Table of Contents Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period f ...

Alimera Sciences, Inc. (NASDAQ:ALIM) Q3 2020 Earnings Conference Call October 29, 2020 9:00 AM ET Company Participants Scott Gordon - President, CORE IR Rick Eiswirth - President & Chief Executive Officer Phil Jones - Chief Financial Officer Conference Call Participants Yi Chen - HC Wainwright Alex Nowak - Craig-Hallum Capital Group James Molloy - Alliance Global Partners Operator Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Alimera Sciences Third Quarter 2020 Financial ...

Revenue Performance - Net revenue decreased by approximately $900,000, or 8%, to approximately $10.0 million for the three months ended June 30, 2020, compared to approximately $10.9 million for the same period in 2019, primarily due to a revenue decrease of $3.9 million in the U.S. business related to the COVID-19 pandemic [144]. - Net revenue increased by approximately $900,000, or 4%, to approximately $24.6 million for the six months ended June 30, 2020, compared to approximately $23.7 million for the same period in 2019, driven by a $4.4 million increase in the international segment [145]. - The company experienced a $3.6 million decrease in U.S. business revenue due to the impact of the COVID-19 pandemic during the six months ended June 30, 2020 [145]. - Net revenue for the U.S. segment decreased by approximately $3.9 million, or 53%, to approximately $3.4 million for the three months ended June 30, 2020, compared to approximately $7.3 million for the same period in 2019 [172]. - Net revenue decreased by approximately $3.6 million, or 26%, to approximately $10.5 million for the six months ended June 30, 2020, compared to approximately $14.1 million for the same period in 2019 [178]. - International segment net revenue increased by approximately $4.4 million, or 45%, to approximately $14.1 million for the six months ended June 30, 2020, compared to approximately $9.7 million for the same period in 2019 [189]. Profit and Loss - The company reported a net loss of $2.5 million for the three months ended June 30, 2020, compared to a net loss of $5.0 million for the same period in 2019 [142]. - Gross profit for the three months ended June 30, 2020, was $8.6 million, down from $9.7 million for the same period in 2019 [142]. - Gross profit decreased by approximately $1.1 million, or 11%, to approximately $8.6 million for the three months ended June 30, 2020, with a gross margin of 85% compared to 89% for the same period in 2019 [150]. - Gross profit for the U.S. segment decreased to approximately $2.997 million for the three months ended June 30, 2020, compared to approximately $6.512 million for the same period in 2019 [172]. - Segment loss from operations for the U.S. segment increased to approximately $3.251 million for the three months ended June 30, 2020, compared to approximately $1.485 million for the same period in 2019 [172]. Expenses - The company recognized approximately $401,000 and $982,000 of royalty expense for the three and six months ended June 30, 2020, respectively, compared to approximately $434,000 and $950,000 for the same periods in 2019 [136]. - Cost of goods sold, excluding depreciation and amortization, increased by approximately $300,000, or 25%, to approximately $1.5 million for the three months ended June 30, 2020, compared to approximately $1.2 million for the same period in 2019 [147]. - Research, development and medical affairs expenses decreased by approximately $1.0 million, or 36%, to approximately $1.8 million for the three months ended June 30, 2020, compared to approximately $2.8 million for the same period in 2019 [153]. - General and administrative expenses decreased by approximately $700,000, or 19%, to approximately $3.0 million for the three months ended June 30, 2020, compared to approximately $3.7 million for the same period in 2019 [156]. - Sales and marketing expenses decreased by approximately $1.7 million, or 28%, to approximately $4.4 million for the three months ended June 30, 2020, compared to approximately $6.1 million for the same period in 2019 [160]. - Total operating expenses decreased by approximately $3.4 million, or 26%, to approximately $9.9 million for the three months ended June 30, 2020, compared to approximately $13.3 million for the same period in 2019 [162]. - Cost of goods sold decreased by approximately $300,000, or 20%, to approximately $1.2 million for the six months ended June 30, 2020, compared to approximately $1.5 million for the same period in 2019 [179]. - Research, development and medical affairs expenses decreased by approximately $100,000, or 3%, to approximately $3.0 million for the six months ended June 30, 2020, compared to approximately $3.1 million for the same period in 2019 [180]. - General and administrative expenses decreased by approximately $200,000, or 5%, to approximately $3.9 million for the six months ended June 30, 2020, compared to approximately $4.1 million for the same period in 2019 [181]. - Sales and marketing expenses decreased by approximately $800,000, or 10%, to approximately $7.5 million for the six months ended June 30, 2020, compared to approximately $8.3 million for the same period in 2019 [182]. - Operating expenses in the Other segment decreased by approximately $500,000, or 33%, to $1.0 million for the three months ended June 30, 2020, compared to approximately $1.5 million for the same period in 2019 [196]. Cash Flow and Financing - As of June 30, 2020, the company had approximately $13.5 million in cash and cash equivalents, an increase of $1.3 million from $12.2 million as of March 31, 2020 [209]. - For the six months ended June 30, 2020, cash provided by operations was approximately $220,000, despite a net loss of $3.7 million [213]. - The company received approximately $1.8 million from the Paycheck Protection Program, which is subject to forgiveness if used for eligible expenses [207]. - The company borrowed $2.5 million under the 2019 Solar Loan Agreement, contributing to net cash provided by financing activities of approximately $4.0 million for the six months ended June 30, 2020 [216]. - The company experienced a $2.8 million net decrease in accounts payable, accrued expenses, and other current liabilities for the six months ended June 30, 2020 [213]. - The company expects to use the remaining proceeds from the 2019 Solar Loan for additional working capital for general corporate purposes [205]. - The company has adjusted its commercial spending in response to the COVID-19 pandemic to operate with existing cash resources [209]. - The company reported a net cash used in investing activities of approximately $220,000 for the six months ended June 30, 2020, primarily due to the purchase of property and equipment [215]. - The company has a new minimum liquidity requirement of $8.5 million plus accounts payable not paid within 90 days, effective May 1, 2020 [206]. - The company cannot ensure that its commercial spending controls will be effective throughout the duration of the pandemic, raising concerns about its ability to continue as a going concern [212]. Strategic Initiatives - The company maintained staffing levels during the pandemic to support customers and patients, despite the adverse effects on revenue [134]. - The company has implemented cost management measures to mitigate anticipated revenue loss due to the pandemic [134]. - The company has received marketing authorization for ILUVIEN in 16 European countries for the treatment of diabetic macular edema and has obtained reimbursement approval in Germany and the U.K. [125]. - The company markets ILUVIEN directly in the U.S., Germany, the U.K., Portugal, Austria, and Ireland, and has agreements with distributors in several other countries [126]. - The company expects to incur approximately $13.5 million in expenses over the next three to four years associated with the NEW DAY Study [200]. - The company anticipates approximately $400,000 of capital expenditures associated with a new manufacturing facility through February 2021 [201]. - The company has incurred a deficit in stockholders' equity of $391.3 million through June 30, 2020 [197].

Alimera Sciences, Inc. (NASDAQ:ALIM) Q2 2020 Earnings Conference Call July 30, 2020 9:00 AM ET Company Participants Scott Gordon - President, CORE IR Rick Eiswirth - President and CEO Phil Jones - CFO Conference Call Participants Alex Nowak - Craig-Hallum Capital Group James Molloy - Alliance Global Partners Yi Chen - HC Wainwright Operator Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Alimera Sciences Second Quarter 2020 Financial Results and Corporate Update Conference C ...

