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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, 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 001-38787

CYCLERION THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Massachusetts
(State or other jurisdiction of
incorporation or organization)

 

83-1895370
(I.R.S. Employer
Identification No.)

 

 

 

245 First Street, 18th Floor, Cambridge, Massachusetts
(Address of principal executive offices)

 

02142
(Zip Code)

 

(857327-8778

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, no par value

 

CYCN

 

The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

 

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

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

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

 

Large accelerated filer 

 

Accelerated filer 

 

 

 

Non-accelerated filer 

 

Smaller reporting company 

 

 

 

 

 

Emerging growth company 

 

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

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

As of July 27, 2021, the registrant had 43,276,749 shares of common stock, no par value, outstanding. 

 

 

 


 

 

CYCLERION PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2021

TABLE OF CONTENTS

 

 

 

Page

 

PART I — FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

5

 

Condensed Consolidated Balance Sheets as of June 30, 2021, and December 31, 2020

5

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for Three and Six Months Ended June 30, 2021, and 2020

6

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for Three and Six Months Ended June 30, 2021, and 2020

7

 

Condensed Consolidated Statements of Cash Flows for Three and Six Months Ended June 30, 2021, and 2020

9

 

Notes to the 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

31

Item 4.

Controls and Procedures

31

 

 

 

 

PART II — OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

 

Signatures

34

 

 

 

 


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements in this report, other than statements of historical facts, including statements about future events, financing plans, financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements that involve certain risks and uncertainties. Use of the words “may,” “might,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal” or the negative of those words or other similar expressions may identify forward-looking statements that represent our current judgment about possible future events, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market and regulatory conditions and the following:

 

the timing, investment and associated activities involved in developing, obtaining regulatory approval for, launching and commercializing our product candidates, including CY6463;

 

the coronavirus (“COVID-19”) pandemic affecting our clinical trials and other operating activities;

 

our relationships with third parties, collaborators and our employees;

 

our ability to execute our strategic priorities;

 

our ability to finance our operations and business initiatives;

 

the success of collaboration or license arrangements of our product candidates;

 

whether the praliciguat out-license will result in the creation of any therapies for the treatment of patients with kidney disease;

 

the uncertain utility, development, promise, and commercialization of praliciguat;

 

whether any development, regulatory, and commercialization milestones or royalty payments provided for in the agreement with Akebia (as defined below) will be achieved;

 

the impact on our business of workforce and expense reduction initiatives;

 

our plans with respect to the development, manufacture or sale of our product candidates and the associated timing thereof, including the design and results of pre-clinical and clinical studies;

 

the safety profile and related adverse events of our product candidates;

 

the efficacy and perceived therapeutic benefits of our product candidates, their potential indications and their market potential;

 

U.S. and non-U.S. regulatory requirements for our product candidates, including any post-approval development and regulatory requirements, and the ability of our product candidates to meet such requirements;

 

3


 

 

our ability to attract and retain employees needed to execute our business plans and strategies and our ability to manage the impact of any loss of key employees;

 

our ability to obtain and maintain intellectual property protection for our product candidates and the strength thereof;

 

our future financial performance, revenues, expense levels, payments, cash flows, profitability, tax obligations, capital raising and liquidity sources, real estate needs and concentration of voting control, as well as the timing and drivers thereof, and internal control over financial reporting;

 

our ability to compete with other companies that are or may be developing or selling products that are competitive with our product candidates;

 

the impact of government regulation in the life sciences industry, particularly with respect to healthcare reform;

 

potential indemnification liabilities we may owe to Ironwood after the Separation (as defined below); and

 

trends and challenges in the markets for our potential products.

