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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 June 30, 2021

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: 001-38997

 

RAPT Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-3313701

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

561 Eccles Avenue

South San Francisco, California 94080

(Address of principal executive offices and zip code)

(650) 489-9000 

(Registrant’s telephone number, including area code)

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

RAPT

Nasdaq Global 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 emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

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

 

As of August 6, 2021, there were 29,488,367 shares of the registrants common stock outstanding.

 

 


 

RAPT THERAPEUTICS, INC.

TABLE OF CONTENTS

 

 

 

 

Page No.

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

 

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three- and Six-Months Ended June 30, 2021 and 2020

 

4

 

Condensed Consolidated Statements of Preferred Stock and Stockholders’ Equity for the Three- and Six-Months Ended June 30, 2021 and 2020

 

5

 

Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2021 and 2020

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

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

 

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

21

Item 4.

Controls and Procedures

 

21

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

22

Item 1A.

Risk Factors

 

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

Item 3.

Defaults Upon Senior Securities

 

59

Item 4.

Mine Safety Disclosures

 

59

Item 5.

Other Information

 

59

Item 6.

Exhibits

 

60

Signatures

 

61

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

 

RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,220

 

 

$

24,918

 

Marketable securities

 

 

137,084

 

 

 

86,592

 

Prepaid expenses and other current assets

 

 

4,651

 

 

 

4,088

 

Total current assets

 

 

227,955

 

 

 

115,598

 

Property and equipment, net

 

 

2,737

 

 

 

2,982

 

Other assets

 

 

389

 

 

 

389

 

Total assets

 

$

231,081

 

 

$

118,969

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,714

 

 

$

2,383

 

Accrued expenses

 

 

5,068

 

 

 

4,935

 

Deferred revenue, current

 

 

2,283

 

 

 

4,096

 

Other current liabilities

 

 

329

 

 

 

328

 

Total current liabilities

 

 

10,394

 

 

 

11,742

 

Deferred rent, net of current portion

 

 

2,141

 

 

 

2,185

 

Deferred revenue, non-current

 

 

967

 

 

 

863

 

Total liabilities

 

 

13,502

 

 

 

14,790

 

Commitments

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

2

 

Additional paid-in capital

 

 

465,179

 

 

 

319,196

 

Accumulated other comprehensive loss

 

 

(137

)

 

 

(177

)

Accumulated deficit

 

 

(247,466

)

 

 

(214,842

)

Total stockholders' equity

 

 

217,579

 

 

 

104,179

 

Total liabilities and stockholders' equity

 

$

231,081

 

 

$

118,969

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

3


RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

869

 

 

$

1,277

 

 

$

2,091

 

 

$

2,212

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,190

 

 

 

10,986

 

 

 

26,961

 

 

 

21,669

 

General and administrative

 

 

3,760

 

 

 

2,802

 

 

 

7,772

 

 

 

6,091

 

Total operating expenses

 

 

16,950

 

 

 

13,788

 

 

 

34,733

 

 

 

27,760

 

Loss from operations

 

 

(16,081

)

 

 

(12,511

)

 

 

(32,642

)

 

 

(25,548

)

Other income (expense), net

 

 

(29

)

 

 

391

 

 

 

18

 

 

 

526

 

Net loss before taxes

 

 

(16,110

)

 

 

(12,120

)

 

 

(32,624

)

 

 

(25,022

)

Provision for income taxes

 

 

 

 

 

267

 

 

 

 

 

 

504

 

Net loss

 

$

(16,110

)

 

$

(12,387

)

 

$

(32,624

)

 

$

(25,526

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

70

 

 

 

(199

)

 

 

108

 

 

 

5

 

Unrealized gain (loss) on marketable securities

 

 

(18

)

 

 

369

 

 

 

(68

)

 

 

152

 

Total comprehensive loss

 

$

(16,058

)

 

$

(12,217

)

 

$

(32,584

)

 

$

(25,369

)

Net loss per share, basic and diluted

 

$

(0.63

)

 

$

(0.51

)

 

$

(1.29

)

 

$

(1.08

)

Weighted average number of shares used in computing net loss

   per share, basic and diluted

 

 

25,589,947

 

 

 

24,336,102

 

 

 

25,217,542

 

 

 

23,743,058

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

24,773,361

 

 

$

2

 

 

$

319,196

 

 

$

(177

)

 

$

(214,842

)

 

$

104,179

 

