10-Q
Lesser of useful life or remaining lease 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022

OR

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

Commission File Number: 001-37783

 

Clearside Biomedical, Inc.

 

(Exact Name of Registrant as Specified in its Charter)

 

 

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)

(678) 270-3631

Registrant’s telephone number, including area code

N/A

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

 

 

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

 

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial 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 May 9, 2022, the registrant had 60,150,442 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

 

 

Page

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

 

 

Balance Sheets as of March 31, 2022 and December 31, 2021

3

 

Statements of Operations for the three months ended March 31, 2022 and 2021

4

 

Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021

5

 

Statements of Cash Flows for the three months ended March 31, 2022 and 2021

6

 

Notes to the Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 6.

Exhibits

25

Signatures

26

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CLEARSIDE BIOMEDICAL, INC.

Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,372

 

 

$

30,436

 

Accounts receivable

 

 

 

 

 

10,000

 

Prepaid expenses

 

 

563

 

 

 

921

 

Other current assets

 

 

339

 

 

 

779

 

Total current assets

 

 

35,274

 

 

 

42,136

 

Property and equipment, net

 

 

301

 

 

 

238

 

Operating lease right-of-use asset

 

 

324

 

 

 

369

 

Restricted cash

 

 

160

 

 

 

160

 

Total assets

 

$

36,059

 

 

$

42,903

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,396

 

 

$

941

 

Accrued liabilities

 

 

2,171

 

 

 

3,312

 

Current portion of operating lease liabilities

 

 

391

 

 

 

387

 

Deferred revenue

 

 

198

 

 

 

 

Total current liabilities

 

 

4,156

 

 

 

4,640

 

Operating lease liabilities

 

 

200

 

 

 

288

 

Total liabilities

 

 

4,356

 

 

 

4,928

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized and no
   shares issued at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized at
  March 31, 2022 and December 31, 2021;
60,147,618 and
  
59,722,930 shares issued and outstanding at March 31, 2022
   and December 31, 2021, respectively

 

 

60

 

 

 

60

 

Additional paid-in capital

 

 

294,778

 

 

 

293,406

 

Accumulated deficit

 

 

(263,135

)

 

 

(255,491

)

Total stockholders’ equity

 

 

31,703

 

 

 

37,975

 

Total liabilities and stockholders’ equity

 

$

36,059

 

 

$

42,903

 

 

See accompanying notes to the financial statements

3


 

CLEARSIDE BIOMEDICAL, INC.

Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

License and other revenue

 

$

347

 

 

$

34

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

4,536

 

 

 

5,490

 

General and administrative

 

 

3,457

 

 

 

2,893

 

Total operating expenses

 

 

7,993

 

 

 

8,383

 

Loss from operations

 

 

(7,646

)

 

 

(8,349

)

Other income

 

 

2

 

 

 

998

 

Net loss

 

$

(7,644

)

 

$

(7,351

)

Net loss per share of common stock — basic and diluted

 

$

(0.13

)

 

$

(0.13

)

Weighted average shares outstanding — basic and diluted

 

 

60,064,209

 

 

 

57,038,664

 

 

See accompanying notes to the financial statements.

 

4


 

CLEARSIDE BIOMEDICAL, INC.

Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

 

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Paid-In-Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

59,722,930

 

 

$

60

 

 

$

293,406

 

 

$

(255,491

)

 

$

37,975

 

Exercise of stock options

 

 

22,727

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Vesting and settlement of restricted stock units

 

 

375,331

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares under employee stock
   purchase plan

 

 

26,630

 

 

 

 

 

 

62

 

 

 

 

 

 

62

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,307

 

 

 

 

 

 

1,307

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,644

)

 

 

(7,644

)

Balance at March 31, 2022

 

 

60,147,618

 

 

$

60

 

 

$

294,778

 

 

$

(263,135

)

 

$

31,703

 

 

 

 

Three Months Ended March 31, 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

 

 

See accompanying notes to the financial statements.

