Note 1:General information about the Company
Founded in 2012, GenSight Biologics S.A. (hereinafter referred to as \u201cGenSight Biologics\u201d or the \u201cCompany\u201d and together with its subsidiaries as the \u201cGroup\u201d) is a clinical-stage biotechnology group discovering and developing novel therapies for neurodegenerative retinal diseases and diseases of the central nervous system. GenSight Biologics\u2019 pipeline leverages two core technology platforms, the Mitochondrial Targeting Sequence (MTS) and optogenetics, to help preserve or restore vision in patients suffering from severe degenerative retinal diseases. The Group focus is in ophthalmology where it develops product candidates to restore eyesight to patients suffering from retinal diseases that would otherwise lead to blindness.
The Company has incurred losses and negative cash flows from operations since its inception and shareholders\u2019 equity amounts to \u20ac(30,702)\u00a0K as of December\u00a031, 2023 as a result of several financing rounds (see Note 10). The Group anticipates incurring additional losses until such time, if ever, that it can generate significant revenue from its product candidates in development. Substantial additional financing will be needed by the Company to fund its operations and to commercially develop its product candidates.
The Group\u2019s future operations are highly dependent on a combination of factors, including: (i)\u00a0the success of its research and development; (ii)\u00a0regulatory approval and market acceptance of the Group\u2019s proposed future products; (iii)\u00a0the timely and successful completion of additional financing; and (iv)\u00a0the development of competitive therapies by other biotechnology and pharmaceutical companies.
The presented consolidated Financial Statements are expressed in thousands of euros, unless stated otherwise. For ease of presentation, numbers have been rounded. Calculations, however, are based on exact figures. Therefore, the sum of the numbers in a column of a table may not conform to the total figure displayed in the column.
The reporting date for the consolidated financial statements is December\u00a031 and covers a twelve-month period. The individual statements of the consolidated subsidiaries GenSight Biologics Inc. and GenSight Biologics France SAS are prepared at the same reporting date, i.e., December\u00a031, and cover a one-year period.
The consolidated financial statements as of December\u00a031, 2023 have been prepared under the responsibility of management of\u00a0the Group and were approved on March\u00a021, 2024 and reapproved on April 17, 2024 by the Board of Directors.
Founded in 2012, GenSight Biologics S.A. (hereinafter referred to as \u201cGenSight Biologics\u201d or the \u201cCompany\u201d and together with its subsidiaries as the \u201cGroup\u201d) is a clinical-stage biotechnology group discovering and developing novel therapies for neurodegenerative retinal diseases and diseases of the central nervous system. GenSight Biologics\u2019 pipeline leverages two core technology platforms, the Mitochondrial Targeting Sequence (MTS) and optogenetics, to help preserve or restore vision in patients suffering from severe degenerative retinal diseases. The Group focus is in ophthalmology where it develops product candidates to restore eyesight to patients suffering from retinal diseases that would otherwise lead to blindness.
The Group\u2019s future operations are highly dependent on a combination of factors, including: (i)\u00a0the success of its research and development; (ii)\u00a0regulatory approval and market acceptance of the Group\u2019s proposed future products; (iii)\u00a0the timely and successful completion of additional financing; and (iv)\u00a0the development of competitive therapies by other biotechnology and pharmaceutical companies.
2.2Going concern
These Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern. As such, no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or classification of liabilities that might be necessary should the Company not be able to continue as a going concern.
Since its incorporation, the Company has funded its activities through several equity financings, grants, conditional advances, and research tax credit (cr\u00e9dit d\u2019imp\u00f4t recherche or \u201cCIR\u201d). In 2019, the French National Drug Safety Agency (ANSM) granted a named patient Temporary Authorization for Use (ATU nominative) for LUMEVOQ\u00ae and the Company started to generate revenue from the sale of LUMEVOQ\u00ae in France.\u00a0
In November 2022, the Company entered into a \u20ac35 million credit facility agreement with the European Investment Bank (EIB). The facility is divided into three tranches of \u20ac8 million for the first Tranche (\u201cTranche A\u201d), \u20ac12 million for the second tranche (\u201cTranche B\u201d) and \u20ac15 million for the third tranche (\u201cTranche C\u201d), respectively, all subject to certain conditions. In February 2023, the Company fully met the disbursement conditions of the \u20ac8 million Tranche A of the financing with the EIB, and requested its draw down.
In December 2022, the Company signed a \u20ac12\u00a0million financing with an entity advised by Heights Capital Capital, subscribed at 90% of the nominal value i.e. \u20ac10.8\u00a0million, in the form of notes convertible into new shares. The proceeds have been partly used to fully repay the balance of its financing with Kreos Capital for \u20ac4.4\u00a0million.
In April 2023, based on its interactions with the EMA\u2019s Committee for Advanced Therapies (CAT) indicating that the data provided thus far would not be sufficient to support a positive opinion of the marketing authorization of LUMEVOQ\u00ae by EMA, the Company decided to withdraw our application ahead of a final opinion by the CAT.
Given the Company\u2019s decision to withdraw the EMA application, there was no immediate need for a Process Performance Qualification (\u201cPPQ\u201d) campaign until a new Marketing Authorisation Application (\u201cMAA\u201d) is submitted. Consequently, the Company decided to manufacture Good Manufacturing Practice (\u201cGMP\u201d) batches as planned, using the commercial process but outside the context of a validation campaign, to generate more batch data for a future MAA filing and provide more experience with the manufacturing process to operating teams, while fulfilling the immediate requirement of supplying product for a possible new clinical trial and for the resumption of an early access program for patients in the beginning of the third quarter of 2024. The Company will thus not meet the contractual condition related to PPQ production for disbursement of the Tranche\u00a0B of the credit facility agreement with the EIB. The Company acknowledge that the availability of such tranche is currently suspended, until such time as a new agreement with the EIB is reached on revised conditions to the disbursement of that tranche. Discussions with the EIB on this matter are still ongoing.
In 2023, the Company has put in place certain additional cash preservation measures, aimed at significantly reducing its operating cash burn in 2023, including a 40% headcount reduction mainly in Commercial teams, leading to a significant reduction equaling approximately 40% of its initially planned 2023 operating expenses. The Company was also able to retrieve its 2022 Research Tax Credit amounting to \u20ac2.2 million in July 2023, much earlier than in normal operating conditions where this tax credit is usually received towards the end of the year. This significant reduction of cash burn will mostly benefit 2024 and the following years until the Company can reach European Medicines Agency (EMA) approval and launch LUMEVOQ\u00ae in Europe.
In August 2023, the Company signed a \u20ac10\u00a0million bridge financing agreement, as amended on October\u00a031, 2023 (the \u201cBridge Financing\u201d), with Sofinnova Crossover\u00a0I\u00a0SLP, Invus Public Equities LP and UPMC Enterprises (together, the \u201cInvestors\u201d), and drew the Tranche\u00a01 of \u20ac6\u00a0million in the form of convertible bonds with a conversion price of \u20ac0.7122 (the \u201c2023\u00a0OCA\u201d).
As of November\u00a021, 2023, the Company announced the successful completion of an offering for a gross amount of \u20ac4.7\u00a0million, composed of the \u20ac4m Tranche\u00a02 private placement, as well as private placement aimed at specialized investors and a public offering for retail investors via the PrimaryBid platform only in France. The Company also announced the issuance of 8,680,797 new shares as a result of the automatic conversion of the convertible bonds subscribed by Sofinnova, Invus and UPMC in August 2023 (2023 OCA or Tranche\u00a01 of the \u20ac10\u00a0million bridge signed in August 2023).
As of February 8, 2024, the Company also announced the completion of an additional \u20ac5\u00a0million capital increase subscribed by existing shareholders (Sofinnova Partners, Invus and UPMC Enterprises) and Heights Capital Capital.
As of December\u00a031, 2023, the Company had \u20ac2.1\u00a0million in cash and cash equivalents compared to \u20ac10.6\u00a0million of cash and cash equivalents as of December\u00a031, 2022. Based on its current operations, plans and assumptions, the Company believes its current balance of cash and cash equivalents, including the net proceeds of the capital increased completed in February\u00a02024 for \u20ac5\u00a0million, should be sufficient to fund its operations until the end of April 2024, and as such will not be sufficient to fund the Company\u2019s operations for at least the next 12 months.
Furthermore, as indicated in Note 11 to the Financial Statements notes, the Company has initiated discussions with its creditors (the Banks, the EIB, and Heights Capital) to prevent itself against an early demand for debt repayment under contractual provisions. In February 2024, the Company obtained waivers subject to the fulfillment of conditions and a suspension of debt payments until April\u00a030, 2024. The Company contemplates to further discuss with its existing creditors to extend these waivers beyond April 30, 2024.
The Company intends to seek other sources of financing, including debt or equity financing or partnering or M&A opportunities, in order to secure its ongoing activities, notably the launch of the new RECOVER Phase III clinical trial, to supplement its working capital requirements and fund its operating expenses beyond end of April 2024 and until the first payments related to the resumption of the early access program in France (AAC/AAP). This resumption is expected in Q3 2024 when LUMEVOQ\u00ae becomes available and the authorization from the ANSM has been obtained.
The Company also anticipates receiving the Research Tax Credit (CIR) of \u20ac1.7 million for the year 2023 in the second quarter of 2024.
The Company's financial statements were prepared on a going concern basis as of December 31, 2023, assuming that the Company will achieve its financing objectives. However, even though the Company believe in its ability to raise additional funds or achieve M&A opportunities, and to obtain an extension of the waivers from its creditors, no assurance can be given at this time as to whether the Company will be able to achieve these objectives or to obtain sufficient funds at attractive terms and conditions, which could require the Company to severely modify its operating plans, not to be able to realize its assets and paid its liabilities in the normal course of business or to be forced to enter into insolvency proceedings or cease our operations in whole or in part.
Therefore, there is substantial doubt regarding its ability to continue as a going concern.
On February 6, 2023, the Company announced that it has received the payment of \u20ac8\u00a0million under the first tranche (the \u201cTranche\u00a0A\u201d) of the unsecured credit facility executed with the European Investment Bank (the \u201cEIB\u201d) on November\u00a03, 2022 maturing in November 2027.
The disbursement of Tranche A was subject, among other conditions, to the issuance of warrants which have been subscribed on January 25, 2023.
The credit facility is divided into three tranches of \u20ac8 million, \u20ac12 million and \u20ac15 million, each subject to the fulfillment of certain conditions precedent and redeemable within 5\u00a0years from the date of signature of the credit facility, i.e. November\u00a03, 2027. No guarantee can be given as to the satisfaction by the Company of the condition\u2019s precedent and the completion of the second and third tranches.
On July 20, 2023, given the Company\u2019s decision to withdraw its EMA application in April\u00a02023, the Company announced there was no immediate need for a validation (PPQ) campaign until a new Marketing Authorization Application (MAA) is submitted. Consequently, the Company decided to manufacture 3 GMP batches as planned, using the commercial process but outside the context of a validation campaign, to generate more batch data for a future MAA filing and provide more experience with the manufacturing process to operating teams, while fulfilling the immediate requirement of supplying product for a possible new clinical trial and for the resumption of an early access program for patients.
The Company will thus not meet the contractual condition related to PPQ production for disbursement of the tranche B of the EIB loan for an amount of \u20ac12\u00a0million. The Company acknowledges that the availability of such tranche is currently suspended, until such time as a new agreement with the EIB is reached on revised conditions to the disbursement of that tranche. Discussions with the EIB on this matter are still ongoing.
On August 3, 2023, the Company announced the signing of the Bridge Financing with the Sofinnova Crossover I SLP, Invus Public Equities LP and UPMC Enterprises (together, the \"Investors\") and drew down the Tranche 1 of \u20ac6 million.
The Bridge Financing is divided into two tranches, each subject to certain conditions:
\u2022A Tranche 1 of \u20ac6 million through the issuance of 60 bonds convertible into new ordinary shares with a value of \u20ac100,000 each (the \u201c2023 OCAs\u201d), maturing in twelve\u00a0months and bearing interest at 10% per annum; and
\u2022A Tranche 2 of \u20ac4 million through the issuance of new ordinary shares.
Each tranche was subscribed for by each investor pro rata to its participation in the Bridge Financing, as follows: 35% for Sofinnova Crossover I SLP, 35% for Invus Public Equities LP and 30% for UPMC Enterprises.
The drawdown of Tranche 1 was subject to, among other conditions, the approval of the Company, the Investors, the Company's creditor banks (notably BNP Paribas, CIC and Bpifrance), the EIB and Heights Capital of certain waivers and agreements.
The drawdown of Tranche\u00a02 was subject, among other conditions, to the fulfillment of the following conditions at the latest on November\u00a015, 2023(14):
\u2022the production of at least two successful GMP batches (Good Manufacturing Practices), of LUMEVOQ\u00ae as demonstrated by a statement signed by a qualified person and/or representative of the quality unit documenting that the GMP batches are within specifications required (individually, a \u201cSuccessful Manufacturing\u201d) or,
\u2022in the event that the GMP batches are not produced, or only one Successful Manufacturing, with unanimous approval by all the Investors.
On October 26, 2023, the Company announced that, in connection with the drawdown of Tranche 1 in August 2023, the Company has obtained from the Banks, the EIB and Heights, subject to certain conditions:
\u2022a waiver by the Banks, the EIB and Heights on any provision which could trigger early repayment of their debt until January\u00a031, 2024;
\u2022an agreement of the EIB and Heights on the pari passu treatment of the 2023 OCAs with the 2022 OCAs;
\u2022a deferral of principal payments due to the Banks until January\u00a031, 2024;
\u2022the suspension of Heights\u2019 conversion rights with respect to the 2022 OCAs until January 31, 2024;
\u2022deferral of principal payments due to Heights in connection with the redemption of the 2022 OCAs until January\u00a031, 2024; and
\u2022a waiver by the EIB of any adjustment right it has under the subscription agreement relating to the Warrants in the context of the Facility signed by the Company and the EIB on December\u00a022, 2022, and in particular the anti-dilution provision contained in this subscription agreement.
3.6Financial assets
Financial assets are initially measured at fair value plus directly attributable transaction costs in the case of instruments not measured at fair value through profit or loss. Directly attributable transaction costs of financial assets measured at fair value through profit or loss are recorded in the consolidated statement of income (loss).
Under IFRS 9, financial assets are classified in the following three categories:
\u2022Financial assets at amortized cost;
\u2022Financial assets at fair value through other comprehensive income (\u201cFVOCI\u201d); and
\u2022Financial assets at fair value through profit or loss.
The classification of financial assets depends on:
\u2022The characteristics of the contractual cash flows of the financial assets; and
\u2022The business model that the entity follows for the management of the financial asset.
Financial assets at amortized cost
Financial assets are measured at amortized cost when (i)\u00a0they are not designated as financial assets at fair value through profit or loss, (ii)\u00a0they are held within a business model whose objective is to hold assets in order to collect contractual cash flows and (iii)\u00a0they give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI\u201d criterion). They are subsequently measured at amortized cost, determined using the effective interest method (\u201cEIR\u201d), less any expected impairment losses in relation to the credit risk. Interest income, exchange gains and losses, impairment losses and gains and losses arising on derecognition are all recorded in the consolidated statement of income (loss).
This category primarily includes trade receivables, as well as other loans and receivables. Long-term loans and receivables that are not interest-bearing or that bear interest at a below-market rate are discounted when the amounts involved are material.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of debt instruments whose contractual cash flows represent payments of interest or repayments of principal, and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising from changes in fair value are recognized in equity within the statement of comprehensive income in the period in which they occur. When such assets are derecognized, the cumulative gains and losses previously recognized in equity are reclassified to profit or loss for the period within the line items Financial income or Financial expenses. The Company did not hold this type of instrument during the periods presented in these financial statements.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
\u2022instruments whose contractual cash flows represent payments of interest or repayments of principal, but which are managed other than with a view to collecting cash flows and/or selling the asset; and
\u2022instruments that management has designated as \u201cfair value through profit or loss\u201d on initial recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items financial income or financial expenses.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
3.10Derivatives
Derivatives are recorded in the statement of financial position at their fair value. Changes in fair value are recognized in profit or loss.
Transaction costs that relate to the issue of the convertible loan are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.
Convertible Bonds
The convertible bonds are financial instruments that will be or may be settled in the entity's own equity or may be settled in equity instruments of the entity.