Proceeds from issuances of common stock in “at the market” offerings, net of issuance costs

 

 

 

 

 

 

 

 

57,100

 

 

 

 

 

 

1,180

 

 

 

 

 

 

 

 

 

1,180

 

Issuances from employee stock plans

 

 

 

 

 

 

 

 

31,620

 

 

 

 

 

 

121

 

 

 

 

 

 

 

 

 

121

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,687

 

 

 

 

 

 

 

 

 

2,687

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

 

 

 

(50

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,514

)

 

 

(16,514

)

Balance at March 31, 2021

 

 

 

 

$

 

 

 

24,862,081

 

 

$

2

 

 

$

323,184

 

 

$

(189

)

 

$

(231,356

)

 

$

91,641

 

Issuance of common stock from the public offering, net of issuance costs

 

 

 

 

 

 

 

 

4,356,060

 

 

 

1

 

 

 

134,581

 

 

 

 

 

 

 

 

 

134,582

 

Proceeds from issuances of common stock in “at the market” offerings, net of issuance costs

 

 

 

 

 

 

 

 

157,871

 

 

 

 

 

 

3,510

 

 

 

 

 

 

 

 

 

3,510

 

Issuances from employee stock plans

 

 

 

 

 

 

 

 

99,909

 

 

 

 

 

 

1,016

 

 

 

 

 

 

 

 

 

1,016

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,888

 

 

 

 

 

 

 

 

 

2,888

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

 

 

 

70

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,110

)

 

 

(16,110

)

Balance at June 30, 2021

 

 

 

 

$

 

 

 

29,475,921

 

 

$

3

 

 

$

465,179

 

 

$

(137

)

 

$

(247,466

)

 

$

217,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

 

 

$

 

 

 

21,833,037

 

 

$

2

 

 

$

235,049

 

 

$

20

 

 

$

(161,950

)

 

$

73,121

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

 

2,500,000

 

 

 

 

 

 

69,842

 

 

 

 

 

 

 

 

 

69,842

 

Issuances from employee stock plans

 

 

 

 

 

 

 

 

970

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,088

 

 

 

 

 

 

 

 

 

2,088

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

204

 

 

 

 

 

 

204

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(217

)

 

 

 

 

 

(217

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,139

)

 

 

(13,139

)

Balance at March 31, 2020

 

 

 

 

$

 

 

 

24,334,007

 

 

$

2

 

 

$

307,009

 

 

$

7

 

 

$

(175,089

)

 

$

131,929

 

Issuances from employee stock plans

 

 

 

 

 

 

 

 

108,835

 

 

 

 

 

 

864

 

 

 

 

 

 

 

 

 

864

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,035

 

 

 

 

 

 

 

 

 

2,035

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(199

)

 

 

 

 

 

(199

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

369

 

 

 

 

 

 

369

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,387

)

 

 

(12,387

)

Balance at June 30, 2020

 

 

 

 

$

 

 

 

24,442,842

 

 

$

2

 

 

$

309,908

 

 

$

177

 

 

$

(187,476

)

 

$

122,611

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

5


 

RAPT THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(32,624

)

 

$

(25,526

)

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

 

 

 

 

 

 

 

 

Amortization of premium on marketable securities

 

 

430

 

 

 

51

 

Depreciation and amortization

 

 

536

 

 

 

595

 

Stock-based compensation expense

 

 

5,575

 

 

 

4,123

 

Gain on foreign currency translation

 

 

108

 

 

 

5

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(563

)

 

 

(4

)

Accounts payable, accrued expenses, and other current liabilities

 

 

471

 

 

 

1,811

 

Deferred revenue

 

 

(1,709

)

 

 

3,788

 

Deferred rent

 

 

(50

)

 

 

(15

)

Net cash used in operating activities

 

 

(27,826

)

 

 

(15,172

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(118,705

)

 

 

(111,892

)

Proceeds from maturities of marketable securities

 

 

67,715

 

 

 

8,000

 

Purchase of property and equipment

 

 

(291

)

 

 

(98

)

Net cash used in investing activities

 

 

(51,281

)

 

 

(103,990

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from public offering, net of issuance costs

 

 

134,582

 

 

 

69,842

 

Proceeds from issuances of common stock in “at the market” offerings, net of issuance costs

 

 

4,690

 

 

 

 

Proceeds from issuance of common stock under the employee stock plans

 

 

1,137

 

 

 

894

 

Net cash provided by financing activities

 

 

