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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 March 31, 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: 001-40227

 

FINCH THERAPEUTICS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-3433558

(State or other jurisdiction of

incorporation or organization)

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

 

 

200 Inner Belt Road, Suite 400

Somerville, Massachusetts

02143

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 229-6499

 

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, $0.001 par value per share

 

FNCH

 

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 ☒

As of May 9, 2022 there were 47,559,098 outstanding shares of the registrant’s common stock, par value $0.001 per share.

 

 

 


 

 

 

FINCH THERAPEUTICS, INC.

FORM 10-Q

For the quarterly period ended March 31, 2022

 

Table of Contents

 

 

 

Page

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

ii

 

SPECIAL NOTE REGARDING COMPANY REFERENCES

iii

 

SPECIAL NOTE REGARDING TRADEMARKS

iii

 

 

 

PART I.

FINANCIAL INFORMATION

1

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

1

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

2

 

Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021

3

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

4

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

PART II.

OTHER INFORMATION

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 5.

Other Information

34

Item 6.

Exhibits

35

Signatures

37

 

 

 

 

 

 

i


 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” or “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and related preparatory work and the period during which the results of the trials will become available, as well as our research and development programs, including our ability to satisfactorily address FDA correspondence;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our ability to obtain regulatory approval of CP101, FIN-211 and any other current or future product candidates that we develop;
our ability to identify and develop additional product candidates;
our ability to advance product candidates into, and successfully complete, preclinical studies and clinical trials;
our ability to contract with contract research organizations, contract manufacturing organizations, third-party suppliers and manufacturers and other third parties with which the Company does business and their ability to perform adequately;
our expectations regarding the potential market size and the rate and degree of market acceptance for any product candidates that we develop;
our ability to fund our working capital requirements and to service any debt obligations we may incur;
our intellectual property position, including the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering our product candidates;
our financial performance and our ability to effectively manage our anticipated growth; and
our ability to obtain additional funding for our operations;

 

These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions and are not guarantees of future performance or development. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including the risk that correspondence from the FDA may require us to collect additional data or information beyond what we currently expect; uncertainties relating to regulatory applications and related filing and approval timelines; our limited operating history and historical losses; the possibility that we may be delayed in initiating, enrolling or completing any clinical trials; unexpected regulatory actions or delays, such as requests for additional safety and/or efficacy data or analysis of data, and including with respect to the FDA's planned review of the validation package for one of our release tests, which is utilized for both CP101 and FIN-211, or government regulation generally; our ability to comply with regulatory requirements or experience unanticipated problems with any of its product candidates; ongoing regulatory obligations and continued regulatory review may result in significant additional expense and we may be subject to penalties for failure to comply; our ability to maintain patent and other intellectual property protection and the possibility that our intellectual property rights may be infringed, invalid or unenforceable or will be threatened by third parties; our ability to qualify and scale our manufacturing capabilities to support multiple global clinical trials; our dependence on third parties in connection with manufacturing, clinical trials and preclinical studies; the impact and duration of the COVID-19 pandemic on our business, as well as those described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and such information may be limited or incomplete. These statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially

ii


 

 

 

available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

 

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in our forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to new information, actual results or changes in our expectations, except as required by law. We qualify all of our forward-looking statements by these cautionary statements.

 

SPECIAL NOTE REGARDING COMPANY REFERENCES

 

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “FTG,” the “Company,” “we,” “us” and “our” refer to Finch Therapeutics Group, Inc. and its subsidiaries.

SPECIAL NOTE REGARDING TRADEMARKS

 

All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

iii


 

 

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

FINCH THERAPEUTICS GROUP, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share data)

 

 

 

MARCH 31,
2022

 

 

DECEMBER 31,
2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

106,931

 

 

$

133,481

 

Accounts receivable

 

 

172

 

 

 

494

 

Prepaid expenses and other current assets

 

 

15,546

 

 

 

8,576

 

Total current assets

 

 

122,649

 

 

 

142,551

 

Property and equipment, net

 

 

19,406

 

 

 

19,635

 

Operating right-of-use assets

 

 

4,811

 

 

 

5,053

 

In-process research and development

 

 

32,900

 

 

 

32,900

 

Goodwill

 

 

18,057

 

 

 

18,057

 

Restricted cash, non-current

 

 

2,268

 

 

 

2,268

 

Other assets

 

 

4,542

 

 

 

4,905

 

TOTAL ASSETS

 

$

204,633

 

 

$

225,369

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

4,765

 

 

$

3,737

 

Accrued expenses and other current liabilities

 

 

10,874

 

 

 

9,925

 

Operating lease liabilities, current

 

 

1,148

 

 

 

1,128

 

Total current liabilities

 

 

16,787

 

 

 

14,790

 

Deferred tax liability

 