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.01 par value per share ALIM The Nasdaq Stock Market LLC (Nasdaq Global Market) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 or oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1 ...

Financial Data and Key Metrics Changes - Revenues for Q1 2020 were $14.5 million, up 12% compared to $12.9 million in Q1 2019 [6][10] - Adjusted EBITDA was $1.3 million in Q1 2020, compared to $27,000 in Q1 2019 [9] - Cash and cash equivalents increased to approximately $12.2 million as of March 31, 2020, up from $9.4 million on December 31, 2019 [11] Business Line Data and Key Metrics Changes - U.S. net sales were $7.1 million, a 4% increase over Q1 2019 [7] - End user demand for ILUVIEN in the U.S. declined to 855 units in Q1 2020 from 939 units in Q1 2019 [7] - International segment sales were $7.5 million, up 23% from $6.1 million in the previous year [8] Market Data and Key Metrics Changes - The international segment continues to grow as a percentage of total revenue, driven by both diabetic macular edema and uveitis indications [8] - The COVID-19 pandemic has limited patient access to physicians, impacting ILUVIEN utilization [12] Company Strategy and Development Direction - The company plans to manage costs by minimizing non-payroll spending while maintaining staffing levels [16] - There is a focus on leveraging the unique value of ILUVIEN, particularly its continuous microdosing technology, to reduce the need for frequent physician visits [13][14] - The company aims to increase unit demand for ILUVIEN in both U.S. and international markets, and expand geographically into new markets [19] Management's Comments on Operating Environment and Future Outlook - The management has withdrawn previously communicated guidance regarding revenue growth and cash flow for 2020 due to the uncertainty caused by COVID-19 [13] - There is cautious optimism about market reopening and a gradual return to normal operations [18] - The management believes that the pandemic highlights the value of ILUVIEN in treatment paradigms, especially for vulnerable patients [14] Other Important Information - The company achieved a revenue milestone of $30 million in trailing six-month revenue, allowing for an additional $2.5 million drawdown to strengthen the balance sheet [10] - The company received $1.8 million in support from the federal government under the Paycheck Protection Program [11] Q&A Session Summary Question: Have providers reached out for information on ILUVIEN related to COVID-19? - Management noted some anecdotal feedback from doctors expressing a desire for more ILUVIEN patients to help manage patient visits during the pandemic [22] Question: What factors contributed to strong European sales? - Management indicated that the strength was due to a combination of factors, including the uveitis indication and a strong presence at conferences [24] Question: How has the COVID-19 situation impacted patient volumes? - Management reported that patient volumes have decreased by 60% to 80% in some practices, but noted that their business has not been impacted to that extent [26] Question: What is the current status of the sales force? - The company has 30 sales reps in the U.S. and about 30 in Europe, with efforts to prepare them for virtual engagement with doctors [41][51] Question: Are there any updates on the stock shortage in the U.S.? - The shortage was due to increased demand and manufacturing equipment issues, but the company is now in good shape regarding inventory [48] Question: Will the company consider changes to its cost structure post-COVID? - Management indicated that they are evaluating their cost structure and may continue to adapt based on the evolving situation [38]

Part I [Business](index=6&type=section&id=Item%201.%20Business) Alimera Sciences is a pharmaceutical company focused on ophthalmic diseases with its sole product, ILUVIEN® - Alimera's only commercial product is ILUVIEN®, an intravitreal implant delivering a continuous microdose of fluocinolone acetonide (FAc) for up to 36 months to treat Diabetic Macular Edema (DME) and prevent relapse in recurrent non-infectious uveitis affecting the posterior segment of the eye (NIU-PS)[12](index=12&type=chunk) ILUVIEN Marketing & Sales Channels | Channel | Regions | | :--- | :--- | | **Direct Sales** | U.S., Germany, the U.K., Portugal, and Ireland. | | **Distributors** | France, Italy, Spain, Belgium, the Netherlands, Luxembourg, Australia, New Zealand, Canada, and several countries in the Middle East. | - The company's business strategy is to maximize ILUVIEN's commercial success for DME and NIU-PS, pursue regulatory approvals in additional countries, and expand its ophthalmic product offerings through in-licensing or acquisitions[18](index=18&type=chunk) - Alimera is entirely dependent on single-source third-party manufacturers for the ILUVIEN implant (Alliance Medical Products), applicator (Flextronics), and active pharmaceutical ingredient (FARMABIOS)[33](index=33&type=chunk)[35](index=35&type=chunk) - The company faces competition from major pharmaceutical companies with established treatments for retinal diseases, including anti-VEGF therapies like Lucentis®, Eylea®, and Avastin®, and other corticosteroids like Ozurdex®[38](index=38&type=chunk)[40](index=40&type=chunk) - Under a key licensing agreement with EyePoint Pharmaceuticals, Alimera pays a **6% royalty** on global net revenues, which increases to **8%** for annual revenues exceeding **$75.0 million**[42](index=42&type=chunk) - In the U.S., two large pharmaceutical distributors accounted for **60% of the company's consolidated revenues** for the year ended December 31, 2019[37](index=37&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from its single-product dependency, reliance on single-source manufacturing, and precarious financial condition - The company is heavily reliant on a single manufacturer for the ILUVIEN applicator, Flextronics, whose contract will terminate on September 30, 2020[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - The company's recurring losses from operations raise **substantial doubt about its ability to continue as a going concern**, as noted in the independent auditor's report[90](index=90&type=chunk) - The company is not in compliance with Nasdaq's minimum Market Value of Listed Securities (MVLS) requirement, which could result in delisting[120](index=120&type=chunk) - The COVID-19 outbreak is identified as a significant risk that could disrupt sales, marketing, and the supply chain[74](index=74&type=chunk)[75](index=75&type=chunk) - Key licensed patents protecting ILUVIEN are set to expire between April 2020 and August 2027 in the U.S and between April 2021 and October 2024 in Europe[110](index=110&type=chunk) - The company's Loan and Security Agreement with Solar Capital contains restrictive operating and financial covenants, including minimum revenue requirements[73](index=73&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - The company has no unresolved comments from the SEC staff[131](index=131&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties) The company leases all its properties, including its U.S headquarters and smaller international offices - The company's U.S headquarters are located in a leased 18,000 square foot office space in Alpharetta, Georgia, with the lease expiring in September 2021[132](index=132&type=chunk) - Internationally, the company leases office space in Dublin, Ireland; Berlin, Germany; Lisbon, Portugal; and a 6,000 square foot facility in Aldershot, U.K[132](index=132&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no legal proceedings - There are no legal proceedings to report[132](index=132&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - This section is not applicable to the company's operations[132](index=132&type=chunk) Part II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, and it has never paid cash dividends, retaining earnings for growth - The company's common stock trades on The Nasdaq Global Market under the symbol "ALIM"[134](index=134&type=chunk) - As of February 27, 2020, there were **4,965,949 shares of common stock issued and outstanding**, held by 25 holders of record[135](index=135&type=chunk) - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[136](index=136&type=chunk) [Selected Consolidated Financial Data](index=42&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) This section is not applicable as the company qualifies as a "smaller reporting company" - The company is not required to provide selected consolidated financial data as it qualifies as a "smaller reporting company"[139](index=139&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 16% in 2019, but a