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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

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: 001-38707

 

LogicBio Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

47-1514975

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

65 Hayden Avenue, 2nd Floor, Lexington, MA 02421

(Address of principal executive offices) (Zip code)

(617) 245-0399

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

LOGC

 

Nasdaq Global Market

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

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

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

 

Large accelerated filer

 

Accelerated filer                  

 

Non-accelerated filer

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

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

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

As of August 6, 2020, the registrant had 23,642,009 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

Page  

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

4

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019

5

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019

6

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019

7

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 6.

Exhibits

29

Signatures

30

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

 

the initiation, cost, timing, progress and results of our current and future research and development activities and preclinical studies and potential future clinical trials, including our plans to initiate, advance and complete our SUNRISE Phase 1/2 clinical trial and other development activities for LB-001 in methylmalonic acidemia, or MMA;  

 

potential attributes and benefits of our GeneRide technology platform and our existing or future product candidates;

 

our ability to take advantage of the modular nature of our GeneRide platform to simplify and accelerate development of new product candidates;

 

the potential benefits of strategic partnership agreements and our ability to enter into selective strategic partnership arrangements;

 

the timing of, and our ability to obtain and maintain, regulatory approvals for our existing or future product candidates;

 

our ability to quickly and efficiently identify and develop additional product candidates;

 

our ability to advance any product candidate into and successfully complete clinical trials;

 

our intellectual property position, including with respect to our trade secrets and the duration of our patent protection; and

 

our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 16, 2020 and under Part II, Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the Securities and Exchange Commission on May 11, 2020, each as may be amended or updated in our Quarterly Reports on Form 10-Q. In particular, the impact of the ongoing COVID-19 pandemic on our ability to progress with our research, development, manufacturing and regulatory efforts, including our plans to initiate, advance and complete our SUNRISE Phase 1/2 clinical trial for LB-001 in MMA, and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, and the effectiveness of actions taken globally to contain and treat the disease. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Given these uncertainties, you should not rely on these forward-looking statements as predictions of future events. We cannot guarantee future results, levels of activity, performance or achievements. 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.

Unless the context otherwise requires, the terms “LogicBio,” “LogicBio Therapeutics, Inc.,” the “Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to LogicBio Therapeutics, Inc. and its subsidiaries.

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

LogicBio Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

June 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,697

 

 

$

33,107

 

Short-term investments

 

 

 

 

 

17,540

 

Prepaid expenses and other current assets

 

 

1,949

 

 

 

2,045

 

Restricted cash

 

 

 

 

 

146

 

Total current assets

 

 

38,646

 

 

 

52,838

 

Property and equipment, net

 

 

1,788

 

 

 

1,696

 

Restricted cash

 

 

622

 

 

 

622

 

Operating lease right-of-use asset

 

 

6,287

 

 

 

504

 

TOTAL ASSETS

 

$

47,343

 

 

$

55,660

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

564

 

 

$

624

 

Accrued expenses and other current liabilities

 

 

2,214

 

 

 

2,435

 

Operating lease liabilities

 

 

1,147

 

 

 

504

 

Deferred revenue

 

 

101

 

 

 

 

Total current liabilities

 

 

4,026

 

 

 

3,563

 

Long-term debt, net of issuance costs and discount

 

 

9,641

 

 

 

9,810

 

Operating lease liabilities, net of current portion

 

 

5,520

 

 

 

 

Total liabilities

 

 

19,187

 

 

 

13,373

 

COMMITMENTS AND CONTINGENCIES (Note 14)

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, par value of $0.0001 per share; 25,000,000 shares authorized;

   no shares issued and outstanding as of June 30, 2020 and December 31, 2019.

 

 

 

 

 

 

Common stock, par value of $0.0001 per share; 175,000,000 shares authorized;

   23,504,843 and 23,036,943 shares issued and outstanding as of June 30, 2020 and

   December 31, 2019, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

113,205

 

 

 

109,640

 

Accumulated other comprehensive income

 

 

 

 

 

14

 

Accumulated deficit

 

 

(85,052

)

 

 

(67,370

)

Total stockholders’ equity

 

 

28,156

 

 

 

42,287

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

47,343

 

 

$

55,660

 

 

See notes to unaudited condensed consolidated financial statements.

