UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

(Mark one)

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or

For the quarterly period ended March 31, 2023

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 

Commission file number 001-15771

 

ABEONA THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

 

Delaware 83-0221517
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer I.D. No.)
incorporation or organization)

 

13306555 Carnegie Avenue of the Americas, 334rd thFloor

Cleveland, New YorkOH44103, NY 10019

(Address of principal executive offices, zip code)

 

(646) 813-4701

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueABEONasdaq Capital MarketsMarket

 

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☒Smaller reporting company ☒
Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial 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 ☒

 

The number of shares outstanding of the registrant’s common stock as of May 3, 20224, 2023 was 146,949,52918,778,182 shares.

 

 

 

ABEONA THERAPEUTICS INC.

Form 10-Q

For the Quarter Ended March 31, 20222023

INDEX

 

  Page No.
PART I - FINANCIAL INFORMATION 
   
Item 1.Financial Statements:3
   
 Condensed Consolidated Balance Sheets as of March 31, 20222023 (Unaudited) and December 31, 202120223
   
 Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 20222023 and 202120224
   
 Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 20222023 and 202120225
   
 Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 20222023 and 202120226
   
 Notes to Unaudited Condensed Consolidated Financial Statements7
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1518
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk2223
   
Item 4.Controls and Procedures2223
   
PART II - OTHER INFORMATION 
   
Item 1.Legal Proceedings2324
  
Item 1A.Risk Factors2324
 
Item 2.Unregistered Sale of Equity Securities and Use of Proceeds24
  
Item 6.Exhibits2324
   
SIGNATURES2425

 

1

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that express management’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “could,” “would,” “seeks,” “estimates,” and variations of such words and similar expressions, and the negatives thereof, are intended to identify such forward-looking statements. Such “forward-looking statements” speak only as of the date made and are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by management that are difficult to predict. Various factors, some of which are beyond the Company’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report, except as may otherwise be required by the federal securities laws.

Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in forward-looking statements due to a number of factors. These statements include statements about: our Phase 3 clinical trial (VIITAL™)plans to submit a Biologics License Application for patients with recessive dystrophic epidermolysis bullosa (“RDEB”)EB-101 and our beliefs relating thereto; our ability to follow patients in the Phase 3 clinical trial;timing thereof; our plans to continue development of AAV-based gene therapies designed to treat ophthalmic and other diseases and next-generation AAV-based gene therapies; the discontinuation of development activities for our ABO-101 and ABO-102 programs; the potential impacts of the COVID-19 pandemic on our business, operations, and financial condition; the achievement of or expected timing, progress and results of clinical development, clinical trials and potential regulatory approvals; our pipeline of product candidates; our belief that we have sufficient resources on hand, access to additional financial resources and/or financial flexibility to fund operations for at least the next 12 months from the date of filing of this report; our belief that EB-101 could potentially benefit patients with RDEB; our ability to developdevelopment of our novel AAV-based gene therapy platform technology; our belief in the adequacy of the clinical trial data from our VIITAL™, clinical trial, together with the data generated in the program to date, to support regulatory approvals; our dependence upon our third-party and related-party customers and vendors and their compliance with regulatory bodies; our estimates regarding expenses, future revenues, capital requirements, and needs for additional financing; our intellectual property position and our ability to obtain, maintain and enforce intellectual property protection and exclusivity for our proprietary assets; our estimates regarding the size of the potential markets for our product candidates, the strength of our commercialization strategies and our ability to serve and supply those markets; and future economic conditions or performance.

Important factors that could affect performance and cause results to differ materially from management’s expectations are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K10-K/A for the fiscal year ended December 31, 2021,2022, as updated from time to time in the Company’s SEC filings, including this Quarterly Report on Form 10-Q. These factors include: the impact of the COVID-19 pandemic on our business, operations (including our clinical trials), and financial condition, and on our ability to access the capital markets; our ability to regain and maintain compliance with the listing standards of the Nasdaq Capital Market; the successful discontinuation of development activities for our ABO-101 and ABO-102 programs; our ability to successfully executesubmit a Biologics License Application for EB-101 and the Phase 3 clinical trial for patients with RDEB;outcome thereof; our ability to find a potential commercialization partner for EB-101; our ability to increase our authorized capital; our ability to access our existing at-the-market sale agreement and any dilution that may result from accessing such sales agreement; our ability to fund our operating expenses and capital expenditure requirements for at least the next 12 months given our existing cash, cash equivalents and short-term investments; our ability to access additional financial resources and/or our financial flexibility to reduce operating expenses if required; our ability to obtain additional equity funding from current or new stockholders, out-licensingstockholders; the potential impacts of global healthcare emergencies, such as pandemics, on our business, operations, and financial condition; our ability to out-license technology and/or other assets, deferring and/or eliminating planned expenditures, restructuring operations and/or reducing headcount, and sales of assets; the dilutive effect that raising additional funds by selling additional equity securities would have on the relative equity ownership of our existing investors, including under our existing at-the-market sale agreement; development of our novel AAV-based gene therapy platform technology; the outcome of any interactions with the U.S. Food and Drug Administration (“FDA”) or other regulatory agencies relating to any of our products or product candidates; our ability to complete enrollment of patients into clinical trials to secure sufficient data to assess efficacy and safety; our ability to continue to secure and maintain regulatory designations for our product candidates; our ability to develop manufacturing capabilities compliant with current good manufacturing practices for our product candidates; our ability to manufacture cell and gene therapy products and produce an adequate product supply to support clinical trials and potentially future commercialization; the rate and degree of market acceptance of our product candidates for any indication once approved; and our ability to meet our obligations contained in license agreements to which we are party.

2

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

Abeona Therapeutics Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

($ in thousands, except share and per share amounts)

 

 March 31,
2022		  December 31,
2021		  March 31, 2023  December 31, 2022 
  (Unaudited)      (Unaudited)    
ASSETS                
Current assets:                
Cash and cash equivalents $20,326  $32,938  $4,680  $14,217 
Short-term investments  10,989   12,086   35,684   37,932 
Restricted cash  5,891   5,891   338   338 
Accounts receivable  -   3,000 
Other receivables  519   188 
Prepaid expenses and other current assets  1,998   2,377   1,623   424 
Total current assets  39,204   56,292   42,844   53,099 
        
Property and equipment, net  8,408   12,339   5,298   5,741 
Right-of-use lease assets  7,540   9,403   5,104   5,331 
Licensed technology, net  -   1,384 
Other assets  20   168   99   43 
Total assets $55,172  $79,586  $53,345  $64,214 
        
LIABILITIES AND STOCKHOLDERS’ EQUITY                
        
Current liabilities:                
Accounts payable $1,601  $4,325  $2,857  $1,811 
Accrued expenses  4,206   5,585   2,569   3,991 
Current portion of lease liability  1,822   1,818   1,789   1,773 
Current portion of payable to licensor  4,708   4,599 
Deferred revenue  -   296 
Other current liabilities  205   204 
Total current liabilities  12,337   16,623   7,420   7,779 
        
Payable to licensor  3,919   3,828   4,263   4,163 
Other long-term liabilities  200   200 
Long-term lease liabilities  7,273   7,560   5,530   5,854 
Warrant liabilities  17,392   19,657 
Total liabilities  23,729   28,211   34,605   37,453 
        
Commitments and contingencies  -       -   - 
Stockholders’ equity:                
Preferred stock - $0.01 par value; authorized 2,000,000 shares;        
NaN shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  -   - 
Preferred stock - $0.01 par value; authorized 2,000,000 shares; No shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  -   - 
Common stock - $0.01 par value; authorized 200,000,000 shares;        
147,079,899 and 147,205,422 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  1,471   1,472 
Common stock - $0.01 par value; authorized 200,000,000 shares; 147,079,899 and 147,205,422 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively  1,471   1,472 
Preferred stock - $0.01 par value; authorized 2,000,000 shares; No shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively  —   — 
Common stock - $0.01 par value; authorized 200,000,000 shares; 17,929,344 and 17,719,720 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively  179   177 
Additional paid-in capital  706,433   705,570   723,069   722,049 
Accumulated deficit  (676,431)  (655,640)  (704,443)  (695,336)
Accumulated other comprehensive loss  (30)  (27)  (65)  (129)
Total stockholders’ equity  31,443   51,375   18,740   26,761 
Total liabilities and stockholders’ equity $55,172  $79,586  $53,345  $64,214 

 

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

 

3

 

Abeona Therapeutics Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

($ in thousands, except share and per share amounts)

(Unaudited)

 

     
 2022 2021  For the three months ended March 31, 
 For the three months ended March 31,  2023  2022 
 2022 2021      
Revenues:                
License and other revenues $346  $-  $—  $346 
                
Expenses:                
Research and development  10,545   8,317   8,041   10,545 
General and administrative  4,224   6,280   3,997   4,224 
Licensed technology impairment charge  1,355   - 
Lease impairment charge  1,561   - 
Construction-in-progress impairment charge  3,252   - 
Impairment of licensed technology  —   1,355 
Impairment of right-of-use lease assets  —   1,561 
Impairment of construction-in-progress  —   3,252 
Total expenses  20,937   14,597   12,038   20,937 
                
Loss from operations  (20,591)  (14,597)  (12,038)  (20,591)
                
Interest and miscellaneous income  1   15 
Interest income  364   7 
Interest expense  (201)  (1,420)  (101)  (201)
Change in fair value of warrant liabilities  2,265   (1,253)
Other income (loss)  403   (6)
Net loss $(20,791) $(16,002) $(9,107) $(22,044)
                
Basic and diluted loss per common share $(0.14) $(0.17) $(0.54) $(3.80)
                
Weighted average number of common shares outstanding – basic and diluted  144,877,693   94,234,653   16,904,024   5,795,107 
                
Other comprehensive income:        
Change in unrealized gains related to available-for-sale debt securities  3   13 
Other comprehensive income (loss):        
Change in unrealized gains (losses) related to available-for-sale debt securities  64   (3)
Comprehensive loss $(20,788) $(15,989) $(9,043) $(22,047)

