Full Press Release Details
Therapeutics LLC and Subsidiary
Financial Statements
Therapeutics LLC and Subsidiary
| Page(s) | |
| Report of Independent Registered Public Accounting Firm | 1 |
| Consolidated Financial Statements | |
| Consolidated Balance Sheets | 2 |
| Consolidated Statements of Operations | 3 |
| Consolidated Statements of Preferred Units and Members' Deficit | 4 |
| Consolidated Statements of Cash Flows | 5 |
| Notes to Consolidated Financial Statements | 6-29 |
Report of Independent Registered Public Accounting Firm
The Board of Directors and Members
Compass Therapeutics LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Compass Therapeutics LLC and Subsidiary (the "Company") as of December 31, 2019 and 2018, and the related
consolidated statements of operations, preferred units and members' deficit, and cash flows for the years then ended, and
the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and
2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America
These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to
assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe
that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since
Therapeutics LLC and Subsidiary
thousands, except units and unit data)
| December 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 25,303 | $ | 57,511 | ||||
| Prepaid expenses and other current assets | 935 | 1,370 | ||||||
| Total current assets | 26,238 | 58,881 | ||||||
| Property and equipment, net | 3,751 | 5,367 | ||||||
| Restricted cash | 263 | 262 | ||||||
| Other assets | 129 | 115 | ||||||
| Total assets | $ | 30,381 | $ | 64,625 | ||||
| Liabilities, Convertible Preferred Units and Members' Deficit | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 5,576 | $ | 3,688 | ||||
| Accounts payable | 629 | 1,730 | ||||||
| Accrued expenses | 3,122 | 2,657 | ||||||
| Derivative liability related to loan | 494 | 390 | ||||||
| Total current liabilities | 9,821 | 8,465 | ||||||
| Long term debt, including accretion, net of current portion | 9,293 | 11,064 | ||||||
| Total liabilities | 19,114 | 19,529 | ||||||
| Commitments (Note 11) | ||||||||
| Convertible preferred units (Series A-1, A-2, A-3, A-4, A4B and A-5) 207,164,404 units authorized, issued, and outstanding as of December 31, 2019 and 2018; aggregate liquidation preference $132,039,394 as of December 31, 2019 and 2018 | 129,870 | 129,870 | ||||||
| Members' deficit: | ||||||||
| Class A common units - 305,346,089 units authorized at December 31, 2019 and 2018; 75,632,932 and 66,578,491 units issued and outstanding at December 31, 2019 and 2018, respectively | 2,585 | 1,670 | ||||||
| Class C common units - 4,509,750 units authorized, issued, and outstanding at December 31, 2019 and 2018 | 720 | 720 | ||||||
| Accumulated deficit | (121,908 | ) | (87,164 | ) | ||||
| Total members' deficit | (118,603 | ) | (84,774 | ) | ||||
| Total liabilities, convertible preferred units and members' deficit | $ | 30,381 | $ | 64,625 |
accompanying notes are an integral part of these consolidated financial statements.
Therapeutics LLC and Subsidiary
Statements of Operations
| Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | 22,449 | $ | 27,095 | ||||
| General and administrative | 11,603 | 11,217 | ||||||
| Total operating expenses | 34,052 | 38,312 | ||||||
| Loss from operations | (34,052 | ) | (38,312 | ) | ||||
| Other income (expense): | ||||||||
| Interest income | 743 | 663 | ||||||
| Interest expense | (1,228 | ) | (767 | ) | ||||
| Change in fair value of call right liability | - | 313 | ||||||
| Change in fair value of derivative liability | (104 | ) | (67 | ) | ||||
| Realized foreign exchange loss | (12 | ) | (13 | ) | ||||
| Total other income (expense), net | (601 | ) | 129 | |||||
| Loss before income taxes | (34,653 | ) | (38,183 | ) | ||||
| Income taxes | (91 | ) | (103 | ) | ||||
| Net loss | $ | (34,744 | ) | $ | (38,286 | ) |
accompanying notes are an integral part of these consolidated financial statements.
