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

Indicate by check mark whether the registrant has submitted electronically ~~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 was required to submit ~~and post~~ such files). Yes ☒ 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 31, 2017,~~May 5, 2020, the registrant had ~~12,951,033~~17,094,839 shares of common stock, $0.0001 par value per share, outstanding.

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 “may,” “will,” “should,” “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:

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:

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~~2019, as filed with the Securities and Exchange Commission on February 14, 2020, 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.

	September 30,			December 31,			March 31,			December 31,
	2017			2016			2020			2019
ASSETS	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	17,539		$	10,684		$	30,633		$	28,709
Marketable securities		34,640			14,046			16,873			25,746
Prepaid expenses and other current assets		850			840			2,961			3,522
Total current assets		53,029			25,570			50,467			57,977
Marketable securities, long-term		—			752
Property and equipment, net		534			522			2,140			2,234
Operating lease right-of-use assets								2,648			2,717
Restricted cash		250			—			234			234
Other assets		35			35			35			35
Total	$	53,848		$	26,879		$	55,524		$	63,197
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,773		$	1,519		$	1,992		$	2,210
Accrued expenses and other current liabilities		2,312			1,982			2,486			2,438
Convertible term loan, net of unamortized discount								19,147			—
Accrued interest payable								399			403
Operating lease liabilities, current								367			355
Total current liabilities		4,085			3,501			24,391			5,406
Convertible term loan, net of unamortized discount								—			19,070
Warrant liabilities		17,807			6,333			60			299
Operating lease liabilities, noncurrent								2,774			2,869
Other long-term liabilities		32			27			27			27
Total liabilities		21,924			9,861			27,252			27,671
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 11)
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
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at March 31, 2020 and December 31, 2019; no shares issued or outstanding at March 31, 2020 and December 31, 2019								—			—
Common stock, $0.0001 par value—authorized, 200,000,000 shares at March 31, 2020 and December 31, 2019; 16,582,444 and 16,513,763 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively								2			2
Additional paid-in capital		109,682			68,559			162,771			161,924
Accumulated deficit		(77,752	)		(51,535	)		(134,343	)		(126,165	)
Other comprehensive loss		(7	)		(7	)
Accumulated other comprehensive loss								(158	)		(235	)
Total stockholders’ equity		31,924			17,018			28,272			35,526
Total	$	53,848		$	26,879		$	55,524		$	63,197

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Grant revenue	$	—		$	—		$	—		$	352
Operating expenses:
Research and development		3,221			2,723			9,152			11,247		$	5,303		$	5,567
General and administrative		1,968			1,452			5,811			4,136			2,879			2,810
Total operating expenses		5,189			4,175			14,963			15,383			8,182			8,377
Loss from operations		(5,189	)		(4,175	)		(14,963	)		(15,031	)		(8,182	)		(8,377	)
Other income (expense):
Interest income		141			27			220			65			241			361
Interest expense														(476	)		—
Change in fair value of warrant liabilities		(5,780	)		—			(11,474	)		—			239			2,821
Net loss		(10,828	)		(4,148	)		(26,217	)		(14,966	)		(8,178	)		(5,195	)
Unrealized (loss) gain on marketable securities		(10	)		(3	)		(7	)		18
Unrealized gain/(loss) on marketable securities														77			(116	)
Comprehensive loss	$	(10,838	)	$	(4,151	)	$	(26,224	)	$	(14,948	)	$	(8,101	)	$	(5,311	)
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
Net loss per common share - basic and diluted													$	(0.49	)	$	(0.32	)
Weighted-average number of shares outstanding - basic and diluted														16,523,750			16,436,970

For the Three Months Ended	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
March 31, 2020	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2019		16,513,763	$	2	$	161,924	$	(126,165	)	$	(235	)	$	35,526
Stock-based compensation		—		—		792		—			—			792
Issuance of common stock for services rendered		26,881		—		25		—			—			25
Issuance of common stock in connection with at-the-market offering, net of issuance costs		41,800				30								30
Net unrealized gain on marketable securities		—		—		—		—			77			77
Net loss		—		—		—		(8,178	)		—			(8,178	)
Balance at March 31, 2020		16,582,444	$	2	$	162,771	$	(134,343	)	$	(158	)	$	28,272

For the Three Months Ended	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
March 31, 2019	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2018		16,434,614	$	2	$	157,931	$	(102,068	)	$	(5	)	$	55,860
Stock-based compensation		—		—		913		—			—			913
Issuance of common stock for services rendered		7,918		—		84		—			—			84
Net unrealized loss on marketable securities		—		—		—		—			(116	)		(116	)
Net loss		—		—		—		(5,195	)		—			(5,195	)
Balance at March 31, 2019		16,442,532	$	2	$	158,928	$	(107,263	)	$	(121	)	$	51,546

	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net loss	$	(26,217	)	$	(14,966	)	$	(8,178	)	$	(5,195	)
Adjustments for:
Depreciation and amortization		115			87			96			83
Operating lease right-of-use asset amortization								69			65
Change in fair value of warrant liabilities		11,474			—			(239	)		(2,821	)
Non-cash investment income (losses)		(50	)		28
Non-cash interest expense								77			—
Non-cash investment expense								(127	)		(12	)
Non-cash stock-based compensation		1,483			1,015			817			972
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	)		561			431
Other assets		—			(35	)		—			(31	)
Accounts payable		254			148			(218	)		106
Accrued expenses and other liabilities		311			(19	)		44			(411	)
Operating lease liabilities								(83	)		26
Net cash used in operating activities		(12,640	)		(11,708	)		(7,181	)		(6,787	)
Cash flows from investing activities:
Proceeds from sale of marketable securities								15,077			8,884
Purchases of marketable securities		(34,397	)		(6,693	)		(6,000	)		—
Proceeds from sale of marketable securities		14,605			4,894
Purchases of property and equipment		(127	)		(156	)		(2	)		(71	)
Net cash used in investing activities		(19,919	)		(1,955	)
Net cash provided by investing activities								9,075			8,813
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
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs								30			—
Cash provided by financing activities		39,664			14,648			30			—
Net increase in cash, cash equivalents and restricted cash		7,105			985			1,924			2,026
Cash and cash equivalents, beginning of period		10,684			4,347
Cash, cash equivalents and restricted cash, beginning of period								28,943			14,958
Cash, cash equivalents and restricted cash, end of period	$	17,789		$	5,332		$	30,867		$	16,984
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
Cash paid for interest, net							$	403		$	—

Spring Bank Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company engaged in 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 most advanced SMNH product candidate, inarigivir soproxil (“inarigivir”) (formerly known as SB 9200), for the treatment of ~~viral diseases.~~ a range of cancers and inflammatory diseases using its proprietary small molecule nucleotide platform. The Company designs its compounds to selectively target and modulate the activity of specific proteins implicated in various disease states. The Company’s internally-developed programs are primarily designed to stimulate and/or dampen immune responses. The Company is devoting its resources to advancing multiple programs in its STING (STimulator of INterferon Genes) product portfolio.

Until January 2020, the Company was developing inarigivir, an orally-administered investigational selective immunomodulator, as a potential treatment for chronic hepatitis B virus, or HBV. Inarigivir was being evaluated in multiple clinical trials, including the Company’s Phase 2b CATALYST trials, designed to evaluate both treatment-naïve and virally-suppressed non-cirrhotic patients with HBV under multiple dosing regimens. The Company discontinued the development of inarigivir based on an ongoing assessment of patients in its Phase 2b CATALYST trials.

Since its inception in 2002 and prior to its initial public offering (“IPO”) in May 2016, the Company built its technology platform and product candidate pipeline, ~~using a semi-virtual business model,~~ supported by grants and ~~direct funding from the United States National Institutes of Health (“NIH”) as well as~~ through private financings. ~~In September 2015, the~~The Company ~~formed a~~has three wholly owned ~~subsidiary,~~subsidiaries: Sperovie Biosciences, Inc. ~~and~~formed in September 2015, SBP Securities Corporation formed in December 2016 ~~the Company~~and SBP International Limited formed ~~a wholly owned subsidiary, SBP Securities Corporation.~~in May 2019.

The Company’s success is dependent upon its ability to successfully complete clinical development and obtain regulatory approval of 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 development of inarigivir, SB 11285 and the Company’s other product candidates.~~

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, 2020 and for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, 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, 2020, results of operations for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, statement of stockholders’ equity for the three months ended March 31, 2020 and 2019 and its cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019. 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,~~2019, 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, 2020 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

As of ~~September 30, 2017,~~March 31, 2020, the Company had an accumulated deficit of ~~$77.8~~$134.3 million and ~~$52.2~~$47.5 million in cash, cash equivalents and marketable securities. On April 8, the Company repaid in full its $20.0 million convertible term loan (see Note 12).

The Company expects to continue 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 available to the Company on acceptable terms, or at all. To the extent that 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.

There can be no assurance, however, that the Company will be able to receive cash proceeds from any of these potential sources. Refer to Part II, Item 1A. — Risk Factors — Business interruptions resulting from the coronavirus disease 2019 (COVID-19) outbreak

or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business, included elsewhere in this Quarterly Report on Form 10-Q regarding the adverse impact of the COVID-19 pandemic on, among other things, capital market conditions.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sperovie Biosciences, Inc., SBP Securities Corporation and SBP ~~Securities Corporation.~~International Limited. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of ~~September 30, 2017.~~March 31, 2020. Sperovie Biosciences, Inc. is a joint borrower with the Company under the Company’s term loan (see Note 9). SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of ~~September 30, 2017.~~March 31, 2020. SBP International Limited had operations consisting mainly of clinical trial oversight, including European data protection oversight, as of March 31, 2020. All intercompany balances and transactions have been eliminated in consolidation.

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, 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. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates relied upon in preparing the accompanying financial statements related to the fair value of ~~common stock and warrant liabilities,~~warrants, 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 actual results may differ from these estimates.

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~~March 31, ~~2016~~2020 are money market fund investments of ~~$15,164,000~~$22.7 million and ~~$9,507,000, respectively,~~included in cash and cash equivalents as of December 31, 2019 are money market fund investments of $21.1 million and United States treasury securities of $6.0 million, which are reported at fair value ~~(Note~~(see Note 5).

