| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Principles of consolidation and basis of presentation The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and in accordance with Article 10 of Regulation S-X of the SEC, and reflect the financial position, results of operations and cash flows of the Company's business. Accordingly, they do not include all of the disclosures required by U.S. GAAP for a complete set of annual audited financial statements. All significant intercompany accounts and transactions are eliminated in consolidation. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K filed with the SEC on March 23, 2023 for the year ended December 31, 2022 (the "2022 Form 10-K"). 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. Financial statement presentation Certain reclassifications have been made to prior periods to conform with the current period presentation. On the consolidated statement of operations, the Company reclassified amounts for impairments and restructuring charges for the three months ended March 31, 2022 from research and development expenses to a separate financial statement line item within operating expenses to conform to current period presentation of impairments and restructuring charges. Use of estimates The preparation of the accompanying unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these unaudited consolidated financial statements include, but are not limited to, the measurement of right-of-use assets and lease liabilities and held for sale assets and liabilities, accrued expenses related to research and development activities, the fair value of the royalty transfer agreement obligations, and the fair value of stock-based compensation awards granted under the Company’s equity-based compensation plans. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the unaudited consolidated financial statements, actual results may materially vary from these estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Concentrations of credit risk and of manufacturing risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and investments. The Company’s cash, cash equivalents and investments are held by financial institutions in the United States. Amounts on deposit may at times exceed federally insured limits. Management believes that the financial institutions are financially sound, and accordingly, minimal credit risk exists with respect to the financial institutions. As of March 31, 2023 , the Company has manufacturing arrangements with vendors for the supply of materials for use in preclinical and clinical studies. If the Company were to experience any disruptions in the vendors' ability or willingness to continue to provide manufacturing services, the Company may experience significant delays in its product development timelines and may incur substantial costs to secure alternative sources of manufacturing. Fair value of financial instruments As of March 31, 2023 and December 31, 2022, the Company’s financial instruments consist of money market funds, commercial paper, agency and corporate bonds and asset-backed securities are included in investments . The carrying value of investments is the estimated fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Cash equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2023 and December 31, 2022 , cash equivalents consisted of U.S treasuries, corporate bonds, and government-backed money market funds. Investments As of March 31, 2023, all investments were classified as available-for-sale and were carried at their estimated fair value. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income (loss) until realized. The Company determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company periodically reviews its investments in debt securities for impairment and adjusts these investments to their fair value when a decline in market value is deemed to be other than temporary. If losses on these securities are considered to be other than temporary, the loss is recognized in the statement of operations. The Company classifies its available-for-sale marketable securities as current or non-current based on each instrument’s underlying effective maturity date and for which the Company has the intent and ability to hold the investment for a period of greater than 12 months. Marketable securities with maturities of less than 12 months are classified as current and are included in investments in the consolidated balance sheets. Marketable securities with maturities greater than 12 months for which the Company has the intent and ability to hold the investment for greater than 12 months are classified as non-current and are included in investments, non-current in the consolidated balance sheets. Assets not placed in service Assets not placed in service include the acquisition of laboratory equipment. Such costs are not depreciated until the asset is completed and placed into service. As of March 31, 2023 laboratory equipment with a carrying amount of $ 0.8 million met the criteria to be presented as assets held for sale. As a result, these assets have been removed from their respective categories on the balance sheet as of March 31, 2023 and have been presented separately within assets held for sale in the current asset section of the balance sheet. See Note 11 for further information. Impairment of long-lived assets Long-lived assets classified as held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated. Impairment charges are recognized at the amount by which the carrying amount of an asset exceeds the fair value of the asset. A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. An impairment loss is recognized for any initial or subsequent write-down to fair value less cost to sell. A gain is recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized for the long-lived asset or disposal group. Impairment charges are presented in the statements of operations in a separate line item within operating expenses with other restructuring charges recognized during the respective periods. During the three months ended March 31, 2023, the Company recognized an impairment charge for the write-down of long-lived assets classified as held for sale related to personal property assets of $ 1.9 million. During the three months ended March 31, 2022, the Company recognized a charge for the impairment of long-lived assets and restructuring expenses related to the wind down of the UK manufacturing operations. See Note 11 for further