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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________________________
FORM 10-Q
_____________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-38295
_____________________________________________________________________________________

X4 PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
_____________________________________________________________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
27-3181608
(I.R.S. Employer
Identification No.)
955 Massachusetts Avenue, 4th Floor
Cambridge, Massachusetts
(Address of principal executive offices)
02139
(Zip Code)
(857) 529-8300
(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 StockXFORThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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 Exchange Act).    Yes      No  ☒

As of May 4, 2020, the registrant had 16,142,275 shares of common stock outstanding.






2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology, although not all forward looking statements contain these identifying words. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this report, regarding, among other things:
the timing, progress and reporting of results of our current trials of X4P-001 (mavorixafor), including our global Phase 3 clinical trial in patients with Warts, Hypogammaglobulinemia, Infections, and Myelokathexis, or WHIM, syndrome, our Phase 1b clinical trial in combination with ibrutinib in patients with Waldenström’s macroglobulinemia, and our Phase 1b clinical trial as monotherapy in patients with Severe Congenital Neutropenia, or SCN;
the initiation, timing, progress and results of our current and future preclinical studies and clinical trials of X4P-002 and X4P-003 or any of our other product candidates or our research and development programs that we pursue;
our expectations regarding the impact of the ongoing coronavirus disease 2019, or COVID-19, pandemic, included the expected duration of disruption and immediate and long-term impact and effect on our business and operations;
the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff or independent physicians supporting the conduct of our clinical trials;
the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic;
the potential benefits that may be derived from any of our product candidates;
the timing of and our ability to obtain and maintain regulatory approval of our existing product candidates or any product candidates that we may develop in the future, and any related restrictions, limitations, or warnings in the label of any approved product candidates;
our plans to research, develop, manufacture and commercialize our product candidates;
the timing of our regulatory filings for our product candidates, along with regulatory developments in the United States and other foreign countries;
the size and growth potential of the markets for our product candidates, if approved, and the rate and degree of market acceptance of our product candidates, including reimbursement that may be received from payors;
the benefits of U.S. Food and Drug Administration, or FDA, and European Commission designations such as, including, without limitation, Fast Track, Orphan Drug and Breakthrough Therapy;
our commercialization, marketing and manufacturing capabilities and strategy;
our ability to attract and retain qualified employees and key personnel;
our competitive position;
3


our expectations regarding our ability to obtain and maintain intellectual property protection;
the success of competing therapies that are or may become available;
our estimates and expectations regarding future operations, financial position, revenues, costs, expenses, uses of cash, capital requirements or our need for additional financing;
our ability to raise additional capital; and
our strategies, prospects, plans, expectations or objectives.

You should refer to the section titled “Risk Factors" in this Quarterly Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.


4


PART I FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.
X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
March 31, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$115,054  $126,184  
Accounts receivable 3,000    
Research and development incentive receivable416  1,998  
Prepaid expenses and other current assets3,480  1,096  
Total current assets121,950  129,278  
Property and equipment, net475  403  
Goodwill27,109  27,109  
Right-of-use assets1,803  1,959  
Other assets2,380  1,949  
Total assets$153,717  $160,698  
Liabilities, Convertible Preferred Stock, Redeemable Common Stock and Stockholders’ Equity
Current liabilities:
Accounts payable$1,248  $2,088  
Accrued expenses5,786  6,461  
Current portion of lease liability916  898  
Total current liabilities7,950  9,447  
Long-term debt, including accretion, net of discount and current portion25,266  20,097  
Lease liability1,684  1,918  
Other liabilities26  16  
Total liabilities34,926  31,478  
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value. 33,333,333 shares authorized as of March 31, 2020 and December 31, 2019, respectively; 16,141,868 and 16,128,862 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
16  16  
Additional paid-in capital262,076  261,367  
Accumulated other comprehensive loss(119) (119) 
Accumulated deficit(143,182) (132,044) 
Total stockholders’ equity118,791  129,220  
Total liabilities and stockholders’ equity
$153,717  $160,698  





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
20202019
License revenue$3,000  $  
Operating expenses:
Research and development8,911  5,655  
General and administrative4,670  4,783  
Total operating expenses13,581  10,438  
Loss from operations(10,581) (10,438) 
Other expense:
Interest income296  69  
Interest expense(584) (399) 
Change in fair value of preferred stock warrant liability  (288) 
Change in fair value of derivative liability  183  
Other income41    
Loss on extinguishment of debt(162)   
Total other expense, net(409) (435) 
Loss before provision for income taxes(10,990) (10,873) 
Provision for income taxes148    
Net loss(11,138) (10,873) 
Accruing dividends on Series A convertible preferred stock  (592) 
Net loss attributable to common stockholders$(11,138) $(11,465) 
Net loss per share attributable to common stockholders—basic and diluted
$(0.56) $(6.67) 
Weighted average common shares outstanding—basic and diluted
20,014  1,718  

