10-Q
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“333

 

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: 001-40355

 

Treace Medical Concepts, Inc.

 

(Exact name of registrant as specified in its charter)

 

 

Delaware

47-1052611

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

100 Palmetto Park Place

Ponte Vedra, Florida 32081

(Address of principal executive offices, including zip code)

 

(904) 373-5940

(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

TMCI

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 1, 2023, 61,331,465 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.

 

 


 

TREACE MEDICAL CONCEPTS, INC.

 

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

 

Table of Contents

 

Item 1.

Unaudited Condensed Financial Statements

3

 

Condensed Balance Sheets

3

 

Condensed Statements of Operations and Comprehensive Loss

4

 

Condensed Statements of Stockholders' Equity (Deficit)

5

 

Condensed Statements of Cash Flows

6

 

Notes to Condensed Financial Statements

7

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

24

Item 4.

Controls and Procedures

25

 

 

Part II: Other Information

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

27

 

Signatures

28

 

 


 

SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS

As used in this Quarterly Report on Form 10-Q (“Quarterly Report”), unless expressly indicated or the context otherwise requires, references to “Treace Medical Concepts,” “we,” “us,” “our,” “the Company,” and similar references refer to Treace Medical Concepts, Inc. This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

These forward-looking statements include, but are not limited to, statements about:

the expected use of our products by physicians;
the expected growth of our business and our organization;
our expected uses of our existing cash, cash equivalents and marketable securities and the sufficiency of such resources to fund our planned operations;
our expectations regarding government and third-party payor coverage and reimbursement;
our ability to retain and recruit key personnel, including the continued development of a sales and marketing infrastructure;
our ability to obtain an adequate supply of materials and components for our products from our third-party suppliers, some of which are single-source suppliers;
our plans and expected timeline related to our products, or developing or acquiring new products, to address additional indications or otherwise;
our ability to manufacture sufficient quantities of our products with sufficient quality;
our ability to obtain and maintain intellectual property protection for our products;
our ability to identify and develop new and planned products and/or acquire new products;
our ability to obtain, maintain and expand regulatory clearances for our products and any new products we develop or acquire;
our ability to expand our business into current and new geographic markets;
our compliance with Nasdaq requirements and government laws, rules and regulations;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for, or ability to obtain, additional financing;
the impact of inflationary pressures, higher interest rates, recent instability in the banking sector, and general economic conditions on our business;
developments and projections relating to our competitors or our industry;
our plans to conduct further clinical studies;
the impact of failures, defaults or instability of financial institutions where we have cash or investment accounts;
the effect of the COVID-19 pandemic or another infectious disease outbreak and its impact or potential impact on our business; and
our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act (the "JOBS Act").

1


 

We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in our Annual Report on Form 10-K under “Part I, Item 1A-Risk Factors” and listed under “Risk Factors” and elsewhere in this Quarterly Report. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements.

These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should not rely upon forward-looking statements as predictions of future events. 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. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the Securities and Exchange Commission (“SEC”) as exhibits to this Quarterly Report with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

TREACE MEDICAL CONCEPTS, INC.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

29,613

 

 

$

19,473

 

Marketable securities, short-term

 

 

141,049

 

 

 

61,779

 

Accounts receivable, net of allowance for doubtful accounts of $677 and $735 as of March 31, 2023 and December 31, 2022, respectively

 

 

25,365

 

 

 

29,196

 

Inventories

 

 

22,519

 

 

 

19,330

 

Prepaid expenses and other current assets

 

 

4,587

 

 

 

3,624

 

Total current assets

 

 

223,133

 

 

 

133,402

 

Property and equipment, net

 

 

15,915

 

 

 

15,338

 

Operating lease right-of-use assets

 

 

9,907

 

 

 

10,138

 

Other non-current assets

 

 

215

 

 

 

146

 

Total assets

 

$

249,170

 

 

$

159,024

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

5,076

 

 

$

8,668

 

Accrued liabilities

 

 

7,971

 

 

 

6,216

 

Accrued commissions

 

 

5,891

 

 

 

7,356

 

Accrued compensation

 

 

3,300

 

 

 

7,666

 

Operating lease and other liabilities

 

 

1,058

 

 

 

339

 

Total current liabilities

 

 

23,296

 

 

 

30,245

 

Long-term debt, net of discount of $1,215 and $1,289 as of March 31, 2023 and December 31, 2022, respectively

