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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 13(a) of the Exchange Act. ☒

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

As of November ~~6, 2019,~~2, 2020, the registrant had ~~16,476,342~~17,267,202 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,” “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 risk factors described in ~~“Item 1A. Risk Factors” in~~ our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission on ~~March 11, 2019,~~February 14, 2020, May 7, 2020 and August 10, 2020, respectively, 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,			September 30,			December 31,
	2019			2018			2020			2019
ASSETS	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	34,371		$	14,724		$	9,988		$	28,709
Marketable securities		28,778			32,914			9,993			25,746
Prepaid expenses and other current assets		1,727			1,649			2,599			3,522
Total current assets		64,876			49,287			22,580			57,977
Marketable securities, long-term		—			16,804
Property and equipment, net		2,264			2,319			1,926			2,234
Operating lease right-of-use assets		2,784			—			2,504			2,717
Restricted cash		234			234			—			234
Other assets		35			167			234			35
Total	$	70,193		$	68,811		$	27,244		$	63,197
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,986		$	1,880		$	3,135		$	2,210
Accrued expenses and other current liabilities		1,998			2,367			2,777			2,438
Accrued interest payable								—			403
Operating lease liabilities, current		343			—			333			355
Total current liabilities		5,327			4,247			6,245			5,406
Term loan, net of unamortized discount		19,011			—
Convertible term loan, net of unamortized discount								—			19,070
Warrant liabilities		450			8,511			56			299
Operating lease liabilities, noncurrent		2,962			—			2,629			2,869
Other long-term liabilities		27			193			—			27
Total liabilities		27,777			12,951			8,930			27,671
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30, 2019 and December 31, 2018; no shares issued or outstanding at September 30, 2019 and December 31, 2018		—			—
Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30, 2019 and December 31, 2018; 16,476,342 and 16,434,614 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		2			2
Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30, 2020 and December 31, 2019; 0 shares issued or outstanding at September 30, 2020 and December 31, 2019								—			—
Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30, 2020 and December 31, 2019; 17,267,202 and 16,513,763 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively								2			2
Additional paid-in capital		161,382			157,931			164,562			161,924
Accumulated deficit		(118,730	)		(102,068	)		(146,245	)		(126,165	)
Accumulated other comprehensive loss		(238	)		(5	)		(5	)		(235	)
Total stockholders’ equity		42,416			55,860			18,314			35,526
Total	$	70,193		$	68,811		$	27,244		$	63,197

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Operating expenses:
Research and development	$	5,228		$	5,656		$	18,070		$	15,188		$	2,516		$	5,228		$	11,023		$	18,070
General and administrative		2,247			2,059			7,547			6,681			2,832			2,247			7,875			7,547
Total operating expenses		7,475			7,715			25,617			21,869			5,348			7,475			18,898			25,617
Loss from operations		(7,475	)		(7,715	)		(25,617	)		(21,869	)		(5,348	)		(7,475	)		(18,898	)		(25,617	)
Other income (expense):
Interest income		271			271			957			603			8			271			293			957
Interest expense		(63	)		—			(63	)		—			—			(63	)		(511	)		(63	)
Loss on extinguishment of convertible term loan														—			—			(1,207	)		—
Change in fair value of warrant liabilities		355			(1,336	)		8,061			3,837			(18	)		355			243			8,061
Net loss		(6,912	)		(8,780	)		(16,662	)		(17,429	)		(5,358	)		(6,912	)		(20,080	)		(16,662	)
Unrealized loss on marketable securities		(20	)		(14	)		(233	)		(13	)
Unrealized gain/(loss) on marketable securities														(4	)		(20	)		230			(233	)
Comprehensive loss	$	(6,932	)	$	(8,794	)	$	(16,895	)	$	(17,442	)	$	(5,362	)	$	(6,932	)	$	(19,850	)	$	(16,895	)
Net loss per common share:
Basic	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.27	)
Diluted	$	(0.42	)	$	(0.59	)	$	(1.01	)	$	(1.39	)
Weighted-average number of shares outstanding:
Basic		16,459,155			14,841,197			16,446,582			13,677,375
Diluted		16,459,155			14,841,197			16,446,582			15,311,152
Net loss per common share - basic and diluted													$	(0.31	)	$	(0.42	)	$	(1.19	)	$	(1.01	)
Weighted-average number of shares outstanding - basic and diluted														17,248,545			16,459,155			16,942,582			16,446,582

For the Three Months Ended																	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2020																	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at June 30, 2020																		17,248,545	$	2	$	164,118	$	(140,887	)	$	(1	)	$	23,232
Stock-based compensation																		—		—		419		—			—			419
Issuance of common stock for services rendered																		18,657		—		25		—			—			25
Net unrealized gain on marketable securities																		—		—		—		—			(4	)		(4	)
Net loss																		—		—		—		(5,358	)		—			(5,358	)
Balance at September 30, 2020																		17,267,202	$	2	$	164,562	$	(146,245	)	$	(5	)	$	18,314

For the Three Months Ended	Common Stock				Additional Paid-in			Accumulated			Other Comprehensive			Total Stockholders’			Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2019	Shares		Amount		Capital			Deficit			Income (Loss)			Equity			Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at June 30, 2019		16,459,155	$	2	$	159,975		$	(111,818	)	$	(218	)	$	47,941			16,459,155	$	2	$	159,975	$	(111,818	)	$	(218	)	$	47,941
Stock-based compensation		—		—		752			—			—			752			—		—		752		—			—			752
Issuance of common stock for services rendered		17,187		—		59			—			—			59			17,187		—		59		—			—			59
Issuance of warrants in connection with term loan		—		—		552			—			—			552			—		—		552		—			—			552
Issuance of warrants to a service provider		—		—		19			—			—			19			—		—		19		—			—			19
Offering costs in connection with common stock offering		—		—		25			—			—			25			—		—		25		—			—			25
Net unrealized loss on marketable securities		—		—		—			—			(20	)		(20	)		—		—		—		—			(20	)		(20	)
Net loss		—		—		—			(6,912	)		—			(6,912	)		—		—		—		(6,912	)		—			(6,912	)
Balance at September 30, 2019		16,476,342	$	2	$	161,382		$	(118,730	)	$	(238	)	$	42,416			16,476,342	$	2	$	161,382	$	(118,730	)	$	(238	)	$	42,416

For the Three Months Ended	Common Stock				Additional Paid-in			Accumulated			Other Comprehensive			Total Stockholders’
September 30, 2018	Shares		Amount		Capital			Deficit			Income (Loss)			Equity
Balance at June 30, 2018		13,182,567	$	1	$	118,541		$	(87,863	)	$	(22	)	$	30,657
Stock-based compensation		—		—		680			—			—			680
Issuance of common stock for services rendered		2,525		—		30			—			—			30
Issuance of common stock in connection with offering, net of issuance costs		3,246,079		1		37,959			—			—			37,960
Issuance costs in connection with at-the-market offering		—		—		(1	)		—			—			(1	)
Net unrealized gain (loss) on marketable securities		—		—		—			—			(14	)		(14	)
Net loss		—		—		—			(8,780	)		—			(8,780	)
Balance at September 30, 2018		16,431,171	$	2	$	157,209		$	(96,643	)	$	(36	)	$	60,532

For the Nine Months Ended

Common Stock

Additional
Paid-in

Accumulated

Other
Comprehensive

Total
Stockholders’

September 30, 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

—

—

2,647

—

—

2,647

Issuance of common stock for services rendered

41,128

—

202

—

—

202

Issuance of common stock in connection with
     at-the-market offering

600

—

6

—

—

6

Issuance of warrants in connection with term loan

��
—

—

552

—

—

552

Issuance of warrants to a service provider

—

—

19

—

—

19

Offering costs in connection with common stock
     offering

—

—

25

—

—

25

Net unrealized loss on marketable securities

—

—

—

—

(233
)

(233
)
Net loss

—

—

—

(16,662
)

—

(16,662
)
Balance at September 30, 2019

16,476,342

$
2

$
161,382

$
(118,730
)

$
(238
)

$
42,416

For the Nine Months Ended

Common Stock

Additional
Paid-in

Accumulated

Other
Comprehensive

Total
Stockholders’

September 30, 2018

Shares

Amount

Capital

Deficit

Income (Loss)

Equity

Balance at December 31, 2017

12,961,993

$
1

$
113,984

$
(79,214
)

$
(23
)

$
34,748

Stock-based compensation

—

—

1,978

—

—

1,978

Issuance of common stock for services rendered

5,770

—

76

—

—

76

Issuance of common stock in connection with
     offering, net of issuance costs

3,246,079

1

37,959

—

—

37,960

Issuance of common stock in connection with
     at-the-market offering, net of issuance costs

217,329

—

3,212

—

—

3,212

Net unrealized gain on marketable securities

—

—

—

—

(13
)

(13
)
Net loss

—

—

—

(17,429
)

—

(17,429
)
Balance at September 30, 2018

16,431,171

$
2

$
157,209

$
(96,643
)

$
(36
)

$
60,532

For the Nine Months Ended September 30,

2019

2018

Cash flows from operating activities:

Net loss

$
(16,662
)

$
(17,429
)
Adjustments for:

Depreciation and amortization

263

193

Loss on the disposal of property and equipment

—

16

Operating lease right-of-use asset amortization

196

—

Change in fair value of warrant liabilities

(8,061
)

(3,837
)
Non-cash interest expense

10

—

Non-cash investment income

(60
)

361

Non-cash stock-based compensation

2,825

2,062

Non-cash issuance of warrants to a service provider

19

—

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(78
)

(449
)
Other assets

132

(46
)
Accounts payable

1,106

(326
)
Accrued expenses and other liabilities

(82
)

1,098

Operating lease liabilities

(79
)

—

Net cash used in operating activities

(20,471
)

(18,357
)
Cash flows from investing activities:

Proceeds from sale of marketable securities

26,767

28,837

Purchases of marketable securities

(6,000
)

(50,000
)
Purchases of property and equipment

(208
)

(1,913
)
Net cash provided by (used in) investing activities

20,559

(23,076
)
Cash flows from financing activities:

Proceeds from term loan and warrants

20,000

—

Issuance costs in connection with term loan and warrants

(447
)

—

Proceeds from issuance of common stock in connection with at-the-market offering,
net of issuance costs

6

3,212

Proceeds from issuance of common stock, net of issuance costs

—

37,959

Cash provided by financing activities

19,559

41,171

Net increase (decrease) in cash, cash equivalents and restricted cash

19,647

(262
)
Cash, cash equivalents and restricted cash, beginning of period

14,958

24,133

Cash, cash equivalents and restricted cash, end of period

$
34,605

$
23,871

Supplemental disclosures of cash flow information:

Cash paid for taxes

$
21

$
3

Cash paid for interest, net

$
53

$
—

For the Nine Months Ended	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
September 30, 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		—		—		1,660		—			—			1,660
Issuance of common stock for services rendered		62,544		—		75		—			—			75
Issuance of common stock in connection with at-the-market offering, net of issuance costs		690,895		—		849		—			—			849
Convertible term loan warrant amendment				—		54		—			—			54
Net unrealized gain on marketable securities		—		—		—		—			230			230
Net loss		—		—		—		(20,080	)		—			(20,080	)
Balance at September 30, 2020		17,267,202	$	2	$	164,562	$	(146,245	)	$	(5	)	$	18,314

For the Nine Months Ended	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive			Total Stockholders’
September 30, 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		—		—		2,647		—			—			2,647
Issuance of common stock for services rendered		41,128		—		202		—			—			202
Issuance of common stock in connection with at-the-market offering, net of issuance costs		600		—		6		—			—			6
Issuance of warrants in connection with term loan		—		—		552		—			—			552
Issuance of warrants to a service provider		—		—		19		—			—			19
Offering costs in connection with common stock offering		—		—		25		—			—			25
Net unrealized loss on marketable securities		—		—		—		—			(233	)		(233	)
Net loss		—		—		—		(16,662	)		—			(16,662	)
Balance at September 30, 2019		16,476,342	$	2	$	161,382	$	(118,730	)	$	(238	)	$	42,416

