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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
___________________________________
FORM 10-Q
___________________________________
(Mark one)
 ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021

 oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___________ to ______________.
 
Commission file number: 001-40654

CONTEXT THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)
___________________________________
 
Delaware47-2566423
(State of other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
3675 Market Street, Suite 200
Philadelphia, Pennsylvania 19104
(Address of principal executive offices, including zip

(267) 225-7416
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per shareCNTXThe 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  ý  No  o

Indicate by check mark whether the registrant has submitted electronically 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 such files). Yes  ý No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

The number of shares of common stock outstanding at November 29, 2021 was 10,963,966 shares.


Table of Contents
INDEX TO FORM 10-Q
 
Page
 
   
_________________________

Unless the context otherwise requires, all references in this Form 10-Q to "Context," "Company," "we," "us," and "our" refer to Context Therapeutics Inc. and its subsidiaries.

_________________________

Trademark Notice
Context Therapeutics® is a trademark of ours in the United States. All other trademarks, trade names and service marks appearing in this Form 10-Q are the property of their respective owners. We do not intend our use or display of other companies' trademarks, trade names or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
2

Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report (including, for purposes of this Note Regarding Forward-Looking Statements, any information or documents incorporated herein by reference) includes express and implied forward-looking statements. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
•    the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
•    the timing, progress and results of preclinical studies and clinical trials for ONA-XR, CLDN6 bsAb, and other product candidates we may develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;
•    the timing, scope and likelihood of U.S. and foreign regulatory filings and approvals, including timing of Investigational New Drug applications and final FDA approval of ONA-XR, CLDN6 bsAb and any other future product candidates;
•    our ability to develop and advance ONA-XR, CLDN6 bsAb, and any other future product candidates, and successfully complete, clinical studies;
•    our manufacturing, commercialization, and marketing capabilities, implementations thereof, and strategy;
•    our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus, sales strategy, and our ability to grow a sales team;
•    the impact of the COVID-19 pandemic on our business and operations, including clinical trials, manufacturing suppliers, collaborators, use of CROs and employees;
•    the need to hire additional personnel and our ability to attract and retain such personnel;
•    the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
•    our expectations regarding the approval and use of our product candidates in combination with other drugs;
•    our competitive position and the success of competing therapies that are or may become available;
•    the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
•    our ability to obtain and maintain regulatory approval of our product candidates;
•    our plans relating to the further development of our product candidates, including additional indications we may pursue;
•    existing regulations and regulatory developments in the United States, Europe and other jurisdictions;
•    our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering ONA-XR, CLDN6 bsAb, and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
•    our continued reliance on third parties to conduct additional clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;
•    our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
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•    the pricing and reimbursement of ONA-XR, CLDN6 bsAb and other product candidates we may develop, if approved;
•    the rate and degree of market acceptance and clinical utility of ONA-XR, CLDN6 bsAb and other product candidates we may develop;
•    our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
•    our current plans to seek additional capital in the future through equity and/or debt financings, partnerships, collaborations, or other sources and the availability of such future sources of capital;
•    our financial performance;
•    the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;
•    the impact of laws and regulations;
•    our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act;
•    our anticipated use of our existing cash and cash equivalents and the proceeds from our initial public offering; and
•    other risks and uncertainties, including those listed under the caption “Risk Factors”.
as well as other statements relating to our future operations, financial performance and financial condition, prospects, strategies, objectives or other future events. Forward-looking statements appear primarily in the sections of this Form 10-Q entitled “Item 1. Financial Statements,” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. As a result, you should not place undue reliance on forward-looking statements.
Additionally, the forward-looking statements contained in this Form 10-Q represent our views only as of the date of this Form 10-Q (or any earlier date indicated in such statement). While we may update certain forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if new information becomes available in the future. However, you are advised to consult any further disclosures we make on related subjects in the reports that we file with the SEC.
The foregoing cautionary statements are intended to qualify all forward-looking statements wherever they may appear in this Form 10-Q. For all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Market, Industry and Other Data

This Form 10-Q contains estimates, projections, market research and other data generated by independent third parties, by third parties on our behalf and by us concerning markets for onapristone. Information that is based on estimates, projections, market research or similar methodologies is inherently subject to uncertainties and actual results, events or circumstances may differ materially from results, events and circumstances reflected in this information. As a result, you are cautioned not to give undue weight to such information.
This Form 10-Q also contains certain data and information, which we obtained from various government and private publications. Although we believe that the publications and reports are reliable, we have not independently verified the data. Statistical data in these publications include projections that are based on a number of assumptions. If any one or more of the
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assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.
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Part I - Financial Information
Item 1. Financial Statements

