(Registrant’s ~~Telephone Number, Including Area Code)~~telephone number, including area code)

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

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

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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

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

As of ~~May 9, 2018~~November 1, 2021, the registrant had ~~20,130,766~~31,760,946 shares of Common Stock ($0.001 par value) outstanding.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or other comparable terms. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include the factors discussed below under the heading “Risk Factor Summary,” and the risk factors detailed further in Item 1A., “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.

	March 31, 2018			December 31, 2017			September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	53,102		$	63,534		$	67,633			$	74,866
Certificate of deposit		50			50
Research and development contract advances		1,383			852
Marketable securities								—				10,003
Accounts receivable								771				1,417
Prepaid expenses and other current assets		884			403			1,851				1,241
Deposits, short-term		510			226
Total current assets		55,929			65,065			70,255				87,527
Property and equipment, net		2,423			1,691			2,339				2,108
Trademark		175			175
Long-term service contract		23			23
Operating lease right-of-use								3,369				6,774
Deposits		776			—			2,619				2,572
Restricted cash								150				150
Other long-term assets								143				402
Total assets	$	59,326		$	66,954		$	78,875			$	99,533
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	1,166		$	1,331
Accrued compensation and related expenses		259			857
Research and development collaboration agreement deferred credit		2,309			2,500
Research and development contract liabilities		341			623
Deferred rent		9			36
Accounts payable							$	2,470			$	2,070
Accrued expenses								3,989				2,787
Research and development contract liability, current portion								5,263				6,681
Operating lease liability, current portion								3,633				4,777
Total current liabilities								15,355				16,315
Research and development contract liability, net of current portion								—				1,938
Operating lease liability, net of current portion								—				2,369
Total liabilities		4,084			5,347		$	15,355			$	20,622
Commitments and contingencies
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred Stock, $0.001 par value; 10,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2018 and December 31, 2017		—			—
Common stock, $0.001 par value; 50,000,000 shares authorized; 20,130,766 and 19,459,194 shares issued and outstanding, at March 31, 2018 and December 31, 2017, respectively		20			19
Common stock to be issued		—			1
Preferred Stock, $0.001 par value; 10,000,000 shares authorized and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020								—				—
Common stock, $0.001 par value; 100,000,000 shares authorized; 31,361,995 and 30,351,366 shares issued and outstanding, at September 30, 2021 and December 31, 2020, respectively								32				30
Additional paid in capital		95,566			94,408			252,550				232,159
Accumulated other comprehensive income								—				7
Accumulated deficit		(40,344	)		(32,821	)		(189,062	)			(153,285	)
Total stockholders’ equity		55,242			61,607			63,520				78,911
Total liabilities and stockholders’ equity	$	59,326		$	66,954		$	78,875			$	99,533

The accompanying notes are an integral part of these ~~condensed~~consolidated financial statements.

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2021			2020			2021			2020
Revenue	$	—		$	—
Collaboration revenue							$	2,395		$	704		$	6,687		$	2,679
Operating expenses:
General and administrative		1,703			889			4,125			3,318			12,660			11,205
Research and development		5,819			2,461			11,288			7,517			29,846			25,542
Total operating expenses		7,522			3,350			15,413			10,835			42,506			36,747
Loss from operations		(7,522	)		(3,350	)		(13,018	)		(10,131	)		(35,819	)		(34,068	)
Other income (expense):
Other income (expense), net		(1	)		—
Total other income (expense)		(1	)		—
Other income:
Interest income, net								25			100			42			386
Total other income								25			100			42			386
Net loss	$	(7,523	)	$	(3,350	)	$	(12,993	)	$	(10,031	)	$	(35,777	)	$	(33,682	)
Net loss per share basic and diluted	$	(0.37	)	$	(0.31	)
Weighted average common shares outstanding, basic and diluted		20,064			10,636
Unrealized (loss) gain from available-for-sale securities								—			83			(7	)		82
Comprehensive loss							$	(12,993	)	$	(9,948	)	$	(35,784	)	$	(33,600	)
Net loss per common share – basic and diluted							$	(0.41	)	$	(0.34	)	$	(1.16	)	$	(1.20	)
Weighted average common shares outstanding – basic and diluted								31,515,178			29,650,909			31,064,579			28,151,361

The accompanying notes are an integral part of these ~~condensed~~consolidated financial statements.

Three Months Ended March 31,

2018

2017

Cash flows from operating activities

Net loss

$
(7,523
)

$
(3,350
)
Adjustments to reconcile net loss to cash used in operating activities:

Depreciation

167

67

Stock-based compensation expense

1,158

543

Deferred rent

(27
)

(27
)
Changes in operating assets and liabilities:

Research and development contract advances

(531
)

(423
)
Prepaid expenses and other current assets

(481
)

(20
)
Deposits

(1,060
)

(101
)
Accounts payable and accrued expenses

(390
)

(76
)
Accrued compensation and related expenses

(599
)

(77
)
Research and development contract liabilities

(282
)

—

Research and development agreement deferred credits

(191
)

—

Net cash used in operating activities

(9,759
)

(3,464
)
Cash flows from investing activities

Purchases of property and equipment

(673
)

(556
)
Net cash used in investing activities

(673
)

(556
)
Net increase (decrease) in cash

(10,432
)

(4,020
)
Cash at beginning of period

63,534

14,926

Cash at end of period

$
53,102

$
10,906

Supplemental disclosures of cash flow information:

Purchases of property and equipment in accounts payable and accrued expenses

$
227

$
29

Accrual of deferred offering costs

$
—

$
76

For the three months ended September 30, 2021 and 2020:
	Common Stock					Additional			Accumulated Other						Total
	Shares			Par Value		Paid-in Capital			Comprehensive Income (Loss)			Accumulated Deficit			Stockholders’ Equity
Balance, June 30, 2021		31,470,216		$	31	$	248,948		$	-		$	(176,069	)	$	72,910
Stock-based compensation		—			—		3,252			—			—			3,252
Exercise of stock options		113,750			1		833			—			—			834
Restricted stock awards released		81,667					(1	)		—			—			(1	)
Restricted stock awards withheld at vesting to cover taxes		(33,638	)		—		(482	)		—			—			(482	)
Net loss		—			—		—			—			(12,993	)		(12,993	)
Balance, September 30, 2021		31,631,995		$	32	$	252,550		$	—		$	(189,062	)	$	63,520

Balance, June 30, 2020		29,303,192		$	29	$	212,121		$	155		$	(132,151	)	$	80,154
Issuance of common stock from ATM offering, net of sales agent commission and fees		842,000			1		14,328			—			—			14,329
Stock-based compensation		—			—		2,500			—			—			2,500
Exercise of stock options		101,125			—		719			—			—			719
Restricted stock awards released		6,666			—		—			—			—			—
Restricted stock awards withheld at vesting to cover taxes		(1,900	)		—		(35	)		—			—			(35	)
Unrealized losses from available-for-sale securities		—			—		—			(83	)		—			(83	)
Net loss		—			—		—			—			(10,031	)		(10,031	)
Balance, September 30, 2020		30,251,083		$	30	$	229,633		$	72		$	(142,182	)	$	87,553

For the nine months ended September 30, 2021 and 2020:
	Common Stock					Additional			Accumulated Other						Total
	Shares			Par Value		Paid-in Capital			Comprehensive Income (Loss)			Accumulated Deficit			Stockholders’ Equity
Balance, December 31, 2020		30,351,366		$	30	$	232,159		$	7		$	(153,285	)	$	78,911
Issuance of common stock from ATM offering, net of sales agent commission and fees		907,700			1		10,356			—			—			10,357
Stock-based compensation		—			—		8,541			—			—			8,541
Exercise of stock options		307,105			1		2,061			—			—			2,062
Issuance of common stock upon exercise of warrants, net		8,048			—		—			—			—			—
Restricted stock awards released		98,333			—		—			—			—			—
Restricted stock awards withheld at vesting to cover taxes		(40,557	)		—		(567	)		—			—			(567	)
Unrealized losses from available-for-sale securities		—			—		—			(7	)		—			(7	)
Net loss		—			—		—			—			(35,777	)		(35,777	)
Balance, September 30, 2021		31,631,995		$	32	$	252,550		$	-		$	(189,062	)	$	63,520

Balance, December 31, 2019		26,562,178		$	26	$	163,068		$	(10	)	$	(108,500	)	$	54,584
Issuance of common stock from ATM offering, net of sales agent commission and fees		3,016,901			3		56,679			—			—			56,682
Stock-based compensation		—			—		8,199			—			—			8,199
Exercise of stock options		377,747			—		1,799			—			—			1,799
Issuance of common stock upon exercise of warrants, net		278,179			1		(1	)		—			—			—
Restricted stock awards released		23,332			—		—			—			—			—
Restricted stock awards withheld at vesting to cover taxes		(7,254	)		—		(111	)		—			—			(111	)
Unrealized gains from available-for-sale securities		—			—		—			82			—			82
Net loss		—			—		—			—			(33,682	)		(33,682	)
Balance, September 30, 2020		30,251,083		$	30	$	229,633		$	72		$	(142,182	)	$	87,553

The accompanying notes are an integral part of these ~~condensed~~consolidated financial statements.

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(35,777	)	$	(33,682	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		948			804
Stock-based compensation		8,541			8,199
Change in operating lease right-of-use asset		3,405			(2,539	)
Amortization of premium/discount on purchased securities		(5	)		77
Loss on disposal of fixed asset		(21	)		—
Changes in operating assets and liabilities:
Account receivable		646			298
Prepaid expenses and other current assets		(867	)		(443	)
Other assets		250			(250	)
Deposits		(47	)		—
Accounts payable		400			225
Accrued expenses		1,202			355
Research and development contract liability		(3,354	)		(945	)
Operating lease liability		(3,513	)		2,406
Net cash used in operating activities		(28,192	)		(25,495	)
Cash flows from investing activities
Purchases of property and equipment		(913	)		(487	)
Cash received from the sale of fixed assets		21			—
Redemption of short-term investments		10,000			5,000
Purchases of marketable securities		—			(9,949	)
Net cash provided by (used in) investing activities		9,108			(5,436	)
Cash flows from financing activities
Proceeds from ATM offering, net of sales agent commission and fees		10,357			56,682
Proceeds from exercise of stock options		2,061			1,799
Restricted stock awards withheld at vesting to cover taxes		(567	)		(111	)
Net cash provided by financing activities		11,851			58,370
Net (decrease)/increase in cash, cash equivalents, and restricted cash		(7,233	)		27,439
Cash, cash equivalents, and restricted cash at beginning of period		75,016			44,440
Cash, cash equivalents, and restricted cash at end of period	$	67,783		$	71,879

The accompanying notes are an integral part of these consolidated financial statements.

For the three and nine months ended ~~March 31, 2018~~September 30, 2021 and ~~2017~~2020

Cue Biopharma, Inc. (the “Company”) was incorporated in the State of Delaware on December 31, 2014 under the name Imagen Biopharma, Inc., and completed its organization, formation, and initial capitalization activities effective as of January 1, 2015. In October 2016, the Company changed its name to Cue Biopharma, Inc. The Company’s corporate office and research facilities are located in Cambridge, Massachusetts.

The Company is a ~~pre-clinical~~clinical-stage biopharmaceutical company ~~that is developing~~engineering a novel ~~and proprietary~~ class of ~~biologic drugs for~~injectable biologics designed to selectively engage and modulate targeted T cells within the ~~selective modulation of the human immune system~~body to treat a broad range of cancers, chronic infectious diseases, and autoimmune ~~disorders.~~

The accompanying condensed financial statements as of March 31, 2018, and for the three months ended March 31, 2018 and 2017, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these condensed financial statements reflect all adjustments which are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. These condensed financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2018.

The information presented in the condensed financial statements and related notes as of March 31, 2018, and for the three months ended March 31, 2018 and 2017, is unaudited. The December 31, 2017 condensed balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

~~Interim results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018, or any future periods.~~diseases.

The Company is in the development stage and has incurred recurring losses and negative cash flows from ~~operations.~~operations since inception. As of ~~March 31, 2018,~~September 30, 2021, the Company had cash and cash equivalents of approximately ~~$53,102,000.~~$67,633,000. Management believes that current cash and cash equivalents on hand at ~~March 31, 2018 should be~~September 30, 2021 are sufficient to fund operations for at least the next twelve months from the date of issuance of these financial ~~statements. The~~statements; however, the future viability of the Company is dependent on its ability to raise additional capital to finance its operations and to fund increased research and development costs in order to seek approval for commercialization of its product candidates. The Company’s failure to raise capital as and when needed would have a negative impact on its financial condition and its ability to pursue its business strategies as this capital is necessary for the Company to perform the research and development activities required to ~~develop~~commercialize the Company’s product candidates in order to generate future revenue streams.

The accompanying unaudited consolidated financial statements as of September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States (“U.S. GAAP”) for financial information, which prescribes elimination of all significant intercompany accounts and transactions in the accounts of the Company and its wholly owned subsidiary, Cue Biopharma Securities Corp., which was incorporated in the Commonwealth of Massachusetts in December 2018. In the opinion of management, these financial statements reflect all adjustments which are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2021.

Interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021, or any future periods.

In March 2020, the Company entered into an “at-the-market” (“ATM”) equity offering sales agreement (the “March 2020 ATM Agreement”) with Stifel Nicolaus & Company, Inc. (“Stifel”) to sell shares of the Company’s common stock for aggregate gross proceeds of up to $35 million, from time to time, through an ATM equity offering program under which Stifel would act as sales agent. As of September 30, 2021, the Company sold 1,824,901 shares of common stock under the March 2020 ATM Agreement for proceeds of approximately $34.3 million, net of commissions paid, but excluding estimated transaction expenses. Due to the issuance and sale of all the shares of common stock available for sale, the March 2020 ATM Agreement terminated in accordance with its terms.

In June 2020, the Company entered into an ATM equity offering sales agreement with Stifel (the “June 2020 ATM Agreement”) to sell shares of the Company’s common stock for aggregate gross proceeds of up to $40 million, from time to time, through an ATM equity offering program under which Stifel acts as sales agent. The June 2020 ATM Agreement will terminate upon the earliest of (a) the sale of $40 million of shares of the Company’s common stock pursuant to the June 2020 ATM Agreement or (b) the termination of the June 2020 ATM Agreement by the Company or Stifel. During the nine months ended September 30, 2021, the Company sold 907,700 shares of common stock under the June 2020 ATM Agreement for proceeds of approximately $10.4 million, net of commissions paid, but excluding transaction expenses. As of September 30, 2021, the Company sold an aggregate 2,099,700 shares of common stock under the June 2020 ATM Agreement for proceeds of approximately $32.7 million, net of commissions paid, but excluding transaction expenses.

Unless described otherwise, all references to the Company in the notes to the Company’s consolidated financial statements include Cue Biopharma Securities Corp. The Company has eliminated all intercompany transactions.

The preparation of financial statements in conformity with ~~United States Generally Accepted Accounting Principles (“GAAP”)~~U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include estimates related to collaboration revenue, the accounting for potential liabilities and accrued expenses, the assumptions utilized in valuing stock-based compensation issued for services, the realization of deferred tax assets, and the ~~impairment of~~useful life with respect to long-lived assets and intangibles. Actual results could differ from those estimates.

The COVID-19 pandemic has prompted governments and regulatory bodies throughout the world to issue “stay-at-home” or other similar orders, and enact restrictions on the performance of “non-essential” services, public gatherings and travel.

The extent to which the COVID-19 pandemic impacts the Company’s ~~operations are subject to a number of factors that may affect its operating results~~business and financial ~~condition. Such~~results will depend on numerous evolving factors ~~include,~~including, but ~~are~~ not limited to: the ~~Company’s ability to determine candidates for clinical testing, the results of clinical testing~~magnitude and ~~trial activities~~duration of the ~~Company’s product candidates,~~COVID-19 pandemic, the ~~Company’s ability~~extent of its impact on worldwide macroeconomic conditions, the speed of the anticipated recovery, access to ~~obtain regulatory approval~~capital markets, and governmental and business reactions to ~~market its product candidates,~~ the ~~Company’s intellectual property, competition from products manufactured and sold or being developed by other companies,~~pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the ~~price of, and demand for,~~information reasonably available to the ~~Company’s product candidates if approved for sale, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its product candidates,~~Company and the unknown future impacts of the COVID-19 pandemic as of September 30, 2021 and through the date of the filing of this Quarterly Report on Form 10-Q. The accounting matters assessed included, but were not limited to, estimates related to collaboration revenue, the accounting for potential liabilities and accrued expenses, the assumptions utilized in valuing stock-based compensation issued for services, the realization of deferred tax assets, and assessments of impairment related to long-lived assets and intangibles. The Company’s ~~ability to raise capital.~~

~~The Company currently has no commercially approved product candidates~~future assessment of the magnitude and ~~there can be no assurance that~~duration of the Company’s research and development programs will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval,COVID-19 pandemic, as well as ~~competition from~~ other ~~biotechnology~~factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Despite the Company’s efforts, the ultimate impact of the COVID-19 pandemic depends on factors beyond the Company’s knowledge or control, including the duration and ~~pharmaceutical companies. The~~severity of the pandemic, as well as third-party actions taken to contain its spread and mitigate its public health effects. As a result, the Company ~~operates~~is unable to estimate the extent to which the COVID-19 pandemic may negatively impact its financial results or liquidity in ~~an environment of rapid change and is dependent upon~~ the ~~continued services of its employees and consultants and obtaining and protecting its intellectual property.~~future.

