crtx-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended March 31, 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 Number: 001-38890

 

Cortexyme, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

90-1024039

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

269 East Grand Ave.

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (415) 910-5717

 

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 $0.001 per share

 

CRTX

 

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, a 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 May 11, 2020, the registrant had 29,417,286 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations and Comprehensive Loss

2

 

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

3

 

Condensed Statements of Cash Flows

4

 

Notes to Unaudited Condensed Financial Statements

5

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

23

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

Signatures

31

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Cortexyme, Inc.

Condensed Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

March 31, 2020

 

 

December 31, 2019 (1)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

85,606

 

 

$

51,214

 

Short term investments

 

 

76,810

 

 

 

48,650

 

Prepaid expenses and other current assets

 

 

6,172

 

 

 

6,192

 

Total current assets

 

 

168,588

 

 

 

106,056

 

Property and equipment, net

 

 

624

 

 

 

709

 

Operating lease right-of-use assets, net

 

 

637

 

 

 

625

 

Long term investments

 

 

61,139

 

 

 

16,763

 

Other assets

 

 

217

 

 

 

217

 

Total assets

 

$

231,205

 

 

$

124,370

 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

   STOCKHOLDERS’ EQUITY / (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,954

 

 

$

3,075

 

Accrued expenses and other current liabilities

 

 

8,153

 

 

 

5,817

 

Total current liabilities

 

 

13,107

 

 

 

8,892

 

Long-term operating lease liability

 

 

57

 

 

 

 

Total liabilities

 

 

13,164

 

 

 

8,892

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 authorized, no shares issued and

   outstanding as of March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.001 par value, 100,000,000 shares authorized,

   29,404,540 and 26,869,413 issued and outstanding as of March 31, 2020 and

   December 31, 2019, respectively

 

 

29

 

 

 

27

 

Additional paid in capital

 

 

305,030

 

 

 

185,196

 

Accumulated other comprehensive income (loss)

 

 

(37

)

 

 

60

 

Accumulated deficit

 

 

(86,981

)

 

 

(69,805

)

Total stockholders’ equity

 

 

218,041

 

 

 

115,478

 

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

 

$

231,205

 

 

$

124,370

 

 

(1)

The balance sheet as of December 31, 2019 is derived from the audited financial statements as of that date

 

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

1


Cortexyme, Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

14,380

 

 

$

4,825

 

General and administrative

 

 

3,478

 

 

 

1,250

 

Total operating expenses

 

 

17,858

 

 

 

6,075

 

Loss from operations

 

 

(17,858

)

 

 

(6,075

)

Interest income

 

 

682

 

 

 

394

 

Net loss

 

 

(17,176

)

 

 

(5,681

)

Other comprehensive income/ (loss):

 

 

 

 

 

 

 

 

Unrealized gain / (loss) on available for sales securities

 

 

(97

)

 

 

26

 

Total comprehensive loss

 

 

(17,273

)

 

 

(5,655

)

Net loss per share - basic and diluted

 

 

(0.61

)

 

 

(1.61

)

Weighted average shares of common stock outstanding -

   basic and diluted

 

 

28,261,719

 

 

 

3,521,045

 

 

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

 

 

2


Cortexyme, Inc.

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

(Unaudited)

(In thousands, except share and per share amounts)

 

For the three months ended March 31, 2020 and 2019

 

 

 

Series A Redeemable

Convertible Preferred

Stock

 

 

Series B Redeemable

Convertible Preferred

Stock

 

 

Common Stock

 

 

Additional

Paid in

 

 

Accumulated Other

Comprehensive

 

 

Accumulated

 

 

Stockholders'

Equity/

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income / (Loss)

 

 

Deficit

 

 

(Deficit)

 

Balance January 1, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

26,869,413

 

 

$

27

 

 

$

185,196

 

 

$

60

 

 

$

(69,805

)

 

$

115,478

 

Issuance of common stock in connection

   with private placement, net of issuance

   costs of $7,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,500,000

 

 

 

2

 

 

 

117,688

 

 

 

 

 

 

 

