Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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Table of Contents

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 June 30, 2024

☐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: 001-40523

Elevation Oncology, Inc.

(Exact name of registrant as specified in its charter)


Delaware	84-1771427
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

101 Federal Street, Suite 1900
Boston, Massachusetts	02110
(Address of principal executive offices)	(Zip Code)

(716) 371-1125

(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	ELEV	The Nasdaq Stock Market LLC

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 2, 2024, there were 59,106,809 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

		Page

Part I	Financial Information	5

Item 1.	Condensed Consolidated Financial Statements (unaudited)	5

	Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	5

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	9

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38

Item 4.	Controls and Procedures	38

Part II	Other Information	40

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98

Item 3.	Defaults Upon Senior Securities	98

Item 4.	Mine Safety Disclosures	98

Item 5.	Other Information	98

Item 6.	Exhibits	98

Exhibit Index		99

Signatures		100

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “predict,” “potential” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. We intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this filing. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements in this Quarterly Report include, among other things, statements about:

●

our ability to develop, obtain regulatory approval and commercialize EO-3021 and our other product candidates;

●

the timing of our preclinical studies and clinical trials for EO-3021 and our other product candidates;

●

our ability to establish and maintain collaborations, including with CSPC Pharmaceutical Group Limited (collectively with its affiliates, “CSPC”), our licensor and partner for EO-3021;

●

estimates of our addressable market and market growth;

●

our expectations regarding demand for, and market acceptance of, EO-3021 and our other product candidates;

●

our ability to compete effectively with existing competitors and new market entrants;

●

the potential effects of extensive government regulations relating to our industry;

●

our ability, and our licensors’ ability, to obtain, maintain, and protect and enforce intellectual property and proprietary rights;

●

our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;

●

our ability to maintain secure, efficient and uninterrupted operation of our information technology systems from security breaches, cyberattacks, loss or leakage of data and other disruptions;

●

our ability to expand our pipeline of product candidates;

●

our ability to attract and retain key management and technical personnel;

●

general economic, market and geopolitical conditions, including fluctuating interest rates, market volatility and inflation, and the impact of geopolitical tensions with China and ongoing regional military conflicts;

●

our expectations regarding expenses, future revenue, capital requirements, and our needs for additional financing.

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The forward-looking statements made in this filing relate only to events or information as of the date on which the statements are made in this Quarterly Report. 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, except as required by law. We intend for the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained 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”).

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PART I —FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (unaudited)

ELEVATION ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30,		December 31,
	2024		2023
		(unaudited)		(Note 2)
Assets
Current assets:
Cash and cash equivalents	$	59,447	$	49,255
Marketable securities, available for sale		51,402		33,852
Prepaid expenses and other current assets		2,720		4,857
Total current assets		113,569		87,964
Property and equipment, net		45		59
Other non-current assets		983		1,068
Total assets	$	114,597	$	89,091

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	344	$	507
Accrued expenses		2,419		3,638
Total current liabilities		2,763		4,145
Non-current liabilities:
Long-term debt, net of discount		30,916		30,137
Total liabilities		33,679		34,282

Commitments and contingencies (see Note 12)

Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023; no shares issued or outstanding as of June 30, 2024 and December 31, 2023		—		—
Common stock, $0.0001 par value; 500,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 54,712,132 and 42,470,264 shares issued as of June 30, 2024 and December 31, 2023, respectively; 54,654,495 and 42,422,531 shares outstanding as of June 30, 2024 and December 31, 2023, respectively		5		4
Additional paid-in capital		298,178		250,825
Accumulated other comprehensive (loss) income		(26)		9
Treasury stock, 57,637 and 47,733 shares as of June 30, 2024 and December 31, 2023, respectively; at cost		(101)		(59)
Accumulated deficit		(217,138)		(195,970)
Total stockholders’ equity		80,918		54,809
Total liabilities and stockholders’ equity	$	114,597	$	89,091

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

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ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Operating expenses:
Research and development	$	6,551	$	6,029	$	12,562	$	13,321
General and administrative		4,412		3,805		8,270		8,151
Restructuring charges		—		—		—		5,107
Total operating expenses		10,963		9,834		20,832		26,579
Loss from operations		(10,963)		(9,834)		(20,832)		(26,579)