As of March 31, 2020 and December 31, 2019, restricted cash consists of approximately $234,000, which is held as a security deposit required in conjunction with a lease agreement for the Company’s principal office and laboratory space entered into in October 2017.

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. Substantially all of the Company’s cash is held at financial institutions that management believes to be of ~~high-credit~~high credit quality. Deposits with these financial institutions may 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. The Company did not have any sources of revenue for the three and nine months ended September 30, 2017.

The Company invests excess cash balances 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, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.

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

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and operating lease liabilities 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.

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,~~As of March 31, 2020, no such impairment has occurred.

The Company’s operating leases include rent escalation payment terms and other incentives received from landlords. Deferred rent represents the difference between actual operating lease payments due and straight-line rent expense over the term of the lease, which is recorded in accrued expenses and other current liabilities. The Company had deferred aggregate rent for its research and development facility in Milford, Massachusetts and its headquarters in Hopkinton, Massachusetts of $35,000 and $35,000 as of September 30, 2017 and December 31, 2016, respectively.

The Company recognizes revenue when all of the following criteria are met: there is persuasive evidence 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.

Research and development expenses consist primarily of costs incurred for the Company’s research activities, including discovery efforts, and the development of product candidates, which include:

The Company expenses research and development costs as incurred. 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. 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 the Company’s consolidated financial statements as prepaid or accrued research and development expenses.

The Company ~~reviews~~accounts for freestanding warrants within stockholders equity or as liabilities based on the ~~terms~~characteristics and provisions of ~~all~~each instrument. The Company evaluates outstanding warrants ~~issued~~in accordance with ASC 480, Distinguishing Liabilities from Equity, and ~~classifies~~ASC 815, Derivatives and Hedging. If none of the criteria in the evaluation in these standards are met, 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.

The Company’s stock-based payments include stock options, performance-based restricted stock units (“performance-based RSUs”), time-based restricted stock units (“time-based RSUs”) and grants of common stock. The Company accounts for all stock-based payment awards granted to employees and nonemployees using a fair value method. ~~The Company’s stock-based payments include stock options and grants of common stock, including common stock subject to vesting.~~ The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is generally the vesting period, on a straight-line basis. The ~~measurement date~~Company accounts 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~~forfeitures as they occur.

The Company measures the fair value of the ~~awards. Stock-based compensation costs for nonemployees are recognized as expense over~~performance-based RSUs relating to the ~~vesting period on~~total share return performance using a ~~straight-line basis.~~Monte Carlo valuation model. The Company measures the fair value of the performance-based RSUs relating to the milestone performance goals using the fair value method and the probability that the specified performance criteria will be met. Each quarter the Company updates its assessment of the probability that the specified milestone criteria will be achieved and adjusts its estimate of the fair value, if necessary. Stock-based compensation expense is classified in the accompanying consolidated statements of operations and comprehensive loss based on the department to which the related services are provided.

The Company’s financial instruments consist of cash equivalents, marketable securities, accounts payable, a term loan 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 the marketable securities and liability classified warrants are remeasured to fair value each reporting period ~~as described in~~(see Note 5.5). The fair value of the term loan approximates its face value due to market terms.

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 (“ASC 820”), establishes a hierarchy of inputs used when available. 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 fair value hierarchy applies only to 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:

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

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that 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 and liabilities measured at fair value on a recurring basis include cash equivalents, marketable securities and warrant liabilities.

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period, determined using the treasury-stock method and the as if-converted method, for convertible securities, if inclusion of these instruments is dilutive. ~~As of September 30, 2017~~

For the three months ended March 31, 2020 and ~~December 31, 2016,~~2019, both methods are equivalent. ~~Common stock, preferred stock~~Basic and ~~warrant issuances are~~diluted net loss per share is described further in Note 7.2.

Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities ~~and for~~as well as net operating loss and tax credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances and information available at 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% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the consolidated financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of interest expense. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company has not identified any material uncertain tax positions.

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 its principal office and laboratory space in Hopkinton, Massachusetts ~~and research and development space in Milford, Massachusetts,~~ under a non-cancelable operating ~~leases.~~lease. The Company has standard indemnification arrangements under ~~these leases~~the lease that require it to indemnify 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,~~March 31, 2020, the Company had not experienced any losses related to these indemnification obligations 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 of these obligations is negligible, and no related reserves were established.

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.

In ~~November 2016,~~August 2018, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”) 2016-18,~~ASU 2018-13, ~~Statement~~Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement. This ASU removes, modifies and adds certain disclosure requirements 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.ASC Topic 820. The ~~new standard is applied retrospectively and~~ASU is effective for ~~our annual~~all entities for fiscal years, and interim periods within those fiscal years, 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 2016, the FASB issued ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”) to require changes 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 is effective for annual reporting periods beginning after December 15, 2016, including interim reporting periods within each annual reporting period.2019. The Company adopted this standard onas of January 1, 2017. The update revises requirements in the following areas: minimum statutory withholding, accounting for income taxes, and forfeitures. Prior 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 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,2020; however, the adoption of this standard isdid 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. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, which supersedes the current leasing guidance 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 the Company for the 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. 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.

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):

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

The following potentially dilutive 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,				For the Three Months Ended March 31,
	2017		2016		2020		2019
Convertible debt						2,328,642		—
Common stock warrants		1,798,084		153,347		1,927,124		1,662,124
Stock options		977,565		718,065
Stock options, RSUs and inducement awards						1,871,058		1,919,765

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 and preserve capital.

The following table summarizes the Company’s investments, by category, as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in thousands):

	September 30,			December 31,		March 31,		December 31,
Investments - Current:	2017			2016		2020		2019
Debt securities - available for sale	$	34,640		$	14,046	$	16,873	$	25,746
Total	$	34,640		$	14,046	$	16,873	$	25,746
			��
Investments - Noncurrent:
Debt securities - available for sale	$	—		$	752
Total	$	—		$	752

A summary of the Company’s available-for-sale classified investments as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):

	At March 31, 2020
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses				Fair Value
Investments - Current:
Corporate bonds	$	5,028	$	—	$	(73	)		$	4,955
United States treasury securities		12,003		—		(85	)		$	11,918
Total	$	17,031	$	—	$	(158	)		$	16,873

	At December 31, 2019
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses				Fair Value
Investments - Current:
Corporate bonds	$	4,990	$	—	$	(58	)		$	4,932
United States treasury securities		20,979		—		(165	)			20,814
Total	$	25,969	$	—	$	(223	)	⁽¹⁾	$	25,746

⁽¹⁾ $(12) of unrealized losses are included in the cash and cash equivalents balance as of December 31, 2019, a total of $(235) net

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

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of ~~September 30, 2017~~March 31, 2020 consisted of the following (in thousands):

	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	34,647	$	34,640	$	17,031	$	16,873
Due after one year through two years		—		—
Total	$	34,647	$	34,640	$	17,031	$	16,873

Property and equipment as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

	September 30,			December 31,			March 31,			December 31,
	2017			2016			2020			2019
Equipment	$	683		$	576		$	1,278		$	1,278
Furniture and fixtures		144			140			425			450
Leasehold improvements		149			133			1,356			1,356
Total property and equipment		976			849			3,059			3,084
Less: accumulated depreciation and amortization		(442	)		(327	)		(919	)		(850	)
Property and equipment, net	$	534		$	522		$	2,140		$	2,234

Depreciation ~~and amortization~~ expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and 2019 was ~~$39,000~~$96,000 and ~~$115,000, respectively. Depreciation and amortization expense for the three and nine months ended September 30, 2016 was $30,000 and $87,000,~~$83,000, respectively.

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~~United States treasury securities 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~~March 31, 2020 and December 31, ~~2016~~2019 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)				Fair Value Measurement at March 31, 2020
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⁾	$	15,164	$	15,164	$	—	$	—	$	22,662	$	22,662	$	—	$	—
Fixed income securities		34,640		—		34,640		—		16,873		—		16,873		—
Total	$	49,804	$	15,164	$	34,640	$	—	$	39,535	$	22,662	$	16,873	$	—

Liabilities:
Warrant liabilities	$	17,807	$	—	$	—	$	17,807	$	60	$	—	$	—	$	60
Total	$	17,807	$	—	$	—	$	17,807	$	60	$	—	$	—	$	60

			Fair Value Measurement at December 31, 2016								Fair Value Measurement at December 31, 2019
Assets:	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		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	$	—	$	—	$	21,065	$	21,065	$	—	$	—
United States treasury securities ⁽¹⁾										5,982		—		5,982		—
Fixed income securities		14,798		—		14,798		—		25,746		—		25,746		—
Total	$	24,305	$	9,507	$	14,798	$	—	$	52,793	$	21,065	$	31,728	$	—

Liabilities:
Warrant liabilities	$	6,333	$	—	$	—	$	6,333	$	299	$	—	$	—	$	299
Total	$	6,333	$	—	$	—	$	6,333	$	299	$	—	$	—	$	299

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, 2020 (in thousands):

Accrued expenses as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

	September 30,		December 31,		March 31,		December 31,
	2017		2016		2020		2019
Clinical	$	1,159	$	738
Preclinical and clinical studies					$	1,717	$	1,473
Compensation and benefits		750		901		388		614
Accounting and legal		281		279		219		240
Other		122		64		162		111
Total accrued expenses	$	2,312	$	1,982
Total accrued expenses and other current liabilities					$	2,486	$	2,438

Effective February 1, 2016, the Company amended and restated its license agreement with BioHEP Technologies Ltd. (“BioHEP”). In connection with the amendment and restatement, the Company issued 125,000 shares of its common stock to BioHEP and granted to BioHEP a warrant to purchase an additional 125,000 shares of its common stock at an exercise price of $16.00 per share, which warrant will expire on August 1, 2018. The fair value of the common stock as of the date of issuance, $2.0 million, was expensed as research and development costs.

In May 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 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 common stock (the “November 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. The November 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.~~

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~~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~~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~~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~~risk-free interest rate of 1.23%; and a dividend yield of 0%. The aggregate fair value of the IPO Warrants was approximately $0.2 million.

