10-Q 1 fbrx-20230930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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

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: 001-38052

 

 

FORTE BIOSCIENCES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

26-1243872

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

3060 Pegasus Park Drive, Building 6

Dallas, Texas

75247

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (310) 618-6994

 

 

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

 

FBRX

 

The Nasdaq Stock Market LLC

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 10, 2023, the registrant had 36,335,105 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Financial Statements

2

Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

2

Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2023 and 2022 (unaudited)

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine months ended September 30, 2023 and 2022 (unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2023 and 2022 (unaudited)

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II.

OTHER INFORMATION

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3.

Defaults Upon Senior Securities

76

Item 4.

Mine Safety Disclosures

77

Item 5.

Other Information

77

Item 6.

Exhibits

78

SIGNATURES

79

 

 

1


 

PART I – FINANCIAL INFORMATION

Item 1: Financial Statements

FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

46,185

 

 

$

41,100

 

Prepaid expenses and other current assets

 

 

917

 

 

 

411

 

Total current assets

 

 

47,102

 

 

 

41,511

 

 

 

 

 

 

 

Property and equipment, net

 

 

98

 

 

 

 

Other assets

 

 

679

 

 

 

486

 

Total assets

 

$

47,879

 

 

$

41,997

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,354

 

 

$

1,153

 

Accrued liabilities

 

 

2,117

 

 

 

2,026

 

Total current liabilities

 

 

7,471

 

 

 

3,179

 

 

 

 

 

 

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Common stock, $0.001 par value: 200,000,000 shares authorized as of September 30, 2023 (unaudited) and December 31, 2022; 36,281,772 and 21,000,069 shares issued and outstanding as of September 30, 2023 (unaudited) and December 31, 2022, respectively

 

 

36

 

 

 

21

 

Additional paid-in capital

 

 

153,025

 

 

 

125,841

 

Accumulated other comprehensive income

 

 

(5

)

 

 

 

Accumulated deficit

 

 

(112,648

)

 

 

(87,044

)

Total stockholders’ equity

 

 

40,408

 

 

 

38,818

 

Total liabilities and stockholders’ equity

 

$

47,879

 

 

$

41,997

 

 

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

2


 

FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

6,369

 

 

$

1,379

 

 

$

18,295

 

 

$

3,106

 

General and administrative

 

 

3,847

 

 

 

2,044

 

 

 

7,810

 

 

 

5,851

 

Total operating expenses

 

 

10,216

 

 

 

3,423

 

 

 

26,105

 

 

 

8,957

 

Loss from operations

 

 

(10,216

)

 

 

(3,423

)

 

 

(26,105

)

 

 

(8,957

)

Other income (expense), net

 

 

261

 

 

 

23

 

 

 

501

 

 

 

(45

)

Net loss

 

$

(9,955

)

 

$

(3,400

)

 

$

(25,604

)

 

$

(9,002

)

Per share information:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(0.26

)

 

$

(0.18

)

 

$

(0.96

)

 

$

(0.56

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares and pre-funded warrants outstanding, basic and diluted

 

 

37,862,772

 

 

 

18,927,446

 

 

 

26,700,505

 

 

 

16,164,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(9,955

)

 

$

(3,400

)

 

$

(25,604

)

 

$

(9,002

)

Unrealized loss on available-for-sale securities

 

 

(6

)

 

 

 

 

 

(5

)

 

 

 

Comprehensive loss

 

$

(9,961

)

 

$

(3,400

)

 

$

(25,609

)

 

$

(9,002

)

 

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

3


 

FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

Additional

 

 

Accumulated

 

 

 

 

 

Total

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Other Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance — December 31, 2021

 

 

 

14,754,447

 

 

$

15

 

 

$

114,698

 

 

 

 

 

$

(73,165

)

 

$

41,548

 

Exercise of employee stock options

 

 

 

1,098

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock under ESPP

 

 

 

5,716

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

1,055

 

 

 

 

 

 

 

 

 

1,055

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,567

)

 

 

(2,567

)

Balance — March 31, 2022

 

 

 

14,761,261

 

 

 

15

 

 

 

115,765

 

 

 

-

 

 

 

(75,732

)

 

 

40,048

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

1,194

 

 

 

 

 

 

 

 

 

1,194

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,035

)

 

 

(3,035

)

Balance — June 30, 2022

 

 

 

14,761,261

 

 

 

15

 

 

 

116,959

 

 

 

-

 

 

 

(78,767

)

 

 

38,207

 

Issuance of common stock through public equity offering, net of offering costs of $595

