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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 2020.
 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from                       to                     .
Commission File Number
001-35342
LUMOS PHARMA, INC.
(Exact name of Registrant as specified in Its Charter)
Delaware
42-1491350
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4200 Marathon Blvd #200
AustinTexas 78756
(512) 215-2630
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockLUMOThe Nasdaq Stock Market

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

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

Indicate by check mark whether the 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. (Check one):
Large accelerated filer o
Accelerated filer o
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No ☒
As of August 13, 2020, there were 8,293,312 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.




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Lumos Pharma, Inc.
FORM 10-Q
Table of Contents
Page
Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019
Condensed Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and
Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2020 and 2019
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019
ITEM 3.


2

Table of Contents

PART I

Lumos Pharma, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands, except share data)
June 30,December 31,
20202019
Assets
Current assets:
Cash and cash equivalents$72,697  $4,952  
Prepaid expenses and other current assets5,158  82  
Income tax receivable4,666    
Other receivables296  35  
Economic interest in Priority Review Voucher ("PRV"), held for sale87,920    
Total current assets170,737  5,069  
Non-current assets:
Property and equipment, net834  84  
Right-of-use asset627  373  
Total non-current assets1,461  457  
Total assets$172,198  $5,526  
Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable$155  $365  
Accrued expenses5,944  709  
Current portion of lease liability731  189  
Current portion of notes payable11    
PRV related liability, held for sale35,720    
Total current liabilities42,561  1,263  
Long-term liabilities:
Royalty obligation payable to Iowa Economic Development Authority6,000    
Lease liability
88  191  
Deferred tax liability7,084    
Total long-term liabilities13,172  191  
Total liabilities55,733  1,454  
Commitments and contingencies
Redeemable convertible preferred stock:
Series A redeemable convertible preferred stock, $0.0001 par value: Authorized, issued and outstanding shares - 0 and 978,849 at June 30, 2020 and December 31, 2019, respectively
  21,904  
Series B redeemable convertible preferred stock, $0.0001 par value: Authorized, issued and outstanding shares - 0 and 1,989,616 at June 30, 2020 and December 31, 2019, respectively
  41,631  
Stockholders' equity (deficit):
Undesignated preferred stock, $0.01 par value: Authorized shares - 5,000,000 at June 30, 2020 and December 31, 2019, respectively: issued and outstanding shares - 0 at June 30, 2020 and December 31, 2019
    
Common stock, $0.01 par value: Authorized shares - 75,000,000 and 36,000,000 at June 30, 2020 and December 31, 2019, respectively; issued and outstanding 8,293,312 and 1,177,933 at June 30, 2020 and December 31, 2019, respectively
83  12  
Additional paid-in capital181,723  202  
Accumulated deficit(65,341) (59,677) 
Total stockholders' equity (deficit)116,465  (59,463) 
Total liabilities, redeemable convertible preferred stock and stockholders' equity$172,198  $5,526  
See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

Lumos Pharma, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except share and per share data)

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues:
Licensing and collaboration revenue
$33  $  $55  $  
Total revenues33    55    
Operating expenses:
 Research and development2,763  1,881  4,669  3,336  
General and administrative
4,147  714  7,478  1,397  
Total operating expenses
6,910  2,595  12,147  4,733  
Loss from operations(6,877) (2,595) (12,092) (4,733) 
Other income and expense:
Miscellaneous income, net24  26  161  59  
Interest income
74    79    
Interest expense
    (50)   
Other income, net
98  26  190  59  
Net loss before taxes(6,779) (2,569) (11,902) (4,674) 
Income tax benefit1,426    6,889    
Net loss$(5,353) $(2,569) $(5,013) $(4,674) 
Accretion of preferred stock to current redemption value  (758) (651) (1,508) 
Net loss attributable to common shareholders$(5,353) $(3,327) $(5,664) $(6,182) 
Basic and diluted loss per share$(0.65) $(2.47) $(1.08) $(4.59) 
Basic and diluted average shares outstanding8,292,809  1,345,402  5,243,577  1,345,402  
See accompanying notes to condensed consolidated financial statements.






4

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Lumos Pharma, Inc.
Condensed Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
(unaudited)
(In thousands, except share data)

Three and Six Month Periods ended June 30, 2020
Series A redeemable convertible preferred stock
Series B redeemable convertible preferred stock
Common Stock
Additional
Paid-in
Capital
Accumulated Deficit
Total
Stockholders' Equity (Deficit)
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2019978,849  $21,904  1,989,616  $41,631  1,177,933  $12  $202  $(59,677) $(59,463) 
Accretion of preferred stock to current redemption value (pre-merger)—  216  —  435  —  —  —  (651) (651) 
Issuance of common stock to former stockholders of NewLink upon merger—  —  —  —  4,146,405  41  116,908  —  116,949  
Conversion of preferred stock into common stock upon merger(978,849) (22,120) (1,989,616) (42,066) 2,968,465  30  64,156  —  64,186  
Share-based compensation—   —  —  —  —  —  177  —  177  
Net income—  —  —  —  —  —  —  340  340  
Balance at March 31, 2020  $    $  8,292,803  $83  $181,443  $(59,988) $121,538  
Share-based compensation—  —  —  —  —  —  274  —  274  
Sales of shares under stock purchase plan —  —  —  —  509  —  6  —  6  
Net loss—  —  —  —  —  —  —  (5,353) (5,353) 
Balance at June 30, 2020  $    $  8,293,312  $83  $181,723  $(65,341) $116,465  
 