large accumulated deficit and low cash reserves raise going concern doubts - The company had an **accumulated deficit of $387.6 million** as of December 31, 2019[144](index=144&type=chunk) - On November 14, 2019, the company effected a **one-for-15 reverse stock split** of its common stock to regain compliance with Nasdaq's minimum bid price requirement[148](index=148&type=chunk)[149](index=149&type=chunk) - On December 31, 2019, the company refinanced its debt by entering into a new **$45.0 million Loan and Security Agreement** with Solar Capital, maturing on July 1, 2024[146](index=146&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Net revenue increased 16% to $53.9 million in 2019, reducing the net loss from operations to $5.3 million Consolidated Statement of Operations (2019 vs. 2018) | Financial Metric | 2019 (in thousands) | 2018 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | **Net Revenue** | **$53,943** | **$46,599** | **+15.8%** | | Gross Profit | $47,317 | $42,291 | +11.9% | | Operating Expenses | $52,591 | $51,961 | +1.2% | | Net Loss from Operations | ($5,274) | ($9,670) | -45.5% | | **Net Loss** | **($10,443)** | **($16,382)** | **-36.3%** | | Net (Loss) Income per Share - Basic | ($2.19) | $3.74 | N/A | - Net revenue increased by **16% to $53.9 million** in 2019, primarily due to growth in international distributor markets and increased sales volume in direct markets[154](index=154&type=chunk) - Gross margin decreased from 91% in 2018 to **88% in 2019**, mainly caused by an increase in royalty expense payable to EyePoint on global net revenue[156](index=156&type=chunk) - Total operating expenses increased by only 1% to $52.6 million, as a $1.5 million increase in sales and marketing expenses was largely offset by decreases in G&A and R&D expenses[161](index=161&type=chunk) [Segment Review](index=50&type=section&id=Segment%20Review) International segment revenue grew 49%, driving overall growth, while the U.S segment remained flat U.S. Segment Performance (2019 vs. 2018) | Metric (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Net Revenue | $32,283 | $31,966 | | Gross Profit | $28,796 | $29,091 | | Operating Expenses | $31,983 | $31,173 | | **Segment Loss from Operations** | **($3,187)** | **($2,082)** | International Segment Performance (2019 vs. 2018) | Metric (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Net Revenue | $21,660 | $14,633 | | Gross Profit | $18,521 | $13,200 | | Operating Expenses | $15,511 | $13,115 | | **Segment Income from Operations** | **$3,010** | **$85** | - International segment revenue grew **49% to $21.7 million**, driven by increased sales volume to international distributors, leading to a significant increase in operating income to $3.0 million[173](index=173&type=chunk) - U.S segment revenue grew only **1% to $32.3 million**, despite a 5% increase in end-user demand, and its operating loss increased by 53% to $3.2 million[170](index=170&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) Recurring losses and negative cash flow raise substantial going concern doubts despite a recent debt refinancing - The company's recurring losses and negative cash flows create **substantial doubt about its ability to continue as a going concern** for the next 12 months[177](index=177&type=chunk)[298](index=298&type=chunk) - As of December 31, 2019, the company had approximately **$9.4 million in cash and cash equivalents**[177](index=177&type=chunk) - Net cash used in operating activities was **$4.2 million in 2019**, a significant improvement from the $11.6 million used in 2018[177](index=177&type=chunk)[257](index=257&type=chunk) - The company refinanced its debt on December 31, 2019, entering into a new **$45.0 million loan agreement** with Solar Capital to provide additional working capital[177](index=177&type=chunk) [Qualitative and Quantitative Disclosures about Market Risk](index=58&type=section&id=Item%207A.%20Qualitative%20and%20Quantitative%20Disclosures%20about%20Market%20Risk) This section is not applicable as the company qualifies as a "smaller reporting company" - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a "smaller reporting company"[201](index=201&type=chunk) [Financial Statements and Supplementary Data](index=58&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the company's consolidated financial statements indexed on page 67 - The consolidated financial statements and related schedules required for this item are indexed on page 67 and incorporated by reference[201](index=201&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=58&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - There were no changes in or disagreements with accountants on accounting and financial disclosure[201](index=201&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[203](index=203&type=chunk) - Management's assessment concluded that the company maintained effective internal control over financial reporting as of December 31, 2019, based on the COSO framework[204](index=204&type=chunk) - The independent auditor, Grant Thornton LLP, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2019[209](index=209&type=chunk) [Other Information](index=62&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - There is no other information to report in this section[216](index=216&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=63&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Required information is incorporated by reference from the company's 2020 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2020 Proxy Statement[216](index=216&type=chunk)[217](index=217&type=chunk)[219](index=219&type=chunk) [Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) Required information is incorporated by reference from the company's 2020 Proxy Statement - Information regarding executive and director compensation is incorporated by reference from the 2020 Proxy Statement[220](index=220&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=65&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference, with details provided on equity compensation plans - Information regarding security ownership is incorporated by reference from the 2020 Proxy Statement[222](index=222&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2019) | Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | **Total** | **908,235** | **$35.46** | **491,867** | [Certain Relationships and Related Transactions, and Director Independence](index=66&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Required information is incorporated by reference from the company's 2020 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Proxy Statement[229](index=229&type=chunk) [Principal Accountant Fees and Services](index=66&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Required information is incorporated by reference from the company's 2020 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the 2020 Proxy Statement[230](index=230&type=chunk) Part IV [Exhibits and Financial Statements Schedules](index=67&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statements%20Schedules) This section indexes financial statements and exhibits, including an auditor's report with a going concern paragraph [Financial Statements](index=68&type=section&id=Financial%20Statements) Audited financial statements show a $387.6 million accumulated deficit and include a going concern warning - The independent auditor's report expresses an unqualified opinion on the financial statements but includes a paragraph highlighting that the company's recurring losses and negative cash flows raise **substantial doubt about its ability to continue as a going concern**[239](index=239&type=chunk)[241](index=241&type=chunk) Consolidated Balance Sheet Highlights (as of Dec 31) | Account (in thousands) | 2019 | 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $9,426 | $13,043 | | Total Assets | $50,309 | $54,108 | | Note payable (non-current) | $38,658 | $37,873 | | Total Liabilities | $54,754 | $51,386 | | Accumulated Deficit | ($387,570) | ($377,127) | | **Total Stockholders' (Deficit) Equity** | **($4,445)** | **$2,722** | - The company adopted the new lease accounting standard (ASC 842) on January 1, 2019, resulting in the recognition of right-of-use assets and lease liabilities on the balance sheet for the first time[242](index=242&type=chunk)[278](index=278&type=chunk) [Form 10-K Summary](index=67&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is not applicable - This section is not applicable[234](index=234&type=chunk)

