10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 March 31, 2023

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: 001-37378

 

ATYR PHARMA, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

20-3435077

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

10240 Sorrento Valley, Suite 300, San Diego, CA

92121

(Address of principal executive offices)

(Zip Code)

(858) 731-8389

(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, par value $0.001 per share

LIFE

The Nasdaq Capital 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 May 5, 2023, there were 54,291,754 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 

 

1


ATYR PHARMA, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

3

Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022

3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)

4

Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022 (unaudited)

5

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)

 

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)

7

Notes to Condensed Consolidated Financial Statements (unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3. Quantitative and Qualitative Disclosures About Market Risk

22

Item 4. Controls and Procedures

22

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

22

Item 1A. Risk Factors

22

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

59

Item 3. Defaults Upon Senior Securities

59

Item 4. Mine Safety Disclosures

59

Item 5. Other Information

59

Item 6. Exhibits

60

SIGNATURES

62

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

aTyr Pharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

20,690

 

 

$

9,981

 

Available-for-sale investments

 

 

93,695

 

 

 

56,165

 

Other receivables

 

 

1,625

 

 

 

11,775

 

Prepaid expenses

 

 

3,437

 

 

 

2,950

 

Total current assets

 

 

119,447

 

 

 

80,871

 

Restricted cash

 

 

3,190

 

 

 

3,165

 

Property and equipment, net

 

 

5,167

 

 

 

3,059

 

Operating lease, right-of-use assets

 

 

6,942

 

 

 

7,250

 

Financing lease, right-of-use assets

 

 

1,948

 

 

 

1,248

 

Other assets

 

 

144

 

 

 

193

 

Total assets

 

$

136,838

 

 

$

95,786

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,965

 

 

$

3,106

 

Accrued expenses

 

 

8,888

 

 

 

9,862

 

Current portion of operating lease liability

 

 

381

 

 

 

630

 

Current portion of financing lease liability

 

 

420

 

 

 

264

 

Total current liabilities

 

 

13,654

 

 

 

13,862

 

Long-term operating lease liability, net of current portion

 

 

11,916

 

 

 

9,633

 

Long-term financing lease liability, net of current portion

 

 

1,570

 

 

 

1,007

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 5,000,000 undesignated authorized shares as of March 31, 2023 (unaudited) and December 31, 2022; no shares issued or outstanding as of March 31, 2023 (unaudited) and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value per share; 85,000,000 authorized shares as of March 31, 2023 (unaudited) and December 31, 2022; issued and outstanding shares – 53,339,611 as of March 31, 2023 (unaudited) and 29,498,488 as of December 31, 2022

 

 

53

 

 

 

29

 

Additional paid-in capital

 

 

539,659

 

 

 

489,502

 

Accumulated other comprehensive loss

 

 

(248

)

 

 

(433

)

Accumulated deficit

 

 

(429,585

)

 

 

(417,634

)

Total aTyr Pharma, Inc. stockholders’ equity

 

 

109,879

 

 

 

71,464

 

Noncontrolling interest in Pangu BioPharma Limited

 

 

(181

)

 

 

(180

)

Total stockholders’ equity

 

 

109,698

 

 

 

71,284

 

Total liabilities and stockholders’ equity

 

$

136,838

 

 

$

95,786

 

 

See accompanying notes.

 

 

3


aTyr Pharma, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

 

2023

 

 

2022

 

 

 

 

(unaudited)

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

$

9,379

 

 

$

8,896

 

 

General and administrative

 

 

3,408

 

 

 

3,482

 

 

Total operating expenses

 

 

12,787

 

 

 

12,378

 

 

Loss from operations

 

 

(12,787

)

 

 

(12,378

)

 

Total other income (expense), net

 

 

835

 

 

 

224

 

 

Consolidated net loss

 

 

(11,952

)

 

 

(12,154

)

 

Net loss attributable to noncontrolling interest in Pangu BioPharma Limited

 

 

1

 

 

 

1

 

 

Net loss attributable to aTyr Pharma, Inc.

 

$

(11,951

)

 

$

(12,153

)

 

Net loss per share, basic and diluted

 

$

(0.29

)

 

$

(0.44

)

 

Shares used in computing net loss per share, basic and diluted

 

 

41,897,706

 

 

 

27,818,379

 

 

See accompanying notes.