Three and Six Month Periods ended June 30, 2019
Series A redeemable convertible preferred stock
Series B redeemable convertible preferred stock
Common Stock
Additional
Paid-in
Capital
Accumulated Deficit
Total
Stockholders' Equity (Deficit)
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2018978,849  $20,903  1,989,616  $39,592  1,345,402  $1  $12  $(46,932) $(46,919) 
Share-based compensation—  —  —  —  —  —  48  —  48  
Accretion of preferred stock to current redemption value (pre-merger)—  247  —  503  —  —  —  (750) (750) 
Net loss—   —  —  —  —  —  —  (2,105) (2,105) 
Balance at March 31, 2019978,849   $21,150  1,989,616  $40,095  1,345,402  $1  $60  $(49,787) $(49,726) 
Share-based compensation—  —  —  —  —  —  40  —  40  
Accretion of preferred stock to current redemption value—  250  —  508  —  —  —  (758) (758) 
Net loss—  —  —  —  —  —  —  (2,569) (2,569) 
Balance at June 30, 2019978,849  $21,400  1,989,616  $40,603  1,345,402  $1  $100  $(53,114) $(53,013) 


See accompanying notes to condensed consolidated financial statements.
5


Lumos Pharma, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
Six Months Ended June 30,
20202019
Cash Flows From Operating Activities
Net loss$(5,013) $(4,674) 
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation451  88  
Depreciation and amortization313  16  
Impairment of right-of-use (ROU) asset(29)   
Amortization of ROU asset and change in operating lease liability(93) 4  
In-process research and development charge426    
Benefit for deferred taxes(2,416)   
Changes in operating assets and liabilities:
Prepaid expenses and other current assets(2,423) (8) 
Other receivables85    
Accounts payable and accrued expenses(3,237) 103  
Income taxes receivable(4,474)   
Net cash used in operating activities(16,410) (4,471) 
Cash Flows From Investing Activities
Cash acquired in connection with merger 84,179    
Purchase of equipment(14)   
Net cash provided by investing activities84,165    
Cash Flows From Financing Activities
   Sales of shares under stock purchase plan6    
    Principal payments on notes payable(16)   
Net cash used in financing activities(10)   
Net increase (decrease) in cash and cash equivalents67,745  (4,471) 
Cash and cash equivalents at beginning of period4,952  14,022  
Cash and cash equivalents at end of period$72,697  $9,551  


See accompanying notes to condensed consolidated financial statements.
6

Table of Contents
Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. Organization and Description of Business
Description of Business
Lumos Pharma, Inc. ("Lumos" or the "Company") is a clinical-stage biopharmaceutical company focused on the identification, acquisition, in-license, development, and commercialization of novel products for the treatment of rare diseases. The Company's mission is to develop new therapies for people with rare diseases, prioritizing its focus where the medical need is high, and the pathophysiology is clear. The Company's principal offices are located in Austin, Texas.
Lumos and its subsidiaries have historically devoted substantially all of their efforts toward research and development. The Company has never earned revenue from commercial sales of its drugs.
The Company believes that its existing cash and cash equivalents as of June 30, 2020 are sufficient to satisfy its operating cash and needs to support the Company through read out of the Phase 2b clinical trial for its LUM-201 product candidate and at least one year after the filing of the Quarterly Report on Form 10-Q in which these financial statements are included. If available liquidity becomes insufficient to meet the Company’s operating obligations as they come due, the Company’s plans include selling additional shares of common stock, alternative funding arrangements and/or reducing expenditures as necessary to meet the Company’s cash requirements. However, there is no assurance that, if required, the Company will be able to raise additional capital or reduce discretionary spending to provide the required liquidity. Failure by the Company to successfully execute its plans or otherwise address its liquidity needs may have a material adverse effect on its business and financial position and may materially affect the Company’s ability to continue as a going concern.
In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. In response to the COVID-19 pandemic, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States, including in the locations of our offices, clinical trial sites, key vendors, and partners. This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads. The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the financial effect of the pandemic at this time, if the pandemic continues to evolve into a severe worldwide crisis, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. The financial statements do not reflect any adjustments as a result of the pandemic.
Merger with NewLink Genetics Corporation
On March 18, 2020, Lumos, the company formerly known as NewLink Genetics Corporation ("NewLink"), completed a merger in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of September 30, 2019, by and among the Company, Cyclone Merger Sub, Inc. ("Merger Sub"), and what was then known as Lumos Pharma, Inc., which has since been renamed “Lumos Pharma Sub, Inc.” (“Private Lumos”) (as amended, the "Merger Agreement"), pursuant to which Merger Sub merged with and into Private Lumos, with Private Lumos surviving as a wholly-owned subsidiary of NewLink (the "Merger").
On March 18, 2020, and prior to the effective time of the Merger (the “Effective Time”), NewLink effected a 1-for-9 reverse stock split of its common stock (the “Reverse Stock Split”) and, following the Merger, changed its name to “Lumos Pharma, Inc.” Unless otherwise noted herein, all references to share amounts give effect to the Reverse Stock Split. Following the completion of the Merger, the business being conducted by the Company became primarily the business conducted by Private Lumos, which is a biopharmaceutical company focused on the identification, acquisition, in-license, development, and commercialization of novel products for the treatment of rare diseases.
Immediately following the Reverse Stock Split and the completion of the Merger, there were 8,292,803 shares of the Company’s common stock outstanding. Under the terms of the Merger, Private Lumos stockholders received an aggregate of 4,146,398 shares of our common stock, at an exchange rate of (i) 0.1308319305 shares of common stock in exchange for each share of Private Lumos common stock outstanding immediately prior to the Merger, (ii) 0.0873621142 shares of our common stock in exchange for each share of Private Lumos Series A Preferred Stock outstanding immediately prior to the Merger, and (iii) 0.1996348626 shares of our common stock in exchange for each share of Private Lumos Series B Preferred Stock outstanding immediately prior to the Merger. Immediately following the Merger, the former Private Lumos stockholders
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Table of Contents
Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
beneficially owned approximately 50% of the shares of the Company and the former NewLink stockholders beneficially owned approximately 50% of the shares of the Company. For accounting purposes, Private Lumos is considered to have acquired NewLink in the Merger. NewLink's shares of common stock listed on The Nasdaq Global Market, previously trading through the close of business on Wednesday, March 18, 2020 (the "Merger Date") under the ticker symbol "NLNK", commenced trading on The Nasdaq Global Market, under the ticker symbol "LUMO", on Thursday, March 19, 2020. The accompanying condensed consolidated financial statements and notes give retroactive effect to the exchange ratio and change in par value for all periods presented.
The Merger was accounted for as a reverse merger with Private Lumos deemed the accounting acquiror for accounting purposes. Further, the Merger was accounted for as an asset acquisition rather than a business combination because the assets acquired and liabilities assumed from NewLink did not meet the definition of a business as defined by ASC 805, Business Combinations as NewLink did not contain the processes in place to generate outputs.

