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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021

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 001-38935

ATRECA, INC.

(Exact name of registrant as specified in its charter)

Delaware

27-3723255

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

835 Industrial Road, Suite 400,

San Carlos, CA 94070

(Address of principal executive offices)

(Zip Code)

(650)-595-2595

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock

BCEL

The Nasdaq Global Select Market

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of November 2, 2021, the registrant had 30,435,167 shares of Class A common stock, $0.0001 par value per share and 6,715,441 shares of Class B common stock, $0.0001 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Loss and Comprehensive Loss

5

Condensed Consolidated Statements of Stockholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

8

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II. OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80

Item 3.

Defaults Upon Senior Securities

80

Item 4.

Mine Safety Disclosures

80

Item 5.

Other Information

80

Item 6.

Exhibits

80

Table of Contents

PART I --- FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Atreca, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

September 30, 

December 31, 

    

2021

    

2020

    

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$

113,189

$

60,789

Investments

39,697

179,296

Prepaid expenses and other current assets

9,180

9,037

Total current assets

162,066

249,122

Property and equipment, net

44,291

19,831

Long-term investments

10,824

Deposits and other

3,080

3,111

Total assets

$

220,261

$

272,064

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts payable

$

5,238

$

5,216

Accrued expenses

9,286

10,302

Other current liabilities

1,631

1,900

Total current liabilities

16,155

17,418

Capital lease obligations, net of current portion

4

Deferred rent

28,677

12,585

Total liabilities

44,832

30,007

Commitment and contingencies (Note 8)

Stockholders’ equity

Class A common stock, $0.0001 par value, 650,000,000 shares authorized as of both September 30, 2021 and December 31, 2020; 30,249,727 and 30,089,162 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

3

3

Class B common stock, $0.0001 par value, 50,000,000 shares authorized as of both September 30, 2021 and December 31, 2020; 6,715,441 shares issued and outstanding as of both September 30, 2021 and December 31, 2020

1

1

Additional paid-in capital

505,680

492,436

Accumulated other comprehensive income (loss)

(6)

58

Accumulated deficit

(330,249)

(250,441)

Total stockholders’ equity

175,429

242,057

Total liabilities and stockholders’ equity

$

220,261

$

272,064

See accompanying notes to the unaudited condensed consolidated financial statements.

- 3 -

Table of Contents

Atreca, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Expenses

Research and development

$

18,721

$

16,808

$

56,145

$

45,198

General and administrative

8,796

6,614

24,648

20,195

Total expenses

27,517

23,422

80,793

65,393

Interest and other income (expense)

Other income

158

353

851

987

Interest income

36

142

183

1,082

Interest expense

(1)

(1)

(3)

(3)

Loss on disposal of property and equipment

(34)

(45)

Loss before income tax expense

(27,358)

(22,928)

(79,807)

(63,327)

Income tax expense

(1)

(1)

(1)

Net loss

$

(27,358)

$

(22,929)

$

(79,808)

$

(63,328)

Net loss per share, basic and diluted

$

(0.74)

$

(0.66)

$

(2.16)

$

(2.09)

Weighted-average shares used in computing net loss per share, basic and diluted

36,918,255

34,723,888

36,884,665

30,313,047

See accompanying notes to the unaudited condensed consolidated financial statements.

- 4 -

Table of Contents

Atreca, Inc.

Condensed Consolidated Statements of Loss and Comprehensive Loss

(in thousands)

(unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Net loss

$

(27,358)

$

(22,929)

$

(79,808)

$

(63,328)

Other comprehensive income (loss):

Unrealized gain(loss) on available-for-sale debt securities

(22)

(99)

(64)

101

Comprehensive loss

$

(27,380)

$

(23,028)

$

(79,872)

$

(63,227)

See accompanying notes to the unaudited condensed consolidated financial statements.

