10-Q
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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 September 30, 2023

 

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 001-37566

 

SYNLOGIC, INC.

(Exact name of Registrant as specified in its Charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

26-1824804

(I.R.S. Employer

Identification No.)

 

 

 

301 Binney St., Suite 402

Cambridge, MA

(Address of principal executive offices)

 

02142

(Zip Code)

(617) 401-9975

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.001 per share

SYBX

The Nasdaq Capital Market

 

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

 

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

 

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

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

 

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

 

As of November 2, 2023, there were 9,189,353 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical fact contained herein are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

the success of our research and development efforts;
the initiation, progress, timing, costs and results of clinical trials for our product candidates;
the time and costs involved in obtaining regulatory approvals for our product candidates;
the success of our collaborations with third parties;
the progress, timing and costs involved in developing manufacturing processes and in manufacturing products, as well as agreements with third-party manufacturers;
the rate of progress and cost of our commercialization activities;
the expenses we incur in marketing and selling our product candidates, if approved;
the revenue generated by sales of our product candidates, if approved;
the emergence of competing or complementary technological developments;
the terms and timing of any additional collaborative, licensing or other arrangements that we may establish;
the acquisition of businesses, products and technologies;
our need to implement additional infrastructure and internal systems;
our need to add personnel and financial and management information systems to support our product development and potential future commercialization efforts, and to enable us to operate as a public company; and
other risks and uncertainties, including those listed under Part II, Item 1A. “Risk Factors”.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

 


 

SYNLOGIC, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Unaudited Consolidated Balance Sheets

 

1

 

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Loss

 

2

 

 

 

Unaudited Consolidated Statements of Stockholders’ Equity

 

3

 

 

 

Unaudited Consolidated Statements of Cash Flows

 

4

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

5

 

 

 

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

 

13

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

24

 

 

 

Item 4. Controls and Procedures

 

24

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1. Legal Proceedings

 

25

 

 

 

Item 1A. Risk Factors

 

25

 

 

 

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

 

60

 

 

 

Item 3. Defaults Upon Senior Securities

 

60

 

 

 

Item 4. Mine Safety Disclosures

 

60

 

 

 

Item 5. Other Information

 

60

 

 

 

Item 6. Exhibits

 

61

 

 

 

Signatures

 

62

 

 


 

SYNlogic, Inc. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In thousands, except share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,536

 

 

$

15,861

 

Short-term marketable securities

 

 

8,879

 

 

 

61,768

 

Prepaid expenses and other current assets

 

 

4,365

 

 

 

2,153

 

Total current assets

 

 

37,780

 

 

 

79,782

 

Property and equipment, net

 

 

5,949

 

 

 

7,323

 

Right of use asset - operating lease

 

 

12,827

 

 

 

14,356

 

Restricted cash

 

 

1,097

 

 

 

1,097

 

Prepaid research and development, net of current portion

 

 

8,586

 

 

 

8,300

 

Other assets

 

 

15

 

 

 

7

 

Total assets

 

$

66,254

 

 

$

110,865

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

708

 

 

$

1,785

 

Accrued expenses

 

 

3,679

 

 

 

5,290

 

Deferred revenue

 

 

264

 

 

 

882

 

Lease liability - operating lease

 

 

4,485

 

 

 

4,152

 

Finance lease obligations

 

 

8

 

 

 

13

 

Total current liabilities

 

 

9,144

 

 

 

12,122

 

Long-term liabilities:

 

 

 

 

 

 

Lease liability - operating lease, net of current portion

 

 

13,706

 

 

 

16,129

 

Finance lease obligations, net of current portion

 

 

 

 

 

4

 

Total long-term liabilities

 

 

13,706

 

 

 

16,133

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, $0.001 par value

 

 

 

 

 

 

250,000,000 shares authorized as of September 30, 2023 and December 31, 2022,
  
4,878,089 shares issued and 4,598,297 shares outstanding as of September 30, 2023 and 4,728,874 shares issued and 4,449,082 shares outstanding as of December 31, 2022

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

445,679

 

 

 

442,303

 

Accumulated other comprehensive income (loss)

 

 

5

 

 

 

(161

)

Accumulated deficit

 

 

(399,767

)

 

 

(357,019

)

Treasury stock, at cost (279,792 shares at September 30, 2023 and at December 31, 2022)