Net loss$(11,138) $(10,873) 
Currency translation adjustments  23  
Total comprehensive loss$(11,138) $(10,850) 





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except share amounts)
(Unaudited)

Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 201916,128,862  $16  $261,367  $(119) $(132,044) $129,220  
Exercise of stock options13,006  —  96  96  
Stock-based compensation expense613  613  
Net loss(11,138) (11,138) 
Balance at March 31, 202016,141,868  16  262,076  (119) (143,182) 118,791  

Series Seed, A and B
Convertible Preferred
Redeemable
Common Stock
Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
(Deficit)
SharesAmountSharesAmountSharesAmount
Balance at December 31, 201840,079,567  $64,675  107,364  $734  351,652    $2,151    $(79,237) $(77,086) 
Conversion of redeemable common stock into common stock(107,364) (734) 107,364  1  733  734  
Conversion of convertible preferred shares into common stock(40,079,567) (64,675) 3,808,430  4  64,671  64,675  
Exchange of common stock in connection with Merger2,440,582  2  45,539  45,541  
Fair value of replacement equity awards817  817  
Reclassification of warrant liability to permanent equity5,235  5,235  
Exercise of stock options16,483  113  113  
Stock-based compensation262  262  
Currency translation adjustment23  23  
Net loss(10,873) (10,873) 
Balance at March 31, 2019        6,724,511  7  119,521  23  (90,110) 29,441  


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


X4 PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
20202019
Cash flows from operating activities:
Net loss$(11,138) $(10,873) 
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense613  262  
Depreciation and amortization expense36  20  
Non-cash lease expense158  119  
Accretion of debt discount119  153  
Loss on extinguishment of debt162    
Change in fair value of preferred stock warrant liability  288  
Change in fair value of derivative liability  (183) 
Other70    
Changes in operating assets and liabilities:
Accounts receivable(3,000)   
Prepaid expenses, other current assets and research and development incentive receivable(869) (595) 
Accounts payable(800) 1,332  
Accrued expenses(668) (2,072) 
Lease liabilities(210) (201) 
Net cash used in operating activities(15,527) (11,750) 
Cash flows from investing activities:
Cash, cash equivalents and restricted cash acquired in connection with the Merger  26,406  
Acquisition of property, equipment and intangible assets(555)   
Net cash provided by investing activities(555) 26,406  
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants96  113  
Proceeds from borrowings under loan and security agreements, net of issuance costs4,888    
Net cash provided by financing activities4,984  113  
Effect of exchange rate changes on cash, cash equivalents and restricted cash(34) (21) 
Net (decrease) increase in cash, cash equivalents and restricted cash(11,132) 14,748  
Cash, cash equivalents and restricted cash at beginning of period128,086  8,498  
Cash, cash equivalents and restricted cash at end of period$116,954  $23,246  
Supplemental disclosure of non-cash investing and financing activities:
Issuance costs not yet paid$20  $  
Conversion of convertible preferred stock into common stock$  $64,675  
Conversion of redeemable common stock into common stock$  $734  
Conversion of convertible preferred stock warrants into common stock warrants$  $5,235  
Fair value of net assets acquired in the Merger$  $46,358  


