UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2021

OR

For the transition period from    to

Commission File Number: 001-38052

FORTE BIOSCIENCES, INC.

(Exact Name of Registrant as Specified in its Charter)

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

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

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.

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 August 11, 2021, the registrant had 14,079,057 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

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PART I – FINANCIAL INFORMATION

Item 1: Financial Statements

FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

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

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FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

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

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FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

(in thousands, except share data)

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

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FORTE BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

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

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FORTE BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read together with the consolidated financial statements of Forte Biosciences, Inc.  (“Forte”, “we”, “our”) and the accompanying notes appearing elsewhere in the Form 10-Q and in our Form 10-K as filed with the Securities and Exchange Commission, or SEC, on March 16, 2021. This discussion of the financial condition and results of operations regarding matters that are not historical facts, are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Act of 1995 and, known as the PSLRA.  These include statements regarding management’s intention, plans, beliefs, expectations or forecasts for the future, and, therefore, you are cautioned not to place undue reliance on them.  No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by law.  We use words such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “intends,” “may,” “will,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance,” and similar expressions to identify these forward-looking statements that are intended to be covered by the safe-harbor provisions of the PSLRA.

Such forward-looking statements are based on our expectations and involve risks and uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements due to a number of factors, including, but not limited to, risks relating to the sufficiency of the Company’s cash balance to fund the Company’s activities, and the expectations with respect thereto; the business and prospects of the Company; Forte’s plans to develop and potentially commercialize its product candidates, including FB-401; the timing of initiation of Forte’s planned clinical trials; the timing of the availability of data from Forte’s clinical trials; the timing of any planned investigational new drug application or new drug application; Forte’s plans to research, develop and commercialize its current and future product candidates; Forte’s ability to successfully enter into collaborations, and to fulfill its obligations under any such collaboration agreements; the clinical utility, potential benefits and market acceptance of Forte’s product candidates; Forte’s commercialization, marketing and manufacturing capabilities and strategy; Forte’s ability to identify additional products or product candidates with significant commercial potential; developments and projections relating to Forte’s competitors and its industry; the impact of government laws and regulations; Forte’s ability to protect its intellectual property position; Forte’s estimates regarding future revenue, expenses, capital requirements and need for additional financing; and the impact of COVID-19 on the Company, the Company’s industry or the economy generally.

The known risks and uncertainties are described in detail under the caption “Risk Factors” and elsewhere in this Form 10-Q and our Form 10-K filed with the SEC on March 16, 2021. Forward-looking statements included in this Form 10-Q are based on information available to Forte as of the date of this Form 10-Q. Accordingly, our actual results may materially differ from our current expectations, estimates and projections. Forte undertakes no obligation to update such forward-looking statements to reflect events or circumstances after the date of this presentation.

Overview

Forte Biosciences, Inc. and its subsidiaries (www.fortebiorx.com) (“Forte”, “we”, “our”) is a clinical-stage biopharmaceutical company focused on advancing through clinical trials our lead product candidate, FB-401, which is a topical live biotherapeutic for the treatment of inflammatory skin diseases, including pediatric and adult patients with atopic dermatitis (“AD”). There is currently a significant unmet need for safe and effective therapies for pediatric atopic dermatitis patients. FB401 was developed in collaboration with the National Institutes of Health (“NIH”), and the National Institute of Allergy and Infectious Diseases (“NIAID”). 

On June 15, 2020, Forte completed a business combination (“Merger”) with Tocagen, Inc. (“Tocagen”), a publicly traded biotechnology company, with Forte being the surviving business. As part of the Merger, the then outstanding Tocagen common stock was adjusted with a reverse split ratio of 1-for-15 and each share of Forte’s common stock was converted into the right to receive approximately 3.1624 shares of Tocagen common stock (prior to giving effect to the reverse split).  Immediately prior to the closing of the Merger, the Tocagen legal entity that survived the Merger changed its name to Forte Biosciences, Inc. Our common stock is publicly traded on the

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Nasdaq Capital Market under the ticker symbol FBRX. Prior to the Merger, Forte was a privately held company incorporated in Delaware on May 3, 2017.

On September 4, 2020, we entered into an “at-the-market” equity offering program (“ATM Facility”), as amended on October 28, 2020, whereby we may from time to time offer and sell shares of our common stock up to an aggregate offering price of $10,000,000 during the term of the ATM Facility. We did not issue any shares of common stock under the ATM Facility which expired in May 2021. We subsequently filed a new "shelf" registration statement on Form S-3 that went effective in June 2021 which will allow us to raise up to $300 million in additional capital to support continued development of our lead product candidate, FB-401. We incurred $44,000 in offering costs related to this shelf registration statement which is recorded in the condensed consolidated balance sheet as of June 30, 2021. We have not issued any securities under the new shelf registration statement as of the filing date of this Form 10-Q.