	For the Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(20,080	)	$	(16,662	)
Adjustments for:
Depreciation		287			263
Loss on the disposal of property and equipment		25			—
Operating lease right-of-use asset amortization		213			196
Change in fair value of warrant liabilities		(243	)		(8,061	)
Loss on extinguishment of convertible term loan		1,207			—
Non-cash interest expense		77			10
Non-cash investment expense		(247	)		(60	)
Non-cash stock-based compensation		1,735			2,825
Non-cash issuance of warrants to a service provider		—			19
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		923			(78	)
Other assets		(199	)		132
Accounts payable		925			1,106
Accrued expenses and other liabilities		(91	)		(82	)
Operating lease liabilities		(262	)		(79	)
Net cash used in operating activities		(15,730	)		(20,471	)
Cash flows from investing activities:
Proceeds from sale of marketable securities		37,230			26,767
Purchases of marketable securities		(21,000	)		(6,000	)
Purchases of property and equipment		(4	)		(208	)
Net cash provided by investing activities		16,226			20,559
Cash flows from financing activities:
Payment of convertible term loan and prepayment fee		(20,300	)		—
Proceeds from term loan and warrants		—			20,000
Issuance costs in connection with term loan and warrants		—			(447	)
Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs		849			6
Cash (used in) provided by financing activities		(19,451	)		19,559
Net (decrease) increase in cash, cash equivalents and restricted cash		(18,955	)		19,647
Cash, cash equivalents and restricted cash, beginning of period		28,943			14,958
Cash, cash equivalents and restricted cash, end of period	$	9,988		$	34,605
Supplemental disclosures of cash flow information:
Cash paid for taxes	$	7		$	21
Cash paid for interest, net	$	837		$	53

Spring Bank Pharmaceuticals, Inc. (the “Company”) is 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 aits 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 also developing ~~its most advanced product candidate,~~ inarigivir, ~~soproxil (“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. On January 29, 2020, the Company announced that it terminated all clinical development of inarigivir for the treatment of ~~chronic hepatitis B virus.~~ HBV due to the occurrence of unexpected serious adverse events, including one patient death, in the Company’s Phase 2b CATALYST trial.

On July 29, 2020, the Company and F-star Therapeutics Limited (“F-star”) entered into a Share Exchange Agreement (the “Exchange Agreement”) pursuant to which, subject to the satisfaction or waiver of the conditions set forth in the Exchange Agreement, the Company will acquire the entire issued share capital of F-star with F-star continuing as the combined company (the “Exchange”). The Exchange is expected to close in the fourth quarter of 2020, subject to the approval of the Company’s stockholders at a special meeting of stockholders to be held on November 19, 2020, as well as other customary conditions.

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, supported by grants and through private financings. The Company has ~~three~~3 wholly owned subsidiaries: Sperovie Biosciences, Inc. formed in September 2015, SBP Securities Corporation formed in December 2016 and SBP International Limited formed 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 pandemic caused by an outbreak of a new strain of coronavirus, or the COVID-19 pandemic, that is affecting the United States and global economy and financial markets is also impacting the Company’s employees, patients, communities and business operations. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s 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 ~~date have been primarily limited to the development of inarigivir, SB 11285, SB 9225~~contain it or treat its impact and the ~~Company’s other product candidates.~~economic impact on local, regional, national and international markets. The Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, suppliers, industry, and workforce.

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

The accompanying interim financial statements as of September 30, ~~2019~~2020 and for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~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, ~~2019,~~2020, results of operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, statement of stockholders’ equity for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 and its cash flows for the nine months ended September 30, ~~2019~~2020 and ~~2018.~~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, ~~2018,~~2019, as filed with the Securities and Exchange Commission (“SEC”) on ~~March 11, 2019.~~February 14, 2020. The results for

the three and nine months ended September 30, ~~2019~~2020 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

As of September 30, ~~2019,~~2020, the Company had an accumulated deficit of ~~$118.7~~$146.2 million and ~~$63.1~~$20.0 million in cash, cash equivalents and marketable securities. On April 8, 2020, the Company repaid in full its $20.0 million convertible term loan (see Note 9).

The Company expects its $20.0 million in cash, cash equivalents and marketable securities as of September 30, 2020 will be sufficient to ~~continue to incur significant and increasing losses~~fund operations for at least the ~~foreseeable future. The Company anticipates~~next twelve months. There is no guarantee that ~~its expenses~~the Exchange will ~~increase significantly as it continues to develop inarigivir, SB 11285, SB 9225 and its other product candidates.~~be completed. The Company does not ~~have~~expect to raise any ~~committed external source~~additional funds prior to the completion of ~~funds. As a result,~~the Exchange. However, if the Exchange is not completed, the Company ~~will need additional financing to support its continuing operations. Adequate~~may require significant additional funds ~~may not~~earlier than it currently expects in order to conduct clinical trials and preclinical and discovery activities. There can be no assurances, however, that additional funding will be available ~~to the Company~~ on ~~acceptable~~favorable 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.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sperovie Biosciences, Inc., SBP Securities Corporation and SBP International Limited. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, ~~2019.~~2020. Sperovie Biosciences, Inc. iswas a joint borrower with the Company under the Company’s convertible 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, ~~2019.~~2020. SBP International Limited had operations consisting mainly of clinical trial oversight, including European data protection oversight, as of September 30, ~~2019.~~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 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. Included in cash and cash equivalents as of September 30, ~~2019 and December 31, 2018~~2020 are money market fund investments of ~~$32.5~~$8.2 million and ~~$13.3~~included in cash and cash equivalents as of December 31, 2019 are money market fund investments of $21.1 million ~~respectively,~~and United States treasury securities of $6.0 million, which are reported at fair value (see Note 5).

As of ~~September 30, 2019 and~~ December 31, ~~2018,~~2019, restricted cash ~~consists~~consisted of approximately $234,000, which iswas 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. As of September 30, 2020, the Company had 0 restricted cash and the security deposit was included in other assets, long-term.

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 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 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 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. As of September 30, ~~2019, no~~2020, 0 such impairment has occurred.

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 accounts for freestanding warrants within stockholders equity or as liabilities based on the characteristics and provisions of each instrument. The Company evaluates outstanding warrants in accordance with ~~ASC~~Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, and 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 stockholders equity and initially recorded at their grant date fair value without subsequent remeasurement. Warrants that meet 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, including common stock subject to vesting.~~stock. The Company accounts for all stock-based payment awards granted to employees and nonemployees using a fair value method. 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 Company accounts for forfeitures as they occur.

The Company measures the fair value of the performance-based ~~restricted stock units~~RSUs relating to the total share return performance using a Monte Carlo valuation model. The Company measures the fair value of the performance-based ~~restricted stock units~~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 (see Note 5). The fair value of the term loan approximates its face value ~~given the close proximity of the execution of the term loan~~due to ~~September 30, 2019.~~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.

For the three and nine months ended September 30, 2020 and 2019, both methods are ~~equivalent and for the three months ended September 30, 2018, both methods are~~ equivalent. For the nine months ended September 30, 2018, diluted net loss per share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants and the change in the fair value of the warrant liability. Basic and diluted net loss per share is described further in Note 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, no0 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, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company has ~~not~~0t 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 previously leased 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, ~~2019,~~2020, the Company had ~~not~~0t experienced any losses related to these indemnification obligations and no0 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 no0 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~~1 operating segment and does not track expenses on a program-by-program basis.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity

(Subtopic 815-40).The amendments in the ASU removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. In addition, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. The ASU is effective for public business entities that meet the definition of a Securities and Exchange Commission (“SEC”) filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard may have on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, 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 ASC Topic 820. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company ~~is currently evaluating the impact that the adoption of this standard may have on the Company’s consolidated financial statements.~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~ (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize most leases on their balance sheet as a right-of-use asset and a lease liability. Leases are classified as either operating or finance, and classification is based on criteria similar to current lease accounting, but without explicit bright lines. In July 2018, the FASB issued ASU No. 2018-10, ~~“Codification Improvements to Topic 842, Leases”~~ (“ASU 2018-10”), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) – Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. The guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, and early adoption is permitted. Under this standard, disclosures are required to enable users of financial statements in assessing the amount, timing, and uncertainty of cash flows arising from leases. The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. Under both transition methods there is a cumulative effect adjustment.

The Company adopted the standard on the effective date of January 1, 2019 by applying the new lease requirements at the effective date. Prior periods continue to be presented based on the accounting standards originally in effect for such periods. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows the Company to carry forward the historical lease classification. The Company will also apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. The standard had an impact of approximately $3.0 million on the Company’s assets and $3.4 million on its liabilities, as of January 1, 2019, for the recognition of right-of-use assets and lease liabilities, which are primarily related to the lease of its corporate headquarters in Hopkinton, Massachusetts. The standard did not have a material impact on the Company’s results of operations or liquidity ~~(see Note 10)~~.

~~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 adopted this standard as of January 1, ~~2019;~~2020; however, the adoption of this standard did not impact the Company’s 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):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2019

2018

2019

2018

Net loss

$
(6,912
)

$
(8,780
)

$
(16,662
)

$
(17,429
)
Less: decrease in change in fair value of warrant liabilities

(3,837
)
Net loss available to common shareholders

$
(21,266
)
Weighted-average number of shares outstanding:

Basic

16,459,155

14,841,197

16,446,582

13,677,375

Effect of dilutive securities:

Common stock warrants

1,633,777

Dilutive potential common shares

15,311,152

Net loss per common share:

Basic

$
(0.42
)

$
(0.59
)

$
(1.01
)

$
(1.27
)
Diluted

$
(0.42
)

$
(0.59
)

$
(1.01
)

$
(1.39
)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Net loss	$	(5,358	)	$	(6,912	)	$	(20,080	)	$	(16,662	)
Weighted-average number of shares outstanding - basic and diluted		17,248,545			16,459,155			16,942,582			16,446,582
Net loss per common share - basic and diluted	$	(0.31	)	$	(0.42	)	$	(1.19	)	$	(1.01	)

~~For the three and nine months ended September 30, 2019, the diluted~~Diluted net loss per common share is the same as basic net loss per common share ~~and~~ for the three months ended September 30, 2018, the diluted net loss per common share is the same as basic net loss per common share. For the nine months ended September 30, 2018, the diluted net loss per common share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants of 1,633,777 shares and the change in the fair value of the warrant liability of $3.8 million.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 Months Ended September 30,				For the Nine Months Ended September 30,				For the Three and Nine Months Ended September 30,
	2019		2018		2019		2018		2020		2019
Convertible debt		2,329,143		—		2,329,143		—		—		2,329,143
Common stock warrants		1,927,124		1,662,124		1,927,124		28,347		1,927,124		1,927,124
Stock options, RSUs and inducement awards		1,948,115		1,349,565		1,948,115		1,349,565
Stock options and inducement awards										1,445,003		1,762,315
Restricted stock units										532,000		185,800

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, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

	September 30,		December 31,		September 30,		December 31,
Investments - Current:	2019		2018		2020		2019
Debt securities - available for sale	$	28,778	$	32,914	$	9,993	$	25,746
Total	$	28,778	$	32,914	$	9,993	$	25,746

Investments - Noncurrent:
Debt securities - available for sale	$	—	$	16,804
Total	$	—	$	16,804

A summary of the Company’s available-for-sale classified investments as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following (in thousands):

	At September 30, 2019									At September 30, 2020
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value		Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses				Fair Value
Investments - Current:
Corporate bonds	$	11,055	$	—	$	(74	)	$	10,981
United States treasury securities		17,961		—		(164	)	$	17,797	$	9,998	$	—	$	(5	)		$	9,993
Total	$	29,016	$	—	$	(238	)	$	28,778	$	9,998	$	—	$	(5	)		$	9,993

	At December 31, 2018									At December 31, 2019
	Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses			Fair Value		Cost Basis		Accumulated Unrealized Gains		Accumulated Unrealized Losses				Fair Value
Investments - Current:
Corporate bonds	$	16,028	$	—	$	(19	)	$	16,009	$	4,990	$	—	$	(58	)		$	4,932
United States treasury securities		16,913		—		(8	)		16,905		20,979		—		(165	)			20,814
Total	$	32,941	$	—	$	(27	)	$	32,914	$	25,969	$	—	$	(223	)	⁽¹⁾	$	25,746

Investments - Noncurrent:
Corporate bonds	$	4,930	$	2	$	—		$	4,932
United States treasury securities		11,852		20		—			11,872
Total	$	16,782	$	22	$	—		$	16,804

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

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of September 30, ~~2019~~2020 consisted of the following (in thousands):

	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	29,016	$	28,778	$	9,998	$	9,993
Due after one year through two years		—		—
Total	$	29,016	$	28,778	$	9,998	$	9,993

Property and equipment as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following (in thousands):

	September 30,			December 31,			September 30,			December 31,
	2019			2018			2020			2019
Equipment	$	1,278		$	1,064		$	1,278		$	1,278
Furniture and fixtures		385			400			385			450
Leasehold improvements		1,356			1,347			1,356			1,356
Total property and equipment		3,019			2,811			3,019			3,084
Less: accumulated depreciation and amortization		(755	)		(492	)
Less: accumulated depreciation								(1,093	)		(850	)
Property and equipment, net	$	2,264		$	2,319		$	1,926		$	2,234

Depreciation expense for the three and nine months ended September 30, 2020 was $96,000 and $287,000, respectively. Depreciation expense for the three and nine months ended September 30, 2019 was $92,000 and $263,000, ~~respectively. Depreciation expense for the three and nine months ended September 30, 2018 was $107,000 and $193,000,~~ 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.