 

 

4


aTyr Pharma, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

Consolidated net loss

 

$

(11,952

)

 

$

(12,154

)

Other comprehensive loss:

 

 

 

 

 

 

Change in unrealized gain (loss) on available-for-sale investments, net of tax

 

 

185

 

 

 

(496

)

Comprehensive loss

 

 

(11,767

)

 

 

(12,650

)

Comprehensive loss attributable to noncontrolling interest in Pangu BioPharma Limited

 

 

1

 

 

 

1

 

Comprehensive loss attributable to aTyr Pharma, Inc. common stockholders

 

$

(11,766

)

 

$

(12,649

)

 

See accompanying notes.

 

 

 

 

5


aTyr Pharma, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

 

 

Three months ended March 31, 2023 (unaudited)

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Other
Comprehensive

 

 

Accumulated

 

 

Noncontrolling

 

 

Total
Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain/(Loss)

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance as of December 31, 2022

 

29,498,488

 

 

$

29

 

 

$

489,502

 

 

$

(433

)

 

$

(417,634

)

 

$

(180

)

 

$

71,284

 

Issuance of common stock upon release of restricted stock units

 

22,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from at-the-market offerings, net of offering costs

 

694,012

 

 

 

1

 

 

 

1,488

 

 

 

 

 

 

 

 

 

 

 

 

1,489

 

Issuance of common stock from underwritten follow-on public offering, net of offering costs

 

23,125,000

 

 

 

23

 

 

 

48,050

 

 

 

 

 

 

 

 

 

 

 

 

48,073

 

Stock-based compensation

 

 

 

 

 

 

 

619

 

 

 

 

 

 

 

 

 

 

 

 

619

 

Net unrealized gain on investments, net of tax

 

 

 

 

 

 

 

 

 

 

185

 

 

 

 

 

 

 

 

 

185

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,951

)

 

 

(1

)

 

 

(11,952

)

Balance as of March 31, 2023

 

53,339,611

 

 

$

53

 

 

$

539,659

 

 

$

(248

)

 

$

(429,585

)

 

$

(181

)

 

$

109,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2022 (unaudited)

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Other
Comprehensive

 

 

Accumulated

 

 

Noncontrolling

 

 

Total
Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain/(Loss)

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance as of December 31, 2021

 

27,793,035

 

 

$

28

 

 

$

481,832

 

 

$

(263

)

 

$

(372,296

)

 

$

(175

)

 

$

109,126

 

Issuance of common stock upon release of restricted stock units

 

2,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon exercise of stock options

 

259

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock from at-the-market offerings, net of offering costs

 

260,455

 

 

 

 

 

 

1,480

 

 

 

 

 

 

 

 

 

 

 

 

1,480

 

Stock-based compensation

 

 

 

 

 

 

 

417

 

 

 

 

 

 

 

 

 

 

 

 

417

 

Net unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

(496

)

 

 

 

 

 

 

 

 

(496

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,153

)

 

 

(1

)

 

 

(12,154

)

Balance as of March 31, 2022

 

28,056,249

 

 

$

28

 

 

$

483,730

 

 

$

(759

)

 

$

(384,449

)

 

$

(176

)

 

$

98,374

 

 

See accompanying notes.

6


 

aTyr Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

Consolidated net loss

 

$

(11,952

)

 

$

(12,154

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

80

 

 

 

81

 

Stock-based compensation

 

 

619

 

 

 

417

 

(Accretion) amortization of (discount) premium of available-for-sale investment securities

 

 

(419

)

 

 

237

 

Amortization of right-of-use assets

 

 

675

 

 

 

217

 

Gain on disposal of property and equipment

 

 

 

 

 

(89

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Other receivables

 

 

9,883

 

 

 

9

 

Prepaid expenses and other assets

 

 

(438

)

 

 

1,180

 

Accounts payable and accrued expenses

 

 

(1,057

)

 

 

216

 

Operating lease liability

 

 

2,019

 

 

 

(233

)

Net cash used in operating activities

 

 

(590

)

 

 

(10,119

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,246

)

 