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Nature of the Business and Basis of Presentation
X4 Pharmaceuticals, Inc. together with its subsidiaries, the “Company”, is a clinical-stage biotechnology company focused on the research, development and commercialization of novel therapeutics for the treatment of rare diseases. The Company’s lead product candidate, mavorixafor, is a potential first-in-class, once-daily, oral inhibitor of CXCR4 and is currently in a Phase 3 clinical trial for the treatment of Warts, Hypogammaglobulinemia, Infections, and Myelokathexis (“WHIM”) syndrome, a rare, inherited, primary immunodeficiency disease caused by genetic mutations in the CXCR4 receptor gene. The Company is also conducting a 14-day, proof-of-concept Phase 1b clinical trial of mavorixafor in patients with severe congenital neutropenia (“SCN”) and a Phase 1b clinical trial of mavorixafor in combination with ibrutinib in Waldenström’s macroglobulinemia (“WM”). The Company is headquartered in Cambridge, Massachusetts.
Liquidity—As of March 31, 2020, the Company had $115.1 million of cash and cash equivalents and an accumulated deficit of $143.2 million. As of the issuance date of these condensed consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the date of these financial statements.
Since its inception, the Company has incurred significant operating losses and negative cash flows from operations. The Company has not yet commercialized a product and does not expect to generate revenue from the commercial sale of any products for several years, if at all. The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, will need additional capital to fund its future operations, which it may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. The Company has funded its operations to date primarily with proceeds from sales of common stock, warrants and prefunded warrants for the purchase of shares of preferred stock and shares of common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements.
If the Company is unable to obtain future funding when needed, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or pre-commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. There is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
Impact of the COVID-19 Pandemic— The impact of the COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. Impacts to the Company’s business have included temporary closures of its clinical trial sites or facilities, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing clinical trials, including enrollment at a slower pace, and the diversion of healthcare resources away from the conduct of the Company’s clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as the Company’s clinical trial sites and hospital staff supporting the conduct of clinical trials.
Merger with Arsanis— On November 26, 2018, Arsanis, Inc., a publicly held Delaware corporation (“Arsanis”), Artemis AC Corp., a Delaware corporation and a wholly-owned subsidiary of Arsanis (“Merger Sub”), and X4 Therapeutics, Inc. (“X4”) entered into an Agreement and Plan of Merger, as amended on December 20, 2018 and March 8, 2019 (the “Merger Agreement”), pursuant to which the Merger Sub merged with and into X4, with X4 surviving the merger as a wholly-owned subsidiary of Arsanis. The transactions described in the foregoing sentence may be referred to in these consolidated financial statements as “the Merger.”
On March 13, 2019, Arsanis, X4 and Merger Sub completed the Merger pursuant to the terms of the Merger Agreement. Pursuant to the terms of the Merger Agreement, each outstanding share of X4’s common stock and preferred stock was exchanged for 0.5702 shares of Arsanis’s common stock (the “Exchange Ratio”). In addition, all outstanding options exercisable for common stock and warrants exercisable for convertible preferred stock of X4 became options and warrants exercisable for the same number of shares of common stock of Arsanis multiplied by the Exchange Ratio. In connection with the Merger, X4 changed its name to X4 Therapeutics, Inc. Following the closing of the Merger, X4 Therapeutics, Inc. became a wholly-owned subsidiary of the Company, which changed its name to X4 Pharmaceuticals, Inc. As used herein, the words “the Company” refers to, for periods following the Merger, X4 Pharmaceuticals, Inc. (formerly Arsanis, Inc.), together with is direct
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and indirect subsidiaries, and for periods prior to the Merger, X4 Therapeutics, Inc. (formerly X4 Pharmaceuticals, Inc.), and its direct and indirect subsidiaries, as applicable.
2. Summary of Significant Accounting Policies
Significant Accounting Policies—The Company’s significant accounting policies are disclosed in the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the notes thereto filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2020. Since the date of those consolidated financial statements, there have been no material changes to the Company's significant accounting policies other that as listed below.
Risks and Uncertainties—With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, the Company has implemented business continuity measures designed to address and mitigate the impact of the COVID-19 pandemic on its business. The Company anticipates that the COVID-19 pandemic will have an impact on the clinical development timelines for certain of its clinical programs. The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease. While the Company is experiencing limited financial impacts 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 the financial impact.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biotechnology industry with research and development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; and the challenges of complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
Principles of Consolidation— The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including X4 Pharmaceuticals (Austria) GmbH, which is incorporated in Vienna, Austria (“X4 GmbH”), and X4 Therapeutics, Inc. All significant intercompany accounts and transactions have been eliminated.
Unaudited Interim Financial Statements— The condensed consolidated balance sheet at December 31, 2019 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP"). The accompanying condensed consolidated financial statements are unaudited. The accompanying unaudited interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 12, 2020. In the opinion of management, all adjustments, consisting only of normal recurring adjustments as necessary, for the fair statement of the Company’s condensed financial position, condensed results of its operations and cash flows have been made. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

Use of Estimates— The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
statements include, but are not limited to, the accrual of research and development expenses, the impairment or lack of impairment of long-lived assets including operating lease right-of-use assets and goodwill, and the constraint of variable consideration from contracts with customers. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The Company anticipates that the COVID-19 pandemic will have an impact on the clinical development timelines for certain of its programs. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.
Cash and Cash Equivalents— The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consisted of money market funds as of March 31, 2020 and December 31, 2019.
Restricted Cash—
(in thousands)As of March 31, 2020As of December 31, 2019
Letter of credit security: Cambridge lease$264  $264  
Letter of credit security: Waltham lease250  250  
Letter of credit security: Vienna Austria lease92  94  
Letter of credit security: Allston lease1,144  1,144  
Corporate credit card collateral150  150  
Total restricted cash (non-current)$1,900  $1,902  

In connection with the Company’s lease agreements for its facilities in Massachusetts and Austria, the Company maintains letters of credit, which are secured by restricted cash, for the benefit of the landlord.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the sum of the total of amounts shown in the Company’s condensed consolidated statements of cash flows as of March 31, 2020, December 31, 2019, March 31, 2019 and December 31, 2018: 
(in thousands)March 31, 2020December 31, 2019March 31, 2019December 31, 2018
Cash and cash equivalents$115,054  $126,184  $22,299  $8,134  
Restricted cash, non-current1,900  1,902  947  364  
Total cash, cash equivalents and restricted cash$116,954  $128,086  $23,246  $8,498  

Goodwill— Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company has determined that it operates in a single operating segment and has a single reporting unit.
The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform an interim quantitative impairment test, whereby the Company compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of its net assets, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than its carrying value, the Company measures the amount of impairment loss, if any, as the excess of the carrying value over the fair value of the reporting unit.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Given the ongoing COVID-19 pandemic and associated volatility reflected in the global financial markets and uncertain impact on the Company’s operations, management conducted an interim test of its goodwill as of March 31, 2020. The Company determined that goodwill was not impaired as of March 31, 2020.