140,409

 

 

 

70,736

 

Net increase (decrease) in cash and cash equivalents

 

 

61,302

 

 

 

(48,426

)

Cash and cash equivalents at beginning of period

 

 

24,918

 

 

 

77,383

 

Cash and cash equivalents at end of period

 

$

86,220

 

 

$

28,957

 

Supplemental disclosures of non-cash investing and financing information

 

 

 

 

 

 

 

 

Issuance costs related to public offering included in accrued expenses

 

$

403

 

 

$

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

6


RAPT THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization

Description of the Business

RAPT Therapeutics, Inc. (“RAPT” or the “Company”) is a clinical-stage, immunology-based biopharmaceutical company focused on discovering, developing and commercializing oral small molecule therapies for patients with significant unmet needs in oncology and inflammatory diseases. Utilizing its proprietary drug discovery and development engine, the Company develops highly selective small molecules that are designed to modulate the critical immune responses underlying these diseases.

The Company is located in South San Francisco, California.

Equity Financings

During the six months ended June 30, 2021, the Company sold 214,971 shares of common stock in “at the market” offerings pursuant to a Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co. and Stifel, Nicolaus & Company, Incorporated (the “ATM Sales Agreement”), for net proceeds of $4.7 million after deducting commissions and other offering related costs. As of June 30, 2021, there was up to $90.9 million available for future issuance of shares of common stock under the ATM Sales Agreement.

In June 2021, pursuant to the shelf registration statement on Form S-3 that was declared effective by the Securities and Exchange Commission (“SEC”) on November 16, 2020, the Company completed a public offering (“2021 Public Offering”) of 4,356,060 shares of common stock, including 568,181 shares of the common stock issued in connection with the exercise by the underwriters of their over-allotment option, at a public offering price of $33.00 per share. The Company received approximately $134.6 million in net proceeds from the 2021 Public Offering, after deducting underwriting discounts and other offering-related costs.

 

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and pursuant to Article 10 of Regulation S‑X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Companys financial position and the results of its operations and cash flows. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed consolidated financial statements and the notes accompanying them should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 11, 2021 with the SEC.

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and include the consolidated accounts of the Company and its wholly-owned subsidiary, RAPT Therapeutics Australia Pty Ltd. All intercompany balances and transactions have been eliminated in consolidation.

Revenue

License and collaborative agreement revenue consists of license, milestone and royalty payments generated through agreements with strategic partners for the development and commercialization of certain product candidates. The terms of an agreement may include a non-refundable upfront fee, payments based upon achievement of milestones and royalties on net product sales. If a portion of the nonrefundable upfront fee or other payments received is allocated to continuing performance obligations under the terms of an agreement, such portion is recorded as deferred revenue and recognized as revenue when or as the underlying performance obligation is satisfied.

7


The Company recognizes revenue when it transfers promised goods or services to customers or counterparties in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized, the Company performs the following steps: (i) identification of the promised goods or services in the agreement; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the agreement; (iii) measurement of the transaction price, including any constraint on variable consideration; (iv) allocation of the transaction price to performance obligations based on estimated selling prices; and (v) recognition of revenue when or as the Company satisfies each performance obligation.

Licenses: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an agreement, the Company will recognize revenue from the nonrefundable, upfront fee allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. If a license is bundled with other performance obligations, the Company utilizes judgment to assess the nature of the combined performance obligations to determine whether the combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: If an agreement includes event-based or milestone payments, the Company evaluates whether the events or milestones are considered likely to be achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is unlikely that a significant revenue reversal would occur, the value of the associated event-based or milestone payments is included in the transaction price. Event-based or milestone payments that are not within the control of the Company are not included in the transaction price until they become likely to be achieved.

Royalties: If an agreement includes sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

Stock-Based Compensation

The Company measures stock-based compensation expense for all employee and non-employee stock-based awards based on their grant date fair value using the Black-Scholes option-pricing model. Subsequent to the adoption of ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, stock-based compensation expense for non-employee stock-based awards is also measured based on the grant date fair value with the estimated fair value expensed over the period for which the non-employee is required to provide service in exchange for the award. For stock-based awards with service conditions only, stock-based compensation expense is recognized over the requisite service period using the straight-line method. For awards with performance conditions, the Company evaluates the probability of achieving performance conditions at each reporting date. The Company recognizes stock-based compensation expense using an accelerated attribution method when it is deemed probable that the performance condition will be met. Forfeitures are recognized as they occur.