Context Therapeutics Inc.
Condensed Consolidated Balance Sheets
September 30, 2021December 31, 2020
(Unaudited)(Note 3)
Assets
Current assets:
Cash and cash equivalents$419,152 $341,037 
Prepaid expenses and other18,379 8,672
Total current assets437,531 349,709
Deferred offering costs1,821,773 117,631
Total assets$2,259,304 $467,340 
Liabilities, Convertible Preferred Stock, Redeemable Common Stock and Stockholders' Equity (Deficit)
Current liabilities:
Convertible promissory notes$ $5,829,292 
Note payable - current 55,014 
Accounts payable3,083,420 2,707,861 
Accrued expenses and other current liabilities1,325,194 955,989 
Total current liabilities4,408,614 9,548,156 
Note payable - noncurrent 69,040 
Total liabilities4,408,614 9,617,196 
Commitments and Contingencies (Note 8)
Stockholders' equity (deficit), inclusive of convertible preferred stock and common stock, $0.001 par value, 120,000,000 shares authorized
Convertible preferred stock and redeemable common stock:
Series A preferred stock, 2,212,543 and 210,715 issued and outstanding at September 30, 2021 and December 31, 2020, respectively (liquidation value of $15,858,181 at September 30, 2021)
14,641,005 1,400,935 
Series Seed preferred stock, 2,624,324 issued and outstanding at September 30, 2021, and December 31, 2020 (liquidation value of $11,796,713 at September 30, 2021)
6,341,288 6,341,288 
Redeemable common stock, 16,666 issued and outstanding at September 30, 2021 and December 31, 2020
82,330 29,000 
Total convertible preferred stock and redeemable common stock21,064,623 7,771,223 
Stockholders' deficit:
Common stock, 348,531 and 331,789 issued and outstanding at September 30, 2021 and December 31, 2020, respectively
348332
Additional paid-in capital2,948,294 1,876,159 
Accumulated deficit(26,162,575)(18,797,570)
Total stockholders' deficit(23,213,933)(16,921,079)
Total liabilities, convertible preferred stock, redeemable common stock and stockholders' deficit$2,259,304 $467,340 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Context Therapeutics Inc.
Condensed Consolidated Statements of Operations (Unaudited)
 
Three months ended September 30,Nine months ended September 30,
2021202020212020
Operating expenses:
Acquired in-process research and development$ $ $3,087,832 $ 
Research and development739,598 468,671 2,511,438 1,046,662 
General and administrative828,464 182,389 1,834,645 755,962 
Loss from operations(1,568,062)(651,060)(7,433,915)(1,802,624)
Interest expense(1,261)(95,211)(64,555)(566,790)
Change in fair value of convertible promissory notes (129,966)9,317 9,798,628 
Other income126,531  124,148  
Net income (loss)$(1,442,792)$(876,237)$(7,365,005)$7,429,214 
Net income (loss) per common share, basic$(4.00)$(2.52)$(20.74)$4.04 
Net income (loss) per common share, diluted$(4.00)$(2.52)$(20.74)$(3.35)
Weighted average shares outstanding, basic361,067 348,382 355,087 348,348 
Weighted average shares outstanding, diluted361,067 348,382 355,087 2,337,027 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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Context Therapeutics Inc.
Condensed Consolidated Statements of Changes in Convertible Preferred Stock, Redeemable Common Stock and Stockholders’ Deficit (Unaudited)
 
