UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from to .
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Common Stock, par value $.001 per share |
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Class | Outstanding as of November 8, 2021 |
IDERA PHARMACEUTICALS, INC.
FORM 10-Q
TABLE OF CONTENTS
Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to “Idera,” the “Company,” “we,” “us,” and “our” refer to Idera Pharmaceuticals, Inc.
IMO® and Idera® are our trademarks. All other trademarks and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
i
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact, included or incorporated in this report regarding our strategy, future operations, clinical trials, collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “continue,” “will,” “schedule,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we will actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause the actual results, performance, or achievements of the Company to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements.
There are a number of important factors that could cause our actual results to differ materially from those indicated or implied by forward-looking statements. These important factors include those set forth under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021 (the “2020 Form 10-K), in this Quarterly Report on Form 10-Q, and in our other disclosures and filings with the SEC. These factors and the other cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all related forward-looking statements whenever they appear in this Quarterly Report on Form 10-Q.
In addition, any forward-looking statements represent our estimates only as of the date that this Quarterly Report on Form 10-Q is filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. All forward-looking statements included in this Quarterly Report on Form 10-Q are made as of the date hereof and are expressly qualified in their entirety by this cautionary notice. We disclaim any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.
ii
PART I — FINANCIAL INFORMATION
Item 1. | Financial Statements. |
IDERA PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| September 30, |
| December 31, |
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(In thousands) | 2021 | 2020* |
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ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Short-term investments |
| — |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets | | | |||||
Other assets |
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Total assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||
Current liabilities: | |||||||
Accounts payable | $ | | $ | | |||
Accrued expenses |
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Operating lease liability | | | |||||
Other current liability | — | | |||||
Total current liabilities |
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Warrant liability, long-term | — | | |||||
Future tranche right liability, long-term | — | | |||||
Operating lease liability, net of current portion | | | |||||
Total liabilities |
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Commitments and contingencies (Note 13) | |||||||
Preferred stock, $ | |||||||
Series B1 redeemable convertible preferred stock (Note 7); Designated — | |||||||
Stockholders’ equity (deficit): | |||||||
Preferred stock, $ | |||||||
Series A convertible preferred stock; Designated — |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( |
| ( | |||
Total stockholders’ equity (deficit) |
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| ( | |||
Total liabilities and stockholders’ equity (deficit) | $ | | $ | |
* The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date.
The accompanying notes are an integral part of these financial statements
1
IDERA PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
(In thousands, except per share amounts) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
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Operating expenses: | |||||||||||||
Research and development | $ | | $ | | $ | | $ | | |||||
General and administrative |
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Restructuring costs | | — | | — | |||||||||
Total operating expenses |
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Loss from operations |
| ( |
| ( |
| ( |
| ( | |||||
Other income (expense): | |||||||||||||
Interest income |
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Interest expense |
| — |
| — |
| ( |
| — | |||||
Warrant revaluation gain (loss) | — | ( | | ( | |||||||||
Future tranche right revaluation gain (loss) | — | ( | | ( | |||||||||
Foreign currency exchange (loss) gain |
| |
| ( |
| ( |
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Net income / (loss) | $ | ( | $ | ( | $ | | $ | ( | |||||
Net income (loss) applicable to common stockholders (Note 12) | |||||||||||||
— Basic | $ | ( | $ | ( | $ | | $ | ( | |||||
— Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Net income (loss) per share applicable to common stockholders (Note 12) | |||||||||||||
— Basic | $ | ( | $ | ( | $ | | $ | ( | |||||
— Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Weighted-average number of common shares used in computing net income (loss) per share applicable to common stockholders | |||||||||||||
— Basic | | |
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— Diluted | | |
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The accompanying notes are an integral part of these financial statements.