As such, the results of operations and cash flows prior to the Merger Date, relate to Private Lumos. Subsequent to the Merger Date the information in these unaudited financial statements relates to the Company and its consolidated entities. All share and per share amounts in the financial statements and related notes have been retroactively adjusted, where applicable, for all periods presented to give effect to the exchange ratio applied in connection with the Merger and the Reverse Stock Split.
2. Basis of Presentation
Basis of presentation
The accompanying unaudited interim consolidated financial statements include the accounts of the Company and its subsidiaries and all intercompany amounts have been eliminated. The unaudited interim consolidated financial statements have been prepared and presented by the Company in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"), and, in management’s opinion, reflect all adjustments necessary to present fairly the Company’s interim condensed financial information.
Certain information and footnote disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019, included in NewLink's Annual Report on Form 10-K and the Company's Current Report on Form 8-K/A, filed with the SEC on May 29, 2020. The financial results for any interim period are not necessarily indicative of financial results for the full year.
The Company’s historical results are not necessarily indicative of the results to be expected in the future and the Company’s operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
The balance sheet at December 31, 2019 was derived from audited financial statements, but does not include all disclosure required by U.S. GAAP.

3. NewLink Genetics Merger
As described in Note 1, Private Lumos merged with the Company on March 18, 2020. The Merger was accounted for as a reverse merger with Private Lumos as the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) Lumos stockholders owned approximately 50% of outstanding common stock of the Company immediately following the closing of the Merger, (ii) the board of directors of the Company (the "Board") consists of three members designated by the NewLink, three members designated by Private Lumos and the Board unanimously appointed a seventh member and (iii) the Company is led by Private Lumos’ then current chief executive officer and chief scientific officer, with other current members of senior management from both Private Lumos and NewLink. The Merger was accounted for as an asset acquisition in accordance with U.S. GAAP as the assets acquired and liabilities assumed from NewLink do not meet the definition of a business as defined by ASC 805, Business Combinations as NewLink did not contain the processes in place to generate outputs. For accounting purposes, Private Lumos acquired the assets and liabilities of NewLink in this Merger.
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Management allocated the net assets acquired and liabilities assumed in connection with the transaction based on their estimated acquisition date fair values as described below.

The fair value of the net assets acquired on March 18, 2020 was $116.9 million. As NewLink’s assets were predominately comprised of cash offset by current liabilities, the carrying value of NewLink’s net assets, including the fair value of acquired intangible assets not previously reflected on NewLink’s balance sheet, is considered to be the best indicator of the fair value and the purchase price. The purchase price assigned a value to the assets and liabilities acquired based on the accumulated cost of the acquisition and allocated based on the acquired assets and liabilities relative fair value. Given the cost of the acquisition was computed based on the fair value of the net assets acquired, the relative fair values assigned equate to the computed fair values of the acquired assets and liabilities.
The acquired net assets of NewLink based on their fair values as of March 18, 2020 are as follows (in thousands):
Assets acquired:
Cash and cash equivalents$84,179  
Prepaid and other current assets2,999
Income tax receivable192
Property and equipment1,020
Economic interest in PRV87,920
Other intangible assets426
Other non-current assets517
Total Assets Acquired177,253
Liabilities assumed:
Accounts payable285
Accrued expenses and other current liabilities8,788
PRV-related liability owed to Merck35,720
Royalty obligation payable to Iowa Economics Development Authority6,000
Deferred tax liability9,500
Other long-term liabilities12
Total liabilities assumed60,305
Total net assets acquired$116,948  