Alimera Sciences, Inc. (NASDAQ:ALIM) Q4 2019 Earnings Conference Call February 27, 2020 9:00 AM ET Company Participants Jules Abraham - CORE IR Rick Eiswirth - President & Chief Executive Officer Phil Jones - Chief Financial Officer Conference Call Participants Andrew D'Silva - B. Riley FBR Alex Nowak - Craig-Hallum Capital Group James Molloy - Alliance Global Partners Yi Chen - H.C. Wainwright Operator Good morning, and welcome to the Alimera Sciences Fourth Quarter and Full Year 2019 Financial Results and ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements of Alimera Sciences, Inc. for the period ended September 30, 2019, along with management's discussion and analysis of financial condition and results of operations, market risk disclosures, and controls and procedures [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section provides the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's accounting policies and specific financial items [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets provide a snapshot of the company's financial position as of September 30, 2019, compared to December 31, 2018, detailing assets, liabilities, and stockholders' (deficit) equity | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Current Assets | $28,108 | $34,848 | -$6,740 | | Total Assets | $46,729 | $54,108 | -$7,379 | | Total Current Liabilities | $14,235 | $10,234 | +$4,001 | | Total Liabilities and Stockholders' (Deficit) Equity | $46,729 | $54,108 | -$7,379 | | Total Stockholders' (Deficit) Equity | -$6,476 | $2,722 | -$9,198 | - Cash and cash equivalents decreased from **$13,043 thousand** at December 31, 2018, to **$7,903 thousand** at September 30, 2019[10](index=10&type=chunk) - Accumulated deficit increased from **$(377,127) thousand** at December 31, 2018, to **$(388,068) thousand** at September 30, 2019[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The Condensed Consolidated Statements of Operations present the company's financial performance for the three and nine months ended September 30, 2019, and 2018, highlighting revenue, expenses, and net loss | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Revenue | $12,850 | $11,137 | $36,595 | $31,484 | | Gross Profit | $11,271 | $10,172 | $32,242 | $28,502 | | Operating Expenses | $12,987 | $12,367 | $38,943 | $38,244 | | Net Loss from Operations | $(1,716) | $(2,195) | $(6,701) | $(9,742) | | Net Loss | $(3,140) | $(3,450) | $(10,941) | $(15,134) | | Net (Loss) Income Available to Stockholders | $(3,140) | $34,880 | $(10,941) | $23,196 | | Basic EPS | $(0.04) | $0.40 | $(0.15) | $0.26 | | Diluted EPS | $(0.04) | $0.39 | $(0.15) | $0.26 | - Net revenue increased by **16%** for both the three and nine months ended September 30, 2019, compared to the prior year periods[14](index=14&type=chunk)[112](index=112&type=chunk) - The prior year's net income available to stockholders was significantly impacted by a **$38,330 thousand** gain on extinguishment of preferred stock[14](index=14&type=chunk)[70](index=70&type=chunk)[124](index=124&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The Condensed Consolidated Statements of Comprehensive Loss detail the net loss and other comprehensive loss components, primarily foreign currency translation adjustments, for the three and nine months ended September 30, 2019, and 2018 | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Loss | $(3,140) | $(3,450) | $(10,941) | $(15,134) | | Foreign currency translation adjustments | $(165) | $(27) | $(193) | $(134) | | Total Other Comprehensive Loss | $(165) | $(27) | $(193) | $(134) | | Comprehensive Loss | $(3,305) | $(3,477) | $(11,134) | $(15,268) | - Foreign currency translation adjustments contributed to other comprehensive loss in both periods, with a larger impact in **2019**[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows illustrate the sources and uses of cash for operating, investing, and financing activities for the nine months ended September 30, 2019, and 2018 | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(4,574) | $(12,213) | | Net cash used in investing activities | $(150) | $(174) | | Net cash (used in) provided by financing activities | $(200) | $975 | | Net change in cash and cash equivalents and restricted cash | $(5,141) | $(11,477) | | Cash and cash equivalents and restricted cash — End of period | $7,934 | $12,624 | - Net cash used in operating activities significantly decreased from **$(12,213) thousand** in **2018** to **$(4,574) thousand** in **2019**[18](index=18&type=chunk)[141](index=141&type=chunk) - Financing activities shifted from providing **$975 thousand** in **2018** (due to new debt issuance) to using **$(200) thousand** in **2019**[18](index=18&type=chunk)[143](index=143&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' (Deficit) Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20(Deficit)%20Equity) This statement details the changes in each component of stockholders' (deficit) equity, including common stock, preferred stock, additional paid-in capital, common stock warrants, accumulated deficit, and accumulated other comprehensive loss, for the nine months ended September 30, 2019, and 2018 - Total stockholders' (deficit) equity decreased from **$2,722 thousand** at December 31, 2018, to **$(6,476) thousand** at September 30, 2019[11](index=11&type=chunk)[20](index=20&type=chunk) - The accumulated deficit increased from **$(377,127) thousand** at December 31, 2018, to **$(388,068) thousand** at September 30, 2019, primarily due to net losses[11](index=11&type=chunk)[20](index=20&type=chunk) - In **2018**, a significant gain on extinguishment of preferred stock of **$38,330 thousand** impacted the accumulated deficit[21](index=21&type=chunk)[79](index=79&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information regarding the figures presented in the condensed consolidated financial statements, covering the company's operations, accounting policies, specific assets, liabilities, and equity components [Note 1. Nature of Operations](index=13&type=section&id=1.%20NATURE%20OF%20OPERATIONS) This note describes Alimera Sciences, Inc. as a pharmaceutical company specializing in ophthalmic pharmaceuticals, primarily focused on diseases affecting the retina - **Alimera Sciences, Inc.** specializes in commercializing and developing ophthalmic pharmaceuticals, focusing on retinal diseases[23](index=23&type=chunk)[106](index=106&type=chunk) - **ILUVIEN®** is the company's only product, authorized for diabetic macular edema (DME) in multiple countries (U.S., EEA, Australia, Canada, Middle East)[23](index=23&type=chunk)[106](index=106&type=chunk) - **ILUVIEN®** also received an additional indication for prevention of relapse in recurrent non-infectious uveitis affecting the posterior segment of the eye (NIPU) in EEA countries, with reimbursement efforts ongoing[23](index=23&type=chunk)[106](index=106&type=chunk) [Note 2. Basis of Presentation](index=15&type=section&id=2.%20BASIS%20OF%20PRESENTATION) This note clarifies that the interim financial statements are unaudited and prepared in accordance with U.S. GAAP for interim reporting, emphasizing that they do not include all disclosures required for complete annual financial statements and that interim results may not predict full-year performance - Interim financial statements are unaudited and prepared under U.S. GAAP for interim information, not including all disclosures required for complete annual statements[26](index=26&type=chunk) - Interim financial results are not necessarily indicative of expected full-year results[26](index=26&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=16&type=section&id=3.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's significant accounting policies, which are consistent with those in its annual report, and details the adoption of new accounting standards related to leases (ASC 842), reclassification of tax effects (ASU 2018-02), and stock-based compensation (ASU 2018-07), as well as standards issued but not yet effective | Expense Category | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and Development Expenses | $113,000 | $397,000 | $421,000 | $811,000 | - The company adopted **ASU 2016-02** (Leases) on January 1, 2019, recognizing lease assets and liabilities on the balance sheet using a modified retrospective approach without restating comparative periods[28](index=28&type=chunk) - **ASU 2018-02** (Reclassification of Certain Tax Effects) and **ASU 2018-07** (Stock-based Compensation) were also adopted on January 1, 2019, with no material impact on financial statements[28](index=28&type=chunk) [Note 4. Revenue Recognition](index=18&type=section&id=4.