UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarterly period ended
| 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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of exchange on which registered | ||
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.
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 ☐ |
| 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 ☐
As October 31, 2022, the issuer had shares of common stock outstanding.
GT Biopharma, Inc. and Subsidiaries
Table of Contents
| 2 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par value)
| September 30 | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current operating lease liability | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-current operating lease liability | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Convertible Preferred stock, par value $, shares authorized | ||||||||
| Series C - shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Common stock, par value $, shares authorized, shares and shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | |
|
|
|
|
|
|
|
| Common stock issuable shares and shares at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development (includes $ and $ of expense from stock compensation to officers, employees and directors vesting during the three months ended September 30, 2022 and 2021, and $ and $ for the nine months ended September 30, 2022 and 2021, respectively) | ||||||||||||||||
| Selling, general and administrative (includes $and $of expense from stock compensation granted to officers, employees and directors during the three months ended September 30, 2022 and 2021, and $ and $ | ||||||||||||||||
| Loss from Operations | ||||||||||||||||
| Other (Income) Expense | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized loss on marketable securities | ||||||||||||||||
| Total Other (Income) Expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
For The Three Months Ended September 30, 2022 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Equity compensation to consultants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendor payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
For The Nine Months Ended September 30, 2022 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | in Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Cancellation of common stock previously issued for services | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Cancellation of common stock previously issued to prior CEO | - | ( | ) | ( | ) | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Common stock issued upon conversion of notes payable | - |
| ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Equity compensation to officers, employees, and board of directors | - | |||||||||||||||||||||||||||||||||||
| Equity compensation to consultants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares in settlement of vendor payable | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| 5 |
For The Three Months Ended September 30, 2021 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Equity compensation to officers and board of directors | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
For The Nine Months Ended September 30, 2021 (Unaudited)
| Preferred Shares | Common Shares | Common Shares Issuable | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Extinguishment of debt discount upon adoption of ASU 2020-06 | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Conversion of Preferred Series J-1 to common stock | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||
| Common shares issued upon mandatory conversion of notes payable and accrued interest | - | |||||||||||||||||||||||||||||||||||
| Common shares issued upon exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock in public offering, net of cost | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for research and development agreement | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | ||||||||||||||||||||||||||||||||||
| Equity compensation to officers and board of directors | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
GT BIOPHARMA, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| For the nine months ended | ||||||||
| September 31, | ||||||||
| 2022 | 2021 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation – consultants | ||||||||
| Stock based compensation - officers, employees and board of directors | ||||||||
| Convertible notes payable issued for consulting services | ||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Change in operating lease right-of-use assets | ||||||||
| Unrealized loss on marketable securities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in prepaid expenses | ||||||||
| (Increase) in deposits | ( | ) | ||||||
| (Decrease) Increase in accounts payable and accrued expenses | ( | ) | ||||||
| (Decrease) in operating lease liability | ( | ) | ||||||
| Increase in accrued interest | ||||||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Sales (purchases) of investments | ( | ) | ||||||
| Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Cancellation of common stock upon settlement with former officer | ( | ) | ||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from issuance of notes payable | ||||||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net (Decrease) Increase in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Right-of-use assets exchanged for lease liabilities | $ | $ | ||||||
| Extinguishment of unamortized debt discount and adjustment to accumulated deficit upon adoption of ASU 2020-06 | $ | $ | ||||||
| Common stock issued upon conversion of notes payable and accrued interest | $ | $ | ||||||
| Common stock issued upon settlement of vendor payable | $ | $ | ||||||
| Convertible notes payable issued for accrued expenses | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
GT BIOPHARMA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022 and 2021
(Unaudited)
Note 1 – Organization and Operations
In 1965, the corporate predecessor of GT Biopharma Inc. (Company), Diagnostic Data, Inc. was incorporated in the State of California. Diagnostic Data changed its incorporation to the State of Delaware in 1972 and changed its name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI Pharmaceuticals merged with International BioClinical, Inc. and Bioxytech S.A. and changed its name to OXIS International, Inc. In July 2017, the Company changed its name to GT Biopharma, Inc.
The Company is a clinical stage biopharmaceutical company focused on the development and commercialization of novel immuno-oncology products based on our proprietary Tri-specific Killer Engager (TriKE®) fusion protein immune cell engager technology platform. The Company’s TriKE® platform generates proprietary therapeutics designed to harness and enhance the cancer killing abilities of a patient’s own natural killer cells, or NK cells. Once bound to a natural killer (“NK”) cell, our moieties are designed to enhance the NK cell, and precisely direct it to one or more specifically targeted proteins expressed on a specific type of cancer cell or virus infected cell, resulting in the targeted cell’s death. TriKE®s can be designed to target any number of tumor antigens on hematologic malignancies or solid tumors and do not require patient-specific customization.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Oxis Biotech, Inc. and Georgetown Translational Pharmaceuticals, Inc. All intercompany transactions and balances have been eliminated in consolidation.
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 28, 2022 (the “2021 Annual Report”). The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Liquidity
The
accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern.
Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the nine
months ended September 30, 2022, the Company recorded a net loss of $
Historically, the Company has financed its operations through public and private sales of common stock, issuance of preferred and common stock, issuance of convertible debt instruments, and strategic collaborations.
| 8 |
COVID-19
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could adversely affect the Company’s operations.
While the pandemic has impacted the Company’s operations, during the nine months ended September 30, 2022, the Company believes the COVID-19 pandemic had limited impact on its operating results. The Company has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity.
