10-Q 1 omic-20220331.htm 10-Q 10-Q
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Table of Contents

 

 

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, 2022

 

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: 001-40443

SINGULAR GENOMICS SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

81-2948451

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

 

3010 Science Park Road
San Diego, California 92121

(858) 333-7830

(Registrant’s address of principal executive offices

and telephone number, including area code)

 

 

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

OMIC

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 (§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 7(a)(2)(B) of the Securities Act.

 

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

 

70,585,264 shares of common stock, $0.0001 par value, outstanding as of April 30, 2022.

 


Table of Contents

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This filing contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, future revenue, business strategy, prospects, products, research and development costs, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these terms or other similar expressions are intended to identify forward-looking statements. Forward-looking statements contained in this report include, but are not limited to, statements about:

estimates of our addressable market, market growth, future revenue, expenses, capital requirements and our needs for additional financing;
our ability to timely and successfully implement our commercialization plan for the G4 and planned PX;
the implementation of our business model and strategic plans for the G4 and planned PX;
our expectations regarding the rate and degree of market acceptance of the G4 and planned PX;
our ability to compete with competitive companies and technologies in our industry;
our ability to manage and grow our business and commercialize the G4 and planned PX;
our ability to develop and commercialize new products and product enhancements;
the impact of the COVID-19 pandemic on our business;
our ability to establish and maintain intellectual property protection for our products or avoid or defend claims of infringement;
our ability to fulfill our contractual commitments;
the performance of third-party manufacturers and suppliers;
our ability to effectively manufacture our products;
the potential effects of government regulation;
our ability to hire and retain key personnel and to manage our future growth effectively;
our ability to obtain additional financing on favorable terms to us or at all;
our expectations regarding use of proceeds from our initial public offering;
the impact of local, regional, national and international economic conditions and events;
our expectations about market trends; and
our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment. 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.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. 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 actual results or to changes in our expectations.

You should read this report and the documents that we reference in this report and have filed with the SEC as exhibits to this report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

 

2


Table of Contents

 

Summary of Material Risks Associated with Our Business

 

Our business is subject to a number of risks that if realized could materially affect our business, prospects, operating results and financial condition. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q. These risks include the following:

Our limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter.
We have incurred significant losses since inception, we expect to incur significant losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.
We are a pre-revenue life science technology company in the development stage and have very limited history commercializing our products or technology, which makes it difficult to evaluate our prospects and predict our future performance.
The life sciences technology market is highly competitive. If we fail to compete effectively, our business and operating results will suffer.
If we are sued for infringing, misappropriating or otherwise violating intellectual property rights of third parties, such litigation could be costly and time-consuming and could prevent or delay us from developing or commercializing our product candidates.
We could have disputes with contractual counterparties regarding our or their performance under those contracts, we could be unable to fulfill such contractual commitments, or our contractual obligations may exceed our current expectations.
If our products fail to achieve early customer and scientific acceptance, we may not be able to achieve broader market acceptance for our products, and our revenues and prospects may be harmed.
We expect to be highly dependent upon revenue generated from the sale of the G4, and any delay or failure by us to finalize the development and to successfully commercialize the G4 could have a substantial adverse effect on our business and results of operations.
The COVID-19 pandemic and efforts to reduce its spread have adversely impacted and may materially and adversely impact our business and operations in the future.
Our business will depend significantly on research and development spending by academic institutions and other research institutions, and any reduction in spending could limit demand for our products and adversely affect our business, results of operations, financial condition and prospects.
Our operating results may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
We have only launched one commercial product, the G4, and we may not be able to successfully commercially launch our planned PX or other products as planned.
The G4 is sold as a research-use-only product; changes in the regulatory landscape could affect the market for such a product.
If we are unable to obtain and maintain sufficient intellectual property protection for our products and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
We may require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not available, may require us to delay, scale back, or cease our product development programs or operations.

3


Table of Contents

 

TABLE OF CONTENTS

 

Part I. Financial Information

2

Item 1. Financial Statements (Unaudited)

2

Condensed Balance Sheets

2

Condensed Statements of Operations

3

Condensed Statements of Comprehensive Loss

4

Condensed Statement of Stockholders’ Equity (Deficit)

5

Condensed Statement of Preferred Stock and Stockholders’ Equity (Deficit)

6

Condensed Statements of Cash Flows

7

Notes to Condensed Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3. Quantitative and Qualitative Disclosures about Market Risk

29

Item 4. Controls and Procedures

29

Part II. Other Information

31

Item 1. Legal Proceedings

31

Item 1A. Risk Factors

32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3. Defaults Upon Senior Securities

63

Item 4. Mine Safety Disclosures

63

Item 5. Other Information

64

Item 6. Exhibits

65

Signatures

66

 

4


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SINGULAR GENOMICS SYSTEMS, INC.