Recently Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, (“ASU 2018-15”). The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The new standard was effective beginning January 1, 2020 and was adopted by the Company on that date. The adoption of ASU 2018-15 did not have an impact on the Company's consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which removes, adds and modifies certain
disclosure requirements for fair value measurements in Topic 820. The Company will no longer be required to disclose the
amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy as well as the valuation processes of Level 3 fair value measurements. The Company will be required to provide additional disclosure related to the changes in
unrealized gains and losses included in other comprehensive loss for recurring Level 3 fair value measurements and the range and weighted average of assumptions used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for the Company on January 1, 2020 and was adopted on that date. The adoption of ASU 2018-13 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.


Recently Issued Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU
2019-12 simplifies the accounting for income taxes, including the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company does not anticipate that the adoption of ASU 2019-12 will have a material impact on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13"), as amended. ASU 2016-13 requires that financial assets measured at amortized cost, such as trade receivables, be presented net of expected credit losses, which may be estimated based on relevant information such as historical experience, current conditions, and future expectation for each pool of similar financial asset. The new guidance requires enhanced disclosures related to trade receivables and associated credit losses. In accordance with ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivative and Hedging (Topic 815), and Leases (Topic 842)- Effective Dates, as the Company meets the definition of a "smaller reporting company", the Company has elected to defer the adoption of ASU 2016-13 until January 1, 2023. The Company expects that the adoption of ASU 2016-13 may accelerate the timing and could increase the level of credit loss expense in the consolidated statement of operations and will likely require an increased level of disclosure in the notes to the consolidated financial statements.

3. License, Collaboration and Funding Agreements
There were no material modifications of the Company’s license, collaboration or funding agreements during the three months ended March 31, 2020.
Research and Development Incentive Program
The Company participates in a research and development incentive program provided by the Austrian government whereby the Company is entitled to reimbursement by the Austrian government for a percentage of qualifying research and development expenses incurred by the Company’s subsidiary in Austria. Under the program, the reimbursement rate for qualifying research and development expenses incurred by the Company through its subsidiary in Austria is 14% for the years ended December 31, 2020 and 2019. As of March 31, 2020, the amount due under the program is $0.4 million, which amount was included in research and development incentive receivable in the condensed consolidated balance sheet. During the three months ended
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2020, the Company recorded $86 thousand of income related to the program within the condensed consolidated statement of operations as “other income”. No amounts were recorded during the three months ended March 31, 2019.
Abbisko Agreement
In July 2019, the Company entered into a license agreement, (the “Abbisko Agreement”) with Abbisko Therapeutics Co., Ltd., (“Abbisko”). Under the terms of the Abbisko Agreement, the Company granted Abbisko the exclusive right to develop, manufacture and commercialize mavorixafor in mainland China, Taiwan, Hong Kong and Macau, the (“Abbisko Territory”). The agreement provides Abbisko with the exclusive rights in the Abbisko Territory to develop and commercialize mavorixafor in combination with checkpoint inhibitors or other agents in multiple oncology indications. The Company retains the full rest-of-world rights to develop and commercialize mavorixafor outside of the Abbisko Territory for all indications and the Company has the ability to utilize data generated pursuant to the Abbisko collaboration for rest-of-world development. Assuming mavorixafor is developed by Abbisko in six indications, the Company would be entitled to milestone payments of up to $208 million, which will vary based on the ultimate sales, if any, of the approved licensed products. In addition, upon commercialization of mavorixafor in the Abbisko Territory, the Company is eligible to receive a tiered royalty, with a percentage range in the low double-digits, on net sales of approved licensed products. Abbisko is obligated to use commercially reasonable efforts to develop and commercialize mavorixafor in the Abbisko Territory.
Following the closing of a qualified financing (as defined in the Abbisko Agreement), Abbisko is required pay the Company a one-time, non-refundable, non-creditable financial milestone payment of $3.0 million. Abbisko achieved such qualified financing in March 2020 and, as a result, the Company was eligible to receive the milestone payment, which was received by the Company in April 2020. The Company is also eligible to receive potential development and regulatory milestone payments, which vary based on the number of indications developed, and potential commercial milestone payments based on annual net sales of mavorixafor-based licensed products.
Upon entering into the Abbisko Agreement, the Company evaluated the agreement under Accounting Standards Codification Topic 606 (“ASC 606”) and determined the agreement contained a single performance obligation related to the exclusive license to develop and commercialize mavorixafor and the transfer of know-how that was satisfied at the inception of the arrangement. The transaction price related to the transfer of the license and know-how was fully constrained at the inception of the arrangement and the Company ascribed no transaction price to the development, regulatory and commercial milestones under the “most-likely-amount” method. The Company concluded that any consideration related to the initial transfer of the license and know-how will be recognized when it is probable that Abbisko will achieve the related financial milestone and other operational milestones. As a result of Abbisko’s achievement of the qualified financing, the Company reversed the constraint related to this milestone and recognized $3.0 million of license revenue and an associated accounts receivable balance.
As of March 31, 2020, Abbisko has not completed any additional development or regulatory operational milestones, other than as noted above and, therefore, the Company continues to fully constrain the value of associated milestone payments. The Company will continue to re-evaluate the transaction price and associated constrained amounts in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