They include a debt component and an option component, and can be classified as :
\u2022compound instruments, including a debt component and an equity component as defined by IAS 32. An instrument is qualified as an equity instrument if it can be settled by exchanging a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments;
\u2022or hybrid instruments in other cases, including a host contract (financial liability) and one or more embedded derivatives. The conversion option can be qualified as an embedded derivative and initially measured at fair value under IFRS 9 and subsequently measured at fair value through profit or loss.
EIB credit facility and warrants
The Company entered into a credit facility with EIB in November\u00a02022 and the \u20ac8m of the Tranche\u00a01 have been received on February 2023 after all conditions, in particular the issuance of share warrants to the EIB, had been met.
This financial instrument includes two instruments (i) a host contract representing a debt component (the loans) and (ii)\u00a0warrants. The two instruments issued (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants). The financial instrument includes different options too: a call option, a prepayment option and a put option. The prepayment option is not a separate derivative instrument.
The warrants, put option and call option are each classified as derivatives on own equity instruments, because the \u201cfixed-for-fixed\u201d rule under IAS\u00a032, which provides that derivatives will be classified as equity if they can only be settled by delivering a fixed number of shares in exchange for a fixed amount of cash or another financial asset, is not met (non-cash settlement option which may result in exchanging a variable number of shares, for a variable price). The derivatives are recognized at fair value through profit and loss.
The put option can only be exercised in the framework and for the purposes of a cashless exercise of the warrants, and thus cannot be exercised on a standalone basis. The put option comes into effect upon the issuance of warrants by the Issuer and remains in effect for the lifetime of the warrants. In addition, the put option is not independently transferable from the warrants. Thus, the put option is not bifurcated and it is to be considered as part of the valuation of the warrants.
The call option is exercisable by the Company, under very specific circumstances wherein the value of the warrants increase due to a takeover bid for the Company. The Company believes it is very unlikely that it will take advantage of exercising the call option. Thus, the call option has been valued at zero and does not require bifurcation. The accounting treatment and impact on the 2023 financial year is described in Note\u00a011 - Financial liabilities.
3.12Financial liabilities
Borrowings and other financial liabilities, excepted for derivative financial liabilities (see upon), are measured initially at their fair value and then at amortized cost, calculated on the basis of the effective interest rate (\u201cEIR\u201d) method.
The transaction expenses that are directly attributable to the acquisition or to the issue of a financial liability reduce that financial liability. These expenses are then amortized actuarially over the lifetime of the liability, on the basis of the EIR.
The EIR is the rate that equalizes the anticipated flow of future cash outflows with the current net book value of the financial liability in order to deduct its amortized cost therefrom.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. The subsidy is presented as a differed income which is amortized in the P&L over the same period.
Other financial liabilities include trade accounts payable, which are measured at fair value (which in most cases equates to face value) on initial recognition, and subsequently at amortized cost.
Note 11:Financial liabilities
11.1Bond financing
Heights Capital
On December 23, 2022, the Company signed a subscription agreement for a \u20ac12 million convertible notes financing from Heights Capital (the \u201c2022 OCAs\u201d). These \u20ac12 million financing were subscribed at 90% of the nominal value i.e. 10.8 million euros, in the form of notes convertible into new shares with a 30% premium.
The Company issued the 2022 OCAs on December 28, 2022 (the \"Issue Date\") at an issue price of \u20ac90,000 per note, for a period of five years, i.e. until December 28, 2027 (the \"Maturity Date\"). The 2022 OCAs do not bear interest.
The 2022 OCAs may be converted into new ordinary shares of the Company exclusively at the option of the holder between the issue Date and the Maturity Date.
Initially, the 2022 OCAs entitled the holder, upon conversion, to a maximum of 22,884 new ordinary shares per note, i.e. a conversion price of 4.37 euros per Note (the \"Conversion Price\").
The Conversion Price corresponds to a premium of 30% on the volume-weighted average price of the Company's shares on the regulated market of Euronext Paris during the last trading session preceding the determination of the terms of issuance (the \"Reference Price\"), thus complying with the price limits set by the 24th\u00a0resolution of the Company\u2019s combined general shareholders\u2019 meeting held on May\u00a025, 2022 (the volume-weighted average of the prices of the Company's shares on the regulated market of Euronext in Paris during the last five trading sessions preceding the determination of the price, less a maximum discount of 15%, i.e. \u20ac3.07) it being specified that the Price Limit may be modified at a future general Meeting.
Following discussions in the third quarter of 2023 between the Company and Heights Capital, a modification to the price limit and other modification have been approved by the shareholders at the shareholders' general meeting held on January 10, 2024. The new price limit equals \u20ac0.4527 corresponding to the closing price of the shares on the regulated market of Euronext in Paris on the last trading day preceding the date falling three business days prior to the publication of the convening notice to the shareholders\u2019 general meeting held on January\u00a010, 2024 in the Bulletin d\u2019Annonce L\u00e9gale Obligatoire, less a 10.36% discount.
From June 2023, the 2022 OCAs were initially to be amortized quarterly in an amount of \u20ac5,263 per 2022 OCA (or \u20ac5,266 for the amortization corresponding to the final maturity date) (the \u201cAmortization Amount\u201c), payable either (i) in new ordinary shares issued at a 10% discount to the market value of the Company\u2019s shares at the time of amortization (it being specified that all payments in shares have to comply with the price limit) or (ii)\u00a0at our option, in cash at 110% of the amount to be amortized, being specified that redemption in cash will become mandatory in the event that the price limit is crossed downwards.
The Company and Heights Capital have first decided to suspend the redemption of the 2022 OCAs until January 31, 2024. Starting from March 2024 and until the maturity date of the 2022 OCAs, Heights Capital will be entitled to trigger an additional amortization payment for each 2022 OCA between two quarterly amortization periods up to the Amortization Amount payable (i)\u00a0either in new ordinary shares at an amortization price equal to the one applicable on the preceding quarterly amortization date, (ii)\u00a0or in cash at 110% of the amortizable amount, it being specified that the repayment in cash will become mandatory in the event that the price limit is crossed downwards (the \u201cAdditional Amortization Right\u201c). Heights Capital may only exercise this Additional Amortization Right up to a maximum of three times per calendar year, without being able to carry over this right to the following year. This Additional Amortization Right does not alter the maximum number of shares that may be issued, and only impacts the maturity of the 2022 OCAs. When exercising the Additional Amortization Right, Heights Capital will be subject to a global trading limitation of 15% of the average daily trading volume of the Company\u2019s shares for the duration of an amortization period. These amendments have been approved by the shareholders at the shareholders' general meeting held on January\u00a010, 2024.
In the context of the February 2024 capital increase, the Company and Heights Capital have further decided to suspend the amortization of the 2022 OCAs until April 30, 2024. A new amendment to the price limit may be presented to the shareholders at the next annual shareholders general meeting if the current price limit is above the market price of the shares at the time of convening such meeting, which should reflect our share price over the period comprising the last eight trading sessions at the time of convening the annual shareholders\u2019 general meeting, subject to a maximum discount of 20%.The number of shares that may be issued under the 2022 OCAs will be between 2,746,108 (in the event of conversion of all the 2022 OCAs at the Conversion Price) and 26,507,620 (in the event of amortization of all the 2022 OCAs at the current price limit of \u20ac0.4527), subject to redemption exclusively in shares.
On the date of the eighteenth anniversary of the Issue Date (the \"18-Month Reset Date\"), the conversion price shall be adjusted (but only if such adjusted price is lower than the conversion price without taking into account such adjustment) to correspond to the share price on the 18-Month Reset Date, it being specified that the conversion price so adjusted shall be at least equal to the Reference Price and the Price Limit; and it being further specified that the conversion price may be adjusted upwards if the volume weighted average of at least 20\u00a0out of 30 consecutive trading days in the 12-month period following the 18-month Reset Date exceeds 150% of the Initial Conversion Price.
In accordance with the terms and conditions of the 2022 OCAs, customary events of default (including in the event of non-payment on a due date, breach of the terms and conditions, delisting or cessation of business) will give Heights an option to request the early redemption of the 2022 OCAs in cash at an amount equal to 110% of the principal amount of 2022 OCAs outstanding. The Company has also given certain customary undertakings (in particular, not to grant any security interests, other than certain customary exceptions in this respect, and not to offer any shares for 30 days following the Issue Date, subject in particular to the issuance of the Warrants to the EIB and certain customary exceptions in this regard). The Company has also undertaken to seek additional equity financing for an amount corresponding to that of the 2022 OCAs.
In the event of a change of control of the Company, Heights has the right to request early redemption in cash of the 2022 OCAs at an amount equal to 110% of the principal amount of the 2022\u00a0OCAs.
The OCAs are non-transferable, except
(i)in accordance with applicable law in connection with a merger, contribution of assets or similar transaction and
(ii)in accordance with the provisions of the Subordination Agreement.
The financing obtained from Heights is qualified as a hybrid instrument in the Group\u2019s financial statements. The derivative instrument is, in accordance with IFRS 9, measured at fair value, with a change in fair value recognized in profit or loss. The amount remaining in debt is recognized at amortized cost using the effective interest rate.
The assumptions and results are detailed in the following tables:
| \n \u00a0 | \n\n December\u00a031, 2023 | \n
| \n Stock price | \n\n \u20ac0.46 | \n
| \n Volatility | \n\n 108.54% | \n
| \n Adjusted Volatility | \n\n 82.1% (20% haircut) | \n
| \n Dividend yield | \n\n 0.00% | \n
| \n Risk Free Rate | \n\n 2.04% | \n
| \n Credit Spread | \n\n 22.90% | \n
| \n Credit Rating | \n\n \u201cCCC Composite\u201d | \n
As of December 31, 2023, condition precedents in relation with the waivers granted by Heights were only partially met, and the entire debt could have become immediately repayable, at 110% of the outstanding principal amount of the 2022 OCAs. As such, the outstanding debt has been classified in full as current liability. A waiver of any contractual provision that could result in the early redemption of the Convertible Notes, was granted in February\u00a024, subject to certain terms and conditions to be fulfilled in 2024.
As of December 31, 2023, the derivative instrument amounts to \u20ac0.1 million and the remaining debt to \u20ac9.1 million.
In the absence of any event of default, the non-current portion of debt would have amounted to \u20ac6.5 million as of December\u00a031, 2023.
In connection with the February 2024 capital increase, the Company have obtained from the Heights Capital some waivers and agreements, in particular a waiver on any provision which could trigger an early repayment of the 2022 OCAs until April\u00a030, 2024. For more information, please refer to section\u00a018.7.2 \u201cNegotiations with existing creditors\u201d.
The bridge financing in August and November 2023
In August 2023, the Company announced the signing of the Bridge Financing with the Investors, divided into two tranches, each subject to certain conditions:
\u2022A Tranche 1 of \u20ac6 million through the issuance of 60 bonds convertible into new ordinary shares with a value of \u20ac100,000 each (the \"2023 OCAs\"), maturing in twelve\u00a0months and bearing interest at 10% per annum; and
\u2022A Tranche 2 of \u20ac4 million through the issuance of new ordinary shares.
The Tranche 1 is qualified as a compound instrument. It includes an equity component recorded in accordance with IAS\u00a032 and a financial liability recorded at amortized cost in accordance with IFRS 9.
As a result drawdown of Tranche 2 in November 2023, 8,680,797 new shares have been issued upon conversion of the 2023 OCAs on the settlement date of the offering, at a conversion price of \u20ac0.7122 per 2023 OCAs.
11.2Conditional advances
In 2014, we received a grant from Bpifrance Financement of both non-refundable subsidies and conditional advances in relation to the development of our optogenetics technology platform. The program would be funded according to a specified schedule set forth in the contract, subject to completion of milestones. As the program advances, we provided Bpifrance Financement with interim progress reports and a final report when the funded project would end. Based on these reports, we were entitled to conditional advances from Bpifrance Financement. Each award of an advance was made to help fund a specific development milestone. The total intended amount of the conditional advances initially granted was \u20ac5.7\u00a0million, of which \u20ac0.7\u00a0million were received in December\u00a02014 and \u20ac2.3\u00a0million in July\u00a02016.
The advances were initially planned to be paid according to the following schedule, subject to completion of milestones:
\u2022\u20ac678\u00a0K received in December\u00a02014;
\u2022\u20ac2,279\u00a0K received in July\u00a02016(15);
\u2022\u20ac494\u00a0K initially expected to be received in the first half of 2018(16);
\u2022\u20ac853\u00a0K initially expected to be received in November\u00a02018; and
\u2022\u20ac986\u00a0K initially expected to be received in November\u00a02019.
On June\u00a03, 2020, the following was decided by the steering committee:
\u2022payment of a last conditional advance of \u20ac1.1\u00a0million and a subsidy of \u20ac0.3\u00a0million to cover for the expenses related to the key-steps\u00a03 and 4;
\u2022removal of the specific regulatory condition in key step 3;
\u2022postponement by 2\u00a0years of the repayment schedule, i.e. a first repayment deadline on June\u00a030, 2024 instead of June\u00a030, 2022;
\u2022establishment of a minimum lump sum reimbursement of \u20ac819\u00a0K, or 20% of the overall received conditional advance.
The repayment schedule of the conditional advances has been updated accordingly for a total amount of \u20ac4,687\u00a0K (\u20ac4,096\u00a0K of cash received + \u20ac591\u00a0K of capitalized interests) and is as follows:
\u2022\u20ac550\u00a0K from June\u00a030, 2024;
\u2022\u20ac1,000\u00a0K from June\u00a030, 2025;
\u2022\u20ac1,500\u00a0K from June\u00a030, 2026; and
\u2022\u20ac1,637\u00a0K from June\u00a030, 2027.
Following the repayment of all of the conditional advances, the Company may be required to make additional payments over a period of two years, depending on whether the Company reaches cumulative revenues, excluding taxes, of \u20ac80.0\u00a0million. These additional repayments should correspond to the difference between 140% of the conditional advance, considering an interest rate of 1.44% and the amount already reimbursed as per the repayment schedule; and should be done within 15\u00a0years following the first year of reimbursement, i.e. 2039.
The obligation to repay these amounts is based on the technical and commercial success of the funded program, as determined by the revenues forecast or revenues deriving from direct or indirect exploitation of those products and results of its optogenetics technology platform.\u00a0In the event Bpifrance Financement determines that the program is not successful, Bpifrance Financement will meet with the Company to assess the impact on the repayments and the repayment schedule.
The Company has decided to include the future cash flows resulting from the additional payments in the calculation of the EIR, based on the first sales projections of its second product.
The current and non-current portions of the financial liability recognized in our financial statements associated with these conditional advances are determined based on the applicable reimbursement schedules at the end of each reporting period. The portion of the conditional advances for terms longer than one year are classified as non-current liabilities while the portion for terms of less than one year are classified as current liabilities.
The table below presents the details of the financial liabilities recorded on the statements of financial position:
| \n In thousands of Euros | \n\n \n | \n
| \n Balance as of January 1, 2023 | \n\n 5,214 | \n
| \n Receipts | \n\n \u2014 | \n
| \n Repayments | \n\n \u2014 | \n
| \n Other | \n\n \u2014 | \n
| \n Current portion | \n\n \u2014 | \n
| \n Accrued interest | \n\n 290 | \n
| \n Balance as of December\u00a031, 2023 | \n\n 5,504 | \n
| \n Non-current portion | \n\n 5,107 | \n
| \n Current portion | \n\n 396 | \n
11.3State-guaranteed loan
The Company obtained a \u20ac6.75\u00a0million loan from a bank syndicate formed with Cr\u00e9dit Industriel et Commercial (CIC), BNP Paribas and Bpifrance, in the form of a state-guaranteed loan (Pr\u00eat Garanti par l\u2019\u00c9tat) (the \u201cPGE\u201d).
Initiated by the French Government to support companies during the Covid-19 crisis, the PGE is a bank loan with a fixed interest rate ranging from 0.25% and 1.75% for the first 12\u00a0months. After an initial interest-only term of one year, the loan can be amortized over up to five years at the option of the Company. The French Government guarantees 90% of the borrowed amount. The Group has signed in June\u00a02021 amendments to the initial agreements, including an amortization period of three years; until mid-2024, as well as effective interest rates ranging from 1.01% to 2.25%.
This benefit, resulting from the low interest is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost.
In connection with the drawdown of Tranche 1 of the Bridge Financing and following discussions with its existing creditors, the Company has obtained waivers from our creditor banks (BNP Paribas, CIC and Bpifrance) on any provision which could trigger an early repayment of their loans to the Company and the deferral of principal payments due to them until January\u00a031, 2023. In the context of the February 2024 capital increase, the same waivers have been obtained until April 30, 2024.
11.4European Investment Bank (\u201cEIB\u201d) credit facility
The Company entered in November 2022 into a \u20ac35\u00a0million credit facility agreement with the European Investment Bank (\u201cEIB\u201d), supported by the European Fund for Strategic Investment (EFSI).
The \u20ac35\u00a0million facility is divided into three tranches: \u20ac8\u00a0million for the first tranche (\u201cTranche\u00a0A\u201d), \u20ac12\u00a0million for the second tranche (\u201cTranche\u00a0B\u201d) and \u20ac15\u00a0million for the third tranche (\u201cTranche\u00a0C\u201d). The disbursement of each tranches, including the first disbursement of Tranche\u00a0A, is subject to certain conditions.
The disbursement of Tranche A was subject to, among other things:
\u2022the execution of a warrant agreement to be entered into with the EIB,
\u2022issue of the warrants relating to Tranche A,
\u2022the full repayment of the outstanding financing with Kreos,
\u2022the successful manufacturing of one engineering batch of LUMEVOQ\u00ae,
\u2022the decision by the Company to launch the validation batches (PPQ) manufacturing campaign, and
\u2022a cash injection of \u20ac10\u00a0million, in the form of equity, convertible bonds (to the extent that their repayment would be subordinated to the EIB\u2019s debt under the terms of a subordination agreement to be concluded) or license revenues.
The disbursement of Tranche\u00a0B is subject to, among other things:
\u2022the full drawdown of Tranche\u00a0A,
\u2022the issue of the warrants relating to Tranche\u00a0B,
\u2022the successful manufacturing campaign of several PPQ batches of LUMEVOQ\u00ae, and
\u2022the submission of responses to the Day\u00a0120 List of Questions to the European Medicines Agency (EMA) (condition satisfied in October 2022).
The disbursement of Tranche\u00a0C is subject to, among other things:
\u2022the full drawdown of Tranche\u00a0B,
\u2022the issue of the warrants relating to Tranche\u00a0C,
\u2022a cash injection of at least \u20ac20\u00a0million (in addition to the aforementioned \u20ac10\u00a0million), in the form of equity, convertible bonds (to the extent that their repayment would be subordinated to the EIB\u2019s debt under the terms of a subordination agreement to be concluded) or license revenues,
\u2022the obtaining of EMA marketing authorization for LUMEVOQ\u00ae in Europe, and
\u2022a condition related to early access for patients.
The credit facility agreement will carry an annual fixed interest rate of 2% for all tranches and a decreasing fixed payment-in-kind (PIK) interest rate per tranche, with 5% for Tranche\u00a0A, 4% for Tranche\u00a0B and 3% for Tranche\u00a0C, and with a maturity of five years for each tranche. Such PIK interest shall be capitalized annually, payable at maturity and added to the outstanding principal amount of the credit and therefore bear interest.
The facility may, in certain circumstances, be prepaid, in whole or in part, with a prepayment fee, either at the election of the Company or upon the demand of EIB following certain prepayment events, including a change of control or a change in senior management of the Company.
Subject to certain terms and conditions, upon the occurrence of standard events of default (i.e. including payment default, misrepresentation, cross default), EIB may demand immediate repayment by the Company of all or part of the outstanding debt and/or cancel any undisbursed tranches.
The credit facility agreement is supplemented by an agreement to be concluded to issue warrants to the benefit of the EIB, pursuant to Article L.225-138 of the French Commercial Code, in varied amounts according to the relevant tranche.
The warrants will have a term of 20 years and will become exercisable upon the occurrence of certain events (such as a change of control or a repayment regarding one or several tranches), thus avoiding dilution for existing shareholders in the near term. Each warrant will entitle EIB to one ordinary share of the Company in exchange for the exercise price (subject to anti-dilution provisions). The exercise price for each warrant will be equal to 95% of the volume weighted average of the trading price of the Company\u2019s ordinary share over the last five trading days preceding the decision of the competent corporate body of the Company to issue such warrants. EIB shall be entitled to, as soon as the warrants become exercisable, a put option at its intrinsic value, (subject to a cap equal to the drawn amount under the facility agreement) requiring the Company to buy back all or part\u00a0of the warrants then exercisable, but not yet exercised. Furthermore, the Company shall be entitled to a call option on all outstanding warrants under certain limited circumstances.
On February\u00a06, 2023, as disbursement conditions for Tranche A were met, including in particular issuance of 1,141,096\u00a0warrants to the EIB, and the Company received the payment of \u20ac8\u00a0million under Tranche A of the unsecured credit facility executed with the EIB.
No guarantee can be given as to the satisfaction by the Company of the conditions precedent and the completion of Tranche\u00a0B and Tranche\u00a0C.
As condition precedent for the drawdown of the Tranche\u00a01 of the bridge financing entered on August\u00a02, 2023 between the Company and the Investors, the following approvals have been granted by the EIB:
\u2022waiver on any provision which could trigger early repayment of their debt until January\u00a031, 2024;
\u2022agreement on the issuance of the OCAs and their ranking, and the execution by the Investors of an accession undertaking to the subordination agreement signed by the Company, the EIB and Heights Capital on December\u00a022, 2022;
\u2022waiver of any adjustment right it has under the warrant agreement in the context of the bridge financing signed by the Company and the EIB on December\u00a022, 2022.
In the context of the February 2024 capital increase, the same waivers have been obtained until April 30, 2024.
The two financial instruments issued with respect to the drawdown of the \u20ac8\u00a0million Tranche\u00a0A (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants).
The loan has been initially recognized at fair value, i.e., the issue proceeds (fair value of the consideration received) net of transaction costs incurred and the fair value at inception date of the derivative instruments of the debt concerned. Loans are subsequently measured at amortized cost, calculated using the effective interest rate method. Any difference between initial fair value and repayment value is recognized in the statement of income (loss) over the life of the loan using the effective interest rate method.
The effective interest rate is the discount rate at which the present value of all future cash flows (including transaction costs) over the expected life of the loan, or where appropriate, over a shorter period of time, is equal to the loan\u2019s initial carrying amount.
The fair value of the warrants has been estimated based on a Black & Scholes approach, including the put option and the attached cap.
The assumptions and results are detailed in the following tables:
| \n \u00a0 | \n\n 31/12/2023 | \n
| \n Number of instruments | \n\n 1,141,096 | \n
| \n Spot | \n\n 0.46 | \n
| \n Strike | \n\n 3.45 | \n
| \n Volatility | \n\n 80% | \n
| \n Risk free rate | \n\n 2.8% | \n
| \n Valuation date | \n\n 31/12/2023 | \n
| \n Expiration | \n\n 22/12/2042 | \n
| \n Term (years) | \n\n 19.0 | \n
| \n Maturity (years) | \n\n 19.0 | \n
| \n Dividends | \n\n 0% | \n
| \n Unit fair value (\u20ac) | \n\n 0.39 | \n
As of December 31, 2023, condition precedents in relation with the waivers granted by the EIB were only partially met, and the entire debt could have become immediately repayable, at the nominal value plus accrued interests. As such, the outstanding debt has been classified in full as current liability. A waiver of\u00a0any contractual provision that could result in the early repayment of the debt, was granted in February\u00a024, subject to certain terms and conditions to be fulfilled in 2024.
The derivative instrument amounts to \u20ac0.4 million and the remaining debt to \u20ac4.9 million as of December 31, 2023.
In the absence of any event of default as of December 31, 2023, the entire debt or \u20ac4.9 million would have been classified as non-current liability.
11.5Maturity dates
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2022, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,214 | \n\n 0 | \n\n 3,176 | \n\n 2,037 | \n
| \n Corporate bonds | \n\n 7,353 | \n\n 302 | \n\n 7,051 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 3,428 | \n\n 2,195 | \n\n 1,233 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,866 | \n\n 894 | \n\n 972 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 17,861 | \n\n 3,391 | \n\n 12,433 | \n\n 2,037 | \n
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2023, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,504 | \n\n 396 | \n\n 4,277 | \n\n 831 | \n
| \n Corporate bonds | \n\n 9,131 | \n\n 9,131 | \n\n 0 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 7,474 | \n\n 7,474 | \n\n 0 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,823 | \n\n 775 | \n\n 1,048 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 23,932 | \n\n 17,777 | \n\n 5,324 | \n\n 831 | \n
Note 15:Financial instruments recognized in the consolidated statements of financial position and related effect on the\u00a0consolidated statement of income (loss)
| \n In thousands of euros | \n\n Book value on | \n\n Fair value | \n\n At amortized | \n\n Fair Value | \n
| \n As of December\u00a031, 2022 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current financial assets | \n\n 632 | \n\n \u2014 | \n\n 632 | \n\n 632 | \n
| \n Current financial assets | \n\n 144 | \n\n 144 | \n\n \u2014 | \n\n 144 | \n
| \n Accounts receivable and related receivables | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Cash and cash equivalents | \n\n 10,610 | \n\n \u2014 | \n\n 10,610 | \n\n 10,610 | \n
| \n Other current assets | \n\n 12,193 | \n\n \u2014 | \n\n 12,193 | \n\n 12,193 | \n
| \n Total financial assets | \n\n 23,579 | \n\n 144 | \n\n 23,435 | \n\n 23,579 | \n
| \n Financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Bond financing | \n\n 7,353 | \n\n \u2014 | \n\n 7,353 | \n\n 7,353 | \n
| \n Derivative liabilities | \n\n 3,447 | \n\n 3,447 | \n\n \u2014 | \n\n 3,447 | \n
| \n Borrowings from Banks | \n\n 3,428 | \n\n \u2014 | \n\n 3,428 | \n\n 3,428 | \n
| \n Conditional advances (non-current portion) | \n\n 5,214 | \n\n \u2014 | \n\n 5,214 | \n\n 5,214 | \n
| \n Refund liability | \n\n 7,485 | \n\n \u2014 | \n\n 7,485 | \n\n 7,485 | \n
| \n Lease liability \u2013 Buildings | \n\n 1,866 | \n\n \u2014 | \n\n 1,866 | \n\n 1,866 | \n
| \n Other non-current liabilities | \n\n 193 | \n\n \u2014 | \n\n 193 | \n\n 193 | \n
| \n Accounts payable and related payables | \n\n 7,813 | \n\n \u2014 | \n\n 7,813 | \n\n 7,813 | \n
| \n Other current liabilities | \n\n 4,339 | \n\n \u2014 | \n\n 4,339 | \n\n 4,339 | \n
| \n Provisions | \n\n 82 | \n\n \u2014 | \n\n 82 | \n\n 82 | \n
| \n Total financial liabilities | \n\n 41,219 | \n\n 3,447 | \n\n 37,773 | \n\n 41,219 | \n
| \n (1) | \n\n The fair value of financial assets classified as fair value through profit and loss corresponds to the market value of the assets. | \n
| \n (2) | \n\n The book amount of financial liabilities measured at amortized cost was deemed to be a reasonable estimation of fair value. | \n
| \n In thousands of euros | \n\n Book value on | \n\n Fair value | \n\n At amortized | \n\n Fair Value | \n
| \n As of December\u00a031, 2023 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current financial assets | \n\n 502 | \n\n \u2014 | \n\n 502 | \n\n 502 | \n
| \n Current financial assets | \n\n 45 | \n\n 45 | \n\n \u2014 | \n\n 45 | \n
| \n Accounts receivable and related receivables | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Cash and cash equivalents | \n\n 2,134 | \n\n \u2014 | \n\n 2,134 | \n\n 2,134 | \n
| \n Other current assets | \n\n 4,349 | \n\n \u2014 | \n\n 4,349 | \n\n 4,349 | \n
| \n Total financial assets | \n\n 7,030 | \n\n 45 | \n\n 6,985 | \n\n 7,030 | \n
| \n Financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Bond financing | \n\n 9,131 | \n\n \u2014 | \n\n 9,131 | \n\n 9,131 | \n
| \n Derivative liabilities | \n\n 559 | \n\n 559 | \n\n \u2014 | \n\n 559 | \n
| \n Borrowings from Banks | \n\n 7,474 | \n\n \u2014 | \n\n 7,474 | \n\n 7,474 | \n
| \n Conditional advances | \n\n 5,504 | \n\n \u2014 | \n\n 5,504 | \n\n 5,504 | \n
| \n Refund liability | \n\n 6,572 | \n\n \u2014 | \n\n 6,572 | \n\n 6,572 | \n
| \n Lease liability \u2013 Buildings | \n\n 1,823 | \n\n \u2014 | \n\n 1,823 | \n\n 1,823 | \n
| \n Other non-current liabilities | \n\n 0 | \n\n \u2014 | \n\n 0 | \n\n 0 | \n
| \n Accounts payable and related payables | \n\n 5,634 | \n\n \u2014 | \n\n 5,634 | \n\n 5,634 | \n
| \n Other current liabilities | \n\n 1,880 | \n\n \u2014 | \n\n 1,880 | \n\n 1,880 | \n
| \n Provisions | \n\n 1,258 | \n\n \u2014 | \n\n 1,258 | \n\n 1,258 | \n
| \n Total financial liabilities | \n\n 39,834 | \n\n 559 | \n\n 39,275 | \n\n 39,834 | \n
| \n (1) | \n\n The fair value of financial assets classified as fair value through profit and loss corresponds to the market value of the assets. | \n
| \n (2) | \n\n The book amount of financial liabilities measured at amortized cost was deemed to be a reasonable estimation of fair value. | \n
Note 25:Management of financial risks
The principal financial instruments held by the Group are cash and cash equivalents. The purpose of holding these instruments is to finance the ongoing business activities of the Group. It is not the Group\u2019s policy to invest in financial instruments for speculative purposes. The Group does not utilize derivatives.
For more information on financial risks, see Section 3.1 \u201cFinancial risks\u201d.
The principal risks to which the Group is exposed are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for management of the Group\u2019s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The note\u00a011.5 details the Group\u2019s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.
The Company\u2019s current financial debt consists of (i) tranche A of the EIB loan for \u20ac8.5 million (nominal amount and financial interests as of December 31, 2023), (ii) bonds convertible into new shares in favor of Heights Capital for a nominal amount of \u20ac12\u00a0million (\u20ac13,2 million in case of full redemption in cash), (iii)\u00a0state guaranteed loans from the Banks for a total outstanding amount of \u20ac2.7 million and (iv) conditional advances received from Bpifrance Financement for a total outstanding amount of \u20ac6.6 million.
Given the information presented in notes 2.2 Going concern and 11 Financial liabilities, financial liabilities excluding the effect of discounting amounts to 25.7 million euros at less than one year and 7.1 million euros at more than one year, based on contractual maturities.
As of December\u00a031, 2023, the Group has not sufficient net working capital to meet its obligations during the next 12\u00a0months. See Note\u00a02.2 Going Concern.
Foreign currency exchange risk
The Group is exposed to foreign exchange risk inherent in certain services provided in the United States, which have been invoiced in U.S. dollars. The Group does not currently have revenues in dollars nor in any other currency. Due to the relatively low level of these expenditures, the exposure to foreign exchange risk is unlikely to have a material adverse impact on the results of operations or financial position of the Group. The Group\u2019s exposure to currencies other than the U.S. dollar is negligible. For the years ended December\u00a031,2022 and 2023, approximately 36% and 34%, respectively, of its purchases and other external expenses were made in U.S. dollars, generating a net foreign exchange gains of \u20ac652\u00a0K in in 2022 and a net foreign exchange loss of \u20ac213\u00a0K in 2023. In light of these insignificant amounts, the Group has not adopted, at this stage, a hedging mechanism in order to protect its business activity against fluctuations in exchange rates. As the Group further increases its business, particularly in the United States, the Group expects to face greater exposure to exchange rate risk and would then consider adopting an appropriate policy for hedging against these risks.
Interest rate risk
The Company has low exposure to interest rate risk. The Group borrow funds at fixed interest rates. The repayment flows of the advances from Banque Publique d\u2019Investissement (\u201cBPI France\u201d) and the borrowings are not subject to interest rate risk.
Credit risk
In order to minimize credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group\u2019s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
The credit risk related to the Group\u2019s cash and cash equivalents is not significant in light of the quality of the co-contracting financial institutions.
The Group does not have significant credit risk exposure to any single customer or any group of counterparties having similar characteristics.
Fair value
The fair value of financial instruments traded on an active market is based on the market rate as of December\u00a031, 2023. The market prices used for the financial assets owned by the Company are the bid prices in effect on the market as of the valuation date.
The nominal value, less the provisions for depreciation, of the accounts receivable and current debts, is presumed to approximate the fair value of those items.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group\u2019s overall strategy remains unchanged from 2022.
The capital structure of the Group consists of net debt (borrowings disclosed in Note 11 after deducting cash and bank balances) and equity of the Group (comprising issued capital, reserves and retained earnings and non-controlling interests as disclosed in Note\u00a010).
The Group is not subject to any externally imposed capital requirements.
(14)The deadline for the completion of the conditions has been amended pursuant to an amendment agreement dated October 31, 2023.
(15)The estimated amount from the initial payment schedule was \u20ac2,675\u00a0K. The costs occurred by the Company amounted to a lower amount than expected, therefore the amount of this milestone was reduced accordingly.
(16)The corresponding milestone occurred in November\u00a02017.
On February 6, 2023, the Company announced that it has received the payment of \u20ac8\u00a0million under the first tranche (the \u201cTranche\u00a0A\u201d) of the unsecured credit facility executed with the European Investment Bank (the \u201cEIB\u201d) on November\u00a03, 2022 maturing in November 2027.
The disbursement of Tranche A was subject, among other conditions, to the issuance of warrants which have been subscribed on January 25, 2023.
The credit facility is divided into three tranches of \u20ac8 million, \u20ac12 million and \u20ac15 million, each subject to the fulfillment of certain conditions precedent and redeemable within 5\u00a0years from the date of signature of the credit facility, i.e. November\u00a03, 2027. No guarantee can be given as to the satisfaction by the Company of the condition\u2019s precedent and the completion of the second and third tranches.
On July 20, 2023, given the Company\u2019s decision to withdraw its EMA application in April\u00a02023, the Company announced there was no immediate need for a validation (PPQ) campaign until a new Marketing Authorization Application (MAA) is submitted. Consequently, the Company decided to manufacture 3 GMP batches as planned, using the commercial process but outside the context of a validation campaign, to generate more batch data for a future MAA filing and provide more experience with the manufacturing process to operating teams, while fulfilling the immediate requirement of supplying product for a possible new clinical trial and for the resumption of an early access program for patients.
The Company will thus not meet the contractual condition related to PPQ production for disbursement of the tranche B of the EIB loan for an amount of \u20ac12\u00a0million. The Company acknowledges that the availability of such tranche is currently suspended, until such time as a new agreement with the EIB is reached on revised conditions to the disbursement of that tranche. Discussions with the EIB on this matter are still ongoing.
On August 3, 2023, the Company announced the signing of the Bridge Financing with the Sofinnova Crossover I SLP, Invus Public Equities LP and UPMC Enterprises (together, the \"Investors\") and drew down the Tranche 1 of \u20ac6 million.
The Bridge Financing is divided into two tranches, each subject to certain conditions:
\u2022A Tranche 1 of \u20ac6 million through the issuance of 60 bonds convertible into new ordinary shares with a value of \u20ac100,000 each (the \u201c2023 OCAs\u201d), maturing in twelve\u00a0months and bearing interest at 10% per annum; and
\u2022A Tranche 2 of \u20ac4 million through the issuance of new ordinary shares.
Each tranche was subscribed for by each investor pro rata to its participation in the Bridge Financing, as follows: 35% for Sofinnova Crossover I SLP, 35% for Invus Public Equities LP and 30% for UPMC Enterprises.
The drawdown of Tranche 1 was subject to, among other conditions, the approval of the Company, the Investors, the Company's creditor banks (notably BNP Paribas, CIC and Bpifrance), the EIB and Heights Capital of certain waivers and agreements.
The drawdown of Tranche\u00a02 was subject, among other conditions, to the fulfillment of the following conditions at the latest on November\u00a015, 2023(14):
\u2022the production of at least two successful GMP batches (Good Manufacturing Practices), of LUMEVOQ\u00ae as demonstrated by a statement signed by a qualified person and/or representative of the quality unit documenting that the GMP batches are within specifications required (individually, a \u201cSuccessful Manufacturing\u201d) or,
\u2022in the event that the GMP batches are not produced, or only one Successful Manufacturing, with unanimous approval by all the Investors.
On October 26, 2023, the Company announced that, in connection with the drawdown of Tranche 1 in August 2023, the Company has obtained from the Banks, the EIB and Heights, subject to certain conditions:
\u2022a waiver by the Banks, the EIB and Heights on any provision which could trigger early repayment of their debt until January\u00a031, 2024;
\u2022an agreement of the EIB and Heights on the pari passu treatment of the 2023 OCAs with the 2022 OCAs;
\u2022a deferral of principal payments due to the Banks until January\u00a031, 2024;
\u2022the suspension of Heights\u2019 conversion rights with respect to the 2022 OCAs until January 31, 2024;
\u2022deferral of principal payments due to Heights in connection with the redemption of the 2022 OCAs until January\u00a031, 2024; and
\u2022a waiver by the EIB of any adjustment right it has under the subscription agreement relating to the Warrants in the context of the Facility signed by the Company and the EIB on December\u00a022, 2022, and in particular the anti-dilution provision contained in this subscription agreement.
3.12Financial liabilities
Borrowings and other financial liabilities, excepted for derivative financial liabilities (see upon), are measured initially at their fair value and then at amortized cost, calculated on the basis of the effective interest rate (\u201cEIR\u201d) method.
The transaction expenses that are directly attributable to the acquisition or to the issue of a financial liability reduce that financial liability. These expenses are then amortized actuarially over the lifetime of the liability, on the basis of the EIR.
The EIR is the rate that equalizes the anticipated flow of future cash outflows with the current net book value of the financial liability in order to deduct its amortized cost therefrom.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. The subsidy is presented as a differed income which is amortized in the P&L over the same period.
Other financial liabilities include trade accounts payable, which are measured at fair value (which in most cases equates to face value) on initial recognition, and subsequently at amortized cost.
Note 11:Financial liabilities
11.1Bond financing
Heights Capital
On December 23, 2022, the Company signed a subscription agreement for a \u20ac12 million convertible notes financing from Heights Capital (the \u201c2022 OCAs\u201d). These \u20ac12 million financing were subscribed at 90% of the nominal value i.e. 10.8 million euros, in the form of notes convertible into new shares with a 30% premium.
The Company issued the 2022 OCAs on December 28, 2022 (the \"Issue Date\") at an issue price of \u20ac90,000 per note, for a period of five years, i.e. until December 28, 2027 (the \"Maturity Date\"). The 2022 OCAs do not bear interest.
The 2022 OCAs may be converted into new ordinary shares of the Company exclusively at the option of the holder between the issue Date and the Maturity Date.
Initially, the 2022 OCAs entitled the holder, upon conversion, to a maximum of 22,884 new ordinary shares per note, i.e. a conversion price of 4.37 euros per Note (the \"Conversion Price\").
The Conversion Price corresponds to a premium of 30% on the volume-weighted average price of the Company's shares on the regulated market of Euronext Paris during the last trading session preceding the determination of the terms of issuance (the \"Reference Price\"), thus complying with the price limits set by the 24th\u00a0resolution of the Company\u2019s combined general shareholders\u2019 meeting held on May\u00a025, 2022 (the volume-weighted average of the prices of the Company's shares on the regulated market of Euronext in Paris during the last five trading sessions preceding the determination of the price, less a maximum discount of 15%, i.e. \u20ac3.07) it being specified that the Price Limit may be modified at a future general Meeting.
Following discussions in the third quarter of 2023 between the Company and Heights Capital, a modification to the price limit and other modification have been approved by the shareholders at the shareholders' general meeting held on January 10, 2024. The new price limit equals \u20ac0.4527 corresponding to the closing price of the shares on the regulated market of Euronext in Paris on the last trading day preceding the date falling three business days prior to the publication of the convening notice to the shareholders\u2019 general meeting held on January\u00a010, 2024 in the Bulletin d\u2019Annonce L\u00e9gale Obligatoire, less a 10.36% discount.