 

 

 

6,142,158

 

 

 

6

 

 

 

7,116

 

 

 

 

 

 

 

 

 

7,122

 

Issuance of common stock upon vesting of restricted stock units

 

 

 

96,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

 

 

 

 

 

 

 

906

 

 

 

 

 

 

 

 

 

906

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,400

)

 

 

(3,400

)

Balance — September 30, 2022

 

 

 

21,000,069

 

 

$

21

 

 

$

124,981

 

 

$

-

 

 

$

(82,167

)

 

$

42,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2022

 

 

 

21,000,069

 

 

$

21

 

 

$

125,841

 

 

 

 

 

$

(87,044

)

 

$

38,818

 

Issuance of common stock under ESPP

 

 

 

7,000

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

877

 

 

 

 

 

 

 

 

 

877

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,753

)

 

 

(6,753

)

Balance — March 31, 2023

 

 

 

21,007,069

 

 

 

21

 

 

 

126,724

 

 

 

-

 

 

 

(93,797

)

 

 

32,948

 

Issuance of common stock under vesting of RSUs, net

 

 

 

44,126

 

 

 

 

 

 

(24

)

 

 

 

 

 

 

 

 

(24

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

855

 

 

 

 

 

 

 

 

 

855

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,896

)

 

 

(8,896

)

Balance — June 30, 2023

 

 

 

21,051,195

 

 

 

21

 

 

 

127,555

 

 

 

1

 

 

 

(102,693

)

 

 

24,884

 

Issuance of common stock and pre-funded warrants in PIPE financing, net of issuance costs

 

 

 

15,166,957

 

 

 

15

 

 

 

24,713

 

 

 

 

 

 

 

 

 

24,728

 

Issuance of common stock under vesting of RSUs, net

 

 

 

53,120

 

 

 

 

 

 

(24

)

 

 

 

 

 

 

 

 

(24

)

Issuance of common stock under ESPP

 

 

 

10,500

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

772

 

 

 

 

 

 

 

 

 

772

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,955

)

 

 

(9,955

)

Balance — September 30, 2023

 

 

 

36,281,772

 

 

$

36

 

 

$

153,025

 

 

$

(5

)

 

$

(112,648

)

 

$

40,408

 

 

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

4


 

FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(25,604

)

 

$

(9,002

)

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

 

 

 

 

 

 

Depreciation expense

 

 

3

 

 

 

 

Stock-based compensation expense

 

 

2,504

 

 

 

3,155

 

Non-cash income/loss on available-for-sale securities

 

 

(139

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(699

)

 

 

76

 

Accounts payable

 

 

4,137

 

 

 

189

 

Accrued liabilities

 

 

61

 

 

 

290

 

Net cash used in operating activities

 

 

(19,737

)

 

 

(5,292

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of available-for-sale securities

 

 

(9,965

)

 

 

 

Proceeds from redemptions of available-for-sale securities

 

 

10,099

 

 

 

 

Purchase of property and equipment

 

 

(71

)

 

 

 

Net cash provided by investing activities

 

 

63

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

24,792

 

 

 

7,284

 

Proceeds from exercise of stock options and ESPP

 

 

15

 

 

 

12

 

Taxes paid related to net share settlement of equity awards

 

 

(48

)

 

 

 

Net cash provided by financing activities

 

 

24,759

 

 

 

7,296

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

5,085

 

 

 

2,004

 

Cash and cash equivalents — beginning of period

 

 

41,100

 

 

 

42,044

 

Cash and cash equivalents — end of period

 

$

46,185

 

 

$

44,048

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Unpaid issuance costs

 

$

64

 

 

$

55

 

Purchase of fixed assets recorded in accounts payable

 

$

30

 

 

$

 

Deferred issuance costs

 

$

 

 

$

107

 

 

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

5


 

FORTE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Description of Business

 

Forte Biosciences, Inc. (www.fortebiorx.com) and its subsidiaries, referred to herein as the “Company”, is a biopharmaceutical company focused on developing its FB-102 program which the Company believes has potentially broad applications for autoimmune diseases, including graft-versus-host disease ("GvHD"). FB-102 is currently in preclinical development and the Company plans to advance FB-102 into the clinic in 2024.

The Company merged with Tocagen, Inc. ("Merger"), a publicly traded biotechnology company, on June 15, 2020. Prior to the Merger, Forte was a privately held company incorporated in Delaware on May 3, 2017. The Company’s common stock is traded on the Nasdaq stock exchange under the ticker symbol “FBRX”‌.

