 11285 resulted in significant inhibition of primary tumor growth, as well as inhibition of tumor metastasis. In the rat orthotopic bladder cancer model, intravenous administration of SB 11285 resulted in potent, dose-dependent inhibition of tumor growth in bladder. As part of the mechanism of action, immuno-histochemistry combined with flow cytometric analysis of tissues and blood from SB 11285-treated groups were conducted which revealed the presence of activated immune cells, including CD8+ T cells, natural killer (NK) cells and macrophages critical for anti-tumor activity. We believe these preclinical studies demonstrate the potential for both intra-tumoral and systemic administration of SB 11285 to target a variety of tumors, which could potentially be used in combination with other therapeutic modalities.

~~We intend to continue the development of SB 11285 as a potentially important addition to the current standard of care in the treatment of~~ ~~various~~ cancers that we believe could increase the treatment responses in patients. We intend to continue to advance the SB 11285 program with preclinical, toxicology, and process development efforts. Subject to the results of these pr~~eclinical studies, we hope to submit an investigational new drug application, or IND, and/or a clinical trial application, or CTA, for SB 11285 in mid-2018, and,~~ ~~if cleared, commence Phase Ib/II clinical trials in liver cancer in the second half of 2018.~~

In August 2017, we entered into a preclinical research collaboration with a third party to examine the potential for the conjugation of selected compounds from our STING agonist platform with selected proprietary antibodies from the third-party’s immune-oncology portfolio.

~~Recent Developments~~

On October 4, 2017, we entered into a lease agreement, or the New Lease, in Hopkinton, Massachusetts. The premises covered by the New Lease will serve as our new principal office and laboratory space. The initial term of the New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations to the premises covered by the New Lease. We have the option to extend the New Lease one time for an additional 5-year period. The total lease payments due during the term of the lease are approximately $4.4 million.

~~Financial Operations Overview~~

To date, we have devoted substantially all of our resources to research and development efforts, including conducting clinical trials for our product candidates, protecting our intellectual property and providing general and administrative support for these operations. We have not generated any revenue to date other than from grants from the National Institutes of Health, or NIH. We have incurred significant annual net operating losses in every year since our inception and expect to continue to incur significant expenses and net operating losses for the foreseeable future. Our net losses were $10.8 million and $26.2 million for the three and nine months ended September 30, 2017, respectively, and $17.4 million for the year ended December 31, ~~2016. As~~2020 filed with the SEC on March 30, 2021, as may be updated by Part II, Item 1A, Risk Factors of ~~September 30, 2017,~~our subsequently filed Quarterly Reports on Form

10-Q.

We caution our readers that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we ~~had an accumulated deficit~~operate may differ materially from those expressed or implied by the forward-looking statements contained in this Quarterly Report on Form

10-Q.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of ~~$77.8 million. Our net losses~~the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may ~~fluctuate significantly~~be based, or that may affect the likelihood that actual results will differ from ~~quarter~~those set forth in the forward-looking statements.

Overview

F-star

Therapeutics, Inc.

(collectively with its subsidiaries,

“F-star”

or the “Company”) is a clinical-stage biopharmaceutical company dedicated to ~~quarter~~developing next generation immunotherapies to transform the lives of patients with cancer.

F-star’s

goal is to offer patients better and ~~year~~more durable benefits than currently available immuno-oncology treatments by developing medicines that seek to ~~year.~~block tumor immune evasion. Through our proprietary tetravalent, bispecific natural antibody (mAb²

™

) format, our mission is to generate highly differentiated medicines with monoclonal antibody-like manufacturability, good safety and tolerability. With four distinct binding sites in a natural human antibody format, we believe that our proprietary technology will overcome many of the challenges facing current immuno-oncology therapies, due to the strong pharmacology enabled by tetravalent bispecific binding.

F-star’s

most advanced product candidate, FS118, is currently being evaluated in a

proof-of-concept

Phase 2 trial in

PD-1/PD-L1

acquired resistance head and neck cancer patients. FS118 is a tetravalent mAb

bispecific antibody targeting two receptors,

PD-L1

and

LAG-3,

both of which are established pivotal targets in immuno-oncology. Phase 1 data from 43 heavily

pre-treated

patients with advanced cancer, who have failed

PD-1/PD-L1

therapy, showed that administration of FS118 was well-tolerated with no dose limiting toxicities up to 20 mg/kg. In addition, a disease control rate (“DCR”), defined as either a complete response, partial response or stable disease, of 49% was observed in 39 evaluable patients receiving dose levels of FS118 of 1mg/kg or greater. In acquired resistance patients, DCR was 59% (16 out of 27 patients) and long-term (greater than six months) disease control was observed in six of these patients. We expect to ~~continue~~provide an update from the

proof-of-concept

Phase 2 trial in

PD-1/PD-L1

acquired resistance head and neck cancer patients in H1 2022.

F-star’s

second product candidate, FS120, aims to ~~incur significant expenses~~improve checkpoint inhibitor and ~~increasing operating losses~~chemotherapy outcomes and is a mAb2 bispecific antibody that is designed to bind to and stimulate OX40 and CD137, two proteins found on the surface of T cells that both function to enhance T cell activity.

F-star

is developing FS120 alone and in combination with

PD-1/PD-L1

therapy for the ~~next several years.~~treatment of tumors where

PD-1/PD-L1

products are approved, and which have

co-expression

of OX40 and CD137 in the tumor microenvironment.

F-star

initiated a Phase 1 clinical trial in patients with advanced cancers in the fourth quarter of 2020 and plan to provide an update on the accelerated dose titration phase of this study in

mid-2021.

F-star’s

third product candidate, FS222, aims to improve outcomes in low

PD-L1

expressing tumors and is a mAb2 bispecific antibody that is designed to target both the costimulatory CD137 and the inhibitory

PD-L1

receptors, which are

co-expressed

in a number of tumor types.

F-star

initiated a Phase 1 clinical trial in patients with advanced cancers for FS222 in late 2020. We ~~anticipate that our expenses will increase significantly as we continue~~believe there is a strong rationale to ~~develop inarigivir,~~ combine FS222 with other anti-cancer agents, including targeted therapy and chemotherapy, and this can be done within the Phase 1 study. We expect to report an update on this study in late 2021.

SB 11285, which

F-star

acquired pursuant to a business combination with Spring Bank Pharmaceuticals, Inc. (“Spring Bank”), is a next generation cyclic dinucleotide STimulator of INterferon Gene (“STING”) agonist designed to improve checkpoint inhibition outcomes as an immunotherapeutic compound for the treatment of selected cancers.

F-star

is conducting an open-label, dose-escalation Phase 1 clinical trial with SB 11285 as an IV administered monotherapy, and ~~our~~in combination with an

anti-PD-L1

antibody, in patients with advanced solid tumors.

F-star

expects to report an update in

mid-2021.

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Share Exchange Agreement

On November 20, 2020,

F-star

Therapeutics, Inc., formerly known as Spring Bank Pharmaceuticals, Inc., completed a business combination (the “Transaction”) with

F-star

Therapeutics Limited

(“F-star

Ltd”) in accordance with the terms of the Share Exchange Agreement, dated July 29, 2020 (the “Exchange Agreement”), by and among the Company,

F-star

Ltd and certain holders of the capital stock and convertible notes of

F-star

Ltd (each a “Seller”, and collectively with holders of

F-star

Ltd securities who subsequently became parties to the Exchange Agreement, the “Sellers”). Pursuant to the Exchange Agreement, each ordinary share of

F-star

Ltd outstanding immediately prior to the closing of the Transaction (the “Closing”) was exchanged by the Sellers that owned such

F-star

Ltd shares for a number of duly authorized, validly issued, fully paid and

non-assessable

shares of Company common stock pursuant to an exchange ratio formula as set forth in the Exchange Agreement (the “Exchange Ratio”), rounded to the nearest whole share of Company common stock (after aggregating all fractional shares of Company common stock issuable to such Seller). Also, on November 20, 2020, in connection with, and prior to completion of, the Transaction, Spring Bank effected a

1-for-4

reverse stock split of its common stock (the “Reverse Stock Split”) and, following the completion of the Transaction, changed its name to

F-star

Therapeutics, Inc. Following the completion of the Transaction, the business of the Company became the business conducted by

F-star,

Under the terms of the Exchange Agreement, at the Closing, Spring Bank issued an aggregate of 4,620,618 shares of its common stock to

F-star

Ltd stockholders, based on an Exchange Ratio of 0.1125 shares of Spring Bank common stock for each

F-star

Ltd pursuant to a formula set forth in the Exchange Agreement.

Pursuant to the Exchange Agreement, immediately prior to the Closing, certain investors in

F-star

Ltd purchased $15.0 million of

F-star

Ltd ordinary shares (the

“Pre-Closing

Financing”). These ordinary shares of

F-star

Ltd were then exchanged at the Closing for shares of the Company’s common stock in the Transaction at the Exchange Ratio.

Pursuant to the Exchange Agreement, all outstanding options to purchase Spring Bank common stock were accelerated immediately prior to the Closing and each outstanding option with an exercise price greater than the closing price of the stock on the Closing Date was exercised in full and all other outstanding options to purchase Company common stock were cancelled effective as of the Closing Date.

Immediately following the Reverse Stock Split and the Closing, there were approximately 4,449,559 shares of Spring Bank common stock outstanding. Following the Closing, the

F-star

Ltd stockholders beneficially owned approximately 53.7% of the combined company’s common stock, and the existing stockholders of Spring Bank beneficially owned approximately 46.3% of the combined company’s common stock. Concurrently with the execution of the Exchange Agreement, certain officers and directors of Spring Bank and

F-star

Ltd and certain stockholders of

F-star

Ltd entered into

lock-up

agreements, pursuant to which they agreed to certain restrictions on transfers of any shares of the Company’s common stock for the

180-day

period following the Closing, other than the shares of the Company’s common stock received in exchange for ordinary shares of

F-star

Ltd subscribed for in the

Pre-Closing

Financing and pursuant to certain other limited exceptions.

In addition, at the Closing, Spring Bank,

F-star

pre-Reverse

Stock Split share of Spring Bank common stock held by stockholders as of the record date on November 19, 2020, immediately prior to the Closing, received a dividend of one contingent value right (“CVR”) (“STING Agonist CVR”), payable on a

pre-Reverse

Stock Split basis, entitling such holders to receive, in connection with certain transactions involving proprietary STING agonist compound designated as SB 11285 occurring on or prior to the STING Agonist CVR Expiration Date (as defined below) that resulted in aggregate Net Proceeds (as defined in the STING Agonist CVR Agreement) at least equal to the Target Payment Amount (as defined below), an aggregate amount equal to the greater of (i) 25% of the Net Proceeds received from all CVR Transactions (as defined in the STING Agonist CVR Agreement) and (ii) an aggregate amount equal to the product of $1.00 and the total number of shares of Company common stock outstanding as of such record date (not to exceed an aggregate amount of $18.0 million) (the “Target Payment Amount”).

