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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, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to
Commission File Number: 001-39264
________________________________________
KEROS THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
________________________________________
Delaware81-1173868
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
99 Hayden Avenue, Suite 120, Building E
Lexington, Massachusetts
02421
(Address of principal executive offices)(Zip Code)
Tel: (617) 314-6297
(Registrant's telephone number, including area code)
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par value per shareKROSThe 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 FilerAccelerated Filer
Non-Accelerated FilerSmaller 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 7, 2020, there were 20,172,546 outstanding shares of the registrant's common stock, par value $0.0001 per share.



TABLE OF CONTENTS
Page
PART I.
Item 1.
Item 2.
19
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Item 4.
Item 5.
Item 6.

1




SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements about:

the timing of initiation for our two Phase 2 clinical trials for our lead protein therapeutic product candidate, KER-050;
the timing of completion of our ongoing expanded Phase 1 clinical trial and the timing of initiation for future clinical trials for our lead small molecule product candidate, KER-047, including the timing of initiation of our two Phase 2 clinical trials of KER-047;
the timing of initiation of our Phase 1 clinical trial for our third product candidate, KER-012;
risks associated with the COVID-19 pandemic, which may adversely impact our business, preclinical studies and clinical trials;
our ability to receive the required regulatory approvals and clearances to successfully market and sell our products in the United States and certain other countries;
our ability to successfully advance our pipeline of additional product candidates;
our ability to develop sales and marketing capabilities;
the rate and degree of market acceptance of any products we are able to commercialize;
our ability to develop sales and marketing capabilities;
the effects of increased competition as well as innovations by new and existing competitors in our market;
our ability to obtain funding for our operations;
our ability to establish and maintain collaborations;
our ability to effectively manage our anticipated growth;
our ability to maintain, protect and enhance our intellectual property rights and proprietary technologies;
our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;
costs associated with defending intellectual property infringement, product liability and other claims;
regulatory developments in the United States, Australia and other foreign countries;
our ability to attract and retain qualified employees;
our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012;
statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance; and
the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

2


You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

SPECIAL NOTE REGARDING COMPANY REFERENCES

Throughout this Quarterly Report on Form 10-Q, “Keros,” the “Company,” “we,” “us” and “our” refer to Keros Therapeutics, Inc. and its subsidiary.


SPECIAL NOTE REGARDING TRADEMARKS

All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
3


PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (unaudited)
4



KEROS THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
JUNE 30,
2020
DECEMBER 31,
2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$144,687  $7,020  
Prepaid expenses and other current assets
3,830  381  
Deferred IPO costs
  604  
Research and development incentive receivable
  922  
Total current assets
148,517  8,927  
Operating lease right-of-use assets
1,025  1,205  
Property and equipment, net
781  708  
Restricted cash
115  115  
TOTAL ASSETS
$150,438  $10,955  
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable
$4,852  $2,088  
Current portion of operating lease liabilities
400  376  
Accrued expenses and other current liabilities
3,042  2,022  
Total current liabilities
8,294  4,486  
Operating lease liabilities, net of current portion
692  899  
Preferred stock tranche liability
  4,956  
Other liabilities
91  119  
Total liabilities
9,077  10,460  
Series A convertible preferred stock, par value of $0.0001 per share; 0 and 10,000,000 shares authorized as of June 30, 2020 and December 31, 2019, respectively; 0 and 4,607,652 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively; liquidation and redemption value of $0 as of June 30, 2020
  9,891  
Series A-1 convertible preferred stock, par value of $0.0001 per share; 0 and 800,000 shares authorized as of June 30, 2020 and December 31, 2019, respectively; 0 and 368,612 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively; liquidation and redemption value of $0 as of June 30, 2020
  944  
Series B-1 convertible preferred stock, par value of $0.0001 per share; 0 and 3,427,004 shares authorized as of June 30, 2020 and December 31, 2019, respectively; 0 and 1,579,043 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively; liquidation and redemption value of $0 as of June 30, 2020
  9,106  
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, par value of $0.0001 per share; 200,000,000 and 27,000,000 shares authorized as of June 30, 2020 and December 31, 2019, respectively; 20,158,080 and 2,429,705 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
2  1  
Additional paid-in capital
183,658  203  
Accumulated deficit
(42,299) (19,650) 
Total stockholders' equity (deficit)
141,361  (19,446) 
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
$150,438  $10,955  
See notes to condensed consolidated financial statements.
5


