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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 March 31, 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: 001-38470

 

Unity Biotechnology, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

26-4726035

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

285 East Grand Ave.

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 416-1192

 

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 $0.0001

UBX

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, 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, 2022, the registrant had 69,168,939 shares of common stock outstanding.

 


 

UNITY BIOTECHNOLOGY, INC.

QUARTERLY REPORT ON FORM 10-Q

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1

Condensed Financial Statements

2

 

Condensed Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021

2

 

Condensed Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021 (unaudited)

3

 

Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021(unaudited)

4

 

Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)

5

 

Notes to Condensed Financial Statements (unaudited)

6

Item 2

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

23

Item 3

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4

Controls and Procedures

32

 

 

 

PART II. OTHER INFORMATION

 

 

 

Item 1

Legal Proceedings

33

Item 1A

Risk Factors

33

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3

Default Upon Senior Securities

76

Item 4

Mine Safety Disclosures

76

Item 5

Other Information

76

Item 6

Exhibits

77

Signatures

78

 

 

1


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

 

Unity Biotechnology, Inc.

Condensed Balance Sheets

(In thousands, except for share amounts and par value)

 

 

 

March 31, 2022

 

 

December 31, 2021(1)

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,446

 

 

$

32,905

 

Short-term marketable securities

 

 

62,717

 

 

 

55,170

 

Prepaid expenses and other current assets

 

 

1,770

 

 

 

1,879

 

Restricted cash

 

 

550

 

 

 

550

 

Total current assets

 

 

81,483

 

 

 

90,504

 

Property and equipment, net

 

 

9,308

 

 

 

9,942

 

Operating lease right-of-use assets

 

 

20,706

 

 

 

21,286

 

Long-term marketable securities

 

 

 

 

 

1,993

 

Long-term restricted cash

 

 

896

 

 

 

896

 

Other long-term assets

 

 

76

 

 

 

91

 

Total assets

 

$

112,469

 

 

$

124,712

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,323

 

 

$

1,985

 

Accrued compensation

 

 

2,837

 

 

 

4,028

 

Accrued and other current liabilities

 

 

6,692

 

 

 

6,370

 

Deferred revenue

 

 

216

 

 

 

216

 

Derivative liability related to debt

 

 

 

 

 

963

 

Current portion of long-term debt

 

 

4,837

 

 

 

3,055

 

Total current liabilities

 

 

17,905

 

 

 

16,617

 

Operating lease liability, net of current portion

 

 

29,339

 

 

 

30,094

 

Long-term debt, net

 

 

14,534

 

 

 

18,409

 

Other long-term liabilities

 

 

 

 

 

23

 

Total liabilities

 

 

61,778

 

 

 

65,143

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Convertible preferred stock, $0.0001 par value; 10,000,000 shares

   authorized; no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 shares

  authorized as of March 31, 2022 and December 31, 2021;

  69,148,106 and 62,991,906 shares issued and outstanding

  as of March 31, 2022 and December 31, 2021, respectively

 

 

7

 

 

 

6

 

Additional paid-in capital

 

 

469,799

 

 

 

459,631

 

Accumulated other comprehensive loss

 

 

(176

)

 

 

(44

)

Accumulated deficit

 

 

(418,939

)

 

 

(400,024

)

Total stockholders’ equity

 

 

50,691

 

 

 

59,569

 

Total liabilities and stockholders’ equity

 

$

112,469

 

 

$

124,712

 

 

(1) The balance sheet as of December 31, 2021 is derived from the audited financial statements as of that date.

 

See accompanying notes to the condensed financial statements.