See the “Risk Factors” section in Item 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2020, and elsewhere in this Quarterly Report on Form 10-Q for a further description of these and other factors. We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

 

 

4


 

 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)

(Unaudited)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,390

 

 

$

54,395

 

Related party accounts receivable

 

 

 

 

 

127

 

Prepaid expenses

 

 

766

 

 

 

816

 

Other current assets

 

 

1,833

 

 

 

3,163

 

Total current assets

 

 

72,989

 

 

 

58,501

 

Restricted cash, net of current portion

 

 

 

 

 

3,837

 

Property and equipment, net

 

 

153

 

 

 

6,865

 

Operating lease right-of-use asset

 

 

 

 

 

43,402

 

Other assets

 

 

2,590

 

 

 

2,773

 

Total assets

 

$

75,732

 

 

$

115,378

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,386

 

 

$

1,149

 

Related party accounts payable

 

 

 

 

 

286

 

Accrued research and development costs

 

 

2,240

 

 

 

1,421

 

Accrued expenses and other current liabilities

 

 

3,375

 

 

 

7,294

 

Short-term note payable

 

 

3,509

 

 

 

3,509

 

Current portion of operating lease liabilities

 

 

 

 

 

3,293

 

Total current liabilities

 

 

10,510

 

 

 

16,952

 

Operating lease liabilities, net of current portion

 

 

 

 

 

38,933

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, no par value, 400,000,000 shares authorized and 43,275,249 issued and outstanding at June 30, 2021 and 400,000,000 shares authorized and 34,047,300 issued and outstanding at December 31, 2020

 

 

 

 

 

 

Accumulated deficit

 

 

(193,010

)

 

 

(163,429

)

Paid-in capital

 

 

258,258

 

 

 

222,949

 

Accumulated other comprehensive loss

 

 

(26

)

 

 

(27

)

Total stockholders' equity

 

 

65,222

 

 

 

59,493

 

Total liabilities and stockholders' equity

 

$

75,732

 

 

$

115,378

 

 

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

 

5


 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands except per share data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from license agreement

 

$

3,000

 

 

$

 

 

$

3,000

 

 

$

 

Revenue from development agreement

 

 

 

 

 

 

 

 

62

 

 

 

 

Revenue from related party

 

 

 

 

 

749

 

 

$

 

 

$

1,763

 

Total revenues

 

 

3,000

 

 

 

749

 

 

 

3,062

 

 

 

1,763

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

12,054

 

 

 

13,794

 

 

 

20,146

 

 

 

30,619

 

General and administrative

 

 

6,241

 

 

 

6,627

 

 

 

11,606

 

 

 

13,518

 

(Gain) / loss on lease modification and termination

 

 

881

 

 

 

 

 

 

881

 

 

 

(2,113

)

Total cost and expenses

 

 

19,176

 

 

 

20,421

 

 

 

32,633

 

 

 

42,024

 

Loss from operations

 

 

(16,176

)

 

 

(19,672

)

 

 

(29,571

)

 

 

(40,261

)

Interest and other income, net

 

 

(6

)

 

 

138

 

 

 

(10

)

 

 

499

 

Net loss

 

$

(16,182

)

 

$

(19,534

)

 

$

(29,581

)

 

$

(39,762

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(0.45

)

 

$

(0.70

)

 

$

(0.85

)

 

$

(1.43

)

Weighted average shares used in calculating:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

 

35,707

 

 

 

27,791

 

 

 

34,899

 

 

 

27,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,182

)

 

$

(19,534

)

 

$

(29,581

)

 

$

(39,762

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment (loss) gain

 

 

1

 

 

 

(12

)

 

 

1

 

 

 

(10

)

Comprehensive loss

 

$

(16,181

)

 

$

(19,546

)

 

$

(29,580

)

 

$

(39,772

)

 

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

 

 

6


 

 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands except share data)

(Unaudited)

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Accumulated

other

comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

loss

 

 

equity (deficit)

 

Balance at December 31, 2019

 

 

27,598,133

 

 

$

 

 

$

183,376

 

 

$

(85,627

)

 

$

(20

)

 

$

97,729

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(20,228

)

 

 

 

 

$

(20,228

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

156,761

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

$

1

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

4,036

 