On January 3, 2020, Merck Sharp & Dohme Corp. ("Merck") notified NewLink that they had been issued a Priority Review Voucher ("PRV") in connection with the U.S. Food and Drug Administration (the "FDA") approval of ERVEBO® (Ebola Zaire Vaccine, Live). Under the terms of the NewLink Merck Agreement (as defined below), on February 4, 2020, Merck assigned all of its rights and interests in connection with the PRV to NewLink. The Company is entitled to 60 percent of the value of the PRV obtained through sale, transfer or other disposition of the PRV, with 40 percent to be payable to Merck upon completion of the sale. Management used the precedent transaction method under the market approach to estimate the value of the PRV and relied on purchase prices indicated by actual precedent priority review voucher transactions that were reasonably comparable to the PRV owned by the Company. The market approach requires several judgments and assumptions to determine the fair value including discount rates, probability assumption of sale, expected consolidated transaction sales price, and tax rates. The 40 percent ownership owed to Merck is separately reflected as a liability in the condensed consolidated balance sheet. Management used an estimated transaction price of $95.0 million based on the observed median guideline transaction of the range of publicly disclosed transactions of $80.0 million to $111.0 million from 2018 and through 2020. This
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
reflected the most current observable inputs as of March 18, 2020 and trends in the market of PRVs and accounts for the decline in the transaction values since the peak sale of $350.0 million in 2015.
The fair value assigned to the acquired in-process research and development assets was estimated based on the estimated expected net proceeds from the sales of these assets as intellectual property. These assets are no longer being actively pursued in further clinical development by the Company. The acquired in-process research and development expenses of $426,000 were expensed to research and development expenses in the statement of operations for the three months ended March 31, 2020.
4. Significant Accounting Policies
Risks and Uncertainties
The Company is monitoring the potential impact of COVID-19, if any, on the carrying value of certain assets and its continued operations. To date, the Company has not experienced material business disruption, nor has it incurred impairment of any assets as a result of COVID-19. The extent to which these events may impact the Company’s business, clinical development and regulatory efforts, and the value of its common stock, will depend on future developments, which are highly uncertain and cannot be predicted at this time. The duration and intensity of these impacts and resulting disruption to the Company’s operations is uncertain and the Company will continue to assess for any future potential financial impact, if any.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Financial Instruments and Concentrations of Credit Risk
Cash and cash equivalents, receivables, and accounts payable are recorded at cost, which approximates fair value based on the short-term nature of these financial instruments. The Company is unable to estimate the fair value of the royalty obligation based on future product sales, as the timing of payments, if any, is uncertain.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held by financial institutions and are federally insured up to certain limits. At times, the Company’s cash and cash equivalents balance exceeds the federally insured limits. To limit the credit risk, the Company invests its excess cash primarily in high quality securities such as money market funds.
Share-Based Compensation
The Company is required to estimate the grant-date fair value of share-based payment transactions with employees which include stock options, restricted stock units ("RSUs") and performance shares and recognizes the compensation cost over the requisite service period based on the estimated fair values. The Company estimates the fair value of each award granted using the Black-Scholes option pricing model. The Black-Scholes model requires the input of assumptions, including the expected stock price volatility, the calculation of expected term and the fair value of the underlying common stock on the date of grant, among other inputs. The Company calculates the fair value of the award on the grant date, which is the date the award is authorized by the Board or by the Chief Executive Officer as delegated by the Board.
The Company has issued awards to nonemployee consultants and advisers. All grants to nonemployees are valued using the same fair value method that we use for grants to employees. The compensation cost on these awards is measured each period until vesting and is recognized through the earlier of the vesting of the award or completion of services by the nonemployee.
Following is a description of the inputs for the Black-Scholes model:
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Exercise Price
The Company uses the quoted market price as listed on the public exchange on the date of grant. If incentive stock options are granted to a 10% stockholder in the Company, the exercise price shall not be less than 110% of the common stock’s fair market value on the date of grant.
Expected Term
The expected term of a stock option is the period of time for which the option is expected to be outstanding. Due to the lack of historical exercise data to provide a reasonable basis upon which to estimate an expected term, we have opted to use the simplified method, which is the use of the midpoint of the vesting term and the contractual term of the award to estimate the expected term.
Risk-Free Interest Rate
The Company uses the average yield on current U.S. Treasury instruments with terms that approximate the expected term of the stock options being valued.
Expected Dividend Yield
The expected dividend yield for all of the Company’s stock option grants is 0%, as the Company has not declared a cash dividend since inception and has no plans to declare a dividend.
Expected Volatility
As the Company does not have sufficient historical stock price information to meet the expected life of the stock option grants, it uses a blended volatility based on the trading history from the common stock of a set of comparable publicly-traded biopharmaceutical companies.
Forfeitures
The Company accounts for forfeitures as they occur.
Property and Equipment
Property and equipment are capitalized as the Company believes they have alternative future uses and are stated at cost, less accumulated depreciation of $403,000 and $154,000 as of June 30, 2020 and December 31, 2019, respectively. Depreciation on all property and equipment is calculated on the straight-line method over the shorter of the lease term or estimated useful life of the asset. Computer equipment has useful lives of three to five years, lab equipment has a useful life of five years, and contract manufacturing organization equipment has a useful life of five years.
Acquired In-process Research and Development
Acquired in-process research and development expense consists of the initial up-front payments incurred in connection with the acquisition or licensing of product candidates that do not meet the definition of a business under ASC 805, Business Combinations. During the six months ended June 30, 2020, the Company expensed the in-process research and development asset of $426,000 acquired as part of the Merger as there is no future economic benefit. The expense of $426,000 is recorded within research and development costs within the consolidated statement of operations.
Asset Held for Sale
An asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that the disposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete the sale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively being marketed for sale at a price that is reasonable given its current market value.
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
A long-lived asset classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. If the long-lived asset is newly acquired, the carrying amount of the long-lived asset is established based on its fair value less cost to sell at the acquisition date. A long-lived asset is not depreciated or amortized while it is classified as held for sale, and an impairment loss would be recognized to the extent the carrying amount exceeds the asset's fair value less cost to sell.
Lumos has classified the PRV as held for sale and is carried at its original fair value less cost to sell on the condensed consolidated balance sheet as of June 30, 2020.
5. License and Research Collaboration Agreement
Merck Sharp & Dohme Corp.
In November 2014, NewLink entered into a licensing and collaboration agreement (the "NewLink Merck Agreement") with Merck to develop, manufacture and commercialize rVSV-ZEBOV-GP, an Ebola vaccine that NewLink licensed from the Public Health Agency of Canada ("PHAC"). Under the terms of the NewLink Merck Agreement, NewLink granted Merck an exclusive, royalty bearing license to rVSV-ZEBOV-GP and related technology. Under the NewLink Merck Agreement, NewLink received a $30.0 million non-refundable, upfront payment in December 2014, and a one-time $20.0 million non-refundable milestone payment in February 2015 upon the initiation of the pivotal clinical trial using the current rVSV-ZEBOV-GP vaccine product as one arm of the trial.
The NewLink Merck Agreement was amended on December 5, 2017 in connection with our entry into an amended and restated PHAC license on December 5, 2017. The amended NewLink Merck Agreement absolves our subsidiary, BioProtection Systems Corporation ("BPS"), from any future obligation to negotiate or amend the terms of the PHAC license, converts the scope of Merck's sublicense under PHAC’s intellectual property rights to be non-exclusive in the Ebola Sudan field of use, and requires Merck to reimburse us in certain circumstances where we may be obligated to pay royalties to PHAC as a result of Merck’s product sales but Merck would not otherwise be obligated to pay a royalty to us. On April 26, 2018, NewLink entered into an agreement with Merck, the U.S. BioMedical Advanced Research and Development Authority ("BARDA"), and the Defense Threat Reduction Agency ("DTRA") to transfer the government grants from BARDA and DTRA to Merck. The transfer was completed in June 2018 and Merck replaced NewLink as the prime contractor on all such grants.
On December 20, 2019, Merck announced that the FDA approved its application for ERVEBO® (Ebola Zaire Vaccine, Live) for the prevention of disease caused by Zaire Ebola virus in individuals 18 years of age and older. On January 3, 2020, Merck notified NewLink that they had been issued a PRV. Under the terms of the NewLink Merck Agreement, on February 4, 2020, Merck assigned all of its rights and interests in connection with the PRV to NewLink. On July 27, 2020, the Company entered into the PRV Transfer Agreement to sell the PRV to Merck. The Company and Merck agreed to value the PRV at $100.0 million, of which the Company will receive 60% or $60.0 million in gross proceeds. The purchase price will be paid in two installments: $34.0 million will be paid upon closing of the sale and $26.0 million will be paid on January 11, 2021.
The Company also has the potential to earn royalties on sales of the vaccine in certain countries, if the vaccine is successfully commercialized by Merck. However, we believe that the market for the vaccine will be limited primarily to areas in the developing world that are excluded from royalty payment or where the vaccine is donated or sold at low or no margin and therefore we do not expect to receive material royalty payments from Merck in the foreseeable future.
For the three and six months ended June 30, 2020, the Company recognized revenues under the amended NewLink Merck Agreement of $33,000, and $55,000, respectively, for work the Company performed as a subcontractor of Merck under the government contracts that were transferred to Merck.
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
6. Common Stock Equity Incentive Plans
Contemporaneous with the Merger closing, the Company assumed Private Lumos' 2012 Equity Incentive Plan and 2016 Equity Incentive Plan. Under these plans, the Company assumed 26,248 stock options issued and outstanding under the Private Lumos 2012 Equity Incentive Plan, with a weighted-average exercise price of $1.39 per share and 163,864 stock options issued and outstanding under the Private Lumos 2016 Stock Plan with a weighted-average exercise price of $3.66 per share. From and after the Effective Time, such options may be exercised for shares of our common stock under the terms of the respective plans under which they were granted.
2019 Equity Incentive Plan
In July 2009, the NewLink stockholders approved the 2009 Equity Incentive Plan (the “2009 Plan”), and in May 2019, NewLink's stockholders approved a proposal to amend and extend the 2009 Plan (the "2019 Plan") which remained in effect for the Company upon the Merger. Following the approval of the 2019 Plan, no additional stock awards will be granted under the 2009 Plan. Shares that remained available for issuance pursuant to the exercise of options or issuance or settlement of stock awards under the 2009 Plan became available for issuance pursuant to the 2019 Plan and all shares that would have otherwise returned to the 2009 Plan became available for issuance pursuant to the 2019 Plan. Under the provisions of the 2019 Plan, the Company may grant the following types of common stock awards:
Incentive Stock Options
Nonstatutory Stock Options
Restricted Stock Awards
Stock Appreciation Rights
Awards under the 2019 Plan, as amended, may be made to officers, employees, members of the Board, advisors, and consultants to the Company.
As of June 30, 2020, including the shares from the Private Lumos 2012 and 2016 Equity Incentive Plans that were assumed through the Merger, there were 1,692,379 shares of common stock authorized for issuance under our equity incentive plans, and 422,536 shares remained available for issuance under the 2019 Plan.  
The increases in the authorized shares of common stock under the 2009 Plan in 2010 and 2011 were approved by NewLink's stockholders. The increases in the authorized shares of common stock under the 2009 Plan in 2012 through 2019 were made pursuant to an “evergreen provision,” in accordance with which, on January 1 of each year, from 2013 to (and including) 2019, a number of shares of common stock in an amount equal to 4% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or such lesser amount of shares (or no shares) approved by the Board, was added or will be added to the shares reserved under the 2009 Plan.
On May 9, 2019, NewLink's stockholders approved an amendment to the 2009 Plan which, among other modifications, included decreasing the automatic annual “evergreen provision” from 4% to 3%, in accordance with which, on January 1 of each year, from 2020 to (and including) 2029, a number of shares of common stock in an amount equal to 3% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or such lesser amount of shares (or no shares) approved by the Board, was added or will be added to the shares reserved under the 2019 Plan.
2010 Non-Employee Directors' Stock Award Plan
Under the terms of the Company’s 2010 Non-Employee Directors’ Stock Award Plan (the "Directors’ Plan") which became effective on November 10, 2011 and remains in effect upon the Merger, 26,455 shares of common stock were reserved for future issuance. On May 9, 2013, an additional 17,989 shares of common stock were added to the shares reserved for future issuance under the Directors' Plan. As of June 30, 2020, no shares remain available for issuance under the Directors' Plan.
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2010 Employee Stock Purchase Plan
Under the terms of the Company’s 2010 Employee Stock Purchase Plan (the "2010 Purchase Plan"), which became effective for NewLink on November 10, 2011 and remains in effect upon the Merger, 23,809 shares of common stock were reserved for future issuance. On May 9, 2013, an additional 20,635 shares of common stock were added to the shares reserved for future issuance under the 2010 Purchase Plan. As of June 30, 2020, 2,119 shares remained available for issuance under the 2010 Purchase Plan.
Share-Based Compensation
Share-based compensation expense for the three months ended June 30, 2020 and 2019 was $274,000 and $40,000, respectively. For the six months ended June 30, 2020 and 2019, share-based compensation was $451,000 and $88,000, respectively. Share-based compensation expense is allocated between research and development and general and administrative expenses within the condensed consolidated statements of operations.
As of June 30, 2020, the total compensation cost related to nonvested option awards not yet recognized was $3.4 million and the weighted-average period over which it is expected to be recognized is 3.5 years.
Stock Options and Performance Stock Options
The following table summarizes the stock option activity, including options with market and performance conditions and options granted and forfeited from December 31, 2019 through June 30, 2020:
Number
of options
Weighted
average
exercise
price
Weighted average
remaining contractual
term (years)
Outstanding at beginning of period
596,312  $30.76  5.0
Options granted
504,104  8.09  
Options exercised
    