2


Unity Biotechnology, Inc.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

12,461

 

 

$

8,717

 

General and administrative

 

 

5,806

 

 

 

6,226

 

Total operating expenses

 

 

18,267

 

 

 

14,943

 

Loss from operations

 

 

(18,267

)

 

 

(14,943

)

Interest income

 

 

29

 

 

 

36

 

Interest expense

 

 

(808

)

 

 

(775

)

Other income (expense), net

 

 

131

 

 

 

(74

)

Net loss

 

 

(18,915

)

 

 

(15,756

)

Other comprehensive (loss) gain

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable debt securities

 

 

(132

)

 

 

10

 

Comprehensive loss

 

$

(19,047

)

 

$

(15,746

)

Net loss per share, basic and diluted

 

$

(0.28

)

 

$

(0.29

)

Weighted-average number of shares used in

  computing net loss per share, basic and diluted

 

 

67,528,552

 

 

 

54,169,349

 

 

See accompanying notes to the condensed financial statements.


 

3


 

Unity Biotechnology, Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

For the Three Months Ended March 31, 2022

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Related Party

Promissory Notes

for Purchase of

 

 

Employee Promissory Notes for Purchase of

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Common Stock

 

 

Common Stock

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

62,991,906

 

 

$

6

 

 

$

459,631

 

 

$

 

 

$

 

 

$

(44

)

 

$

(400,024

)

 

$

59,569

 

Issuance of common stock, net of issuance costs,

   under ATM offering program

 

 

2,325,000

 

 

 

 

 

 

3,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,420

 

Issuance of common stock to Lincoln Park Capital Fund

 

 

900,000

 

 

 

 

 

 

910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

910

 

Issuance of common stock to Hercules Capital

 

 

2,627,612

 

 

 

1

 

 

 

3,178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,179

 

Vesting of restricted stock units

 

 

303,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,660

 

Unrealized loss on available-for-sale marketable

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

 

 

 

(132

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,915

)

 

 

(18,915

)

Balances at March 31, 2022

 

 

69,148,106

 

 

$

7

 

 

$

469,799

 

 

$

 

 

$

 

 

$

(176

)

 

$

(418,939

)

 

$

50,691

 

 

 

For the Three Months Ended March 31, 2021

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Related Party

Promissory Notes

for Purchase of

 

 

Promissory Notes

for Purchase of

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Common Stock

 

 

Common Stock

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

53,253,213

 

 

$

5

 

 

$

422,379

 

 

$

(210

)

 

$

 

 

$

5

 

 

$

(339,299

)

 

$

82,880

 

Issuance of common stock, net of issuance costs,

   under at-the-market equity ("ATM") offering program

 

 

1,220,629

 

 

 

 

 

 

8,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,892

 

Issuance of common stock upon exercise of stock

   options

 

 

259,019

 

 

 

 

 

 

1,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,183

 

Repurchase of early exercised shares

 

 

(33,370

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,744

 

Vesting of restricted stock units

 

 

88,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclass of promissory notes for purchase of

   common stock

 

 

 

 

 

 

 

 

 

 

 

210

 

 

 

(210

)

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale marketable

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,756

)

 

 

(15,756

)

Balances at March 31, 2021

 

 

54,787,709

 

 

$

5

 

 

$

435,198

 

 

$

 

 

$

(210

)

 

$

15

 

 

$

(355,055

)

 

$

79,953

 

 

See accompanying notes to the condensed financial statements.

 

4


 

Unity Biotechnology, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(18,915

)

 

$

(15,756

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

627

 

 

 

757

 

Amortization of debt issuance costs

 

 

322

 

 

 

191

 

Debt extinguishment gain upon conversion to equity

 

 

(199

)

 

 

 

Net accretion and amortization of premium and discounts on

   marketable securities

 

 

131

 

 

 

290

 

Stock-based compensation

 

 

2,660

 

 

 

2,744

 

Non-cash rent expense

 

 

(626

)

 

 

(556

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

110

 

 

 

1,585

 

Other long-term assets

 

 

14

 

 

 

 

Accounts payable

 

 

1,345

 

 

 

(640

)

Accrued compensation

 

 

(1,191

)

 

 

(3,516

)

Accrued liabilities and other current liabilities

 

 

774

 

 

 

(190

)

Other long-term liabilities

 

 

(24

)

 

 

 

Net cash used in operating activities

 

 

(14,972

)

 

 

