ABEONA THERAPEUTICS INC.

Previous wording

Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases. Our lead clinical program is pz-cel, investigational autologous, COL7A1 gene-corrected epidermal sheets, currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”). We have announced positive data from the VIITAL™ study evaluating the efficacy, safety and tolerability of pz-cel. The VIITAL™ study met both its two co-primary efficacy endpoints demonstrating statistically significant, clinically meaningful improvements in wound healing and pain reduction in large chronic RDEB wounds. On September 25, 2023, we submitted a Biologics License Application (“BLA”) for pz-cel to the U.S. Food and Drug Administration (“FDA”). As part of the submission, we requested Priority Review, which, if granted, would shorten the FDA’s review period to six months from the filing acceptance of the BLA instead of ten months under standard review. In November 2023, the FDA accepted and granted priority review for our BLA for pz-cel. Under the Prescription Drug User Fee Act (“PDUFA”), the FDA has set a target action date of May 25, 2024.

Current wording

Abeona is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening diseases. Our lead clinical program is pz-cel, investigational autologous, COL7A1 gene-corrected epidermal sheets, currently in development for recessive dystrophic epidermolysis bullosa (“RDEB”). In 2022, we announced positive data from the VIITAL™ study evaluating the efficacy, safety and tolerability of pz-cel. The VIITAL™ study met both its co-primary efficacy endpoints demonstrating statistically significant, clinically meaningful improvements in wound healing and pain reduction in large chronic RDEB wounds. In September 2023, we submitted a Biologics License Application (“BLA”) for pz-cel to the U.S. Food and Drug Administration (“FDA”). In November 2023, the FDA accepted and granted priority review for our BLA for pz-cel, and subsequently, under the Prescription Drug User Fee Act (“PDUFA”), the FDA set a target action date of May 25, 2024. In April 2024, the FDA issued a Complete Response Letter (“CRL”) in response to the BLA. The CRL noted that certain additional information needed to satisfy the Chemistry Manufacturing and Controls (“CMC”) requirements of the pz-cel BLA must be satisfactorily resolved before the application can be approved. The CRL did not identify any deficiencies related to the clinical efficacy or clinical safety data in the BLA, and the FDA did not request any new clinical trials or clinical data to support the approval of pz-cel. In August 2024, we completed a Type A Meeting with the FDA to discuss our forthcoming resubmission of our BLA and in October 2024, we resubmitted our BLA. The FDA notified the Company in November 2024 that the BLA was accepted for review, with an assigned PDUFA target action date of April 29, 2025.

Previous wording

We have continued to prepare our current Good Manufacturing Practices (“cGMP”) commercial facility in Cleveland, Ohio for manufacturing pz-cel drug product to support our planned commercial launch of pz-cel, if approved. Pz-cel study drug product for all our VIITAL™ study participants has been manufactured at our Cleveland facility. As part of our commercial planning, we continue to engage with stakeholders across the healthcare system, including public and private payors, and healthcare providers to better understand market access and potential pricing for pz-cel. We have also begun discussions with high volume treatment centers of excellence to onboard them for pz-cel application upon potential FDA approval.

Current wording

We have continued to prepare our current Good Manufacturing Practices (“cGMP”) facility in Cleveland, Ohio for manufacturing commercial grade pz-cel drug product to support our planned commercial launch of pz-cel, if approved. Pz-cel study drug product for all our VIITAL™ study participants has been manufactured at our Cleveland facility. As part of our commercial planning, we continue to engage with stakeholders across the healthcare system, including public and private payors, and healthcare providers to better understand market access and potential pricing for pz-cel. We have also begun discussions with high volume treatment centers of excellence to onboard them for pz-cel application upon potential FDA approval.

Previous wording

Our development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic diseases using the novel AIM™ capsid platform that we have exclusively licensed from the University of North Carolina at Chapel Hill, and internal AAV vector research programs.

Current wording

Our development portfolio also features adeno-associated virus (“AAV”) based gene therapies designed to treat ophthalmic diseases using the novel AIM™ capsids that we have exclusively licensed from the University of North Carolina at Chapel Hill and developed internally through our AAV vector research programs.