The CVR payment obligation expires on the later of 18 months following the Closing or the

one-year

anniversary of the date of the final database lock of the STING clinical trial (as defined in the STING Agonist CVR Agreement) (the “STING Agonist CVR Expiration Date”). The STING Agonist CVRs are not transferable, except in certain limited circumstances, are not certificated or evidenced by any instrument, do not accrue interest and are not registered with the SEC or listed for trading on any exchange. Until the STING Agonist CVR Expiration Date, subject to certain exceptions, the Company is required to use commercially reasonable efforts to (a) complete the STING Trial and (b) pursue a CVR Transaction. The STING Agonist CVR Agreement became effective upon the Closing and, unless terminated earlier in accordance with its terms, will continue in effect until the STING Agonist CVR Expiration Date the payment or all CVR payment amounts are paid pursuant to their terms.

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At the Closing, Spring Bank,

F-star

Ltd, a representative of Spring Bank stockholders prior to the Closing, and Computershare Trust Company N.A., as the Rights Agent, also entered into a STING Antagonist Contingent Value Rights Agreement (the “STING Antagonist CVR Agreement”). Pursuant to the Exchange Agreement and the STING Antagonist CVR Agreement, each share of common stock held by Spring Bank stockholders as of November 19, 2020, immediately prior to the Closing, received a dividend of one CVR (“STING Antagonist CVR”) entitling such holders to receive, in connection with the execution of a potential development agreement (the “Approved Development Agreement”) and certain other transactions involving proprietary STING antagonist compound occurring on or prior to the STING Antagonist CVR Expiration Date (as defined below) equal to: 80% of all net proceeds (as defined in the STING Antagonist CVR Agreement) received by the Company after the Closing pursuant to (i) the Approved Development Agreement, if any, and (ii) all CVR Transactions (as defined in the STING Antagonist CVR Agreement) entered into prior to the STING Antagonist CVR Expiration Date.

The CVR payment obligations expire on the seventh anniversary of the Closing (the “STING Antagonist CVR Expiration Date”). The STING Antagonist CVRs are not transferable, except in certain limited circumstances, are not certificated or evidenced by any instrument, do not accrue interest and are not registered with the SEC or listed for trading on any exchange. Until the STING Antagonist CVR Expiration Date, subject to certain exceptions, the Company is required to use commercially reasonable efforts to (a) consummate the Approved Development Agreement, (b) to perform the terms of the Approved Development Agreement and (c) pursue CVR Transactions. The STING Antagonist CVR Agreement became effective upon the Closing and, unless terminated earlier in accordance with its terms, will continue in effect until the STING Antagonist CVR Expiration Date or all CVR payment amounts are paid pursuant to their terms.

The acquisition-date fair value of the CVR liability represents the future payments that are contingent upon the achievement of sale or licensing for the product candidates. ~~See “—Liquidity~~The fair value of the contingent consideration acquired of $2.5 million as of December 31, 2020 and as of March 31, 2021] is based on the Company’s probability-weighted discounted cash flow assessment that considers probability and timing of future payments. The fair value measurement is based on significant Level 3 unobservable inputs such as the probability of achieving a sale or licensing agreement, anticipated timelines and discount rate. Changes in the fair value of the liability will be recognized in the consolidated statement of operations and comprehensive loss until settlement.

All issued and outstanding

F-star

Ltd share options granted under

F-star’s

three legacy equity incentive plans became exercisable in full immediately prior to the Closing. At the Closing, all issued share options and restricted stock units granted by

F-star

Ltd under the

F-star

Therapeutics Limited 2019 Equity Incentive Plan (the “2019 Plan”) were replaced by options and awards on the same terms (including vesting), of the combined company’s common stock, based on the Exchange Ratio.

The Company’s common stock, which was listed on the Nasdaq Capital ~~Resources—Funding Requirements.”~~Market, traded through the close of business on Friday, November 20, 2020 under the ticker symbol “SBPH” and continued trading on the Nasdaq Capital Market, on a post-Reverse Stock Split adjusted basis, under the ticker symbol “FSTX” beginning on Monday, November 23, 2020. Commencing on November 23, 2020, the Company’s common stock was represented by a new CUSIP number, 30315R 107. After the Closing of the Transaction, the Company had approximately $30 million in cash. The combined company is now headquartered out of

F-star

Ltd existing facilities in Cambridge, United Kingdom and office in Cambridge, MA.

Business Combinations

(“ASC 805”). The Transaction was accounted for as a reverse acquisition with

F-star

Ltd being deemed the acquiring company for accounting purposes. Under ASC 805,

F-star

Ltd as the accounting acquirer, recorded the assets acquired and liabilities assumed of Spring Bank in the Transaction at their fair values as of the acquisition date (see Note 4 of the financial statements).

F-star

(1) F-star

Ltd shareholders owned the majority of the voting rights of the combined company;

(2) F-star

Ltd designated a majority (five of eight) of the initial members of the board of directors of the combined company; and

(3) F-star

Ltd senior management held the key positions in senior management of the combined company. As a result, upon consummation of the Transaction, the historical financial statements of

F-star

Ltd became the historical financial statements of the combined organization.

Table of Contents

Impact of

COVID-19

on our Business

In March 2020, the World Health Organization declared the novel strain of coronavirus

(“COVID-19”)

a pandemic and recommended containment and mitigation measures worldwide. The

COVID-19

pandemic has been evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures.

Management continues to closely monitor the impact of the

COVID-19

pandemic on all aspects of the business, including how it will impact operations and the operations of customers, vendors, and business partners. Management took action in April 2020 to temporarily furlough some of its workforce and took advantage of the U.K. Government Coronavirus Job Retention Scheme that provided funding to businesses with furloughed staff. The grant funding available covered 80% of furloughed employees’ wages plus employer National Insurance and pension contributions up to a maximum of £2,500 per month per furloughed employee. From December 2020 to April 2021, the U.K. government imposed a third national “lockdown”, severely impacting on

day-to-day

activities. The onset of the global pandemic and consequent government-imposed restrictions resulted in a three to

six-month

delay in the operationalization of our clinical trials for FS118, FS120, FS222 and SB 11285. The extent to which

COVID-19

impacts our future business, results of operation and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence at this time, such as the continued duration of the outbreak, new information that may emerge concerning the severity or other strains of

COVID-19

or the effectiveness of actions to contain

COVID-19

or treat its impact, among others. If the Company or any of the third parties with which we engage, however, were to experience shutdowns or other business disruptions, the ability to conduct business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business, results of operation and financial condition. The estimates of the impact on the Company’s business may change based on new information that may emerge concerning

COVID-19

and the actions to contain it or treat its impact and the economic impact on local, regional, national, and international markets.

Management has not identified any triggering events that would result in any significant impairment losses in the carrying values of assets as a result of the pandemic and are not aware of any specific related event or circumstance that would require management to revise estimates reflected in our consolidated financial statements.

Recent Developments

Loan and Security Agreement

On April 1, 2021, the Company entered into a Venture Loan and Security Agreement (the “Loan and Security Agreement”) with Horizon Technology Finance Corporation (“Horizon”) as lender and collateral agent for itself. The Loan and Security Agreement provides for four (4) separate and independent $2.5 million term loans (“Loan A”, “Loan B”, “Loan C”, and “Loan D”) (with each of Loan A, Loan B, Loan C and Loan D, individually a “Term Loan” and, collectively, the “Term Loans”), whereby upon the satisfaction of all the conditions to the funding of the Term Loans, each Term Loan would be delivered by Horizon to the Company in the following manner: (i) Loan A was to be delivered by Horizon to the Company prior to April 1, 2021, (ii) Loan B was required to be delivered by Horizon to the Company prior to April 1, 2021, (iii) Loan C is required to be delivered by Horizon to the Company prior to June 30, 2021, and (iv) Loan D is required to be delivered by Horizon to the Company prior to June 30, 2021. The Company may only use the proceeds of the Term Loans for working capital or general corporate purposes as contemplated by the Loan and Security Agreement. The Company drew down $5 million on April 1, 2021.

The term note matures on the

48-month

The Company may, at its option upon at least five business days’ written notice to Horizon, prepay all or any portion of the outstanding Term Loan by simultaneously paying to Horizon an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Term Loan so prepaid; plus (ii) an amount equal to (A) if such Term Loan is prepaid on or before the Loan Amortization Date (as defined in the Loan and Security Agreement) applicable to such Term Loan, three percent of the then outstanding principal balance of such Term Loan, (B) if such Term Loan is prepaid after the Loan Amortization Date applicable to such Term Loan, but on or before the date that is12 months after such Loan Amortization Date, two percent of the then outstanding principal balance of such Term Loan, or (C) if such Term Loan is prepaid more than 12 months after the Loan Amortization Date applicable to such Term Loan, one percent of the then outstanding principal balance of such Term Loan; plus (iii) the outstanding principal balance of such Term Loan; plus (iv) all other sums, if any, that had become due and payable under the Loan and Security Agreement.

In connection with the entry into the Loan and Security Agreement, the Company issued to Horizon warrants (each, individually, a “Warrant” and, collectively, the “Warrants”) to purchase an aggregate number of shares of the Company’s common stock in an amount equal to $100,000 divided by the price for each respective Warrant. If at any time the Company files a registration statement relating to an offering for its own account, or the account of others, of any of its equity securities, the Company agreed to include such number of shares underlying the Warrants in that registration statement as requested by the holder.

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The Warrants, which are exercisable for an aggregate of 42,236 shares, will ~~need additional financing~~be exercisable for a period of seven years at a

per-share

exercise price of $9.47, which is equal to ~~support our continuing operations. Until such~~the

10-day

Sales Agreement and Underwriting Agreement

On March 30, 2021, the Company entered into a Sales Agreement (the “2021 Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”) with respect to an

”at-the-market”

offering, as defined in Rule 415 of the Securities Act of 1933, as amended, under which the Company could offer and sell, from time to time in its sole discretion, shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $50.0 million (the “Placement Shares”) through SVB Leerink as its sales agent.

Upon delivery of a placement notice in April 2021, and subject to the terms and conditions of the 2021 Sales Agreement, SVB Leerink began to sell the Placement Shares. The Company agreed to pay SVB Leerink a commission equal to three percent of the gross sales proceeds of any Placement Shares sold through SVB Leerink under the 2021 Sales Agreement, and also provided SVB Leerink with customary indemnification and contribution rights. As of May 6, 2021, the Company had issued and sold 979,843 shares, for gross proceeds of $9.5 million, resulting in net proceeds of $9.2 million after deducting sales commissions. On May 6, 2021, the Company terminated the 2021 Sales Agreement.

On May 6, 2021, the Company entered into an underwriting agreement with SVB Leerink, as representative of the underwriters, relating to an underwritten public offering of approximately 9.3 million shares of the Company’s common stock, par value $0.0001 per share. The underwritten public offering resulted in gross proceeds of $65.0 million. The Company incurred $3.9 million in issuance costs associated with the underwritten public offering, resulting in net proceeds to the Company of $61.1 million.