The Company maintains its cash balances with a financial institution in ~~Federally-insured~~federally insured accounts and may periodically have cash balances in excess of insurance limits. The Company maintains its accounts with a financial institution with a high credit rating. The Company has not experienced any losses to date and believes that it is not exposed to any significant credit risk on cash.

The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. The Company currently invests available cash in money market funds.

Marketable securities consist of investments with original maturities greater than ninety days and less than one year from the balance sheet date. The Company classifies all of its investments as available-for-sale securities. Accordingly, these investments are recorded at fair value, which is based on quoted market prices. Unrealized gains and losses are recognized and determined on a specific identification basis and are included in other comprehensive loss. Realized gains and losses are determined on a specific identification basis and are included in other income on the consolidated statement of operations and other comprehensive loss. Amortization and accretion of discounts and premiums is recorded in interest income. The Company has invested available cash in United States Treasury obligations.

The Company ~~purchased~~had $150,000 in restricted cash deposited with a ~~$50,000 certificate of deposit~~commercial bank to collateralize a credit card ~~account with a commercial bank that was classified as short-term restricted cash~~ as of ~~March 31, 2018~~September 30, 2021 and December 31, ~~2017.~~2020.

Property and equipment is recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from ~~disposition~~dispositions of property and equipment are included in income and expense when realized. Amortization of leasehold improvements is provided using the straight-line method over the shorter of the lease term or the useful life of the underlying assets. Depreciation of property and equipment is provided using the straight-line method over the following estimated useful lives:

The Company recognizes depreciation and amortization expense in general and administrative expenses and in research and development expenses in the Company’s consolidated statements of operations and comprehensive loss, depending on how each category of property and equipment is utilized in the Company’s business activities.

Trademark consists of the Company’s right, title and interest to the CUE BIOLOGICS Mark, and any derivative mark incorporating CUE, throughout the world, together with all associated goodwill and common law rights appurtenant thereto, including, but not limited to, any right, title and interest in any corporate name, company name, business, name, trade name, dba, domain name, or other source identifier incorporating CUE.

The Company has classified the trademark as a component of other long-term assets, having a useful life of 15 years. The Company evaluates the status of this intangible asset for amortization and impairment at each quarter end and year end reporting date. For each of the three and nine months ended September 30, 2021 and 2020, the Company recorded approximately $3,000 and $9,000 in amortization expense, respectively, on a straight-line basis.

The Company recognizes collaboration revenue under certain of the Company’s license and collaboration agreements that are within the scope of Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company’s contracts with customers typically include promises related to licenses to intellectual property and research and development services. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. The Company measures the transaction price based on the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods and/or services to the customer. The Company utilizes the “most likely amount” method to estimate the amount of variable consideration, to predict the amount of consideration to which it will be entitled for its one open contract. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includes development and regulatory milestone payments, the Company evaluates whether the associated event is considered probable of achievement and estimates the amount to be included in the transaction price using the most likely amount method. Currently, the Company has one contract with an option to acquire additional goods and/or services in the form of additional research and development services for additional product candidates which it evaluated and determined that the option to acquire additional goods and/or services was not a material right related to the LG Chem Collaboration Agreement (as defined in Note 8).

Research and development expenses consist primarily of compensation costs, fees paid to consultants, outside service providers and organizations (including research institutes at universities), facility costs, and development and clinical trial costs with respect to the Company’s product candidates.

Payments made pursuant to research and development contracts are initially recorded as research and development contract advances in the Company’s balance sheet and then charged to research and development expenses in the Company’s statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s balance sheet, with a corresponding charge to research and development expenses in the Company’s statement of operations.

~~Nonrefundable advance payments for future research and development activities pursuant to an executory contractual arrangement are recorded as advances as described above.~~ Nonrefundable advance payments are recognized as an expense as the related services are performed. The Company evaluates whether it expects the services to be rendered at each quarter end and year end reporting date. If the Company does not expect the services to be rendered, the advance payment is charged to expense. Nonrefundable advance payments for research and development services are included in prepaid and other current assets on the balance sheet. To the extent that a nonrefundable advance payment is for contracted services to be performed within 12 months from the reporting date, such advance is included in current assets; otherwise, such advance is included in non-current assets.

The Company evaluates the status of its research and development agreements and contracts, and the carrying amount of the related assets and liabilities, at each quarter end and year end reporting date, and adjusts the carrying amounts and their classification on the balance sheet as appropriate.

The Company’s proprietary biologics are at an early stage and will require substantial time and funding to continue development. There can be no assurances that any of the Company’s biologics will ultimately become commercially viable product candidates. In order to finance its research and development programs, the Company may periodically enter into collaboration agreements with third parties that provide funding for certain aspects of the Company’s ongoing research and development activities. The Company considers various factors in determining the appropriate accounting treatment for such collaboration agreements, including, among others, the risks of and costs associated with the research and development program being funded, the stage of development of the proprietary biologics subject to the research and development program, the likelihood at initiation that the collaboration arrangement will result in an economically successful outcome to the third party, the continuing involvement of the Company in the research and development program and the expenditure of the funds, the transfer of the financial risk associated with the research and development program to the third party, the intended use of the funds and any restrictions thereon, and the probability of any repayment obligations or other forms of consideration if the proprietary biologics subject to the research and development program are not successfully developed and commercialized.

In accordance with ASC 730-20-25-8, to the extent that a collaboration agreement results in a substantive and genuine transfer of financial risk to a third party funding source because any economic benefit that the third party may receive depends solely on the research and development program successfully developing commercially viable product candidates having future economic benefit (which is uncertain at the initiation of the collaboration agreement), the Company will account for such collaboration agreement as a contract to perform research and development services for a third party. The funds received from the third party under such a collaboration agreement will initially be recorded as a deferred credit in the Company’s balance sheet. As the related contractual research and development costs are incurred, the applicable amount of the deferred credit will be credited to operations and will be classified as an offset to such research and development costs in the Company’s statement of operations.

The Company is the exclusive worldwide licensee of, and has patent applications pending for, numerous domestic and foreign patents. Due to the significant uncertainty associated with the successful development of one or more commercially viable product candidates based on the Company’s research efforts and any related patent applications, all patent costs, including patent-related legal fees, filing fees and other costs are charged to ~~operations~~expense as incurred. For the three and nine months ended ~~March 31, 2018 and 2017,~~September 30, 2021, patent expenses were ~~$117,000~~$522,000 and ~~$109,000,~~$1,606,000, respectively. For the three and nine months ended September 30, 2020, patent expenses were $245,000 and $1,586,000, respectively. Patent expenses are included in general and administrative expenses in the Company’s ~~statement~~consolidated statements of ~~operations.~~operations and comprehensive loss.

Licensing fees and costs consist primarily of costs relating to the acquisition of the Company’s license agreement (the “Einstein License Agreement”) with the Albert Einstein College of Medicine (“Einstein”), including related royalties, maintenance fees, milestone payments and product development costs. Licensing fees and costs are charged to ~~operations~~research and development expense as incurred.

The Company reviews long-lived assets, consisting of property and equipment, for impairment at each fiscal year end or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company will adjust the carrying value of these long-lived assets in the period in which the impairment occurs.

The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”) as of January 1, 2019, which supersedes the existing guidance for lease accounting, ASC, Topic 840, Leases. ASC 842 requires a lessee to record a right-of-use asset and ~~Deferred Rent Liability~~

~~Operating~~a corresponding lease ~~agreements which contain provisions~~liability for ~~future rent increases or periods in which rent payments are reduced or abated are recorded in monthly rent expense in~~most lease arrangements on the balance sheet. Under the standard, disclosure of key information about leasing arrangements to assist users of the financial statements with assessing the amount, timing and uncertainty of ~~the total payments over the lease term divided by the number of months~~cash flows arising from leases are required.

of the lease term. The difference between rent expense recorded and the amount paid is credited or charged to a deferred rent liability account. The current portion of deferred rent is included in current liabilities, and the remaining amount is shown in the balance sheet as a non-current liability. Accordingly, rent expense is recorded on a straight-line basis.

The Company periodically issues ~~stock options~~stock-based awards to officers, directors, employees, Scientific and Clinical Advisory Board members, ~~non-employees~~ and outside consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

Stock-based payments to officers, directors, employees, Scientific and ~~employees,~~Clinical Advisory Board members and outside consultants, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values. Stock option grants, which are generally time-vested, are measured at the grant date fair value and charged to operations on a straight-line basis over the service period, which generally approximates the vesting ~~period.~~ term. The Company also grants performance-based awards periodically to officers of the Company. The Company recognizes compensation costs related to performance awards over the requisite service period if and when the Company concludes that it is probable that the performance condition will be achieved.

The fair value of stock options and restricted stock units is determined utilizing the Black-Scholes option-pricing model, which is affected by several variables, including the risk-free interest rate, the expected dividend yield, the life of the equity award, the exercise price of the stock option as compared to the fair value of the common stock on the grant date, and the estimated volatility of the common stock over the term of the equity award.

Stock options granted to members of the Company’s Scientific and Clinical Advisory Board, non-employees and outside consultants are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the stock options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the value on the date of vesting.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Until the Company has an established a trading market for its common stock, estimated volatility is based on the average historical volatilities of comparable public companies in a similar industry. The expected dividend yield is based on the current yield at the grant date; the Company has never declared or paid dividends and has no plans to do so for the foreseeable future. As permitted by Staff Accounting Bulletin No. 107, due to the Company’s lack of trading history and option activity, management utilizes the simplified method to estimate the expected term of options at the date of grant. The exercise price is determined based on the fair value of the Company’s common stock at the date of grant. The Company accounts for forfeitures as they occur in accordance with ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), and reverses previously recognized stock compensation costs in the period that the award is forfeited.occur.

The Company recognizes the fair value of stock-based compensation in general and administrative expenses and in research and development expenses in the Company’s ~~statement~~consolidated statements of operations and comprehensive loss, depending on the type of services provided by the recipient of the equity award.

Components of comprehensive income or loss, including net income or loss, are reported in the financial statements in the period in which they are recognized. Other comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). Comprehensive income (loss) includes net income (loss) as well as changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The ~~Company issues new shares~~Company’s only element of ~~common stock to satisfy stock option exercises.~~other comprehensive income (loss) in all periods presented was unrealized gain or loss on available-for-sale securities.

The Company’s computation of earnings (loss) per share (“EPS”) for the respective periods includes basic and diluted EPS. Basic EPS is measured as the income (loss) attributable to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares that would result from the exercise of outstanding stock options and warrants as if they had been exercised at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Basic and diluted loss per common share is the same for all periods presented because all outstanding stock options and warrants are anti-dilutive.

At ~~March 31, 2018~~September 30, 2021 and ~~2017,~~2020, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.

The authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed in one of three categories, as presented below.

Level 1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives.

Level 2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges.

Level 3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded non-exchange-based derivatives and commingled investment funds and are measured using present value pricing models.

The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.

The Company had approximately $60,005,000 in cash equivalents that was measured and recorded at fair value on the Company’s balance sheet as of September 30, 2021. The Company had approximately $72,943,000 in cash equivalents and $10,003,000 in short-term marketable securities that were measured and recorded at fair value on the Company’s balance sheet as of December 31, 2020.

The carrying value of financial instruments (consisting of cash, a certificate of deposit, accounts payable, accrued compensation and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments.

In ~~May 2014,~~June 2016, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued ~~Accounting Standards Update~~ASU No. ~~2014-09, Revenue from Contracts with Customers (“ASU 2014-09”)~~2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (CECL). ~~ASU 2014-09 eliminates transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle based approach~~The new standard requires entities to measure all expected credit losses for ~~determining revenue recognition. ASU 2014-09 will require that companies recognize revenue~~financial assets held at the reporting date based on ~~the value of transferred goods or services as they occur in the contract. ASU 2014-09 also requires additional disclosure about the nature, amount, timing~~historical experience, current conditions and ~~uncertainty of revenue~~reasonable and ~~cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.~~supportable forecasts. The ~~FASB has issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20, all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09~~new standard is effective for annual reporting periods beginning after December 15, ~~2017, with early adoption permitted. Entities are able to transition to~~2022, including interim reporting periods within each annual reporting period for smaller reporting companies. The Company is still evaluating the ~~standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company adopted the provisions~~impact of ASU ~~2014-09 as of January 1, 2018. As the Company is unlikely to generate any sustainable operating revenues in the next several years, the adoption of ASU 2014-09 did not have any impact~~No. 2016-13 on the Company’s consolidated financial ~~statement presentation or disclosures.~~statements.

In ~~February 2016,~~December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires a lessee~~for Income Taxes, which is intended to ~~record a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, on the balance sheet~~simplify various aspects related to accounting for all leases with terms longer than 12 months, as well as the disclosure of key information about leasing arrangements. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures are required to provide the amount, timing and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU 2016-02 isincome taxes. The pronouncement became effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, ~~2018, including interim periods within those fiscal years. Early application is permitted. The Company will adopt the provisions of~~2020. ASU 2016-02 in the quarter beginning January 1, 2019. The Company generally does not finance purchases of property and equipment, but does lease its operating facilities. While the Company is continuing to assess the potential impact of ASU 2016-02, it currently expects that most of its lease commitments will be subject to ASU 2016-02 and accordingly, upon adoption will be recognized as lease liabilities and right-of-use assets in the Company’s balance sheet.

~~In May 2017, the FASB issued Accounting Standards Update~~ No. 2017-09, Compensation-Stock Compensation (Topic 718); Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for public entities for fiscal years and interim periods beginning after December 15, 2017. The ASU is applied prospectively on and after the effective date. This standard did not have a material effect on the Company’s financial statements.

In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-112019-12 is effective for the Company beginning in fiscal ~~years beginning after December 15, 2018,~~2021. The Company adopted ASU No. 2019-12 on January 1, 2021 and ~~interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using~~it did not have a ~~full or modified retrospective approach. The adoption of ASU 2017-11 is not currently expected to have any~~material impact on the Company’s financial ~~statement presentation~~position, results of operations or ~~disclosures.~~disclosures.

Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.

The Company accounts for its financial assets and liabilities using fair value measurements. The authoritative accounting guidance defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, and indicate the level of the fair value hierarchy utilized to determine such fair value:

As of September 30, 2021, the Company reported approximately $60,005,000 of cash equivalents. The Company��s cash equivalents that are invested in money market funds are valued using Level 1 inputs for identical securities. During the nine months ended September 30, 2021, the Company redeemed its marketable securities for operations. As of December 31, 2020, the Company reported approximately $82,946,000 of cash equivalents and marketable securities. During the year ended December 31, 2020, there were 0 transfers between Level 2 and Level 3.

The carrying values of accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these balances.

As of December 31, 2020, the fair value of available-for-sale marketable securities by type of security was as follows:

At September 30, 2021, the Company had redeemed its entire investment in marketable securities. At December 31, 2020, marketable securities consisted of approximately $10,003,000 of investments that mature within twelve months.

Property and equipment as of ~~March 31, 2018~~September 30, 2021 and December 31, ~~2017~~2020 consisted of the following:

Depreciation expense for the three months ended ~~March 31, 2018~~September 30, 2021 and ~~2017~~2020 was approximately ~~$167,000~~$232,000 and ~~$67,000,~~$199,000, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was approximately $682,000 and $596,000, respectively. Depreciation expense for the nine months ended September 30, 2021 excludes trademark amortization expense of approximately $9,000, and amortization of capitalized license expenses of approximately $257,000. Depreciation for the nine months ended September 30, 2020 excludes trademark amortization expense of approximately $9,000, and amortization of capitalized license expenses of approximately $199,000. During the ~~three~~nine months ended ~~March 31, 2018~~September 30, 2021, the Company sold fully depreciated lab equipment with an acquisition cost of $269,000, and ~~2017, there~~the Company recorded a gain on the sale of fixed assets of $21,000, which is presented in other income on the consolidated statement of operations and other comprehensive loss. There were no0 disposals of property and ~~equipment..~~equipment for the three and nine months ended September 30, 2020.