KEROS THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
THREE MONTHS ENDED JUNE 30,SIX MONTHS ENDED JUNE 30,
2020201920202019
REVENUE:
Research collaboration revenue
$  $2,500  $  $5,000  
Total revenue
  2,500    5,000  
OPERATING EXPENSES:
Research and development
(7,264) (4,497) (15,791) (9,364) 
General and administrative
(3,650) (654) (5,627) (1,145) 
Total operating expenses
(10,914) (5,151) (21,418) (10,509) 
LOSS FROM OPERATIONS
(10,914) (2,651) (21,418) (5,509) 
OTHER INCOME (EXPENSE), NET
Interest expense, net
(1) (2) (3) (4) 
Research and development incentive income
  378    558  
Change in fair value of preferred stock tranche obligation
  (647) (1,490) (1,251) 
Other income, net158  69  90  170  
Total other income (expense), net157  (202) (1,403) (527) 
Loss before income taxes
(10,757) (2,853) (22,821) (6,036) 
Income tax benefit    172    
Net loss
$(10,757) $(2,853) $(22,649) $(6,036) 
Net loss attributable to common stockholders—basic and diluted (Note 10)$(10,963) $(3,303) $(23,661) $(6,936) 
Net loss per share attributable to common stockholders—basic and diluted
$(0.62) $(1.44) $(2.35) $(3.05) 
Weighted-average common stock outstanding—basic and diluted
17,623,994  2,288,058  10,054,026  2,273,278  


See notes to condensed consolidated financial statements.
6


KEROS THERAPEUTICS, INC.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit
(In thousands, except share and per share data)
(Unaudited)
CONVERTIBLE PREFERRED STOCK
COMMON STOCK
$0.0001 PAR VALUE
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
TOTAL
STOCKHOLDERS'
DEFICIT
$0.0001 PAR VALUE SERIES A
$0.0001 PAR VALUE SERIES A-1
$0.0001 PAR VALUE SERIES B-1
$0.0001 PAR VALUE SERIES C
SHARES
AMOUNT
SHARES
AMOUNT
SHARES
AMOUNT
SHARES
AMOUNT
SHARES
AMOUNT
As of December 31, 20194,607,652  $9,891  368,612  $944  1,579,043  $9,106    $  2,429,705  $1  $203  $(19,650) $(19,446) 
Exercise of common stock options—  —  —  —  —  —  —  44,686  —  13  —  13  
Issuance of Series C convertible preferred stock,
net of issuance costs of $219
—  —  —  —  —  4,169,822  55,781  —  —  —  —    
Vesting of restricted stock—  —  —  —  —  —  —  17,279  —  —  —    
Stock-based compensation—  —  —  —  —  —  —  —  —  12  —  12  
Settlement of preferred stock tranche liability—  —  —  —  —  —  —  —  —  6,446  —  6,446  
Net loss—  —  —  —  —  —  —  —  —  —  (11,892) (11,892) 
March 31, 20204,607,652  $9,891  368,612  $944  1,579,043  $9,106  4,169,822  $55,781  2,491,670  $1  $6,674  $(31,542) $(24,867) 
Offering expenses associated with direct offering—  —  —  —  —  —  —  —  —  (8) —  (8) 
Conversion of convertible preferred stock upon initial public offering(4,607,652) (9,891) (368,612) (944) (1,579,043) (9,106) (4,169,822) (55,781) 10,725,129  1  75,721  —  75,722  
Initial public offering, net of underwriting discounts, commissions and offering costs—  —  —  —  —  —  —  —  6,900,000    100,123  —  100,123  
Exercise of common stock options—  —  —  —  —  —  —  24,003  —  9  —  9  
Vesting of restricted stock—  —  —  —  —  —  —  17,278  —    —    
Stock-based compensation—  —  —  —  —  —  —  —  —  1,139  —  1,139  
Net loss—  —  —  —  —  —  —  —  —  —  (10,757) (10,757) 
As of June 30, 2020  $    $    $    $  20,158,080  $2  $183,658  $(42,299) $141,361  
CONVERTIBLE PREFERRED STOCK
COMMON STOCK
$0.0001 PAR VALUE
ADDITIONAL
PAID-IN
CAPITAL
ACCUMULATED
DEFICIT
TOTAL
STOCKHOLDERS'
DEFICIT
$0.0001 PAR VALUE SERIES A
$0.0001 PAR VALUE SERIES A-1
$0.0001 PAR VALUE SERIES B-1
$0.0001 PAR VALUE SERIES C
SHARES
AMOUNT
SHARES
AMOUNT
SHARES
AMOUNT
SHARES
AMOUNT
SHARES
AMOUNT
As of December 31, 20184,607,652  $9,891  368,612  $944  1,579,043  $9,106    $  2,243,648  $1  $130  $(7,314) $(7,183) 
Vesting of restricted stock—  —  —  —  —  —  —  —  25,918  —  —  —    
Stock-based compensation—  —  —  —  —  —  —  —  —  —  11  —  11  
Net loss—  —  —  —  —  —  —  —  —  —  —  (3,183) (3,183) 
As of March 31, 20194,607,652  $9,891  368,612  $944  1,579,043  $9,106    $  2,269,566  $1  $141  $(10,497) $(10,355) 
Exercise of common stock options—  —  —  —  —  —  —  —  22,029  —  3  —  3  
Vesting of restricted stock—  —  —  —  —  —  —  —  25,918  —  —  —    
Stock-based compensation—  —  —  —  —  —  —  —  —  —  13  —  13  
Net loss—  —  —  —  —  —  —  —  —  —  —  (2,853) (2,853) 
As of June 30, 20194,607,652$9,891  368,612$944  1,579,043$9,106  $  2,317,513$1  $157  $(13,350) $(13,192) 
See notes to condensed consolidated financial statements.
7