Previous wording

License and other revenues for the year ended December 31, 2023 was $3.5 million, as compared to $1.4 million for the same period of 2022. The revenues in both periods mainly result from clinical milestones achieved under a sublicense agreement we entered into with Taysha Gene Therapies in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome. In 2022, there was also $0.3 million in revenue consisting of the recognition of deferred revenue related to grants for the ABO-102 and ABO-101 development programs.

Current wording

License and other revenues for the year ended December 31, 2024 was nil, as compared to $3.5 million for the same period of 2023. There was no license or other revenue in 2024 as no clinical development milestones were met in 2024. The revenue in 2023 consists of revenue resulting from achieving clinical development milestones achieved under a sublicense agreement we entered into with Taysha Gene Therapies in October 2020 relating to an investigational AAV-based gene therapy for Rett syndrome.

Previous wording

Total royalty expenses were $1.6 million for the year ended December 31, 2023, as compared to $0.4 million for the same period of 2022, an increase of $1.2 million. The increase in expense was due to royalties owed to our licensors resulting from the milestones due from Taysha related to Rett syndrome.

Current wording

Total royalty expenses were nil for the year ended December 31, 2024, as compared to $1.6 million for the same period of 2023. The royalty expense in 2023 was due to royalties owed to our licensors resulting from the milestones due from Taysha related to Rett syndrome.

Previous wording

Total research and development spending for the year ended December 31, 2023 was $31.1 million, as compared to $29.0 million for the same period of 2022, an increase of $2.1 million. The increase in expenses was primarily due to an $2.2 million increase in salaries and $0.1 million in non-cash stock-based compensation costs due to increased headcount related to the filing of our BLA.

Current wording

Total research and development spending for the year ended December 31, 2024 was $34.4 million, as compared to $31.1 million for the same period of 2023, an increase of $3.3 million. The increase in expenses was primarily due to a $4.0 million increase in salaries and $0.5 million in non-cash stock-based compensation costs due to increased headcount related to manufacturing capacity expansion preparing for the potential launch of pz-cel, partially offset by a decrease in clinical and development work costs of $1.3 million due to reduced spending on clinical trials as the majority of our clinical trials have finalized except for our long-term follow up trials.

Previous wording

Total general and administrative expenses were $19.0 million for the year ended December 31, 2023, as compared to $17.3 million for the same period of 2022, an increase of $1.7 million. The increase in expenses was primarily due to:

Current wording

Total general and administrative expenses were $29.9 million for the year ended December 31, 2024, as compared to $19.0 million for the same period of 2023, an increase of $10.9 million. The increase in expenses was primarily due to:

Previous wording

Loss/(gain) on operating lease right-of-use assets

Current wording

Gain on operating lease right-of-use assets

Previous wording

The gain on operating lease right-of-use assets was $1.1 million for the year ended December 31, 2023, as compared to a loss on operating lease right-of-use assets of $2.5 million in the same period of 2022. The gain on operating lease right-of-use assets for 2023 was related to the termination of our operating leases for office space that we no longer use, resulting in a gain from the difference between the carrying value of the right-of-use lease assets and the related lease liabilities.

Current wording

The gain on operating lease right-of-use assets was $1.1 million for the year ended December 31, 2023. The gain on operating lease right-of-use assets for 2023 was related to the termination of our operating leases for office space that we no longer use, resulting in a gain from the difference between the carrying value of the right-of-use lease assets and the related lease liabilities. There was no such gain during the year ended December 31, 2024.

Previous wording

Interest income was $2.1 million for the year ended December 31, 2023, as compared to $0.4 million in the same period of 2022. The increase resulted from higher earnings on short-term investments driven by higher interest rates and increased average short-term investment balances.

Current wording

Interest income was $4.2 million for the year ended December 31, 2024, as compared to $2.1 million in the same period of 2023. The increase resulted from higher earnings on short-term investments driven by higher interest rates and increased average short-term investment balances.

Previous wording

Change in fair value of warrant liabilities

Current wording

Change in fair value of warrant and derivative liabilities

Previous wording

The change in fair value of warrant liabilities was a loss of $11.7 million for the year ended December 31, 2023, as compared to a gain of $11.4 million in the same period of 2022.

