Form 10-Q
Table of Contents
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number:
001-40551
 
 
Acumen Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Delaware
 
36-4108129
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
   
427 Park St.,
Charlottesville, Virginia
 
22902
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (434)
297-1000
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange on which registered
Common stock, par value $0.0001 per share
  
ABOS
  
The Nasdaq Global Select Market
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.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
Emerging growth company           
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 August
13
, 2021, the
 registrant had 40,468,087 shares of common stock, $0.0001 par value per share, outstanding.
 
 
 

Table of Contents
Table of Contents
 
 
  
 
Page
 
PART I.
 
  
 
1
 
Item 1.
 
  
 
1
 
 
  
 
1
 
 
  
 
2
 
 
  
 
3
 
 
  
 
4
 
 
  
 
5
 
Item 2.
 
  
 
19
 
Item 3.
 
  
 
29
 
Item 4.
 
  
 
29
 
PART II.
 
  
 
30
 
Item 1.
 
  
 
30
 
Item 1A.
 
  
 
30
 
Item 2.
 
  
 
90
 
Item 3.
 
  
 
91
 
Item 4.
 
  
 
91
 
Item 5.
 
  
 
91
 
Item 6.
 
  
 
92
 
  
 
93
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry 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 future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
 
 
the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements;
 
 
our ability to obtain funding for our operations, including funding necessary to develop and commercialize ACU193, subject to necessary regulatory approvals;
 
 
the ability of our clinical trials to demonstrate the safety and efficacy of ACU193, and other positive results;
 
 
the success, cost and timing of our development activities, nonclinical studies and clinical trials;
 
 
the timing and focus of our future clinical trials, and the reporting of data from those trials;
 
 
our plans relating to commercializing ACU193, subject to obtaining necessary regulatory approvals;
 
 
our ability to attract and retain key scientific and clinical personnel;
 
 
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
 
 
our reliance on third parties to conduct clinical trials of ACU193, and for the manufacture of ACU193 for nonclinical studies and clinical trials;
 
 
the success of competing therapies that are or may become available;
 
 
our plans and ability to obtain or protect our intellectual property rights, including extensions of existing patent terms where available;
 
 
the scope of protection we are able to establish and maintain for intellectual property rights covering ACU193 and technology;
 
 
potential claims relating to our intellectual property;
 
 
existing regulations and regulatory developments in the United States and other jurisdictions;
 
 
our ability to obtain and maintain regulatory approval of ACU193, and any related restrictions, limitations and/or warnings in the label of any approved product candidate;
 
 
our plans relating to the further development and manufacturing of ACU193, including additional therapeutic indications which we may pursue;
 
 
our financial performance;
 
i

 
the effects of the ongoing
COVID-19
pandemic; and
 
 
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.
You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the header “Risk Factors” and elsewhere in this Quarterly Report on Form
10-Q.
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form
10-Q
relate only to events as of the date on which the statements are made, and we undertake no obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form
10-Q
or to reflect new information or the occurrence of unanticipated events, except as required by law.
Unless the context otherwise indicates, references in this report to the terms “Acumen,” “the Company,” “we,” “our” and “us” refer to Acumen Pharmaceuticals, Inc.
We may announce material business and financial information to our investors using our investor relations website (www.investors.acumenpharm.com). We therefore encourage investors and others interested in Acumen to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, webcasts, press releases and conference calls.
 
ii

 
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Acumen Pharmaceuticals, Inc.
Condensed Balance Sheets
(in thousands, except share and per share data)
 
 
  
June 30, 2021
 
 
December 31, 2020
 
 
  
(Unaudited)
 
 
 
 
ASSETS
                
Current assets
                
Cash and cash equivalents
   $ 68,812     $ 43,777  
Grant receivable
     109       109  
Prepaid expenses and other current assets
     1,651       543  
    
 
 
   
 
 
 
Total current assets
     70,572       44,429  
Property and equipment, ne
t
 
 
6
 
 
 
 
Deferred offering costs
     2,352        
Other assets
     13        
    
 
 
   
 
 
 
Total assets
   $ 72,943     $ 44,429  
    
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
                
Current liabilities
                
Accounts payable
   $ 2,907     $ 531  
Accrued expenses and other current liabilities
     1,611       423  
Preferred stock tranche rights liability
           5,033  
Preferred stock warrant liability
           380  
    
 
 
   
 
 
 
Total liabilities
     4,518       6,367  
 
 
 
 
 
 
 
 
 
Series A convertible preferred stock, $0.0001 par value; 711,203 shares authorized as of June 30, 2021 and December 31, 2020; 477,297 shares issued and outstanding as of June 30, 2021 and December 31, 2020; liquidation preference of $1,067 as of June 30, 2021
     1,067       1,067  
Series
A-1
convertible preferred stock, $0.0001 par value; 11,898,177 shares authorized as of June 30, 2021 and December 31, 2020; 7,985,305 and 7,537,879 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; liquidation preference of $18,097 as of June 30, 2021
     22,963       16,333  
Series B convertible preferred stock, $0.0001 par value; 29,457,450 shares authorized as of June 30, 2021 and December 31, 2020; 19,770,070 and 11,862,043 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; liquidation preference of $75,116 as of June 30, 2021
     150,474       39,253  
 
 
 
 
 
 
 
 
 
Stockholders’ deficit
                
Common stock, $0.0001 par value; 50,500,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 556,570 and 419,124 shares issued and outstanding as of
June 30, 2021 and December 31, 2020
, respectively
            