KEROS THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
SIX MONTHS ENDED JUNE 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$(22,649) $(6,036) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense
131  94  
Stock-based compensation expense
1,151  24  
Non-cash lease expense
180  87  
Changes in fair value of preferred stock tranche obligation
1,490  1,251  
Changes in operating assets and liabilities:
Research and development incentive receivable
922  (553) 
Prepaid expenses and other current assets
(3,449) 1,853  
Deferred IPO costs
604    
Accounts payable
2,764  596  
Operating lease liabilities
(183) (91) 
Deferred revenue
  (5,000) 
Accrued expenses and other current liabilities
1,020  255  
Other liabilities
(28) (25) 
Net cash used in operating activities
(18,047) (7,545) 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(204) (171) 
Net cash used in investing activities
(204) (171) 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series C preferred stock
56,000    
Payment of Series C preferred stock issuance costs(227)   
Proceeds from issuance of common stock from the initial public offering, net of underwriting discounts of $7,728
102,672    
Payment of initial public offering costs(2,549)   
Proceeds from exercise of stock options
22  4  
Net cash provided by financing activities
155,918  4  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH137,667  (7,712) 
Cash, cash equivalents and restricted cash at beginning of period7,135  23,390  
Cash, cash equivalents and restricted cash at end of period$144,802  $15,678  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Settlement of preferred stock tranche obligation
$6,446  $  
Conversion of preferred stock into common stock upon closing of initial public offering$75,714  $  
The following table provides a reconciliation of the cash, cash equivalents and restricted cash as of each of the periods shown above:
SIX MONTHS ENDED JUNE 30,
20202019
Cash and cash equivalents$144,687  $15,547  
Restricted cash115  131  
Total cash, cash equivalents and restricted cash$144,802  $15,678  
See notes to condensed consolidated financial statements.
8