~~A summary of the assets and liabilities that are measured at fair value as of September 30, 2019 and December 31, 2018 is as follows (in thousands):~~

Fair Value Measurement at
September 30, 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)

Money market funds⁽¹⁾

$
32,526

$
32,526

$
—

$
—

Fixed income securities

28,778

—

28,778

—

Total

$
61,304

$
32,526

$
28,778

$
—

Liabilities:

Warrant liabilities

$
450

$
—

$
—

$
450

Total

$
450

$
—

$
—

$
450

Fair Value Measurement at
December 31, 2018

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⁾

$
13,264

$
13,264

$
—

$
—

Fixed income securities

49,718

—

49,718

—

Total

$
62,982

$
13,264

$
49,718

$
—

Liabilities:

Warrant liabilities

$
8,511

$
—

$
—

$
8,511

Total

$
8,511

$
—

$
—

$
8,511

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, corporate bonds and~~ 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, 2020 and December 31, 2019 is as follows (in thousands):

			Fair Value Measurement at September 30, 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⁾	$	8,246	$	8,246	$	—	$	—
United States treasury securities		9,993		—		9,993		—
Total	$	18,239	$	8,246	$	9,993	$	—

Liabilities:
Warrant liabilities	$	56	$	—	$	—	$	56
Total	$	56	$	—	$	—	$	56

			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)
Money market funds ⁽¹⁾	$	21,065	$	21,065	$	—	$	—
United States treasury securities ⁽¹⁾		5,982		—		5,982		—
Fixed income securities		25,746		—		25,746		—
Total	$	52,793	$	21,065	$	31,728	$	—

Liabilities:
Warrant liabilities	$	299	$	—	$	—	$	299
Total	$	299	$	—	$	—	$	299

⁽¹⁾Money market funds and United States treasury securities with maturities of less than 90 days at the date of purchase are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.

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~~nine months ended September 30, ~~2019~~2020 (in thousands):

	November Private Placement Warrants			November Private Placement Warrants
Balance at December 31, 2017	$	13,128
Change in fair value		(4,617	)
Balance at December 31, 2018		8,511		$	8,511
Change in fair value		(8,061	)		(8,212	)
Balance at September 30, 2019	$	450
Balance at December 31, 2019					299
Change in fair value					(243	)
Balance at September 30, 2020				$	56

Accrued expenses as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following (in thousands):

	September 30,		December 31,		September 30,		December 31,
	2019		2018		2020		2019
Clinical	$	1,032	$	941
Preclinical and clinical studies					$	1,159	$	1,473
Compensation and benefits		526		830		1,085		614
Accounting and legal		238		227		424		240
Other		202		369		109		111
Total accrued expenses and other current liabilities	$	1,998	$	2,367	$	2,777	$	2,438

In connection with the amendment and restatement of a license agreement with BioHEP Technologies Ltd. (“BioHEP”) in February 2016, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to BioHEP (the “BioHEP Warrant”). The BioHEP Warrant had an exercise price of $16.00 per share and expired unexercised on August 1, 2018. 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 interest rate of 1.01%, and a dividend yield of 0%. The fair value was expensed as research and development costs.

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

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 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 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 September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the fair value of the November 2016 Private Placement Warrants was approximately ~~$0.5~~$56,000 and $0.3 million, respectively, and ~~$8.5 million, respectively~~10,960 shares have been exercised to date (see Note 5).

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

	September 30, 2019			December 31, 2018			September 30, 2020			December 31, 2019
Risk-free interest rate		1.6	%		2.5	%		0.1	%		1.6	%
Expected term (in years)		2.1			2.9			1.1			1.9
Expected volatility		62.3	%		78.1	%		100.0	%		100.0	%
Expected dividend yield		0	%		0	%		0	%		0	%

In September 2019, the Company entered into a ~~Loan and Security Agreement~~term loan (the ~~“Loan and Security Agreement”~~“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 ~~and Security Agreement,~~, the Company issued to certain lenders warrants to purchase 250,000 shares of common stock (the “Pontifax Warrants”). ~~The~~Prior to their amendment in April 2020 (see Note 9), the Pontifax Warrants ~~are~~were exercisable at an exercise price of $6.57 per ~~share and~~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 on the date of issuance 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. The aggregate fair value remaining on the payoff date was $0.5 million and was included in the loss on extinguishment of the Convertible Term Loan upon repayment (see Note 9). In connection with the repayment of the Convertible Term Loan, the Pontifax Warrants were amended and restated to amend the exercise price to $2.08 per share, which was 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 of the Pontifax Warrants remained the same. During the nine months ended September 30, 2020, there was an incremental expense of approximately $54,000 as a result of the amendment of the Pontifax Warrant exercise price.

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 on the date of issuance was approximately ~~$19,000~~$19,000. Approximately $13,000 and ~~will be~~$6,000 has been expensed ~~over~~during the ~~life of the service contract.~~periods ended September 30, 2020 and December 31, 2019, respectively.

A summary of the warrant activity for the nine months ended September 30, ~~2019~~2020 and for the year ended December 31, ~~2018~~2019 is as follows:

In August 2017, the Company entered into a Controlled Equity Offering^SMSales 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 ~~year~~nine months ended ~~December 31, 2018,~~September 30, 2020, the Company sold an aggregate of ~~217,329~~690,895 shares of its common stock, pursuant to the Sales Agreement at a weighted-average selling price of ~~$15.42~~$1.32 per share, which resulted in ~~$3.2~~approximately $0.8 million ofin net proceeds to the Company.

~~In August 2018,~~ There were 0 shares sold during the three months ended September 30, 2020. During the nine months ended September 30, 2019, the Company ~~issued and~~ sold ~~in an underwritten public offering~~ an aggregate of ~~3,246,079~~600 shares of its common stock pursuant to the Sales Agreement at ~~$12.50~~a weighted-average selling price of $10.03 per share, which ~~included 246,079 shares pursuant~~resulted in de minimis net proceeds to the ~~exercise~~Company. There were 0 shares sold during the three months ended September 30, 2019 and the Company does not intend to issue any shares under the Sales Agreement between September 30, 2020 and the closing of ~~an option to purchase additional shares granted to~~ the underwriters in connection with the offering. The offering resulted in $38.0 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.Exchange.

In April 2014, the Company’s Board of Directors approved the 2014 Stock Incentive Plan (the “2014 Plan”) and 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 no0 further awards were available to be issued under the 2014 Plan.

The Company’s Board of Directors initially adopted the 2015 Plan 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.

In ~~June~~March 2018, ~~upon~~the Board approved the Amended and Restated 2015 Plan. Upon receipt of stockholder approval at the Company’s 2018 annual meeting in June 2018, the 2015 Plan was amended and restated in its entirety increasing the authorized number of shares of common stock reserved for issuance by 800,000 shares ~~(together~~(the Amended and Restated 2015 Plan, and together with the 2014 ~~Plan, the 2015~~ Plan, the “Stock Incentive Plans”). ~~The Board approved~~Upon receipt of stockholder approval at the Company’s 2020 annual meeting in June 2020, the Amended and Restated 2015 Plan ~~on March 9, 2018. Pursuant~~was further amended to increase the authorized number of shares of common stock reserved for issuance by 1,150,000 shares. Following this approval there are 2,816,863 shares authorized for issuance pursuant to the Amended and Restated 2015 ~~Plan, there are 1,666,863 shares authorized for issuance.~~Plan. In addition, to the extent any outstanding awards under the 2014 Plan expire, terminate or are otherwise surrendered, cancelled or 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~~all Stock Incentive Plans is ~~2,300,000.~~3,450,000. As of September 30, ~~2019,~~2020, the Company had ~~339,644~~1,360,791 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 Stock Incentive Plans expire 10 years after the grant date, unless the Board sets a shorter term. There were no0 stock options granted prior to 2015.

The following table summarizes the option activity under the Stock Incentive Plans for the nine months ended September 30, ~~2019~~2020 and the year ended December 31, ~~2018:~~2019:

	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, 2017		988,565		$	10.83	$	2,617,859
Granted		311,000			12.28		—
Exercised		—			—		—
Cancelled		—			—		—
Outstanding at December 31, 2018		1,299,565			11.18		881,385		1,299,565		$	11.18	$	881,385
Granted		395,500			9.61		—		395,500			9.61		—
Exercised		—			—		—		—			—		—
Cancelled		(22,750	)		13.36		—		(22,750	)		13.36		—
Options outstanding at September 30, 2019		1,672,315		$	10.78	$	—
Options exercisable at September 30, 2019		1,016,449		$	11.23	$	—
Outstanding at December 31, 2019									1,672,315			10.78		—
Granted									270,000			1.44		—
Exercised									—			—		—
Cancelled									(587,312	)		10.23		—
Options outstanding at September 30, 2020									1,355,003		$	9.15	$	—
Options exercisable at September 30, 2020									929,497		$	10.71	$	—

As of September 30, ~~2019,~~2020, all options outstanding have a weighted-average remaining contractual life of ~~7.5~~6.9 years. The weighted-average fair value of all stock options granted for the nine months ended September 30, ~~2019~~2020 was ~~$6.74.~~$0.99. Intrinsic value at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 is based on the closing price of the Company’s common stock on that date of ~~$3.44~~$1.34 per share and ~~$10.39~~$1.58 per share, respectively.

In January 2018, the Company issued a stock option award as an inducement grant for the purchase of an aggregate of 50,000 shares of the Company’s common stock, outside of the 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 for the purchase of an aggregate of 40,000 shares of the Company’s

common stock, outside of the Stock Incentive Plans, at an exercise price of $10.39 per share. These inducement grants are excluded from the option activity table above.

The assumptions the Company used to determine the fair value of stock options granted to employees and directors during the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as follows, presented on a weighted-average basis:

	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2020			2019
Risk-free interest rate		2.5	%		2.5	%		0.7	%		2.5	%
Expected term (in years)		5.9			6.1			5.9			5.9
Expected volatility		81.1	%		82.5	%		82.8	%		81.1	%
Expected dividend yield		0	%		0	%		0	%		0	%

In January 2019, the Company issued performance-based RSUs to senior management under the Amended and Restated 2015 Plan that ~~represent~~represented shares potentially issuable in the future subject to the satisfaction of certain performance milestones as well as a service ~~condition~~.condition. The vesting of 50% of the performance-based RSUs iswas 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 iswas 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 iswas based upon the achievement of a performance goal milestone as of December 31, 2020.