Current wording

The change in fair value of warrant and derivative liabilities was a loss of $0.8 million for the year ended December 31, 2024, as compared to a loss of $11.7 million in the same period of 2023.

Previous wording

We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. The change in the fair value of warrant liabilities is primarily due to the fluctuation in our stock price year over year and a shorter term.

Current wording

We issued stock purchase warrants that are required to be classified as a liability and valued at fair market value at each reporting period. In addition, the conversion feature in our loan agreement is required to be classified as a liability and valued at fair market value at each reporting period. The change in the fair value of warrant and derivative liabilities was primarily due to the increase in our stock price year over the year offset by a reduced term of each of the warrants and derivative liabilities. At September 30, 2024, the conversion feature in our loan agreement no longer met the criteria of a derivative liability, and the derivative liability was reclassified to equity.

Previous wording

Other income was $2.9 million for the year ended December 31, 2023, as compared to $0.1 million in the same period of 2022. The change was primarily a result of $2.1 million in other income related to the impact of the employee retention credit that we submitted for 2020 and 2021.

Current wording

Other income was $1.2 million for the year ended December 31, 2024, as compared to $2.9 million in the same period of 2023. The change was primarily a result of $2.1 million in other income related to the impact of the employee retention credit that was recorded in 2023, partially offset by a refundable job creation tax credit of $0.5 million received in 2024.

Previous wording

Net cash used in operating activities was $43.5 million for the year ended December 31, 2022, primarily comprised of our net loss of $39.7 million and decrease in operating assets and liabilities of $5.9 million partially offset by net non-cash charges of $2.1 million.

Current wording

Net cash used in operating activities was $56.0 million for the year ended December 31, 2024, primarily comprised of our net loss of $63.7 million and decreases in operating assets and liabilities of $4.4 million, partially offset by net non-cash charges of $12.1 million. Non-cash charges consisted primarily of $0.8 million of the change in fair value of warrant and derivative liabilities, $6.6 million of stock-based compensation, $1.5 million of non-cash interest expense and $2.0 million of depreciation and amortization.

Previous wording

Net cash used in investing activities was $24.0 million for the year ended December 31, 2022, primarily comprised of purchases of short-term investments of $78.2 million and capital expenditures of $0.1 million, partially offset by proceeds from maturities of short-term investments of $52.6 million and proceeds from the disposal of property and equipment of $1.7 million.

Current wording

Net cash used in investing activities was $39.2 million for the year ended December 31, 2024, primarily comprised of purchases of short-term investments of $157.0 million and capital expenditures of $2.4 million, partially offset by proceeds from maturities of short-term investments of $120.2 million.

Previous wording

Net cash provided by financing activities was $43.2 million for the year ended December 31, 2022, primarily comprised of proceeds of $12.8 million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and proceeds of $34.1 million from a private offering of common stock and warrants on November 3, 2022, partially offset by the proceeds and redemption of our convertible redeemable preferred stock.

Current wording

Net cash provided by financing activities was $104.1 million for the year ended December 31, 2024, primarily comprised of proceeds of $70.2 million in net proceeds from our May 2024 underwritten offering, $15.5 million from open market sales of common stock pursuant to the ATM Agreement (as defined below) and net proceeds of $19.0 million from our credit facility entered into in January 2024.

Previous wording

Our principal source of liquidity is cash, cash equivalents, restricted cash and short-term investments, collectively referred to as our cash resources. As of December 31, 2023, our cash resources were $52.6 million. We believe that our current cash and cash equivalents, restricted cash and short-term investments, as well as our credit facility with Avenue Venture Opportunities Fund, L.P, are sufficient to fund operations through at least the next 12 months from the date of this report on Form 10-K. We may need to secure additional funding to carry out all of our planned research and development and potential commercialization activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on our future prospects.