On November 2, 2020, we closed an underwritten public offering of 1,614,035 shares of common stock at $28.50 per share, which included the over-allotment option exercised by the underwriters to purchase an additional 210,526 shares. Total net proceeds were $42.7 million after deducting underwriting discounts and other offering expenses of approximately $3.3 million.

We issued 673,463 and 560,402 shares of our common stock pursuant to cashless exercises by certain warrant holders in February 2021 and June 2021, respectively.

FB-401

We are developing a new approach to treating inflammatory skin disease using a topical live biotherapeutic, FB-401, which consists of three therapeutic strains of a commensal Gram-negative bacteria, Roseomonas mucosa, that were specifically selected for their impact on key parameters of inflammatory skin disease. Genetic-based microbiome identification revealed significant differences in the Gram-negative skin biome between AD patients and healthy volunteers. Over 50% of AD patients did not have any culturable Gram-negative flora. Our extensive preclinical and mechanism of action data demonstrate that FB-401 improves AD disease parameters by:

To date, a Phase 1/2a study has been completed with pediatric and adult patients 3 years of age and older, demonstrating significant reduction in AD disease and pruritus (severe itch), as well as control of S. aureus while tapering or eliminating steroid use. The phase 1/2a trial data demonstrated good tolerability as well as significant consistent activity with patients with mild, moderate and severe disease, across age groups including pediatrics and adults, and across key endpoints including Eczema Activity and Severity Index (“EASI”), SCORAD and pruritus.

Specifically, in the 20 pediatric subjects, FB-401 demonstrated a nearly 80% improvement from baseline in AD disease activity as measured by EASI and that effect was durable for between 3 and 8 months after stopping therapy.  The proportion of patients that achieved at least a 50% improvement in disease, or EASI 50, was 90%, while EASI 75 was achieved by 70% of the patients and EASI 90 was achieved by 30% of the patients.  In the subgroup of moderate to severe patients, 100% achieved EASI 50, nearly 90% achieved EASI 75 and a third achieved EASI 90.  The completed phase 1/2a trial data has been published in Science Translational Medicine.

In September 2020, we initiated a multicenter, placebo-controlled and double-blinded clinical trial of FB-401 which was expected to enroll approximately 124 adolescent and adult AD subjects and healthy volunteers aged 2 years of age and older. Enrollment was completed with 154 subjects in March 2021. We anticipate announcing preliminary results in the third quarter of 2021.

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For additional information about the trial, see ClinicalTrials.gov using the identifier NCT04504279. In April 2021, we initiated an open-label, multicenter study to evaluate the continued safety of FB-401 for up to 48 weeks in children, adolescents and adult subjects 2 years of age and older with mild to moderate AD who were enrolled in our previous FB401 study.

In October 2020, the U.S. Food and Drug Administration (“FDA”) granted Fast Track Designation to FB-401 for the treatment of AD.

Intellectual Property

We own or exclusively license eleven U.S. patents which provide extensive protection covering the composition, manufacture, and method of use of our Gram-negative bacteria technology which is focused on inflammatory skin conditions.

In December 2017, Forte entered into an exclusive license agreement with the Department of Health and Human Services (“DHHS”), as amended in May 2020. Under the agreement, the DHHS granted Forte an exclusive, sublicensable and worldwide license to certain patent rights under which we may develop and commercialize pharmaceutical and biological compositions comprising Gram-negative bacteria for the topical treatment of dermatological diseases and conditions.

Components of Operating Results

Revenue

We have no products approved for commercial sale and have not generated any revenue from product sales. In the future, we may generate revenue from product sales, royalties on product sales, license fees, milestones, or other upfront payments if we enter into any collaborations or license agreements. We expect that our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such payments and sales.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits of research and development personnel and 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 and clinical trial costs are a component of research and development expenses. The Company expenses costs for its drug manufacturing activities performed by Contract Manufacturing Organizations (“CMOs”), costs for its preclinical and clinical trial activities 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.

We expect our research and development expenses to increase for the foreseeable future as we continue to conduct our ongoing regulatory, research and development activities, initiate new clinical trials and build our pipeline. The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for any of our product candidates.  Due to the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration, costs and timing of our clinical trials, and as a result, the actual costs to complete our planned clinical trials may exceed the expected costs.