The Company ~~estimates~~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 Company estimates the fair value of ~~milestone-based~~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.~~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 ~~milestone~~ criteria will be achieved and adjusts its estimate of the fair value, if necessary. The Company amortizes the fair values of milestone-based RSUs over the requisite service period for each separately vesting tranche of the award. As of September 30, 2019, the Company estimates that it is currently not probable that it will achieve the December 31, 2019 clinical milestone applicable to the milestone-based RSUs and has not recognized stock-based compensation expense for these RSUs as it relates to the December 31, 2019 milestone base goal. As of September 30, 2019, the Company estimates that it is currently probable that it will achieve the December 31, 2020 clinical milestone applicable to the milestone-based RSUs and has recognized the stock-based compensation expense for these RSUs as it relates to the December 31, 2020 milestone.

The total stock-based compensation recognized for the three and nine months ended September 30, 2019 for the RSUs was approximately $0.1 million and $0.4 million, respectively. As of September 30, 2019, the Company adjusted stock-based compensation approximately $0.1 million for previously recognized stock-based compensation for the December 31, 2019 clinical milestone ~~currently~~ estimated to be not ~~probable.~~probable at that time.

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 Amended and Restated 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 nine months ended September 30, 2020. The Company did not recognize any expense related to the milestone performance-based RSUs.

In April 2020, the Company issued 360,000 performance-based RSUs to senior management under the Amended and Restated 2015 Plan that represented shares potentially issuable in the future subject to the satisfaction of certain performance milestones. The vesting of 50% of the performance-based RSUs is based on the achievement of a performance goal milestone as of December 31, 2020 and the vesting of the remaining 50% of the performance-based RSUs is based upon the achievement of a performance goal milestone as of December 31, 2021. For the three and nine months ended September 30, 2020, the Company recognized approximately $48,000 and $91,000 expense, respectively, related to the 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 and nine months ended September 30, 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 and nine months ended September 30, 2020, the Company recognized approximately $33,000 and $76,000 expense related to the time-based RSUs, respectively.

The following table is a rollforward of all RSU activity under the Stock Incentive Plans for the nine months ended September 30, ~~2019:~~2020:

	Restricted Stock Units			Weighted-Average Grant Date Fair Value		Restricted Stock Units			Weighted-Average Grant Date Fair Value
Total nonvested units at December 31, 2018		—		$	—
Total nonvested units at December 31, 2019							139,350		$	7.86
Granted		203,700			8.49		559,000			1.41
Exercised		—			—
Vested		—			—		—			—
Cancelled		(17,900	)		8.49		(166,350	)		6.82
Total nonvested units at September 30, 2019		185,800		$	8.49
Total nonvested units at September 30, 2020							532,000		$	1.07

The assumptions used to determine the fair value of the RSUs granted to management during the nine months ended September 30, 2019 for the performance goal milestone units is based on the market price of the award on the grant date, which was a weighted

average fair value for the nine months ended September 30, 2019 of $10.35 per share. 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, which the weighted average fair value as of the nine months ended September 30, 2019 was $6.62 per share.

The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Stock-based compensation:	2019		2018		2019		2018		2020		2019		2020		2019
Research and development	$	314	$	214	$	971	$	628	$	163	$	314	$	609	$	971
General and administrative		497		499		1,854		1,434		281		497		1,126		1,854
Total Stock-based compensation	$	811	$	713	$	2,825	$	2,062	$	444	$	811	$	1,735	$	2,825

The fair value of stock options vested during the nine months ended September 30, ~~2019~~2020 was ~~$2.4~~$1.8 million. At September 30, ~~2019,~~2020, there was ~~$4.6~~$2.0 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 ~~2.6~~2.0 years.

~~The expense recognized is partially dependent upon the Company’s estimate of the number of shares that will ultimately be issued.~~ At September 30, ~~2019,~~2020, there was ~~$0.7~~$0.4 million of unrecognized stock-based compensation expense relating to ~~performance-based~~the time-based RSUs granted pursuant to the Stock Incentive Plans, which will be recognized over the weighted-average remaining vesting period of 1.3 years.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company reserved the following shares of common stock for issuance of shares resulting from exercise of outstanding warrants and options, convertible shares from the Convertible Term Loan, ~~and Security Agreement, options and performance-based RSUs,~~ as well as issuance of shares available for grant under the Stock Incentive Plans:

	September 30,		December 31,		September 30,		December 31,
	2019		2018		2020		2019
IPO warrants		28,347		28,347		28,347		28,347
November private placement warrants		1,633,777		1,633,777		1,633,777		1,633,777
Loan and security agreement		2,329,143		—
Convertible term loan						—		2,329,143
Pontifax warrants		250,000		—		250,000		250,000
September 2019 warrants		15,000		—		15,000		15,000
2015 amended and restated stock incentive plan		2,197,759		2,238,887
Amended and restated 2015 stock incentive plan						3,247,794		2,160,338
Inducement awards		90,000		50,000		90,000		90,000
Total		6,544,026		3,951,011		5,264,918		6,506,605

In September 2019, the Company entered into a Convertible Term Loan ~~and Security Agreement~~ 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 (collectively, the “Lenders”), providing for a $20.0 million term loan (the “Convertible Term Loan”), which the Company received on September 19, 2019 (the “Closing Date”). The Convertible Term Loan bears interest at an annual rate of 8.0%. The Loan and Security Agreement provides 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 19, 2023 (the “Maturity Date”). The 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 September 23, 2023 (the “Maturity Date”). In April 2020, the ~~Maturity Date.~~Company entered into 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. Upon repayment of the Convertible Term Loan, the Company incurred a loss on extinguishment of debt, which included $0.3 million for a prepayment fee, $0.4 million of unamortized issuance costs, $0.5 million in unamortized Pontifax Warrant costs and approximately $54,000 for the Pontifax Warrant amendment (see Note 7).

~~The~~Pursuant to the Convertible Term Loan, the Company ~~may,~~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 ~~may,~~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, which is equal to two times the weighted average closing price of the Company’s common stock during the 30 trading days prior to the execution of the Loan and Security Agreement (the “30-day VWAP”).share.

The Company’s obligations ~~are~~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 Company’s intellectual property. The Convertible Term Loan ~~and Security Agreement contains~~contained customary events of default, representations, warranties and covenants, including a material adverse effect clause. The Company ~~must~~was required to maintain a minimum cash balance of $7.0 million in ~~Spring Bank Pharmaceuticals, Inc. accounts, or it is in breach of the Loan and Security Agreement, which the Company is in compliance with as of September 30, 2019.~~its accounts.

Upon the occurrence of an event of default, a default interest rate of an additional 4% per annum ~~may be~~would have been applied to the outstanding loan balances, and the Lenders ~~may~~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 Convertible Term Loan ~~and Security Agreement~~ and under applicable law.

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 are exercisable for a period of six years from the Closing Date at an exercise price of $6.57 per share, which is equal to 1.5 times 30-day VWAP. 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 and nine months ended September 30, 2019, the Company recorded interest expense of approximately $63,000 in connection with the Convertible Term Loan. The fair value of the term loan as of September 30, 2019 approximates its face value given the close proximity of the execution to September 30, 2019 and due to market terms.

The Company evaluated the accounting for the Convertible Term Loan ~~and Security Agreement~~ and identified an embedded derivative related to the contingent interest feature. The Company determined the fair value of the contingent interest feature to be ~~di minimis~~de minimis.

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. The aggregate fair value of the Pontifax Warrants on the date of issuance was approximately $0.6 million and was recorded as a discount to the term loan and will ~~re-value~~be amortized over the ~~derivative at~~

life of the ~~end~~term loan using the effective interest rate method. The aggregate fair value remaining on the payoff date was $0.5 million and was included in the loss on extinguishment of ~~each reporting period.~~

~~The following table summarizes the Company’s future principal debt payments on~~ the Convertible Term Loan asupon repayment. In connection with the repayment of the Convertible Term Loan, the Pontifax Warrants were amended and restated to amend the exercise price to $2.08 per share, which was 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 of the Pontifax Warrants remained the same. During the nine months ended September 30, ~~2019~~ (2020, there was an incremental expense of approximately $54,000 for the amendment of the Pontifax Warrant exercise price, which is included in ~~thousands):~~the loss on extinguishment of debt (see Note 7).

During the nine months ended September 30, 2020, the Company recorded interest expense of approximately $511,000, in connection with the Convertible Term Loan. There was 0 interest expense during the three months ended September 30, 2020. There was approximately $63,000 in interest expense recorded during the three and nine months ended September 30, 2019.

The Company has operating leases for its principal office and laboratory space and the Company’s former headquarters. The Company’s leases have remaining lease terms of approximately ~~8.5~~8.1 years for its principal office and laboratory space, which includes an option to extend the lease for up to 5 years, and approximately 20.7 years for 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 September 30, 2020 and 2019 was as follows:

	For the Nine Months Ended September 30,			For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2019			2020		2019		2020		2019
Operating cash flow from operating leases (in thousands)	$	273		$	149	$	143	$	440	$	273

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

Weighted Average Remaining Lease Term
Operating leases	8.5 years

Weighted Average Discount Rate
Operating leases		8.0	%

As of September 30, 2020 and December 31, 2019, the weighted average remaining lease term for operating leases was 7.8 years and 8.3 years, respectively.

As of September 30, 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 and nine months ended September 30, 2020 were approximately $165,000 and $495,000, respectively. Total operating lease costs for the three and nine months ended September 30, 2020 were offset by $29,000 and $79,000, respectively, for sublease income and variable lease cost payments. Operating lease costs under the leases for the three and nine months ended September 30, 2019 were approximately $130,000 and $390,000, respectively. Total operating lease costs for the three and nine months ended September 30, 2019 were offset by $22,000 and $59,000, respectively, for sublease income and variable lease cost payments. Total rent expense for the three and nine months ended September 30, 2018 was $144,000 and $286,000 respectively, which included payments for a lease of the Company’s research and development facility. The lease term of the research and development facility ended as of June 30, 2018.

The following table summarizes the Company’s maturities of operating lease liabilities as of September 30, ~~2019~~2020 (in thousands):

~~For comparative purposes, the Company’s aggregate future minimum non-cancellable commitments under operating leases as of December 31, 2018 were as follows (in thousands):~~

Year
2019	$	417
2020		588
2020 (excluding the nine months ended September 30, 2020)				$	149
2021		508			508
2022		450			450
2023					462
2024					474
Thereafter		2,867			1,931
Total minimum lease payments	$	4,830
Total lease payments			Total lease payments	$	3,974
Less: present value discount					(1,012	)
Total				$	2,962

~~In January 2016,~~On September 3, 2020, a Company stockholder filed a complaint in the United States District Court for the Southern District of New York (Lenthall v. Spring Bank Pharmaceuticals, Inc. et al, Case No. 1:20-cv-07219 (S.D.N.Y.)), against the Company ~~entered into an amended~~ and ~~restated license agreement~~the members of the Company’s Board of Directors (the “individual defendants”), alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act and of Delaware state law. The plaintiff alleges that the defendants made materially misleading disclosures in the Company’s Form S-4 registration statement filed in connection with ~~BioHEP, which became effective on February 1, 2016.~~

~~Under~~ the ~~amended and restated license agreement,~~proposed Exchange (the “Form S-4”), by allegedly omitting material information with respect to (i) financial projections relating to the Company ~~agreed~~and F-star, (ii) Ladenburg’s fairness opinion and (iii) any financial analyses conducted on the Company. The plaintiff in Lenthall seeks declaratory and injunctive relief to ~~pay BioHEP up to $3.5 million~~enjoin the Exchange as well as damages and attorneys’ and experts’ fees.