~~The~~In November 2016, the Company ~~received approximately $5.3 million in proceeds upon~~entered into a definitive agreement with respect to the ~~exercise~~private placement of ~~warrants to purchase 641,743~~1,644,737 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~~and 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~~(the “November 2016 Private Placement Warrants”) to a group of accredited investors. These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. 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 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~~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. As of March 31, 2020 and December 31, ~~2016 and September 30, 2017,~~2019, the fair value of the November 2016 Private Placement Warrants was approximately ~~$6.3~~$0.1 million and ~~$17.8~~$0.3 million, respectively and 10,960 shares have been exercised to date (see Note 5).

A summary of the ~~Black Scholes~~Black-Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

In September 2019, the Company entered into a term loan (the “Convertible Term Loan”) with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., in its capacity as administrative agent and collateral agent for itself and the lenders, providing for a $20.0 million term loan (see Note 9). In connection with the Company’s Convertible Term Loan, the Company issued to certain lenders warrants to purchase 250,000 shares of common stock (the “Pontifax Warrants”). Prior to their amendment in April 2020 (see Note 12), the Pontifax Warrants were exercisable at an exercise price of $6.57 per share. The Pontifax Warrants expire on September 19, 2025. The Company evaluated the terms of the Pontifax Warrants and concluded that they are equity-classified. The fair value of the Pontifax Warrants was estimated on the issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of 6.0 years; expected stock price volatility of 83.2%; a risk-free interest rate of 1.7%; and a dividend yield of 0%. The aggregate fair value of the Pontifax Warrants was approximately $0.6 million and was recorded as a discount to the term loan and will be amortized over the life of the term loan using the effective interest rate method.

In September 2019, the Company issued warrants to a service provider to purchase 15,000 shares of common stock (the “September 2019 Warrants”). The September 2019 Warrants are exercisable at an exercise price of $4.21 per share and expire on September 19, 2021. The Company evaluated the terms of the September 2019 Warrants and concluded that they are equity-classified. The fair value of the September 2019 Warrants was estimated on the applicable issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of 2.0 years; expected stock price volatility of 69.4%; a risk-free interest rate of 1.7%; and a dividend yield of 0%. The aggregate fair value of the September 2019 Warrants was approximately $19,000. Approximately $13,000 and $6,000 has been expensed during the periods ended March 31, 2020 and December 31, 2019, respectively.

A summary of the warrant activity for the three months ended March 31, 2020 and for the year ended December 31, ~~2016 and for the nine months ended September 30, 2017:~~2019 is as follows:

In August 2017, the Company entered into a Controlled Equity Offering^SM 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 pays Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. During the three months ended March 31, 2020, the Company sold an aggregate of 41,800 shares of its common stock pursuant to the Sales Agreement at a weighted-average selling price of $1.42 per share, which resulted in approximately $30,000 in net proceeds to the Company. During the year ended December 31, 2019, the Company sold an aggregate of 600 shares of its common stock pursuant to the Sales Agreement at a weighted-average selling price of $10.03 per share, which resulted in de minimis net proceeds to the Company.

In April 2014, the Company’s Board of Directors approved the 2014 Stock Incentive Plan (the “2014 Plan”)~~. The Company’s 2014 Plan provides for the issuance 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’s 2015 Stock Incentive Plan (the “2015 Plan”) became effective immediately prior to 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.

The Company’s Board of Directors initially adopted the 2015 Plan ~~provides~~in December 2015, subject to stockholder approval, and authorized 750,000 shares of Common Stock to be issued under the 2015 Plan. The 2014 Plan and 2015 Plan provide 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~~

In March 2018, the Board approved the Amended and Restated 2015 Plan. Upon receipt of ~~shares reserved for issuance under~~stockholder approval at the Company’s 2018 annual meeting in June 2018, the 2015 Plan iswas amended and restated in its entirety increasing 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 (together with the 2014 Plan, the 2015 Plan, the “Stock Incentive Plans”). 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 the Company’s IPO, those shares are added to the authorized shares under the Amended and Restated 2015 Plan. The total amount of shares authorized for issuance under both the 2014 Plan and the Amended and Restated 2015 Plan is 2,300,000. As of March 31, 2020, the Company had 352,399 shares available for issuance under the Amended and Restated 2015 Plan.

The exercise price of stock options cannot be less than the fair value of the common stock on the date of grant. Stock options awarded under the ~~2015 Plan~~Stock Incentive Plans expire 10 years after the grant date, unless the Board sets a shorter term. ~~As of September 30, 2017, the Company had 472,087 shares available for issuance under the 2015 Plan.~~There were no stock options granted prior to 2015.

The following table summarizes the option activity under the Stock Incentive Plans for the ~~nine~~three months ended ~~September 30, 2017, under the 2014 Plan~~March 31, 2020 and the ~~2015 Plan (collectively the “Plans”):~~

	Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value		Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value
Options outstanding at December 31, 2015		610,481		$	11.99	$	—
Outstanding at December 31, 2018									1,299,565		$	11.18	$	881,385
Granted		128,334			10.41		—		395,500			9.61		—
Exercised		(10,247	)		9.28		29,550		—			—		—
Cancelled		(24,253	)		9.89		—		(22,750	)		13.36		—
Outstanding at December 31, 2016		704,315		$	11.82		—
Outstanding at December 31, 2019									1,672,315			10.78		—
Granted		286,500			8.20		—		225,000			1.41		—
Exercised		(10,000	)		9.28		11,228		—			—		—
Cancelled		(3,250	)		12.44		—		(315,257	)		11.26		—
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
Options outstanding at March 31, 2020									1,582,058		$	9.35	$	—
Options exercisable at March 31, 2020									991,466		$	10.85	$	—

As of ~~September 30, 2017,~~March 31, 2020, all options ~~granted are expected to vest and the~~outstanding have a weighted-average remaining contractual life of ~~all options is 8.4~~7.3 years. The weighted-average fair value of all stock options granted for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was ~~$5.67.~~$0.98. Intrinsic value at ~~September 30, 2017~~March 31, 2020 and December 31, 2019 is based on the closing price of the Company’s common stock on that date of ~~$16.84~~$0.93 per ~~share.~~share and $1.58 per share, respectively.

~~Prior to~~In January 2018, the ~~Company’s IPO on May 11, 2016,~~Company issued a stock option award as an inducement grant for the ~~Board determined the estimated fair value~~purchase of an aggregate of 50,000 shares of the Company’s common stock, onoutside of the ~~date~~Stock Incentive Plans, at an exercise price of $12.02 per share. In February 2019, the Company issued a stock option award as an inducement grant ~~based on a number~~for the purchase of ~~objective and subjective factors, including third party valuations. Since the IPO, the fair value~~an aggregate of 40,000 shares of the Company’s common stock, ~~on the date~~outside of the ~~grant is based on the closing~~Stock Incentive Plans, at an exercise price of $10.39 per share of the common stock on the NASDAQ Capital Market on the date of grant. The computation of expected volatility is based on the historical volatilities of peer companies. The peer companies include organizations thatshare. These inducement grants 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 interest rate is based on the U.S. Treasury bill rates for U.S. treasury bills with terms commensurate with the expected term of~~excluded from the option ~~grants on the grant date of the option. The Company accounts for stock option forfeitures when they occur.~~activity table above.

~~There were no stock options granted prior to 2015.~~ The assumptions the Company used to determine the fair value of stock options granted to employees and directors ~~in 2017~~during the three months ended March 31, 2020 and ~~2016~~2019 are as follows, presented on a weighted-average ~~basis.~~basis:

	Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2020			2019
Risk-free interest rate		2.0	%		1.4	%		0.7	%		2.6	%
Expected term (in years)		6.0			6.1			6.0			6.0
Expected volatility		79.8	%		77.6	%		82.5	%		81.1	%
Expected dividend yield		0	%		0	%		0	%		0	%

In January 2019, the Company issued performance-based RSUs to senior management under the 2015 Plan that represented shares potentially issuable in the future subject to the satisfaction of certain performance milestones as well as a service condition. The vesting of 50% of the performance-based RSUs was based upon the Company’s performance relative to a peer group over a two-year performance period, from January 1, 2019 through December 31, 2020, measured by the Company’s relative total shareholder return. The vesting of 25% of the performance-based RSUs was based on the achievement of a performance goal milestone as of December 31, 2019 and the vesting of the remaining 25% of the performance-based RSUs was based upon the achievement of a performance goal milestone as of December 31, 2020.

The Company estimated the fair value of total shareholder return performance-based RSUs at the date of grant using a Monte Carlo valuation methodology and amortizes those fair values over the requisite service period for each separately vesting tranche of the award. The Monte Carlo methodology that the Company uses to estimate the fair value of total shareholder return performance-based RSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the total shareholder return performance-based RSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria.

The fair value of the performance-based RSUs granted to management in 2019 for the Company’s relative total share return units is based on the Monte Carlo Simulation method on the grant date. The weighted average fair value as of the three months ended March 31, 2020 was $6.62 per share.

The Company estimates the fair value of milestone performance-based RSUs at the date of grant using the fair value method and the probability that the specified performance criteria will be met and amortizes the fair value over the requisite service period for each separately vesting tranche of the award when attainment of the milestone is deemed probable. The assumption used to determine the fair value of the performance-based RSUs granted to management in 2019 for the performance goal milestone units is based on the market price of the award on the grant date. Each quarter the Company updates its assessment of the probability that the specified criteria will be achieved and adjusts its estimate of the fair value, if necessary.

As of December 31, 2019, the Company did not meet the 2019 milestone under the performance-based RSUs, and accordingly 46,450 shares were returned to the 2015 Plan. The 2020 milestone was not deemed probable, and the previously recognized expense of $0.1 million was reversed during the year ended December 31, 2019. The Company recognized $0.3 million expense related to the total shareholder return component of the performance-based RSUs during the year ended December 31, 2019.