- 5 -

Table of Contents

Atreca, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)

Accumulated

Additional

Other

Total

Three Months Ended September 30, 2020

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balances at June 30, 2020

28,192,733

$

3

$

358,401

$

216

$

(204,505)

$

154,115

Issuance of common stock upon public offering, net

8,423,375

1

126,054

126,055

Issuance of common stock upon exercise of options

37,133

172

172

Issuance of common stock under the Employee Stock Purchase Plan

39,608

479

479

Stock-based compensation

3,487

3,487

Unrealized loss on available-for-sale debt securities

(99)

(99)

Net loss

(22,929)

(22,929)

Balances at September 30, 2020

36,692,849

$

4

$

488,593

$

117

$

(227,434)

$

261,280

Accumulated

Additional

Other

Total

Three Months Ended September 30, 2021

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balances at June 30, 2021

36,894,414

$

4

$

501,474

$

16

$

(302,891)

$

198,603

Issuance of common stock under the Employee Stock Purchase Plan

70,754

353

353

Stock-based compensation

3,853

3,853

Unrealized loss on available-for-sale debt securities

(22)

(22)

Net loss

(27,358)

(27,358)

Balances at September 30, 2021

36,965,168

$

4

$

505,680

$

(6)

$

(330,249)

$

175,429

See accompanying notes to the unaudited condensed consolidated financial statements.

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Atreca, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)

Accumulated

Additional

Other

Total

Nine Months Ended September 30, 2020

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balances at December 31, 2019

27,970,167

$

3

$

351,039

$

16

$

(164,106)

$

186,952

Issuance of common stock upon public offering, net

8,423,375

1

126,054

126,055

Issuance of common stock upon exercise of options

223,143

1,131

1,131

Vesting of early exercised stock options

4

4

Issuance of common stock under the Employee Stock Purchase Plan

76,164

1,012

1,012

Stock-based compensation

9,353

9,353

Unrealized gain on available-for-sale debt securities

101

101

Net loss

(63,328)

(63,328)

Balances at September 30, 2020

36,692,849

$

4

$

488,593

$

117

$

(227,434)

$

261,280

Accumulated

Additional

Other

Total

Nine Months Ended September 30, 2021

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders'

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balances at December 31, 2020

36,804,603

$

4

$

492,436

$

58

$

(250,441)

$

242,057

Issuance of common stock upon exercise of options

46,793

272

272

Issuance of common stock under the Employee Stock Purchase Plan

113,772

837

837

Stock-based compensation

12,135

12,135

Unrealized loss on available-for-sale debt securities

(64)

(64)

Net loss

(79,808)

(79,808)

Balances at September 30, 2021

36,965,168

$

4

$

505,680

$

(6)

$

(330,249)

$

175,429

See accompanying notes to the unaudited condensed consolidated financial statements.

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Atreca, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended September 30, 

    

2021

    

2020

Cash Flows from Operating Activities

Net loss

$

(79,808)

$

(63,328)

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

Depreciation and amortization

3,184

1,805

Loss on disposal of property and equipment

45

Stock-based compensation

12,135

9,353

Amortization (accretion) of investments

1,311

(63)

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(307)

(1,170)

Accounts payable

(358)

38

Accrued expenses

3,128

(93)

Other current liabilities

(1,111)

932

Deferred rent

16,967

3,952

Net cash used in operating activities

(44,814)

(48,574)

Cash Flows from Investing Activities

Purchase of property and equipment

(31,453)

(3,726)

Purchase of investments

(30,529)

(163,881)

Proceeds from maturities of investments

157,929

63,110

Change in deposits

127

Net cash provided by (used in) investing activities

95,947

(104,370)

Cash Flows from Financing Activities

Proceeds from the issuance of common stock under the Employee Stock Purchase Plan

837

1,012

Proceeds from exercise of stock options

272

1,131

Proceeds from public offering, net

126,688

Principal payments on capital lease obligations

(36)

(35)

Payments of initial offering costs

(364)

Net cash provided by financing activities

1,073

128,432

Net change in cash, cash equivalents and restricted cash

52,206

(24,512)

Cash, cash equivalents and restricted cash, beginning of period

62,441

159,236

Cash, cash equivalents and restricted cash, end of period

$

114,647

$

134,724

See accompanying notes to the unaudited condensed consolidated financial statements.

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Atreca, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

Nine Months Ended September 30, 

    

2021

    

2020

  

Supplemental Disclosure of Cash Flow Information

Cash paid for interest

$

3

$

3

Cash paid for income taxes

$

1

$

1

Supplemental Schedule of Non-Cash Investing and Financing Activities

Costs related to public offering included in accounts payable and accrued liabilities

$

$

269

Vesting of early exercised common stock options

$

$

4

Purchases of property and equipment included in accounts payable and accrued liabilities

$

3,548

$

91

See accompanying notes to the unaudited condensed consolidated financial statements.