Current wording

Our principal source of liquidity is cash, cash equivalents, restricted cash and short-term investments, collectively referred to as our cash resources. As of December 31, 2024, our cash resources were $98.1 million. We believe that our current cash and cash equivalents, restricted cash and short-term investments are sufficient to fund operations through at least the next 12 months from the date of this report on Form 10-K. We may need to secure additional funding to carry out all of our planned research and development and potential commercialization activities. If we are unable to obtain additional financing or generate license or product revenue, the lack of liquidity and sufficient capital resources could have a material adverse effect on our future prospects.

Previous wording

We have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $150.0 million. Any sales of shares pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. We sold 3,659,882 shares of our common stock under the ATM Agreement and received $14.4 million of net proceeds during the year ended December 31, 2023. We sold 3,479,016 shares of our common stock under the ATM Agreement and received $12.8 million of net proceeds during the year ended December 31, 2022. Subsequent to December 31, 2023 and through March 1, 2024, we sold 724,659 shares of our common stock under the ATM Agreement resulting in $5.3 million in net proceeds.

Current wording

We have an open market sale agreement with Jefferies LLC (as amended, the “ATM Agreement”) pursuant to which, we may sell from time to time, through Jefferies LLC, shares of our common stock for an aggregate sales price of up to $75.0 million. Any sales of shares pursuant to this agreement are made under our effective “shelf” registration statement on Form S-3 that is on file with and has been declared effective by the SEC. We sold 2,825,954 shares of our common stock under the ATM Agreement and received $15.5 million of net proceeds during the year ended December 31, 2024. We sold 3,659,882 shares of our common stock under the ATM Agreement and received $14.6 million of net proceeds during the year ended December 31, 2023. Subsequent to December 31, 2024 and through March 11, 2025, we sold 915,925 shares of our common stock under the ATM Agreement resulting in $4.8 million in net proceeds.

Previous wording

We enter into agreements in the normal course of business with clinical research organizations for clinical trials and clinical manufacturing organizations for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor, and are thus not included in the contractual obligations table.

Current wording

We enter into agreements in the normal course of business with clinical research organizations for clinical trials and clinical manufacturing organizations for supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These contractual obligations are cancelable at any time by us, generally upon prior written notice to the vendor.

Previous wording

On November 12, 2021, we entered into a Settlement Agreement with REGENXBIO to resolve all current disputes between the parties including the aforementioned AAA arbitration and New York State Supreme Court action. In accordance with the Settlement Agreement, we agreed to pay REGENXBIO a total of $30 million, payable as follows: (1) $20 million payable that was paid in 2021 after execution of the Settlement Agreement, (2) $5 million on the first anniversary of the effective date of the Settlement Agreement that was paid in 2022, and (3) $5 million upon the earlier of: (i) the third anniversary of the effective date of the Settlement Agreement or (ii) the closing of a Strategic Transaction, as defined in the Settlement Agreement. As of December 31, 2023, we have recorded the payable to licensor in the contractual obligations as the one remaining payment due to REGENXBIO under the Settlement Agreement.

Current wording

On November 12, 2021, we entered into a Settlement Agreement with REGENXBIO to resolve all current disputes between the parties including the aforementioned AAA arbitration and New York State Supreme Court action. In accordance with the Settlement Agreement, we agreed to pay REGENXBIO a total of $30 million, payable as follows: (1) $20 million payable that was paid in 2021 after execution of the Settlement Agreement, (2) $5 million on the first anniversary of the effective date of the Settlement Agreement that was paid in 2022, and (3) $5 million upon the earlier of: (i) the third anniversary of the effective date of the Settlement Agreement or (ii) the closing of a Strategic Transaction, as defined in the Settlement Agreement. As of December 31, 2024, we have paid all amounts due under the Settlement Agreement.

Previous wording

In addition, we are also party to other license agreements, which include contingent payments. However, contingent payments related to these license agreements are not disclosed as the satisfaction of these contingent payments is uncertain as of December 31, 2023 and, if satisfied, the timing of payment for these amounts was not reasonably estimable as of December 31, 2023. Commitments related to the license agreements include contingent payments that will become payable if and when certain development, regulatory and commercial milestones are achieved. During the next 12 months, certain contingent payments could become due upon potential BLA approval and sales of pz-cel related to such license agreements.