 

5


 

CLEARSIDE BIOMEDICAL, INC.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(7,644

)

 

$

(7,351

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

46

 

 

 

45

 

Share-based compensation expense

 

 

1,307

 

 

 

1,154

 

Gain on extinguishment of debt

 

 

 

 

 

(998

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

10,689

 

 

 

279

 

Other assets and liabilities

 

 

(39

)

 

 

(36

)

Accounts payable and accrued liabilities

 

 

(686

)

 

 

1,348

 

Deferred revenue

 

 

198

 

 

 

 

Net cash provided by (used in) operating activities

 

 

3,871

 

 

 

(5,559

)

Investing activities

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Proceeds from registered direct offering, net of issuance costs

 

 

 

 

 

11,078

 

Proceeds from at-the-market sales agreement, net of issuance costs

 

 

 

 

 

3,249

 

Proceeds from exercise of stock options

 

 

3

 

 

 

38

 

Proceeds from shares issued under employee stock purchase plan

 

 

62

 

 

 

54

 

Net cash provided by financing activities

 

 

65

 

 

 

14,419

 

Net increase in cash, cash equivalents and restricted cash

 

 

3,936

 

 

 

8,860

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

30,696

 

 

 

17,647

 

Cash, cash equivalents and restricted cash, end of period

 

$

34,632

 

 

$

26,507

 

Supplemental disclosure of noncash financing activities

 

 

 

 

 

 

Forgiveness of PPP Loan and accrued interest

 

$

 

 

$

998

 

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

34,372

 

 

$

26,147

 

Restricted cash (including $100 for each period recorded in other current assets)

 

 

260

 

 

 

360

 

Cash, cash equivalents and restricted cash at end of period

 

$

34,632

 

 

$

26,507

 

 

See accompanying notes to the financial statements.

 

6


 

CLEARSIDE BIOMEDICAL, INC.

Notes to the Financial Statements

(unaudited)

 

 

1. The Company

Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space (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 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's licensees successfully commercialize XIPERE®, its other licensees receive regulatory approval 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 $34.4 million as of March 31, 2022.

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. In January 2022, the Company received $10.0 million from Bausch + Lomb, a division of Bausch Health Companies, Inc. ("Bausch"), upon completion of pre-launch activities for XIPERE pursuant to the license agreement granting Bausch an exclusive license to develop and commercialize XIPERE in the United States and Canada. Bausch launched XIPERE in the United States in the first quarter of 2022.

The Company has funded its operations primarily through the sale of common stock and 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 complete the development and conduct clinical trials for the regulatory approval of its product candidates if requested by regulatory bodies. 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 generate significant revenue from its 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.

Based on its current plans and forecasted expenses, the Company expects that its cash and cash equivalents as of the filing date, May 12, 2022, will enable it to fund its planned operating expenses and capital expenditure requirements for at least the next twelve months from that date. 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.

 

7


 

 

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”).

Unaudited Interim Financial Information

The accompanying balance sheet as of March 31, 2022, statements of operations for the three months ended March 31, 2022 and 2021, statements of stockholders’ equity for the three months ended March 31, 2022 and 2021 and statements of cash flows for the three months ended March 31, 2022 and 2021 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 March 31, 2022, its results of its operations for the three months ended March 31, 2022 and 2021, its changes in stockholders’ equity for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are unaudited. The results for the three months ended March 31, 2022 are not indicative of results to be expected for the year ending December 31, 2022, 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, 2021.

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 global economic uncertainty. 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, the Company is not aware of any specific event or circumstance that would require us to update its estimates, assumptions and judgments or revise the carrying value of 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.

8


 

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;
costs associated with preclinical and clinical development activities;
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 trial activities, are recognized based on an evaluation of the estimated total costs for the clinical trial, progress to completion of specific tasks using data such as patient enrollment, pass through expenses, clinical site activations, data from the clinical sites 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 contracts and any subsequent amendments, 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, directors and consultants 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. 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 recipient's underlying role 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.

