Company Quick10K Filing
Atreca
Price11.12 EPS-1
Shares28 P/E-9
MCap311 P/FCF-20
Net Debt-167 EBIT-34
TEV143 TEV/EBIT-4
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-11
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-13
S-1 2019-05-24 Public Filing
8-K 2020-06-10
8-K 2020-05-20
8-K 2020-05-14
8-K 2020-03-11
8-K 2019-11-12
8-K 2019-08-22
8-K 2019-08-13
8-K 2019-07-17
8-K 2019-07-11
8-K 2019-06-24

BCEL 10Q Quarterly Report

Part I - - - Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 atre-20200331ex311f5d768.htm
EX-31.2 atre-20200331ex3126f7f15.htm
EX-32.1 atre-20200331ex321b43beb.htm

Atreca Earnings 2020-03-31

Balance SheetIncome StatementCash Flow

10-Q 1 atre-20200331x10q.htm 10-Q atre_Current Folio_10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended 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 001-38935


ATRECA, INC.

(Exact name of registrant as specified in its charter)


 

 

Delaware

27‑3723255

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

450 East Jamie Court

South San Francisco, CA 94080

(Address of principal executive offices)

(Zip Code)

(650)‑595-2595

(Registrant’s telephone number, including area code)

Unchanged

(Former name, former address and former fiscal year, if changed since last report)


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

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock

BCEL

The Nasdaq Global Select Market

 

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

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 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  .

As of May 13, 2020, the registrant had 22,200,923 shares of Class A common stock, $0.0001 par value per share and 5,934,191 shares of Class B common stock, $0.0001 par value per share, outstanding.

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION  

 

Item 1. 

Condensed Consolidated Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Loss and Comprehensive Loss

5

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2. 

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

20

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4. 

Controls and Procedures

28

PART II. OTHER INFORMATION 

30

Item 1. 

Legal Proceedings

30

Item 1A. 

Risk Factors

30

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

74

Item 3. 

Defaults Upon Senior Securities

74

Item 4. 

Mine Safety Disclosures

74

Item 5. 

Other Information

74

Item 6. 

Exhibits

74

 

 

 

 

PART I --- FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

Atreca, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2020

    

2019

    

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

92,183

 

$

157,954

 

Investments

 

 

58,880

 

 

14,663

 

Prepaid expenses and other current assets

 

 

3,147

 

 

3,502

 

Total current assets

 

 

154,210

 

 

176,119

 

Property and equipment, net

 

 

6,632

 

 

5,771

 

Long-term investments

 

 

15,229

 

 

10,799

 

Deposits and other

 

 

2,898

 

 

3,026

 

Total assets

 

$

178,969

 

$

195,715

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

2,378

 

$

2,133

 

Accrued expenses

 

 

2,930

 

 

5,395

 

Other current liabilities

 

 

1,549

 

 

419

 

Total current liabilities

 

 

6,857

 

 

7,947

 

Capital lease obligations, net of current portion

 

 

41

 

 

53

 

Deferred rent

 

 

1,431

 

 

763

 

Other non-current liabilities

 

 

505

 

 

 —

 

Total liabilities

 

 

8,834

 

 

8,763

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 650,000,000 shares authorized as of both March 31, 2020 and December 31, 2019, respectively; 22,159,404 and 22,035,976 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively

 

 

 2

 

 

 2

 

Class B common stock, $0.0001 par value, 50,000,000 shares authorized as of both March 31, 2020 and December 31, 2019, respectively; 5,934,191 shares issued and outstanding as of both March 31, 2020 and December 31, 2019, respectively

 

 

 1

 

 

 1

 

Additional paid-in capital

 

 

354,477

 

 

351,039

 

Accumulated other comprehensive income

 

 

179

 

 

16

 

Accumulated deficit

 

 

(184,524)

 

 

(164,106)

 

Total stockholders’ equity

 

 

170,135

 

 

186,952

 

Total liabilities and stockholders’ equity

 

$

178,969

 

$

195,715

 

 

-  3  -

Atreca, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2020

    

2019

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

Research and development

 

$

14,210

 