Current wording

In addition, we are also party to other license agreements, which include contingent payments. However, contingent payments related to these license agreements are not disclosed as the satisfaction of these contingent payments is uncertain as of December 31, 2024 and, if satisfied, the timing of payment for these amounts was not reasonably estimable as of December 31, 2024. Commitments related to the license agreements include contingent payments that will become payable if and when certain development, regulatory and commercial milestones are achieved. During the next 12 months, certain contingent payments could become due upon potential BLA approval and sales of pz-cel or any other developmental milestones for sub-licensed products related to such license agreements.

Previous wording

We account for leases pursuant to ASC 842,Leases (“ASC 842”). ASC 842 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases*.*We determine if an arrangement is a lease at inception or when amended. Right-of-use lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The classification of our leases as operating or finance leases along with the initial measurement and recognition of the associated right-of-use assets and lease liabilities is performed at the lease commencement date or when amended. The measurement of lease liabilities is based on the present value of future lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. As we have no external borrowings, the incremental borrowing rates are determined using information on indicative borrowing rates that would be available to us based on the value, currency and borrowing term provided by financial institutions, adjusted for company and market specific factors. Although we do not expect our estimates of the incremental borrowing rates to generate material differences within a reasonable range of sensitivities, judgement is involved in selecting an appropriate rate, and the rate selected for each lease will have an impact on the value of the lease liability and corresponding right-of-use lease asset in the consolidated balance sheets.

Current wording

We account for leases pursuant to ASC 842,Leases(“ASC 842”). ASC 842 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases*.*We determine if an arrangement is a lease at inception or when amended. Right-of-use lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The classification of our leases as operating or finance leases along with the initial measurement and recognition of the associated right-of-use assets and lease liabilities is performed at the lease commencement date or when amended. The measurement of lease liabilities is based on the present value of future lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. As we have no external borrowings, the incremental borrowing rates are determined using information on indicative borrowing rates that would be available to us based on the value, currency and borrowing terms provided by financial institutions, adjusted for company and market specific factors. Although we do not expect our estimates of the incremental borrowing rates to generate material differences within a reasonable range of sensitivities, judgement is involved in selecting an appropriate rate, and the rate selected for each lease will have an impact on the value of the lease liability and corresponding right-of-use lease asset in the consolidated balance sheets.

Previous wording

In June 2023, we terminated one of our operating leases for office space. The termination resulted in a gain of $1.1 million for the year ended December 31, 2023, representing the difference between the carry value of the right-of-use assets and the related lease liabilities. This gain is included in loss/(gain) on right-of-use lease assets in the consolidated statement of operations and comprehensive loss.

Current wording

In June 2023, we terminated one of our operating leases for office space. The termination resulted in a gain of $1.1 million for the year ended December 31, 2023, representing the difference between the carry value of the right-of-use assets and the related lease liabilities. This gain is included in gain on right-of-use lease assets in the consolidated statement of operations and comprehensive loss.

Previous wording

Long-Lived Assets consist of property and equipment, licensed technology, and right-of-use (“ROU”) assets. We test our long-lived assets for impairment on an annual basis, or when events and circumstances indicate that the carrying value of an asset or group of assets may not be fully recoverable. If indicators are present or changes in circumstance suggest that impairment may exist. We assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If the carrying amount is not recoverable, we measure the amount of any impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset. The undiscounted future operating cash flows require considerable judgement and are sensitive to changes in underlying assumptions such as operating costs related to our current facilities, headcount requirements and our clinical costs. As a result, there can be no assurance that the estimates and assumptions made for purpose of our impairment determinations would prove to be an accurate predication of the future.

Current wording

Long-Lived Assets consist of property and equipment, licensed technology, and right-of-use (“ROU”) assets. We test our long-lived assets for impairment on an annual basis, or when events and circumstances indicate that the carrying value of an asset or group of assets may not be fully recoverable. If indicators are present or changes in circumstance suggest that impairment may exist. We assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recovered through undiscounted future operating cash flows. If the carrying amount is not recoverable, we measure the amount of any impairment by comparing the carrying value of the asset to the present value of the expected future cash flows associated with the use of the asset. The undiscounted future operating cash flows require considerable judgement and are sensitive to changes in underlying assumptions such as operating costs related to our current facilities, headcount requirements and our clinical costs. As a result, there can be no assurance that the estimates and assumptions made for purpose of our impairment determinations would prove to be an accurate prediction of the future.

