Full Press Release Details
FORTE BIOSCIENCES, INC.
Audited Financial Statements
For the years ended December 31, 2019 and December 31, 2018
FORTE BIOSCIENCES, INC.
INDEX TO FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm | FBRX-2 | |||
| Balance Sheets as of December 31, 2019 and 2018 | FBRX-3 | |||
| Statements of Operations for the years ended December 31, 2019 and December 31, 2018 | FBRX-4 | |||
| Statements of Convertible Preferred Stock and Stockholders Deficit for the years ended December 31, 2019 and December 31, 2018 | FBRX-5 | |||
| Statements of Cash Flows for the years ended December 31, 2019 and December 31, 2018 | FBRX-6 | |||
| Notes to Financial Statements | FBRX-7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Forte Biosciences, Inc. (the Company ) as of December 31, 2019 and 2018, and the
related statements of operations, convertible preferred stock and stockholders deficit, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the financial
statements ). In our opinion, the 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 each of the
two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
These financial statements are the
responsibility of the Company s management. Our responsibility is to express an opinion on these 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 and in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 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 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 financial statements. We
believe that our audits provide a reasonable basis for our opinion.
We have served as the Company s auditor since 2018.
/s/ Mayer Hoffman McCann P.C.
San Diego, California
FORTE BIOSCIENCES, INC.
| December 31, 2019 | December 31, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 6,938,778 | $ | 5,015,634 | ||||
| Prepaid expenses and other current assets | 567,422 | 56,045 | ||||||
| Total current assets | 7,506,200 | 5,071,679 | ||||||
| Property and equipment, net | 150,601 | |||||||
| Total assets | $ | 7,656,801 | $ | 5,071,679 | ||||
| Liabilities, convertible preferred stock and stockholders deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,568,734 | $ | 78,379 | ||||
| Accrued liabilities | 343,216 | 71,251 | ||||||
| Total current liabilities | 1,911,950 | 149,630 | ||||||
| Commitments and contingencies (Note 4) | ||||||||
| Series A Convertible Preferred Stock, $0.0001 par value; 15,072,819 shares authorized as of December 31, 2019 and 2018; 15,072,814 and 8,247,354 shares issued and outstanding as of December 31, 2019 and 2018, respectively; aggregate liquidation preference of $10,820,773 and $5,920,775 as of December 31, 2019 and 2018, respectively | 10,514,638 | 5,658,977 | ||||||
| Stockholders deficit: | ||||||||
| Common stock, $0.0001 par value: 28,858,687 shares authorized as of December 31, 2019 and 2018; 10,000,000 shares issued and outstanding at December 31, 2019 and 2018 | 1,000 | 1,000 | ||||||
| Additional paid-in capital | 199,710 | 164,000 | ||||||
| Accumulated deficit | (4,970,497 | ) | (901,928 | ) | ||||
| Stockholders deficit: | (4,769,787 | ) | (736,928 | ) | ||||
| Total liabilities, convertible preferred stock and stockholders deficit | $ | 7,656,801 | $ | 5,071,679 |
The accompanying notes are an integral
part of these financial statements.
FORTE BIOSCIENCES, INC.
STATEMENTS OF OPERATIONS
| Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||
| Operating expenses: | ||||||||
| Research and development | $ | 2,683,930 | $ | 422,602 | ||||
| General and administrative | 1,380,306 | 265,680 | ||||||
| Total operating expenses | 4,064,236 | 688,282 | ||||||
| Loss from operations | (4,064,236 | ) | (688,282 | ) | ||||
| Other income (expense): | ||||||||
| Interest income (expense) | 2,520 | (173,380 | ) | |||||
| Other expenses | (6,853 | ) | ||||||
| Net loss | $ | (4,068,569 | ) | $ | (861,662 | ) | ||
| Per share information: | ||||||||
| Net loss per share basic and diluted | $ | (0.41 | ) | $ | (0.10 | ) | ||
| Weighted average shares outstanding, basic and diluted | 10,000,000 | 8,958,904 |
The accompanying notes are an integral part of these financial statements.
FORTE BIOSCIENCES, INC.
STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS DEFICIT
| Series A Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders Deficit | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance December 31, 2017 | $ | $ | $ | $ | (40,266 | ) | $ | (40,266 | ) | |||||||||||||||||||
| Issuance of common stock to founder | 10,000,000 | 1,000 | 1,000 | |||||||||||||||||||||||||
| Issuance of Series A convertible preferred stock, conversion of notes payable | 1,143,303 | 656,623 | ||||||||||||||||||||||||||
| Issuance of Series A convertible preferred stock, net of issuance cost of $ 97,645 | 7,104,051 | 5,002,354 | ||||||||||||||||||||||||||
| Beneficial conversion feature on conversion of notes payable | 164,000 | 164,000 | ||||||||||||||||||||||||||
| Net loss | (861,662 | ) | (861,662 | ) | ||||||||||||||||||||||||
| Balance December 31, 2018 | 8,247,354 | 5,658,977 | 10,000,000 | 1,000 | 164,000 | (901,928 | ) | (736,928 | ) | |||||||||||||||||||
| Issuance of Series A convertible preferred stock, net of issuance cost of $ 44,337 | 6,825,460 | 4,855,661 | ||||||||||||||||||||||||||
| Stock based compensation | 35,710 | 35,710 | ||||||||||||||||||||||||||
| Net loss | (4,068,569 | ) | (4,068,569 | ) | ||||||||||||||||||||||||
| Balance December 31, 2019 | 15,072,814 | $ | 10,514,638 | 10,000,000 | $ | 1,000 | $ | 199,710 | $ | (4,970,497 | ) | $ | (4,769,787 | ) |
The accompanying notes are an integral part of these financial statements.