In March 2020, the Company and the recipients of these performance-based RSUs agreed to cancel the agreements and as a result, 139,350 shares were returned to the 2015 Plan. The Company recognized the remaining expense for the total shareholder return performance-based RSUs in the amount of $0.3 million during the three months ended March 31, 2020. The Company did not recognize any expense related to the milestone performance-based RSUs.

In March 2020, the Company issued 199,000 time-based RSUs to employees under the Amended and Restated 2015 Plan. The weighted average grant date fair value of the time-based RSUs was $1.41 for the three months ended March 31, 2020. The vesting for the time-based RSUs is 50% after one-year from the grant date and the remaining 50% as of December 31, 2021. For the three months ended March 31, 2020, the Company recognized approximately $11,000 expense related to the time-based RSUs.

The following table is a rollforward of all RSU activity under the Stock Incentive Plans for the three months ended March 31, 2020:

The following table summarizes the Company’s stock-based compensation expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, under the Plans~~2019 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016		For the Three Months Ended March 31,
Stock-based compensation:									2020		2019
Research and development	$	121	$	104	$	402	$	286	$	275	$	317
General and administrative		389		274		1,081		729		542		655
Total Stock-based compensation	$	510	$	378	$	1,483	$	1,015	$	817	$	972

The fair value of stock options vested during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was ~~$1,275,000.~~$1.1 million. At ~~September 30, 2017,~~March 31, 2020, there was ~~$3,875,000~~$3.2 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~~2.4 years.

At March 31, 2020, there was $0.3 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 1.8 years. At March 31, 2020, there was no unrecognized stock-based compensation expense relating to the performance-based RSUs.

As of ~~September 30, 2017~~March 31, 2020 and ~~2016,~~December 31, 2019, the Company ~~has~~ reserved the following shares of common stock for ~~potential conversion~~issuance of ~~the~~shares resulting from exercise of outstanding warrants and ~~outstanding~~ options, ~~and~~convertible shares from the Convertible Term Loan, as well as issuance of shares available for grant under the ~~2015 Plan:~~

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

	March 31,		December 31,
	2020		2019
IPO warrants		28,347		28,347
November private placement warrants		1,633,777		1,633,777
Convertible term loan		2,328,642		2,329,143
Pontifax warrants		250,000		250,000
September 2019 warrants		15,000		15,000
2015 amended and restated stock incentive plan		2,133,457		2,160,338
Inducement awards		90,000		90,000
Total		6,479,223		6,506,605

In April 2015, the Company entered into an amendment to the lease for its research and development facility in Milford, Massachusetts to extend the term of the lease through March 31, 2018 and expand the leased laboratory space.

~~In March 2016,~~September 2019, the Company entered into a ~~new operating lease~~Convertible Term Loan with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P., as lenders, and Pontifax Medison Finance GP, L.P., in its capacity as administrative agent and collateral agent for ~~its headquarters in Hopkinton, Massachusetts with~~itself and the lenders (collectively, the “Lenders”), providing for a ~~lease~~$20.0 million term ~~through May 31, 2021. The total payments due during~~loan (the “Convertible Term Loan”), which the ~~term of the lease are approximately $771,000.~~

~~Rent paid for the three and nine months ended~~Company received on 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):~~

~~See subsequent events (Note 10) regarding a new lease commitment that~~19, 2019 (the “Closing Date”). In April 2020, the Company entered into ~~after~~a prepayment notice and pay-off letter with the Lenders, which provided for the full repayment in cash of the $20.0 million Convertible Term Loan and amended the exercise price with respect to the Pontifax Warrants (see Note 12). Prior to the full repayment of the Convertible Term Loan in April 2020, the Convertible Term Loan bore interest at an annual rate of 8.0%. The Convertible Term Loan provided for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the Convertible Term Loan in quarterly installments starting upon expiration of the interest only period and continuing through September ~~30, 2017.~~19, 2023 (the “Maturity Date”). The ~~commitments~~Company incurred issuance costs of $0.4 million and Pontifax Warrants costs of $0.6 million. The Convertible Term Loan issuance costs and Pontifax Warrant costs are shown as an offset to the Convertible Term Loan on the balance sheet and are amortized using the effective interest method to interest expense through the Maturity Date.

Pursuant to the Convertible Term Loan, the Company was entitled, at its option, to prepay some or all of the then outstanding principal balance and all accrued and unpaid interest on the Convertible Term Loan, together with a prepayment charge equal to 3% of the principal amount being prepaid.The Lenders were entitled, at their option, to elect to convert the then outstanding Convertible Term Loan amount and all accrued and unpaid interest thereon into shares of the Company’s common stock at a conversion price of $8.76 per share.

The Company’s obligations were secured by a security interest, senior to any current and future debts and to any security interest, in all of the Company’s right, title, and interest in, to and under all of its property and other assets, subject to limited exceptions including the ~~new lease agreement are not included~~Company’s intellectual property. The Convertible Term Loan contained customary events of default, representations, warranties and covenants, including a material adverse effect clause. The Company was required to maintain a minimum cash balance of $7.0 million in its accounts, which requirement the Company was in compliance with as of March 31, 2020.

Upon the occurrence of an event of default, a default interest rate of an additional 4% per annum would have been applied to the outstanding loan balances, and the Lenders would have been able to declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the ~~table above.~~Convertible Term Loan and under applicable law. The Company evaluated the accounting for the Convertible Term Loan and identified an embedded derivative related to the contingent interest feature. At issuance and as of March 31, 2020, the Company determined the fair value of the contingent interest feature to be de minimis and will re-value the derivative at the end of each reporting period.

In addition, the Company issued the Lenders warrants to purchase an aggregate of 250,000 shares of the Company’s common stock (the “Pontifax Warrants”). The Pontifax Warrants are exercisable for a period of six years from the Closing Date and were exercisable at an exercise price of $6.57 per share prior to their amendment in April 2020 (see Note 12). The aggregate fair value of the Pontifax Warrants was approximately $0.6 million and was recorded as a discount to the term loan and will be amortized over the life of the term loan using the effective interest rate method (see Note 7).

During the three months ended March 31, 2020, the Company recorded interest expense of approximately $0.5 million, in connection with the Convertible Term Loan. There was no interest expense recorded during the three months ended March 31, 2019. The fair value of the term loan as of March 31, 2020 approximates its face value due to market terms. As of March 31, 2020, the Company classified the Convertible Term Loan as a current liability based on the repayment in April 2020.

~~In January 2016,~~The Company has operating leases for its principal office and laboratory space and the ~~Company entered into~~Company’s former headquarters. The Company’s leases have remaining lease terms of approximately 8.6 years for its principal office and laboratory space, which includes an ~~amended and restated license agreement with BioHEP, which became effective on February 1, 2016.~~

~~Under~~option to extend the ~~amended and restated license agreement, the Company agreed to pay BioHEP~~lease for up to ~~$3.5 million in development~~5 years, and ~~regulatory milestone payments~~approximately 1.2 years for ~~disease(s) caused~~its former headquarters. The Company’s former headquarters location is subleased through the remainder of the lease term.

Other information related to leases as of March 31, 2020 and 2019 was as follows:

As of March 31, 2020 and December 31, 2019, the weighted average remaining lease term for operating leases was 8.1 years and 8.3 years, respectively.

As of March 31, 2020 and December 31, 2019, the weighted average discount rate for operating leases was 8% for both periods.

Operating lease costs under the leases for the three months ended March 31, 2020 and 2019 were approximately $165,000 and $130,000, respectively. Total operating lease costs for the three months ended March 31, 2020 and 2019 were offset by ~~each distinct virus~~$29,000 and $19,000, respectively, for ~~which~~sublease income and variable lease cost payments.

The following table summarizes the ~~Company develops licensed product(s). BioHEP is also eligible to receive tiered royalties in the low-to-mid single-digits on net product sales~~Company’s maturities of ~~licensed products by the Company and its affiliates and sub licensees, and a specified share~~operating lease liabilities as 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.March 31, 2020 (in thousands):

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.

In September 2019, the Company entered into a ~~transition agreement~~Convertible Term Loan with certain Lenders, providing for a $20.0 million term loan, which the Company received on September 19, 2019 (see Note 9).

On April 8, 2020, the Company entered into a prepayment notice and pay-off letter with the Lenders (the “Pay-Off Letter”), which provided for the full repayment in cash on April 8, 2020 of the $20.0 million Convertible Term Loan. The Pay-Off Letter provided that the repayment amount would be approximately $20.3 million, which included payment in full of all outstanding principal and accrued interest underlying the Convertible Term Loan and $0.3 million for a prepayment fee. Pursuant to the Pay-Off Letter, all of the Company’s ~~former~~indebtedness and obligations to the Lenders were discharged in full, and all security interests and other liens held by the Lenders as security for the Loan terminated upon the Lenders’ receipt of the repayment amount (see Note 9).

In connection with the repayment of the Convertible Term Loan, the Pontifax Warrants, issued in September 2019, were amended and restated so that the new exercise price is $2.08, which is equal to 1.5 times the weighted-average closing price of the Company’s

Common Stock during the 90 days prior to the repayment date. All other terms and conditions of the Pontifax Warrants remain the same (see Note 7).

On April 7, 2020, the Company appointed Lori Firmani, the Company’s Vice President, ~~and Chief Executive Officer. Under the transition agreement, he continued to serve~~Finance, as the Company’s ~~president~~principal financial officer and ~~chief executive~~principal accounting officer, ~~for a transition period that ended on August 17, 2015. Following~~effective as of April 24, 2020, which was 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~~effective date of the ~~transition agreement. There was no remaining unpaid balance relating to this obligation at September 30, 2017.~~

~~During~~resignation of Jonathan Freve as 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 amendedCompany’s Chief Financial Officer and ~~restated license agreement. The Company incurred no such payments during the nine months ended September 30, 2017.~~

The Company has evaluated subsequent events through the date on which the consolidated financial statements were issued, to ensure that this submission includes appropriate disclosure of events both recognized in 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% 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, the Company is responsible under the New Lease for specified costs and charges, including certain operating expenses, utilities, taxes and insurance.

~~You~~The following information should be read in conjunction with the ~~following discussion~~unaudited financial information and ~~analysis~~the notes thereto included in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto for the year ended December 31, 2019, 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 United States Securities and Exchange Commission, or the SEC, on February 14, 2020.