 

3,461

 

 

 

3,461

 

Operating lease liabilities, non-current

 

 

4,594

 

 

 

4,887

 

Other liabilities

 

 

 

 

 

7

 

Total liabilities

 

 

24,842

 

 

 

23,145

 

COMMITMENTS AND CONTINGENCIES (Note 9)

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized as of March 31, 2022 and
    December 31, 2021;
47,532,588 and 47,512,182 shares issued and outstanding as of
    March 31, 2022 and December 31, 2021, respectively

 

 

48

 

 

 

47

 

Additional paid-in capital

 

 

365,305

 

 

 

363,172

 

Accumulated deficit

 

 

(185,562

)

 

 

(160,995

)

Total stockholders’ equity

 

 

179,791

 

 

 

202,224

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

204,633

 

 

$

225,369

 

 

See notes to unaudited condensed consolidated financial statements.

1


 

 

 

FINCH THERAPEUTICS GROUP, INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)

 

 

 

THREE MONTHS ENDED
MARCH 31,

 

 

 

2022

 

 

2021

 

REVENUE:

 

 

 

 

 

 

Collaboration revenue

 

$

354

 

 

$

3,553

 

Total revenue

 

 

354

 

 

 

3,553

 

OPERATING EXPENSES:

 

 

 

 

 

 

Research and development

 

 

(15,530

)

 

 

(12,975

)

General and administrative

 

 

(9,404

)

 

 

(4,552

)

Total operating expenses

 

 

(24,934

)

 

 

(17,527

)

Net loss from operations

 

 

(24,580

)

 

 

(13,974

)

OTHER INCOME (EXPENSE), NET:

 

 

 

 

 

 

Interest income (expense)

 

 

13

 

 

 

(1

)

Other expense, net

 

 

 

 

 

(6

)

Total other income (expense), net

 

 

13

 

 

 

(7

)

Loss before income taxes

 

 

(24,567

)

 

 

(13,981

)

Net loss

 

$

(24,567

)

 

$

(13,981

)

Net loss attributable to common stockholders—basic and diluted (Note 15)

 

$

(24,567

)

 

$

(13,981

)

Net loss per share attributable to common stockholders—basic and diluted

 

$

(0.52

)

 

$

(1.00

)

Weighted-average common stock outstanding—basic and diluted

 

 

47,528,948

 

 

 

14,033,273

 

 

See notes to unaudited condensed consolidated financial statements.

2


 

 

 

FINCH THERAPEUTICS GROUP, INC.

Condensed Consolidated Statements of Redeemable Convertible

Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited, in thousands, except share and per share data)

 

 

 

REDEEMABLE CONVERTIBLE PREFERRED STOCK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.001 PAR VALUE
SERIES A

 

 

$0.001 PAR VALUE
SERIES B

 

 

$0.001 PAR VALUE
SERIES C

 

 

$0.001 PAR VALUE
SERIES D

 

 

 

COMMON STOCK
$0.001 PAR VALUE

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED

 

 

TOTAL
STOCKHOLDERS’

 

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

DEFICIT

 

 

EQUITY (DEFICIT)

 

BALANCE, January 1, 2021

 

 

11,596,280

 

 

$

53,593

 

 

 

5,166,203

 

 

$

36,336

 

 

 

7,588,254

 

 

$

53,221

 

 

 

6,902,872

 

 

$

89,904

 

 

 

 

8,391,793

 

 

$

8

 

 

$

7,109

 

 

$

(102,835

)

 

$

(95,718

)

Conversion of redeemable convertible preferred stock into common stock upon initial public offering

 

 

(11,596,280

)

 

 

(53,593

)

 

 

(5,166,203

)

 

 

(36,336

)

 

 

(7,588,254

)

 

 

(53,221

)

 

 

(6,902,872

)

 

 

(89,904

)

 

 

 

31,253,609

 

 

 

31

 

 

 

233,022

 

 

 

-

 

 

 

233,053

 

Initial public offering, net of underwriting discounts, commissions and net of offering costs of $11,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,500,000

 

 

 

8

 

 

 

115,706

 

 

 

-

 

 

 

115,714

 

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81,901

 

 

 

-

 

 

 

54

 

 

 

-

 

 

 

54

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

335

 

 

 

-

 

 

 

335

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

(13,981

)

 

 

(13,981

)

BALANCE, March 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

47,227,303

 

 

$

47

 

 

$

356,226

 

 

$

(116,816

)

 

$

239,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK
$0.001 PAR VALUE

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED

 

 

TOTAL
STOCKHOLDERS’

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

DEFICIT

 

 

EQUITY (DEFICIT)

 

BALANCE, January 1, 2022

 

 

47,512,182

 

 

$

47

 

 

$

363,172

 

 

$

(160,995

)

 

$

202,224

 

Exercise of common stock options

 

 

20,406

 

 

 

1

 

 

 

13

 

 

 

-

 

 

 

14

 

Stock-based compensation

 

 

 

 

 

-

 

 

 

2,120

 

 

 

-

 

 

 

2,120

 

Net loss

 

 

 

 

 

-

 

 

 

-

 

 

 

(24,567

)

 

 

(24,567

)

BALANCE, March 31, 2022

 

 

47,532,588

 

 

$

48

 

 

$

365,305

 

 

$

(185,562

)

 

$

179,791

 

See notes to unaudited condensed consolidated financial statements.