2
IDERA PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | |||||||
September 30, | |||||||
(In thousands) |
| 2021 |
| 2020 |
| ||
Cash Flows from Operating Activities: | |||||||
Net income (loss) | $ | | $ | ( | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Stock-based compensation |
| |
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Warrant liability revaluation gain | ( | | |||||
Future tranche right liability revaluation gain | ( | | |||||
Issuance of common stock for services rendered | |
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Accretion of discounts on short-term investments | ( |
| ( | ||||
Depreciation and amortization expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets | |
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Accounts payable, accrued expenses, and other liabilities | ( |
| ( | ||||
Other | | | |||||
Net cash used in operating activities |
| ( |
| ( | |||
Cash Flows from Investing Activities: | |||||||
Purchases of available-for-sale securities |
| — |
| ( | |||
Proceeds from maturity of available-for-sale securities |
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Purchases of property and equipment |
| — |
| ( | |||
Net cash provided by (used in) investing activities |
| |
| ( | |||
Cash Flows from Financing Activities: | |||||||
Proceeds from common stock financings, net |
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Proceeds from employee stock purchases |
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Proceeds from exercise of common stock options and warrants |
| | — | ||||
Payments on seller-financed purchases | ( |
| — | ||||
Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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| ( | |||
Cash and cash equivalent, beginning of period |
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Cash and cash equivalents, end of period | $ | | $ | | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | | $ | — | |||
Supplemental disclosure of non-cash financing and investing activities: | |||||||
Offering costs in accounts payable and accrued expenses | $ | — | $ | |
The accompanying notes are an integral part of these financial statements.
3
IDERA PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||
Series B1 Preferred | Common Stock | Additional | Total | |||||||||||||||||
Number of | $0.01 Par | Number of | $0.001 Par | Paid-In | Accumulated | Stockholders’ | ||||||||||||||
(In thousands) | Shares |
| Value |
| Shares |
| Value |
| Capital |
| Deficit |
| Deficit | |||||||
Balance, December 31, 2019 |
| | $ | — | | $ | | $ | | $ | ( | $ | ( | |||||||
Sale of common stock, net of issuance costs |
| — |
| — | | | | — | | |||||||||||
Issuance of common stock under employee stock purchase plan |
| — |
| — | | — | | — | | |||||||||||
Issuance of common stock under equity incentive plan (vesting of restricted stock units) | — | — | | — | — | — | — | |||||||||||||
Issuance of common stock for services rendered |
| — |
| — | | — | | — | | |||||||||||
Stock-based compensation |
| — |
| — | — | — | | — | | |||||||||||
Net income |
| — | — | — | — | — | | | ||||||||||||
Balance, March 31, 2020 |
| | $ | — | | $ | | $ | | $ | ( | $ | ( | |||||||
Sale of common stock, net of issuance costs |
| — |
| — | | | | — | | |||||||||||
Issuance of common stock under employee stock purchase plan |
| — |
| — | | — | | — | | |||||||||||
Issuance of common stock for services rendered |
| — |
| — | | — | | — | | |||||||||||
Stock-based compensation |
| — |
| — | — | — | | — | | |||||||||||
Net loss |
| — | — | — | — | — | ( | ( | ||||||||||||
Balance, June 30, 2020 |
| | $ | — | | $ | | $ | | $ | ( | $ | ( | |||||||
Sale of common stock and prefunded warrants, net of issuance costs |
| — | — | | | | — | | ||||||||||||
Issuance of common stock under employee stock purchase plan |
| — | — | | — | | — | | ||||||||||||
Issuance of common stock for services rendered |
| — | — | | — | | — | | ||||||||||||
Stock-based compensation |
| — | — | — | — | | — | | ||||||||||||
Net loss |
| — | — | — | — | — | ( | ( | ||||||||||||
Balance, September 30, 2020 |
| | $ | — | | $ | | $ | | $ | ( | $ | ( |
4
IDERA PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
(UNAUDITED)
For the Nine Months Ended September 30, 2021 | ||||||||||||||||||||
Series B1 Preferred | Common Stock | Additional | Total | |||||||||||||||||
Number of | $0.01 Par | Number of | $0.001 Par | Paid-In | Accumulated | Stockholders’ | ||||||||||||||
(In thousands) | Shares |
| Value |
| Shares |
| Value |
| Capital |
| Deficit |
| Equity (Deficit) | |||||||
Balance, December 31, 2020 |
| | $ | — | | $ | | $ | | $ | ( | $ | ( | |||||||
Sale of common stock, net of issuance costs |
| — |
| — | | | | — | | |||||||||||
Conversion of Series B1 preferred stock | ( | — | | | ( | — | — | |||||||||||||
Issuance of common stock under employee stock purchase plan |
| — |
| — | |
| — |
| |
| — |
| | |||||||
Issuance of common stock under equity incentive plan (vesting of restricted stock units) | — |
| — | |
| — |
| — |
| — |
| — | ||||||||
Issuance of common stock upon exercise of common stock options and warrants | — |
| — | | | | — | | ||||||||||||
Issuance of common stock for services rendered |
| — |
| — | |
| — |
| |
| — |
| | |||||||
Stock-based compensation |
| — |
| — | — |
| — |
| |
| — |
| | |||||||
Net income |
| — | — | — |
| — |
| — |
| |
| | ||||||||
Balance, March 31, 2021 | | $ | — | | $ | | $ | | $ | ( | $ | | ||||||||
Sale of common stock, net of issuance costs | — | — | | | | — | | |||||||||||||
Conversion of Series B1 preferred stock | ( | — | | | ( | — | — | |||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | | — | | — | | |||||||||||||
Issuance of common stock upon exercise of common stock options and warrants | — | — | | | ( | — | — | |||||||||||||
Issuance of common stock for services rendered | — | — | | — | | — | | |||||||||||||
Stock-based compensation | — | — | — | — | | — | | |||||||||||||
Net loss | — | — | — | — | — | ( | ( | |||||||||||||
Balance, June 30, 2021 | — | $ | — | | $ | | $ | | $ | ( | $ | | ||||||||
Sale of common stock, net of issuance costs | — | — | | | | — | | |||||||||||||
Issuance of common stock under employee stock purchase plan | — |
| — | | — | | — | | ||||||||||||
Stock-based compensation | — | — | — | — | | — | | |||||||||||||
Net loss | — | — | — | — | — | ( | ( | |||||||||||||
Balance, September 30, 2021 |
| — | $ | — | | $ | | $ | | $ | ( | $ | |
The accompanying notes are an integral part of these financial statements
5
IDERA PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2021
Note 1. Business and Organization
Business Overview
Idera Pharmaceuticals, Inc. (“Idera” or the “Company”), a Delaware corporation, is a clinical-stage biopharmaceutical company with a business strategy focused on the clinical development, and ultimately the commercialization, of drug candidates for rare disease indications characterized by small, well-defined patient populations with serious unmet medical needs. The Company’s current focus is to identify and potentially acquire rights to novel development or commercial stage rare disease programs, as well as on its Toll-like receptor (“TLR”) agonist, tilsotolimod (IMO-2125), for oncology. The Company believes it can develop and commercialize targeted therapies on its own. The Company has in the past and may in the future explore collaborative alliances to support development and commercialization of any of its drug candidates.
Reduction-in-Force
In April 2021, following the announcement that the Company’s ILLUMINATE-301 trial did not meet its primary endpoint of objective response rate (“ORR”), the Company implemented a reduction-in-force which affected approximately
In connection with these actions, the Company incurred and paid termination costs for the reduction in workforce, which includes severance, benefits and related costs, of approximately $
Liquidity and Financial Condition
As of September 30, 2021, the Company had an accumulated deficit of $
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management currently anticipates that the Company’s balance of cash and cash equivalents on hand as of September 30, 2021 is sufficient to enable the Company to continue as a going concern through the one-year period subsequent to the filing date of this Quarterly Report on Form 10-Q. The Company has and will continue to evaluate available alternatives to extend its operations beyond this date, which include raising additional capital through the LPC Agreement (Note 8) and ATM Agreement (Note 8) or additional financing or strategic transactions. Additionally, management’s plans may include the possible deferral of certain operating expenses unless additional capital is received. Management’s operating plan, which underlies the analysis of the Company’s ability to continue as a going concern, involves the estimation of the amount and timing of future cash inflows and outflows. Actual results could vary from the operating plan.
6
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements included herein have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, and disclosures considered necessary for a fair presentation of interim period results have been included. Interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. For further information, refer to the financial statements and footnotes thereto included in the Company’s 2020 Form 10-K.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of 90 days or less when purchased to be “cash equivalents.” Cash and cash equivalents at September 30, 2021 consisted of cash and money market funds. Cash and cash equivalents at December 31, 2020 consisted of cash and cash equivalents and short-term investments.
Financial Instruments
The fair value of the Company’s financial instruments is determined and disclosed in accordance with the three-tier fair value hierarchy specified in Note 3. The Company is required to disclose the estimated fair values of its financial instruments. As of September 30, 2021, the Company’s financial instruments consisted of cash and cash equivalents. As of December 31, 2020, the Company’s financial instruments consisted of cash, cash equivalents, short-term investments, receivables and warrant and future tranche right liabilities. The estimated fair values of these financial instruments approximate their carrying values. As of September 30, 2021, the Company did not have any derivatives, hedging instruments or other similar financial instruments.
Concentration of Credit Risk
Financial instruments that subject the Company to credit risk primarily consist of cash, cash equivalents, and short-term investments. The Company’s credit risk is managed by investing in highly rated money market instruments, U.S. treasury bills, corporate bonds, commercial paper and/or other debt securities. Due to these factors, no significant additional credit risk is believed by management to be inherent in the Company’s assets. As of September 30, 2021, all the Company’s cash and cash equivalents were held at
Operating Lease Right-of-use Assets and Lease Liability
The Company accounts for leases under ASC Topic 842, Leases. Operating leases are included in “Operating lease right-of-use assets” within the Company’s condensed balance sheets and represent the Company’s right to use an underlying asset for the lease term. The Company’s related obligation to make lease payments are included in “Operating lease liability” and “Operating lease liability, net of current portion” within the Company’s condensed balance sheets. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The ROU assets are tested for impairment according to ASC Topic 360, Property, Plant, and Equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term.
As of September 30, 2021 and December 31, 2020, the Company’s operating lease ROU assets and corresponding short-term and long-term lease liabilities primarily relate to its existing Exton, PA facility operating lease which expires on May 31, 2025.
7
Note 2. Summary of Significant Accounting Policies (Continued)
Warrant Liability
The Company accounts for stock warrants as either equity instruments, liabilities or derivative liabilities in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480) and/or ASC Topic 815, Derivatives and Hedging (ASC 815), depending on the specific terms of the warrant agreement. Freestanding warrants for shares that are potentially redeemable, whereby the Company may be required to transfer assets (e.g. cash or other assets) outside of its control, are classified as liabilities. Liability-classified warrants are recorded at their estimated fair values at each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are recorded in Warrant Revaluation (Loss) Gain in the Company’s condensed statements of operations. Equity-classified warrants are recorded within additional paid-in capital at the time of issuance and not subject to remeasurement. During the three months ended March 31, 2021, all the Company’s liability-classified warrants terminated and, accordingly, the liability balance was derecognized. For additional discussion on warrants, see Note 8.
Future Tranche Right Liability
On December 23, 2019, the Company entered into a Securities Purchase Agreement (the “December 2019 Securities Purchase Agreement”) with institutional investors affiliated with Baker Brothers (as defined below), an existing stockholder (see Note 11). As more fully described in Note 7, the December 2019 Securities Purchase Agreement contained call options on redeemable preferred shares with warrants (conditionally exercisable for shares that are puttable). The Company determined that these call options represented freestanding financial instruments and accounted for the options as liabilities (“Future Tranche Right Liability”) under ASC 480, which requires the measurement and recognition of the fair value of the liability at the time of issuance and at each reporting period. Any change in fair value is recognized in Future Tranche Right Liability Revaluation Gain (Loss) in the Company’s condensed statements of operations. During the three months ended March 31, 2021, the liability-classified call options provided for under the December 2019 Securities Purchase Agreement terminated and, accordingly, the liability balance was derecognized. For additional discussion on the Future Tranche Right Liability, see Note 7.
Preferred Stock
The Company applies ASC 480 when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.
Accretion of redeemable convertible preferred stock includes the accretion of the Company's Series B redeemable convertible preferred stock to its stated value. The carrying value of the Series B redeemable convertible preferred stock is accreted to redemption value using the effective interest method, from the date of issuance to the earliest date the holders can demand redemption or until the redeemable convertible preferred stock cease to be outstanding.