Liquidity and Risks

 

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. Since inception, the Company has incurred losses and negative cash flows from operations. As of September 30, 2023, the Company had an accumulated deficit of $112.6 million. The Company used $19.7 million of cash in operating activities during the nine months ended September 30, 2023. Management expects to continue to incur additional losses in the foreseeable future as the Company focuses its development efforts on advancing FB-102 through additional preclinical trials and into the clinic in 2024.

The Company had cash and cash equivalents of approximately $46.2 million as of September 30, 2023. The Company’s cash and cash equivalents are held at financial institutions and exceed federally insured limits. The Company believes that its existing cash and cash equivalents will be sufficient to allow the Company to fund its operations for at least 12 months from the filing date of this Form 10-Q.

The Company will continue to need to raise additional capital or obtain financing from other sources. Management may fund future operations through the sale of equity and debt financings and may also seek additional capital through arrangements with strategic partners or other sources. There can be no assurance that additional funding will be available on terms acceptable to the Company, if at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it may be forced to delay or reduce the scope of its research and development programs and/or limit or cease its operations. The Company's ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the military conflicts in Eastern Europe, the Middle East, and otherwise.

There are numerous risks and uncertainties associated with pharmaceutical development and the Company is unable to predict the timing or amount of increased expenses on the development of future product candidates or when or if it will start to generate revenues. Even if the Company does generate revenues, it may not be able to achieve or maintain profitability. If the Company fails to become profitable or is unable to sustain profitability on a continuing basis, then it may be unable to continue its operations at planned levels and may be forced to reduce its operations.

Businesses throughout our industry have been and will continue to be impacted by a number of challenging and unexpected global and national events and circumstances that continue to evolve, including without limitation the COVID-19 pandemic, the military conflicts in Ukraine and the Middle East, increased economic uncertainty, inflation, rising interest rates, recent and any potential future financial institution failures, and other geopolitical tensions. The extent of the impact of these events and circumstances on our business, operations, development

6


 

timelines and plans remains uncertain, and will depend on certain developments, including the duration and scope of the events and their impact on our development activities, third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. We have been and continue to actively monitor the potential impacts that these various events and circumstances may have on our business and we take steps, where warranted, to minimize any potential negative impacts on our business resulting from these events and circumstances.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company should be read in conjunction with its audited financial statements and accompanying notes thereto as of and for the year ended December 31, 2022 included in the Company’s Form 10-K as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023. The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), as found in the Accounting Standards Codification (“ASC”), the Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”), and the rules and regulations of the US Securities and Exchange Commission (“SEC”).

In the opinion of management, the accompanying condensed consolidated financial statements include all Company’s financial position, the results of its operations and cash flows for the periods presented. Interim results are not necessarily indicative of results for the full year or any future period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Forte Subsidiary, Inc and Forte Biosciences Emerald Limited. All intercompany accounts and transactions have been eliminated in the preparation of the condensed consolidated financial statements.

Cash, Cash Equivalents

Cash and cash equivalents include money market funds and deposits with commercial banks. Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase.

Marketable Securities

 

The Company’s marketable securities primarily consist of U.S. government and agency securities classified within cash and cash equivalents depending on their maturity date at the time of purchase. The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the consolidated statements of operations and comprehensive loss and as a separate component of stockholders’ equity. Realized gains and losses are calculated on the specific identification method and recorded as interest income (loss).

 

Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is accreted to maturity. Amortization and accretion of premiums and discounts are recorded in other income (expense), net, in the consolidated statements of operations.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy that prioritizes the inputs used in determining fair value by their reliability and preferred use as follows:

Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities.

7


 

Level 2 – Valuations based on quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Valuations based on inputs that are both significant to the fair value measurements and are unobservable.

To the extent that a valuation is based on models or inputs that are less observable, or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

There have been no significant changes to the valuation methods utilized by the Company during the periods presented. There have been no transfers between Level 1, Level 2, and Level 3 in any periods presented.

The carrying amounts of financial instruments consisting of cash and cash equivalents, available-for-sale securities, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities included in the Company’s financial statements, are reasonable estimates of fair value, primarily due to their short maturities.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, expenses and the disclosure of contingent assets and liabilities in the Company’s condensed consolidated financial statements and accompanying notes. Significant management estimates that affect the reported amounts of assets, liabilities and expenses include stock-based compensation expense and accruals for clinical trials and drug manufacturing. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits of research and development personnel, costs related to research activities, preclinical studies, clinical trials and drug manufacturing. Non-refundable advance payments for goods or services that will be used in future research and development activities are deferred and capitalized and are only expensed when the goods have been received or when the service has been performed rather than when the payment is made.