Financial Operations Overview

License revenue

To date, we ~~can generate significant~~have not generated any revenue from product sales, ~~if ever,~~and we do not expect to ~~finance~~generate any revenue from product sales for the foreseeable future. Our revenue consists of collaboration revenue under our ~~operations through a combination of public or private equity or debt financings or other sources, which~~license and collaboration agreements with Ares Trading S.A. (“Ares”) and Denali Therapeutics, Inc. (“Denali”), including amounts that are recognized related to upfront payments, milestone payments, option exercise payments, and amounts due to us for research and development services. In the future, revenue may include ~~collaborations with third parties. Arrangements with collaborators or others may require us to relinquish rights to certain of~~new collaboration agreements, additional milestone payments, option exercise payments, and royalties on any net product sales under our technologies or product candidates. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve and sustain profitability, and we may never be able to do so.

~~As of September 30, 2017, we had $52.2 million in cash, cash equivalents and marketable securities.~~collaborations. We expect that ~~our cash, cash equivalents~~any revenue we generate will fluctuate from period to period as a result of the timing and ~~marketable securities as~~amount of September 30, 2017 will enable us to fund our operating expenses and capital expenditure requirements through the end of 2019. However, we anticipate that our existing cash, cash equivalents, restricted cash and marketable securities will not be sufficient to fund additional development of inarigivir beyond our Phase 2 ACHIEVE clinical trial. See “—Liquidity and Capital Resources.”

~~Grant revenue~~

Historically, we have generated revenue from grants from the NIH for the development of inarigivir. The NIH grants provided funding of $6.8 million between October 2003 and April 2016. As of September 30, 2017, no additional funding remains available to us under any grant for the development of any of our product candidates.

~~Operating expenses~~

~~Our operating expenses since inception have consisted primarily of~~license, research and development ~~expense~~services, and ~~general~~milestone and ~~administrative costs.~~

other payments.

Operating Expenses

Research and development

costs

Research and development costs are expensed as incurred. Research and development expenses ~~consist primarily~~are comprised of costs incurred ~~for our~~in performing research and development activities, including ~~our discovery efforts,~~salaries, share-based compensation and benefits, facilities costs and laboratory supplies, depreciation, amortization and impairment expense, manufacturing expenses and external costs of outside vendors engaged to conduct preclinical development activities and clinical trials as well as the cost of licensing technology. Typically, upfront payments and

milestone payments made for the licensing of technology are expensed as research and development ~~of our product candidates,~~in the period in which ~~include:~~

they are incurred, except for payments relating for intellectual property rights with future alternative use which will be expensed when the intellectual property is in use.

Non-refundable

advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Those expenses associated with R&D and clinical costs primarily include:

expenses incurred under agreements with ~~third parties, including~~ contract research organizations ~~or CROs, that conduct research, preclinical activities and clinical trials on our behalf~~(“CROs”) as well as ~~contract manufacturing organizations, or CMOs,~~investigative sites and consultants that ~~manufacture drug products for use in~~conduct our clinical trials, preclinical studies and ~~clinical trials;~~

other scientific development services;

~~salaries, benefits~~manufacturing

scale-up

expenses and ~~other related costs, including stock-based compensation expense, for personnel in our research and development functions;~~

~~costs of outside consultants, including their fees, stock-based compensation and related travel expenses;~~

the cost of ~~laboratory supplies and~~ acquiring ~~developing~~ and manufacturing preclinical ~~study~~ and clinical trial materials;

~~costs related to compliance with regulatory requirements; and~~

expenses incurred for outsourced professional scientific development services;

~~facility-related~~

costs for laboratory materials and supplies used to support our research activities;

allocated facilities costs, depreciation, and other expenses, which include ~~direct depreciation costs and allocated expenses for~~ rent and ~~maintenance~~utilities;

up-front,

milestone and management fees for maintaining licenses under our third-party licensing agreements; and

compensation expense.

Table of ~~facilities and other operating costs.~~

Contents

~~We expense research and development costs as incurred. We recognize~~

The Company recognizes external ~~development~~R&D costs based on an evaluation of the progress to completion of specific tasks using information provided to usit by ~~our vendors~~its internal program managers and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

Our primary focus of research and development since inception has been on the development of inarigivir. Our direct research and development expenses consist primarily of external costs, such as fees paid to investigators, consultants and CROs in connection with our preclinical studies and clinical trial and regulatory fees. We do not allocate employee-related costs and other indirect costs to specific research and development programs because our primary focus has been on the discovery and development of inarigivir. Our direct research and development expenses are not currently tracked on a program-by-program basis.

The successful development of our product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, we will generate revenues from inarigivir or any of our other current or potential product candidates. This is due to the numerous risks and uncertainties associated with developing medicines, including the uncertainties of:

~~establishing an appropriate safety profile with IND-enabling toxicology studies;~~

service providers.

~~successful enrollment in and completion of clinical trials;~~

~~receipt of marketing approvals from applicable regulatory authorities;~~

~~establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;~~

~~obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;~~

~~launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; and~~

~~a continued acceptable safety profile of the products following approval.~~

A change in the outcome of any of these variables with respect to any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.

Research and development activities are central to ~~our~~the Company’s business ~~model.~~models. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of ~~later-stage~~later stage clinical trials. ~~We expect~~As a result, the Company expects that ~~our~~ research and development expenses will ~~continue~~increase over the next several years as the Company increases personnel costs, initiate and conduct additional clinical trials and prepare regulatory filings related to ~~increase in~~ the ~~foreseeable future as we continue~~various product candidates.

The successful development of our product ~~candidates. However, we do not believe that it~~candidates is ~~possible~~highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to ~~accurately project total program-specific expenses through commercialization. There~~complete the remainder of the development of these product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our product candidates. This is due to the numerous ~~factors~~risks and uncertainties associated with developing products, including the ~~successful commercialization of any~~uncertainty of:

completing research and preclinical development of our product candidates, including conducting future ~~trial design~~clinical trials of FS118, FS120, FS222 and ~~various~~SB 11285;

progressing the preclinical and clinical development of FS118, FS120, FS222 and SB 11285;

establishing an appropriate safety profile with investigational new drug-enabling studies to advance our preclinical programs into clinical development;

identifying new product candidates to add to our development pipeline;

successful enrolment in, and the initiation and completion of clinical trials;

the timing, receipt and terms of any marketing approvals from applicable regulatory ~~requirements, many~~authorities;

commercializing the product candidates, if and when approved, whether alone or in collaboration with others;

establishing commercial manufacturing capabilities or making arrangements with third party manufacturers;

the development and timely delivery of ~~which cannot~~commercial-grade drug formulations that can be ~~determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact~~used in our clinical trials;

addressing any competing technological and market developments, as well as any changes in governmental regulations;

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations under such arrangements;

maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and

know-how,

as well as obtaining and maintaining regulatory exclusivity for our product candidates;

continued acceptable safety profile of the drugs following approval; and

attracting, hiring, and retaining appropriately qualified personnel.

A change in the outcome of any of these variables with respect to the development ~~programs~~of a product candidate could mean a significant change in the costs and ~~plans.~~

timing associated with the development of that product candidate. For example, the U.S. Food and Drug Administration, European Medicines Agency or another regulatory authority may require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or we may experience significant trial delays due to patient enrolment or other reasons, in which case we would be required to expend significant additional financial resources and time on the completion of clinical development. In addition, we may obtain unexpected results from our clinical trials and we may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success.

General and administrative

expenses

General and administrative expenses consist primarily of salaries, related benefits, travel, and ~~other related costs, including stock-based~~share-based compensation expense for personnel in ~~our~~ executive, finance, ~~corporate and business development~~legal and administrative functions. General and administrative expenses also include ~~legal fees relating to~~facility-related costs, patent filing and ~~corporate matters;~~prosecution costs, insurance and marketing costs and professional fees for legal, consulting, accounting, ~~auditing,~~audit, tax services and ~~consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation~~ costs ~~and allocated expenses for rent and maintenance of facilities and other operating costs.~~

~~We anticipate~~associated with being a public company. Other expense also includes foreign currency transaction losses. The Company expects that ~~our~~ general and administrative expenses will increase in the future as ~~we increase our headcount to support~~ the ~~expected growth in our research and development~~Company expands its operating activities and ~~the potential commercialization~~incurs costs of ~~our product candidates. We also expect to continue to incur significant expenses associated with~~ being a US public ~~company, including increased costs~~company.

Table of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Contents

Other income ~~(expense)~~

and expenses, net

Other income ~~(expense) consists~~and expenses, net, is primarily rent received from subletting an office in the United States and interest received on overdue trade receivable balances, bank interest received, and interest expense, which is primarily bank interest payable and similar charges, the interest liability on leased assets and convertible debt notes, and foreign exchange losses incurred. Foreign exchange gain (loss) is foreign exchange gains or losses due to the fluctuation of ~~interest income earned on our cash, cash equivalents, restricted cash and marketable securities and~~ the ~~gain/loss on~~GBP, U.S. dollar and/or the ~~change~~Euro. Change in the fair value of convertible debt is the ~~warrant liabilities.~~

~~Critical Accounting Policies~~fair value adjustment of the convertible notes as measured using level 3 inputs which was converted on November 20, 2020 with the transaction with Spring Bank.

Benefits from income tax

For the three months ended March 31, 2021 and ~~Significant Judgments and Estimates~~

~~Our consolidated financial statements are prepared in accordance with generally accepted accounting principles~~2020, the Company was subject to corporate taxation in the United States, United Kingdom and Austria.

Our U.K.-established entities have generated losses and some profits in the United Kingdom since inception and have therefore not paid significant U.K. corporation tax.

F-star

Biotechnologische

Forschungs-und

Entwicklungsges.m.b.H has historical losses in Austria with more recent profits, which has resulted in payment of ~~America.~~Austrian corporation tax in the years ended December 31, 2020 and 2019. The ~~preparation~~corporation tax benefit (tax) presented in the Company’s statements of ~~our consolidated financial statements~~comprehensive income (loss) represents the tax impact from its operating activities in the United States, United Kingdom and ~~related disclosures requires us~~Austria, which have generated taxable income in certain periods. As the entities located in the United Kingdom carry out extensive research and development activities, they seek to benefit from the U.K. research and development tax credit cash rebate regime known as the Small and

Medium-sized

Enterprises R&D Tax Credit Program (the “SME Program”). Qualifying expenditures largely comprise employment costs for research staff, consumables expenses incurred under agreements with third parties that conduct research and development, preclinical activities, clinical activities and manufacturing on the Company’s behalf and certain internal overhead costs incurred as part of research projects. No research and development activities are carried out in Austria, so the Company is not able to utilize the research and development premium available under the Austrian corporation tax regime.

The tax credit received in the United Kingdom pursuant to the SME Program permits companies to deduct an extra 130% of their qualifying costs from their yearly profit or loss, as well as the normal 100% deduction, to make ~~estimates~~a total 230% deduction. If the company is incurring losses, it is entitled to claim a tax credit worth up to 14.5% of the surrenderable loss. To qualify for relief under the SME Program, companies are required to employ fewer than 500 staff and ~~assumptions that affect~~have a turnover of under €100.0 million or a balance sheet total of less than €86.0 million.