Additional
paid-in
capital
     9,241       8,374  
Accumulated deficit
     (115,320     (26,965
    
 
 
   
 
 
 
Total stockholders’ deficit
     (106,079     (18,591
    
 
 
   
 
 
 
Total liabilities, convertible preferred stock and stockholders’ deficit
   $ 72,943     $ 44,429  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
1

Table of Contents
Acumen Pharmaceuticals, Inc.
Condensed Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
 
 
  
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
  
2021
 
 
2020
 
 
2021
 
 
2020
 
Grant and other revenue
   $     $
151
     $     $ 377  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
                                 
Research and development
     2,254      
1,927
       4,832       3,977  
General and administrative
     1,187      
259
       2,402       481  
    
 
 
   
 
 
    
 
 
   
 
 
 
Total operating expenses
     3,441      
2,186
       7,234       4,458  
    
 
 
   
 
 
    
 
 
   
 
 
 
Loss from operations
     (3,441 )    
(2,035
)
     (7,234     (4,081
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense)
                                 
Interest income
     4       —          8       1  
Change in fair value of preferred stock tranche rights liability and preferred stock
 
warrant liability
     (57,940 )     —          (81,157 )     —    
Other income
     19       —          28       —    
    
 
 
   
 
 
    
 
 
   
 
 
 
Total other income (expense)
     (57,917 )     —          (81,121 )     1  
    
 
 
   
 
 
    
 
 
   
 
 
 
Net loss attributable to common stockholders
   $ (61,358 )   $
(2,035
)
   $ (88,355   $ (4,080
    
 
 
   
 
 
    
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per common share, basic and diluted
   $ (141.93 )   $
(4.86
)
   $ (207.52   $ (9.73
    
 
 
   
 
 
    
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding, basic and diluted
     432,325       419,124        425,761       419,124  
    
 
 
   
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
2

Table of Contents
Acumen Pharmaceuticals, Inc.
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share data)
(Unaudited)
Three Months Ended June 30, 2021
 
 
  
Series A
Convertible
Preferred Stock
 
  
Series
A-1

Convertible
Preferred Stock
 
  
Series B

Convertible

Preferred Stock
 
  
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated

Deficit
 
 
Total
Stockholders’

Deficit
 
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
Balance
 
as
 
of
 
March 31,
 
2021
  
 
477,297
 
  
$
1,067
 
  
 
7,537,879
 
  
$
16,333
 
  
 
11,862,043
 
  
$
39,253
 
  
 
419,124
 
  
$
  
 
  
$
8,500
 
  
$
(53,962
 
$
(45,462
Share-based compensation
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
127
 
  
 
—  
 
 
 
127
 
Issuance of milestone shares for cash, net of issuance costs of $16
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
7,908,027
 
  
 
30,031
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Exercise of preferred stock warrant
  
 
—  
 
  
 
—  
 
  
 
447,426
 
  
 
1,250
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Reclassification of preferred stock tranche rights liability upon issuance of milestone shares
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
81,190
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Reclassification of warrant liability upon exercise of preferred stock warrant
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
5,380
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Exercise of common stock warrants
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
137,446
 
  
 
—  
 
  
 
614
 
  
 
—  
 
 
 
614
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(61,358
 
 
(61,358
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Balance as of June 30, 2021
  
 
477,297
 
  
$
1,067
 
  
 
7,985,305
 
  
$
22,963
 
  
 
19,770,070
 
  
$
150,474
 
  
 
556,570
 
  
$
  
 
  
$
9,241
 
  
$
(115,320
 
$
(106,079
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Three Months Ended June 30, 2020
 
 
  
Series A
Convertible
Preferred Stock
 
  
Series
A-1

Convertible
Preferred Stock
 
  
Series B

Convertible Preferred
Stock
 
  
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated

Deficit
 
 
Total
Stockholders’

Deficit
 
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
Balance
 
as
 
of
 
March 31,
 
2020
  
 
477,297
 
  
$
1,067
 
  
 
7,537,879
 
  
$
16,333
 
  
 
            —  
 
  
$
—  
 
  
 
419,124
 
  
$
—  
 
  
$
8,259
 
  
$
(21,685
 
$
(13,426
Share-based compensation 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
          —  
 
  
 
—  
 
  
 
—  
 
  
 
38
 
  
 
            —  
 
 
 
38
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(2,035
 
 
(2,035
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Balance as of June 30, 2020
  
 
477,297
 
  
$
1,067
 
  
 
7,537,879
 
  
$
16,333
 
  
 
—  
 
  
$
—  
 
  
 
419,124
 
  
$
—  
 
  
$
8,297
 
  
$
(23,720
 
$
(15,423
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Six Months Ended June 30, 2021
 
 
  
Series A
Convertible
Preferred Stock
 
  
Series
A-1

Convertible
Preferred Stock
 
  
Series B

Convertible

Preferred Stock
 
  
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated

Deficit
 
 
Total
Stockholders’

Deficit
 
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
Balance as of December 31, 2020
  
 
477,297
 
  
$
1,067
 
  
 
7,537,879
 
  
$
16,333
 
  
 
11,862,043
 
  
$
39,253
 
  
 
419,124
 
  
$
—  
 
  
$
8,374
 
  
$
(26,965
 
$
(18,591
Share-based compensation
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
  
 
  
 
—  
 
  
 
—  
 
  
 
253
 
  
 
—  
 
 
 
253
 
Issuance of milestone shares for cash, net of issuance costs of $16
  
 
—  
 
  
 