$

11,713

General and administrative

 

 

7,123

 

 

2,518

Total expenses

 

 

21,333

 

 

14,231

Interest and other income (expense)

 

 

 

 

 

 

Other income

 

 

231

 

 

165

Interest income

 

 

685

 

 

545

Interest expense

 

 

(1)

 

 

(2)

Preferred stock warrant liability revaluation

 

 

 —

 

 

(50)

Loss on disposal of property and equipment

 

 

 —

 

 

(5)

Loss before income tax expense

 

 

(20,418)

 

 

(13,578)

Income tax expense

 

 

 —

 

 

(1)

Net loss

 

$

(20,418)

 

$

(13,579)

Net loss per share, basic and diluted

 

$

(0.73)

 

$

(6.40)

Weighted-average shares used in computing net loss per share, basic and diluted

 

 

28,020,408

 

 

2,120,925

 

 

-  4  -

Atreca, Inc.

Condensed Consolidated Statements of Loss and Comprehensive Loss

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2020

    

2019

 

 

 

 

 

 

 

Net loss

 

$

(20,418)

 

$

(13,579)

Other comprehensive income (loss);

 

 

 

 

 

 

Unrealized gain on fair value of investments

 

 

163

 

 

28

Unrealized loss on currency translation

 

 

 —

 

 

(1)

Comprehensive loss

 

$

(20,255)

 

$

(13,552)

 

 

 

 

 

 

-  5  -

Atreca, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

Total

Three Months Ended March 31, 2019

 

Preferred Stock

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Accumulated

 

Stockholders'

 

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity (Deficit)

Balances at December 31, 2018

 

17,248,259

 

$

209,668

 

 

2,119,872

 

$

 1

 

$

3,593

 

$

(4)

 

$

(96,622)

 

$

(93,032)

Issuance of convertible preferred stock

 

 —

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise of options

 

 —

 

 

 —

 

 

3,385

 

 

 —

 

 

13

 

 

 —

 

 

 —

 

 

13

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

776

 

 

 —

 

 

 —

 

 

776

Unrealized gain on fair value of investments

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

28

 

 

 —

 

 

28

Unrealized currency exchange loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1)

 

 

 —

 

 

(1)

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(13,579)

 

 

(13,579)

Balances at March 31, 2019

 

17,248,259

 

$

209,668

 

 

2,123,257

 

$

 1

 

$

4,382

 

$

23

 

$

(110,201)

 

$

(105,795)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

Total

Three Months Ended March 31, 2020

 

Preferred Stock

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Accumulated

 

Stockholders'

 

 

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balances at December 31, 2019

 

 —

 

$

 —

 

 

27,970,167

 

$

 3

 

$

351,039

 

$

16

 

$

(164,106)

 

$

186,952

Issuance of common stock upon exercise of options

 

 —

 

 

 —

 

 

86,872

 

 

 —

 

 

419

 

 

 —

 

 

 —

 

 

419

Vesting of early exercised stock options

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 4

 

 

 —

 

 

 —

 

 

 4

Issuance of common stock under the Employee Stock Purchase Plan

 

 —

 

 

 —

 

 

36,556

 

 

 —

 

 

533

 

 

 —

 

 

 —

 

 

533

Stock-based compensation

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,482

 

 

 —

 

 

 —

 

 

2,482

Unrealized gain on fair value of investments

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

163

 

 

 —

 

 

163

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(20,418)

 

 

(20,418)

Balances at March 31, 2020

 

 —

 

$

 —

 

 

28,093,595

 

$

 3

 

$

354,477

 

$

179

 

$

(184,524)

 

$

170,135

 

 

 

 

 

 

 

 

 

-  6  -

Atreca, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2020

    

2019

Cash Flows from Operating Activities

 

 

 

 

 

 

Net loss

 

$

(20,418)

 

$

(13,579)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

541

 

 

397

Loss on disposal of property and equipment

 

 

 —

 

 

 5

Stock-based compensation

 

 

2,482

 

 

776

Preferred stock warrant liability revaluation

 

 

 —

 

 

50

Accretion of discount on investments

 

