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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2022

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: 001-39527 

 

 

PRELUDE THERAPEUTICS INCORPORATED

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-1384762

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

200 Powder Mill Road

Wilmington, Delaware

19803

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (302) 467-1280

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

PRLD

 

The 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, 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 filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes  ☒    No  

As of August 2, 2022, the registrant had 47,833,307 shares of voting and non-voting common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

 

Balance Sheets (Unaudited)

1

 

Statements of Operations and Comprehensive Loss (Unaudited)

2

 

Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)

3

 

Statements of Cash Flows (Unaudited)

5

 

Notes to Unaudited Interim Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

72

Item 3.

Defaults Upon Senior Securities

72

Item 4.

Mine Safety Disclosures

72

Item 5.

Other Information

72

Item 6.

Exhibits

73

Signatures

74

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PRELUDE THERAPEUTICS INCORPORATED

BALANCE SHEETS

(UNAUDITED)

 

(in thousands, except share data)

 

June 30,

2022

 

 

December 31,

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

50,706

 

 

$

31,828

 

Marketable securities

 

 

195,599

 

 

 

259,405

 

Prepaid expenses and other current assets

 

 

2,319

 

 

 

3,882

 

Total current assets

 

 

248,624

 

 

 

295,115

 

Restricted cash

 

 

4,044

 

 

 

4,044

 

Property and equipment, net

 

 

4,285

 

 

 

3,929

 

Right-of-use asset

 

 

1,793

 

 

 

1,707

 

Other assets

 

 

309

 

 

 

303

 

Total assets

 

$

259,055

 

 

$

305,098

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,273

 

 

$

7,840

 

Accrued expenses and other current liabilities

 

 

7,716

 

 

 

9,621

 

Operating lease liability

 

 

1,822

 

 

 

1,740

 

Total current liabilities

 

 

15,811

 

 

 

19,201

 

Other liabilities

 

 

2,400

 

 

 

 

Total liabilities

 

 

18,211

 

 

 

19,201

 

Commitments (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Voting common stock, $0.0001 par value: 487,149,741 shares authorized; 36,369,248 and 36,200,299 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

4

 

 

 

4

 

Non-voting common stock, $0.0001 par value; 12,850,259 shares authorized; 11,402,037 and 11,402,037 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

519,092

 

 

 

505,723

 

Accumulated other comprehensive income (loss)

 

 

(2,294

)

 

 

(711

)

Accumulated deficit

 

 

(275,959

)

 

 

(219,120

)

Total stockholders’ equity

 

 

240,844

 

 

 

285,897

 

Total liabilities and stockholders’ equity

 

$

259,055

 

 

$

305,098

 

 

See accompanying notes to unaudited interim financial statements.

1


PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except share and per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

21,310

 

 

$

22,409

 

 

$

44,131

 

 

$

38,879

 

General and administrative

 

 

8,151

 

 

 

5,513

 

 

 

15,618

 

 

 

11,010

 

Total operating expenses

 

 

29,461

 

 

 

27,922

 

 

 

59,749

 

 

 

49,889

 

Loss from operations

 

 

(29,461

)

 

 

(27,922

)

 

 

(59,749

)

 

 

(49,889

)

Other income, net

 

 

2,087

 

 

 

1,057

 

 

 

2,910

 

 

 

1,724

 

Net loss

 

$

(27,374

)

 

$

(26,865

)

 

$

(56,839

)

 

$

(48,165

)

Per share information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock, basic and diluted

 

$

(0.58

)

 

$

(0.58

)

 

$

(1.20

)

 

$

(1.06

)

Weighted average common shares outstanding, basic

   and diluted

 

 

47,276,684

 

 

 

46,057,112

 

 

 

47,172,136

 

 

 

45,592,117

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(27,374

)

 

$

(26,865

)

 

$

(56,839

)

 

$

(48,165

)

Unrealized gain (loss) on marketable securities, net of tax

 

 

19

 

 

 

 

 

 

(1,583

)

 

 

 

Comprehensive loss

 

$

(27,355

)

 

$

(26,865

)

 

$

(58,422

)

 

$

(48,165

)

 

See accompanying notes to unaudited interim financial statements.

 

 

 

2


 

PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

 

 

Stockholders’ equity (deficit)

 

 

 

Voting common stock

 

 

Non-voting common

stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

(in thousands, except shares)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional

paid-in capital

 

 

Comprehensive

Income (Loss)

 

 

Accumulated

deficit

 

 

Total

 

Balance at January 1, 2022

 

 

36,200,299

 

 

$

4

 

 

 

11,402,037

 

 

$

1

 

 

$

505,723

 

 

$

(711

)

 

$

(219,120

)

 

$

285,897

 

Issuance of common stock upon exercise of stock options

 

 

93,032

 

 

 

 

 

 

 

 

 

 

 

 

153

 

 

 

 

 

 

 

 

 

153

 

Unrealized gain (loss) on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,602

)

 

 

 

 

 

(1,602

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,829

 

 

 

 

 

 

 

 

 

6,829

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,465

)

 

 

(29,465

)

Balance at March 31, 2022

 

 

36,293,331

 

 

$

4

 

 

 

11,402,037

 

 

$

1

 

 

$

512,705

 

 

$

(2,313

)

 

$

(248,585

)

 

$

261,812

 

Issuance of common stock upon exercise of stock options

 

 

31,253

 

 

 

 

 

 

 

 

 

 

 

 

59

 

 

 

 

 

 

 

 

 

59

 

Issuance of common stock under ESPP

 

 

68,080

 

 

 

 

 

 

 

 

 

 

 

 

300

 

 

 

 

 

 

 

 

 

 

 

300

 

Unrealized gain (loss) on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Stock-based compensation expense, net of forfeitures of restricted stock awards

 

 

(23,416

)

 

 

 

 

 

 

 

 

 

 

 

6,028

 

 

 

 

 

 

 

 

 

6,028

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,374

)

 

 

(27,374

)

Balance at June 30, 2022

 

 

36,369,248

 

 

$

4

 

 

 

11,402,037

 

 

$

1

 

 

$

519,092

 

 

$

(2,294

)

 

$

(275,959

)

 

$

240,844

 

See accompanying notes to unaudited interim financial statements.

3


PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

(UNAUDITED)

 

 

 

Stockholders’ equity (deficit)

 

 

 

Voting common stock

 

 

Non-voting common stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

 

 

 

(in thousands, except shares)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

Total

 

Balance at January 1, 2021

 

 

32,595,301

 

 

$

3

 

 

 

11,110,371

 

 

$

1

 

 

$

319,605

 

 

$

(107,426

)

 

$

212,183

 

Issuance of common stock upon exercise of stock options

 

 

210,274

 

 

 

 

 

 

 

 

 

 

 

 

386

 

 

 

 

 

 

386

 

Sale of common stock,

   net of offering costs of $739

 

 

2,583,334

 

 

 

1

 

 

 

291,666

 

 

 

 

 

 

161,411

 

 

 

 

 

 

161,412

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,886

 

 

 

 

 

 

3,886

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,300

)

 

 

(21,300

)

Balance at March 31, 2021

 

 

35,388,909

 

 

$

4

 

 

 

11,402,037

 

 

$

1

 

 

$

485,288

 

 

$

(128,726

)

 

$

356,567

 

Issuance of common stock upon exercise of stock options

 

 

247,786

 

 

 

 

 

 

 

 

 

 

 

 

422

 

 

 

 

 

 

422

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,237

 

 

 

 

 

 

4,237

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,865

)

 

 

(26,865

)

Balance at June 30, 2021

 

 

35,636,695

 

 

$

4

 

 

 

11,402,037

 

 

$

1

 

 

$

489,947

 

 

$

(155,591

)

 

$

334,361

 

See accompanying notes to unaudited interim financial statements.

 

4


 

PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Six months ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

Cash flows used in operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(56,839

)

 

$

(48,165

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

625

 

 

 

359

 

Noncash lease expense

 

 

842

 

 

 

572

 

Stock-based compensation

 

 

12,857

 

 

 

8,123

 

Amortization of premium and discount on marketable securities, net

 

 

1,784

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,557

 

 

 

1,044

 

Accounts payable

 

 

(838

)

 

 

3,327

 

Accrued expenses and other liabilities

 

 

495

 

 

 

(856

)

Operating lease liabilities

 

 

(846

)

 

 

(459

)

Net cash used in operating activities

 

 

(40,363

)

 

 

(36,055

)

Cash flows provided by (used in) investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(27,140

)

 

 

 

Proceeds from maturities of marketable securities

 

 

87,579

 

 

 

 

Purchases of property and equipment

 

 

(1,710

)

 

 

(1,367

)

Net cash provided by (used in) investing activities

 

 

58,729

 

 

 

(1,367

)

Cash flows provided by financing activities:

 

 

 

 

 

 

 

 

Proceeds from the sale of common stock, net of offering costs

 

 

 

 

 

161,424

 

Proceeds from the issuance of common stock under ESPP

 

 

300

 

 

 

 

Proceeds from the issuance of common stock in connection with the exercise of stock options

 

 

212

 

 

 

808

 

Net cash provided by financing activities

 

 

512

 

 

 

162,232

 

Net increase in cash and cash equivalents

 

 

18,878

 

 

 

124,810

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

35,872

 

 

 

218,309

 

Cash, cash equivalents, and restricted cash at end of period

 

$

54,750

 

 

$

343,119

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

 

$

928

 

 

$

 

Property and equipment in accounts payable

 

$

77

 

 

$

386

 

Unrealized loss on marketable securities

 

$

(1,583

)

 

$

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited interim financial statements.

 

 

5


 

 

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

1. Background

Prelude Therapeutics Incorporated (the “Company”) was incorporated in Delaware on February 5, 2016 and is a clinical-stage fully integrated oncology company built on a foundation of drug discovery excellence to deliver novel precision cancer medicines to underserved patients. Since beginning operations, the Company has devoted substantially all its efforts to research and development, conducting preclinical and clinical studies, recruiting management and technical staff, administration, and raising capital. 

2. Risks and liquidity

The Company is subject to a number of risks common to early-stage companies in the biotechnology industry. Principal among these risks are the uncertainties in the development process, development of the same or similar technological innovations by competitors, protection of proprietary technology, dependence on key personnel, compliance with government regulations and approval requirements, and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval, or that any approved products will be commercially viable. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and contractors.

Since its inception, the Company has incurred operating losses and has an accumulated deficit of $276.0 million at June 30, 2022. The Company has no revenue to date and devotes its efforts to research and development. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development.

The Company believes that its cash, cash equivalents, and marketable securities as of June 30, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of 2024.  

To fund its operating expenses and capital expenditure requirements after that date, the Company plans to seek additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be required to delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.

On March 10, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. There continues to be significant uncertainty as to the effects of this disease and emerging variants 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, CROs, and/or trial monitors and other critical vendors and consultants supporting the trial. 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 the ongoing COVID-19 pandemic, 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 financial statements.


6


 

 

 

3. Summary of significant accounting policies

The summary of significant accounting policies included in the Company’s financial statements for the year ended December 31, 2021 can be found in “Note 3. Summary of significant accounting policies” of the Company’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2022. Those policies have not materially changed, except as set forth below.

Basis of presentation

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2021 found in the Form 10-K filed with the SEC on March 17, 2022. 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”).

Use of estimates

The preparation of the unaudited interim 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 unaudited interim 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 financial statements in the period they are determined to be necessary. The most significant estimate relates to accrued clinical trial expenses.

Income taxes

Based upon the historical and anticipated future losses, management has determined that the deferred tax assets generated by net operating losses and research and development credits do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of June 30, 2022 and December 31, 2021.

Cash, Cash Equivalents and Restricted cash

The Company’s cash equivalents include short-term highly liquid investments with an original maturity of 90 days or less when purchased and are carried at fair value in the accompanying balance sheets.

Restricted cash comprises a letter of credit for the benefit of the landlord in connection with the Company’s Chestnut Run Lease. See Note 8 for further details.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the balance sheet that total to the amounts shown in the statement of cash flows:

(in thousands)

 

June 30,

2022

 

 

December 31,

2021

 

Cash and cash equivalents

 

$

50,706

 

 

$

31,828

 

Restricted cash

 

 

4,044

 

 

 

4,044

 

Total cash, cash equivalents, and restricted cash shown in statement of cash flows

 

$

54,750

 

 

$

35,872

 

Marketable Securities

The Company’s marketable securities consist of investments in corporate debt securities and commercial paper that are classified as available-for-sale. The securities are carried at fair value with the unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss), a component of stockholders’ equity (deficit). Realized gains and losses as well as credit losses, if

7


 

any, on marketable securities are included in the Company’s statements of operations. The Company classifies marketable securities that are available for use in current operations as current assets on the balance sheets.

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. The weighted-average number of shares of common stock outstanding used in the basic net loss per share calculation does not include unvested restricted stock awards as these instruments are considered contingently issuable shares until they vest. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise of securities, such as stock options, and the effect from unvested restricted stock awards and restricted stock units which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. The Company’s unvested restricted stock awards entitle the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the unvested restricted stock awards have no obligation to fund losses.

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:

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Unvested restricted stock awards

 

 

356,432

 

 

 

841,965

 

Unvested restricted stock units

 

 

170,000

 

 

 

25,000

 

Stock options

 

 

8,915,289

 

 

 

6,769,438

 

 

 

 

9,441,721

 

 

 

7,636,403

 

 

Amounts in the above table reflect the common stock equivalents.

Recently Issued Accounting Pronouncements

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 unaudited interim financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments” which has subsequently been amended by ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11, and ASU No. 2020-03 (“ASU 2016-03”). This guidance replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company early adopted this standard as of January 1, 2022 using a modified retrospective approach. It did not have a material impact on the Company’s financial statements and related disclosures.

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance: Disclosures by Business Entities about Government Assistance”. The amendments in this Update improve financial reporting by requiring disclosures that increase the transparency of transactions with a government. The amendments require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy (i) the type of transaction (ii) the accounting for the transaction, and (iii) the effect of the transaction on the entity’s financial statements. The Company adopted this standard as of January 1, 2022 using a prospective approach and it did not have a material impact on the Company’s financial statements and related disclosures.

 

 

8


 

 

4. Marketable Securities

The following is a summary of the Company’s marketable securities.

(in thousands)

 

Amortized Cost

 

 

Gross unrealized gain

 

 

Gross unrealized loss

 

 

Fair Value

 

June 30, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

184,045

 

 

$

20

 

 

$

(2,289

)

 

$

181,776

 

Commercial paper

 

 

13,848

 

 

 

 

 

 

(25

)

 

 

13,823

 

Total

 

$

197,893

 

 

$

20

 

 

$

(2,314

)

 

$

195,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

193,798

 

 

$

1

 

 

$

(696

)

 

$

193,103

 

Commercial paper

 

 

66,318

 

 

 

1

 

 

 

(17

)

 

 

66,302

 

Total

 

$

260,116

 

 

$

2

 

 

$

(713

)

 

$

259,405

 

The Company’s marketable securities generally have contractual maturity dates of 16 months or less. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary, is primarily related to market factors and believes that it is more likely than not that it will be able to hold its debt securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and an allowance for credit losses was not recognized.

5. Fair Value of Financial Instruments

Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments be made. Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments. Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value. The Company follows the provisions of ASC 820, for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

9


 

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis:

 

 

Fair value measurement at reporting date using

 

(in thousands)

 

Quoted prices

in active

markets for

identical

assets

(Level 1)

 

 

Significant

other

observable

inputs

(Level 2)

 

 

Significant

unobservable

inputs

(Level 3)

 

June 30, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (Money Market Funds)

 

$

47,958

 

 

$

 

 

$