| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with GAAP and follow the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In management’s opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position and its results of operations and its cash flows for the periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the year ended December 31, 2022 , which are contained in the Company’s Current Report on Form 10-K filed with the SEC on March 14, 2023. The results for interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ materially from those estimates. Short-Term Investments Short-term investments are marketable securities with maturities greater than three months from date of purchase that are specifically identified to fund current operations. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund our operations, as necessary. The cost of short-term investments is adjusted for amortization of premiums or accretion of discounts to maturity, and such amortization or accretion is included in interest income. Dividend and interest income is recognized as interest income on the statements of operations and comprehensive loss when earned. Short-term investments are classified as available-for-sale securities and carried at fair value with unrealized gains and non-credit related losses recorded in other comprehensive income (loss) and included as a separate component of stockholders’ equity. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis and included in interest income on the condensed consolidated statements of operations and comprehensive loss. Allowance for Credit Losses For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the severity of the impairment, any changes in interest rates, market conditions, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive income (loss) on the unaudited condensed statements of operations and comprehensive loss. We elected the practical expedient to exclude the applicable accrued interest from both the fair value and amortized costs basis of our available-for-sale securities for purposes of identifying and measuring an impairment. Accrued interest receivable on available-for-sale securities is recorded within prepaid expenses and other current assets on our unaudited condensed consolidated balance sheets. Our accounting policy is to not measure an allowance for credit loss for accrued interest receivable and to write-off any uncollectible accrued interest receivable as a reversal of interest income in a timely manner, which we consider to be in the period in which we determine the accrued interest will not be collected by us. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash, cash equivalents and short-term investments. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. Clinical Trial and Contracts Accruals The Company accrues clinical trial costs based on work performed. In determining the amount to accrue, the Company relies on estimates of total costs incurred based on enrollment, the completion of clinical trials and other events. The Company follows this method because it believes reasonably dependable estimates of the costs applicable to various stages of a clinical trial can be made. However, the actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending on a number of factors. Differences between the actual clinical trial costs and the estimated clinical trial costs that have been accrued in any prior period are recognized in the subsequent period in which the actual costs become known. Historically, estimated accrued expenses have approximated actual expenses incurred; however, material differences could occur in the future. Research and Development Expenses Research and development costs are expensed as incurred. These costs consist primarily of salaries and other personnel-related expenses, including share-based compensation, facility-related expenses, contract manufacturing costs and services performed by clinical research organizations, research institutions, and other outside service providers. The Company makes estimates of its accrued expenses as of each balance sheet date in the condensed consolidated financial statements based on facts and circumstances known to us at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. This process involves reviewing contracts and purchase orders, reviewing the terms of vendor agreements, communicating with applicable personnel to identify services that have been performed on the Company's behalf and estimating the level of service performed and the associated cost incurred for the services when it has not yet been invoiced or otherwise notified of actual cost. The majority of the Company's service providers invoice monthly in arrears for services performed. Share-Based Compensation The Company accounts for share-based compensation expense related to stock options granted to employees, members of the board of directors, and outside consultants by estimating the fair value of each stock option on the date of grant or modification date using the Black-Scholes option pricing model. The Company accounts for restricted stock units (“RSUs”) by determining the fair value of each restricted stock unit based on the closing market price of the common stock on the date of grant or modification date. The Company recognizes share-based compensation on a straight-line basis over the requisite service period of the stock-based award, and forfeitures are recognized as they occur. The estimate of fair value for share-based compensation for stock options requires management to make estimates and judgments about, among other things, employee exercise behavior and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is used in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and managed its business as one segment operating in the United States. All long-lived assets were located in the United States at June 30, 2023 and December 31, 2022. Investments The Company invests in available-for-sale securities consisting of money market funds, commercial paper, corporate debt securities, U.S. Treasury securities and U.S. agency bonds. Available-for-sale securities are classified as either cash, cash equivalents or short-term investments on the Company's unaudited condensed consolidated balance sheets. The following tables summarize, by major security type, the Company's cash equivalents and short-term investments that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, in thousands:
June 30, 2023
Maturities Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Cash equivalents:
Money market funds 1 or less $ 13,382 $ — $ — $ 13,382
Total cash equivalents 13,382 — — 13,382
Short-term investments:
Commercial paper 1 or less 20,536 — ( 14 ) 20,522
U.S. Treasury securities 2 or less 19,817 — ( 40 ) 19,777
Corporate debt securities 2 or less 1,163 — ( 2 ) 1,161
U.S. Agency bonds 2 or less 17,173 — ( 59 ) 17,114
Total short-term investments 58,689 — ( 115 ) 58,574
Total $ 72,071 $ — $ ( 115 ) $ 71,956
December 31, 2022
Maturities Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Cash equivalents:
Money market funds 1 or less $ 15,492 $ — $ — $ 15,492
Total cash equivalents 15,492 — — 15,492
Short-term investments:
U.S. Treasury securities 1 or less 19,785 — ( 109 ) 19,676
Commercial paper 1 or less 27,739 — ( 34 ) 27,705
Corporate debt securities 2 or less 1,872 — — 1,872
U.S. Agency bonds 2 or less 5,052 — ( 35 ) 5,017
Total short-term investments 54,448 — ( 178 ) 54,270
Total $ 69,940 $ — $ ( 178 ) $ 69,762 The Company has classified investments with remaining maturity at purchase of more than three months and remaining maturities of one year or less as short-term investments. The Company has also classified investments with remaining maturities of greater than one year as short-term investments, which reflects management's intention to use the proceeds from sales of these securities to fund operations, as necessary. As of June 30, 2023, the unrealized losses for available-for-sale investments were primarily due to changes in interest rates and not due to increased credit risks associated with specific securities. The Company does not currently intend to sell the investments before recovery of their amortized cost basis, which may be at the time of maturity. As of June 30, 2023, no allowance for credit losses was recorded and the Company did not recognize any impairment losses related to investments. As of June 30, 2023, none of the short-term investments were in a continuous unrealized loss position for a period greater than 12 months. Accrued interest receivable on available-for-sale securities was $ 0.1 million at June 30, 2023 and December 31, 2022. For the six months ended June 30, 2023 and 2022, we have no t written off any accrued interest receivables. Fair Value Measurements The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market- based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets. Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying amounts of the Company’s cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair values for these financial instruments due to their short maturities. Available-for-sale securities consist of U.S. Treasury securities, which are measured at fair value using Level 1 inputs and commercial paper, corporate debt securities, and U.S. Agency bonds, which is measured at fair value using Level 2 inputs. The Company determines the fair value of Level 2 related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. Below is a summary of assets, including cash equivalents and short-term investments, measured at fair value as of June 30, 2023 and December 31, 2022, in thousands.
Fair Value Measurements Using
June 30, 2023 Level 1 Level 2
Cash equivalents:
Money market funds $ 13,382 $ 13,382 $ —
Total cash equivalents 13,382 13,382 —
Short-term investments:
U.S. Treasury securities 19,777 19,777 —
Commercial paper 20,522 — 20,522
Corporate debt securities 1,161 — 1,161
U.S. Agency bonds 17,114 — 17,114
Total short-term investments 58,574 19,777 38,797
Total $ 71,956 $ 33,159 $ 38,797
Fair Value Measurements Using
December 31, 2022 Level 1 Level 2
Cash equivalents:
Money market funds $ 15,492 $ 15,492 $ —
Total cash equivalents 15,492 15,492 —
Short-term investments:
U.S. Treasury securities 19,676 19,676 —
Commercial paper 27,705 — 27,705
Corporate debt securities 1,872 — 1,872
U.S. Agency bonds 5,017 — 5,017
Total short-term investments 54,270 19,676 34,594
Total $ 69,762 $ 35,168 $ 34,594 A s of June 30, 2023 and December 31, 2022 , the Company had no liabilities measured at fair value on a recurring basis. Net Loss Per Share Basic loss per common share is computed by dividing net loss by the weighted average number of common shares and warrants to purchase common stock for nominal consideration outstanding during the period. Diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from outstanding common stock equivalents. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company's net loss position. The following common stock equivalent securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:
June 30,
2023 2022
Shares issuable upon conversion of preferred stock 292,799 292,799
Common stock options and RSUs outstanding 9,633,971 6,534,336
ESPP shares pending issuance 18,277 —
Warrants to purchase common stock 23,100 23,100
Total excluded securities 9,968,147 6,850,235 Recently Issued Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that the Company will adopt as of the specified effective date. The Company has evaluated recently issued accounting pronouncements and as a result, based on the Company's preliminary assessment, do not believe any will have a material impact on the condensed consolidated financial statements or related footnote disclosures. |
