10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2022

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: 001-39979

 

VOR BIOPHARMA INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

81-1591163

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

100 Cambridgepark Drive, Suite 101

Cambridge, Massachusetts

02140

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 655-6580

 

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, $0.0001 par value per share

 

VOR

 

Nasdaq Global Select Market

 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

Number of shares of the registrant’s Common Stock outstanding as of August 5, 2022 was 38,056,306.

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021

2

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2022 and 2021

3

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

11

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

18

Item 4.

Controls and Procedures

19

 

 

 

PART II.

OTHER INFORMATION

20

 

 

 

Item 1.

Legal Proceedings

20

Item 1A.

Risk Factors

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

Item 6.

Exhibits

21

 

Signatures

22

 

 

i


 

Note Regarding Company References

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Vor,” “Vor Bio,” “Vor Biopharma Inc.,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Vor Biopharma Inc. and its consolidated subsidiary, and “our board of directors” refers to the board of directors of Vor Biopharma Inc.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “estimate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions intended to identify statements about the future. These statements speak only as of the date of this Quarterly Report on Form 10-Q 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 the forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements include, without limitation, statements about:

the timing, progress and results of our preclinical studies and clinical trials of our product candidates, including statements regarding the timing of initiation, enrollment and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
the timing of any submission of filings for regulatory approval of, and our ability to obtain and maintain regulatory approvals for, our product candidates for any indication;
the impacts of the COVID-19 pandemic, which could continue to adversely impact our business, including our preclinical studies and clinical trials;
our ability to identify patients with the diseases treated by our product candidates, and to enroll patients in trials;
our expectations regarding the market acceptance and opportunity for and clinical utility of our product candidates, if approved for commercial use;
our expectations regarding the scope of any approved indication for any product candidate;
our ability to successfully commercialize our product candidates;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for or ability to obtain additional funding before we can expect to generate any revenue from product sales;
our ability to establish or maintain collaborations or strategic relationships;
our ability to identify, recruit and retain key personnel, including executive officers and members of management;
our reliance upon intellectual property licensed from third parties and our ability to obtain such licenses on commercially reasonable terms or at all;
our ability to protect and enforce our intellectual property position for our product candidates, and the scope of such protection;
our financial performance;
the period over which we estimate our existing cash, cash equivalents and marketable securities will be sufficient to fund our future operating expenses and capital expenditure requirements;
our competitive position and the development of and projections relating to our competitors or our industry;
the impact of laws and regulations; and
our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we

ii


 

expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. You should refer to the “Summary Risk Factors” and “Part I, Item 1A. Risk Factors” sections in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of material factors that may cause our actual results or events to differ materially from those expressed or implied by our forward-looking statements.

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

VOR BIOPHARMA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

June 30,

 

 

December 31,

 

(in thousands, except share amounts)

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,952

 

 

$

119,801

 

Marketable securities

 

 

88,136

 

 

 

87,668

 

Prepaid expenses

 

 

5,467

 

 

 

4,836

 

Other current assets

 

 

2,288

 

 

 

2,094

 

Total current assets

 

 

158,843

 

 

 

214,399

 

Restricted cash equivalents

 

 

2,413

 

 

 

2,413

 

Property and equipment, net

 

 

14,832

 

 

 

6,853

 

Operating lease right-of-use assets

 

 

46,142

 

 

 

15,670

 

Other assets

 

 

2,385

 

 

 

3,255

 

Total assets

 

$

224,615

 

 

$

242,590

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,268

 

 

$

1,545

 

Accrued liabilities

 

 

6,286

 

 

 

6,335

 

Operating lease liabilities

 

 

4,429

 

 

 

1,839

 

Other current liabilities

 

 

279

 

 

 

434

 

Total current liabilities

 

 

12,262

 

 

 

10,153

 

Long-term liabilities:

 

 

 

 

 

 

Operating lease liabilities—non-current

 

 

37,379

 

 

 

16,174

 

Total liabilities

 

 

49,641

 

 

 

26,327

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares
   authorized as of June 30, 2022 and December 31, 2021;
   
0 shares issued and outstanding as of June 30,
   2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 400,000,000
   shares authorized as of June 30, 2022 and December 31, 2021;
   
37,644,288 and 37,375,428 shares issued and
   
37,506,236 and 37,174,741 outstanding as of June 30, 2022 and
   December 31, 2021, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