For stock options requiring an assessment of value during the ~~three~~nine months ended ~~March 31, 2018,~~September 30, 2021 and 2020, the fair value of each stock option award was estimated using the Black-Scholes option-pricing model utilizing the following assumptions:

A summary of stock option activity for the ~~three~~nine months ended ~~March 31, 2018~~September 30, 2021 is as follows:

The Company recognized approximately ~~$1,158,000~~ ~~and $543,000~~ $7,428,000 in stock-based compensation expense during the ~~three~~nine months ended ~~March 31, 2018 and 2017, respectively.~~September 30, 2021, related to stock options activity. As of ~~March 31, 2018,~~September 30, 2021, total unrecognized stock-based compensation expense was approximately ~~$10,219,000,~~$18,124,000, which is expected to be recognized as an operating expense in the Company’s consolidated statement of operations ~~through June 2022.~~and other comprehensive loss over the weighted average remaining period of 2.4 years. During the three months ended September 30, 2021, the Company granted 35,000 shares of stock options. During the nine months ended September 30, 2021, the Company granted stock options to purchase 1,026,000 shares of common stock with a weighted average grant date fair value of $14.41 per share. During the three and nine months ended September 30, 2020, the Company granted stock options to purchase 235,000 shares of common stock with a weighted average grant date fair value of $15.51 per share and stock options to purchase 964,300 shares of common stock with a weighted average grant date fair value of $13.63 per share, respectively.

The intrinsic value of exercisable but unexercised in-the-money stock options at ~~March 31, 2018~~September 30, 2021 was approximately ~~$8,941,000,~~$23,179,000, based on a weighted average grant date fair value of ~~$14.05~~$14.57 per share on September 30, 2021.

On October 3, 2019, the Company granted 100,000 restricted stock units (“RSUs”) with time-based vesting conditions to an executive officer having an average grant date fair value of $7.53 per share. The RSUs vest in three equal installments beginning on the grant date, and annually on each anniversary of the grant date thereafter, subject to the recipient’s continued service on each applicable vesting date. Compensation expense is recognized on a straight-line basis.

On February 5, 2020, the Company granted 150,000 RSUs with time-based vesting conditions to an executive officer. One-half of the RSUs vested on September 30, 2021, and the balance vests on March ~~29, 2018.~~31, 2022, subject to the recipient’s continued service on each applicable vesting date. On March 31, 2020, the Company granted 50,000 RSUs with time-based vesting conditions to an executive officer. The RSUs vest in three equal installments beginning on the grant date, and annually on each anniversary of the grant date thereafter, subject to the recipient’s continued service on each applicable vesting date. Compensation expense is recognized on a straight-line basis.

On August 21, 2020, the Company granted 20,000 RSUs with time-based vesting conditions to an executive officer. The RSUs vest in three equal installments beginning on the grant date, and annually on each anniversary of the grant date thereafter, subject to the recipient’s continued service on each applicable vesting date. Compensation expense is recognized on a straight-line basis.

The following table summarizes the RSU activity under the Company’s 2016 Omnibus Incentive Plan for the nine months ended September 30, 2021:

The Company recognized approximately $1,113,000 in stock-based compensation during the nine months ended September 30, 2021 related to RSU activity. As of September 30, 2021, total unrecognized stock-based compensation was approximately $1,660,000, which is expected to be recognized as an operating expense in the Company’s consolidated statement of operations and other comprehensive loss with a weighted average remaining period of less than1 year.

Stock-based compensation expense for the three and nine months ended ~~March 31, 2018~~September 30, 2021 and ~~2017~~2020 was included in the Company’s consolidated statement of operations and other comprehensive loss as follows:

The Company had ~~approximately 1,252,000~~2 tranches of ~~outstanding and exercisable~~ common stock warrants outstanding at ~~March 31, 2018.~~September 30, 2021. The first tranche was exercisable for an aggregate of 370,370 shares of common stock and was issued on June 15, 2015 with an exercise price of $2.70 per share. These warrants were issued with a 7-year term and expire on June 15, 2022. The second tranche was exercisable for an aggregate of 882,071 shares of common stock and was issued on December 27, 2017 with an exercise price of $9.38 per share. These warrants were issued with a 5-year term and expire on December 26, 2022. The intrinsic value of exercisable but unexercised in-the-money common stock warrants at ~~March 31, 2018~~September 30, 2021 was approximately ~~$8,323,000~~$4,844,000 based on a fair value of ~~$14.05~~$14.57 per share on ~~March 29, 2018.~~September 30, 2021.

Each tranche of warrants was evaluated under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and the Company determined that equity classification was appropriate.

The following table shows common stock warrants outstanding as of September 30, 2021:

The ~~former interim Chief Financial Officer~~Company recognizes collaboration revenue under certain of the Company’s license or collaboration agreements that are within the scope of ASC 606. The Company’s contracts with customers typically include promises related to licenses to intellectual property and research and development services. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and if, over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company’s contracts may include options to acquire additional goods and/or services.

The terms of the Company’s arrangements with customers typically include the payment of one or more of the following: (i) non-refundable, up-front payment, (ii) development, regulatory and commercial milestone payments, (iii) future options and (iv) royalties on net sales of licensed products. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. The Company measures the transaction price based on the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods and/or services to the customer. The Company utilizes the “most likely amount” method to estimate the amount of variable consideration, to predict the amount of consideration to which it will be entitled for its one open contract. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Milestone payments that are not within the control of the Company ~~who is also~~or the ~~Chief Financial Officer~~licensee, such as those dependent upon receipt of ~~MDB,~~regulatory approval, are not considered to be probable of achievement until the triggering event occurs. At the end of each reporting period, the Company reevaluates the probability of achievement of each milestone and any related constraint, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, the Company recognizes revenue upon the later of: (i) when the related ~~party,~~sales occur or (ii) when the performance obligation to which some or all of the payment has been ~~compensated~~allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any development, regulatory or commercial milestones or royalty revenue resulting from any of its collaboration arrangements. Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.

The Company allocates the transaction price to each performance obligation identified in the contract on a ~~rate~~relative standalone selling price basis, when applicable. However, certain components of ~~$6,000 per month, reflecting an aggregate charge~~variable consideration are allocated specifically to ~~operations~~one or more particular performance obligations in a contact to the extent both of the following criteria are met: (i) the terms of the payment relate specifically to the efforts to satisfy the performance obligation or transfer the distinct good or service and (ii) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective of the standard whereby the amount allocated depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services. The Company develops assumptions that require judgement to determine the standalone selling price for each performance obligation identified in each contract. The key assumptions utilized in determining the standalone selling price for each performance obligation may include forecasted revenues, development timelines, estimated research and development costs, discount rates, likelihood of ~~the three months ended March 31, 2018~~exercise and ~~2017~~probabilities of ~~$18,000.~~technical and regulatory success.

During 2015, the Company entered into a license agreement, (the “Einstein License”), with the Albert Einstein College of Medicine, (“Einstein”) for certain patent rights (the “Patents”) relating to the Company’s core technology platform for the engineering of biologics to control T-cell activity, precision, immune-modulatory drug candidates, and two supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T-cell targeting peptides. On July 31, 2017, the Company entered into an amended and restated license agreement which modified certain obligations of the parties under the Einstein License. For each of the three months ended March 31, 2018 and 2017, the Company incurred approximately $12,500 in fees and expenses to Einstein in relation to this license.

During 2015, the Company entered into a license agreement, (the “Einstein License”), with the Albert Einstein College of Medicine, (Einstein) for certain patent rights (the “Patents”) relating to the Company’s core technology platform for the engineering of biologics to control T-cell activity, precision, immune-modulatory drug candidates, and two supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T-cell targeting peptides. The Company’s remaining commitments with respect to this agreement areRevenue is recognized based on the ~~attainment~~amount of ~~future milestones.~~

~~On March 7, 2017,~~the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. For performance obligations that are satisfied over time, the Company ~~entered into an agreement with Catalent for Catalent~~recognizes revenue by measuring the progress toward complete satisfaction of

the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to ~~provide services~~the customer. The Company uses input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustments are recorded on a ~~sequential milestone~~cumulative catch-up basis, ~~with respect to~~which would affect revenue and net loss in the ~~development and manufacture~~period of adjustment. The Company measures progress toward satisfaction of the Company’s lead drug candidate, CUE-101. The services under the agreement are designed to support the preparation and filing of an Investigational New Drug Application with the United States Food and Drug Administration to allow for the commencement of a Phase 1 clinical trial of CUE-101 in the United States. The Company incurred total direct costs under this agreement aggregating $1.2 million during the three months ended March 31, 2018 and currently estimates that it will incur an additional $3.2 of such costs during the year ended December 31, 2018. Certain of these payments will consist of nonrefundable advance payments for which the Company anticipates receiving the contracted services within 12 months from the date of payment. Management periodically reviews and updates the project’s estimated budget and timeline.performance obligation over time as effort is expended.

On November 14, 2017, the Company entered into ~~an Exclusive Patent License and Research~~a collaboration agreement (the “Merck Collaboration ~~Agreement (the “Collaboration~~ Agreement”) with Merck Sharp & Dohme Corp. (“Merck”) for a partnership to research and develop certain of the Company’s proprietary biologics that target certain autoimmune disease indications (the “Initial Indications”). ~~We view this~~The Company views the Merck Collaboration Agreement as a component of ~~our~~its development strategy since it will allow usthe Company to advance ~~our~~its autoimmune programs in partnership with a world class pharmaceutical company, while also continuing ~~our~~its focus on ~~our~~its more advanced cancer programs. The research program outlined in the Merck Collaboration Agreement entails (1) ~~our~~the Company’s research, discovery and development of certain ~~CUE Biologics™~~Immuno-STAT^TM drug candidates up to the point of demonstration of certain biologically relevant effects (“Proof of Mechanism”) and (2) the further development by Merck of the ~~CUE Biologics™~~Immuno-STAT drug candidates that have demonstrated Proof of Mechanism (the

~~“Proposed~~ “Proposed Product Candidates”) up to the point of demonstration of all or substantially all of the properties outlined in such Proposed Product Candidates’ profiles as described in the Merck Collaboration Agreement.

For the purposes of this collaboration, the Company granted to Merck under the Collaboration Agreement an exclusive license under certain of is patent rights, including a sublicense of patent rights licensed from Einstein, to the extent applicable to the specific CUE Biologics™ that are elected to be developed by Merck. From the effective date of the Collaboration Agreement until the earlier of (i) the first achievement of Proof of Mechanism for a CUE Biologics™ drug candidate or (ii) 18 months after the Company notifies the joint steering committee that the first Product Candidate has been synthesized under the research program, the Company is required to forebear from researching, developing or licensing to a third party rights related to any CUE Biologics™ drug candidate for the treatment of autoimmune diseases other than pursuant to the Collaboration Agreement. In addition, so long as Merck continues product development on a Proposed Product Candidate, the Company is restricted from conducting any development activities within the Initial Indication covered by such Proposed Product Candidate other than pursuant to the Collaboration Agreement. The Company is not required to forbear at any time, however, from developing other CUE Biologics™ for use in therapeutic areas other than autoimmune diseases, e.g., for use in treating cancer or infectious diseases.

In exchange for the licenses and other rights granted to Merck under the Merck Collaboration Agreement, Merck paid to the Company a $2.5 million nonrefundable up-front payment. Additionally, the Company may be eligible to receive funding in developmental milestone payments, as well as tiered royalties, if all research, development, regulatory and commercial milestones agreed upon by both parties are successfully achieved. Excluding the up-front payment described above, the Company is eligible to earn up to ~~$101~~$101.0 million for the achievement of certain research and development milestones, ~~$120~~$120.0 million for the achievement of certain regulatory milestones and ~~$150~~$150.0 million for the achievement of certain commercial milestones, in addition to tiered royalties on sales, if all pre-specified milestones associated with multiple products across the primary disease indication areas are achieved. The Merck Collaboration Agreement requires the Company to use the first ~~$2.7~~$2.5 million of milestone payments it receives under the agreement to fund contract research. The amount of the royalty payments is a percentage of product sales ranging in the single digits based on the amount of such sales.

As it relates to the Merck Collaboration Agreement, the Company recognized the up-front payment associated with its one open contract as a contract liability upon receipt of payment as it requires deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified in current liabilities. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as contract liabilities, net of current portion. The Company determined that there was one performance obligation, consisting of the license and research development services. Thus, the transaction price of $2.5 million was allocated to the single performance obligation.

Aside from the $2.8 million in milestone payments earned to date, the Company does not believe that any variable consideration should be included in the transaction price at September 30, 2021. The Company’s assessment ensured that estimates of variable consideration would be included in the transaction price only to the extent the Company had a high degree of confidence that revenue would not be reversed in a subsequent reporting period. The Company will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as other changes in circumstances occur. For the three months ended September 30, 2021 and 2020, the Company recorded approximately $293,000 and $51,000, respectively, in collaboration revenue related to the Merck Collaboration Agreement. For the nine months ended September 30, 2021 and 2020, the Company recorded approximately $1,762,000 and $174,000, respectively, in collaboration revenue related to the Merck Collaboration Agreement. As of September 30, 2021, the Company recorded a short-term research and development liability on its balance sheet of approximately $328,000. As of December 31, 2020, the Company recorded a short-term research and development liability on its balance sheet of approximately $607,000.

On November 6, 2018, the Company entered into a collaboration agreement (the “LG Chem Collaboration Agreement”) with LG Chem Life Sciences (“LG Chem”) related to the development of the Company’s Immuno-STATs focused in the field of oncology. Pursuant to the LG Chem Collaboration Agreement, the Company granted LG Chem an exclusive license to develop, manufacture and commercialize the Company’s lead product, CUE-101, as well as Immuno-STATs that target T cells against two additional cancer antigens, in certain Asian countries (collectively, the “LG Chem Territory”). On April 30, 2021, LG Chem’s option pursuant to the Global License and Collaboration Agreement, as amended on November 5, 2020, expired, and accordingly the Company no longer has any material obligations under the Global License and Collaboration Agreement. In June 2021, after ongoing discussions

regarding the selection of the second of the two additional cancer antigens, LG Chem and the Company agreed to let the selection period expire without a second antigen being selected. The Company retains rights to develop and commercialize all assets included in the LG Chem Collaboration Agreement in the United States and in global markets outside of the LG Chem Territory. In exchange for the licenses and other rights granted to LG Chem under the LG Chem Collaboration Agreement, LG Chem made a $5.0 million equity investment in common stock of the Company and a $5.0 million nonrefundable up-front cash payment. The Company is also eligible to receive up to an additional $400.0 million in research, development, regulatory and sales milestones. In addition, the LG Chem Collaboration Agreement also provides that LG Chem will pay the Company tiered single-digit percentage royalties on net sales of commercialized product candidates in the LG Chem Territory.

On May 16, 2019, LG Chem paid the Company a $2.5 million milestone payment for the U.S. Food and Drug Administration’s (“FDA”) acceptance of the investigational new drug application (“IND”) for the Company’s lead drug candidate, CUE-101, pursuant to the LG Chem Collaboration Agreement. The $2.5 million milestone payment was recorded as a contract liability upon receipt of payment as it requires deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Of the $2.5 million milestone payment, approximately $412,500 was recognized as tax withholding, shown as income tax expense on the consolidated statement of operations and other comprehensive loss.

On December 7, 2020, the Company earned a $1.25 million milestone payment on the selection of a pre-clinical candidate pursuant to the LG Chem Collaboration Agreement. The $1.25 million milestone payment was recorded as a contract liability upon receipt. Revenue related to this milestone payment will be recognized by the Company pursuant to the Company’s revenue recognition policy in relation to the performance of its obligations related to the development of this pre-clinical candidate. Of the $1.25 million milestone payment, approximately $206,250 was withheld as payment of foreign tax withholding and shown as income tax expense on the consolidated statement of operations and other comprehensive loss.

