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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

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 No. 001-38359

 

resTORbio, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

81-3305277

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

500 Boylston Street, 13th Floor

Boston, MA

 

 

02116

(Address of principal executive offices)

 

(Zip Code)

(857) 315-5528

(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, par value $0.0001 per share

TORC

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 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 July 29, 2020, the registrant had 36,453,882 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019

4

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

31

Signatures

33

 

 

i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

 

the ability to satisfy the conditions to the merger transaction with Adicet Bio, Inc., including the ability to obtain shareholder approval, on the proposed terms and timeframe;

 

the ability to realize the anticipated benefits of transactions related to the merger transaction with Adicet Bio, Inc. and other restructuring activities, including in connection with the merger transaction, or other initiatives in a timely manner or at all;

 

the risk of unanticipated costs, liabilities or delays relating to the merger transaction with Adicet Bio, Inc., including the outcome of any legal proceedings relating to the merger transaction;

 

the occurrence of any change, effect, event, development, matter, state of facts, series of events or circumstances that could give rise to the termination of the agreement with Adicet Bio, Inc. related to the merger transaction, including a termination of such agreement under circumstances that could require us to pay a termination fee to Adicet Bio, Inc.;

 

our plans to develop and commercialize RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, and other product candidates for the targeted indications and patient populations, including the therapeutic potential and clinical benefits thereof;

 

our future clinical trials for RTB101 alone or in combination with a rapalog, such as everolimus or sirolimus, whether conducted by us or by any future collaborators

 

the timing of initiation and the anticipated results of our ongoing and future clinical trials of RTB101 alone or in combination with rapalogs, such as everolimus or sirolimus;

 

the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;

 

the impact of any business interruptions to our operations or to those of our clinical sites, manufacturers, suppliers, or other vendors resulting from the coronavirus disease (COVID-19) outbreak or similar public health crisis;

 

the rate and degree of market acceptance and clinical utility of any products for which we receive regulatory approval;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position and strategy;

 

our ability to identify additional product candidates with significant commercial potential;

 

our plans to enter into collaborations for the development and commercialization of product candidates;

 

the potential benefits of any future collaboration;

 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

developments relating to our competitors and our industry; and

 

the impact of government laws and regulations.

1


We may not 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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

2


PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

resTORbio, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(In thousands, except share and per share data)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,889

 

 

$

33,774

 

Marketable securities

 

 

 

 

 

57,699

 

Prepaid expenses and other current assets

 

 

2,860

 

 

 

1,780

 

Total current assets

 

 

73,749

 

 

 

93,253

 

Restricted cash

 

 

245

 

 

 

245

 

Property and equipment, net

 

 

348

 

 

 

414

 

Total assets

 

$

74,342

 

 

$

93,912

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,467

 

 

$

6,716

 

Accrued liabilities

 

 

1,097

 

 

 

5,483

 

Total current liabilities

 

 

3,564

 

 

 

12,199

 

Other liabilities

 

 

34

 

 

 

15

 

Total liabilities

 

 

3,598

 

 

 

12,214

 

Commitments and contingencies (see Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized as of

   June 30, 2020 and December 31, 2019; none issued and outstanding

   as of June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.0001 par value, 150,000,000 shares authorized as of

   June 30, 2020 and December 31, 2019; 36,446,853 and 36,444,732

   shares issued and outstanding as of June 30, 2020 and

   December 31, 2019, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

237,509

 

 

 

235,777

 

Accumulated deficit

 

 

(166,769

)

 

 

(154,132

)

Accumulated other comprehensive income

 

 

 

 

 

49

 

Total stockholders’ equity

 

 

70,744

 

 

 

81,698

 

Total liabilities and stockholders’ equity

 

$

74,342

 

 

$

93,912

 

 

See accompanying notes to these condensed consolidated financial statements.