—  
 
  
     
  
     
  
 
7,908,027
 
  
 
30,031
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Exercise of preferred stock warrant
  
 
—  
 
  
 
—  
 
  
 
447,426
 
  
 
1,250
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Reclassification of preferred stock tranche rights liability upon issuance of milestone shares
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
81,190
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Reclassification of warrant liability upon exercise of preferred stock warrant
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
5,380
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
 
 
—  
 
Exercise of common stock warrants
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
137,446
 
  
 
—  
 
  
 
614
 
  
 
—  
 
 
 
614
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(88,355
 
 
(88,355
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Balance
 
as
 
of
 
June 30,
 
2021
  
 
477,297
 
  
$
1,067
 
  
 
7,985,305
 
  
$
22,963
 
  
 
19,770,070
 
  
$
150,474
 
  
 
556,570
 
  
$
—  
 
  
$
9,241
 
  
$
(115,320
 
$
(106,079
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Six Months Ended June 30, 2020
 
 
  
Series A
Convertible
Preferred Stock
 
  
Series
A-1

Convertible
Preferred Stock
 
  
Series B

Convertible Preferred
Stock
 
  
Common Stock
 
  
Additional
Paid-in

Capital
 
  
Accumulated

Deficit
 
 
Total
Stockholders’

Deficit
 
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
Balance
 
as
 
of
 
December 31,
 
2019
  
 
477,297
 
  
$
1,067
 
  
 
7,537,879
 
  
$
16,333
 
  
 
            —  
 
  
$
—  
 
  
 
419,124
 
  
$
—  
 
  
$
8,220
 
  
$
(19,640
 
$
(11,420
Share-based compensation 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
          —  
 
  
 
—  
 
  
 
—  
 
  
 
77
 
  
 
            —  
 
 
 
77
 
Net loss
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
(4,080
 
 
(4,080
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Balance as of June 30, 2020
  
 
477,297
 
  
$
1,067
 
  
 
7,537,879
 
  
$
16,333
 
  
 
—  
 
  
$
—  
 
  
 
419,124
 
  
$
—  
 
  
$
8,297
 
  
$
(23,720
 
$
(15,423
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
3

Table of Contents
Acumen Pharmaceuticals, Inc.
Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
 
    
Six Months Ended 
June 30,
 
    
2021
   
2020
 
Cash flows from operating activities
                
Net loss
   $ (88,355   $ (4,080
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability
     81,157       —    
Stock-based compensation expense
     253       77  
Changes in operating assets and liabilities:
                
Grant receivable
           30  
Prepaid expenses and other current assets
     (1,108     406  
Other assets
     (13     (270
Accounts payable
     741       380  
Accrued expenses and other current liabilities
     691       147  
    
 
 
   
 
 
 
Net cash used in operating activities
     (6,634 )     (3,310
 
 
 
 
 
 
 
 
 
Cash flows from
investing
 activities
                
Purchase of fixed asset
s
 
 
(6
)
 
 
 
 
 
Net cash used in investing activities
 
 
(6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
 
Proceeds from issuance of Series B milestone shares, net of issuance costs
     30,031       —    
Proceeds from exercise of Series A-1 warrant
 
 
1,250
 
 
 
 
 
 
Proceeds from exercise of common stock warrants
 
 
614
 
 
 
 
 
 
Payments for deferred offering costs
 
 
(220
)
 
 
 
 
 
    
 
 
   
 
 
 
Net cash provided by financing activities
     31,675       —    
 
 
 
 
 
 
 
 
 
Net change in cash and cash equivalents
     25,035       (3,310
Cash and cash equivalents, at the beginning of the period
     43,777       6,552  
    
 
 
   
 
 
 
Cash and cash equivalents, at the end of the period
   $ 68,812     $ 3,242  
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information
                
Cash paid for income taxes
   $     $ —    
    
 
 
   
 
 
 
Cash paid for interest
   $     $ —    
    
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of noncash financing activities
                
Reclassification of preferred stock tranche rights liability upon share issuance
 
$
81,190
 
 
$
 
 
 
    
 
 
   
 
 
 
Reclassification of warrant liability upon exercise of preferred stock warrant
   $ 5,380     $ —    
    
 
 
   
 
 
 
Deferred offering costs in accounts payable
   $ 1,635     $ —    
    
 
 
   
 
 
 
Deferred offering costs in accrued expenses and other current liabilities
   $ 497     $ —    
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
4