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General and Administrative Expenses

General and administrative expenses consist primarily of professional fees for legal, auditing, tax and business consulting services, personnel expenses and travel costs. We expect that general and administrative expenses will increase in the future as we expand our operating activities. In addition, we expect to incur significant additional costs associated with being a SEC registrant such as increases in legal fees, costs associated with Sarbanes-Oxley compliance, accounting fees, directors’ and officers’ liability insurance premiums, and other expenses.

Acquired In-Process Research and Development Expense

The Company acquired in-process research and development assets in connection with its Merger with Tocagen. As the acquired in-process research and development assets were deemed to have no current or alternative future use, an expense of $32.1 million was recognized in the condensed consolidated statements of operations on the Merger date of June 15, 2020.

Other Expenses, Net

Other expenses, net consists of foreign exchange gains or losses and franchise taxes, partially offset by interest earned on our cash and cash equivalents balances.

Critical Accounting Policies and Estimates

There have been no significant changes during the six months ended June 30, 2021 to our critical accounting policies, significant judgments and estimates as disclosed in our management’s discussion and analysis of financial condition and results of operations included in our Annual Report on our Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 16, 2021.

COVID-19

The pandemic caused by an outbreak of a new strain of coronavirus, or COVID-19 and its variants, has resulted, and is likely to continue to result, in significant national and global economic disruption and may adversely affect our operations. We are actively monitoring the impact of COVID-19 and the possible effects on our financial condition, liquidity, operations, suppliers, industry, and workforce. However, the full extent, consequences, and duration of the COVID-19 pandemic and the resulting impact on us cannot currently be predicted. We will continue to evaluate the impact that these events could have on our operations, financial position, results of operations and cash flows during the remainder of fiscal year 2021.

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Results of Operations

Comparison of Three and Six Months Ended June 30, 2021 and 2020

The following tables summarize our results of operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

Research and Development Expenses

Research and development expenses were $3.5 million for the three months ended June 30, 2021 compared to $1.9 million for the same period in 2020. The increase of $1.6 million was primarily due to a net increase of approximately $0.9 million in manufacturing, clinical, regulatory and other expenses as we advanced our FB-401 program through US FDA clinical trials, and an increase in approximately $0.7 million in payroll and related expenses including stock-based compensation expense as a result of increased headcount.

Research and development expenses were $6.9 million for the six months ended June 30, 2021 compared to $3.3 million for the same period in 2020. The increase of $3.6 million was primarily due to a net increase of approximately $1.8 million of manufacturing, clinical, regulatory and other expenses as we advanced our FB-401 program through US FDA clinical trials, and an increase of approximately $1.8 million in payroll and related expenses including stock-based compensation expense as a result of increased headcount.

We expect our research and development expenses to increase substantially during the next few years as we continue to advance FB-401 through US FDA clinical trials and possibly initiate additional trials.

General and Administrative Expenses

General and administrative expenses were $2.2 million for the three months ended June 30, 2021 compared to $0.8 million for the same period in 2020. This increase of $1.4 million was primarily due to an increase of approximately $0.7 million in payroll and related expenses including stock-based compensation expense as we increased our headcount and an increase of approximately $0.7 million in legal, professional, insurance and other expenses as a result of being a public company. 

General and administrative expenses were $3.6 million for the six months ended June 30, 2021 compared to $1.4 million for the same period in 2020. This increase of $2.2 million was primarily due to an increase of approximately $1.2 million in payroll and related expenses including stock-based compensation expense as we increased our headcount and an increase of approximately $1.0 million in legal, professional, insurance and other expenses as a result of being a public company.

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We expect our general and administrative expenses to increase substantially during the next few years as a result of staff expansion, higher insurance premiums, increased legal, accounting and other compliance costs associated with operating and scaling a public company.

In-process research and development assets acquired

In connection with the Merger, we recognized a charge of $32.1 million of acquired in-process research and development expenses for assets with no alternative use for the three and six months ended June 30, 2020.  There was no corresponding expense in the three or six months ended June 30, 2021.

Other Expense, net

The increases in other expenses, net of approximately $0.1 million for each of the three and six months ended June 30, 2021 compared with the same periods in the prior year were primarily due to foreign currency transaction losses related to contracts denominated in currencies other than the U.S. dollar as a result of differences between the exchange rates on the billing and payment dates, and higher franchise taxes in the current year.

Liquidity and Capital Resources

We have no products approved for commercial sale and have not generated any revenue from product sales or out-licenses. We have never been profitable and have incurred operating losses in each year since inception. Our net loss was approximately $10.6 million for the six months ended June 30, 2021. As of June 30, 2021, we had an accumulated deficit of approximately $62.1 million. We expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue the clinical development of FB-401. In addition, operating as a SEC registrant have involved and may continue to involve the hiring of additional financial and other personnel, upgrading financial information systems, and incurring costs associated with operating and scaling a public company. We expect that our operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to the timing of clinical development programs.