Condensed Balance Sheets

(In thousands, except share and par value amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

188,572

 

 

$

201,049

 

Short-term investments

 

 

127,402

 

 

 

138,174

 

Inventory

 

 

6,329

 

 

 

3,011

 

Prepaid expenses and other current assets

 

 

3,486

 

 

 

5,526

 

Total current assets

 

 

325,789

 

 

 

347,760

 

Right-of-use lease assets

 

 

5,749

 

 

 

-

 

Property and equipment, net

 

 

6,714

 

 

 

6,072

 

Restricted cash

 

 

1,734

 

 

 

687

 

Other noncurrent assets

 

 

2,125

 

 

 

1,129

 

Total assets

 

$

342,111

 

 

$

355,648

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,525

 

 

$

2,348

 

Accrued expenses

 

 

2,911

 

 

 

4,278

 

Lease liabilities, current

 

 

2,646

 

 

 

-

 

Other current liabilities

 

 

-

 

 

 

118

 

Total current liabilities

 

 

9,082

 

 

 

6,744

 

Long-term debt, net of issuance costs

 

 

9,941

 

 

 

9,904

 

Lease liabilities, noncurrent

 

 

3,878

 

 

 

-

 

Other noncurrent liabilities

 

 

1,728

 

 

 

2,827

 

Total liabilities

 

 

24,629

 

 

 

19,475

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Series A Common Stock Equivalent Convertible Preferred Stock, $0.0001 par value; 7,000 shares authorized, 2,500 and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 400,000,000 shares authorized, 70,509,463 and 72,438,742 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

492,144

 

 

 

488,200

 

Accumulated other comprehensive loss

 

 

(767

)

 

 

(138

)

Accumulated deficit

 

 

(173,902

)

 

 

(151,896

)

Total stockholders’ equity

 

 

317,482

 

 

 

336,173

 

Total liabilities and stockholders’ equity

 

$

342,111

 

 

$

355,648

 

 

See accompanying notes to these unaudited condensed financial statements.

2


Table of Contents

 

SINGULAR GENOMICS SYSTEMS, INC.

Condensed Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

Research and development

$

10,645

 

 

$

6,608

 

Selling, general and administrative

 

11,375

 

 

 

3,654

 

Total operating expenses

 

22,020

 

 

 

10,262

 

 

 

 

 

 

 

Loss from operations

 

(22,020

)

 

 

(10,262

)

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest and other income

 

156

 

 

 

131

 

Interest expense

 

(142

)

 

 

(188

)

Change in fair value of convertible promissory notes

 

-

 

 

 

(11,400

)

Change in fair value of warrant liability

 

-

 

 

 

(2,202

)

Net loss

$

(22,006

)

 

$

(23,921

)

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

Basic and diluted net loss per share

$

(0.31

)

 

$

(2.05

)

Weighted-average shares used to compute basic and diluted net loss per share

 

71,011,041

 

 

 

11,652,998

 

 

See accompanying notes to these unaudited condensed financial statements.

3


 

SINGULAR GENOMICS SYSTEMS, INC.

Condensed Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

2022

 

 

2021

 

Net loss

$

(22,006

)

 

$

(23,921

)

Other comprehensive loss:

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

(629

)

 

 

(49

)

Comprehensive loss

$

(22,635

)

 

$

(23,970

)

 

See accompanying notes to these unaudited condensed financial statements.

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Table of Contents

 

SINGULAR GENOMICS SYSTEMS, INC.

Condensed Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

Shares

 

Amount

 

 

Shares

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

-

 

$

-

 

 

 

72,438,742

 

$

7

 

 

$

488,200

 

 

$

(138

)

 

$

(151,896

)

 

$

336,173

 

Exchange of common stock for Series A Common Stock Equivalent

 

2,500

 

 

-

 

 

 

(2,500,000

)

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Vesting of common stock issued for early exercise
   of stock options

 

-

 

 

-

 

 

 

505,322

 

 

-

 

 

 

344

 

 

 

-

 

 

 

-

 

 

 

344

 

Issuance of common stock in connection with exercise
   of stock options

 

-

 

 

-

 

 

 

65,399

 

 

-

 

 

 

34

 

 

 

-

 

 

 

-

 

 

 

34

 

Stock-based compensation

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

3,566

 

 

 

-

 

 

 

-

 

 

 

3,566

 

Unrealized loss on available- for-sale marketable
   securities

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

 

(629

)

 

 

-

 

 

 

(629

)

Net loss

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,006

)

 

 

(22,006

)

Balance at March 31, 2022

 

2,500

 

$

-

 

 

 

70,509,463

 

$

7

 

 

$

492,144

 

 

$

(767

)

 

$

(173,902

)

 

$

317,482

 

 

See accompanying notes to these unaudited condensed financial statements.