Table of Contents
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited
)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Acumen Pharmaceuticals, Inc. (“Acumen” or the “Company”) was incorporated in 1996 in the state of Delaware. Acumen discovers and develops targeted therapies for the treatment of Alzheimer’s disease. Acumen’s lead drug candidate, ACU193, is a humanized monoclonal antibody which selectively targets amyloid-beta oligomers (“AßOs”). Acumen and Merck & Co. discovered and developed ACU193 through an eight-year research collaboration. Acumen currently holds exclusive rights to the program. The Company submitted an Investigation Drug Application (“IND”) for ACU193 to the Food and Drug Administration (“FDA”) in the fourth quarter of 2020. We initiated a Phase 1 clinical trial of ACU193 in patients with early Alzheimer’s disease in April 2021.
The Company is subject to the uncertainty of whether the Company’s intellectual property will develop into successful commercial products
.
November 2020 Reverse Stock Split
On November 20, 2020, the Company effected a
1-for-30 reverse
stock split of its authorized, issued and outstanding shares of common stock and convertible preferred stock. Accordingly, all share and per share amounts for the periods presented in the accompanying financial statements and these notes have been adjusted retroactively, where applicable, to reflect this reverse stock split. On November 20, 2020, the Company also increased the number of shares of preferred stock and common stock authorized for issuance (see Note 5).
June 2021 Reverse Stock Split
The Company’s Board of Directors (“Board”) approved a reverse split of shares of the Company’s common stock and convertible preferred stock on a
1-for-1.49
basis (the “June 2021 Reverse Stock Split”), which was effected on June 23, 2021. The par value and the number of authorized shares of the convertible preferred stock and common stock were not adjusted in connection with the June 2021 Reverse Stock Split. All references to common stock, convertible preferred stock, warrants to purchase common stock, warrants to purchase convertible preferred stock, options to purchase common stock, share data, per share data and related information contained in the financial statements have been retrospectively adjusted to reflect the effect of the June 2021 Reverse Stock Split for all periods presented. No fractional shares of the Company’s common stock were issued in connection with the June 2021 Reverse Stock Split. Any fractional share resulting from the June 2021 Reverse Stock Split was rounded down to the nearest whole share, and any stockholder entitled to a fractional share as a result of the June 2021 Reverse Stock Split
will receive
 a cash payment in lieu of receiving fractional shares.
Initial Public Offering
On July 6, 2021, the Company issued 9,999,999 shares of common stock in an initial public offering (“IPO”), 
and on July 8, 2021, the Company issued an additional
 1,499,999
shares of common stock that were purchased by the underwriters pursuant to the underwriters’ option to purchase additional shares at the public offering price less underwriting discounts and commissions. The price to the public for each share was
 $16.00.
 
The aggregate net proceeds from the Company’s IPO, after underwriting discounts and commissions and other offering expenses of $15.4 million, were $168.6 million. 
On July 6, 2021, in connection with the closing of the IPO,
477,297 shares of Series A, 7,985,305
shares of Series A-1,
and 19,770,070
shares of Series B convertible preferred stock, respectively, automatically converted into an equal number of shares of common stock and warrants to purchase shares of common stock were automatically net exercised for the purchase of an aggregate of
178,847
shares of common stock. 
As a result of the IPO, the underwriters’ exercise of their option, the conversions of the Series A,
A-1
and B convertible preferred stock, and the exercise of the warrants, the Company’s total number of outstanding shares increased by 39,911,517 immediately following the closing of the IPO. See Note 9 for further information regarding subsequent events.
5

Table of Contents
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
Liquidity and Capital Resources
The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2021 and December 31, 2020, the Company had an accumulated deficit of $115.3 million and $27.0 million, respectively, and working capital of $66.1 million and $38.1 million, respectively. The Company has historically relied on raising capital from venture capital firms and private investors and funding from a government grant to finance its operations.
On June 9, 2021, the Board and the holders of more than 67% of the then outstanding shares of Series B convertible preferred stock held by the Series B purchasers (the “Requisite Investors”) elected to waive the achievement of the milestone subject to the terms and conditions of the Series B Preferred Stock Purchase Agreement (the “Series B Agreement”) and consummate the subsequent closing (the “Milestone Closing”) (see Note 4). On June 17, 2021, the Milestone Closing for the Series B convertible preferred stock occurred, resulting in the sale of 7,908,027 shares of Series B convertible preferred stock at $3.80 per share for gross proceeds of $30.0 million.
As a result of the Milestone Closing and the closing of the Company’s IPO on July 6, 2021, management believes that its existing financial resources are sufficient to continue operating activities at least through 2024. Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of the Company’s products. The Company may need to obtain additional financing to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. Until such time, if ever, the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that such financing will be available on terms acceptable to the Company, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation of other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts. 
The impact of the coronavirus
(“COVID-19”)
outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of
COVID-19
on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected.
NOTE 2. BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying condensed financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.
Emerging Growth Company
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s condensed financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended, the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
 
6

Table of Contents
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
Use of Estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts and historical experience, as well as other pertinent industry and regulatory authority information, including the potential future effects of
 
COVID-19,
 
the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company’s cash equivalents consist of funds held in a money market account. The Company had 
$
36.8
 
million in cash equivalents as of
 
both 
June
 
30, 2021 and December 31,
 
2020.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality.
 
The Company has not experienced any losses on these deposits.
Fair Value of Financial Instruments
The Company’s financial assets and liabilities are accounted for in accordance with Accounting Standards Codification (“ASC”) 820,
Fair Value Measurements and Disclosure
s
,
which defines fair value 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. The fair value hierarchy requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
Level 1— Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgement. Accordingly, the degree of judgement exercised by management in determining fair value is greatest for instruments categorized as 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.
 