FORTE BIOSCIENCES, INC.
STATEMENTS OF CASH FLOWS
| Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (4,068,569 | ) | $ | (861,662 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | 10,996 | |||||||
| Stock based compensation expense | 35,710 | |||||||
| Beneficial conversion feature on conversion of notes payable | 164,000 | |||||||
| Accrued interest converted to Series A preferred | 6,623 | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | 2,873 | (56,045 | ) | |||||
| Accounts payable | 976,105 | 57,709 | ||||||
| Accrued liabilities | 271,965 | 71,251 | ||||||
| Net cash used in operating activities | (2,770,920 | ) | (618,124 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (161,597 | ) | ||||||
| Net cash used in investing activities | (161,597 | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of notes payable | 630,104 | |||||||
| Proceeds from issuance of convertible preferred stock, net of issuance costs | 4,855,661 | 5,002,354 | ||||||
| Proceeds from issuance of common stock | 1,000 | |||||||
| Net cash provided by financing activities | 4,855,661 | 5,633,458 | ||||||
| Net increase in cash | 1,923,144 | 5,015,334 | ||||||
| Cash beginning of period | 5,015,634 | 300 | ||||||
| Cash end of period | $ | 6,938,778 | $ | 5,015,634 | ||||
| Non-cash investing and financing activities: | ||||||||
| Issuance of preferred stock for conversion of notes payable and accrued interest | $ | $ | 656,623 | |||||
| Conversion of accounts payable into note payable | $ | $ | 19,896 |
The accompanying notes are an integral
part of these financial statements.
FORTE BIOSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
Organization and Description of Business
Forte Biosciences, Inc., or the Company is a Delaware Corporation, incorporated under the laws of
the State of Delaware on May 3, 2017. The Company s principal executive office is located in Torrance, California. The Company is developing a new topical therapeutic treatment for the treatment of atopic dermatitis.
Liquidity and Capital Resources
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 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. For the year ended December 31, 2019, the Company incurred a net loss of $4,068,569, and used $2,770,920 of cash for operating activities in the year ended December 31, 2019. As of December 31,
2019, the Company had cash on hand of $6,938,778.
Management expects to continue to incur additional substantial losses in the foreseeable future as a
result of the Company s research and development activities. However, the Company believes that its existing cash on hand as of December 31, 2019, will provide sufficient funds to enable it to meet its obligations for twelve months from
the issuance of these financial statements. Future operations beyond 2020 will be reliant on additional equity or financing arrangements. There can be no assurances that, in the event that the Company requires additional financing, such financing
will be available on terms which are favorable to the Company, or at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay or reduce the scope of its research programs
and/or limit or cease its operations.
Because of the numerous risks and uncertainties associated with pharmaceutical development, the Company is unable
to predict the timing or amount of increased expenses or when or if it will start to generate revenues. Even if the Company is able to 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 be forced to reduce its operations.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company prepares its
financial statements in accordance with U.S. generally accepted accounting principles (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as
found in the Accounting Standards Codification and Accounting Standards Update (ASU) of the Financial Accounting Standards Board ( FASB ).
The preparation of the
Company s financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in the Company s financial
statements and accompanying notes. Significant management estimates that affect the reported amounts of assets and liabilities include useful lives of property and equipment, stock-based compensation and deferred tax assets. 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.
The Company s chief executive officer is the chief operating decision maker (CODM). The CODM reviews financial information presented on a basis. Resource
allocation decisions are made by the CODM based on results. There are no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels or components below the unit level. As such, the Company has
concluded that there is one operating and reportable segment.
Cash includes deposits with commercial banks.
Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method.
Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, retirement, or sale of an asset, the related cost and accumulated depreciation is removed from the
accounts and any resulting gain or loss is included in the results of operations. Estimated useful lives for property and equipment are as follows:
| Estimated Useful Lives | ||||
| Manufacturing equipment | 3 years |
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment when events or changes in circumstances indicate the carrying value of the assets may not be recoverable.
Recoverability is measured by comparison of the book values of the assets to future net undiscounted cash flows that the assets or the asset groups are expected to generate. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the estimated discounted future net cash flows arising from the assets or asset groups. No impairment losses on long-lived
assets have been recorded through December 31, 2019.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development
activities, including salaries and benefits, contract services, and other outside costs. The value of goods and services received from contract research organizations and contract manufacturing organizations in the reporting period are estimated
based on the level of services performed, and progress in the period in cases when the Company has not received an invoice from the supplier.
Costs to secure, defend and maintain
patents are expensed as incurred, and are classified as general and administrative expenses due to the uncertainty of future benefits.
Basic per share data is computed by dividing net income or loss applicable to common stockholders by the weighted average number
of common shares outstanding during the period, without consideration for common stock equivalents. Diluted per share data is computed by dividing net income or loss applicable to common stockholders by the weighted average number of common shares
outstanding during the period increased to include, if dilutive, the number of additional common shares that would have been outstanding as calculated
using the treasury stock method. Potential common shares comprise of the Company s outstanding but unexercised options.
The number of stock options excluded from the diluted loss per share calculation for the year ended December 31, 2019 and 2018 presented because their
effect would be anti-dilutive was 2,450,000 and 2,450,000, respectively.
Stock-Based Compensation
The Company issues stock-based awards to employees and non-employees, generally in the form of stock options. The Company accounts for stock-based compensation
awards in accordance with ASC Topic 718, Compensation Stock Compensation (ASC 718). As of January 1, 2019, the Company adopted the guidance in Accounting Standards Update ( ASU ) 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . Subsequent to adoption of ASU 2018-07, non-employee awards are no longer required to be remeasured at each financial period; instead