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 June 30, 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 incorporation or | (I.R.S. Employer
|
13306555 Carnegie Avenue of the Americas, 33rd Floor, New York4thFloor
Cleveland, NYOH4410310019
(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 class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, $0.01 par value | ABEO | Nasdaq Capital Market |
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 registrantsregistrant’s common stock as of August 1, 20222023 was shares.
ABEONA THERAPEUTICS INC.
Form 10-Q
For the Quarter Ended June 30, 20222023
INDEX
| 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 abilityplans to continue assubmit a going concern; our Phase 3 clinical trial (VIITAL™)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 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 EB-101 could potentially benefit patients with RDEB; development 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 successfully execute our Phase 3 clinical trialsubmit a Biologics License Application for patients with RDEB;EB-101 and the outcome thereof; our ability to find a potential commercialization partner for EB-101; our ability to access our existing at-the-market sale agreement; 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; 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; 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
ABEONA THERAPEUTICS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In$ in thousands, except share and per share amounts)
June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,133 | $ | 32,938 | ||||
| Short-term investments | 13,963 | 12,086 | ||||||
| Restricted cash | 5,891 | 5,891 | ||||||
| Accounts receivable | 1,000 | 3,000 | ||||||
| Other receivables | 1,869 | — | ||||||
| Prepaid expenses and other current assets | 1,440 | 2,377 | ||||||
| Total current assets | 30,296 | 56,292 | ||||||
| Property and equipment, net | 7,460 | 12,339 | ||||||
| Right-of-use lease assets | 6,943 | 9,403 | ||||||
| Licensed technology, net | — | 1,384 | ||||||
| Other assets | 20 | 168 | ||||||
| Total assets | $ | 44,719 | $ | 79,586 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,738 | $ | 4,325 | ||||
| Accrued expenses | 5,331 | 5,585 | ||||||
| Current portion of lease liability | 1,798 | 1,818 | ||||||
| Current portion of payable to licensor | 4,818 | 4,599 | ||||||
| Deferred revenue | — | 296 | ||||||
| Total current liabilities | 13,685 | 16,623 | ||||||
| Payable to licensor | 4,011 | 3,828 | ||||||
| Other long-term liabilities | 200 | 200 | ||||||
| Long-term lease liabilities | 6,737 | 7,560 | ||||||
| Total liabilities | 24,633 | 28,211 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - $ par value; authorized shares; shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | — | — | ||||||
| Common stock - $ par value; authorized shares; and shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 1,467 | 1,472 | ||||||
| Additional paid-in capital | 703,379 | 705,570 | ||||||
| Accumulated deficit | (684,726 | ) | (655,640 | ) | ||||
| Accumulated other comprehensive loss | (34 | ) | (27 | ) | ||||
| Total stockholders’ equity | 20,086 | 51,375 | ||||||
| Total liabilities and stockholders’ equity | $ | 44,719 | $ | 79,586 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
ABEONA THERAPEUTICS INC. AND SUBSIDIARIESCondensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues: | ||||||||||||||||
| License and other revenues | $ | 1,000 | $ | — | $ | 1,346 | $ | — | ||||||||
| Expenses: | ||||||||||||||||
| Royalties | 350 | — | 350 | — | ||||||||||||
| Research and development | 6,658 | 8,533 | 17,203 | 16,868 | ||||||||||||
| General and administrative | 3,460 | 5,182 | 7,684 | 11,444 | ||||||||||||
| Impairment of licensed technology | — | — | 1,355 | — | ||||||||||||
| Impairment of right-of-use lease asset | — | — | 1,561 | — | ||||||||||||
| Impairment of construction-in-progress | (1,460 | ) | — | 1,792 | — | |||||||||||
| Total expenses | 9,008 | 13,715 | 29,945 | 28,312 | ||||||||||||
| Loss from operations | (8,008 | ) | (13,715 | ) | (28,599 | ) | (28,312 | ) | ||||||||
| Interest and other income | 30 | 8 | 31 | 23 | ||||||||||||
| Interest expense | (317 | ) | (1,500 | ) | (518 | ) | (2,920 | ) | ||||||||
| Net loss | $ | (8,295 | ) | $ | (15,207 | ) | $ | (29,086 | ) | $ | (31,209 | ) | ||||
| Deemed dividends related to Series A and Series B Convertible Redeemable Preferred Stock | (3,782 | ) | — | (3,782 | ) | — | ||||||||||
| Net loss attributable to Common Shareholders | $ | (12,077 | ) | $ | (15,207 | ) | $ | (32,868 | ) | $ | (31,209 | ) | ||||
| Basic and diluted loss per common share | $ | (2.08 | ) | $ | (3.93 | ) | $ | (5.67 | ) | $ | (8.18 | ) | ||||
| Weighted average number of common shares outstanding – basic and diluted | 5,806,473 | 3,864,791 | 5,800,822 | 3,817,380 | ||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized gains related to available-for-sale debt securities | (4 | ) | (4 | ) | (7 | ) | 9 | |||||||||
| Comprehensive losses | $ | (12,081 | ) | $ | (15,211 | ) | $ | (32,875 | ) | $ | (31,200 | ) | ||||
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,225 | $ | 14,217 | ||||
| Short-term investments | 30,547 | 37,932 | ||||||
| Restricted cash | 338 | 338 | ||||||
| Accounts receivable | 3,500 | — | ||||||
| Other receivables | 2,227 | 188 | ||||||
| Prepaid expenses and other current assets | 1,201 | 424 | ||||||
| Total current assets | 44,038 | 53,099 | ||||||
| Property and equipment, net | 4,489 | 5,741 | ||||||
| Right-of-use lease assets | 4,915 | 5,331 | ||||||
| Other assets | 108 | 43 | ||||||
| Total assets | $ | 53,550 | $ | 64,214 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 3,477 | $ | 1,811 | ||||
| Accrued expenses | 4,161 | 3,991 | ||||||
| Current portion of lease liability | 1,597 | 1,773 | ||||||
| Other current liabilities | 205 | 204 | ||||||
| Total current liabilities | 9,440 | 7,779 | ||||||
| Payable to licensor | 4,367 | 4,163 | ||||||
| Long-term lease liabilities | 4,377 | 5,854 | ||||||
| Warrant liabilities | 26,021 | 19,657 | ||||||
| Total liabilities | 44,205 | 37,453 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - $ par value; authorized shares; shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | — | — | ||||||
| Common stock - $ par value; authorized shares; and shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 215 | 177 | ||||||
| Additional paid-in capital | 730,322 | 722,049 | ||||||
| Accumulated deficit | (721,097 | ) | (695,336 | ) | ||||
| Accumulated other comprehensive loss | (95 | ) | (129 | ) | ||||
| Total stockholders’ equity | 9,345 | 26,761 | ||||||
| Total liabilities and stockholders’ equity | $ | 53,550 | $ | 64,214 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
ABEONA THERAPEUTICS INC. AND SUBSIDIARIESCondensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||||||||||||||
| Three months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
Convertible Redeemable Preferred Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | — | $ | — | — | $ | — | 5,883,196 | $ | 1,471 | $ | 706,433 | $ | (676,431 | ) | $ | (30 | ) | $ | 31,443 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | 724 | — | — | 724 | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations and shares settled for tax witholding settlement | — | — | — | — | (12,821 | ) | (4 | ) | 4 | — | — | — | ||||||||||||||||||||||||||||
| Issuance of Series A and Series B Convertible Redeemable Preferred Stock, net of issuance costs | 1,000,006 | 17,974 | 250,005 | 4,494 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Deemed dividends related to Series A and Series B Convertible Redeemable Preferred Stock | — | 3,026 | — | 756 | — | — | (3,782 | ) | — | — | (3,782 | ) | ||||||||||||||||||||||||||||
| Redemption of Series A and Series B Convertible Redeemable Preferred Stock | (1,000,006 | ) | (21,000 | ) | (250,005 | ) | (5,250 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (8,295 | ) | — | (8,295 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2022 | — | $ | — | — | $ | — | 5,870,375 | $ | 1,467 | $ | 703,379 | $ | (684,726 | ) | $ | (34 | ) | $ | 20,086 | |||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||||||||||||||
| Six months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
Convertible Redeemable Preferred Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | — | $ | — | — | $ | — | 5,888,217 | $ | 1,472 | $ | 705,570 | $ | (655,640 | ) | $ | (27 | ) | $ | 51,375 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | 1,586 | — | — | 1,586 | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations and shares settled for tax witholding settlement | — | — | — | — | (17,842 | ) | (5 | ) | 5 | — | — | — | ||||||||||||||||||||||||||||
| Issuance of Series A and Series B Convertible Redeemable Preferred Stock | 1,000,006 | 17,974 | 250,005 | 4,494 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Deemed dividends related to Series A and Series B Convertible Redeemable Preferred Stock | — | 3,026 | — | 756 | — | — | (3,782 | ) | — | — | (3,782 | ) | ||||||||||||||||||||||||||||
| Redemption of Series A and Series B Convertible Redeemable Preferred Stock | (1,000,006 | ) | (21,000 | ) | (250,005 | ) | (5,250 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (29,086 | ) | — | (29,086 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2022 | — | $ | — | — | $ | — | 5,870,375 | $ | 1,467 | $ | 703,379 | $ | (684,726 | ) | $ | (34 | ) | $ | 20,086 | |||||||||||||||||||||
Abeona Therapeutics Inc. and Subsidiaries
ABEONA THERAPEUTICS INC. AND SUBSIDIARIESCondensed Consolidated Statements of Stockholders’ Equity ContinuedOperations and Comprehensive Loss
($ in thousands, except share and per share amounts)
(Unaudited)
(In thousands, except share amounts)
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues: | ||||||||||||||||
| License and other revenues | $ | 3,500 | $ | 1,000 | $ | 3,500 | $ | 1,346 | ||||||||
| Expenses: | ||||||||||||||||
| Royalties | 1,575 | 350 | 1,575 | 350 | ||||||||||||
| Research and development | 8,523 | 6,658 | 16,564 | 17,203 | ||||||||||||
| General and administrative | 5,021 | 3,460 | 9,018 | 7,684 | ||||||||||||
| Impairment of licensed technology | — | — | — | 1,355 | ||||||||||||
| Loss/(gain) on right-of-use lease assets | (1,065 | ) | — | (1,065 | ) | 1,561 | ||||||||||
| Impairment of construction-in-progress | — | (1,460 | ) | — | 1,792 | |||||||||||
| Total expenses | 14,054 | 9,008 | 26,092 | 29,945 | ||||||||||||
| Loss from operations | (10,554 | ) | (8,008 | ) | (22,592 | ) | (28,599 | ) | ||||||||
| Interest income | 417 | 31 | 781 | 38 | ||||||||||||
| Interest expense | (103 | ) | (200 | ) | (204 | ) | (401 | ) | ||||||||
| Change in fair value of warrant liabilities | (8,629 | ) | 4,198 | (6,364 | ) | 2,945 | ||||||||||
| Other income (expense) | 2,215 | (118 | ) | 2,618 | (124 | ) | ||||||||||
| Net loss | $ | (16,654 | ) | $ | (4,097 | ) | $ | (25,761 | ) | $ | (26,141 | ) | ||||
| Deemed dividends related to Series A and Series B Convertible Redeemable Preferred Stock | — | (3,782 | ) | — | (3,782 | ) | ||||||||||
| Net loss attributable to Common Shareholders | $ | (16,654 | ) | $ | (7,879 | ) | $ | (25,761 | ) | $ | (29,923 | ) | ||||
| Basic and diluted loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized gains (losses) related to available-for-sale debt securities | (30 | ) | (4 | ) | 34 | (7 | ) | |||||||||
| Comprehensive loss | $ | (16,684 | ) | $ | (7,883 | ) | $ | (25,727 | ) | $ | (29,930 | ) | ||||
| Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||
| Three months ended June 30, 2021 | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||
| Balance at March 31, 2021 | 3,961,557 | $ | 990 | $ | 680,103 | $ | (586,706 | ) | $ | 3 | $ | 94,390 | ||||||||||||
| Stock-based compensation expense | — | — | 2,428 | — | — | 2,428 | ||||||||||||||||||
| Issuance of common stock under open market sale agreement | 59,409 | 16 | 2,439 | — | — | 2,455 | ||||||||||||||||||
| Issuance of common stock in connection with the exercise of stock options | 821 | — | 24 | — | — | 24 | ||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations | 28,254 | 7 | (7 | ) | — | — | — | |||||||||||||||||
| Net loss | — | — | — | (15,207 | ) | — | (15,207 | ) | ||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||
| Balance at June 30, 2021 | 4,050,041 | $ | 1,013 | $ | 684,987 | $ | (601,913 | ) | $ | (1 | ) | $ | 84,086 | |||||||||||
| Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||
| Six months ended June 30, 2021 | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income/(Loss) | Equity | |||||||||||||||||||
| Balance at December 31, 2020 | 3,845,267 | $ | 961 | $ | 672,304 | $ | (570,704 | ) | $ | (10 | ) | $ | 102,551 | |||||||||||
| Stock-based compensation expense | — | — | 4,378 | — | — | 4,378 | ||||||||||||||||||
| Issuance of common stock under open market sale agreement | 122,542 | 32 | 7,634 | — | — | 7,666 | ||||||||||||||||||
| Issuance of common stock in connection with the exercise of stock options | 20,349 | 5 | 686 | — | — | 691 | ||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations | 61,883 | 15 | (15 | ) | — | — | — | |||||||||||||||||
| Net loss | — | — | — | (31,209 | ) | — | (31,209 | ) | ||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | 9 | 9 | ||||||||||||||||||
| Balance at June 30, 2021 | 4,050,041 | $ | 1,013 | $ | 684,987 | $ | (601,913 | ) | $ | (1 | ) | $ | 84,086 | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
ABEONA THERAPEUTICS INC. AND SUBSIDIARIESAbeona Therapeutics Inc. and Subsidiaries
Condensed Consolidated Statements of Cash FlowsStockholders’ Equity
($ in thousands, except share amounts)
(Unaudited)
(In thousands)
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||
| Three months ended June 30, 2023 | ||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||
| Balance at March 31, 2023 | - | - | 17,929,344 | $ | 179 | $ | 723,069 | $ | (704,443 | ) | $ | (65 | ) | $ | 18,740 | |||||||||||
| Stock-based compensation expense | — | — | 927 | — | — | 927 | ||||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations and shares settled for tax withholding settlement | 1,657,052 | 17 | (22 | ) | — | — | (5 | ) | ||||||||||||||||||
| Issuance of common stock, net of offering costs under open market sale agreement (ATM) | 1,891,761 | 19 | 6,348 | — | — | 6,367 | ||||||||||||||||||||
| Net loss | - | - | — | — | — | (16,654 | ) | — | (16,654 | ) | ||||||||||||||||
| Other comprehensive loss | — | — | — | — | (30 | ) | (30 | ) | ||||||||||||||||||
| Balance at June 30, 2023 | - | - | 21,478,157 | $ | 215 | $ | 730,322 | $ | (721,097 | ) | $ | (95 | ) | $ | 9,345 | |||||||||||
| 2022 | 2021 | |||||||
| For the six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (29,086 | ) | $ | (31,209 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,584 | 1,641 | ||||||
| Stock-based compensation expense | 1,586 | 4,378 | ||||||
| Non-cash impairment of licensed technology | 1,355 | — | ||||||
| Non-cash impairment of right-of-use lease asset | 1,561 | — | ||||||
| Non-cash impairment of construction-in-progress | 1,792 | — | ||||||
| Accretion and interest on short-term investments | (177 | ) | 266 | |||||
| Amortization of right-of-use lease assets | 899 | 543 | ||||||
| Non-cash interest | 402 | — | ||||||
| Loss on disposal of property and equipment | 106 | — | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | 2,000 | — | ||||||
| Other receivables | (1,827 | ) | — | |||||
| Prepaid expenses and other current assets | 937 | 1,387 | ||||||
| Other assets | 148 | (22 | ) | |||||
| Accounts payable, accrued expenses and lease liabilities | (3,684 | ) | (4,977 | ) | ||||
| Change in payable to licensor | (296 | ) | 2,919 | |||||
| Net cash used in operating activities | (22,700 | ) | (25,074 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (103 | ) | (501 | ) | ||||
| Proceeds from disposal of property and equipment | 1,487 | — | ||||||
| Purchases of short-term investments | (34,442 | ) | (15,164 | ) | ||||
| Proceeds from maturities of short-term investments | 32,735 | 46,965 | ||||||
| Net cash (used in) provided by investing activities | (323 | ) | 31,300 | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from open market sales of common stock | — | 7,666 | ||||||
| Proceeds from exercise of stock options | — | 691 | ||||||
| Proceeds from issuance of Series A and Series B Convertible Redeemable Preferred Stock, net of issuance costs | 22,468 | — | ||||||
| Redemption of Series A and Series B Convertible Redeemable Preferred Stock | (26,250 | ) | — | |||||
| Net cash (used in) provided by financing activities | (3,782 | ) | 8,357 | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | (26,805 | ) | 14,583 | |||||
| Cash, cash equivalents and restricted cash at beginning of period | 38,829 | 13,571 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 12,024 | $ | 28,154 | ||||
| Supplemental cash flow information: | ||||||||
| Cash and cash equivalents | $ | 6,133 | $ | 27,179 | ||||
| Restricted cash | 5,891 | 975 | ||||||
| Total cash, cash equivalents and restricted cash | $ | 12,024 | $ | 28,154 | ||||
| Six months ended June 30, 2023 | ||||||||||||||||||||||||||
| 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 | — | — | 1,697 | — | — | 1,697 | ||||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations and shares settled for tax withholding settlement | 1,768,116 | 18 | (27 | ) | — | — | (9 | ) | ||||||||||||||||||
| Issuance of common stock, net of offering costs under open market sale agreement (ATM) | 1,990,321 | 20 | 6,603 | — | — | 6,623 | ||||||||||||||||||||
| Net loss | - | - | — | — | — | (25,761 | ) | — | (25,761 | ) | ||||||||||||||||
| Other comprehensive income | — | — | — | — | 34 | 34 | ||||||||||||||||||||
| Balance at June 30, 2023 | - | - | 21,478,157 | $ | 215 | $ | 730,322 | $ | (721,097 | ) | $ | (95 | ) | $ | 9,345 | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
| 5 |
Abeona Therapeutics Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
($ in thousands, except share amounts)
(Unaudited)
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||||||||
| Three months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Convertible Redeemable Preferred Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | — | $ | — | — | $ | — | 5,883,196 | $ | 1,471 | $ | 697,426 | $ | (677,684 | ) | $ | (30 | ) | $ | 21,183 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | 724 | — | — | 724 | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations | — | — | — | — | (12,821 | ) | (4 | ) | 4 | — | — | — | ||||||||||||||||||||||||||||
| Issuance of Series A and Series B Convertible Redeemable Preferred Stock | 1,000,006 | 17,974 | 250,005 | 4,494 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Deemed dividends related to Series A and Series B Convertible Redeemable Preferred Stock | — | 3,026 | — | 756 | — | — | (3,782 | ) | — | — | (3,782 | ) | ||||||||||||||||||||||||||||
| Redemption of Series A and Series B Convertible Redeemable Preferred Stock | (1,000,006 | ) | (21,000 | ) | (250,005 | ) | (5,250 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (4,097 | ) | — | (4,097 | ) | ||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2022 | — | $ | — | — | $ | — | 5,870,375 | $ | 1,467 | $ | 694,372 | $ | (681,781 | ) | $ | (34 | ) | $ | 14,024 | |||||||||||||||||||||
| Six months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Convertible Redeemable Preferred Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | — | $ | — | — | $ | — | 5,888,217 | $ | 1,472 | $ | 696,563 | $ | (655,640 | ) | $ | (27 | ) | $ | 42,368 | |||||||||||||||||||||
| Balance | — | $ | — | — | $ | — | 5,888,217 | $ | 1,472 | $ | 696,563 | $ | (655,640 | ) | $ | (27 | ) | $ | 42,368 | |||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | 1,586 | — | — | 1,586 | ||||||||||||||||||||||||||||||
| Issuance of common stock in connection with restricted share awards, net of cancellations | — | — | — | — | (17,842 | ) | (5 | ) | 5 | — | — | — | ||||||||||||||||||||||||||||
| Issuance of Series A and Series B Convertible Redeemable Preferred Stock | 1,000,006 | 17,974 | 250,005 | 4,494 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Deemed dividends related to Series A and Series B Convertible Redeemable Preferred Stock | — | 3,026 | — | 756 | — | — | (3,782 | ) | — | — | (3,782 | ) | ||||||||||||||||||||||||||||
| Redemption of Series A and Series B Convertible Redeemable Preferred Stock | (1,000,006 | ) | (21,000 | ) | (250,005 | ) | (5,250 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | (26,141 | ) | — | (26,141 | ) | ||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | — | — | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
| Balance at June 30, 2022 | — | $ | — | — | $ | — | 5,870,375 | $ | 1,467 | $ | 694,372 | $ | (681,781 | ) | $ | (34 | ) | $ | 14,024 | |||||||||||||||||||||
| Balance | — | $ | — | — | $ | — | 5,870,375 | $ | 1,467 | $ | 694,372 | $ | (681,781 | ) | $ | (34 | ) | $ | 14,024 | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
| 6 |
Abeona Therapeutics Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
| 2023 | 2022 | |||||||
| For the six months ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (25,761 | ) | $ | (26,141 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation and amortization | 1,276 | 1,584 | ||||||
| Stock-based compensation expense | 1,697 | 1,586 | ||||||
| Change in fair value of warrant liabilities | 6,364 | (2,945 | ) | |||||
| Non-cash impairment of licensed technology | — | 1,355 | ||||||
| Non-cash loss/(gain) of right-of-use lease assets | (1,065 | ) | 1,561 | |||||
| Non-cash impairment of construction-in-progress | — | 1,792 | ||||||
| Accretion and interest on short-term investments | (74 | ) | (177 | ) | ||||
| Amortization of right-of-use lease assets | 450 | 899 | ||||||
| Non-cash interest | 204 | 402 | ||||||
| Loss on disposal of property and equipment | 47 | 106 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | (3,500 | ) | 2,000 | |||||
| Other receivables | (2,039 | ) | (1,827 | ) | ||||
| Prepaid expenses and other current assets | (777 | ) | 937 | |||||
| Other assets | (65 | ) | 148 | |||||
| Accounts payable, accrued expenses and lease liabilities | 1,214 | (3,684 | ) | |||||
| Other current liabilities | 1 | — | ||||||
| Change in payable to licensor | — | (296 | ) | |||||
| Net cash used in operating activities | (22,028 | ) | (22,700 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (250 | ) | (103 | ) | ||||
| Proceeds from disposal of property and equipment | 179 | 1,487 | ||||||
| Purchases of short-term investments | (14,156 | ) | (34,442 | ) | ||||
| Proceeds from maturities of short-term investments | 21,649 | 32,735 | ||||||
| Net cash provided by (used in) investing activities | 7,422 | (323 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from ATM sales of common stock, net of issuance costs | 6,623 | — | ||||||
| Proceeds from net settlement of restricted share awards | (9 | ) | — | |||||
| Proceeds from issuance of Series A and Series B Convertible Redeemable Preferred Stock, net of issuance costs | — | 22,468 | ||||||