7

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
The following tables present the Company’s fair value hierarchy for its money market securities, preferred stock tranche rights liability and preferred stock warrant liability measured at fair value on a recurring basis (in thousands):
 
  
Fair value measurements at reporting date using
 
  
Fair Value at
June 30, 2021
 
 
  
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
 
  
Significant
Other
Observable
Inputs (Level 2)
 
  
Significant
Unobservable
Inputs (Level 3)
 
Assets included in:
                                   
Cash and cash equivalents
                                   
Money market securities
   $ 36,766      $      $      $ 36,766  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
   $ 36,766      $      $      $ 36,766  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
 
 
    
Fair value measurements at reporting date using
        
    
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
    
Significant
Other
Observable
Inputs (Level 2)
    
Significant
Unobservable
Inputs (Level 3)
    
Fair Value at
December 31, 
2020
 
Assets included in:
                                   
Cash and cash equivalents
                                   
Money market securities
   $ 36,758      $ —        $ —        $ 36,758  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
   $ 36,758      $ —        $ —        $ 36,758  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities included in:
                                   
Preferred stock tranche rights liability
   $ —        $ —        $ 5,033      $ 5,033  
Preferred stock warrant liability
     —          —          380        380  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total fair value
   $ —        $ —        $ 5,413      $ 5,413  
    
 
 
    
 
 
    
 
 
    
 
 
 
The carrying values reported in the Company’s condensed balance sheets for cash and cash equivalents, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.
Refer to Note 4 for further information about the Level 3 rollforward of activity and Level 3 inputs.
Grant Receivable
Grant receivable consists of research expenses reimbursable under a grant from the National Institute of Health (“NIH”). The Company carries its grant receivable at the unreimbursed amount. On a periodic basis, the Company evaluates its grant receivable to determine whether an allowance is required. The allowance is management’s best estimate of probable losses. Management determined that no allowance was necessary as of
June 30, 2021 and December 31, 2020.
Convertible Preferred Stock
The Company records shares of convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The Company has applied the guidance in ASC
480-10-S99-3A,
SEC Staff Announcement: Classification and Measurement of Redeemable Securities
and has therefore classified the Series A, Series
A-1
and Series B convertible preferred stock as mezzanine equity. The convertible preferred stock is recorded outside of stockholders’ deficit because, in the event of certain deemed liquidation events considered not solely within the Company’s control, such as a merger, acquisition and sale of all or substantially all of the Company’s assets (a “Deemed Liquidation Event”), the convertible preferred stock will become redeemable at the option of the holders. In the event of a change of control of the Company, proceeds received from the sale of such shares will be distributed in accordance with the corresponding liquidation preferences. The Company did not adjust the carrying values of the convertible preferred stock to the deemed liquidation values of such shares since a liquidation event was not probable at any of the reporting dates. Subsequent adjustments to increase or decrease the carrying values to the ultimate liquidation values will be made only if and when it becomes probable that such a liquidation event will occur.
Preferred Stock Tranche Rights Liability
The Company determined that its obligation to issue, and the Company’s investors’ right to purchase, additional shares of Series B convertible preferred stock pursuant to the Milestone Closing (see Note 1 and Note 4) represented a freestanding financial instrument (the “tranche liability”). The tranche liability was initially recorded at fair value. The proceeds from the sale of the convertible preferred stock were first allocated to the fair value of the tranche liability with the remaining proceeds from the sale of the convertible preferred stock allocated to the Series B convertible preferred stock. The tranche liability was remeasured at each reporting period and upon the exercise of the obligation, with gains and losses arising from subsequent changes in its fair value recognized in other income and expense in the condensed statements of operations. As discussed above in Note 1, the Milestone Closing occurred on June 17, 2021 and, as a result, the remaining value of the tranche liability was reclassified to convertible preferred stock on the condensed balance sheet.
 
8

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
Preferred Stock Warrant Liability
The Company accounted for the warrant to purchase Series
A-1
convertible preferred stock as a liability as this warrant was a freestanding financial instrument that required the Company to transfer assets upon exercise. The warrant liability was initially recorded at fair value. The warrant liability was remeasured at each reporting period and upon the exercise of the applicable warrant, with gains and losses arising from subsequent changes in its fair value recognized in other income and expense in the condensed statements of operations. The warrant was exercised on June 22, 2021 and the remaining value of the warrant liability was reclassified to convertible preferred stock on the condensed balance sheet.
Common Stock Warrants
The Company assesses whether warrants issued require accounting as derivatives. The Company determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with FASB ASC Topic 815,
 Derivatives and Hedging
. As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity.
Grant and Other Revenue Recognition
The Company’s NIH grant is not within the scope of ASC 606,
Revenue from Contracts with Customers
(“ASC 606”)
,
as the grant does not meet the definition of a contract with a customer. The Company has concluded that the grant meets the definition of a contribution and is a
non-reciprocal
transaction, and management has also concluded that Subtopic
958-605,
 Not-for-Profit-Entities-Revenue
Recognition
 does not apply, as Acumen is a business entity and the grant is with a governmental agency.
In the absence of applicable guidance under U.S. GAAP, the Company’s policy is to recognize grant revenue when the related costs are incurred and the right to payment is realized. Costs incurred are recorded in research and development and general and administrative expenses on the accompanying condensed statements of operations.
The Company believes the recognition of revenue as costs are incurred and amounts become realizable is analogous to the concept of transfer of control of a service over time under ASC 606.
Research and Development Expenses
Research and development expenses primarily consist of consultants and materials, biologic storage, salaries and other personnel-related expenses related to research and development activities and are expensed as incurred. 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 on the condensed balance sheets as prepaid or accrued expenses. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs.
Stock-based Compensation
The Company expenses stock-based compensation to employees,
non-employees
and board members over the requisite service period based on the estimated grant-date fair value of the awards and actual forfeitures. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, which requires the use of a number of complex assumptions including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends, and the expected term of the option. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. All stock-based compensation costs are recorded in research and development expense or general and administrative expense in the condensed statements of operations based upon the respective employee’s or
non-employee’s
roles within the Company. Forfeitures are recorded as they occur. See also Note 6 below.
9