 Series A
Preferred Stock 
Series Seed
Preferred Stock
Redeemable
Common Stock
 Common Stock Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Deficit
 Shares Amount SharesAmountSharesAmount SharesAmount
Balance at January 1, 2020
$ $ 16,666$126,000  324,145$324 $1,480,955 $(25,442,035)$(23,960,756)
Share-based compensation expense, including vesting of restricted stock and issuance of common stock
— — —  7,5128 126,959 — 126,967 
Change in fair value of redeemable common stock to redemption value
— — (13,000) — 13,000 — 13,000 
Net income— — —  — — 826,480 826,480 
Balance at March 31, 2020  16,666113,000  331,657332 1,620,914 (24,615,555)(22,994,309)
Sale of Series A preferred stock20,926150,000 — —  — — — — 
Fair value of warrants issued in conjunction with the Series A preferred stock(7,843)— —  — 7,843 — 7,843 
Sale of Series Seed preferred stock— 8,77150,000 —  — — — — 
Conversion of Junior Convertible Notes to Series Seed preferred stock— 2,615,5536,291,288 —  — — — — 
Share-based compensation expense, including vesting of restricted stock and issuance of common stock— — —  44— 30,642 — 30,642 
Change in fair value of redeemable common stock to redemption value— — (82,000) — 82,000 — 82,000 
Net income— — —  — — 7,478,971 7,478,971 
Balance at June 30, 202020,926142,157 2,624,3246,341,288 16,66631,000  331,701332 1,741,399 (17,136,584)(15,394,853)
Sale of Series A preferred stock62,781450,000 — —  — — — — 
Fair value of warrants issued in conjunction with the Series A preferred stock(23,520)— —  — 23,520 — 23,520 
Share-based compensation expense, including vesting of restricted stock and issuance of common stock— — —  45— 30,818 — 30,818 
Change in fair value of redeemable common stock to redemption value— — 1,000  — (1,000)— (1,000)
Net loss— — —  — — (876,237)(876,237)
Balance at September 30, 2020
83,707$568,637 2,624,324$6,341,288 16,666$32,000  331,746$332 $1,794,737 $(18,012,821)$(16,217,752)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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Context Therapeutics Inc.
Condensed Consolidated Statements of Changes in Convertible Preferred Stock, Redeemable Common Stock and Stockholders’ Deficit (Unaudited)
 Series A
Preferred Stock
Series Seed
Preferred Stock
Redeemable
Common Stock
 Common Stock Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Deficit
 SharesAmountSharesAmountShares Amount SharesAmount
Balance at January 1, 2021210,715 $1,400,935 2,624,324 $6,341,288 16,666$29,000  331,789$332 $1,876,159 $(18,797,570)$(16,921,079)
Sale of Series A preferred stock, net of offering costs of $213,073
453,094 3,034,526 — — —   — — — — 
Conversion of Senior Convertible Notes, including accrued interest, to Series A preferred stock844,824 5,728,793 — — —   — 137,497 — 137,497 
Fair value of warrants issued in conjunction with the Series A preferred stock— (158,658)— — —   — 158,658 — 158,658 
Fair value of warrants issued as placement agent fees— (13,388)— — —   — 13,388 — 13,388 
Share-based compensation expense, including vesting of restricted stock and issuance of common stock— — — — —   4,2184 25,509 — 25,513 
Net loss— — — — —   — — (892,049)(892,049)
Balance at March 31, 20211,508,6339,992,208 2,624,3246,341,288 16,66629,000 336,007336 2,211,211 (19,689,619)(17,478,072)
Sale of Series A preferred stock, net of offering costs of $96,948
285,351 1,948,309 — —  — — — — 
Fair value of Series A preferred stock issued in conjunction with collaboration and licensing agreement418,559 2,837,832 — —  — — — — 
Fair value of warrants issued in conjunction with the Series A preferred stock— (106,935)— —  — 106,935 — 106,935 
Fair value of warrants issued as placement agent fees— (30,409)— —  — 30,409 — 30,409 
Share-based compensation expense, including vesting of restricted stock and issuance of common stock— — — —  6,2626 119,357 — 119,363 
Change in fair value of redeemable common stock to redemption value— — — — 53,330 — (53,330)— (53,330)
Net loss— — — —  — — (5,030,164)(5,030,164)
Balance at June 30, 20212,212,54314,641,005 2,624,3246,341,288 16,66682,330 342,269342 2,414,582 (24,719,783)(22,304,859)
Fair value of warrants issued for services— — — — —   — 371,895 — 371,895 
Share-based compensation expense, including vesting of restricted stock and issuance of common stock— — — — —   6,2626 161,817 — 161,823 
Net loss— — — — —   — — (1,442,792)(1,442,792)
Balance at September 30, 2021
2,212,543 $14,641,005 2,624,324 $6,341,288 16,666$82,330  348,531$348 $2,948,294 $(26,162,575)$(23,213,933)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Context Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine months ended September 30,
20212020
Operating activities:
Net income (loss)$(7,365,005)$7,429,214 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Acquired in-process research and development charge3,087,832  
Fair value of warrants for services provided371,895  
Share-based compensation expense306,699 188,427 
Non-cash interest expense64,555 566,790 
Change in fair value of convertible promissory notes(9,317)(9,798,628)
Gain on extinguishment of debt(125,577) 
Changes in operating assets and liabilities:
Prepaid expenses and other current assets(9,707)151 
Accounts payable(179,199)356,255 
Accrued expenses and other current liabilities20,021 399,196 
Cash used in operating activities(3,837,803)(858,595)
Investing activities:
Acquired in-process research and development(250,000) 
Cash used in investing activities(250,000) 
Financing activities:
Proceeds from the issuance of convertible bridge notes 25,000 
Proceeds from the issuance of note payable 124,054 
Proceeds from the sale of Series Seed preferred stock, net 50,000 
Proceeds from the sale of Series A preferred stock4,982,835 600,000 
Payment of offering costs related to initial public offering(816,917) 
Cash provided by financing activities4,165,918 799,054 
Net increase (decrease) in cash and cash equivalents78,115 (59,541)
Cash and cash equivalents at beginning of period341,037 226,603 
Cash and cash equivalents at end of period$419,152 $167,062 
Supplemental disclosure of non-cash financing activities:
Conversion of convertible promissory notes, including accrued interest, to Series A preferred stock$5,866,290 $ 
Fair value of warrants issued in conjunction with Series A preferred stock$309,390 $31,363 
Conversion of convertible promissory notes, including accrued interest, to Series Seed preferred stock$ $6,291,288 
Series A preferred stock issued for acquired in-process research and development$2,837,832 $ 
Deferred offering costs in accounts payable and accrued expenses$1,004,856 $ 
Change in fair value of redeemable common stock to redemption value$53,330 $94,000 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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CONTEXT THERAPEUTICS INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(1) Organization and Description of Business
Context Therapeutics Inc. (the “Company”) is a clinical-stage biopharmaceutical company dedicated to improving the lives of women living with cancer. The Company was organized in April 2015 under the laws of the State of Delaware. The Company’s operations are located in Philadelphia, Pennsylvania. In April 2021, the Company completed a reverse triangular merger, which resulted in Context Therapeutics Inc. becoming the sole holder of 100% of the membership interests in Context Therapeutics LLC, which resulted in all common units, preferred units, options, warrants or other rights to purchase common or preferred units of Context Therapeutics LLC converting into common stock, preferred stock, options, warrants or other rights to purchase common or preferred stock of Context Therapeutics Inc. As this was a transaction between entities under common control, the carryover basis of accounting was used to record the assets, liabilities and equity of Context Therapeutics LLC. Further, as a common control transaction the condensed consolidated financial statements of the Company reflect the merger transaction as if it had occurred as of the earliest period presented herein.
(2) Risks and Liquidity
The Company has incurred losses and negative cash flows from operations since inception and had an accumulated deficit of $26.2 million as of September 30, 2021. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant revenues from its product candidates currently in development. Management believes its cash and cash equivalents of $0.4 million as of September 30, 2021, together with the gross proceeds of $28.8 million from its initial public offering ("IPO") in October 2021 (note 10) and expected gross proceeds of $31.3 million from its private placement in December 2021 (note 10), are sufficient to fund the projected operations for at least the next 12 months from the issuance date of these condensed consolidated financial statements. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates.
The Company plans to seek additional capital in the future through equity and/or debt financings, partnerships, collaborations, or other sources to carry out the Company’s planned development activities. If additional capital is not available when required, the Company may need to delay or curtail its operations until such funding is received. Various internal and external factors will affect whether and when the Company’s product candidates become approved for marketing and successful commercialization. The regulatory approval and market acceptance of the Company’s product candidates, length of time and cost of developing and commercializing these product candidates and/or failure of them at any stage of the approval process will materially affect the Company’s financial condition and future operations.

