Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Current assets: | ||
| Cash and cash equivalents | $ 35,902 | $ 41,100 |
| Prepaid expenses and other current assets | 369 | 411 |
| Total current assets | 36,271 | 41,511 |
| Other assets | 437 | 486 |
| Total assets | 36,708 | 41,997 |
| Current liabilities: | ||
| Accounts payable | 1,342 | 1,153 |
| Accrued liabilities | 2,418 | 2,026 |
| Total current liabilities | 3,760 | 3,179 |
| Commitments and contingencies (Note 4) | ||
| Stockholders’ equity | ||
| Common stock, $0.001 par value: 200,000,000 shares authorized as of March 31, 2023 (unaudited) and December 31, 2022; 21,007,069 and 21,000,069 shares issued and outstanding as of March 31, 2023 (unaudited) and December 31, 2022, respectively | 21 | 21 |
| Additional paid-in capital | 126,724 | 125,841 |
| Accumulated deficit | (93,797) | (87,044) |
| Total stockholders’ equity | 32,948 | 38,818 |
| Total liabilities and stockholders' equity | $ 36,708 | $ 41,997 |
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - $ / shares |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 21,007,069 | 21,000,069 |
| Common stock, shares outstanding | 21,007,069 | 21,000,069 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
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| Operating expenses: | ||
| Research and development | $ 4,787 | $ 693 |
| General and administrative | 2,068 | 1,821 |
| Total operating expenses | 6,855 | 2,514 |
| Loss from operations | (6,855) | (2,514) |
| Other income (expense), net | 102 | (53) |
| Net loss | $ (6,753) | $ (2,567) |
| Net loss per share - basic | $ (0.32) | $ (0.17) |
| Net loss per share - diluted | $ (0.32) | $ (0.17) |
| Weighted average shares outstanding, basic | 21,006,680 | 14,759,806 |
| Weighted average shares outstanding, diluted | 21,006,680 | 14,759,806 |
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
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| Cash flows from operating activities: | ||
| Net loss | $ (6,753) | $ (2,567) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Stock-based compensation expense | 877 | 1,055 |
| Changes in operating assets and liabilities: | ||
| Prepaid expenses and other assets | 91 | 39 |
| Accounts payable | 189 | (370) |
| Accrued liabilities | 392 | (132) |
| Net cash used in operating activities | (5,204) | (1,975) |
| Cash flows from financing activities: | ||
| Proceeds from exercise of stock options and ESPP | 6 | 12 |
| Payment of deferred financing costs | (46) | |
| Net cash provided by (used in) by financing activities | 6 | (34) |
| Net decrease in cash and cash equivalents | (5,198) | (2,009) |
| Cash and cash equivalents — beginning of period | 41,100 | 42,044 |
| Cash and cash equivalents — end of period | $ 35,902 | $ 40,035 |
Organization and Description of Business |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Organization and Description of Business | 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. FB-102 is currently in preclinical development. 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 March 31, 2023, the Company had an accumulated deficit of $93.8 million. The Company used $5.2 million of cash in operating activities during the three months ended March 31, 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 preclinical trials. The Company had cash and cash equivalents of approximately $35.9 million as of March 31, 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 conflicts in Eastern Europe, 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 war in Ukraine, 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 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. |
Summary of Significant Accounting Policies |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | 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 adjustments that are of a normal and recurring nature and that are necessary for the fair presentation of the 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 and 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. 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. • 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, 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. The Company had $5.1 million and $5.0 million in money market funds as of March 31, 2023 and December 31, 2022, respectively, which are classified within Level 1. 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 in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022. 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 includes net loss and other comprehensive income (loss) for the period. The Company did not have other comprehensive income (loss) items such as unrealized gains and losses. Comprehensive loss was equal to net loss for the three months ended March 31, 2023 and 2022. 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 outstanding during the period, 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:
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. |
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Balance Sheet Components |
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| Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Components | 3. Balance Sheet Components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):
Other Assets Other assets as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):