(15,091

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(17,067

)

 

 

(38,174

)

Maturities of marketable securities

 

 

11,250

 

 

 

52,250

 

Purchase of property and equipment

 

 

 

 

 

(14

)

Net cash provided by investing activities

 

 

(5,817

)

 

 

14,062

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock under ATM offering program,

   net of issuance costs

 

 

3,420

 

 

 

8,892

 

Proceeds from issuance of common stock upon exercise of stock options,

   net of repurchases

 

 

 

 

 

1,172

 

Proceeds from issuance of common stock to Lincoln Park Capital Fund,

   net of issuance costs

 

 

910

 

 

 

 

Net cash provided by financing activities

 

 

4,330

 

 

 

10,064

 

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

 

 

(16,459

)

 

 

9,035

 

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

 

 

34,351

 

 

 

19,253

 

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

 

$

17,892

 

 

$

28,288

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

518

 

 

$

584

 

Supplemental Disclosures of Non-Cash Investing and Financing

   Activities

 

 

 

 

 

 

 

 

Issuance of common stock in payment of debt

 

$

3,178

 

 

$

 

Property and equipment included in accounts payable and accrued liabilities

 

$

 

 

$

57

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

16,446

 

 

$

26,842

 

Restricted cash

 

 

1,446

 

 

 

1,446

 

Total cash, cash equivalents and restricted cash

 

$

17,892

 

 

$

28,288

 

 

See accompanying notes to the condensed financial statements.

5


Unity Biotechnology, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

1. Organization

Description of Business

Unity Biotechnology, Inc. (the “Company”) is a biotechnology company engaged in the research and development of therapeutics to slow, halt, or reverse diseases of aging. The Company devotes substantially all of its time and efforts to performing research and development, raising capital, and recruiting personnel. The Company’s headquarters are located in South San Francisco, California. The Company was incorporated in the State of Delaware in 2009.

Liquidity

 

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) (“ASU No. 2014-15”), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s Condensed Financial Statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred operating losses and has an accumulated deficit as a result of ongoing efforts to develop drug product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. The Company had an accumulated deficit of $418.9 million and $400.0 million as of March 31, 2022 and December 31, 2021, respectively. The Company had net losses of $18.9 million and $15.8 million for the three months ended March 31, 2022 and 2021, respectively, and net cash used in operating activities of $15.0 million and $15.1 million for the three months ended March 31, 2022 and 2021, respectively. To date, none of the Company’s drug candidates have been approved for sale, and therefore, the Company has not generated any product revenue and does not expect positive cash flows from operations in the foreseeable future. The Company has financed its operations primarily through private placements of preferred stock and promissory notes, public equity issuances and more recently, from its ATM Offering Programs (as defined in Note 9), the Term Loan Facility (as defined in Note 7), and an Equity Purchase Agreement (as defined in Note 9) and will continue to be dependent upon equity and/or debt financing until the Company is able to generate positive cash flows from its operations.

The Company had cash, cash equivalents, and marketable securities of $79.2 million as of March 31, 2022. As of May 10, 2022, the date of issuance of these Condensed Financial Statements, the Company expects that its cash and cash equivalents as of March 31, 2022 will not be sufficient to fund its current business plan including related operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these Condensed Financial Statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to seek to address this condition by raising additional capital to finance its operations. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing. Therefore, it is not considered probable, as defined in ASU No. 2014-15, that the Company’s plans to raise additional capital will alleviate the substantial doubt regarding its ability to continue as a going concern.

6


Management expects operating losses to continue for the foreseeable future. As a result, the Company will need to raise additional capital. If sufficient funds on acceptable terms are not available when needed, the Company could be required to significantly reduce its operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs. Failure to manage discretionary spending or raise additional financing, as needed, may adversely impact the Company’s ability to achieve its intended business objectives.

2. Summary of Significant Accounting Policies

Basis of Presentation

These condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim reporting.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

Unaudited Condensed Financial Statements

The accompanying financial information for the three months ended March 31, 2022 and 2021 are unaudited. The unaudited condensed financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2022 and its results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021. The results for interim periods are not necessarily indicative of the results expected for the full fiscal year or any other periods.