| Redemption of Series A and Series B Convertible Redeemable Preferred Stock | — | (26,250 | ) | |||||
| Net cash provided by (used in) financing activities | 6,614 | (3,782 | ) | |||||
| Net decrease in cash, cash equivalents and restricted cash | (7,992 | ) | (26,805 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 14,555 | 38,829 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 6,563 | $ | 12,024 | ||||
| Supplemental cash flow information: | ||||||||
| Cash and cash equivalents | $ | 6,225 | $ | 6,133 | ||||
| Restricted cash | 338 | 5,891 | ||||||
| Total cash, cash equivalents and restricted cash | $ | 6,563 | $ | 12,024 | ||||
| Supplemental non-cash flow information: | ||||||||
| Right-of-use asset obtained in exchange for new operating lease liabilities | $ | 419 | $ | — | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
| 7 |
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 the Company’s subsidiaries, “Abeona” or the “Company”), a Delaware corporation, is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening rare genetic diseases. The 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.. The Company’s development portfolio also features AAV-basedadeno-associated virus (“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 the Company has exclusively licensed from the University of North Carolina at Chapel Hill, and internal AAV vector research programs.
Reverse Stock SplitBasis of Presentation
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 $ 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”) remains at 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.
As a result of the Reverse Stock Split, every 25 shares of Common Stock outstanding immediately prior to the effectiveness of the Reverse Stock Split were combined and converted into one share of New Common Stock without any change in the par value per share. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to a fraction of one share of New Common Stock as a result of the Reverse Stock Split instead received an amount in cash equal to such fraction multiplied by the closing sale price of Common Stock on the Nasdaq Capital Market on July 1, 2022, as adjusted for the Reverse Stock Split.
Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock and warrants outstanding at July 1, 2022, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants. In addition, the number of shares reserved for issuance under the Company’s 2015 Equity Incentive Plan were reduced proportionately.
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, 20212022 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 Company’s audited consolidated financial statements and notes thereto included in the Company’sour 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,April 10, 2023.
Reverse Stock Split
As described in Note 1 to the consolidated financial 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 $ 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 atshares. 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.
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 June 30, 2022,2023, the Company had cash, cash equivalents, restricted cash and short-term investments of $26.037.1 million. For the six months ended June 30, 2022,2023, the Company had cash outflows from operations of $22.722.0 million. The Company has not generated significant revenues and has 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 the Company’s product candidates will require significant additional financing.
| 8 |
The 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 the Company’s product candidates, raising additional capital to continue to fund the Company’s operations, development of competing drugs and therapies and protection of proprietary technology and market acceptance of the Company’s products.technology. As a result of these and other risks and the related uncertainties, there can be no assurance of the Company’s future success.
Subsequent to June 30, 2023, as described in Note 12, the Company raised $25.0 million, with net proceeds of $23.0 million, after offering costs through the issuance of common stock and warrants.
The Company believes that its current cash and cash equivalents, restricted cash and short-term investments are only sufficient resources to fund its operating expenses intooperations through at least the second quarternext 12 months from the date of 2023. However, in order to further advance development and seek potential regulatory approval of the Company’s investigational EB-101 product for RDEB or to advance any of the Company’s preclinical AAV ophthalmology assets, thethis quarterly report on Form 10-Q. The Company wouldmay need to secure additional funds through equityfunding to carry out all of its planned research and development and commercialization activities. If the Company is unable to obtain additional financing or debt offerings, potential upfront payments from potential commercial partners, potential salegenerate license or product revenue, the lack of liquidity and sufficient capital resources could have a priority review voucher, or other potential sources. The Company cannot be certain that additional funding will be availablematerial adverse effect on acceptable terms, or at all. These factors individually and collectively raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date of these interim condensed consolidated financial statements. The interim condensed consolidated financial statements do not contain any adjustments that might result from the resolution of any of the above uncertainty.
its 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.
Other receivables
Other receivables include employee retention credits (“ERC”), sublease rent receivables and other miscellaneous receivables. As of June 30, 2023 and December 31, 2022, the Company had ERC receivables of $2.1 million and nil, respectively.
Summary of Significant Accounting Policies
There have been no new, anticipated or material changes to the significant accounting policies discusseddisclosed in the Company’s Annual Report on Form 10-K10-K/A for the year ended December 31, 2021 that are of significance, or potential significance, to the Company, other than the adoption of accounting pronouncements below.2022.
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 $16,000the 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 during the three months ended June 30,for 2021. The correction of the error resulted in the Company reclassified depreciation and amortization costs of $1.6 million and $32,000 to research and development and general and administrative expenses, respectively, on the condensed consolidated statements of operations and comprehensive loss during the six months ended June 30, 2021. The Company also reclassified certain rent expenses of $0.3 million and $0.6 million from general and administrative to research and development expenses on the condensed consolidated statements of operations and comprehensive loss duringadjusting its quarterly information presented for the three and six months ended June 30, 2021, respectively. Additionally,2022. The matter was correctly presented in the Company also reclassified $fiscal year end December 31, 2022 consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K/A.
5.0 million
The following tables present the effects of restricted cash from prepaid expenses, other current assets and restricted cash and $0.9 millionthe correction of restricted cash from other assets and restricted cashthe prior period error to restricted cash on the condensed consolidated balance sheets asstatement of December 31, 2021.operations and comprehensive loss (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 June 30, 2022 | ||||||||||||
| Condensed Consolidated Statement of Operations and Comprehensive Loss | As Reported | Adjustment | As Revised | |||||||||
| Change in fair value of warrant liabilities | $ | — | $ | 4,198 | $ | 4,198 | ||||||
| Net loss | $ | (8,295 | ) | $ | 4,198 | $ | (4,097 | ) | ||||
| Net loss attributable to Common Shareholders | $ | (12,077 | ) | $ | 4,198 | $ | (7,879 | ) | ||||
| Basic and diluted loss per common share | $ | ( | ) | $ | $ | ( | ) | |||||
| Comprehensive loss | $ | (12,081 | ) | $ | 4,198 | $ | (7,883 | ) | ||||
| 9 |
| For the six months ended June 30, 2022 | ||||||||||||
| Condensed Consolidated Statement of Operations and Comprehensive Loss | As Reported | Adjustment | As Revised | |||||||||
| Change in fair value of warrant liabilities | $ | — | $ | 2,945 | $ | 2,945 | ||||||
| Net loss | $ | (29,086 | ) | $ | 2,945 | $ | (26,141 | ) | ||||
| Net loss attributable to Common Shareholders | $ | (32,868 | ) | $ | 2,945 | $ | (29,923 | ) | ||||
| Basic and diluted loss per common share | $ | ( | ) | $ | $ | ( | ) | |||||
| Comprehensive loss | $ | (32,875 | ) | $ | 2,945 | $ | (29,930 | ) | ||||
The following tables present the effects of the correction of the prior period error to the condensed consolidated cash flow statement (in thousands):
| For the six months ended June 30, 2022 | ||||||||||||
| Condensed Consolidated Cash Flow Statement | As Reported | Adjustment | As Revised | |||||||||
| Net loss | $ | (29,086 | ) | $ | 2,945 | $ | (26,141 | ) | ||||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||||||
| Change in fair value of warrant liabilities | $ | — | $ | (2,945 | ) | $ | (2,945 | ) | ||||
| Net cash provided by operating activities | $ | (22,700 | ) | $ | — | $ | (22,700 | ) | ||||
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 June 30, 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 | |||||
| Additional paid-in capital, March 31, 2022 | $ | 706,433 | $ | (9,007 | ) | $ | 697,426 | |||||
| Additional paid-in capital, March 31, 2022 | $ | 31,443 | $ | (10,260 | ) | $ | 21,183 | |||||
| Net loss | $ | (29,086 | ) | $ | 2,945 | $ | (26,141 | ) | ||||
| Additional paid-in capital, June 30, 2022 | $ | 703,379 | $ | (9,007 | ) | $ | 694,372 | |||||
| Total stockholders’ equity, June 30, 2022 | $ | 20,086 | $ | (6,062 | ) | $ | 14,024 | |||||
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. The 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:
| 2022 | 2021 | |||||||||||||||
For the three and six months ended June 30, | For the three and six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| Stock options | 265,411 | 309,059 | ||||||||||||||
| Restricted stock | 61,108 | 128,725 | ||||||||||||||
| Warrants | 1,788,000 | — | ||||||||||||||
| Total | 2,114,519 | 437,784 | ||||||||||||||
Recently AdoptedNew Accounting Pronouncements
In August 2020, the FASBNo new accounting pronouncement issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies the accounting for convertible instruments by eliminating the requirementor effective had, or is expected to separately account for embedded conversion features as an equity component in certain circumstances. A convertible debt instrument will be reported ashave, a single liability instrument with no separate accounting for an embedded conversion feature unless separate accounting is required for an embedded conversion feature as a derivative or under the substantial premium model. The ASU simplifies the diluted earnings per share calculation by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. Further, the ASU requires enhanced disclosures about convertible instruments. The Company adopted ASU 2020-06 as of January 1, 2022 and there was no material impact on the Company’s condensed consolidated financial statements upon adoption.statements.