This report contains forward-looking statements that are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, or PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA. Forward-looking statements involve risks and uncertainties. In this Quarterly Report on Form 10-Q, words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution our readers that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and ~~results~~liquidity, and the development of ~~operations together with Part I, Item 1“Financial Statements” and related notes included elsewhere~~the industry in which we 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 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 be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

We are a clinical-stage biopharmaceutical company engaged in the discovery and development of novel therapeutics for the treatment of a ~~novel class~~range of ~~therapeutics~~cancers and inflammatory diseases using our proprietary small molecule ~~nucleic acid hybrid, or SMNH, chemistry~~nucleotide platform. ~~Our SMNH~~We design our 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. Our internally-developed programs are primarily designed to stimulate and/or dampen immune responses. We are devoting our resources to advancing multiple programs in our STING product portfolio, including our STING agonist clinical program in oncology, our STING antagonist compounds for inflammatory diseases, and our STING agonist antibody drug conjugate (ADC) program for oncology. We are also in the process of evaluating our portfolio of RIG-I agonist and STING agonist compounds as potential therapeutics and vaccine adjuvants for SARS-CoV-2, the virus responsible for COVID-19.

The pandemic caused by an outbreak of a new strain of coronavirus, or the COVID-19 pandemic, that is affecting the U.S. and global economy and financial markets is also impacting our employees, patients, communities and business operations. The full extent to which the COVID-19 pandemic will directly or in directly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets. Management is actively monitoring this situation and the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce. In the paragraphs that follow, we have described impacts of the COVID-19 pandemic on our clinical and preclinical development programs. For additional information on risks posed by the COVID-19 pandemic, please see Part II, Item 1A. — Risk Factors — Business interruptions resulting from the coronavirus disease 2019 (COVID-19) outbreak or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business, included elsewhere in this Quarterly Report on Form 10-Q.

We are developing our ~~most advanced SMNH~~lead STING agonist 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.~~

We are currently developing inarigivir for the treatment of chronic hepatitis B virus, or HBV. We are conducting Part A 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 placebo 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.

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.

~~We are developing~~ SB ~~11285, a novel proprietary STING agonist, as a potential~~next-generation immunotherapeutic agent for the treatment of selected cancers. ~~Recent published scientific literature indicates~~SB 11285 is currently being evaluated as an intravenously (IV)-administered monotherapy in a Phase 1a/1b multicenter, dose escalation clinical trial in patients with advanced solid tumors. Phase 1a of this trial is a dose-escalation study with IV SB 11285 monotherapy which allows combination with a checkpoint inhibitor after the completion of the first two cohorts of the trial. Phase 1b of this trial is designed to explore IV SB 11285 antitumor activity in combination with a checkpoint inhibitor in tumor types expected to be responsive to immunotherapy. In February 2020, we entered into a clinical collaboration with Roche for the use of Roche’s PD-L1 checkpoint inhibitor atezolizumab (Tecentriq®) in the combination cohorts of this trial.

We initiated dosing in the initial monotherapy cohort of this Phase 1 trial in the fourth quarter of 2019 and in April 2020, we announced that the Safety Review Committee for the trial recommended dose escalation to the next planned monotherapy cohort in the trial. Following this recommendation, we began dosing at the next higher monotherapy dose level. Although several of the institutions involved in the conduct of this trial have suspended patient enrollment in all of their clinical trials due to the COVID-19

pandemic, we have been able to continue dosing patients in this trial at a key site and are in the process of dosing patients in the second monotherapy cohort.Depending on whether we are able to continue enrolling and dosing patients in this Phase 1 trial, we plan to complete the second monotherapy cohort during the second quarter of 2020 and be in a position to initiate the first combination cohort examining the co-administration of SB 11285 and atezolizumab in the summer of 2020. We are also hoping to generate sufficient data from our Phase 1a/1b IV STING agonist program by the end of 2020 to enable advancement into a Phase 2 clinical trial. While the company currently anticipates this Phase 1 trial will remain open and currently enrolled patients will continue on study, all clinical sites activated for the study may determine to stop enrolling and/or dosing patients as a result of the impact of the COVID-19 pandemic, which has the potential to impact both the advancement into combination cohorts and the availability of data in 2020.

ADCs represent a novel platform to enable the targeted delivery of payload molecules. Conjugation of a payload molecule to an antibody that has its own efficacy profile could allow for a single drug with enhanced potency and safety compared to either mechanism alone. We believe the chemistry used to develop our STING agonists is differentiated from first generation STING agonists because preclinical studies have shown that our molecules allow for site-specific conjugation to other therapeutic modalities, including antibodies, to form ADCs. Our STING agonists, in combination with an antibody to form an ADC, could provide targeted delivery to the tumor site to better achieve anti-tumor efficacy. We plan to nominate a lead STING agonist ADC product candidate in the first half of 2021. However, as a result of the impact of the COVID-19 pandemic, third parties that we are working with on our STING agonist ADC program could scale back their operations, which has the potential to impact our development timelines.

We are also exploring the use of our novel STING antagonist compounds for the treatment of certain autoimmune and inflammatory diseases where the STING pathway is involved. Our STING antagonists are selectively designed to block aberrant activation of the STING pathway, ~~can result~~which contributes to the causes of certain autoimmune and inflammatory diseases, including STING-associated vasculopathy with onset in ~~the induction of cellular interferons~~infancy (SAVI), systemic lupus erythematosus (SLE) and ~~cytokines and promote an aggressive and strong anti-tumor response through the induction of innate and adaptive immune response.~~other proinflammatory-mediated diseases. In ~~our preclinical studies performed in~~ ~~in vitro~~ ~~systems, SB 11285 has been observed to cause the induction~~July 2019, we presented pre-clinical data from a novel STING antagonist compound, which showed potent inhibition of interferon and ~~other~~pro-inflammatory cytokines in wild type and mutant STING in vitro models. In vivo administration of this compound antagonized STING-agonist-induced interferon and cytokine production in the blood, spleen and liver in mice, illustrating the potential that this compound has for therapeutic applications in interferonopathies, as well as ~~cell death, or apoptosis, of multiple tumor-derived cell lines.~~

~~We continue to conduct preclinical studies of SB 11285~~autoimmune and inflammatory diseases. Furthermore, 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,~~2019, we entered into a ~~preclinical~~ research ~~collaboration~~agreement with the University of Texas Southwestern Medical School to evaluate our small molecule STING antagonist compounds. We hope to initiate IND-enabling activities for a lead, orally-available STING antagonist product candidate from our portfolio in 2020. However, as a result of the impact of the COVID-19 pandemic, some third ~~party~~parties that we are working with on our STING antagonist program have scaled back, and others could scale back, their operations, which has the potential to impact our development timelines.

In April 2020, we announced that we are exploring programs and collaborations to study our portfolio of RIG-I agonist and STING agonist compounds as potential therapeutics and vaccine adjuvants for SARS-CoV-2, the virus responsible for COVID-19. We are collaborating with the National Institute of Allergy and Infectious Diseases (NIAID) to examine ~~the potential for the conjugation of selected~~multiple compounds from our RIG-I agonist and STING agonist ~~platform~~portfolio in the Middle East Respiratory Syndrome Coronavirus (MERS-CoV) assay and the SARS-CoV-2 antiviral assay. We are also pursuing the inclusion of inarigivir soproxil, a RIG-I agonist, as an adjuvant therapy in ongoing clinical trials involving Bacille Calmette-Guerin (BCG) vaccines against SARS-CoV-2.

Until January 2020, we had been developing inarigivir, an orally-administered investigational selective immunomodulator, as a potential treatment for chronic hepatitis B virus, or HBV. In April 2019, we launched two Phase 2 global trials (CATALYST 1 and CATALYST 2) examining the administration of inarigivir 400mg as monotherapy and co-administered with ~~selected proprietary antibodies from~~a nucleotide in naïve and virally suppressed chronic HBV patients. Inarigivir had also been the ~~third-party’s immune-oncology portfolio.~~

~~On October 4, 2017, we entered into~~subject of a ~~lease agreement, or~~Phase 2 trial evaluating the ~~New Lease, in Hopkinton, Massachusetts. The premises covered by~~safety, efficacy and pharmacodynamics of escalating doses (50mg, 200mg and 400mg) of inarigivir co-administered with Gilead Sciences’ Vemlidy® (tenofovir alafenamide 25mg) for the ~~New Lease will serve as our new principal office and laboratory space. The initial term~~treatment of chronic HBV infection. All clinical development of inarigivir for the ~~New Lease is 125 months beginning on the date on which the landlord substantially completes certain renovations~~treatment of HBV was terminated due to the ~~premises covered by the New Lease. We have the option to extend the New Lease~~occurrence of unexpected serious adverse events, including one ~~time for an additional 5-year period. The total lease payments due during the term of the lease are approximately $4.4 million.~~

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. No additional funding remains available to us under any grant for the development of any of our product candidates. We have funded our operations primarily through proceeds received from private placements of convertible notes, common stock and/or warrants; the exercise of options and warrants; NIH grant funding; and public offerings of securities.

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,~~March 31, 2020 and ~~$17.4~~2019 were $8.2 million ~~for the year ended December 31, 2016.~~and $5.2 million, respectively. As of ~~September 30, 2017,~~March 31, 2020, we had an accumulated deficit of ~~$77.8~~$134.3 million. Our

net losses may fluctuate significantly from quarter to quarter and year to year. We expect to continue to incur significant expenses and increasing operating losses for the next several years.

We anticipate that our expenses will increase significantly as we continue to develop ~~inarigivir,~~ SB 11285 and our other product candidates. See “—Liquidity and Capital Resources—Funding Requirements.” As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings, including our at-the-market offering program with Cantor Fitzgerald & Co., or other sources, which may include collaborations with third parties. Arrangements with collaborators or others may require us to relinquish rights to certain of 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,~~March 31, 2020, we had ~~$52.2~~$47.5 million in cash, cash equivalents and marketable securities. On April 8, 2020, we used approximately $20.3 million to fund the repayment in full of our outstanding convertible term loan. We made the decision to repay this loan as a result of changes in our operating needs following our announcement in the first quarter of 2020 that we would discontinue the development of our HBV program, as well as the cost of capital associated with the loan. Following the full repayment of the loan, we expect that our 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~~first quarter of ~~2019. However, we anticipate that~~2022 based on 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.~~current operating plan. See “—Liquidity and Capital Resources.”