Aside from the $3.75 million in milestone payments under the LG Chem Collaboration Agreement and payments received in accordance with the research and development cost sharing provisions of the collaboration agreement, the Company does not believe that any variable consideration should be included in the transaction price as of September 30, 2021. The Company’s assessment ensured that estimates of variable consideration would be included in the transaction price only to the extent the Company had a high degree of confidence that revenue would not be reversed in a subsequent reporting period. The Company will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as other changes in circumstances occur. For the three months ended September 30, 2021 and 2020, the Companyrecognized revenue of approximately $2,102,000 and approximately $653,000, respectively, related to the LG Chem Collaboration Agreement. For the nine months ended September 30, 2021 and 2020, the Companyrecognized revenue of approximately $4,925,000 and approximately $2,455,000, respectively, related to the LG Chem Collaboration Agreement. As of September 30, 2021, the Companyrecorded short-term research and development liabilities on its balance sheet of approximately $4,935,000. As of December 31, 2020, the Companyrecorded short- and long-term research and development liabilities on its balance sheet of approximately $6,074,000 and $1,938,000, respectively.

The Company considered the capitalization of contract costs under the guidance in ASC 340-40, Other Assets and Deferred Costs: Contracts with Customers. There were no contract costs identified in the Merck Collaboration Agreement. As it related to the LG Chem Collaboration Agreement, the Company capitalized license expenses of approximately $908,000 as of September 30, 2021, paid to Einstein pursuant to the Einstein License Agreement which requires the Company to pay a percentage of sublicenses related to the Company’s patent rights for components of its core technology that is licensed from Einstein. This amount is comprised of approximately $438,000 of capitalized license expenses related to the up-front payment received from LG Chem in December 2018, approximately $313,000 in capitalized license expenses related to the milestone payment received in June 2019, and approximately $157,000 in capitalized license expenses related to the milestone payment received in December 2020, net of accumulated amortizationon all capitalized license expenses of approximately $668,000. As of September 30, 2021, $160,000 in capitalized license expenses net of accumulated amortization was included in prepaid expenses and other short-term assets related to the LG Chem Collaboration Agreement. As of December 31, 2020, $416,900 was included in prepaid expenses and other short-term assets.

In 2015, the Company entered into the Einstein License Agreement with Einstein for certain patent rights relating to the Company’s core technology platform for the engineering of biologics to control T cell activity, precision, immune-modulatory drug candidates, and 2 supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T cell targeting peptides. On July 31, 2017, the Company entered into an amended and restated license agreement which modified certain obligations of the parties under the Einstein License Agreement. For each of the three and nine months ended September 30, 2021, the Company incurred approximately$80,000 and $257,000, respectively, in fees and expenses to Einstein in relation to this license. For the three and nine months ended September 30, 2020, the Company incurred approximately$18,750 and $56,250, respectively, in fees and expenses to Einstein in relation to this license.

The Company’s remaining commitments with respect to the Einstein License Agreement are based on the attainment of future milestones. The aggregate amount of milestone payments to be made under the Einstein License Agreement equals up to $1.85 million for each product, process or service that use the patents covered by the Einstein License Agreement, including certain technology received from Einstein relating thereto (“Licensed Products”), and up to $1.85 million for each new indication of a Licensed Product. Additionally, the aggregate amount of one-time milestone payments based on cumulative sales of all Licensed Products equals up to $5.75 million.

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

The Company may be subject to various legal proceedings from time to time as part of its business. As of September 30, 2021, the Company was not a party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on its business, financial condition or results of operations.

The Company leases approximately 19,900 square feet of office space in Cambridge, Massachusetts under a lease that began in May 2018 and is scheduled to expire on June 14, 2022 (the “Lease”), as discussed further below. Upon adoption of ASC 842, the Company recorded a right-of-use asset and corresponding lease liability for the Lease on January 1, 2019, by calculating the present value of lease payments, discounted at 6%, the Company’s estimated incremental borrowing rate annually, over the 2-year remaining term.

The Company adopted ASC 842 as of January 1, 2019 using the effective date method, in which the Company did not restate prior periods. Upon adoption, the Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allowed it to carry forward the historical lease classification. The Company does not allocate consideration in its leases to lease and non-lease components and does not record leases on its balance sheets with terms of 12 months or less.

The Company uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company’s incremental borrowing rate represents the rate of interest that it would have to pay to borrow over a similar term an amount equal to the lease payments in a similar economic environment.

The adoption of ASC 842 on January 1, 2019 resulted in the recognition of approximately $9,692,000 of right-of-use asset and $9,347,000 of lease liabilities on the Company’s balance sheet. The adoption did not have a material net impact on the Company’s consolidated statements of operations and comprehensive loss or accumulated deficit. The Company will review the classification of newly entered leases as either an operating or a finance lease and recognize a related right-of-use asset and lease liability on its balance sheet upon commencement.

On January 18, 2018, the Company entered into an operating lease agreement for its laboratory and office space in Cambridge, Massachusetts for the period from May 1, 2018 through April 30, 2021 (the “Laboratory and Office Lease”). The lease contains escalating payments during the lease period. Upon execution of this lease agreement, the Company prepaid three months of rent, two of which will be held in escrow and credited against future rent payments and the other of which was applied to the first month’s rent. The Company also prepaid seven and one-half months’ rent pursuant to an amendment to the lease agreement executed on June 18, 2018. These amounts were recorded to deposits and prepaid expenses, respectively, at December 31, 2018. On June 18, 2018, the Company entered into an amendment to the Laboratory and Office Lease that provided the Company with a reduction in rental fees for its office and laboratory space in exchange for prepayment of a portion of the fees. This amendment was effective beginning on May 15, 2018.

The monthly rent payment due under the Laboratory and Office Lease, as amended, was $330,550 until April 2021 and increased to $375,174 for the remainder of the term.

On September 20, 2018, the Company entered into an operating lease for additional laboratory space at 21 Erie Street, Cambridge, Massachusetts for the period from October 15, 2018 through April 14, 2021 (the “Additional Laboratory Lease”). The lease contains escalating payments during the lease period. The monthly rental rate under the Additional Laboratory Lease was $72,600 for the first 12 months and $78,600 for the remainder of the term. Upon execution of this lease agreement, the Company prepaid 12 months’ rent pursuant to the lease agreement executed on September 20, 2018.

On September 19, 2019, the Company entered into a second amendment to the Additional Laboratory Lease that removed one holding room from the additional laboratory space. The amendment was effective beginning on October 1, 2019. The monthly rental rate under the Additional Laboratory Lease decreased from $78,600 to $58,995 for the remainder of the lease term. The partial termination of the lease did not change the classification of the lease and remained accounted for as an operating lease. The weighted-average discount rate remained the same at 6%. The Company accounted for the lease modification under ASC 842 that removed one holding room by electing Approach 1, which remeasured the right-of-use asset on the basis of the amount of the liability change. The modification of the partial termination resulted in a reduction to right-of-use asset and lease liability of $335,465 and $327,079, respectively. The difference of $8,386 was recorded as a loss to the right-of-use asset as of December 31, 2020.

On June 24, 2020, the Company entered into a second amendment to the Laboratory and Office Lease. Pursuant to the amendment (1) the term of the lease was extended to June 14, 2022 and (2) the monthly rental rate for the last 14 months of the lease term was increased to $375,174. The Company determined that the amendment should be accounted for as a lease modification applicable under ASC 842, not as a separate contract, with an effective date of lease modification of May 14, 2020. At the effective date of modification, the Company recorded an adjustment to the right-of-use asset and lease liability in the amount of approximately $4,826,000.

On July 20, 2020, the Company entered into a third amendment to the Additional Laboratory Lease. Pursuant to the amendment, the term of the lease was extended to June 14, 2022. The Company determined that the amendment should be accounted for as a lease modification applicable under ASC 842, not as a separate contract, with an effective date of lease modification of August 4, 2020, when the agreement was fully executed. At the effective date of modification, the Company recorded an adjustment to the right-of-use asset and lease liability in the amount of approximately $813,000.

At September 30, 2021, the Company recorded approximately $3,369,000 to operating lease right-of-use asset, and approximately $3,633,000 to the short-term operating lease liability. At September 30, 2021, the remaining lease term was 1 year for both leases. At December 31, 2020, the Company recorded approximately $6,774,000 to operating lease right-of-use asset, and approximately $4,777,000 and $2,369,000 to short- and long-term operating lease liability, respectively. At December 31, 2020, the remaining lease term was 1.46 years for both leases. As of September 30, 2021 and December 31, 2020, a security deposit of approximately $177,000 is included in deposits on the Company’s consolidated balance sheet.

Future minimum lease payments under these leases at September 30, 2021 are as follows:

Total rent expense of approximately $1,223,000 and $1,212,000 was included in the consolidated statement of operations and other comprehensive loss for the three months ended September 30, 2021 and 2020, respectively, and $3,668,000 and $3,372,000 for the nine months ended September 30, 2021 and 2020, respectively.Other information pertaining to the Company’s operating leases for the three and nine months ended September 30, 2021 is summarized in the table below.

In October 2021, the Company entered into an open market sale agreement (the “October 2021 ATM Agreement”) with Jefferies LLC, as agent, to sell shares of the Company’s common stock for aggregate gross proceeds of up to $80 million, from time to time, through an ATM equity offering program. The October 2021 ATM Agreement will terminate upon the earliest of (a) the sale of $80 million of shares of the Company’s common stock pursuant to the October 2021 ATM Agreement or (b) the termination of the October 2021 ATM Agreement by the Company or Jefferies, LLC. The June 2020 ATM Agreement with Stifel was terminated prior to entering into the October 2021 ATM Agreement with Jefferies. As of November 1, 2021, the Company sold an aggregate 108,500 shares of common stock under the October 2021 ATM Agreement for proceeds of approximately $1.4 million, net of commissions paid, but excluding transaction expenses.

On October 22, 2021, the Company entered into a third amendment to the Laboratory and Office Lease. Pursuant to the amendment (1) the term of the lease was extended to March 14, 2024 and (2) the monthly rental rate for the last 21 months of the lease term was increased from $375,174 to $388,305.

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Cue Biopharma, Inc. and its subsidiary (“Cue Biopharma”, “we”, “us”, “our” or the “Company”) should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto for the fiscal year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed by us with the Securities and Exchange Commission, or SEC, on March 9, 2021, or the 2020 Annual Report.

We are a clinical-stage biopharmaceutical company engineering a novel class of injectable biologics to selectively engage and modulate targeted T cells within the patient’s body. We believe our proprietary Immuno-STAT (Selective Targeting and Alteration of T Cells) platform will allow us to harness the fullest potential of an individual’s intrinsic immune repertoire for restoring health while avoiding the deleterious side effects of broad immune activation (for immuno-oncology or infectious disease indications) or broad immune suppression (for autoimmunity and inflammation). In addition to the selective modulation of T cell activity, we believe Immuno-STATs offer several key points of potential differentiation over competing approaches, including modularity and versatility, providing broad disease coverage, manufacturability, and convenient administration.

Through rational protein engineering, we leverage the modular and versatile nature of the Immuno-STAT platform to design drug product candidates for selective immune modulation in cancer, chronic infectious disease, and autoimmune disease. To address the needs of these clinical indications, we have developed four biologic series within the Immuno-STAT platform: CUE-100, CUE-200, CUE-300 and CUE-400, each specifically designed through rational protein engineering to possess distinct signaling modules for desired biological mechanisms that may be applied across many diseases. The CUE-100 series exploits rationally engineered IL-2 in context of the core Immuno-STAT framework for selective activation of targeted tumor-specific T cells, while the CUE-200 series is focused on cell surface receptors including CD80 and/or 4-1BBL to address T cell exhaustion associated with chronic infections. The CUE-300 series, being developed for autoimmune diseases, incorporates the inhibitory PD-L1 co-modulator for selective inhibition of the autoreactive T cell repertoire. This approach is pertinent for autoimmune diseases with known, well characterized, limited or few autoantigens, such as type 1 diabetes. The CUE-400 series, for autoimmune diseases with diverse or unknown autoantigens, represents a novel class of bispecific molecules that can selectively and effectively expand induced regulatory T cells, or iTregs. We categorize these molecules as “pathway-specific modulators,” or PSM. The first candidate, CUE-401, incorporates the two key biological signals that are necessary for generation of iTregs, namely IL-2 and TGF-beta. Based on structure-based rational protein engineering, both IL-2 and TGF-beta have been affinity tuned (i.e. the binding strength has been optimized) to maintain on-target engagement while minimizing systemic toxicities.

Our vision for the IL-2-based CUE-100 series has centered on three key pillars of validation, expansion and accelerationof our pipeline assets. We believe our lead clinical candidate, CUE-101, validates our technology platform and effectively reduces the risk profile of our IL-2-based pipeline, since the core framework is conserved. CUE-102 and CUE-103 allow us to expand our pipeline with the strategic intent of demonstrating modularity by incorporating different tumor antigens and human leukocyte antigen, or HLA, alleles. Acceleration of our platform applications via Neo-STAT^TM and RDI-STAT^TM (as described below) allow us to address the key challenges of tumor heterogeneity and tumor escape mechanisms. Based upon early, emerging clinical data from CUE-101, we are planning to focus our resources and core competencies on the further development of CUE-101 and additional CUE-100 series candidates, such as CUE-102 and CUE-103. In order to focus our efforts on realizing the potential value of our CUE-100 series, we intend to seek third party relationships to further develop the CUE-200, CUE-300, and CUE-400 series.

Our drug product candidates are in various stages of clinical and preclinical development, and while we believe that these candidates hold potential value, our activities are subject to significant risks and uncertainties. We have not yet commenced any commercial revenue-generating operations, have limited cash flows from operations, and will need to raise additional capital to fund our growth and ongoing business operations.

The pipeline below details our current portfolio assets and their stages of development. CUE-101 is our most advanced clinical stage asset, representative of the CUE-100 series and is currently being dosed in a Phase 1 monotherapy trial for human papilloma virus (HPV)-driven recurrent/metastatic (R/M) head and neck cancer, as well as in a first line Phase 1 combination trial with KEYTRUDA® (pembrolizumab) in the same indication. CUE-102, our second clinical drug candidate from the IL-2 based CUE-100 series, focuses on Wilm’s tumor-1 (WT1) as the targeted tumor antigen.

We have made significant progress advancing the IL-2-based CUE-100 series and have generated a significant body of supportive data with the prospects of reducing the risk profile and enhancing prospective value for not only CUE-101, but also potentially for the entire IL-2 based CUE-100 series for oncology. We dosed the first patient in September 2019 in a monotherapy Phase 1 dose escalation clinical trial of CUE-101 for the treatment of HPV16-driven R/M head and neck squamous cell carcinoma, or HNSCC, in late-stage treatment-refractory patients with R/M-HNSCC who have received and failed several prior lines of systemic therapy including checkpoint inhibitors such as KEYTRUDA, already approved for first-line, or 1L, HPV+R/M HNSCC. To date, CUE-101 has demonstrated a favorable tolerability profile in the monotherapy trial and continues to generate supportive and encouraging emerging data pertaining to its pharmacokinetic, or PK, and pharmacodynamic, or PD, profile, as well as anti-tumor clinical activity as evidenced by a confirmed partial response, or PR, as well as multiple confirmed stable diseases, or SDs, lasting greater than 12 weeks, in the dose escalation phase of the clinical trial. In addition, in our Phase 1 clinical trial, we have continued to observe what we believe to be emerging data supporting an overall survival advantage. We have previously reported that the first nine patients, from the dose escalation Part A, i.e., patient from cohorts 1-3, representing dose concentrations from 0.06mg/kg, 0.18mg/kg and 0.54mg/kg respectively, had a median survival of greater than or equal to 12 months, which is four months beyond the median survival of approximately eight months reported for second line patients receiving checkpoint inhibitors pembrolizumab and nivolumab as a treatment for R/M-HNSCC.

Based upon data generated in the dose escalation Part A of the trial, we have chosen cohort 6, 4mg/kg as the recommended Phase 2 dose, or RP2D, for the Part B patient expansion dose concentration. Recruitment to the expansion cohort is ongoing, and we expect to enroll a total of 20 patients at the RP2D. We have generated encouraging data from the Part B patient expansion and believe we have a potential defined registration path as a monotherapy for second line and beyond patients.

