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may 10

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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: 001-39980

 

Sensei Biotherapeutics, Inc.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

83-1863385

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

451 D Street, Suite 710

Boston, MA

02210

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (240) 243-8000

 

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, $0.0001 par value per share

 

SNSE

 

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. YesNo

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). YesNo

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

The number of shares of Registrant’s Common Stock outstanding as of May 6, 2022 was 30,628,813.

 

 

 


 

Table of Contents

 

 

 

Page

PART I

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Convertible Preferred Stock, Common Stock and Stockholders’ Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

Signatures

 

29

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

SENSEI BIOTHERAPEUTICS, 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

 

$

8,721

 

 

$

7,159

 

Marketable securities

 

 

127,503

 

 

 

140,462

 

Prepaid expenses

 

 

2,554

 

 

 

547

 

Other current assets

 

 

199

 

 

 

374

 

Total current assets

 

 

138,977

 

 

 

148,542

 

Right of use assets - operating leases, net

 

 

6,267

 

 

 

 

Right of use assets - financing leases, net

 

 

2,551

 

 

 

 

Property and equipment, net

 

 

2,204

 

 

 

4,644

 

Other non-current assets

 

 

39

 

 

 

39

 

Total assets

 

$

150,038

 

 

$

153,225

 

Liabilities, convertible preferred stock and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

5,100

 

 

$

2,456

 

Compensation and employee benefits liabilities

 

 

560

 

 

 

1,753

 

Operating lease liabilities, current

 

 

1,160

 

 

 

 

Financing lease liabilities, current

 

 

786

 

 

 

680

 

Total current liabilities

 

 

7,606

 

 

 

4,889

 

Operating lease liabilities, non-current

 

 

5,278

 

 

 

 

Financing lease liabilities, non-current

 

 

1,846

 

 

 

1,674

 

Other non-current liabilities

 

 

 

 

 

149

 

Total liabilities

 

 

14,730

 

 

 

6,712

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value and 250,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 30,682,813 and 30,609,029 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

297,815

 

 

 

296,049

 

Accumulated deficit

 

 

(161,611

)

 

 

(149,206

)

Accumulated other comprehensive loss

 

 

(899

)

 

 

(333

)

Total stockholders’ equity

 

 

135,308

 

 

 

146,513

 

Total liabilities and stockholders’ equity

 

$

150,038

 

 

$

153,225

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

7,455

 

 

$

3,365

 

General and administrative

 

 

5,032

 

 

 

4,604

 

Total operating expenses

 

 

12,487

 

 

 

7,969

 

Loss from operations

 

 

(12,487

)

 

 

(7,969

)

Other income (expense):

 

 

 

 

 

 

Realized gain on marketable securities

 

 

15

 

 

 

 

Interest income

 

 

310

 

 

 

 

Interest expense

 

 

(243

)

 

 

(3

)

Net loss

 

 

(12,405

)

 

 

(7,972

)

Net loss attributable to common stockholders

 

$

(12,405

)

 

$

(7,972

)

Net loss per common share, basic and diluted

 

$

(0.40

)

 

$

(0.42

)

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

 

 

30,647,679

 

 

 

18,904,853

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(12,405

)

 

$

(7,972

)

Other comprehensive items:

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(566

)

 

 

 

Total other comprehensive loss

 

 

(566

)

 

 

 

Total comprehensive loss

 

$

(12,971

)

 

$

(7,972

)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share data)

 

 

 

Convertible
Preferred Stock
(Series AA)

 

 

Convertible
Preferred Stock
(Series BB)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Comprehensive Loss

 

 

Equity (Deficit)

 

Balance at December 31, 2020

 

 

747,683,172

 

 

$

61,411

 

 

 

52,680,306

 

 

$

10,925

 

 

 

 

1,875,422

 

 

$

 

 

$

55,969

 

 

$

(112,412

)

 

$

 

 

$

(56,443

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,349

 

 

 

 

 

 

 

 

 

1,349

 

Issuance of series BB preferred stock

 

 

 

 

 

 

 

 

113,275,902

 

 

 

23,491

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of preferred stock to common
 stock upon closing of the initial public offering

 

 

(747,683,172

)

 

 

(61,411

)

 