 

4


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

965

 

 

$

 

 

$

1,986

 

 

$

 

Total revenue

 

 

965

 

 

 

 

 

 

1,986

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,895

 

 

 

7,934

 

 

 

13,068

 

 

$

13,420

 

General and administrative

 

 

3,029

 

 

 

2,524

 

 

 

6,221

 

 

 

5,156

 

Total operating expenses

 

 

8,924

 

 

 

10,458

 

 

 

19,289

 

 

 

18,576

 

LOSS FROM OPERATIONS

 

 

(7,959

)

 

 

(10,458

)

 

 

(17,303

)

 

 

(18,576

)

OTHER INCOME (EXPENSE), NET:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

10

 

 

 

411

 

 

 

177

 

 

 

854

 

Interest expense

 

 

(273

)

 

 

 

 

 

(545

)

 

 

 

Other expense, net

 

 

(5

)

 

 

(1

)

 

 

(11

)

 

 

(1

)

Total other (expense) income, net

 

 

(268

)

 

 

410

 

 

 

(379

)

 

 

853

 

Loss before income taxes

 

 

(8,227

)

 

 

(10,048

)

 

 

(17,682

)

 

 

(17,723

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

(22

)

Net loss

 

$

(8,227

)

 

$

(10,048

)

 

$

(17,682

)

 

$

(17,745

)

Net loss per share—basic and diluted

 

$

(0.35

)

 

$

(0.45

)

 

$

(0.76

)

 

$

(0.79

)

Weighted-average common stock outstanding—basic and diluted

 

 

23,326,018

 

 

 

22,479,511

 

 

 

23,250,910

 

 

 

22,396,780

 

 

See notes to unaudited condensed consolidated financial statements.

 

5


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(8,227

)

 

$

(10,048

)

 

$

(17,682

)

 

$

(17,745

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

27

 

 

 

 

 

 

36

 

Foreign currency translation adjustment

 

 

 

 

 

3

 

 

 

 

 

 

6

 

Comprehensive loss

 

$

(8,227

)

 

$

(10,018

)

 

$

(17,682

)

 

$

(17,703

)

 

See notes to unaudited condensed consolidated financial statements.

 

6


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

$0.0001 Par Value

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity

 

BALANCE, January 1, 2019

 

 

22,188,393

 

 

$

3

 

 

$

107,473

 

 

$

(9

)

 

$

(27,242

)

 

$

80,225

 

Vesting of restricted stock

 

 

160,337

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

276

 

 

 

 

 

 

 

 

 

276

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,697

)

 

 

(7,697

)

BALANCE, March 31, 2019

 

 

22,348,730

 

 

 

3

 

 

 

107,749

 

 

 

3

 

 

 

(34,939

)

 

 

72,816

 

Vesting of restricted stock

 

 

160,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

13,454

 

 

 

 

 

 

82

 

 

 

 

 

 

 

 

 

82

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

27

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

531

 

 

 

 

 

 

 

 

 

531

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,048

)

 

 

(10,048

)

BALANCE, June 30, 2019

 

 

22,522,516

 

 

$

3

 

 

$

108,362

 

 

$

33

 

 

$

(44,987

)

 

$

63,411

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, January 1, 2020

 

 

23,036,943

 

 

$

3

 

 

$

109,640

 

 

$

14

 

 

$

(67,370

)

 

$

42,287

 

Vesting of restricted stock

 

 

160,340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

19,378

 

 

 

 

 

 

84

 

 

 

 

 

 

 

 

 

84

 

Realized gain on investments

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

805

 

 

 

 

 

 

 

 

 

805

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,455

)

 

 

(9,455

)

BALANCE, March 31, 2020

 

 

23,216,661

 

 

 

3

 

 

 

110,529

 

 

 

 

 

 

(76,825

)

 

 

33,707

 

Vesting of restricted stock

 

 

18,642

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock, net of issuance costs of $33

 

 

269,540

 

 

 

 

 

 

1,907

 

 

 

 

 

 

 

 

 

1,907

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

769

 

 

 

 

 

 

 

 

 

769

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,227

)

 

 

(8,227

)

BALANCE, June 30, 2020

 

 

23,504,843

 

 

$

3

 

 

$

113,205

 

 

$

 

 

$

(85,052

)

 

$

28,156

 

 

See notes to unaudited condensed consolidated financial statements.