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Notes to Unaudited Interim Condensed Consolidated Financial Statements

1.            Business

Nature of Business

Atreca, Inc. (the “Company”) was incorporated in the State of Delaware on June 11, 2010 (“inception date”), and is located in San Carlos, California. The Company is a biopharmaceutical company utilizing its differentiated platform to discover and develop novel antibody-based immunotherapeutics to treat a range of solid tumor types. The Company's lead product candidate, ATRC-101, is a monoclonal antibody in clinical development with a novel mechanism of action and target derived from an antibody identified using its discovery platform. The Company operates in a single segment. Since inception, the Company has been primarily engaged in research and development, raising capital, building its management team and building its intellectual property portfolio.

2.           Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly owned subsidiary. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Form 10-K”).

Principles of Consolidation

The condensed consolidated financial statements include accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions are eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of income and expenses in the condensed consolidated financial statements and accompanying notes. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates. Key estimates in the condensed consolidated financial statements include estimated useful lives of property and equipment, impairment of long-lived assets, accrued expenses, valuation of deferred income tax assets, fair value of warrants issued to purchasers of shares of common stock and fair value of options granted under the Company's stock option plan.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of September 30, 2021 and its results of operations and cash flows for the three months and nine months ended September 30, 2021 and 2020. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three-month and nine-months periods are also unaudited. The condensed results of operations for the three months and nine months ended

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September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The consolidated balance sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date.

Collaborations

Historically, we have entered into a number of discovery collaborations as we developed our discovery platform. These collaborations have generally focused on identifying novel antibodies in areas of significant unmet medical need.

In July 2020, the Company entered into a Collaboration and License Agreement with Xencor, Inc. (“Xencor Agreement”), to research, develop and commercialize novel CD3 bispecific antibodies as potential therapeutics in oncology. Under the Xencor Agreement, the Company and Xencor, Inc. will engage in a three-year research program in which the Company will provide antibodies against novel tumor targets through its discovery platform from which Xencor, Inc. will engineer XmAb bispecific antibodies that also bind to the CD3 receptor on T cells. Up to two joint programs are eligible to be mutually selected for further development and commercialization, with each partner sharing 50% of costs and profits. Each company has the option to lead development, regulatory and commercialization activities for one of the joint programs. In addition, the Xencor Agreement allows each partner the option to pursue up to two programs independently, with a mid-to high-single digit percent royalty payable on net sales to the other partner.

For the cost-sharing related to the research program, the Company will follow the presentation and disclosure guidance of Accounting Standard Codification (“ASC”) 808, Collaboration Agreements. As of September 30, 2021, the Company had $1,000 of net payable under the research cost-sharing provision recorded in accrued expenses on the accompanying balance sheet.

The Company evaluated the Xencor Agreement under the provisions of Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers and all related amendments (collectively, “ASC 606”) and ASU 2018-18, Collaborative Arrangements (Topic 808) Clarifying the Interaction between Topic 808 and Topic 606. The Company concluded that Xencor, Inc. is not a customer as there are no distinct units of account that are reflective of a vendor-customer relationship or exchange of consideration for the research activities.

Other Income

Other income is comprised of amounts earned from services performed under service agreements. Beginning January 1, 2018, the Company follows the provisions of Accounting Standards Update 2014-09 ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). The guidance provides a unified model to determine how income is recognized.

In determining the appropriate amount of other income to be recognized as it fulfills its obligations under the agreements, the Company performs the following steps: (i) identifies the promised goods or services in the contract; (ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measures the transaction price, including the constraint on variable consideration; (iv) allocates the transaction price to the performance obligations based on estimated selling prices; and (v) recognizes other income when (or as) the Company satisfies each performance obligation.

Upon adoption of Topic 606, there was no change to the units of accounting previously identified with respect to existing service agreements under legacy Generally Accepted Accounting Principles (“GAAP”), which are now considered performance obligations under Topic 606, and there was no change to the revenue recognition pattern for the performance obligations. Accordingly, the adoption of the new standard resulted in no cumulative effect change to the Company's opening accumulated deficit balance.