Therapeutics LLC and Subsidiary
Statements of Preferred Units and Members' Deficit
Ended December 31, 2019 and 2018
(In thousands, except units)
| Preferred Units | Common Units | Common Units | Common Units | |||||||||||||||||||||||||||||||||||||
| Series A-1, A-2, A-3, | Total | |||||||||||||||||||||||||||||||||||||||
| A-4A, A4B and A-5 | Class A | Class B | Class C | Accumulated | Members' | |||||||||||||||||||||||||||||||||||
| Units | Amount | Units | Amount | Units | Amount | Units | Amount | Deficit | Deficit | |||||||||||||||||||||||||||||||
| Balances at December 31, 2017 | 162,424,715 | $ | 81,513 | 5,078,488 | $ | 181 | 46,542,838 | $ | 833 | - | $ | - | $ | (48,878 | ) | $ | (47,864 | ) | ||||||||||||||||||||||
| Additional issuance costs in connection with the prior issuance of Series A4B preferred units | - | (7 | ) | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Issuance of Series A-5 preferred units - net of issuance costs of $129,241 | 44,739,689 | 49,084 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Issuance of Class C common units associated with Series A-5 preferred units | - | (720 | ) | - | - | - | - | 4,509,750 | 720 | - | 720 | |||||||||||||||||||||||||||||
| Redesignation of Class B common units | - | - | 46,542,838 | 833 | (46,542,838 | ) | (833 | ) | - | - | - | - | ||||||||||||||||||||||||||||
| Issuance of profit interests and related unit compensation expense | - | - | 16,143,382 | 656 | - | - | - | - | - | 656 | ||||||||||||||||||||||||||||||
| Forteiture of common units | - | - | (1,186,217 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | (38,286 | ) | (38,286 | ) | ||||||||||||||||||||||||||||
| Balances at December 31, 2018 | 207,164,404 | $ | 129,870 | 66,578,491 | $ | 1,670 | - | $ | - | 4,509,750 | $ | 720 | $ | (87,164 | ) | $ | (84,774 | ) | ||||||||||||||||||||||
| Issuance of profit interests and related unit compensation expense | - | - | 19,643,100 | 915 | - | - | - | - | - | 915 | ||||||||||||||||||||||||||||||
| Forfeiture of common units | - | - | (10,588,659 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | (34,744 | ) | (34,744 | ) | ||||||||||||||||||||||||||||
| Balances at December 31, 2019 | 207,164,404 | $ | 129,870 | 75,632,932 | $ | 2,585 | - | $ | - | 4,509,750 | $ | 720 | $ | (121,908 | ) | $ | (118,603 | ) |
accompanying notes are an integral part of these consolidated financial statements.
Therapeutics LLC and Subsidiary
Statements of Cash Flows
| Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (34,744 | ) | $ | (38,286 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 2,120 | 1,921 | ||||||
| Loss/(gain) on disposal of fixed asset | 5 | (15 | ) | |||||
| Non-cash interest expense | 116 | 121 | ||||||
| Unit-based compensation | 915 | 656 | ||||||
| Change in fair value of derivative liability related to loan | 104 | 67 | ||||||
| Change in fair value of call right liability | - | (313 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | 435 | 112 | ||||||
| Other long term assets | (56 | ) | 69 | |||||
| Accounts payable | (1,101 | ) | 992 | |||||
| Accrued expenses | 509 | 999 | ||||||
| Deferred rent | (44 | ) | (2 | ) | ||||
| Net cash used in operating activities | (31,741 | ) | (33,679 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (466 | ) | (2,020 | ) | ||||
| Net cash used in investing activities | (466 | ) | (2,020 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Additional issuance costs from prior issuance of Series A4B preferred units | - | (7 | ) | |||||
| Proceeds from issuance of Series A-5 preferred units | - | 49,213 | ||||||
| Issuance costs from Series A-5 preferred units | - | (129 | ) | |||||
| Proceeds from borrowings under loan | - | 15,000 | ||||||
| Fees related to borrowings under loan | - | (46 | ) | |||||
| Net cash provided by financing activities | - | 64,031 | ||||||
| Net change in cash, cash equivalents and restricted cash | (32,207 | ) | 28,332 | |||||
| Cash, cash equivalents and restricted cash at beginning of year | 57,773 | 29,441 | ||||||
| Cash, cash equivalents and restricted cash at end of year | $ | 25,566 | $ | 57,773 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 1,115 | $ | 556 | ||||
| Supplemental disclosure of noncash investing and financing activities | ||||||||
| Acquisition of equipment included in accrued expenses | $ | 3 | $ | 105 | ||||
| Issuance of Class C common units associated with Series A-5 preferred units | $ | - | $ | 720 |
accompanying notes are an integral part of these consolidated financial statements.
