Abeona Therapeutics(ABEO) - 2023 Q1 - Quarterly Report

FORM 10-Q Filing Information Details Abeona Therapeutics Inc.'s Q1 2023 Form 10-Q filing, identifying it as a non-accelerated, smaller reporting company * Abeona Therapeutics Inc. filed Form 10-Q for the quarter ended March 31, 2023[1] * The registrant is classified as a non-accelerated filer and a smaller reporting company[2] Common Stock Outstanding Data | Metric | Value | | :----- | :---- | | Common Stock Outstanding (as of May 4, 2023) | 18,778,182 shares | FORWARD-LOOKING STATEMENTS Outlines forward-looking statements, emphasizing inherent risks, BLA plans for EB-101, gene therapy development, and financial estimates * Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those anticipated[4][5] * Key areas of forward-looking statements include plans for EB-101 BLA submission, development of AAV-based gene therapies, clinical trial progress, regulatory approvals, and financial projections[5] * Important factors affecting performance are detailed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K/A[6] PART I - FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial information for the company, including financial statements and management's discussion and analysis Item 1. Financial Statements Provides unaudited condensed consolidated financial statements, including balance sheets, operations, equity, cash flows, and explanatory notes Condensed Consolidated Balance Sheets Reports decreased total assets from $64.2M to $53.3M, with corresponding reductions in total liabilities and stockholders' equity for Q1 2023 Condensed Consolidated Balance Sheet Data (in thousands) | Metric (in thousands) | March 31, 2023 (Unaudited) | December 31, 2022 | Change | | :-------------------- | :------------------------- | :---------------- | :----- | | ASSETS | | | | | Cash and cash equivalents | $4,680 | $14,217 | $(9,537) | | Short-term investments | $35,684 | $37,932 | $(2,248) | | Total current assets | $42,844 | $53,099 | $(10,255) | | Total assets | $53,345 | $64,214 | $(10,869) | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | Total current liabilities | $7,420 | $7,779 | $(359) | | Warrant liabilities | $17,392 | $19,657 | $(2,265) | | Total liabilities | $34,605 | $37,453 | $(2,848) | | Total stockholders' equity | $18,740 | $26,761 | $(8,021) | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss Reports a net loss of $9.1 million for Q1 2023, a significant improvement from $22.0 million in the prior year, driven by reduced expenses and a gain from warrant liabilities Condensed Consolidated Statements of Operations and Comprehensive Loss Data (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | License and other revenues | $0 | $346 | $(346) | | Research and development | $8,041 | $10,545 | $(2,504) | | General and administrative | $3,997 | $4,224 | $(227) | | Impairment of licensed technology | $0 | $1,355 | $(1,355) | | Impairment of right-of-use lease assets | $0 | $1,561 | $(1,561) | | Impairment of construction-in-progress | $0 | $3,252 | $(3,252) | | Total expenses | $12,038 | $20,937 | $(8,899) | | Loss from operations | $(12,038) | $(20,591) | $8,553 | | Interest income | $364 | $7 | $357 | | Change in fair value of warrant liabilities | $2,265 | $(1,253) | $3,518 | | Net loss | $(9,107) | $(22,044) | $12,937 | | Basic and diluted loss per common share | $(0.54) | $(3.80) | $3.26 | Unaudited Condensed Consolidated Statements of Stockholders' Equity Reports a decrease in total stockholders' equity from $26.8 million to $18.7 million, primarily due to net loss, partially offset by stock-based compensation and common stock issuance Condensed Consolidated Statements of Stockholders' Equity Data (in thousands) | Metric (in thousands) | Balance at December 31, 2022 | Three Months Ended March 31, 2023 | Balance at March 31, 2023 | | :-------------------- | :--------------------------- | :-------------------------------- | :------------------------ | | Common Shares | 17,719,720 | 209,624 | 17,929,344 | | Stock Amount | $177 | $2 | $179 | | Additional Paid-in Capital | $722,049 | $1,020 | $723,069 | | Accumulated Deficit | $(695,336) | $(9,107) | $(704,443) | | Accumulated Other Comprehensive Loss | $(129) | $64 | $(65) | | Total Stockholders' Equity | $26,761 | $(8,021) | $18,740 | * Stock-based compensation expense contributed $770 thousand to additional paid-in capital during the quarter[13] * Issuance of common stock under the ATM agreement resulted in $256 thousand in total stockholders' equity[13] Unaudited Condensed Consolidated Statements of Cash Flows Reports net cash used in operating activities of $11.7 million for Q1 2023, an improvement from the prior year, with increased cash from investing activities Condensed Consolidated Statements of Cash Flow Data (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(11,744) | $(13,687) | $1,943 | | Net cash provided by investing activities | $2,211 | $1,075 | $1,136 | | Net cash used in financing activities | $(4) | $0 | $(4) | | Net decrease in cash, cash equivalents and restricted cash | $(9,537) | $(12,612) | $3,075 | | Cash, cash equivalents and restricted cash at end of period | $5,018 | $26,217 | $(21,199) | Notes to Unaudited Condensed Consolidated Financial Statements Provides detailed explanations for the unaudited financial statements, covering operations, accounting policies, liquidity, fair value, equity, compensation, and license agreements NOTE 1 – NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Describes Abeona as a clinical-stage biopharmaceutical company, details financial statement presentation, reverse stock split impact, liquidity, and a prior period error correction Background Abeona Therapeutics Inc. is a clinical-stage biopharmaceutical company focused on developing cell and gene therapies for life-threatening diseases * Abeona Therapeutics Inc. is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases[19] * The lead clinical program is EB-101, an autologous, engineered cell therapy for recessive dystrophic epidermolysis bullosa (RDEB)[19] * The development portfolio includes AAV-based gene therapies for ophthalmic diseases, utilizing the novel AIM™ capsid platform[19] Basis of Presentation The unaudited interim condensed consolidated financial statements are prepared in conformity with U.S. GAAP, with intercompany balances eliminated * Financial statements are prepared in conformity with U.S. GAAP, with intercompany balances and transactions eliminated[20] * Statements are unaudited, include normal recurring adjustments, and are condensed per SEC rules[20] * These statements should be read with the audited consolidated financial statements in the 2022 Annual Report on Form 10-K/A[21] Reverse Stock Split A 25-to-1 reverse stock split was effective July 1, 2022, retroactively adjusting all share and per share information * A 25-to-1 reverse stock split was effective on July 1, 2022[22] * All share and per share information has been retroactively adjusted for all periods presented[22] * The number of authorized common stock shares remained at 200,000,000 after the split[22] Uses and Sources of Liquidity As of March 31, 2023, the Company had $40.7 million in cash resources, believed to be sufficient for the next 12 months, but additional financing is anticipated Liquidity Metrics (in millions) | Metric | Value (in millions) | | :----- | :------------------ | | Cash, cash equivalents, restricted cash and short-term investments (as of March 31, 2023) | $40.7 | | Cash outflows from operations (3 months ended March 31, 2023) | $11.7 | * The Company has not generated significant revenues or achieved profitable operations and requires significant additional financing for product candidate development and commercialization[24] * Current cash resources are believed to be sufficient for at least the next 12 months, but additional funding may be needed[26] Use of Estimates Financial statement preparation requires management to make estimates and assumptions, which may differ from actual results * Management uses estimates and assumptions in financial statement preparation, impacting reported asset/liability amounts and revenue/expense disclosures[27] * Actual results could differ from these estimates[27] Summary of Significant Accounting Policies No new or material changes to significant accounting policies have occurred since the 2022 Annual Report on Form 10-K/A * No new or material changes to significant accounting policies since the 2022 Annual Report on Form 10-K/A[28] Correction of Error An error from 2021 regarding warrant classification was corrected in Q4 2022, resulting in restatement and adjustments to prior period financial statements * An error was identified and corrected in Q4 2022 regarding the classification of 2021 common stock warrants as liabilities instead of additional paid-in capital[29] * The correction led to a restatement of 2021 financial statements and adjustments for the three months ended March 31, 2022[29] Impact of Prior Period Error Correction (in thousands) | Metric (in thousands) | As Reported (March 31, 2022) | Adjustment | As Revised (March 31, 2022) | | :-------------------- | :--------------------------- | :--------- | :-------------------------- | | Change in fair value of warrant liabilities | $0 | $(1,253) | $(1,253) | | Net Loss | $(20,791) | $(1,253) | $(22,044) | | Basic and diluted loss per common share | $(3.59) | $(0.21) | $(3.80) | | Comprehensive loss | $(20,794) | $(1,253) | $(22,047) | Net Loss Per Share Basic and diluted net loss per share is calculated using weighted-average common shares, excluding anti-dilutive potential securities * Basic and diluted net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding[35] * Potential dilutive securities (stock options, restricted stock, warrants) are excluded from diluted EPS calculations because their impact would be anti-dilutive[35] Potential Dilutive Securities | Potential Dilutive Securities | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Stock options | 234,697 | 284,072 | | Restricted stock | 929,946 | 77,945 | | Warrants | 9,397,879 | 1,788,000 | | Total | 10,562,522 | 2,150,017 | New Accounting Pronouncements No new accounting pronouncements are expected to materially impact the Company's condensed consolidated financial statements * No new accounting pronouncements are expected to materially impact the Company's financial statements[37] NOTE 2 – SHORT-TERM INVESTMENTS Short-term investments decreased to $35.7 million at March 31, 2023, with minor unrealized losses attributed to interest rate changes, not credit risks Short-Term Investments Fair Value (in thousands) | Metric (in thousands) | March 31, 2023 Fair Value | December 31, 2022 Fair Value | Change | | :-------------------- | :------------------------ | :--------------------------- | :----- | | U.S. treasury and federal agency securities | $35,684 | $37,932 | $(2,248) | | Total available-for-sale, short-term investments | $35,684 | $37,932 | $(2,248) | * All available-for-sale securities mature in one year or less[41] * Unrealized losses were not significant and were due to changes in interest rates, not credit risks; no other-than-temporary impairment was recorded[41] NOTE 3 – PROPERTY AND EQUIPMENT, NET Property and equipment, net, decreased to $5.3 million, with depreciation expense of $0.7 million for Q1 2023, and a $3.3 million impairment charge recorded in Q1 2022 Property and Equipment, Net (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Total property and equipment, net | $5,298 | $5,741 | $(443) | Depreciation Expense (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Depreciation expense | $700 | $800 | $(100) | * A $3.3 million impairment charge was recorded in Q1 2022 for construction-in-progress dedicated to the discontinued ABO-101 and ABO-102 programs[45] NOTE 4 – LICENSED TECHNOLOGY A $1.4 million impairment charge was recorded in Q1 2022 for ABO-101 and ABO-102 licensed technology due to program discontinuation, resulting in no remaining net value * Exclusive license for ABO-101 and ABO-102 patent portfolios was acquired in 2015[46] * A $1.4 million impairment charge was recorded in Q1 2022 due to the discontinuation of ABO-101 and ABO-102 development[46] * There is no remaining net value of licensed technology as of March 31, 2023, and December 31, 2022[46] NOTE 5 – FAIR VALUE MEASUREMENTS Financial assets and liabilities are measured at fair value using a three-level hierarchy, with warrant liabilities classified as Level 3 due to unobservable inputs * Fair value measurements are categorized into a three-level hierarchy based on input observability[49][50] Fair Value Measurements (in thousands) | Description (in thousands) | Fair Value at March 31, 2023 | Level 1 | Level 2 | Level 3 | | :------------------------- | :--------------------------- | :------ | :------ | :------ | | Cash equivalents (Money market fund) | $4,133 | $4,133 | — | — | | Short-term investments (U.S. treasury and federal agency securities) | $35,684 | — | $35,684 | — | | Total assets measured at fair value | $39,817 | $4,133 | $35,684 | — | | Warrant liabilities | $17,392 | — | — | $17,392 | Warrant Liabilities Warrant liabilities, valued at $17.4 million, are Level 3 fair value measurements, with a $2.3 million gain in Q1 2023 due to stock price reduction and shorter term * Warrant liabilities are Level 3 fair value measurements, valued using the Black-Scholes option-pricing model with unobservable inputs[53] Warrant Liabilities Data (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Warrant liabilities | $17,392 | $19,657 | $(2,265) | | Gain recognized in earnings from change in fair value | $(2,265) | N/A | N/A | * The change in fair value of warrant liabilities was primarily due to the reduction in the Company's stock price year-over-year and a shorter term[104] Warrant Details | Warrant Details | 2022 Private Placement | 2021 Public Offering | | :-------------- | :--------------------- | :------------------- | | Shares purchasable | 7,609,879 | 1,788,000 | | Weighted average exercise price | $4.75 | $9.75 | | Expiration date | November 2027 | December 2026 | NOTE 6 – SETTLEMENT LIABILITY The Company has a $30.0 million settlement agreement with REGENXBIO Inc., with a long-term payable of $4.3 million due in November 2024 * The Company entered a settlement agreement with REGENXBIO Inc. on November 12, 2021, for a total payment of $30.0 million[57] * $20.0 million was paid in November 2021[57] Long-Term Payable to Licensor (in thousands) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Long-term portion of payable to licensor (due November 2024) | $4,263 | $4,163 | * The payable is recorded at present value using a 9.6% interest rate[58] NOTE 7 – ACCRUED EXPENSES Total accrued expenses were $2.6 million as of March 31, 2023, primarily for employee compensation and contracted services Accrued Expenses (in thousands) | Component (in thousands) | March 31, 2023 | | :----------------------- | :------------- | | Accrued employee compensation | $838 | | Accrued contracted services and other | $1,731 | | Total accrued expenses | $2,569 | NOTE 8 – LEASES The Company leases various spaces, recorded a $1.6 million impairment in Q1 2022, and reported $0.5 million in operating lease costs for Q1 2023 * The Company leases manufacturing, laboratory, and administrative offices under operating leases[61] * A $1.6 million impairment charge was recorded in Q1 2022 for a lease portion related to discontinued ABO-101 and ABO-102 programs[61] Operating Lease Costs (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total operating lease costs | $472 | $589 | Operating Lease Liabilities Data | Lease Metric | Value | | :----------- | :---- | | Present value of operating lease liabilities (as of March 31, 2023) | $7,319 thousand | | Weighted-average remaining term | 73 months | | Weighted-average discount rate | 7.2% | NOTE 9 – EQUITY Details equity activities including a 25:1 reverse stock split, public offerings, an ATM agreement, and a private placement that generated significant proceeds and warrants * A 25:1 Reverse Stock Split was effective July 1, 2022, with authorized shares remaining at 200,000,000[67] * The December 2021 public offering generated approximately $16.0 million in net proceeds and resulted in 1,788,000 outstanding stock purchase warrants[68][69] * Under the ATM Agreement, 98,560 shares of common stock were sold for $0.3 million in net proceeds during Q1 2023[70] * A November 2022 private placement raised $32.6 million net and resulted in 7,609,879 outstanding warrants expiring November 3, 2027[71][73] Reverse Stock Split Effective July 1, 2022, the Company implemented a 25:1 Reverse Stock Split, maintaining 200,000,000 authorized common stock shares * A 25:1 Reverse Stock Split was effective on July 1, 2022[67] * The number of authorized common stock shares remained at 200,000,000 after the split[67] Public Offerings A December 2021 public offering generated $16.0 million net proceeds, resulting in 1,788,000 outstanding warrants classified as liabilities * A public offering closed on December 21, 2021, selling 1,788,000 common shares and warrants[68] Public Offering Details | Metric | Value | | :----- | :---- | | Net proceeds from public offering | ~$16.0 million | | Outstanding stock purchase warrants (as of March 31, 2023) | 1,788,000 | | Exercise price per share | $9.75 | | Expiration date | December 21, 2026 | * Warrants were accounted for as liabilities at a fair value of $9.0 million due to specific valuation inputs not indexed to the Company's stock[68] Open Market Sale Agreement The Company's ATM Agreement allows sales of common stock up to $150.0 million, with 98,560 shares sold for $0.3 million net proceeds in Q1 2023 * The Company has an ATM Agreement to sell up to $150.0 million of common stock through Jefferies LLC[70] ATM Agreement Sales | Metric | Value | | :----- | :---- | | Shares sold under ATM Agreement (Q1 2023) | 98,560 | | Net proceeds (Q1 2023) | $0.3 million | * The Company is subject to a one-third public float limitation on primary public offerings until its public float exceeds $75 million[70] Private Placement Offerings A November 2022 private placement raised $32.6 million net, resulting in 7,609,879 outstanding warrants exercisable at $4.75 per share * A private placement in November 2022 sold common stock, pre-funded warrants, and accompanying warrants[71] Private Placement Offering Details | Metric | Value | | :----- | :---- | | Aggregate purchase price (gross) | $35.0 million | | Net proceeds | $32.6 million | | Outstanding warrants (as of March 31, 2023) | 7,609,879 | | Exercise price per share | $4.75 | | Expiration date | November 3, 2027 | * Warrants were recorded as liabilities at a fair value of $22.0 million based on a Black-Scholes option pricing model[71] NOTE 10 – STOCK-BASED COMPENSATION Total stock-based compensation expense for Q1 2023 was $0.8 million, with $2.4 million unrecognized for options and $3.6 million for restricted stock awards Stock-Based Compensation Expense (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Research and development | $584 | $372 | $212 | | General and administrative | $186 | $490 | $(304) | | Total stock-based compensation expense | $770 | $862 | $(92) | * As of March 31, 2023, $2.4 million of unrecognized compensation cost for non-vested option awards remains, with a weighted average remaining vesting period of 1.9 years[81] * As of March 31, 2023, $3.6 million of total unrecognized compensation expense for unvested restricted stock awards remains, with a weighted average vesting period of 2.8 years[83] Stock Options No stock options were granted in Q1 2023, with 234,697 options outstanding at a weighted average exercise price of $37.00 * Fair value of stock options is estimated using the Black-Scholes option valuation model[76] * No stock options were granted during the three months ended March 31, 2023[80] Stock Option Activity | Stock Option Activity (as of March 31, 2023) | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | | :------------------------------------------- | :---------------- | :------------------------------ | :-------------------------------------------------- | | Outstanding | 234,697 | $37.00 | 6.21 | | Exercisable | 162,633 | $36.33 | 5.36 | | Unvested | 72,064 | $38.52 | 8.12 | Restricted Stock During Q1 2023, 136,850 restricted stock awards were granted, with 920,295 outstanding at a weighted average grant date fair value of $4.49 per unit Restricted Stock Activity | Restricted Stock Activity (Three Months Ended March 31, 2023) | Number of Awards | Weighted Average Grant Date Fair Value Per Unit | | :------------------------------------------------------------ | :--------------- | :---------------------------------------------- | | Outstanding at December 31, 2022 | 816,958 | $5.35 | | Granted | 136,850 | $2.44 | | Cancelled/forfeited | (23,862) | $4.89 | | Vested | (9,651) | $47.36 | | Outstanding at March 31, 2023 | 920,295 | $4.49 | * The total fair value of restricted stock awards that vested during the three months ended March 31, 2023, was $0.5 million[83] NOTE 11 – LICENSE/SUPPLIER AGREEMENT Details the exclusive license agreement with Ultragenyx for ABO-102, outlining royalty and milestone payment eligibility, and reimbursement for development costs * On May 16, 2022, the Company entered an exclusive license agreement with Ultragenyx Pharmaceutical Inc. for ABO-102[85] * Ultragenyx assumed responsibility for ABO-102 development, manufacturing, and commercialization globally[85] * Abeona is eligible to receive tiered royalties (mid-single-digit up to 10%) on net sales and up to $30.0 million in commercial milestone payments[85] * Reimbursement for development and transition costs from Ultragenyx is recognized as a reduction of research and development costs[86] Ultragenyx License Agreement The May 2022 exclusive license agreement with Ultragenyx for ABO-102 transferred program responsibilities, entitling Abeona to tiered royalties and commercial milestone payments * Exclusive license agreement with Ultragenyx for ABO-102 was signed on May 16, 2022[85] * Ultragenyx is responsible for ABO-102 development, manufacturing, and commercialization globally[85] * Abeona is eligible for tiered royalties (mid-single-digit to 10%) on net sales and up to $30.0 million in commercial milestone payments[85] * Ultragenyx reimburses Abeona for certain development and transition costs, which are recognized as a reduction of R&D expenses[86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on Abeona's Q1 2023 financial condition and operational results, focusing on cell and gene therapies, pipeline progress, and liquidity OVERVIEW Abeona is a clinical-stage biopharmaceutical company with EB-101 as its lead program, planning a BLA submission for EB-101 in Q2/Q3 2023, and advancing AAV-based gene therapies * Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases, with EB-101 for RDEB as its lead program[89] * Positive topline data from the VIITAL™ study for EB-101 showed statistically significant improvements in wound healing and pain reduction[89] * A Biologics License Application (BLA) for EB-101 is planned for submission to the FDA in late Q2 or early Q3 2023[89] * The company is also developing AAV-based gene therapies for ophthalmic diseases and preparing its Cleveland facility for EB-101 commercial manufacturing[90] Preclinical Pipeline Abeona's preclinical programs focus on novel AAV capsids for genetic eye diseases, with pre-IND meetings planned for Q2 2023 and new data presentation in May 2023 * Preclinical programs investigate novel AAV capsids for genetic eye diseases: ABO-504 (Stargardt disease), ABO-503 (XLRS), and ABO-505 (ADOA)[91] * Pre-Investigational New Drug (IND) application meetings with the FDA are scheduled for Q2 2023 to align on IND-enabling studies[91] * New preclinical data from these programs will be presented at the 26th Annual Meeting of the American Society of Gene & Cell Therapy (ASGCT) in May 2023[91] Recent Developments Abeona announced an oral presentation at the ISID Meeting on May 11, 2023, showcasing additional Phase 3 VIITAL™ study data for EB-101 * On May 11, 2023, Abeona announced an oral presentation at the inaugural ISID Meeting in Tokyo, Japan[92] * The presentation included additional data from the pivotal Phase 3 VIITAL™ study for EB-101[92] * EB-101 treatment significantly improved wound healing, pain reduction, itch, and blistering at 6, 12, and 24 weeks compared to untreated control wounds[92] RESULTS OF OPERATIONS Abeona reported a net loss of $9.1 million for Q1 2023, a significant improvement from $22.0 million in the prior year, driven by reduced expenses and a gain from warrant liabilities Results of Operations Summary (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Total expenses | $12,038 | $20,937 | $(8,899) | | Loss from operations | $(12,038) | $(20,591) | $8,553 | | Change in fair value of warrant liabilities | $2,265 | $(1,253) | $3,518 | | Net loss | $(9,107) | $(22,044) | $12,937 | License and other revenues License and other revenues were nil for Q1 2023, a decrease from $0.3 million in Q1 2022, which was primarily from deferred revenue recognition License and Other Revenues (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | License and other revenues | $0 | $346 | $(346) | * The 2022 revenue was primarily from deferred revenue recognition related to ABO-102 and ABO-101 development programs[96] Research and development Research and development expenses decreased by $2.5 million, or 24%, to $8.0 million for Q1 2023, mainly due to reduced work on discontinued programs and lower personnel costs Research and Development Expenses (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Research and development expenses | $8,041 | $10,545 | $(2,504) | * Decrease primarily due to: * Decreased clinical and development work for discontinued ABO-102 and ABO-101 programs ($1.7 million) * Decreased salary and related costs ($0.8 million) * Decreased stock compensation expenses ($0.2 million)[97] * R&D activities are expected to continue for advancing product candidates, including employee, preclinical, clinical trial, manufacturing, and regulatory costs[98] General and administrative General and administrative expenses decreased by $0.2 million, or 5%, to $4.0 million for Q1 2023, driven by lower professional fees and other costs, partially offset by increased personnel and stock compensation General and Administrative Expenses (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | General and administrative expenses | $3,997 | $4,224 | $(227) | * Decrease primarily due to: * Decreased professional fees ($0.2 million) * Decreased other costs ($0.4 million)[99] * Partially offset by: * Increased salary and related costs ($0.3 million) * Increased non-cash stock-based compensation ($0.1 million)[99] Impairment of licensed technology Impairment of licensed technology was nil for Q1 2023, compared to a $1.4 million impairment charge in Q1 2022 due to discontinued development programs Impairment of Licensed Technology (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Impairment of licensed technology | $0 | $1,355 | $(1,355) | * The $1.4 million impairment in 2022 resulted from discontinuing ABO-102 and ABO-101 development programs[100] Impairment of right-of-use lease assets Impairment of right-of-use lease assets was nil for Q1 2023, compared to a $1.6 million impairment charge in Q1 2022 related to a discontinued manufacturing facility lease Impairment of Right-of-Use Lease Assets (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Impairment of right-of-use lease assets | $0 | $1,561 | $(1,561) | * The $1.6 million impairment in 2022 was for a lease related to a future manufacturing facility for discontinued ABO-102 and ABO-101 programs[101] Impairment of construction-in-progress Impairment of construction-in-progress was nil for Q1 2023, compared to a $3.3 million impairment charge in Q1 2022 for a facility dedicated to discontinued MPS IIIA and IIIB programs Impairment of Construction-in-Progress (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Impairment of construction-in-progress | $0 | $3,252 | $(3,252) | * The $3.3 million impairment in 2022 was for a facility dedicated to the discontinued MPS IIIA and MPS IIIB development programs[102] Interest income Interest income significantly increased to $0.4 million for Q1 2023, driven by higher earnings on short-term investments due to increased interest rates and balances Interest Income (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Interest income | $364 | $7 | $357 | * Increase resulted from higher earnings on short-term investments due to higher interest rates and increased short-term investment balances[103] Interest expense Interest expense decreased by 50% to $0.1 million for Q1 2023, primarily due to a $5.0 million settlement payment made in November 2022 Interest Expense (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Interest expense | $(101) | $(201) | $100 | * Decrease primarily due to a $5.0 million settlement payment made in November 2022 to REGENXBIO Inc[104] Change in fair value of warrant liabilities A gain of $2.3 million from the change in fair value of warrant liabilities was recorded for Q1 2023, a significant shift from a $1.3 million loss in the prior year Change in Fair Value of Warrant Liabilities (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Change in fair value of warrant liabilities | $2,265 | $(1,253) | $3,518 | * The gain was primarily due to the reduction in the Company's stock price year-over-year and a shorter term for the warrants[104] Other income (loss) Other income was $0.4 million for Q1 2023, a substantial improvement from a prior-year loss, primarily due to a refund of overpaid franchise taxes Other Income (Loss) (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Other income (loss) | $403 | $(6) | $409 | * The change was primarily due to other income related to a refund of overpayment of franchise taxes[106] LIQUIDITY AND CAPITAL RESOURCES Abeona had $40.7 million in cash resources as of March 31, 2023, sufficient for the next 12 months, but anticipates needing additional funding for R&D and commercialization Cash Flow Summary (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(11,744) | $(13,687) | $1,943 | | Net cash provided by investing activities | $2,211 | $1,075 | $1,136 | | Net cash used in financing activities | $(4) | $0 | $(4) | | Net decrease in cash, cash equivalents and restricted cash | $(9,537) | $(12,612) | $3,075 | * As of March 31, 2023, cash resources (cash, cash equivalents, restricted cash, short-term investments) totaled $40.7 million[112] * The Company believes current cash resources are sufficient for at least the next 12 months but may need additional funding for planned R&D and commercialization activities[112] * Raising additional funds through equity sales would dilute existing investors, and collaborations might require