Options forfeited
(2,011) 21.04  
Options expired
(29,426) 54.22  
Outstanding at end of period
1,068,979  $19.44  7.2
Options exercisable at end of period
433,796  $32.90  4.6
The Company estimates the fair value of each stock option grant on the date of grant using a Black-Scholes option pricing model. In conjunction with the Merger, the Company re-valued the outstanding awards under its equity incentive plans which did not result in a material incremental expense during the six months ended June 30, 2020.
The following table summarizes the range of assumptions used to estimate the fair value of stock options granted, including those options granted with a market condition, during the six months ended June 30, 2020:
Risk-free interest rate
0.42% to 0.46%
Expected dividend yield
%
Expected volatility
86.1% to 88.7%
Expected term (in years)
5.8 to 6.1
Weighted-average grant-date fair value per share
$5.79
No options were exercised during the six months ended June 30, 2020. The fair value of awards vested during the six months ended June 30, 2020 was $687,000.
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Restricted Stock and Performance Restricted Stock
Restricted stock is common stock that is subject to restrictions, including risks of forfeiture, determined by a committee of the Board in its sole discretion, for as long as such common stock remains subject to any such restrictions. A holder of restricted stock has all rights of a stockholder with respect to such stock, including the right to vote and to receive dividends thereon, except as otherwise provided in the award agreement relating to such award. Restricted stock awards are classified as equity within the consolidated balance sheets. The fair value of each restricted stock grant is estimated on the date of grant using the closing price of the Company's common stock on The Nasdaq Stock Market on the date of grant.
A summary of the Company's unvested restricted stock, including restricted stock with performance conditions, at June 30, 2020 and changes during the six months ended June 30, 2020 are as follows:
Number
of restricted shares
Weighted
average
grant date fair value
Unvested at beginning of period210  $312.94  
Granted73,987  7.90  
Vested(443) 159.10  
Forfeited/cancelled    
Unvested at end of period73,754  $7.86  
The Company does not have a formal policy regarding the source of shares issued upon exercise of stock options or issuance of restricted stock. The Company expects shares issued to be issued from treasury shares or new shares.
7. Leases
The Company has certain facility leases with non-cancellable terms ranging between one and two years, with certain renewal options.
The Company records lease liabilities based on the present value of lease payments over the lease term using an incremental borrowing rate to discount its lease liabilities, as the rate implicit in the lease is typically not readily determinable. To compute the present value of the lease liability, the Company used a weighted-average discount rate of 5%. Certain lease agreements include renewal options that are under the Company's control. The Company includes optional renewal periods in the lease term only when it is reasonably certain that the Company will exercise its option. Prior to the Merger, NewLink had asserted it would not renew the lease terms through expiry of the lease renewal option periods. The weighted-average remaining lease term as of June 30, 2020 is less than 1.0 year.
The Company does not separate lease components from non-lease components. Variable lease payments include payments to lessors for taxes, maintenance, insurance and other operating costs as well as payments that are adjusted based on an index or rate. The Company's lease agreements do not contain any residual value guarantees or restrictive covenants.
Future minimum lease payments under the non-cancellable operating leases (with initial or remaining lease terms in excess of one year) as of June 30, 2020 are as follows (in thousands), excluding option renewals:
For the Year Ended December 31:
2020$376  
2021278  
Total future minimum lease payments654  
     Less: Imputed interest(17) 
Unamortized lease incentive182  
Total$819  