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
Income Taxes
Income taxes are recorded in accordance with ASC 740,
Income Taxes
(“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse, and net operating loss (“NOL”) carryforwards and research and development tax credit (“R&D Credit”) carryforwards. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero. In the event the Company were to determine that it would be able to realize some or all its deferred income tax assets in the future, an adjustment to the deferred income tax asset valuation allowance would increase income in the period such determination was made.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company has not recorded any accruals related to uncertain tax positions as of June 30, 2021 and December 31, 2020. The Company’s policy is to record interest and penalties, if any, as part of income tax benefit. No interest or penalties were recorded during the six months ended June 30, 2021 and 2020.
Net Loss Per Share of Common Stock
Basic net loss per share of common stock is calculated using the
two-class
method under which earnings are allocated to both common shares and participating securities based on their participation rights. Net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holders of the convertible preferred stock do not have a contractual obligation to share in any losses. Basic net loss per share is calculated by dividing the net loss attributable to common shares by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of stock options and warrants to purchase common stock (using the treasury stock method), and the conversion of convertible preferred stock and the preferred warrant (using the
if-converted
method). See Note 8 below.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU
No. 2016-02,
Leases (Topic 842)
, as amended, with guidance regarding the accounting for and disclosure of leases. This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will become effective for the Company for annual reporting periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The adoption of Topic 842 is not expected to have a material impact on the financial statements.
In December 2019, the FASB issued ASU
No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
(“ASU
2019-12”),
which is intended to simplify various aspects related to accounting for income taxes. ASU
2019-12
removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements.
 
10

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
NOTE 3. SUPPLEMENTAL FINANCIAL INFORMATION
Prepaid expenses and other current assets consisted of the following (in thousands):
 
    
June 30,
2021
    
December 31,
2020
 
Research and development service agreements
   $ 1,491      $ 432  
Prepaid raw materials
     65        91  
Other
     95        20  
    
 
 
    
 
 
 
Total prepaid expenses and other current assets
   $ 1,651      $ 543  
    
 
 
    
 
 
 
Accrued expenses and other current liabilities consisted of the following (in thousands):
 
    
June 30,
2021
    
December 31,
2020
 
Research and development
   $ 453      $ 133  
Bonuses and other employee liabilities
     600        —    
Professional fees
     506        200  
Other
     52        90  
    
 
 
    
 
 
 
Total accrued expenses and other current liabilitie
s
   $ 1,611      $ 423  
    
 
 
    
 
 
 
NOTE 4. CONVERTIBLE PREFERRED STOCK, TRANCHE LIABILITY AND WARRANT LIABILIT
Y
Convertible Preferred Stock
On November 20, 2020, the Company entered into the Series B Agreement for a private placement of up to 19,770,070 shares of Series B convertible preferred stock, $0.0001 par value per share, at an original issuance price of $3.80 per share, subject to separate closings, including: (1) 11,862,043 shares at the Initial Closing on November 20, 2020, and (2) 7,908,027 shares at a subsequent closing that would be triggered by the achievement of a specific clinical milestone. The Series B Agreement obligated the Company to issue and sell and the Series B purchasers to purchase up to a total of 7,908,027 additional shares of Series B convertible preferred stock (the “Milestone Shares”) at the same price per share upon the achievement of a certain defined clinical milestone. The determination as to whether the milestone event has been met was subject to certification by the Board and the Requisite Investors. Each Series B convertible preferred stock investor had the right, but not the obligation, to purchase all or any portion of the Milestone Shares at any time in its sole option and in its sole and absolute discretion, whether or not the Company achieved the applicable clinical milestone. See “
Series B Convertible Preferred Stock Tranche Rights Liability
” below).
As discussed above in Note 1, on June 9, 2021, the Board and the Requisite Investors elected to waive the achievement of the milestone subject to the terms and conditions of the Series B Agreement and consummate the Milestone Closing and, on June 17, 2021, the Milestone Closing occurred, resulting in the sale of 7,908,027 shares of Series B convertible preferred stock at $3.80 per share for gross proceeds of $30.0 million.
On June 22, 2021, a warrant to purchase 447,426 shares of Series
A-1
convertible preferred stock at an exercise price of $2.794 per share was exercised (see
“Series
A-1
Convertible Preferred Stock Warrant Liability”
below).
Convertible preferred stock consisted of the following (in thousands, except share and per share data):
 
    
June 30, 2021
 
    
Shares
Authorized
    
Shares
Issued and
Outstanding
    
Weighted
Average
Issuance
Price per
Share
    
Carrying
Value
    
Liquidation
Preference
 
Series A
     711,203        477,297      $ 2.24      $ 1,067      $ 1,067  
Series
A-1
     11,898,177        7,985,305        2.27        22,963        18,097  
Series B
     29,457,450        19,770,070        3.80        150,474        75,116  
    
 
 
    
 
 
             
 
 
    
 
 
 
Total
     42,066,830        28,232,672               $ 174,504      $ 94,280  
    
 
 
    
 
 
             
 
 
    
 
 
 
 
11

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
    
December 31, 2020
 
    
Shares
Authorized
    
Shares
Issued and
Outstanding
    
Weighted
Average
Issuance
Price per
Share
    
Carrying
Value
    
Liquidation
Preference
 
Series A
     711,203        477,297      $ 2.24      $ 1,067      $ 1,067  
Series
A-1
     11,898,177        7,537,879        2.24        16,333        16,847  
Series B
     29,457,450        11,862,043        3.80        39,253        45,070  
    
 
 
    
 
 
             
 
 
    
 
 
 