During the fourth quarter of 2020, we also initiated a Phase 1 clinical trial into the first-line R/M HNSCC setting to evaluate the potential synergy of a combination of CUE-101 with Merck Sharp & Dohme Corp.’s, or Merck’s, anti-PD-1 therapy KEYTRUDA®. The first patient in this combination study was dosed in the first quarter of 2021. In the third quarter of 2021, we completed the enrollment of the second cohort, at 2mg/kg, and initiated the enrollment of patients in the third cohort at 4mg/kg. To date, no dose-limiting toxicities have been observed in the first two cohorts. Early signs of activity in the combination study are encouraging, with

three of three patients from cohort two, 2mg/kg, demonstrating reductions in their target tumor lesions on their first scan after two cycles of therapy. The potential synergy with KEYTRUDA is due to CUE-101’s design and protein engineering to selectively activate and expand tumor-targeted T cells directly in the patient’s body. We believe the potential of CUE-101 to synergize with and enhance the clinical activity of KEYTRUDA is mechanistically attractive since the presence of expanded tumor-specific T cells are a pre-requisite for and an obligatory target of anti-PD-1. We believe that early clinical data metrics from the dose escalation cohorts of the combination trial appear to be encouraging and supportive of potential mechanistic synergy from the combination of CUE-101 and KEYTRUDA®. In preclinical studies, we have observed activation and expansion of the targeted T cells circulating in the peripheral blood, as well as a significant expansion of tumor infiltrating lymphocytes. In addition to the Phase 1 monotherapy and combination trial with KEYTRUDA, CUE-101 is being used in an investigator sponsored Phase 2 neoadjuvant study in locally advanced HPV+ HNSCC patients at Washington University in St. Louis. This study is expected to provide further mechanistic evidence and insights into the activation and effector function of T cells resident in tumor tissue and their impact on tumor viability and is scheduled to begin in the fourth quarter of 2021.

CUE-101 is the most advanced candidate from our IL-2 based CUE-100 series and is representative and exemplary of the union of the rational protein engineering underscoring the Immuno-STAT platform and key immunological targets, or activity nodes, to selectively enhance anti-tumor immunity. Data relating to this work were recently published in a peer-reviewed journal, Clinical Cancer Research. Importantly, we believe that the totality of clinical data with CUE-101, underscored by the recent confirmed partial response and several durable stable diseases in patients from the ongoing Phase 1 monotherapy study of CUE-101, effectively reduces the risk profile of the IL-2 based CUE-100 series. The core framework of the CUE-100 series remains essentially the same for each drug candidate, except for the 9-10 amino acid sequence of the targeting peptide epitope within the major histocompatibility complex, or MHC, pocket or the HLA in humans. Therefore, with the exception of some protein engineering modifications to ensure stability and manufacturability, the core IL-2 scaffold is conserved as a shared molecular feature of all molecules generated within this series (including CUE-102, and the next-gen platform, Neo-STAT^TM, as described below). Data pertaining to platform validation for the CUE-100 series Immuno-STATs and Neo-STATs were recently published in Nature Scientific Reports.

Furthering the development of the CUE-100 series, we are also advancing additional promising preclinical candidates that we believe hold the potential to treat multiple cancers. Data from our second product candidate of the CUE-100 series, CUE-102 (WT1)have been presented in external conferences, including most recently at the New York Academy of Science Frontiers in Cancer Immunotherapy conference in May 2021. These data support early evidence of selective T cell expansion, along with polyfunctional effector function including killing of target cells. We are continuing to develop CUE-102 toward an investigational new drug application, or IND, through enabling studies, and we anticipate filing an IND for this product candidate in the first half of 2022. We have also generated foundational data with an Immuno-STAT targeting the mutated G12V KRAS T cell epitope, CUE-103, including demonstration of activation and expansion of T cells expressing G12V-specific T cell receptors, or TCRs. These data were presented at the Society for Immunotherapy of Cancer, or SITC, meeting in November 2020 and more recently at the Immuno-Oncology conference, IO-360, in February 2021. An update on the ongoing Phase 1 clinical trial of CUE-101, as well as updates pertaining to CUE-102 and other platform assets, including CUE-103, is planned for the upcoming SITC meeting scheduled on November 10-14, 2021. At the 2021 Federation of Clinical Immunology Societies conference in June 2021, we shared preclinical data on our CUE-401 molecule, comprised of an IL-2 variant and TGF-beta variant. These data demonstrated CUE-401 activity on iTregs both in vitro and in vivo for potential autoimmune disease indications.

Importantly, through rational protein engineering, we have expanded the reach of the Immuno-STAT platform to potentially address the diversity and heterogeneity of many cancers by developing a derivative scaffold from the CUE-100 series that contains stable “peptide-less” or “empty” MHC pocket, or HLA molecules, to which peptides of interest may be covalently attached. We refer to this derivative scaffold as Neo-STAT™. Neo-STAT is designed to provide greater flexibility for targeting multiple tumor epitopes, enhance production efficiencies, decrease time and cost to manufacture and potentially lend itself to personalized neo-antigen strategies in cancer immunotherapy as an off-the-shelf approach.

In addition, in an effort to address tumor escape mechanisms of MHC or HLA loss and related components of antigen presentation, we have engineered a bi-specific RDI-STAT (Re-Directed Immuno-STAT) platform that harnesses virally directed Immuno-STATs linked with a tumor-targeting moiety to bind to a protein on the surface of the cancer cell and make them appear as virally infected cells. This allows us to utilize the pre-existing protective anti-viral T cell repertoire present in a patient’s body to kill cancers, including those that have lost expression of MHC or HLA or have defects in antigen-presenting pathways. As with CUE-101 and our other CUE-100 series drug candidates, these innovative platforms potentially avoid systemic T cell activation and related cytokine release syndrome to provide significant differentiation over other approaches, including IL-2 variants and other bi-specific molecules, that rely on global T cell activation.

The COVID-19 pandemic has prompted governments and regulatory bodies throughout the world to issue “stay-at-home” or similar orders, and enact restrictions on the performance of “non-essential” services, public gatherings and travel. Beginning in March

2020, we undertook precautionary measures intended to help minimize the risk of virus transmission to our employees, including the establishment of remote working standards, pausing all non-essential travel worldwide for our employees, and limiting employee attendance at industry events and in-person work-related meetings, to the extent those events and meetings are continuing. We also established policies and procedures for all personnel who enter our company premises. The policies and procedures we implemented are consistent with the rules and guidelines recommended by the Centers for Disease Control and Prevention, the Commonwealth of Massachusetts and the City of Cambridge. However, these actions or additional measures we may undertake may ultimately delay progress of our developmental goals or otherwise negatively affect our business. In addition, third-party actions taken to contain the spread of the novel coronavirus, SARS-CoV-2, and mitigate public health effects may negatively affect our business. To date, we have experienced supply chain disruptions for lab supplies used in our pre-clinical research. We do not believe any of these actions or disruptions have had a significant impact on our productivity or our operations.

In January 2021, we were notified by our contract manufacturing organization, or CMO, that the manufacture of our cGMP material for the CUE-102 drug candidate would be delayed by approximately six weeks due to the invocation of the Defense Production Act, or DPA, which gives priority to the manufacture of vaccines and other drug products used to prevent or treat COVID-19. The delay in the manufacturing of our CUE-102 cGMP batch has impacted the expected filing date of the CUE-102 IND that was planned for the fourth quarter of 2021. The CUE-102 IND is now expected to be filed in the first quarter of 2022 based on the revised CUE-102 cGMP manufacturing date provided by our CMO.

Our technology is in the development phase. We believe that our licensed platforms have the potential for creating a diverse pipeline of promising drug candidates addressing multiple medical indications. We intend to maximize the value and probability of commercialization of our Immuno-STAT product candidates by focusing on researching, testing, optimizing, conducting pilot studies, performing early stage clinical development and potentially partnering, where appropriate, for more extensive, later stages of clinical development, as well as seeking extensive patent protection and intellectual property development.

Since we are a development-stage company, the majority of our business activities to date and our planned future activities will be devoted to furthering research and development.

A fundamental part of our corporate development strategy is to establish one or more strategic partnerships with leading pharmaceutical or biotechnology organizations that will allow us to more fully exploit the potential of our technology platform, such as those described below under the headings “Collaboration Agreement with Merck” and “Collaboration with LG Chem”.

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported revenue and expenses during the reported periods. We evaluate these estimates and judgments, including those described below, on an ongoing basis. We base our estimates on historical experience, known trends and events, contractual milestones and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our 2020 Annual Report, have the greatest potential impact on our financial statements, so we consider those estimates, assumptions and judgments to be our critical accounting policies and estimates. There were no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2021.

A discussion of recent accounting pronouncements is included in Note 2 to the Company’s consolidated financial statements in this Quarterly Report on Form 10-Q.

Significant Contracts and Agreements Related to Research and Development Activities

On January 14, 2015, we entered into a license agreement, as amended and restated on July 31, 2017, or the Einstein License, with Albert Einstein College of Medicine, or Einstein, for certain patent rights relating to our core technology platform for the engineering of biologics to control T cell activity, precision, immune-modulatory drug candidates, and two supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T cell targeting peptides.

We hold an exclusive worldwide license, with the right to sublicense, import, make, have made, use, provide, offer to sell, and sell all products, processes and services that use the patents covered by the Einstein License, including certain technology received from Einstein related thereto, or the Licensed Products. Under the Einstein License, we are required to:

As of September 30, 2021, we were in compliance with our obligations under the Einstein License.

The Einstein License expires upon the expiration of the last obligation to make royalty payments to Einstein which may be due with respect to certain Licensed Products, unless terminated earlier under the provisions thereof. The Einstein License includes certain termination provisions if we fail to meet our obligations thereunder.

We account for the costs incurred in connection with the Einstein License in accordance with Accounting Standards Codification, or ASC 730, Research and Development. For the three and nine months ended September 30, 2021, costs incurred with respect to the Einstein License were$80,000 and $257,000, respectively. For the three and nine months ended September 30, 2020, costs incurred with respect to the Einstein License were$18,750 and $56,250, respectively. Such costs are included in research and development costs in the Company’s consolidated statement of operations and other comprehensive loss. Pursuant to the Einstein License, we issued to Einstein 671,572 shares of our common stock in connection with the consummation of the initial public offering of our common stock on December 27, 2017.

On November 14, 2017, we entered into an Exclusive Patent License and Research Collaboration Agreement, or the Merck Collaboration Agreement, with Merck for a partnership to research and develop certain of our proprietary biologics that target certain autoimmune disease indications, or the Initial Indications. We view the Merck Collaboration Agreement as a component of our development strategy since it will allow us to advance our autoimmune programs in partnership with a world class pharmaceutical company, while also continuing our focus on our more advanced cancer programs. The research program outlined in the Merck Collaboration Agreement entails (1) our research, discovery and development of certain Immuno-STAT drug candidates up to the point of demonstration of certain biologically relevant effects, or Proof of Mechanism, and (2) the further development by Merck of the Immuno-STAT drug candidates that have demonstrated Proof of Mechanism, or the Proposed Product Candidates, up to the point of demonstration of all or substantially all of the properties outlined in such Proposed Product Candidates’ profiles as described in the Merck Collaboration Agreement.

For the purposes of this collaboration, we granted to Merck under the Merck Collaboration Agreement an exclusive license under certain of our patent rights, including a sublicense of patent rights licensed from Einstein, to the extent applicable to the specific Immuno-STAT that are elected to be developed by Merck. So long as Merck continues product development on a Proposed Product Candidate, we are restricted from conducting any development activities within the Initial Indication covered by such Proposed Product Candidate other than pursuant to the Merck Collaboration Agreement.

In exchange for the licenses and other rights granted to Merck under the Merck Collaboration Agreement, Merck paid to us a $2.5 million nonrefundable up-front payment. Additionally, we may be eligible to receive funding in developmental milestone payments, as well as tiered royalties, if all research, development, regulatory and commercial milestones agreed upon by both parties are successfully achieved. Excluding the $2.5 million up-front payment described above, we are eligible to earn up to $101.0 million for the achievement of certain research and development milestones, $120.0 million for the achievement of certain regulatory milestones and $150.0 million for the achievement of certain commercial milestones, in addition to tiered royalties on sales, if all pre-specified milestones associated with multiple products across the primary disease indication areas are achieved. The Merck Collaboration Agreement requires us to use the first $2.5 million of milestone payments we receive under the agreement to fund contract research. The amount of the royalty payments is a percentage of product sales ranging in the single digits based on the amount of such sales. For the three months ended ~~March 31, 2018, the Company~~September 30, 2021 and 2020, we recorded approximately ~~$191,000~~$293,000 and $51,000, respectively, in ~~direct costs~~collaboration revenue related to the ~~non-refundable up-front payment.~~Merck Collaboration Agreement. For the nine months ended September 30, 2021 and 2020, we recorded approximately $1,762,000 and $174,000, respectively, in collaboration revenue related to the Merck Collaboration Agreement.

The term of the Merck Collaboration Agreement extends until the expiration of all royalty obligations following a product candidate’s receipt of marketing authorization, at which point Merck’s licenses and sublicenses granted under the agreement shall become fully paid-up, perpetual licenses and sublicenses, as applicable. Royalties on each product subject to the Merck Collaboration Agreement shall continue on a country-by-country basis until the expiration of the later of: (1) the last-to-expire patent claiming the compound on which such product is based and (2) a period of ten years after the first commercial sale of such product in such country.

Notwithstanding the foregoing, Merck may terminate the Merck Collaboration Agreement at any time upon 30 days’ notice to ~~the Company.~~us. The Merck Collaboration Agreement may also be terminated by either party if the other party is in breach of its obligations thereunder and fails to cure such breach within 90 days after notice or by either party if the other party files for bankruptcy or other similar insolvency proceedings.

~~On July 29, 2015, the Company~~Effective November 6, 2018, we entered into ~~an operating lease~~a collaboration agreement ~~for its laboratory space for~~with LG Chem Life Sciences, or LG Chem, which we refer to as the ~~period from August 1, 2015 through April 30, 2018. The lease contained escalating payments during the lease period. The Company records monthly rent expense on the straight-line basis, equal~~LG Chem Collaboration Agreement, related to the ~~total~~development of Immuno-STATs focused in the field of oncology.

Pursuant to the LG Chem Collaboration Agreement, we granted LG Chem an exclusive license to develop, manufacture and commercialize our lead product, CUE-101, as well as Immuno-STATs that target T cells against two additional cancer antigens, or Product Candidates, in Australia, Japan, Republic of Korea, Singapore, Malaysia, Vietnam, Thailand, Philippines, Indonesia, China (including Macau and Hong Kong) and Taiwan, which we refer to collectively as the LG Chem Territory. On December 20, 2018, we reported the selection of Wilm’s Tumor 1, or WT1, as the first target antigen for a Product Candidate under the LG Chem Collaboration Agreement. In June 2021, after ongoing discussions regarding the selection of the ~~lease payments over the lease term divided by the number of months~~second of the ~~lease term.~~

~~On November 14, 2016,~~two additional cancer antigens, we agreed with LG Chem to let the ~~Company entered into an amended lease agreement that provided the Company with additional laboratory space. This amendment was effective beginning December 1, 2016~~selection period expire without a second antigen being selected. We retain rights to develop and ~~expired on April 30, 2018.~~

On July 30, 2015, the Company entered into an operating lease agreement, as amended, for dedicated vivarium space for the period from August 1, 2015 through March 31, 2018. The operating lease agreement contained an option to increase the amount of space leased for an additional cost.

On January 16, 2018, the Company entered into an amended lease agreement that provided the Company with additional laboratory space. This amendment was effective beginning on January 16, 2018 and expired on April 30, 2018.

On January 18, 2018, the Company entered into an operating lease agreement for its laboratory and office space at 21 Erie St. Cambridge, Massachusetts for the period from May 1, 2018 through April 30, 2021.The lease contains escalating payments during the lease period. Upon execution of this lease agreement the Company prepaid three months of rent which will be held in escrow and credited against future rents.

~~Future minimum lease payments under these leases at March 31, 2018 are as follows:~~

~~Total rent expense, excluding dedicated vivarium space, of approximately $670,000 and $493,000 was~~commercialize all assets included in the ~~statement of operations for the three months ended March 31, 2018 and 2017, respectively.~~

The Company may be subject to various legal proceedings from time to time as part of its business. As of March 31, 2018, the Company was not a party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on its business, financial condition or results of operations.