 

 

 

 

9


 

3. Property and Equipment, Net

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

 

 

Estimated
Useful Lives
(Years)

 

March 31,
2022

 

 

December 31,
2021

 

Furniture and fixtures

 

5

 

$

337

 

 

$

337

 

Machinery and equipment

 

5

 

 

285

 

 

 

176

 

Computer equipment

 

3

 

 

13

 

 

 

13

 

Leasehold improvements

 

Lesser of
useful life
or
remaining
lease term

 

 

667

 

 

 

667

 

 

 

 

 

 

1,302

 

 

 

1,193

 

Less: Accumulated depreciation

 

 

 

 

(1,001

)

 

 

(955

)

 

 

 

 

$

301

 

 

$

238

 

 

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accrued research and development

 

$

1,114

 

 

$

1,083

 

Accrued employee costs

 

 

519

 

 

 

1,854

 

Accrued professional fees

 

 

106

 

 

 

30

 

Accrued expense

 

 

432

 

 

 

345

 

 

 

$

2,171

 

 

$

3,312

 

 

5. CARES Act Paycheck Protection Program Loan

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 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 accrued on the outstanding principal amount at the rate of 1.0% per annum. The term of the Note was until April 2022, with the Company 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. On January 11, 2021, the Company was notified by the PPP Lender that the PPP Loan had been forgiven in full, including approximately $7,000 of 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 operations in other income as a gain on extinguishment of debt.

6. Common Stock

The Company’s amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of $0.001 par value common stock. As of March 31, 2022 and December 31, 2021, there were 60,147,618 and 59,722,930 shares of common stock outstanding, respectively.

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. 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 4.5 years as of March 31, 2022.

10


 

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
March 31,

 

 

 

2022

 

 

2021

 

Research and development

 

$

402

 

 

$

377

 

General and administrative

 

 

514

 

 

 

422

 

Total

 

$

916

 

 

$

799

 

 

The following table summarizes the activity related to stock options during the three months ended March 31, 2022:

 

 

 

 

 

 

Weighted

 

 

 

Number of

 

 

Average

 

 

 

Shares

 

 

Exercise Price

 

Options outstanding at December 31, 2021

 

 

5,762,328

 

 

$

4.07

 

Granted

 

 

1,310,940

 

 

 

2.17

 

Exercised

 

 

(22,727

)

 

 

0.15

 

Forfeited

 

 

 

 

 

 

Options outstanding at March 31, 2022

 

 

7,050,541

 

 

 

3.73

 

 

 

 

 

 

 

 

Options exercisable at December 31, 2021

 

 

3,148,502

 

 

 

4.59

 

 

 

 

 

 

 

 

Options exercisable at March 31, 2022

 

 

3,743,739

 

 

 

4.47

 

 

As of March 31, 2022, the Company had $6.9 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.8 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 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
March 31,

 

 

 

2022

 

 

2021

 

Research and development

 

$

197

 

 

$

171

 

General and administrative

 

 

186

 

 

 

170

 

Total

 

$

383

 

 

$

341

 

 

11


 

The following table summarizes the activity related to RSUs during the three months ended March 31, 2022:

 

 

 

 

 

 

Weighted Average

 

 

 

Number of

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

Non-vested RSUs outstanding at December 31, 2021

 

 

1,317,347

 

 

$

3.58

 

Granted

 

 

648,460

 

 

 

2.19

 

Vested

 

 

(375,331

)

 

 

3.44

 

Non-vested RSUs outstanding at March 31, 2022

 

 

1,590,476

 

 

 

3.04

 

 

As of March 31, 2022, the Company had $4.5 million of unrecognized compensation expense related to the RSUs which is expected to be recognized over a weighted average period of 3.0 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 share-based compensation expense recognized for the 2016 ESPP is reflected in the statements of operations and comprehensive loss as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Research and development

 

$

5

 

 

$

8

 

General and administrative

 

 

3

 

 

 

6

 

Total

 

$

8

 

 

$

14

 

 

During the three months ended March 31, 2022, the Company issued 26,630 shares of common stock purchased under the 2016 ESPP.

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 per month subject to an increase of 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):

 

 

March 31,
2022

 

Operating lease right-of-use asset

 

$

324

 

 

 

 

 

Liabilities

 

 

 

Current portion of operating lease liabilities

 

$

391

 

Operating lease liabilities

 

 

200

 

Total operating lease liabilities

 

$

591

 

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 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 March 31, 2022, the Company’s weighted average discount rate was 11.0% and the weighted average lease term was 1.5 years.