Total
     42,066,830        19,877,219               $ 56,653      $ 62,984  
    
 
 
    
 
 
             
 
 
    
 
 
 
Dividends
The holders of Series B, Series
A-1
and Series A convertible preferred stock were entitled to receive dividends ahead of, or simultaneously with, common stockholders in an amount equal to the product of (A) the dividend payable on each share of the class or series of convertible preferred stock determined, if applicable, as if all shares of such class or series of convertible preferred stock had been converted into common stock and (B) the number of shares of common stock issuable upon conversion of a share of preferred stock. No dividends have been declared since inception.
Liquidation preference
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Series B convertible preferred stock were entitled to receive, prior and in preference to, holders of Series
A-1
convertible preferred stock, Series A convertible preferred stock, and holders of common stock, in the amount of the original issue price plus any declared but unpaid dividends thereon. If upon occurrence of such an event, the assets and funds to be distributed among the holders of Series B convertible preferred stock were insufficient to permit full payment to such holders, the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of the Series B convertible preferred stock.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Series
A-1
convertible preferred stock were entitled to receive, prior and in preference to, holders of Series A convertible preferred stock and holders of common stock, in the amount of the original issue price plus any declared but unpaid dividends thereon. If upon occurrence of such an event, the assets and funds to be distributed among the holders of Series
A-1
convertible preferred stock were insufficient to permit full payment to such holders, the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of the Series
A-1
convertible preferred stock.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Series A convertible preferred stock were entitled to receive, prior and in preference to, holders of common stock, in the amount of the original issue price plus any declared but unpaid dividends thereon. If upon occurrence of such an event, the assets and funds to be distributed among the holders of Series A convertible preferred stock were insufficient to permit full payment to such holders, the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of the Series A convertible preferred stock.
Conversion rights
Shares of all series of convertible preferred stock were convertible into such number of fully paid and
non-assessable
shares of common stock as determined by dividing the original issuance price for such series by the applicable conversion price for such series then in effect. The initial conversion price per share for each series of convertible preferred stock was the original issue price applicable to such series as shown in the table above, subject to adjustment in the event of certain dilutive issuances. The convertible preferred stock original issuance price and conversion price were each subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the convertible preferred stock.
Each share of convertible preferred stock was convertible at any time at the option of the holder at the conversion ratio then in effect. In addition, each share of convertible preferred stock was to be automatically converted into common stock at the conversion ratio then in effect upon either (a) the closing of an underwritten public offering resulting in gross proceeds to the Company of at least $75 million and at a price per share equal to at least two times the Series B original issuance price, or $7.60 (subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B convertible preferred stock), or (b) the date and time, or the occurrence of an event, specified in such vote or written consent of at least 67% of the holders of the then outstanding shares of Series B convertible preferred stock
.
 
12

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
 
If any Series B purchaser failed to purchase its respective portion of the Milestone Shares upon occurrence of the Milestone Closing, each existing share of Series B convertible preferred stock held by such stockholder would have automatically converted into one share of common stock two days after the Milestone Closing.
On July 6, 2021, in connection with the closing of the IPO, each outstanding share of Series A, Series
A-1
and Series B convertible preferred stock converted into one share of common stock.
Voting rights
Holders of convertible preferred stock were entitled to vote as a single class together with the holders of common stock and had one vote for each share of common stock into which the convertible preferred stock was convertible.
The holders of Series B convertible preferred stock were entitled to elect two directors to the Board, and the holders of Series A and Series
A-1
convertible preferred stock, voting together as a single class, were also entitled to elect two directors to the Board. The holders of common stock, exclusively and as a separate class, are entitled to elect
 
two directors to the Board. The final director to the Board was designated by the holders of a majority of the shares of the preferred stock and common stock, voting together as a single class.
A majority of the outstanding shares of convertible preferred stock was necessary for approving certain matters, including the ability to either increase or decrease the authorized number of directors constituting the Board, pursuant to protective provisions in the Company’s amended and restated certificate of incorporation.
Series B Convertible Preferred Stock Tranche Rights Liability
The Company concluded that the tranche liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series B convertible preferred stock. The fair value for the tranche liability was estimated as a forward contract using a valuation model, calibrated at issuance. The valuation model at issuance estimated the implied value of the Series B stock as of the expected milestone date utilizing the probability of milestone achievement, expected timing of milestone achievement, and risk-free rate. The model was calibrated such that the value of the initial tranche and the forward contract were equal to the initial tranche proceeds at issuance. Subsequently, the fair value of the liability was discounted to the valuation date and adjusted for probability of the achievement of the milestone event. The calibrated valuation model was updated as of December 31, 2020, March 31, 2021 and in the Stay Private scenario utilized in the hybrid methodology as of June 17, 2021 (the date of the Milestone Closing). Significant estimates and assumptions impacting fair value include the discount rate, expected time to the Milestone Closing, and probability of the Milestone Closing. The discount rate was equal to the risk-free rate commensurate with the estimated timing of the Milestone Closing.
The following assumptions were used in the estimation of the fair value of the tranche liability as a forward contract as of each of the dates indicated:
 
    
June 17,
2021
 
December 31,
2020
Risk-free interest rate
   0.07%   0.12
Expected time to Milestone Closing (in years)
   0.8   1.3
Probability of achievement of Milestone Closing
   100   65
For the other portion of the hybrid method used as of
 