Drug manufacturing, clinical and preclinical costs are a component of research and development expenses. The Company expenses costs for its drug manufacturing activities performed by Contract Manufacturing Organizations (“CMOs”), preclinical and clinical trial costs performed by Contract Research Organizations (“CROs”) and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements. The Company uses information it receives from internal personnel and outside service providers to estimate the percentage of completion and therefore the expense to be incurred.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions from non-owner sources. Unrealized gains or losses on available-for-sale securities is a component of other comprehensive gains or losses and is presented net of taxes.

8


 

Net Loss Per Share

Basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares and pre-funded warrants outstanding during the period as their exercise requires only nominal consideration for the delivery of shares, without consideration for common stock equivalents.

Diluted net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock and common stock equivalents outstanding during the period in accordance with the treasury stock method. The following number of unexercised stock options, warrants and restricted stock units, which are common stock equivalents, have been excluded from the diluted net loss calculation as their effect would have been anti-dilutive for all periods presented:

 

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Options

 

 

2,643,195

 

 

 

2,329,918

 

Restricted stock units

 

 

1,124,701

 

 

 

162,201

 

Warrants

 

 

4,434

 

 

 

4,434

 

Total

 

 

3,772,330

 

 

 

2,496,553

 

 

Recently Issued Accounting Standards Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of a specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations.

In August 2020, the FASB issued ​ASU 2020-06​, ​Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40)​ (“ASU 2020-06”). ​ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted earnings per share computation. The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but not earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its condensed consolidated financial statements and does not expect the adoption of this amended guidance to have a material impact on the Company’s condensed consolidated financial statements.

3. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of September 30, 2023 and December 31, 2022 consist of the following (in thousands):

 

 

September 30, 2023

 

 

December 31, 2022

 

Prepaid manufacturing and preclinical expenses

 

$

91

 

 

$

 

Prepaid insurance

 

 

370

 

 

 

341

 

Prepaid professional fees

 

 

362

 

 

 

 

Other

 

 

94

 

 

 

70

 

Total prepaid expenses and other current assets

 

$

917

 

 

$

411

 

 

9


 

Other Assets

Other assets as of September 30, 2023 and December 31, 2022 consist of the following (in thousands):

 

 

September 30, 2023

 

 

December 31, 2022

 

Prepaid insurance

 

$

329

 

 

$

473

 

Prepaid professional fees

 

 

302

 

 

 

 

Other

 

 

48

 

 

 

13

 

Total other assets

 

$

679

 

 

$

486

 

Accrued Liabilities

Accrued liabilities as of September 30, 2023 and December 31, 2022 consist of the following (in thousands):

 

 

September 30, 2023

 

 

December 31, 2022

 

 Accrued legal and professional fees

 

$

97

 

 

$

643

 

 Accrued compensation

 

 

850

 

 

 

890

 

 Accrued manufacturing and preclinical expenses

 

 

1,100

 

 

 

485

 

 Other

 

 

70

 

 

 

8

 

Total accrued liabilities

 

$

2,117

 

 

$

2,026

 

 

4. Fair Value

 

The Company measures its financial assets and liabilities at fair value, which is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company uses the following three-level valuation hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial assets and liabilities:

Level 1 - Observable inputs such as unadjusted quoted prices in active markets for identical instruments.
Level 2 - Quoted prices for similar instruments in active markets or inputs that are observable for the asset or liability, either directly or indirectly.
Level 3 - Significant unobservable inputs based on the Company’s assumptions.

Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. Money market funds were included as cash and cash equivalents and U.S. Treasury bills were included in cash equivalents in the condensed consolidated balance sheets for the periods presented.

The following tables provides a summary of the assets that are measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

 

 

Fair Value Measurements as of
September 30, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Funds

 

$

5,385

 

 

$

 

 

$

 

 

$

5,385

 

U.S. Treasury Bills

 

$

 

 

$

25,041

 

 

$

 

 

$

25,041

 

Total

 

$

5,385

 

 

$

25,041

 

 

$

 

 

$

30,426

 

 

 

 

Fair Value Measurements as of
December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Funds

 

$

5,061

 

 

$

 

 

$

 

 

$

5,061

 

Total

 

$

5,061

 

 

$

 

 

$

 

 

$

5,061

 

 

10


 

 

5. Available-for-sale Securities

 

The following table summarizes the Company's available-for-sale securities as of September 30, 2023. The Company did