 

 

(2,518

)

 

 

(2,518

)

Total stockholders' equity

 

 

43,404

 

 

 

82,610

 

Total liabilities and stockholders' equity

 

$

66,254

 

 

$

110,865

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

1


 

Synlogic, INC. aND SUBSIDIARIES

Unaudited Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Revenue

$

393

 

 

$

678

 

 

$

602

 

 

$

1,074

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

9,616

 

 

 

14,610

 

 

 

33,831

 

 

 

38,405

 

General and administrative

 

3,400

 

 

 

4,402

 

 

 

11,291

 

 

 

12,785

 

Total operating expenses

 

13,016

 

 

 

19,012

 

 

 

45,122

 

 

 

51,190

 

Loss from operations

 

(12,623

)

 

 

(18,334

)

 

 

(44,520

)

 

 

(50,116

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest and investment income

 

549

 

 

 

422

 

 

 

1,794

 

 

 

658

 

Interest expense

 

 

 

 

(1

)

 

 

(1

)

 

 

(3

)

Other income (expense)

 

(1

)

 

 

1

 

 

 

(9

)

 

 

10

 

Total other income, net

 

548

 

 

 

422

 

 

 

1,784

 

 

 

665

 

Loss before income taxes

 

(12,075

)

 

 

(17,912

)

 

 

(42,736

)

 

 

(49,451

)

Income tax expense

 

(3

)

 

 

 

 

 

(12

)

 

 

 

Net loss

$

(12,078

)

 

$

(17,912

)

 

$

(42,748

)

 

$

(49,451

)

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

$

(2.57

)

 

$

(3.73

)

 

$

(9.17

)

 

$

(10.29

)

Weighted-average common stock outstanding - basic and diluted

 

4,699,847

 

 

 

4,807,207

 

 

 

4,662,444

 

 

 

4,804,127

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(12,078

)

 

$

(17,912

)

 

$

(42,748

)

 

$

(49,451

)

Net unrealized (loss) gain on marketable securities

 

3

 

 

 

42

 

 

 

166

 

 

 

(346

)

Comprehensive loss

$

(12,075

)

 

$

(17,870

)

 

$

(42,582

)

 

$

(49,797

)

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

2


 

Synlogic, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

 

 

Common stock
$0.001 par value

 

Additional
paid-in

 

Accumulated
other
comprehensive

 

Accumulated

 

Treasury Stock

 

Total

 

 

Shares

 

Amount

 

capital

 

income (loss)

 

deficit

 

Shares

 

Amount

 

equity

 

 

For the Three Months Ended September 30, 2023

 

Balance at June 30, 2023

 

4,854,048

 

$

5

 

$

444,974

 

$

2

 

$

(387,689

)

 

(279,792

)

$

(2,518

)

$

54,774

 

Issuance of common stock under employee stock purchase plan

 

27,156

 

 

 

 

65

 

 

 

 

 

 

 

 

 

 

65

 

Cancellation of restricted stock

 

(3,008

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reverse Split: fractional share adjustment

 

(107

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

640

 

 

 

 

 

 

 

 

 

 

640

 

Unrealized gain (loss) on securities

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

(12,078

)

 

 

 

 

 

(12,078

)

Balance at September 30, 2023

 

4,878,089

 

$

5

 

$

445,679

 

$

5

 

$

(399,767

)

$

(279,792

)

$

(2,518

)

$

43,404

 

 

For the Three Months Ended September 30, 2022

 

Balance at June 30, 2022

 

4,682,014

 

$

5

 

$

440,189

 

$

(433

)

$

(322,411

)

 

 

$

 

$

117,350

 

Issuance of common stock under employee stock purchase plan

 

4,409

 

 

 

54

 

 

 

 

 

 

 

 

 

 

54

 

Cancellation of restricted stock

 

(725

)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

894

 

 

 

 

 

 

 

 

894

 

Unrealized gain (loss) on securities

 

 

 

 

42

 

 

 

 

 

 

 

42

 

Net loss

 

 

 

 

 

(17,912

)

 

 

 

 

 

(17,912

)

Balance at September 30, 2022

 

4,685,698

 

$

5

 

$

441,137

 

$

(391

)

$

(340,323

)

 

 

$

 

$

100,428

 

 

For the Nine Months Ended September 30, 2023

 