June
17
, 2021, the fair value for the tranche liability was estimated based upon an allocation of the underlying equity value, which was determined using an IPO value as estimated through analysis of IPOs for comparable guideline companies, to arrive at a value per share in the IPO scenario. The estimated fair value of the tranche liability was $81,190,000 and $5,033,000 as of the Milestone Closing on
June 17
, 2021 and December 31, 2020, respectively. The significant increase in the
June
17
, 2021 valuation stems from
 
both
a shift in methodology from an option pricing method (“OPM”) to a Hybrid Model where the concluded value of the forward tranche is derived by the sum of the probability weighted present value of the forward tranche in the Stay Private and IPO scenarios (with the former including all other potential exit scenarios other than an imminent IPO
),
 
as well as the increase in the probability of achievement of the Milestone Closing. The resulting difference in estimated fair value
was
recognized as a change in fair value within other income in the accompanying condensed statements of operations.
The tranche liability was revalued each reporting period with the change in fair value recorded in the accompanying condensed statements of operations through the issuance of the Milestone Shares on June 17, 2021. Following the Milestone Closing, the
 
remaining tranche
 liability was reclassified to convertible preferred stock on the condensed balance sheet.
 
13

Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Series
A-1
Convertible Preferred Stock Warrant Liability
On October 19, 2018, the Company issued a
10-year
warrant (the “Series
A-1
Warrant”) to purchase up to an aggregate of 447,426 shares of Series
A-1
convertible preferred stock at an exercise price of $2.794 on or before October 18, 2028.
The warrant liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series
A-1
convertible preferred stock. As such, it was revalued each reporting period with the change in fair value recorded in the accompanying condensed statements of operations until the warrant was exercised on June 22, 2021.
The fair value of the warrant liability was estimated using the OPM backsolve method as of December 31, 2020 and using a hybrid method, which included an OPM backsolve in the Stay Private scenario as of June 
22
, 2021. The following assumptions were used in the estimation of the fair value of the warrant liability using the OPM backsolve method as of each of the dates indicated:
 
 
  
June 22,
2021
 
December 31,
2020
Risk-free interest rate
     0.25     0.13%
Expected term (in years)
     2.0     2.0
Expected volatility
     90     90%
Expected dividend yield
   0   0%
The hybrid method used to value the warrant liability at
June
22
, 2021 considered both the underlying equity value determined using the OPM backsolve method in a Stay Private scenario, as well as the underlying equity value that was determined using an expected IPO value as estimated through analysis of IPOs for comparable guideline companies, to arrive at a value per share in the IPO scenario. The underlying equity values from each approach were probability weighted based upon the expected likelihood of each scenario. The fair value of the warrant liability was estimated to be $12.02 and $0.85 as of June 
22
, 2021 and December 31, 2020, respectively
.
The following table provides a reconciliation of the tranche liability and warrant liability measured at fair value using Level 3 significant unobservable inputs (in thousands):
 
    
Series A-1

Preferred
Stock Warrant
    
Series B
Tranche
Rights
    
Total
 
Balance, December 31, 2020
   $ 380      $ 5,033      $ 5,413  
Change in fair value
     5,000        76,157        81,157  
Settlement of tranche liability due to issuance of Milestone Shares
    
 
 
       (81,190      (81,190 )  
Settlement of warrant liability upon exercise of warrant
     (5,380     
 
 
       (5,380
    
 
 
    
 
 
    
 
 
 
Balance, June 30, 2021
   $      $      $  
    
 
 
    
 
 
    
 
 
 
NOTE 5. STOCKHOLDERS’ DEFICIT
Authorized Shares
The Company amended its certificate of incorporation on November 20, 2020, such that the total number of shares of common stock authorized to be issued was increased to 50,500,000, and the total number of shares of preferred stock authorized to be issued was increased to 42,066,830, of which 711,203 were designated Series A convertible preferred stock, 11,898,177 were designated as Series
A-1
convertible preferred stock and 29,457,450 were designated as Series B convertible preferred stock. The certificate of incorporation was also amended for the reverse stock splits that became effective on June 23, 2021 and November 20, 2020, but there were no changes to the authorized shares as a result of the reverse stock split that became effective on June 23, 2021 (see Note 1).
See additional information in Note 9 related to an amendment to the Company’s certificate of incorporation effective upon the closing of the IPO on July 6, 2021.
 
14
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Common Stock
As of June 30, 2021, the Company’s Amended and Restated Certificate of Incorporation authorized the issuance of 50,500,000 shares of common stock, $0.0001 par value per share. Each share of common stock was entitled to one voting right. The holders of common stock were entitled to elect two directors to the Board. Holders of common stock, voting together as a single class with the holders of preferred stock, could also designate an additional director to the Board. Common stock owners were entitled to dividends when funds are legally available and declared by the Board.
Common Stock Warrants
In June 2021, several holders of warrants to purchase the Company’s common stock exercised their warrants and purchased a total
 of 137,446 shares of common stock at an exercise price of $4.47.
As of June 30, 2021 and December 31, 2020, the remaining outstanding warrants to purchase the Company’s common stock were comprised of the following:
 
 
  
Equity Upon
Exercise
 
  
Exercise Price
 
  
Expiration Dates
 
  
 
June 30, 3021
  
December 31, 2020
 
Warrants issued in 2014
  
 
Common Stock
 
  
$
4.47
 
  
 
3/21/2024 - 6/30/2025
 
  
 
72,178
  
 
83,726
 
Warrants issued in 2015
  
 
Common Stock
 
  
$
4.47
 
  
 
6/30/2025
 
  
 
109,908
  
 
209,690