Other income (expense):
Interest income (expense), net		513		(271)		628		(580)
Loss on extinguishment of debt		—		—		(942)		—
Total other income (expense), net		513		(271)		(314)		(580)
Loss before income taxes		(10,450)		(10,105)		(21,146)		(27,159)
Income tax expense		11		5		22		10
Net loss	$	(10,461)	$	(10,110)	$	(21,168)	$	(27,169)
Net loss per share, basic and diluted	$	(0.18)	$	(0.36)	$	(0.38)	$	(1.04)
Weighted average common shares outstanding, basic and diluted		59,018,340		28,405,046		55,415,111		26,025,025

Comprehensive loss:
Net loss	$	(10,461)	$	(10,110)	$	(21,168)	$	(27,169)
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities		(26)		49		(35)		159
Total other comprehensive (loss) income		(26)		49		(35)		159
Total comprehensive loss	$	(10,487)	$	(10,061)	$	(21,203)	$	(27,010)

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

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ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in		Treasury		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Stock		Income (Loss)		Deficit		Equity
Balance at December 31, 2023	42,422,531	$	4	$	250,825	$	(59)	$	9	$	(195,970)	$	54,809
Issuance of common stock upon at-the-market offering, net of issuance costs	11,625,295		1		44,206		—		—		—		44,207
Issuance of common stock upon stock option exercises	366,947		—		487		—		—		—		487
Issuance of common stock upon exercise of common warrants	200,000		—		450		—		—		—		450
Issuance of warrants upon amendment of debt facility	—		—		261		—		—		—		261
Vesting of restricted stock units, net of withholding	39,722		—		—		(42)		—		—		(42)
Stock-based compensation	—		—		1,949		—		—		—		1,949
Unrealized loss on marketable securities	—		—		—		—		(35)		—		(35)
Net loss	—		—		—		—		—		(21,168)		(21,168)
Balance at June 30, 2024	54,654,495	$	5	$	298,178	$	(101)	$	(26)	$	(217,138)	$	80,918


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in		Treasury		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Stock		Loss		Deficit		Equity
Balance at December 31, 2022	23,312,529	$	2	$	199,492	$	(35)	$	(161)	$	(150,266)	$	49,032
Vesting of restricted common stock	3,946		—		1		—		—		—		1
Issuance of common stock, purchase warrants and pre-funded warrants for the purchase of common stock, net of underwriting discounts, commissions and offering costs	17,810,000		2		46,501		—		—		—		46,503
Issuance of common stock upon stock option exercises	1,239,899		—		1,466		—		—		—		1,466
Vesting of restricted stock units, net of withholding	15,578		—		—		(19)		—		—		(19)
Stock-based compensation	—		—		2,208		—		—		—		2,208
Unrealized gain on marketable securities	—		—		—		—		159		—		159
Net loss	—		—		—		—		—		(27,169)		(27,169)
Balance at June 30, 2023	42,381,952	$	4	$	249,668	$	(54)	$	(2)	$	(177,435)	$	72,181

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

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ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in		Treasury		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Stock		Loss		Deficit		Equity
Balance at March 31, 2024	51,679,383	$	5	$	282,575	$	(85)	$	—	$	(206,677)	$	75,818
Issuance of common stock upon at-the-market offering, net of issuance costs	2,958,879		—		14,551		—		—		—		14,551
Issuance of common stock upon stock option exercises	4,000		—		5		—		—		—		5
Vesting of restricted stock units, net of withholding	12,233		—		—		(16)		—		—		(16)
Stock-based compensation	—		—		1,047		—		—		—		1,047
Unrealized loss on marketable securities	—		—		—		—		(26)		—		(26)
Net loss	—		—		—		—		—		(10,461)		(10,461)
Balance at June 30, 2024	54,654,495	$	5	$	298,178	$	(101)	$	(26)	$	(217,138)	$	80,918