Accrued Liabilities Accrued liabilities as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):
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Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 4. Commitments and Contingencies Concentrations of Credit Risk Bank accounts in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company’s cash accounts significantly exceed FDIC limits. Indemnifications As permitted under Delaware law, the Company indemnifies its officers, directors, and employees for certain events and occurrences while the officer, or director is, or was, serving at the Company’s request in such capacity. Lease Agreements The Company has entered into month-to-month lease agreements for certain office and laboratory space. The lease agreements are cancellable by the Company at any time with a 30-day notice. Total rent expense for all locations for the three months ended March 31, 2023 was $7,000. Total rent expense for all locations for the three months ended March 31, 2022 was $3,000. Preclinical Services The Company has entered into various agreements with third-party vendors for preclinical services. The estimated remaining commitments as of March 31, 2023 under these agreements were approximately $2.4 million. Legal Proceedings In November 2022, a stockholder of the Company filed a complaint in the Delaware Court of Chancery to access certain books and records of the Company pursuant to Section 220 of the Delaware General Corporation Law, as well as to seek attorney fees (the “Books and Records Action”). The Books and Records Action remains pending. The Company believes that it has meritorious defenses to the claims asserted in the Books and Records Action and intends to vigorously defend against it and may be entitled to attorney fees should the stockholder not determine to dismiss the action. |
Equity |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Equity [Abstract] | |
| Equity | 5. Equity
Preferred Stock
The Company has 10 million authorized shares of Series A Preferred Stock, par value $0.001, with no shares outstanding as of March 31, 2023 and December 31, 2022.
Common Stock In June 2021, the Company filed a shelf registration statement on Form S-3 that went effective in June 2021 which will allow the Company to raise up to $300 million in additional capital. On March 31, 2022, the Company entered into an “at-the-market” equity offering program (“ATM Facility”) whereby the Company may from time to time offer and sell shares of its common stock up to an aggregate offering price of $25.0 million during the term of the ATM Facility. On April 1, 2022, the Company filed a prospectus supplement to the June 2021 Form S-3 relating to the offer and sale of the shares pursuant to the ATM Facility covering sales of up to $7.0 million of shares of common stock. On August 12, 2022, the Company filed an additional prospectus supplement relating to the offer and sale of shares pursuant to the ATM Facility covering sales of up to an additional $2.7 million of shares of common stock. The Company is not obligated to sell any shares under the ATM Facility. The ATM Facility may be terminated at any time upon ten days’ prior notice, or at any time in certain circumstances, including the occurrence of a material adverse effect on the Company. The Company has agreed to pay the sales agent a commission equal to 3.0% of the gross proceeds from the sales of shares under the ATM Facility and has agreed to provide the sales agent with customary indemnification and contribution rights. The Company issued 6.1 million shares of common stock for gross proceeds of approximately $7.7 million under the ATM Facility from July 1, 2022 through December 31, 2022 and incurred $595,000 in issuance costs related to the ATM Facility and shelf registration statement. As of the date of filing of this Quarterly Report on Form 10-Q, the Company has reached its limit under the ATM Facility and as such may not currently sell any additional securities under this facility. While the ATM Facility remains in place, it remains restricted in its ability to access additional funding from the sale of securities under Form S-3.
Warrants to purchase 4,434 shares of the Company’s common stock at an exercise price of $140.25 per share which were previously issued by Tocagen, survived the Merger and remained outstanding as of March 31, 2023 and December 31, 2022. These warrants have an expiration date of October 30, 2025.
Rights Plan On July 11, 2022, the Company authorized and declared a dividend distribution of one right (each, a “Right”) for each outstanding share of common stock of the Company to stockholders of record as of the close of business on July 21, 2022. Each Right entitles the registered holder to purchase from the Company of a share of Series A Participating Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of the Company at an exercise price of $16.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment. The Rights are not exercisable until the Distribution Date. The Distribution Date is the 10th business day after the public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 10 percent or more of our common stock or the 10th business day after a person or group announces a tender or exchange offer that would result in ownership by a person or group of 10 percent or more of our common stock.