 

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

4

 

Abeona Therapeutics Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

($ in thousands, except share amounts)

(Unaudited)

 

  Shares  Amount  Capital  Deficit  Income/(Loss)  Equity 
              Accumulated    
        Additional     Other  Total 
  Common Stock  Paid-in  Accumulated  Comprehensive  Stockholders’ 
  Shares  Amount  Capital  Deficit  Income/(Loss)  Equity 
Balance at December 31, 2021  147,205,422  $1,472  $705,570  $(655,640) $(27) $51,375 
Stock-based compensation expense  -   -   862   -   -   862 
Issuance of common stock in connection with restricted share awards, net of cancellations  (125,523)  (1)  1   -   -   - 
Issuance of common stock under open market sale agreement                        
Issuance of common stock under open market sale agreement, shares                        
Issuance of common stock in connection with the exercise of stock options                        
Issuance of common stock in connection with the exercise of stock options, shares                        
Issuance of common stock in connection with restricted share awards, net of cancellations                        
Issuance of common stock in connection with restricted share awards, net of cancellations, shares                        
Net loss  -   -   -   (20,791)  -   (20,791)
Other comprehensive income  -   -   -   -   (3)  (3)
Balance at March 31, 2022  147,079,899  $1,471  $706,433  $(676,431) $(30) $31,443 
                                       
                         
Balance at December 31, 2020  96,131,678  $961  $672,304  $(570,704) $(10) $102,551 
Stock-based compensation expense  -   -   1,950   -   -   1,950 
Issuance of common stock under open market sale agreement  1,578,324   16   5,195   -   -   5,211 
Issuance of common stock in connection with the  exercise of stock options  488,204   5   662   -   -   667 
Issuance of common stock in connection with restricted share awards, net of cancellations  840,727   8   (8)  -   -   - 
Net loss  -   -   -   (16,002)  -   (16,002)
Other comprehensive income  -   -   -   -   13   13 
Balance at March 31, 2021  99,038,933  $990  $680,103  $(586,706) $3  $94,390 

              Accumulated    
        Additional     Other  Total 
  Common Stock  Paid-in  Accumulated  Comprehensive  Stockholders’ 
  Shares  Amount  Capital  Deficit  Loss  Equity 
                   
Balance at December 31, 2022  17,719,720  $177  $722,049  $(695,336) $(129) $26,761 
Stock-based compensation expense  —   —   770   —  —   770 
Issuance of common stock in connection with restricted share awards, net of cancellations and shares settled for tax withholding settlement  111,064   1   (5)  —  —   (4)
Issuance of common stock, net of offering costs under open market sale agreement (ATM)  98,560   1   255   —  —   256 
Net loss  —  —  —   (9,107)  —   (9,107)
Other comprehensive income  —  —  —   —   64   64 
Balance at March 31, 2023  17,929,344  $179  $723,069  $(704,443) $(65) $18,740 

 

              Accumulated    
        Additional     Other  Total 
  Common Stock  Paid-in  Accumulated  Comprehensive  Stockholders’ 
  Shares  Amount  Capital  Deficit  Loss  Equity 
                   
Balance at December 31, 2021  5,888,217  $1,472  $696,563  $(655,640) $(27) $42,368 
Stock-based compensation expense  —   —   862   —   —   862 
Issuance of common stock in connection with restricted share awards, net of cancellations  (5,021)  (1)  1   —   —   — 
Net loss  —   —   —   (22,044)  —   (22,044)
Other comprehensive loss  —   —   —   —   (3)  (3)
Other comprehensive income (loss)  —   —   —   —   (3)  (3)
Balance at March 31, 2022  5,883,196  $1,471  $697,426  $(677,684) $(30) $21,183 

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

 

5

 

Abeona Therapeutics Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)

 

 2023  2022 
 2022  2021  For the three months ended March 31, 
 For the three months ended March 31,  2023  2022 
 2022  2021      
Cash flows from operating activities:                
Net loss $(20,791) $(16,002) $(9,107) $(22,044)
Adjustments to reconcile net loss to cash used in operating activities:                
Depreciation and amortization  811   817   661   811 
Stock-based compensation expense  862   1,950   770   862 
Non-cash licensed technology impairment charge  1,355   - 
Non-cash lease impairment charge  1,561   - 
Non-cash construction-in-progress impairment charge  3,252   - 
Change in fair value of warrant liabilities  (2,265)  1,253 
Non-cash impairment of licensed technology  —   1,355 
Non-cash impairment of right-of-use lease assets  —   1,561 
Non-cash impairment of construction-in-progress  —   3,252 
Accretion and interest on short-term investments  (84)  125   (117)  (84)
Amortization of right-of-use lease assets  302   268   227   302 
Non cash interest  200   - 
Non-cash interest  100   200 
Change in operating assets and liabilities:                
Accounts receivable  3,000   -   —   3,000 
Other receivables  (75)  — 
Prepaid expenses and other current assets  379   882   (1,199)  379 
Other assets  148   (20)  (56)  148 
Accounts payable, accrued expenses and lease liabilities  (4,386)  (3,024)  (684)  (4,386)
Other current liabilities  1   — 
Change in payable to licensor  (296)  1,419   —   (296)
Net cash used in operating activities  (13,687)  (13,585)  (11,744)  (13,687)
                
Cash flows from investing activities:                
Capital expenditures  (103)  (444)  (218)  (103)
Purchases of short-term investments  (7,487)  (15,164)  (7,964)  (7,487)
Proceeds from maturities of short-term investments  8,665   24,984   10,393   8,665 
Net cash provided by investing activities  1,075   9,376   2,211   1,075 
                
Cash flows from financing activities:                
Proceeds from open market sales of common stock  -   5,211 
Proceeds from exercise of stock options  -   667 
Net cash provided by financing activities  -   5,878 
Payments made for net settlement of restricted share awards  (4)  — 
Net cash used in financing activities  (4)  — 
                
Net increase/(decrease) in cash and cash equivalents  (12,612)  1,669 
Cash and cash equivalents at beginning of period  32,938   13,571 
Cash and cash equivalents at end of period $20,326  $15,240 
Net decrease in cash, cash equivalents and restricted cash  (9,537)  (12,612)
Cash, cash equivalents and restricted cash at beginning of period  14,555   38,829 
Cash, cash equivalents and restricted cash at end of period $5,018  $26,217 
                
Supplemental cash flow information:                
Cash and cash equivalents $20,326  $14,265  $4,680  $20,326 
Restricted cash  5,891   975   338   5,891 
Total cash, cash equivalents and restricted cash $26,217  $15,240  $5,018  $26,217 

 

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

6

 

ABEONA THERAPEUTICS INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 1 – NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Background

 

Abeona Therapeutics Inc. (together with ourthe Company’s subsidiaries, “we,” “our,” “Abeona” or the “Company”), a Delaware corporation, is a clinical-stage biopharmaceutical company developing genecell and cellgene therapies for life-threatening rare genetic diseases. OurThe Company’s lead clinical program is EB-101, an autologous, gene-correctedengineered cell therapy currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”), which is currently in the pivotal Phase 3 VIITAL™ clinical trial. Following a comprehensive. The Company’s development portfolio review in early 2022, we have decided to focus our research and development resources on the VIITAL™ readout while actively pursuing a potential commercialization partner for EB-101 with the objective of reducing operating expenses and extending our cash runway. As part of this portfolio prioritization, we have intensified our pursuit of a strategic partnership to take over development activities for ouralso features adeno-associated virus (“AAV”)-based gene therapy ABO-102 for Sanfilippo syndrome type A (“MPS IIIA”) and we have discontinued development of our AAV-based gene therapy ABO-101 for Sanfilippo syndrome type B (“MPS IIIB”). We plan to continue development of AAV-based gene therapies designed to treat highly unmet, medically needed ophthalmic and other diseases and next-generation AAV-based gene therapies using the novel AIM™ capsid platform that we havethe Company has exclusively licensed from the University of North Carolina at Chapel Hill, (“UNC”), and internal AAV vector research programs.

 

Basis of Presentation

 

The Company’s unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except as otherwise disclosed, necessary for the fair presentation of the financial position, results of operations, and changes in financial position for such periods, have been made. These unaudited interim condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. Certain information that is normally required by U.S. GAAP has been condensed or omitted in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The December 31, 2022 condensed consolidated balance sheet was derived from the audited statements, but does not include all disclosures required by U.S. GAAP.

 

Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K10-K/A for the year ended December 31, 2021,2022, which was filed with the SEC on March 31, 2022.April 10, 2023.

 

Reverse Stock Split

As described in Note 1 to the consolidated financials statements included in the Company’s 2022 Annual Report on Form 10-K/A, on June 30, 2022, the Company filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”), to effectuate a reverse stock split of the Company’s outstanding common stock, par value $0.01 per share (“Common Stock”), at an exchange ratio of 25-to-1 (the “Reverse Stock Split”). The Reverse Stock Split was effective on July 1, 2022. The number of authorized shares of Common Stock immediately after the Reverse Stock Split (“New Common Stock”) remained at 200,000,000 shares. All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

7

Uses and Sources of Liquidity

 

The unaudited interim condensed consolidated financial statements have been prepared on the going concern basis, which assumes the Company will have sufficient cash to pay its operating expenses, as and when they become payable, for a period of at least 12 months from the date the financial report is issued.

 

As of March 31, 2022, we2023, the Company had cash, cash equivalents, restricted cash and short-term investments of $37.240.7 million. For the three months ended March 31, 2022, we2023, the Company had cash outflows from operations of $13.711.7 million. We haveThe Company has not generated significant product revenues and havehas not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and nonclinical testing, and commercialization of our productsthe Company’s product candidates will require significant additional financing.

 

We areThe Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of product candidates, obtaining the necessary regulatory approval to market ourthe Company’s product candidates, raising additional capital to continue to fund ourthe Company’s operations, development of competing drugs and therapies and protection of proprietary technology and market acceptance of our products.technology. As a result of these and other risks and the related uncertainties, there can be no assurance of ourthe Company’s future success.