In October 2021, the Company closed an IPO, in which it issued and sold 5,750,000 shares at a public offering price of $5.00 per share. In addition, at the closing of the IPO, the Company issued warrants to purchase up to 250,000 shares of common stock to designees of the placement agent. The placement agent's warrants have an exercise price of $6.25 per share and a term of five years from the date of issuance. Immediately prior to the completion of the IPO, all of the Company’s preferred stock converted into an aggregate of 4,836,867 shares of common stock and 480,415 warrants converted into 9,816 shares of common stock. The Company received gross proceeds of approximately $28.8 million as a result of the offering.

On December 1, 2021, the Company entered into a definitive securities purchase agreement for a private placement of 5,000,000 shares of common stock together with warrants to purchase 5,000,000 shares of common stock that will result in gross proceeds of approximately $31.3 million, before deducting placement offering expenses. Each share of common stock and accompanying warrant are being sold together at a combined offering price of $6.25. The warrants have a term of 5.5 years and an exercise price of $6.25 per share. The private placement is expected to close on December 6, 2021, subject to customary closing conditions.

The Company faces risks associated with companies whose products are in development. These risks include the need for additional financing to complete its research and development, achieving its research and development objectives, defending its intellectual property rights, recruiting and retaining skilled personnel, and dependence on key members of management, among others.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The spread of COVID-19 during 2020 and 2021 has caused worldwide economic downturn and significant volatility in the financial markets.
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There is significant uncertainty as to the likely effects of this disease which may, among other things, materially impact the Company’s planned clinical trials. This pandemic or outbreak could result in difficulty securing clinical trial site locations, contract research organizations, and/or trial monitors and other critical vendors and consultants supporting the trials. In addition, outbreaks or the perception of an outbreak, near a clinical trial site location could impact the Company’s ability to enroll patients. These situations, or others associated with COVID-19, could cause delays in the Company’s clinical trial plans and could increase expected costs, all of which could have a material adverse effect on the Company’s business and its financial condition. At the current time, the Company is unable to quantify the potential effects of this pandemic on its future consolidated financial statements.