3


resTORbio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

1,788

 

 

$

16,553

 

 

$

6,629

 

 

$

25,405

 

General and administrative

 

 

3,864

 

 

 

2,616

 

 

 

6,403

 

 

 

5,455

 

Total operating expenses

 

 

5,652

 

 

 

19,169

 

 

 

13,032

 

 

 

30,860

 

Loss from operations

 

 

(5,652

)

 

 

(19,169

)

 

 

(13,032

)

 

 

(30,860

)

Other income, net

 

 

54

 

 

 

847

 

 

 

403

 

 

 

1,478

 

Loss before income taxes

 

 

(5,598

)

 

 

(18,322

)

 

 

(12,629

)

 

 

(29,382

)

Income tax expense

 

 

1

 

 

 

10

 

 

 

8

 

 

 

19

 

Net loss

 

$

(5,599

)

 

$

(18,332

)

 

$

(12,637

)

 

$

(29,401

)

Net loss per share, basic and diluted

 

$

(0.15

)

 

$

(0.51

)

 

$

(0.35

)

 

$

(0.91

)

Weighted-average common shares used in computing net loss

   per share, basic and diluted

 

 

36,446,235

 

 

 

35,684,368

 

 

 

36,445,460

 

 

 

32,248,646

 

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(5,599

)

 

$

(18,332

)

 

$

(12,637

)

 

$

(29,401

)

Net unrealized (losses) gains on marketable securities

 

 

(32

)

 

 

138

 

 

 

(49

)

 

 

211

 

Comprehensive loss

 

$

(5,631

)

 

$

(18,194

)

 

$

(12,686

)

 

$

(29,190

)

 

See accompanying notes to these condensed consolidated financial statements.

 

 

4


resTORbio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated Other Compressive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2019

 

 

36,444,732

 

 

$

4

 

 

$

235,777

 

 

$

(154,132

)

 

$

49

 

 

$

81,698

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

1,019

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

975

 

 

 

 

 

 

 

 

 

975

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,038

)

 

 

 

 

 

(7,038

)

Net unrealized losses on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17

)

 

 

(17

)

Balance at March 31, 2020

 

 

36,445,751

 

 

$

4

 

 

$

236,751

 

 

$

(161,170

)

 

$

32

 

 

$

75,617

 

Vesting of restricted stock units, net of shares withheld for taxes

 

 

1,102

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

759

 

 

 

 

 

 

 

 

 

759

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,599

)

 

 

 

 

 

(5,599

)

Net unrealized losses on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32

)

 

 

(32

)

Balance at June 30, 2020

 

 

36,446,853

 

 

$

4

 

 

$

237,509

 

 

$

(166,769

)

 

$

 

 

$

70,744

 

5


resTORbio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

Common Stock

 

 

Additional

Paid In

 

 

Accumulated

 

 

Accumulated Other Compressive

 

 

Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Equity

 

Balance at December 31, 2018

 

 

28,054,344

 

 

$

3

 

 

$

175,635

 

 

$

(71,393

)

 

$

(41

)

 

$

104,204

 

Issuance of common stock upon closing of public offering, net of

   issuance costs of $3,455

 

 

7,200,000

 

 

 

1

 

 

 

46,584

 

 

 

 

 

 

 

 

 

46,585

 

Vesting of restricted shares

 

 

500

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

662

 

 

 

 

 

 

 

 

 

662

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,069

)

 

 

 

 

 

 

(11,069

)

Net unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73

 

 

 

73

 

Balance at March 31, 2019

 

 

35,254,844

 

 

$

4

 

 

$

222,882

 

 

$

(82,462

)

 

$

32

 

 

$

140,456

 

Issuance of common stock upon closing of public offering, net of

   issuance costs of $228

 

 

487,934

 

 

 

 

 

 

3,163

 

 

 

 

 

 

 

 

 

3,163

 

Issuance of common stock pursuant to the at-the-market offering,

   net of issuance costs of $64

 

 

62,663

 

 

 

 

 

 

582

 

 

 

 

 

 

 

 

 

582

 

Vesting of restricted shares

 

 

500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

4,423

 

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

(15

)

Exercise of stock options

 

 

7,029

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

944

 

 

 

 

 

 

 

 

 

944

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(18,332

)

 

 

 

 

 

(18,332

)

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138

 

 

 

138

 

Balance at June 30, 2019

 

 

35,817,393

 

 

$

4

 

 

$

227,562

 

 

$

(100,794

)

 

$

170

 

 

$

126,942

 

 

See accompanying notes to these condensed consolidated financial statements.