~~Historically, we have generated~~We do not expect to generate revenue from ~~grants from the NIH~~product sales unless and until we successfully complete development and obtain regulatory approval for ~~the~~one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party contract research organizations, or CROs, to carry out our clinical development ~~of inarigivir. The NIH grants provided funding of $6.8 million between October 2003~~activities, and ~~April 2016. As of September 30, 2017, no additional funding remains available to us under any grant~~we do not yet have a sales organization. If we obtain regulatory approval for ~~the development of~~ any of our product ~~candidates.~~candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will seek to continue to fund our operations through public or private equity or debt financings or other sources including geographic partnerships. However, we may be unable to raise additional funds or enter into other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our products.

In September 2019, we entered into a loan and security agreement with certain affiliates of Pontifax Medison Finance, or the Lenders, that provided for a $20.0 million term loan and bears annual interest at a rate of 8.0%, which we refer to as the Convertible Term Loan. On April 8, 2020, we entered into a prepayment notice and pay-off letter with the Lenders, which provided for the full repayment in cash on April 8, 2020 of the Convertible Term Loan. The pay-off letter provided that the repayment amount would be approximately $20.3 million, which included payment in full of all outstanding principal and accrued interest underlying the Convertible Term Loan and $0.3 million for a prepayment fee. Pursuant to the pay-off letter, all of our indebtedness and obligations to the Lenders were discharged in full, and all security interests and other liens held by the Lenders as security for the Loan terminated upon the Lenders’ receipt of the repayment amount. We made the decision to repay the Convertible Term Loan as a result of changes in our operating needs following our announcement in the first quarter of 2020 that we were discontinuing the development of our HBV program, as well as the cost of capital associated with the Convertible Term Loan. Following the full repayment of the Convertible Term Loan, we expect that our cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements through the first quarter of 2022. See “—Liquidity and Capital Resources.”

Our operating expenses since inception have consisted primarily of research and development expense and general and administrative costs.

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, which include:

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors 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~~direct research and development ~~since inception has been~~expenses are not currently tracked on a program-by-program basis. Until January 2020, we were primarily focused on the research and development of inarigivir. Going forward, we expect our primary focus to be on the research and development of compounds targeting the STING pathway. 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.~~programs.

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~~any of our product candidates. We are also unable to predict when, if ever, we will generate revenues from ~~inarigivir~~SB 11285 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:~~related to:

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 business model. 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 clinical trials. We expect that our research and development expenses will continue to increase in the foreseeable future as we ~~continue~~initiate clinical trials for certain product candidates and pursue later stages of clinical development of ~~our~~other product candidates. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax 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 that our general and administrative expenses ~~will~~may increase in the future asif we increase our headcount to support ~~the expected~~ growth in our research and development activities and the potential commercialization of our product candidates. We also expect to ~~continue to~~ incur ~~significant~~additional expenses associated with being a public company, including ~~increased~~ costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and ~~SEC~~Securities and Exchange Commission requirements, director and officer insurance ~~costs,~~premiums, and investor and public relations costs.

Other income (expense) consists of interest income earned on our cash, cash equivalents, restricted cash and marketable ~~securities and the gain/loss on~~securities.

Change in fair value of warrant liabilities consists of a gain or (loss) related to the change in the fair value of the ~~warrant liabilities.~~warrants issued in connection with our private placement offering in November 2016, resulting from factors such as a change in our stock price and a change in expected stock price volatility.

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of our consolidated financial statements and related disclosures requires usour 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 ~~involved in~~underlying the accounting policies described therein may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these current estimates ~~under~~based on different assumptions and under different conditions.

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:

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.

~~In connection with entering into the amended and restated license agreement with BioHEP effective February 1,~~ Issued in 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 of the warrant and concluded that it should be equity-classified. The fair value of the warrant, $0.8 million 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 of common stock at an exercise price of $15.00 per share, which we refer to collectively as the IPO warrants. We evaluated the terms of the IPO warrants 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 in this Quarterly Report on Form 10-Q.

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, which we refer to ~~a group of accredited investors. The~~as the November 2016 Warrants. These warrants ~~will be~~are exercisable ~~beginning May 24, 2017~~ at an exercise price of $10.79 per share. We evaluated the terms of ~~the~~these warrants and concluded that they should be liability-classified. In November 2016, we recorded the fair value of these warrants of approximately $8.3 million. We recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of ~~September 30, 2017,~~March 31, 2020, the fair value of the warrants was approximately ~~$17.8~~$0.1 million, which is ~~an increase~~a decrease of ~~$11.5~~$0.2 million from the fair value of approximately ~~$6.3~~$0.3 million as of December 31, ~~2016.~~2019. See Note 7 of the notes to the unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.

We issue stock-based awards to employees and non-employees, generally in the form of stock options or performance-based restricted stock units. We account for our stock-based compensation awards in accordance with Financial Accounting Standards Board, (FASB) ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees and non-employees, including grants of employee stock options and modifications to existing stock awards, to be recognized in the statements of operations and comprehensive loss based on their fair values.

We measure stock options and other stock-based awards granted to employees, nonemployees and directors based on the fair value on the date of grant and recognize the corresponding compensation expense of those awards, ~~net of estimated forfeitures,~~ over the requisite service period, which is generally the vesting period of the respective award. We account for forfeitures as they occur. Generally, we issue stock options and performance based restricted stock ~~awards~~units with ~~only~~ service-based vesting conditions and record the expense for these awards using the straight-line method.

~~We measure stock options~~ Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and ~~other stock-based awards granted to consultants and nonemployees based on~~adjust our estimate of the fair value of the award on the date at which the related service is complete. We recognize this compensation expense over the period during which services are rendered by such consultants and nonemployees until completed. At the end of each financial reporting period prior to completion of the service, we remeasure the fair value of these awards using the then-current fair value of our commonperformance-based restricted stock ~~and updated assumption inputs in the Black-Scholes option-pricing model.~~units (“performance-based RSUs”) if necessary.

We estimate the fair value of 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 volatility of our common stock, the expected term of our stock options, the risk-free interest rate 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 a group of publicly traded peer companies. We expect to continue to do so until such time as we have adequate historical data regarding 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 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 risk-free interest rate by reference

to the United States Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect 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 compensation expense is reversed in the period that the forfeiture occurs.

~~In 2015,~~ The assumptions we ~~began issuing~~used to determine the fair value of granted stock options in three months ended March 31, 2020 and 2019 are as follows:

The fair value of the performance-based RSUs granted to ~~employees, directors and consultants. During~~management in 2019 for our relative total share return units is based on the ~~periods~~Monte Carlo Simulation method on the grant date. The weighted average fair value of these performance-based RSUs as of the three months ended ~~September 30, 2017 and 2016, we issued common stock~~March 31, 2020 was $6.62 per share. The assumptions used to ~~consultants and advisors as compensation for services and recognized expense equal to~~determine the fair value of the ~~shares issued.~~ time-based RSUs granted to management during the three months ended March 31, 2020 is based on the market price of the award on the grant date, which was a weighted average fair value for the three months ended March 31, 2020 of $1.41 per share.

These assumptions represent our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different. We recognize compensation expense for only the portion of awards that are expected to vest. The impact of our stock-based compensation expense for stock options and performance based restricted stock units granted to employees and non-employees may grow in future periods if the fair value of our common stock increases.

The following table summarizes the classification of our stock-based compensation expenses recognized in our consolidated statements of operations and comprehensive loss (in thousands):

In April 2012, 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 of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, as an EGC, ~~can delay~~we could have delayed the adoption of certain accounting standards until those standards would otherwise apply to private companies. ~~We have~~However, we 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:~~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 year in which we have total annual gross revenues of approximately $1.07 billion or more; the last day of the fiscal year following the fifth anniversary of the date of the completion of the closing of ~~an IPO;~~our initial public offering, or IPO, which is December 31, 2021; the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or the date on which we are deemed to be a large accelerated filer under the rules of the ~~Securities and Exchange Commission, or the~~ SEC.

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

The following table summarizes our results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in thousands):

	For the Three Months Ended March 31,
	2020			2019			Change
Operating expenses:
Research and development	$	5,303		$	5,567		$	(264	)
General and administrative		2,879			2,810			69
Total operating expenses		8,182			8,377			(195	)
Loss from operations		(8,182	)		(8,377	)		195
Other income (expense)		(235	)		361			(596	)
Change in fair value of warrant liabilities		239			2,821			(2,582	)
Net loss	$	(8,178	)	$	(5,195	)	$	(2,983	)

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 for the three months ended September 2017 and 2016. There was no grant revenue for the nine months ended September 30, 2017 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 ~~were $3.2 million for~~during the three months ended ~~September 30, 2017, compared to $2.7~~March 31, 2020 and 2019 were $5.3 million ~~for~~and $5.6 million, respectively. The decrease of $0.3 million during the three months ended ~~September 30, 2016. The increase of $0.5 million~~March 31, 2020 was primarily due ~~primarily~~ to ~~an increase~~a decrease in spending on preclinical studies and clinical trial ~~related activities for inarigivir~~manufacturing costs of $1.3 million and ~~preclinical studies for~~ ~~SB 11285~~ ~~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~~ laboratory supplies 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;~~$0.1 million; offset by an increase in clinical trial-related costs of $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 of $0.2 million associated with higher headcount in the nine months ended September 30, 2017.$1.1 million.

