Ocugen Inc
For the period ended Dec 31, 2023. Filed Apr 16, 2024.
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FY2023 · Filed Apr 16, 2024
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Report of Independent Registered Public Accounting Firm F-
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Ocugen, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ocugen, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
The Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Restatement of 2022 Financial Statements
As discussed in Note 16 to the consolidated financial statements, the 2022 consolidated financial statements have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| Accounting for Collaborative Arrangement Revenue | |
| Description of the Matter | As disclosed in Notes 2 and 3 to the consolidated financial statements, the Company recognizes collaborative arrangement revenue as the Company’s performance obligations are satisfied over time. Collaborative arrangement revenue is recognized under an input method using the ratio of costs incurred to date compared to the total estimated costs required to complete the performance obligations. The transaction price consists of variable consideration that is based on the estimated market value of all co-development services to be provided by the other party to the arrangements. The Company recorded collaborative arrangement revenue of $6.0 million for the year ended December 31, 2023. Auditing the estimated transaction prices and the Company’s progress towards the satisfaction of the performance obligations under the collaborative arrangements is especially challenging because it involves subjective management assumptions about the transaction prices, including the need to constrain estimates of variable consideration, and the research and development costs necessary to satisfy the performance obligations. The measurement and recognition of collaborative arrangement revenue is subject to these estimates and judgments developed by management. |
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| How We Addressed the Matter in Our Audit | To test the amount of collaborative arrangement revenue recognized in the current period, we performed audit procedures that included, among others, reading the collaborative arrangements and testing the accuracy and completeness of the underlying data used in making the estimates. To assess the reasonableness of the Company’s significant estimates and judgments, we performed sensitivity analyses of key inputs, compared cost estimates to costs previously incurred for similar activities, inspected communications between the Company and its vendors regarding estimated costs for clinical activities, evaluated the remaining level of effort required to complete the performance obligations, and inspected evidence of actual costs incurred, including confirmations with third parties. We also discussed the basis for key assumptions with the Company’s research and development personnel, who oversee the completion of the collaborative arrangements and related clinical trials. Based on these audit procedures, we evaluated the Company’s application of the constraint on variable consideration and recalculated the revenue recognized for the period based on the ratio of costs incurred compared to estimated total costs at completion of the research and development services and the transaction prices. |
/s/Ernst & Young LLP
We have served as the Company's auditor since 2018.
Philadelphia, Pennsylvania
April 16, 2024
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.