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: 001-38443

 

Cogent Biosciences, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

46-5308248

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

200 Cambridge Park Drive, Suite 2500

Cambridge, Massachusetts

 

02140

(Address of principal executive offices)

 

(Zip code)

(617) 945-5576

(Registrant’s telephone number, including area code)

 

 

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, $0.001 Par Value

 

COGT

 

The Nasdaq Global Select Market

 

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

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

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

 

As of August 5, 2022, there were 65,758,266 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

 

 

 


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. 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, objectives of management and expected market growth are forward-looking statements. These statements 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.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar expressions. The forward looking statements in this Quarterly Report on Form 10-Q are only predictions. 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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

the potential impacts of raising additional capital, including dilution to our existing stockholders, restrictions on our operations or requirements that we relinquish rights to our technologies or product candidates;
business interruptions resulting from the coronavirus disease (“COVID-19”) outbreak or similar public health crises, which could cause a disruption to the development of our product candidates and adversely impact our business;
the success, cost, and duration of our product development activities and clinical trials;
the timing of our planned regulatory submissions to the FDA for our bezuclastinib product candidate, also known as CGT9486;
our ability to obtain and maintain regulatory approval for our bezuclastinib product candidate and any other product candidates we may develop, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;
the potential for our identified research priorities to advance our bezuclastinib product candidate or for our teams to discover and develop additional product candidates;
the ability to license additional intellectual property rights relating to our bezuclastinib product candidate or future product candidates from third-parties and to comply with our existing or future license agreements and/or collaboration agreements;
our ability to commercialize our bezuclastinib product candidate and future product candidates in light of the intellectual property rights of others;
our ability to obtain funding for our operations, including funding necessary to complete further discovery, development and commercialization of our existing and future product candidates;
the scalability and commercial viability of our manufacturing methods and processes;
the commercialization of our product candidates, if approved;
our ability to attract collaborators with development, regulatory, and commercialization expertise;
future agreements with third parties in connection with the commercialization of our product candidates and any other approved product;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
the rate and degree of market acceptance of our product candidates;
the pricing and reimbursement of our product candidates, if approved;
regulatory developments in the United States and foreign countries;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

i


the development and success of competing therapies that are or may be under development in clinical trials or become available commercially;
our ability to attract and retain key scientific and management personnel;
the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
our use of the proceeds from the private placements, sales of our preferred stock and public offerings of our common stock from time to time; and
our expectations regarding our ability to obtain and maintain intellectual property protection for our bezuclastinib product candidate and future product candidates.

While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

ii


Cogent Biosciences, Inc.

Table of Contents

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

PART II—OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Recent Sales of Unregistered Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

Signatures

29

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

325,562

 

 

$

219,684

 

Prepaid expenses and other current assets

 

 

3,858

 

 

 

2,949

 

Restricted cash

 

 

1,255

 

 

 

 

Total current assets

 

 

330,675

 

 

 

222,633

 

Operating lease, right-of-use asset

 

 

26,891

 

 

 

2,771

 

Property and equipment, net

 

 

3,591

 

 

 

1,706

 

Restricted cash

 

 

 

 

 

1,255

 

Other assets

 

 

4,895

 

 

 

3,727

 

Total assets

 

$

366,052

 

 

$

232,092

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,492

 

 

$

3,483

 

Accrued expenses and other current liabilities

 

 

12,049

 

 

 

8,210

 

CVR liability (Note 3)

 

 

3,060

 

 

 

3,060

 

Operating lease liability

 

 

9,057

 

 

 

2,324

 

Total current liabilities

 

 

27,658

 

 

 

17,077

 

Operating lease liability, net of current portion

 

 

19,009

 

 

 

831

 

Total liabilities

 

 

46,667

 

 

 

17,908

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 9,000,000 shares authorized; no shares issued
   or outstanding

 

 

 

 

 

 

Series A non-voting convertible preferred stock, $0.001 par value; 1,000,000 
   shares authorized;
87,379 and 103,289 shares issued and outstanding at
   June 30, 2022 and December 31, 2021, respectively

 

 

71,400

 

 

 

85,400

 

Common stock, $0.001 par value; 150,000,000 shares authorized; 65,707,714
   shares and
43,805,922 shares issued and outstanding at June 30, 2022 and
   December 31, 2021, respectively

 

 

66

 

 

 

44

 

Additional paid-in capital

 

 

584,453

 

 

 

399,713

 

Accumulated deficit

 

 

(336,534

)

 

 

(270,973

)

Total stockholders’ equity

 

 

319,385

 

 

 

214,184

 

Total liabilities and stockholders’ equity

 

$

366,052

 

 

$

232,092

 

 

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

1


 

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

29,479

 

 

 

12,388

 

 

 

54,949

 

 

 

20,601

 

General and administrative

 

6,376

 

 

 

4,904

 