 

 

52,785

 

 

 

52,711

 

Operating lease liabilities, net of current portion

 

 

15,447

 

 

 

15,539

 

Other long-term liabilities

 

 

25

 

 

 

 

Total liabilities

 

 

91,553

 

 

 

98,495

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value, 300,000,000 shares authorized; 61,280,703 issued and outstanding as of March 31, 2023; 300,000,000 shares authorized; 55,628,208 issued and outstanding as of December 31, 2022

 

 

61

 

 

55

 

Additional paid-in capital

 

 

255,786

 

 

 

145,221

 

Accumulated deficit

 

 

(98,174

)

 

 

(84,720

)

Accumulated other comprehensive (loss) income

 

 

(56

)

 

 

(27

)

Total stockholders’ equity

 

 

157,617

 

 

 

60,529

 

Total liabilities and stockholders’ equity

 

$

249,170

 

 

$

159,024

 

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

3


 

TREACE MEDICAL CONCEPTS, INC.

Condensed Statement of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

2023

 

 

2022

 

Revenue

 

$

42,195

 

 

$

29,047

 

Cost of goods sold

 

 

8,039

 

 

 

5,130

 

Gross profit

 

 

34,156

 

 

 

23,917

 

Operating expenses

 

 

 

 

 

 

Sales and marketing

 

 

33,655

 

 

 

22,299

 

Research and development

 

 

3,412

 

 

 

3,052

 

General and administrative

 

 

10,865

 

 

 

6,662

 

Total operating expenses

 

 

47,932

 

 

 

32,013

 

Loss from operations

 

 

(13,776

)

 

 

(8,096

)

Interest income

 

 

1,479

 

 

 

9

 

Interest expense

 

 

(1,285

)

 

 

(951

)

Other income, net

 

 

128

 

 

 

2

 

Other non-operating income (expense), net

 

 

322

 

 

 

(940

)

Net loss

 

$

(13,454

)

 

$

(9,036

)

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

Unrealized loss on marketable securities

 

 

(29

)

 

 

 

Comprehensive loss

 

$

(13,483

)

 

$

(9,036

)

 

 

 

 

 

 

 

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

 

$

(0.23

)

 

$

(0.16

)

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

 

58,723,760

 

 

 

54,827,665

 

 

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

4


 

TREACE MEDICAL CONCEPTS, INC.

Condensed Statement of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balances at December 31, 2022

 

 

55,628,208

 

 

$

55

 

 

$

145,221

 

 

$

(84,720

)

 

$

(27

)

 

$

60,529

 

Issuance of common stock upon exercise of stock options

 

 

125,890

 

 

 

 

 

 

352

 

 

 

 

 

 

 

 

 

352

 

Issuance of common stock for vesting of restricted stock units

 

 

50,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,692

 

 

 

 

 

 

 

 

 

2,692

 

Issuance of common stock from public offering, net of issuance costs and underwriting discount of $7.5 million

 

 

5,476,190

 

 

 

6

 

 

 

107,521

 

 

 

 

 

 

 

 

 

107,527

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,454

)

 

 

 

 

 

(13,454

)

Unrealized loss on available-for-sale marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29

)

 

 

(29

)

Balances at March 31, 2023

 

 

61,280,703

 

 

$

61

 

 

$

255,786

 

 

$

(98,174

)

 

$

(56

)

 

$

157,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

54,181,082

 

 

$

45

 

 

$

134,933

 

 

$

(41,905

)

 

$

 

 

 

93,073

 

Issuance of common stock upon exercise of stock options

 

 

1,097,860

 

 

 

1

 

 

 

1,371

 

 

 

 

 

 

 

 

 

1,372

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,409

 

 

 

 

 

 

 

 

 

1,409

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(9,036

)

 

 

 

 

 

(9,036

)

Balances at March 31, 2022

 

 

55,278,942

 

 

$

46

 

 

$

137,713

 

 

$

(50,941

)

 

$

 

 

$

86,818

 

 

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

5


 

TREACE MEDICAL CONCEPTS, INC.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(13,454

)

 

$

(9,036

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

924

 

 

 

334

 

Provision for allowance for doubtful accounts

 

 

38

 

 

 

30

 

Share-based compensation expense

 

 

2,692

 

 

 

1,409

 

Non-cash lease expense

 

 

626

 

 

 