The Company generally allocates the transaction price to distinct performance obligations at their stand-alone selling prices, determined by their estimated costs plus some margin. Performance obligations are generally delivered over time and recognized based upon observable inputs as the related research services are performed, which are

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recorded as research and development expenses. Amounts due under service agreements are generally billed monthly as services are delivered and do not generally result in contract liabilities or assets. Receivables under service agreements of $0 and $13,000 are included in prepaid expenses and other current assets as of September 30, 2021 and December 31, 2020, respectively. In February 2020, the Company entered into an agreement with an external partner for a research project to identify the antigenic targets of select antibodies discovered by the Company with potential utility in oncology. The nonrefundable upfront payment from this agreement was classified as a contract liability and the Company fully recognized the amount as other income over the service period of 18 months. Contract liabilities of $0 and $0.8 million related to the agreement are included in other current liabilities as of September 30, 2021 and December 31, 2020, respectively.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments purchased with an original maturity of three months or less.

The Company maintained restricted cash of $1.5 million and $1.7 million as of September 30, 2021 and December 31, 2020, respectively. This amount is included in deposits and other in the accompanying condensed consolidated balance sheets and is comprised solely of letters of credit required pursuant to leases for Company facilities.

The Company’s reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows were as follows (in thousands):

    

September 30, 

    

December 31, 

2021

    

2020

Cash and cash equivalents

$

113,189

$

60,789

Restricted cash

1,458

1,652

Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows

$

114,647

$

62,441

Investments

The Company considers securities purchased with original maturities greater than three months to be investments. The Company’s policy is to protect the value of its investment portfolio and minimize principal risk by earning returns based on current interest rates. The Company’s intent is to convert all investments into cash to be used for operations and has classified them as available for sale. For purposes of determining realized gains and losses, the cost of securities sold is based on specific identification. Interest and dividends on securities classified as available-for-sale are included in interest income.

Risks and Uncertainties

The Company is subject to a number of risks associated with companies at a similar stage, including COVID-19, dependence on key individuals, competition from similar services and larger companies, volatility of the industry, ability to obtain regulatory clearance, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company and general economic conditions.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents, investments and other receivables. Cash and cash equivalents are held at two financial institutions and were in excess of the Federal Deposit Insurance Corporation insurable limit at September 30, 2021 and December 31,

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2020. Additionally, cash and cash equivalents and investments are maintained at brokerage firms for which amounts are insured by the Securities Investor Protection Corporation subject to legal limits. The Company has not experienced any losses on its deposits to date.

The Company does not require collateral or other security for other receivables; however, credit risk is mitigated by the Company’s ongoing evaluations of its debtors’ credit worthiness.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits, consultant fees, stock-based compensation, certain facility costs, legal costs and other costs associated with preclinical and clinical development.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers in connection with preclinical and clinical development activities and contract manufacturing organizations in connection with the production of materials for clinical trials. At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs.

Stock-Based Compensation

The Company generally grants stock options to its employees for a fixed number of shares with an exercise price equal to the fair value of the underlying shares at the date of grant. The Company accounts for stock option grants using the fair value method. The fair value of options is calculated using the Black-Scholes option pricing model. For restricted stock units, fair value is based on the closing price of the Company’s Class A common stock on the grant date. Stock-based compensation is recognized as the underlying options vest using the straight-line attribution approach, and forfeitures are recorded as they occur.

Emerging Growth Company Status

The Company is an “emerging growth company,” (“EGC”) as defined in the Jumpstart Our Business Startups Act, (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, the Company’s condensed consolidated financial statements may not be comparable to companies that comply with public company Financial Accounting Standards Board (“FASB”) standards’ effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that the Company is no longer an EGC.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (“Topic 740”): which simplifies the accounting for income taxes, eliminates certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. The new guidance, effective January 1, 2021, did not have an impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02 and subsequent amendments to the initial guidance under ASU 2017-13, ASU 2018-10, ASU 2018-11, and ASU 2019-01 (collectively, “Topic 842”), which modifies the

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accounting by lessees for all leases with a term greater than 12 months. This standard will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Topic 842 is effective for the Company as of January 1, 2022, in accordance with the EGC adoption date. Early adoption is permitted. The Company’s most significant lease is its operating lease for its corporate headquarters, and, while the Company has not yet estimated the amounts by which its financial statements will be affected by the adoption of this guidance, it expects that the overall recognition of expense will be similar to current guidance, but that there will be a significant change in the balance sheet due to the recognition of right of use assets and the corresponding lease liabilities.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2020-03 which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables. The amendment replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. For available-for-sale debt securities, credit losses should be recorded through an allowance for credit losses. Topic 326 is effective for the Company as of January 1, 2023. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

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3.           Fair Value of Financial Instruments

The fair value of the Company's assets and liabilities, which qualify as financial instruments under FASB ASC 820, Fair Value Measurements and Disclosures, approximates their carrying value represented in the balance sheet. The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

September 30, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

  

  

  

  

Money market funds

$

108,046

$

$

$

108,046

Certificates of deposit

1,670

1,670

Corporate debt securities

6,118

6,118

U.S. Treasury securities

42,733

42,733

Total

$

152,449

$

6,118

$

$

158,567

December 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

  

  

  

  

Money market funds

$

57,951

$

$

$

57,951

U.S. Agency Bonds

10,706

10,706

Certificates of deposit

941

941

Corporate debt securities

16,667

16,667

U.S. Treasury securities

150,982

150,982

Total

$

209,874

$

27,373

$

$

237,247

The Company utilized the market approach and Level 1 valuation inputs to value its money market funds and U.S. government treasury securities because published fair market values were readily available. The Company measured the fair value of corporate debt securities and U.S. agency bonds using Level 2 valuation inputs, which are based on quoted prices and market observable data of similar instruments. As of September 30, 2021 and December 31, 2020, gross unrealized gains and unrealized losses for cash equivalents and investments were not material, and the remaining contractual maturity of all marketable securities was less than two years.

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4.           Cash, Cash Equivalents and Investments

The fair value and the amortized cost of cash, cash equivalents and available-for-sale investments by major security type consist of the following (in thousands):

Gross

Gross

Estimated

Cash and

 

Amortized

Unrealized

Unrealized

Fair

Cash

Short-term

Long-term

 

September 30, 2021

    

Cost

    

Gains

    

Losses

    

Value

    

Equivalents

Investment

Investment

 

Cash, cash equivalents and money market funds

$

113,189

$

$

$

113,189

$

113,189

$

$

U.S. Treasury securities

 

42,739

(6)

42,733

32,644

10,089

Corporate debt securities

6,118

6,118

6,118

Certificates of deposit

1,669

 

1

 

 

1,670

 

 

935

735

Total

$

163,715

$

1

$

(6)

$

163,710

$

113,189

$

39,697

$

10,824

Gross

Gross

Estimated

Cash and

 

Amortized

Unrealized

Unrealized

Fair

Cash

Short-term

Long-term

 

December 31, 2020

    

Cost

    

Gains

    

Losses

    

Value

    

Equivalents

Investment

Investment

 

Cash, cash equivalents and money market funds

$

60,789

$

$

$

60,789

$

60,789

$

$

U.S. Treasury securities

 

150,929

53

150,982

150,982

Corporate debt securities

16,668

(1)

16,667

16,667

U.S. Agency bonds

10,704

2

10,706

10,706

Certificates of deposit

937

 

4

 

 

941

 

 

941

 

Total

$

240,027

$

59

$

(1)

$

240,085

$

60,789

$

179,296

$

5.           Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

    

September 30,

December 31,

    

2021

    

2020

    

Prepaid insurance

$

2,307

$

1,453

Vendor prepayments and deposits

3,092

1,557

Prepaid rent

 

807

 

1,397

Tenant improvement receivables

2,589

3,732

Non-trade receivables

 

48

 

336

Interest receivable and other current assets

337

562

Total prepaid expenses and other current assets

$

9,180

$

9,037

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6.           Property and Equipment, net

Property and equipment consists of the following (in thousands):

September 30, 

    

December 31, 

    

2021

    

2020

 

Laboratory equipment

$

13,090

$

11,287

Furniture and fixtures

 

1,968

 

242

Computer hardware and software

 

1,423

 

919

Leasehold improvements

 

37,841

 

667

Construction in process

 

 

14,379

 

54,322

 

27,494

Less accumulated depreciation and amortization

 

(10,031)