 

(80)

 

 

 —

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

356

 

 

(562)

Accounts payable

 

 

(79)

 

 

716

Accrued expenses

 

 

(3,020)

 

 

(993)

Other current liabilities

 

 

1,124

 

 

225

Other non-current liabilities

 

 

505

 

 

 —

Deferred rent

 

 

675

 

 

(12)

Net cash used in operating activities

 

 

(17,914)

 

 

(12,977)

Cash Flows from Investing Activities

 

 

 

 

 

 

Purchase of property and equipment

 

 

(523)

 

 

(166)

Purchase of investments

 

 

(58,974)

 

 

(74,314)

Proceeds from maturities of investments

 

 

10,570

 

 

 —

Change in deposits

 

 

127

 

 

52

Net cash used in investing activities

 

 

(48,800)

 

 

(74,428)

Cash Flows from Financing Activities

 

 

 

 

 

 

Proceeds from the issuance of common stock under the Employee Stock Purchase Plan

 

 

533

 

 

 —

Proceeds from exercise of stock options

 

 

423

 

 

13

Principal payments on capital lease obligations

 

 

(13)

 

 

(12)

Payments of initial offering costs

 

 

 —

 

 

(57)

Net cash provided by (used in) financing activities

 

 

943

 

 

(56)

Net change in cash, cash equivalents and restricted cash

 

 

(65,771)

 

 

(87,461)

Cash, cash equivalents and restricted cash, beginning of period

 

 

159,236

 

 

114,504

Cash, cash equivalents and restricted cash, end of period

 

$

93,465

 

$

27,043

-  7 -

Atreca, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2020

    

2019

  

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

Cash paid for interest

 

$

 1

 

$

 2

 

Cash paid for income taxes

 

$

 —

 

$

 1

 

Supplemental Schedule of Non-Cash Investing and Financing Activities

 

 

 

 

 

 

 

Vesting of early exercised common stock options

 

$

 4

 

$

 —

 

Purchases of property and equipment included in accounts payable and accrued liabilities

 

$

 —

 

$

879

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

 —

 

$

223

 

 

 

-  8 -

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

1.            Business

Nature of Business

Atreca, Inc. (the “Company”) was incorporated in the State of Delaware on June 11, 2010 (“inception date”), and is located in South San Francisco, California. In April 2016, the Company formed a wholly owned subsidiary, Atreca Pte. Ltd., in Singapore. Atreca Pte. Ltd., was dissolved in the first quarter of fiscal year 2020. The Company is a biopharmaceutical company utilizing its differentiated platform to discover and develop novel antibody-based immunotherapeutics to treat a range of solid tumor types. The Company's lead product candidate, ATRC-101, is a monoclonal antibody in clinical development with a novel mechanism of action and target derived from an antibody identified using its discovery platform. The Company operates in a single segment. Since inception, the Company has been primarily engaged in research and development, raising capital, building its management team and building its intellectual property portfolio.

 

2.           Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and accounts have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Form 10-K”).

Prior period reclassification

An immaterial reclassification of prior period amounts has been made to conform to the current period presentation.

Principles of Consolidation

The condensed consolidated financial statements include accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions are eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of income and expenses in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Key estimates in the consolidated financial statements include estimated useful lives of property and equipment, impairment of long-lived assets, accrued expenses, valuation of deferred income tax assets, fair value of warrants issued to purchasers of shares of preferred stock and common stock and fair value of options granted under the Company's stock option plan.

 

-  9 -

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of March 31, 2020 and its results of operations and cash flows for the three months ended March 31, 2020 and 2019. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The condensed results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2019 included herein was derived from the audited consolidated financial statements as of that date.

Other Income

Other income is comprised of amounts earned from services performed under service agreements. Beginning January 1, 2018, the Company follows the provisions of Accounting Standards Update 2014-09 Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). The guidance provides a unified model to determine how income is recognized.

In determining the appropriate amount of other income to be recognized as it fulfills its obligations under the agreements, the Company performs the following steps: (i) identifies the promised goods or services in the contract; (ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measures the transaction price, including the constraint on variable consideration; (iv) allocates the transaction price to the performance obligations based on estimated selling prices; and (v) recognizes other income when (or as) the Company satisfies each performance obligation.