Balance at December 31, 2022

 

4,728,874

 

$

5

 

$

442,303

 

$

(161

)

$

(357,019

)

 

(279,792

)

$

(2,518

)

$

82,610

 

Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs

 

115,966

 

 

 

 

1,249

 

 

 

 

 

 

 

 

 

 

1,249

 

Issuance of restricted stock

 

10,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

34,489

 

 

 

 

124

 

 

 

 

 

 

 

 

 

 

124

 

Cancellation of restricted stock

 

(11,947

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reverse Split: fractional share adjustment

 

(107

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

2,003

 

 

 

 

 

 

 

 

 

 

2,003

 

Unrealized gain (loss) on securities

 

 

 

 

 

 

 

166

 

 

 

 

 

 

 

 

166

 

Net loss

 

 

 

 

 

 

 

 

 

(42,748

)

 

 

 

 

 

(42,748

)

Balance at September 30, 2023

 

4,878,089

 

$

5

 

$

445,679

 

$

5

 

$

(399,767

)

 

(279,792

)

$

(2,518

)

$

43,404

 

For the Nine Months Ended September 30, 2022

 

Balance at December 31, 2021

 

4,646,590

 

$

5

 

$

438,178

 

$

(45

)

$

(290,872

)

 

 

$

 

$

147,266

 

Exercise of options

 

2,370

 

 

 

61

 

 

 

 

 

 

 

 

61

 

Issuance of restricted stock

 

33,817

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under employee stock purchase plan

 

7,108

 

 

 

137

 

 

 

 

 

 

 

 

137

 

Cancellation of restricted stock

 

(4,187

)

 

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

2,761

 

 

 

 

 

 

 

 

2,761

 

Unrealized gain (loss) on securities

 

 

 

 

(346

)

 

 

 

 

 

 

(346

)

Net loss

 

 

 

 

 

(49,451

)

 

 

 

 

 

(49,451

)

Balance at September 30, 2022

 

4,685,698

 

$

5

 

$

441,137

 

$

(391

)

$

(340,323

)

 

 

$

 

$

100,428

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3


 

Synlogic, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

(In thousands)

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(42,748

)

 

$

(49,451

)

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

 

 

 

 

 

 

Depreciation

 

 

1,555

 

 

 

1,907

 

Gain on disposal of property and equipment

 

 

(11

)

 

 

 

Equity-based compensation expense

 

 

2,003

 

 

 

2,761

 

Accretion/amortization of investment securities

 

 

(512

)

 

 

(364

)

Change in carrying amount of operating lease right of use asset

 

 

2,469

 

 

 

2,347

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

(1,500

)

Prepaid expenses and other current assets

 

 

(2,212

)

 

 

419

 

Prepaid research and development, net of current portion

 

 

(286

)

 

 

1,780

 

Accounts payable and accrued expenses

 

 

(2,688

)

 

 

107

 

Deferred revenue

 

 

(618

)

 

 

440

 

Operating lease liabilities

 

 

(3,030

)

 

 

(2,932

)

Other assets

 

 

(8

)

 

 

(9

)

Net cash used in operating activities

 

 

(46,086

)

 

 

(44,495

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(8,831

)

 

 

(66,191

)

Proceeds from maturity of marketable securities

 

 

62,398

 

 

 

110,366

 

Purchases of property and equipment

 

 

(186

)

 

 

(685

)

Proceeds from the sale of property and equipment

 

 

16

 

 

 

 

Net cash provided by investing activities

 

 

53,397

 

 

 

43,490

 

Cash flows from financing activities:

 

 

 

 

 

 

Payments on finance lease obligations

 

 

(9

)

 

 

(9

)

Proceeds from issuance of common stock in connection with at-the-market offering, net of issuance costs

 

 

1,249

 

 

 

 

Proceeds from employee stock purchases and exercise of stock options

 

 

124

 

 

 

198

 

Net cash provided by financing activities

 

 

1,364

 

 

 

189

 

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

 

 

8,675

 

 

 

(816

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

16,958

 

 

 

17,535

 

Cash, cash equivalents and restricted cash at end of period

 

$

25,633

 

 

$

16,719

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

Assets acquired under operating lease obligation

 

$

940

 

 

$

2,698

 

Property and equipment purchases included in accounts payable and accrued expenses

 

$

 