The U.K. government has released draft legislation to introduce a cap on the ~~reported~~ amount of ~~assets,~~the payable credit that a qualifying loss-making small and

medium-sized

enterprise business can receive through research and development relief in any one year. The cap would be applied to restrict payable credit claims in excess of £20,000 with effect for accounting periods beginning on or after April 2021 by reference to, broadly, three times the total employee payroll tax and social security liabilities ~~revenue, costs~~of the company. The draft legislation also contains an exemption which prevents the cap from applying. That exemption requires the company to be creating, or taking steps to create, intellectual property as well as having research and ~~expenses~~development expenditure in respect of connected parties which does not exceed 15% of the total claimed. The Company does not expect this legislation, if adopted, to have a material impact on its payable credit claims based on amounts currently claimed.

Research and ~~related disclosures. We believe that the estimates and assumptions involved~~development tax credits received in the ~~accounting policies described therein may have~~United Kingdom are recorded as a reduction in research and development expenses. The U.K. research and development tax credit is payable to companies after surrendering tax losses and is not dependent on current or future taxable income. As a result, it is not reflected as part of the ~~greatest potential impact~~income tax provision. If, in the future, any U.K. research and development tax credits generated are utilized to offset a corporate income tax liability in the United Kingdom, that portion would be recorded as a benefit within the income tax provision, and any refundable portion not dependent on ~~our consolidated financial statements and, therefore, consider these~~taxable income would continue to be ~~our critical accounting policies. We evaluate our estimates~~recorded as a reduction to research and ~~assumptions~~development expenses.

Income tax expense was relatively flat compared to the three months ended March 31, 2020.

In the event the Company generates revenues in the future, the Company may benefit from the United Kingdom “patent box” regime that allows profits attributable to revenues from patents or patented products to be taxed at an effective rate of 10%. Value Added Tax (“VAT”) is broadly charged on all taxable supplies of goods and services by

VAT-registered

businesses. In the United Kingdom, under current rates, an ~~ongoing basis. Our actual results may differ~~amount of 20% of the value, as determined for VAT purposes, of the goods or services supplied is added to all sales invoices and is payable to the United Kingdom’s tax authority, Her Majesty’s Revenue and Customs (“HMRC”). Similarly, VAT paid on purchase invoices is generally reclaimable from ~~these estimates~~HMRC. In Austria, under ~~different assumptions~~current rates, an amount of 20% of the value, as determined for VAT purposes, of the goods or services supplied is added to all sales invoices and ~~conditions.~~

is payable to the Austrian tax authority. Similarly, VAT paid on purchase invoices is generally reclaimable from the Austrian tax authority.

Table of Contents

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a predetermined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

CROs in connection with performing research services on our behalf and clinical trials;

investigative sites or other providers in connection with clinical trials;

vendors in connection with preclinical and clinical development activities; and

vendors related to product manufacturing, development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

~~Equity-Classified Warrants~~

In connection with entering into the amended and restated license agreement with BioHEP effective February 1, 2016, we issued to BioHEP a warrant to purchase 125,000 shares of our common stock at a purchase price of $16.00 per share. We evaluated the terms

Contingent value rights

The acquisition-date fair value of the ~~warrant and concluded~~CVR liability represents the future payments that ~~it should be equity-classified.~~are contingent upon the achievement of sale or licensing for the STING product candidates. The fair value of the ~~warrant, $0.8 million~~contingent value rights is based on the Company’s probability-weighted discounted cash flow assessment that considers probability and ~~was expensed as research and development costs.~~

~~In connection with our initial public offering, or IPO, we issued the sole book-running manager for the IPO warrants to purchase 28,347 shares~~timing of ~~common stock at an exercise price of $15.00 per share, which we refer to collectively~~future payments. The fair value measurement is based on significant Level 3 unobservable inputs such as the ~~IPO warrants. We evaluated the terms~~probability of ~~the IPO warrants~~achieving a sale or licensing agreement, anticipated timelines, and ~~concluded that they should be equity-classified. The aggregate fair value of the IPO warrants was $0.2 million. See Note 7 of the notes to the unaudited financial statements included elsewhere~~discount rate. Changes in ~~this Quarterly Report on Form 10-Q.~~

~~Liability-Classified Warrants~~

In connection with our private placement offering in November 2016, or the November private placement, we issued warrants to purchase 1,644,737 shares of common stock to a group of accredited investors. The warrants will be exercisable beginning May 24, 2017 at an exercise price of $10.79 per share. We evaluated the terms of the warrants and concluded that they should be liability-classified. We recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of September 30, 2017, the fair value of the ~~warrants was approximately $17.8 million, which is an increase~~liability will be recognized in the consolidated statement of ~~$11.5 million from~~operations and comprehensive loss until settlement.

Share-based compensation

The Company accounts for share-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”). ASC 718 requires companies to estimate the fair value of ~~approximately $6.3 million as of December 31, 2016. See Note 7 of the notes to the unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.~~

~~Stock-Based Compensation~~

~~We measure stock options and other stock-based~~equity-based payment awards ~~granted to employees and directors based on the fair value~~ on the date of ~~grant~~grant. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company’s consolidated statements of operations and ~~recognize~~comprehensive loss.

The Company records the ~~corresponding~~expense for option awards using a graded vesting method. The Company accounts for forfeitures as they occur. For share-based awards granted to

non-employee

consultants, the measurement date is the date of grant. The compensation expense ~~of those awards, net of estimated forfeitures,~~is then recognized over the requisite service period, which is ~~generally~~ the vesting period of the respective award. ~~Generally, we issue~~

The fair value of stock options ~~and restricted stock awards with only service-based vesting conditions and record~~(“options”) on the ~~expense for these awards~~grant date is estimated using the ~~straight-line method.~~

~~We measure~~Black-Scholes option-pricing model using the single-option approach. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including an option’s expected term and the price volatility of the underlying stock, ~~options and other stock-based awards granted~~ to ~~consultants and nonemployees based on~~determine the fair value of the ~~award on~~award.

Historically given the ~~date at which~~absence of an active market for the ~~related service is complete. We recognize this compensation expense over~~ordinary shares of

F-star

Ltd, the ~~period during which services are rendered by such consultants and nonemployees until completed. At~~board of directors determined the ~~end of each financial reporting period prior to completion of the service, we remeasure the~~estimated fair value of ~~these awards using~~ the ~~then-current fair~~Company’s equity instruments based on input from management, which utilized the most recently available independent third-party valuation, and considering a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector. Each valuation methodology includes estimates and assumptions that require judgment. These estimates and assumptions include a number of objective and subjective factors in determining the value of ~~our common stock and updated assumption inputs in the Black-Scholes option-pricing model.~~

~~We estimate the fair value of~~

F-star

Ltd ordinary shares at each ~~stock option~~ grant ~~using the Black-Scholes option-pricing model. Use of this model requires that we make assumptions as to the fair value of our common stock, the~~date. The expected volatility ~~of our common stock, the expected term of our stock options, the risk-free interest rate~~for F star Ltd was calculated based on reported volatility data for a period that approximates the expected term of our stock options and our expected dividend yield. Because we lack company-specific historical and implied volatility information due in part to the limited time in which we have operated as a publicly traded company, we estimate our expected volatility based on the historical volatility of arepresentative group of publicly traded ~~peer companies. We expect to continue to do so until such~~companies for which historical information was available. The historical volatility is calculated based on a period of time ~~as we have adequate historical data regarding~~commensurate with the ~~volatility of our traded stock price. We use the simplified method prescribed by the SEC’s Staff Accounting Bulletin No. 107,~~ ~~Share-Based Payment, to calculate~~assumption used for the expected ~~term of options granted to employees and directors. We base the expected term of options granted to consultants and nonemployees on the contractual term of the options. We determine the~~term. The risk-free interest rate ~~by reference~~

tois based on the ~~United States~~U.S. Treasury yield curve in effect at the time of grant ~~of the award for time periods approximately equal to~~commensurate with the expected term assumption.

F-star

Ltd used the simplified method, under which the expected term is presumed to be the midpoint between the vesting date and the end of the ~~award. Expected~~contractual term.

F-star

Ltd utilized this method due to the lack of historical exercise data and the plain nature of its share-based awards.

Table of Contents

The Company uses the remaining contractual term for the expected life of

non-employee

awards. The expected dividend yield is ~~based on~~assumed to be zero as the ~~fact that we have~~Company has never paid ~~cash~~ dividends and ~~do not expect~~has no current plans to pay any ~~cash dividends in the foreseeable future.~~

~~There were no stock options granted prior to 2015. We recognize forfeitures as they occur and the~~dividends.

The Company classifies share-based compensation expense ~~is reversed~~ in ~~the period that the forfeiture occurs.~~

In 2015, we began issuing stock options to employees, directors and consultants. During the periods ended September 30, 2017 and 2016, we issued common stock to consultants and advisors as compensation for services and recognized expense equal to the fair value of the shares issued. The following table summarizes the classification of our stock-based compensation expenses recognized in ourits consolidated statements of operations and comprehensive loss ~~(in thousands):~~

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Research and development

$
121

$
104

$
402

$
286

General and administrative

389

274

1,081

729

$
510

$
378

$
1,483

$
1,015

~~JOBS Act~~

~~In April 2012,~~Income in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Subject to certain conditions, as an EGC, we intend to rely on certain exemptions afforded by the JOBS Act, including the exemption from: certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments; the requirement that the auditors provide an attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and complying with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earliest of the last day of the fiscal yearsame manner in which ~~we have total annual gross revenues of approximately $1.07 billion~~the award recipient’s payroll costs are classified or ~~more;~~in which the last day of the fiscal year following the fifth anniversary of the date of the completion of the closing of an IPO; the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or the date on which weaward recipient’s service payments are ~~deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC.~~

classified.

