Immuneering Corp

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 –Organization and Nature of Business

Immuneering Corporation, a Delaware corporation (“Immuneering” or the “Company”), was incorporated in 2008. Immuneering is a clinical-stage oncology company seeking to develop medicines for broad populations of cancer patients, with an initial aim to therapeutically address patients harboring RAS or RAF mutations. The Company aims to achieve universal RAS/RAF activity through Deep Cyclic Inhibition ("DCI"), of the MAPK pathway, impacting cancer cells while sparing healthy cells. Immuneering’s lead product candidate IMM-1-104, as well as its second product candidate IMM-6-415, are in Phase 1/2a clinical trials in patients with advanced solid tumors harboring RAS and RAS/RAF mutations, respectively. The Company is developing IMM-1-104 as a potential once-daily oral therapy that aims to achieve universal-RAS activity and IMM-6-415 with an accelerated twice-daily oral dosing cadence that aims to achieve universal-RAS/RAF activity, in each case through Deep Cyclic Inhibition of the MAPK pathway. The Company’s development pipeline also includes several early-stage programs.

On October 30, 2019, Immuneering formed a wholly owned subsidiary, Immuneering Securities Corporation (“ISC”), a Massachusetts securities corporation, for the sole purpose of buying, selling and holding securities on the Company’s behalf.

On December 22, 2021, the Company acquired all outstanding shares of capital stock of BioArkive, Inc. (“BioArkive”), a California corporation, which as a result became a wholly owned subsidiary.

Immuneering, ISC and BioArkive are collectively referred to as the “Company” throughout these condensed consolidated financial statements.

The Company is subject to a number of inherent risks associated with any biotechnology company that has substantial expenditures for research and development. These risks include, but are not limited to, the need to obtain adequate additional funding, possible failure of clinical trials or other events demonstrating lack of clinical safety or efficacy of its product candidates, dependence on key personnel, reliance on third-party service providers for manufacturing drug product and conducting clinical trials, the ability to successfully secure its proprietary technology, and risks related to the regulatory approval and commercialization of a product candidate. There can be no assurance that the Company’s research and development programs will be successful. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees, advisors, and consultants.

On August 3, 2021, the Company completed its initial public offering (“IPO”) pursuant to which it issued and sold 8,625,000 shares of its Class A common stock, inclusive of 1,125,000 shares of its Class A common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $120,318,750, after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company, which were $2,124,317.

On April 20, 2023, the Company completed an underwritten follow-on equity offering, pursuant to which it issued and sold 2,727,273 shares of its Class A common stock $0.001 par value per share at an offering price of $11.00 per share. The aggregate net proceeds received by the Company from the offering were $28,200,003, after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company of $203,768.

To date, the Company has funded its operations through service revenues (which have since ceased), and with proceeds from the sale of its capital stock and convertible notes. The Company has incurred recurring losses over the past several years and as of June 30, 2024, the Company had an accumulated deficit of $191,646,334. The Company expects to continue to generate operating losses for the foreseeable future. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations. Management considered whether or not there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern, and concluded that there are none as it estimates that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of these unaudited condensed consolidated financial statements.

Note 2 -Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (“FASB”). The FASB sets generally accepted accounting principles (“GAAP”) to ensure the condensed consolidated financial statements are consistently reported. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codifications (“ASC”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

There have been no material changes to the accounting policies of the Company as those set forth in Note 2 to the audited consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Unaudited Interim Financial Information

The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with GAAP and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted from the unaudited interim condensed consolidated financial statements, as is permitted by such rules and regulations. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2023.

It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, operating results and cash flows. Revenues and net loss for any interim period are not necessarily indicative of future or annual results.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting periods. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets, liabilities and the recording of expenses that are not readily apparent from other sources. Significant estimates reflected in these condensed consolidated financial statements include but are not limited to: the accrued research and development expenses, the determination of fair value of stock-based awards, and the impairment of goodwill and intangible assets. Actual results may differ materially and adversely from these estimates.