4. Fair Value of Financial Assets and Liabilities
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:
Fair Value Measurements as of March 31, 2020 Using:
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents—money market funds$48,770  $6,417  $  $55,187  
$48,770  $6,417  $  $55,187  
Liabilities:  None

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fair Value Measurements as of December 31, 2019 Using:
(in thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents—money market funds$23,638  $39,999  $  $63,637  
$23,638  $39,999  $  $63,637  
Liabilities: None
The Company’s cash equivalents consisted of money market funds invested in U.S. Treasury securities. The money market funds were valued based on reported market pricing for the identical assets, which represents a Level 1 measurement, or by using inputs observable in active markets for similar securities, which represents a Level 2 measurement.

During the three months ended March 31, 2020, the Company refinanced its Amended and Restated Loan and Security Agreement (as defined in Note 7) with Hercules Capital Inc. (“Hercules”). The debt refinancing was deemed to be an extinguishment of the June 2019 Amended and Restated Loan and Security Agreement (the “previous debt”) in exchange for the Amended Loan Agreement (the “new debt”) as further described in Note 7. The loss on extinguishment was calculated as the difference between the carrying amount of the previous debt and the fair value of the new debt, which is a non-recurring Level 3 measure. The fair value of the new debt was calculated based on the cash flows of the new debt, including end-of-term payments, interest payments, principal payments and lender fees, discounted to present value using the appropriate market rate. The market rate is a significant unobservable input. The Company developed a range of market rates in reference to the Company's recent borrowing activities with this lender, which are deemed to be reflective of the market rate. The Company considered a range from 10.5% to 12.5% and determined that 11.5% represented a reasonable rate for purposes of determining the fair value of the new debt, which was $25.3 million.

5. Property and Equipment, Net
Property and equipment, net consisted of the following:
(in thousands)March 31,
2020
December 31, 2019
Leasehold improvements$299  $299  
Furniture and fixtures139  139  
Computer equipment37  37  
Software33  33  
Lab equipment267  159  
775  667  
Less: Accumulated depreciation and amortization(300) (264) 
$475  $403  
Depreciation and amortization expense related to property and equipment was $36 thousand and $20 thousand for the three months ended March 31, 2020 and 2019 respectively.

6. Accrued Expenses
Accrued expenses consisted of the following
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X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands)March 31,
2020
December 31,
2019
Accrued employee compensation and benefits$2,289  2,916  
Accrued external research and development expenses1,287  1,977  
Accrued professional fees1,160  1,347  
Accrued lease construction costs682    
Other368  221  
$5,786  $6,461  

7. Long-Term Debt
Long-term debt consisted of the following:
(in thousands)March 31,
2020
December 31,
2019
Principal amount of long-term debt$25,000  $20,000  
Debt discount, net of accretion238  (317) 
Cumulative accretion of final payment due at maturity28  414  
Long-term debt, including accretion$25,266  $20,097  
Hercules Loan Agreements
In October 2018, the Company entered into the Loan and Security Agreement, as amended in December 2019 (the “Hercules Loan Agreement”), under which the Company borrowed an aggregate of $10.0 million under a term loan. In June 2019, the Company refinanced the Hercules Loan Agreement and entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Hercules. The Amended and Restated Loan Agreement provided for aggregate maximum borrowings of $35.0 million, under which $20.0 million was borrowed, including $10.0 million that was previously outstanding and $10.0 million in new borrowings. Borrowings under the Amended and Restated Agreement accrued interest at a variable rate equal to the greater of (i) 8.75% or (ii) The Wall Street Journal prime rate plus 2.75%. In an event of default and until such event is no longer continuing, the interest rate applicable to borrowings under the Amended and Restated Agreement would be increased by 4.0%.

On March 13, 2020, the Company entered into a First Amendment to the Amended and Restated Loan and Security Agreement dated June 27, 2019 (collectively the “Amended Loan Agreement”) with Hercules, which provides for aggregate maximum borrowings of up to $50.0 million. The Amended Loan Agreement provides for (i) a term loan of $25.0 million, including the $20.0 million previously outstanding under the Amended and Restated Loan Agreement, and an additional $5.0 million drawn at the closing of the first amendment on March 13, 2020, (ii) subject to the achievement of certain performance milestones and other conditions, a right of the Company to request that Hercules make additional term loan advances in an aggregate amount of up to $7.5 million through June 30, 2021, (iii) subject to the achievement of certain performance milestones and conditions, a right of the Company to request that Hercules make additional term loan advances in an aggregate amount of up to $7.5 million through June 30, 2022 and (iv) subject to Hercules investment committee’s sole discretion, a right of the Company to request that Hercules make additional term loan advances in an aggregate amount of up to $10.0 million through December 31, 2022.