(3) Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals and estimates that impact the financial statements) considered necessary to present fairly the Company’s financial position as of September 30, 2021, and its results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The unaudited condensed consolidated financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2020. The consolidated financial information as of December 31, 2020 included herein has been derived from the annual audited consolidated financial statements.
The unaudited condensed consolidated financial statements include the accounts of the Company, Context Therapeutics LLC, Context Biopharma, Inc. and Context Ireland Ltd., the Company’s wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Estimates and assumptions are periodically reviewed, and the effects of the revisions are reflected in the accompanying unaudited interim condensed consolidated financial statements in the period they are determined to be necessary. Significant estimates and assumptions made in the accompanying unaudited interim condensed consolidated financial statements include, but are not limited to, the fair value of common stock, share-based compensation arrangements, the fair value of convertible debt and in recording the prepayments, accruals and associated expense for research and development activities performed for the Company by third parties.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured
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limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment.
Fair Value of Financial Instruments
At September 30, 2021 and December 31, 2020, the Company’s level 1 financial instruments included cash equivalents and accounts payable. The carrying amounts of these assets and liabilities approximate fair value due to their short-term nature. Convertible promissory notes are recorded at approximate fair value on a recurring basis (see Note 4 for further discussion).
Cash and Cash Equivalents
The Company considers all highly liquid investments that have original maturities of three months or less when acquired to be cash equivalents. Cash equivalents consist of amounts invested in money market funds.
Deferred Offering Costs
The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, the costs are recorded as a reduction of additional paid-in capital generated as a result of such offering. Should an in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations. As of September 30, 2021 and December 31, 2020, the Company had deferred offering costs of $1.8 million and $0.1 million, respectively, related to the Company’s in-process IPO and the Company’s Series A convertible preferred stock (“Series A Stock”) financing (see Note 6). All deferred offering costs related to the Company’s Series A Stock financing were recorded against Series A Stock upon completion of the financing in April 2021.
Convertible Preferred Stock and Redeemable Common Stock
The Company accounts for its convertible preferred stock subject to possible conversion in accordance with ASC 480, Distinguishing Liabilities from Equity. Conditionally convertible preferred stock (including stock that feature conversion rights that are either within the control of the holder or subject to conversion upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. The Company’s convertible preferred stock feature redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2021 and December 31, 2020, the convertible preferred stock subject to contingent redemption is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s unaudited interim condensed consolidated balance sheets. For more information related to the redemption and conversion features of convertible preferred stock, see Note 6. Certain common stock issued to Drexel University (“Drexel”) contain put option rights whereby Drexel may, at their option, request the Company to redeem the common stock held by Drexel and at the estimated fair value of the common stock at the time of redemption. Drexel’s common stock are presented as temporary equity and subsequently remeasured to their estimated redemption value at each reporting period. Drexel’s put option right terminated immediately prior to and upon consummation of the IPO.
Acquired In-Process Research and Development Costs
Acquired in-process research and development (“IPR&D”) expense consists of the initial up-front payments incurred in connection with the acquisition or licensing of products or technologies that do not meet the definition of a business under FASB ASC Topic 805, Business Combinations. The Company’s acquired IPR&D expense of $3.1 million for the nine months ended September 30, 2021 reflects the fair value of consideration ascribed to the collaboration and licensing agreement with Integral Molecular, Inc. (“Integral”) for the development of an anti-claudin 6 (“CLDN6”) bispecific monoclonal antibody (“BsMAb”) for gynecologic cancer therapy. See Note 8 for further discussion.
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Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs include salaries, share-based compensation, and other operational costs related to the Company’s research and development activities and external costs of outside vendors engaged to conduct clinical studies and other research and development activities.
The Company makes estimates of prepaid/accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly.
Nonrefundable advance payments for goods and services, including fees for clinical trial expenses, process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.
Share-Based Compensation
The Company measures and recognizes share-based compensation expense for both employee and nonemployee awards based on the grant date fair value of the awards. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The Company recognizes forfeitures as they occur.
The Company classifies share-based compensation expense in its unaudited interim condensed consolidated statements of operations in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.
The Company estimates the fair value of employee and non-employee stock awards as of the date of grant using the Black-Scholes option pricing model. Until its IPO that closed in October 2021, the Company historically has been a private company and lacks Company-specific historical and implied volatility information. Therefore, management estimates the expected share price volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own publicly traded share price. The expected term of the Company’s stock awards has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” stock awards. The risk-free interest rate is determined by reference to the yield curve of a zero-coupon U.S. Treasury bond on the date of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.
In addition, the Company measures and recognizes share-based compensation expense for advisors, officers and director restricted share-based awards based on the grant date fair value of the awards.
Net Income (Loss) Per Share
The Company computes net income (loss) per share using the weighted-average number of common shares outstanding during the period. For periods with a net loss, basic and diluted net loss per share are the same because the conversion, exercise or issuance of all potential common stock equivalents, which comprise the entire amount of the Company’s outstanding convertible promissory notes, preferred stock, warrants and share-based awards, would be anti-dilutive.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

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Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Convertible promissory notes 783,127   
Series Seed convertible preferred stock2,624,324 2,624,324 2,624,324  
Series A convertible preferred stock2,212,543 83,707 2,212,543  
Stock Options436,437 24,830 436,437 24,830 
Unvested restricted stock awards33,397 88 33,397 88 
Warrants480,415 128,355 480,415 128,355 
5,787,116 3,644,431 5,787,116 153,273 

Amounts in the above table reflect common stock equivalents.

For the nine months ended September 30, 2020, the Company used the two-class method to compute basic net income per common share. Under this method, undistributed earnings are allocated to common stock, the Series Seed Preferred Stock, and the Series A Preferred Stock to the extent that the preferred stockholders may share in earnings. In periods of net loss, losses are not allocated to participating securities as the holders of such securities have no obligation to fund losses. The total earnings allocated to common stock is then divided by the weighted average common shares outstanding to determine the basic income per share.
 
For purposes of calculating diluted income (loss) per common share, the denominator includes both the weighted average common shares outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants and share-based awards using the treasury stock method. In addition, the Company considers the potential dilutive impact of its preferred stock and convertible debt using the treasury stock and if-converted methods, if either is more dilutive than the two-class method. The two-class method was more dilutive for the nine months ended September 30, 2020.
 