On September 8, 2020, in ~~development and regulatory milestone payments~~the United States District Court for ~~disease(s) caused by each distinct virus for which~~the District of Delaware, a purported class action (Adam Franchi v. Spring Bank Pharmaceuticals, Inc. et al, Case No. 1:20-cv-01198 (D. Del.)) was filed against the Company, ~~develops licensed product(s). BioHEP is also eligible to receive tiered royalties~~members of the Company’s Board of Directors and F-star, alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act. This complaint alleges that the defendants made materially misleading disclosures in the ~~low-to-mid single-digits on net product sales of licensed products~~Form S-4 by allegedly omitting material information with respect to (i) financial projections relating to the Company and F-star, (ii) the confidentiality agreements entered into by the Company prior to its engagement of Ladenburg, (iii) the process leading up to the execution of the Exchange Agreement and ~~its affiliates~~(iv) any financial analyses performed by Ladenburg. The plaintiff in Franchi seeks declaratory and ~~sub licensees,~~injunctive relief to enjoin the Exchange; or in the event of consummation of the Exchange, rescissory damages against the defendants; filing by the defendants of a Registration Statement deemed not to be materially misleading by the plaintiff; and attorneys’ and experts’ fees.

On September 18, 2020, in the United States District Court for the Southern District of New York, another Company stockholder filed a ~~specified share of non-royalty sublicensing revenues~~complaint (Arshad v. Spring Bank Pharmaceuticals, Inc., et al., Case No. 1:20-cv-07723 (S.D.N.Y.)), against the Company and ~~its affiliates~~

~~receive from sub licensees, which share~~the members of ~~sublicensing revenues is capped at a maximum aggregate of $2.0 million under all such sublicenses. Milestone and royalty payments associated with~~ the Company’s ~~amended~~Board of Directors, alleging violations of Section 14(a) of the Exchange Act and ~~restated license agreement~~Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act. The plaintiff alleges that the defendants made materially misleading disclosures in the Form S-4 by allegedly omitting material information with ~~BioHEP cannot~~respect to (i) financial projections relating to the Company and F-star, (ii) Ladenburg’s Opinion and (iii) the process relating to the Exchange. The plaintiff in Arshad seeks declaratory and injunctive relief to enjoin the Exchange; or in the event of consummation of the Exchange, rescissory damages against the defendants; filing by the defendants of a Registration Statement deemed not to be ~~reasonably estimated~~materially misleading by the plaintiff; and attorneys’ and experts’ fees.

On October 29, 2020, in the United States District Court Eastern District of New York, another Company stockholder filed a complaint (Nowakowski v. Spring Bank Pharmaceuticals, Inc., et al., Case No. 1:20-cv-05219 (E.D.N.Y.)), against the Company and the members of the Company’s Board of Directors, alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act. The plaintiff alleges that the defendants made materially misleading disclosures in the Form S-4 by allegedly omitting material information with respect to ~~whether~~(i) financial projections relating to the Company and F-star, (ii) Ladenburg’s fairness opinion and (iii) the process relating to the Exchange. The plaintiff in Nowakowski seeks declaratory and injunctive relief to enjoin the Exchange; or ~~when they~~in the event of consummation of the Exchange, rescissory damages against the defendants; declaration that defendants violated Sections 14(a) and 20(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder; and attorneys’ and experts’ fees.

The Company believes that the complaints set forth above are without merit and intends to defend against them vigorously. There can be no assurance, however, that the Company or any defendant will ~~occur. As of September 30, 2019, there have been no milestone or royalty payments made~~be successful. At present, the Company is unable to ~~BioHEP.~~

The Company accrues for contingent liabilities to the extent that the liability is probable and estimable. There are no0 accruals for contingent liabilities in these consolidated financial statements.

The Company has evaluated subsequent events through the date on which the consolidated financial statements were issued to ensure that this ~~submission~~Quarterly Report on Form 10-Q 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.

The following information should be read in conjunction with the unaudited financial information and 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, ~~2018,~~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 ~~March 11, 2019.~~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 liquidity, and the development of 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 a novel ~~class of~~ therapeutics for the treatment of ~~viral infections,~~a range of cancers and inflammatory diseases ~~and certain cancers~~ using our proprietary small molecule nucleotide platform. We design our compounds to selectively target and modulate the activity of specific proteins implicated in various disease states. WeOur internally-developed programs are ~~developing our lead product candidate, inarigivir soproxil,~~ primarily designed to stimulate and/or ~~inarigivir, for the treatment of chronic hepatitis B virus, or HBV.~~ dampen immune responses. We have ~~designed~~devoted resources to advancing multiple programs in our ~~antiviral~~STING product candidates, including inarigivir, to selectively activate within infected hepatic cells the cellular protein, retinoic acid-inducible gene 1 (RIG-I), to inhibit viral replication and to cause the induction of intracellular interferon signaling pathways for antiviral defense. We believe that inarigivir, as a RIG-I agonist, could play an important role in antiviral therapy as a result of its dual mechanism of action that is designed to selectively modulate the body’s immune response and inhibit viral replication. We are also developing additional product candidates,portfolio, including our STING ~~(STimulator of INterferon Genes)~~ agonist ~~product candidate, SB 11285, which is an immunotherapeutic agent~~clinical program in oncology, our STING antagonist compounds for ~~the potential treatment of selected cancers.~~inflammatory diseases, and our STING agonist antibody drug conjugate (ADC) program for oncology.

~~The World~~ ~~Health~~ Organization estimates that 257 million people are chronically infected with chronic HBV worldwide, and nearly 900,000 people worldwide die every year due to complications from chronic HBV infection despite the availability of vaccines against the virus. There is no approved cure for chronic HBV and currently approved direct-acting antiviral therapies for the treatment of chronic HBV lack a broadly sustained response following the discontinuation of treatment.

~~We are~~Until January 2020, we had been developing inarigivir soproxil, an orally-administered investigational selective immunomodulator, as a potential ~~backbone in a combinatorial~~ treatment for chronic ~~HBV, with a goal to accelerate and substantially increase functional cure rates in a simple, safe and selective manner. We recently completed our global Phase 2 ACHIEVE trial of inarigivir and have~~hepatitis B virus. 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 a nucleotide in naïve and virally suppressed chronic HBV patients. ~~We anticipate presenting initial results from these trials throughout 2020. We are also pursuing the~~On January 29, 2020, we announced that we were terminating all clinical development of ~~SB 9225, a co-formulation of~~ inarigivir ~~with~~ ~~tenofovir disoproxil fumarate,~~ ~~or TDF, as a potential fixed-dose combination product~~ for the treatment of ~~patients~~HBV due to the occurrence of unexpected serious adverse events, including one patient death, in our Phase 2b CATALYST trial.

On July 29, 2020, we entered into a share exchange agreement, or the Exchange Agreement, with ~~chronic HBV. In addition~~F-star Therapeutics Limited, or F-star, a private company registered in England and Wales, and the holders of issued shares in the capital of F-star and the holders of convertible notes of F-star, pursuant to which, subject to the satisfaction or waiver of the conditions set forth in the Exchange Agreement, we will acquire the entire issued share capital of F-star, with F-star Therapeutics, Inc. to continue as the combined company, which we collectively refer to as the Exchange. The Exchange is expected to close in the fourth quarter of 2020, subject to the approval by our ~~inarigivir clinical trials, we continue~~stockholders at a special meeting of stockholders to ~~explore~~ ~~collaborations, including with siRNA compounds targeting hepatitis B surface antigen, or HBsAg,~~be held on November 19, 2020, as well as other ~~antiviral~~customary conditions. Upon completion of the Exchange, Spring Bank Pharmaceuticals, Inc. will be renamed F-star Therapeutics, Inc., and ~~immunomodulatory mechanisms. We believe~~is expected to trade on the ~~immunomodulatory activity~~Nasdaq Capital Market under the ticker symbol “FSTX”.

The Exchange is intended to create a company focused on transforming the lives of ~~inarigivir could become~~patients with cancer through the development of innovative tetravalent bispecific (mAb2™) antibodies. The combined company will advance its immuno-oncology pipeline of multiple tetravalent bispecific antibody programs, including the Company’s STING (STimulator of INterferon Gene) agonist, SB 11285, currently in a ~~key component~~Phase 1/2 clinical trial.

Since the signing of the Exchange Agreement on July 29, 2020, we have primarily been focused on conducting activities with respect to SB 11285, our intravenously (IV)-administered STING agonist product candidate, which is currently being administered as a monotherapy and in combination in a Phase 1 trial.

The paragraphs that follow reflect Spring Bank’s programs as a stand-alone entity. For a discussion of the business of the combined company, assuming the completion of the Exchange, see Spring Bank’s Final Prospectus and Proxy Statement, as filed with the Securities and Exchange Commission on October 20, 2020.

The pandemic caused by an outbreak of a new strain of coronavirus, or the COVID-19 pandemic, that is affecting the United States 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 indirectly impact our business, results of operations and financial condition will depend on future ~~combinatorial treatment for patients infected with chronic HBV, increasing~~developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the ~~percentage of chronic HBV patients who achieve a functional cure.~~

~~We entered into a clinical trial supply~~actions taken to contain it or treat its impact and ~~collaboration agreement with Gilead Sciences, Inc., or Gilead, which has been subsequently amended, under which Gilead~~the economic impact on local, regional, national and international markets. Management is ~~funding~~actively monitoring this situation and ~~conducting a Phase 2 clinical trial examining inarigivir (50mg, 200mg~~the possible effects on our financial condition, liquidity, operations, suppliers, industry, and ~~400mg) co-administered with Vemlidy® 25 mg (tenofovir alafenamide) in patients infected with chronic HBV.~~workforce. In ~~October 2019,~~the paragraphs that follow, we ~~announced interim top-line results at 12 weeks from the first 50mg cohort of this Phase 2 trial. In this trial, 30 patients with HBV~~

~~infection received low-dose inarigivir 50mg plus Vemlidy for 12 weeks. At week 12, 7~~have described impacts of the ~~30 patients were HBsAg responders~~COVID-19 pandemic on our clinical and ~~met the primary efficacy study endpoint of having greater than or equal~~preclinical development programs.

We continue to 0.5 log₁₀ IU/mL reduction in HBsAg from baseline. In the inarigivir 50mg monotherapy cohort of the Company’s completed Phase 2 ACHIEVE trial, only 1 of 14 patients was a HBsAg responder at week 12. The co-administration of inarigivir 50mg and Vemlidy was generally safe and well tolerated with no serious adverse events observed over the 12-week treatment period. Treatment-emergent adverse events ranged from mild to moderate in severity. Interim top-line results from the remaining cohorts of this trial are expected in 2020.

We are also developing novel chimeric antisense oligonucleotide compounds, which we refer to as CASOs, for the treatment of HBV. In July 2019, we entered into a research agreement with The National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of ~~Health, to evaluate~~develop our ~~CASOs. We plan to evaluate a triple combination for HBV consisting of the lead CASO co-administered with inarigivir and a nucleo(s)tide analog for potentially achieving functional cure.~~

~~In addition to our inarigivir clinical development program, we are also developing a STING program consisting of STING agonists and antagonists. Our~~ lead STING agonist product candidate, SB 11285, isas a ~~potential~~ next-generation immunotherapeutic agent for the treatment of selected cancers. ~~In our preclinical studies in multiple tumor-derived cell lines,~~ SB 11285 ~~has been observed to cause the induction of cytokines consistent with engagement of the target,~~is currently being evaluated as ~~well as cell death and apoptosis. Based on our preclinical studies performed to date, SB 11285 has reduced tumor volumes, without dose-limiting toxicities,~~an intravenously (IV)-administered monotherapy in multiple rodent tumor models when administered intravenously or intratumorally. These findings lead us to believe that SB 11285 has the potential to be administered clinically by either route of administration, and that SB 11285 may be used to target a variety of tumors at various anatomic sites and, if approved, has the potential to be used in combination with other therapeutic modalities to enhance efficacy.