								Accumulated
				Additional				Other				Total
	Common Stock			Paid-in		Treasury		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Stock		Loss		Deficit		Equity
Balance at March 31, 2023	23,786,337	$	2	$	201,185	$	(47)	$	(51)	$	(167,325)	$	33,764
Issuance of common stock, purchase warrants and pre-funded warrants for the purchase of common stock, net of underwriting discounts, commissions and offering costs	17,810,000		2		46,501		—		—		—		46,503
Issuance of common stock upon stock option exercises	777,826		—		1,238		—		—		—		1,238
Vesting of restricted stock units, net of withholding	7,789		—		—		(7)		—		—		(7)
Stock-based compensation	—		—		744		—		—		—		744
Unrealized gain on marketable securities	—		—		—		—		49		—		49
Net loss	—		—		—		—		—		(10,110)		(10,110)
Balance at June 30, 2023	42,381,952	$	4	$	249,668	$	(54)	$	(2)	$	(177,435)	$	72,181

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

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ELEVATION ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six months ended June 30,
	2024		2023
Operating activities
Net loss	$	(21,168)	$	(27,169)
Reconciliation of net loss to net cash used in operating activities:
Stock-based compensation		1,949		2,208
Non-cash interest expense		268		337
Amortization of premium and interest on marketable securities		(625)		(175)
Depreciation expense		14		20
Loss on extinguishment of debt		942		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets		2,222		1,413
Accounts payable		(163)		(1,122)
Accrued expenses		(1,219)		(6,154)
Net cash used in operating activities		(17,780)		(30,642)
Investing activities
Purchase of marketable securities		(46,960)		—
Proceeds from sales and maturities of marketable securities		30,000		43,100
Net cash (used in) provided by investing activities		(16,960)		43,100
Financing activities
Proceeds from issuance of common stock upon at-the-market offering, net of issuance costs		44,207		—
Proceeds from issuance of common stock, purchase warrants and pre-funded warrants for the purchase of common stock, net of underwriting discounts, commissions, and offering costs		—		46,503
Proceeds from issuance of common stock upon stock option exercises		487		1,466
Proceeds from issuance of common stock upon exercise of common warrants		450		—
Common stock repurchase		(42)		(19)
Payment of debt extinguishment costs		(170)		—
Net cash provided by financing activities		44,932		47,950
Increase in cash and cash equivalents		10,192		60,408
Cash and cash equivalents, beginning of period		49,255		45,917
Cash and cash equivalents, end of period	$	59,447	$	106,325
Supplemental disclosure of cash flow information
Cash paid for interest	$	1,784	$	1,392
Supplemental disclosure of non-cash financing activities
Offering costs in accounts payable and accrued expenses	$	—	$	390

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

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ELEVATION ONCOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

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

(unaudited)

1. Nature of Business

Elevation Oncology, Inc. (the “Company”), which was formerly known as 14ner Oncology, Inc., was incorporated under the laws of the State of Delaware on April 29, 2019 (“Inception”). The Company is an innovative oncology company focused on the discovery and development of selective cancer therapies to treat patients across a range of solid tumors with significant unmet medical needs. The Company is leveraging its antibody-drug conjugate (“ADC”) expertise to advance a novel pipeline, initially targeting two validated targets in oncology, Claudin 18.2 and HER3. The Company‘s lead candidate, EO-3021, is a potential best-in-class ADC designed to target Claudin 18.2 and is currently being evaluated in a Phase 1 clinical trial in patients with advanced, unresectable or metastatic solid tumors likely to express Claudin 18.2 including gastric, gastroesophageal junction, pancreatic or esophageal cancers. In addition to its monotherapy approach, the Company plans to expand its ongoing Phase 1 clinical trial to evaluate EO-3021 in combination with ramucirumab, a VEGFR2 inhibitor, and dostarlimab, a PD-1 inhibitor. Additionally, the Company expects to nominate a development candidate for its second program, a HER3-targeting ADC for the treatment of patients with solid tumors that overexpress HER3.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of its product candidates will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

Liquidity

The Company has incurred recurring net losses since inception and has funded its operations to date through the proceeds from the sale of convertible preferred stock, proceeds from public offerings of common stock and warrants, and borrowings under a debt facility. The Company incurred net losses of $10.5 million and $10.1 million for the three months ended June 30, 2024 and 2023, respectively, and $21.2 million and $27.2 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had an accumulated deficit of $217.1 million and cash, cash equivalents, and marketable securities totaling $110.8 million. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance date of the condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

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2. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

The condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiary, Elevation Oncology Securities Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation of Unaudited Interim Condensed Consolidated Financial Statements

The condensed consolidated interim financial statements have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. The December 31, 2023 condensed consolidated balance sheet was derived from the December 31, 2023 audited consolidated 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 SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2024.