 

 

 

 

 

 

 

 

$

4,036

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

$

2

 

Balance at March 31, 2020

 

 

27,754,894

 

 

 

 

 

 

187,413

 

 

 

(105,855

)

 

 

(18

)

 

 

81,540

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(19,534

)

 

 

 

 

 

(19,534

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

102,816

 

 

 

 

 

 

155

 

 

 

 

 

 

 

 

 

155

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

3,952

 

 

 

 

 

 

 

 

 

3,952

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

(12

)

Balance at June 30, 2020

 

 

27,857,710

 

 

$

 

 

$

191,520

 

 

$

(125,389

)

 

$

(30

)

 

$

66,101

 

 

7


 

 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Accumulated

other

comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

loss

 

 

equity (deficit)

 

Balance at December 31, 2020

 

 

34,047,300

 

 

$

 

 

$

222,949

 

 

$

(163,429

)

 

$

(27

)

 

$

59,493

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,399

)

 

 

 

 

 

(13,399

)

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

82,625

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

27

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

1,921

 

 

 

 

 

 

 

 

 

1,921

 

Share‑based compensation expense related to issuance of stock options to non-employees

 

 

 

 

 

 

 

 

391

 

 

 

 

 

 

 

 

 

391

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

34,129,925

 

 

 

 

 

 

225,288

 

 

 

(176,828

)

 

 

(27

)

 

 

48,433

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,182

)

 

 

 

 

 

(16,182

)

Issuance of common stock - June 2021 equity private placement and ATM

 

 

9,087,547

 

 

 

 

 

 

30,497

 

 

 

 

 

 

 

 

 

30,497

 

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

 

 

57,777

 

 

 

 

 

 

133

 

 

 

 

 

 

 

 

 

133

 

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

 

 

 

 

 

 

 

 

1,942

 

 

 

 

 

 

 

 

 

1,942

 

Share‑based compensation expense related to issuance of stock options and RSUs to non-employees

 

 

 

 

 

 

 

 

398

 

 

 

 

 

 

 

 

 

398

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Balance at June 30, 2021

 

 

43,275,249

 

 

$

 

 

$

258,258

 

 

$

(193,010

)

 

$

(26

)

 

$

65,222

 

 

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

 

 

 

8


 

 

Cyclerion Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(29,581

)

 

$

(39,762

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

376

 

 

 

1,239

 

Net loss on disposal of property and equipment

 

 

6,322

 

 

 

194

 

(Gain) / loss on lease modification and termination

 

 

881

 

 

 

(2,113

)

Share-based compensation expense

 

 

4,652

 

 

 

7,989

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Related party accounts receivable

 

 

127

 

 

 

723

 

Prepaid expenses

 

 

50

 

 

 

(294

)

Other current assets

 

 

(121

)

 

 

38

 

Operating lease assets

 

 

1,344

 

 

 

(4,555

)

Other assets

 

 

183

 

 

 

(851

)

Accounts payable

 

 

237

 

 

 

(246

)

Related party accounts payable

 

 

(286

)

 

 

294

 

Accrued research and development costs

 

 

819

 

 

 

(549

)

Operating lease liabilities

 

 

(1,048

)

 

 

(1,342

)

Accrued expenses and other current liabilities

 

 

(3,919

)

 

 

(4,166

)

Net cash (used in) operating activities

 

 

(19,964

)

 

 

(43,401

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(1,480

)

Proceeds from sale of property and equipment

 

 

1,464

 

 

 

59

 

Net cash provided by (used in) investing activities

 

 

1,464

 

 

 

(1,421

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from June 2021 equity private placement and ATM

 

 

30,497

 

 

 

 

Proceeds from exercises of stock options and ESPP

 

 

160

 

 

 

155

 

Proceeds from short-term note payable

 

 

 

 

 

3,509

 

Net cash provided by financing activities

 

 

30,657

 

 

 

3,664

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

1

 

 