 

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Table of Contents

 

SINGULAR GENOMICS SYSTEMS, INC.

Condensed Statements of Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(In thousands, except share data)

 

 

Series Seed
Convertible
Preferred Stock

 

 

Series A
Convertible
Preferred Stock

 

 

Series B
Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

Shares

 

Amount

 

 

Shares

 

Amount

 

 

Shares

 

Amount

 

 

 

Shares

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2020

 

6,520,790

 

$

4,486

 

 

 

12,932,429

 

$

19,908

 

 

 

19,373,169

 

$

44,790

 

 

 

 

10,816,937

 

$

1

 

 

$

1,552

 

 

$

17

 

 

$

(53,125

)

 

$

(51,555

)

Vesting of common stock issued for early exercise
   of stock options

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

 

151,343

 

 

-

 

 

 

92

 

 

 

-

 

 

 

-

 

 

 

92

 

Issuance of common stock in connection with exercise
   of stock options

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

 

1,855,904

 

 

-

 

 

 

995

 

 

 

-

 

 

 

-

 

 

 

995

 

Stock-based compensation

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

 

-

 

 

-

 

 

 

1,096

 

 

 

-

 

 

 

-

 

 

 

1,096

 

Unrealized loss on available- for-sale marketable
   securities

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

 

-

 

 

-

 

 

 

-

 

 

 

(49

)

 

 

-

 

 

 

(49

)

Net loss

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,921

)

 

 

(23,921

)

Balance at March 31, 2021

 

6,520,790

 

$

4,486

 

 

 

12,932,429

 

$

19,908

 

 

 

19,373,169

 

$

44,790

 

 

 

 

12,824,184

 

$

1

 

 

$

3,735

 

 

$

(32

)

 

$

(77,046

)

 

$

(73,342

)

 

See accompanying notes to these unaudited condensed financial statements.

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Table of Contents

 

SINGULAR GENOMICS SYSTEMS, INC.

Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Three Months Ended
March 31, 2022

 

 

Three Months Ended
March 31, 2021

 

Operating activities

 

 

 

 

 

Net loss

$

(22,006

)

 

$

(23,921

)

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

 

 

 

 

 

Depreciation

 

461

 

 

 

211

 

Stock-based compensation

 

3,566

 

 

 

1,096

 

Change in fair value of convertible promissory notes

 

-

 

 

 

11,400

 

Change in fair value of warrant liability

 

-

 

 

 

2,202

 

Amortization of premium on short-term investments

 

1,174

 

 

 

72

 

Amortization of right-of-use lease assets

 

641

 

 

 

-

 

Accretion of debt issuance costs

 

37

 

 

 

78

 

Changes in operating assets and liabilities:

 

 

 

 

 

Inventory

 

(3,318

)

 

 

-

 

Prepaid expenses and other current assets

 

1,648

 

 

 

(264

)

Other noncurrent assets

 

(1,111

)

 

 

(804

)

Accounts payable

 

1,013

 

 

 

144

 

Accrued expenses

 

(1,367

)

 

 

585

 

Other current liabilities

 

-

 

 

 

(58

)

Lease liabilities

 

(550

)

 

 

-

 

Other noncurrent liabilities

 

(27

)

 

 

74

 

Net cash used in operating activities

 

(19,839

)

 

 

(9,185

)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of short-term investments

 

(35,193

)

 

 

(101,608

)

Sales of short-term investments

 

10,334

 

 

 

8,838

 

Maturities of short-term investments

 

34,184

 

 

 

2,816

 

Purchases of property and equipment

 

(939

)

 

 

(507

)

Net cash provided by (used in) investing activities

 

8,386

 

 

 

(90,461

)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from issuance of common stock, net of repurchases

 

23

 

 

 

2,984

 

Proceeds from issuance of convertible promissory notes

 

-

 

 

 

130,500

 

Net cash provided by financing activities

 

23

 

 

 

133,484

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(11,430

)

 

 

33,838

 

Cash and cash equivalents and restricted cash, beginning of year

 

201,736

 

 

 

12,170

 

Cash and cash equivalents and restricted cash, end of period

$

190,306

 

 

$

46,008

 

 

 

 

 

 

 

Supplemental disclosure for cash activities

 

 

 

 

 

Interest paid

$

105

 

 

$

148

 

Supplemental disclosure for non-cash activities

 

 

 

 

 

Initial lease liability recognized upon adoption of ASC 842

$

7,074

 

 

$

-

 

Vesting of restricted stock

$

344

 

 

$

92

 

Deferred offering costs in accrued expenses

$

-

 

 

$

804

 

Purchase of property and equipment included in accounts payable

$

164

 

 

$

86

 

 

See accompanying notes to these unaudited condensed financial statements.