Borrowings under the Amended Loan Agreement bear interest at a variable rate equal to a per annum rate of interest equal to the greater of either (i) 3.75% plus the prime rate as reported in The Wall Street Journal, and (ii) 8.75%. In an event of default, as defined in the Amended Loan Agreement, and until such event is no longer continuing, the interest rate applicable to borrowings under the Amended Loan Agreement would be increased by 4.0%.

Borrowings under the Amended Loan Agreement are repayable in monthly interest-only payments through January 1, 2022, and in equal monthly payments of principal and accrued interest from February 1, 2022 until the maturity date of the loan, which is July 1, 2023. The Company may prepay all, but not less than all, of the outstanding borrowings, subject to a prepayment premium of up to 2.0%, 1.0% or 0.5% of the principal amount outstanding as of the date of repayment, in each case depending on when such repayment is made. In addition, the Amended Loan Agreement provides for payments of (i) $0.8 million payable upon the earlier of November 1, 2021 or the repayment in full of all obligations under the Amended Loan
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Agreement, and (ii) 4.0% of the aggregate principal amount of all Term Loan Advances drawn under the Amended Loan Agreement, payable upon the earlier of the maturity of the Amended Loan Agreement or the repayment in full of all obligations under the Amended Loan Agreement.

Borrowings under the Amended Loan Agreement are collateralized by substantially all of the Company’s personal property and other assets except for their intellectual property (but including rights to payment and proceeds from the sale, licensing or disposition of the intellectual property). Under the Amended Loan Agreement, the Company has agreed to affirmative and negative covenants to which it will remain subject until maturity or repayment of the loan in full. The covenants include, without limitation:

(a) Effective upon the date the outstanding principal amount of the advances under the Amended Loan Agreement exceeds $25.0 million, the Company at all times thereafter must maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than or equal to the greater of (i) $30.0 million or (ii) 6 multiplied by a metric based on prior months’ cash expenditures (“RML”); provided, however, that from and after the Company’s achievement of certain performance milestones, the required level shall be reduced to the greater of (x) $20.0 million, or (y) 3 multiplied by the current RML; and provided further, that subject to the achievement of certain milestones, this covenant shall be extinguished.

(b) Restrictions on the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.

The Company’s obligations under the Amended Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, insolvency and a material adverse change in the Borrower’s business, operations or financial or other condition. In addition, under the Amended Loan Agreement, Hercules has the right to participate, in a cumulative amount of up to $3.0 million in the aggregate, of which $1.0 million has already been exercised, and subject to exceptions as provided in the Amended Loan Agreement, in any future offering of the Company’s equity securities for cash that is solely for financing purposes and is broadly marketed to multiple investors.
The Company concluded that the previous debt under the Amended and Restated Loan Agreement was extinguished based on the difference in the cash flows of the previous and new debt. Accordingly, the difference between the carrying amount of the previous debt, including the unamortized debt discount, and the fair value of the new debt under the Amended Loan Agreement was recorded as a $162 thousand loss on extinguishment of debt for the three months ended March 31, 2020. Legal and consulting fees paid to third parties directly related to the new debt have been deferred and will be amortized to interest expense over the life of the new debt arrangement using the effective interest method.
The Company recognized aggregate interest expense under its loan agreements with Hercules of $584 thousand and $357 thousand during the three months ended March 31, 2020 and 2019, respectively. Interest expense includes $118 thousand and $113 thousand for the three months ended March 31, 2020 and 2019, respectively, related to the accretion of the debt discount and the final payment. The annual effective interest rate of the Amended Loan Agreement as of March 31, 2020 is 10.7%. There were no principal payments due or paid under the loan agreements with Hercules during the three months ended March 31, 2020.
As of March 31, 2020, future principal payments and the final payment due under the Amended Loan Agreement were as follows (in thousands):
Year Ending December 31,Total
2020$  
2021  
202214,871  
202310,129  
Long-term debt$25,000  