 

7

Following a comprehensive portfolio review in early 2022, we have decided to focus our researchThe Company believes that its current cash and development resources on the EB-101 program with the objective of reducing operating expensescash equivalents, restricted cash and extending our cash runway. As part of this portfolio prioritization, we have intensified our pursuit of a strategic partnership to take over development activities for our AAV-based gene therapy ABO-102 for MPS IIIA and we have discontinued development of our AAV-based gene therapy ABO-101 for MPS IIIB. Based upon these current operating plans, our ability to access additional financial resources and/or our financial flexibility to further reduce operating expenses if required, we believe that we haveshort-term investments are sufficient resources to fund operations through at least the next 12 months from the date of this Quarterly Reportquarterly report on Form 10-Q. We willThe Company may need to secure additional funding beyond the next 12 months to carry out all of ourits planned research and development and commercialization activities. If we arethe Company is unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on ourits future prospects.

 

Use of Estimates

 

The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from these estimates and assumptions.

 

Summary of Significant Accounting Policies

 

There have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K10-K/A for the year ended December 31, 20212022 that are of significance, or potential significance, to the Company.

 

ReclassificationsCorrection of Error

 

Certain comparative figuresDuring the fourth quarter of 2022, the Company identified errors in the accounting for certain common stock warrants that were issued in 2021. The common stock warrants were not indexed to the Company’s own stock and therefore should have been reclassifiedclassified as liabilities at their estimated fair value instead of additional paid-in capital. Although the errors were immaterial to conformprior periods, the 2021 financial statements were restated in accordance with Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”, due to the current year presentation. The Company reclassified depreciation and amortization costssignificance of $0.8 million and $35,000the out-of-period correction to research and development and general and administrative expenses, respectively, on the condensed2021 period. There was no impact to the Company’s consolidated statements of operations and comprehensive loss duringfor 2021. The correction of the error resulted in the Company adjusting its quarterly information presented for the three months ended March 31, 2021. 2022. There was no error correction related to the fiscal year end December 31, 2022 consolidated financial statements as included in the Company’s 2022 Annual Report on Form 10-K/A.

The Company also reclassified certain rent expensesfollowing tables present the effects of $0.3 million from general and administrativethe correction of the prior period error to research and development expenses on the condensed consolidated statementsstatement of operations and comprehensive loss during(in thousands, except for per share data):

SCHEDULE OF EFFECTS OF THE RESTATEMENT TO AMOUNTS IN THE PREVIOUSLY REPORTED CONSOLIDATED FINANCIAL STATEMENTS

          
  For the three months ended March 31, 2022 
Condensed Consolidated Statement of Operations and Comprehensive Loss As Reported  Adjustment  As Revised 
          
Change in fair value of warrant liabilities $—  $(1,253) $(1,253)
Net Loss $(20,791) $(1,253) $(22,044)
Basic and diluted loss per common share $(3.59) $(0.21) $(3.80)
Comprehensive loss $(20,794) $(1,253) $(22,047)

8

The following tables present the three months ended March 31, 2021. Additionally,effects of the Company also reclassified $5.0 millioncorrection of restricted cash from prepaid expenses, other current assets and restricted cash and $0.9 million of restricted cash from other assets and restricted cashthe prior period error to restricted cash on the condensed consolidated balance sheets as of December 31, 2021.cash flow statement (in thousands):

 

  For the three months ended March 31, 2022 
Condensed Consolidated Cash Flow Statement As Reported  Adjustment  As Revised 
          
Net Loss $(20,791) $(1,253) $(22,044)
Adjustments to reconcile net loss to cash used in operating activities:            
Change in fair value of warrant liabilities $—  $(1,253) $(1,253)
Net cash provided by operating activities $(13,687) $—  $(13,687)

The following tables present the effects of the correction of the prior period error to the condensed consolidated statement of stockholders’ equity (in thousands):

  As of March 31, 2022 
Condensed Consolidated Statement of Stockholders’ Equity As Reported  Adjustment  As Revised 
          
Additional paid-in capital, December 31, 2021 $705,570  $(9,007) $696,563 
Total stockholders’ equity, December 31, 2021 $51,375  $(9,007) $42,368 
Net Loss $(20,791) $(1,253) $(22,044)
Additional paid-in capital, March 31, 2022 $706,433  $(9,007) $697,426 
Total stockholders’ equity, March 31, 2022 $31,443  $(10,260) $21,183 

Net Loss Per Share

 

Basic and diluted net loss per share is computed by dividing net loss attributable to common shareholders by the weighted-average number of shares of common stock. We doThe Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive. Potential dilutive securities result from outstanding restricted stock, stock options, and stock purchase warrants.

 

The following table sets forth the potential securities that could potentially dilute basic income/(loss) per share in the future that were not included in the computation of diluted net loss per share because to do so would have been anti-dilutive for the periods presented:

SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

 2022  2021  For the three months ended March 31, 
 For the three months ended March 31,  2023  2022 
 2022  2021      
Stock options  7,101,803   7,091,879   234,697   284,072 
Restricted stock  1,948,334   2,636,216   929,946   77,945 
Warrants  44,700,000   -   9,397,879   1,788,000 
Total  53,750,137   9,798,095   10,562,522   2,150,017 

 

8

New Accounting Pronouncements

No new accounting pronouncement issued or effective had, or is expected to have, a material impact on the Company’s condensed consolidated financial statements.

 

NOTE 2 – SHORT-TERM INVESTMENTS

Short-term investments consistedThe following table provides a summary of the following marketable securities as of:short-term investments (in thousands):

SCHEDULE OF AVAILABLE FOR SALE SHORT-TERM INVESTMENTS

(in thousands) March 31, 2022 
  Amortized Cost  Gross Unrealized Gain  Gross Unrealized Loss  Fair Value 
Available-for-sale, short-term investments                                   
U.S. treasury securities $10,986  $3  $-  $10,989 
Total $10,986  $3  $-  $10,989 
  March 31, 2023 
  Amortized Cost  Gross Unrealized Gain  Gross Unrealized Loss  Fair Value 
             
Available-for-sale, short-term investments:                
U.S. treasury and federal agency securities $35,720   —   (36) $35,684 
Total available-for-sale, short-term investments $35,720   —   (36) $35,684 

9

 

  December 31, 2021 
  Amortized Cost  Gross Unrealized Gain  Gross Unrealized Loss  Fair Value 
Available-for-sale, short-term investments                                    
U.S. treasury securities $12,077  $9  $-  $12,086 
Total $12,077  $9  $-  $12,086 

  December 31, 2022 
  Amortized Cost  Gross Unrealized Gain  Gross Unrealized Loss  Fair Value 
             
Available-for-sale, short-term investments:                
U.S. treasury and federal agency securities $38,032   —   (100) $37,932 
Total available-for-sale, short-term investments $38,032   —   (100) $37,932 

 

As of March 31, 2022,2023, the available-for-sale securities classified as short-term investments mature in one year or less. Unrealized losses on available-for-sale securities as of March 31, 20222023 were not significant and were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. None of the short-term investments have been in a continuous unrealized loss position for more than 12 months. Accordingly, no other-than-temporary impairment was recorded for the three months ended March 31, 2022.2023.

 

There were 0no significant realized gains or losses recognized on the sale or maturity of available-for-sale investments for the three months ended March 31, 20222023 or 2021.2022.

 

NOTE 3 – PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost and depreciated or amortized using the straight-line method based on useful lives as follow:follows (in thousands):

 SCHEDULE OF PROPERTY AND EQUIPMENT

(in thousands) Useful lives (years) March 31,
2022		  December 31,
2021		 
 Useful lives (years) March 31, 2023  December 31, 2022 
       
Laboratory equipment 5 $9,138  $9,081  5 $7,849  $7,636 
Furniture, software and office equipment 3 to 5  1,908   1,896  3 to 5  1,384   1,379 
Leasehold improvements Shorter of remaining lease term or useful life  8,603   8,603  Shorter of remaining lease term or useful life  8,605   8,605 
Construction-in-progress    3,252   3,219 
Subtotal    22,901   22,799     17,838   17,620 
Less: accumulated depreciation    (11,241)  (10,460)    (12,540)  (11,879)
Less: construction-in-progress impairment    (3,252)  - 
Property and equipment, net   $8,408  $12,339 
Total property and equipment, net   $5,298  $5,741 

 

Depreciation expense was $0.7 and $0.8 million for the three months ended March 31, 20222023 and 2021,2022, respectively.

 

On March 31, 2022, the Company announced that we wereit was pursuing a strategic partner to take over development activities of ABO-102 and that we wereit was discontinuing development of ABO-101. As a result, of this shift in priorities, the Company determined the construction-in-progress whichthat was dedicated to the ABO-101 and ABO-102 programs had no future value, and thus we recorded an impairment charge of $3.3 million for the three months ended March 31, 2022.

9

 

NOTE 4 – LICENSED TECHNOLOGY

On May 15, 2015, we acquired Abeona Therapeutics LLC, which had an exclusive license through Nationwide Children’s Hospital to the AB-101 and AB-102 patent portfolios for developing treatments for patients with Sanfilippo Syndrome Type A and Type B. The license is amortized over the life of the license of 20 yearsyears.. On March 31, 2022, the Company announced that it was pursuing a strategic partner to take over development activities of ABO-102 and that it was discontinuing development of ABO-101. As a result of this shift in priorities, the Company determined the remaining value of the licensed technology had no future value and thus, recorded an impairment charge of $1.4 million for the three months ended March 31, 2022. There is no remaining net value of licensed technology as of March 31, 2023 and December 31, 2022.

Licensed technology consists of the following:

SCHEDULE OF LICENSED TECHNOLOGY

(in thousands) March 31,
2022		  December 31,
2021		 
Licensed technology $2,156  $2,156 
Less accumulated amortization  (801)  (772)
Less impairment charge  (1,355)  - 
Licensed technology, net $-  $1,384 

 

Amortization expense on licensed technology was nil and $29,000 for the three months ended March 31, 20222023 and 2021,2022, respectively.

