UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________________________to_____________________________________________________
Commission File Number: |
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(Exact name of registrant as specified in its charter)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Emerging growth company |
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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
As of November 3, 2023, the registrant had
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (Quarterly Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act) that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report are forward-looking statements.
In some cases, you can identify forward-looking statements by words such as “may,” “can,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “seek,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “possible” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
1
Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions included in this Quarterly Report, particularly those described in the “Risk Factors” section in Part II, Item 1A of this Quarterly Report, that could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. 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. In light of these risks, uncertainties and assumptions, the forward- looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we assume no obligation to update or revise these any forward-looking statements for any reason even if new information becomes available in the future.
You should read this Quarterly Report and the documents that we have filed as an exhibit to this Quarterly Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
In addition, this Quarterly Report contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates, including data regarding the estimated size of such markets and the incidence of certain medical conditions. We obtained the industry, market and similar data set forth in this Quarterly Report from our internal estimates and research, and from academic and industry research, publications, surveys and studies conducted by third parties, including governmental agencies. Industry publications and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable. Our estimates of the potential market opportunities for our product candidates include a number of key assumptions based on our industry knowledge, industry publications and third party research, surveys and studies, which may be based on a small sample size and fail to accurately reflect market opportunities. Information based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by us and third parties, industry, medical and general publications, government data and similar sources. This Quarterly Report contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents.
Unless stated otherwise, references in this Quarterly Report to “us,” “we,” “our,” “our Company,” or “the Company” and similar terms refer to TScan Therapeutics, Inc.
2
RISK FACTOR SUMMARY
Our business operations are subject to numerous risks that, if realized, could materially and adversely affect our business, financial condition, results of operations, and future growth prospects. These risks are discussed more fully in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:
Risks Related to Our Business and Industry
Risks Related to the Development of Our Product Candidates
3
Risks Related to Manufacturing
Risks Related to Government Regulation
Risks Related to Our Intellectual Property
Risks Related to Our Reliance on Third Parties
4
General Risk Factors
5
Table of Contents
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PART I. |
7 |
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Item 1. |
7 |
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7 |
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8 |
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9 |
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10 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
11 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
26 |
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Item 1. |
26 |
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Item 1A. |
26 |
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Item 2. |
84 |
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Item 3. |
84 |
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Item 4. |
84 |
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Item 5. |
84 |
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Item 6. |
84 |
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86 |
6
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
TScan Therapeutics, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
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September 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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- |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets |
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Restricted cash |
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Long-term deposit and other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liability, current portion |
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Deferred revenue, current portion |
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Current portion of long-term debt |
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- |
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Total current liabilities |
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Deferred revenue, net of current portion |
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- |
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Operating lease liability, net of current portion |
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Long-term debt and accrued interest |
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Other long term liabilities |
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Total liabilities |
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Stockholders' equity: |
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Voting common stock, $ |
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Non-voting common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
TScan Therapeutics, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other (expense) income: |
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Interest and other income, net |
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Interest expense |
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( |
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( |
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( |
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( |
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Total other income |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted average common shares outstanding—basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
TScan Therapeutics, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(Unaudited)
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Additional |
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Total |
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Common Stock |
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Non-voting Common Stock |
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Paid-In |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at June 30, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balances at September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Balances at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balances at September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Additional |
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Total |
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Common Stock |
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Non-voting Common Stock |
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Paid-In |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at January 1, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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- |
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- |
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- |
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- |
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Vesting of restricted common stock |
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- |
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- |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balances at September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Balances at January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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- |
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- |
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- |
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- |
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Issuance of common stock, net of offering costs |
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- |
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- |
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- |
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Issuance of pre-funded warrants, net of offering costs |
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- |
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- |
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- |
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- |
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- |
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Conversion of non-voting common stock to voting common stock |
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- |
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( |
) |
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- |
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- |
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- |
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- |
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Stock-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Balances at September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
TScan Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation expense |
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Accretion of marketable securities |
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( |
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- |
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Non-cash interest expense related to note payable |
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Stock-based compensation |
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Changes in current assets and liabilities: |
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Prepaid expenses and other assets |
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( |
) |
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Prepaid rent |
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- |
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( |
) |
Right-of-use assets and lease liabilities, net |
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( |
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Accounts payable |
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Accrued expense and other liabilities |
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( |
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Deferred revenue |
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( |
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Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Purchases of marketable securities |
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( |
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- |
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Net cash used in investing activities |
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( |
) |
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( |
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Cash flows from financing activities: |
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Proceeds from issuance of common stock, net of offering costs |
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- |
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Proceeds from issuance of pre-funded warrants, net of offering costs |
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- |
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Proceeds from exercise of stock options |
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Proceeds from issuance of term loan, net of issuance costs paid to lender |
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- |
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Payments of debt issuance costs |
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- |
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( |
) |
Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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( |
) |
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Cash, cash equivalents, and restricted cash - beginning of period |
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Cash, cash equivalents, and restricted cash - end of period |
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Summary of cash, cash equivalents and restricted cash reported within the consolidated balance sheets: |
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Cash and cash equivalents |
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Restricted cash |
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Total cash, cash equivalents, and restricted cash |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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||
Cash paid for interest |
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$ |
|
|
$ |
- |
|
|
Supplemental disclosure of non-cash investing and financing activities: |
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|
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||
Purchase of property and equipment in accounts payable and accrued liabilities |
|
$ |
|
|
$ |
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||
Debt issuance costs not yet paid |
|
$ |
- |
|
|
$ |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10
TSCAN THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business and Basis of Presentation
Nature of Business
TScan Therapeutics, Inc. and its wholly-owned subsidiary, TScan Securities Corporation (the Company), is a biotechnology company that was incorporated in Delaware on
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (US GAAP) and applicable rules and regulations of the Securities and Exchange Commission (the SEC) regarding interim financial reporting, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. Management believes that the interim financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of its operations and cash flows. The condensed consolidated financial statements include the accounts of TScan Therapeutics, Inc. and its subsidiary, TScan Securities Corporation. All intercompany balances and transactions have been eliminated in consolidation. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods, or any future year or period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 8, 2023. In the opinion of the Company’s management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included.
Risks, Uncertainties and Going Concern
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, successful development of technology, obtaining additional funding, protection of proprietary technology, compliance with government regulations, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for its product candidates and the ability to successfully market any products that receive approval, fluctuations in operating results, economic pressure impacting therapeutic pricing, dependence on key personnel, risks associated with changes in technologies, development by competitors of technological innovations and the ability to scale manufacturing to large scale production. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from sales.
The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has primarily funded its operations with proceeds from sales of capital stock, payments received under its license and collaboration agreements and issuance of a debt facility to K2 HealthVentures LLC. Since its inception, the Company has incurred recurring losses, including net losses of $
Emerging Growth Company Status
The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth
11
company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.
2. Summary of Significant Accounting Policies
The accounting policies of the Company are set forth in Note 2 to the consolidated financial statements contained in the Company's 2022 Annual Report on Form 10-K, the accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies therein.
Available-for-Sale Securities
The Company classifies all of its investments as available-for-sale based upon its intent with regard to such investments. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in other comprehensive income (loss). The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest and investment income. Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities, are included in interest and investment income.
The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest and investment income. To determine whether an other-than-temporary impairment exists, the Company considers whether it has the ability and intent to hold the investment until a market price recovery, and whether evidence indicating the recoverability of the cost of the investment outweighs evidence to the contrary.
3. Fair Value Measurements
During the third quarter of 2023, the Company purchased $
The following tables set forth by level, within the fair value hierarchy, the assets carried at fair value (in thousands):
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Fair value measurements at September 30, 2023 using |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash Equivalents: |
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|
|
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Government securities |
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$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Money market funds |
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|
|
|
|
- |
|
|
|
- |
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||
Marketable Securities: |
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|
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Government securities |
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|
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|
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- |
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|
|
- |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
|
Fair value measurements at December 31, 2022 using |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Cash Equivalents: |
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Money market funds |
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$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
||
Total |
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$ |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
Money market funds and government securities are valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were
The carrying value of cash, accounts payable and accrued expenses that are reported on the condensed consolidated balance sheets approximate their fair value due to the short-term nature of these assets and liabilities. The Company entered into long-term debt in September 2022; given the short period to maturity of the debt, the carrying value approximates fair value.
12
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
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September 30, |
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December 31, |
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2023 |
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2022 |
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||
Accrued research and development |
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$ |
|
|
$ |
|
||
Accrued employee compensation and benefits |
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|
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Accrued consulting and professional services |
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Accrued legal services and license fee |
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Other |
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