relinquishing valuable rights[116] Operating activities Net cash used in operating activities for Q1 2023 was $11.7 million, driven by net loss and decreases in operating assets and liabilities, partially offset by non-cash charges Operating Cash Flow (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in operating activities | $(11,744) | $(13,687) | $1,943 | * Q1 2023 cash usage comprised a $9.1 million net loss, $2.0 million decrease in operating assets/liabilities, and $0.6 million net non-cash charges[109] Investing activities Net cash provided by investing activities for Q1 2023 was $2.2 million, primarily from maturities of short-term investments, partially offset by new purchases and capital expenditures Investing Cash Flow (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash provided by investing activities | $2,211 | $1,075 | $1,136 | * Q1 2023 investing activities included $10.4 million from maturities of short-term investments, offset by $8.0 million in purchases and $0.2 million in capital expenditures[110] Financing activities Net cash used in financing activities for Q1 2023 was $4,000, primarily due to the net settlement of restricted share awards, with historical funding from common stock sales Financing Cash Flow (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash used in financing activities | $(4) | $0 | $(4) | * Cash used in financing activities was primarily for the net settlement of restricted share awards[111] * Historically, operations have been funded primarily through sales of common stock[111] Critical Accounting Estimates The preparation of financial statements requires critical accounting estimates and assumptions that are inherently uncertain and could materially impact results * Critical accounting estimates involve uncertain assumptions that could materially impact financial results[121] * Estimates are based on experience and reasonable factors, but actual results may differ[122] Recently Issued Accounting Standards Not Yet Effective or Adopted This section refers to Note 1 for a discussion of recently issued accounting standards not yet effective or adopted * Refer to Note 1 for discussion of recently issued accounting standards not yet effective or adopted[122] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable for the Company * This section is not applicable[123] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting * Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023[124] * No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2023[125] PART II - OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity security sales, and a list of exhibits filed with the Form 10-Q Item 1. Legal Proceedings The Company reported no legal proceedings for the period * There are no legal proceedings to report[126] Item 1A. Risk Factors The Company's business is subject to numerous risks and uncertainties detailed in its Annual Report, with no material changes since December 31, 2022 * The Company's business is subject to numerous risks and uncertainties detailed in the Annual Report on Form 10-K/A[126] * No material changes to the risk factors have occurred since the December 31, 2022 Annual Report[126] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds For Q1 2023, the Company purchased 1,924 shares of equity securities at an average price of $2.48 per share for tax withholding obligations Equity Securities Purchased | Period | Total Number of Shares Purchased | Average Price Per Share | | :----- | :------------------------------- | :---------------------- | | February 1, 2023 - February 28, 2023 | 132 | $2.27 | | March 1, 2023 - March 31, 2023 | 1,792 | $2.49 | | Total (Q1 2023) | 1,924 | $2.48 | * Shares were surrendered to the Company for payment of tax withholding obligations in connection with the vesting of restricted stock[128] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL financial statements * Exhibits include Principal Executive Officer and Principal Financial Officer Certifications (31.1, 31.2), Certification Pursuant to 18 U.S.C. Section 1350 (32), and Inline XBRL financial statements (101)[129][130] SIGNATURES This section contains the signatures of Abeona Therapeutics Inc.'s President and CEO, and CFO, certifying the report on May 11, 2023 * The report is signed by Vishwas Seshadri, President and Chief Executive Officer, and Joseph Vazzano, Chief Financial Officer[132][133] * The report was signed on May 11, 2023[132]