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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
8. Income Taxes
For the three and six months ended June 30, 2020, the Company recorded a benefit of $1.4 million and $6.9 million, respectively. For the three and six months ended June 30, 2019, the Company recorded no income tax benefit. The income tax benefit is show below (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Current tax benefit$  $  $4,473  $  
Deferred tax benefit1,426    2,416    
Total income tax benefit$1,426  $  $6,889  $  
On March 25, 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law to provide emergency assistance to affected individuals, families, and businesses. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses. The CARES Act amends the net operating losses ("NOLs") provisions of the Tax Cut and Jobs Act of 2017 (the "Tax Act"), providing for a five year carryback for NOLs generated in tax years beginning after December 31, 2017 and before January 1, 2021. A tax benefit of $4.5 million related to pre-tax NOLs was carried back to each of the five taxable years to fully offset taxable income with a full receivable recorded for this amount as of June 30, 2020. The Company received the full refund in July 2020.
The income tax amount for the three and six months ended June 30, 2020 differs from the amount that would be expected after applying the statutory U.S. federal income tax rate primarily due to the benefit of $4.5 million recorded as a result of the CARES Act. Additionally, the income tax benefit for the three and six months ended June 30, 2020 includes $1.4 million and $2.4 million, respectively, for the release of the valuation allowance related to Private Lumos NOLs and a current period benefit for losses the Company anticipates will be offset by future income. The income tax amount for the three and six months ended June 30, 2019 differs from the amount that would be expected after applying the statutory U.S. federal income tax rate primarily due to the full valuation allowance.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected taxable income, and tax planning strategies in making this assessment. As a result of the Merger, a deferred tax liability of $9.5 million was recorded for the step up in book basis over tax basis for the net value of the PRV which the Company sold in July 2020. A net deferred tax liability of $7.1 million is shown on the condensed consolidated balance sheet as of June 30, 2020. As of June 30, 2020, there is not a valuation allowance recorded.
Based on Section 382 ownership change analyses through March 18, 2020, as a result of the Merger, both historical NewLink and Private Lumos experienced Section 382 ownership changes on March 18, 2020.
The Company has a reserve for uncertain tax positions related to state tax matters of $653,000 as of June 30, 2020 recorded within accrued expenses in the condensed consolidated balance sheet, which includes the accrual of interest and penalties. The Company does not expect the amount to change significantly within the next 12 months.
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
9. Net Loss per Share of Common Stock
Basic loss per share is based upon the weighted-average number of shares of common stock outstanding during the period, without consideration of common stock equivalents. Diluted loss per share is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average potentially dilutive common stock equivalents during the period when the effect is dilutive.