Therapeutics LLC and Subsidiary
to Consolidated Financial Statements
Therapeutics LLC, a limited liability company, was formed under the laws of the state of Delaware in January 2014. Compass Therapeutics
LLC has a wholly owned subsidiary, Compass Therapeutics Advisors Inc., formed in February 2015. Compass Therapeutics LLC and its
wholly-owned subsidiary (the "Company") are headquartered in Massachusetts. The Company is a fully integrated drug
discovery and development company focused on comprehensively drugging the immune system with combinations of human monoclonal
antibodies, multiclonals and engineered protein constructs.
Company is subject to risks and uncertainties common to companies in the biotechnology and pharmaceutical industries. There can
be no assurance that the Company's research and development will be successfully completed, that adequate protection for
the Company's technology will be obtained, that any products developed will obtain necessary government regulatory approval
or that any approved products will be commercially viable. The Company operates in an environment of rapid change in technology
and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services
of its employees and consultants.
accordance with Accounting Standards Update ("ASU") No. 2014-15, Disclosure of Uncertainties about an Entity's
Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events,
considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within
one year after the date that the consolidated financial statements are issued.
Since its inception, the
Company has funded its operations primarily with proceeds from the sale of preferred units and borrowings under loan
agreements. The Company has incurred recurring losses since its inception, including net losses of $34.7 million and $38.3
million for the years ended December 31, 2019 and 2018, respectively. In addition, as of December 31, 2019, the
Company had an accumulated deficit of $121.9 million. The Company expects to continue to generate operating losses for the
foreseeable future. As of the issuance date of the annual consolidated financial statements for the year ended
December 31, 2019, the Company expected that its cash and cash equivalents after taking into consideration private
offering that was completed in June 2020 (See Note 16) would be sufficient to fund its operating expenses and capital
expenditure requirements into Q4 2021. The future viability of the Company beyond that point is dependent on its ability
to raise additional capital to finance its operations.
Therapeutics LLC and Subsidiary
to Consolidated Financial Statements
Basis of Presentation
accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting
principles generally accepted in the United States of America ("GAAP"). Any reference in these notes to applicable
guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification ("ASC") and
as amended by Accounting Standards Updates of the Financial Accounting Standards Board ("FASB").
accompanying consolidated financial statements include the accounts of Compass Therapeutics LLC and its wholly-owned subsidiary,
Compass Therapeutics Advisors Inc. All intercompany accounts and transactions have been eliminated in consolidation.
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in
these financial statements include, but are not limited to, the accrual of research and development expenses, the valuation of
the preferred equity call right liability, the valuation of the embedded derivative, the valuation of common units and estimates
associated with unit-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience.
Actual results could differ from those estimates. Changes in estimates are recorded in the period that they become known.
segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by
the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company has one operating
segment. The Company's chief operating decision maker, its chief executive officer, manages the Company's operations
on a consolidated basis for the purpose of allocating resources. All of the Company's long-lived assets are held in the
Therapeutics LLC and Subsidiary
to Consolidated Financial Statements