 

6


resTORbio, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)  

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(12,637

)

 

$

(29,401

)

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

 

 

 

 

 

 

 

 

Accretion on marketable securities

 

 

150

 

 

 

(625

)

Depreciation and amortization expense

 

 

68

 

 

 

55

 

Stock-based compensation expense

 

 

1,734

 

 

 

1,607

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,080

)

 

 

(1,786

)

Accounts payable

 

 

(4,251

)

 

 

5,197

 

Accrued liabilities

 

 

(4,386

)

 

 

(1,263

)

Other liabilities

 

 

19

 

 

 

(8

)

Net cash used in operating activities

 

 

(20,383

)

 

 

(26,224

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(48

)

Maturities of marketable securities

 

 

57,500

 

 

 

67,500

 

Purchases of marketable securities

 

 

 

 

 

(77,104

)

Net cash provided by (used in) investing activities

 

 

57,500

 

 

 

(9,652

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from public offering, net of issuance costs

 

 

 

 

 

49,748

 

Proceeds from at-the-market offering, net of issuance costs

 

 

 

 

 

627

 

Taxes paid related to net share settlement of restricted stock units

 

 

(2

)

 

 

(9

)

Net cash (used in) provided by financing activities

 

 

(2

)

 

 

50,366

 

Net increase in cash, cash equivalents and restricted cash

 

 

37,115

 

 

 

14,490

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

34,019

 

 

 

6,881

 

Cash, cash equivalents and restricted cash at end of period

 

$

71,134

 

 

$

21,371

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

2

 

 

$

11

 

Issuance costs associated with at-the-market offering included in accounts payable

 

$

 

 

$

45

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

7


resTORbio, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization

resTORbio, Inc. (collectively referred to with its wholly-owned, controlled subsidiaries, resTORbio Securities Corp. and Project Oasis Merger Sub, Inc. (“Merger Sub”) as “resTORbio” or the “Company”) was incorporated in the State of Delaware on July 5, 2016. The Company is a clinical-stage biopharmaceutical company developing innovative medicines that target the biology of aging to prevent or treat aging-related diseases with the potential to extend healthy lifespan. The Company’s principal operations are located in Boston, Massachusetts.

In November 2019, the Company announced that top line data from the PROTECTOR 1 Phase 3 study, evaluating the safety and efficacy of RTB101 in preventing clinically symptomatic respiratory illness in adults age 65 and older, did not meet its primary endpoint and the Company has stopped the development of RTB101 for clinically symptomatic respiratory illness.

In February 2020, the Company retained JMP Securities LLC (“JMP”) as a financial advisor to assist it in its evaluation of a broad range of strategic alternatives to enhance stockholder value, including additional capital raising transactions, an acquisition, merger, business combination, licensing and/or other strategic transaction involving the Company.

On April 28, 2020, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Adicet Bio, Inc. ("Adicet") and Merger Sub pursuant to which, subject to the satisfaction or waiver of the conditions therein, The Merger Sub will merge with and into Adicet (the “Merger”), with Adicet continuing as the surviving company and a wholly-owned subsidiary of resTORbio. The Merger Agreement was approved by the members of the Company's board of directors (the "Board"), and the Board resolved to recommend approval of the Merger Agreement to the Company's shareholders. The closing of the Merger is subject to approval of the Company shareholders and the satisfaction of customary closing conditions.