7


Table of Contents

 

SINGULAR GENOMICS SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

1. Business

Description of Business

Singular Genomics Systems, Inc. (the “Company”) is a life science technology company that is leveraging novel, next-generation sequencing (“NGS”) and multiomics technologies to empower researchers and clinicians. The Company developed a unique and proprietary NGS technology, which is referred to as its Sequencing Engine. The Sequencing Engine is the foundational platform technology that forms the basis of the Company’s products in development as well as its core product tenets: power, speed, flexibility and accuracy. The Company is developing two products that are purpose-built to target applications in which these core product tenets matter most. The first product, the G4, targets the NGS market. The G4 is a benchtop next-generation sequencer designed to produce fast and accurate genetic sequencing results. The integrated purpose-built kits that run on the G4 address specific applications in the oncology and immune profiling markets. The second product in development, the PX, combines single-cell analysis, spatial analysis, genomics and proteomics in one integrated instrument to offer a versatile multiomics solution.

The Company was incorporated in the state of Delaware in June 2016 and has its principal operations in San Diego, California.

Initial Public Offering

On June 1, 2021, the Company closed its initial public offering (“IPO”) in which it sold 11,730,000 shares of common stock (which included 1,530,000 shares that were sold pursuant to the full exercise of the IPO underwriters’ option to purchase additional shares) at a public offering price of $22.00 per share. The Company received net proceeds of approximately $237.2 million after deducting offering costs, underwriting discounts and commissions of $20.9 million.

Concurrent with the closing of the IPO:

38,826,388 outstanding shares of convertible preferred stock converted into an equivalent number of shares of common stock;
outstanding principal and interest amount of convertible promissory notes (the “2021 Convertible Notes”) converted into 7,531,777 shares of common stock; and
a warrant to purchase 129,156 shares of convertible preferred stock (the “SVB Warrant”) was automatically adjusted to become a warrant to purchase an equivalent number of shares of common stock.

Liquidity and Capital Resources

The Company has incurred net losses since inception and, as of March 31, 2022 and December 31, 2021, had an accumulated deficit of $173.9 million and $151.9 million, respectively. The Company has a limited operating history, and the revenue and income potential of the Company’s business are unproven. From incorporation in June 2016 through March 31, 2022, substantially all of the Company’s operations have been funded by the sales of equity securities and issuances of debt. As of March 31, 2022, the Company had cash, cash equivalents and short-term investments of $316.0 million. The Company believes that its cash, cash equivalents and short-term investments as of March 31, 2022 are sufficient to fund its operations for at least 12 months from the issuance date of the accompanying unaudited condensed financial statements.

 

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Table of Contents

 

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for fair presentation, have been included. Interim financial results are not necessarily indicative of results anticipated for the full year.

The preparation of the Company’s unaudited condensed financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed financial statements and accompanying notes. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may significantly differ from these estimates and assumptions. For the year ended December 31, 2021, significant estimates and assumptions include the fair value of the 2021 Convertible Notes, the fair value of the liability for the SVB Warrant, the fair value of the Company’s preferred and common stock and stock-based compensation. After December 31, 2021, significant estimates and assumptions include stock-based compensation and the value of lease liabilities and right-of-use lease assets.

Summary of Significant Accounting Policies

During the three months ended March 31, 2022, other than the policies described below, there were no changes to the Company’s significant accounting policies as described in Note 2 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets (in thousands):

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Cash and cash equivalents

 

$

188,572

 

 

$

201,049

 

Restricted cash

 

 

1,734

 

 

 

687

 

Total

 

$

190,306

 

 

$

201,736

 

Short-term Investments

Short-term investments primarily consisted of corporate debt securities, asset-backed securities and treasury securities. The Company’s investments in securities are classified as current as they are available for use in current operations. The following tables summarize the short-term investments held at March 31, 2022 and December 31, 2021 (in thousands):

 

 

March 31, 2022

 

 

Amortized
Cost

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

U.S. treasury securities

$

6,486

 

 

$

(3

)

 

$

6,483

 

Asset-backed securities

 