 

 

12,324

 

 

 

9,491

 

Total operating expenses

 

35,855

 

 

 

17,292

 

 

 

67,273

 

 

 

30,092

 

Loss from operations

 

(35,855

)

 

 

(17,292

)

 

 

(67,273

)

 

 

(30,092

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

272

 

 

 

120

 

 

 

379

 

 

 

245

 

Other income

 

656

 

 

 

623

 

 

 

1,333

 

 

 

1,227

 

Change in fair value of CVR liability

 

 

 

 

 

 

 

 

 

 

343

 

Total other income

 

928

 

 

 

743

 

 

 

1,712

 

 

 

1,815

 

Net loss and comprehensive loss

$

(34,927

)

 

$

(16,549

)

 

$

(65,561

)

 

$

(28,277

)

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

$

(0.71

)

 

$

(0.43

)

 

$

(1.39

)

 

$

(0.77

)

Weighted average common shares outstanding, basic and diluted

 

49,388,936

 

 

 

38,441,729

 

 

 

47,259,261

 

 

 

36,670,353

 

 

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

2


 

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

 

 

 

Series A Non-Voting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred
Stock

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

103,289

 

 

$

85,400

 

 

 

43,805,922

 

 

$

44

 

 

$

399,713

 

 

$

(270,973

)

 

$

214,184

 

Conversion of Series A non-voting preferred
   stock into common stock

 

 

(7,955

)

 

 

(7,000

)

 

 

1,988,750

 

 

 

2

 

 

 

6,998

 

 

 

 

 

 

 

Issuance of common stock under Employee
   Stock Purchase Plan

 

 

 

 

 

 

 

 

18,995

 

 

 

 

 

 

129

 

 

 

 

 

 

129

 

Issuance of common stock upon exercise of
   stock options

 

 

 

 

 

 

 

 

5,599

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,175

 

 

 

 

 

 

4,175

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,634

)

 

 

(30,634

)

Balances at March 31, 2022

 

 

95,334

 

 

 

78,400

 

 

 

45,819,266

 

 

 

46

 

 

 

411,024

 

 

 

(301,607

)

 

 

187,863

 

Issuance of common stock and pre-funded
   warrants in underwritten public offering,
   net of offering costs of $
10.8 million

 

 

 

 

 

 

 

 

17,899,698

 

 

 

18

 

 

 

161,897

 

 

 

 

 

 

161,915

 

Conversion of Series A non-voting preferred
   stock into common stock

 

 

(7,955

)

 

 

(7,000

)

 

 

1,988,750

 

 

 

2

 

 

 

6,998

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,534

 

 

 

 

 

 

4,534

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,927

)

 

 

(34,927

)

Balances at June 30, 2022

 

 

87,379

 

 

 

71,400

 

 

 

65,707,714

 

 

 

66

 

 

 

584,453

 

 

 

(336,534

)

 

 

319,385

 

 

 

 

 

Series A Non-Voting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred
Stock

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

132,244

 

 

$

110,881

 

 

 

32,347,905

 

 

$

32

 

 

$

322,454

 

 

$

(198,700

)

 

$

234,667

 

Conversion of Series A non-voting preferred
   stock into common stock

 

 

(18,409

)

 

 

(16,200

)

 

 

4,602,250

 

 

 

5

 

 

 

16,195

 

 

 

 

 

 

 

Issuance of common stock to settle CVR
   liability

 

 

 

 

 

 

 

 

212,429

 

 

 

 

 

 

2,043

 

 

 

 

 

 

2,043

 

Issuance of common stock for services

 

 

 

 

 

 

 

 

31,683

 

 

 

 

 

 

260

 

 

 

 

 

 

260

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,521

 

 

 

 

 

 

1,521

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,728

)

 

 

(11,728

)

Balances at March 31, 2021

 

 

113,835

 

 

$

94,681

 

 

 

37,194,267

 

 

$

37

 

 

$

342,473

 

 

$

(210,428

)

 

$

226,763

 

Conversion of Series A non-voting preferred
   stock into common stock

 

 

(10,546

)

 

 

(9,281

)

 

 

2,636,500

 

 

 

3

 

 

 

9,278

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,590

 

 

 

 

 

 

2,590

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,549

)

 

 

(16,549

)

Balances at June 30, 2021

 

 

103,289

 

 

$

85,400

 

 

 

39,830,767

 

 

$

40

 

 

$

354,341

 

 

$

(226,977

)

 

$

212,804

 

 

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

3


 

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(65,561

)

 

$

(28,277

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

166

 

 

 

31

 

Stock-based compensation expense

 

 

8,709

 

 

 

4,371

 

Amortization of operating leases, right-of-use assets

 

 

1,064

 

 

 

900

 

Change in fair value of CVR liability

 

 

 

 

 

(343

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(909

)

 

 

(523

)

Other assets

 