 

7


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(17,682

)

 

$

(17,745

)

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

 

 

 

 

 

 

 

 

Depreciation expense

 

 

226

 

 

 

104

 

Net amortization of premiums and discounts on investments

 

 

26

 

 

 

(337

)

Stock-based compensation expense

 

 

1,574

 

 

 

807

 

Non-cash interest expense

 

 

103

 

 

 

 

Non-cash lease expense

 

 

1,025

 

 

 

567

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

96

 

 

 

(683

)

Accounts payable

 

 

(113

)

 

 

448

 

Accrued expenses and other current liabilities

 

 

(1,201

)

 

 

(123

)

Deferred revenue

 

 

101

 

 

 

 

Net cash used in operating activities

 

 

(15,845

)

 

 

(16,962

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of investments

 

 

 

 

 

(48,028

)

Maturities of investments

 

 

17,500

 

 

 

10,200

 

Purchase of property and equipment

 

 

(202

)

 

 

(749

)

Net cash provided by (used in) investing activities

 

 

17,298

 

 

 

(38,577

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

84

 

 

 

82

 

Net proceeds from stock issuances

 

 

1,907

 

 

 

 

Net cash provided by financing activities

 

 

1,991

 

 

 

82

 

Effect on foreign exchange rates on cash and cash equivalents

 

 

 

 

 

7

 

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED

   CASH

 

 

3,444

 

 

 

(55,450

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

33,875

 

 

 

81,052

 

Cash, cash equivalents and restricted cash at end of period

 

$

37,319

 

 

$

25,602

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED

   CASH

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,697

 

 

$

25,456

 

Short-term restricted cash

 

 

 

 

 

146

 

Long-term restricted cash

 

 

622

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

37,319

 

 

$

25,602

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

442

 

 

$

 

Cash paid for income taxes

 

$

 

 

$

4

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

 

 

 

 

 

 

 

 

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

 

$

6,428

 

 

$

1,323

 

Property and equipment purchases in accounts payable and accrued expenses

 

$

116

 

 

$

56

 

Deferred financing costs in accounts payable and accrued expenses

 

$

 

 

$

39

 

 

See notes to unaudited condensed consolidated financial statements.

 

8


 

LogicBio Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except share and per share data)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Business Overview

LogicBio Therapeutics, Inc. (“LogicBio” or the “Company”) was incorporated in 2014 as a Delaware corporation. Its principal offices are in Lexington, Massachusetts. LogicBio is a company dedicated to extending the reach of genetic medicine with pioneering targeted delivery platforms. The Company’s proprietary genome editing technology platform, GeneRide, enables the site-specific integration of a therapeutic transgene without nucleases or exogenous promoters by harnessing the native process of homologous recombination. LogicBio is developing LB-001, a wholly owned genome editing program leveraging GeneRide for the treatment of methylmalonic acidemia (“MMA”). In addition, the Company has a research collaboration with Takeda to develop LB-301, an investigational therapy leveraging GeneRide for the treatment of the rare pediatric disease Crigler-Najjar syndrome (“CN”).

LogicBio is also developing a Next Generation Capsid platform for use in gene editing and gene therapy. Data presented have shown that the capsids deliver highly efficient functional transduction of human hepatocytes with improved manufacturability with low levels of pre-existing neutralizing antibodies in human samples. Top-tier capsid candidates from this effort demonstrated significant improvements over benchmark AAVs currently in clinical development. The Company is developing these highly potent vectors for internal development candidates and potentially for business development collaborations.

Based on the Company’s GeneRide technology, LogicBio is developing its lead product candidate, LB-001, to treat MMA. In August 2020, the Company announced the clearance of an investigational new drug application, or IND, to support the initiation of a Phase 1/2 clinical trial on LB-001 in pediatric patients with MMA. LogicBio expects to enroll the first patient in early 2021.

LogicBio believes that achieving clinical proof of concept in an inherited liver disease such as MMA will validate the Company’s platform technology, including its potential application to other organs and diseases. In addition to MMA and CN, LogicBio has demonstrated proof of concept of its platform in hemophilia B and alpha-1-antitrypsin deficiency (“A1ATD”) animal disease models. The Company expects to select future product candidates from these and other genetic diseases addressed by targeting the liver initially, and later by targeting the central nervous system, or CNS, and muscle.