information. Restricted cash Cash accounts that are restricted as to withdrawal or usage are presented as restricted cash in the Company's balance sheets. Restricted cash includes amounts held as a security deposit in the form of a letter of credit for the Company’s leased facilities, which total $ 1.2 million as of March 31, 2023. On March 13, 2023, the Federal Deposit Insurance Corporation ("FDIC") stated it had transferred all of the deposits, both insured and uninsured, and substantially all of the assets of Silicon Valley Bank to the Silicon Valley Bridge Bank, N.A., a bridge bank that will be operated by the FDIC. The Company’s restricted cash balances had historically been held as certificates of deposit at Silicon Valley Bank, and those assets were transferred to Silicon Valley Bridge Bank, N.A. as of March 31, 2023. Deferred offering costs The Company capitalizes costs that are directly associated with in-process equity financings until such financings are consummated at which time such costs are recorded against the gross proceeds of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations. Assets held for sale The Company records assets and corresponding liabilities as held for sale that meet the criteria outlined for this designation in ASC 360, Property, Plant, and Equipment . A long-lived asset or disposal group classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. Assets and liabilities held for sale are included in a separate financial statement line item in the balance sheets for the periods they meet this designation. Stock-based compensation The Company measures stock-based awards at grant-date fair value and records compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. The Company accounts for forfeitures as they occur. The Company issues share-based compensation awards with service-only and performance- and service- based criteria. For performance-based awards, share-based compensation is based on estimated performance until the performance measurement date. At the performance measurement date, share-based compensation is adjusted to actual performance. Estimating the fair value of stock options and warrants requires the input of subjective assumptions, including the expected life of the instrument and stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards and warrants. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. Leases At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases are classified at their commencement date, which is defined as the date on which the lessor makes the underlying asset available for use by the lessee, as either operating or finance leases based on the economic substance of the agreement. The Company recognizes lease right-of-use assets and related liabilities in its consolidated balance sheets for both operating and finance leases. Lease liabilities are measured at the lease commencement date as the present value of the future lease payments using the interest rate implicit in the lease, or the incremental borrowing rate if the rate implicit in the lease is not readily determinable. Lease right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments less expected lease incentives. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. The Company recognizes operating lease costs in operating expenses in its consolidated statements of operations, inclusive of rent escalation provisions and rent holidays, on a straight-line basis over the respective lease term. Research and development expenses Research and development costs are expensed as incurred and consist primarily of funds paid for employee wages and funds paid to third parties for the provision of services for product candidate development, clinical and preclinical development and related supply and manufacturing costs, and regulatory compliance costs. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs. Upfront milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed as services are rendered. Transaction costs All expenses related to the proposed transaction with Adaptimmune are expensed as incurred. Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A reduction in the carrying value of the deferred tax assets is required when it is not more likely than not that such deferred tax assets are realizable. Net loss per share Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and diluted loss per share are the same. The following potentially dilutive securities, on an as converted basis, have been excluded from the computation of diluted weighted-average shares outstanding as of March 31, 2023 and 2022, as they would be antidilutive:
As of March 31,
2023 2022
Stock options outstanding 3,588,655 5,905,550
Common stock warrants 203,676 203,676
Unvested restricted stock units 1,110,660 66,000
Employee stock purchase plan 4,637 10,169
Total 4,907,628 6,185,395 Comprehensive loss Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources (which excludes investments from owners). The Company’s only element of other comprehensive loss is unrealized gains and losses on investments. Common stock Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Preferred stock The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law, to provide by resolution or resolutions for, out of the unissued shares of Undesignated Preferred Stock, the issuance of the shares of Undesignated Preferred Stock in one or more series of such stock, and by filing a certificate of designations pursuant to applicable law of the State of Delaware, to establish or change from time to time the number of shares of each such series, and to fix the designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof. As of March 31, 2023 , there are no preferred shares issued. Reconciliation of cash, cash equivalents and restricted cash as presented in the statements of cash flows The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited consolidated balance sheets to the total of the same such amounts shown in the unaudited consolidated statements of cash flows for the three months ended March 31, 2023 and 2022.
As of March 31,
2023 2022
Cash and cash equivalents $ 14,446 $ 74,117
Restricted cash 1,152 1,158
Cash, cash equivalents and restricted cash shown in the statements of cash flows $ 15,598 $ 75,275 Segment information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one consolidated operating segment. JOBS Act accounting election 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 use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. |