Results of Operations

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~

2020

The following table summarizes our results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 (in thousands):

For the Three Months Ended September 30,

Increase

For the Nine Months Ended September 30,

Increase

2017

2016

(Decrease)

2017

2016

(Decrease)

Grant revenue

$
—

$
—

$
—

$
—

$
352

$
(352
)
Operating expenses:

Research and development

3,221

2,723

498

9,152

11,247

(2,095
)
General and administrative

1,968

1,452

516

5,811

4,136

1,675

Total operating expenses

5,189

4,175

1,014

14,963

15,383

(420
)
Loss from operations

(5,189
)

(4,175
)

(1,014
)

(14,963
)

(15,031
)

68

Other income

141

27

114

220

65

155

Change in fair value of warrant liabilities

(5,780
)

—

(5,780
)

(11,474
)

—

(11,474
)
Net loss

$
(10,828
)

$
(4,148
)

$
(6,680
)

$
(26,217
)

$
(14,966
)

$
(11,251
)

~~Grant revenue. There was no grant revenue~~


	Three Months Ended March 31,
	2021			2020			Change
	(in thousands)
Statements of Comprehensive Loss
License revenue	$	2,917		$	1,355		$	1,562
Operating expenses:
Research and development		7,267			3,400			3,867
General and administrative		6,429			3,189			3,240

Total operating expenses		13,696			6,589			7,107

Loss from operations		(10,779	)		(5,234	)		(5,545	)
Other non-operating income (expense):
Other income (expense)		1,018			(1,527	)		2,545
Change in fair value of convertible notes		—			(386	)		386

Loss before income taxes		(9,761	)		(7,147	)		(2,614	)

Provision for income taxes		(108	)		(12	)		(96	)

Net loss	$	(9,869	)	$	(7,159	)	$	(2,710	)

Licensing and Research & Development Services Revenue

Revenue for the three months ended ~~September 2017 and 2016. There~~March 31, 2021, was ~~no grant revenue for the nine months ended September 30, 2017~~$2.9 million, compared to $0.4 million for the nine months ended September 30, 2016. The decrease was primarily due to the completion of our last NIH grant as of April 30, 2016. As of September 30, 2017, no additional funding remained available to us under any grant for the development of any of our product candidates.

~~Research and development expenses~~.

~~Research and development expenses were $3.2~~with $1.4 million for the three months ended ~~September 30, 2017, compared~~March 31, 2020, a decrease of approximately $1.6 million.

For the three months ended March 31, 2021 and 2020, revenue has been generated from two collaboration partners (Ares and Denali).

Revenue from contracts with Ares for the three months ended March 31, 2021 increased by $1.9 million from the three months ended March 31, 2020 due to the payment of an option fee of $2.7 million to acquire intellectual property rights, which was offset by a reduction in R&D service revenues of $0.8 million. In addition, there was a decrease in overall revenue of $0.3 million relating to licensing and R&D services for the second molecule in the Company’s License and Collaboration Agreement with Denali. All performance obligations relating to this molecule were satisfied in February 2021, which resulted in portion of revenue recognized during the three months ended March 31, 2021.

Research and development costs

Costs related to research and development for the three months ended March 31, 2021 increased by approximately $3.9 million to $7.3 million from $3.4 million for the three months ended ~~September 30, 2016. The~~March 31, 2020.

This $3.9 million increase was primarily due to a $1.0 million increase in manufacturing costs, mainly due to an FS118 manufacturing batch in the first quarter of ~~$0.5 million was due primarily to~~2021, an increase in ~~spending on preclinical studies~~clinical CRO and clinical assay costs of $1.1 million and $0.3 million respectively, due to the first full quarter of Phase 1 clinical trial ~~related activities~~costs for ~~inarigivir~~FS120 and ~~preclinical studies for~~ ~~SB 11285~~ FS222, and a decrease in other costs of $0.1 million due to the timing of other project-related activities. The remaining increase of $1.0 million is due to a $1.4 million decrease in the ~~three months ended September 30, 2017.~~

Research and development expenses were $9.1 million for the nine months ended September 30, 2017, compared to $11.2 million for the nine months ended September 30, 2016. The decrease of $2.1 million was due primarily to $2.7 million in non-cash charges primarily in connection with our amended and restated license agreement with BioHEP;U.K. R&D tax incentive, which is allocated across all programs, offset by ~~an increase of~~a $0.4 million ~~in spending on preclinical studies and clinical trial related activities for inarigivir and SB 11285 in the nine months ended September 30, 2017 and an~~ increase in ~~additional salaries and benefits~~R&D staff costs.

Table of ~~$0.2 million associated with higher headcount in the nine months ended September 30, 2017.~~

Contents

General and administrative ~~expenses~~.

expense

General and administrative ~~expenses were $2.0 million~~expense for the three months ended ~~September 30, 2017,~~March 31, 2021, increased by approximately $3.2 million, as compared to the three months ended March 31, 2020, to $6.4 million due to an increase of $1.4 million in share-based compensation, $1.5 million in professional fees, insurance and other costs associated with being a public company and $0.3 million in other costs, primarily due to additional rent for the leased buildings acquired with Spring Bank transaction.

Other income and expenses, net

Other income and expenses, net, for the three-month period ended March 31, 2021, of $1.0 million compared with net other expenses of $1.5 million for the three ~~months~~month period ended ~~September 30, 2016. This increase of $0.5 million~~March 31, 2020, was ~~primarily~~ due to ~~an increase~~a gains of $2.2 million on foreign exchange transactions, a decrease of $0.3 million in ~~non-cash charges for stock based compensation of $0.1 million, additional salaries and benefits of $0.1 million associated with higher headcount of non-research and development employees in~~interest expense relating to the three months ended September 30, 2017, an increase of $0.1 million for public company related expenses in the three months ended September 30, 2017, an increase of $0.1 million for consulting related costs during the three months ended September 30, 2017convertible notes that were outstanding at March 31, 2020, and an increase of $0.1 million ~~for other general and administrative costs in the three months ended September 30, 2017.~~

~~General and administrative expenses were $5.8~~of rental income. In addition, there was a charge of $0.4 million for the nine months ended September 30, 2017, compared to $4.1 million for the nine months ended September 30, 2016. This increase of $1.7 million was primarily due to an increase in non-cash charges for stock based compensation of $0.4 million, additional salaries and benefits of $0.7 million associated with higher headcount of non-research and development employees in the nine months ended September 30, 2017, $0.6 million for public company related expenses incurred during the nine months ended September 30, 2017 and $0.1 million for additional rent expense for the nine months ended September 30, 2017; offset by a decrease of $0.1 million for legal and consulting related costs during the nine months ended September 30, 2017.

~~Other income~~. Other income for the three and nine months ended September 30, 2017 and 2016 is solely comprised of interest income. Interest income for the three and nine months ended September 30, 2017 was $141,000 and $220,000, respectively, and was primarily related to the interest earned on marketable securities. Interest income for the nine months ended September 30, 2016 was $27,000 and $65,000, respectively, and was primarily related to the interest earned on marketable securities.

~~Change~~change in fair value of ~~warrant liabilities. Change in fair value of warrant liabilities~~convertible debt, for the for three ~~and nine~~ months ended September 30, 2017 was $5.8 million and $11.5 million, respectively, and was solely related to an increase in the fair value of the warrants from the November private placement, primarily due to the increase in the Company’s stock price. There were no warrant liabilities during the three and nine months ended September 30, 2016.

March 31, 2020.

Liquidity and Capital Resources

Sources of ~~Liquidity~~

liquidity

From our inception through ~~September 30, 2017,~~March 31, 2021, we have not generated any revenue from product sales, and we have incurred significant operating losses and negative cash flows from our operations. We do not expect to generate significant revenue from sales of any products for several years, if at all.

As of March 31, 2021, the Company had an accumulated deficit of $57.0 million, cash of $3.7 million, and accounts payable and accrued expenses of $11.1 million. The future success of the Company is dependent on its ability to successfully obtain additional working capital, obtain regulatory approval for and successfully launch and commercialize its product candidates and to ultimately attain profitable operations.

Historically, we have financed our operations ~~through~~primarily with proceeds from the issuance of ordinary and convertible preferred shares, proceeds from issuances in connection with a convertible note facility, proceeds received from ~~private placements~~upfront payments and development milestone payments in connection with our collaboration arrangements, and payments received for research and development services. We expect this historical financing trend to continue if and until we are able obtain regulatory approval for and successfully commercialize one or more of ~~convertible notes, common stock and/~~our drug candidates, although there can be no assurance that we will obtain regulatory approval or ~~warrants;~~successfully commercialize any of our current or planned future product candidates.

On March 30, 2021, the exercise of options and warrants; NIH grant funding; and public offerings of securities. As of September 30, 2017, we had cash, cash equivalents and marketable securities totaling $52.2 million and an accumulated deficit of $77.8 million.

~~In August 2017, we~~Company entered into a ~~Controlled Equity Offering Sales Agreement, or~~2021 Sales Agreement with ~~Cantor Fitzgerald & Co., or Cantor, pursuant~~SVB Leerink with respect to an

at-the-market

offering program under which ~~we may~~the Company could offer and sell, from time to time ~~through Cantor,~~in its sole discretion, shares of ~~our~~its common stock, par value $0.0001 per share, having an aggregate offering price of up to $50.0 ~~million. We will pay Cantor a commission rate equal to 3.0%~~million through SVB Leerink as its sales agent. As of May 6, 2021, the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement will be offered and sold pursuant to our Registration Statement on Form S-3 (Registration No. 333-218399) that was declared effective by the SEC on June 12, 2017, or the Registration Statement, and a prospectus supplement and accompanying base prospectus that we filed with the SEC on August 18, 2017.

~~In June 2017, we~~Company had issued and sold 979,843 shares, for gross proceeds of $9.5 million, resulting in net proceeds of $9.2 million after deducting sales commissions. On May 6, 2021, the Company terminated the 2021 Sales Agreement.

On May 6, 2021, the Company entered into an underwriting agreement with SVB Leerink, as representative of the underwriters, relating to an underwritten public offering ~~an aggregate~~ of ~~3,269,219~~approximately 9.3 million shares of ~~our~~the Company’s common stock, ~~at $13.00~~par value $0.0001 per ~~share, which included 384,604 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering.~~share. The ~~shares issued in this offering were registered under the Securities Act pursuant to the Registration Statement. The~~underwritten public offering resulted in ~~$39.6~~gross proceeds of $65.0 million. The Company incurred $3.9 million ofin issuance costs associated with the underwritten public offering, resulting in net proceeds ~~after deducting underwriting discounts and commissions and other offering expenses payable by us.~~

~~In November 2016, we~~to the Company of $61.1 million.

On April 1, 2021, the Company, as borrower, entered into the Loan and Security Agreement with Horizon Technology Finance Corporation, as lender and collateral agent for itself. The Loan and Security Agreement provides for four (4) separate and independent $2.5 million term loans (“Loan A”, “Loan B”, “Loan C”, and “Loan D”) (with each of Loan A, Loan B, Loan C and Loan D, individually a ~~definitive agreement with a group~~“Term Loan” and, collectively, the “Term Loans”), whereby upon the satisfaction of ~~accredited investors resulting in a private placement of 1,644,737 shares of our common stock and warrants to purchase 1,644,737 shares of common stock, which we refer to as~~all the November private placement. These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. The warrants will be exercisable beginning May 24, 2017 with a term of five years at an exercise price of $10.79. We completed the November private placement on November 23, 2016, resulting in approximately $15.0 million in gross proceeds. Net proceeds from this issuance after deducting placement agent fees and other offering-related expenses were $13.7 million.