336

 

Amortization of debt issuance costs

 

 

74

 

 

 

45

 

Recovery of loss reserve for surgical instruments

 

 

(23

)

 

 

 

Gain on fair value adjustment to derivative liability

 

 

 

 

 

(90

)

Accretion (amortization) of discount
(premium) on marketable securities, net

 

 

(297

)

 

 

 

Net changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts Receivable

 

 

3,793

 

 

 

2,542

 

Inventory

 

 

(3,189

)

 

 

(551

)

Prepaid expenses and other assets

 

 

(963

)

 

 

1,233

 

Other non-current assets

 

 

(69

)

 

 

(134

)

Payable to broker for unsettled marketable security purchases

 

 

710

 

 

 

 

Operating lease liabilities

 

 

(478

)

 

 

(133

)

Accounts payable

 

 

(3,592

)

 

 

(607

)

Accrued liabilities

 

 

(4,076

)

 

 

(2,619

)

Other, net

 

 

25

 

 

 

 

Net cash used in operating activities

 

 

(17,259

)

 

 

(7,241

)

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of available-for-sale marketable securities

 

 

(99,550

)

 

 

 

Maturities of available-for-sale marketable securities

 

 

20,548

 

 

 

 

Purchases of property and equipment

 

 

(1,478

)

 

 

(1,481

)

Net cash used in investing activities

 

 

(80,480

)

 

 

(1,481

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock from public offering, net of issuance costs and underwriting discount of $7.5 million

 

 

107,527

 

 

 

 

Proceeds from exercise of employee stock options

 

 

352

 

 

 

1,372

 

Net cash provided by financing activities

 

 

107,879

 

 

 

1,372

 

Net increase (decrease) in cash and cash equivalents

 

 

10,140

 

 

 

(7,350

)

Cash and cash equivalents at beginning of period

 

 

19,473

 

 

 

105,833

 

Cash and cash equivalents at end of period

 

$

29,613

 

 

$

98,483

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

1,285

 

 

$

951

 

Operating lease right-of-use assets obtained in exchange for new lease liabilities

 

$

 

 

$

15,300

 

Operating lease right-of-use asset and lease liability adjustment due to lease incentive

 

$

(35

)

 

$

 

Unrealized losses on marketable securities

 

$

29

 

 

$

 

 

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

6


 

TREACE MEDICAL CONCEPTS, INC.

Notes to Condensed Financial Statements

(unaudited)

1. Formation and Business of the Company

The Company

Treace Medical Concepts, LLC was formed on July 29, 2013, as a Florida limited liability company. Effective July 1, 2014, the entity converted to a Delaware corporation and changed its name to Treace Medical Concepts, Inc. (the "Company"). The Company is a medical technology company with the goal of advancing the standard of care for the surgical management of bunion and related midfoot deformities. The Company received 510(k) clearance for the Lapiplasty® System in March 2015 and began selling its surgical medical devices in September 2015. The Company has pioneered the proprietary Lapiplasty 3D Bunion Correction System – a combination of instruments, implants and surgical methods designed to surgically correct all three planes of the bunion deformity and secure the unstable joint, addressing the root cause of the bunion. In addition, the Company offers other advanced instrumentation and implants for use in the Lapiplasty Procedure or other ancillary procedures performed in high frequency with bunion surgery. In 2021, the Company expanded its offerings with the Adductoplasty® Midfoot Correction System, designed for reproducible correction of the midfoot to provide further support to hallux valgus patients. The Company operates from its corporate headquarters located in Ponte Vedra, Florida.

Initial Public Offering and Follow-on Offering

On April 27, 2021, the Company completed its initial public offering ("IPO). The Company received net proceeds of $107.6 million from the IPO. On February 10, 2023, the Company completed a follow-on public offering of 5,476,190 shares of its common stock, which included the exercise in full of the underwriters' option to purchase additional shares, at a price to the public of $21.00 per share. The February 2023 offering resulted in net proceeds of $107.5 million after deducting underwriting discounts and commissions of $6.9 million and offering expenses payable by the Company of $0.6 million.

Liquidity and Capital Resources

The Company has incurred operating losses to date and has an accumulated deficit of $98.2 million as of March 31, 2023. During the three months ended March 31, 2023 and 2022, the Company used $17.3 million and $7.2 million of cash in its operating activities, respectively. As of March 31, 2023, the Company had cash and cash equivalents of $29.6 million and marketable securities available-for-sale of $141.0 million.