Upon adoption of Topic 606, there was no change to the units of accounting previously identified with respect to existing service agreements under legacy Generally Accepted Accounting Principles (“GAAP”), which are now considered performance obligations under Topic 606, and there was no change to the revenue recognition pattern for the performance obligations. Accordingly, the adoption of the new standard resulted in no cumulative effect change to the Company's opening accumulated deficit balance.

The Company generally allocates the transaction price to distinct performance obligations at their stand-alone selling prices, determined by their estimated costs plus some margin. Performance obligations are generally delivered over time and recognized based upon observable inputs as the related research services are performed, which are recorded as research and development expenses. Amounts due under service agreements are generally billed monthly as services are delivered and do not generally result in contract liabilities or assets. Receivables under service agreements of $215,000 and $237,000 are included in prepaid expenses and other current assets as of March 31, 2020 and December 31, 2019, respectively.  In February 2020, the Company entered into an agreement with an external partner for a research project to identify the antigenic targets of select antibodies discovered by the Company with potential utility in oncology. The nonrefundable upfront payment from this agreement was classified as a contract liability and will be recognized as other income over the expected service period of 18 months. Contract liabilities of $1.4 million and $0.5 million related to the agreement are included in other current liabilities and other non-current liabilities, respectively, as of March 31, 2020.  There were no contract liabilities included in other current liabilities and non-current liabilities as of December 31, 2019.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments purchased with an original maturity of three months or less.

The Company maintained restricted cash of $1,282,000 as of both March 31, 2020 and December 31, 2019, respectively. This amount as of March 31, 2020 is included in deposits and other in the accompanying condensed

-  10 -

consolidated balance sheets and is comprised solely of letters of credit required pursuant to leases for Company facilities.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows.

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

 

2020

    

2019

 

Cash and cash equivalents

 

$

92,183

 

$

157,954

 

Restricted cash

 

 

1,282

 

 

1,282

 

Cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows

 

$

93,465

 

$

159,236

 

 

Investments

The Company considers securities purchased with original maturities greater than three months to be investments. The Company’s policy is to protect the value of its investment portfolio and minimize principal risk by earning returns based on current interest rates. The Company’s intent is to convert all investments into cash to be used for operations and has classified them as available for sale. For purposes of determining realized gains and losses, the cost of securities sold is based on specific identification. Interest and dividends on securities classified as available-for-sale are included in interest income.

Convertible Preferred Stock Warrants

The Company issued convertible preferred stock warrants, which were exercisable into Series A preferred stock with liquidation preference. The conversion feature was evaluated under ASC Topic 480, Distinguishing liabilities from equity and the warrants were determined to be debt instruments and classified prior to its initial public offering (the “IPO”) as liabilities on the consolidated balance sheets. The Company recorded these warrant liabilities at fair value and adjusted the carrying value to their estimated fair value at each reporting date with the increases or decreases in the fair value recorded as a gain (loss) on revaluation of the warrant liability in the consolidated statements of operations. Upon the IPO, the 49,997 preferred stock warrants were converted to common stock warrants of Class A shares and the warrant liability of $0.5 million was reclassified to additional paid-in capital as a result of the conversion. The warrants were not subject to further remeasurement for fair value.

Risks and Uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from similar services and larger companies, volatility of the industry, ability to obtain regulatory clearance, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company and general economic conditions.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, investments and other receivables. Cash and cash equivalents are held at two financial institutions and were in excess of the Federal Deposit Insurance Corporation insurable limit at March 31, 2020 and December 31, 2019. Additionally, cash and cash equivalents and investments are maintained at brokerage firms for which amounts are insured by the Securities Investor Protection Corporation subject to legal limits. The Company has not experienced any losses on its deposits to date.

-  11 -

The Company does not require collateral or other security for other receivables; however, credit risk is mitigated by the Company’s ongoing evaluations of its debtors’ credit worthiness.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits, consultant fees, stock-based compensation, certain facility costs, legal costs and other costs associated with preclinical and clinical development.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers in connection with preclinical and clinical development activities and contract manufacturing organizations in connection with the production of materials for clinical trials. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs.