~~In June 2019, we filed an investigational new drug application for~~ a Phase 11a/1b multicenter, dose escalation clinical trial ~~for the intravenously-administered (IV) SB 11285 for the clinical study of~~in patients with advanced solid ~~tumors, which was accepted by the U.S. Food and Drug Administration in July 2019. Part 1~~tumors. Phase 1a of this ~~Phase 1~~ trial is a dose-escalation study with IV SB 11285 monotherapy ~~followed by~~which allows combination with a checkpoint inhibitor ~~and~~after the completion of the first two cohorts of the trial. Phase 1b of this trial is designed to ~~determine a recommended phase 2 dose. Part 2 of this Phase 1 trial will~~ explore IV SB 11285 antitumor activity in combination with a checkpoint inhibitor in ~~selected~~ tumor ~~types. The trial will~~types expected to be ~~conducted at multiple sites~~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 ~~United States.~~ combination cohorts of this trial.

We initiated dosing in the initial monotherapy cohort of this Phase 1 trial in the ~~third~~fourth quarter of ~~2019~~2019. In August 2020, we initiated the first combination cohort of this Phase 1 trial examining the co-administration of SB 11285 and ~~anticipate that top-line results from~~atezolizumab. 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 multiple sites and completed the dosing of patients in the third cohort in August 2020. Depending on whether we are able to continue enrolling and dosing patients in this Phase 1 trial, we plan to complete the fourth monotherapy cohort during the fourth quarter of 2020. Spring Bank anticipates that it will ~~be available~~announce monotherapy data in ~~2020.~~the fourth quarter of 2020 and hopes to generate sufficient data from the Phase 1a/1b IV STING agonist program by the end of the first half of 2021 to enable advancement into a Phase 2 clinical trial. While Spring Bank 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 and the first half of 2021.

We have also explored 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, which contributes to the causes of certain autoimmune and inflammatory diseases, including STING-associated vasculopathy with onset in infancy (SAVI), systemic lupus erythematosus (SLE) and other proinflammatory-mediated diseases. In July 2019, we presented ~~pre-clinical~~preclinical data from a novel STING antagonist compound, which showed potent inhibition of interferon and 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 autoimmune and inflammatory diseases. Furthermore, in August 2019, we entered into a research agreement with the University of Texas Southwestern Medical School to evaluate our small molecule STING antagonist compounds.

In April 2020, we announced that we were 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 have continued to work with the National Institute of Allergy and Infectious Diseases (NIAID) to examine multiple compounds from our RIG-I agonist and STING agonist 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.

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 for the three and nine months ended September 30, ~~2019~~2020 were ~~$6.9~~$5.4 million and ~~$16.7~~$20.1 million, respectively, and our net losses for the three and nine months ended September 30, ~~2018~~2019 were ~~$8.8~~$6.9 million and ~~$17.4~~$16.7 million, respectively. As of September 30, ~~2019,~~2020, we had an accumulated deficit of ~~$118.7~~$146.2 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, wedo not expect to ~~finance our operations through a combination~~raise any additional funds prior to the completion 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 othersthe Exchange. However, if the Exchange is not completed, we may require ussignificant additional funds earlier than we currently expect in order to ~~relinquish rights to certain of our technologies or product candidates. Adequate~~conduct clinical trials and preclinical and discovery activities. There can be no assurances, however, that additional ~~financing may not~~funding will be available ~~to us~~ on ~~acceptable~~favorable terms, or at all. ~~Our inability to~~To the extent that we raise additional capital asthrough the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, 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, andthe terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may ~~never~~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 ~~able~~favorable to ~~do so.~~us.

There is no guarantee that the Exchange will be completed. As of September 30, ~~2019,~~2020, we had ~~$63.1~~$20.0 million in cash, cash equivalents and marketable securities. ~~Based on our current operating plan, we~~We expect that our cash, cash equivalents and marketable securities as of September 30, ~~2019~~2020 will ~~enable us~~be sufficient to fund ~~our operating expenses and capital expenditure requirements into 2022. See “—Liquidity and Capital Resources.”~~

~~We do not expect to generate revenue~~operations for at least the next twelve months. This estimate assumes no additional funding from ~~product sales unless and until we successfully complete development and obtain regulatory approval for one~~new collaboration agreements 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 activities, and we do not yet have a sales organization. If we obtain regulatory approval for any of our product 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 that provides for a $20.0 million term loan and bears annual interest at a rate of 8.0%, which we refer to as the Loan and Security Agreement. The lenders may, at their option, elect 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 a conversion price of $8.76 per share. The Loan and Security Agreement contains customary events of default, representations, warranties and covenants. The Loan and Security Agreement is described further in Note 9 to the notes to the consolidated financial statements contained in this Quarterly Report on Form 10-Q.financings.

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 direct research and development expenses are not currently tracked on a program-by-program basis. ~~Our primary focus has been~~Until January 2020, we were primarily focused on the research and development of inarigivir. Going forward, and at least until the completion of the Exchange, 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 research and development of inarigivir.~~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 development of 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 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~~anticipate our research and development expenses will ~~continue to increase~~trend below comparable prior period levels in the ~~foreseeable~~near future as ~~we initiate clinical trials for certain product candidates~~a result of reduced research and ~~pursue later stages~~development activities and a reduced headcount of ~~clinical~~research and development of 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.personnel.

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 ~~increase~~remain consistent with comparable prior period levels in the ~~future as we increase our headcount~~near future. We will continue to ~~support the expected growth in our research and development activities and the potential commercialization of our product candidates. We also expect to~~ incur ~~increased~~ 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 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.~~securities, interest expense paid on the Convertible Term Loan and the loss on extinguishment of debt for repayment of the Convertible Term Loan.

Change in fair value of warrant liabilities consists of a gain or (loss) related to the change in the fair value of the warrants issued in connection with our private placement offering in November 2016, resulting from ~~a change~~ 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 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 as the November 2016 Warrants. These warrants are exercisable at an exercise price of $10.79 per share. We evaluated the terms of 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, ~~2019,~~2020, the fair value of the warrants was approximately ~~$0.5 million,~~$56,000, which is a decrease of ~~$8.0 million~~approximately $243,000 from the fair value of approximately ~~$8.5 million~~$299,000 as of December 31, ~~2018.~~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 adopted ASU 2018-07,~~ ~~Improvements to Nonemployee Share-Based Payment Accounting~~, effective July 1, 2018, which aligns the accounting treatment of nonemployee awards with employee awards. Described below is the methodology we have utilized in measuring stock-based compensation expense. Stock option, common stock and restricted stock values are determined based on a blend of our stock price and the quoted market price of our comparable public companies.

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, 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 units with service-based vesting conditions and record the expense for these awards using the straight-line method. Each quarter we update our assessment of the probability that the specified performance criteria will be achieved and adjust our estimate of the fair value of the performance-based ~~RSUs~~restricted stock 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. The assumptions we used to determine the fair value of granted stock options in nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

	For the Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2020			2019
Risk-free interest rate		2.5	%		2.5	%		0.7	%		2.5	%
Expected term (in years)		5.9			6.1			5.9			5.9
Expected volatility		81.1	%		82.5	%		82.8	%		81.1	%
Expected dividend yield		0	%		0	%		0	%		0	%

The assumptions used to determine the fair value of the ~~performance-based restricted stock units~~time-based RSUs granted to management during the nine months ended September 30, ~~2019 for the performance goal milestone units~~2020 is based on the market price of the award on the grant date, which was a weighted average fair value for the nine months ended September 30, ~~2019~~2020 of $10.35 per share. The fair value of the performance-based restricted stock units 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, which the weighted average fair value as of the nine months ended September 30, 2019 was $6.62$1.41 per share.

These assumptions ~~represented~~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.

~~We expect the~~The impact of our stock-based compensation expense for stock options and performance based restricted stock units granted to employees and non-employees to may grow in future periods ~~due to the potential increases in~~if the fair value of our common stock ~~and the increase in the number of grants as a result of an increase in headcount.~~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):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Stock-based compensation:	2019		2018		2019		2018		2020		2019		2020		2019
Research and development	$	314	$	214	$	971	$	628	$	163	$	314	$	609	$	971
General and administrative		497		499		1,854		1,434		281		497		1,126		1,854
Total Stock-based compensation	$	811	$	713	$	2,825	$	2,062
Total stock-based compensation									$	444	$	811	$	1,735	$	2,825

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 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 SEC.

Comparison of the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

The following table summarizes our results of operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,									For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2019			2018			Change			2019			2018			Change			2020			2019			Change			2020			2019			Change
Operating expenses:
Research and development	$	5,228		$	5,656		$	(428	)	$	18,070		$	15,188		$	2,882		$	2,516		$	5,228		$	(2,712	)	$	11,023		$	18,070		$	(7,047	)
General and administrative		2,247			2,059			188			7,547			6,681			866			2,832			2,247			585			7,875			7,547			328
Total operating expenses		7,475			7,715			(240	)		25,617			21,869			3,748			5,348			7,475			(2,127	)		18,898			25,617			(6,719	)
Loss from operations		(7,475	)		(7,715	)		240			(25,617	)		(21,869	)		(3,748	)		(5,348	)		(7,475	)		2,127			(18,898	)		(25,617	)		6,719
Other income(expense)		208			271			(63	)		894			603			291
Other income (expense)																				8			208			(200	)		(1,425	)		894			(2,319	)
Change in fair value of warrant liabilities		355			(1,336	)		1,691			8,061			3,837			4,224			(18	)		355			(373	)		243			8,061			(7,818	)
Net loss	$	(6,912	)	$	(8,780	)	$	1,868		$	(16,662	)	$	(17,429	)	$	767		$	(5,358	)	$	(6,912	)	$	1,554		$	(20,080	)	$	(16,662	)	$	(3,418	)

Research and development expenses during the three months ended September 30, 2020 and 2019 ~~and 2018~~ were ~~$5.2~~$2.5 million and ~~$5.7~~$5.2 million, respectively. The decrease of ~~$0.5~~$2.7 million during the three months ended September 30, 2020 was primarily due to a decrease in spending on preclinical and clinical trial-related activities for inarigivir and manufacturing costsfor inarigivir and

SB 11285 of $2.1 million, as well as other research and development related expenses of $0.6 million, including laboratory supplies, salaries and benefits costs and non-cash charges for stock-based compensation.

Research and development expenses during the nine months ended September 30, 2020 and 2019 were $11.0 million and $18.1 million, respectively. The decrease of $7.1 million during the nine months ended September 30, 2020 was primarily due to a decrease in spending on preclinical studies and clinical trial-related activities for inarigivir and manufacturing costsfor inarigivir and SB 11285 of ~~$0.7~~$5.9 million, ~~and an increase in~~ as well as other research and development related expenses of ~~$0.2~~$1.2 million, including laboratory supplies, salaries and benefits costs and non-cash charges for stock-based compensation.

Research and development expenses during the nine months ended September 30, 2019 and 2018 were $18.1 million and $15.2 million, respectively. The increase of $2.9 million during the nine months ended September 30, 2019 was primarily due to an increase in spending on preclinical studies and clinical trial-related activities for inarigivir and ~~SB 11285 of $1.6 million, salaries and benefits~~ ~~associated with higher research and development headcount~~ ~~of $0.5 million and~~ ~~other research and development related expenses of $0.8 million~~ ~~including~~ ~~laboratory supplies, lease-related costs, non-cash charges for stock-based compensation and non-cash charges for depreciation.~~

General and administrative expenses during the three months ended September 30, 2020 and 2019 ~~and 2018~~ were ~~$2.2~~$2.8 million and ~~$2.1~~$2.2 million, respectively. The increase of ~~$0.1~~$0.6 million during the three months ended September 30, ~~2019~~2020 was primarily due to an increase in legal-related costs of $0.8 million, offset by a net decrease in other general and administrative ~~related expenses~~costs of ~~$0.1 million, including consulting-related costs and public company related costs, offset by salaries and benefits and legal-related costs.~~$0.2 million.