 Three Months EndedNine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Basic net income (loss) per common share calculation:  
Net income (loss) attributable to common shareholders$(1,442,792)$(876,237)$(7,365,005)$7,429,214 
Less: undistributed earnings to participating securities   (6,021,339)
Net income (loss) attributable to common shareholders - basic(1,442,792)(876,237)(7,365,005)1,407,875 
Weighted average common shares outstanding - basic361,067 348,382 355,087 348,348 
Net income (loss) per share - basic$(4.00)$(2.52)$(20.74)$4.04 
Diluted net income (loss) per common share calculation:    
Net income (loss) attributable to common shareholders$(1,442,792)$(876,237)$(7,365,005)$7,429,214 
Less: undistributed earnings to participating securities   (6,021,339)
Less: change in fair value of convertible promissory notes and interest expense   (9,231,838)
Net loss attributable to common shareholders – diluted
(1,442,792)(876,237)(7,365,005)(7,823,963)
Weighted average common shares outstanding - basic361,067 348,382 355,087 348,348 
Convertible securities   1,988,679 
Weighted average common shares outstanding - diluted361,067 348,382 355,087 2,337,027 
Net income (loss) per share - diluted $(4.00)$(2.52)$(20.74)$(3.35)
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Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
 
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) the lease classification or (c) the determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. In June 2020, the FASB issued ASU 2020-05 that further delayed the effective date of Topic 842 to fiscal years beginning July 1, 2022, and interim periods within those years. The Company is currently evaluating the impact of adopting this guidance to its consolidated financial statements but does not believe this adoption will have a material impact due to the fact that the Company does not have any long-term lease commitments.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. The new guidance will be effective for the Company on July 1, 2023. The Company is currently evaluating the impact of adopting this guidance to its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intraperiod tax allocation, and calculating income taxes in an interim period. In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax), which is partially based on income, evaluating tax basis of goodwill recognized from a business combination and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The ASU is effective for fiscal year beginning after December 15, 2021, and will be applied either retrospectively or prospectively based upon the applicable amendments. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance to its consolidated financial statements.

(4) Fair Value Measurements
The Company utilizes a valuation hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques related to its financial assets and financial liabilities. The three levels of inputs used to measure fair value are described as follows:
Level 1 – Observable inputs such as quoted prices in active markets.
Level 2 – Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.
Level 3 – Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
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In accordance with the fair value hierarchy described above, the following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis:

  September 30, 2021
 Total Quoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Financial assets    
Cash equivalents
(Money Market Funds)
$50,384$50,384$$

  December 31, 2020
 TotalQuoted Prices in Active
Markets for Identical
Assets (Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Financial assets    
Cash equivalents
(Money Market Funds)
$50,367$50,367$$
Liabilities   
Convertible Promissory Notes$5,829,292$$$5,829,292
 
As further described in Note 5, the Company issued convertible promissory notes from inception through April 2019 (the “Junior Convertible Notes”) to various investors and from October 2019 through March 2020, the Company issued convertible bridge notes to the Co-Founder and Chief Executive Officer (the “Convertible Bridge Notes”). During April 2020, certain of the Junior Convertible Notes were converted into Senior Convertible Notes (the “Senior Convertible Notes”) (collectively, the “Convertible Promissory Notes”).
Due to the number of embedded provisions contained in the Convertible Promissory Notes and Convertible Bridge Notes, the fair value option, as prescribed by ASC 815, Derivatives and Hedging, was elected and applied to all Convertible Promissory Note and Convertible Bridge Note issuances since the Company’s inception in 2015, in connection with the preparation of these financial statements. The fair value of the Convertible Promissory Notes and Convertible Bridge Notes was determined using a scenario-based analysis that estimated the fair value based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholders, including various IPO, settlement, equity financing, corporate transaction and dissolution scenarios.
The Company adjusted the carrying value of its Convertible Promissory Notes and Convertible Bridge Notes to their estimated fair value at each reporting date, with any related increases or decreases in the fair value recorded as change in fair value of convertible promissory notes in the consolidated statement of operations. The change in fair value of convertible promissory notes within the nine months ended September 30, 2021 unaudited interim condensed consolidated statement of operations also includes reversals of gains and losses previously recognized by the Company upon conversion of the notes (Note 5).
The fair value of the Senior Convertible Notes at September 30, 2020 and December 31, 2020 was calculated using an option pricing model (“OPM”) framework and utilized the back-solve method for inferring and allocating the equity value predicated on the concurrent sale of Series A Stock. This method was selected as it was concluded that the sale of the Series A Stock was an arm’s-length transaction. Application of the OPM back-solve method involves making assumptions for the expected time to liquidity and volatility, and then solving for the value of equity such that value for the most recent financing equals the amount paid.
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The following table presents a roll-forward of the aggregate fair values of the Company’s Convertible Promissory Notes (Note 5) for which fair value is determined by Level 3 inputs for the periods indicated:

 
Balance at December 31, 2020
$5,829,292
Fair value adjustments(9,317)
Accrued interest46,315
Conversion of Senior Convertible Notes into Series A Stock(5,866,290)
Balance at September 30, 2021
$