Goodwill

Goodwill represents the excess of the fair value of the acquiree over the recognized basis of the net identifiable assets acquired and includes the future economic benefits from other assets that could not be individually identified and separately recognized. Goodwill is not amortized, but instead is periodically reviewed for impairment and an impairment charge is recorded in the periods in which the recorded carrying value of goodwill exceeds its fair value.

On a quarterly basis, the Company performs a review of its business to determine if events or changes in circumstances have occurred which could have a material adverse effect on the fair value of the Company and its goodwill. If such events or changes in circumstances were deemed to have occurred, the Company would perform an impairment test of goodwill as of the end of the quarter and record any noted impairment loss.

The Company’s market capitalization has in the past declined, for example recently starting in March 2024 and continued through the second quarter, and may in the future decline, and any such decrease in market capitalization may be an indicator of impairment. The Company will continue to assess the impact of its market capitalization and any other indicators of potential impairment. It is possible that if the Company’s market capitalization decline is more than temporary, or if other indicators of impairment are identified, an interim impairment analysis may be necessary, which could result in an impairment of goodwill, intangible assets and other long-lived assets in future periods.

The goodwill test is performed at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

The Company performs its annual impairment test during the fourth quarter of each fiscal year. The Company performed an interim impairment analysis in the quarter ended June 30, 2024 as a result of the decline in market capitalization. Based on the step 1 analysis performed, the fair value of the reporting unit exceeded the carrying value on the valuation date and as a result there is no impairment pursuant to ASC 350 for the quarter ended June 30, 2024.

There wereno impairments identified for the year ended December 31, 2023 or for the three and six months ended June 30, 2024.

Deferred Offering Costs

The Company capitalizes certain legal, professional, and other third-party charges related to ongoing equity financings as deferred offering costs until fully consummated. These costs are to be recorded as a reduction of the offering’s proceeds which are recorded to additional paid-in capital within stockholders’ equity. Should the Company choose not to initiate such financing, the deferred offering costs would be immediately expensed as operating expenses.

On August 10, 2022, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with Piper Sandler & Co, (the “Sales Agent”) to sell shares of the Company’s common stock, par value $0.001 per share, with aggregate gross sales proceeds of up to $50 million, from time to time, through an “at the market” equity offering program. Deferred offering costs associated with the Sales Agreement are reclassified to additional paid-in capital on a pro-rata basis when the Company completes offerings under the Sales Agreement. Any remaining deferred costs will be expensed to the statement of operations should the planned offering be abandoned. The Company had approximately $0.5 million of deferred offering costs as of June 30, 2024 and $0.3 million as of December 31, 2023.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (“JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to avail itself of this extended transition period and, as a result, the Company will not be required to adopt certain new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280) (“ASU 2023-07”). The guidance in ASU 2023-07 expands prior reportable segment disclosure requirements by requiring entities to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and details of how the CODM uses financial reporting to assess their segment’s performance. The standard is effective for fiscal years beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating this standard's potential impact on its condensed consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance in ASU 2023-09 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted this effective January 1, 2024 and there was no impact to the condensed consolidated financial statements.

Note 3 –Marketable Securities

There wereno marketable securities as of June 30, 2024. Marketable securities consisted of the following as of December 31, 2023:

Our marketable securities are classified as available-for-sale pursuant to ASC 320, Investments – Debt and Equity Securities and are recorded at fair value. Unrealized gains (losses) are included as a component of accumulated other comprehensive loss in the consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized. The Company assesses its available-for-sale marketable securities for impairment on a quarterly basis. There were no impairments of the Company’s available-for-sale marketable securities measured and carried at fair value during the three and six months ended June 30, 2024 or 2023. Realized gains and losses are included in other income (expense) on the consolidated statements of operations.

Our marketable securities portfolio contains investments in U.S. Treasury, other U.S. government-backed securities, and commercial paper. We review our portfolio based on the underlying risk profile of the securities and we don't expect there to be a loss on these investments. We also regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.