%20REVENUE%20RECOGNITION) This note details the company's revenue recognition policies, primarily from product sales to distributors, pharmacies, hospitals, and wholesalers - Revenue from product sales is recognized at a point in time when the customer obtains control, typically upon delivery[32](index=32&type=chunk) - Net sales price includes estimates for variable consideration such as statutory rebates, commercial rebates, product returns, and sales discounts[32](index=32&type=chunk) - As of September 30, 2019, **$1,000,000** in milestone payments from a Canadian distributor had not been recognized as revenue and are included in other non-current liabilities[32](index=32&type=chunk) [Note 5. Leases](index=20&type=section&id=5.%20LEASES) This note describes the company's accounting for leases under ASC 842, detailing the adoption of practical expedients, the classification of operating and finance leases, and the related balance sheet information, costs, and maturity schedules - The company adopted **ASC 842** on January 1, 2019, electing practical expedients not to reassess initial direct costs, lease classification, or whether contracts contain leases[39](index=39&type=chunk) - Operating leases primarily consist of office space, with right-of-use assets of **$1,162 thousand** and total lease liabilities of **$1,338 thousand** as of September 30, 2019[40](index=40&type=chunk)[41](index=41&type=chunk) - Finance leases primarily consist of office equipment and automobiles, with property and equipment (net) of **$462 thousand** and total lease liabilities of **$390 thousand** as of September 30, 2019[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 6. Going Concern](index=23&type=section&id=6.%20GOING%20CONCERN) This note addresses the company's going concern status, highlighting recurring losses, negative cash flow, and accumulated deficit - The company has incurred recurring losses and negative cash flow from operations, with an accumulated deficit of **$388,068 thousand** as of September 30, 2019[50](index=50&type=chunk) - Substantial doubt exists about the company's ability to continue as a going concern within **one year** due to uncertainty regarding future revenues and the need for additional debt or equity financing[50](index=50&type=chunk) - The company must maintain compliance with debt covenants under its **$40,000,000** Loan and Security Agreement[50](index=50&type=chunk) [Note 7. Inventory](index=24&type=section&id=7.%20INVENTORY) This note provides a breakdown of the company's inventory, which includes component parts, work-in-process, and finished goods, as of September 30, 2019, and December 31, 2018 | Category | Sep 30, 2019 | Dec 31, 2018 | | :--------------- | :----------- | :----------- | | Component parts | $482 | $129 | | Work-in-process | $510 | $924 | | Finished goods | $650 | $1,352 | | Total Inventory | $1,642 | $2,405 | - Total inventory decreased from **$2,405 thousand** at December 31, 2018, to **$1,642 thousand** at September 30, 2019[52](index=52&type=chunk) - Component parts inventory increased, while work-in-process and finished goods decreased[52](index=52&type=chunk) [Note 8. Intangible Asset](index=24&type=section&id=8.%20INTANGIBLE%20ASSET) This note details the company's intangible asset, primarily related to the EyePoint Milestone Payment for ILUVIEN® FDA approval - The intangible asset has a gross carrying amount of **$25,000 thousand**, amortized over approximately **13 years**[54](index=54&type=chunk) - Amortization expense was approximately **$489 thousand** for both the three months and **$1,451 thousand** for the nine months ended September 30, 2019 and 2018, respectively[54](index=54&type=chunk) - The net book value of the intangible asset was **$15,272 thousand** as of September 30, 2019, down from **$16,723 thousand** at December 31, 2018[54](index=54&type=chunk) [Note 9. Accrued Expenses](index=25&type=section&id=9.%20ACCRUED%20EXPENSES) This note provides a breakdown of the company's accrued expenses as of September 30, 2019, and December 31, 2018, including clinical investigator expenses, compensation, rebate reserves, and lease liabilities | Category | Sep 30, 2019 | Dec 31, 2018 | | :------------------------------------------ | :----------- | :----------- | | Accrued clinical investigator expenses | $886 | $781 | | Accrued compensation expenses | $1,829 | $1,427 | | Accrued rebate, chargeback and other revenue reserves | $583 | $346 | | Accrued lease liabilities | $449 | — | | Other accrued expenses | $169 | $1,089 | | Total accrued expenses | $3,916 | $3,643 | - Total accrued expenses increased from **$3,643 thousand** at December 31, 2018, to **$3,916 thousand** at September 30, 2019[57](index=57&type=chunk) - Accrued lease liabilities of **$449 thousand** were recognized in **2019** due to the adoption of **ASC 842**[57](index=57&type=chunk) [Note 10. License Agreements](index=25&type=section&id=10.%20LICENSE%20AGREEMENTS) This note details the company's license agreement with EyePoint Pharmaceuticals US, Inc. for ILUVIEN® technology, including the expansion of the license to include uveitis, the conversion to a royalty-based payment structure, and the remaining Future Offset for royalty reductions - The New Collaboration Agreement with EyePoint expanded the **ILUVIEN®** license to include uveitis (including NIPU) in Europe, the Middle East, and Africa[59](index=59&type=chunk)[106](index=106&type=chunk) - The payment structure converted from a profit share to a royalty on global net revenues, increasing from **2%** to **6%** effective December 12, 2018, with an additional **2%** for revenues exceeding **$75,000,000** annually[59](index=59&type=chunk)[106](index=106&type=chunk) - The company retained a Future Offset right to recover up to **$15,000,000** of commercialization costs, with a balance of approximately **$9,346,000** as of September 30, 2019, which will reduce future royalty payments[60](index=60&type=chunk)[108](index=108&type=chunk) [Note 11. Loan Agreements](index=27&type=section&id=11.%20LOAN%20AGREEMENTS) This note describes the company's debt agreements, including the payoff of the Hercules Loan Agreement in 2018 and the subsequent entry into a $40,000,000 Loan and Security Agreement with Solar Capital Ltd - The Hercules Loan Agreement was paid off on January 5, 2018, resulting in a loss on early extinguishment of debt of approximately **$1,766 thousand**[63](index=63&type=chunk)[64](index=64&type=chunk)[122](index=122&type=chunk) - On January 5, 2018, the company entered into a **$40,000,000** Loan and Security Agreement with Solar Capital Ltd., maturing on July 1, 2022[67](index=67&type=chunk)[141](index=141&type=chunk) - Interest on the Solar Capital loan is one-month LIBOR plus **7.65%** per annum (approximately **10.1%** as of September 30, 2019), with interest-only payments for the first **30 months**[67](index=67&type=chunk) [Note 12. Earnings (Loss) Per Share (EPS)](index=29&type=section&id=12.%20EARNINGS%20(LOSS)%20PER%20SHARE%20(EPS)) This note explains the calculation of basic and diluted earnings per share (EPS) using the two-class method, considering preferred stockholders' participation in dividends but not losses | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :---------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $(0.04) | $0.40 | $(0.15) | $0.26 | | Diluted EPS | $(0.04) | $0.39 | $(0.15) | $0.26 | - Basic and diluted EPS for the three and nine months ended September 30, 2019, were **$(0.04)** and **$(0.15)**, respectively[14](index=14&type=chunk)[71](index=71&type=chunk)[125](index=125&type=chunk) - For the three and nine months ended September 30, 2018, basic EPS was **$0.40** and **$0.26**, and diluted EPS was **$0.39** and **$0.26**, respectively, primarily due to a gain on extinguishment of preferred stock[14](index=14&type=chunk)[71](index=71&type=chunk)[125](index=125&type=chunk) [Note 13. Preferred Stock](index=31&type=section&id=13.%20PREFERRED%20STOCK) This note details the company's Series A, Series B, and Series C Convertible Preferred Stock, describing their issuance, conversion rights, liquidation preferences, and the exchange of Series B for Series C Preferred Stock in 2018, which resulted in a significant gain - As of September 30, 2019, there were **600,000 shares** of Series A Preferred Stock outstanding, convertible into common stock at **$40.00** divided by **$2.66** per share[10](index=10&type=chunk)[75](index=75&type=chunk) - On September 4, 2018, all outstanding Series B Preferred Stock was exchanged for **10,150 shares** of Series C Convertible Preferred Stock, resulting in a **$38,330 thousand** gain on extinguishment of preferred stock[21](index=21&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) - Series C Preferred Stock has an aggregate stated value of **$10,150,000** and is convertible into **10,150,000 shares** of common stock at **$1.00** per share, with certain conversion limitations[77](index=77&type=chunk) [Note 14. Stock Incentive Plans](index=33&type=section&id=14.