The following table presents the computation of basic and diluted loss per share of common stock (in thousands, except share and per share data):

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net loss$(5,353) $(2,569) $(5,013) $(4,674) 
Accretion of preferred stock to current redemption value  (758) (651) (1,508) 
Net loss attributable to common shareholders$(5,353) $(3,327) $(5,664) $(6,182) 
Basic and diluted weighted-average shares outstanding8,292,809  1,345,402  5,243,577  1,345,402  
Basic and diluted loss per share$(0.65) $(2.47) $(1.08) $(4.59) 

All common stock equivalents are excluded from the computation of diluted loss per share during periods in which losses are reported since the result would be anti-dilutive. As of June 30, 2020, anti-dilutive stock options and restricted stock awards excluded from our calculation totaled 1,068,979 and 73,754, respectively. As of June 30, 2019, anti-dilutive stock options and restricted stock awards excluded from our calculation totaled 287,854 and 0, respectively.
10. Restructuring and Severance Charges
The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. Employee severance costs are accrued when the restructuring actions are probable and estimable. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits, is recognized ratably over the future service period. The Company also records costs incurred with contract terminations associated with restructuring activities.
On September 30, 2019, prior to the Merger, NewLink adopted a restructuring plan to reduce its headcount by approximately 60%, which consisted primarily of clinical and research and development staff, and made several changes to senior leadership in order to conserve resources.
In addition to the restructuring, Charles J. Link, Jr, M.D. retired from NewLink and the NewLink board of directors, effective August 3, 2019 and Nicholas Vahanian retired from his position as the President and member of the board of directors, effective September 27, 2019, and his employment with the company ended on November 11, 2019.
In conjunction with the restructuring and departure of former NewLink executives, NewLink recorded restructuring and severance charges of $5.6 million during the year ended December 31, 2019. The following table shows the amount accrued for restructuring activities which is recorded within accrued expenses in the consolidated balance sheet (in thousands):
Total Employee Severance Cost
Balance as of December 31, 2019$4,700  
Expensed  
Cash Payments3,731  
Balance as of June 30, 2020$969  