 

$

35

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

Cash paid for income taxes

 

$

12

 

 

$

 

Cash paid for interest

 

$

1

 

 

$

2

 

Issuance costs included in accounts payable and accrued expenses

 

$

295

 

 

$

 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4


 

SYNLOGIC, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(1)
Nature of Business

Organization

Synlogic, Inc., together with its wholly owned and consolidated subsidiaries (Synlogic or the Company), is a late-stage biopharmaceutical company advancing novel, orally-administered, non-systemically absorbed therapeutics for serious diseases based on the Company's Synthetic Biotic product platform. Synthetic Biotics are generated from Synlogic’s proprietary platform, leveraging a reproducible, modular approach to the generation of novel drug candidates that perform or deliver critical therapeutic functions. Synthetic Biotics are designed to metabolize a toxic substance, compensate for missing or damaged metabolic pathways or deliver combinations of therapeutic factors. Synlogic’s goal is to discover, develop and ultimately commercialize Synthetic Biotics. Since incorporation, the Company has devoted substantially all of its efforts to the research and development of its product candidates.

Risks and Uncertainties

At September 30, 2023, the Company had approximately $33.4 million in cash and cash equivalents, $1.1 million of restricted cash and an accumulated deficit of approximately $399.8 million. Since its inception through September 30, 2023, the Company has primarily financed its operations through the issuance of preferred stock, units and warrants, the sale of its common stock, and collaborations, including with Roche. In the absence of positive cash flows from operations, the Company is highly dependent on its ability to find additional sources of funding in the form of debt or equity financing. Inclusive of the net cash proceeds received in October 2023 from the sale of the Company's common stock, as further described in Note 14, Subsequent Events, management believes that the Company has sufficient cash and other sources of liquidity, including cash equivalents, to fund its operations through at least twelve months from the date of issuance of these financial statements.

As a clinical-stage company, the Company is subject to a number of risks common to other life science companies, including, but not limited to, raising additional capital, development by its competitors of new technological innovations, risk of failure in preclinical and clinical studies, safety and efficacy of its product candidates in clinical trials, the risk of relying on external parties such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), the regulatory approval process, market acceptance of the Company’s products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology. The Company’s therapeutic programs are currently pre-commercial, spanning discovery through development and will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization of any product candidates. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance-reporting capabilities. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company may never achieve profitability, and unless and until it does, it will continue to need to raise additional capital or obtain financing from other sources, such as strategic collaborations or alliances.

COVID-19

While the Company is not aware of a material impact from the continuation of the COVID-19 pandemic through September 30, 2023, the full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations, and financial condition, including expenses and manufacturing, clinical trials, and research and development costs, depends on future developments that are uncertain at this time.

5


 

(2)
Summary of Significant Accounting Policies

The significant accounting policies described in the Company’s audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (SEC) on March 29, 2023 (the 2022 Annual Report), have had no material changes during the nine months ended September 30, 2023, other than the note below.

Reverse Stock Split

On September 27, 2023, the Company effected a one-for-fifteen reverse stock split of its issued and outstanding common stock, which also adjusted all outstanding warrants. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split. All fractional shares resulting from the reverse stock split were paid in cash.

 

Basis of Presentation

The accompanying consolidated financial statements and the related disclosures as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and the rules and regulations of the SEC for interim financial statements. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. These interim consolidated financial statements should be read in conjunction with the Company’s 2022 and 2021 audited consolidated financial statements and notes included in the 2022 Annual Report. The consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date but does not include all disclosures including notes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position and results of operations for the three and nine months ended September 30, 2023 and 2022. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or any other interim period or future year or period.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of Synlogic and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

Recently Issued Accounting Pronouncements

 

New accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) from time to time, and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future financial statements.

 

(3)
Fair Value of Financial Instruments

The tables below present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, as described under Note 2, Summary of Significant Accounting Policies, in the audited financial statements included in the 2022 Annual Report.

The Company’s investment portfolio includes many fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company applied other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. In addition, model processes were used to assess interest rate impact and develop prepayment scenarios. These models take into consideration relevant credit information, perceived market movements, sector news and economic events. The inputs into these models may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads and other relevant data.

6


 

At September 30, 2023 and December 31, 2022, the Company has classified assets measured at fair value on a recurring basis as follows (in thousands):