%20STOCK%20INCENTIVE%20PLANS) This note provides information on the company's stock incentive plans, including stock options and restricted stock units (RSUs) - Stock option compensation expense was approximately **$408 thousand** and **$1,470 thousand** for the three and nine months ended September 30, 2019, respectively[81](index=81&type=chunk) - As of September 30, 2019, total unrecognized compensation cost for non-vested stock options was **$2,321 thousand**, expected to be recognized over **2.33 years**[81](index=81&type=chunk) - RSU compensation expense was **$90 thousand** and **$416 thousand** for the three and nine months ended September 30, 2019, respectively[91](index=91&type=chunk) [Note 15. Income Taxes](index=36&type=section&id=15.%20INCOME%20TAXES) This note discusses the company's income tax policies, including the recognition of deferred tax assets and liabilities, the use of a valuation allowance due to historical operating losses, and the impact of IRC Sections 382 and 383 on NOL carry-forwards - The company records a valuation allowance against its net deferred tax asset due to recurring operating losses, making realization uncertain[93](index=93&type=chunk)[95](index=95&type=chunk) - As of December 31, 2018, the company had federal NOL carry-forwards of approximately **$122,455 thousand** and state NOL carry-forwards of approximately **$153,333 thousand**[95](index=95&type=chunk) - A Section 382 ownership change in late 2015 preliminarily estimated that approximately **$18.6 million** of federal NOLs and **$382 thousand** of federal tax credits generated prior to the change will not be utilized[95](index=95&type=chunk) [Note 16. Segment Information](index=38&type=section&id=16.%20SEGMENT%20INFORMATION) This note provides financial information by segment (U.S., International, and Other), detailing net revenue, cost of goods sold, gross profit, and operating expenses for each, as evaluated by the chief operating decision maker - The company operates in three segments: U.S., International, and Other, with performance evaluated primarily on segment loss from operations[100](index=100&type=chunk)[128](index=128&type=chunk) - Two U.S. customers accounted for **68%** and **62%** of consolidated revenues for the three and nine months ended September 30, 2019, respectively[99](index=99&type=chunk)[108](index=108&type=chunk) | Segment | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. | $8,692 | $8,492 | $22,778 | $23,096 | | International | $4,158 | $2,645 | $13,817 | $8,388 | | Other | $— | $— | $— | $— | | **Consolidated** | **$12,850** | **$11,137** | **$36,595** | **$31,484** | [Note 17. Subsequent Events](index=40&type=section&id=17.%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the reporting period, including a purchase agreement with Lincoln Park Capital Fund, LLC for up to $20,000,000 of common stock and stockholder approval for a potential reverse stock split - On October 24, 2019, the company entered into a purchase agreement with Lincoln Park Capital Fund, LLC, allowing it to sell up to **$20,000,000** of common stock over **36 months**[104](index=104&type=chunk)[141](index=141&type=chunk) - Lincoln Park made an initial purchase of **2,000,000 shares** at **$0.50** per share for **$1,000,000** on October 28, 2019[104](index=104&type=chunk)[141](index=141&type=chunk) - Stockholders authorized the board to effect a reverse stock split (one-for-five to one-for-30) by May 4, 2020, to regain Nasdaq compliance[104](index=104&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and do not include all disclosures required for complete annual financial statements[26](index=26&type=chunk) - Financial results for any interim period are not necessarily indicative of expected full-year results[26](index=26&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, liquidity, and capital resources for the three and nine months ended September 30, 2019, compared to the prior year [Overview](index=41&type=section&id=Overview) This overview introduces Alimera Sciences, Inc. as a pharmaceutical company focused on retinal diseases, with ILUVIEN® as its sole product - **Alimera Sciences** specializes in ophthalmic pharmaceuticals for retinal diseases, with **ILUVIEN®** as its only product[106](index=106&type=chunk) - **ILUVIEN®** is approved for DME in the U.S., EEA, and other regions, and for NIPU in EEA countries, with ongoing reimbursement efforts[106](index=106&type=chunk) - The company markets **ILUVIEN®** directly in some countries and through distributors in others, with recent pricing approval for NIPU in Germany[106](index=106&type=chunk)[108](index=108&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) This section analyzes the company's consolidated financial results for the three and nine months ended September 30, 2019, compared to 2018, detailing changes in net revenue, cost of goods sold, gross profit, and various operating expenses, leading to the net loss [Net Revenue](index=43&type=section&id=Net%20Revenue) Net revenue increased by 16% for both the three and nine months ended September 30, 2019, primarily due to growth in the international segment, including both distributor and direct sales, partially offset by a slight decrease in the U.S. segment for the nine-month period - Net revenue increased by approximately **$1.8 million** (**16%**) to **$12.9 million** for the three months ended September 30, 2019[112](index=112&type=chunk) - Net revenue increased by approximately **$5.1 million** (**16%**) to **$36.6 million** for the nine months ended September 30, 2019[112](index=112&type=chunk) - International segment revenue increases (approx. **$900k** for **3 months**, **$3.2M** for **9 months** from distributors; approx. **$600k** for **3 months**, **$2.2M** for **9 months** from direct sales) were the primary drivers[112](index=112&type=chunk) [Cost of Goods Sold, Excluding Depreciation and Amortization, and Gross Profit](index=44&type=section&id=Cost%20of%20Goods%20Sold,%20Excluding%20Depreciation%20and%20Amortization,%20and%20Gross%20Profit) Cost of goods sold increased significantly due to higher royalty expenses from an increased royalty percentage payable to EyePoint - Cost of goods sold (excluding D&A) increased by approximately **$630 thousand** (**65%**) for the three months and **$1.4 million** (**47%**) for the nine months ended September 30, 2019[114](index=114&type=chunk) - The increase in cost of goods sold was primarily due to an increased royalty percentage payable to EyePoint on global net revenue[114](index=114&type=chunk) - Gross profit increased by approximately **$1.1 million** (**11%**) to **$11.3 million** for the three months and **$3.7 million** (**13%**) to **$32.2 million** for the nine months ended September 30, 2019[114](index=114&type=chunk) [Research, Development and Medical Affairs Expenses](index=44&type=section&id=Research,%20Development%20and%20Medical%20Affairs%20Expenses) Research, development, and medical affairs expenses remained relatively stable for the three-month period and slightly decreased for the nine-month period, primarily focused on supporting ILUVIEN® and compliance with regulatory requirements - Expenses were approximately **$2.8 million** for both three-month periods ended September 30, 2019 and 2018[115](index=115&type=chunk) - Expenses decreased by approximately **$100 thousand** (**1%**) to **$8.3 million** for the nine months ended September 30, 2019[115](index=115&type=chunk) - These expenses are primarily for **ILUVIEN®** support, personnel, medical affairs, and regulatory compliance[115](index=115&type=chunk) [General and Administrative Expenses](index=44&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses decreased for both the three and nine-month periods, mainly due to lower personnel costs, although the nine-month period saw an offset from increased professional fees and logistics costs related to Brexit preparation - Expenses decreased by approximately **$300 thousand** (**9%**) to **$3.1 million** for the three months ended September 30, 2019, primarily due to lower personnel costs[116](index=116&type=chunk) - Expenses decreased by approximately **$300 thousand** (**3%**) to **$10.2 million** for the nine months ended September 30, 2019, with a **$1.1 million** decrease in personnel costs partially offset by a **$700 thousand** increase in professional fees and Brexit-related logistics costs[116](index=116&type=chunk) [Sales and Marketing Expenses](index=44&type=section&id=Sales%20and%20Marketing%20Expenses) Sales and marketing expenses increased for both periods, driven by higher personnel costs (including refilling vacant territories) and increased marketing costs, particularly for the direct-to-patient advertising pilot program - Expenses increased by approximately **$900 