 

10

NOTE 5 – SETTLEMENT LIABILITYFAIR VALUE MEASUREMENTS

 

On November 12, 2021, we entered into a settlement agreement (“Settlement Agreement”) with our prior licensor, REGENXBIO Inc. (“REGENXBIO”) to resolve all existing disputes betweenThe Company calculates the parties. In accordance with the Settlement Agreement, we agreed to pay REGENXBIO a total of $30.0 million, payable as follows: (1) $20.0 million paid in November 2021 after executionfair value of the Settlement Agreement, (2) $5.0 millionCompany’s assets and liabilities that qualify as financial instruments and includes additional information in the notes to the consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of other receivables, prepaid expenses and other current assets, other assets, accounts payable, accrued expenses, and payables to licensor approximate their carrying amounts due to the relatively short maturity of these instruments.

U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

●Level 1 – Quoted prices in active markets for identical assets or liabilities.
●Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
●Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the first anniversaryinputs used to determine the fair value at the measurement date in the table below.

The following table provides a summary of financial assets measured at fair value on a recurring and non-recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):

SCHEDULE OF FAIR VALUE, ASSETS AND LIABILITIES MEASURED ON RECURRING AND NON-RECURRING BASIS

Description Fair Value at March 31, 2023  Level 1  Level 2  Level 3 
             
Recurring Assets                
Cash equivalents                
Money market fund $4,133  $4,133  $—  $— 
Short-term investments                
U.S. treasury and federal agency securities  35,684   —   35,684   — 
Total assets measured at fair value $39,817  $4,133  $35,684  $— 
                 
Liabilities                
Warrant liabilities $17,392   —   —  $17,392 
Total liabilities measured at fair value $17,392  $—  $—  $17,392 

Description Fair Value at December 31, 2022  Level 1  Level 2  Level 3 
             
Recurring Assets:                
Cash equivalents                
Money market fund $12,923  $12,923  $—  $— 
Short-term investments                
U.S. treasury and federal agency securities  37,932   —   37,932   — 
Total assets measured at fair value $50,855  $12,923  $37,932  $— 
                 
Liabilities                
Warrant liabilities $19,657   —   —  $19,657 
Total liabilities measured at fair value $19,657  $—  $—  $19,657 

11

Warrant Liabilities

The warrant liabilities are valued using significant inputs not observable in the market. Accordingly, the warrant liability is measured at fair value on a recurring basis using unobservable inputs and are classified as Level 3 inputs within the fair value hierarchy. Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodology used to determine fair value and such changes could result in a significant increase or decrease in the fair value. The Company’s valuation of the effective datecommon stock warrants utilized the Black-Scholes option-pricing model, which incorporated assumptions and estimates to value the common stock warrants. The Company assessed these assumptions and estimates at the end of each reporting period. Assumptions used to estimate the fair value of the Settlement Agreement, and (3) $5.0 million upon the earlier of: (i) the third anniversary of the effective date of the Settlement Agreement or (ii) the closing of a Strategic Transaction, as definedwarrants in the Settlement Agreement.Black-Scholes option-pricing model are as follows:

SCHEDULE OF ESTIMATE FAIR VALUE OF WARRANTS

  As of March 31, 
  2023  2022 
       
Common share price $2.82  $8.00 
Expected term (years)  3.72 – 4.59   4.72 
Risk-free interest rate (%)  3.56% – 3.65%   2.40%
Volatility (%)  103.82% – 110.51%   101.36%

 

As of March 31, 2023, the Company had outstanding warrant liabilities related to the 2022 we recordedprivate placement that allow the payables dueholders to REGENXBIO in the condensed consolidated balance sheets based on the present valuepurchase 7,609,879 shares of the remaining payments due to REGENXBIO under the Settlement Agreement using an interest ratecommon stock at a weighted average exercise price of $9.64.75%. per share. The current portion of the payable due inexpiration date for these warrant liabilities is November 2022 is $4.7 million and the long-term portion due in November 2024 is $3.9 million as of March 31, 2022.2027. As of March 31, 2023 and December 31, 2022, we have recordedthe Company had outstanding warrant liabilities related to the 2021 public offering that allow the holders to purchase 1,788,000 shares of common stock at a weighted average exercise price of $5.0 9.75 per share. The expiration date for these warrant liabilities is December 2026.

million

The following table provides a summary of restricted cash in the balance sheet that serves as collateral foractivity on the payment owed to REGENXBIO in November 2022.warrant liabilities (in thousands):

SCHEDULE OF ACTIVITY OF WARRANT LIABILITIES

     
Warrant liabilities as of December 31, 2022 $19,657 
Gain recognized in earnings from change in fair value  (2,265)
Loss recognized in earnings from change in fair value  - 
Warrant liabilities as of March 31, 2023 $17,392 

NOTE 6 – FAIR VALUE MEASUREMENTSSETTLEMENT LIABILITY

 

We calculateOn November 12, 2021, the fair valueCompany entered into a settlement agreement (“Settlement Agreement”) with the Company’s prior licensor REGENXBIO Inc. (“REGENXBIO”) to resolve all existing disputes between the parties. In accordance with the Settlement Agreement, the Company agreed to pay REGENXBIO a total of our assets$30.0 million, payable as follows: (1) $20.0 million paid in November 2021 after execution of the Settlement Agreement, (2) $5.0 million on the first anniversary of the effective date of the Settlement Agreement, and liabilities that qualify(3) $5.0 million upon the earlier of (i) the third anniversary of the effective date of the Settlement Agreement or (ii) the closing of a Strategic Transaction, as financial instruments and include additional informationdefined in the notes to the consolidated financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of accounts receivable, prepaid expenses and other current assets, other assets, accounts payable, accrued expenses, loan payable, payable to licensor and deferred revenue approximate their carrying amounts due to the relatively short maturity of these instruments.Settlement Agreement.

 

U.S. GAAP defines fair value asAs of March 31, 2023, the exchange price that would be received for an asset or paidCompany recorded the payable due to transfer a liability (an exit price)REGENXBIO in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

● Level 1 - Quoted prices in active markets for identical assets or liabilities.
● Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
● Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.

10

We have segregated all financial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchycondensed consolidated balance sheets based on the inputs usedpresent value of the remaining payments due to determineREGENXBIO under the fair value at the measurement dateSettlement Agreement using an interest rate of 9.6%. The long-term portion due in the table below.November 2024

was $4.3

Financial assets  measured at fair value on a recurring million and non-recurring basis$4.2 million as of March 31, 20222023 and December 31, 2021 are summarized below:2022, respectively.

SCHEDULE OF FAIR VALUE, ASSETS AND LIABILITIES MEASURED ON RECURRING AND NON-RECURRING BASIS

(in thousands)            
Description Fair Value at
March 31,
2022		  Level 1  Level 2  Level 3 
Recurring Assets:                
Cash equivalents                
Money market fund $16,694  $16,694  $-  $- 
Short-term investments                
U.S. treasury securities  10,989   -   10,989   - 
Total assets measured at fair value $27,683  $16,694  $10,989  $- 

Description Fair Value at
December 31,
2021		  Level 1  Level 2  Level 3 
                 
Recurring Assets:                
Cash equivalents                          
Money market fund $28,590  $28,590  $-  $- 
Cash equivalents fair value $28,590  $28,590  $-  $- 
Short-term investments                
U.S. treasury securities  12,086   -   12,086   - 
Short-term investments fair value  12,086   -   12,086   - 
Total recurring assets  40,676   28,590   12,086   - 
                 
Non-recurring Assets                
Licensed technology, net $1,384  $-  $-  $1,384 
                 
Total assets measured at fair value $42,060  $28,590  $12,086  $1,384 

NOTE 7 – ACCRUED EXPENSES

Accrued expenses consistedThe following table provides a summary of the following as of:components of accrued expenses (in thousands):

SCHEDULE OF ACCRUED EXPENSES

(in thousands) March 31,
2022		  December 31,
2021		 
Accrued employee compensation $745  $1,794 
Accrued contracted services and other  3,461   3,091 
Accrued sublicense fee owed to licensor  -   700 
Accrued expenses $4,206  $5,585 
  March 31, 2023  December 31, 2022 
       
Accrued employee compensation $838  $2,593 
Accrued contracted services and other  1,731   1,398 
Total accrued expenses $2,569  $3,991 

 

1112

 

NOTE 8 – LEASES

 

We leaseThe Company leases space under operating leases for manufacturing and laboratory facilities in Cleveland, Ohio, as well as administrative offices in New York, New York. WeThe Company also lease office space in Madrid, Spain as well asleases certain office equipment under operating leases, which have a non-cancelable lease term of less than one year and, therefore, we havethe Company has elected the practical expedient to exclude these short-term leases from ourthe Company’s right-of-use assets and lease liabilities.

 

On March 31, 2022, the Company announced that wethey were pursuing a strategic partner to take over development activities of ABO-102 and that we werethe Company was discontinuing development of ABO-101. As a result of this shift in priorities, the Company determined the portion of the lease whichthat was dedicated to the future facility for the ABO-101 and ABO-102 programs, had no future value and thus, wethe Company recorded an impairment charge of $1.6 million for the three months ended March 31, 2022.