Stock‑Based Compensation

The Company generally grants stock options to its employees for a fixed number of shares with an exercise price equal to the fair value of the underlying shares at the date of grant. The Company accounts for stock option grants using the fair value method. The fair value of options is calculated using the Black‑Scholes option pricing model. Stock‑based compensation is recognized as the underlying options vest using the straight‑line attribution approach, and forfeitures are recorded as they occur.

Emerging Growth Company Status

The Company is an “emerging growth company,” (“EGC”) as defined in the Jumpstart Our Business Startups Act, (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, the Company’s condensed consolidated financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board (“FASB”) standards’ effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that the Company is no longer an EGC.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016‑02 and subsequent amendments to the initial guidance under ASU 2017-13, ASU 2018-10, ASU 2018-11, and ASU 2019-01 (collectively, “Topic 842”), which modifies the accounting by lessees for all leases with a term greater than 12 months. This standard will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Topic 842 is effective for the Company as of January 1, 2022. Early adoption is permitted. The Company’s most significant lease is its operating lease for its corporate headquarters, and, while the Company has not yet estimated the amounts by which its financial statements will be affected by the adoption of this guidance, it expects that the overall recognition of expense will be similar to current guidance, but that there will be a significant change in the balance sheet due to the recognition of right of use assets and the corresponding lease liabilities.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses  (“Topic 326”): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. The amendment replaces the existing incurred loss impairment

-  12 -

model with an expected loss methodology, which will result in more timely recognition of credit losses. For available-for-sale debt securities, credit losses should be recorded through an allowance for credit losses. Topic 326 is effective for the Company as of January 1, 2023. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

 

 

3.           Fair Value of Financial Instruments

 

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

 

  

 

 

  

 

 

  

 

 

  

Money market funds

 

$

85,176

 

$

 —

 

$

 —

 

$

85,176

Certificates of deposit

 

 

2,644

 

 

 —

 

 

 —

 

 

2,644

Commercial paper

 

 

 —

 

 

19,544

 

 

 —

 

 

19,544

Corporate debt securities

 

 

 —

 

 

16,400

 

 

 —

 

 

16,400

U.S. Treasury securities

 

 

31,217

 

 

 —

 

 

 —

 

 

31,217

U.S. Agency bonds

 

 

 —

 

 

10,015

 

 

 —

 

 

10,015

 

 

$

119,037

 

$

45,959

 

$

 —

 

$

164,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

 

  

 

 

  

 

 

  

 

 

  

Money market funds

 

$

152,770

 

$

 —

 

$

 —

 

$

152,770

Certificates of deposit

 

 

1,950

 

 

 —

 

 

 —

 

 

1,950

Corporate debt securities

 

 

 —

 

 

3,459

 

 

 —

 

 

3,459

U.S. Treasury securities

 

 

20,052

 

 

 —

 

 

 —

 

 

20,052

Total

 

$

174,772

 

$

3,459

 

$

 —

 

$

178,231

 

The Company utilized the market approach and Level 1 valuation inputs to value its money market funds and U.S. government treasury securities because published net asset values were readily available. The Company measured the fair value of the commercial paper, corporate debt securities and U.S. agency bonds using Level 2 valuation inputs, which are based on quoted prices and market observable data of similar instruments. As of March 31, 2020 and 2019, gross unrealized gains and unrealized losses for cash equivalents and short-term investments were not material, and the contractual maturity of all marketable securities was less than two years.