| 10 |
NOTE 2 – SHORT-TERM INVESTMENTS
The following table provides a summary of the short-term investments (in thousands):
SCHEDULE OF AVAILABLE FOR SALE SHORT-TERM INVESTMENTS
| June 30, 2022 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
| Available-for-sale, short-term investments | ||||||||||||||||
| U.S. treasury securities | $ | 13,970 | — | (7 | ) | $ | 13,963 | |||||||||
| Total available-for-sale, short-term investments | $ | 13,970 | — | (7 | ) | $ | 13,963 | |||||||||
| June 30, 2023 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
| Available-for-sale, short-term investments: | ||||||||||||||||
| U.S. treasury and federal agency securities | $ | 30,613 | — | (66 | ) | $ | 30,547 | |||||||||
| Total available-for-sale, short-term investments | $ | 30,613 | — | (66 | ) | $ | 30,547 | |||||||||
| 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 available-for-sale, short-term investments | $ | 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 June 30, 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 June 30, 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 orand six months ended June 30, 2022.2023.
There were 0no significant realized gains or losses recognized on the sale or maturity of available-for-sale investments for the three orand six months ended June 30, 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 follows (in thousands):
SCHEDULE OF PROPERTY AND EQUIPMENT
| Useful lives (years) | June 30, 2022 | December 31, 2021 | Useful lives (years) | June 30, 2023 | December 31, 2022 | |||||||||||||||
| Laboratory equipment | 5 | $ | 8,619 | $ | 9,081 | 5 | $ | 7,276 | $ | 7,636 | ||||||||||
| Furniture, software and office equipment | 3 to 5 | 1,909 | 1,896 | 3 to 5 | 991 | 1,379 | ||||||||||||||
| Leasehold improvements | Shorter of remaining lease term or useful life | 8,603 | 8,603 | Shorter of remaining lease term or useful life | 8,603 | 8,605 | ||||||||||||||
| Construction-in-progress | — | 3,219 | ||||||||||||||||||
| Subtotal | 19,131 | 22,799 | 16,870 | 17,620 | ||||||||||||||||
| Less: accumulated depreciation | (11,671 | ) | (10,460 | ) | (12,381 | ) | (11,879 | ) | ||||||||||||
| Total property and equipment, net | $ | 7,460 | $ | 12,339 | $ | 4,489 | $ | 5,741 | ||||||||||||
Depreciation expense was $0.6 million and $0.8 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $1.3 million and $1.6 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. During the three and six months ended June 30, 2022, the Company incurred a loss on disposal of equipment of $0.1 million which is reflected in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.
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 construction-in-progress that was dedicated to the ABO-101 and ABO-102 programs had no future value, and thus the Company recorded an impairment charge of $3.31.8 million for the three months ended March 31, 2022. During the three months ended June 30, 2022, the Company received a $1.5 million refund from a vendor related to the proposed construction-in-progress and recorded a reduction of the impairment charge of $1.5 million. For the six months ended June 30, 2022, the net impairment charge recorded was $1.8 million.2022.
| 11 |
NOTE 4 – LICENSED TECHNOLOGY
On May 15, 2015, the Companywe 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 to expense over the life of the license of 20 years years.. 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 nil and $1.4 million for the three and six months ended June 30, 2022, respectively.2022. There is no
The following table provides a summary remaining net value of licensed technology (in thousands):as of June 30, 2023 and December 31, 2022.
SCHEDULE OF LICENSED TECHNOLOGY
| June 30, 2022 | December 31, 2021 | |||||||
| Licensed technology | $ | 2,156 | $ | 2,156 | ||||
| Less accumulated amortization | (801 | ) | (772 | ) | ||||
| Less impairment charge | (1,355 | ) | — | |||||
| Total licensed technology, net | $ | — | $ | 1,384 | ||||
Amortization expense on licensed technology was nil and $29,000 for the six months ended June 30, 2023 and 2022, respectively. There was no amortization expense for the three months ended June 30, 2022 and 2021, respectively and $29,000 and $44,000 for the six months ended June 30, 2022 and 2021, respectively.2023 or 2022.
NOTE 5 – SETTLEMENT LIABILITYFAIR VALUE MEASUREMENTS
On November 12, 2021,The Company calculates the Company entered into a settlement agreement (“Settlement Agreement”) withfair value of the Company’s priorassets 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 REGENXBIO Inc. (“REGENXBIO”)approximate their carrying amounts due to resolvethe 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 existing disputes betweenfinancial assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the parties. In accordance withmost appropriate level within the Settlement Agreement, the Company agreed to pay REGENXBIO a total of $30.0 million, payable as follows: (1) $20.0 million paid in November 2021 after execution of the Settlement Agreement, (2) $5.0 millionfair value hierarchy based on the first anniversary ofinputs used to determine the effectivefair value at the measurement date 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 defined in the Settlement Agreement.table below.
The following table provides a summary of financial assets measured at fair value on a recurring and non-recurring basis as of June 30, 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 June 30, 2023 | Level 1 | Level 2 | Level 3 | ||||||||||||
| Recurring Assets | ||||||||||||||||
| Cash equivalents | ||||||||||||||||
| Money market fund | $ | 5,678 | $ | 5,678 | $ | — | $ | — | ||||||||
| Short-term investments | ||||||||||||||||
| U.S. treasury and federal agency securities | 30,547 | — | 30,547 | — | ||||||||||||
| Total assets measured at fair value | $ | 36,225 | $ | 5,678 | $ | 30,547 | $ | — | ||||||||
| Liabilities | ||||||||||||||||
| Warrant liabilities | $ | 26,021 | — | — | $ | 26,021 | ||||||||||
| Total liabilities measured at fair value | $ | 26,021 | $ | — | $ | — | $ | 26,021 | ||||||||
| 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 | ||||||||
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 common 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 warrants in the Black-Scholes option-pricing model are as follows:
SCHEDULE OF ESTIMATE FAIR VALUE OF WARRANTS
| June 30, 2023 | December 31, 2022 | |||||||
| Common share price | $ | $ | ||||||
| Expected term (years) | 3.47 – 4.35 | 3.96 – 4.84 | ||||||
| Risk-free interest rate (%) | 4.13% – 4.28% | 3.91% – 4.01% | ||||||
| Volatility (%) | 100.00% – 105.04% | 102.40% – 107.55% | ||||||
As of June 30, 2022,2023, the Company recordedhad outstanding warrant liabilities related to the payables due2022 private placement that allow the holders 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 usingcommon stock at an interest rateexercise price of $9.64.75%. per share. The current portion of the payable due inexpiration date for these warrant liabilities is November 2022 is $4.8 million and the long-term portion due in November 2024 is $4.0 million as of June 30, 2022.2027. As of June 30, 2023 and December 31, 2022, the Company recordedhad outstanding warrant liabilities related to the 2021 public offering that allow the holders to purchase 1,788,000 shares of common stock at an exercise price of $5.09.75 millionper share. The expiration date for these warrant liabilities is December 2026.
The following table provides a summary of restricted cash in the condensed consolidated 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 | ||
| Loss recognized in earnings from change in fair value | 6,364 | |||
| Warrant liabilities as of June 30, 2023 | $ | 26,021 |
NOTE 6 – FAIR VALUE MEASUREMENTSSETTLEMENT LIABILITY
TheOn November 12, 2021, the Company calculatesentered into a settlement agreement (“Settlement Agreement”) with the fair valueCompany’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 $30.0 million, payable as follows: (1) $20.0 million paid in November 2021 after execution of the Company’s assetsSettlement 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, payables 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 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:
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 inputs 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 June 30, 2022 and December 31, 2021 (in thousands):
SCHEDULE OF FAIR VALUE, ASSETS AND LIABILITIES MEASURED ON RECURRING AND NON-RECURRING BASIS
| Description | Fair Value at June 30, 2022 | Level 1 | Level 2 | Level 3 | ||||||||||||
| Recurring Assets: | ||||||||||||||||
| Cash equivalents | ||||||||||||||||
| Money market fund | $ | 2,860 | $ | 2,860 | $ | — | $ | — | ||||||||
| Short-term investments | ||||||||||||||||
| U.S. treasury securities | 13,963 | — | 13,963 | — | ||||||||||||
| Total assets measured at fair value | $ | 16,823 | $ | 2,860 | $ | 13,963 | $ | — | ||||||||
| Description | Fair Value at 31, 2021 | Level 1 | Level 2 | Level 3 | ||||||||||||
| Recurring Assets: | ||||||||||||||||
| Cash equivalents | ||||||||||||||||
| Money market fund | $ | 28,590 | $ | 28,590 | $ | — | $ | — | ||||||||
| Short-term investments | ||||||||||||||||
| U.S. treasury securities | 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 | ||||||||
As of June 30, 2023, the Company recorded the payable due to REGENXBIO in the condensed consolidated balance sheets based on the present value of the remaining payments due to REGENXBIO under the Settlement Agreement using an interest rate of 9.6%. The long-term portion due in November 2024 was $4.4 million and $4.2 million as of June 30, 2023 and December 31, 2022, respectively.
NOTE 7 – ACCRUED EXPENSES
The following table provides a summary of the components of accrued expenses (in thousands):
SCHEDULE OF ACCRUED EXPENSES
| June 30, 2022 | December 31, 2021 | June 30, 2023 | December 31, 2022 | |||||||||||||
| Accrued employee compensation | $ | 1,855 | $ | 1,794 | $ | 1,434 | $ | 2,593 | ||||||||
| Accrued contracted services and other | 3,476 | 3,091 | 2,727 | 1,398 | ||||||||||||
| Accrued sublicense fee owed to licensor | — | 700 | ||||||||||||||
| Total accrued expenses | $ | 5,331 | $ | 5,585 | $ | 4,161 | $ | 3,991 | ||||||||
NOTE 8 – LEASES
The Company leases space under operating leases for administrative, manufacturing and laboratory facilities in Cleveland, Ohio, as well as administrative offices in New York, New York.Ohio. The Company also leases office space in Madrid, Spain as well asNew York, New York, that the Company sublets. The Company also leases certain office equipment under operating leases, which have a non-cancelable lease term of less than one year and, therefore, the Company has elected the practical expedient to exclude these short-term leases from the Company’s right-of-use assets and lease liabilities.
In June 2023, the Company terminated one of its operating leases for office space. The termination resulted in a gain of $1.1 million from the difference of the right-of-use assets and lease liabilities in the three and six months ended June 30, 2023 and is included in loss/(gain) on right-of-use lease assets in the condensed consolidated statement of operations and comprehensive loss.
On March 31, 2022, the Company announced that they were pursuing a strategic partner to take over development activities of ABO-102 and that the 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, the Company recorded an impairment charge of nil and $1.6 million for the three and six months ended June 30, 2022, respectively.2022.
The following table provides a summary of the components of lease costs and rent (in thousands):
SCHEDULE OF COMPONENTS OF LEASE COST
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating lease cost | $ | 353 | $ | 461 | $ | 708 | $ | 933 | ||||||||
| Variable lease cost | 116 | 116 | 215 | 212 | ||||||||||||
| Short-term lease cost | 13 | 20 | 31 | 41 | ||||||||||||
| Total operating lease costs | $ | 482 | $ | 597 | $ | 954 | $ | 1,186 | ||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Operating lease cost | $ | 461 | $ | 434 | $ | 933 | $ | 868 | ||||||||
| Variable lease cost | 116 | 104 | 212 | 239 | ||||||||||||
| Short-term lease cost | 20 | 5 | 41 | 10 | ||||||||||||
| Total operating lease costs | $ | 597 | $ | 543 | $ | 1,186 | $ | 1,117 | ||||||||
| 14 |
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 June 30, 2022 are2023 were as follows:follows (in thousands):
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES
| Maturity of lease liabilities: | (in thousands) | |||||||
| Future minimum lease payments and obligations | Operating Leases | |||||||
| Remainder of 2022 | $ | 892 | ||||||
| 2023 | 1,835 | |||||||
| 2023, remainder | $ | 799 | ||||||
| 2024 | 1,877 | 993 | ||||||
| 2025 | 1,547 | 1,552 | ||||||
| 2026 | 871 | 791 | ||||||
| 2027 | 807 | |||||||
| Thereafter | 3,663 | 2,516 | ||||||
| Total undiscounted operating lease payments | 10,685 | 7,458 | ||||||
| Less: imputed interest | 2,150 | 1,484 | ||||||
| Present value of operating lease liabilities | $ | 8,535 | $ | 5,974 | ||||
The weighted-average remaining term of the Company’s operating leases was 8268 months and the weighted-average discount rate used to measure the present value of the Company’s operating lease liabilities was 7.27.5% as of June 30, 2023.
Future cash receipts from the Company’s sublease agreements as of June 30, 2023 are as follows (in thousands):
SCHEDULE OF FUTURE CASH RECEIPTS FROM OPERATING SUBLEASE
| Operating | ||||
| Future cash receipts | Subleases | |||
| 2023, remainder | $ | 270 | ||
| 2024 | 634 | |||
| 2025 | 485 | |||
| Total future cash receipts | $ | 1,389 | ||
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 shares.
Public Offerings
On December 21, 2021, the Company closed an underwritten public offering of post-split shares of common stock at a public offering price of $ 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 June 30, 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 or six months ended June 30, 2023.
| 15 |
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 sold shares of its common stock under the ATM Agreement resulting in net proceeds of $6.6 million during the six months ended June 30, 2023. There were no sales under the ATM Agreement during the three and six months ended June 30, 2022.
Private Placement Offerings
On November 3, 2022, the Company sold shares of its common stock, and in lieu of shares of common stock, pre-funded warrants exercisable for 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 $ per share of common stock. The pre-funded warrants were exercised in December 2022 and converted to shares of commons stock. Total shares sold and converted during the year ended December 31, 2022 were 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. The stock purchase warrants 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.
As of June 30, 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.
The Company has two stock-based compensation plans: (1) 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.previously granted stock options under its 2005 Equity Incentive Plan (the “2005 Incentive Plan”), under which no further grants can be made. In addition, prior to May 17, 2023, the Company had previously granted stock options and stock awards under the Abeona Therapeutics Inc. 2015 Equity Incentive Plan (the “2015 Incentive Plan”). As of May 17, 2023, no further grants can be made under the 2015 Incentive Plan. The Company now grants stock options and stock awards under the Abeona Therapeutics Inc. 2023 Equity Incentive Plan (the “2023 Incentive Plan”) which was approved by stockholders on May 17, 2023. As of June 30, 2023, there were shares available to be granted under the 2023 Incentive Plan. In addition, in 2023, the Company’s board of directors approved various restricted stock awards to be granted to six new hires as inducement grants (“Inducement Grants”).
SCHEDULE OF STOCK BASED COMPENSATION
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Research and development | $ | 218 | $ | 184 | $ | 404 | $ | 556 | ||||||||
| General and administrative | 709 | 540 | 1,293 | 1,030 | ||||||||||||
| Total stock-based compensation expense | $ | 927 | $ | 724 | $ | 1,697 | $ | 1,586 | ||||||||
For the three months ended June 30, | For the six months ended June 30 | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Research and development | $ | 540 | $ | 1,092 | $ | 556 | $ | 2,247 | ||||||||
| General and administrative | 184 | 1,336 | 1,030 | 2,131 | ||||||||||||
| Total stock-based compensation expense | $ | 724 | $ | 2,428 | $ | 1,586 | $ | 4,378 | ||||||||
| 16 |
Stock Options:
The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option valuation model. The 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 – the Company estimates the volatility of the share price at the date of grant using a “look-back” period which coincides with the expected term, defined below. The Company believes using a “look-back” period which coincides with the expected term is the most appropriate measure for determining expected volatility. | |
| ● | Expected term – 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 – 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 – the Company uses an expected dividend yield of zero because |
SCHEDULE OF WEIGHTED-AVERAGE ASSUMPTIONS TO ESTIMATE THE FAIR VALUE OF THE OPTIONS GRANTED
| For the six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Expected volatility | % - | % - | ||||||
| Expected term | - years | - years | ||||||
| Risk-free interest rate | % - | % - | ||||||
| Expected dividend yield | — | — | ||||||
| For the six months ended June 30, | ||||||||
| 2023* | 2022 | |||||||
| Expected volatility | n/a | % - % | ||||||
| Expected term | n/a | - years | ||||||
| Risk-free interest rate | n/a | % - % | ||||||
| Expected dividend yield | n/a | 0% | ||||||
*the Company did not grant any stock options in the six months ended June 30, 2023.
SCHEDULE OF STOCK OPTIONS ACTIVITY
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | Weighted Average | ||||||||||||||||||||||||||||
| Weighted | Remaining | Aggregate | ||||||||||||||||||||||||||||||
| Outstanding at December 31, 2021 | 314,194 | $ | 38.48 | $ | — | |||||||||||||||||||||||||||
| Number of | Average | Contractual Term | Intrinsic Value | |||||||||||||||||||||||||||||
| Options | Exercise Price | (years) | (in thousands) | |||||||||||||||||||||||||||||
| Outstanding at December 31, 2022 | 240,770 | $ | 37.04 | $ | — | |||||||||||||||||||||||||||
| Granted | 7,760 | $ | 5.30 | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||
| Cancelled/forfeited | (56,556 | ) | $ | 35.31 | — | $ | — | (10,047 | ) | $ | 36.19 | — | $ | — | ||||||||||||||||||
| Exercised | — | $ | — | — | $ | — | — | $ | — | — | $ | — | ||||||||||||||||||||
| Outstanding at June 30, 2022 | 265,398 | $ | 38.18 | $ | 5 | |||||||||||||||||||||||||||
| Outstanding at June 30, 2023 | 230,723 | $ | 37.08 | $ | — | |||||||||||||||||||||||||||
| Exercisable | 148,066 | $ | 38.28 | $ | — | 169,637 | $ | 36.33 | $ | — | ||||||||||||||||||||||
| Unvested | 117,332 | $ | 38.05 | $ | 5 | 61,086 | $ | 39.17 | $ | — | ||||||||||||||||||||||
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 June 30, 2022,2023, the total compensation cost related to non-vested option awards not yet recognized was approximately $ million with a weighted average remaining vesting period of years.
The following table summarizes stock option activity for the 2005 Incentive Plan during the six months ended June 30, 2022:Restricted Stock
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 | 3,200 | $ | 32.00 | $ | — | |||||||||||
| Cancelled/forfeited | — | $ | — | — | $ | — | ||||||||||
| Exercised | — | $ | — | — | $ | — | ||||||||||
| Outstanding at June 30, 2022 | 3,200 | $ | 32.00 | $ | — | |||||||||||
| Exercisable | 3,200 | $ | 32.00 | $ | — | |||||||||||
| Unvested | — | $ | — | — | $ | — | ||||||||||
Restricted Stock:
SCHEDULE OF RESTRICTED STOCK AWARD ACTIVITY
Number of Awards | Weighted Average Grant Date Fair Value | Weighted Average | ||||||||||||||
| Grant Date Fair | ||||||||||||||||
| Outstanding at December 31, 2021 | 97,260 | $ | 46.59 | |||||||||||||
| Number of Awards | Value Per Unit | |||||||||||||||
| Outstanding at December 31, 2022 | 816,958 | $ | 5.35 | |||||||||||||
| Granted | 12,680 | $ | 6.29 | 1,817,559 | $ | 3.96 | ||||||||||
| Cancelled/forfeited | (27,161 | ) | $ | 39.38 | (46,394 | ) | $ | 4.40 | ||||||||
| Vested | (21,671 | ) | $ | 53.07 | (21,820 | ) | $ | 28.34 | ||||||||
| Outstanding at June 30, 2022 | 61,108 | $ | 39.14 | |||||||||||||
| Outstanding at June 30, 2023 | 2,566,303 | $ | 4.18 | |||||||||||||
As of June 30, 2022,2023, there was approximately $ 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 years. The total fair value of restricted stock awards that vested during the six months ended June 30, 2023 was $ million.
NOTE 1011 – EQUITYLICENSE/SUPPLIER AGREEMENT
Sublicense Agreement Relating to Rett Syndrome:
Series A and B Convertible Redeemable Preferred Stock
On May 2, 2022,In October 2020, the Company consummated an offeringentered into a sublicense agreement with certain institutional investors Taysha Gene Therapies (“Taysha”) for a gene therapy for Rett syndrome and MECP2 gene constructs and regulation of their expression. The agreement grants Taysha worldwide exclusive rights to intellectual property developed by scientists at the private placementUniversity of sharesNorth Carolina at Chapel Hill, the University of Edinburgh and the Company, and the Company’s know-how relating to the research, development, and manufacture of the Company’s Series A Convertible Redeemable Preferred Stock (the “Series A Preferred Stock”)gene therapy for Rett syndrome and sharesMECP2 gene constructs and regulation of the Company’s Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”). The shares, which have since been redeemed in accordance with their terms described below, and are thus no longer outstanding as of June 30, 2022, had an aggregated stated value of $25.0 million. Each share of the Preferred Stock had a purchase price of $, representing an original issue discount of 5% of the stated value. In connection with this offering, the Company had net proceeds of $22.5 million and recognized a deemed dividend of $3.8 million. In connection with this transaction, the Company placed $26.3 million into an escrow account for any future redemption which consisted of the gross proceeds of $25.0 million and the redemption value of $1.3 million.expression.
The Preferred Stock was convertible,transaction price of the contract includes (i) $3.0 million of fixed consideration, (ii) up to $26.5 million of variable consideration in the form of event-based milestone payments, (iii) up to $30.0 million of variable consideration in the form of sales-based milestone payments, and (iv) other royalty-based payments based on net sales. The event-based milestone payments are based on certain development and regulatory events occurring. The Company evaluated whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before recognizing the associated revenue. The Company determined that these milestone payments are not within the Company’s control or the licensee’s control, such as regulatory approvals, and are not considered probable of being achieved until those approvals are received. Accordingly, the Company has fully constrained the $26.5 million of event-based milestone payments until such time that it is probable that a significant revenue reversal would not occur. The sales-based milestone payments and other royalty-based payments are based on a level of sales for which the license is deemed to be the predominant item to which the royalties relate. The Company will recognize revenue for these payments at the optionlater of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the holders and, in certain circumstances, byroyalty has been allocated has been satisfied or partially satisfied. To date, the Company into shares of Common Stock at a conversion price of $has not recognized any sales-based or royalty revenue resulting from this licensing arrangement.
11.25
per share. The holders of the Series A Preferred Stock and Series B Preferred Stock had the right to requireUnder this arrangement, the Company to redeem their shares of preferred stock for cash at 105% of the stated value of such shares commencing after the earlier of the receipt of stockholder approval of an amendment to the Company’s Restated Certificate of Incorporation to effect a reverse stock splitrecognized $3.5 million and 60 days after the closing of the issuances of the Series A Preferred Stock and Series B Preferred Stock and until 90 days after such closing. The Company had the option to redeem the Series A Preferred Stock for cash at 105% of the stated value commencing after the 90th day following the closing of the issuance of the Series A Preferred Stock, subject to the holders’ rights to convert the shares prior to such redemption. $1.0As a result, the Preferred Stock was recorded separately from stockholders’ equity because it was redeemable upon the occurrence of redemption events that were considered not solely withing the Company’s control. As such, million in revenue during the three and six months ended June 30, 2023 and 2022, respectively based on event-based-milestone payments. As of June 30, 2023 and December 31, 2022, the Company recognized approximatelyhad $3.83.5 million and nil million in deemed dividends related tocontract assets included in accounts receivable on the Preferred Stock in theCompany’s condensed consolidated statementsbalance sheet, respectively. As of operationsJune 30, 2023 and comprehensive lossDecember 31, 2022, the Company had $1.6 million and nil in contract liabilities included in accounts payable on the Company’s condensed consolidated statementsbalance sheet, respectively, as a result of changes in stockholders’ equity.this transaction.
On June 17, 2022, the holders of all shares of Series A Preferred Stock and shares of Series B Preferred Stock exercised their right to cause the Company to redeem all such shares for $26.3 million, which represented a price equal to 105% of the stated value. The redemption of these shares was paid out of the escrow account noted above.
Common Stock and WarrantsUltragenyx License Agreement
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 (“New Common Stock”) remained at shares.
Public Offerings
On December 21, 2021, the Company closed an underwritten public offering of post-split shares of common stock at a public offering price of $ 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 estimated offering expenses payable by the Company.
As of June 30, 2022, 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 or six months ended June 30, 2022.
NOTE 11 – LICENSE AGREEMENT
On May 16, 2022, the Company and Ultragenyx Pharmaceutical Inc. (“Ultragenyx”) entered into an exclusive license agreement (the “License Agreement”) for AAV gene therapy ABO-102 for the treatment of Sanfilippo syndrome type A (MPS IIIA) (“ABO-102”). Under the License Agreement, Ultragenyx will assumeassumed responsibility for the ABO-102 program from the Company, with 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 expects to be entitled in exchange for transferring the related intellectual property and certain, 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 subsequent sale, and (b) the performance obligation to 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 has 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 reduction of research and development costs. SuchThere were no amounts due to the Company from Ultragenyx under the License Agreement of $1.8 million are recorded as a component of other receivables in the condensed consolidated balance sheets as of June 30, 2022.2023 and December 31, 2022, respectively.
NOTE 12 – SUBSEQUENT EVENTS
On July 3, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain existing institutional investors relating to the issuance and sale of an aggregate of (a) shares of the Company’s common stock (the “Shares”), and (b) pre-funded warrants to purchase 2,919,140 shares of the Company’s common stock (the “2023 Pre-Funded Warrants”) to certain of such investors (the “Offering”). On July 6, 2023, the Shares were sold to the investors at an offering price of $ per share for $25.0 million with net proceeds of $23.0 million after offering costs. The 2023 Pre-Funded Warrants were sold to certain of the investors at an offering price of $ per 2023 Pre-Funded Warrant, which represents the per share offering price for the Company’s common stock less a $0.0001 per share exercise price for each such 2023 Pre-Funded Warrant. The 2023 Pre-Funded Warrants are immediately exercisable at a nominal exercise price of $0.0001 per share and may be exercised at any time until the 2023 Pre-Funded Warrants are exercised in full.
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 “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 Therapeutics Inc. (“we,” “our,” “Abeona” or the “Company”) is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening rare genetic diseases. Our lead clinical program is EB-101, ana genetically engineered, autologous gene-corrected cell therapy, currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”), which is currently. We have announced positive data from the VIITAL™ study evaluating the efficacy, safety and tolerability 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 positive results, we intend to submit a Biologics License Application (“BLA”) for EB-101 to the U.S. Food and Drug Administration (“FDA”) in the pivotal Phase 3 VIITAL™ clinical trial.third quarter of 2023.
Our development portfolio also features AAV-basedadeno-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 late third quarter or early fourth 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 to the U.S. Food and Drug Administration (“FDA”).commercial launch of EB-101, if approved. 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 FDA, we believe that we have alignment with the FDA on the CMC requirements for EB-101, including characterization and validation plans
Ultragenyx License Agreement
On May 16, 2022, we entered into an exclusive license agreement (the “License Agreement”) with Ultragenyx Pharmaceutical Inc. (“Ultragenyx”) for our investigational AAV gene therapy ABO-102 for the treatment of Sanfilippo syndrome type A (“MPS IIIA”) (“ABO-102”). Under the License Agreement, Ultragenyx will assume responsibility for the ABO-102 program from us, with the exclusive right to develop, manufacture, and commercialize ABO-102 worldwide. Also pursuant to the License Agreement, following regulatory approval, we are 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.EB-101.
Preclinical Pipeline
While our lead clinical program is currently focused on an ultra-rare indication, 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 AAV-based therapies for five undisclosed ophthalmic conditions eachserious 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”). We completed pre-Investigational New Drug Application (“IND”) meetings with estimated U.S. prevalence ranging from 5,000the FDA regarding the preclinical development plans and regulatory requirements to 15,000 patients. In 2021, we shared data fromsupport first-in-human trials. We plan to initiate IND-enabling preclinical studies in non-human primates that will helpthe second half of 2023.
Recent Developments
On July 6, 2023, we closed on a $25.0 million, with net proceeds of $23.0 million after offering costs, registered direct offering priced at-the market under Nasdaq rules to determine optimal routescertain existing institutional investors. We sold 3,284,407 shares of administrationour common stock (and, in lieu of common stock for certain investors, pre-funded warrants to purchase 2,919,140 shares of our common stock) at an offering price of $4.03 per share (or $4.0299 per pre-funded warrant, which represents the per share offering price for the common stock less the $0.0001 per share exercise price for each pre-funded warrant). The pre-funded warrants are immediately exercisable at a nominal exercise price of $0.0001 per share and may be exercised at any time until the pre-funded warrants are exercised in full.
In July 2023, we believe we have made significant progress toward measuring efficacysubmitted the briefing package for the pre-BLA meeting with the FDA for our anticipated submission of EB-101 in the preclinical setting. We have also generated appropriate mouse models, produced research grade vectors,treatment of RDEB. The briefing package contains information regarding Chemistry, Manufacturing, and started dosing mice in proof-of-concept studies that we hope will yield data beginningControls (“CMC”) and clinical data. The pre-BLA meeting is scheduled for late-August 2023 and Abeona anticipates filing its EB-101 BLA in the third quarter of 2022 to support pre-IND meetings2023 following a successful pre-BLA meeting with the FDA in the second half of 2022 or early 2023.FDA.
Preferred Stock Offering
On May 2, 2022, we consummated an offering with certain institutional investors for the private placement of 1,000,006 shares of our Series A Convertible Redeemable Preferred Stock (the “Series A Preferred Stock”) and 250,005 shares of our Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock, and together with the Series A Preferred Stock, together the “Preferred Stock”). The shares, which have since been redeemed in accordance with their terms described below, and are thus no longer outstanding as of June 30, 2022, had an aggregated stated value of $25.0 million. Each share of the Preferred Stock had a purchase price of $19.00, representing an original issue discount of 5% of the stated value. The Preferred Stock was convertible, at the option of the holders and, in certain circumstances, by us, into shares of Common Stock at a conversion price of $11.25 per share. The holders of the Series A Preferred Stock and Series B Preferred Stock had the right to require us to redeem their shares of preferred stock for cash at 105% of the stated value of such shares commencing after the earlier of the receipt of stockholder approval of an amendment to our Restated Certificate of Incorporation to effect a reverse stock split and 60 days after the closing of the issuances of the Series A Preferred Stock and Series B Preferred Stock and until 90 days after such closing. We had the option to redeem the Series A Preferred Stock for cash at 105% of the stated value commencing after the 90th day following the closing of the issuance of the Series A Preferred Stock, subject to the holders’ rights to convert the shares prior to such redemption. On June 17, 2022, the holders of all 1,000,006 shares of Series A Preferred Stock and 250,005 shares of Series B Preferred Stock exercised their right to cause us to redeem all of such shares at a price equal to 105% of the stated value.
Reverse Stock Split
On June 30, 2022, we filed a Certificate of Amendment to our 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 our outstanding common stock, par value $0.01 per share 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 our common stock immediately after the Reverse Stock Split remained at 200,000,000 shares.
Nasdaq Compliance
On July 19, 2022, we received formal notification from the Nasdaq Stock Market LLC confirming that we had regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that our common stock maintain a minimum bid price of at least $1.00 per share, and confirming that the matter is now closed.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 20222023 and June 30, 20212022
| For the three months ended | ||||||||||||||||||||||||||||||||
| June 30, | June 30, | Change | For the three months ended | Change | ||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | $ | % | June 30, 2023 | June 30, 2022 | $ | % | ||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| License and other revenues | $ | 1,000 | $ | — | $ | 1,000 | N/A | $ | 3,500 | $ | 1,000 | $ | 2,500 | 250 | % | |||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||
| Royalties | 350 | — | 350 | N/A | 1,575 | 350 | 1,225 | 350 | % | |||||||||||||||||||||||
| Research and development | 6,658 | 8,533 | (1,875 | ) | (22 | )% | 8,523 | 6,658 | 1,865 | 28 | % | |||||||||||||||||||||
| General and administrative | 3,460 | 5,182 | (1,722 | ) | (33 | )% | 5,021 | 3,460 | 1,561 | 45 | % | |||||||||||||||||||||
| Loss/(gain) on right-of-use lease assets | (1,065 | ) | — | (1,065 | ) | N/A | ||||||||||||||||||||||||||
| Impairment of construction-in-progress | (1,460 | ) | — | (1,460 | ) | N/A | — | (1,460 | ) | 1,460 | N/A | |||||||||||||||||||||
| Total expenses | 9,008 | 13,715 | (4,707 | ) | (34 | )% | 14,054 | 9,008 | 5,046 | 56 | % | |||||||||||||||||||||
| Loss from operations | (8,008 | ) | (13,715 | ) | 5,707 | (42 | )% | (10,554 | ) | (8,008 | ) | (2,546 | ) | 32 | % | |||||||||||||||||
| Interest and other income | 30 | 8 | 22 | 275 | % | |||||||||||||||||||||||||||
| Interest income | 417 | 31 | 386 | 1,245 | % | |||||||||||||||||||||||||||
| Interest expense | (317 | ) | (1,500 | ) | 1,183 | (79 | )% | (103 | ) | (200 | ) | 97 | (49 | )% | ||||||||||||||||||
| Change in fair value of warrant liabilities | (8,629 | ) | 4,198 | (12,827 | ) | (306 | )% | |||||||||||||||||||||||||
| Other income (expense) | 2,215 | (118 | ) | 2,333 | (1,977 | )% | ||||||||||||||||||||||||||
| Net loss | $ | (8,295 | ) | $ | (15,207 | ) | $ | 6,912 | (45 | )% | $ | (16,654 | ) | $ | (4,097 | ) | $ | (12,557 | ) | 306 | % | |||||||||||
N/A -– not applicable or not meaningful
License and other revenues
License and other revenues for the three months ended June 30, 20222023 was $1.0$3.5 million as compared to nil$1.0 million for the same period of 2021.2022. The revenuerevenues in 2022 resultedboth periods result from a clinical milestonemilestones achieved in the second quarter of 2022 under a sublicense agreement we entered into with Taysha Gene Therapies (“Taysha”) in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome (“Rett”), including certain intellectual property relating to MECP2 gene constructs and regulation of their expression..
Royalties
Total royalties were $0.4$1.6 million for the three months ended June 30, 2022,2023, as compared to nil$0.4 million for the same period of 2021,2022, an increase of $0.4$1.2 million. The increase in expense was due to royalties owed to our licensors resulting from the $1.0 million milestonemilestones due from Taysha related to Rett.
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 June 30, 20222023 was $6.7$8.5 million, as compared to $8.5$6.7 million for the same period of 2021, a decrease2022, an increase of $1.8$1.9 million. The decreaseincrease in expenses was primarily due to:
| ● | ||
| ● | ||
| ● |
| 21 |
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. |
General and administrative
General and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public reporting company related costs, professional expensesfees (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 $3.5$5.0 million for the three months ended June 30, 2022,2023, as compared to $5.2$3.4 million for the same period of 2021, a decrease2022, an increase of $1.7$1.6 million. The decreaseincrease in expenses was primarily due to:
| ● | ||
| ● | ||
| ● | increased professional fees of $0.2 million; and | |
| ● |
Loss/(gain) on right-of-use lease assets
The gain on right-of-use lease assets was $1.1 million for the three months ended June 30, 2023, as compared to nil in the same period of 2022. At the end of June 2023, we terminated an operating lease for office space that we no longer use, resulting in a gain from the difference of the right-of-use lease assets and the lease liabilities.
Impairment of construction-in-progress
Impairment for construction-in-progressConstruction-in-progress impairment charge was $(1.5) millionnil for the three months ended June 30, 2022,2023, as compared to nila reduction in the impairment charge of $1.5 million in the same period of 2021.2022. The construction-in-progress was for a facility for the ABO-102MPS IIIA and ABO-101MPS 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 impairment of $3.3 million for the three months ended March 31, 2022. We subsequently received certain refunds pertaining to the planned facility build-out, which reduced the overall impairment charge by $1.5 million for the three months ended June 30, 2022.
Interest and other income
Interest and other income was $30,000$0.4 million for the three months ended June 30, 2022,2023, as compared to $8,000$31,000 in the same period of 2021.2022. The increase resulted from higher earnings on short-term investments driven by higher interest rates partially offset by a lower average balance ofand increased short-term investments.investment balances.
Interest expense
Interest expense was $0.3$0.1 million for the three months ended June 30, 2022,2023, as compared to $1.5$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 loss of $8.6 million for the three months ended June 30, 2023, as compared to a gain of $4.2 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 fluctuation in our stock price year over year and a shorter term.
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Other income (expense)
Other income was $2.2 million for the three months ended June 30, 2023, as compared to other expense of $118,000 in the same period of 2022. The change was primarily a result of $2.1 million in other income related to the impact of the employee retention credit that we have submitted for 2020 and 2021.
Comparison of Six Months Ended June 30, 20222023 and June 30, 20212022
| For the six months ended | ||||||||||||||||||||||||||||||||
| June 30, | June 30, | Change | For the six months ended | Change | ||||||||||||||||||||||||||||
| ($ in thousands) | 2022 | 2021 | $ | % | June 30, 2023 | June 30, 2022 | $ | % | ||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| License and other revenues | $ | 1,346 | $ | — | $ | 1,346 | N/A | $ | 3,500 | $ | 1,346 | $ | 2,154 | 160 | % | |||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||
| Royalties | 350 | — | 350 | N/A | 1,575 | 350 | 1,225 | 350 | % | |||||||||||||||||||||||
| Research and development | 17,203 | 16,868 | 335 | 2 | % | 16,564 | 17,203 | (639 | ) | (4 | )% | |||||||||||||||||||||
| General and administrative | 7,684 | 11,444 | (3,760 | ) | (33 | )% | 9,018 | 7,684 | 1,334 | 17 | % | |||||||||||||||||||||
| Impairment of licensed technology | 1,355 | — | 1,355 | N/A | — | 1,355 | (1,355 | ) | N/A | |||||||||||||||||||||||
| Impairment of right-of-use lease asset | 1,561 | — | 1,561 | N/A | ||||||||||||||||||||||||||||
| Loss/(gain) on right-of-use lease assets | (1,065 | ) | 1,561 | (2,626 | ) | (168 | )% | |||||||||||||||||||||||||
| Impairment of construction-in-progress | 1,792 | — | 1,792 | N/A | — | 1,792 | (1,792 | ) | N/A | |||||||||||||||||||||||
| Total expenses | 29,945 | 28,312 | 1,663 | 6 | % | 26,092 | 29,945 | (3,853 | ) | (13 | )% | |||||||||||||||||||||
| Loss from operations | (28,599 | ) | (28,312 | ) | (287 | ) | 1 | % | (22,592 | ) | (28,599 | ) | 6,007 | (21 | )% | |||||||||||||||||
| Interest and other income | 31 | 23 | 8 | 35 | % | |||||||||||||||||||||||||||
| Interest income | 781 | 38 | 743 | 1,955 | % | |||||||||||||||||||||||||||
| Interest expense | (518 | ) | (2,920 | ) | 2,402 | (82 | )% | (204 | ) | (401 | ) | 197 | (49 | )% | ||||||||||||||||||
| Change in fair value of warrant liabilities | (6,364 | ) | 2,945 | (9,309 | ) | (316 | )% | |||||||||||||||||||||||||
| Other income (expense) | 2,618 | (124 | ) | 2,742 | (2,211 | )% | ||||||||||||||||||||||||||
| Net loss | $ | (29,086 | ) | $ | (31,209 | ) | $ | 2,123 | (7 | )% | $ | (25,761 | ) | $ | (26,141 | ) | $ | 380 | (1 | )% | ||||||||||||
N/A -– not applicable or not meaningful
License and other revenues
License and other revenues for the six months ended June 30, 20222023 was $1.3$3.5 million, as compared to nil$1.3 million for the same period of 2021.2022. The revenuerevenues in 2022 resultedboth periods mainly result from a clinical milestonemilestones achieved in the second quarter of 2022 under a sublicense agreement we entered into with Taysha in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome, including certain intellectual property relating to MECP2 gene constructs and regulation of their expression. Theresyndrome. In 2022, there was also revenue consisting of the recognition of deferred revenue related to grants for the ABO-102 and ABO-101 development programs.
Royalties
Total royalties were $0.4$1.6 million for the six months ended June 30, 2022,2023, as compared to nil$0.4 million for the same period of 2021,2022, an increase of $0.4$1.2 million. The increase in expense was due to royalties owed to our licensors resulting from the $1.0 million milestonemilestones due from Taysha related to Rett.
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.
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Total research and development spending for the six months ended June 30, 20222023 was $17.2$16.6 million, as compared to $16.9$17.2 million for the same period of 2021, an increase of $0.3 million. The increase in expenses was primarily due to:
General and administrative
Total general and administrative expenses were $7.7 million for the six months ended June 30, 2022, as compared to $11.4 million for the same period of 2021, a decrease of $3.7$0.6 million. The decrease in expenses was primarily due to:
| ● | decreased | |
| ● | decreased | |
| ● | increased other costs of |
We expect our research and development activities to continue as we work 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. |
General and administrative
General and administrative expenses primarily consist of payroll and personnel costs, office facility costs, public reporting company related costs, professional fees (e.g., legal expenses) and other general operating expenses not otherwise included in research and development expenses.
Total general and administrative expenses were $9.0 million for the six months ended June 30, 2023, as compared to $7.7 million for the same period of 2022, an increase of $1.3 million. The increase in expenses was primarily due to:
| increased salary and related costs of $1.4 million; | |
| ● | increased non-cash stock-based compensation of $0.3 million; partially offset by |
| ● | decreased other costs of $0.4 million. |
Impairment of licensed technology
Impairment of licensed technology was $1.4 millionnil for the six months ended June 30, 2022,2023, as compared to nil$1.4 million in the same period of 2021.2022. The licensed technology was for the ABO-102 and ABO-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 six months ended June 30, 2022.
ImpairmentLoss/(gain) of right-of-use lease assetassets
Impairment ofThe gain on right-of-use lease assetassets was $1.6 million$1.1 for the six months ended June 30, 2022,2023, as compared to nila loss on right-of-use assets of $1.6 million in the same period of 2021.2022. The impairmentgain on right-of-use assets for 2023 was related to the termination of our operating leases for office space that we no longer use, resulting in a gain from the difference of the right-of-use lease assets and the lease liabilities.
The loss on right-of-use assets for 2022 was related to a lease for a future manufacturing facility for the ABO-102 and ABO-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 six months ended June 30, 2022.
Impairment of construction-in-progress
Impairment of construction-in-progressConstruction-in-progress impairment charge was $1.8 millionnil for the six months ended June 30, 2022,2023, as compared to nil$1.8 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. The construction-in-progress was for a facility for the ABO-102 and ABO-101 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 impairment of $1.8 million for the six months ended June 30, 2022.
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Interest and other income
Interest and miscellaneous income was $31,000$0.8 million for the six months ended June 30, 2022,2023, as compared to $23,000$38,000 in the same period of 2021.2022. The increase resulted from higher earnings on short-term investments driven by higher interest rates partially offset by a lower average balance ofand increased short-term investments.investment balances.
Interest expense
Interest expense was $0.5$0.2 million for the six months ended June 30, 2022,2023, as compared to $2.9$0.4 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 loss of $6.4 million for the six months ended June 30, 2023, as compared to a gain of $2.9 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 is primarily due to the fluctuation in our stock price year over year and a shorter term.
Other income (expense)
Other income was $2.6 million for the six months ended June 30, 2023, as compared to other expense of $0.1 million in the same period of 2022. The change was primarily a result of $2.1 million in other income related to the impact of the employee retention credit that we have submitted for 2020 and 2021.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows for the Six Months Ended June 30, 20222023 and 20212022
| For the six months ended June 30, | ||||||||
| ($ in thousands) | 2022 | 2021 | ||||||
| Total cash and cash equivalents (used in) /provided by: | ||||||||
| Operating activities | $ | (22,700 | ) | $ | (25,074 | ) | ||
| Investing activities | (323 | ) | 31,300 | |||||
| Financing activities | (3,782 | ) | 8,357 | |||||
| Net (decrease) increase in cash and cash equivalents | $ | (26,805 | ) | $ | 14,583 | |||
| For the six months ended | ||||||||
| ($ in thousands) | June 30, 2023 | June 30, 2022 | ||||||
| Total cash, cash equivalents and restricted cash (used in) provided by: | ||||||||
| Operating activities | $ | (22,028 | ) | $ | (22,700 | ) | ||
| Investing activities | 7,422 | (323 | ) | |||||
| Financing activities | 6,614 | (3,782 | ) | |||||
| Net decrease in cash, cash equivalents and restricted cash | $ | (7,992 | ) | $ | (26,805 | ) | ||
Operating activities
Net cash used in operating activities was $22.0 million for the six months ended June 30, 2023, primarily comprised of our net loss of $25.8 million, increases in operating assets and liabilities of $5.1 million and net non-cash charges of $8.9 million.
Net cash used in operating activities was $22.7 million for the six months ended June 30, 2022, primarily comprised of our net loss of $29.1 million and a decrease in operating assets and liabilities of $2.7 million, partially offset by net non-cash charges of $9.1 million.
Investing activities
Net cash used in operatingprovided by investing activities was $25.1$7.4 million for the six months ended June 30, 2021,2023, primarily comprised of our net lossproceeds from maturities of $31.2 million and a decrease in operating assets and liabilitiesshort-term investments of $0.7$21.6 million, partially offset by net non-cash chargespurchases of $6.8short-term investments of $14.2 million.
Investing activities
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Net cash used in investing activities was $0.3 million for the six months ended June 30, 2022, primarily comprised of proceeds from maturities of short-term investments of $32.7 million and proceeds from disposal of property and equipment of $1.5 million, partially offset by purchases of short-term investments of $34.4 million and capital expenditures of $0.1 million.
Financing activities
Net cash provided by investingfinancing activities was $31.3$6.6 million for the six months ended June 30, 2021,2023, primarily comprised of $6.6 million in net proceeds from maturitiesATM sales of short-term investments of $47.0 million, partially offset by purchases of short-term investments of $15.2 million and capital expenditures of $0.5 million.
Financing activitiescommon stock.
Net cash used in financing activities was $3.8 million for the six months ended June 30, 2022, primarily comprised of the proceeds and redemption of our convertible redeemable preferred stock.
Net cash provided by financing activities was $8.4 million for the six months ended June 30, 2021, primarily comprised of proceeds of $7.7 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.
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 June 30, 2022,2023, our cash resources were $26.0$37.1 million. WeOn July 6, 2023, we raised a further $23.0 million net proceeds in cash via a registered direct offering priced at-the market under Nasdaq rules to existing investors . As a result, we believe that our current cash and cash equivalents, restricted cash and short-term investments are only sufficient to fund our operating expenses intooperations through at least the second quarternext 12 months from the date of 2023. However, in order to further advance development and seek potential regulatory approval of our investigational EB-101 product for RDEB, or to advance any of our preclinical AAV-based ophthalmology assets, we wouldthis report on Form 10-Q. We may need to secure additional funds through equityfunding to carry out all of our planned research and development activities. If we are unable to obtain additional financing or debt offerings, potential upfront payments from potential commercial partners, potential salegenerate license or product revenue, the lack of liquidity and sufficient capital resources could have a priority review voucher, or other potential sources. We cannot be certain that additional funding will be availablematerial adverse effect on acceptable terms, or at all. These factors individually and collectively raise substantial doubt about our ability to continue as a going concern.future prospects.
We have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150.0 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. We did not sell anysold 1,990,321 shares of our common stock under the ATM Agreement duringresulting in net proceeds of $6.6 million for the six months ended June 30, 2022. Cumulatively, as of June 30, 2022, we have sold an aggregate of 270,350 shares of our common stock under the ATM Agreement and received $25.0 million of net proceeds.2023.
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 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; | |
| ● | any continuing impact to our business, operations, and clinical programs from the COVID-19 pandemic and government actions related thereto; | |
| ● | 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. |
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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.
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.
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.
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 June 30, 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 June 30, 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 June 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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. Aside from the risk factor below, thereThere have been no material changes in the assessment of otherour 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
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 June 30, 2023:
| Total number | ||||||||
| of shares | Average price | |||||||
| (or units) | paid per share | |||||||
| purchased (a) | (or unit) | |||||||
| Shares delivered or withheld pursuant to restricted stock awards | ||||||||
| April 1, 2023 – April 30, 2023 | — | $ | — | |||||
| May 1, 2023 – May 31, 2023 | — | $ | — | |||||
| June 1, 2023 – June 30, 2023 | 1,125 | $ | 3.42 | |||||
| 1,125 | $ | 3.42 | ||||||
| (a) | Reflects shares of common stock surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock. |
ThereITEM 5. OTHER INFORMATION
On June 15, 2023, the Company awarded retention bonuses (the “Retention Bonus Agreements”) to Vishwas Seshadri, Ph.D., Joseph Vazzano, and Brendan O’Malley, Ph.D. (collectively, the “NEOs”). Under the Retention Bonus Agreements, the Company has awarded the NEOs bonus payments in addition to their base salaries in three installments conditioned upon their continued employment at the Company through the second anniversary of the effective date of the applicable Retention Bonus Agreement. Such bonuses are to be disbursed at the Company’s sole discretion, including upon the determination that the Company’s financial performance permits such payment. In the event the Company undergoes a change of control transaction, then any outstanding payment shall immediately become due and payable to the employee upon the closing of such change of control transaction.
The foregoing description of the Retention Bonus Agreements is substantial doubt about our abilityqualified in its entirety by reference to continuethe full text of the Retention Bonus Agreements, which are filed herewith as a going concern, which may hinder our ability to obtain future financing. If we do not continue as a going concern, investors could loseExhibits 10.3, 10.4, and 10.5 and incorporated by reference herein in their entire investment.entirety.
Our financial statements as of June 30, 2022 have been prepared under the assumption that we will continue as a going concern for the next 12 months. As of June 30, 2022, our current cash and cash equivalents, restricted cash and short-term investments were $26.0 million. We believe that our current cash resources are only sufficient to fund our operating expenses into the second quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Our ability to continue as a going concern will depend on our ability to obtain additional funding, as to which no assurances can be given. To further advance development and seek potential regulatory approval of our lead product for RDEB or to advance any of our preclinical ophthalmology assets, we would need to secure additional funds through equity or debt offerings, potential upfront payments from potential commercial partners, potential sale of a priority review voucher, or other potential sources. Our future success depends on our ability to raise capital or implement the various strategic alternatives discussed above. We cannot be certain that these initiatives or raising additional capital will be available to us or, if available, will be on terms acceptable to us. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forego future development and other opportunities, or even terminate our operations.
| 28 |
ITEM 6. EXHIBITS
See Exhibit Index below, which is incorporated by reference herein.
Exhibit Index
Exhibits:
* 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.
† Certain provisions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
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: | August | By: | /s/ Vishwas Seshadri | |
| Vishwas Seshadri | ||||
| President and Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | August | By: | /s/ Joseph Vazzano | |
| Joseph Vazzano | ||||
| Chief Financial Officer | ||||
| (Principal Financial Officer) | ||||