3


 

 

 

FINCH THERAPEUTICS GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

 

 

 

THREE MONTHS ENDED
MARCH 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(24,567

)

 

$

(13,981

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,331

 

 

 

368

 

Stock-based compensation expense

 

 

2,120

 

 

 

335

 

Other non-cash operating lease cost

 

 

242

 

 

 

211

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

322

 

 

 

(1,217

)

Due from related party

 

 

 

 

 

9

 

Prepaid expenses and other current assets

 

 

(6,970

)

 

 

2,344

 

Other non-current assets

 

 

363

 

 

 

 

Accounts payable

 

 

1,093

 

 

 

58

 

Accrued expenses and other current liabilities

 

 

693

 

 

 

(926

)

Due to related party

 

 

 

 

 

54

 

Deferred revenue

 

 

 

 

 

(2,236

)

Operating lease liabilities

 

 

(273

)

 

 

(233

)

Net cash used in operating activities

 

 

(25,646

)

 

 

(15,214

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(909

)

 

 

(8,834

)

Proceeds from sale of property and equipment

 

 

 

 

 

10

 

Net cash used in investing activities

 

 

(909

)

 

 

(8,824

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from initial public offering, net of underwriting discounts, commissions and offering costs

 

 

 

 

 

118,575

 

Principal payments on finance lease obligation

 

 

(9

)

 

 

(8

)

Proceeds from exercise of stock options, net

 

 

14

 

 

 

54

 

Payment of deferred offering costs

 

 

 

 

 

(1,254

)

Net cash provided by financing activities

 

 

5

 

 

 

117,367

 

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(26,550

)

 

 

93,329

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

135,965

 

 

 

99,910

 

Cash, cash equivalents and restricted cash at end of period

 

$

109,415

 

 

$

193,239

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

2

 

 

$

3

 

Cash paid in connection with operating lease liabilities

 

$

369

 

 

$

344

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Property and equipment in accounts payable and accrued liabilities

 

$

574

 

 

$

978

 

Conversion of redeemable convertible preferred stock into common stock

 

$

 

 

$

233,053

 

Operating right-of-use assets obtained in exchange for new operating leases upon adoption of ASC 842

 

$

 

 

$

5,965

 

Deferred initial public offering costs in AP and accruals

 

$

 

 

$

594

 

 

4


 

 

 

The following table provides a reconciliation of the cash, cash equivalents and restricted cash as of each of the periods shown above:

 

 

THREE MONTHS ENDED
MARCH 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

106,931

 

 

$

193,023

 

Restricted cash

 

 

2,484

 

 

 

216

 

Total cash, cash equivalents and restricted cash

 

$

109,415

 

 

$

193,239

 

 

See notes to unaudited condensed consolidated financial statements.

5


 

 

 

FINCH THERAPEUTICS GROUP, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Business

Finch Therapeutics Group, Inc. (the “Company” or “FTG”) was incorporated in 2017 as a Delaware corporation. The Company was formed as a result of a merger and recapitalization of Finch Therapeutics, Inc. (“Finch”) and Crestovo Holdings LLC (“Crestovo”) in September 2017, in which the former owners of Finch and Crestovo were issued equivalent stakes in the newly formed company, FTG. Crestovo was renamed Finch Therapeutics Holdings LLC in November 2020 (“Finch Holdings”). Finch and Finch Holdings are both wholly-owned subsidiaries of FTG.

The Company is a clinical-stage microbiome therapeutics company leveraging its Human-First Discovery platform to develop a novel class of orally administered biological drugs. It is developing novel therapeutics designed to deliver missing microbes and their clinically relevant biochemical functions to correct dysbiosis and the diseases that emerge from it. The Company’s Human-First Discovery platform uses reverse translation to identify diseases of dysbiosis and to design microbiome therapeutics that address them. Its lead product candidate, CP101, is an orally administered complete microbiome therapeutic in development for the prevention of recurrent Clostridioides difficile infection ("CDI").