The accompanying condensed consolidated interim 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 fiscal year ended December 31, 2023 (the “Annual Report”).

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions, based on judgments considered reasonable, which 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 expenses during the reporting period. The Company bases its estimates and assumptions on known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accruals for research and development expenses and the assumptions used in the valuation of share-based compensation awards. Changes in estimates are recorded in the period in which they become known. Due to the risks and uncertainties involved in the Company’s business and evolving market conditions and, given the subjective element of the estimates and assumptions made, actual results may differ from estimated results.

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity of three months or less to be cash equivalents. As of June 30, 2024 and December 31, 2023, cash equivalents consisted of money market funds, U.S. government debt securities, and corporate debt securities. The Company places its cash with high-credit-quality financial institutions domiciled in the United States, which are insured by the Federal Deposit Insurance Corporation (“FDIC”).

Deferred Financing Costs

The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the condensed consolidated statements of operations. Unamortized deferred financing costs are presented on the condensed consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.

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Concentrations of Credit Risk and Significant Suppliers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company’s money market funds are invested in highly rated funds. Periodically, the Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents and does not believe that it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. These programs could be adversely affected by a significant interruption in the supply of such drug substance and drug products. During the three months ended June 30, 2024 and 2023, the Company had one and two vendor(s) that accounted for approximately 65% and 67% of its research and development expense, respectively. During the six months ended June 30, 2024 and 2023, the Company had one and two vendor(s) that accounted for approximately 65% and 62% of its research and development expense, respectively. As of June 30, 2024 and December 31, 2023, the Company had four and two vendors that accounted for approximately 72% and 39% of total accounts payable, respectively.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Non-observable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and marketable securities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying amount of the Company’s accounts payable approximates fair value due to its short-term nature. The carrying value of the Company’s long-term debt approximates its fair value due to its variable interest rate.

Marketable Securities, Available For Sale

All marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company may classify certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date.

Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity until realized. Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net. The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. In accordance with the

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Company’s investment policy, management invests in money market funds, corporate bonds, commercial paper, asset-backed securities and government securities. The Company has not realized any losses on its marketable securities to date.

When the fair value is below the amortized cost of a marketable security, an estimate of expected credit losses is made. The credit-related impairment amount is recognized in the condensed consolidated statements of operations. Credit losses are recognized through the use of an allowance for credit losses account in the condensed consolidated balance sheet and subsequent improvements in expected credit losses are recognized as a reversal of an amount in the allowance account. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis, then the allowance for the credit loss is written-off and the excess of the amortized cost basis of the asset over its fair value is recorded in the condensed consolidated statements of operations. There were no credit losses recorded during the six months ended June 30, 2024 and 2023.

Comprehensive Income (Loss)

The Company’s only element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale marketable securities.

Patent Costs

The legal and professional costs incurred by the Company to maintain its patent rights are expensed and included as part of general and administrative expenses. As of June 30, 2024 and 2023, the Company has determined that these expenses have not met the criteria to be capitalized.

Recently Issued but Not Yet Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.

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3. Fair Value Measurements of Financial Assets

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


	As of June 30, 2024
	Level 1		Level 2		Level 3		Total
Cash Equivalents:
Money market funds	$	39,499	$	—	$	—	$	39,499
U.S. Government debt securities		—		2,370		—		2,370
Corporate debt securities		—		995		—		995
Total	$	39,499	$	3,365	$	—	$	42,864

Marketable Securities:
Corporate debt securities	$	—	$	22,714	$	—	$	22,714
Commercial paper		—		3,337		—		3,337
U.S. Government debt securities		—		25,351		—		25,351
Total	$	—	$	51,402	$	—	$	51,402

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