 

(10

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

12,158

 

 

 

(41,168

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

58,232

 

 

 

102,621

 

Cash, cash equivalents and restricted cash, end of period

 

$

70,390

 

 

$

61,453

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

Cash paid for initial direct costs of lease modification

 

$

 

 

$

6,507

 

Non-cash investing activities

 

 

 

 

 

 

 

 

Fixed asset purchases in accounts payable and accrued expenses

 

$

 

 

$

9

 

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,390

 

 

$

56,462

 

Restricted cash

 

 

 

 

 

4,991

 

Total cash, cash equivalents and restricted cash

 

$

70,390

 

 

$

61,453

 

 

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

 

 

9


 

 

Cyclerion Therapeutics, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Business

Nature of Operations

Cyclerion Therapeutics, Inc. (“Cyclerion”, the “Company” or “we”) is a clinical-stage biopharmaceutical company on a mission to develop treatments that restore cognitive function. Our lead asset, CY6463 (previously known as, IW-6463), is a pioneering, central nervous system (“CNS”)-penetrant, soluble guanylate cyclase (sGC) stimulator that is currently in clinical development for Alzheimer’s disease with vascular pathology (ADv), and Mitochondrial Encephalomyopathy, Lactic Acidosis and Stroke-like episodes (MELAS), and cognitive impairment associated with schizophrenia (CIAS). sGC stimulators are small molecules that act synergistically with nitric oxide (NO) as positive allosteric modulators of sGC to boost production of cyclic guanosine monophosphate (cGMP). cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions in the CNS including neuronal function, neuroinflammation, cellular bioenergetics, and vascular function.

Cyclerion GmbH, a wholly owned subsidiary, was incorporated in Zug, Switzerland on May 3, 2019. Cyclerion GmbH is an operational entity with one employee who is the Company’s Chief Scientific Officer. The functional currency is the Swiss franc.

Cyclerion Securities Corporation, a wholly owned subsidiary, was incorporated in Massachusetts on November 15, 2019, and was granted securities corporation status in Massachusetts for the 2019 tax year. Cyclerion Securities Corporation has no employees.

Company Overview

The Company’s mission is to develop treatments that restore cognitive function. Its priorities are advancing its ongoing CY6463 clinical programs and next generation compound, CY3018.

CNS assets. CY6463 is an orally administered CNS-penetrant sGC stimulator that is being developed as a symptomatic and potentially disease modifying therapy for serious CNS diseases. Nitric oxide sGC-cGMP is a fundamental CNS signaling network, but it has not yet been leveraged for its full therapeutic potential. CY6463 enhances the brain’s natural ability to produce cGMP, an important second messenger in the CNS, by stimulating sGC, a key node in the NO-sGC-cGMP pathway. This pathway is critical to basic CNS functions and deficient NO-sGC-cGMP signaling is believed to play an important role in the pathogenesis of neurodegenerative diseases. Agents that stimulate sGC to produce cGMP may compensate for deficient NO signaling.

On January 13, 2020, we announced positive results from our Phase 1 first-in-human study that provided the foundation for continued development of CY6463. The Phase 1 healthy participant study results indicate that CY6463 was well tolerated. Pharmacokinetic (PK) data, obtained from both blood and cerebral spinal fluid (CSF), support once-daily dosing, with or without food, and demonstrated CY6463 penetration of the blood-brain-barrier with CSF concentrations expected to be pharmacologically active.

On October 14, 2020, we announced positive topline results from our CY6463 Phase 1 translational pharmacology study in healthy elderly participants. Treatment with CY6463 for 15-days in this 24-subject study confirmed and extended results seen in the earlier first-in-human Phase 1 study: once daily oral treatment demonstrated blood-brain-barrier penetration with expected CNS exposure and target engagement. Results also showed significant improvements in neurophysiological and objective performance measures as well as in inflammatory biomarkers associated with aging and neurodegenerative diseases. CY6463 was shown to be safe and generally well tolerated. Significant effects on cerebral blood flow and markers of bioenergetics were not observed in this study of healthy elderly participants. We believe that these results, together with nonclinical data, support continued development of CY6463 as a potential new medicine for serious CNS diseases.