During the three and six months ended June 30, 2024 and 2023, we recognizedno year-to-date credit loss related to our short-term investments, and hadno allowance for credit loss recorded as of June 30, 2024 or December 31, 2023.

Note 4 –Fair Value Measurements

We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table summarizes our cash equivalents measured at fair value on a recurring basis as of June 30, 2024:

There have been no changes to the valuation methods during the six months ended June 30, 2024. There were no transfers between Level 1 and Level 2 and we hadno financial assets or liabilities that were classified as Level 3 at any point during the six months ended June 30, 2024.

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently, at the end of each reporting period, valued utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value. After completing our valuation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2024 and December 31, 2023.

The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2023:

Note 5 –Property and Equipment, net

Property and equipment, net consisted of the following:

Depreciation/amortization expense totaled $90,533 and $78,242 for the three months ended June 30, 2024 and 2023, respectively. Depreciation/amortization expense totaled $180,742 and $154,768 for the six months ended June 30, 2024 and 2023, respectively.

Note 6 –Accrued Expenses

Accrued expenses consisted of the following:

Note 7 -Common Stock

The Company had 200,000,000 authorized shares of Class A common stock, $0.001 par value per share as of June 30, 2024 and December 31, 2023 of which 29,653,355 and 29,271,629 were issued and outstanding, respectively. The holders of Class A common stock are entitledone vote for each share of common stock. Dividends may be paid when, and if declared by the Board of Directors, subject to the limitations, powers and preferences granted to the Preferred Stockholders and on a proportionate basis with holders of Class B common stock.

The Company had 20,000,000 authorized shares of Class B common stock, $0.001 par value per share as of June 30, 2024 and December 31, 2023, of whichno shares have been issued nor are outstanding. The holders of Class B common stock haveno voting rights. Dividends may be paid when, and if, declared by the Board of Directors, subject to the limitations, powers and preferences granted to the preferred stockholders and on a proportionate basis with holders of Class A common stock.

Equity Offerings

On August 10, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-266738) (the “2022 Shelf Registration Statement”) with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and/or units or any combination thereof in the aggregate amount of up to $200 million for a period of up tothree years from the date of its effectiveness on August 19, 2022.

On August 10, 2022, the Company also entered into the Sales Agreement with the Sales Agent to sell shares of the Company’s Class A common stock, par value $0.001 per share, with aggregate gross sales proceeds of up to $50 million, from time to time, through an “at the market” equity offering program (the “ATM Program”) under the 2022 Shelf Registration Statement. Subject to the terms and conditions of the Sales Agreement, the Sales Agent may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act, including sales made through the Nasdaq Global Market, on any other existing trading market for the common stock, to or through a market maker, or, if expressly authorized by the Company, in privately negotiated transactions. The Company or Sales Agent may terminate the Sales Agreement upon notice to the other party and subject to other conditions. The Company will pay the Sales Agent a commission equal to 3.0% of the gross proceeds of any Common Stock sold through the Sales Agent under the Sales Agreement and has provided the Sales Agent with customary indemnification rights.

Issuance costs incurred related to the Sales Agreement are classified as long-term assets on the balance sheet at June 30, 2024. The Company had approximately $0.5 million of deferred offering costs as of June 30, 2024 and $0.3 million as of December 31, 2023. No shares were sold pursuant to the ATM Program during the three or six months ended June 30, 2024 or June 30, 2023, respectively.

On April 20, 2023, the Company completed an underwritten follow-on equity offering, pursuant to which it issued and sold 2,727,273 shares of its Class A common stock, $0.001 par value per share, at an offering price of $11.00 per share under the 2022 Shelf Registration Statement. The aggregate net proceeds received by the Company from the offering were $28,200,003, after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company of $203,768.