Prior to the closing of the Merger, we had raised net cash proceeds of approximately $9.9 million in a Series A financing round from private placements of preferred stock. In connection with the Merger, we issued 3,804,817 shares of our common stock and warrants (“Concurrent Financing Warrants”) to purchase 2,752,546 shares of our common stock (in each case, after giving effect to the exchange ratio and reverse split contemplated by the Merger) for net proceeds of $19.4 million. In addition, on June 16, 2020, we issued an additional 411,112 shares of common stock for net proceeds of $4.6 million.

On September 4, 2020, we entered into an “at-the-market” equity offering program (“ATM Facility”), as amended on October 28, 2020, whereby we could from time to time offer and sell shares of our common stock up to an aggregate offering price of $10,000,000 during the term of the ATM Facility. We did not issue any shares of common stock under the ATM Facility which expired in May 2021. We subsequently filed a new "shelf" registration statement on Form S-3 that went effective in June 2021 which will allow us to raise up to $300 million in additional capital to support continued development of our lead product candidate, FB-401. We incurred $44,000 in offering costs related to this shelf registration statement which is recorded in Other Assets in the condensed consolidated balance sheet for the period ended June 30, 2021. We have not issued any securities under the new shelf registration statement as of the filing date of this Form 10-Q.

On November 2, 2020, we closed an underwritten public offering of 1,614,035 shares of common stock at $28.50 per share, which includes the over-allotment option exercised by the underwriters to purchase an additional 210,526 shares. Total net proceeds were $42.7 million after deducting underwriting discounts and other offering expenses of approximately $3.3 million.

We issued 673,463 and 560,402 shares of our common stock pursuant to cashless exercises of Concurrent Financing Warrants by certain warrant holders in February 2021 and June 2021, respectively.  As of June 30, 2021, Concurrent Financing Warrants to purchase 1,013,116 shares of the Company’s common stock remain outstanding.

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We had cash and cash equivalents of approximately $50.8 million as of June 30, 2021. We believe that our existing cash and cash equivalents will be sufficient to allow us to fund our operations for at least 12 months from the filing date of this Form 10-Q. 

Future Capital Requirements

We have not generated any revenue from product sales or from out-licensing. We do not know when, or if, we will generate any revenue. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval and commercialize our product candidates. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacturing and clinical trials of, and seek regulatory approval for FB-401. We expect to incur additional costs associated with operating as a SEC registrant. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We expect our research and development expenses to substantially increase in connection with our ongoing activities, particularly as we continue to advance FB-401 in the clinic.

Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:

If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any equity or debt financing may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to other parties rights to develop or commercialize our drug candidates that we would prefer to retain.

See the “Risk Factors” section on this Form 10-Q for additional risks associated with our substantial capital requirements.

The following table shows a summary of our cash flows for the six months ended June 30, 2021 and 2020 (in thousands):

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Operating Activities

Net cash used in operating activities for the six months ended June 30, 2021 was $8.0 million and consisted primarily of a net loss of $10.6 million adjusted for non-cash items of $1.8 million which were primarily related to stock-based compensation and the write-off of offering costs related to the expired ATM Facility and decreases in net operating assets of $0.8 million.

Net cash used in operating activities for the six months ended June 30, 2020 was $6.9 million and consisted primarily of a net loss of $36.8 million adjusted for non-cash items primarily related to $30.9 million of IPR&D write off in connection with the Merger, and increases in net operating assets of $1.0 million.

Investing activities

Cash provided from investing activities for the six months ended June 30, 2020 was $3.6 million, which primarily consisted of cash acquired from the reverse merger with Tocagen, Inc. that closed on June 15, 2020.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2021 consisted of $44,000 in fees paid for our shelf registration statement, partially offset by $42,000 in proceeds received from the exercise of stock options.

Net cash provided by financing activities was $24.1 million for the six months ended June 30, 2020 was primarily from net proceeds received from the sale of the company’s common stock.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Contractual Obligations

See Note 5 to the Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

Recent Accounting Standards

See Note 2 to the Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Qualitative and Quantitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b‑2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021.

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Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that some of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Part II. OTHER INFORMATION

Item 1: Legal Proceedings

From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. We are not currently a party to any material pending litigation or other material legal proceeding.

Item 1A:  Risk Factors

You should consider carefully the following information about the risks described below, together with the other information contained in this Quarterly Report on Form 10-Q and in our other public filings, in evaluating our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline.

Our ability to execute on our business strategy is subject to a number of risks, which are discussed more fully below in this section. You should carefully consider these risks before making an investment in our common stock. These risks include, among others, the following:

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