12


 

Minimum lease payments were as follows at March 31, 2022 (in thousands):

 

Year Ending December 31,

 

 

 

2022

 

 

308

 

2023

 

 

316

 

Total minimum lease payments

 

 

624

 

Less imputed interest

 

 

(33

)

Total operating lease liabilities

 

$

591

 

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 for each of the three months ended March 31, 2022 and 2021. Variable lease cost was $24,000 for each of the three months ended March 31, 2022 and 2021. Short-term lease cost was $21,000 and $2,000 for the three months ended March 31, 2022 and 2021. Cash payments included in operating activities on the statement of cash flows for operating lease liabilities were $99,000 and $95,000 for the three months ended March 31, 2022 and 2021, 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.

10. License and Other Agreements

Bausch + Lomb

On October 22, 2019, the Company entered into a License Agreement (as amended, the "Bausch License Agreement”) with 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 using the Company’s proprietary SCS Microinjector (the “Device”), as well as specified other steroids, corticosteroids and NSAIDs in combination with the Device (“Other Products,” and together with XIPERE, the “Products”), subject to specified exceptions, in the United States and Canada (the “Territory”) for the treatment of ophthalmology indications, including non-infectious uveitis.

Pursuant to the Bausch License Agreement, Bausch paid the Company an upfront payment of $5.0 million in October 2019. In October 2021, the FDA approved XIPERE. The Company received $5.0 million from Bausch as a result of the approval. In December 2021, $10.0 million was recorded upon completion of pre-launch activities for XIPERE and payment was received in January 2022. In addition, Bausch has agreed to pay up to an aggregate of $55.0 million in additional milestone payments upon the achievement of (i) specified regulatory approvals for specified additional indications of XIPERE 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 annual net sales thresholds in the Territory, in each case subject to reductions in specified circumstances; provided that the Company will not receive any royalties on the first $45.0 million of cumulative net sales of all products in the Territory. Bausch launched XIPERE in the United States in the first quarter of 2022.

 

Arctic Vision (Hong Kong) Limited

On March 10, 2020, the Company entered into a License Agreement (the “License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”). Pursuant to the License Agreement, the Company has granted an exclusive license to Arctic Vision to develop, distribute, promote, market and commercialize XIPERE, subject to specified exceptions, in China, Hong Kong, Macau, Taiwan and South Korea (the “Arctic Territory”). Under the terms of the 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 License Agreement, Arctic Vision paid the Company an upfront payment of $4.0 million in March 2020. In December 2021, the Company received a milestone payment of $4.0 million following the receipt of FDA approval of XIPERE in the United States. In addition, Arctic Vision has agreed to pay the Company up to $22.5 million in development and sales milestones. Further, during the applicable royalty term, the Company will also be entitled to receive tiered royalties of ten to twelve percent of net sales based on achieving certain annual net sales thresholds in the 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

13


 

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.

In August 2021, the Company 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, 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 $3.0 million in consideration for the expansion of the Arctic Territory.

 

Other

The Company periodically enters into short-term agreements with 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.

11. Fair Value Measurements

The Company’s material financial instruments at March 31, 2022 and December 31, 2021 consisted primarily of cash and cash equivalents. 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.

There were no significant transfers between Levels 1, 2 and 3 during the three months ended March 31, 2022 and the year ended December 31, 2021.

 

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
March 31,

 

 

 

2022

 

 

2021

 

Outstanding stock options

 

 

7,050,541

 

 

 

5,816,856

 

Non-vested restricted stock units

 

 

1,590,476

 

 

 

1,504,861

 

Stock purchase warrants

 

 

29,796

 

 

 

29,796

 

 

 

 

8,670,813

 

 

 

7,351,513

 

 

 

14


 

 

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, 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, 2021 appearing in our Annual Report on Form 10-K filed with the SEC on March 11, 2022.

Overview

We are a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space, or SCS®. Our novel SCS injection platform, utilizing our proprietary SCS Microinjector®, enables an in-office, repeatable, non-surgical procedure for the targeted and compartmentalized delivery of a wide variety of therapies to the macula, retina or choroid to potentially preserve and improve vision in patients with sight-threatening eye diseases. Our SCS injection platform can be used in conjunction with existing drugs designed for delivery to the SCS, novel therapies and future therapeutic innovations. We believe our proprietary suprachoroidal administration platform has the potential to become a standard for delivery of therapi