350,815

 

 

 

346,382

 

Accumulated other comprehensive loss

 

 

(1,326

)

 

 

 

Accumulated deficit

 

 

(174,519

)

 

 

(130,123

)

Total stockholders’ equity

 

 

174,974

 

 

 

216,263

 

Total liabilities and stockholders’ equity

 

$

224,615

 

 

$

242,590

 

 

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

1


 

VOR BIOPHARMA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except share and per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

15,333

 

 

$

12,970

 

 

$

30,613

 

 

$

21,911

 

General and administrative

 

 

6,459

 

 

 

5,410

 

 

 

13,979

 

 

 

10,199

 

Total operating expenses

 

$

21,792

 

 

$

18,380

 

 

$

44,592

 

 

$

32,110

 

Loss from operations

 

$

(21,792

)

 

$

(18,380

)

 

$

(44,592

)

 

$

(32,110

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

133

 

 

 

10

 

 

 

196

 

 

 

17

 

Total other income

 

 

133

 

 

 

10

 

 

 

196

 

 

 

17

 

Net loss

 

$

(21,659

)

 

$

(18,370

)

 

$

(44,396

)

 

$

(32,093

)

Cumulative dividends on redeemable convertible
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

(1,228

)

Net loss attributable to common stockholders

 

$

(21,659

)

 

$

(18,370

)

 

$

(44,396

)

 

$

(33,321

)

Net loss per share attributable to common stockholders,
   basic and diluted

 

$

(0.58

)

 

$

(0.50

)

 

$

(1.19

)

 

$

(1.13

)

Weighted-average common shares outstanding,
   basic and diluted

 

 

37,437,063

 

 

 

36,843,087

 

 

 

37,365,647

 

 

 

29,593,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available for sale investments

 

 

(254

)

 

 

 

 

 

(1,326

)

 

 

 

Total other comprehensive loss

 

 

(254

)

 

 

 

 

 

(1,326

)

 

 

 

Comprehensive loss attributable to common stockholders

 

$

(21,913

)

 

$

(18,370

)

 

$

(45,722

)

 

$

(33,321

)

 

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

2


 

Vor Biopharma Inc.

CONDENSED CONSOLIDATED Statements of redeemable convertible preferred stock and

stockholders’ EQUITY (Deficit)

(Unaudited)

 

 

 

Common
Stock

 

 

Additional
Paid-In

 

 

Accumulated other comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Capital

 

 

loss

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

37,174,741

 

 

$

4

 

 

$

346,382

 

 

$

0

 

 

$

(130,123

)

 

$

216,263

 

Issuance of common stock upon vesting
    and exercise of stock options

 

 

161,573

 

 

 

 

 

 

247

 

 

 

 

 

 

 

 

 

247

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,746

 

 

 

 

 

 

 

 

 

1,746

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(1,072

)

 

 

 

 

 

(1,072

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,737

)

 

 

(22,737

)

Balance at March 31, 2022

 

 

37,336,314

 

 

$

4

 

 

$

348,375

 

 

$

(1,072

)

 

$

(152,860

)

 

$

194,447

 

Issuance of common stock upon vesting
    and exercise of stock options

 

 

74,358

 

 

 

 

 

 

146

 

 

 

 

 

 

 

 

 

146

 

Issuance of common stock from open
    market sales agreement

 

 

95,564

 

 

 

 

 

 

553

 

 

 

 

 

 

 

 

 

553

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,741

 

 

 

 

 

 

 

 

 

1,741

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(254

)

 

 

 

 

 

(254

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,659

)

 

 

(21,659

)

Balance at June 30, 2022

 

 

37,506,236

 

 

$

4

 

 

$

350,815

 

 

$

(1,326

)

 

$

(174,519

)

 

$

174,974

 

 

 

 

 

Series A-1 Preferred
Stock

 

Series A-2 Preferred
Stock

 

Series B Preferred
Stock

 

Common
Stock

 

Additional
Paid-In

 

Accumulated

 

Total
Stockholders’
Equity

(in thousands, except share amounts)

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

(Deficit)

Balance at December 31, 2020

 

20,000,000

 

$2

 

107,194,866

 

$42,786

 

124,519,220

 

$64,548

 

505,074

 

$1

 

$2,158

 

$(61,224)

 

$(59,065)