From the Company’s inception, it has devoted substantially all of its efforts to business planning, engaging regulatory, manufacturing and other technical consultants, planning and executing clinical trials and raising capital. The Company’s future operations are highly dependent on the success of the merger with Adicet.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. The 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, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the Company's financial position as of June 30, 2020 and the results of operations and cash flows for the interim periods ended June 30, 2020 and 2019. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 that was filed with the Securities and Exchange Commission (“SEC”) on March 12, 2020 (the “2019 Form 10-K”). Interim results are not necessarily indicative of results for a full year or for any other interim period. The condensed consolidated financial statements include the accounts of resTORbio, Inc. and its wholly owned subsidiaries, resTORbio Securities Corp. and Project Oasis Merger Sub, Inc. All inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities, as of the date of the condensed consolidated financial statements, and the reported amounts of any expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to accrued liabilities, income taxes, and stock-based compensation expense. Management bases its estimates on historical experience, and on various other market-specific relevant assumptions that management believes to be reasonable, under the circumstances. Actual results may differ from those estimates or assumptions.

8


Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the condensed consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the 2019 Form 10-K. There have been no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2020.

Fair Value Measurements

Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. The authoritative accounting guidance describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable. These levels of inputs are as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3—Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The following table summarizes assets measured at fair value on a recurring basis at June 30, 2020 (in thousands):

 

 

 

 

 

 

 

Active

 

 

Observable

 

 

Unobservable

 

 

 

June 30,

 

 

Markets

 

 

Inputs

 

 

Inputs

 

Description

 

2020

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds (included in

   cash and cash equivalents)

 

$

70,889

 

 

$

70,889

 

 

$

 

 

$

 

Total

 

$

70,889

 

 

$

70,889

 

 

$

 

 

$

 

 

 

The following table summarizes assets measured at fair value on a recurring basis at December 31, 2019 (in thousands):

 

 

 

 

 

 

 

Active

 

 

Observable

 

 

Unobservable

 

 

 

December 31,

 

 

Markets

 

 

Inputs

 

 

Inputs

 

Description

 

2019

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds (included in

   cash and cash equivalents)

 

$

33,774

 

 

$

33,774

 

 

$

 

 

$

 

U.S. treasury securities (included

   in marketable securities)

 

 

57,699

 

 

 

57,699

 

 

 

 

 

 

 

Total

 

$

91,473

 

 

$

91,473

 

 

$

 

 

$

 

 

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). ASU 2018-13 modifies fair value disclosure requirements, specifically around level transfers and valuation of Level 3 assets and liabilities. ASU 2018-13 is effective for financial statements issued for annual and interim periods beginning after December 15, 2019 for all entities. Early adoption of all or part of ASU 2018-13 is permitted. Effective January 1, 2020, the Company adopted the standard. The adoption did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires a lessee to recognize a right-of-use asset and a lease liability for operating leases, initially measured at the present value of the future lease

9


payments, in the balance sheet. ASU 2016-02 also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. For public entities, the guidance was effective for annual reporting periods beginning after December 15, 2018 and for interim periods within those fiscal years. For non-public entities and emerging growth companies that choose to take advantage of the extended transition period, the guidance was effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entities. In June 2020, the FASB issued ASU No. 2020-05, which deferred the effective date for nonpublic entities and emerging growth companies that choose to take advantage of the extended transition period to annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application continues to be allowed. The adoption of this standard is expected to have an impact on the amount of the Company’s assets and liabilities presented. The Company expects to utilize the new transition method described in ASU No. 2018-11 and use the effective date as the Company’s date of initial application for the new standard. The Company expects to elect the available package of practical expedients in transition which would allow it to not re-assess 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 the new lease standard. As of December 31, 2019, the Company has not elected to early adopt the guidance.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which intends to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. For public entities, ASU 2018-07 is required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. For non-public entities and emerging growth companies that choose to take advantage of the extended transition period, ASU 2018-07 is effective for annual periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities but no earlier than the Company’s adoption of ASC 606. The Company does not expect the impact of ASU 2018-07 to be material to its consolidated financial statements.

3. Marketable Securities

As of June 30, 2020, the Company did not have any marketable securities.

As of December 31, 2019, the fair value of marketable securities by type of security was as follows (in thousands):

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

Description

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

U.S. government agency treasuries and securities

 

$

57,650

 

 

$

49

 

 

$

 

 

$

57,699

 

Total

 

$

57,650

 

 

$

49

 

 

$

 

 

$

57,699