Since its inception, the Company has devoted the majority of its efforts to business planning, research and development, developing markets, raising capital, and recruiting management and technical staff. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are a dependency on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and clinical manufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, meet its obligations and, ultimately, obtain regulatory approval of its products, successfully commercialize its products, generate revenue and attain profitable operations.

 

COVID-19 Impact

 

The Company is closely monitoring the COVID-19 pandemic in order to ensure the safety of its personnel and to continue advancing its research and development activities. Since mid-March, the Company has ceased all business travel and most of its non-laboratory employees have been working remotely. After being limited to working in shifts on-premises through early July, the Company’s laboratory employees have returned to normal working schedules on-premises to conduct in-house research and development activities with social distancing and other protective measures. The Company plans to maintain these or similar restrictions until it believes employees can fully resume such activities in accordance with federal, state and local requirements and guidelines.

 

The COVID-19 pandemic did not have a material impact on the Company’s results of operations, cash flow and financial position as of and for the three and six months ended June 30, 2020. However, the full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial position will depend on future developments that are uncertain and cannot be accurately predicted.

Liquidity and Capital Resources

The Company has had recurring losses and incurred a loss of $17,682 during the six months ended June 30, 2020. Net cash used in operations for the six months ended June 30, 2020 was $15,845. The Company expects to continue to generate operating losses and

9


 

use cash in operations for the foreseeable future.  As of June 30, 2020, the Company had cash and cash equivalents of $36,697 which management believes will be sufficient to fund its operating expenses and capital expenditure requirements into the third quarter of 2021. However, based on the Company’s operating losses since inception, the expectation of continued operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, it has been deemed there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date these condensed consolidated financial statements are issued.

The Company will require substantial additional capital to fund its research and development and ongoing operating expenses. Management’s plans to mitigate this risk include raising additional capital through equity or debt financings, or through strategic transactions. These plans may also include the possible deferral of certain operating expenses unless and until additional capital is received. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses. While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management believes its historical success in managing cash flows and obtaining capital will continue in the foreseeable future.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of June 30, 2020 , consolidated results of operations for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020. Since the date of those financial statements, there have been no material changes to its significant accounting policies other than the Company’s significant accounting policy over revenue recognition under ASC 606 (defined below) which is discussed in this note.

Revenue Recognition

To date the Company’s only revenue has consisted of service revenue, all of which is attributable to research cost reimbursement under the Company’s January 2020 research agreement with Takeda Pharmaceutical Company Limited (“Takeda”) for the development of product candidate LB-301 to treat Crigler-Najjar Syndrome (the “Takeda Agreement”). The Company has not generated any revenue from product sales and does not expect to generate any revenue from product sales for the foreseeable future.

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, the

10


 

Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

 

(i)

identification of the promised goods or services in the contract;

 

(ii)

determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

 

(iii)

measurement of the transaction price, including the constraint on variable consideration;

 

(iv)

allocation of the transaction price to the performance obligations; and

 

(v)

recognition of revenue when (or as) each performance obligation is satisfied.

 

If a contract is determined to be within the scope of ASC 606 at inception, the Company assesses the goods or services promised within such contract, determines which of those goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in the Company's balance sheets. If the Company expects to have an unconditional right to receive the consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

Recently Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU requires that credit losses be reported using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848).  This ASU provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.  The ASU is effective as of March 12, 2020 through December 31, 2022.  The Company will evaluate transactions or contract modifications, including any related to its July 2019 loan and security agreement which uses LIBOR as a reference rate, occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis.  The ASU is currently not expected to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

 

11


 

3. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

Description

 

June 30, 2020

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Other

Observable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds and other cash equivalents

 

$

36,697

 

 

$

36,697

 

 

$

 

 

$

 

Total financial assets

 

$

36,697

 

 

$

36,697

 

 

$

 

 

$

 

 

Description

 

December 31,

2019

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Other

Observable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Overnight repurchase agreements

 

$

30,001

 

 

$

 

 

$

30,001

 

 

$

 

U.S. Treasury securities