KEROS THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Keros Therapeutics, Inc. (“Keros” or the “Company”) was incorporated in 2015 as a Delaware corporation. Its principal offices are in Lexington, Massachusetts. The Company is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological and musculoskeletal disorders with high unmet medical need.
The accompanying unaudited interim condensed consolidated financial statements are prepared in conformity 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 Australian subsidiary, Keros Therapeutics Australia Pty Ltd (“Keros Australia”). All significant intercompany transactions and accounts have been eliminated in consolidation.
Since its inception in 2015, the Company has devoted the majority of its resources on business planning, research and development of its product candidates, including by conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations. To date, the Company has not generated any revenue from product sales as none of its product candidates have been approved for commercialization.
On April 13, 2020, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 6,900,000 shares of its common stock, which includes 900,000 shares issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $16.00 per share, for aggregate gross proceeds of $110.4 million. The Company received approximately $100.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.
In connection with the IPO, the Company's board of directors (the "Board") and stockholders approved an amended and restated certificate of incorporation to, among other things, effect a one-for-2.1703 reverse stock split of its issued and outstanding shares of common stock and convertible preferred stock, as well as to effect a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock. The reverse stock split was effected on March 31, 2020. Accordingly, all share and per share amounts of common stock for all periods presented in the accompanying unaudited interim condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split and adjustment of preferred stock conversion ratios.
Upon the closing of the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 10,725,129 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

The Company’s condensed consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s existing cash and cash equivalents, will allow the Company to continue its operations for at least the next 12 months. In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations. If the Company is unable to obtain additional funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.
The accompanying unaudited interim condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 have been prepared by the Company in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of Article 10 of Regulation S-X of the Securities Act published by the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes the disclosures are adequate. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s
9


final prospectus that forms part of the Company’s Registration Statement on Form S-1 (Reg. No. 333-237212), filed with the SEC pursuant to Rule 424(b)(4) on April 8, 2020 (the “Prospectus”).
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019 and condensed consolidated cash flows for the six months ended June 30, 2020 and 2019. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
The significant accounting policies and estimates used in preparation of the unaudited interim condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Company’s Prospectus. Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2020.
Risks and Uncertainties

With the global COVID-19 pandemic continuing in the second quarter of 2020, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business operations, including its preclinical studies and clinical trials, supply chains and third-party providers. Additionally, in response to the spread of COVID-19, the Company closed its principal executive office in March 2020, with its administrative employees continuing their work outside of the office, and limited the number of staff in any given research laboratory. The Company anticipates that the COVID-19 pandemic will have an impact on the development timelines for several of its preclinical and clinical programs. The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock will depend on future developments which are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States, Australia and other countries and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biopharmaceutical industry with research and development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations; product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing its intellectual property rights; the challenges of complying with applicable regulatory requirements; and identifying, acquiring or in-licensing additional products or product candidates. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties discussed above.
10


Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of proceeds generated as a result of the offering. Should a planned equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the condensed consolidated statement of operations. Upon closing the IPO in April 2020, deferred offering costs were reclassified to additional paid-in capital, representing a reduction in IPO proceeds. As of June 30, 2020 and December 31, 2019, the Company had deferred offering costs of $0 and $0.6 million, respectively.
Recently Issued Accounting Pronouncements
The new accounting pronouncements recently adopted by the Company and issued by the Financial Accounting Standards Board ("FASB") that are applicable to the Company are described in the Company’s audited financial statements as of and for the year ended December 31, 2019, and the notes thereto, which are included in the Company’s Prospectus filed with the SEC on April 8, 2020. There have been no new accounting pronouncements issued in the six months ended June 30, 2020 that are applicable to the Company.
3. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):
DESCRIPTIONJUNE 30, 2020QUOTED PRICES ACTIVE MARKETS FOR IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 2)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 3)
Asset
Money market funds$143,208  $143,208  $  $  
Total financial assets$143,208  $143,208  $  $  

DESCRIPTION
DECEMBER 31, 2019
QUOTED PRICES ACTIVE MARKETS FOR IDENTICAL ASSETS
(LEVEL 1)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 2)
SIGNIFICANT OTHER OBSERVABLE INPUTS
(LEVEL 3)
Asset
Money market funds
$4,972  $4,972  $  $  
Total financial assets
$4,972  $4,972  $  $  
Liability
Preferred stock tranche obligation
$(4,956) $  $