8. Leases
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X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company has lease agreements for its facilities in Cambridge, Massachusetts, which is the Company’s principal executive offices; Vienna, Austria, which is the Company’s research and development center; Waltham, Massachusetts, which the Company has sublet to a third party; and Allston, Massachusetts, as further discussed below. There are no restrictions or financial covenants associated with any of the lease agreements.
Cambridge Lease— In August 2017, the Company entered into a non-cancellable operating lease agreement for office space of approximately thirteen thousand square feet in Cambridge, Massachusetts (“Cambridge Lease”) which expires on July 31, 2022. The Cambridge Lease includes an annual rent escalation clause and the Company has the option to extend the lease for one period of five additional years. Base rent is approximately $825 thousand annually and the monthly rent expense is being recognized on a straight-line basis over the term of the lease as the Company amortizes the associated operating lease right-of-use asset. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of lease. These costs are not included in the determination of the leases’ right-of-use operating assets or lease operating liabilities.
Waltham Lease— The Company has six thousand square feet of office space in Waltham, Massachusetts (“Waltham Lease”). The Waltham Lease, as amended, commenced on January 1, 2019, and expires approximately 5 years from the commencement date. The base rent is approximately $262 thousand annually. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, which costs are not included in the determination of the leases’ right-of-use assets or lease liabilities. The Company is subleasing the space to a third party for the duration of the lease. The right-of-use asset is being amortized to rent expense over the 5-year term of the lease.
Vienna Austria Lease— The Company has an operating lease for approximately four hundred square meters of laboratory and office space in Vienna, Austria, (“Vienna Austria Lease”) which commenced on March 1, 2019, as amended, for a term of 2 years. The lease is cancellable by the Company upon three months’ notice with no penalty. The annual base rent is approximately $155 thousand. The Company has classified this lease as a short-term lease as it is not reasonably certain that the Company will not terminate the lease within one year and, accordingly, has not recorded a right-of-use asset. Accordingly, rent expense is recorded on a straight-line basis as incurred over the term of the lease.
Allston Lease— On November 11, 2019, the Company entered into a lease agreement for approximately 28,000 square feet of office space currently under construction in a building located in Allston, Massachusetts (“Allston Lease”). The office space is expected to replace the Company’s current headquarters located in Cambridge, Massachusetts. The Company intends to move into the premises upon the completion of construction, which is anticipated to be in 2020. Monthly rent payments under the lease are expected to commence in May 2020, reflecting a 180-day rent-free period following the execution of the Lease, subject to the timely completion of construction of the premises. Base rental payments will be approximately $1.0 million annually, plus certain operating expenses. The term of the lease will continue until November 2026, unless earlier terminated in accordance with the terms of the lease. The Company has the right to sublease the premises, subject to landlord consent. The Company also has the right to renew the lease for an additional five years at the then prevailing effective market rental rate. The Company is required to provide the landlord with a $1.1 million security deposit in the form of a letter of credit, which is classified as restricted cash.

For the Allston Lease, the Company is participating in the construction of the office space and has incurred construction costs to prepare the office space for its use, which will be partially reimbursed by the landlord. The Company has concluded that these construction costs generate and enhance the landlord’s assets and, as such, costs that are not reimbursed will be classified as prepaid rent and then reclassified to the right-of-use asset on the lease commencement date. The lease commencement date is expected to occur once the landlord's asset is completed and available for additional leasehold improvements funded by the Company. Upon the date of lease commencement, which had not yet occurred as of March 31, 2020, the Company will recognize the lease liability, which will reflect the future rent payments for the term of the lease discounted at the Company's collateralized borrowing rate, and the right-of-use asset, which will be measured as the lease liability plus the prepaid rent incurred to date.
As the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.
17

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The components of lease expense for the three months ended March 31, 2020 and 2019 were as follows (dollars in thousands):
For the three months ended March 31,
Lease Cost20202019
Fixed operating lease cost$218  $187  
Short-term lease costs38  8  
Total lease expense$256  $195  
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$242  $201  
Sublease income$48  $  
Leased assets obtained in exchange for new operating lease liabilities (1)
$484  
Weighted-average remaining lease term—operating leases2.8 years3.9 years
Weighted-average discount rate—operating leases9.0 %9.0 %
___________________________________________
(1)Acquired in the Merger
Maturities of lease liabilities due under lease agreements that have commenced as of March 31, 2020 are as follows (in thousands):
Maturity of lease liabilitiesOperating
Leases
2020$853  
20211,098  
2022754  
2023263  
2024  
Total lease payments2,968  
Less: interest(365) 
Total operating lease liabilities as of March 31, 2020$2,603  

9. Commitment and Contingencies
The Company has agreements with clinical research organizations (“CROs”) pursuant to which the Company and the CROs are conducting clinical trial of mavorixafor for the treatment of WHIM syndrome, WM and SCN. The Company may terminate these agreements by providing notice pursuant to the contractual provisions of such agreements and would incur early termination fees. The Company has agreements with contract manufacturing organizations (“CMOs”) for the production of mavorixafor for use in clinical trials.
Indemnification Agreements— In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnification obligations. The Company is not currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its consolidated financial statements as of March 31, 2020 or December 31, 2019.
18