We have initiated our CY6463 Phase 2a clinical trial in adult participants with MELAS. Startup activities are ongoing for our Phase 2a clinical trial in ADv, with enrollment expected to begin in mid-2021.The ADv study

 

10


 

will be supported in part by a grant from the Alzheimer’s Association’s Part the Cloud-Gates Partnership Grant Program, which provides Cyclerion with $2 million of funding over two years. Startup activities are ongoing for our Phase 1b clinical study in CIAS, with enrollment expected to begin in the second half of 2021.

Our next generation CNS asset, CY3018, is a differentiated CNS-penetrant sGC stimulator with greater CSF-to-plasma exposure relative to CY6463. CY3018 is intended to expand the potential of sGC stimulation for the treatment of disorders of the CNS.

Non-CNS assets. We have other assets that are outside of our current strategic focus. These non-core assets are not being internally developed at this time and with the exception of praliciguat, are available for licensing to a third-party partner. Praliciguat is an orally administered, once-daily systemic sGC stimulator. On June 3, 2021, we entered into a License Agreement with Akebia Therapeutics, Inc. (“Akebia”) relating to the exclusive worldwide license to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing the pharmaceutical compound praliciguat and other related products and forms thereof enumerated in such agreement. Olinciguat is an orally administered, once-daily, vascular sGC stimulator that was evaluated in a Phase 2 study of participants with sickle cell disease. We released topline results from this study in October 2020.

The Separation

On April 1, 2019, Ironwood Pharmaceuticals, Inc. (“Ironwood”) completed the separation of its sGC business, and certain other assets and liabilities, into a separate, independent publicly traded company by way of a pro-rata distribution of all of the outstanding shares of common stock of Cyclerion Therapeutics, Inc. through a dividend distribution of one share of the Company’s common stock, with no par value per share, for every 10 shares of Ironwood common stock held by Ironwood stockholders as of the close of business on March 19, 2019, the record date for the Distribution (the entire transaction being the “Separation”). As a result of the Separation, the Company became an independent public company and commenced trading under the symbol “CYCN” on the Nasdaq Global Select Market on April 2, 2019.

June 2021 Equity Private Placement

On June 3, 2021, the Company entered into a Common Stock Purchase Agreement (the “June 2021 Equity Private Placement”) for the private placement of 5,735,988 shares of the Company’s common stock, for total gross proceeds of approximately $18 million. The closing of the June 2021 Equity Private Placement occurred on June 7, 2021. The Company did not utilize the services of a placement agent or broker and accordingly incurred no material related transaction fees or commissions.

At-the-Market Offering

On July 24, 2020, the Company filed a Registration Statement on Form S-3 (the “Shelf”) with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $150.0 million. The Shelf was declared effective as of July 31, 2020. On September 3, 2020, the Company entered into a Sales Agreement (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an at-the-market offering (the “ATM Offering”) under the Shelf. Under the ATM Offering, the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million through Jefferies as its sales agent. The Company will pay to Jefferies cash commissions of 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement. During the three and six months ended June 30, 2021, the Company sold 3,351,559 shares of its common stock for net proceeds of $12.5 million under the ATM Offering, after deducting commissions paid to Jefferies of approximately $0.4 million.

 

11


 

Basis of Presentation

The condensed consolidated financial statements and the related disclosures are unaudited and have been prepared in accordance with accounting principles generally accepted in the U.S. Additionally, certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on February 25, 2021.

In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position and the results of its operations for the interim periods presented. The results of operations for the three and six months ended June 30, 2021, and 2020 are not necessarily indicative of the results that may be expected for the full year or any other subsequent interim period.