thousand** (**16%**) to **$6.4 million** for the three months ended September 30, 2019[119](index=119&type=chunk) - Expenses increased by approximately **$1.1 million** (**6%**) to **$18.5 million** for the nine months ended September 30, 2019[119](index=119&type=chunk) - Key drivers were increases in personnel costs (approx. **$570k** for **3 months**) and marketing costs (approx. **$350k** for **3 months**, **$790k** for **9 months**), including a direct-to-patient advertising pilot program[119](index=119&type=chunk) [Operating Expenses](index=45&type=section&id=Operating%20Expenses) Total operating expenses increased for both the three and nine-month periods, primarily due to higher sales and marketing expenses, partially offset by decreases in general and administrative and research and development expenses - Total operating expenses increased by approximately **$600 thousand** (**5%**) to **$13.0 million** for the three months ended September 30, 2019[120](index=120&type=chunk) - Total operating expenses increased by approximately **$700 thousand** (**2%**) to **$38.9 million** for the nine months ended September 30, 2019[120](index=120&type=chunk) - The increase was mainly driven by sales and marketing expenses, partially offset by decreases in G&A and R&D[120](index=120&type=chunk) [Interest Expense and Other](index=45&type=section&id=Interest%20Expense%20and%20Other) Interest expense and other remained stable for the three-month period and slightly increased for the nine-month period, primarily consisting of interest and amortization of deferred financing costs and debt discounts related to the Solar Capital loan - Interest expense and other was approximately **$1.2 million** for both three-month periods ended September 30, 2019 and 2018[121](index=121&type=chunk) - Interest expense and other increased by approximately **$200 thousand** (**6%**) to **$3.7 million** for the nine months ended September 30, 2019[121](index=121&type=chunk) - These expenses are primarily associated with the **2018** Loan Agreement with Solar Capital[121](index=121&type=chunk) [Loss on early extinguishment of debt](index=45&type=section&id=Loss%20on%20early%20extinguishment%20of%20debt) The company recorded a loss of approximately $1.8 million for the nine months ended September 30, 2018, due to the refinancing of the Hercules Loan Agreement with the new Solar Capital loan - A loss of approximately **$1.8 million** on early extinguishment of debt was recorded for the nine months ended September 30, 2018[122](index=122&type=chunk) - This loss resulted from refinancing the Hercules Loan Agreement with the **2018** Loan Agreement with Solar Capital[122](index=122&type=chunk) [Basic and Diluted Net Income (Loss) Applicable to Common Stockholders per Share of Common Stock](index=46&type=section&id=Basic%20and%20Diluted%20Net%20Income%20(Loss)%20Applicable%20to%20Common%20Stockholders%20per%20Share%20of%20Common%20Stock) Basic and diluted EPS were negative for both periods in 2019, reflecting net losses, while 2018 saw positive EPS primarily due to a significant gain on extinguishment of preferred stock | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :---------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $(0.04) | $0.40 | $(0.15) | $0.26 | | Diluted EPS | $(0.04) | $0.39 | $(0.15) | $0.26 | - Net income available to stockholders for **2018** was primarily driven by a **$38,330 thousand** gain on extinguishment of preferred stock[124](index=124&type=chunk) - Approximately **34.7 million** common stock equivalent securities were anti-dilutive and excluded from diluted EPS in **2019**, compared to **14.0 million** in **2018**[126](index=126&type=chunk) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Revenue | $12,850 | $11,137 | $36,595 | $31,484 | | Gross Profit | $11,271 | $10,172 | $32,242 | $28,502 | | Operating Expenses | $12,987 | $12,367 | $38,943 | $38,244 | | Net Loss from Operations | $(1,716) | $(2,195) | $(6,701) | $(9,742) | | Net Loss | $(3,140) | $(3,450) | $(10,941) | $(15,134) | | Basic EPS | $(0.04) | $0.40 | $(0.15) | $0.26 | | Diluted EPS | $(0.04) | $0.39 | $(0.15) | $0.26 | - Net revenue increased by **16%** for both the three and nine months ended September 30, 2019, primarily driven by the international segment[112](index=112&type=chunk) - Net loss from operations improved for both periods in **2019** compared to **2018**[112](index=112&type=chunk) [Results of Operations - Segment Review](index=47&type=section&id=Results%20of%20Operations%20-%20Segment%20Review) This section provides a detailed review of the financial performance of the U.S., International, and Other segments, focusing on net revenue, cost of goods sold, and operating expenses, and how these contribute to segment loss or income from operations [U.S. Segment](index=47&type=section&id=U.S.%20Segment) The U.S. segment experienced a slight revenue increase for the three-month period but a decrease for the nine-month period, despite an increase in end-user demand - U.S. net revenue increased by **$200 thousand** (**2%**) to **$8.7 million** for the three months ended September 30, 2019[130](index=130&type=chunk) - U.S. net revenue decreased by **$300 thousand** (**1%**) to **$22.8 million** for the nine months ended September 30, 2019, despite a **2%** increase in end-user demand (units)[132](index=132&type=chunk) - Cost of goods sold increased by **39%** for **three months** and **19%** for **nine months**, primarily due to higher royalty expense to EyePoint[130](index=130&type=chunk)[132](index=132&type=chunk) [International Segment](index=48&type=section&id=International%20Segment) The International segment showed strong revenue growth for both periods, driven by increased sales to distributors and direct sales in Europe - International net revenue increased by **$1.6 million** (**62%**) to **$4.2 million** for the three months and **$5.4 million** (**64%**) to **$13.8 million** for the nine months ended September 30, 2019[133](index=133&type=chunk)[135](index=135&type=chunk) - Cost of goods sold increased by **132%** for **three months** and **111%** for **nine months**, due to increased unit sales and higher royalty expense to EyePoint[133](index=133&type=chunk)[135](index=135&type=chunk) - General and administrative expenses increased by **$500 thousand** (**21%**) for **nine months**, partly due to professional fees and logistics costs related to Brexit preparation[135](index=135&type=chunk) [Other Segment](index=50&type=section&id=Other%20Segment) The Other segment primarily accounts for non-cash items such as stock-based compensation and depreciation and amortization, which are not allocated to the U.S. or International segments for management evaluation - The Other segment includes non-cash items like stock-based compensation and depreciation and amortization, which are not used by the chief operating decision maker to evaluate U.S. and International segments[137](index=137&type=chunk) - Stock-based compensation expense decreased by approximately **$500 thousand** (**50%**) for the three months and **$1.5 million** (**44%**) for the nine months ended September 30, 2019[138](index=138&type=chunk) - Depreciation and amortization increased by approximately **$30 thousand** (**5%**) for the three months and **$100 thousand** (**5%**) for the nine months ended September 30, 2019[139](index=139&type=chunk) - The company's chief operating decision maker evaluates segments based on net loss from operations, adjusted for non-cash items like stock-based compensation and D&A[128](index=128&type=chunk)[137](index=137&type=chunk) - Activity-based costing methods are used to allocate certain operating expenses to segments[128](index=128&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company has a history of losses and negative cash flow, with $7.9 million in cash as of September 30, 2019 - The company has an accumulated deficit of **$388.1 million** and recurring losses and negative cash flow from operations[141](index=141&type=chunk) - As of September 30, 2019, cash and cash equivalents were approximately **$7.9 million**[141](index=141&type=chunk) - The company will likely need additional capital to fund **ILUVIEN®** commercialization and has entered a **$20 million** common stock purchase agreement with Lincoln Park Capital Fund, LLC[141](index=141&type=chunk) [Contractual Obligations and Commitments](index=52&type=section&id=Contractual%20Obligations%20and%20Commitments) There have been no material changes to the company's contractual obligations and commitments outside the ordinary course of business since its Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes to contractual obligations and commitments since the December 31, 2018, Annual Report on Form 