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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
11. Commitments and Contingencies
From time to time, claims are asserted against the Company arising in the ordinary course of business. In the opinion of management, liabilities, if any, arising from existing claims are not expected to have a material effect on the Company's earnings, financial position, or liquidity.
On or about May 12, 2016, Trevor Abramson filed a putative securities class action lawsuit in the United States District Court for the Southern District of New York (the “Court for the Southern District of NY”), captioned Abramson v. NewLink Genetics Corp., et al., Case 1:16-cv-3545 (the “Securities Action”). Subsequently, the Court for the Southern District of NY appointed Michael and Kelly Nguyen as lead plaintiffs and approved their selection of Kahn, Swick & Foti, LLC as lead counsel in the Securities Action. On October 31, 2016, the lead plaintiffs filed an amended complaint asserting claims under the federal securities laws against NewLink, NewLink’s former Chief Executive Officer Charles J. Link, Jr., and NewLink’s former Chief Medical Officer and President Nicholas Vahanian, (collectively, the “Defendants”). The amended complaint alleges the Defendants made material false and/or misleading statements that caused losses to NewLink’s investors. The Defendants filed a motion to dismiss the amended complaint on July 14, 2017. On March 29, 2018, the Court for the Southern District of NY dismissed the amended complaint for failure to state a claim, without prejudice, and gave the lead plaintiffs until May 4, 2018 to file any amended complaint attempting to remedy the defects in their claims. On May 4, 2018, the lead plaintiffs filed a second amended complaint asserting claims under the federal securities laws against the Defendants. Like the first amended complaint, the second amended complaint alleges that the Defendants made material false and/or misleading statements or omissions relating to the Phase 2 and 3 trials and efficacy of the product candidate algenpantucel-L that caused losses to NewLink's investors. The lead plaintiffs do not quantify any alleged damages in the second amended complaint but, in addition to attorneys’ fees and costs, they sought to recover damages on behalf of themselves and other persons who purchased or otherwise acquired NewLink’s stock during the putative class period of September 17, 2013 through May 9, 2016, inclusive, at allegedly inflated prices and purportedly suffered financial harm as a result. The Defendants filed a motion to dismiss the second amended complaint on July 31, 2018. On February 13, 2019, the Court for the Southern District of NY dismissed the second amended complaint for failure to state a claim, with prejudice, and closed the case. On March 14, 2019, lead plaintiffs filed a notice of appeal. The briefing on lead plaintiffs' appeal was completed in early July 2019 and oral argument before the Second Circuit Court of Appeals was held on October 21, 2019. In an opinion dated July 13, 2020, the Second Circuit Court of Appeals affirmed the district court’s dismissal of the second amended complaint in part, vacated the district court’s dismissal of the second amended complaint in part, and remanded the matter to the district court for further proceedings. On August 6, 2020, the Company filed a Petition for Rehearing en banc requesting reconsideration of portions of the opinion from the Second Circuit Court of Appeals and is awaiting the Court’s determination concerning the petition. The Company intends to continue defending the Securities Action vigorously.
On or about April 26, 2017, Ronald Morrow filed a shareholder derivative lawsuit on behalf of NewLink in the Court for the Southern District of NY, against NewLink’s former Chief Executive Officer Charles J. Link, Jr., NewLink’s former Chief Medical Officer and President Nicholas Vahanian, and NewLink directors Thomas A. Raffin, Joseph Saluri, Ernest J. Talarico, III, Paul R. Edick, Paolo Pucci, and Lota S. Zoth (collectively, the “Morrow Defendants”), captioned Morrow v. Link., et al., Case 1:17-cv-03039 (the “Morrow Action”). The complaint alleges that the Morrow Defendants caused NewLink to issue false statements in its 2016 proxy statement regarding risk management and compensation matters in violation of federal securities law. The complaint also asserts state law claims against the Morrow Defendants for breaches of fiduciary duties, unjust enrichment, abuse of control, insider trading, gross mismanagement, and corporate waste, alleging that the Morrow Defendants made material misstatements or omissions related to the Phase 2 and 3 trials and efficacy of the product candidate algenpantucel-L, awarded themselves excessive compensation, engaged in illegal insider trading, and grossly mismanaged NewLink. The plaintiff does not quantify any alleged damages in the complaint but seeks restitution for damages to NewLink, attorneys’ fees, costs, and expenses, as well as an order directing that proposals for strengthening board oversight be put to a vote of NewLink’s shareholders. The language for such proposals is not specified in the complaint. The plaintiff also contemporaneously filed a statement of relatedness, informing the Court for the Southern District of NY that the Morrow Action is related to Abramson v. NewLink Genetics Corp., et al., Case 1:16-cv-3545. On May 19, 2017, the plaintiff dismissed the Morrow Action without prejudice. Also on May 19, 2017, plaintiffs’ counsel in the Morrow Action filed a new shareholder derivative complaint that is substantively identical to the Morrow Action, except that the plaintiff is Rickey Ely. The latter action is captioned Ely v. Link, et al., Case 17-cv-3799 (the “Ely Action”). By agreement of the parties and order dated June 26, 2017, the Court for the Southern District of NY temporarily stayed the Ely Action until the Securities Action is dismissed or otherwise finally resolved. Under the terms of the stay, the plaintiff in the Ely Action had until March 15, 2019 (30 days after dismissal of the Securities Action with prejudice) to file an amended derivative complaint or rest upon the current derivative complaint. By further agreement of the parties, dated March 15, 2019, the Ely Action will continue to be stayed pending the
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Lumos Pharma, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
outcome of the appeal in the Securities Action. If the Securities Action continues to be dismissed in its entirety following its appeal plaintiff in the Ely Action has agreed to withdraw or dismiss the action, with prejudice. The Company disputes the claims in the Ely Action and intends to defend against them vigorously.
12. Subsequent Events