Balance at December 31, 2019
$21,842,931
Issuance of Convertible Bridge Notes25,000
Fair value adjustments(9,798,628)
Accrued interest566,287
Conversion of Junior Convertible Notes into Series Seed Stock(6,291,288)
Balance at September 30, 2020
$6,344,302
  
(5) Convertible Promissory Notes
Junior Convertible Notes
From inception through December 2018, the Company issued Junior Convertible Notes that had an aggregate issuance date fair value of $15.8 million, an aggregate principal balance of $10.7 million and bore interest at rates ranging from 3.00% to 7.73% per year. From January 2019 through April 2019, the Company issued Junior Convertible Notes in the aggregate principal of $1.5 million that bore interest at rates ranging between 6.00% and 15.00% per year. From April 2015 through December 2017, the Company issued demand notes to the Chief Executive Officer and an immediate family member (the “Related Party”) with an aggregate principal balance of $1.8 million that bore interest at rates ranging from 3.00% to 6.00% per year. During April 2019, $1.9 million of principal and interest was converted from demand notes to a Junior Convertible Note bearing interest at a rate of 15.00%. Additionally, in July 2019, the Company issued $1.2 million of Junior Convertible Notes in lieu of severance payments to former executives.
All of the outstanding principal and accrued but unpaid interest associated with the Junior Convertible Notes converted into 2,615,553 Series Seed Stock in May 2020, of which 840,363 shares were issued to the Related Party. Due to certain embedded features within the Junior Convertible Notes, the Company elected to account for these notes and all their embedded features under the fair value option. At the time of conversion, the estimated fair value of the Junior Convertible Notes was $6.3 million and was reclassified to Series Seed convertible preferred equity. In connection with the conversion in 2020, the Company recorded a non-cash credit of $7.7 million related to the final decrease in fair value of the Junior Convertible Notes.
Convertible Bridge Notes
From October 2019 through March 2020, the Company issued convertible bridge notes to the Related Party in the amount of $0.5 million. The Convertible Bridge Notes bore interest at a rate of 6.0% and were set to mature on December 31, 2021 (“Maturity Date”). In the event of qualified financing resulting in gross proceeds of $1.0 million (“Bridge Note Qualified Financing”), the outstanding principal and interest of the Convertible Bridge Notes would automatically convert into Series A Stock at a price equal to the issue price per share of the stock issued in the Bridge Note Qualified Financing and on the same terms and conditions of such Bridge Note Qualified Financing. In the event that a Bridge Note Qualified Financing was not consummated prior to the Maturity Date, then, at the election of the holder made at least five days prior to the Maturity Date, effective upon the Maturity Date, the outstanding principal balance and any unpaid accrued interest under the Senior Convertible Notes was to convert into Series A Stock of the Company at a conversion price equal to 80% of the conversion price. On December 22, 2020, the outstanding principal and accrued but unpaid interest associated with the Convertible Bridge Notes converted into 78,178 shares of Series A Stock.
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Due to certain embedded features within the Convertible Bridge Notes, the Company elected to account for these notes and all their embedded features under the fair value option. For the three and nine months ended September 30, 2020, the Company recognized a change of $19,000 and $0.1 million in the condensed consolidated statement of operations related to increases and decreases in the fair value of the Convertible Bridge Notes. For the three and nine months ended September 30, 2020, the Company recognized approximately $8,000 and $23,000 of interest expense in connection with the Convertible Bridge Notes.
Senior Convertible Notes
In April 2020, $5.1 million of principal and $0.6 million of accrued interest related to certain Junior Convertible Notes were converted into Senior Convertible Notes. Of the Senior Convertible Notes issued in 2020, $2.5 million of principal and $0.4 million of accrued interest were issued to the Related Party. The Senior Convertible Notes bore interest at a rate of 6.0% per year and were set to mature on December 31, 2021 (“Maturity Date”). All of the Company’s assets, including intellectual property, were pledged as collateral to the Senior Convertible Note holders.
All of the outstanding principal and accrued but unpaid interest associated with the Senior Convertible Notes converted into 844,824 shares of Series A Stock in February 2021, of which 430,467 shares were issued to the Related Party. Due to certain embedded features within the Senior Convertible Notes, the Company elected to account for these notes and all their embedded features under the fair value option. At the time of conversion, the estimated fair value of the Junior Convertible Notes was $5.7 million and was reclassified to Series A convertible preferred equity. The Company recorded a non-cash debit of $0.2 million in the condensed consolidated statement of operations for the three months ended September 30, 2020, related to an increase in fair value of the Senior Convertible Notes. The Company recorded a non-cash credit of $9,000 and $1.9 million in the condensed consolidated statement of operations for the nine months ended September 30, 2021 and 2020, respectively, related to the decrease in fair value of the Senior Convertible Notes. For the three months ended September 30, 2020, the Company recognized $0.1 million of interest expense in connection with the Senior Convertible Notes, including $45,000 payable to the Related Party. For the nine months ended September 30, 2021 and 2020, the Company recognized $45,000 and $0.2 million of interest expense in connection with the Senior Convertible Notes, including $23,000 and $88,000 payable to the Related Party, respectively.
Paycheck Protection Program
In May 2020, the Company entered into an original loan agreement with Pacific Western Bank as the lender (“Lender”) for a loan in an aggregate principal amount of $0.1 million (the “Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and implemented by the U.S. Small Business Administration. At December 31, 2020, the outstanding principal balance of the Loan was approximately $124,000. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which among other things, extended the deferral period for loan payments to either (1) the date that Small Business Administration remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period. The Loan was set to mature in two years and bore interest at a rate of 1.0% per year, with all payments deferred through September 5, 2021.
The entire PPP Loan was forgiven in July 2021 and recognized as a gain on extinguishment of debt within other income in the condensed consolidated statement of operations.
(6) Convertible Preferred Stock, Redeemable Common Stock and Common Stock
Series A convertible preferred stock and Series Seed convertible preferred stock
In February, March and April 2021, the Company sold 738,445 shares of Series A Stock for $7.168 per share for net proceeds of $5.0 million. The Company also issued 184,597 warrants to purchase common stock at an exercise price of $7.168 to the Series A stockholders as part of the Series A Stock financing. Additionally, the Company issued 24,134 warrants to purchase common stock at an exercise price of $7.168 to placement agents as a part of the Series A Stock financing.
In February 2021, the Company converted $6.1 million of principal and interest related to Senior Convertible Notes into 844,824 shares of Series A Stock at a price of $7.168 per share. In addition, warrants with a fair value of $0.1 million associated with the Senior Convertible Notes were reclassified into additional paid-in capital.
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Immediately prior to the completion of the IPO, all of the Company’s preferred stock converted into shares of common stock (see Note 10).
 