General and administrative expenses ~~were $2.0 million for~~during the three months ended ~~September 30, 2017, compared to $1.5~~March 31, 2020 and 2019 were $2.9 million ~~for~~and $2.8 million, respectively. The increase of $0.1 million during the three months ended ~~September 30, 2016. This increase of $0.5 million~~March 31, 2020 was primarily due to an increase in ~~non-cash charges for stock based compensation~~consulting-related costs of ~~$0.1~~$0.3 million ~~additional~~and salaries and benefits of $0.1 million, ~~associated with higher headcount~~offset by legal-related costs of ~~non-research~~$0.2 million and ~~development employees in the three months ended September 30, 2017, an increase~~non-cash stock-based compensation 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~~million.

Other income (expense). Other income (expense) during the three months ended ~~September 30, 2017~~March 31, 2020 and ~~an increase~~2019 is comprised of ~~$0.1 million for other general and administrative costs in~~interest income, offset by interest expense. Interest income during the three months ended ~~September 30, 2017.~~

~~General~~March 31, 2020 and ~~administrative expenses were $5.8~~2019 was $0.2 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 ofand $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~~expense during the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2020 was ~~$27,000 and $65,000, respectively,~~$0.5 million and was ~~primarily related~~due to the interest ~~earned~~expense incurred on ~~marketable securities.~~the Convertible Term Loan. There was no interest expense as of March 31, 2019.

Change in fair value of warrant liabilities. ~~Change~~The change in fair value of warrant liabilities ~~for~~during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and 2019 was ~~$5.8~~a gain of $0.2 million and ~~$11.5~~$2.8 million, ~~respectively, and~~respectively. The change in value each period was solely ~~related~~due to ~~an increase~~the change in the fair value of the ~~warrants from~~November 2016 Warrants, primarily as a result of the ~~November private placement, primarily due to the increase~~change in ~~the Company’s~~our stock ~~price. There were no warrant liabilities during the three~~price and ~~nine months ended September 30, 2016.~~stock price volatility.

From our inception through ~~September 30, 2017,~~March 31, 2020, we have financed our operations through proceeds received from private placements of convertible notes, common stock and/or ~~warrants;~~warrants, the exercise of options and ~~warrants;~~warrants, NIH grant ~~funding;~~funding and public offerings of securities. As of ~~September 30, 2017,~~March 31, 2020, we had cash, cash equivalents and marketable securities totaling ~~$52.2~~$47.5 million and an accumulated deficit of ~~$77.8~~$134.3 million.

In August 2017, we entered into a Controlled Equity Offering^SM Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or 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. We ~~will~~ pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement ~~will be~~are 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, orwhich we refer to as the S-3 Registration Statement, and a prospectus supplement and accompanying base prospectus that we filed with the SEC on August 18, 2017.During the period ended March 31, 2020, we sold an aggregate of 41,800 shares of our common stock under the Sales Agreement at a weighted average selling price of $1.42 per share, which resulted in approximately $30,000 of net proceeds. During the year ended December 31, 2019, we sold an aggregate of 600 shares of our common stock under the Sales Agreement at a weighted average selling price of $10.03 per share, which resulted in de minimis net proceeds.

In ~~June 2017,~~September 2019, we ~~issued~~entered into the Convertible Term Loan with the Lenders that provided for a $20.0 million term loan at an annual interest rate of 8.0%. The Convertible Term Loan provided for interest-only payments for twenty-four months and ~~sold~~repayment of the aggregate outstanding principal balance of the loan in ~~an underwritten public offering an aggregate~~quarterly installments starting upon expiration of ~~3,269,219~~the interest only period and continuing through September 19, 2023. The Lenders could have, at their option, elected to convert some or all of the then outstanding term loan amount and all accrued and unpaid interest thereon into shares of our common stock at ~~$13.00~~a conversion price of $8.76 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 shares issued in this offering were registered under the Securities Act pursuant to the Registration Statement. The offering resulted in $39.6 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by us.share.

On April 8, 2020, we entered into a ~~definitive agreement~~prepayment notice and pay-off letter with the Lenders, which provided for the full repayment in cash on April 8, 2020 of its $20.0 million Convertible Term Loan. The pay-off letter provided that the repayment amount would be approximately $20.3 million, which included payment in full of all outstanding principal and accrued interest underlying the Convertible Term Loan and $0.3 million for a ~~group~~prepayment fee. Pursuant to the pay-off letter, all of ~~accredited investors resulting~~our indebtedness and obligations to the Lenders were discharged in ~~a private placement~~full, and all security interests and other liens held by the Lenders as security for the Convertible Term Loan terminated upon the Lenders’ receipt of ~~1,644,737 shares~~the repayment amount. In connection with the repayment of the Convertible Term Loan, the warrants previously issued to the lenders were amended and restated so that the new exercise price is $2.08, which is equal to 1.5 times the weighted-average closing price of our common stock during the 90 days prior to the repayment date. All other terms and ~~warrants~~conditions of the Pontifax Warrants remain the same.

We made the decision to ~~purchase 1,644,737 shares~~repay the Convertible Term Loan as a result of ~~common stock, which~~changes in our operating needs following our announcement in the first quarter of 2020 that we ~~refer to~~were discontinuing the development of our HBV program, as well as the ~~November private placement. These investors paid $9.12 for each share~~cost 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 to the public of $12.00 per share, which included 24,900 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connectioncapital associated with the ~~IPO. The offering resulted in $8.2 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by us. In connection with~~Loan. Following the ~~closing~~full repayment of the ~~IPO,~~Convertible Term Loan, we ~~received approximately $5.3 million in proceeds upon~~expect that our cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements through the ~~exercise~~first quarter of ~~previously issued warrants to purchase 641,743 shares of common stock.~~2022.

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

	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2020			2019
Net cash used in operating activities	$	(12,640	)	$	(11,708	)	$	(7,181	)	$	(6,787	)
Net cash used in investing activities		(19,919	)		(1,955	)
Net cash provided by investing activities								9,075			8,813
Net cash provided by financing activities		39,664			14,648			30			—
Net increase in cash, cash equivalents and restricted cash	$	7,105		$	985		$	1,924		$	2,026

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 during the three months ended March 31, 2020 and 2019 was ~~$12.6~~$7.2 million and ~~$11.7~~$6.8 million, ~~during the nine months ended September 30, 2017 and 2016,~~ respectively. The increase in cash used in operating activities ~~for~~during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 compared to ~~September 30, 2016~~three months ended March 31, 2019 of $0.4 million was primarily due to an increase in net loss of ~~$11.3~~$3.0 million ~~which were~~and other net changes of $0.3 million, offset by a decrease in ~~prepaid expenses, accounts payable and~~ accrued expenses and other current liabilities of ~~$1.2~~$0.5 million. In addition, there was ~~an increase~~a decrease in the non-cash change in the fair value of the warrant liability of ~~$11.5~~$2.6 million and ~~an increase in~~other non-cash ~~stock based compensation~~changes of $0.5 million, which was offset by a decrease in non-cash common stock and warrant valuation expense related to the BioHEP license agreement of $2.8 million for the nine months ended September 30, 2017.$0.2 million.

Net cash ~~used in~~provided by investing activities. Net cash ~~used in~~provided by investing activities ~~was $19.9 million for~~during the ~~nine~~three months ended ~~September 30, 2017 compared to $2.0~~March 31, 2020 and 2019 was $9.1 million ~~for~~and $8.8 million, respectively. The cash provided by investing activities during the ~~nine~~three months ended ~~September 30, 2016. The cash used in investing activities of $19.9 million in the nine months ended September 30, 2017~~March 31, 2020 was primarily the result of ~~$14.6~~$15.1 million in proceeds from the sale of marketable securities, which was offset by ~~$34.4~~$6.0 million for the purchase of marketable securities. The cash used in investing activities during the three months ended

March 31, 2019 was primarily the result of $8.9 million in proceeds from the sale of marketable securities, ~~and~~which was offset by $0.1 million for the purchase of property and equipment. The cash used in investing activities of $2.0 million for the nine months ended September 30, 2016 was mainly due to proceeds of $4.9 million from 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 months ended September 30, 2016.

Net cash provided by financing activities. Net cash provided by financing activities ~~was $39.7 million and $14.6 million~~ during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was $30,000 and ~~2016, respectively. The cash provided by financing activities in the nine months ended September 30, 2017~~ was primarily the result of ~~$42.5 million of gross~~net proceeds from our at-the-market offering program under the ~~common stock offering and $0.1 million of proceeds from the exercise of stock options, offset by $2.9 million of offering expenses. The cash provided by~~

Sales Agreement. There were no other financing activities induring the ~~nine~~three months ended September 30, 2016 was primarily the result of $11.3 million of gross proceeds received from our IPO, cash of $5.3 million for the exercise of warrants in connection with the closing 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. March 31, 2019.

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:

WeAs of March 31, 2020, we had $47.5 million in cash, cash equivalents and marketable securities. On April 8, 2020, we used approximately $20.3 million to fund the repayment in full of our Convertible Term Loan. Following the full repayment of the loan, we expect that our ~~existing~~ cash, cash equivalents and marketable securities as of ~~September 30, 2017~~March 31, 2020 will enable us to fund our operating expenses and capital expenditure requirements through the ~~end~~first quarter of ~~2019. However, we anticipate that~~2022 based on 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.~~ current operating plan. 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,~~our product candidates, 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:

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. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need 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 on Form S-3 (File No. 333-218399~~), which we refer to as 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 we filed with the SEC on August 18, 2017. As of ~~September 30, 2017,~~March 31, 2020, we had up to ~~$107.5~~approximately $59.6 million in securities available for future issuance under the S-3 Registration Statement, which includes ~~$50.0~~approximately $42.7 million in shares issuable pursuant to ~~the~~our at-the-market program and our Sales Agreement with Cantor. However, pursuant to the instructions to Form S-3, we only have the ability to sell shares under the S-3 Registration Statement, during any 12-month period, in an amount less than or equal to one-third of the aggregate market value of our common stock held by non-affiliates. 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.

There can be no assurance, however, that we will be able to receive cash proceeds from any of these potential sources. Refer to Part II, Item 1A. — Risk Factors — Business interruptions resulting from the coronavirus disease 2019 (COVID-19) outbreak or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business, included elsewhere in this Quarterly Report on Form 10-Q regarding the adverse impact of the COVID-19 pandemic on, among other things, capital market conditions.