Management believes that the Company’s existing cash, cash equivalents, and marketable securities will allow the Company to continue its planned operations for at least the next 12 months from the date of the issuance of these interim condensed financial statements.

2. Summary of Significant Accounting Policies

The Company prepared the unaudited interim condensed financial statements included in this report in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission related to quarterly reports on Form 10-Q.

Basis of Presentation

The condensed financial statements have been prepared on the same basis as the Company’s annual financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 8, 2023, with the exception of the reclassification as discussed below. The unaudited condensed financial statements included herein reflect all adjustments, including normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for future quarters or for the fiscal year ending December 31, 2023.

7


 

An adjustment has been made to the Statement of Operations for the three months ended March 31, 2022 for $0.4 million to reclassify surgical instrument expense from cost of goods sold to sales and marketing expense, to conform with the current year's presentation. This reclassification had no effect on the Company's net loss.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Significant estimates and assumptions include reserves and write-downs related to accounts receivable, inventories, the recoverability of long-term assets, stock-based compensation, deferred tax assets and related valuation allowances and impact of contingencies. The Company had no accrued contingent liabilities as of March 31, 2023 and December 31, 2022.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. The Company maintains its cash and cash equivalents balances with established financial institutions and, at times, such balances with any one financial institution may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company's available for sale securities portfolio primarily consists of U.S. treasury and agency securities, money market funds, commercial paper, Yankee CDs, high credit quality asset-backed securities and corporate debt securities. The Company's investment policy requires its available for sale securities to meet certain criteria including investment type, credit ratings, and a maximum portfolio duration of one year. If any of the financial institutions where we hold deposits were to fail or be taken over by the FDIC, such as the recent takeover of Silicon Valley Bank, where we did hold cash as deposits, our access to these accounts could be temporarily unavailable or permanently lost for the amounts in excess of the FDIC insured limits. The Company did not have material cash deposits at Silicon Valley bank at the time of the FDIC takeover or as of March 31, 2023.

The Company earns revenue from the sale of its products to customers such as hospitals and ambulatory surgery centers. The Company’s accounts receivable is derived from revenue earned from customers. The Company performs ongoing credit evaluations of its customers’ financial condition. On March 31, 2023 and December 31, 2022, no customer accounted for more than 10% of accounts receivable. For the three months ended March 31, 2023 and 2022, there were no customers that represented 10% or more of revenue.

3. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. This guidance requires financial instruments measured at amortized cost, and trade accounts receivable to be presented at the net amount expected to be collected. The model requires an entity to estimate credit losses based on historical information, current conditions and reasonable and supportable forecasts of future economic conditions. In November 2019, the FASB issued ASU 2019-10, which provides that this standard is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within that fiscal year. The Company adopted the new standard as of January 1, 2023. Adoption of the standard did not have a material impact on our financial position, results of operations, or our disclosures.

8


 

4. Fair Value Measurements

Assets and liabilities recorded at fair value in the condensed financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis – The following assets and liabilities are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):

 

 

 

March 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

12,289

 

 

$

 

 

$

 

 

$

12,289

 

Commercial paper

 

 

 

 

 

998

 

 

 

 

 

 

998

 

Corporate debt

 

 

 

 

 

8,358

 

 

 

 

 

 

8,358

 

Yankee CD

 

 

 

 

 

4,502

 

 

 

 

 

 

4,502

 

Short-term marketable securities at fair value

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agencies

 

 

33,544

 

 

 

23,221

 

 

 

 

 

 

56,765

 

Commercial paper

 

 

 

 

 

2,550

 

 

 

 

 

 

2,550

 

Corporate debt

 

 

 

 

 

33,570

 

 

 

 

 

 

33,570

 

Asset-backed securities

 

 

 

 

 

29,845

 

 

 

 

 

 

29,845

 

Yankee CD

 

 

 

 

 

18,319

 

 

 

 

 

 

18,319

 

Total

 

$

45,833

 

 

$

121,363

 

 

$

 

 

$

167,196

 

 

 

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

13,141

 

 

$

 

 

$

 

 

$

13,141

 

Commercial paper

 

 

 

 

 

323

 

 

 

 

 

 

323

 

Corporate debt

 

 

 

 

 

2,197

 

 

 

 

 

 

2,197