-  13 -

4.           Cash, Cash Equivalents and Investments

 

The fair value and the amortized cost of cash, cash equivalents and available-for-sale investments by major security type consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2020

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

Cash and cash equivalents and investments

    

Cost

    

Gains

    

Losses

    

Value

Cash, cash equivalents and money market funds

 

$

86,473

 

$

 —

 

$

 —

 

$

86,473

U.S. Treasury securities

 

 

31,017

 

 

200

 

 

 —

 

 

31,217

Commercial paper

 

 

19,543

 

 

 —

 

 

 —

 

 

19,543

Corporate debt securities

 

 

16,436

 

 

 

 

 

(36)

 

 

16,400

U.S. Agency bonds

 

 

10,000

 

 

15

 

 

 —

 

 

10,015

Certificates of deposit

 

 

2,644

 

 

 —

 

 

 —

 

 

2,644

Total

 

 

166,113

 

 

215

 

 

(36)

 

 

166,292

Less amounts classified as cash and cash equivalents

 

 

(92,183)

 

 

 —

 

 

 —

 

 

(92,183)

Total available-for-sale investments

 

$

73,930

 

$

215

 

$

(36)

 

$

74,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2019

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

Cash and cash equivalents and investments

    

Cost

    

Gains

    

Losses

    

Value

Cash, cash equivalents and money market funds

 

$

157,954

 

$

 —

 

$

 —

 

$

157,954

U.S. Treasury securities

 

 

20,037

 

 

16

 

 

 —

 

 

20,053

Corporate debt securities

 

 

3,459

 

 

 —

 

 

 —

 

 

3,459

Certificates of deposit

 

 

1,950

 

 

 —

 

 

 —

 

 

1,950

Total

 

 

183,400

 

 

16

 

 

 —

 

 

183,416

Less amounts classified as cash and cash equivalents

 

 

(157,954)

 

 

 —

 

 

 —

 

 

(157,954)

Total available-for-sale investments

 

$

25,446

 

$

16

 

$

 —

 

$

25,462

 

 

 

5.           Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

    

2020

    

2019

    

Vendor prepayments and deposits

 

$

1,173

 

$

963

 

Prepaid rent

 

 

721

 

 

879

 

Prepaid insurance

 

 

693

 

 

1,265

 

Non-trade receivables

 

 

343

 

 

242

 

Interest receivables and other current assets

 

 

217

 

 

153

 

Total prepaid expenses and other current assets

 

$

3,147

 

$

3,502

 

 

-  14 -

6.           Property and Equipment, net

Property and equipment consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

March 31, 

    

December 31, 

 

 

    

2020

    

2019

 

Laboratory equipment

 

$

10,409

 

$

9,355

 

Furniture and fixtures

 

 

242

 

 

225

 

Computer hardware and software

 

 

798

 

 

785

 

Leasehold improvements

 

 

702

 

 

629

 

Construction in process

 

 

351

 

 

136

 

 

 

 

12,502

 

 

11,130

 

Less accumulated depreciation and amortization

 

 

(5,870)

 

 

(5,359)

 

Total property and equipment, net

 

$

6,632

 

$

5,771

 

 

Depreciation expense was $541,000 and $397,000 for the three months ended March 31, 2020 and 2019, respectively.

The net book value of property and equipment under capital leases was $83,000 and $94,000 at March 31, 2020 and December 31, 2019, respectively.

 

7.           Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2020

    

2019

Compensation and related benefits

 

$

1,434

 

$

4,435

Lab equipment

 

 

555

 

 

 —

Contract research fees

 

 

389

 

 

563

Professional fees

 

 

302

 

 

214

Other

 

 

250

 

 

183

Total accrued expenses

 

$

2,930

 

$

5,395

 

 

8.           Commitments and Contingencies

Leases

The Company leases its office facilities under non-cancellable operating lease agreements that expire at various dates through July 2033. Under the terms of the leases, the Company is responsible for certain insurance, property taxes and maintenance expenses. The office facilities lease agreements contain scheduled increases over the lease term. The related rent expense is calculated on a straight-line basis with the difference recorded as deferred rent. Rent expense was $1,985,000 and $385,000 for the three months ended March 31, 2020 and 2019, respectively.

The Company leases certain property and equipment under capital leases. In 2017, the Company financed purchases of $226,000 under a capital lease agreement. Outstanding amounts under the capital lease agreements are generally secured by liens on the related property and equipment.

-  15 -

Future minimum lease payments under non-cancelable operating and capital lease agreements consisted of the following at March 31, 2020 (in thousands):