 

(165,956,208

)

 

 

(34,416

)

 

 

 

19,034,069

 

 

 

2

 

 

 

95,826

 

 

 

 

 

 

 

 

 

95,828

 

Issuance of common stock upon closing of the
 initial public offering, net of issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,030,295

 

 

 

1

 

 

 

138,488

 

 

 

 

 

 

 

 

 

138,489

 

Exercise of common stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,648,709

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,972

)

 

 

 

 

 

(7,972

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

30,588,495

 

 

$

3

 

 

$

291,633

 

 

$

(120,384

)

 

$

 

 

$

171,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

30,609,029

 

 

$

3

 

 

$

296,049

 

 

$

(149,206

)

 

$

(333

)

 

$

146,513

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,515

 

 

 

 

 

 

 

 

 

1,515

 

Exercise of options into common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73,784

 

 

 

 

 

 

237

 

 

 

 

 

 

 

 

 

237

 

Employee stock purchase plan expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(566

)

 

 

(566

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,405

)

 

 

 

 

 

(12,405

)

Balance at March 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

30,682,813

 

 

$

3

 

 

$

297,815

 

 

$

(161,611

)

 

$

(899

)

 

$

135,308

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(12,405

)

 

$

(7,972

)

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

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,515

 

 

 

1,349

 

Depreciation and amortization

 

 

157

 

 

 

98

 

Accretion on marketable securities

 

 

197

 

 

 

 

Interest on finance lease

 

 

 

 

 

3

 

Non-cash lease expense

 

 

291

 

 

 

 

Amortization of financing lease right-of-use assets

 

 

177

 

 

 

 

Realized gain on marketable securities

 

 

(15

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

 

(2,007

)

 

 

(1,992

)

Other assets

 

 

175

 

 

 

50

 

Accounts payable and accrued liabilities

 

 

2,644

 

 

 

(1,880

)

Compensation and employee benefits

 

 

(1,193

)

 

 

(475

)

Operating lease liabilities

 

 

(271

)

 

 

 

Other liabilities

 

 

(15

)

 

 

52

 

Net cash used in operating activities

 

 

(10,750

)

 

 

(10,767

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(19

)

 

 

(487

)

Purchases of short-term investments

 

 

(8,017

)

 

 

 

Sales of short-term investments

 

 

12,365

 

 

 

 

Maturities of short-term investments

 

 

7,864

 

 

 

 

Net cash provided by (used in) investing activities

 

 

12,193

 

 

 

(487

)

Financing activities

 

 

 

 

 

 

Principle payments from financing leases

 

 

(133

)

 

 

(10

)

Proceeds from the exercise of common stock options

 

 

238

 

 

 

1

 

Employee stock purchase plan expense

 

 

14

 

 

 

 

Proceeds on the issuance of series BB convertible preferred stock

 

 

 

 

 

23,491

 

Proceeds from issuance of common stock upon initial public offering, net of issuance costs

 

 

 

 

 

140,594

 

Net cash provided by financing activities

 

 

119

 

 

 

164,076

 

Net increase in cash and cash equivalents

 

 

1,562

 

 

 

152,822

 

Cash and cash equivalents at beginning of period

 

 

7,159

 

 

 

16,596

 

Cash and cash equivalents at end of period

 

$

8,721

 

 

$

169,418

 

Supplemental disclosure of noncash financing information:

 

 

 

 

 

 

Property and equipment additions included in accounts payable and accrued liabilities

 

$

11

 

 

$

15

 

Deferred offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

534

 

Interest on financing

 

$

 

 

$

3

 

Conversion of series AA and BB convertible preferred stock into common stock

 

$

 

 

$

95,826

 

Initial measurement of operating lease right-of-use assets

 

$

6,558

 

 

$

 

Initial measurement of operating lease liabilities

 

$

5,580

 

 

$

 

Initial measurement of finance lease right-of-use assets

 

$

411

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

SENSEI BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED consolidated FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND OPERATIONS

Business

Sensei Biotherapeutics, Inc. (the “Company” or “Sensei”) is a biopharmaceutical company that was incorporated in 1999 as a Maryland corporation until incorporated in Delaware on December 1, 2017. The Company is engaged in the discovery, development and delivery of next generation immunotherapies with an initial focus on treatments for cancer.