Previous wording

For licenses that are combined with other performance obligation, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development and licensing agreement. Such a change could have a material impact on the amount of revenue we record in future periods.

Current wording

For licenses that are combined with other performance obligations, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. The measure of progress, and therefore periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development and licensing agreement. Such a change could have a material impact on the amount of revenue we record in future periods.

Previous wording

The transaction price of the contract includes (i) $3.0 million of fixed consideration, (ii) up to $26.5 million of variable consideration in the form of event-based milestone payments, (iii) up to $30.0 million of variable consideration in the form of sales-based milestone payments, and (iv) other royalty-based payments based on net sales. The event-based milestone payments are based on certain development and regulatory events occurring. We evaluated whether the milestone conditions have been achieved and if it is probable that a significant cumulative revenue reversal would not occur before recognizing the associated revenue. We determined that these milestone payments are not within our control or the licensee’s control, such as regulatory approvals, and are not considered probable of being achieved until those approvals are received. Accordingly, we have fully constrained the $26.5 million of event-based milestone payments until such time that it is probable that significant cumulative revenue reversal would not occur. The sales-based milestone payments and other royalty-based payments are based on a level of sales for which the license is deemed to be the predominant item to which the royalties relate. We will recognize revenue for these payments at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any sales-based or royalty revenue resulting from this licensing arrangement.

Current wording

The transaction price of the contract includes (i) $3.0 million of fixed consideration, (ii) up to $26.5 million of variable consideration in the form of event-based milestone payments, (iii) up to $30.0 million of variable consideration in the form of sales-based milestone payments, and (iv) other royalty-based payments based on net sales. The event-based milestone payments are based on certain development and regulatory events occurring. We evaluated whether the milestone conditions have been achieved and if it is probable that a significant cumulative revenue reversal would not occur before recognizing the associated revenue. We determined that these milestone payments are not within our control or the licensee’s control, such as regulatory approvals, and are not considered probable of being achieved until those approvals are received. Accordingly, we have fully constrained the $26.5 million of event-based milestone payments until such time that it is probable that a significant cumulative revenue reversal would not occur. The sales-based milestone payments and other royalty-based payments are based on a level of sales for which the license is deemed to be the predominant item to which the royalties relate. We will recognize revenue for these payments at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any sales-based or royalty revenue resulting from this licensing arrangement.

Previous wording

Under this arrangement, we recognized $3.5 million and $1.0 million of revenue during the years ended December 31, 2023 and 2022, respectively, which amount related solely to variable consideration. As of December 31, 2023 and 2022, we do not have any contract assets or contract liabilities as a result of this transaction.

Current wording

Under this arrangement, we recognized nil and $3.5 million of revenue during the years ended December 31, 2024 and 2023, respectively, which amount related solely to variable consideration. As of December 31, 2024 and 2023, we do not have any contract assets or contract liabilities as a result of this transaction.

Previous wording

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Current wording

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued expenses.

Previous wording

Stock option-based compensation expense recognized for the years ended December 31, 2023 and 2022 was $1.4 million and $2.0 million, respectively. Restricted stock-based compensation expense recognized for the years ended December 31, 2023 and 2022 was $3.4 million and $1.1 million, respectively.

Current wording

Stock option-based compensation expense recognized for the years ended December 31, 2024 and 2023 was $1.1 million and $1.4 million, respectively. Restricted stock-based compensation expense recognized for the years ended December 31, 2024 and 2023 was $5.6 million and $3.4 million, respectively.

Previous wording

The change in fair value of warrant liability recognized for the year ended December 31, 2023 resulted in a loss of $11.7 million. The change in fair value of warrant liability recognized for the year ended December 31, 2022 resulted in a gain of $11.4 million.

Current wording

The change in fair value of warrant liability recognized for the year ended December 31, 2024 and 2023 resulted in a loss of $0.8 million and $11.7 million, respectively.