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

The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto for the fiscal year ended December 31, 2017 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed by us with the Securities and Exchange Commission, or SEC, on March 29, 2018.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the “safe harbor” created by those sections. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “would,” “could,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate,” “strategy,” “future,” “likely” or other comparable terms. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding anticipated results of our drug development efforts, including study results, our expectations regarding regulatory developments and expected future operating results. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, our limited operating history, limited cash and a history of losses; our ability to achieve profitability; our ability to secure required Food and Drug Administration (“FDA”) or other governmental approvals for our product candidates and the breadth of any approved indication; negative or inconclusive results from our clinical studies or serious and unexpected drug-related side effects or other safety issues experienced by participants in our clinical trials; delays and changes in regulatory requirements, policy and guidelines including potential delays in submitting required regulatory applications to the FDA; our reliance on licensors, collaborations and strategic alliances; our ability to obtain adequate financing to fund our business operations in the future; and the other risks and uncertainties described in the Risk Factors and in Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recently filed Annual Report on Form 10-K and any subsequently filed Quarterly Report(s) on Form 10-Q. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

The Company is an innovative biopharmaceutical company developing a novel and proprietary class of biologic drugs for the selective modulation of the human immune system to treat a broad range of cancers and autoimmune disorders. We believe our innovative CUE Biologics™ platform approach to selectively modulate disease relevant T cells, provides a transformative solution to the challenges facing prevailing immunotherapeutics. By directly engaging and modulating disease relevant T cells in the patient’s body via an injectable drug, we believe our biologic drug candidates will be able to realize the true potential of immune modulation. Through our proprietary CUE Biologics™ platform, we believe we are uniquely positioned to become a prominent and leading player in immunotherapy, immuno-oncology, and autoimmune disease. While currently in preclinical development, our proprietary platform is intended to allow us to efficiently design and develop drug candidates that specifically and selectively engage disease relevant T cells for therapeutic affect, while minimizing or eliminating unwanted side effects. We have been aggressively seeking patent protection for our pioneering innovations and, combined with a license agreement with the Albert Einstein College of Medicine (“Einstein”), continue to build a robust intellectual property portfolio. This portfolio includes our core technology platform for the engineering of biologics to selectively control T cell activity, which we call CUE Biologics™, a growing portfolio of precision immuno-modulatory drug candidates, and two supporting technologies we call MOD™ and viraTope™ that enable the discovery of costimulatory signaling molecules (ligands) and T cell targeting peptides, respectively. The Company’s corporate offices and research facilities are located in Cambridge, Massachusetts.

The Company’s product candidates are currently in preclinical development, and the Company’s activities are subject to significant risks and uncertainties. The Company has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and will need to raise additional capital to its growth and ongoing business operations.

The Company’s technology is in the development phase. The Company believes that its licensed platforms have the potential for creating a robust pipeline of drug candidates addressing multiple medical indications. The Company intends to maximize the value and probability of commercialization of its CUE Biologics™ immunotherapeutics by focusing on research, testing, optimizing, conducting pilot studies, performing early stage clinical development and partnering for more extensive, later stages of clinical development, as well as seeking extensive patent protection and intellectual property development.

~~Since the Company is a development stage company, the majority of its business activities to date and its planned future activities will be devoted to further research and development.~~

A fundamental part of the Company’s corporate development strategy is to establish one or more strategic partnerships with leading pharmaceutical or biotechnology organizations that will allow the Company to more fully exploit the potential of its technology platform, such as the one with Merck described below under the heading “CollaborationLG Chem Collaboration Agreement ~~with Merck.”~~

The following discussion and analysis of financial condition and results of operations is based upon the Company’s financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States ~~of America (“GAAP”). Certain accounting policies~~ and estimates are particularly important to the understanding of the Company’s financial position and results of operations and require the application of significant judgment by management or can be materially affected by changes from period to period in ~~economic factors or conditions that are~~global markets outside of the ~~Company’s control. As a result, these issues~~LG Chem Territory. Under the LG Chem Collaboration Agreement, we will engineer the selected Immuno-STATs for up to three alleles, which are ~~subject~~expected to ~~an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine~~include the ~~appropriate assumptions to be used~~predominant alleles in the ~~determination~~LG Chem Territory, thereby enhancing our market reach by providing for greater patient coverage of populations in global markets, while LG Chem will establish a chemistry, manufacturing and controls, or CMC, process for the development and commercialization of selected Product Candidates. The LG Chem Collaboration Agreement provided LG Chem with the option to select one additional Immuno-STAT for an oncology target, or an Additional Immuno-STAT, for an exclusive worldwide development and commercialization license. On December 18, 2019, we and LG Chem entered into a global license and collaboration agreement, which was amended on November 5, 2020. We refer to such agreement, as amended, as the Global License and Collaboration Agreement. The Global License and Collaboration Agreement supersedes the provisions of the LG Chem Collaboration Agreement related to LG Chem’s option for an Additional Immuno-STAT but generally does not become effective unless and until LG Chem exercises its option, other than certain ~~estimates. Those estimates are based~~select provisions including the length of the option period and representations, warranties and covenants of the parties. On April 30, 2021, LG Chem’s option pursuant to the Global License and Collaboration Agreement, as amended on November 5, 2020, expired, and accordingly the ~~Company’s historical operations,~~Global License and Collaboration Agreement no longer contains any material obligations of ours. We will retain an option to co-develop and co-commercialize the ~~future business plans and the projected financial results,~~additional program worldwide.

Under the terms of ~~existing contracts, trends in~~ the ~~industry,~~LG Chem Collaboration Agreement, LG Chem paid us a $5.0 million non-refundable, non-creditable up-front payment and ~~information available from other outside sources. For a more complete description~~purchased approximately $5.0 million of ~~the Company’s significant accounting policies, see Note 2 to the financial statements included in this report.~~

~~Research and development expenses consist primarily~~shares of compensation costs, fees paid to consultants, outside service providers and organizations (including research institutes at universities), facility costs, and development and clinical trial costs with respect to the Company’s product candidates.

Research and development expenses incurred under contracts are expensed ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate. Other research and development expenses are charged to operations as incurred. Payments made pursuant to research and development contracts are initially recorded as research and development contract advances in the Company’s balance sheet and then charged to research and development expenses in the Company’s statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s balance sheet, with a corresponding charge to research and development expenses in the Company’s statement of operations.

Nonrefundable advance payments for future research and development activities pursuant to an executory contractual arrangement are recorded as advances as described above. Nonrefundable advance payments are recognized as an expense as the related services are performed. The Company evaluates whether it expects the services to be rendered at each quarter end and year end reporting date. If the Company does not expect the services to be rendered, the advance payment is charged to expense. To the extent that a nonrefundable advance payment is for contracted services to be performed within 12 months from the reporting date, such advance is included in current assets; otherwise, such advance is included in non-current assets.

Licensing fees and costs consist primarily of costs relating to the acquisition of the Company’s license agreement with Einstein, including related royalties, maintenance fees, milestone payments and product development costs. Licensing fees and costs are charged to operations as incurred.

The Company periodically issues stock options to officers, directors, employees, Scientific and Clinical Advisory Board members, non-employees and consultants for services rendered. Such issuances vest and expire according to terms established at the issuance date.

Stock-based payments to officers, directors and employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values. Stock option grants, which are generally time-vested, are measured at the grant date fair value and charged to operations on a straight-line basis over the vesting period. The fair value of stock options is determined utilizing the Black-Scholes option-pricing model, which is affected by several variables, including the risk-free interest rate, the expected dividend yield, the life of the equity award, the exercise price of the stock option as compared to the fair value of the common stock on the grant date, and the estimated volatility of the common stock over the term of the equity award.

Stock options granted to members of the Company’s Scientific and Clinical Advisory Board, non-employees and outside advisors and consultants are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the stock options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the value on the date of vesting.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Until the Company has established a trading market for its common stock, estimated volatility is based on the average historical volatilities of comparable public companies in a similar industry. The expected dividend yield is based on the current yield at the grant date; the Company has

never declared or paid dividends and has no plans to do so for the foreseeable future. As permitted by Staff Accounting Bulletin No. 107, due to the Company’s lack of history and option activity, management utilizes the simplified method to estimate the expected term of options at the date of grant. The exercise price is determined based on the fair value of the Company’sour common stock at ~~the date of grant.~~

The Company recognizes the fair value of stock-based compensation in general and administrative expenses and in research and development expenses in the Company’s statement of operations, depending on the type of services provided by the recipient of the equity award. The Company issues new shares of common stocka price per share equal to ~~satisfy stock option exercises.~~

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 eliminates transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The FASB has issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20, all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. Entities are able to transition20% premium to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company adopted the provisions of ASU 2014-09 as of January 1, 2018. As the Company is unlikely to generate any sustainable operating revenues in the next several years, the adoption of ASU 2014-09 did not have any impact on the Company’s financial statement presentation or disclosures.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires a lessee to record a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, on the balance sheet for all leases with terms longer than 12 months, as well as the disclosure of key information about leasing arrangements. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocatedvolume weighted-average closing price per share over the ~~lease term, generally on a straight-line basis. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures are required~~thirty (30) trading day period immediately prior to provide the amount, timing and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company will adopt the provisions of ASU 2016-02 in the quarter beginning January 1, 2019. The Company generally does not finance purchases of property and equipment, but does lease its operating facilities. While the Company is continuing to assess the potential impact of ASU 2016-02, it currently expects that most of its lease commitments will be subject to ASU 2016-02 and accordingly, upon adoption will be recognized as lease liabilities and right-of-use assets in the Company’s balance sheet.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation-Stock Compensation (Topic 718); Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for public entities for fiscal years and interim periods beginning after December 15, 2017. The ASU is applied prospectively on and after the effective date. This standard did not have a material effect on the Company’s financial statements.

In July 2017, the FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified

~~retrospective approach. The adoption of ASU 2017-11 is not currently expected to have any impact on the Company’s financial statement presentation or disclosures.~~

On January 14, 2015, the Company entered into a license agreement, as amended and restated on July 31, 2017 (the “Einstein License”), with Einstein for certain patent rights (the “Patents”) relating to the Company’s core technology platform for the engineering of biologics to control T cell activity, precision, immune-modulatory drug candidates, and two supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T cell targeting peptides. The Company holds an exclusive worldwide license, with the right to sublicense, import, make, have made, use, provide, offer to sell, and sell all products, processes and services that use the patents covered by the Einstein License, including certain technology received from Einstein related thereto (the “Licensed Products”). Under the Einstein License, the Company is required to:

~~The Company was in compliance with its obligations under the Einstein License at March 31, 2018 and 2017.~~

The Company accounts for the costs incurred in connection with the Einstein License in accordance with ASC 730, Research and Development. For the quarters ended March 31, 2018, and 2017, costs incurred with respect to the Einstein License aggregated $12,500 for each period. Such costs are included in research and development costs in the statements of operations.

Pursuant to the Einstein License, the Company issued to Einstein 671,572 shares of common stock of the Company in connection with the consummation of the initial public offering of its common stock on December 27, 2017. Under the Einstein License, the Company must also use its best efforts to file a registration statement covering the resale of the 671,572 shares issued to Einstein no later than 180 days after the consummation of such offering.

~~Catalent Pharma Solutions, LLC (“Catalent”) is a global provider of drug delivery technology and development solutions for drugs, biologics and consumer health products.~~

On March 7, 2017, the Company entered into an agreement with Catalent for Catalent to provide services on a sequential milestone basis with respect to the development and manufacture of the Company’s lead drug candidate, CUE-101. The services under the agreement are designed to support the preparation and filing of an Investigational New Drug Application with the United States Food and Drug Administration to allow for the commencement of a Phase 1 clinical trial of CUE-101 in the United States.

On July 5, 2017, the Company entered into a separate Master Services Agreement with Catalent that outlines the terms and conditions under which Catalent will provide contract services with respect to the Company’s research and development activities for a period of five years. The Company may terminate this agreement without cause upon 90 days’ prior written notice. Unless and until terminated, this agreement will automatically be extended for successive one-year periods.

On November 14, 2017, the Company entered into an Exclusive Patent License and Research Collaboration Agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”) for a partnership to research and develop certain of the Company’s proprietary biologics that target certain autoimmune disease indications (the “Initial Indications”). We view this Collaboration Agreement as a component of our development strategy since it will allow us to advance our autoimmune programs in partnership with a world class pharmaceutical company, while also continuing our focus on our more advanced cancer programs. The research program outlined in the Collaboration Agreement entails (1) our research, discovery and development of certain CUE Biologics™ drug candidates up to the point of demonstration of certain biologically relevant effects (“Proof of Mechanism”) and (2) the further development by Merck of the CUE Biologics™ drug candidates that have demonstrated Proof of Mechanism (the “Proposed Product Candidates”) up to the point of demonstration of all or substantially all of the properties outlined in such Proposed Product Candidates’ profiles as described in the Collaboration Agreement.

For the purposes of this collaboration, the Company granted to Merck under the Collaboration Agreement an exclusive license under certain of is patent rights, including a sublicense of patent rights licensed from Einstein, to the extent applicable to the specific CUE Biologics™ that are elected to be developed by Merck. From the effective date of the Collaboration Agreement until the earlier of (i) the first achievement of Proof of Mechanism for a CUE Biologics™ drug candidate or (ii) 18 months after the Company notifies the joint steering committee that the first Product Candidate has been synthesized under the research program, the Company is required to forebear from researching, developing or licensing to a third party rights related to any CUE Biologics™ drug candidate for the treatment of autoimmune diseases other than pursuant to theLG Chem Collaboration Agreement. In addition, so long as Merck continues product development on a Proposed Product Candidate, the Company is restricted from conducting any development activities within the Initial Indication covered by such Proposed Product Candidate other than pursuant to the Collaboration Agreement. The Company is not required to forbear at any time, however, from developing other CUE Biologics™ for use in therapeutic areas other than autoimmune diseases, e.g., for use in treating cancer or infectious diseases.

In exchange for the licenses and other rights granted to Merck under the Collaboration Agreement, Merck paid to the Company a $2.5 million nonrefundable up-front payment. Additionally, the Company may beWe are also eligible to receive ~~funding in developmental milestone~~up to an additional aggregate payments ~~as well as tiered royalties,~~of approximately $400.0 million if ~~all~~certain research, development, regulatory and commercial milestones ~~agreed upon by both parties~~ are successfully achieved. ~~Excluding the up-front~~On May 16, 2019, we earned a $2.5 million milestone payment ~~described above, the Company is eligible to earn up to $101 million~~ for the ~~achievement~~U.S. Food and Drug Administration’s, or FDA’s, acceptance of ~~certain research and development milestones, $120~~the IND for our lead drug candidate, CUE-101, pursuant to the LG Chem Collaboration Agreement. On December 7, 2020, we earned a $1.25 million ~~for~~

milestone payment on the ~~achievement~~selection of ~~certain regulatory milestones and $150 million for~~a pre-clinical candidate pursuant to the ~~achievement of certain commercial milestones, in~~LG Chem Collaboration Agreement. In addition, tothe LG Chem Collaboration Agreement also provides that LG Chem will pay us tiered single-digit royalties on net sales ~~if all pre-specified milestones associated with multiple products across the primary disease indication areas are achieved. The~~of commercialized Product Candidates, or Collaboration Agreement requires the Company to use the first $2.7 million of milestone payments we receive under the agreement to fund contract research. The amount of the royalty payments is a percentage of product sales rangingProducts, in the ~~single digits based~~LG Chem Territory on ~~the amount of such sales. For the three months ended March 31, 2018, the Company recorded approximately $191,000 in direct costs to the non-refundable up-front payment.~~

~~The term of the Collaboration Agreement extends until the expiration of all royalty obligations following~~ a ~~product candidate’s receipt of marketing authorization, at which point Merck’s licenses~~product-by-product and sublicenses granted under the agreement shall become fully paid-up, perpetual licenses and sublicenses, as applicable. Royalties on each product subject to the Collaboration Agreement shall continue on a country-by-country basis, until the later of expiration of patent rights in a country, the ~~later of: (1) the last-to-expire patent claiming the compound on which~~expiration of regulatory exclusivity in such ~~product is based and (2) a period of~~country, or ten years after the first commercial sale of ~~such product~~a Collaboration Product in such ~~country.~~country, subject to certain royalty step-down provisions set forth in the LG Chem Collaboration Agreement.

~~Notwithstanding~~Pursuant to the ~~foregoing, Merck~~LG Chem Collaboration Agreement, the parties will share research costs related to Collaboration Products, and LG Chem will provide CMC process development for selected Product Candidates and potentially additional downstream manufacturing capabilities, including clinical and commercial supply for Collaboration Products. In return for performing CMC process development, LG Chem is eligible to receive low-single digit royalty payments on the sales of Collaboration Products sold in all countries outside the LG Chem Territory. The amount of fees and milestone payments, as well as whether we receive royalty payments, will depend on the number of alleles selected by LG Chem and whether we exercise our option to co-develop and co-commercialize the additional program worldwide, in which case we would share costs and profits instead of receiving royalties and post-option-exercise milestones. For the three months ended September 30, 2021 and 2020, we recognized revenue of approximately $2,102,000 and approximately $653,000, respectively, related to the LG Chem Collaboration Agreement. For the nine months ended September 30, 2021 and 2020, we recognized revenue of approximately $4,925,000 and approximately $2,455,000, respectively, related to the LG Chem Collaboration Agreement.