 

ComponentsThe following table provides a summary of the components of lease cost are as follows:costs and rent (in thousands):

 SCHEDULE OF COMPONENTS OF LEASE COST

(in thousands) 2022  2021 
 For the three months ended March 31,  2023  2022 
(in thousands) 2022  2021 
 For the three months ended March 31, 
 2023  2022 
     
Operating lease cost $

472

  $434  $415  $472 
Variable lease cost $96  $135   39   96 
Short-term lease cost $21  $5   18   21 
Total operating lease costs $472  $589 

 

MaturitiesFuture minimum lease payments and obligations, which do not include short-term leases, of the Company’s operating lease liabilities which do not include short-term leases, as of March 31, 2022 are2023 were as follows:follows (in thousands):

 SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

Maturity of lease liabilities: (in thousands) 
2022, remainder $1,364 
2023  1,834 
Future minimum lease payments and obligations Operating Leases 
   
2023, remainder $1,338 
2024  1,879   1,815 
2025  1,896   1,572 
2026  871   811 
2027  828 
Thereafter  3,662   2,586 
Total undiscounted operating lease payments  11,506   8,950 
Less: imputed interest  2,411   1,631 
Present value of operating lease liabilities $9,095  $7,319 

 

The weighted-average remaining term of the Company’s operating leases was 8473 months and the weighted-average discount rate used to measure the present value of the Company’s operating lease liabilities was 7.37.2%% as of March 31, 2022.2023.

Future cash receipts from the Company’s sublease agreements as of March 31, 2023 are as follows (in thousands):

SCHEDULE OF FUTURE CASH RECEIPTS FROM OPERATING SUBLEASE

  Operating 
Future cash receipts Subleases 
    
2023, remainder $313 
2024  429 
2025  343 
Total future cash receipts $1,085 

13

NOTE 9 – EQUITY

Reverse Stock Split

Effective July 1, 2022, the Company’s stock underwent a 25:1 Reverse Stock Split. The number of authorized shares of Common Stock immediately after the Reverse Stock Split remained at 200,000,000 shares.

Public Offerings

On December 21, 2021, the Company closed an underwritten public offering of 1,788,000 post-split shares of common stock at a public offering price of $9.75 post-split per share and stock purchase warrants to purchase 1,788,000 post-split shares of common stock at an exercise price of $9.75 post-split. The net proceeds to the Company were approximately $16.0 million, after deducting $1.5 million of underwriting discounts and commissions and offering expenses payable by the Company. The net proceeds were allocated to the warrant liability as noted below with the remainder of $7.0 million recorded in common stock and additional paid-in capital. In the event of certain fundamental transactions involving the Company, the holders of the stock purchase warrants may require the Company to make a payment based on a Black-Scholes valuation, using specific inputs that are not considered indexed to the Company’s stock in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). Therefore, the Company accounted for the stock purchase warrants as liabilities and were recorded at the closing date fair value of $9.0 million which was based on a Black-Scholes option pricing model. The remainder of the proceeds were allocated to common stock issued and recorded as a component of equity.

As of March 31, 2023, there were 1,788,000 post-split stock purchase warrants outstanding. These stock purchase warrants expire on December 21, 2026. During such time as each warrant is outstanding, the holder of the warrant is entitled to participate in any dividends or other distribution of assets to holders of shares of common stock. There was no warrant activity during the three months ended March 31, 2023.

Open Market Sale Agreement

On August 17, 2018 the Company entered into an open market sale agreement (as amended, the “ATM Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which, the Company may sell from time to time, through Jefferies, shares of its common stock for an aggregate sales price of up to $150.0 million. Any sales of shares pursuant to this agreement are made under the Company’s effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. The Company is currently subject to General Instruction I.B.6 of Form S-3, as a result of which the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates. The Company remains subject to this one-third limitation until such time as its public float exceeds $75 million. The Company sold 98,560 shares of its common stock under the ATM Agreement and recorded a receivable of $0.3 million for the net proceeds during the three months ended March 31, 2023.

Private Placement Offerings

On November 3, 2022, the Company sold 7,065,946 shares of its common stock, and in lieu of shares of common stock, pre-funded warrants exercisable for 543,933 shares of common stock, and accompanying warrants to purchase 7,609,879 shares of its common stock to a group of new and existing institutional investors in a private placement. The offering price for each share of common stock and accompanying warrant was $4.60, and the offering price for each pre-funded warrant and accompanying warrant was $4.59, which equaled the offering price per share of the common stock and accompanying warrant, less the $0.01 per share exercise price of each pre-funded warrant. Each accompanying warrant represents the right to purchase one share of the Company’s common stock at an exercise price of $4.75 per share of common stock. The pre-funded warrants were exercised in December 2022 and converted to 543,933 shares of commons stock. Total shares sold and converted during the year ended December 31, 2022 were 7,609,879 for an aggregate purchase price of $35.0 million gross, or $32.6 million net of related costs of $1.5 million which was expensed to general and administrative expenses and $0.9 million which was recorded as a reduction to additional paid-in-capital. The net proceeds were allocated to the warrant liability as noted below with the remainder of $12.9 million and $0.1 million recorded in additional paid-in capital and common stock, respectively. In the event of certain fundamental transactions involving the Company, the holders of the stock purchase warrants may require the Company to make a payment based on a Black-Scholes valuation, using specific inputs that are not considered indexed to the Company’s stock in accordance with ASC 815. Therefore, the Company accounted for the stock purchase warrants as liabilities and were recorded at the closing date fair value of $22.0 million which was based on a Black-Scholes option pricing model. The remainder of the proceeds were allocated to common stock issued and recorded as a component of equity.

14

As of March 31, 2023, there were 7,609,879 warrants outstanding related to this private placement offering. The warrants expire on November 3, 2027. During such time as each warrant is outstanding, the holder of the warrant is entitled to participate in any dividends or other distribution of assets to holders of shares of common stock.

NOTE 910 – STOCK-BASED COMPENSATION

We have two stock-based compensation plans: (1)The Company previously granted stock options under its 2005 Equity Incentive Plan (the “2005 Incentive Plan”), under which no further grants can be made. The Company now grants stock options and stock awards under the Abeona Therapeutics Inc. 2015 Equity Incentive Plan (the “2015 Incentive Plan”), which was approved by stockholders on May 7, 2015 and last amended on May 20, 2020 and (2) Abeona Therapeutics Inc. 2005 Equity2020. As of March 31, 2023, there were 136,303 shares available to be granted under the 2015 Incentive Plan (the “2005 Inventive Plan”), under which no furtherPlan. On March 22, 2023, the Company’s board of directors approved 131,750 restricted stock awards to be granted to six new hires as inducement grants can be made.(“Inducement Grants”).

The following table summarizes stock-based compensation expense for the three months ended March 31, 2023 and 2022 and 2021:(in thousands):

 SCHEDULE OF STOCK BASED COMPENSATION

(in thousands) 2022  2021 
  For the three months ended March 31, 
(in thousands) 2022  2021 
Research and development $372  $1,155 
General and administrative  490   795 
Stock based compensation expense $862  $1,950 
  2023  2022 
  For the three months ended March 31, 
  2023  2022 
       
Research and development $584  $372 
General and administrative  186   490 
Total stock-based compensation expense $770  $862 

 

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Stock Options

Stock Options: We estimate

The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option valuation model. WeThe Company then recognize the grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

 

●Expected volatility - we estimate– the Company estimates the volatility of ourthe share price at the date of grant using a “look-back” period which coincides with the expected term, defined below. We believeThe Company believes using a “look-back” period which coincides with the expected term is the most appropriate measure for determining expected volatility.

 

●Expected term - we estimate– the Company estimates the expected term using the “simplified” method, as outlined in SEC Staff Accounting Bulletin No. 107, “Share-Based Payment.”

 

●Risk-free interest rate - we estimate– the Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant.

 

●●Dividends - we use– the Company uses an expected dividend yield of zero because we havethe Company has not declared ornor paid a cash dividend, nor do we haveare there any plans to declare a dividend.

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The Company estimated the fair value of stock options granted in the periods presented utilizing a Black-Scholes option-valuation model utilizing the following assumptions:

 SCHEDULE OF WEIGHTED-AVERAGE ASSUMPTIONS TO ESTIMATE THE FAIR VALUE OF THE OPTIONS GRANTED

  2022  2021 
  For the three months ended March 31, 
  2022  2021 
Expected volatility  95%  99%
Expected term  6.08 years   6.08 years 
Risk-free interest rate  1.73%  1.00%
Expected dividend yield  0%  0%
For the three months ended March 31,
2023*2022
Expected volatilityn/a95.13% - 95.26%
Expected termn/a6.07 – 6.08 years
Risk-free interest raten/a1.69% - 1.76%
Expected dividend yieldn/a0%

*the Company did not grant any stock options in the three months ended March 31, 2023.

 

The following table summarizes stock option activity for the 2015 Incentive Plan and the 2005 Incentive Plan during the three months ended March 31, 2022 :2023:

SCHEDULE OF STOCK OPTIONS ACTIVITY

 Number of Options  Weighted Average Exercise Price  

Weighted Average Remaining

Contractual

Term (years)

  Aggregate Intrinsic Value (in thousands)  Number of Options  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value
(in thousands)		 
Outstanding at December 31, 2021  7,854,851  $1.54   7.63  $- 
         
Outstanding at December 31, 2022 240,770  $37.04   6.42  $— 
Granted  104,000  $0.26   -  $-  —  $—   —  $— 
Cancelled/forfeited  (937,048) $1.40   -  $-  (6,073) $38.65   —  $— 
Exercised  -  $-   -  $-   —  $—   —  $— 
Outstanding at March 31, 2022  7,021,803  $1.54   7.24  $6 
Outstanding at March 31, 2023  234,697  $37.00   6.21  $— 
Exercisable  3,516,716  $1.51   5.49  $-  162,633  $36.33   5.36  $— 
Unvested  3,505,087  $1.57   8.98  $6  72,064  $38.52   8.12  $— 

 

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock. As of March 31, 2022,2023, the total compensation cost related to non-vested option awards not yet recognized iswas approximately $5.02.4 million with a weighted average remaining vesting period of 2.61.9 years.