 

 

117,690

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,127

 

 

 

 

 

 

191

 

 

 

 

 

 

 

 

 

191

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,955

 

 

 

 

 

 

 

 

 

1,955

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(97

)

 

 

 

 

 

(97

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(17,176

)

 

 

(17,176

)

Balance March 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

29,404,540

 

 

$

29

 

 

$

305,030

 

 

$

(37

)

 

$

(86,981

)

 

$

218,041

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2019

 

 

9,008,919

 

 

$

17,178

 

 

 

9,152,108

 

 

$

86,868

 

 

 

3,412,366

 

 

$

3

 

 

$

245

 

 

 

(49

)

 

$

(32,825

)

 

$

(32,626

)

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

154,557

 

 

 

1

 

 

 

63

 

 

 

 

 

 

 

 

 

64

 

Stock based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

 

 

 

 

 

 

190

 

Vesting of Series B redeemable

   convertible preferred stock in lieu of rent

 

 

 

 

 

 

 

 

 

 

 

92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

26

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,681

)

 

 

(5,681

)

Balance March 31, 2019

 

 

9,008,919

 

 

$

17,178

 

 

 

9,152,108

 

 

$

86,960

 

 

 

3,566,923

 

 

$

4

 

 

$

498

 

 

$

(23

)

 

$

(38,506

)

 

$

(38,027

)

 

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

 

 

 

3


 

Cortexyme, Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net Loss

 

$

(17,176

)

 

$

(5,681

)

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

 

 

 

 

 

 

 

 

Non-cash rent expense

 

 

92

 

 

 

92

 

Stock based compensation

 

 

1,955

 

 

 

190

 

Depreciation and amortization

 

 

83

 

 

 

19

 

Amortization of (discount) premium on available for sale investments

 

 

56

 

 

 

(171

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

49

 

 

 

(3,628

)

Other assets

 

 

 

 

 

(250

)

Accounts payable

 

 

1,879

 

 

 

1,451

 

Accrued expenses and other current liabilities

 

 

2,283

 

 

 

762

 

Net cash used in operating activities

 

 

(10,779

)

 

 

(7,216

)

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Purchase of investments

 

 

(95,543

)

 

 

(25,585

)

Proceeds from maturities of investments

 

 

22,867

 

 

 

28,800

 

Purchase of property and equipment

 

 

(5

)

 

 

(51

)

Net cash (used in) provided by investing activities

 

 

(72,681

)

 

 

3,164

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments of finance leases

 

 

(29

)

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

191

 

 

 

64

 

Proceeds from private placement offering, net of issuance costs

 

 

117,690

 

 

 

 

Net cash provided by financing activities

 

 

117,852

 

 

 

64

 

Net change in cash and cash equivalents

 

 

34,392

 

 

 

(3,988

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

51,214

 

 

 

24,872

 

Cash, cash equivalents and restricted cash at end of period

 

$

85,606

 

 

$

20,884

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash information:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

122

 

 

$

815

 

 

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

4


 

Cortexyme, Inc.

Notes to Unaudited Condensed Financial Statements

Note 1. Organization

Description of Business

Cortexyme, Inc. (the “Company”) was incorporated in the State of Delaware in June 2012 and is headquartered in South San Francisco, California. The Company is a clinical stage biopharmaceutical company focused on developing therapeutics based on data supporting a new theory of the cause of Alzheimer’s disease and other degenerative disorders. Cortexyme is targeting a specific, infectious pathogen tied to neurodegeneration and chronic inflammation in humans and animal models.

Reverse Stock Split

On April 25, 2019, the Company’s Board of Directors approved a one-for-0.367647 reverse split of the Company’s issued and outstanding common stock, redeemable convertible preferred stock, and stock options. The par value of the common stock was not adjusted as a result of the reverse stock split. All share and per share amounts in the accompanying unaudited condensed financial statements and notes to the unaudited condensed financial statements have been retroactively adjusted for all periods presented to reflect the reverse stock split.

Initial Public Offering

On May 8, 2019, the Company’s registration statement on Form S-1 (File No. 333-230853) for its initial public offering of common stock (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). On May 13, 2019, the Company closed its IPO with the sale of 5,073,800 shares of common stock, which included 661,800 shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $17.00 per share, resulting in net proceeds of $77.8 million, after deducting underwriting discounts and commissions and estimated offering expenses paid by the Company.

In addition, in connection with the closing of the IPO, all of the Company’s outstanding shares of redeemable convertible preferred stock were automatically converted into 18,161,027 shares of common stock, and there are no shares of redeemable convertible preferred stock outstanding.

Private Investment in Public Equity (“PIPE”)

In February 2020, the Company completed a private investment in public equity transaction (“PIPE Financing”). The Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with certain accredited investors, including an entity affiliated with a member of the Company’s Board of Directors, pursuant to which the Company sold and issued shares of common stock for aggregate gross proceeds of $125.0 million. Costs related to the offering were $7.3 million. Pursuant to the Purchase Agreements, the Company sold 2,500,000 common shares at $50.00 per common share.  In connection with the PIPE Financing, the Company filed a registration statement on Form S-1 (File No. 333-237594), with the SEC registering for resale the shares of common stock issued in the PIPE Financing. The registration statement was declared effective by the SEC on April 13, 2020.

Liquidity and Capital Resources

The Company has incurred losses and negative cash flows from operations since inception and expects to continue to generate operating losses for the foreseeable future. As of March 31, 2020, the Company had an accumulated deficit of $87.0 million. Since inception through March 31, 2020, the Company has funded operations primarily with the net proceeds from the issuance of convertible promissory notes, from the issuance of redeemable convertible preferred stock, from the net proceeds from the IPO and from the net proceeds from the PIPE Financing. As of March 31,2020, the Company had cash, cash equivalents, and short-term investments of $162.4 million, which it believes will be sufficient to fund its planned operations for a period of at least 12 months from the date of the issuance of the accompanying unaudited financial statements. The Company also has long-term investments of $61.1 million.

Management expects to incur additional losses in the future to fund its operations and conduct product research and development and may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidate.

5


 

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions of the SEC on Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The condensed balance sheet as of March 31, 2020, the condensed statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the condensed statements of stockholders’ equity/(deficit) as of March 31, 2020 and 2019, the condensed statements of cash flows for the three months ended March 31, 2020 and 2019, and the financial data and other financial information disclosed in the notes to the condensed financial statements are unaudited. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Form 10-K filed with the SEC on March 16, 2020. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or for any other future annual or interim period.

Risks and Uncertainties

The pandemic caused by an outbreak of a new strain of coronavirus, COVID-19, has resulted, and is likely to continue to result, in significant national and global economic disruption and may adversely affect our business. The Company is actively monitoring the impact of COVID-19 and the possible effects on its financial condition, liquidity, operations, clinical trials, suppliers, industry and workforce. However, the full extent, consequences, and duration of the COVID-19 pandemic and the resulting impact on the Company cannot currently be predicted. The Company will continue to evaluate the impact that these events could have on the Company’s operations, financial position, and the results of operations and cash flows during fiscal year 2020.

 

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities. The most significant estimates used in the Company’s financial statements relate to the determination of the fair value of common stock prior to the initial public offering, stock-based awards and other issuances, accruals for research and development costs, useful lives of long-lived assets, stock-based compensation and related assumptions, the incremental borrowing rate for leases and income tax uncertainties, including a valuation allowance for deferred tax assets; and contingencies. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from the Company’s estimates.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the three months ended March 31, 2020, as compared to the significant accounting policies described in our Annual Report on Form 10-K.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash and cash equivalents. Cash equivalents, which consist of amounts invested in money market funds, are stated at fair value. There are no unrealized gains or losses on the money market funds for the periods presented.

6


 

 

Fair Value Measurements

The fair value of our financial instruments reflects the amounts that we estimate we would receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). We disclose and recognize the fair value of our assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;

Level 2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs in markets that are not considered to be active;

Level 3 - Inputs that are unobservable. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. 

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted the standard effective January 1, 2019.

The Company determines if an arrangement includes a lease at inception. Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. The Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The lease terms may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The Company has elected not to recognize a right-of-use asset and lease liability for short-term leases. A short-term lease is a lease with an expected lease term of 12 months or less and which does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The Company also elected the package of practical expedients under the transition guidance that will retain the historical lease classification and initial direct costs for any leases that exist prior to adoption of the new guidance and the practical expedient to not separate lease and non-lease components. See Note 6 for further disclosure.

Finance lease right of use assets are recorded on the balance sheet in Property and equipment, net. The current portion of the operating lease liability is recorded in accrued expenses and other current liabilities.  

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to not use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies.

 

Recent Accounting Pronouncements Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.  The new guidance changes disclosure requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. The Company adopted this effective January 1, 2020. The adoption of this pronouncement did not have a material impact on its financial statements or disclosures.

7


 

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)”: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which clarifies the accounting for implementation costs in cloud computing arrangements. The Company adopted the standard prospectively on January 1, 2020. The adoption of this pronouncement did not have a material impact on its financial statements

Recent Accounting Pronouncements Not Yet Adopted

The following are new accounting pronouncements that the Company is evaluating for future impacts on its financial statements:

Financial Instruments—Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of current expected credit losses when determining the value of certain assets. The guidance also amends reporting around allowances for credit losses on available-for-sale marketable securities. For Smaller Reporting Companies as defined by the SEC, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

Note 3. Fair Value Measurements

The Company measures and reports its cash equivalents, restricted cash, and investments at fair value.

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2020 and December 31, 2019 are presented in the following tables (in thousands):

 

 

 

Fair Value Measurements at March 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

 

$

52,441

 

 

$

52,441

 

 

$

 

 

$

 

Certificates of deposit

 

 

41,439

 

 

 

 

 

 

41,439

 

 

 

 

Repurchase agreements

 

 

21,000

 

 

 

 

 

 

21,000

 

 

 

 

Corporate notes

 

 

91,816

 

 

 

 

 

 

91,816

 

 

 

 

Government and agency notes

 

 

13,611

 

 

 

 

 

 

13,611

 

 

 

 

Total

 

$

220,307

 

 

$

52,441

 

 

$

167,866

 

 

$

 

 

 

 

 

Fair Value Measurements at December 31, 2019

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

 

$

30,054

 

 

$

30,054

 

 

$

 

 

$

 

Certificates of deposit

 

 

20,046

 

 

 

 

 

 

20,046

 

 

 

 

Repurchase agreements

 

 

15,000

 

 

 

 

 

 

15,000

 

 

 

 

Corporate notes

 

 

38,783

 

 

 

 

 

 

38,783

 

 

 

 

Government notes

 

 

7,574

 

 

 

 

 

 

7,574

 

 

 

 

Commercial paper

 

 

1,096

 

 

 

 

 

 

1,096

 

 

 

 

Total

 

$

112,553

 

 

$

30,054

 

 

$

82,499

 

 

$

 

 

 

8


 

The following table summarizes the available-for-sale securities (in thousands):

 

 

 

Fair Value Measurements at March 31, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Money market funds

 

$

52,441

 

 

$

 

 

$

 

 

$

52,441

 

Certificates of deposit

 

 

41,314

 

 

 

132

 

 

 

(7

)

 

 

41,439

 

Repurchase agreements

 

 

21,000

 

 

 

 

 

 

 

 

 

21,000

 

Corporate notes

 

 

92,007

 

 

 

99

 

 

 

(290

)

 

 

91,816

 

Government and agency notes

 

 

13,582

 

 

 

29

 

 

 

 

 

 

13,611

 

Total cash equivalents and investments

 

$

220,344

 

 

$

260

 

 

$

(297

)

 

$

220,307

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (maturities within 90 days)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

82,358

 

Short-term investments (maturities within

   one year)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76,810

 

Long-term investments (maturities beyond

   1 year)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

61,139

 

Total cash equivalents and investments

 

 

 

 

 

 

 

 

 

 

 

 

 

$

220,307

 

 

 

 

Fair Value Measurements at December 31, 2019

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Money market funds

 

$

30,054

 

 

$

 

 

$

 

 

$

30,054

 

Certificates of deposit

 

 

19,992

 

 

 

54

 

 

 

 

 

 

20,046

 

Repurchase agreements

 

 

15,000

 

 

 

 

 

 

 

 

 

15,000

 

Corporate notes

 

 

38,788

 

 

 

 

 

 

(5

)

 

 

38,783

 

Government notes

 

 

7,563

 

 

 

11

 

 

 

 

 

 

 

7,574

 

Commercial paper

 

 

1,096

 

 

 

 

 

 

 

 

 

1,096

 

Total cash equivalents and investments

 

$

112,493

 

 

$

65

 

 

$

(5

)

 

$

112,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (maturities within 90 days)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

47,140

 

Short-term investments (maturities within

   one year)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,650

 

Long-term investments (maturities beyond

   1 year)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,763

 

Total cash equivalents and investments

 

 

 

 

 

 

 

 

 

 

 

 

 

$

112,553

 

 

As of March 31, 2020, the remaining contractual maturities of available-for-sale securities was approximately six months. There have been no significant realized losses on available-for-sale securities for the period presented. Based on the Company’s review of its available-for-sale securities, the Company has a limited number of available-for-sale securities in insignificant loss positions as of March 31, 2020, none of which have been in a loss position for more than 120 days. The Company believes it had no other-than-temporary impairments on these securities as of March 31, 2020, because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.

 

The investments are classified as available-for-sale securities. At March 31, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income (loss) was comprised solely of activity related to the Company’s available-for-sale securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities for the three months ended March 31, 2020 and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the quarter.

There were no transfers between Levels 1, 2 or 3 for the period presented.

9


 

Note 4: Cash, cash equivalents and investments

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that sum to the total of the same amounts shown in the condensed statements of cash flows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash and cash equivalents

 

$

85,606

 

 

$

20,634

 

Restricted cash

 

 

 

 

 

250

 

Total cash, cash equivalents and restricted cash

 

$

85,606

 

 

$

20,884

 

 

Restricted cash as of March 31, 2019 relates to a compensating balance to secure a credit card facility. There was no restricted cash as of March 31, 2020.

The following tables categorize the fair values of cash, cash equivalents, and short-term investments measured at fair value on a recurring basis on our balance sheet (in thousands):

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Cash

 

$

3,248

 

 

$

4,074

 

Money market funds

 

 

52,441

 

 

 

30,054

 

Repurchase agreements

 

 

21,000

 

 

 

15,000

 

Certificates of deposit

 

 

395

 

 

 

985

 

Government and agency notes

 

 

1,502

 

 

 

 

Corporate notes

 

 

7,020

 

 

 

1,101

 

Total cash and cash equivalents

 

$

85,606

 

 

$

51,214

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

Commercial paper

 

$

 

 

$

1,096

 

Certificates of deposit

 

 

28,584

 

 

 

15,428

 

Corporate notes

 

 

43,540

 

 

 

24,552

 

Government and agency notes

 

 

4,686

 

 

 

7,574

 

Total short-term investments

 

$

76,810

 

 

$

48,650

 

 

 

 

 

 

 

 

 

 

Long-term investments

 

 

 

 

 

 

 

 

Corporate notes

 

$

41,256

 

 

$

13,130

 

Certificates of deposit

 

 

12,460

 

 

 

3,633

 

Government and agency notes

 

 

7,423

 

 

 

 

Total long-term investments

 

$

61,139

 

 

$

16,763

 

 

  

Note 5. Balance Sheet Components

Prepaid expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Prepaid expenses

 

$

164

 

 

$

987

 

Prepaid insurance

 

 

278

 

 

 

 

Prepaid research and development expenses

 

 

4,776

 

 

 

4,517

 

Other current assets

 

 

954

 

 

 

688

 

Total prepaid expenses and other current assets

 

$

6,172

 

 

$

6,192