 

(43

)

Purchases of available-for-sale investment securities

 

 

(46,226

)

 

 

 

Maturities of available-for-sale investment securities

 

 

9,300

 

 

 

14,500

 

Proceeds from sale of property and equipment

 

 

 

 

 

169

 

Net cash (used in) provided by investing activities

 

 

(38,172

)

 

 

14,626

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock through option exercises

 

 

 

 

 

1

 

Proceeds from issuance of common stock from at-the-market offerings, net of offering costs

 

 

1,489

 

 

 

1,480

 

Proceeds from issuance of common stock from underwritten follow-on public offering, net of offering costs

 

 

48,073

 

 

 

 

Principal paid on finance lease liabilities

 

 

(66

)

 

 

 

Net cash provided by financing activities

 

 

49,496

 

 

 

1,481

 

Net change in cash, cash equivalents and restricted cash

 

 

10,734

 

 

 

5,988

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

13,146

 

 

 

2,336

 

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

 

$

23,880

 

 

$

8,324

 

 

 

 

 

 

 

Cash and cash equivalents at the end of period

 

$

20,690

 

 

$

8,324

 

Restricted cash at the end of period

 

 

3,190

 

 

 

 

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

 

$

23,880

 

 

$

8,324

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

46

 

 

$

 

Purchases of property and equipment in accounts payable

 

$

2,136

 

 

$

 

Right-of-use assets obtained in exchange for lease obligation

 

$

1,043

 

 

$

 

 

See accompanying notes.

 

7


aTyr Pharma, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Organization, Business, Basis of Presentation and Summary of Significant Accounting Policies

Organization and Business

We were incorporated in the State of Delaware on September 8, 2005. We are a biotherapeutics company engaged in the discovery and development of first-in-class medicines from our proprietary tRNA synthetase platform.

Principles of Consolidation

Our condensed consolidated financial statements include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma Limited (Pangu BioPharma). All intercompany transactions and balances are eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. 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 U.S. GAAP can be condensed or omitted. In our 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 our financial position and our results of operations and cash flows for periods presented. These statements do not include all disclosures required by U.S. GAAP and should be read in conjunction with our financial statements and accompanying notes for the fiscal year ended December 31, 2022, contained in our Annual Report on Form 10-K filed with the SEC on March 14, 2023. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.

Risks and Uncertainties

In addition to the COVID-19 pandemic and the ongoing Ukraine-Russia conflict, global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, and recession risks, which has resulted in further volatility in the U.S. and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. The ultimate long-term impact of the COVID-19 pandemic, the ongoing Ukraine-Russia conflict and other evolving geopolitical and macroeconomic conditions on our business is uncertain, although we continue to actively monitor the impact of these factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Liquidity and Financial Condition

We have incurred net losses in each year since our inception in 2005, including a consolidated net loss of $12.0 million for the three months ended March 31, 2023. As of March 31, 2023, we had an accumulated deficit of $429.6 million. We believe that our existing cash, cash equivalents, restricted cash and available-for-sale investments of $117.6 million as of March 31, 2023 will be sufficient to meet our material cash requirements from known contractual and other obligations for a period of at least one year from the filing date of this Quarterly Report on Form 10-Q.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years at a minimum. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to raise substantial additional capital to fund our operations. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts and the timing and nature of the regulatory approval process for our product candidates. We anticipate that we will seek to fund our operations through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates potentially through debt financings. However, we may be unable to raise additional capital or enter into such arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such arrangements when needed would have a negative impact on our financial condition and ability to develop our product candidates.

8


Restricted Cash

As of March 31, 2023, restricted cash was approximately $3.2 million, which was held as a security deposit in conjunction with our new facility lease and financing leases as discussed further in Note 4 - Commitments and Contingencies.

Allowance of 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.

Use of Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure for these items in our condensed consolidated financial statements and accompanying notes. The most significant estimates in our condensed consolidated financial statements relate to clinical trial and research and development expenses. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ materially from these estimates and assumptions.