 

The following table summarizes stock option activity for the 2005 Incentive Plan during the three months ended March 31, 2022 :

SCHEDULE OF STOCK OPTIONS ACTIVITY

  Number of Options  Weighted Average Exercise Price  

Weighted Average Remaining

Contractual Term (years)

  Aggregate Intrinsic Value (in thousands) 
Outstanding at December 31, 2021  80,000  $1.28   1.80  $         - 
Cancelled/forfeited  -  $-   -  $- 
Exercised  -  $-   -  $- 
Outstanding at March 31, 2022  80,000  $1.28   1.54  $- 
Exercisable  80,000  $1.28   1.54  $- 
Unvested  -  $-   -  $- 

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Restricted Stock:

 

The following table summarizes restricted stock award activity for the 2015 Incentive Plan and Inducement Grants during the three months ended March 31, 2022:2023:

 SCHEDULE OF RESTRICTED STOCK AWARD ACTIVITY

 Number of Awards  Weighted Average Grant Date Fair Value  Number of Awards  Weighted Average Grant Date Fair Value Per Unit 
Outstanding at December 31, 2021  2,431,515  $1.86 
     
Outstanding at December 31, 2022  816,958  $5.35 
Granted  252,000  $0.28   136,850  $2.44 
Cancelled/forfeited  (377,523) $1.58   (23,862) $4.89 
Vested  (357,658) $2.31   (9,651) $47.36 
Outstanding at March 31, 2022  1,948,334  $1.63 
Outstanding at March 31, 2023  920,295  $4.49 

 

As of March 31, 2022,2023, there iswas approximately $2.83.6 million of total unrecognized compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted average vesting period of 2.72.8 years. The total fair value of restricted stock awards that vested during the three months ended March 31, 2023 was $0.5 million.

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NOTE 11 – LICENSE/SUPPLIER AGREEMENT

 

NOTE 10 – SUBSEQUENT EVENTSUltragenyx License Agreement

 

On April 29,May 16, 2022, the Company and Ultragenyx Pharmaceutical Inc. (“Ultragenyx”) entered into a Securities Purchasean exclusive license agreement (the “License Agreement”) for AAV gene therapy ABO-102 for the treatment of Sanfilippo syndrome type A (MPS IIIA). Under the License Agreement, (the “Purchase Agreement”)Ultragenyx assumed responsibility for the ABO-102 program from the Company, with certain institutional investors (the “Investors”),the exclusive right to develop, manufacture, and commercialize ABO-102 worldwide. Also pursuant to the License Agreement, following regulatory approval, the Company is eligible to receive tiered royalties from mid-single-digit up to 10% on net sales and up to $30.0 million in commercial milestone payments. Both forms of consideration comprise the transaction price to which the Company agreedexpects to issuebe entitled in exchange for transferring the related intellectual property and sell, in a private placement (the “Offering”), 1,000,006 sharescertain, contractually-specified transition services to Ultragenyx. The sales-based royalty and milestone payments are subject to the royalty recognition constraint. As such, these fees are not recognized as revenue until the later of: (a) the occurrence of the Company’s Series A Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”),subsequent sale, and 250,005 shares of(b) the Company’s Series B Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock,” and together with the Series A Preferred Stock, the “Preferred Stock”), at an offering price of $19.00 per share, representing a 5% original issue discount (“OID”)performance obligation to the stated value of $20.00 per share, for gross proceeds of approximately $25.0 million in the aggregate for the Offering, before the deduction of discounts, fees and offering expenses. The shares of Preferred Stock will be convertible, at a conversion price of $0.45 per share (subject in certain circumstances to adjustments), into shares of the Company’s common stock, $0.01 per share (the “Common Stock”), at the option of the holders and, in certain circumstances, by the Company. The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The Offering closed on May 2, 2022.which they relate has been satisfied.

 

Additionally, pursuant to the License Agreement, Ultragenyx will reimburse the Company for certain development and transition costs actually incurred by the Company. These costs are passed through to Ultragenyx without mark-up. The Company intends to callhas determined that these costs are not incurred for the purpose of satisfying any performance obligation under the License Agreement. Accordingly, the reimbursement of these costs is recognized as a special meetingreduction of stockholders to consider an amendment (the “Amendment”)research and development costs. Such amounts due to the Company’s Restated CertificateCompany from Ultragenyx under the License Agreement of Incorporation (the “Charter”), to effect$13,000 and nil are recorded as a reverse stock splitcomponent of the outstanding shares of Common Stock by a ratio to be determined by the Board of Directors of the Company within a range to be specifiedother receivables in the proposal put to the stockholders for approvalcondensed consolidated balance sheet as of the Amendment (the “Reverse Stock Split”). The Investors have agreed in the Purchase Agreement to not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the shares of the Preferred Stock until the Reverse Stock Split, to vote the shares of the Series A Preferred Stock purchased in the Offering in favor of such AmendmentMarch 31, 2023 and to vote the shares of the Series B Preferred Stock purchased in the Offering in a manner that “mirrors” the proportions on which the shares of Common Stock (excluding any shares of Common Stock that are not voted) and Series A Preferred Stock are voted on the Reverse Stock Split. The Reverse Stock Split requires the approval of the majority of the votes associated with our outstanding stock entitled to vote on the proposal. Because the Series B Preferred Stock will automatically and without further action of the purchaser be voted in a manner that “mirrors” the proportions on which the shares of Common Stock (excluding any shares of Common Stock that are not voted) and Series A Preferred Stock are voted on the Reverse Stock Split, abstentions by common stockholders will not have any effect on the votes cast by the holders of the Series B Preferred Stock.December 31, 2022, respectively.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K10-K/A for the year ended December 31, 20212022 (the “Annual Report”). This discussion and analysis contains forward-looking statements, which involve risks and uncertainties. As a result of many factors, such as those described under “Cautionary Note Regarding Forward-Looking“Forward-Looking Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

 

Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening rare genetic diseases. Our lead clinical program is EB-101, an autologous, gene-correctedengineered cell therapy currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”), which is currently in the pivotal Phase 3 VIITAL™ clinical trial. Following a comprehensive portfolio review in early. In November 2022, we have decided to focus our researchannounced positive topline data from the VIITAL™ study evaluating the efficacy, safety and development resourcestolerability of EB-101. The VIITAL™ study met its two co-primary efficacy endpoints demonstrating statistically significant, clinically meaningful improvements in wound healing and pain reduction in large chronic RDEB wounds. Based on the VIITAL™ readout while actively pursuingpositive topline results, we intend to submit a potential commercialization partnerBiologics License Application (“BLA”) for EB-101 withto the objectiveU.S. Food and Drug Administration (“FDA”) in late second quarter of reducing operating expenses and extending our cash runway. As part2023 or early third quarter of this portfolio prioritization, we have intensified our pursuit of a strategic partnership to take over development activities for our adeno-associated virus (“AAV”)-based gene therapy ABO-102 for Sanfilippo syndrome type A (“MPS IIIA”) and we have discontinued development of our AAV-based gene therapy ABO-101 for Sanfilippo syndrome type B (“MPS IIIB”).2023.

 

We plan to continue to develop AAV-basedOur development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic and other diseases and next-generation AAV-based gene therapies using the novel AIM™ capsid platform that we have exclusively licensed from the University of North Carolina at Chapel Hill, and internal AAV vector research programs.

 

RECENT DEVELOPMENTS

EB-101 (Autologous, Gene-Corrected Cell Therapy) for RDEB

We achieved target enrollment in the first quarter of 2022 for our pivotal Phase 3 VIITAL™ study for our investigational product for RDEB, EB-101. We anticipate topline data readout in the third quarter of 2022. We are focusing our research and development resources on the VIITAL™ readout while actively pursuing a potential commercialization partner. We are optimistic about EB-101’s potential based on updated Phase 1/2a results presented at various medical congresses.

We have continued to prepare our current Good Manufacturing Practices (“cGMP”) commercial facility in Cleveland, Ohio for manufacturing EB-101 drug product to support our planned Biologics License Application (“BLA”) filing.BLA filing to the FDA. EB-101 study drug product for all our VIITAL™ study participants has been manufactured at our Cleveland facilityfacility. As part of our commercial planning, we continue to engage with stakeholders across the healthcare system, including public and we have now completed submission of Module 3private payors, and healthcare providers to better understand market access and potential pricing for Chemistry, Manufacturing and Controls (“CMC”) describing the in-house production of both retroviral vector and the final drug product to the Investigational New Drug Application (“IND”). Based on feedback from the U.S. Food and Drug Administration (“FDA”), we believe that we have alignment with the FDA on the CMC requirements for EB-101, including characterization and validation plans.EB-101.

 

Preclinical Pipeline

 

While our clinical programs are currently focused on rare diseases, we intend to address larger areas of unmet medical need in the future, and ourOur preclinical programs are investigating the use of novel AAV capsids in five undisclosed ophthalmic conditions each with estimated U.S. prevalence ranging from 5,000AAV-based therapies for serious genetic eye diseases, including ABO-504 for Stargardt disease, ABO-503 for X-linked retinoschisis (“XLRS”) and ABO-505 for autosomal dominant optic atrophy (“ADOA”). In 2022, we evaluated the ability of our gene constructs and capsids to 15,000 patients. In 2021, we shared data from studiesdeliver and express the recombinant protein in non-human primates that will help to determine optimal routes of administrationtarget eye tissues and believe we have made significant progress toward measuring efficacyrescue mutant phenotypes in the preclinical setting.mouse disease models. We have also generated appropriate mouse models, produced recombinant capsids, and started dosing mice in proof-of-concept studies that we hope will yield data beginning in mid-2022 to support pre-INDscheduled pre-Investigational New Drug (“IND”) application meetings with the FDA.FDA in the second quarter of 2023 to gain alignment on IND enabling studies. We will present new preclinical data from these three programs at the 26th Annual Meeting of the American Society of Gene & Cell Therapy (“ASGCT”) taking place from May 16-20, 2023 in Los Angeles, CA.