The Rights will be redeemable at the Company’s option for $0.001 per Right at any time on or prior to the 10th business day after the public announcement that an Acquiring Person has acquired beneficial ownership of 10 percent or more of the Common Stock.
The Rights expire on the earliest of July 12, 2023 or on the redemption or exchange of the Rights. There is no financial statement impact until such time as the rights become exercisable. |
Stock-Based Compensation |
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | 6. Stock-Based Compensation Equity Plans The Company inherited the 2017 Equity Incentive Plan (the "2017 Plan") as part of its merger with Tocagen, Inc. in June 2020. The 2017 Plan was terminated in May 2021 and replaced by the 2021 Equity Incentive Plan (the “2021 Plan”). The 2017 Plan will continue to govern outstanding awards issued under the 2017 Plan. The 2021 Plan had an initial reserve of 1,000,000 shares available for grant. The 2021 Plan was amended in June 2022 to increase the shares available for grant by an additional 1,500,000 shares. The 2021 Plan provides for the grant of incentive stock options (“ISOs”), non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of the Company and its affiliates. Service-based awards generally vested over a four-year period, with the first 25% of such awards vesting following twelve months of continued employment or service with the remaining awards vesting monthly in equal installments over the following thirty-six months. For certain service-based awards to the board of directors, vesting occurs in thirty-six equal monthly installments over a three-year period for initial grants and in twelve equal monthly installments over a twelve-month period for subsequent grants. As of March 31, 2023, there were 187,277 shares available for issuance under the 2021 Plan. On July 26, 2020, the Company adopted the 2020 Inducement Equity Incentive Plan (the “2020 Inducement Plan”) and reserved 500,000 shares for future grant under the 2020 Inducement Plan. As of March 31, 2023, there were 115,000 shares available for issuance under the 2020 Inducement Plan.
Stock Options The risk-free interest rate valuation assumption for options is based on the U.S. Treasury yield curve rate at the date of grant with a maturity approximating the expected term of the option. The expected term assumption for options granted to employees is determined using the simplified method that represents the average of the contractual term of the option and the weighted average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. Due to the Company’s limited trading of its common stock and lack of company-specific historical or implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies in the life sciences industry whose shares are publicly traded. The Company selects the peer group based on comparable characteristics, including development stage, product pipeline, and enterprise value. The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. Prior to the Merger, the fair value per share was determined by the Company’s Board of Directors, as of the date of each grant based on independent third-party valuations, taking into consideration various objective and subjective factors. Subsequent to the Merger, the fair value per share is the closing stock price on the option grant date. The weighted average grant-date fair value of stock options granted in the three months ended March 31, 2023 and 2022 was $0.82 and $0.96, respectively. The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing model were as follows.