Income Taxes
In accordance with ASC Topic 270, Interim Reporting, and ASC Topic 740, Income Taxes, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. For the three and nine months ended September 30, 2021 and 2020, the Company recorded
8
Note 2. Summary of Significant Accounting Policies (Continued)
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, as of September 30, 2021, management does not believe that any other recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future financial statements.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the guidance on an issuer’s accounting for convertible instruments and contracts in its own equity. The Company adopted ASU 2020-06 in the first quarter of 2021. The adoption of this ASU did not have a material effect on the Company’s financial statements.
COVID-19
While the Company is not aware of a material impact from the continuation of the coronavirus ("COVID-19") pandemic through September 30, 2021, the full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations, and financial condition, including expenses and manufacturing, clinical trials, and research and development costs, depends on future developments that are highly uncertain at this time.
Note 3. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company applies the guidance in ASC Topic 820, Fair Value Measurement, to account for financial assets and liabilities measured on a recurring basis. Fair value is measured at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.
The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following three categories:
● | Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
● | Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability, or |
● | Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were
9
Note 3. Fair Value Measurements (Continued)
The table below presents the assets and liabilities measured and recorded in the financial statements at fair value on a recurring basis at September 30, 2021 and December 31, 2020 categorized by the level of inputs used in the valuation of each asset and liability.
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September 30, 2021 |
| ||||||||||||
(In thousands) | Total | Level 1 | Level 2 | Level 3 |
| ||||||||
Assets | |||||||||||||
Cash | $ | | $ | | $ | — | $ | — | |||||
Cash equivalents – money market funds | | | — | — | |||||||||
Total assets | $ | | $ | | $ | — | $ | — | |||||
December 31, 2020 | |||||||||||||
(In thousands) | Total | Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||||
Cash | $ | | $ | | $ | — | $ | — | |||||
Cash equivalents – money market funds | | | — | — | |||||||||
Short-term investments – commercial paper | | — |
| |
| — | |||||||
Short-term investments – US treasury bills |
| |
| — |
| |
| — | |||||
Total assets | $ | | $ | | $ | | $ | — | |||||
Liabilities | |||||||||||||
Warrant liability | $ | | $ | — | $ | — | $ | | |||||
Future tranche right liability | | — | — | | |||||||||
Total liabilities | $ | | $ | — | $ | — | $ | |
The Level 1 assets consist of money market funds, which are actively traded daily. The Level 2 assets consist of commercial paper and U.S. treasury bills whose fair value may not represent actual transactions of identical securities. The fair value of commercial paper is generally determined based on the relationship between the investment’s discount rate and the discount rates of the same issuer’s commercial paper available in the market which may not be actively traded daily. Since these fair values may not be based upon actual transactions of identical securities, they are classified as Level 2.
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
Warrant Liability and Future Tranche Right Liability
The reconciliation of the Company's warrant and future tranche right liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:
Future | ||||||
Warrant | Tranche Right | |||||
(In thousands) | Liability | Liability | ||||
Balance, December 31, 2020 |
| $ | | $ | | |
Change in the fair value of liability (1) |
|
| ( |
| ( | |
Balance, September 30, 2021 |
| $ | — | $ | — |
(1) | During the nine months ended September 30, 2021, the Company’s liability-classified warrants and future tranche rights terminated, and accordingly, the liabilities were derecognized. |
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Note 4. Investments
The Company’s available-for-sale investments at fair value consisted of the following as of December 31, 2020:
December 31, 2020 |
| ||||||||||||
Gross | Gross | Estimated |
| ||||||||||
Unrealized | Unrealized | Fair |
| ||||||||||
(In thousands) |
| Cost |
| (Losses) |
| Gains |
| Value |
| ||||
Short-term investments – commercial paper | $ | | $ | — | $ | — | $ | | |||||
Short-term investments – US treasury bills |
| |
| — |
| — |
| | |||||
Total short-term investments | $ | | $ | — | $ | — | $ | |
The Company had
As of December 31, 2020, the Company had