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Preferred Stock OfferingRecent Developments

 

On April 29, 2022,May 11, 2023 we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which we agreed to issue and sell, in a private placement (the “Offering”), 1,000,006 shares of our Series A Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and 250,005 shares of our Series B Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock,” and together with the Series A Preferred Stock, the “Preferred Stock”), atannounced an offering price of $19.00 per share, representing a 5% original issue discount (“OID”) to the stated value of $20.00 per share, for gross proceeds of approximately $25.0 million in the aggregate for the Offering, before the deduction of discounts, fees and offering expenses. The shares of Preferred Stock will be convertible, at a conversion price of $0.45 per share (subject in certain circumstances to adjustments), into shares of our common stock, $0.01 per share (the “Common Stock”),oral presentation at the option ofinaugural International Societies for Investigative Dermatology (“ISID”) Meeting in Tokyo, Japan. The presentation included additional data from our pivotal Phase 3 VIITAL™ study which further demonstrates the holderspotential for EB-101. The additional analyses reported showed EB-101 treatment significantly improved both wound healing and pain reduction at 6, 12, and 24 weeks compared with untreated control wounds, and showed significantly greater improvement in certain circumstances, by us. The Purchase Agreement contains customary representations, warrantiespatient-reported outcomes related to itch and agreements by us and customary conditions to closing. The Offering closed on May 2, 2022.blistering.

 

We intend to call a special meeting of stockholders to consider an amendment (the “Amendment”) to our Restated Certificate of Incorporation (the “Charter”), to effect a reverse stock split of the outstanding shares of Common Stock by a ratio to be determined by our Board of Directors within a range to be specified in the proposal put to the stockholders for approval of the Amendment (the “Reverse Stock Split”). The Investors have agreed in the Purchase Agreement to not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the shares of the Preferred Stock until the Reverse Stock Split, to vote the shares of the Series A Preferred Stock purchased in the Offering in favor of such Amendment and to vote the shares of the Series B Preferred Stock purchased in the Offering in a manner that “mirrors” the proportions on which the shares of Common Stock (excluding any shares of Common Stock that are not voted) and Series A Preferred Stock are voted on the Reverse Stock Split. The Reverse Stock Split requires the approval of the majority of the votes associated with our outstanding stock entitled to vote on the proposal. Because the Series B Preferred Stock will automatically and without further action of the purchaser be voted in a manner that “mirrors” the proportions on which the shares of Common Stock (excluding any shares of Common Stock that are not voted) and Series A Preferred Stock are voted on the Reverse Stock Split, abstentions by common stockholders will not have any effect on the votes cast by the holders of the Series B Preferred Stock.

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RESULTS OF OPERATIONS

 

Comparison of Three Months Ended March 31, 20222023 and March 31, 20212022

 

  For the three months ended  Change 
($ in thousands) March 31, 2023  March 31, 2022  $  % 
             
Revenues:                
License and other revenues $—  $346  $(346)  N/A
                
Expenses:                
Research and development  8,041   10,545   (2,504)  (24)%
General and administrative  3,997   4,224   (227)  (5)%
Impairment of licensed technology  —   1,355   (1,355)  N/A 
Impairment of right-of-use lease assets  —   1,561   (1,561)  N/A 
Impairment of construction-in-progress  —   3,252   (3,252)  N/A 
Total expenses  12,038   20,937   (8,899)  (43)%
                 
Loss from operations  (12,038)  (20,591)  8,553   (42)%
                 
Interest income  364   7   357   5,100%
Interest expense  (101)  (201)  100   (50)%
Change in fair value of warrant liabilities  2,265   (1,253)  3,518   (281)%
Other income  403   (6)  409   (6,817)%
Net loss $(9,107) $(22,044) $12,937   (59)%

 

  For the three months ended       
  March 31,  March 31,  Change 
($ in thousands) 2022  2021  $  % 
Revenues:                
License and other revenues $346  $-  $346   N/A 
                 
Expenses:                
Research and development  10,545   8,317   2,228   27%
General and administrative  4,224   6,280   (2,056)  -33%
Licensed technology impairment charge  1,355   -   1,355   N/A 
Lease impairment charge  1,561   -   1,561   N/A 
Construction-in-progress impairment charge  3,252   -   3,252   N/A 
Total expenses  20,937   14,597   6,340   43%
                 
Loss from operations  (20,591)  (14,597)  (5,994)  41%
                 
Interest and miscellaneous income  1   15   (14)  -93%
Interest expense  (201)  (1,420)  1,219   -86%
Net loss $(20,791) $(16,002) $(4,789)  30%
N/A - not applicable or not meaningful                

N/A – not applicable or not meaningful

 

License and other revenues

License and other revenues for the three months ended March 31, 20222023 was $0.3 million,nil, as compared to nil$0.3 million for the same period of 2021.2022. The revenue in 2022 consisted mainlyprimarily of the recognition of deferred revenue related to grants for the MPS IIIAABO-102 and MPS IIIBABO-101 development programs.

 

Research and development

Research and development expenses include, but are not limited to, payroll and personnel expense, lab supplies, preclinical and development costs, clinical trial costs, manufacturing and manufacturing facility costs, costs associated with regulatory approvals, depreciation on lab supplies and manufacturing facilities, and consultant-related expenses.

 

Total research and development spending for the three months ended March 31, 20222023 was $10.5$8.0 million, as compared to $8.3$10.5 million for the same period of 2021, an increase2022, a decrease of $2.2$2.5 million. The increasedecrease in expenses was primarily due to:

 

●increaseddecreased clinical and development work for our cell and gene therapy product candidates and other related costs of $2.3 million;$1.7 million which was due to the discontinuation of the ABO-102 and ABO-101 programs;
●increaseddecreased salary and related costs of $0.5$0.8 million; and
●increased other costsdecreased stock compensation expenses of $0.2 million; partially offset by
●decreased stock compensation expensesincreased other costs of $0.8$0.2 million.

17

 

We expect our research and development activities to continue as we attempt to advancework towards advancing our product candidates towards potential regulatory approval, reflecting costs associated with the following:

 

●employee and consultant-related expenses;
●preclinical and developmental costs;
●clinical trial costs;
●the cost of acquiring and manufacturing clinical trial materials; and
●costs associated with regulatory approvals.

 

19

General and administrative

General and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public reporting company related costs, professional expenses (i.e.fees (e.g., legal expenses) and other general operating expenses not otherwise included in research and development expenses. We expect to continue to incur our general and administrative costs as we seek potential regulatory approval and potential commercialization of our product candidates.

 

Total general and administrative expenses were $4.2$4.0 million for the three months ended March 31, 2022,2023, as compared to $6.3$4.2 million for the same period of 2021,2022, a decrease of $2.1$0.2 million. The decrease in expenses was primarily due to:

 

●decreased professional fees of $1.9$0.2 million; and
●decreased other costs of $0.4 million; partially offset by
●increased salary and related costs of $0.3 million; and
●increased non-cash stock-based compensation of $0.3 million; partially offset by
●increased other costs of $0.1 million.

 

LicensedImpairment of licensed technology impairment charge

LicensedImpairment of licensed technology impairment charge was $1.4 millionnil for the three months ended March 31, 2022,2023, as compared to nil$1.4 million in the same period of 2021.2022. The licensed technology was for the MPS IIIAABO-102 and MPS IIIBABO-101 development programs and as a result of our shift in priorities, we determined the remaining value of the licensed technology had no future value and thus we recorded an impairment charge of $1.4 million for the three months ended March 31, 2022.

 

Lease impairment chargeImpairment of right-of-use lease assets

Lease impairment chargeImpairment of right-of-use lease assets was $1.6 millionnil for the three months ended March 31, 2022,2023, as compared to nil$1.6 million in the same period of 2021.2022. The impairment was related to a lease for a future manufacturing facility for the MPS IIIAABO-102 and MPS IIIBABO-101 development programs, andwhich, as a result of our shift in priorities, we determined the remaining value of the portion of this lease had no future value and thus we recorded an impairment charge of $1.6 million for the three months ended March 31, 2022.

 

Construction-in-progress impairment chargeImpairment of construction-in-progress

Construction-in-progress impairment charge was $3.3 millionnil for the three months ended March 31, 2022,2023, as compared to nil$3.3 million in the same period of 2021.2022. The construction-in-progress was for a facility for the MPS IIIA and MPS IIIB development programs. As a result of our shift in priorities, we determined the remaining value of the construction-in-progress facility had no future value and thus we recorded an impairment charge of $3.3 million for the three months ended March 31, 2022.

 

Interest and miscellaneous income

Interest and miscellaneous income was $1,000$0.4 million for the three months ended March 31, 2022,2023, as compared to $15,000$7,000 in the same period of 2021.2022. The decreaseincrease resulted from lowerhigher earnings on short-term investments driven by lowerhigher interest rates and a lower average balance ofincreased short-term investments.investment balances.

 

Interest expense

Interest expense was $0.2$0.1 million for the three months ended March 31, 2022,2023, as compared to $1.4$0.2 million in the same period of 2021.2022. The decrease results primarily from the resolution$5.0 million settlement payment made in November 2022 of a disputed liability owed to our prior licensor, REGENXBIO, Inc.

 

Change in fair value of warrant liabilities

The change in fair value of warrant liabilities was a gain of $2.3 million for the three months ended March 31, 2023, as compared to a loss of $1.3 million for the same period in 2022.

We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. The change in the fair value of warrant liabilities was primarily due to the reduction in our stock price year over the year and a shorter term.

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Other income (loss)

Other income was $0.4 million for the three months ended March 31, 2023, as compared to other loss of $6,000 in the same period of 2022. The change was primarily a result of other income related to a refund of overpayment of franchise taxes.

 

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows for the Three Months Ended March 31, 20222023 and 20212022

 For the three months ended March 31,  For the three months ended 
($ in thousands) 2022  2021  March 31, 2023  March 31, 2022 
Total cash and cash equivalents (used in) /provided by:        
     
Total cash, cash equivalents and restricted cash (used in) provided by:        
Operating activities $(13,687) $(13,585) $(11,744) $(13,687)
Investing activities  1,075   9,376   2,211   1,075 
Financing activities  -   5,878   (4)  — 
Net (decrease)/increase in cash and cash equivalents $(12,612) $1,669 
Net decrease in cash, cash equivalents and restricted cash $(9,537) $(12,612)

 

Operating activities

Net cash used in operating activities was $11.7 million for the three months ended March 31, 2023, primarily comprised of our net loss of $9.1 million and decreases in operating assets and liabilities of $2.0 million and net non-cash charges of $0.6 million.