The LG Chem Collaboration Agreement includes various representations, warranties, covenants, indemnities and other customary provisions. LG Chem may terminate the LG Chem Collaboration Agreement for convenience or in the event we undergo a change of control on a program-by-program, product-by-product or country-by-country basis, or in its entirety, at any time ~~upon 30 days’~~following the notice toperiod set forth in the ~~Company. The~~LG Chem Collaboration Agreement. Either party may terminate the LG Chem Collaboration Agreement, ~~may~~in its entirety or on a program-by-program, product-by-product or country-by-country basis, in the event of an uncured material breach. The LG Chem Collaboration Agreement is also ~~be terminated~~terminable by either party if(i) upon the bankruptcy, insolvency or liquidation of the other party ~~is in breach~~or (ii) for certain activities involving the challenge of ~~its obligations thereunder and fails to cure such breach within 90 days after notice or~~certain patents controlled by ~~either party if~~ the other ~~party files for bankruptcy or other similar insolvency proceedings.~~party. Unless earlier terminated, the LG Chem Collaboration Agreement will expire on a product-by-product and country-by-country basis upon the expiration of the applicable royalty term.

We have not generated commercial revenue from product sales. To date, we have generated collaboration revenue from the Merck Collaboration Agreement and the LG Chem Collaboration Agreement. Collaboration revenue may vary from period to period depending on the progress of our work in connection with either or both of our collaboration agreements.

~~The Company~~We generally ~~recognizes~~recognize operating expenses as they are incurred in two general categories, general and administrative expenses and research and development expenses. ~~The Company’s~~Our operating expenses also include non-cash components related to depreciation and amortization of property and equipment and stock-based compensation, which are allocated, as appropriate, to general and administrative expenses and research and development expenses.

General and administrative expenses consist of salaries and related expenses for executive, legal, finance, human resources, information technology and administrative personnel, as well as professional fees, insurance costs, and other general corporate expenses. Management expects general and administrative expenses to increase in future periods as ~~the Company adds~~we add personnel and

~~incurs~~ incur additional expenses related to an expansion of ~~its~~our research and development activities, ~~and its operation as a public company,~~ including higher legal, accounting, insurance, compliance, compensation and other expenses.

Research and development expenses consist primarily of compensation expenses, fees paid to consultants, outside service providers and organizations (including research institutes at universities), facility expenses, and development and clinical trial expenses with respect to ~~the Company’s~~our product candidates. ~~The Company charges~~We charge research and development expenses to operations as they are incurred. Management expects research and development expenses to increase in the future as ~~the Company increases its~~we increase our efforts to develop technology for potential future products based on ~~its~~our technology and research.

Three and Nine Months Ended ~~March 31, 2018~~September 30, 2021 and ~~2017~~2020

~~The Company’s~~Our consolidated statements of operations and other comprehensive loss for the three and nine months ended ~~March 31, 2018~~September 30, 2021 and ~~2017~~2020, as discussed herein, are presented below.

	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
	2018			2017			2021			2020			2021			2020
	(in thousands)						(in thousands)						(in thousands)
Revenue	$	—		$	—
Collaboration revenue							$	2,395		$	704		$	6,687		$	2,679
Operating expenses:
General and administrative		1,703			889			4,125			3,318			12,660			11,205
Research and development		5,819			2,461			11,288			7,517			29,846			25,542
Total operating expenses		7,522			3,350			15,413			10,835			42,506			36,747
Loss from operations		(7,522	)		(3,350	)		(13,018	)		(10,131	)		(35,819	)		(34,068	)
Other Expense		(1	)		—
Net loss	$	(7,523	)	$	(3,350	)
Other income:
Interest income, net								25			100			42			386
Total other income								25			100			42			386
Net Loss							$	(12,993	)	$	(10,031	)	$	(35,777	)	$	(33,682	)
Unrealized (loss) gain from available-for-sale securities								—			83			(7	)		82
Comprehensive loss							$	(12,993	)	$	(9,948	)	$	(35,784	)	$	(33,600	)
Net loss per common share – basic and diluted							$	(0.41	)	$	(0.34	)	$	(1.16	)	$	(1.20	)
Weighted average common shares outstanding – basic and diluted								31,515,178			29,650,909			31,064,579			28,151,361

Collaboration revenue was $2,395,000 and $704,000 for the three months ended September 30, 2021 and 2020, respectively. We recognized collaboration revenue of $6,687,000 and $2,679,000 for the nine months ended September 30, 2021 and 2020, respectively. All collaboration revenue recognized was related to the performance of services under our collaboration agreements with Merck and LG Chem.

General and administrative expenses totaled ~~approximately $1,703,000~~$4,125,000 and ~~$889,000~~$3,318,000 for the three months ended ~~March 31, 2018~~September 30, 2021 and ~~2017,~~2020, respectively. This increase of ~~approximately $814,000~~$807,000 during the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was due primarily to legal expense, accounting expense related to the ~~growth~~issuance of our common stock pursuant to an “at-the-market” equity offering program, and stock compensation related to related parties and non-related parties. We expect our general and administrative expenses to increase as we continue to expand our operations.

General and administrative expenses for the ~~Company~~three months ended September 30, 2021 consisted of expenses related to professional and ~~its activities.~~consulting fees of $1,319,000, stock-based compensation of $1,199,000, employee and board compensation of $1,064,000, rent of $263,000, insurance expense of $85,000, depreciation and amortization of $25,000, travel of $9,000, investor relations expense of $5,000 and other expenses of $155,000. General and administrative expenses for the three months ended September 30, 2020 consisted of expenses related to stock-based compensation expense of $1,050,000, employee and board compensation of $964,000, professional and consulting fees of $744,000, rent of $297,000, insurance expense of $67,000, investor relations of $53,000, depreciation and amortization of $25,000, travel of $3,000, and other expenses of $115,000.

General and administrative expenses totaled $12,660,000 and $11,205,000 for the nine months ended September 30, 2021 and 2020, respectively. This increase of $1,455,000 was due primarily to legal expense and stock compensation paid to related parties and non-related parties and promotions. We expect our general and administrative expenses to continue to increase as we expand our operations.

General and administrative expenses for the ~~three~~nine months ended ~~March 31, 2018~~September 30, 2021 consisted of expenses related to professional and consulting fees of $4,065,000, stock-based compensation of $3,662,000, employee and board compensation of ~~approximately $459,000, stock based compensation of $380,000, professional and consulting fees of $346,000,~~$3,221,000, rent of ~~$102,000,~~$800,000, insurance expense of $254,000, depreciation and amortization of ~~$8,000,~~$80,000, investor relations of $19,000, travel of ~~$110,000,~~$14,000, and other expenses of ~~$298,000.~~ $544,000. General and administrative expenses for the ~~three~~nine months ended ~~March 31, 2017 included~~September 30, 2020 consisted of expenses related to professional and consulting fees of $3,498,000, stock-based compensation expense of $3,060,000, employee and board compensation of ~~$235,000, professional and consulting fees of $173,000,~~$2,901,000, rent of ~~$58,000,~~$814,000, investor relations of $271,000, insurance expense of $194,000, depreciation and amortization of ~~$3,000, stock-based compensation of $227,000,~~$75,000, travel of ~~$57,000,~~$28,000, and other expenses of ~~$136,000.~~$364,000.

Research and development expenses totaled ~~approximately $5,819,000~~$11,288,000 and ~~$2,461,000~~$7,517,000 for the three months ended ~~March 31, 2018~~September 30, 2021 and ~~2017,~~2020, respectively. This increase of ~~approximately $3,358,000~~ $3,771,000 during the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was due primarily to the ~~growth~~increase in laboratory and drug substance manufacturing costs and clinical expenses, offset by a decrease in stock-based compensation expense. We expect our research and development expenses to increase as we expand our clinical development activities. However, some of this increase will be offset by reduced expenditures anticipated in programs outside of immune-oncology such as infectious disease (the CUE-200 series) and auto-immune disease (the CUE-300 and CUE-400 series).

Research and development expenses for the ~~Company~~three months ended September 30, 2021 included expenses related to research and ~~its activities.~~laboratory expenses of $3,551,000, employee and Scientific and Clinical Advisory Board compensation of $2,473,000, stock-based compensation expense of $2,053,000, clinical expenses of $1,109,000, rent of $959,000, depreciation and amortization of $291,000, insurance expense of $251,000, other professional fees of $199,000, licensing fees of $175,000, travel of $13,000, and other expenses of $216,000. Research and development expenses for the three months ended September 30, 2020 included expenses related to employee and Scientific and Clinical Advisory Board compensation of $1,835,000, research and laboratory expenses of $1,558,000, stock-based compensation expense of $1,450,000, clinical expenses of $1,022,000, rent of $915,000, depreciation and amortization of $243,000, insurance expense of $168,000, other professional fees of $130,000, licensing fees of $24,000, travel of $4,000, and other expenses of $168,000.

Research and development expenses totaled $29,846,000 and $25,542,000 for the nine months ended September 30, 2021 and 2020, respectively. This increase of $4,304,000 was due primarily to the increase in laboratory and drug substance manufacturing costs and clinical expenses, offset by a decrease in new hires in 2021 and stock compensation expense related to executives. We expect our research and development expenses to continue to increase as we expand our development activities.

Research and development expenses for the ~~three~~nine months ended ~~March 31, 2018~~September 30, 2021 included expenses related to research and laboratory expenses of $7,805,000, employee and Scientific and Clinical Advisory Board compensation of ~~approximately $1,169,000,~~$7,354,000, stock-based compensation of ~~$778,000~~$4,879,000, clinical expenses of $3,263,000, rent of $2,867,000, other professional fees of $1,223,000, depreciation and amortization of ~~$159,000, research and laboratory expenses~~$868,000, insurance expense of ~~$2,987,000, rent of $568,000,~~$735,000, licensing fees of ~~$36,000,~~$221,000, travel expenses of $23,000, and other expenses of ~~$121,000.~~$608,000. Research and development expenses for the ~~three~~nine months ended ~~March 31, 2017~~September 30, 2020 included expenses related to research and laboratory expenses of $6,449,000, employee and Scientific and Clinical Advisory Board compensation of ~~$597,000,~~$6,012,000, stock-based compensation expense of $5,139,000, clinical expenses of $3,054,000, rent of $2,560,000, depreciation and amortization of ~~$64,000, stock-based compensation~~$728,000, insurance expense of ~~$316,000, research and laboratory expenses of $854,000, rent of $435,000, licensing fees of $29,000,~~$489,000, other professional fees of ~~$115,000,~~$397,000, licensing fees of $74,000, travel expenses of $26,000, and other expenses of ~~$51,000.~~$614,000.

~~The Company’s loss from operations~~Interest income was ~~approximately $7,522,000~~$25,000 and $100,000 for the three months ended ~~March 31, 2018,~~September 30, 2021 and 2020, respectively. This decrease of $75,000 was primarily due to lower interest yields and reduced investment of our cash in cash equivalents in marketable securities during the 2021 period. Interest income was $42,000 for the nine months ended September 30, 2021, as compared to ~~$3,350,000~~$386,000 for the ~~three~~nine months ended ~~March 31, 2017.~~

~~As a result~~September 30, 2020. This decrease of $344,000was due to reduced investment of our cash in cash equivalents in marketable securities during the ~~foregoing,~~2021 period, offset by the ~~Company’s net loss was approximately $7,523,000 for the three months ended March 31, 2018, as compared to $3,350,000 for the three months ended March 31, 2017.~~gain on sale of fixed assets of $19,000.

~~The Company has~~We have financed ~~its~~our working capital requirements primarily through private and public offerings of equity securities and cash received ~~in December 2017~~ from Merck ~~in connection with~~and LG Chem under the ~~Collaboration Agreement.~~respective collaboration agreements. At ~~March 31, 2018, the Company~~September 30, 2021, we had cash and ~~a certificate of deposit~~cash equivalents totaling ~~approximately $53,152,000~~$67,633,000 available to fund ~~the Company’s~~our ongoing business activities. Additional information concerning ~~the Company’s~~our financial condition and results of operations is provided in the financial statements included in this ~~report.~~Quarterly Report on Form 10-Q.

The amounts that ~~the Company~~we actually ~~spends~~spend for any specific purpose may vary significantly and will depend on a number of factors, including, but not limited to, ~~the Company’s~~our research and development activities and programs, clinical testing, regulatory approval, market conditions, and changes in or revisions to ~~the Company’s~~our business strategy and technology development plans. ~~Investors~~

On January 4, 2019, we filed a universal shelf registration statement on Form S-3 with the SEC, or the 2019 Shelf, to register for sale from time to time up to $150.0 million of our common stock, preferred stock, debt securities, warrants and/or units in one of more offerings (File No. 333-229140). The 2019 Shelf became effective on February 3, 2019.

In March 2020, we entered into an at-the-market, or ATM, equity offering sales agreement, or the March 2020 Sales Agreement, with Stifel Nicolaus & Company, Inc., or Stifel, to sell shares of our common stock for aggregate gross proceeds of up to $35.0 million, from time to time, through an “at-the-market” equity offering program under which Stifel acts as sales agent. As of September 30, 2021, we sold a total of 1,824,901 shares of common stock under the March 2020 Sales Agreement for proceeds of $34.3 million, net of commissions paid, but excluding estimated transaction expenses. Due to the issuance and sale of all the shares of common stock subject thereto, the March 2020 Sales Agreement terminated in accordance with its terms.

The shares of common stock sold under the March 2020 Sales Agreement were made pursuant to the 2019 Shelf.

On June 22, 2020, we filed a registration statement on Form S-3ASR, which became automatically effective upon filing with the SEC (File No. 333-239357), or the 2020 Shelf, to register for sale from time to time up to $300.0 million of our common stock, preferred stock, debt securities, warrants, rights and/or units in one or more offerings.

In June 2020, we entered into an ATM equity offering sales agreement, or the June 2020 Sales Agreement, with Stifel to sell shares of our common stock for aggregate gross proceeds of up to $40.0 million, from time to time, through an “at-the-market” equity offering program under which Stifel acts as sales agent. The sales agreement will ~~be relying on~~terminate upon the ~~judgment~~earliest of ~~the Company’s management regarding the application of the proceeds from~~(a) the sale of $40.0 million of shares of our common stock pursuant to the ~~Company’s~~June 2020 Sales Agreement or (b) the termination of the June 2020 Sales Agreement by us or Stifel. During the nine months ended September 30, 2021, we sold 907,700 shares of common ~~stock.~~stock under the June 2020 ATM Agreement for proceeds of $10.4 million, net of commissions paid, but excluding transaction expenses. As of September 30, 2021, we sold 2,099,700 shares of common stock under the June 2020 Sales Agreement for proceeds of $32.7 million, net of commissions paid, but excluding estimated transaction expenses. The shares of common stock sold under the June 2020 Sales Agreement are made pursuant to the 2020 Shelf.

In October 2021, we entered into an open market sale agreement with Jefferies LLC, or the October 2021 ATM Agreement, to sell shares of our common stock for aggregate gross proceeds of up to $80 million, from time to time, through an ATM equity offering program under which Jefferies acts as sales agent. The ~~Company believes that its existing cash resources~~October 2021 ATM Agreement will ~~be sufficient~~terminate upon the earliest of (a) the sale of $80 million of shares of our common stock pursuant to ~~fund~~ the ~~Company’s projected operating requirements for at least~~October 2021 ATM Agreement or (b) the ~~next 12 months from~~termination of the ~~issuance of this report based on current operating plans. Until~~October 2021 ATM Agreement by us or Jefferies LLC. The June 2020 ATM Agreement with Stifel was terminated prior to entering into the Company is able to generate sustainable revenues that generate operating profitability and positive operating cash flows, the Company expects to finance its future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. However, there can be no assurances that the Company will be able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its future operating requirements, if at all. If the Company is unable to obtain sufficient cash resources to fund its operations, the Company may be forced to reduce or discontinue its operations entirely.October 2021 ATM Agreement with Jefferies.

If ~~the Company issues~~we issue additional equity securities to raise funds, the ownership percentage of ~~the Company’s~~our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of ~~the Company’s~~our common stock. If ~~the Company issues~~we issue debt securities, ~~the Company~~we may be required to grant security interests in its assets, could have substantial debt service obligations, and lenders may have a senior position (compared to stockholders) in any potential future bankruptcy or ~~liquidation of the Company.~~liquidation. Additionally, corporate collaboration and licensing arrangements may require us to incur non-recurring and other charges, give up certain rights relating to our intellectual property and research and development activities, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, issue debt which may require liens on our assets and which will increase our monthly expense obligations, or disrupt our management and business.