~~In May 2016, we completed our IPO and sold an aggregate of 944,900 shares of common stock at a price~~conditions to the ~~public~~funding of ~~$12.00 per share, which included 24,900 shares pursuant~~the Term Loans, each Term Loan would be delivered by Horizon to the ~~exercise of an option~~Company in the following manner: (i) Loan A was to ~~purchase additional shares granted~~be delivered by Horizon to the ~~underwriters in connection with~~Company prior to April 1, 2021, (ii) Loan B was required to be delivered by Horizon to the ~~IPO.~~Company prior to April 1, 2021, (iii) Loan C is required to be delivered by Horizon to the Company prior to June 30, 2021, and (iv) Loan D is required to be delivered by Horizon to the Company prior to June 30, 2021. The ~~offering resulted in $8.2 million of net~~Company may only use the proceeds ~~after deducting underwriting discounts and commissions and other offering expenses payable by us. In connection with the closing~~ of the ~~IPO, we received approximately $5.3~~Term Loans for working capital or general corporate purposes as contemplated by the Loan and Security Agreement. The Company drew down $5 million ~~in proceeds upon the exercise of previously issued warrants to purchase 641,743 shares of common stock.~~

on April 1, 2021.

Cash Flows

The following table summarizes ~~sources and uses of~~our cash flows for each of the periods ~~presented (in thousands):~~

presented:

For the Nine Months Ended September 30,

2017

2016

Net cash used in operating activities

$
(12,640
)

$
(11,708
)
Net cash used in investing activities

(19,919
)

(1,955
)
Net cash provided by financing activities

39,664

14,648

Net increase in cash, cash equivalents and restricted cash

$
7,105

$
985


	Three Months Ended March 31,
	2021			2020			Change
	(in thousands)
Net cash used in operating activities	$	(14,378	)	$	(1,524	)	$	(12,854	)
Net cash used in investing activities		(252	)		(62	)		190
Net cash provided by financing activities		—			500			(500	)
Effect of exchange rate changes on cash		(216	)		(267	)		51

Net increase in cash	$	(14,846	)	$	(1,353	)	$	(13,493	)

Table of Contents

Operating activities

Net cash used ~~in operating activities. The use~~ of ~~cash in both periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities was $12.6~~$14.4 million ~~and $11.7 million during the nine months ended September 30, 2017 and 2016, respectively. The increase in cash used~~ in operating activities for the ~~nine~~three months ended ~~September 30, 2017 compared to September 30, 2016~~March 31, 2021, consisted of the net loss of $9.9 million adjusted for changes in operating assets and liabilities of $6.2 million and offset by

non-cash

charges of $1.7 million, primarily for share-based compensation expense of $2.2 million, interest expense of $0.1 million, depreciation of $0.1 million, and the deduction of foreign exchange gains of $0.7 million.

Net cash used of $1.5 million in operating activities for the three months ended March 31, 2020 was primarily due to ~~an increase in~~a net loss of ~~$11.3~~$7.2 million ~~which were~~ offset by ~~a decrease in prepaid expenses, accounts payable and accrued expenses~~$2.6 million of ~~$1.2 million. In addition, there was an increase in the~~

non-cash ~~change in the fair value of the warrant liability of $11.5 million and an increase in non-cash stock based~~

items which included share-based compensation of $0.5 million, ~~which~~foreign exchange losses of $1.3 million, depreciation of $0.2 million, interest expense of $0.3 million and changes in fair value of convertible notes of $0.4 million. There was ~~offset by a decrease~~also an adjustment for changes in ~~non-cash common stock~~operating assets and ~~warrant valuation expense related to~~liabilities of $3.0 million.

Investing activities

For the ~~BioHEP license agreement of $2.8 million for the nine~~three months ended ~~September 30, 2017.~~

~~Net cash used in investing activities. Net~~March 31, 2021 and 2020, net cash used in investing activities was ~~$19.9~~$0.3 million ~~for the nine months ended September 30, 2017 compared to $2.0~~and $0.1 million, ~~for the nine months ended September 30, 2016. The cash used in investing activities~~respectively. Company acquired capital equipment of ~~$19.9~~$0.3 million in the ~~nine~~three months ended ~~September 30, 2017 was primarily the result of $14.6 million in proceeds from the sale of marketable securities, offset by $34.4 million for the purchase of marketable securities~~March 31, 2021 and $0.1 million ~~for~~in the ~~purchase of property and equipment. The cash used in investing activities of $2.0 million for the nine~~three months ended ~~September 30, 2016 was mainly due to proceeds of $4.9 million from~~March, 31, 2020.

Financing activities

For the ~~sale of marketable securities, offset by $6.7 million for the purchase of marketable securities and $0.2 million for the purchase of property and equipment for the nine~~three months ended ~~September 30, 2016.~~

~~Net cash provided by financing activities. Net~~March 31, 2021, net cash provided by financing activities was ~~$39.7 million and $14.6 million during~~$0. For the ~~nine~~three months ended ~~September 30, 2017 and 2016, respectively. The~~March 31, 2020, net cash provided by financing activities was $0.5 million, which was due to the issuance of convertible notes.

Funding Requirements

The Company has incurred significant losses and has an accumulated deficit of $57.0 million as of March 31, 2021.

F-star

expects to incur substantial losses in the ~~nine months ended September 30, 2017 was primarily~~foreseeable future as it conducts and expands its research and development and clinical trial activities. As of May 17, 2021, the ~~result~~date of ~~$42.5 million~~issuance of ~~gross~~the consolidated financial statements, after proceeds from Sales Agreement and drawdown of the ~~common stock offering and $0.1 million of proceeds from~~Term Loans, the ~~exercise of stock options, offset by $2.9 million of offering expenses. The cash provided by~~

~~financing activities in the nine months ended September 30, 2016 was primarily the result of $11.3 million of gross proceeds received from our IPO,~~Company’s cash of ~~$5.3~~approximately $76.3 million will be sufficient to fund its current operating plan and planned capital expenditures for at least the next 12 months.

The Company may continue to seek additional funding through public equity, private equity, debt financing, collaboration partnerships, or other sources. There are no assurances, however, that the Company will be successful in raising additional working capital, or if it is able to raise additional working capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into other such arrangements if and when needed would have a negative impact on its business, results of operations and financial condition and its ability to develop its product candidates

Our future capital requirements will depend on many factors, including:

our ability to raise capital in light of the impacts of the ongoing global

COVID-19

pandemic on the global financial markets;

the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and clinical trials for the ~~exercise~~product candidates we may develop;

our ability to enroll clinical trials in a timely manner and to quickly resolve any delays or clinical holds that may be imposed on our development programs, particularly in light of ~~warrants in connection~~the global

COVID-19

pandemic;

the costs associated with our manufacturing process development and evaluation of third-party manufacturers and suppliers;

the ~~closing~~costs, timing and outcome of regulatory review of our ~~IPO and $0.1 million for the exercise of stock options, offset by $2.1 million in underwriting discounts and offering expenses related to our IPO.~~

~~Funding Requirements~~

We expect to continue to incur significant and increasing losses for the foreseeable future. We anticipate these losses to increase as our expenses increase, and we expect that our expenses will increase if and as we:

product candidates;

~~continue to develop and conduct clinical trials of inarigivir, including the ongoing Part A of our Phase 2 ACHIEVE trial of inarigivir for chronic HBV;~~

~~continue preclinical development~~

the costs of ~~SB 11285~~preparing and ~~our other product candidates and initiate clinical trials of SB 11285 and our other product candidates, if supported by the preclinical data;~~

~~initiate and continue research and preclinical and clinical development efforts for our other product candidates;~~

~~seek to identify and develop additional product candidates;~~

~~seek regulatory and~~submitting marketing approvals for any of our product candidates that successfully complete clinical trials, ~~if any;~~

~~establish sales,~~and the costs of maintaining marketing ~~distribution~~authorization and ~~other commercial infrastructure in the future to commercialize various~~related regulatory compliance for any products for which we ~~may~~ obtain marketing ~~approval, if any;~~

approval;

~~require~~

the ~~manufacture~~costs of ~~larger quantities of product candidates for clinical development~~preparing, filing, and ~~potentially commercialization;~~

~~maintain, expand~~prosecuting patent applications, maintaining and ~~protect~~enforcing our intellectual property ~~portfolio;~~

and proprietary rights, and defending intellectual property-related claims;

~~hire and retain additional personnel, including clinical, quality control and scientific personnel;~~

add operational, financial and management information systems and personnel, including personnel to support our product development and help us continue to comply with our obligations as a public company; and

Table of Contents

~~add equipment and physical infrastructure to support our research and development programs.~~

We expect that our existing cash, cash equivalents and marketable securities as of September 30, 2017 will enable us to fund our operating expenses and capital expenditure requirements through the end of 2019. However, we anticipate that our existing cash, cash equivalents and marketable securities will not be sufficient to fund additional development of inarigivir beyond our Phase 2 ACHIEVE clinical trial in patients with chronic HBV. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development of inarigivir and SB 11285, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements both near and long-term, will depend on many factors, including, but not limited to:

~~initiation, progress, timing, costs and results of preclinical studies and clinical trials of inarigivir, including Part A of our Phase 2 ACHIEVE clinical trial in patients with chronic HBV;~~

~~initiation, progress, timing, costs and results of preclinical studies of SB 11285;~~

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

~~our obligation to make royalty and non-royalty sublicense payments to third-party licensors, if any, under our licensing agreements;~~

~~the timing, receipt, and amount of milestone payments or royalties, if any, from inarigivir, SB 11285, or any of our other product candidates;~~

•

~~the number and characteristics of product candidates that we discover or in-license and develop;~~

the outcome, timing and cost of seeking regulatory review by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;

the costs of ~~filing, prosecuting, defending~~future activities, including product sales, medical affairs, marketing, manufacturing, and ~~enforcing any patent claims and maintaining and enforcing other intellectual property rights;~~

~~subject to receipt of marketing approval, revenue, if any, received from commercial sales of inarigivir and any other products;~~

~~the costs and timing of the implementation of commercial-scale manufacturing activities;~~

~~the costs and timing of establishing sales, marketing and~~ distribution, ~~capabilities~~ for any product candidates for which we ~~may~~ receive ~~regulatory~~marketing approval; ~~and~~

the terms of our current and any future license agreements and collaborations; and the extent to which we acquire or

in-license

other product candidates, technologies and intellectual property;

the success of our collaborations with Ares and Denali and other partners;

our ability to establish and maintain additional collaborations on favorable terms, if at all; and

the costs of operating as a public company.

~~Identifying~~

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles. The preparation of our consolidated financial statements and related disclosures requires our management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates and assumptions underlying the accounting policies described therein may have the greatest potential ~~product candidates~~impact on our consolidated financial statements and, conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expecttherefore, consider these to be ~~commercially available for many years, if ever. Accordingly, we will need~~our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these current estimates based on different assumptions and under different conditions. There have been no material changes to ~~obtain substantial additional funds to achieve our business objectives.~~

~~Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds.~~ ~~We have an effective shelf registration statement~~the Company’s critical accounting policies and estimates as discussed in the Company’s Annual Report on Form ~~S-3 (File No. 333-218399), which we refer to as~~

10-K

for the Registration Statement. In August 2017, we entered into the Sales Agreement with Cantor pursuant to which we may offer and sell, from time to time through Cantor, shares of our common stock having an aggregate offering price of up to $50.0 million. Shares sold under the Sales Agreement will be offered and sold pursuant to the Registration Statement and a prospectus supplement and accompanying base prospectus that weyear ended December 31, 2020, filed with the SEC on ~~August 18, 2017. As of September~~March 30, 2017, we had up to $107.5 million in securities available for future issuance under the Registration Statement, which includes $50.0 million in shares issuable pursuant to the Sales Agreement with Cantor. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Additional debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interests of our stockholders.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

2021.