Net cash used in operating activities was $13.7 million for the three months ended March 31, 2022, primarily comprised of our net loss of $20.8$22.1 million and a decrease in operating assets and liabilities of $1.2$1.1 million, partially offset by net non-cash charges of $8.3$9.5 million.

Net cash used in operating activities was $13.6 million for the three months ended March 31, 2021, primarily comprised of our net loss of $16.0 million and decrease in operating assets and liabilities of $0.7 million, partially offset by net non-cash charges of $3.1 million

 

Investing activities

Net cash provided by investing activities was $2.2 million for the three months ended March 31, 2023, primarily comprised of proceeds from maturities of short-term investments of $10.4 million, partially offset by purchases of short-term investments of $8.0 million and capital expenditures of $0.2 million.

Net cash provided by investing activities was $1.1 million for the three months ended March 31, 2022, primarily comprised of proceeds from maturities of short-term investments of $8.7 million, partially offset by purchases of short-term investments of $7.5 million and capital expenditures of $0.1 million.

 

Financing activities

Net cash provided by investingused in financing activities was $9.4 million$4,000 for the three months ended March 31, 2021,2023, primarily comprised of proceeds from maturitiesthe net settlement of short-term investments of $25.0 million, partially offset by purchases of short-term investments of $15.2 million and capital expenditures of $0.4 million.

Financing activities

Net cash provided by financing activities was $5.9 million for the three months ended March 31, 2021, primarily comprised of proceeds of $5.2 million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and proceeds of $0.7 million from the exercise of stock options.restricted share awards.

 

We have historically funded our operations primarily through sales of common stock. The COVID-19 pandemic has negatively affected the global economy and created significant volatility and disruption of financial markets. An extended period of economic disruption could negatively affect our business, financial condition, and access to sources of liquidity.

 

Our principal source of liquidity is cash, cash equivalents, restricted cash and short-term investments, collectively referred to as our cash resources. As of March 31, 2022,2023, our cash resources were $37.2$40.7 million. Following a comprehensive portfolio review in early 2022, we have decided to focus our research and development resources on the EB-101 program with the objective of reducing operating expenses and extending our cash runway. As part of this portfolio prioritization, we have intensified our pursuit of a strategic partnership to take over development activities for our AAV-based gene therapy ABO-102 for MPS IIIA and we have discontinued development of our AAV-based gene therapy ABO-101 for MPS IIIB. Based upon these current operating plans, our ability to access additional financial resources and/or our financial flexibility to further reduce operating expenses if required, weWe believe that we haveour current cash and cash equivalents, restricted cash and short-term investments are sufficient resources to fund operations through at least the next 12 months from the date of this Quarterly Reportreport on Form 10-Q. We willmay need to secure additional funding beyond the next 12 months to carry out all of our planned research and development activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on our future prospects.

 

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On August 17, 2018, we entered into

We have an open market sale agreement with Jefferies LLC. PursuantLLC (as amended, the “ATM Agreement”) pursuant to the terms of this agreement,which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150$150.0 million. Any sales of shares pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. On November 19, 2021,We are currently subject to General Instruction I.B.6 of Form S-3, as a result of which the amount of funds we entered into an amendment to the agreement (the “Amendment,” and as amended, the “ATM Agreement”)can raise through primary public offerings of securities in connection with the filing of a new shelfany 12-month period using our registration statement on Form S-3 (File No. 333-256850) (the “Registration Statement”), filed with the SEC on June 7, 2021 and declared effective by the SEC on October 22, 2021. The Amendment amends the ATM Agreementis limited to reflect the filingone-third of the new Registration Statement (dueaggregate market value of the voting and non-voting common equity held by non-affiliates. We remain subject to the prior Form S-3 (File No. 333-224867) expiring in June 2021).this one-third limitation until such time our public float exceeds $75 million. We did not sell any shares of our common stock under the ATM Agreement during the three months ended March 31, 2022. Cumulatively, as of March 31, 2022, we have sold an aggregate of 6,758,74498,560 shares of our common stock under the ATM Agreement and received $25.0recorded a receivable of $0.3 million of net proceeds.proceeds for the three months ended March 31, 2023.

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Since our inception, we have incurred negative cash flows from operations and have expended, and expect to continue to expend substantial funds to complete our planned product development efforts. We have not been profitable since inception and to date have received limited revenues from the sale of products.products or licenses. We expect to incur losses for the next several years as we continue to invest in product research and development, preclinical studies, clinical trials, and regulatory compliance and cannot provide assurance that we will ever be able to generate sufficient product sales or royalty revenue to achieve profitability on a sustained basis, or at all.

 

If we raise additional funds by selling additional equity securities, the relative equity ownership of our existing investors will be diluted, and the new investors could obtain terms more favorable than previous investors. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.

 

We are carefully and continually reassessing key business activities and all associated spending decisions. Nonetheless, we are spending necessary funds on manufacturing activities and preclinical studies and clinical trials of potential products, including research and development with respect to our acquired and developed technology. Our future capital requirements and adequacy of available funds depend on many factors, including:

 

 ●the impact to our business, operations, and clinical programs from the COVID-19 pandemic and related effects on the U.S. and global economy;
●the successful development, regulatory approval and commercialization of our cell and gene therapy and other product candidates;
 ●the ability to establish and maintain collaborative arrangements with corporate partners for the research, development, and commercialization of products;
 ●continued scientific progress in our research and development programs;
 ●the magnitude, scope and results of preclinical testing and clinical trials;
 ●the costs involved in filing, prosecuting, and enforcing patent claims;
 ●the costs involved in conducting clinical trials;
 ●competing technological developments;any continuing impact to our business, operations, and clinical programs from the COVID-19 pandemic and government actions related thereto;
 ●the cost of manufacturing and scale-up;competing technological developments;
 ●the cost of manufacturing and scale-up;
●the ability to establish and maintain effective commercialization arrangements and activities; and
 ●the successful outcome of our regulatory filings.

 

Due to uncertainties and certain of the risks described above, our ability to successfully commercialize our product candidates, our ability to obtain applicable regulatory approval to market our product candidates, our ability to obtain necessary additional capital to fund operations in the future, our ability to successfully manufacture our products and our product candidates in clinical quantities or for commercial purposes, government regulation to which we are subject, the uncertainty associated with preclinical and clinical testing, intense competition that we face, market acceptance of our products, the potential necessity of licensing technology from third parties and protection of our intellectual property, it is not possible to reliably predict future spending or time to completion by project or product category or the period in which material net cash inflows from significant projects are expected to commence. If we are unable to timely complete a particular project, our research and development efforts could be delayed or reduced, our business could suffer depending on the significance of the project and we might need to raise additional capital to fund operations, as discussed in the risks above.

 

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We plan to continue our policy of investing any available funds in suitable certificates of deposit, money market funds, government securities and investment-grade, interest-bearing securities. We do not invest in derivative financial instruments.

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Critical Accounting Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:

 

 ●it requires assumptions to be made that were uncertain at the time the estimate was made, and
 ●changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition.

 

While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material. For a discussion of the critical accounting estimates that affect the unaudited condensed consolidated financial statements, see “Critical Accounting Estimates” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

 

See Note 1 to our unaudited condensed consolidated financial statements for a discussion of our significant accounting policies.

 

Recently Issued Accounting Standards Not Yet Effective or Adopted

 

Management does not believe that anySee Note 1 to our unaudited condensed consolidated financial statements for a discussion of recently issued butaccounting standards not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.or adopted.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management and consultants, including the Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls and Procedures”), as of March 31, 2022,2023, as such term is defined in Rules 13a-15(e)13a-15I and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Conclusion of Evaluation — Based on this Disclosure Controls and Procedures evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our Disclosure Controls and Procedures as of March 31, 20222023 were effective.

 

Changes in Internal Control Over Financial Reporting – There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

NoneNone.

 

ITEM 1A. RISK FACTORS

 

Our business and financial results are subject to numerous risks and uncertainties. As a result, the risks and uncertainties discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K10-K/A for the year ended December 31, 20212022 should be carefully considered. There have been no material changes in the assessment of our risk factors from those set forth in our Annual Report on Form 10-K10-K/A for the year ended December 31, 2021.2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) The following table provides information about purchases of equity securities that are registered pursuant to Section 12 of the Exchange Act for the quarter ended March 31, 2023:

  Total number of shares (or units) purchased (a)  Average price paid per share (or unit) 
Shares delivered or withheld pursuant to restricted stock awards        
January 1, 2023 - January 31, 2023  —  $— 
February 1, 2023 - February 28, 2023  132  $2.27 
March 1, 2023 - March 31, 2023  1,792  $2.49 
   1,924  $2.48 

(a)Reflects shares of common stock surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock.

ITEM 6. EXHIBITS

See Exhibit Index below, which is incorporated by reference herein.

Exhibit Index

Exhibits:

3.1Amended and Restated Certificate of Incorporation of Abeona Therapeutics Inc.
3.2Amended and Restated Bylaws of Abeona Therapeutics Inc.
10.1Letter Agreement, dated February 28, 2022, between the Company and Joseph Vazzano.
31.1 Principal Executive Officer Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
   
31.2 Principal Financial Officer Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
   
32* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101 The following materials from Abeona’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022,2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 31, 20222023 and December 31, 2021,2022 (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2023 and 2022 and 2021,(unaudited), (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 and 2021,(unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 and 2021,(unaudited), and (v) Notes to Condensed Consolidated Financial Statements.Statements (unaudited).

 

* Pursuant to Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filing.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  ABEONA THERAPEUTICS INC.
    
Date:May 13, 202211, 2023By:/s/ Vishwas Seshadri
   Vishwas Seshadri
   President and Chief Executive Officer
   (Principal Executive Officer)
    
Date:May 13, 202211, 2023By:/s/ Joseph Vazzano
   Joseph Vazzano
   Chief Financial Officer
   (Principal Financial Officer)

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