The table below summarizes the stock option activity during the three months ended March 31, 2023:
The aggregate intrinsic value of options at March 31, 2023 is based on the Company’s fair value of its stock price on that date of $1.01 per share. Restricted Stock Unit Awards There were 1,100,000 restricted stock units granted during the three months ended March 31, 2023 with of the restricted stock units vesting every quarter. The Company made a change in accounting estimate in the three months ended March 31, 2022 related to the vesting of performance-based restricted stock units. As a result of this change in accounting estimate, $158,000 of expense that had been previously recognized in 2021 was reversed in the three months ended March 31, 2022. The table below summarizes the restricted stock unit awards activity during the three months ended March 31, 2023:
2017 Employee Stock Purchase Plan In May 2021, the Company’s board of directors reactivated the Company’s 2017 Employee Stock Purchase Plan (“ESPP”) which had previously been suspended. The ESPP allows eligible employees to withhold up to 15% of their earnings to purchase shares of the Company’s common stock at a price per share equal to the lower of (i) 85% of the fair market value of a share of the Company’s common stock on the first date of an offering or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. The Company had 521,522 shares available for future issuance under the ESPP as of March 31, 2023. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year through January 1, 2027, by the lesser of (a) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (b) 300,000 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b). The Company issued 7,000 shares under the ESPP during the three months ended March 31, 2023. The ESPP is considered a compensatory plan. The Company recorded stock-based compensation expense related to its ESPP of $2 thousand for the three months ended March 31, 2023. The Company did not record stock-based compensation expense related to its ESPP for the three months ended March 31, 2022. Stock-Based Compensation Expense Stock-based compensation expenses included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 were (in thousands):
As of March 31, 2023, there was unrecognized stock-based compensation expense related to stock options and restricted stock units with service conditions of $6.2 million, which is expected to be recognized over a weighted-average period of 2.03 years. Total unrecognized stock-based compensation expenses related to stock options and restricted stock units with performance conditions were approximately $0.2 million. |
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Related Party Transactions |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | 7. Related Party Transactions One member of the Company’s board of directors received cash payments of $5,000 for scientific consulting services for the three months ended March 31, 2022.
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Summary of Significant Accounting Policies (Policies) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | 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 adjustments that are of a normal and recurring nature and that are necessary for the fair presentation of the 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. |
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| Principles of Consolidation | 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. |
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| Cash and Cash Equivalents | Cash and 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. |
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| Fair Value of Financial Instruments | 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. • 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, 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. The Company had $5.1 million and $5.0 million in money market funds as of March 31, 2023 and December 31, 2022, respectively, which are classified within Level 1. 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 in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022. |
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| Use of Estimates | 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. |
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| Research and Development Costs | 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. |
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| Comprehensive Loss | Comprehensive Loss Comprehensive loss includes net loss and other comprehensive income (loss) for the period. The Company did not have other comprehensive income (loss) items such as unrealized gains and losses. Comprehensive loss was equal to net loss for the three months ended March 31, 2023 and 2022. |
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| Net Loss Per Share | 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 outstanding during the period, 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:
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| Recently Issued Accounting Standards Not Yet Adopted | 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. |
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Summary of Significant Accounting Policies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Common Stock Equivalents Excluded from Diluted Net Loss Calculation | 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:
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Balance Sheet Components (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):
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| Schedule of Other Assets | Other assets as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):
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| Components of Accrued Liabilities | Accrued liabilities as of March 31, 2023 and December 31, 2022 consist of the following (in thousands):