Liquidity and capital resources

Since its inception, the Company has devoted substantially all of its resources to advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Since its inception, the Company has incurred substantial losses and had a net loss of $12.4 million for the three months ended March 31, 2022. As of March 31, 2022, the Company had an accumulated deficit of $161.6 million. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

In February 2021, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 8,030,295 shares of its common stock at a public offering price of $19.00 per share, for aggregate gross proceeds of $152.6 million. The Company received $138.5 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company.

The Company expects that its cash, cash equivalents and marketable securities as of March 31, 2022 of $136.2 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

Reverse stock split

On January 29, 2021, the Company effected a reverse stock split of the Company’s common stock on a 48-for-1 basis (the “Reverse Stock Split”). In connection with the Reverse Stock Split, the conversion ratio for the Company’s Series AA and Series BB convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split. Accordingly, all common stock share and per share amounts, as well as all preferred stock conversion ratios, for all periods presented in these financial statements have been retroactively adjusted, to reflect this reverse stock split and adjustment of the Series AA and BB convertible preferred stock conversion ratios.

 

5


 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company has prepared the accompanying condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States (“US GAAP”). The condensed consolidated financial statements include those accounts of the Company and its subsidiaries after elimination of all intercompany accounts and transactions.

Unaudited interim financial information

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from these condensed consolidated financial statements, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results for any interim period are not necessarily indicative of results for any future period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods presented. Estimates are used for, but are not limited to, depreciation of equipment, the Company’s enterprise value, fair value of financial instruments, the Company’s ability to continue as a going concern and contingencies. Actual results may differ from those estimates.

Cash and cash equivalents

Cash equivalents are highly liquid investments with an original maturity of 90 days or less at the date of purchase and consist of time deposits and investments in money market funds with commercial banks and financial institutions. At March 31, 2022, cash and cash equivalents included cash on deposit at commercial banks and a money market fund that invests in U.S. Government securities.

Marketable securities

Investments consist of marketable securities with original maturities greater than 90 days. The Company has classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale. Accordingly, these investments are recorded at fair value (level 2). Unrealized gains and losses are reported as the accumulated other comprehensive items in stockholders’ equity. Amortization and accretion of premiums and discounts are recorded in other income (expense). Realized gains or losses on debt securities are included in interest income or interest expense, respectively. If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s statement of operations and comprehensive loss.

Leases

Prior to January 1, 2022, the Company accounted for leases in accordance with ASC 840, Leases ("ASC 840"). At lease inception, the Company determined if an arrangement was an operating or capital lease. For operating leases, the Company recognized rent expense, inclusive of rent escalations, holidays and lease incentives, on a straight-line basis over the lease term. The difference between rent expense recorded and the amount paid was charged to deferred rent. The Company presented lease incentives as deferred rent and amortized the incentives as a reduction to rent expense on a straight-line basis over the lease term. The Company classified deferred rent as current and noncurrent liabilities based on the portion of the deferred rent that was scheduled to mature within the proceeding twelve months.

Effective January 1, 2022, the Company accounts for leases in accordance with Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) (“ASC 842”). At contract inception, the Company determines if an arrangement is or contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease. For each lease with a term greater than twelve months, the Company records a right-of-use asset and lease liability.

6


 

A right-of-use asset represents the economic benefit conveyed to the Company by the right to use the underlying asset over the lease term. A lease liability represents the obligation to make lease payments arising from the lease. The Company elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets and therefore measures each lease payment as the total of the fixed lease and associated non-lease components. Lease liabilities are measured at lease commencement and calculated as the present value of the future lease payments in the contract using the rate implicit in the contract, when available. If an implicit rate is not readily determinable, the Company uses an incremental borrowing rate measured as the rate at which the Company could borrow, on a fully collateralized basis, a commensurate loan in the same currency over a period consistent with the lease term at the commencement date. Right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor. The lease term is measured as the noncancelable period in the contract, adjusted for any options to extend or terminate when it is reasonably certain the Company will extend the lease term via such options based on an assessment of economic factors present as of the lease commencement date. The Company elected the practical expedient to not recognize leases with a lease term of twelve months or less.