Use of Estimates

The condensed financial statements have been prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the amounts and disclosures reported in the condensed financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s condensed balance sheets and the amount of expenses and income reported for each of the periods presented are affected by estimates and assumptions, which are used for, but are not limited to, determining the fair value of assets and liabilities, contingent consideration liability, the fair value of right-of-use assets and lease liabilities, derivative liabilities related to debt and stock-based compensation. Actual results could differ from such estimates or assumptions.

 

Segments

 

The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of allocating resources.

Restructuring

The Company recognizes restructuring charges related to reorganization plans that have been committed to by management and when liabilities have been incurred. In connection with these activities, the Company records restructuring charges at fair value for a) contractual employee termination benefits when obligations are associated to services already rendered, rights to such benefits have vested, and payment of benefits is probable and can be reasonably estimated, and b) one-time employee termination benefits when management has committed to a plan of termination, the plan identifies the employees and their expected termination dates, the details of termination benefits are complete, it is unlikely changes to the plan will be made or the plan will be withdrawn and communication to such employees has occurred.

One-time employee termination benefits are recognized in their entirety when communication has occurred, and future services are not required. Contract termination costs to be incurred over the remaining contract term without economic benefit are recorded in their entirety when the contract is canceled.

7


The recognition of restructuring charges requires the Company to make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned reorganization plan. At the end of each reporting period, the Company evaluates the remaining accrued restructuring balances to ensure that no excess accruals are retained, and the utilization of the provisions are for their intended purpose in accordance with developed restructuring plans.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The ASU contains improvements to the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the Codification. The ASU also improves various topics in the Codification so that entities can apply guidance more consistently on codifications that are varied in nature where the original guidance may have been unclear. The amendments in ASU 2020-10 are effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-10 to have a material impact on its financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity. ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)Measurement of Credit Losses on Financial Instruments, as clarified in subsequent amendments. ASU 2016-13 changes the impairment model for certain financial instruments. The new model is a forward-looking expected loss model and will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees and net investments in leases, as well as trade receivables. For available-for-sale debt securities with unrealized losses, credit losses will be measured in a manner similar to today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. In October 2019, the FASB voted to delay the effective date of this standard. Topic 326 will be effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the effect that this ASU will have on its financial position, results of operations, and disclosures.

3. Fair Value Measurements

The Company determines the fair value of financial and non-financial assets and liabilities based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction between market participants at the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:

 

Level 1: Quoted prices in active markets for identical instruments

 

Level 2: Other significant observable inputs (including quoted prices in active markets for similar instruments)

 

Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain investments)

The carrying amounts of financial instruments such as cash and cash equivalents, restricted cash, prepaid expenses and other current assets, accounts payable, accrued compensation, accrued and other current liabilities approximate

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the related fair values due to the short maturities of these instruments. As the long-term debt is subject to variable interest rates that are based on market rates which are regularly reset, considering level 2 inputs, the Company believes the carrying value of the long-term debt approximates its fair value.

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements were as follows (in thousands):

 

 

March 31, 2022

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

9,766

 

 

$

9,766

 

 

$

 

 

$

 

U.S. treasuries

 

 

2,000

 

 

 

 

 

 

2,000

 

 

 

 

Total cash equivalents

 

 

11,766

 

 

 

9,766

 

 

 

2,000

 

 

 

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

 

59,709

 

 

 

 

 

 

59,709

 

 

 

 

U.S. government debt securities

 

 

3,008

 

 

 

 

 

 

3,008

 

 

 

 

Total short-term marketable securities

 

 

62,717

 

 

 

 

 

 

62,717

 

 

 

 

Total assets subject to fair value measurements

   on a recurring basis

 

$

74,483

 

 

$

9,766

 

 

$

64,717

 

 

$

 

 

 

 

December 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets: