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

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

(Former name, former address and former fiscal year, if changed since last report)

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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~6, 2020,~~5, 2021, the registrant had ~~48,353,952~~59,666,519 shares of common stock, $0.001 par value per share, outstanding.

1. The Company

Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company ~~dedicated~~focused on revolutionizing the delivery of therapies to ~~developing and delivering treatments that restore and preserve vision for people with serious~~the back of the eye ~~diseases. The Company’s proprietary SCS Microinjector targets~~through the suprachoroidal space and offers unique access to the macula, retina and choroid where sight-threatening disease often occurs. This suprachoroidal space injection is an inherently flexible, in-office, non-surgical procedure, intended to provide targeted delivery to the site of disease and to work with both established and new formulations of medications, as well as future therapeutic innovations, such as gene therapy(SCS®). Incorporated in the State of Delaware on May 26, 2011, the Company has its corporate headquarters in Alpharetta, Georgia.

The Company’s activities since inception have primarily ~~consist~~consisted of developing product and technology rights, raising capital and performing research and development activities. The Company has no current source of revenue to sustain present activities, and does not expect to generate meaningful revenue until and unless the ~~Company receives~~Company's licensees successfully commercialize XIPERE™, its other licensees receive regulatory approval of and successfully commercializes its product candidates or the Company commercializes its product candidates either on its own or with a third party. The Company is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals.

Liquidity

The Company had cash and cash equivalents of ~~$14.8~~$25.2 million as of September 30, ~~2020.~~ 2021. On January 6, 2021, the Company entered into a securities purchase agreement with certain institutional purchasers that purchased 4.2 million shares of its common stock in a registered direct offering at a price of $2.851 per share. The Company raised net proceeds of $11.1 million after deducting offering expenses. During the nine months ended September 30, 2021, the Company sold 2.9 million shares of its common stock for net proceeds of $12.2 million under its at-the-market agreement with Cowen and Company, LLC.

In August 2021, the Company entered into an amendment to the Arctic Vision License Agreement (as defined in Note 10 - License and Other Agreements) to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, the Company entered into a second amendment to the Arctic Vision License Agreement to expand the territories covered by the license to include Australia and New Zealand. The Company received an aggregate of $3.0 million in consideration for the expansion of the licensed territory.

On October 25, 2021, the Company announced that the U.S. Food and Drug Administration (the "FDA") approved XIPERE (triamcinolone acetonide injectable suspension) for the treatment of macular edema associated with uveitis, a form of eye inflammation. The Company is entitled to an aggregate of $9.0 million in milestone payments related to the approval of XIPERE from Arctic Vision (Hong Kong) Limited and Bausch + Lomb. In addition, the Company is entitled to receive $10.0 million from Bausch upon completion of pre-launch activities for XIPERE. Bausch expects to launch XIPERE in the United States in the first quarter of 2022.

The Company has funded its operations primarily through the sale of ~~convertible preferred~~common stock and ~~common~~convertible preferred stock and the issuance of long-term debt. The Company will continue to need to obtain additional financing to fund future operations, including completing the development, partnering and potential commercialization of its primary product candidates. The Company will need to obtain financing to conduct additional trials for the regulatory approval of its product candidates if requested by regulatory bodies, and completing the development of any product ~~candidates that might be acquired.~~candidates. If such products were to receive regulatory approval, the Company would need to obtain financing to prepare for the potential commercialization of its product candidates, if the Company decides to commercialize the products on its own.

The Company has suffered recurring losses and negative cash flows from operations since inception and anticipates incurring additional losses until such time, if ever, that it can ~~obtain regulatory approval to sell, and then~~ generate significant revenue from ~~commercializing~~ its ~~lead product candidate, XIPERE™ (triamcinolone acetonide suprachoroidal injectable suspension) with its licensees.~~licensees' commercialization of XIPERE. In the absence of product or other revenues, the amount, timing, nature or source of which cannot be predicted, the Company’s losses will continue as it conducts its research and development activities.

~~These conditions raise substantial doubt about~~Based on its current plans and forecasted expenses, the ~~Company’s ability~~Company expects that its cash and cash equivalents as of the filing date, November 10, 2021, will enable it to ~~continue~~fund its planned operating expenses and capital expenditure requirements into 2023. This estimate assumes receipt of the $9.0 million of milestone payments that the Company is entitled receive from its licensees as a ~~going concern within one year after~~result of the ~~date~~FDA approval of XIPERE. In addition, the ~~financial statements are issued.~~estimate assumes receipt of the $10.0 million milestone payment that the Company is entitled to receive from Bausch upon completion of pre-launch activities for XIPERE. The Company has based this estimate on assumptions that may prove to be wrong, and it could exhaust its capital resources sooner than expected. Until the Company can generate sufficient revenue, the Company will need to finance future cash needs through public or private equity offerings, license agreements, debt financings or restructurings, collaborations, strategic alliances and marketing or distribution arrangements.

~~The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.~~ The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.

2. Significant Accounting Policies

Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

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Unaudited Interim Financial Information

The accompanying balance sheet as of September 30, ~~2020,~~2021, statements of operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, statements of stockholders’ equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 and statements of cash flows for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, ~~2020,~~2021, its results of its operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, its changes in stockholders’ equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 and its cash flows for the nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 are unaudited. The results for the nine months ended September 30, ~~2020~~2021 are not indicative of results to be expected for the year ending December 31, ~~2020,~~2021, any other interim periods or any future year or period. These unaudited financial statements should be read in conjunction with the audited financial statements and related footnotes, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, the accounting for useful lives to calculate depreciation and amortization, clinical trial expense accruals, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.

Effects of COVID-19

The COVID-19 pandemic ~~is expected to continue to result in a~~has created global ~~slowdown of~~volatility, economic ~~activity.~~uncertainty and general market disruption. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, ~~we are~~the Company is not aware of any specific event or circumstance that would require us to update ~~our~~its estimates, assumptions and judgments or revise the carrying value of ~~our~~its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Revenue Recognition

The Company recognizes revenue from its contracts with customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company’s primary revenue arrangements are license agreements which typically include upfront payments, regulatory and commercial milestone payments and royalties based on future product sales. The arrangements may also include payments for the Company’s SCS Microinjector devices as well as payments for assistance and oversight of the customer’s use of the Company’s technology. In determining the amount of revenue to be recognized under these agreements, the Company performs the following steps: (i) identifies the promised goods and services to be transferred in the contract, (ii) identifies the performance obligations, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations and (v) recognizes revenue as the performance obligations are satisfied.

The Company receives payments from its customers based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Research and Development Costs

Research and development costs are charged to expense as incurred and include:



employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and development personnel;



expenses incurred under agreements with contract research organizations, contract manufacturing organizations and consultants that conduct preclinical studies and clinical ~~trials and preclinical studies;~~

trials;



costs associated with preclinical and clinical development activities;

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•

~~costs associated with submitting regulatory approval applications for the Company’s product candidates;~~



costs associated with submitting regulatory approval applications for the Company’s product candidates;



costs associated with training physicians on the suprachoroidal injection procedure and educating and providing them with appropriate product candidate information;



costs associated with technology and intellectual property licenses;



costs for the Company’s research and development facility; and



depreciation expense for assets used in research and development activities.

Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the patterns of costs incurred, and are reflected in the financial statements as prepaid or accrued expense.

Share-Based Compensation

Compensation cost related to share-based awards granted to employees is measured based on the estimated fair value of the award at the grant date. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The fair value of restricted stock units granted is measured based on the market value of the Company’s common stock on the date of grant. Share-based compensation costs are expensed on a straight-line basis over the relevant vesting period.

Compensation cost related to shares purchased through the Company’s employee stock purchase plan, which is considered compensatory, is based on the estimated fair value of the shares on the offering date, including consideration of the discount and the look back period. The Company estimates the fair value of the shares using a Black-Scholes option pricing model. Compensation expense is recognized over the six-month withholding period prior to the purchase date.

All share-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying employees’ roles within the Company.

Cash Equivalents

Cash equivalents consist of short-term, highly liquid investments with an original term of three months or less at the date of purchase.

Concentration of Credit Risk Arising From Cash Deposits in Excess of Insured Limits

The Company maintains its cash in bank deposits that at times may exceed federally insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any significant risks with respect to its cash balances.

Recent Accounting Pronouncements

~~Accounting Pronouncements Recently Adopted~~

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820-10): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~ ~~(“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC Topic 820,~~ ~~Fair Value Measurements and Disclosures~~. Under this ASU, certain disclosure requirements for fair value measurements are eliminated, amended or added. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The Company adopted ASU 2018-13 on January 1, 2020, and the adoption did not have a material impact on its financial statements and disclosures.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. The Company adopted ASU 2016-13 on January 1, 2020, and the adoption did not have a material impact on its financial statements and related disclosures.

~~Recent Accounting Pronouncements Not Yet Adopted~~

In December 2019, the FASB issued ~~ASU~~Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“(“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax

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liabilities for outside basis differences. The new ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The ~~guidance is effective for the~~ Company ~~beginning~~adopted ASU 2019-12 on January 1, 2021, and ~~prescribes different transition methods for the various provisions. Early adoption is permitted. The Company does not expect~~ the adoption ~~of ASU 2019-12 to~~did not have a material impact on its financial statements and related disclosures.

3. Property and Equipment, Net

Property and equipment, net consisted of the following (dollar amounts in thousands):


	Estimated Useful Lives (Years)	September 30, 2021			December 31, 2020
Furniture and fixtures	5	$	337		$	337
Machinery and equipment	5		176			176
Computer equipment	3		13			13
Leasehold improvements	Lesser of useful life or remaining lease term		667			667
			1,193			1,193
Less: Accumulated depreciation			(910	)		(777	)
		$	283		$	416

Estimated
Useful Lives
(Years)

September 30,
2020

December 31,
2019

Furniture and fixtures

5

$
337

$
337

Machinery and equipment

5

176

121

Computer equipment

3

13

13

Leasehold improvements

Lesser of
useful life or
remaining
lease term

667

667

1,193

1,138

Less: Accumulated depreciation

(733
)

(597
)

$
460

$
541

Accrued liabilities consisted of the following (in thousands):


	September 30,		December 31,
	2021		2020
Accrued research and development	$	1,594	$	234
Accrued employee costs		1,145		1,132
Accrued professional fees		82		56
Accrued expense		175		160
	$	2,996	$	1,582

September 30,

December 31,

2020

2019

Accrued research and development

$
110

$
359

Accrued employee costs

950

1,530

Accrued severance

86

751

Accrued professional fees

32

58

Accrued expense

144

232

$
1,322

$
2,930

~~On May 14, 2018, the Company entered into a second amended and restated loan and security agreement (the “2~~^nd A&R Loan Agreement”) with SVB, MidCap Funding III Trust and MidCap Financial Trust (together, “MidCap” and collectively with SVB, the “Lenders”), which amended and restated in its entirety the first amended and restated loan agreement. The 2^nd A&R Loan Agreement provided for new term loans of up to $20.0 million, with a floating interest rate equal to 6.50% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, or (ii) 1.89%5. ~~The 2~~^nd A&R Loan Agreement includes, among other things, the ability of the Lenders to accelerate the payment of the term loan in the event of material adverse change and restrictions on the Company’s ability to sell, assign, license, transfer or otherwise dispose of its assets, including intellectual property assets, without the prior written consent of the Lenders.

The Company borrowed an initial tranche of $10.0 million on May 14, 2018, of which $7.0 million was used to repay all amounts outstanding under the first amended and restated loan agreement, including fees associated with the final payment. The prepayment fees were waived. ~~Of the remaining $10.0 million under the 2~~^nd ~~A&R Loan Agreement, the Company elected not to draw $5.0 million and the other $5.0 million was not available for draw.~~

~~On October 18, 2019, the Company entered into an amendment to~~ ~~the 2~~^nd A&R Loan Agreement with the Lenders. Pursuant to the amendment, the Company repaid $5.0 million of the outstanding principal balance of the $10.0 million term loan. The Company did not pay any final payment or termination fees in connection with the $5.0 million prepayment. In addition, the Company and the Lenders agreed to modify the term loan repayment schedule. As amended, the term loan repayment schedule provided for interest only payments through October 31, 2020, followed by consecutive equal monthly payments of principal and interest in arrears continuing

~~through the maturity date of October 1, 2022.~~ ~~The Company had the option to prepay the outstanding balance in full, subject to a prepayment fee. The borrowings under the 2~~^nd ~~A&R Loan Agreement were secured by substantially all of the Company’s assets.~~

~~On May 7, 2020, due to various restrictions and other limiting covenants of~~ ~~the 2~~^nd ~~A&R Loan Agreement~~, ~~the Company~~ ~~elected to prepay in full the outstanding~~ ~~$5.0 million principal balance, plus $0.3 million reflecting the final payment fee and accrued interest. The prepayment fees were waived by the lender.~~

~~As a result of the prepayment, there was no interest expense, accretion of the final payment or accretion of the deferred debt issuance costs on the borrowings under the 2~~^nd A&R Loan Agreement described above for the three months ended September 30, 2020. Interest expense on the borrowings under the loan agreements described above was $223,000 for the three months ended September 30, 2019, and $147,000 and $676,000 for the nine months ended September 30, 2020 and 2019, respectively. Accretion of the final payment was $47,000 for the three months ended September 30, 2019, and $59,000 and $141,000 for the nine months ended September 30, 2020 and 2019, respectively. Accretion of the deferred debt issuance costs was $16,000 for the three months ended September 30, 2019, and $129,000 and $47,000 for the nine months ended September 30, 2020 and 2019, respectively.

On April 20, 2020, the Company entered into a loan agreement with Silicon Valley Bank (the “PPP Lender”) under the terms of which the PPP Lender made a loan to the Company in an aggregate principal amount of ~~$1.0~~$1.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan is evidenced by a promissory note (the “Note”) containing the terms and conditions for repayment of the PPP Loan.

Under the terms of the Note and the PPP Loan, interest a~~ccrues~~accrued on the outstanding principal amount at the rate of ~~1.0%~~1.0% per annum. The term of the Note iswas until April 2022 ~~though it may be payable sooner in connection~~, with ~~an event of default under the Note. The Company has applied for loan forgiveness and expects to be notified of the results in the fourth quarter of 2020. There can be no assurance that~~ the Company ~~will obtain forgiveness of the PPP Loan in whole or in part. To the extent the loan amount is not forgiven under the PPP, as described below, the Company would be~~ obligated to make equal monthly payments of principal and interest, beginning in November 2020 and continuing until the maturity date.

The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. ~~Under~~On January 11, 2021, the Company was notified by the PPP ~~the Company may apply for forgiveness for all or a portion of~~Lender that the PPP Loan ~~based on a formula that takes into account a number~~had been forgiven in full, including approximately $7,000 of ~~factors, including~~accrued interest. In accordance with ASC 405-20, Extinguishment of Liabilities, the income from the forgiveness of the amount borrowed and the accrued interest was recognized in the statement of ~~loan proceeds used by the Company during the~~ ~~24-week period after the loan origination for certain purposes, including payroll costs, interest~~operations in other income as a gain on ~~certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least~~ 60%extinguishment of the loan amount has been used for eligible payroll costs; the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs will qualify for forgiveness.debt.

The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including (i) failing to make a payment when due under the Note, (ii) failure to do anything required by the Note or any other loan document, (iii) defaults of any other loan with the PPP Lender, (iv) failure to disclose any material fact or making a materially false or misleading representation to the PPP Lender or U.S. Small Business Administration (“SBA”), (v) default on any loan or agreement with another creditor, if the PPP Lender believes the default may materially affect the Company’s ability to pay the Note, (vi) failure to pay any taxes when due, (vii) becoming the subject of a proceeding under any bankruptcy or insolvency law, having a receiver or liquidator appointed for any part of the Company’s business or property, or making an assignment for the benefit of creditors, (viii) having any adverse change in financial condition or business operation that the PPP Lender believes may materially affect the Company’s ability to pay the Note, (ix) if the Company reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the PPP Lender’s prior written consent, or (x) becoming the subject of a civil or criminal action that the PPP Lender believes may materially affect the Company’s ability to pay the Note. Upon the occurrence of an event of default, the PPP Lender has customary remedies and may, among other things, require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company.

~~As of September 30, 2020, in connection with the PPP Loan, the Company recorded $0.6 million in short-term debt and $0.4 million in long-term debt.~~

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7.6. Common Stock

The Company’s amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of ~~$0.001~~$0.001 par value common stock. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~48,227,442~~59,626,519 and ~~44,413,372~~51,860,941 shares of common stock outstanding, respectively.

8.7. Stock Purchase Warrants

In September 2016, in connection with a loan agreement, the Company issued warrants to purchase up to 29,796 shares of common stock at a price per share of ~~$10.74.~~$10.74. The warrants expire in September 2026, or earlier upon the occurrence of specified mergers or acquisitions of the Company, and are immediately exercisable. The warrants were recorded in equity and had a weighted average remaining life of ~~6.0~~ 5.0years as of September 30, ~~2020.~~2021.

8. Share-Based Compensation

Share-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation.

Stock Options

The Company has granted stock option awards to employees, directors and consultants from its 2011 Stock Incentive Plan (the “2011 Plan”) and its 2016 Equity Incentive Plan (the “2016 Plan”). The estimated fair value of options granted is determined as of the date of grant using the Black-Scholes option pricing model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the awards.

Share-based compensation expense for options granted under the 2011 Plan and the 2016 Plan is reflected in the statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	391	$	290	$	1,182	$	882
General and administrative		525		384		1,461		1,176
Total	$	916	$	674	$	2,643	$	2,058

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Research and development

$
290

$
243

$
881

$
1,066

General and administrative

384

543

1,176

2,166

Total

$
674

$
786

$
2,057

$
3,232

The following table summarizes the activity related to stock options during the nine months ended September 30, ~~2020:~~2021:

Weighted

Number of

Average

Shares

Exercise Price

Options outstanding at December 31, 2019

4,104,450

$
4.63

Granted

1,100,250

2.31

Exercised

(253,216
)

0.89

Forfeited

(702,041
)

6.49

Options outstanding at September 30, 2020

4,249,443

3.95

Options exercisable at December 31, 2019

2,452,764

5.44

Options exercisable at September 30, 2020

2,225,536

4.97


				Weighted
	Number of			Average
	Shares			Exercise Price
Options outstanding at December 31, 2020		4,248,193		$	3.95
Granted		1,794,906			3.93
Exercised		(184,360	)		1.19
Forfeited		—			—
Options outstanding at September 30, 2021		5,858,739			4.03

Options exercisable at December 31, 2020		2,355,900			4.96

Options exercisable at September 30, 2021		3,081,524			4.58

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As of September 30, ~~2020,~~2021, the Company had ~~$4.1~~$6.5 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of ~~2.3~~2.7 years.

Restricted Stock Units

The Company has granted restricted stock units (“RSUs”) to employees from the 2016 Plan. The shares underlying the RSU awards have vesting terms of ~~one~~two to four years from the date of grant subject to the employees’ continuous service and subject to accelerated vesting in specified circumstances.

The fair value of the RSUs granted is measured based on the market value of the Company’s common stock on the date of grant and is recognized ratably over the requisite service period, which is generally the vesting period of the awards.

The total share-based compensation expense related to RSUs is reflected in the statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	194	$	70	$	561	$	304
General and administrative		190		80		552		348
Total	$	384	$	150	$	1,113	$	652

The following table summarizes the activity related to RSUs during the nine months ended September 30, ~~2020:~~2021:

Weighted Average

Number of

Grant Date

Shares

Fair Value

Non-vested RSUs outstanding at December 31, 2019

1,269,300

$
0.87

Granted

486,000

2.39

Vested

(887,575
)

0.93

Forfeited

(6,700
)

0.91

Non-vested RSUs outstanding at September 30, 2020

861,025

1.67


				Weighted Average
	Number of			Grant Date
	Shares			Fair Value
Non-vested RSUs outstanding at December 31, 2020		767,271		$	1.78
Granted		965,344			4.01
Vested		(415,268	)		1.27
Non-vested RSUs outstanding at September 30, 2021		1,317,347			3.58

The Company recorded $0.2 million and $45,000 of share-based compensation expense for the three months ended September 30, 2020 and 2019, respectively, and $0.7 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively, for the RSUs.

As of September 30, ~~2020,~~2021, the Company had ~~$1.2~~$3.8 million of unrecognized compensation expense related to the RSUs which is expected to be recognized over a weighted average period of ~~2.6~~ 3.1 years.

Employee Stock Purchase Plan

The 2016 Employee Stock Purchase Plan (the “2016 ESPP”) became effective on June 1, 2016. The 2016 ESPP is considered a compensatory plan and the fair value of the discount and the look-back period are estimated using the Black-Scholes option pricing model and expense is recognized over the six-month withholding period prior to the purchase date.

The ~~Company recorded $17,000 and $2,000 of~~ share-based compensation expense recognized for the ~~three months ended September 30, 2020 and 2019, respectively, and $24,000 and $15,000 for the nine months ended September 30, 2020 and 2019, respectively,~~2016 ESPP is reflected in the statements of operations ~~for the estimated number of shares to be purchased on the next purchase date following the conclusion of the applicable reporting period.~~ and comprehensive loss as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	12	$	10	$	29	$	12
General and administrative		4		7		16		11
Total	$	16	$	17	$	45	$	23

During the nine months ended September 30, ~~2020,~~2021, the Company issued ~~35,359~~65,481 shares of common stock purchased under the 2016 ESPP.

~~10.~~9. Commitments and Contingencies

Lease Commitment Summary

In November 2016, the Company signed an office lease agreement to lease approximately 20,000 square feet of office space in Alpharetta, Georgia for its corporate headquarters. The lease agreement is for a 6.5 year term with a renewal option for one additional five-year term. Rental payments are ~~$35,145~~$35,145 per month subject to an increase of 3%3% per year. Rent expense under this lease is recognized on a straight-line basis over the term of the lease. In addition, the lease agreement requires payment of the pro-rata share of the annual operating expenses associated with the premises.

The Company’s operating leases included on the balance sheet are as follows (in thousands):

September 30,
2020

Operating lease right-of-use asset

$
563

Liabilities

   Current portion of operating lease liabilities

$
370

   Operating lease liabilities

689

      Total operating lease liabilities

$
1,059


	September 30, 2021
Operating lease right-of-use asset	$	412

Liabilities
Current portion of operating lease liabilities	$	384
Operating lease liabilities		374
Total operating lease liabilities	$	758

The Company recognizes a right-of-use asset for the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments over the lease term. The renewal option is not

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included in the calculation of the right-of-use asset and the lease liabilities as the Company has not yet determined if the Alpharetta, Georgia lease will be renewed. The present value of the lease payments is calculated using an incremental borrowing rate as the Company’s leases do not provide an implicit interest rate. At September 30, ~~2020,~~2021, the Company’s weighted average discount rate was ~~11.0%~~11.0% and the weighted average lease term was ~~3.0~~2.0 years.

Minimum lease payments were as follows at September 30, ~~2020~~2021 (in thousands):


Year Ending December 31,
2020		95
2021		392		$	99
2022		407			407
2023		316			316
Total minimum lease payments		1,210			822
Less imputed interest		(151	)		(64	)
Total operating lease liabilities	$	1,059		$	758

Equipment leases with an initial term of 12 months or less are not recorded with operating lease liabilities. The Company recognizes expense for these leases on a straight-line basis over the lease term. The equipment leases were deemed to be immaterial.

Operating lease cost was ~~$62,000 and $100,000~~$62,000 for each of the three months ended September 30, 2021 and 2020, and ~~2019,~~$185,000 for each of the nine months ended September 30, 2021 and 2020. Variable lease cost was $24,000 for each of the three months ended September 30, 2021 and 2020, and $71,000 for each of the nine months ended September 30, 2021 and 2020. Short-term lease cost was $2,000 for each of the three months ended September 30, 2021 and 2020, respectively, and ~~$185,000~~$6,000 and ~~$300,000~~$10,000 for the nine months ended September 30, ~~2020~~2021 and ~~2019, respectively. Variable lease cost was $24,000 and $36,000 for the three months ended September 30,~~ 2020, and 2019, respectively, and $71,000 and $122,000 for the nine months ended September 30, 2020 and 2019, respectively. Short-term lease cost was $2,000 and $4,000 for the three months ended September 30, 2020 and 2019, respectively, and $10,000 and $13,000 for the nine months ended September 30, 2020 and 2019, respectively. Cash payments included in operating activities on the statement of cash flows for operating lease liabilities were ~~$283,000~~$293,000 and ~~$389,000~~$283,000 for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

Contract Service Providers

In the course of the Company’s normal business operations, it has agreements with contract service providers to assist in the performance of its research and development, clinical research and manufacturing. Substantially all of these contracts are on an as needed basis.

~~11.~~10. License and Other Agreements

Bausch ~~License Agreement Amendment~~+ Lomb

On ~~April 27, 2020,~~October 22, 2019, the Company ~~and Bausch Health Ireland Limited (“Bausch”)~~ entered into ~~an amendment (the “Amendment”) to the Company’s~~a License Agreement with Bausch ~~dated October 22, 2019 (as amended, the “Bausch License Agreement”~~+ Lomb, a division of Bausch Health Companies, Inc. (“Bausch”). Pursuant to the Bausch License Agreement, the Company has granted an exclusive license to Bausch to develop, manufacture, distribute, promote, market and commercialize XIPERE ~~the Company’s proprietary suspension of the corticosteroid triamcinolone acetonide formulated for administration to the back of the eye~~ using the Company’s proprietary microinjector (the “Device”), as well as specified other steroids, corticosteroids and NSAIDs in combination with the Device (“Other ~~Products”;~~Products,” and together with XIPERE, the “Products”), subject to specified exceptions, in the United States and Canada (the ~~“Original Territory”~~“Territory”) for the treatment of ophthalmology indications, including non-infectious uveitis. ~~Pursuant~~

On April 27, 2020, the Company and Bausch entered into an amendment to the ~~Amendment,~~Company’s License Agreement with Bausch dated October 22, 2019 (as amended, the Company has granted Bausch an exclusive option (the “Option”) to develop, manufacture, distribute, promote, market and commercialize XIPERE in one or more of the following regions: (i) the European Union, including the United Kingdom, (ii) Australia and New Zealand and (iii) South America and Mexico (such regions, the “Additional Regions” and together with the Original Territory, the “Territory”“Bausch License Agreement”). ~~The Option may be exercised any time before the earlier of regulatory approval of XIPERE in the United States and August 31, 2021.~~

Pursuant to the Bausch License Agreement, Bausch ~~paid the Company~~made an upfront payment of ~~$5.0~~$5.0 million (the “Upfront Payment”) in October ~~2019, which~~2019. In October 2021, the FDA approved XIPERE. The Company is ~~subject~~entitled to receive $5.0 million from Bausch as a ~~refund if~~result of the ~~Bausch License Agreement~~approval. An additional payment of $10.0 million is ~~terminated in specified circumstances.~~due upon completion of pre-launch activities for XIPERE. In addition, Bausch has a ~~greed~~agreed to ~~make additional payments of up to $15.0 million upon the achievement of specified pre-launch development and regulatory milestones (the “Pre-Launch Milestone Payments”) and~~pay up to an aggregate of ~~$57.3~~$55.0 million in additional milestone payments upon the achievement of (i) specified regulatory approvals for specified additional indications of XIPERE ~~(including certain regulatory and commercial milestones if Bausch exercises its Option in the European Union)~~ and (ii) specified levels of annual net sales (as defined in the Bausch License Agreement). Further, during the applicable royalty term, the Company will also be entitled to receive tiered royalties at increasing percentages, from the high-teens to twenty percent, based on XIPERE achieving certain an ~~nual~~annual net sales thresholds in the ~~Original~~ Territory, ~~as well as a lower royalty on annual net sales of Other Products in the Original Territory and on annual net sales of~~ ~~Xipere~~ ~~in the Additional Regions if Bausch exercises its Option,~~ in each case

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subject to reductions in specified circumstances; provided that the Company will not receive any royalties on the first $45.0million of cumulative net sales of all products in the ~~Original~~ Territory.

~~During the term of the~~ Bausch ~~License Agreement, and~~expects to launch XIPERE in the ~~Territory, the Company has agreed not to (i) develop or commercialize XIPERE alone or in combination with an Other Device (as defined~~United States in the Bausch License Agreement) in the licensed field, (ii) develop or commercialize any corticosteroid with the Device or an Other Device in the licensed field, (iii) develop or commercialize the Device or an Other Device with any active pharmaceutical ingredient for non-infectious uveitis or macular edema associated with non-infectious uveitis, including with any Other Drug (as defined in the Bausch License Agreement, which are restricted to those steroids, corticosteroids and non-steroidal anti-inflammatory drugs specifically identified in the Bausch License Agreement), (iv) develop or commercialize any Other Drug in combination with the Device and (v) commercialize any Other Device for achieving non-surgical access to the suprachoroidal space where such device is sold as a stand-alone product, subject to specified exceptions. first quarter of 2022.

The Bausch License Agreement will expire upon expiration of the royalty terms for all Products and countries in the Territory, with each royalty term for a given Product and country ending on the latest of (i) the date of expiration of the last-to-expire valid claim of any licensed patent rights covering such Product in such country in the Territory,, (ii) the date of the loss of regulatory exclusivity for such Product in such country in the Territory, or (iii) ten years from the later of the first sale of such Product in such country in the Territory. For a specified period of time, Bausch may terminate the Bausch License Agreement immediately and have the Upfront Payment refunded if the U.S. Food and Drug Administration (the “FDA”) has not approved the Company’s New Drug Application (“NDA”) for XIPERE by August 31, 2021. Following the payment of the Pre-Launch Milestone Payments, Bausch may also terminate the Bausch License Agreement for convenience upon 180 days’ written notice. In addition, the Company can terminate the Bausch License Agreement if Bausch commences a legal action challenging the validity, enforceability or scope of any of the licensed patents. If the FDA requires an additional clinical trial prior to approving the NDA for XIPERE and the Company notifies Bausch that the Company will not conduct the trial at the Company’s expense, then Bausch may terminate the Bausch License Agreement and have the Upfront Payment refunded within 60 days of the receipt of such notice from the Company. Both parties may terminate the Bausch License Agreement (i) upon a material breach of the Bausch License Agreement, subject to a specified cure period and specified exceptions, or (ii) if the other party encounters bankruptcy or insolvency. Upon termination (other than for a material breach by or bankruptcy or insolvency event of the Company), all licenses and other rights granted by the Company to Bausch pursuant to the Bausch License Agreement would revert to the Company.

The Company iswas responsible for all development expenses for XIPERE in the ~~Original~~ Territory until the ~~NDA~~ isCompany's New Drug Application ("NDA") was approved by the FDA, subject to specified exceptions, as well as manufacturing costs in connection with the ~~NDA~~.NDA. The Company iswas also responsible for all clinical and development expenses conducted to satisfy the FDA’s requests in the

complete response letter issued on October 18, 2019 related to the NDA and any subsequent complete response letter related to the NDA (the “CRL-related expenses”). If Following FDA approval of XIPERE, ~~is approved by the FDA,~~ Bausch ~~will be~~is responsible for all ~~expenses following~~ such ~~approval; provided that~~expenses.

Due to the ~~Company~~refund provisions in the License Agreement, the upfront payment of $5.0 million received from Bausch was included on the balance sheet as deferred revenue as of September 30, 2021 and December 31, 2020. The refund provisions lapsed upon FDA approval of XIPERE. The $5.0 million will be ~~responsible for~~recognized as revenue in the ~~CRL-related expenses and for half~~fourth quarter of ~~the costs of any post-approval clinical trials required by the FDA, up to a specified maximum amount.~~2021.

Arctic Vision (Hong Kong) Limited

On March 10, 2020, the Company entered into a License Agreement (the ~~“Arctic License~~“License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”). Pursuant to the ~~Arctic~~ License Agreement, the Company has granted an exclusive license to Arctic Vision to develop, distribute, promote, market and commercialize XIPERE, ~~the Company’s proprietary suspension of the corticosteroid triamcinolone acetonide formulated for administration to the back of the eye using the Company’s proprietary SCS Microinjector,~~ subject to specified exceptions, in China, Hong Kong, Macau, Taiwan and South Korea (the “Arctic Territory”). Under the terms of the ~~Arctic~~ License Agreement, neither party may commercialize XIPERE in the other party’s territory. Arctic Vision has agreed to use commercially reasonably efforts to pursue development and commercialization of XIPERE for indications associated with uveitis in the Arctic Territory. In addition, upon receipt of the Company’s consent, Arctic Vision will have the right, but not the obligation, to develop and commercialize XIPERE for additional indications in the Arctic Territory.

Pursuant to the ~~Arctic~~ License Agreement, Arctic Vision paid the Company an upfront payment of $4.0 million in March 2020. In addition, Arctic Vision has agreed to pay ~~the Company~~ up to ~~a total of $35.5 million. This amount includes an upfront payment of $4.0 million as well as an aggregate of up to $31.5~~$31.5 million in development milestone payments for specified events, ~~prior to and~~ including $4.0 million upon receipt of FDA approval of XIPERE in the United States and sales milestone payments for achievement of specified levels of net sales. Further, during the applicable royalty term, the Company will also be entitled to receive tiered royalties of ~~ten~~10 to ~~twelve~~12 percent of net sales based on achieving certain annual net sales thresholds in the ~~Arctic~~ Territory, subject to customary reductions, payable on a product-by-product and country-by-country basis, commencing at launch in such country and lasting until the latest of (i) the date that all valid claims within the licensed patent rights covering XIPERE have expired, (ii) the date of the loss of marketing or regulatory exclusivity of XIPERE in a given country, or (iii) ten years from the first commercial sale of XIPERE in a given country. ~~As of March 31, 2020,~~

In August 2021, the Company ~~had completed its performance obligations related~~entered into an amendment to the ~~upfront payment~~Arctic Vision License Agreement to expand the territories covered by the license to include India and ~~recognized license revenue~~the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, the Company entered into a second amendment to the Arctic Vision License Agreement to expand the Arctic Territory to include Australia and New Zealand. The Company received an aggregate of ~~$4.0~~$3.0 million ~~during~~in consideration for the ~~three months ended March 31, 2020.~~expansion of the Arctic Territory.

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Other

The Company ~~has~~ periodically ~~entered~~enters into ~~other~~ short-term agreements ~~generally~~ with ~~performance obligations of one to two months,~~other customers to evaluate the potential use of its proprietary SCS Microinjector with third-party product candidates for the treatment of various diseases. Funds received from these agreements are recognized as revenue over the term of the agreement. The Company did not record any revenue from these agreements for the three months ended September 30, 2020. The Company recorded $15,000 of revenue from these agreements during the three months ended September 30, 2019, and $0.2 million and $0.1 million for the nine months ended September 30, 2020 and 2019, respectively.

~~12.~~11. Fair Value Measurements

The Company records certain financial assets and liabilities at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, on fair value measurements. As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.



Level 1—Unadjusted quoted prices in active, accessible markets for identical assets or liabilities.



Level 2—Other inputs that are directly or indirectly observable in the marketplace.



Level 3—Unobservable inputs that are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s material financial instruments at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 consisted primarily of cash and cash equivalents, and at December 31, 2020, also included long-term debt. The fair values of cash and cash equivalents, other current assets and accounts payable approximate their respective carrying values due to the short term nature of these instruments and are classified as Level 1 in the fair value hierarchy. The fair value of long-term debt approximates the carrying value due to variable interest rates that correspond to market rates and is classified as Level 1 in the fair value hierarchy.

There were no0 significant transfers between Levels 1, 2 and 3 during the nine months ended September 30, ~~2020~~2021 and the year ended December 31, ~~2019.~~2020.

~~The following tables summarize the fair value of financial assets that are measured at fair value and the classification by level of input within the fair value hierarchy (in thousands):~~

September 30, 2020

Level 1

Level 2

Level 3

Recorded
Value

Financial Assets:

Cash and money markets

$
14,839

$
—

$
—

$
14,839

Restricted cash money market

360

—

—

360

Total financial assets

$
15,199

$
—

$
—

$
15,199

December 31, 2019

Level 1

Level 2

Level 3

Recorded
Value

Financial Assets:

Cash and money markets

$
22,595

$
—

$
—

$
22,595

Restricted cash money market

360

—

—

360

Total financial assets

$
22,955

$
—

$
—

$
22,955

1514

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~~13.~~

12. Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration of the dilutive effect of potential common stock equivalents. Diluted net loss per share gives effect to all dilutive potential shares of common stock outstanding during this period. For all periods presented, the Company’s potential common stock equivalents, which included stock options, restricted stock units and stock purchase warrants, have been excluded from the computation of diluted net loss per share as their inclusion would have the effect of reducing the net loss per share. Therefore, the denominator used to calculate both basic and diluted net loss per share is the same in all periods presented. The Company’s potential common stock equivalents that have been excluded from the computation of diluted net loss per share for all periods presented because of their antidilutive effect consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Outstanding stock options		5,858,739		4,249,443		5,858,739		4,249,443
Non-vested restricted stock units		1,317,347		861,025		1,317,347		861,025
Stock purchase warrants		29,796		29,796		29,796		29,796
		7,205,882		5,140,264		7,205,882		5,140,264

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Outstanding stock options

4,249,443

4,192,884

4,249,443

4,192,884

Non-vested restricted stock units

861,025

1,319,300

861,025

1,319,300

Stock purchase warrants

29,796

29,796

29,796

29,796

5,140,264

5,541,980

5,140,264

5,541,980

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Quarterly Report on Form 10-Q may constitute 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. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission, or SEC, ~~particularly in Part II – Item 1A,~~under the heading “Risk Factors”. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, ~~2019~~2020 appearing in our Annual Report on Form 10-K filed with the SEC on March ~~13, 2020.~~15, 2021.

Overview

We are a biopharmaceutical company ~~dedicated~~focused on revolutionizing the delivery of therapies to ~~developing and delivering treatments that restore and preserve vision for people with serious~~the back of the eye ~~diseases.~~through the suprachoroidal space (SCS®). Our SCS injection platform, utilizing our proprietary SCS Microinjector ~~targeting~~®, enables an in-office, repeatable, non-surgical procedure for the ~~suprachoroidal space, or SCS, offers unique access~~targeted and compartmentalized delivery of a wide variety of therapies to the macula, retina or choroid to potentially preserve and ~~choroid where~~improve vision in patients with sight-threatening ~~disease often occurs. When fluid is injected between the choroid~~eye diseases. We are developing our own pipeline of small molecule product candidates for administration via our SCS Microinjector and sclera, the elasticity of the SCS allows the fluid to migrate and spread spherically toward the posterior regions of the eye where it is absorbed into adjacent tissue. Our proprietary microinjector is able to precisely administer drugs into the SCS utilizing a needle that is approximately one millimeter in length. This method of administration facilitates more targeted delivery of therapeutic agents to chorioretinal structures.

~~The~~strategically partner our SCS injection ~~is an inherently flexible, in-office, non-surgical procedure intended to provide targeted delivery of established~~platform with companies utilizing other ophthalmic therapeutic innovations. Our first product, XIPERE™ (triamcinolone acetonide injectable suspension) for suprachoroidal use, was approved by the U.S. Food and ~~new formulations of medications, as well as therapeutic innovations such as gene therapy and viral nanoparticle conjugates, to~~Drug Administration, or the ~~site of disease.~~FDA, in October 2021.

We are leveraging our SCS injection platform by building an internal research and development pipeline ~~in areas such as novel small molecules and gene therapy,~~targeting chorioretinal diseases and by creating external collaborations with other companies. Using our suprachoroidal injection technology ~~that can be used~~ in conjunction with proprietary formulations of existing drugs as well as novel therapies, we believe we have created a broad therapeutic platform for developing product candidates to treat serious back of the eye diseases.

The current development status of our pipeline of internal product candidates and external collaborations is summarized in the chart below:

Internal Pipeline

Our first ~~candidate,~~product, XIPERE, formerly known as CLS-TA, is a proprietary, preservative-free suspension of the corticosteroid triamcinolone acetonide, or TA, ~~formulated~~ for administration via suprachoroidal injection. Corticosteroids are the standard of care in uveitis. They are effective at treating the inflammatory aspect of ocular disease, but when delivered locally, either topically as drops, intravitreally, or by periocular injection, they have been associated with significant side effects, such as cataract formation or exacerbation, and elevated intraocular pressure, or IOP, which can lead to glaucoma.

On October 25, 2021, we announced that the FDA approved XIPERE ~~is being developed~~ for the treatment of macular edema associated with uveitis. Uveitis is a set of ocular inflammatory conditions affecting approximately 350,000 patients in the United States and more than one million worldwide. Approximately one-third of uveitis patients develop uveitic macular edema, a build-up of fluid in the macula, the area of the retina responsible for sharp, straight-ahead vision. Macular edema is the leading cause of vision loss and blindness in uveitis patients and can occur from uveitis affecting any anatomic location—anterior, intermediate, posterior or panuveitis.

~~In December 2018, we submitted a New Drug Application, or NDA, for XIPERE~~ The uveitis market is expected to ~~the Food and Drug Administration, or FDA, for the treatment of macular edema associated with uveitis. In October 2019, w~~e received a complete response letter, or CRL, from the FDA regarding our NDA for XIPERE. The FDA did not identify any efficacy issues, and there were no requests for further clinical efficacy studies. The CRL included the FDA’s request for additional stability data, additional clarifying information on components of the manufacturing process, and reinspection of the drug product manufacturer.

~~In August 2020, we secured a new contract manufacturing organization, or CMO,~~grow to manufacture the registration batches of XIPERE for the resubmission of our NDA, as well as to manufacture batches of XIPERE for potential commercialization. Our prior CMO notified us that they were no longer willing to serve as our commercial supplier for XIPERE and that they were uncertain about being prepared for an FDA pre-approval inspection on our timeline. In connection with the engagement of the new CMO, the

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~~technology underlying the manufacturing process is being transferred so that they can begin generating the data required~~nearly $550 million by ~~the FDA.As a result, we expect to resubmit the XIPERE NDA no later than the first half of 2021. We expect the FDA will review the NDA within six months of the resubmission date.~~

~~After evaluation of our prior work and based on recently presented data~~2024 in the ~~scientific community, we have decided to advance our~~United States, and over $1 billion globally.

We are developing a proprietary suspension of axitinib, a tyrosine kinase inhibitor, or TKI, for suprachoroidal injection, which we refer to as ~~CLS-AX, into further preclinical development.~~CLS-AX. In our ~~internal~~ preclinical studies, administration of CLS-AX ~~delivered~~ through suprachoroidal injection was well tolerated and showed durability over several months, providing us with the opportunity to potentially reduce treatment burden and address a primary need for neovascular age-related macular degeneration, or wet AMD, patients.

In August 2020, we announced that the FDA had accepted our Investigational New Drug application, or IND, for CLS-AX. ~~We expect to initiate a~~In January 2021, we announced that the first patients had been enrolled in our Phase 1/2a clinical trial of CLS-AX, known as OASIS. In March 2021, we completed patient dosing in ~~patients with wet AMD~~Cohort 1 of OASIS and in June 2021, reported that we achieved our safety and tolerability endpoints. In September 2021, we completed patient enrollment in Cohort 2 and expect to report data by the end of ~~2020. The Phase 1/2a~~2021. If the data from Cohort 2 are positive, we intend to continue the clinical trial ~~is expected to be an open-label, dose-escalation~~with a dose escalation in Cohort 3. We have added a three-month extension study to ~~assess the safety and tolerability~~follow Cohort 2 patients over a longer period of single doses of CLS-AX administered through suprachoroidal injection following two or more prior treatments with aflibercept, an intravitreal anti-VEGF agent. We expect to report initial safety data from this trial in mid-2021.time.

~~Our preclinical proof-of-concept studies utilizing suprachoroidal delivery of marker genes using DNA nanoparticles have shown the potential for suprachoroidal administration to deliver genes.~~ We ~~are conducting additional preclinical work with SCS delivery of therapeutic transgenes. We have commenced a therapeutic biofactory program which will entail the~~ ~~suprachoroidal administration of non-viral vector gene therapy for retinal diseases. This program~~ is ~~designed to cause the expression and secretion of an anti-VEGF therapeutic protein from retinal cells.~~

~~In addition, we~~ have initiated another small molecule program utilizing suprachoroidal administration of an integrin inhibitor suspension. Integrins play a role in pathologic processes, such as inflammation, angiogenesis and fibrosis. ~~Importantly, integrin~~Integrin inhibition has had some recent preliminary validation in preclinical models and clinical studies of diabetic macular edema and macular ~~degeneration. Accordingly, given the unique mechanism of action,~~degeneration conducted by others. We believe that integrin inhibition could potentially serve as primary therapy, adjunctive therapy to anti-VEGF agents ~~and/~~or secondary therapy in refractory cases of diabetic macular edema and macular degeneration. ~~We believe that suprachoroidal~~ Suprachoroidal delivery of an integrin inhibitor suspension ~~may~~could provide targeting, compartmentalization and durability advantages over topical or intravitreal delivery, similar to what we have observed in other preclinical studies of small molecule suspensions, such as triamcinolone acetonide and axitinib. Therefore, we are assessing ocular tolerability, distribution and pharmacokinetics of our integrin inhibitor suprachoroidal suspension in a series of preclinical studies. ~~We expect our first set of data from these preclinical~~These studies ~~in the first half of 2021.~~are ongoing.

~~The current development status of our pipeline of product candidates that are not currently the subject of collaborations with third parties is summarized in the chart below:~~16

External Collaborations Pipeline

In addition to growing our internal pipeline, we are also focused on collaborating with other companies to provide access to the suprachoroidal space.

During the second half of 2019, we entered into three license and other agreements that we believe validate and expand the reach of our suprachoroidal injection platform. In October 2019, we announced that Bausch + Lomb, a division of Bausch Health Companies, Inc., or Bausch, ~~is our~~acquired an exclusive license for the commercialization ~~partner for~~and development of XIPERE (triamcinolone acetonide suprachoroidal suspension) in the United States and Canada.

In ~~April 2020, we granted Bausch~~October 2019, REGENXBIO Inc., or REGENXBIO, exercised its option to license our SCS Microinjector technology for in-office delivery of adeno-associated virus, or AAV,-based therapeutics to the SCS to potentially treat AMD, diabetic retinopathy and certain other conditions for which chronic anti-VEGF treatment is currently the standard of care. REGENXBIO is currently conducting two Phase 2 clinical trials using our SCS Microinjector technology: the Phase 2 trial entitled AAVIATE for the treatment of wet AMD and a second Phase 2 trial entitled ALTITUDE for the treatment of diabetic retinopathy. REGENXBIO reported positive initial data from both clinical trials in October 2021.

In July 2019, Aura Biosciences, or Aura, licensed our SCS Microinjector to deliver Aura’s proprietary drug candidates into the SCS for the potential treatment of certain ocular cancers, including choroidal melanoma. Aura is currently conducting a Phase 2 trial in choroidal melanoma comprised of an ~~exclusive option, or~~open-label, dose escalation phase and a randomized, masked dose expansion phase. Aura reported positive initial data on its Phase 2 clinical trial for the ~~Option, to develop, manufacture, distribute, promote, market and commercialize XIPERE~~treatment of choroidal melanoma in ~~one or more~~October 2021. Aura has announced the randomized phase of the following regions: (i) the European Union, including the United Kingdom, (ii) Australia and New Zealand and (iii) South America and Mexico, or collectively the Additional Regions, in exchange for Bausch extending the deadline by which we must obtain regulatory approval for XIPEREtrial is planned to begin in the ~~United States.~~ ~~The Option may be exercised~~second half of 2022 and will serve as ~~to any or all~~the first pivotal trial for the treatment of ~~the Additional Regions any time before the earlier of regulatory approval of XIPERE in the United States~~indeterminate lesions and ~~August 31, 2021.~~choroidal melanoma.

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In March 2020, we entered into a license agreement, or the Arctic Vision License Agreement, with Arctic Vision (Hong Kong) Limited, or Arctic Vision. Pursuant to the Arctic Vision License Agreement, we granted an exclusive license to ~~Artic~~Arctic Vision to develop, distribute, promote, market and commercialize XIPERE, subject to specified exceptions, in China, Hong Kong, Macau, Taiwan and South ~~Korea.~~

Our clinical development partners, including REGENXBIO in AAV viral vector gene therapy and Aura Biosciences in ocular cancer, continue to make progress in their programs utilizing our SCS Microinjector. REGENXBIO initiated theirKorea, or the Arctic Territory. In December 2020, Arctic Vision announced approval of its IND for a Phase 23 clinical trial ~~entitled AAVIATE,~~of XIPERE in China and they expect to begin Phase 3 clinical trials later this year.

In August 2021, we entered into an amendment to the Arctic Vision License Agreement to expand the territories covered by the license to include India and the ASEAN Countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). In September 2021, we entered into a second amendment to the Arctic Vision License Agreement to expand the Arctic Territory to include Australia and New Zealand. We received an aggregate of $3.0 million in consideration for the ~~treatment~~expansion of ~~wet AMD. They also expect~~the Arctic Territory.

These partnerships enable us to ~~initiate a Phase 2 clinical trial, entitled ALTITUDE, for~~expand the ~~treatment of diabetic retinopathy by the end of 2020. Aura initiated a Phase 2 clinical trial for the treatment of choroidal melanoma during the third quarter of 2020.~~

~~The current development status~~use of our ~~pipeline licensed~~suprachoroidal injection platform to ~~or otherwise being developed~~other indications and geographies globally. Under these license agreements, we are eligible to receive up to an aggregate of more than $200 million in ~~collaboration with third parties, is summarized in the chart below:~~potential future development and sales milestones, as well as and royalties from net sales of covered products.

We have incurred net losses since our inception. In recent years, our operations have consisted primarily of conducting preclinical studies and clinical trials, raising capital and undertaking other research and development initiatives. To date, we have not generated any revenue, other than license and other revenue, and we have primarily financed our operations through public offerings and private placements of our equity securities, issuances of convertible promissory notes and loan agreements. As of September 30, ~~2020,~~2021, we had an accumulated deficit of ~~$248.8~~$274.2 million. We recorded net losses of ~~$2.4~~$4.9 million and ~~$6.5~~$2.4 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and net losses of ~~$11.1~~$18.3 million and ~~$27.7~~$11.1 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the necessary development for and obtaining regulatory approval of our product candidates, as well as discovering compounds and developing proprietary formulations to utilize with our SCS Microinjector.

We expect to continue to incur significant and increasing operating losses at least for the next several years. We do not expect to generate significant product or license and other revenue unless and until XIPERE is successfully commercialized by its licensees or until we successfully complete ~~necessary~~ development of, obtain regulatory approval for and ~~successfully~~ commercialize ~~one or more of our~~additional product candidates, either on our own or together with ~~our licensees.~~a third party. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities. Our clinical trial expenses have decreased significantly following our decision to discontinue late-stage clinical trials of XIPERE for indications other than uveitis. However, we expect clinical trial expenses to increase in 2021 as a result of our Phase 1/2a clinical trial of CLS-AX. We also will continue our efforts to seek to discover, research and develop additional product candidates and ~~conduct various preclinical and clinical activities to further our pipeline programs.~~seek regulatory approvals in additional regions for XIPERE for the treatment of macular edema associated with uveitis. Based on our current research and development plans and expected near-term partnership milestone payments, we expect to have sufficient resources to fund our planned operations into ~~the third quarter of 2021.~~2023.

Impact of COVID-19 on Our Business

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We have been actively monitoring the novel coronavirus, or COVID-19, situation and its impact globally. Our financial results for the three and nine months ended September 30, ~~2020~~2021 were not significantly impacted by COVID-19, and we currently do not expect any material impact on our financial results for the remainder of ~~2020.~~2021. We continue to operate normally with the exception of enabling our employees to work from home and abiding by travel restrictions issued by federal and local governments.

As the COVID-19 pandemic continues, we may experience other disruptions that could severely impact our business, results of operations and prospects. The extent to which COVID-19 may impact our business, preclinical development and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted, such as the ~~ultimate geographic spread of the disease, the~~ duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, ~~and~~ the effectiveness of actions taken in the United States and other countries to contain and treat the ~~disease.~~disease and the impact of new variants or mutations of the coronavirus, such as the Delta variant.

Components of Operating Results

Revenue

We have not generated any revenue from the sale of any drugs, and we do not expect to generate any product revenue unless or until XIPERE is commercialized by our licensees or we obtain regulatory approval of and commercialize our product candidates, either on our own or with a third party. Our revenue in recent periods has been generated primarily from our license agreements. We are seeking to enter into additional license and other agreements with third parties to evaluate the potential use of our proprietary SCS Microinjector with the third party’s product candidates for the treatment of various eye diseases. These agreements may include payments to us for technology access, upfront license payments, regulatory and commercial milestone payments and royalties.

Research and Development

Research and development expenses consist primarily of costs incurred for the research and development of our preclinical and clinical product candidates, which include:



employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and development personnel;



expenses incurred under agreements with contract research organizations, or CROs, as well as contract manufacturing organizations and consultants that conduct clinical trials and preclinical studies;



costs associated with nonclinical activities and development activities;



costs associated with submitting regulatory approval applications for our product candidates;



costs associated with training physicians on the suprachoroidal injection procedure and educating and providing them with appropriate product candidate information;



costs associated with technology and intellectual property licenses;



costs for our research and development facility; and



depreciation expense for assets used in research and development activities.

We expense research and development costs to operations as incurred. These costs include preclinical activities, such as manufacturing and stability and toxicology studies, that are supportive of a product candidate itself. In addition, there are expenses related to clinical trials and similar activities for each program, including costs associated with CROs. Clinical costs are recognized based on the terms of underlying agreements, as well as an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations and additional information provided to us by our vendors about their actual costs occurred. Expenses related to activities that support more than one development program or activity, such as salaries, share-based compensation and depreciation, are not classified as direct preclinical costs or clinical costs and are separately classified as unallocated.

2018

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The following table shows our research and development expenses by program ~~including those that have been discontinued,~~ for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (in thousands).


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2021		2020		2021		2020
XIPERE (uveitis program)	$	781	$	427	$	2,048	$	2,129	$	771	$	781	$	2,646	$	2,048
XIPERE (RVO program)		1		118		71		4,298
CLS-AX (wet AMD program)		478		—		1,429		—		1,341		478		3,382		1,429
Total		1,260		545		3,548		6,427		2,112		1,259		6,028		3,477
Unallocated		2,230		2,183		7,053		7,926		3,035		2,231		8,669		7,124
Total research and development expense	$	3,490	$	2,728	$	10,601	$	14,353	$	5,147	$	3,490	$	14,697	$	10,601

Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended under contracts with research institutions, consultants and CROs that conduct and manage clinical trials on our behalf. We generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If future timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we would modify our estimates of accrued expenses accordingly on a prospective basis.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. It is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of XIPERE or any of our product candidates that obtain regulatory approval. ~~We may never succeed in achieving regulatory approval for any of our product candidates.~~

The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors that may include, among others:



the costs associated with process development, scale-up and manufacturing of XIPERE, our product candidates and the SCS ~~Microinjector in support of filings for regulatory approval;~~

Microinjector;



the number of trials required for approval and any requirement for extension trials;



per patient trial costs;



the number of patients that participate in the trials;



the number of sites included in the trials;



the countries in which the trials are conducted;



the length of time required to enroll eligible patients;



the number of doses that patients receive;



the potential impact of the COVID-19 pandemic on the enrollment in, and timing of, our clinical trials;



the drop-out or discontinuation rates of patients;



potential additional safety monitoring or other studies requested by regulatory agencies;



the duration of patient follow-up; and



the efficacy and safety profiles of the product candidates.

In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

General and Administrative

General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative costs historically included commercial

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pre-launch preparations for XIPERE, and also include facility related costs not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, and accounting and audit services.

Other Income (Expense)

Other income consists of the gain on the extinguishment of the PPP Loan and accrued interest and interest income earned on our cash and cash equivalents and short-term investments. Interest income is not considered significant to our financial statements.

Other expense consists of interest expense incurred under our loan agreements.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used in the determination of share-based compensation and some of our research and development expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. During the nine months ended September 30, ~~2020,~~2021, there were no significant changes to our critical accounting policies disclosed in our audited financial statements for the year ended December 31, ~~2019,~~2020, which are included in our Annual Report on Form 10-K, as filed with the SEC on March ~~13, 2020.~~15, 2021.

Results of Operations for the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

The following table sets forth our results of operations for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.


	Three Months Ended September 30,						Period-to-Period			Three Months Ended September 30,						Period-to-Period
	2020			2019			Change			2021			2020			Change
	(in thousands)									(in thousands)
License and other revenue	$	3,432		$	141		$	3,291		$	3,074		$	3,432		$	(358	)
Operating expenses:
Research and development		3,490			2,728			762			5,147			3,490			1,657
General and administrative		2,374			3,781			(1,407	)		2,816			2,374			442
Total operating expenses		5,864			6,509			(645	)		7,963			5,864			2,099
Loss from operations		(2,432	)		(6,368	)		3,936			(4,889	)		(2,432	)		(2,457	)
Other income											2			—			2
Other expense		(1	)		(168	)		167			—			(1	)		1
Net loss	$	(2,433	)	$	(6,536	)	$	4,103		$	(4,887	)	$	(2,433	)	$	(2,454	)

Revenue. In the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we recognized ~~$3.4~~$3.1 million and ~~$126,000,~~$3.4 million, respectively, of revenue associated with our license agreements. License revenue for the three months ended September 30, 2021 was primarily a result of a milestone payments received from Arctic Vision. License revenue for the three months ended September 30, 2020 was primarily a result of a milestone payments received from REGENXBIO.

Research and development. Research and development expense increased by $1.7 million, from $3.5 million for the three months ended September 30, 2020 to $5.1 million for the three months ended September 30, 2021. This increase was due to a $0.9 million increase in costs for the for CLS-AX program, including costs for OASIS, a Phase 1/2a clinical trial of CLS-AX and a $0.3 million increase in employee related costs. In addition, there was a $0.3 million increase in costs in our other programs.

General and administrative. General and administrative expenses increased by $0.4 million, from $2.4 million for the three months ended September 30, 2020 to $2.8 million for the three months ended September 30, 2021. This was primarily attributable to an increase in employee related costs.

Results of Operations for the Nine Months Ended September 30, 2021 and 2020

The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020.


	Nine Months Ended September 30,						Period-to-Period
	2021			2020			Change
	(in thousands)
License and other revenue	$	3,888		$	7,883		$	(3,995	)
Operating expenses:
Research and development		14,697			10,601			4,096
General and administrative		8,525			8,107			418
Total operating expenses		23,222			18,708			4,514
Loss from operations		(19,334	)		(10,825	)		(8,509	)
Other income		1,001			—			1,001
Other expense		—			(273	)		273
Net loss	$	(18,333	)	$	(11,098	)	$	(7,235	)

Revenue. In the nine months ended September 30, 2021 and 2020, we recognized $3.9 million and $7.9 million, respectively, of revenue associated with our license agreements. License revenue for the nine months ended September 30, 2021 was primarily a result of milestone payments of $3.8 million received from Arctic Vision. License revenue for the nine months ended September 30, 2020 was primarily a result of milestone payments of $4.3 million received from Arctic Vision and $3.0 million received from REGENXBIO in September 2020. In addition, in the three months ended September 30, 2019, we recognized $15,000 of revenue associated with other agreements to evaluate the potential use of our proprietary SCS Microinjector with third-party product candidates for the treatment of various diseases.REGENXBIO.

Research and development. Research and development expense increased by ~~$0.8~~$4.1 million, from ~~$2.7~~$10.6 million for the ~~three~~nine months ended September 30, ~~2019~~2020 to ~~$3.5~~$14.5 million for the ~~three~~nine months ended September 30, ~~2020.~~2021. This increase was primarily due to a ~~$0.8~~$2.0 million increase in costs for the for CLS-AX program, including costs for OASIS, a Phase 1/2a clinical trial of CLS-AX, and a $0.6 million increase in costs related ~~to the initiation of CLS-AX Phase 1/2a clinical trial and costs related~~ drug manufacturing for ~~XIPERE and a $0.2~~XIPERE. In addition, employee related costs increased $1.1 million ~~increase in costs related to preclinical work on potential product candidates. These increases were partially offset by a decrease in costs for travel and consulting services due to~~during the ~~COVID-19 pandemic.~~same period.

General and administrative. General and administrative expenses ~~decreased~~increased by ~~$1.4 million, from $3.8~~$0.4 million for the ~~three~~nine months ended September 30, ~~2019 to $2.4~~2021 and 2020. This increase was primarily a result of a $0.8 million increase in employee related costs, partially offset by a $0.3 million decrease in patent costs and professional fees.

Other income. Other income for the ~~three~~nine months ended September 30, ~~2020. This~~2021 was primarily ~~attributable to a decrease~~comprised of ~~$0.8 million in marketing-related expenses related to~~ the ~~change~~gain on the extinguishment of ~~our business strategy to seek partners for XIPERE rather than commercializing XIPERE on our own~~debt from the forgiveness of the PPP Loan and ~~a decrease of $0.5 million in professional fees.~~accrued interest.

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Other expense. Other expense for the ~~three~~nine months ended September 30, ~~2019~~2020 primarily consisted of interest on long-term debt, the amortization of financing costs, the accretion of warrants and the final payment related to our prior loan agreement.

~~Results of Operations for the Nine Months Ended September 30, 2020 and 2019~~

~~The following table sets forth our results of operations for the nine months ended September 30, 2020 and 2019.~~

Nine Months Ended
September 30,

Period-to-Period

2020

2019

Change

(in thousands)

License and other revenue

$
7,883

$
231

$
7,652

Operating expenses:

Research and development

10,601

14,353

(3,752
)
General and administrative

8,107

13,169

(5,062
)
Total operating expenses

18,708

27,522

(8,814
)
Loss from operations

(10,825
)

(27,291
)

16,466

Other expense

(273
)

(383
)

110

Net loss

$
(11,098
)

$
(27,674
)

$
16,576

~~Revenue~~. In the nine months ended September 30, 2020, we recognized $7.7 million of revenue associated with our license agreements, primarily as a result of the $4.0 million upfront payment from Arctic Vision in March 2020 and milestone payments of $3.0 million from REGENXBIO in September 2020. In addition, in the nine months ended September 30, 2020 and 2019, we recognized $0.2 million and $0.1 million, respectively, of revenue associated with other agreements.

~~Research and development~~. Research and development expense decreased by $3.8 million, from $14.4 million for the nine months ended September 30, 2019 to $10.6 million for the nine months ended September 30, 2020. This decrease was primarily attributable to the $4.3 million in costs incurred during the nine months ended September 30, 2019 to close down the SAPPHIRE and TOPAZ trials. Additionally, there was a $0.8 million decrease in employee-related costs between the periods. These decreases were partially offset by a $1.4 million increase in costs related to device and drug manufacturing, primarily for CLS-AX.

~~General and administrative~~. General and administrative expenses decreased by $5.1 million, from $13.2 million for the nine months ended September 30, 2019 to $8.1 million for the nine months ended September 30, 2020. This decrease was primarily attributable to a $3.3 million reduction in marketing-related expenses related to the change of our business strategy to seek partners for XIPERE rather than commercializing XIPERE on our own, a decrease of $1.3 million of employee-related costs due to expenses incurred in the prior year primarily related to the departure of our former chief executive officer and a $0.6 million decrease in professional fees.

~~Other expense~~. Other expense for each of the nine months ended September 30, 2020 and 2019 primarily consisted of interest on long-term debt, the amortization of financing costs, the accretion of warrants and the final payment related to our prior loan agreement, offset in part by interest income from our short-term investments.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily through the proceeds of public offerings of our common stock, sales of convertible preferred stock and the issuance of long-term debt. As of September 30, ~~2020,~~2021, we had cash and cash equivalents of ~~$14.8~~$25.2 million. We invest any cash in excess of our immediate requirements primarily with a view to liquidity and capital preservation. As of September 30, ~~2020,~~2021, our funds were held in cash and money market funds.

In ~~September 2020, we received $3.0 million in milestone payments under the REGENXBIO agreement.~~

On April ~~20,~~ 2020, we entered into a loan agreement with Silicon Valley Bank under the terms of which Silicon Valley bank loaned us $1.0 million, or the PPP Loan, pursuant to the Paycheck Protection Program, or PPP, under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. In accordance with the requirements of the CARES Act, we ~~have~~ used the proceeds primarily for payroll costs and other eligible expenses. The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. ~~We have applied for forgiveness for the full amount of~~On January 11, 2021, we received notification from Silicon Valley Bank that the PPP ~~Loan,~~loan was forgiven in ~~which case we would not be required to repay the principal amount or~~full, including approximately $7,000 of accrued interest. ~~There can be no assurance that we will obtain forgiveness of the PPP Loan in whole or in part.~~

OnIn March ~~10,~~ 2020, we entered into the Arctic License ~~Agreement. Pursuant~~Agreement, pursuant to the Arctic License Agreement, we granted an exclusive license to Artic Vision to develop, distribute, promote, market and commercialize XIPERE, subject to specified exceptions, in the Arctic Territory. Pursuant to the Arctic License Agreement,which Arctic Vision has agreed to pay us up to a total of $35.5 million.

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This amount includes an upfront payment of $4.0 million, which we received in March 2020, as well as an aggregate of up to $31.5 million in potential development milestone payments for specified events, ~~prior to and~~ including ~~receipt of~~$4.0 million upon regulatory approval of XIPERE in the United States and potential sales milestone payments for achievement of specified levels of net

sales. Further, during the applicable royalty term, we will also be entitled to receive tiered royalties of 10-12% of net sales in the Arctic Territory, subject to customary reductions.

~~We previously entered into a loan and security agreement with Silicon Valley Bank and MidCap Financial Services, or collectively the Lenders, under which we borrowed $10.0 million in May 2018~~.In October 2019, we ~~repaid~~announced that Bausch acquired an exclusive license for the commercialization and development of XIPERE in the United States and Canada. On October 25, 2021, we announced that the FDA approved XIPERE for the treatment of macular edema associated with uveitis. We are entitled to receive $5.0 million from Bausch within 30 days of FDA approval, and we are eligible to receive an additional $10.0 million upon completion of pre-launch activities for XIPERE. Bausch expects to launch XIPERE in the ~~outstanding principal balance.~~ ~~Under~~United States in the ~~loan agreement, we were required to pay accrued interest only on the $5.0 million remaining outstanding balance~~ ~~through October 31, 2020, followed by consecutive equal monthly payments~~first quarter of ~~principal and interest in arrears continuing through the maturity date of October 1, 2022. We had the option to prepay the outstanding balance in full, subject to a prepayment fee. In May 2020,~~ we ~~elected to prepay in full the outstanding~~ ~~$5.0 million principal balance, plus $0.3 million reflecting a final payment fee and accrued interest. The prepayment fees were waived by the lenders.~~2022.

We have entered into an at-the-market sales agreement, or the ATM agreement, with Cowen and Company LLC, or Cowen, under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen acting as our sales agent. During the ~~three and~~ nine months ended September 30, ~~2020,~~2021, we sold ~~1.4~~2.9 million ~~and 2.6 million~~ shares ~~respectively,~~ of our common stock for net proceeds of ~~$2.3~~$12.2 million ~~and $5.1 million, respectively,~~ under the ATM agreement. As of September 30, ~~2020,~~2021, there was ~~$34.1~~$14.4 million available for sales of our common stock under the ATM agreement.

Funding Requirements

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, ~~ongoing costs related to our NDA submission for XIPERE,~~ research and development costs to build our product candidate pipeline, legal and other regulatory expenses and general overhead costs.

The successful development of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the ~~remainder of the~~ development of ~~XIPERE~~CLS-AX or any future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from product sales. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:



successful enrollment in, and completion of, clinical trials;



receipt of marketing approvals from applicable regulatory authorities;



establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;



obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; and



launching commercial sales of the products, if and when approved, whether alone or in collaboration with others.

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that candidate.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license and development agreements. Other than potential payments we may receive under our license and other agreements, we do not currently have any committed external source of funds, though, as described above, we may also be able to sell our common stock under the ATM agreement with Cowen subject to the terms of that agreement and depending on market conditions. We expect that we will require additional capital to fund our ongoing operations. Additional funds may not be available to us on a timely basis, on commercially reasonable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, including any future collaboration or licensing arrangement for XIPERE outside of the territories in which we have previously licensed or granted options to license XIPERE, we may be required to relinquish additional rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or

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terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We also incur costs as a public company, including costs and expenses for fees to members of our board of directors, accounting and finance personnel costs, directors and officers insurance premiums, audit and legal fees, investor relations fees and expenses for compliance with reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.

Outlook

We have suffered recurring losses and negative cash flows from operations since inception and anticipate incurring additional losses until such time, if ever, that we can obtain FDA approval to market and then generate significant ~~revenue~~milestone payments and

royalties from ~~XIPERE.~~XIPERE and other licensing arrangements or revenues from other product candidates. We will need additional financing to fund our operations. ~~These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date of this report. We have~~ Our plans ~~to mitigate this going concern risk, which~~ primarily consist of raising additional capital, potentially in a combination of equity or debt financings or restructurings, or potentially entering into additional collaborations, partnerships and ~~the expected receipt of future milestone payments under our license agreements.~~other strategic arrangements.

Based on our current plans and forecasted expenses, we expect that our cash and cash equivalents as of ~~September 30, 2020~~the filing date, November 10, 2021, will enable us to fund our planned operating expenses and capital expenditure requirements into ~~the third quarter of 2021.~~2023. This estimate ~~gives effect to additional development~~assumes receipt of the $9.0 million of milestone payments that we ~~expect~~are entitled receive from our licensees as a result of FDA approval of XIPERE. In addition, the estimate assumes receipt of the $10.0 million milestone payment that we are entitled to receive ~~under our license agreements. However, we~~from Bausch upon completion of pre-launch activities for XIPERE. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect.

~~Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.~~ The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should we be unable to continue as a going concern.

Cash Flows

The following is a summary of the net cash flows provided by (used in) our operating, investing and financing activities (in thousands):


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020
Net cash (used in) provided by:
Operating activities	$	(8,684	)	$	(28,757	)	$	(15,787	)	$	(8,684	)
Investing activities		(55	)		32,925			—			(55	)
Financing activities		983			10,340			23,617			983
Net change in cash and cash equivalents	$	(7,756	)	$	14,508		$	7,830		$	(7,756	)

During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, our operating activities used net cash of ~~$8.7~~$15.8 million and ~~$28.8~~$8.7 million, respectively. The use of cash in each period primarily resulted from our net losses. The ~~decrease~~increase in net loss to $18.3 million for the nine months ended September 30, 2021 as compared to $11.1 million for the nine months ended September 30, 2020 ~~as compared~~was primarily attributable to ~~$27.7 million for~~higher research and development expenses related to the preclinical and clinical CLS-AX program in the nine months ended September 30, ~~2019 was primarily attributable to lower research~~2021 and ~~development expenses as a result of the discontinuation of the SAPPHIRE and TOPAZ trials and ceasing of commercialization activities~~higher license revenue in ~~2019. The losses are partially offset by non-cash items, made up primarily of share-based compensation, of $3.1 million and $3.7 million for~~ the nine months ended September 30, 2020 and 2019, respectively. The nine months ended September 30, 2019 also included a net cash outflow of $5.4 million primarily from the decrease in our accounts payable balance during that period, which was the result of payments for the winding down of the clinical trials.2020.

During the nine months ended September 30, 2020, our net cash used in investing activities was $55,000, ~~for~~due to the purchase of equipment.

During the nine months ended September 30, ~~2019,~~2021 our net cash provided by ~~investing~~financing activities was ~~$32.9~~$23.6 million. This primarily consisted of $11.1 million ~~primarily due to maturities~~ of ~~short-term, available-for-sale investments.~~

net proceeds from the sale of shares of our common stock in a registered direct offering and $12.2 million of net proceeds from the sale of shares of our common stock under the ATM agreement. During the nine months ended September 30, 2020, our net cash provided by financing activities ~~was $1.0 million. This primarily~~ consisted of $5.1 million of net proceeds from the sale of shares of our common stock under the ATM agreement and $1.0 million of proceeds from the PPP Loan, partially offset by ~~the full prepayment~~a payment of ~~the remaining~~ $5.3 million ~~owed~~ under our credit facility. During the nine months ended September 30, 2019, our net cash provided by financing activities was $10.3 million, almost exclusively consisting of net proceeds from the sale of shares of common stock under the ATM agreement.

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~~Contractual Obligations~~

As of September 30, 2020, there were no significant changes to our contractual obligations from those presented as of December 31, 2019 in our Annual Report on Form 10-K, except for the May 2020 prepayment in full of amounts outstanding under the Loan Agreement described above.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

Recent Accounting Pronouncements

See Item 1, “Financial Statements – Note 2, Significant Accounting Policies” for a discussion of recent accounting pronouncements and their effect on us.

~~JOBS Act~~

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~The market risk inherent in our financial instruments~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and ~~in our financial position represents~~are not required to provide the potential loss arising from adverse changes in interest rates. As of September 30, 2020 and December 31, 2019, we had cash and cash equivalents of $14.8 million and $22.6 million, respectively. We generally hold our cash in interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and short-term investments.information required under this item.

~~We do not have any foreign currency or other material derivative financial instruments.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s

management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial ~~reporting despite the fact that many of our employees are working remotely due to the COVID-19 pandemic.~~reporting. However, we continue to monitor and assess the potential impact of the COVID-19 pandemic on our control environment.

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PART II – ~~OTHE~~ROTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

Item 1A. Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. These risks could be amplified by the COVID-19 pandemic and its potential impact on the global economy generally and our business and industry in particular.In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described below and in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission on March ~~13, 2020. Except as described below, there~~15, 2021. There have been no material changes to the risk factors described in that report.

We have secured a new contract manufacturer for XIPERE to produce data necessary for the resubmission of our NDA for XIPERE. As a result, the timing of regulatory approval for XIPERE is uncertain, and we may never obtain regulatory approval for XIPERE in the United States.

We have secured a new manufacturing partner for XIPERE. Our prior CMO notified us that they were no longer willing to serve as our commercial supplier for XIPERE and that they were uncertain about being fully prepared for an FDA pre-approval inspection on our timeline. Given our previously disclosed delays, we had begun evaluating alternative manufacturers. In August 2020, we engaged a new CMO to manufacture the registration batches of XIPERE for the resubmission of our NDA.

In connection with the engagement of the new CMO, the technology underlying the manufacturing process is being transferred to the new CMO so that they can begin generating the data required by the FDA.

The timeline for the CMO’s ability to complete the necessary activities is uncertain, and the CMO may be unable to timely complete the technology transfer, implement the manufacturing processes or generate the needed data. While we believe, based on information received from the new CMO, that we will be able to resubmit the NDA no later than the first half of 2021, we cannot predict the outcome of any interactions with the FDA nor can we guarantee when, or if, we will be successful in receiving regulatory approval for XIPERE. In addition, the FDA could require supplemental data or information from the new CMO, particularly if the FDA inspects the new CMO’s facilities. As a result, the timing of regulatory approval for XIPERE is uncertain, and we may never obtain regulatory approval for XIPERE in the United States. If we do not obtain regulatory approval for XIPERE or are further delayed in obtaining such approval, it would have a material adverse effect on our operations and financial condition.

~~COVID-19 could adversely impact our business, including our clinical trials.~~

In December 2019, a novel strain of coronavirus, SARS-CoV-2, causing COVID-19, was initially reported and has since been declared a pandemic by the World Health Organization. The COVID-19 pandemic has resulted in continuing travel and other restrictions in order to reduce the spread of the disease, including state and local orders across the country that, among other things, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. In response to these public health directives and orders, we have implemented work-from-home policies for our employees. The effects of the executive orders and our work-from-home policies may negatively impact employee productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.

Quarantines and similar government orders and employer restrictions related to COVID-19 may adversely impact our business operations and the business operations of third parties on which we rely. In addition, our clinical trials and those of our licensing partners may be affected by the COVID-19 pandemic. For example, clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic. Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability, or that of our licensing partners, to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 may be impaired, which could adversely impact our clinical trial operations or those of our licensing partners and, as a result, negatively affect our ability to receive regulatory and development milestones under our license agreements.

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The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a continued widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The global pandemic of COVID-19 continues to rapidly evolve. The extent to which the COVID-19 pandemic impacts our business, our clinical development and regulatory efforts and those of our licensing partners will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries, and business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the global economy as a whole.

We have granted an exclusive license to Bausch for the commercialization and development of XIPERE in the United States and Canada. If we are delayed in receiving FDA approval for XIPERE, or we are unable to maintain our partnership with Bausch, or if Bausch fails to successfully commercialize XIPERE, our business and prospects will be materially harmed.

We have granted an exclusive license to Bausch for the commercialization and development of XIPERE in the United States and Canada. Pursuant to our agreement with Bausch, we are entitled to receive payments based on the achievement of specified sales and regulatory milestones and tiered royalties based on annual net sales of XIPERE. The successful or timely achievement of many of these milestones is outside of our control because the relevant activities will be conducted by Bausch. We expect to depend to a large degree on the payments from Bausch and future potential commercialization partners in order to fund our operations, and a failure to receive such payments may cause us to:

	•	~~delay, reduce or terminate certain research and development programs;~~
	•	~~reduce headcount;~~
	•	~~pursue the raising of additional funds through equity or convertible debt financings that could be dilutive to our stockholders;~~
	•	~~seek funds by entering into agreements that require us to assign rights to technologies or products that we would have otherwise retained;~~
	•	~~enter into new arrangements that may be less favorable than those we would have obtained under different circumstances; or~~
	•	~~consider strategic transactions or engaging in a joint venture with a third party.~~

In addition, Bausch may terminate the License Agreement immediately and have the upfront payment of $5.0 million refunded if the FDA has not approved the XIPERE NDA by August 31, 2021. Based upon our current expectations, we expect that the FDA may not have approved the XIPERE NDA by such date. Therefore, if we are not able to enter into an amendment to the License Agreement or obtain a waiver from Bausch, it is possible that Bausch could terminate the License Agreement and that we would be required to refund the initial $5.0 million upfront payment. If this were to occur, our business prospects would be materially harmed, and we would need to seek a new partner to commercialize XIPERE in the United States and Canada and the Additional Regions.

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~~We may not be entitled to forgiveness of our PPP Loan, and our application for the PPP Loan could in the future be determined to have been impermissible or could result in damage to our reputation.~~

In April 2020, we received proceeds of $1.0 million from a loan under the PPP of the CARES Act, which we have used to retain employees, maintain payroll and make lease and utility payments as contemplated by the CARES Act. ~~We have applied for forgiveness of the full amount of the PPP Loan from the U.S. Small Business Administration, or SBA, as permitted by its terms.~~ While the SBA has issued some guidance around the forgiveness of PPP loans, there remains uncertainty about the timing and process for obtaining forgiveness. We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest. We cannot provide any assurance that we will be eligible for loan forgiveness or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

In order to obtain the PPP Loan, we were required to certify, among other things, that the economic uncertainty presented by the COVID-19 pandemic made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and we believe that we satisfied all eligibility criteria for the PPP Loan and that our receipt of the PPP Loan was consistent with the objectives of the PPP. However, the certification described above does not contain any objective criteria and is subject to interpretation. For example, the SBA issued guidance stating that it was unlikely that a public company with substantial market value and access to capital markets would be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the PPP has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good faith belief that we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that applied to us in connection with the PPP Loan, such as the False Claims Act, or if it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties, and we could be required to repay the PPP Loan in its entirety. In addition, our receipt of the PPP Loan may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine. However, this exclusive forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~(a)~~

~~Sales of Unregistered Securities~~

~~None.~~

30Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

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Item 6. Exhibits


Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37783) filed with the SEC on June 7, 2016).

3.2		Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37783) filed with the SEC on June 7, 2016).

31.110.1#		First Amendment to the License Agreement by and between the Registrant and Arctic Vision (Hong Kong) Limited, dated as of August 15, 2021.

10.2*#		Second Amendment to the License Agreement by and between the Registrant and Arctic Vision (Hong Kong) Limited, dated as of September 9, 2021.

10.3*		Second Amendment to the License Agreement by and between the Registrant and Bausch + Lomb Ireland Limited (as assignee of Bausch Health Ireland Limited), dated as of September 27, 2021.

31.1*		Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.

31.2*		Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.

32.1**		Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


*	Filed herewith.

These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit have been omitted by means of marking such portions with asterisks [***] as the identified confidential portions (i) are not material and (ii) the Registrant customarily and actually treats that information as private or confidential.

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S~~IGNATURES~~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.


	Clearside Biomedical, Inc.

Date: November 10, ~~2020~~2021	By:	/s/ Charles A. Deignan
		Charles A. Deignan
		Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial Officer)


Delaware	45-2437375
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
900 North Point Parkway, Suite 200 Alpharetta, GA	30005
(Address of principal executive offices)	(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CLSD	The Nasdaq Stock Market LLC


	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	14,839		$	22,595		$	25,217		$	17,287
Prepaid expenses		1,174			1,139			1,187			722
Other current assets		9			1,485			119			109
Total current assets		16,022			25,219			26,523			18,118
Property and equipment, net		460			541			283			416
Operating lease right-of-use asset		563			656			412			528
Restricted cash		360			360			160			260
Total assets	$	17,405		$	26,776		$	27,378		$	19,322
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	909		$	1,280		$	776		$	1,997
Accrued liabilities		1,322			2,930			2,996			1,582
Current portion of long-term debt		606			1,333			—			991
Current portion of operating lease liabilities		370			360			384			373
Deferred revenue		5,000			5,000			5,000			5,000
Total current liabilities		8,207			10,903			9,156			9,943
Long-term debt		385			3,819
Operating lease liabilities		689			897			374			616
Total liabilities		9,281			15,619			9,530			10,559
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized and no shares issued at September 30, 2020 and December 31, 2019		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized at September 30, 2020 and December 31, 2019; 48,227,442 and 44,413,372 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		48			44
Preferred stock, $0.001 par value; 10,000,000 shares authorized and 0 shares issued at September 30, 2021 and December 31, 2020								—			—
Common stock, $0.001 par value; 100,000,000 shares authorized at September 30, 2021 and December 31, 2020; 59,626,519 and 51,860,941 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively								60			52
Additional paid-in capital		256,831			248,770			291,988			264,578
Accumulated deficit		(248,755	)		(237,657	)		(274,200	)		(255,867	)
Total stockholders’ equity		8,124			11,157			17,848			8,763
Total liabilities and stockholders’ equity	$	17,405		$	26,776		$	27,378		$	19,322


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020
Operating activities
Net loss	$	(11,098	)	$	(27,674	)	$	(18,333	)	$	(11,098	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		136			160			133			136
Share-based compensation expense		2,733			3,473			3,801			2,733
Gain on extinguishment of debt								(998	)		—
Non-cash interest expense		59			141			—			59
Accretion of debt discount		129			46			—			129
Amortization and accretion on available-for-sale investments, net		—			(115	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,441			571			(475	)		1,441
Other assets and liabilities		(105	)		306			(115	)		(105	)
Accounts payable and accrued liabilities		(1,979	)		(5,665	)		200			(1,979	)
Net cash used in operating activities		(8,684	)		(28,757	)		(15,787	)		(8,684	)
Investing activities
Maturities of available-for-sale investments		—			32,950
Acquisition of property and equipment		(55	)		(25	)		—			(55	)
Net cash (used in) provided by investing activities		(55	)		32,925
Net cash provided by (used in) investing activities								—			(55	)
Financing activities
Proceeds from long-term debt	991				—
Payments made on long-term debt		(5,340	)		—
Proceeds from registered direct offering, net of issuance costs								11,078			—
Proceeds from at-the-market sales agreement, net of issuance costs		5,084			10,319			12,208			5,084
Proceeds from exercise of stock options		217			6			220			217
Proceeds from shares issued under employee stock purchase plan		31			15			111			31
Proceeds from long-term debt								—			991
Payments made on long-term debt								—			(5,340	)
Net cash provided by financing activities		983			10,340			23,617			983
Net (decrease) increase in cash, cash equivalents and restricted cash		(7,756	)		14,508
Net increase (decrease) in cash, cash equivalents and restricted cash								7,830			(7,756	)
Cash, cash equivalents and restricted cash, beginning of period		22,955			8,403			17,647			22,955
Cash, cash equivalents and restricted cash, end of period	$	15,199		$	22,911		$	25,477		$	15,199
Supplemental disclosure of noncash financing activities
Forgiveness of PPP Loan and accrued interest							$	998		$	—


		Page
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	2
	Balance Sheets as of September 30, ~~2020 (unaudited)~~2021 and December 31, ~~201~~20209	23
	Statements of Operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019 (unaudited)~~2020	34
	Statements of Stockholders’ Equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019 (unaudited)~~2020	45
	Statements of Cash Flows for the nine months ended September 30, ~~2020~~2021 and ~~2019 (unaudited)~~2020	56
	Notes to the Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2623
Item 4.	Controls and Procedures	2623
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	2825
Item 1A.	Risk Factors	2825
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3025
Item 6.	Exhibits	3126
Signatures		32
		27


	Nine Months Ended September 30, 2021
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			Equity
Balance at December 31, 2020		51,860,941	$	52	$	264,578	$	(255,867	)	$	8,763
Issuance of common shares under a direct registered offering		4,209,050		4		11,074		—			11,078
Issuance of common shares under at-the-market sales agreement		1,186,579		2		3,247		—			3,249
Exercise of stock options		62,493		—		38		—			38
Vesting and settlement of restricted stock units		227,754		—		—		—			—
Issuance of common shares under employee stock purchase plan		31,908		—		54		—			54
Share-based compensation expense		—		—		1,154		—			1,154
Net loss		—		—		—		(7,351	)		(7,351	)
Balance at March 31, 2021		57,578,725		58		280,145		(263,218	)		16,985
Issuance of common shares under at-the-market sales agreement		1,397,436		1		7,083		—			7,084
Exercise of stock options		21,673		—		33		—			33
Vesting and settlement of restricted stock units		93,757		—		—		—			—
Share-based compensation expense		—		—		1,331		—			1,331
Net loss		—		—		—		(6,095	)		(6,095	)
Balance at June 30, 2021		59,091,591		59		288,592		(269,313	)		19,338
Issuance of common shares under at-the-market sales agreement		307,404		1		1,874		—			1,875
Exercise of stock options		100,194		—		149		—			149
Vesting and settlement of restricted stock units		93,757		—		—		—			—
Issuance of common shares under employee stock purchase plan		33,573		—		57		—			57
Share-based compensation expense		—		—		1,316		—			1,316
Net loss		—		—		—		(4,887	)		(4,887	)
Balance at September 30, 2021		59,626,519	$	60	$	291,988	$	(274,200	)	$	17,848


	Nine Months Ended September 30, 2020
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			Equity
Balance at December 31, 2019		44,413,372	$	44	$	248,770	$	(237,657	)	$	11,157
Issuance of common shares under at-the-market sales agreement		455,186		1		1,192		—			1,193
Share-based compensation expense		—		—		1,001		—			1,001
Net loss		—		—		—		(2,911	)		(2,911	)
Balance at March 31, 2020		44,868,558		45		250,963		(240,568	)		10,440
Issuance of common shares under at-the-market sales agreement		800,170		1		1,606		—			1,607
Exercise of stock options		58,333		—		72		—			72
Vesting and settlement of restricted stock units		512,550		—		—		—			—
Issuance of common shares under employee stock purchase plan		35,359		—		31		—			31
Share-based compensation expense		—		—		891		—			891
Net loss		—		—		—		(5,754	)		(5,754	)
Balance at June 30, 2020		46,274,970		46		253,563		(246,322	)		7,287
Issuance of common shares under at-the-market sales agreement		1,382,564		2		2,283		—			2,285
Exercise of stock options		194,883		—		144		—			144
Vesting and settlement of restricted stock units		375,025		—		—		—			—
Share-based compensation expense		—		—		841		—			841
Net loss		—		—		—		(2,433	)		(2,433	)
Balance at September 30, 2020		48,227,442	$	48	$	256,831	$	(248,755	)	$	8,124

	Three and Nine Months Ended September 30, 2020
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			Equity
Balance at December 31, 2019		44,413,372	$	44	$	248,770	$	(237,657	)	$	11,157
Issuance of common shares under at-the-market sales agreement		455,186		1		1,192		—			1,193
Share-based compensation expense		—		—		1,001		—			1,001
Net loss		—		—		—		(2,911	)		(2,911	)
Balance at March 31, 2020		44,868,558		45		250,963		(240,568	)		10,440
Issuance of common shares under at-the-market sales agreement		800,170		1		1,606		—			1,607
Vesting of restricted stock units		512,550		—		—		—			—
Exercise of stock options		58,333		—		72		—			72
Issuance of common shares under employee stock purchase plan		35,359		—		31		—			31
Share-based compensation expense		—		—		891		—			891
Net loss		—		—		—		(5,754	)		(5,754	)
Balance at June 30, 2020		46,274,970		46		253,563		(246,322	)		7,287
Issuance of common shares under at-the-market sales agreement		1,382,564		2		2,283		—			2,285
Vesting of restricted stock units		375,025		—		—		—			—
Exercise of stock options		194,883		—		144		—			144
Share-based compensation expense		—		—		841		—			841
Net loss		—		—		—		(2,433	)		(2,433	)
Balance at September 30, 2020		48,227,442	$	48	$	256,831	$	(248,755	)	$	8,124

	September 30, 2020
	Level 1		Level 2		Level 3		Recorded Value
Financial Assets:
Cash and money markets	$	14,839	$	—	$	—	$	14,839
Restricted cash money market		360		—		—		360
Total financial assets	$	15,199	$	—	$	—	$	15,199

	December 31, 2019
	Level 1		Level 2		Level 3		Recorded Value
Financial Assets:
Cash and money markets	$	22,595	$	—	$	—	$	22,595
Restricted cash money market		360		—		—		360
Total financial assets	$	22,955	$	—	$	—	$	22,955

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company