The fair value of restricted stock awards granted after the Company’s initial public offering (“IPO”) is determined based on the stock price on the date of grant. The estimated fair value is amortized as compensation expense over the service period of the award.

Stock-based compensation expense related to the Company’s employee stock purchase plan is recognized based on the fair value of each award estimated on the first day of the offering period using the Black‑Scholes option-pricing model and recorded as expense over the service period using the straight‑line method.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares outstanding during the period plus the number of potential dilutive securities outstanding during the period calculated in accordance with the treasury stock method. Diluted net loss per share is the same as basic net loss per share for all periods presented since the effect of including potential dilutive securities is anti-dilutive.

8


Marketable securities

Marketable securities primarily consist of commercial paper, corporate bonds and U.S. government agency securities. The Company has classified its marketable securities as available-for-sale and may sell these securities prior to their stated maturities. The Company views these marketable securities as available to support current operations and classifies marketable securities with maturities beyond 12 months as current assets. The Company’s marketable securities are carried at estimated fair value, which is derived from independent pricing sources based on quoted prices in active markets for similar securities. Unrealized gains and losses are reported as a component of accumulated other comprehensive loss, net of tax. The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in other income, net on the condensed consolidated statements of operations.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on our condensed consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

In February 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-02, Leases. ASU 2016-02 requires lessees to record most leases on their balance sheet while recognizing expense in a manner similar to the accounting under the original lease guidance (Topic 840). ASU 2016‑02 states that a lessee would recognize a lease liability for the obligation to make lease payments as well as a right-to-use asset for the right to use the underlying asset for the lease term. ASU 2016-02 is effective for the Company’s fiscal year beginning after December 15, 2021 and early adoption is permitted. The Company intends to adopt the new guidance as of January 1, 2022. The Company is currently evaluating the impact of adopting ASU 2016-02.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amended the guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For available-for-sale debt securities, credit losses will be presented as an allowance rather than as a write-down. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to increase awareness of the amendments and to expedite improvements to Topic 326. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses, Topic 326, which provided companies an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. These ASUs do not change the core principle of the guidance in ASU 2016-13; instead, these amendments are intended to clarify and improve operability of certain topics. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates and ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which defer the effective date of the new credit loss standard. ASU 2016-13 and its related amendments are effective for the Company’s fiscal year beginning after December 15, 2022 and early adoption is permitted. The Company is currently assessing when it will adopt ASU 2016-13 and the impact that adoption will have on its condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Financial instruments such as cash and cash equivalents, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.

Assets and liabilities recorded at fair value on a recurring basis in the balance sheet are categorized based on the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

9


Level 3Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

To date, the Company has not recorded any impairment charges on marketable securities due to other-than-temporary declines in market value. In determining whether a decline is other than temporary, the Company considers various factors, including the length of time and extent to which the market value has been less than amortized cost, the financial condition and near-term prospects of the issuer and the Company’s intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

The Company estimates the fair values of investments in corporate debt securities, commercial paper and U.S. government agency securities using valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

Cash equivalents and marketable securities, all of which are classified as available-for-sale securities and measured at fair value on a recurring basis, consisted of the following (in thousands):

 

 

 

 

 

As of June 30, 2021

 

 

 

Fair Value

Hierarchy

Level

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds—classified

   as cash equivalents

 

Level 1

 

$

84,393

 

 

$

 

 

$

 

 

$

84,393

 

Corporate debt

 

Level 2

 

 

72,797

 

 

 

9

 

 

 

(28

)

 

 

72,778

 

Commercial paper

 

Level 2

 

 

45,530

 

 

 

 

 

 

 

 

 

45,530

 

U.S. government agency securities

 

Level 2

 

 

18,773

 

 

 

3

 

 

 

 

 

 

18,776

 

Total

 

 

 

$

221,493

 

 

$

12

 

 

$

(28

)

 

$

221,477

 

 

 

 

 

 

As of December 31, 2020

 

 

 

Fair Value

Hierarchy

Level

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds—classified

   as cash equivalents

 

Level 1

 

$

21,333

 

 

$

 

 

$

 

 

$

21,333

 

Corporate debt

 

Level 2

 

 

32,164

 

 

 

48

 

 

 

 

 

 

32,212

 

Asset-backed securities

 

Level 2

 

 

12,367

 

 

 

2

 

 

 

(1

)

 

 

12,368