10,770

 

 

 

(47

)

 

 

10,723

 

Corporate debt securities

 

110,913

 

 

 

(717

)

 

 

110,196

 

Total

$

128,169

 

 

$

(767

)

 

$

127,402

 

 

 

December 31, 2021

 

 

Amortized
Cost

 

 

Gross
Unrealized
Losses

 

 

Estimated
Fair Value

 

Asset-backed securities

$

21,172

 

 

$

(25

)

 

$

21,147

 

Corporate debt securities

 

117,140

 

 

 

(113

)

 

 

117,027

 

Total

$

138,312

 

 

$

(138

)

 

$

138,174

 

 

 

9


Table of Contents

 

The following table summarizes contractual maturities of available-for-sale securities held at March 31, 2022 and December 31, 2021 (in thousands):

 

 

 

March 31,
2022

 

 

December 31,
2021

 

 

 

Estimated
Fair Value

 

 

Estimated
Fair Value

 

Due within one year

 

$

99,110

 

 

$

94,085

 

After one but within five years

 

 

28,292

 

 

 

44,089

 

Total

 

$

127,402

 

 

$

138,174

 

 

The Company determined there was no other-than-temporary impairment of any of its investments.

Inventory

Inventory includes raw materials, which are goods to be consumed directly or indirectly in production, work in process, which are goods in the course of production, and finished goods, which are goods awaiting sale. Inventory is recorded at the lower of cost or net realizable value. Costs are based on standard costs that are adjusted regularly to reflect current conditions so that at the balance-sheet date standard costs reasonably approximate costs under a first-in, first-out basis. Standard costs include acquisition and production costs. Raw materials include inventories that may be used in research and development activities, and such items are expensed as consumed or capitalized as property and equipment and depreciated.

Inventory in the prior year’s financial statements have been reclassified to conform to the current presentation on the condensed balance sheets and condensed statements of cash flows. No subtotals in the prior year financial statements were impacted as a result.

Leases

The Company adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), effective January 1, 2022. ASC 842 requires the Company to recognize on the balance sheet lease liabilities and corresponding right-of-use (“ROU”) lease assets for its operating leases where the Company is the lessee. The initial impact of the adoption is discussed below in the section titled “Recent Accounting Pronouncements—Adopted.”

The Company determines if an arrangement is or contains a lease at contract inception. Lease liabilities represent the Company’s obligation to make payments under its operating leases. ROU lease assets represent the Company’s right to use assets under its operating leases. The Company determines the value of lease liabilities and ROU lease assets on a lease-by-lease basis. A lease liability is recognized at the commencement date of an operating lease based on the present value of the future lease payments over the expected lease term. A corresponding ROU lease asset is recognized at the commencement date of an operating lease based on the value of the lease liability, adjusted for any lease incentives received, any initial direct costs incurred and any lease payments made at or before the lease commencement date. The Company made a policy election to not recognize lease liabilities and ROU lease assets for operating leases with an expected lease term of twelve months or less.

The Company calculates the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily determined. In that case, the Company uses its incremental borrowing rate based on information available at the date of lease commencement. The incremental borrowing rate is the estimated rate of interest that the Company would pay to borrow, on a collateralized basis, an amount equal to the lease payments over the expected lease term.

After lease commencement, the Company measures its operating leases as follows: (i) the lease liability based on the present value of the remaining lease payments using the incremental borrowing rate determined at lease commencement; and (ii) the ROU lease asset based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between lease expense and amounts paid under the lease. Lease expense is recognized on a straight-line basis over the expected lease term. Any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Variable lease payments such as those related to property taxes, insurance and common area maintenance are recognized as expense when incurred.

 

10


Table of Contents

 

Recent Accounting Pronouncements—Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”), codified as ASC 842. ASC 842 requires the Company to recognize on the balance sheet lease liabilities and corresponding ROU lease assets for its operating leases where the Company is the lessee. The Company adopted this standard effective January 1, 2021 using the modified retrospective method by applying the new standard to all leases existing as of January 1, 2022 and not restating any prior comparative periods. The Company elected the practical expedients to carry forward its historical lease classification, not reassess whether any expired or existing contracts are or contain leases and not reassess initial direct costs for existing leases. On January 1, 2022, the Company recorded operating lease liabilities of $7.1 million, ROU lease assets of $6.4 million, and derecognized deferred rent of $0.7 million. The additional disclosures required by the standard have been included in the section above titled “Leases” and in Note 9. Prior comparative periods have not been adjusted and continue to be reported under ASC 840.

Recent Accounting Pronouncements—Not Yet Adopted