Note 3  Business Combination and Recapitalization As discussed in Note 1, on December 18, 2019, HSAC completed the acquisition of ISL and acquired 100% of the ISL Shares for total consideration of $420.9 million, consisting of 42,080,376 shares of HSACs common stock and 10,000 shares of HSACs Series A preferred stock, in each case, valued at $10.00 per share (the deemed value of the shares issued pursuant to the Share Exchange Agreement). The Business Combination was accounted for as a reverse recapitalization whereby HSAC was treated as the acquired company for accounting purposes. This determination was primarily based on the fact that subsequent to the Business Combination, the Sellers have a majority of the voting power of the combined company, ISL will comprise all of the ongoing operations of the combined entity, a majority of the governing body of the combined company, and ISLs senior management will comprise all of the senior management of the combined company. The Business Combination was accounted as the equivalent of ISL issuing stock for the net assets of HSAC, accompanied by a recapitalization. The net assets of HSAC were stated at historical cost with no goodwill or other intangible assets recorded. Reported amounts from operations included herein prior to the Business Combination are those of ISL. The shares, options and net loss per share available to holders of the Companys common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination (0.48906624 Immunovant, Inc. shares for 1 ISL Share). In connection with the Business Combination, the Company incurred direct and incremental costs of $2.8 million, consisting of legal, accounting, financial advisory and other professional fees, which are included in additional paid-in capital in the consolidated balance sheets as of June 30, 2020. The Company incurred additional financial advisory fees related to the Business Combination of $2.3 million, which are included in accumulated deficit within the consolidated balance sheets as of June 30, 2020. Earnout Shares Pursuant to the Share Exchange Agreement, the Sellers were entitled to receive up to an aggregate of 20,000,000 additional shares of the Companys common stock (the Earnout Shares) if the volume-weighted average price of the Companys shares equals or exceeds the following prices for any 20 trading days within any 30 trading-day period (the Trading Period) following December 18, 2019, the date of the closing of the Business Combination: (i) during any Trading Period prior to March 31, 2023, 10,000,000 Earnout Shares upon the achievement of a volume-weighted average price of at least $17.50 per share; and (ii) during any Trading Period prior to March 31, 2025, 10,000,000 Earnout Shares upon the achievement of a volume-weighted average price of at least $31.50 per share (each of (i) and (ii) are a Milestone). On May 12, 2020, the Company issued 10,000,000 shares of common stock to the Sellers (including 8,773,969 shares of common stock issued to RSL) on achievement of first Milestone set forth above. See Note 8  Stockholders Equity for additional details. The second Milestone set forth above has not yet been met. In addition, if prior to March 31, 2025, (i) there is a change of control of the Company, (ii) any liquidation, dissolution or winding up of the Company is initiated, (iii) any bankruptcy, dissolution or liquidation proceeding is instituted by or against the Company, or (iv) the Company makes an assignment for the benefit of creditors or consents to the appointment of a custodian, receiver or trustee for all or substantial part of its assets or properties (each, an Acceleration Event), then any Earnout Shares that have not been previously issued by the Company (whether or not previously earned) shall be deemed earned and due by the Company to the Sellers, unless in a change of control, the value of the consideration to be received in exchange for a share of the Companys common stock is lower than the share price threshold set forth in the second Milestone described above. The Earnout Shares are indexed to the Companys equity and meet the criteria for equity classification. Sponsor Restricted Stock Agreement In accordance with that certain restricted stock agreement, dated September 29, 2019, by and between HSAC and Health Sciences Holdings, LLC (the Sponsor), the Sponsor subjected 1,800,000 shares of its common stock based on the vesting of 900,000 shares for each milestone (Sponsor Restricted Shares) to potential forfeiture in the event that the Milestones (as defined above) are not achieved. On May 12, 2020, the Company achieved the first Milestone under the Share Exchange Agreement as described above and, as a result, 900,000 of the Sponsor Restricted Shares vested and are no longer subject to forfeiture. For accounting purposes, the remaining 900,000 of the Sponsor Restricted Shares are considered issued but not outstanding as of June 30, 2020. In the event of an Acceleration Event (as defined above), the remaining 900,000 Sponsor Restricted Shares will vest and no longer be subject to forfeiture, unless in a change of control, the value of the consideration to be received in exchange for one share of common stock is lower than the share price threshold set forth in the second Milestone described above. Any Sponsor Restricted Shares that have not vested on or prior to March 31, 2025 will be forfeited by the Sponsor after such date.