General and administrative expenses during the nine months ended September 30, 2020 and 2019 ~~and 2018~~ were ~~$7.5~~$7.9 million and ~~$6.7~~$7.5 million, respectively. The increase of ~~$0.8~~$0.3 million during the nine months ended September 30, ~~2019~~2020 was primarily due to an increase in legal-related costs of $0.6 million, consulting-related costs of $0.3 million and net other general and administrative costs of $0.1 million, offset by a decrease in non-cash charges for stock-based compensation of ~~$0.4~~$0.7 million.

Other income (expense). Other income (expense) during the three months ended September 30, 2020 is comprised of interest income.Interest income during the three months ended September 30, 2020 was approximately $8,000 and was primarily related to the interest earned on marketable securities. There was no interest expense as of September 30, 2020. Other income (expense) during the nine months ended September 30, 2020 is comprised of interest income, offset by interest expense and loss on extinguishment of debt.Interest income was approximately $293,000 and was primarily related to the interest earned on marketable securities. Interest expense was approximately $511,000 and was due to the interest expense incurred on the Convertible Term Loan. Loss on extinguishment of debt was approximately $1.2 million and ~~other general and administrative related expenses~~was due to the repayment of ~~$0.4 million, including salaries and benefits, legal-related costs, public company related costs and consulting-related costs, offset by lease-related costs.~~the Convertible Term Loan.

Other ~~income(expense). Other income(expense)~~income (expense) during the three and nine months ended September 30, 2019 is comprised of interest income, offset by interest expense.Interest income during the three and nine months ended September 30, 2019 was ~~$0.3 million~~approximately $271,000 and ~~$1.0 million,~~approximately $957,000, respectively, and was primarily due to the interest earned on marketable securities. Interest expense during the three and nine months ended September 30, 2019 was $0.1 million during both periods and was due to the interest expense incurred on the Convertible Term Loan. Other income(expense) during the three and nine months ended September 30, 2018 was comprised solely of interest income of $0.3 million and $0.6 million, respectively, and was primarily due to the interest earned on marketable securities. The increase in interest income during the three and nine months ended September 30, 2019 was due to a higher average balance of marketable securities.

Change in fair value of warrant liabilities. The change in fair value of warrant liabilities during the three months ended September 30, 2020 was a loss of approximately $18,000 and the change in fair value of warrant liabilities during the nine months ended September 30, 2020 was a gain of approximately $243,000. The change in fair value of warrant liabilities during the three and nine months ended September 30, 2019 was a gain of $0.4 million and $8.1 ~~million, respectively. The change in fair value of warrant liabilities during the three and nine months ended September 30, 2018 was a loss of $1.3 million and a gain $3.8~~ million, respectively. The change in value each period was solely due to the change in the fair value of the November 2016 Warrants, primarily as a result of the change in our stock price and stock price volatility.

From our inception through September 30, ~~2019,~~2020, we have financed our operations 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. As of September 30, ~~2019,~~2020, we had cash, cash equivalents and marketable securities totaling ~~$63.1~~$20.0 million and an accumulated deficit of ~~$118.7~~$146.2 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 pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. Shares sold under the Sales Agreement ~~are~~were 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, which we refer to as the S-3 Registration Statement, and a prospectus supplement and accompanying base prospectus that we filed with the ~~Securities and Exchange Commission~~SEC on August 18, 2017. During the ~~year~~nine months ended ~~December 31, 2018,~~September 30, 2020, we sold an aggregate of ~~217,329~~690,895 shares of our common stock, pursuant to the Sales Agreement at a weighted-average selling price of $1.32 per share, which resulted in approximately $0.8 million in net proceeds to the Company. There were no shares sold during the three months ended September 30, 2020 and we do not intend to issue any shares under the Sales Agreement between September 30, 2020 and the closing of the Exchange. During the nine months ended September 30, 2019, we sold an aggregate of 600 shares of our common stock under the Sales Agreement at a weighted average

selling price of ~~$15.42~~$10.03 per share, which resulted in ~~$3.2 million of~~de minimis net proceeds. There were no shares sold during the three months ended September 30, 2019.

In August 2018, we issued and sold in an underwritten public offering an aggregate of 3,246,079 shares of our common stock at $12.50 per share, which included 246,079 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 ~~our S-3 Registration Statement~~ ~~and a prospectus supplement and base prospectus filed on August 9, 2018~~. ~~The offering resulted in $38.0 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by us.~~

In September 2019, we entered into a loan and security agreement with certain affiliates of Pontifax Medison Finance, or the ~~Loan and Security Agreement~~Lenders, that ~~provides~~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. The Convertible Term Loan ~~and Security Agreement provides~~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 19, 2023. The ~~lenders may,~~Lenders could have, at their option, ~~elect~~elected to convert some or all of the then outstanding term loan amount and all accrued and unpaid interest thereon into shares of ~~the Company’s~~our common stock at a conversion price of $8.76 per ~~share,~~share.

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 our $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 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 Convertible Term Loan terminated upon the Lenders’ receipt of 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 was equal to ~~two~~1.5 times the ~~weighted average~~weighted-average closing price of ~~the Company’s~~our common stock during the ~~30 trading~~90 days prior to the ~~execution~~repayment date and resulted in an incremental expense of approximately $54,000. All other terms and conditions of the Pontifax Warrants remain the same.

We made the decision to repay the Convertible Term Loan ~~and Security Agreement. The Loan and Security Agreement contains customary affirmative and negative covenants and events~~as a result of ~~default. The Loan and Security Agreement is described~~changes in ~~Note 9 to~~our operating needs following our announcement in the ~~notes to~~first quarter of 2020 that we were discontinuing the ~~condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.~~development of our HBV program, as well as the cost of capital associated with the Convertible Term Loan.

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

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 nine months ended September 30, 2020 and 2019 ~~and 2018~~ was ~~$20.5~~$15.7 million and ~~$18.4~~$20.5 million, respectively. The ~~increase~~decrease in cash used in operating activities during the nine months ended September 30, ~~2019~~2020 compared to nine months ended September 30, ~~2018~~2019 of ~~$2.1~~$4.8 million was primarily due to ~~an increase in accrued expenses and other current and non-current liabilities of $1.2 million, offset by~~ a decrease ~~in accounts payable of $1.4 million, net loss of $0.8 million and other net changes of $0.4 million. In addition, there was an increase~~ in the non-cash change in the fair value of the warrant liability of ~~$4.2~~$7.8 million, ~~and~~ non-cash change in stock-based compensation of ~~$0.8~~$1.1 million and prepaid expense and other current assets of $1.0 million, offset by an increase in net loss of $3.4 million, loss on extinguishment of debt of $1.2 million and other ~~non-cash~~net changes of ~~$0.1~~$0.5 million.

Net cash provided by ~~(used in)~~ investing activities. Net cash provided by ~~(used in)~~ investing activities during the nine months ended September 30, 2020 and 2019 ~~and 2018~~ was ~~$20.6~~$16.2 million and ~~$(23.1)~~$20.6 million, respectively. The cash provided by investing activities during the nine months ended September 30, 2020 was primarily the result of $37.2 million in proceeds from the sale of marketable securities, which was offset by $21.0 million for the purchase of marketable securities. The cash used in investing activities during the nine months ended September 30, 2019 was primarily the result of $26.8 million in proceeds from the sale of marketable securities, which was offset by $6.0 million for the purchase of marketable securities and $0.2 million for the purchase of property and equipment. The cash used in investing activities during the nine months ended September 30, 2018 was primarily the result of $28.8 million in proceeds from the sale of marketable securities, which was offset by $50.0 million for the purchase of marketable securities and $1.9 million for the purchase of property and equipment.

Net cash (used in) provided by financing activities. Net cash ~~provided by~~used in financing activities during the nine months ended September 30, ~~2019 and 2018~~2020 was ~~$19.6~~$19.5 million and ~~$41.2 million, respectively. The~~net cash provided by financing activities during the nine months ended September 30, 2019 was approximately $19.6 million. Net cash used in financing activities during the nine months ended September 30, 2020 was primarily the result of $20.3 million for payment of the Convertible Term Loan and prepayment charge, offset by $0.8 million of net proceeds from our at-the-market offering program under the Sales Agreement. Net cash provided by financing activities during the

nine months ended September 30, 2019 was the result of $20.0 million of proceeds from the Convertible Term Loan and Pontifax Warrants, offset by $0.4 million of issuance costs in connection with the Convertible Term Loan and Pontifax Warrants. The cash provided by financing activities during the nine months ended September 30, 2018 was primarily the result of $38.0 million of net proceeds from the issuance of common stock and $3.2 million of net proceeds from our at-the-market offering program under the Sales Agreement.

~~We expect to continue to incur significant~~As of September 30, 2020, we had $20.0 million in cash, cash equivalents and ~~increasing losses for the foreseeable future.~~ marketable securities. We ~~anticipate these losses to increase as our expenses increase, and we~~ expect that our ~~expenses~~cash, cash equivalents and marketable securities as of September 30, 2020 will ~~increase~~be sufficient to fund operations for at least the next twelve months. This estimate assumes no additional funding from new collaboration agreements or equity financings.

Our future capital requirements as a stand-alone company, if ~~and as we:~~the proposed Exchange were not to be completed, are difficult to forecast. Our future funding requirements will depend on many factors, including, but not limited to:

~~seek~~We do not expect to ~~identify and develop~~raise any additional ~~product candidates;~~

~~Based on our current operating plan, we expect that our existing cash, cash equivalents and marketable securities as of September 30, 2019~~ ~~will enable us to fund our operating expenses and capital expenditure requirements into 2022~~. ~~We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner~~funds earlier than we currently ~~expect.~~expect in order to conduct clinical trials and preclinical and discovery activities. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating ~~expenses~~expenditures associated with ~~completing the~~future research and development ofactivities.

To the extent the Exchange is not completed and our ~~product candidates. Our~~capital resources are insufficient to meet our future operating and 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~~finance our future cash needs through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements. However, additional ~~funds to achieve our business objectives.~~

~~Adequate additional funds~~funding may not be available to us on acceptable terms or at ~~all. We do not currently have any committed external source of funds.~~ As of September 30, 2019, we had up to $59.6 million in securities available for future issuance under the S-3 Registration Statement, which includes $42.7 million in shares issuable pursuant to our at-the-market programall, and our ~~Sales Agreement with Cantor.~~ Toability to obtain funding may be adversely affected by the ~~extent that we raise additional~~uncertainty and volatility in the United States capital ~~through~~markets relating to the ~~sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and~~ongoing COVID-19 pandemic. In addition, the terms of ~~these securities~~any financing may ~~include liquidation or other preferences that~~ adversely affect the holdings or the rights of our ~~common~~ stockholders. ~~Additional debt financing and equity financing,~~For example, 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~~by issuing equity securities or ~~licensing arrangements with third parties, we may have to relinquish valuable rights~~by selling convertible debt securities, further dilution to our ~~technologies, future revenue streams, research programs,~~existing stockholders may result. In addition, pursuant to the instructions to Form S-3, if we file a new S-3 shelf registration statement, we would only have the ability to sell shares under such registration statement, during any 12-month period, in an amount less than or ~~product candidates or grant licenses on terms that may~~equal to one-third of the aggregate market value of our common stock held by non-affiliates, which is commonly referred to as our “public float.” If adequate funds are not ~~be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed,~~available, we may be required to ~~delay, limit, reduce or terminate our product development programs or any future commercialization efforts or grant~~obtain funds through collaborators that may require us to relinquish rights to ~~develop and market product~~our technologies or drug candidates that we ~~would~~might otherwise ~~prefer~~seek to develop ~~and market ourselves.~~or commercialize independently.

We have contractual obligations pursuant to our amended and restated license agreement with BioHEP Technologies Ltd., or 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. As of September 30, 2019, there have been no milestone or royalty payments made to BioHEP.