Note 8 -Net Loss Per Share Attributable to Common Stockholders

Basic and diluted net loss per share attributable to common stockholders was calculated at June 30, 2024 and June 30, 2023 as follows:

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares) at June 30, 2024 and June 30, 2023:

Note 9 –Stock-Based Compensation

During 2015, the Company established the Long Term Incentive Plan (“Incentive Plan”), under which incentive stock options, nonqualified stock options, restricted stock or other awards may be awarded to employees, directors or consultants of the Company. The options typically vest over afour-year period. Upon the effectiveness of the Company’s 2021 Incentive Award Plan (the “2021 Plan”), the Company ceased granting awards under the Incentive Plan. However, the Incentive Plan continues to govern awards outstanding thereunder.

On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Plan, which became effective on July 29, 2021. The 2021 Plan provides for the grant of incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares reserved for issuance under the 2021 Plan was initially equal to 2,590,000 plus an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i)4% of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors. No more than 15,350,000 shares of Class A common stock may be issued under the 2021 Plan upon the exercise of incentive stock options. Shares issued under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. If an award under the 2021 Plan expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, cancelled without having been fully exercised/settled or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2021 Plan. In addition, shares subject to stock options issued under the Incentive Plan may become available for issuance under the 2021 Plan to the extent such stock options are canceled, forfeited, exchanged, settled in cash or otherwise terminated. As of June 30, 2024, there were 1,388,539 shares available for future issuance under the 2021 Plan.

On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on July 29, 2021. A total of 250,000 shares of Class A common stock were initially reserved for issuance under this plan. The number of shares of Class A common stock that may be issued under the 2021 ESPP will automatically increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i)1% of the shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors, provided that not more than 3,340,000 shares of Class A common stock may be issued under the 2021 ESPP. As of June 30, 2024, there were 917,677 shares of common stock reserved for future issuance under the 2021 ESPP and 152,427 shares had been granted or purchased under the 2021 ESPP.

On May 21, 2024 (the “Effective Date”), based upon the recommendation of the Compensation Committee (the “Committee”) of the Company's Board of Directors (the “Board”), the Board approved an option repricing, in accordance with the 2021 Plan, which repricing was effected on the Effective Date. The repricing applied to options to purchase shares of the Company’s Class A common stock with an exercise price per share greater than $3.01 that were held by current employees and certain non-employee service providers under the 2021 Plan (the “Eligible Options”).

Options held by Benjamin Zeskind, Ph.D., the Company’s President and Chief Executive Officer, Brett Hall, Ph.D., the Company's Chief Scientific Officer and the non-employee members of the Board were not eligible for the repricing.

As a result of the repricing, as of the Effective Date, the exercise price of all Eligible Options was reduced to $3.01 per share, which represents approximately two times the closing trading price of the Company’s Class A common stock on the Nasdaq Global Market on the Effective Date; however, the exercise price for repriced options will revert to the original exercise price for any exercise occurring prior to June 30, 2025 (the "Retention Period"), unless there is a change of control of the Company or the option holder’s employment has been terminated (i) by the Company without cause or (ii) by reason of death or disability. The repriced options otherwise remain subject to their existing terms and conditions as set forth in the 2021 Plan and applicable award agreements. As of the Effective Date, outstanding options to purchase 2,986,354 shares were deemed Eligible Options and were repriced such that the exercise price per share for such outstanding options was reduced to $3.01 per share. There were no changes to the number of shares, the vesting schedule or the expiration date of the Eligible Options.

The effect of the repricing resulted in a total incremental non-cash stock-based compensation expense of $0.6 million, which was calculated using the Black-Scholes option-pricing model, of which $0.2 million of the incremental non-cash stock-based compensation expense is associated with vested repriced options and will be recognized on a straight-line basis through the 13-month Retention Period. The remaining $0.4 million of the incremental non-cash stock-based compensation expense is associated with unvested repriced options and will be recognized as follows: (a) if the Retention Period is greater than the remaining original vesting period of the repriced option, the incremental cost will be amortized on a straight-line basis through the Retention Period end date or (b) if the Retention Period is less than the remaining original vesting term of the repriced option, the incremental cost will be amortized on a straight-line basis over the remaining original vesting period.