Initial Public Offering

On March 18, 2021, the Company completed its initial public offering (“IPO”) in which the Company issued and sold 7,500,000 shares of its common stock at a public offering price of $17.00 per share, for aggregate gross proceeds of $127.5 million and net proceeds of $115.7 million after deducting underwriting discounts and commissions of $8.9 million and offering costs of $2.9 million. On April 20, 2021, the Company issued 192,877 additional shares of common stock, pursuant to the underwriters’ partial exercise of their overallotment option, at a public offering price of $17.00 per share for aggregate gross proceeds of $3.3 million and net proceeds of $3.0 million after deducting underwriting discounts, commissions and offering costs.

In connection with the IPO, the Company’s board of directors (the “Board”) and stockholders approved an amended and restated certificate of incorporation to, among other things, effect a one-for-14.444 reverse stock split of the Company’s issued and outstanding shares of common stock and redeemable convertible preferred stock, as well as to effect a proportional adjustment to the existing conversion ratios for the Company’s redeemable convertible preferred stock. The reverse stock split was effected on March 12, 2021. Accordingly, all share and per share amounts of common stock for all periods presented in the accompanying unaudited interim condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split and adjustment of preferred stock conversion ratios. Upon the closing of the IPO, all of the then-outstanding shares of redeemable convertible preferred stock automatically converted into 31,253,609 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

COVID-19 Impact

The extent of the impact of the COVID-19 pandemic on the Company’s business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak, including due to the emergence of variants of the virus, and the impact of the ongoing pandemic on clinical trial enrollment, trial sites, contract research organizations, contract manufacturing organizations, and other third parties with which the Company does business, as well as its impact on regulatory authorities and its key scientific and management personnel. While the Company is experiencing limited financial impacts at this time, given the risks and uncertainties associated with the pandemic, the Company’s business, financial condition and results of operations ultimately could be materially adversely affected. The Company continues to closely monitor the COVID-19 pandemic as it evolves its business continuity plans, clinical development plans and response strategy.

At this time, it is unknown how long the adverse conditions associated with the COVID-19 pandemic will last and what the complete financial effect will be to the Company.

6


 

 

 

Liquidity and Capital Resources

Management believes that the Company’s cash and cash equivalents of $106.9 million as of March 31, 2022, will allow the Company to continue its operations for at least the next 12 months from the date these financial statements are issued. In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations. If the Company is unable to obtain additional funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development ("R&D") programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of Article 10 of Regulation S-X of the Securities Act of 1933, as amended, published by the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes the disclosures are adequate. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2022.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments that are necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, condensed consolidated statements of stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021, and condensed consolidated cash flows for the three months ended March 31, 2022 and 2021. Such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other accounting standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on the condensed consolidated statements or disclosures.

The significant accounting policies and estimates used in preparation of the unaudited interim condensed consolidated financial statements are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2022.

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements or changes to accounting pronouncements that could be expected to materially impact the Company’s unaudited condensed consolidated financial statements during the three months ended March 31, 2022, as compared to the recent accounting pronouncements described in Note 2 of the Company’s condensed consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021.

7


 

 

 

3. FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

 

DESCRIPTION

 

MARCH 31,
2022

 

 

QUOTED
PRICES
IN ACTIVE
MARKETS FOR
IDENTICAL
ASSETS
(LEVEL 1)

 

 

SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)

 

 

SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 3)

 

Asset

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

105,712

 

 

$

105,712

 

 

$

 

 

$

 

Total financial assets

 

$

105,712

 

 

$

105,712

 

 

$

 

 

$

 

 

DESCRIPTION

 

DECEMBER 31,
2021

 

 

QUOTED
PRICES
IN ACTIVE
MARKETS FOR
IDENTICAL
ASSETS
(LEVEL 1)

 

 

SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 2)

 

 

SIGNIFICANT
OBSERVABLE
INPUTS
(LEVEL 3)

 

Asset

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

132,275

 

 

$

132,275

 

 

$

 

 

$

 

Total financial assets

 

$

132,275

 

 

$

132,275

 

 

$

 

 

$

 

 

There were no transfers between fair value levels during the three months ended March 31, 2022 and the year ended December 31, 2021. The carrying values of accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

 

MARCH 31,
2022

 

 

DECEMBER 31,
2021

 

Lab equipment

 

$

3,978

 

 

$

3,850

 

Office furniture and fixtures

 

 

537

 

 

 

537

 

Leasehold improvements

 

 

13,899

 

 

 

13,894

 

Construction work-in-progress

 

 

1,298

 

 

 

329

 

Software

 

 

4,883

 

 

 

4,883

 

Computer equipment

 

 

367

 

 

 

368

 

Total

 

$

24,962

 

 

$

23,861

 

Less: Accumulated depreciation

 

 

(5,556

)

 

 

(4,226

)

Property and equipment, net

 

$

19,406

 

 

$

19,635

 

 

Depreciation expense was $1.3 million and $0.4