Leases

We determine if an arrangement is a lease at inception. Short-term leases with an initial term of 12 months or less are not recorded on our balance sheet. For long-term operating leases with an initial term of greater than 12 months, we recognize an operating right-of-use asset (ROU) and a lease liability based on the present value of future lease payments using an estimated rate of interest that we would pay to borrow equivalent funds on a collateralized basis at the lease commencement date. We determine the lease term at the commencement date by considering whether renewal options and termination options are reasonably assured of exercise. Rent expense for operating leases is recognized on a straight-line basis over the lease term and is included in operating expenses in our condensed consolidated statements of operations. For financing leases, interest expense and amortization of the ROU is included in operating expenses in our condensed consolidated statements of operations and variable lease payments are expensed as incurred.

If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease. If a lease continues to exist, the lease modification is determined to be a separate contract when the modification grants the lessee an additional ROU that is not included in the original lease and the lease payments increase commensurate with the standalone price for the additional ROU. A lease modification that results in a separate contract will be accounted for in the same manner as a new lease. For a modification that is not a separate contract, we reassess the lease classification using the modified terms and conditions and the facts and circumstances as of the effective date of the modification and recognize the amount of the remeasurement of the lease liability for the modified lease as an adjustment to the corresponding operating lease ROU asset.

Our ROU assets consist of operating leases and financing leases. Operating leases include our new corporate headquarters and laboratory space and our prior corporate headquarters. Our prior corporate headquarters lease will expire in May 2023. Financing leases include various research and development and information technology equipment.

We do not separate lease and non-lease components of our long-term leases.

Revenue Recognition

We evaluate our agreements under ASC Topic 606, Revenue from Contracts with Customers and ASC Topic 808, Collaborative Arrangements. We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. In determining the appropriate amount of

9


revenue to be recognized as we fulfill our obligations under our agreement, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. We use key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

We recognize revenue in one of two ways, over time or at a point in time. We recognize revenue over time when we are executing on our performance obligation over time and our partner receives benefit over time. For example, we recognize revenue over time when we provide research and development services. We recognize revenue at a point in time when we transfer control of a distinct performance obligation to our partner. For example, if a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of warrants for common stock, options and restricted stock units outstanding under our stock option plans and estimated shares to be purchased under our employee stock purchase plan. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to our net loss position.

Potentially dilutive securities not considered for the calculation of diluted net loss per share are as follows (in common stock equivalents):

 

 

March 31,

 

 

 

2023

 

 

2022

 

Common stock warrants

 

 

13,760

 

 

 

13,760

 

Common stock options and restricted stock units

 

 

3,922,930

 

 

 

1,824,164

 

Employee stock purchase plan

 

 

34,588

 

 

 

2,045

 

Total

 

 

3,971,278

 

 

 

1,839,969

 

 

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We adopted Topic 326 on January 1, 2023. The adoption did not have a material impact on our condensed consolidated financial statements.

2. Fair Value Measurements

The carrying amounts of cash equivalents, prepaid and other assets, accounts payable and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments. Investment securities are recorded at fair value.

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 nonrecurring 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:

10


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.

Financial assets measured at fair value on a recurring basis consist of investment securities. Investment securities are recorded at fair value, defined as the exit price in the principal market in which we would transact, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Level 2 securities are valued using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data, or discounted cash flow techniques and include our investments in commercial paper, corporate debt securities, municipal bonds and U.S. government agencies securities. We have no financial liabilities measured at fair value on a recurring basis. None of our non-financial assets and liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

Assets measured at fair value on a recurring basis are as follows (in thousands):

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

Total

 

 

Quoted Prices in
Active
Markets
for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

As of March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

20,514

 

 

$

20,514

 

 

$

 

 

$

 

Available-for-sale investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

52,492

 

 

 

 

 

 

52,492

 

 

 

 

Corporate debt securities

 

 

20,880

 

 

 

 

 

 

20,880

 

 

 

 

Municipal bonds

 

 

1,001

 

 

 

 

 

 

1,001

 

 

 

 

U.S. government agencies

 

 

19,322

 

 

 

 

 

 

19,322

 

 

 

 

Total available-for-sale investments

 

 

93,695

 

 

 

 

 

 

93,695

 

 

 

 

Total assets measured at fair value

 

$

114,209

 

 

$

20,514

 

 

$

93,695

 

 

$

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

Total