The following is a summary of the rights, preferences, and terms of the Series A Stock and Series Seed Stock (collectively, Convertible Preferred Stock):
Distribution
Series A stockholders shall receive a non-cumulative distribution of 6% per year of the original capital contribution, which shall be payable upon the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (“Dissolution Event”), or the redemption or repurchase of any Series A Stock. Series Seed Stock does not receive a distribution right.
Liquidation
Upon a Dissolution Event, the holders of shares of Series A Stock shall receive the greater of 1.5 times the original issuance price plus any accrued distributions or the amount that such Series A stockholders would receive if the Series A Stock were converted to common stock, prior to any distribution with respect to Series Seed Stock or common stock.
After amounts paid out to the Series A stockholders upon a Dissolution Event, the Series Seed Stock then outstanding shall be entitled to be paid out in accordance with the positive balance in their capital accounts with respect to their Series Seed Stock, after giving effect to all contributions, distributions and allocations with respect to such Series Seed shares for all periods, before any payment shall be made to the holders of common stock.
Conversion Rights
Each share of Convertible Preferred Stock is convertible, at the option of the holder thereof, at any time, and without the payment of additional consideration, into a number of fully paid and nonassessable common stock as determined by dividing the original issue price for the Convertible Preferred Stock by the conversion price for the Convertible Preferred Stock in effect at the time of conversion, except as otherwise defined in the Operating Agreement (the “Operating Agreement”). Notwithstanding the foregoing, in the event of a liquidation, dissolution, or winding up of the Company or acquisition of the majority of the Company’s assets, the Series Seed Stock conversion right will terminate at the close of business on the last full day preceding the date fixed for the first payment of any funds and assets distributable on such event to the shareholders’ holding Series Seed Stock. No fractional common stock will be issued upon conversion of the Convertible Preferred Stock. In lieu of any fractional shares, the Company shall pay cash equal to such fraction multiplied by the fair market value of a common stock as determined in good faith by the Management Committee of the Company.
Voting Rights
In connection with the Company’s issuance of Series A Stock, the Company’s Management Committee shall be reconstituted so as to be comprised on five members, including one member appointed by a majority of the Series A stockholders, one member appointed by a majority of the Series Seed Stock holders, two independent members and the Company’s Chief Executive Officer.
Redemption
Due to certain deemed liquidation events that are outside of the control of the Company, the Series A Stock and Series Seed Stock are contingently redeemable and presented as temporary equity in the accompanying consolidated balance sheets.
 
Redeemable Common Stock and Common Stock
As a result of the reverse triangular merger (see Note 1), the total number of shares of stock that the Company has authority to issue is 120,000,000 shares, of which 100,000,000 shares are common stock, $0.001 par value per share, 10,000,000 shares are Undesignated Preferred Stock, $0.001 par value per share, 5,000,000 shares of Series Seed Convertible Preferred Stock, $0.001 par value per share and 5,000,000 shares of Series A Convertible Preferred Stock, $0.001 par value per share. Series Seed Stock and common stockholders do not have the power to take part in the direct management of the Company and have limited voting rights.
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The Company issued 16,666 shares of common stock to Drexel during 2015 that included a put option right whereby Drexel may, at their option, request the Company repurchase the common stock held by Drexel upon the earlier of (i) several triggering events associated with insolvency and bankruptcy matters of the Company and (ii) the tenth anniversary of the original issuance of common stock to Drexel. Redemption, if el