Issuance of Series B
    redeemable convertible
    preferred stock

 

  —

 

  —

 

  —

 

  —

 

87,259,605

 

45,375

 

  —

 

  —

 

  —

 

  —

 

  —

Conversion of redeemable
    convertible preferred stock
    into common stock upon
    closing of initial public
    offering

 

  (20,000,000)

 

  (2)

 

  (107,194,866)

 

  (42,786)

 

  (211,778,825)

 

  (109,923)

 

24,924,501

 

2

 

152,709

 

  —

 

152,711

Issuance of common stock upon closing
    of initial public offering, net of
    offering costs and underwriter fees
    of $
17,132

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

11,302,219

 

1

 

186,307

 

  —

 

186,308

Issuance of common stock
    upon vesting and exercise
    of stock options

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

38,216

 

  —

 

65

 

  —

 

65

Stock-based compensation expense

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

891

 

  —

 

891

Net loss

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  (13,723)

 

  (13,723)

Balance at March 31, 2021

 

  —

 

$—

 

  —

 

$—

 

  —

 

$—

 

36,770,010

 

$4

 

$342,130

 

$(74,947)

 

$267,187

Issuance of common stock
    upon vesting and exercise
    of stock options

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

115,362

 

  —

 

224

 

  —

 

224

Stock-based compensation expense

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

1,067

 

  —

 

1,067

Net loss

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  —

 

  (18,370)

 

  (18,370)

Balance at June 30, 2021

 

  —

 

$—

 

  —

 

$—

 

  —

 

$—

 

36,885,372

 

$4

 

$343,421

 

$(93,317)

 

$250,108

 

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

3


 

Vor Biopharma Inc.

condensed CONSOLIDATED StatementS of Cash Flows

(unaudited)

 

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(44,396

)

 

$

(32,093

)

Adjustments to reconcile net loss to net cash used in operations:

 

 

 

 

 

 

Depreciation expense

 

 

1,001

 

 

 

665

 

Non-cash lease expense

 

 

2,512

 

 

 

1,504

 

Stock-based compensation

 

 

3,487

 

 

 

1,958

 

Other

 

 

120

 

 

 

4

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Operating lease liability

 

 

(8,238

)

 

 

(1,141

)

Prepaid expenses and other current assets

 

 

(728

)

 

 

(4,064

)

Accounts payable and accrued liabilities

 

 

(1,473

)

 

 

(762

)

Other assets

 

 

(181

)

 

 

(285

)

Net cash used in operating activities

 

 

(47,896

)

 

 

(34,214

)

Cash flow from investing activities

 

 

 

 

 

 

Purchases of marketable securities

 

 

(5,044

)

 

 

(75,122

)

Proceed from maturities of marketable securities

 

 

3,130

 

 

 

 

Purchases of property and equipment

 

 

(7,843

)

 

 

(2,090

)

Net cash used in investing activities

 

 

(9,757

)

 

 

(77,212

)

Cash flow from financing activities

 

 

 

 

 

 

Proceeds from issuance of redeemable convertible preferred stock

 

 

 

 

 

45,375

 

Proceeds from the issuance of common stock upon closing of initial
   public offering, net of underwriter fees

 

 

 

 

 

189,199

 

Payment of initial public offering costs

 

 

 

 

 

(2,215

)

Proceeds from the issuance of common stock from open market sales agreement

 

 

504

 

 

 

 

Proceeds from stock option exercises

 

 

300

 

 

 

44

 

Net cash provided by financing activities

 

 

804

 

 

 

232,403

 

Net (decrease) increase in cash, cash equivalents and restricted cash equivalents

 

 

(56,849

)

 

 

120,977

 

Cash, cash equivalents and restricted cash equivalents,
   beginning of period

 

$

122,214

 

 

$

50,098

 

Cash, cash equivalents and restricted cash equivalents, end of period

 

$

65,365

 

 

$

171,075

 

Supplemental disclosure of non-cash activities

 

 

 

 

 

 

Lease incentive paid by the landlord on behalf of the Company

 

$

7,927

 

 

$

 

Operating right-of-use assets and operating lease liability recorded
   upon lease commencement

 

$

23,376

 

 

$

35

 

Purchases of property and equipment in accounts payable and accrued liabilities

 

$

1,331

 

 

$

142

 

Conversion of redeemable convertible preferred stock to common
   stock upon closing of the initial public offering