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
License Agreements— In February 2017, Arsanis entered into an option and license agreement with Adimab to obtain rights to certain RSV antibodies, which are being used in the “ASN500” program. The Company exercised this option for an up-front payment of $250 thousand. In July 2019, the Company transferred the intellectual property related to the ASN500 program through an exclusive, worldwide license with a third party. The Company remains obligated to make payments to Adimab based on future clinical and regulatory milestones of up to approximately $25 million, as well as royalty payments on a product-by-product and country-by-country basis of a mid-single-digit percentage based on net sales of products based on certain RSV antibodies during the applicable term for such product in that country. The third party is required to fund any future payments that may become due to Adimab.
Legal Proceedings— The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to any legal proceedings.
10. Preferred and Common Stock Warrants
Prior to the Merger (see Note 1), the Company issued warrants for the purchase of its preferred stock and had classified these preferred stock warrants as a liability on its consolidated balance sheet as the warrants were deemed to be freestanding financial instruments that may have required the Company to transfer assets upon exercise. The liability associated with each of these warrants was initially recorded at fair value upon the issuance date of each warrant and was subsequently remeasured to fair value as a component of other income (expense), net in the consolidated statement of operations. Upon the closing of the Merger, pursuant to the Merger Agreement, all of the outstanding X4 preferred stock was converted to Arsanis common stock and the X4 preferred stock warrants converted to warrants for the purchase of Arsanis common stock. The Company assessed the features of the warrants and determined that they qualify for classification as permanent equity upon the closing of the Merger. Accordingly, the Company remeasured the warrants to fair value upon the closing of the Merger, which was $5.2 million at March 13, 2019, with $288 thousand of expense recorded during the three months ended March 31, 2019. Upon the closing of the Merger, the warrant liability was reclassified to additional paid-in capital.
In connection with its issuance of common stock in public offerings that closed on April 16, 2019 and November 29, 2019, the Company issued 3,900,000 Class A warrants, which are exercisable for the Company’s common stock, and 5,416,667 Class B warrants, which are exercisable for shares of the Company’s common stock or prefunded warrants to purchase shares of the Company's common. The Class A warrants have an exercise price of $13.20 per warrant, expire on April 15, 2024 and were immediately exercisable. The Class B warrants were immediately exercisable upon issuance, have an exercise price of $15.00 per warrant and expire on a date that is the earlier of (a) the date that is 30 calendar days from the date on which the Company issues a press release announcing top-line data from its Phase 3 clinical trial of mavorixafor for the treatment of patients with WHIM syndrome (or, if such date is not a business day, the next business day) and (b) November 28, 2024. In addition, in connection with the April 16, 2019 and November 29, 2019 offerings, the Company issued 2,130,000 and 1,750,000 prefunded warrants, respectively, for proceeds of $10.999 and $11.999 per share, respectively. Each of the prefunded warrants is exercisable into 1 share of the Company's common stock, has a remaining exercise price of $0.001 per share and was immediately exercisable upon issuance.
The following table provides a roll forward of outstanding warrants for the three month period ended March 31, 2019:
Number of
warrants
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term (Years)
Outstanding and exercisable warrants to purchase preferred shares as of December 31, 20185,146,400  $1.94  4.23
Conversion of warrant to purchase preferred shares to warrants for the purchase of common stock and adjusted for the Exchange Ratio and Reverse Stock Split
(4,657,350) 1.94
Issuance of warrants for the purchase of common stock5,000  19.80  
Exercised    
Cancelled    
Outstanding warrants to purchase common shares as of March 31, 2019494,050  $20.39  3.04
19

X4 PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides a roll forward of outstanding warrants for the three month period ended March 31, 2020:
Number of warrantsWeighted Average Exercise PriceWeighted Average Contractual Term (Years)
Outstanding and exercisable warrants to purchase common shares as of December 31, 201913,656,871$13.684.59
Issued
Exercised
Cancelled
Outstanding and exercisable warrants to purchase common shares as of March 31, 202013,656,871$13.684.34


As of March 31, 2020, the Company’s outstanding warrants to purchase shares of common stock consisted of the following:
Issuance DateNumber of
Shares of
Common
Stock Issuable
Exercise
Price
ClassificationExpiration Date
August 14, 201581,228  $21.78  EquityAugust 14, 2020
August 21, 201569,603  $21.78  EquityAugust 21, 2020
October 25, 20165,155  $19.78  EquityOctober 24, 2026
November 1, 2017130,609  $19.78  EquityOctober 31, 2020
November 17, 20178,442  $19.78  EquityNovember 16, 2020
December 4, 20175,661  $19.78  EquityDecember 3, 2020
December 28, 20176,925  $19.78  EquityDecember 27, 2020
December 28, 2017115,916  $19.78  EquityDecember 28, 2027
September 12, 201825,275  $19.78  EquitySeptember 12, 2021
September 12, 201820,220  $19.78  EquitySeptember 12, 2028
October 19, 201820,016  $19.78  EquityOctober 19, 2028
March 13, 20195,000  $19.80  EquityMarch 12, 2029
April 16, 20193,866,154  $13.20  EquityApril 15, 2024
April 16, 2019