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Stock-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Weighted-Average Assumptions Used to Value Stock Options | The weighted-average assumptions used to value these stock options using the Black-Scholes option-pricing model were as follows.
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| Summary of Stock Option Activity | The table below summarizes the stock option activity during the three months ended March 31, 2023:
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| Summary of Restricted Stock Unit Award Transactions | The table below summarizes the restricted stock unit awards activity during the three months ended March 31, 2023:
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| Summary of Stock-Based Compensation Expenses | Stock-based compensation expenses included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 were (in thousands):
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Organization and Description of Business - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Accumulated deficit | $ 93,797 | $ 87,044 | |
| Cash used in operating activities | (5,204) | $ (1,975) | |
| Cash and cash equivalents | $ 35,902 | $ 41,100 | |
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
| Schedule Of Significant Accounting Policies [Line Items] | |||
| Transfers between fair value hierarchy levels | $ 0 | ||
| Other comprehensive income (loss) | 0 | $ 0 | |
| Level 1 | |||
| Schedule Of Significant Accounting Policies [Line Items] | |||
| Money market funds, at carrying value | $ 5,100,000 | $ 5,000,000.0 | |
Summary of Significant Accounting Policies - Schedule of Common Stock Equivalents Excluded from Diluted Net Loss Calculation (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from diluted net loss calculation | 3,679,830 | 2,187,855 |
| Options | ||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from diluted net loss calculation | 2,413,195 | 1,924,570 |
| Restricted Stock Units | ||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from diluted net loss calculation | 1,262,201 | 258,851 |
| Warrants | ||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | ||
| Anti-dilutive securities excluded from diluted net loss calculation | 4,434 | 4,434 |
Balance Sheet Components - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Balance Sheet Related Disclosures [Abstract] | ||
| Prepaid insurance | $ 260 | $ 341 |
| Other | 109 | 70 |
| Total prepaid expenses and other current assets | $ 369 | $ 411 |
Balance Sheet Components - Schedule of Other Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Balance Sheet Related Disclosures [Abstract] | ||
| Prepaid insurance | $ 425 | $ 473 |
| Other | 12 | 13 |
| Total other assets | $ 437 | $ 486 |
Balance Sheet Components - Components of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Balance Sheet Related Disclosures [Abstract] | ||
| Accrued legal and professional fees | $ 341 | $ 643 |
| Accrued compensation | 320 | 890 |
| Accrued manufacturing and preclinical expenses | 1,698 | 485 |
| Other | 59 | 8 |
| Total accrued liabilities | $ 2,418 | $ 2,026 |
Commitments and Contingencies - Additional Information (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Commitments And Contingencies [Line Items] | ||
| FDIC insured amount | $ 250,000 | |
| Rent expenses | 7,000 | $ 3,000 |
| Contractual Obligation | $ 2,400,000 | |
Stock-Based Compensation - Summary of Weighted-Average Assumptions Used to Value Stock Options (Details) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Share-Based Payment Arrangement [Abstract] | ||
| Fair value of common stock | $ 1.02 | $ 1.58 |
| Risk-free interest rate | 3.70% | 1.75% |
| Dividend yield | 0.00% | 0.00% |
| Expected term of options (years) | 5 years 9 months 7 days | 5 years 10 months 24 days |
| Volatility | 101.42% | 66.89% |
Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Number of Shares Outstanding | ||
| Outstanding, Beginning | 2,363,195 | |
| Granted | 50,000 | |
| Outstanding, Ending | 2,413,195 | 2,363,195 |
| Vested and expected to vest | 2,413,195 | |
| Exercisable | 915,791 | |
| Weighted-Average Exercise Price | ||
| Outstanding, Beginning | $ 9.29 | |
| Granted | 1.02 | |
| Outstanding, Ending | 9.12 | $ 9.29 |
| Vested and expected to vest | 9.12 | |
| Exercisable | $ 13.82 | |
| Weighted-Average Remaining Contractual Term (Years) | ||
| Outstanding | 7 years 8 months 8 days | 8 years 2 months 19 days |
| Vested and expected to vest | 7 years 8 months 8 days | |
| Exercisable | 7 years 4 months 2 days | |
| Aggregate Intrinsic Value | ||
| Outstanding | $ 70 | $ 65 |
| Vested and expected to vest | 70 | |
| Exercisable | $ 6 |
Stock-Based Compensation - Summary of Restricted Stock Unit Award Transactions (Details) - Restricted Stock Unit Awards |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
$ / shares
shares
| |
| Shares | |
| Outstanding at December 31, 2022 | shares | 162,201 |
| Granted | shares | 1,100,000 |
| Outstanding at March 31, 2023 | shares | 1,262,201 |
| Weighted Avg Grant Date Fair Value | |
| Outstanding at December 31, 2022 | $ / shares | $ 3.36 |
| Granted | $ / shares | 1.01 |
| Outstanding at March 31, 2023 | $ / shares | $ 1.31 |
Stock-Based Compensation - Summary of Stock-Based Compensation Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock-based compensation expense | $ 877 | $ 1,055 |
| Research and Development | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock-based compensation expense | 304 | 286 |
| General and Administrative | ||
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
| Stock-based compensation expense | $ 573 | $ 769 |
Related Party Transactions - Additional Information (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2022
USD ($)
| |
| Director | |
| Related Party Transaction [Line Items] | |
| Payments for scientific consulting services | $ 5,000 |