The condensed consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries, Cyclerion GmbH, and Cyclerion Securities Corporation. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying condensed consolidated financial statements.

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs and comparing those needs to the current cash and cash equivalent balances. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

The Company has experienced negative operating cash flows for all historical periods presented and the Company expects these losses to continue into the foreseeable future as the Company continues the development and clinical testing of its product candidate CY6463, CY3018 and its discovery research programs. Through June 30, 2021, the Company had raised an aggregate of $219.8 million in net proceeds from equity private placements and the ATM Offering.

After considering the Company’s current research and development plans and the timing expectations related to the progress of its programs, and after considering its existing cash and cash equivalents as of June 30, 2021, the Company did not identify conditions or events that would raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements were issued.

2. Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies to the consolidated financial statements contained in the Company’s 2020 annual report on Form 10-K. The Company includes herein certain updates to those policies.

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires the Company’s management to make estimates and judgments that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of expenses during the reported periods. On an ongoing basis, the Company’s management evaluates its estimates, judgments, and methodologies. Significant estimates and assumptions in the consolidated financial statements include those related to revenue, impairment of long-lived assets, valuation procedures for right-of-use assets and operating lease liabilities, income taxes, including the valuation allowance for deferred tax assets, research and development expenses, contingencies, share-based compensation and going concern. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the

 

12


 

results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Except as discussed elsewhere in the notes to the consolidated financial statements, the Company did not adopt any new accounting pronouncements during the six months ended June 30, 2021 that had a material effect on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. As a smaller reporting company, ASU 2016-13 will become effective for the Company for fiscal years beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact that ASU 2016-13 will have on its financial statements and related disclosures.

In May 2021 the FASB issued Accounting Standards Update No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force (EITF) , which amends the FASB Accounting Standards Codification (ASC or the “Codification”) to provide explicit guidance, and, thus, reduce diversity in practice, on accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange. This amendment provides that for an entity that presents earnings per share (EPS) in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS calculation. The amended guidance becomes mandatorily effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and should be applied prospectively to modifications or exchanges occurring on or after the effective date. The Company is currently evaluating the impact that ASU 2021-04 will have on its consolidated financial statements and related disclosures.

No other accounting standards known by the Company to be applicable to it that have been issued by the FASB or other standard-setting bodies and that do not require adoption until a future date are expected to have a material impact on the Company’s consolidated financial statements upon adoption.

3. Related Party Transactions

Development Agreement with Ironwood

As part of the Separation from Ironwood, the Company entered into a Development Agreement with Ironwood.

Under the Development Agreement, the Company provided certain research and development services to Ironwood at mutually agreed upon rates and the amounts earned are recorded as revenue from related party for the three and six months ended June 30, 2020. Such research and development activities were governed by a joint steering committee composed of representatives of both Ironwood and the Company. Ironwood and the Company have agreed not to renew the Development Agreement beyond the end of its initial term on March 31, 2021. These transactions under the Development Agreement were considered related party transactions due to Mark Currie’s role as President of the Company through December 31, 2020, and board member of Ironwood. In January 2021, Mark Currie’s role transitioned from President of the Company to a senior advisor on a consulting basis. Therefore, effective January 2021, transactions under the Development Agreement are no longer accounted for as related party transactions. The Company recorded approximately $0.8 million and $1.8 million as related party revenue for the three and six months ended June 30, 2020, respectively.

 

13


 

4. Fair Value of Financial Instruments

The Company’s cash equivalents are generally classified within Level 1 of the fair value hierarchy. 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 used to determine such fair values as of June 30, 2021 and December 31, 2020 (in thousands):

 

 

 

Fair Value Measurements as of June 30, 2021 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

64,407

 

 

$

 

 

$

 

 

$

64,407

 

Cash equivalents

 

$

64,407

 

 

$

 

 

$

 

 

$

64,407

 

 

 

 

Fair Value Measurements as of December 31, 2020 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

53,240

 

 

$

 

 

$

 

 

$