Contractual Obligations and Commitments

~~The following table summarizes our contractual obligations at September 30, 2017, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):~~

Payments Due by Period

Total

Less Than
1 Year

1 – 3
Years

3 – 5
Years

More than
5 Years

Operating lease commitments

$
624

$
194

$
430

$
0

$
—

Total

$
624

$
194

$
430

$
0

$
—

In addition to the amounts shown in the above table, we have contractual obligations pursuant to our amended and restated license agreement with BioHEP. Under this agreement, we have agreed to pay up to $3.5 million in development and regulatory milestone payments to BioHEP for each distinct viral indication for which we develop licensed product(s). BioHEP is also eligible to

receive tiered royalties in the low-to-mid single-digits on net product sales of licensed products by us and our affiliates and sub licensees, and a specified share of non-royalty sublicensing revenues we and our affiliates receive from sub licensees, which share of sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses. Milestone and royalty payments associated with our amended and restated license agreement with BioHEP have not been included in the above table of contractual obligations as we cannot reasonably estimate if or when they will occur.

On October 4, 2017, we entered into a New Lease. The premises covered by the New Lease will serve as our new principal office and laboratory space. The initial term of the New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations to the premises covered by the New Lease, which we expect to occur in approximately April 2018. Following an eleven-month rent abatement period, we will be obligated to make monthly rent payments in the amount of $34,533, which is subject to increase by approximately 3% annually for the first five years of the New Lease and by approximately 2.5% annually thereafter. The total lease payments due during the term of the lease are approximately $4.4 million. In addition, we are responsible under the New Lease for specified costs and charges, including certain operating expenses, utilities, taxes and insurance.

We enter into contracts in the normal course of business with ~~third party~~third-party service providers for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. We have not included our payment obligations under these contracts in the table as these contracts generally provide for termination upon notice, and therefore, we believe that our

non-cancelable

obligations under these agreements are not ~~material.~~material and we cannot reasonably estimate the timing of if and when they will occur. We could also enter into additional research, manufacturing, supplier and other agreements in the future, which may require

up-front

payments and even long-term commitments of cash.

Off-Balance

Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any

off-balance

sheet arrangements, as defined in the rules and regulations of the SEC.

Recently Issued Accounting Pronouncements

In ~~November 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which includes provisions intended to clarify how entities present restricted cash and restricted cash equivalents in the statement of cash flows. Companies must show the change in total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The new standard is applied retrospectively and is effective for our annual periods beginning after December 15, 2017, and for interim periods within those annual periods, with early adoption permitted. We elected early adoption of this standard as of September 30, 2017, the first period in which we had restricted cash. The adoption of this standard has resulted in the presentation of the change in cash, cash equivalents and restricted cash on the statement of cash flows in the periods presented.

~~In March~~June 2016, the FASB issued ASU ~~2016-09,~~ ~~Compensation – Stock Compensation~~No.

2016-13,

Measurement of Credit Losses on Financial Instruments

(“ASU

2016-13”).

ASU

2016-13

will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and

held-to-maturity

debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. In November 2019, the FASB issued ASU No.

2019-10,

Financial Instruments — Credit Losses (Topic ~~718)~~326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): ~~Improvements~~Effective Dates

to ~~Employee Share-Based Payment Accounting~~ (“amend the effective date of ASU ~~2016-09”)~~

2016-13,

for entities eligible to ~~require changes~~be “smaller reporting companies,” as defined by the SEC, to several areas of employee stock-based compensation payment accounting in an effort to simplify stock-based compensation reporting. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, forfeitures, and intrinsic value accounting for private entities. ASU 2016-09 isbe effective for ~~our annual reporting periods~~fiscal years beginning after December 15, ~~2016,~~2022, including interim ~~reporting~~ periods within each annual reporting period. We adopted this standard on January 1, 2017. The update revises our requirements in the following areas: minimum statutory withholding, accounting for income taxes, and forfeitures. Prior to adoption, we applied a 0% forfeiture rate to stock-based compensation, resulting in no cumulative effect adjustment to the opening period. Upon adoption of this standard, our accounting policy is to recognize forfeitures as they occur.

The update requires us to recognize the income tax effect of awards in the income statement when the awards vest or are settled. It also allows us to repurchase more of an employee’s shares than we could prior to the update for tax withholding purposes without triggering a liability. The income tax related items had no effect on the current period presentation and we maintain a full valuation allowance against our deferred tax assets.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~ (Topic 606), or ASC 606, which amends the guidance for revenue recognition to replace numerous industry-specific requirements. ASC 606 implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. ASC 606 also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in ASC 606 are effective for reporting periods beginning after December 15, 2016, and earlythose fiscal years. Early adoption is permitted. The Company has not ~~permitted. In July 2015, FASB approved the deferral of adoption by one year. Entities can transition~~elected to ~~the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Until we expect material revenue to be recognized, the adoption of this standard~~early adopt ASU

No. 2016-13.

The Company is ~~not expected to have an impact on our consolidated financial statements.~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities, which amends Accounting Standards Codification, or ASC, Subtopic 825-10,~~ ~~Financial Instruments - Overall~~, and includes updates on certain aspects of recognition, measurement, presentation and disclosure of financial instruments and applies to all entities that hold financial assets or owe financial liabilities. The new standard is effective for our annual period beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the potential impact that the adoption of ~~this standard may~~ASU

2016-13

will have on ~~our consolidated~~the Company’s financial ~~statements.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842), which supersedes the current leasing guidance~~position and upon adoption, will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. The new standard is effective for our annual period beginning after December 15, 2018, and can be early adopted by applying a modified retrospective approach for leases existing at, and entered into after, the beginning of the earliest comparable period presented in the financial statements. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.

~~In September 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230,~~ ~~Statement of Cash Flows~~, and includes provisions intended to reduce diversity in practice and provides guidance on eight specific statements of cash flows classification issues. The new standard is effective for our annual period ending after December 15, 2017, and for annual and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.

~~In July 2017, the FASB issued ASU 2017-11,~~ Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

We are exposed to market risk related to changes in interest rates. Our cash, cash equivalents and marketable securities of $52.2 million as of September 30, 2017, consisted of cash, money market accounts and short-term marketable debt securities. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, an immediate 10% change in market interest rates would not be expected to have a material impact on the fair market value of our investment portfolio or on our financial condition or results of operations.

~~Item 4.~~

~~Controls and Procedures.~~

~~Evaluation of Disclosure Controls~~

Emerging Growth Company and ~~Procedures~~

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of September 30, 2017, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such dateSmaller Reporting Company Status

We are ~~effective at the reasonable assurance level. The term “disclosure controls and procedures,”~~an emerging growth company, (“EGC”) as defined in ~~Rules 13a-15(e) and 15d-15(e)~~ the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an EGC until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering (December 31, 2021), (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule

12b-2

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our ordinary shares held by

non-affiliates

exceeded $700.0 million as of the last business day of the second fiscal quarter of such fiscal year or (4) the date on which we have issued more than $1.0 billion in

non-convertible

debt securities during the prior three-year period. The JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies. In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, we are entitled to rely on certain exemptions as an EGC we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of

non-emerging

growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that has or may be adopted by the Public Company

Table of Contents

Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of Spring Bank’s initial public offering (December 31, 2021) or until we no longer meet the requirements of being an EGC, whichever is earlier.

We are also a smaller reporting company as defined under the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and

non-voting

common stock held by

non-affiliates

is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and

non-voting

common stock held by

non-affiliates

is less than $700.0 million measured on the last business day of our second fiscal quarter.

Table of Contents

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined in

Rule 12b-2 under

the Securities Exchange Act ~~means~~of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of March 31, 2021, our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and ~~other~~ procedures ~~of a company that are designed~~as defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act to ensure that information required to be disclosed by ~~a company~~the Company in the reports that it files or submits under the Exchange Act ~~are~~is recorded, processed, summarized and reported within the time periods specified inby the ~~SEC’s~~SEC rules and ~~forms. Disclosure controls~~forms, and ~~procedures include, without limitation, controls and procedures designed to ensure~~ that such information ~~required to be disclosed by us in the reports we file or submit under the Exchange Act~~ is accumulated and communicated to our management, including our ~~principal executive officer~~Chief Executive Officer and ~~principal financial and accounting officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. ~~Management recognizes that any~~Based on this evaluation, our Chief Executive Officer and Chief Financial Officer due the material weaknesses in our internal controls as previously disclosed in our Annual Report on Form 10-k for the year ended December 31, 20220, as described below, our disclosure controls and procedures ~~no matter how well designed and operated, can provide only reasonable assurance~~were not effective as of ~~achieving their objectives and~~March 31, 2021.

Management’s Annual Report on Internal Control over Financial Reporting

We have performed an evaluation of the effectiveness of our internal control over financial reporting, based on criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control-Integrated Framework. Based on that evaluation, our management, ~~necessarily applies its judgment~~including our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was not effective as of March 31, 2021, due to material weaknesses in ~~evaluating~~internal control over financial reporting, associated with (i) the ~~cost-benefit relationship~~lack of ~~possible~~formal policies and procedures and sufficient complement of personnel to implement effective segregation of duties and (ii) the lack of sufficient formality and evidence of controls over key reports and ~~procedures.~~

~~Inherent Limitations~~spreadsheets.

A material weakness is a deficiency, or a combination of ~~Internal Controls~~

deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future ~~periods~~years are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As an EGC under the JOBS Act, we are exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

Remediation Plans

As discussed above, the material weaknesses over effective controls on the financial statement close and reporting process as well as lack of an effective control environment with formal processes and procedures and not having sufficient formality and evidence of controls as of December 31, 2020, were not remediated as of March 31, 2021. We have commenced measures to remediate these material weaknesses and have hired additional finance and accounting personnel during the fourth quarter of 2020 with appropriate expertise to perform specific functions which we believe will allow for proper segregation of duties, design key controls and implement improved processes and internal controls. We will continue to assess our finance and accounting staffing needs to ensure remediation of these material weaknesses. The material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) during the ~~quarter~~three months ended ~~September 30, 2017,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any material litigation.

Item 1A.

Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC on March 30, 2021, which could materially affect our business, financial condition, or results of operations. There have been no material changes ~~in or additions~~ to the risk factors ~~included~~described in our Annual Report on Form

10-K ~~for the year ended~~ ~~December~~ ~~31, 2016 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.~~

~~Item 5.~~

~~Other Information.~~

On October 26, 2017, our Board of Directors, or Board, elected Christiana Bardon, M.D., to the Board as a class II director with a term expiring at the 2020 annual meeting of stockholders. The Board also appointed Dr. Bardon to the Compensation Committee of the Board.