The Company has been following the recommendations of health authorities to minimize exposure risk for its team members, including having team members work remotely. Most vendors have transitioned to electronic submission of invoices and payments.
Accounting Estimates
The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include accruals for potential liabilities, assumptions used in deriving the fair value of derivative liabilities, valuation of equity instruments issued for services and realization of deferred tax assets. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The
Company considers highly liquid investments with maturities of three months or less at the date of acquisition as cash equivalents in
the accompanying condensed consolidated financial statements. As of September 30, 2022, total cash and cash equivalents which consist
of cash and money market funds, amounted to approximately $
The
Company also invested its excess cash in commercial paper and corporate notes and bonds. Management generally determines the appropriate
classification of its investments at the time of purchase. We classify these investments as short-term investments as part of current
assets, based upon our ability and intent to use any and all of these investments as necessary to satisfy liquidity requirements that
may arise from our businesses. Investments are carried at fair value with the unrealized holding gains and losses reported in the accompanying
condensed consolidated statements of operations. As of September 30, 2022, total short-term investments amounted to approximately $
Fair Value of Financial Instruments
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.
The three levels of the fair value hierarchy are as follows:
| Level 1 | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. | |
| Level 2 | Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. | |
| Level 3 | Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The
carrying amount of the Company’s derivative liability of $
The carrying amounts of the Company’s other financial assets and liabilities, such as cash, prepaid expense, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The fair value of the embedded derivatives is determined using a Binomial valuation method at inception and on subsequent valuation dates.
| 9 |
Stock-Based Compensation
The Company accounts for share-based awards to employees, non-employees and consultants in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Stock-based compensation cost is measured at fair value on the grant date and that fair value is recognized as expense over the requisite service, or vesting period.
The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using its own historical stock price volatility. The expected term of the instrument is estimated by using the simplified method. The risk-free interest rate is estimated using comparable published federal funds rates.
Research and Development Costs
Costs incurred for research and development are expensed as incurred. The salaries, benefits, and overhead costs of personnel conducting research and development of the Company’s products are included in research and development expenses. Purchased materials that do not have an alternative future use are also expensed.
Leases
The Company accounts for its leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”). ASC 842 requires lessees to (i) recognize a right of use asset (“ROU asset”) and a lease liability that is measured at the present value of the remaining lease payments, on the consolidated balance sheets, (ii) recognize a single lease cost, calculated over the lease term on a straight-line basis, and (iii) classify lease related cash payments within operating and financing activities. The Company has made an accounting policy election to not recognize short-term leases on the consolidated balance sheets and all non-lease components, such as common area maintenance, were excluded. At any given time during the lease term, the lease liability represents the present value of the remaining lease payments, and the ROU asset is measured as the amount of the lease liability, adjusted for pre-paid rent, unamortized initial direct costs, and the remaining balance of lease incentives received. Both the lease ROU asset and liability are reduced to zero at the end of the lease term.
The Company leases office space and equipment. At the lease inception date, the Company determines if an arrangement is, or contains a lease. Some of the Company’s leases include options to renew at similar terms. The Company assesses these options to determine if the Company is reasonably certain of exercising these options based on relevant economic and financial factors. Options that meet these criteria are included in the lease term at the lease commencement date.
During
the nine months ended September 30, 2022, the Company executed lease agreements for its office space and equipment and as a result, recorded
operating lease right-of-use assets and the related lease liabilities of $
Basic loss per share is computed using the weighted-average number of common shares outstanding during the period. Common stock issuable is included in our calculation as of the date of the underlying agreement. Diluted loss per share is computed using the weighted-average number of common shares and the dilutive effect of contingent shares outstanding during the period. Potentially dilutive contingent shares, which primarily consist of common stock issuable for the exercise of stock options and warrants, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.
| September 30, 2022 (Unaudited) | September 30, 2021 (Unaudited) | |||||||
| Options to purchase common stock | ||||||||
| Warrants to purchase common stock | ||||||||
| Unvested restricted common stock | ||||||||
| Convertible Series C Preferred Stock | - | | ||||||
| Total anti-dilutive securities | | |
Concentration
Cash
is deposited in one financial institution. The balances held at this financial institution at times may be more than Federal Deposit
Insurance Corporation (“FDIC”) insurance limits of up to $
The Company has a significant concentration of expenses incurred and accounts payable from a single vendor. Please see Note 4 for further information.
Segments
The Company determined its reporting units in accordance with ASC 280, “Segment Reporting”. Management evaluates a reporting unit by first identifying its’ operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
| 10 |
Management has determined that the Company has one operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.
Recent Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. Effective January 1, 2022, we adopted ASU 2021-04 using a prospective approach. The adoption of this standard did not have a material impact on the Company’s financial statements or disclosures.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government Assistance. ASU 2021-10 increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU as of January 1, 2022 on a prospective basis. The adoption of this standard did not have any material impact on the Company’s financial statements or disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
Note 3 – Fair Value of Financial Instruments
The estimated fair values of financial instruments outstanding were (in thousands):
| September 30, 2022 (Unaudited) | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| December 31, 2021 | ||||||||||||||||
| Unrealized | Unrealized | Fair | ||||||||||||||
| Cost | Gains | Losses | Value | |||||||||||||
| Short-term investments | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| 11 |
The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) (in thousands):
| September 30, 2022 (Unaudited) | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
| December 31, 2021 | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||
| Corporate notes and commercial paper | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
As
of September 30, 2022, the fair value of the derivative liability was $
| Three Months Ending | Nine Months Ending | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||
| Issuance of warrants | ||||||||||||||||
| Change in fair value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||