 

$

 

 

$

152,711

 

 

A reconciliation of the cash, cash equivalents and restricted cash equivalents reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows is as follows:

 

 

 

For the Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

62,952

 

 

$

169,516

 

Restricted cash equivalents

 

 

2,413

 

 

 

1,559

 

Total cash, cash equivalents and restricted cash equivalents as shown on the
   statements of cash flows

 

$

65,365

 

 

$

171,075

 

 

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

4


 

 

VOR BIOPHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of the Business

Vor Biopharma Inc. (the “Company”) is a clinical-stage cell and genome engineering company that combines a novel patient engineering approach with targeted therapies to provide a single company solution for patients suffering from hematological malignancies. The Company’s proprietary platform leverages its expertise in hematopoietic stem cell (“HSC”) biology, genome engineering and targeted therapy development to genetically modify HSCs to remove surface targets expressed by cancer cells. The Company is headquartered in Cambridge, Massachusetts. The Company was incorporated on December 30, 2015.

Risks and Uncertainties

The Company is subject to a number of risks common to development stage companies in the biotechnology industry, including, but not limited to, risks of failure of preclinical studies and clinical trials, dependence on key personnel, protection of proprietary technology, reliance on third party organizations, risks of obtaining regulatory approval for any product candidate that it may develop, development by competitors of technological innovations, compliance with government regulations, the impact of the COVID-19 pandemic, including impacts related to the variants of the virus, geopolitical tensions, adverse macroeconomic conditions and the need to obtain additional financing.

The Company anticipates that it will continue to incur significant operating losses for the next several years as it continues to develop its product candidates. The Company believes that its existing cash, cash equivalents and marketable securities at June 30, 2022 will be sufficient to allow the Company to fund its current operations through at least a period of one year after the date the financial statements are issued.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies in developing the estimates and assumptions that are used in the preparation of the condensed consolidated financial statements. Management must apply significant judgment in this process. Management’s estimation process often may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: estimating the fair value of the Company’s common stock (prior to its initial public offering); accrued expenses and research and development expenses.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

The accompanying condensed consolidated balance sheet as of December 31, 2021 has been derived from the Company’s audited consolidated financial statements for the year ended December 31, 2021. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual

5


 

consolidated financial statements and notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”).

During the six months ended June 30, 2022, other than the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as discussed below, and addition of the cloud computing arrangement accounting policy, there have been no changes to the Company’s significant accounting policies as described in the 2021 Annual Report.

Measurement of Credit Losses

For financial assets measured at fair value through other comprehensive loss, the Company must record an allowance for credit losses at the end of each reporting period in the condensed consolidated statement of operations. When developing an estimate of expected credit losses on financial assets, the Company will consider available information relevant to assessing the collectability of cash flows. This information may include internal information, external information, or a combination of both, relating to past events, current conditions, and reasonable and supportable forecasts for financial asset pools.

The Company’s investment in corporate bonds and U.S. treasury securities, reported as available-for-sale investments, and the associated accrued interest reported as other current assets on the condensed consolidated balance sheets, is the only financial asset pool. The financial asset pool was determined by the type of financial asset instrument and its credit quality. Management does not expect a credit loss with this financial asset pool and determined an allowance was not required based on the issuers' current high quality credit ratings and the lack of default history on its obligations.

Cloud Computing Arrangements

The Company capitalizes implementation costs for cloud computing arrangement service contracts. The Company’s cloud computing arrangements relate to its enterprise resource planning and manufacturing software. These assets are classified as software and included in property and equipment, net in the consolidated balance sheets and are amortized on a straight-line basis over their assessed useful life beginning when the contract is ready for its intended use. The estimated useful lives of these assets is three years and are subject to the Company’s existing Impairment of Long-Lived Assets accounting policy as described in the 2021 Annual Report.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2020-03 (“ASU 2016-13”). This standard requires that credit losses be recorded using an expected losses model rather than the incurred losses model that was previously used and establishes additional credit risk disclosures associated with financial assets. The adoption of this standard on January 1, 2022, did not have a significant impact on the Company’s financial statements.

3. Marketable Securities

The amortized cost and estimated fair value of marketable securities, by contractual maturity are as follows:

 

 

June 30, 2022

 

(in thousands)

 

Amortized Cost

 

 

Gross Unrealized Holding Gains