10-K[144](index=144&type=chunk) [Off-Balance Sheet Arrangements](index=52&type=section&id=Off-Balance%20Sheet%20Arrangements) The company does not have any relationships with unconsolidated entities or financial partnerships that would constitute off-balance sheet arrangements - The company does not engage in off-balance sheet arrangements with unconsolidated entities or financial partnerships[145](index=145&type=chunk) - Guarantees are entered into in the ordinary course of business for the performance of the company and its subsidiaries[145](index=145&type=chunk) [Impact of Recent Accounting Pronouncements](index=52&type=section&id=Impact%20of%20Recent%20Accounting%20Pronouncements) This section refers to Note 3 of the Interim Financial Statements for a description of recent accounting pronouncements, their expected adoption dates, and anticipated effects on financial statements - Refer to Note 3 for details on recent accounting pronouncements, adoption dates, and expected financial impacts[146](index=146&type=chunk) - The company incurred significant losses since inception, with an accumulated deficit of **$388.1 million** as of September 30, 2019[108](index=108&type=chunk)[141](index=141&type=chunk) - Future operations will require additional expenses for **ILUVIEN®** commercialization, regulatory approvals, and clinical development of future products[109](index=109&type=chunk) - The company's ability to raise additional capital is crucial, especially given non-compliance with Nasdaq listing requirements[141](index=141&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not required for smaller reporting companies, and therefore, no disclosures are provided regarding quantitative and qualitative market risk - Not required for smaller reporting companies[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2019, concluding they were effective - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2019[148](index=148&type=chunk) - New internal controls were implemented to evaluate contracts and assess the impact of the new lease accounting standard (**ASC 842**)[149](index=149&type=chunk) - No other material changes to internal control over financial reporting occurred during the period[149](index=149&type=chunk) [PART II. OTHER INFORMATION](index=55&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional non-financial information, including legal proceedings, updated risk factors, details on equity securities, defaults, mine safety, other information, and a list of exhibits [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material pending legal proceedings, and management is unaware of any contemplated proceedings by governmental authorities - No material pending legal proceedings[152](index=152&type=chunk) - Management is unaware of any contemplated governmental proceedings[152](index=152&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the company's Annual Report on Form 10-K, primarily focusing on the company's non-compliance with Nasdaq Global Market's continuing listing requirements - The company received notices from Nasdaq for failing to comply with the minimum bid price (**$1.00**) and Market Value of Listed Securities (**$50,000,000**) requirements[152](index=152&type=chunk)[154](index=154&type=chunk) - Failure to regain compliance could lead to delisting from the Nasdaq Global Market, reducing stock liquidity, market price, and institutional investor interest[152](index=152&type=chunk)[154](index=154&type=chunk) - Stockholders approved a proposal for a reverse stock split (one-for-five to one-for-30) by May 4, 2020, to help regain compliance with the bid price rule[152](index=152&type=chunk)[153](index=153&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item states that there were no unregistered sales of equity securities or use of proceeds to report for the period - None to report[156](index=156&type=chunk) [Item 3. Defaults Upon Senior Securities](index=58&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities to report for the period - None to report[156](index=156&type=chunk) [Item 4. Mine Safety Disclosures](index=58&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[156](index=156&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report for the period - None to report[156](index=156&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, registration rights agreements, compensation programs, purchase agreements, and certifications required by the Sarbanes-Oxley Act - Includes Restated Certificate of Incorporation, Amended and Restated Bylaws, and amendments[158](index=158&type=chunk) - Lists the Registration Rights Agreement and Purchase Agreement with Lincoln Park Capital Fund, LLC[158](index=158&type=chunk) - Contains certifications of the Principal Executive Officer and Principal Financial Officer as required by Sections **302** and **906** of the Sarbanes-Oxley Act[158](index=158&type=chunk) [Signatures](index=60&type=section&id=Signatures) This section contains the required signatures of the registrant's authorized officers, specifically the President and Chief Executive Officer, and the Chief Financial Officer, certifying the filing of the report - Report signed by Richard S. Eiswirth, Jr., President and Chief Executive Officer[159](index=159&type=chunk) - Report signed by J. Philip Jones, Chief Financial Officer[159](index=159&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net revenue for Q3 2019 was $12.9 million, a 16% increase compared to Q3 2018 and an 18% sequential growth from Q2 2019 [6][19] - U.S. net revenue was approximately $8.7 million, up 2% from $8.5 million in Q3 2018 and up 19% sequentially from Q2 2019 [20] - International segment revenue increased 62% to approximately $4.2 million compared to $2.6 million in Q3 2018 [21] - Net loss for Q3 2019 was approximately $3.1 million, a decrease from a net loss of approximately $3.5 million in Q3 2018 [23] - Cash and cash equivalents decreased to approximately $7.9 million from $13 million at the end of 2018 [25] Business Line Data and Key Metrics Changes - U.S. end-user demand was essentially flat, with a slight decrease to 973 units compared to 977 units in Q3 2018 [20] - The international segment's growth was driven by expansion into new markets, particularly France and Spain, which contributed significantly to revenue [10] Market Data and Key Metrics Changes - France ranked first in monthly end-user demand for ILUVIEN across all international markets in Q3 2019 [10] - The company expanded its agreement with Horus Pharma to sell ILUVIEN in the Benelux countries, targeting approximately 70,000 patients suffering from DME [10] Company Strategy and Development Direction - The company aims to leverage its global sales infrastructure to build a leading company dedicated to retinal physicians and their patients [30] - The focus is on driving the message of ILUVIEN's unique benefits in treating DME and posterior uveitis, emphasizing its continuous micro-dosing technology [13][15] - The company is exploring potential acquisitions to strengthen its portfolio, particularly in the retina space [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory, expecting to generate breakeven to positive adjusted EBITDA moving forward [23] - The company anticipates that the collection of receivables and business growth will lead to neutral to positive cash flow from operations in the next two quarters [26] - Management highlighted the importance of the recent label approval for ILUVIEN in treating posterior uveitis, which is expected to drive future sales [11] Other Important Information - The company announced a $20 million common stock purchase agreement with Lincoln Park Capital Fund, providing flexibility for future capital needs [26] - The company is positioned as the 10th largest ophthalmology company based on 2018 revenue, with a unique focus on retinal diseases [30] Q&A Session Summary Question: What was the cash flow from operations and CapEx for the quarter? - Cash flow from operations in Q3 was a burn of $3.9 million, with CapEx at $110,000 [35] Question: What is the current status of the sales force? - The sales team has improved over the quarter, with some newer representatives leading in sales [33][34] Question: Are there benefits from OZURDEX shortages? - Management noted that they have not seen a significant impact from OZURDEX shortages yet, as larger accounts have stocked up [37] Question: What is the status of the Canadian market? - The Canadian partner is still working on pricing and reimbursement, with no updates expected until next year [41] Question: What is the guidance for the fourth quarter? - Management expects growth to remain consistent with the 16% year-to-date growth, absent the one-time revenue from OZURDEX last year [57]