In September 2019, we entered into the Convertible Term Loan ~~and Security Agreement~~with the Lenders that ~~provides~~provided for a $20.0 million term loan ~~that bears~~with an annual interest ~~at a~~ rate of 8.0%. The Convertible Term Loan ~~and Security Agreement provides~~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 19, 2023. 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. 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.The Convertible Term Loan and ~~Security Agreement is~~the subsequent repayment are described in Note 9 to the notes to the consolidated financial statements contained in 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 August 2020, the Financial Accounting Standards Boards (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40).The amendments in the ASU removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. In addition, the ASU expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. The ASU is effective for public business entities that meet the definition of a Securities and Exchange Commission (“SEC”) filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, 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 ASC Topic 820. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2019. We ~~are currently evaluating the impact that the adoption of this standard may have on our consolidated financial statements.~~

~~We adopted the standard on the effective date of January 1, 2019 by applying the new lease requirements at the effective date.~~ ~~Prior periods continue to be presented based on the accounting standards originally in effect for such periods~~. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows us to carry forward the historical lease classification. ~~We will also apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption.~~ The standard had an impact of approximately $3.0 million on our assets and $3.4 million on our liabilities, as of January 1, 2019, for the recognition of right-of-use assets and lease liabilities, which are primarily related to the lease of our corporate headquarters in Hopkinton, Massachusetts. The standard did not have a material impact on our results of operations or liquidity.

~~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 adopted this standard as of January 1, ~~2019;~~2020; however, the adoption of this standard did not impact 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 ~~$63.1~~$20.0 million as of September 30, ~~2019,~~2020, consisted of cash, cash equivalents and marketable securities. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of ~~U.S.~~United States interest rates. However, because a significant amount of the 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, ~~2019,~~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 nine months ended September 30, ~~2019,~~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.

On September 3, 2020, a Company stockholder filed a complaint in the United States District Court for the Southern District of New York (Lenthall v. Spring Bank Pharmaceuticals, Inc. et al, Case No. 1:20-cv-07219 (S.D.N.Y.)), against the Company and the members of the Company’s Board of Directors (the “individual defendants”), alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act and of Delaware state law. The plaintiff alleges that the defendants made materially misleading disclosures in the Company’s Form S-4 registration statement filed in connection with the proposed Exchange (the “Form S-4”), by allegedly omitting material information with respect to (i) financial projections relating to the Company and F-star, (ii) Ladenburg’s fairness opinion and (iii) any financial analyses conducted on the Company. The plaintiff in Lenthall seeks declaratory and injunctive relief to enjoin the Exchange as well as damages and attorneys’ and experts’ fees.

On September 8, 2020, in the United States District Court for the District of Delaware, a purported class action (Adam Franchi v. Spring Bank Pharmaceuticals, Inc. et al, Case No. 1:20-cv-01198 (D. Del.)) was filed against the Company, members of the Company’s Board of Directors and F-star, alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act. This complaint alleges that the defendants made materially misleading disclosures in the Form S-4 by allegedly omitting material information with respect to (i) financial projections relating to the Company and F-star, (ii) the confidentiality agreements entered into by the Company prior to its engagement of Ladenburg, (iii) the process leading up to the execution of the Exchange Agreement and (iv) any financial analyses performed by Ladenburg. The plaintiff in Franchi seeks declaratory and injunctive relief to enjoin the Exchange; or in the event of consummation of the Exchange, rescissory damages against the defendants; filing by the defendants of a Registration Statement deemed not to be materially misleading by the plaintiff; and attorneys’ and experts’ fees.

On September 18, 2020, in the United States District Court for the Southern District of New York, another Company stockholder filed a complaint (Arshad v. Spring Bank Pharmaceuticals, Inc., et al., Case No. 1:20-cv-07723 (S.D.N.Y.)), against the Company and the members of the Company’s Board of Directors, alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act. The plaintiff alleges that the defendants made materially misleading disclosures in the Form S-4 by allegedly omitting material information with respect to (i) financial projections relating to the Company and F-star, (ii) Ladenburg’s fairness opinion and (iii) the process relating to the Exchange. The plaintiff in Arshad seeks declaratory and injunctive relief to enjoin the Exchange; or in the event of consummation of the Exchange, rescissory damages against the defendants; filing by the defendants of a Registration Statement deemed not to be materially misleading by the plaintiff; and attorneys’ and experts’ fees.

On October 29, 2020, in the United States District Court Eastern District of New York, another Company stockholder filed a complaint (Nowakowski v. Spring Bank Pharmaceuticals, Inc., et al., Case No. 1:20-cv-05219 (E.D.N.Y.)), against the Company and the members of the Company’s Board of Directors, alleging violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and as against the individual defendants, alleging violations of Section 20(a) of the Exchange Act. The plaintiff alleges that the defendants made materially misleading disclosures in the Form S-4 by allegedly omitting material information with respect to (i) financial projections relating to the Company and F-star, (ii) Ladenburg’s fairness opinion and (iii) the process relating to the Exchange. The plaintiff in Nowakowski seeks declaratory and injunctive relief to enjoin the Exchange; or in the event of consummation of the Exchange, rescissory damages against the defendants; declaration that defendants violated Sections 14(a) and 20(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder; and attorneys’ and experts’ fees.

The Company believes that the complaints set forth above are without merit and intends to defend against them vigorously. There can be no assurance, however, that the Company or any defendant will be successful. At present, the Company is unable to estimate potential losses, if any, related to these lawsuits.

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

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, ~~2018,~~2019, or the Form 10-K, in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which could materially affect our business, financial condition, or results of operations. ~~Other than the addition of the following risk factors, there~~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 ended~~ ~~December 31, 2018.~~

~~The terms of our loan and security agreement with Pontifax Medison Finance require us~~referred to meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

In September 2019, we entered into a loan and security agreement with Pontifax Medison Finance (the “Loan and Security Agreement”) that is secured by a lien covering all of our assets, other than our intellectual property. The Loan and Security Agreement contains customary affirmative and negative covenants and events of default. Affirmative covenants include, among others, covenants requiring us to protect and maintain our intellectual property, deliver certain financial reports, maintain minimum cash balances of $7.0 million and maintain insurance coverage. Negative covenants include, among others, restrictions on transferring any part of our business or intellectual property; incurring additional indebtedness; engaging in mergers or acquisitions; paying dividends or making other distributions; making investments; and creating other liens on our assets, in each case subject to customary exceptions. Events of default include, among others, non-payment, breaches or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on us. After the occurrence of an event of default the selling shareholders may (i) accelerate payment of all obligations and impose a prepayment charge, (ii) sign and file in our name any notices, assignment or agreements necessary to perfect payment, or (iii) notify any of our account debtors to make payment directly to it.previous sentence. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility. These restrictions may include, among other things, limitations on borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens, pay dividends, redeem capital stock or make investments. If we default under the terms of the Loan and Security Agreement or any future debt facility, the lender may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lender’s right to repayment would be senior to the rights of the holders of our common stock. The lender could declare a default upon the occurrence of any event that they interpret as a material adverse effect as defined under the Loan and Security Agreement. Any declaration by the lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.

Repayment of our convertible notes, if they are not otherwise converted, will require a significant amount of cash, and we may not have sufficient cash flow from our business to make payments on our indebtedness.

Our ability to pay the principal of or interest on the convertible notes issued under the Loan and Security Agreement (the “Convertible Notes”) depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service the Convertible Notes or other future indebtedness and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring indebtedness or obtaining additional debt financing or equity financing on terms that may be onerous or highly dilutive. Our ability to refinance the Convertible Notes or other future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including the Convertible Notes.

The issuance of shares of our common stock upon conversion of the Convertible Notes and exercise of the warrants issued under the Loan and Security Agreement could substantially dilute your investment and could impede our ability to obtain additional financing.

~~The Convertible Notes are convertible into and the warrants issued under the~~ ~~Loan and Security Agreement (the “Pontifax Warrants”)~~ are exercisable for shares of our common stock and give the holders an opportunity to profit from a rise in the market price of our common stock such that conversion or exercise thereof could result in dilution of the equity interests of our shareholders. We

~~have no control over whether the holders will exercise their right to convert their Convertible Notes or~~ ~~exercise~~ their Pontifax Warrants. While the Convertible Notes are convertible at a fixed price $8.76 per share and the Pontifax Warrants are exercisable at a fixed price $6.57, both of which are higher than our current market price, we cannot predict the market price of our ~~common~~ stock at any future date, and therefore, cannot predict whether the Convertible Notes will be converted or whether the Pontifax Warrants will be exercised. The existence and potentially dilutive impact of the Convertible Notes and the Pontifax Warrants may prevent us from obtaining additional financing in the future on acceptable terms, or at all.

On September 19, 2019, we issued a warrant to a service provider to purchase 15,000 shares of our common stock pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended in exchange for services rendered by the service provider. These warrants have an exercise price of $4.21 per share and expire on September 19, 2021.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index.

** 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.)

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


	PART I.FINANCIAL INFORMATION	Page
Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations and Comprehensive Loss	4
	Consolidated Statements of Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3633
Item 4.	Controls and Procedures	3633
	PART II.OTHER INFORMATION
Item 1.	Legal Proceedings	3735
Item 1A.	Risk Factors	37
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	3835
Item 6.	Exhibits	3836
Exhibit Index		3937
Signatures		4038

	Warrants
~~Outstanding at December 31, 2017~~		~~1,787,124~~
~~Grants~~		—
~~Exercises~~		—
~~Expirations/cancellations~~		~~(125,000~~	)
Outstanding at December 31, 2018		1,662,124
Grants		265,000
Exercises		—0
Expirations/cancellations		—0
Outstanding at December 31, 2019		1,927,124
Grants		0
Exercises		0
Expirations/cancellations		0
Outstanding at September 30, ~~2019~~2020		1,927,124


Exhibit Number		Description

~~4.1~~2.1		~~Form of Pontifax Warrants issued under the Loan and Security~~Share Exchange Agreement, dated ~~September 3, 2019 (Incorporated~~as of July 29, 2020, by and among Spring Bank Pharmaceuticals, Inc., F-star Therapeutics Limited and the persons listed therein (incorporated by reference to Exhibit ~~4.2~~2.1 to the Registrant’s ~~Registration Statement~~Current Report on Form ~~S-3~~8-K filed ~~November 1, 2019~~July 30, 2020 (Commission File No. ~~333-234436))~~001-37718).

10.1		~~Loan and Security~~Form of STING Agonist CVR Agreement ~~dated September 3, 2019,~~ by and among Spring Bank, ~~Pharmaceuticals, Inc.~~F-star, a representative of the Spring Bank stockholders prior to the Closing, and Computershare Trust Company N.A., ~~Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P. (Incorporated~~as the Rights Agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed ~~September 4, 2019~~July 30, 2020 (Commission File No. 001-37718)).

10.2		~~Registration Rights~~Form of STING Antagonist CVR Agreement ~~dated September 19, 2019,~~by and among Spring Bank, ~~Pharmaceuticals, Inc.~~F-star, a representative of the Spring Bank stockholders prior to the Closing, and Computershare Trust Company N.A., as the ~~Lender parties thereto~~ (~~Incorporated~~Rights Agent (incorporated by reference to Exhibit 10.2 to the Registrant’s ~~Registration Statement~~Current Report on Form ~~S-3~~8-K filed ~~November 1, 2019~~July 30, 2020 (Commission File No. ~~333-234436))~~001-37718).

~~31.1~~10.3		Form of Company Lock-up Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed July 30, 2020 (Commission File No. 001-37718).

10.4		Form of Seller Lock-Up Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed July 30, 2020 (Commission File No. 001-37718).

10.5		Form of Voting Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed July 30, 2020 (Commission File No. 001-37718).

10.6*		Form of Retention and Bonus Award Agreement.

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

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

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	Spring Bank Pharmaceuticals, Inc.

Date: November ~~7, 2019~~3, 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)

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☒

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

Year
2019 (excluding the nine months ended September 30, 2019)	$	144
2020		588
2021		508
2022		450
2023		462
Thereafter		2,405
Total lease payments	$	4,557
Less: present value discount		(1,252	)
Total	$	3,305