In September 2019, we entered into the Convertible Term Loan with the Lenders that provided for a $20.0 million term loan with an annual interest rate of 8.0%. The ~~following table summarizes our contractual obligations at~~Convertible Term Loan provided for interest-only payments for twenty-four months and repayment of the aggregate outstanding principal balance of the term loan in quarterly installments starting upon expiration of the interest only period and continuing through September ~~30, 2017, and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):~~

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.

19, 2023. On ~~October 4, 2017,~~April 8, 2020, we entered into a ~~New Lease. The premises covered~~prepayment notice and pay-off letter with the Lenders, which provided for the full repayment in cash on April 8, 2020 of the Convertible Term Loan. Pursuant to the pay-off letter, all of our indebtedness and obligations to the Lenders were discharged in full, and all security interests and other liens held by the ~~New Lease will serve~~Lenders as ~~our new principal office and laboratory space. The initial term~~security for the Loan terminated upon the Lenders’ receipt of the ~~New Lease is 125 months beginning on~~repayment amount. The Convertible Term Loan and the ~~date on which the landlord substantially completes certain renovations~~subsequent repayment are described in Notes 9 and 12, respectively, to the ~~premises covered by~~notes to the ~~New Lease, which we expect to occur~~consolidated financial statements contained 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. this Quarterly Report on Form 10-Q.

We enter into contracts in the normal course of business with 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.

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.

In ~~November 2016,~~August 2018, the ~~Financial Accounting Standards Board, or~~ FASB issued ~~Accounting Standards Update, or~~ ASU ~~No. 2016-18,~~2018-13, ~~Statement~~Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirement for Fair Value Measurement. This ASU removes, modifies and adds certain disclosure requirements 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.ASC Topic 820. The ~~new standard is applied retrospectively and~~ASU is effective for ~~our annual periods beginning after December 15, 2017,~~all entities for fiscal years, and ~~for~~ interim periods within those ~~annual periods, with early adoption permitted.~~fiscal years, beginning after December 31, 2019. We ~~elected early adoption of~~adopted 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 2016, the FASB issued ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”) to require changes 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 is effective for our annual reporting periods beginning after December 15, 2016, 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 early adoption is not permitted. In July 2015, 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 we expect material revenue to be recognized,2020; however, the adoption of this standard isdid 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 impact that the adoption of this standard may have on our consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~, which supersedes the current leasing guidance 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.

We are exposed to market risk related to changes in interest rates. Our cash, cash equivalents and marketable securities of ~~$52.2~~$47.5 million as of ~~September 30, 2017,~~March 31, 2020, consisted of cash, ~~money market accounts~~cash equivalents 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 a significant amount of the ~~short-term nature of the instruments~~marketable securities in our investment portfolio are short-term in nature, 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.

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,~~March 31, 2020, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that 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 and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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 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.

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, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, in March 2020 certain of our employees began working remotely. We have not identified any material changes in our internal control over financial reporting as a result of these changes to the working environment. We are continually monitoring and assessing the COVID-19 situation to determine any potential impacts on the design and operating effectiveness of our internal controls over financial reporting.

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.

~~There~~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, 2019, or the Form 10-K, which could materially affect our business, financial condition, or results of operations. Other than the addition of the following risk factor, there have been no material changes in or additions to the risk factors included in our Annual Report on Form 10-K for the year endedDecember 31, ~~2016~~2019.

Business interruptions resulting from the coronavirus disease 2019 (COVID-19) outbreak or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business.

Public health crises such as pandemics or similar outbreaks could adversely impact our business. In December 2019, a novel strain of a virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China and has reached multiple other regions and countries, including Massachusetts where our primary office and laboratory space is located. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers, in Massachusetts, across the United States and in other countries. The extent to which COVID-19 impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions to contain COVID-19 or address its impact in the short and long term, among others.

Additionally, timely initiation and completion of preclinical activities and clinical trials is dependent upon the availability of, for example, preclinical and clinical trial sites, researchers and investigators, regulatory agency personnel, and materials, which may be adversely affected by global health matters, such as pandemics. We plan to conduct preclinical activities and clinical trials for our investigational drug product candidates in geographies which are currently being affected by COVID-19.

Further, in response to the pandemic and in accordance with direction from state and local government authorities, we have restricted access to our facilities mostly to personnel and third parties who must perform critical activities that must be completed on-site, limited the number of such personnel that can be present at our facilities at any one time, and requested that most of our personnel work remotely. In the event that governmental authorities were to further modify current restrictions, our employees conducting research and development activities may not be able to access our laboratory space, and our ~~Quarterly Report~~core activities may be significantly limited or curtailed, possibly for an extended period of time.

Some factors from the COVID-19 pandemic that could delay or otherwise adversely affect the completion of our preclinical activities and the planned initiation of our clinical trials for our investigational drug product candidates, including STING, as well as our business generally, include:

These and other factors arising from COVID-19 could worsen in countries that are already afflicted with the coronavirus or could continue to spread to additional countries, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.

In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile 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~~result of the ~~Board.~~

~~In accordance with our current non-employee director compensation policy, Dr. Bardon will receive~~COVID-19 pandemic. As 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 sharesresult, we may face difficulties raising capital through sales of our common stock ~~in lieu of cash fees.~~

~~In addition, in accordance~~or such sales may be on unfavorable terms. The COVID-19 outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business, preclinical studies and planned clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as 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 priceultimate geographic spread of the ~~common stock on~~disease, the ~~NASDAQ Capital Market on October 26, 2017. This option becomes exercisable on a monthly basis over~~duration of the ~~course of three years, subject~~outbreak, travel restrictions and other actions to ~~Dr. Bardon’s continued service~~contain the outbreak or address its impact, such as ~~a director~~social distancing and quarantines or lock-downs in the ~~event~~United States and other countries, business closures or business disruptions and the effectiveness 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,actions taken in the ~~event of a change in control of~~United States and other countries to contain and address 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.~~disease.

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.

** Furnished herewith. This certification is not deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and is not deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

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.

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

~~86 South Street~~35 Parkwood Drive, Suite 210 Hopkinton, MA	01748
(Address of principal executive offices)	(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐☒

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒

		Emerging growth company	☒

		~~Page~~
	PART I. FINANCIAL INFORMATION	Page
Item 1.	Consolidated Financial Statements (Unaudited)
	~~Condensed~~ Consolidated Balance Sheets	3
	~~Condensed~~ Consolidated Statements of Operations and Comprehensive Loss	4
	~~Condensed~~ Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3334
Item 4.	Controls and Procedures	3334
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3435
Item 1A.	Risk Factors	34
~~Item 5.~~	~~Other Information~~	3435
Item 6.	Exhibits	3436
Exhibit Index		3537
Signatures		3638

	Warrants
Outstanding at December 31, ~~2015~~2018		~~1,181,776~~1,662,124
Grants		~~1,798,084~~265,000
Exercises		~~(641,743~~—	)
Expirations/cancellations		~~(540,033~~—	)
Outstanding at December 31, ~~2016~~2019		~~1,798,084~~1,927,124
Grants		—
Exercises		—
Expirations/cancellations		—
Outstanding at ~~September 30, 2017~~March 31, 2020		~~1,798,084~~1,927,124

Year
2020 (excluding the three months ended March 31, 2020)	$	445
2021		508
2022		450
2023		462
2024		474
Thereafter		1,931
Total lease payments	$	4,270
Less: present value discount		(1,129	)
Total	$	3,141

Asset Category		Useful Life
Equipment		5-7 years
Furniture and fixtures		5 years
Leasehold improvements		Lesser of 10 years or the remaining term of the respective lease

	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

	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 Private Placement Warrants
Balance at December 31, 2018	$	8,511
Change in fair value		(8,212	)
Balance at December 31, 2019		299
Change in fair value		(239	)
Balance at March 31, 2020	$	60

	March 31, 2020			December 31, 2019
Risk-free interest rate		0.2	%		1.6	%
Expected term (in years)		1.6			1.9
Expected volatility		100.0	%		100.0	%
Expected dividend yield		0	%		0	%

	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	%

	Restricted Stock Units			Weighted-Average Grant Date Fair Value
Total nonvested units at December 31, 2019		139,350		$	7.86
Granted		199,000			1.41
Vested		—			—
Cancelled		(139,350	)		7.86
Total nonvested units at March 31, 2020		199,000		$	1.41

Year
2017	$	59
2018		174
2019		157
2020		164
Thereafter		70
Total minimum lease payments	$	624

	For the Three Months Ended March 31,
Cash paid for amounts included in the measurement of lease liabilities:	2020		2019
Operating cash flow from operating leases (in thousands)	$	144	$	39

Right-of-use assets obtained in exchange for lease obligations:
Operating leases (in thousands)	$	—	$	2,980

	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	$	—


Exhibit Number		Description

3.1		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed April 13, 2020 (Commission File No. 001-37718).

4.1		Form of Amended and Restated Warrant (Pontifax) (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed April 13, 2020 (Commission File No. 001-37718).

10.1		~~Controlled Equity Offering~~^SM ~~Sales Agreement,~~Pay-Off Letter, dated ~~as of August 18, 2017,~~April 8, 2020, by and ~~between~~among Spring Bank Pharmaceuticals, Inc., Pontifax Medison Finance (Israel) L.P. and ~~Cantor Fitzgerald & Co.~~Pontifax Medison Finance (Cayman) L.P. (incorporated by reference to Exhibit 10.1 to ~~Spring Bank Pharmaceuticals, Inc.’s~~the Registrant’s Current Report on Form 8-K filed ~~on August 18, 2017)~~April 13, 2020 (Commission File No. 001-37718).

10.2		Form of Restricted Stock Unit Agreement.

10.3		Form of Retention Agreement.

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		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		Certification of Principal Executive Officer and 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

	Spring Bank Pharmaceuticals, Inc.

Date: ~~October 31, 2017~~May 7, 2020	By:	/s/ ~~Jonathan Freve~~Lori Firmani
		~~Jonathan Freve~~Lori Firmani
		~~Chief Financial Officer and Treasurer~~Vice President of Finance
		(Principal Financial and Accounting Officer)