The following table summarizes our changes in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2021 and 2020:

During the ~~three~~nine months ended ~~March 31, 2018, the Company~~September 30, 2021 and 2020, we used cash of ~~approximately $9,759,000~~$28,192,000 and $25,495,000, respectively, in operating ~~activities, as compared to $3,464,000~~activities. Cash used in operating activities during the ~~three~~nine months ended ~~March 31, 2017. The difference between cash~~September 30, 2021 consisted primarily of our net loss of $35,777,000, and decreases of $3,513,000 in operating lease liability, $3,354,000 in research and development contract liability, $867,000 in prepaid expenses and other current assets. Cash used in operating activities was partially offset by increases of $8,541,000 in stock-based compensation, $3,405,000 in change in operating lease right-of-use asset, $1,202,000 in accrued expenses, $948,000 in depreciation and ~~net loss~~amortization, $646,000 in accounts receivable, $400,000 in accounts payable and $250,000 in other assets.

Cash used in operating activities during the nine months ended September 30, 2020 consisted primarily of our net loss of approximately $33,682,000, and reflected the following changes in account balances: a decrease of approximately $443,000 in prepaid expenses, $945,000 in research and development contract liabilities, other assets of $250,000, and $2,539,000 in change in operating lease right-of-use asset, offset by $804,000 in depreciation and amortization, and $8,199,000 in stock-based compensation expense, premium/discount on purchased securities of $77,000, operating lease liability of $2,406,000, accounts payable of $225,000, accounts receivable of $298,000, and ~~changes in operating assets and liabilities and the payment~~accrued expenses of ~~a $1,074,000 deposit pursuant to the January 18, 2018 lease agreement for laboratory and office space as 21 Erie Street Cambridge, MA.~~approximately $355,000.

During the ~~three~~nine months ended ~~March 31, 2018,~~September 30, 2021, our investing activities provided $9,108,000 in cash, compared to cash used by investing activities of $5,436,000 during the nine months ended September 30, 2020. This increase of $14,544,000 in cash from investing activities was primarily due to the redemption of our entire short-term investment in marketable securities. Cash provided by investing activities during the nine months ended September 30, 2021 consisted of $10,000,000 for the redemption of short-term investments and ~~2017~~$21,000 of cash received on the ~~Company~~sale of fixed assets, offset by the purchase of property and equipment of $913,000. Cash used ~~cash of approximately $673,000 and $556,000, respectively,~~ in investing activities during the nine months ended September 30, 2020 consisted primarily of $10,000,000 for the purchase of ~~office~~short-term investments, offset by a discount on securities purchased of approximately $51,000, $5,000,000 in maturities of short-term investments, and ~~laboratory equipment.~~ the purchase of property and equipment of approximately $487,000.

During the ~~three~~nine months ended ~~March 31, 2018~~September 30, 2021 and ~~2017, there was no impact to~~2020, we generated cash from financing ~~activities.~~

~~On July 29, 2015, the Company entered into an operating lease agreement for its laboratory space for the period~~activities of $11,851,000 and $58,370,000, respectively, a decrease of $46,519,000. Cash from ~~August 1, 2015 through April 30, 2018. The lease contained escalating payments~~financing activities during the ~~lease period. The Company records monthly rent expense on~~nine months ended September 30, 2021, consisted of cash proceeds from the ~~straight-line basis, equal to the total of the lease payments over the lease term divided by the number of months of the lease term.~~

~~On July 30, 2015, the Company entered into an operating lease agreement, as amended, for dedicated vivarium space for the period from August 1, 2015 through March 31, 2018.~~

On November 14, 2016, June 28, 2017, and January 16, 2018, the Company entered into amendments to the operating lease agreement that each provided the Company with additional laboratory space. These amendments were effective beginning December 1, 2016 and July 1, 2017, and January 16, 2018, respectively, and continuedcommon stock sold through the ~~expiration~~June 2020 Sales Agreement of $10,357,000, net of underwriting commissions and fees, and exercises of common stock options of $2,061,000, offset by cash used of $567,000 to pay taxes related to restricted stock withheld at vesting. Cash from financing activities during the ~~lease~~nine months ended September 30, 2020, consisted of cash proceeds from the common stock sold through our ATM equity offering programs with Stifel of approximately $56,682,000, net of underwriting commissions and fees, the exercise of common stock options of approximately $1,799,000, and cash used of approximately $111,000 to pay taxes related to restricted stock withheld at vesting.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of our Immuno-STAT platform, continue ongoing and initiate new clinical trials of and seek marketing approval for our product candidates. Our expenses will also increase if, and as, we:

We believe that our existing cash and cash equivalents as of September 30, 2021 will enable us to fund our operating requirements for at least the next 12 months. We have based this estimate on ~~April 30, 2018.~~assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

~~On January 22, 2018,~~We will need to raise additional capital or incur indebtedness to continue to fund our operations in the ~~Company entered into an operating lease agreement for laboratory space~~future. Our ability to ~~commence following the expiration~~raise additional funds will depend on financial, economic and market conditions, many of ~~its lease agreement described above with a term continuing until April 30, 2021. The monthly rental rate under the lease agreement is approximately $297,000 for the first 18 months~~which are outside of our control, and ~~$388,000 for the remainder~~we may be unable to raise financing when needed, or on terms favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, which could adversely affect our business prospects, and we may be unable to continue our operations. Because of ~~the term. Pursuant to the terms of the lease agreement, the Company prepaid three months of rent payments upon entering into the lease agreement.~~

~~During 2015, the Company entered into a license agreement, (the “Einstein License”),~~uncertainties associated with the ~~Albert Einstein College~~research, development and commercialization of ~~Medicine, (Einstein)~~our product candidates, we are unable to estimate the exact amount of our working capital requirements. Factors that may affect our planned future capital requirements and accelerate our need for ~~certain patent rights (the “Patents”) relating to~~additional working capital include the ~~Company’s core technology platform~~following:

A change in the ~~engineering~~outcome of ~~biologics to control T-cell activity, precision, immune-modulatory drug candidates, and two supporting technologies that enable the discovery~~any of ~~costimulatory signaling molecules (ligands) and T-cell targeting peptides. The Company’s remaining commitments with respect to this agreement are based on the attainment of future milestones.~~

~~On March 7, 2017, the Company entered into an agreement with Catalent for Catalent to provide services on a sequential milestone basis~~these or other variables with respect to the development of any of our product candidates could significantly change the costs and ~~manufacture of the Company’s lead drug candidate, CUE-101. The services under the agreement are designed to support the preparation and filing of an Investigational New Drug Application~~timing associated with the ~~United States Food and Drug Administration to allow for the commencement~~development of ~~a Phase 1 clinical trial of CUE-101~~that product candidate. Further, our operating plans may change in the ~~United States. The Company incurred total direct~~future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties and grants from organizations and foundations. If we raise additional funds by selling shares of our common stock or other equity-linked securities, the ownership interest of our current stockholders will be diluted. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be acceptable to us. If we raise additional funds through debt financing, we may have to grant a security interest on our assets to the future lenders, our debt service costs ~~under this agreement aggregating $1.2 million during~~may be substantial, and the lenders may have a preferential position in connection with any future bankruptcy or liquidation.

If we are unable to raise additional capital when needed, we may be required to curtail the development of our technology or materially curtail or reduce our operations. We could be forced to sell or dispose of our rights or assets. Any inability to raise adequate funds on commercially reasonable terms could have a material adverse effect on our business, results of operation and financial condition, including the possibility that a lack of funds could cause our business to fail, dissolve and liquidate with little or no return to investors.

During the three and nine months ended March 31, 2018 and currently estimates that it will incur an additional $3.2 million of such costs during the year ended December 31, 2018. Certain of these payments will consist of nonrefundable advance payments for which the Company anticipates receiving the contracted services within 12 months from the date of payment. Management periodically reviews and updates the project’s estimated budget and timeline.

~~The following table sets forth the Company’s estimated fixed~~September 30, 2021, there were no material changes to our contractual obligations and commitments ~~to make future payments~~as of December 31, 2020 described under ~~existing contracts at March 31, 2018. This table excludes potential milestone~~Management’s Discussion and ~~royalty payments due under~~Analysis of Financial Condition and Results of Operations in our ~~Einstein License.~~2020 Annual Report.

At ~~March 31, 2018, the Company~~September 30, 2021, we did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND ~~QUALITATI~~VEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Market risk represents~~As a smaller reporting company, we are not required to provide the risk of loss that may result from the change in value of financial instruments due to fluctuations in their market price. Market risk is inherent in all financial instruments. The primary quantifiable market risk associated with our financial instruments is sensitivity to changes in interest rates. Interest rate risk represents the potential loss from adverse changes in market interest rates. The primary objective of our investment activities is to preserve principal while maximizing our income from investments and minimizing our market risk. As of March 31, 2018, our portfolio of financial instruments consisted of cash and certificates of deposit. Due to the short term nature of these financial instruments, we believe there is no material exposure to interest rate risk, and/or credit risk, arising from our portfolio of financial instruments.information required by this Item 3.

Our assets and liabilities are denominated in U.S. dollars. Consequently, we have not considered it necessary to use foreign currency contracts or other derivative instruments to manage changes in currency rates. We do not now, nor do we plan to, use derivative financial instruments for speculative or trading purposes. However, these circumstances might change.

We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based on our management’s evaluation (with the participation of our principal executive officer and our principal financial officer) of our disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective ~~to achieve their stated purpose~~ as of ~~March 31, 2018,~~September 30, 2021, the end of the period covered by this report.

Our management, including our principal executive officer and our principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of control effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

There were no changes in our internal control over financial reporting during the ~~quarter~~three months ended ~~March 31, 2018~~September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In evaluating ~~the Company~~us and ~~its~~our business, you should carefully consider the information included in this Quarterly Report on Form 10-Q and in other documents we file with the SEC and the risk factors previously disclosed in “Cautionary Note Regarding Forward-Looking Statements And Industry Data—Risk Factor Summary” and “Part I, Item 1A. Risk Factors” of our 2020 Annual Report on Form 10-K for the year ended December 31, 2017, and in “Part II, Item1A. Risk Factors” in any subsequently filed Quarterly Report(s) on Form 10-Q. There have been no material changes to such risk factors as of March 31, 2018.Report.

~~As described in the registration statement on Form S-1 we filed in connection with our initial public offering (the “IPO),~~

~~pursuant to our license agreement Albert Einstein College of Medicine (“Einstein”) we agreed to issue to Einstein 671,572 shares of~~

~~common stock in connection with the IPO. Such shares were issued on January 9, 2018. We relied on the exemption provided by~~

~~Section 4(a)(2) of the Securities Act to issue such shares inasmuch as the investor is accredited and there is no form of general~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		47-3324577
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)		(I.R.S. Employer Identification No.)

21 Erie ~~St.~~ Street Cambridge, Massachusetts		02139
(Address of ~~Principal Executive Offices)~~principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CUE	Nasdaq Capital Market

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements	3
	~~Condensed Balance Sheets as of March 31, 2018 and December 31, 2017 (Unaudited)~~	3
	~~Condensed Statements of Operations for the three months ended March 31, 2018 and 2017 (Unaudited)~~	4
	~~Condensed Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (Unaudited)~~	5
	~~Notes to Condensed Financial Statements (Unaudited)~~	6
	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (Unaudited)	6
	Consolidated Statements of Operations and Other Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	7
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	8
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)	9
	Notes to the Consolidated Financial Statements (Unaudited)	10
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1525
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	2438
	Item 4. Controls and Procedures	2438
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings	2539
	Item 1A. Risk Factors	2539
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2539
	Item 3. Defaults Upon Senior Securities	2539
	Item 4. Mine Safety Disclosures	2539
	Item 5. Other Information	2539
	Item 6. Exhibits	2640

Laboratory equipment		5 years
Computer and office equipment		3 years
Furniture and fixtures		3-8 years

	Fair Value Measurements as of September 30, 2021
	(in thousands)
	Level 1		Level 2		Level 3		Fair Value
Cash equivalents	$	60,005	$	—	$	—	$	60,005
Total	$	60,005	$	—	$	—	$	60,005

	Fair Value Measurements as of December 31, 2020
	(in thousands)
	Level 1		Level 2		Level 3		Fair Value
Cash equivalents	$	72,943	$	—	$	—	$	72,943
Marketable securities		—		10,003		—		10,003
Total	$	72,943	$	10,003	$	—	$	82,946

	December 31, 2020
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury Securities	$	9,995	$	7	$	—	$	10,003
	$	9,995	$	7	$	—	$	10,003

		~~March 31, 2018~~September 30, 2021
Risk-free interest rate		~~2.43 to 2.62%~~0.61% - 1.31%
Expected dividend yield		0%
Expected volatility		~~82.0-83.0%~~97.8% - 100.9%
Expected life		~~3.2~~5.50 to ~~7.0~~6.25 years

		September 30, 2020
Risk-free interest rate		0.38% - 1.78%
Expected dividend yield		0%
Expected volatility		93.4% - 99.6%
Expected life		5.50 to 6.25 years

	Number of Shares (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)
Stock options outstanding at December 31, 2017		2,732	$	4.07		5.76
Stock options outstanding at December 31, 2020								5,030,899		$	9.10		5.51
Granted		25	$	16.65				1,026,000			14.41
Exercised		—	$	—				(307,105	)		6.71
Cancelled		—	$	—				(216,137	)		13.84
Stock options outstanding at March 31, 2018		2,757	$	4.18		5.52
Stock options exercisable at March 31, 2018		818	$	3.13		4.95
Stock options outstanding at September 30, 2021								5,533,657			10.03		5.55
Stock options exercisable at September 30, 2021								3,477,224		$	8.20		3.99

Restricted Stock Units	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Nonvested balance at December 31, 2020		230,002		$	16.66
Vested/Released		(98,333	)	$	18.21
Nonvested balance at September 30, 2021		131,669		$	15.51

	Warrant Issued June 15, 2015- Tranche 1			Warrant Issued December 27, 2017- Tranche 2		Total
Shares remaining to be issued as of December 31, 2020		72,611			789,358		861,969
Issued via cashless exercises		(8,048	)		—		(8,048	)
Withheld as payment to cover issued shares		(1,952	)		—		(1,952	)
Shares remaining to be issued as of September 30, 2021		62,611			789,358		851,969

Year	(in thousands)
2021		1,312
2022		2,408
Total lease payment	$	3,720
Less: present value discount		(87	)
Total	$	3,633

Other information (in thousands)	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,285	$	3,744
Operating lease cost	$	1,225	$	3,670
Weighted average discount rate	6.0%		6.0%
Weighted average remaining lease term	0.71 year		0.71 year

			Payments Due by Period (in thousands)
			Less Than						More Than
Description	Total		One Year		1 - 3 Years		3 - 5 Years		5 Years
	(in thousands)
Operating lease obligations		12,561		2,595		9,966		—		—
Total	$	12,561	$	2,595	$	9,966	$	—	$	—

		Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	Exhibit	Filing Date	Registration/File No.
3.1	Amended and Restated Certificate of Incorporation of the Registrant		8-K	3.1	12/27/17	001-38327
3.2	Amended and Restated Bylaws of the Registrant		S-1	3.5	12/05/17	333-220550
10.1	License Agreement between the Registrant and MIL 21E, LLC dated January 19, 2018		10-K	10.21	03/29/18	001-38327
31.1	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	X
31.2	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	X
32.1	Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Documents	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Documents	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Documents	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Documents	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Documents	X

		Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	Exhibit	Filing Date	Registration/File No.
10.1	Open Market Sale Agreement^SM, dated October 1, 2021, by and between Cue Biopharma, Inc. and Jefferies LLC	X
10.2	Third Amendment to License Agreement, dated October 22, 2021, by and between Cue Biopharma, Inc. and MIL 21E, LLC.	X
31.1	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	X
31.2	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	X
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.INS	Inline eXtensible Business Reporting Language (XBRL) Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, has been formatted in Inline XBRL.	X

	Cue Biopharma, Inc.


Dated: ~~May 14, 2018~~November 9, 2021	By:	/s/ Daniel R. Passeri

		Daniel R. Passeri Chief Executive Officer and Director (Principal Executive Officer)

Dated: ~~May 14, 2018~~November 9, 2021	By:	/s/ Kerri-Ann Millar

		Kerri-Ann Millar ~~Vice President, Finance~~Chief Financial Officer (Principal Financial and Accounting Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company