Components of a lease are split into three categories: lease components, non-lease components, and non-components. The fixed and in-substance fixed contract consideration (including any consideration related to non-components) are allocated, based on the respective relative fair values, to the lease components and non-lease components. The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.

The Company’s operating and finance leases are presented in the consolidated balance sheet as lease right-of-use assets, classified as noncurrent assets, and lease liabilities, classified as current and noncurrent liabilities. Operating and finance lease expense is recognized on a straight-line basis over the lease term. Variable costs associated with a lease, such as maintenance and utilities, are not included in the measurement of the lease liabilities and right-of-use assets but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

ASC 842 provides several optional practical expedients in transition. The Company applied the ‘package of practical expedients’ which allow the Company to not reassess whether existing or expired arrangements contain a lease, the lease classification of existing or expired leases, or whether previous initial direct costs would qualify for capitalization under ASC 842.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities of $6.7 million and operating right-of-use assets of $6.6 million, along with the write-off of certain deferred rent balances of $0.1 million within the Company’s condensed consolidated balance sheets as of January 1, 2022. Leases previously reported as capital leases are now referred to as finance leases. The adoption did not have a significant impact on the Company’s condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of cash flows.

Recently Issued Accounting Standards Updates

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which was subsequently amended in November 2018 through ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses.” ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. ASU No. 2018-19 further clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment from receivables of operating leases should be accounted for in accordance with Topic 842, Leases. As per the latest ASU 2020-02, FASB deferred the timelines for certain small public and private entities, thus the new guidance will be adopted by the Company for the annual reporting period beginning January 1, 2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company does not expect adoption of this new guidance to have a material impact on its results of operations, financial condition, and financial statement disclosures.

 

3. MARKETABLE SECURITIES

7


 

Marketable securities consist of the following as of March 31, 2022 (in thousands):

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Commercial paper

 

$

39,494

 

 

$

-

 

 

$

(30

)

 

$

39,464

 

Corporate bonds

 

 

81,908

 

 

$

3

 

 

$

(602

)

 

$

81,309

 

U.S. Government agencies

 

 

7,000

 

 

$

-

 

 

$

(270

)

 

$

6,730

 

Total

 

$

128,402

 

 

$

3

 

 

$

(902

)

 

$

127,503

 

 

As of March 31, 2022, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for corporate bonds and U.S. government agencies securities with a fair value of $62.5 million that had maturities of one to three years.

As of March 31, 2022, $118 thousand and $781 thousand of unrealized losses were associated with marketable securities with contractual maturities of one year or less and more than one year, respectively.

There were no impairments of the Company’s assets measured and carried at fair value during the three months ended March 31, 2022.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following (in thousands):

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Research equipment

 

$

2,761

 

 

$

4,974

 

Office equipment and furniture

 

 

536

 

 

 

606

 

Leaseholder improvement

 

 

253

 

 

 

253

 

Total property and equipment

 

 

3,550

 

 

 

5,833

 

Less accumulated depreciation and amortization

 

 

(1,346

)

 

 

(1,189

)

Property and equipment, net

 

$

2,204

 

 

$

4,644

 

 

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $157 thousand and $98 thousand, respectively.

Effective January 1, 2022, the Company adopted ASC 842 and reclassed capital leases that were previously classified as property and equipment, net were presented separately under right of use assets - financing leases, net on the Company's condensed consolidated balance sheet. $2.2 million relates to items previously classified under research equipment and $70 thousand relates to items previously classified under office equipment and furniture on the table above. These leases are further described in Note 7.

 

5. Debt

 

In May 2020, the Company received $567 thousand in loan funding from the Paycheck Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Flexibility Act, and administered by the Small Business Administration. The unsecured loan (the “PPP Loan”) is with Silicon Valley Bank.

Under the terms of the PPP Loan, interest accrued on the outstanding principal at a rate of 1.0% per annum. On August 6, 2021, the Small Business Administration approved the forgiveness for the full amount of the PPP Loan, which included principal of $567 thousand, plus interest. The Company recognized a gain on debt extinguishment in other income (expense) on the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2021.

8


 

6. FAIR VALUE MEASUREMENTS

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