 

(1,168

)

 

 

(1,970

)

Accounts payable

 

 

9

 

 

 

1,260

 

Accrued expenses and other current liabilities

 

 

3,173

 

 

 

1,666

 

Operating lease liability

 

 

(273

)

 

 

(992

)

Net cash used in operating activities

 

 

(54,790

)

 

 

(23,877

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,585

)

 

 

(123

)

Net cash used in investing activities

 

 

(1,585

)

 

 

(123

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of shares of common stock and pre-funded warrants, net of offering costs of $10.8 million

 

 

162,115

 

 

 

 

Proceeds from issuance of stock from employee stock purchase plan

 

 

129

 

 

 

 

Proceeds from issuance of common stock upon stock option exercises

 

 

9

 

 

 

 

Payment to CVR Holders

 

 

 

 

 

(85

)

Net cash (used in) provided by financing activities

 

 

162,253

 

 

 

(85

)

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

 

 

105,878

 

 

 

(24,085

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

220,939

 

 

 

243,445

 

Cash, cash equivalents and restricted cash at end of period

 

$

326,817

 

 

$

219,360

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

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

 

$

25,184

 

 

$

 

Supplemental disclosure of noncash investing and financing information:

 

 

 

 

 

 

Offering costs included in accounts payable and accrued expenses

 

$

200

 

 

$

 

Property & equipment included in accounts payable and accrued expenses

 

$

466

 

 

$

 

Conversion of Series A Convertible Preferred stock into common shares

 

$

14,000

 

 

$

25,481

 

Issuance of shares in partial settlement of CVR liability

 

$

 

 

$

2,043

 

 

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

4


 

COGENT BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.
Nature of the Business and Basis of Presentation

Cogent Biosciences, Inc. (“Cogent” or the “Company”) is a biotechnology company focused on developing precision therapies for genetically defined diseases. Cogent’s approach is to design rational precision therapies that treat the underlying cause of disease and improve the lives of patients. Cogent’s most advanced program is bezuclastinib, also known as CGT9486, a highly selective tyrosine kinase inhibitor designed to potently inhibit the KIT D816V mutation as well as other mutations in KIT exon 17. In the vast majority of cases, KIT D816V is responsible for driving Systemic Mastocytosis (“SM”), a serious disease caused by unchecked proliferation of mast cells. Exon 17 mutations are also found in patients with advanced gastrointestinal stromal tumors (“GIST”), a type of cancer with strong dependence on oncogenic KIT signaling. Bezuclastinib is a highly selective and potent KIT inhibitor with the potential to provide a new treatment option for these patient populations. In addition to bezuclastinib, the Company’s research team is developing a portfolio of novel targeted therapies to help patients fighting serious, genetically driven diseases, initially targeting FGFR2 and ErbB2. The Company was incorporated in March 2014 under the laws of the State of Delaware. On October 2, 2020 the Company filed an amendment to its certificate of incorporation to change its name from Unum Therapeutics Inc. to Cogent Biosciences, Inc. The name change became effective on October 6, 2020. In connection with the name change, the Company’s common stock began trading under the ticker symbol “COGT” and the new CUSIP for the Company’s common stock is 19240Q 201.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, the impact of COVID-19, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive 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-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

The accompanying 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 incurred recurring losses since inception, including a net loss of $65.6 million for the six months ended June 30, 2022. As of June 30, 2022, the Company had an accumulated deficit of $336.5 million. The Company expects to continue to generate operating losses in the foreseeable future. As of the issuance date of the interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the condensed consolidated financial statements.

The Company expects that it will continue to incur significant expenses in connection with its ongoing business activities. The Company will need to seek additional funding through equity offerings, debt financings, collaborations, licensing arrangements and other marketing and distribution arrangements, partnerships, joint ventures, combinations or divestitures of one or more of its assets or businesses. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborative arrangements or divest its assets. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Arrangements with collaborators or others may require the Company to relinquish rights to certain of its technologies or product candidates. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

 

5


 

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The consolidated balance sheet at December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2022 and results of operations for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021 have been made. The Company’s results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Mono, Inc. and Kiq Bio LLC. All intercompany accounts and transactions have been eliminated.

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, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuation of the CVR liability and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. The Company adopted ASU 2020-06 on January 1, 2022. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

3. Fair Value of Financial Assets and Liabilities

The following tables present the Company’s fair value hierarchy for its financial assets and liabilities, which are measured at fair value on a recurring basis (in thousands):

 

 

 

Fair Value Measurements at June 30, 2022 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

 

 

$

265,230

 

 

$

 

 

$

265,230

 

Total Assets

 

$

 

 

$

265,230

 

 

$

 

 

$

265,230

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

CVR Liability

 

$

 

 

$

 

 

$

3,060

 

 

$

3,060

 

Total Liabilities

 

$

 

 

$

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