During the quarter ended June 30, 2024, the Company recognized incremental stock-based compensation expense totaling $36 thousand associated with the repricing which is included in general and administrative and research and development expense in the condensed consolidated statement of operations and comprehensive loss.

The Company recognized stock-based compensation expense of $1,661,749 and $3,136,507 during the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2023, the Company recognized stock-based compensation expense of $1,333,882 and $2,607,387, respectively. As of June 30, 2024, compensation expense remaining to be recognized for outstanding stock options was $13,151,883 and to be recognized over a weighted-average period of 2.44 years.

The fair value of options granted is calculated on the grant date using the Black-Scholes option valuation model. Prior to the Company’s IPO on August 3, 2021, the Company wasa private company and thus lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own publicly traded stock price. For the six months ended June 30, 2024, the Company granted 1,530,445 shares of stock options at a weighted-average grant date fair value of $3.69.

The Company used the following assumptions in its application of the Black-Scholes option pricing model for grants during the six months ended June 30, 2024 and 2023:

The following table summarizes the stock option activity during the six months ended June 30, 2024:

For the three and six months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense on the accompanying condensed consolidated statements of operations as follows:

Note 10 –Commitments and Contingencies

Operating Leases

In October 2020, the Company entered into an office lease (“Via Frontera Lease”) in San Diego, California with a lease term of 67 months. At the lease commencement date, a right-to-use asset and lease liability was recognized by the Company for $637,863. In January 2022, the Company exercised its option to terminate the Via Frontera Lease 20 months early. The Company subsequently entered into a sublease of the Via Frontera Lease, the term of which commenced in March 2022. The lease and sublease terminated on October 1, 2023. The lease termination was accounted for as a lease modification which reduces the term of the existing lease and the Company adjusted the value of its right-of-use asset and operating lease liability by $347,739 using an incremental borrowing rate of approximately 6%. The sublease income was accounted for as a reduction of rent expense in the statement of operations.

As part of the BioArkive acquisition, the Company assumed the obligations ofthree leases in San Diego, California. One is for 38,613 square feet of office and laboratory space, under a lease that terminates on April 30, 2032; the second was for a 6,100 square feet of office and laboratory space under a lease that terminated on December 31, 2022; and the third was for a lease for 4,760 square feet of office and laboratory space under a lease that terminated on March 31, 2024. As a result, the Company recorded right-to-use assets and lease liabilities of $4,824,700 on the acquisition date of December 22, 2021.

The Company currently also leases office space in Cambridge, Massachusetts and New York, New York, pursuant to short-term arrangements. The Cambridge lease is on a month-to-month basis, requiring one month’s notice before termination. The New York lease was renewed on July 17, 2024 to extend the lease term until February 28, 2025. These lease agreements include or included payments for lease and non-lease components. The Company has elected to not separate such components and these payments were recognized as rent expense.

As of June 30, 2024, inclusive of the renewal outlined above, total future minimum lease payments for its short-term leases in Cambridge, Massachusetts, and New York, New York were $35,500 due in 2024 and $11,000 due in 2025.

Future minimum lease payments for operating leases with initial or remaining terms in excess of one year at June 30, 2024 were as follows:

Quantitative information regarding the Company’s leases for the six months ended June 30, 2024 and 2023 is as follows:

As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

Litigation

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities and may be exposed to litigation in connection with its product candidates and operations. The Company’s policy is to assess the likelihood of any adverse judgments or outcomes related to legal matters, as well as ranges of probable losses. When it is probable that future expenditures will be made and can be reasonably estimated the Company will accrue a liability for such matters. Significant judgement is required to determine both probability and estimated amount. The Company is not aware of any material legal matters.

Clinical Research Contracts

The Company may enter into contracts in the normal course of business with contract research organizations for clinical trials, with contract manufacturing organizations for clinical supplies, and with other vendors for preclinical studies, supplies and other services for the Company’s operating purposes. These contracts generally provide for termination with a 30-day notice.