In accordance with our current non-employee director compensation policy, Dr. Bardon will receive a $35,000 annual cash retainer for service on the Board and a $5,000 annual cash retainer for service on the Compensation Committee. These cash retainers are payable quarterly in arrears. The non-employee director compensation policy includes a stock-for-fees policy, under which Dr. Bardon has elected to receive shares of our common stock in lieu of cash fees.

In addition, in accordance with the non-employee director compensation policy, Dr. Bardon received an option to purchase 11,000 shares of common stock upon her election to the Board, at an exercise price of $15.17, the closing share price of the common stock on the NASDAQ Capital Market on October 26, 2017. This option becomes exercisable on a monthly basis over the course of three years, subject to Dr. Bardon’s continued service as a director and, in the event of a change in control of the company, the vesting schedule of the option will accelerate in full. Dr. Bardon is also entitled to receive an option to purchase 5,500 shares of common stock on the date of each annual meeting of stockholders with an exercise price equal to the closing share price of the common stock on the NASDAQ Stock Market on the date of grant. Such option shall vest in 12 equal monthly installments while Dr. Bardon is serving as a director and, in the event of a change in control of the company, the vesting schedule of the option will accelerate in full.

Also, in connection with her election to the Board, we and Dr. Bardon entered into an indemnification agreement. The indemnification agreement is substantially the same as the form of indemnification agreement that we have entered into with our other directors, a copy of which was filed as Exhibit 10.1 to our Registration Statement on Form S-1 (File No. 333-208875) filed with the SEC on January 5, 2016 and is hereby incorporated by reference. The indemnification agreement provides that we will indemnify Dr. Bardon for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by her in any action or proceeding arising out of her service as a director.

In November 2016, we entered into a definitive agreement with respect to the private placement of 1,644,737 shares of common stock and warrants to purchase 1,644,737 shares of our common stock to a group of accredited investors. All investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. The warrants are currently exercisable at an exercise price of $10.79 per share. Burrage Capital Healthcare Fund I, L.P. (“Burrage Capital”), of which Dr. Bardon serves as the Portfolio Manager, purchased 54,824 shares of common stock and warrants to purchase 54,824 shares of common stock in the private placement. UBS Oncology Impact Fund L.P. (“Oncology Impact Fund”) purchased 603,070 shares of common stock and warrants to purchase 603,070 shares of common stock in the private placement. Dr. Bardon’s spouse, Ansbert Gadicke, M.D., serves as the Managing Member of MPM Oncology Impact Management GP LLC, an indirect General Partner of Oncology Impact Fund. Additionally, in June 2017, we completed a public offering of 3,269,219 shares of our common stock at $13.00 per share. Oncology Impact Fund purchased 230,769 shares of common stock at the public offering price in this public offering. Dr. Bardon may be deemed to have a beneficial ownership interest in the shares purchased by the entities identified above.

~~There are no arrangements or understandings between Dr. Bardon and any other person pursuant to which Dr. Bardon was elected as a director.~~

March 30, 2021.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures.

Note Applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

The exhibits filed as part of this Quarterly Report on

Form 10-Q

are set forth on the Exhibit Index set forth immediately ~~below.~~

prior to the signature page.

Table of Contents ~~EXHIBIT~~

EXHIBIT INDEX


Exhibit Number		Description
~~10.1~~
4.1*		~~Controlled Equity Offering~~^SMForm of Warrant issued under the Venture Loan and Security Agreement, dated April 1, 2021.

10.1*		Venture Loan and Security Agreement, dated April 1, 2021, by and among F-star Therapeutics, Inc., as borrower, F-star Therapeutics Limited, as guarantor, and Horizon Technology Finance Corporation, as lender and collateral agent.

10.2		Sales Agreement, dated ~~as of August 18, 2017,~~March 30, 2021, by and between ~~Spring Bank Pharmaceuticals,~~ F-star Therapeutics, Inc. and ~~Cantor Fitzgerald & Co.~~SVB Leerink LLC (incorporated by reference to Exhibit ~~10.1~~1.2 to ~~Spring Bank Pharmaceuticals, Inc.’s Current Report~~the Registration Statement on Form ~~8-K~~ S-3 filed by the Registrant on ~~August 18, 2017)~~March 30, 2021, Reg. No. 333-254884).

~~31.1~~ 31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~ 31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~ 32.1*		Certification of Principal Executive Officer ~~and~~Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

Table of Contents ~~SIGNATURES~~

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.

	September 30,			December 31,
	2017			2016
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	17,539		$	10,684
Marketable securities		34,640			14,046
Prepaid expenses and other current assets		850			840
Total current assets		53,029			25,570
Marketable securities, long-term		—			752
Property and equipment, net		534			522
Restricted cash		250			—
Other assets		35			35
Total	$	53,848		$	26,879
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,773		$	1,519
Accrued expenses and other current liabilities		2,312			1,982
Total current liabilities		4,085			3,501
Warrant liabilities		17,807			6,333
Other long-term liabilities		32			27
Total liabilities		21,924			9,861
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30, 2017 and December 31, 2016; no shares issued or outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30, 2017 and December 31, 2016; 12,697,038 and 9,416,238 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		1			1
Additional paid-in capital		109,682			68,559
Accumulated deficit		(77,752	)		(51,535	)
Other comprehensive loss		(7	)		(7	)
Total stockholders’ equity		31,924			17,018
Total	$	53,848		$	26,879

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Grant revenue	$	—		$	—		$	—		$	352
Operating expenses:
Research and development		3,221			2,723			9,152			11,247
General and administrative		1,968			1,452			5,811			4,136
Total operating expenses		5,189			4,175			14,963			15,383
Loss from operations		(5,189	)		(4,175	)		(14,963	)		(15,031	)
Other income (expense):
Interest income		141			27			220			65
Change in fair value of warrant liabilities		(5,780	)		—			(11,474	)		—
Net loss		(10,828	)		(4,148	)		(26,217	)		(14,966	)
Unrealized (loss) gain on marketable securities		(10	)		(3	)		(7	)		18
Comprehensive loss	$	(10,838	)	$	(4,151	)	$	(26,224	)	$	(14,948	)
Net loss per common share – basic and diluted	$	(0.85	)	$	(0.53	)	$	(2.48	)	$	(2.18	)
Weighted-average number of shares outstanding – basic and diluted		12,696,986			7,759,630			10,555,461			6,856,876

	September 30,			December 31,
Investments - Current:	2017			2016
Debt securities - available for sale	$	34,640		$	14,046
Total	$	34,640		$	14,046
			��
Investments - Noncurrent:
Debt securities - available for sale	$	—		$	752
Total	$	—		$	752

	At September 30, 2017
	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
Investments - Current:
Commercial paper	$	14,345	$	—	$	—		$	14,345
Corporate bonds		18,309		—		(7	)		18,302
United States treasury securities		1,993		—		—			1,993
Total	$	34,647	$	—	$	(7	)	$	34,640

	At December 31, 2016
	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
Investments - Current:
Agency bonds	$	452	$	—	$	—		$	452
Commercial paper		2,947		—		—			2,947
Corporate bonds		8,499		—		(7	)		8,492
United States treasury securities		2,155		—		—			2,155
Total	$	14,053	$	—	$	(7	)	$	14,046

Investments - Noncurrent:
Corporate bonds		752		—		—			752
Total	$	752	$	—	$	—		$	752

	Amortized Cost		Fair Value
Due in one year or less	$	34,647	$	34,640
Due after one year through two years		—		—
Total	$	34,647	$	34,640

			Fair Value Measurement at September 30, 2017
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds ⁽¹⁾	$	15,164	$	15,164	$	—	$	—
Fixed income securities		34,640		—		34,640		—
Total	$	49,804	$	15,164	$	34,640	$	—

Liabilities:
Warrant liabilities	$	17,807	$	—	$	—	$	17,807
Total	$	17,807	$	—	$	—	$	17,807

			Fair Value Measurement at December 31, 2016
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds ⁽¹⁾	$	9,507	$	9,507	$	—	$	—
Fixed income securities		14,798		—		14,798		—
Total	$	24,305	$	9,507	$	14,798	$	—

Liabilities:
Warrant liabilities	$	6,333	$	—	$	—	$	6,333
Total	$	6,333	$	—	$	—	$	6,333

	November Private Placement Warrants
Balance at December 31, 2015	$	—
Issuance of warrants		8,275
Change in fair value		(1,942	)
Balance at December 31, 2016		6,333
Change in fair value		11,474
Balance at September 30, 2017	$	17,807

	September 30, 2017			December 31, 2016
Risk-free interest rate		1.8	%		1.9	%
Expected term (in years)		4.1			4.9
Expected volatility		70.0	%		65.5	%
Expected dividend yield		0	%		0	%

	Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value
Options outstanding at December 31, 2015		610,481		$	11.99	$	—
Granted		128,334			10.41		—
Exercised		(10,247	)		9.28		29,550
Cancelled		(24,253	)		9.89		—
Outstanding at December 31, 2016		704,315		$	11.82		—
Granted		286,500			8.20		—
Exercised		(10,000	)		9.28		11,228
Cancelled		(3,250	)		12.44		—
Options outstanding at September 30, 2017		977,565		$	10.78	$	5,923,320
Options exercisable at September 30, 2017		390,417		$	11.67	$	2,019,924

	Nine Months Ended September 30,
	2017			2016
Risk-free interest rate		2.0	%		1.4	%
Expected term (in years)		6.0			6.1
Expected volatility		79.8	%		77.6	%
Expected dividend yield		0	%		0	%

Year
2017	$	59
2018		174
2019		157
2020		164
Thereafter		70
Total minimum lease payments	$	624

	For the Three Months Ended September 30,						Increase			For the Nine Months Ended September 30,						Increase
	2017			2016			(Decrease)			2017			2016			(Decrease)
Grant revenue	$	—		$	—		$	—		$	—		$	352		$	(352	)
Operating expenses:
Research and development		3,221			2,723			498			9,152			11,247			(2,095	)
General and administrative		1,968			1,452			516			5,811			4,136			1,675
Total operating expenses		5,189			4,175			1,014			14,963			15,383			(420	)
Loss from operations		(5,189	)		(4,175	)		(1,014	)		(14,963	)		(15,031	)		68
Other income		141			27			114			220			65			155
Change in fair value of warrant liabilities		(5,780	)		—			(5,780	)		(11,474	)		—			(11,474	)
Net loss	$	(10,828	)	$	(4,148	)	$	(6,680	)	$	(26,217	)	$	(14,966	)	$	(11,251	)

	Payments Due by Period
	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
Operating lease commitments	$	624	$	194	$	430	$	0	$	—
Total	$	624	$	194	$	430	$	0	$	—

Large accelerated filer

Accelerated filer

Non-accelerated
filer

☐ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

Emerging growth company