From June 2023, the 2022 OCAs were initially to be amortized quarterly in an amount of \u20ac5,263 per 2022 OCA (or \u20ac5,266 for the amortization corresponding to the final maturity date) (the \u201cAmortization Amount\u201c), payable either (i) in new ordinary shares issued at a 10% discount to the market value of the Company\u2019s shares at the time of amortization (it being specified that all payments in shares have to comply with the price limit) or (ii)\u00a0at our option, in cash at 110% of the amount to be amortized, being specified that redemption in cash will become mandatory in the event that the price limit is crossed downwards.
The Company and Heights Capital have first decided to suspend the redemption of the 2022 OCAs until January 31, 2024. Starting from March 2024 and until the maturity date of the 2022 OCAs, Heights Capital will be entitled to trigger an additional amortization payment for each 2022 OCA between two quarterly amortization periods up to the Amortization Amount payable (i)\u00a0either in new ordinary shares at an amortization price equal to the one applicable on the preceding quarterly amortization date, (ii)\u00a0or in cash at 110% of the amortizable amount, it being specified that the repayment in cash will become mandatory in the event that the price limit is crossed downwards (the \u201cAdditional Amortization Right\u201c). Heights Capital may only exercise this Additional Amortization Right up to a maximum of three times per calendar year, without being able to carry over this right to the following year. This Additional Amortization Right does not alter the maximum number of shares that may be issued, and only impacts the maturity of the 2022 OCAs. When exercising the Additional Amortization Right, Heights Capital will be subject to a global trading limitation of 15% of the average daily trading volume of the Company\u2019s shares for the duration of an amortization period. These amendments have been approved by the shareholders at the shareholders' general meeting held on January\u00a010, 2024.
In the context of the February 2024 capital increase, the Company and Heights Capital have further decided to suspend the amortization of the 2022 OCAs until April 30, 2024. A new amendment to the price limit may be presented to the shareholders at the next annual shareholders general meeting if the current price limit is above the market price of the shares at the time of convening such meeting, which should reflect our share price over the period comprising the last eight trading sessions at the time of convening the annual shareholders\u2019 general meeting, subject to a maximum discount of 20%.The number of shares that may be issued under the 2022 OCAs will be between 2,746,108 (in the event of conversion of all the 2022 OCAs at the Conversion Price) and 26,507,620 (in the event of amortization of all the 2022 OCAs at the current price limit of \u20ac0.4527), subject to redemption exclusively in shares.
On the date of the eighteenth anniversary of the Issue Date (the \"18-Month Reset Date\"), the conversion price shall be adjusted (but only if such adjusted price is lower than the conversion price without taking into account such adjustment) to correspond to the share price on the 18-Month Reset Date, it being specified that the conversion price so adjusted shall be at least equal to the Reference Price and the Price Limit; and it being further specified that the conversion price may be adjusted upwards if the volume weighted average of at least 20\u00a0out of 30 consecutive trading days in the 12-month period following the 18-month Reset Date exceeds 150% of the Initial Conversion Price.
In accordance with the terms and conditions of the 2022 OCAs, customary events of default (including in the event of non-payment on a due date, breach of the terms and conditions, delisting or cessation of business) will give Heights an option to request the early redemption of the 2022 OCAs in cash at an amount equal to 110% of the principal amount of 2022 OCAs outstanding. The Company has also given certain customary undertakings (in particular, not to grant any security interests, other than certain customary exceptions in this respect, and not to offer any shares for 30 days following the Issue Date, subject in particular to the issuance of the Warrants to the EIB and certain customary exceptions in this regard). The Company has also undertaken to seek additional equity financing for an amount corresponding to that of the 2022 OCAs.
In the event of a change of control of the Company, Heights has the right to request early redemption in cash of the 2022 OCAs at an amount equal to 110% of the principal amount of the 2022\u00a0OCAs.
The OCAs are non-transferable, except
(i)in accordance with applicable law in connection with a merger, contribution of assets or similar transaction and
(ii)in accordance with the provisions of the Subordination Agreement.
The financing obtained from Heights is qualified as a hybrid instrument in the Group\u2019s financial statements. The derivative instrument is, in accordance with IFRS 9, measured at fair value, with a change in fair value recognized in profit or loss. The amount remaining in debt is recognized at amortized cost using the effective interest rate.
The assumptions and results are detailed in the following tables:
| \n \u00a0 | \n\n December\u00a031, 2023 | \n
| \n Stock price | \n\n \u20ac0.46 | \n
| \n Volatility | \n\n 108.54% | \n
| \n Adjusted Volatility | \n\n 82.1% (20% haircut) | \n
| \n Dividend yield | \n\n 0.00% | \n
| \n Risk Free Rate | \n\n 2.04% | \n
| \n Credit Spread | \n\n 22.90% | \n
| \n Credit Rating | \n\n \u201cCCC Composite\u201d | \n
As of December 31, 2023, condition precedents in relation with the waivers granted by Heights were only partially met, and the entire debt could have become immediately repayable, at 110% of the outstanding principal amount of the 2022 OCAs. As such, the outstanding debt has been classified in full as current liability. A waiver of any contractual provision that could result in the early redemption of the Convertible Notes, was granted in February\u00a024, subject to certain terms and conditions to be fulfilled in 2024.
As of December 31, 2023, the derivative instrument amounts to \u20ac0.1 million and the remaining debt to \u20ac9.1 million.
In the absence of any event of default, the non-current portion of debt would have amounted to \u20ac6.5 million as of December\u00a031, 2023.
In connection with the February 2024 capital increase, the Company have obtained from the Heights Capital some waivers and agreements, in particular a waiver on any provision which could trigger an early repayment of the 2022 OCAs until April\u00a030, 2024. For more information, please refer to section\u00a018.7.2 \u201cNegotiations with existing creditors\u201d.
The bridge financing in August and November 2023
In August 2023, the Company announced the signing of the Bridge Financing with the Investors, divided into two tranches, each subject to certain conditions:
\u2022A Tranche 1 of \u20ac6 million through the issuance of 60 bonds convertible into new ordinary shares with a value of \u20ac100,000 each (the \"2023 OCAs\"), maturing in twelve\u00a0months and bearing interest at 10% per annum; and
\u2022A Tranche 2 of \u20ac4 million through the issuance of new ordinary shares.
The Tranche 1 is qualified as a compound instrument. It includes an equity component recorded in accordance with IAS\u00a032 and a financial liability recorded at amortized cost in accordance with IFRS 9.
As a result drawdown of Tranche 2 in November 2023, 8,680,797 new shares have been issued upon conversion of the 2023 OCAs on the settlement date of the offering, at a conversion price of \u20ac0.7122 per 2023 OCAs.
11.2Conditional advances
In 2014, we received a grant from Bpifrance Financement of both non-refundable subsidies and conditional advances in relation to the development of our optogenetics technology platform. The program would be funded according to a specified schedule set forth in the contract, subject to completion of milestones. As the program advances, we provided Bpifrance Financement with interim progress reports and a final report when the funded project would end. Based on these reports, we were entitled to conditional advances from Bpifrance Financement. Each award of an advance was made to help fund a specific development milestone. The total intended amount of the conditional advances initially granted was \u20ac5.7\u00a0million, of which \u20ac0.7\u00a0million were received in December\u00a02014 and \u20ac2.3\u00a0million in July\u00a02016.
The advances were initially planned to be paid according to the following schedule, subject to completion of milestones:
\u2022\u20ac678\u00a0K received in December\u00a02014;
\u2022\u20ac2,279\u00a0K received in July\u00a02016(15);
\u2022\u20ac494\u00a0K initially expected to be received in the first half of 2018(16);
\u2022\u20ac853\u00a0K initially expected to be received in November\u00a02018; and
\u2022\u20ac986\u00a0K initially expected to be received in November\u00a02019.
On June\u00a03, 2020, the following was decided by the steering committee:
\u2022payment of a last conditional advance of \u20ac1.1\u00a0million and a subsidy of \u20ac0.3\u00a0million to cover for the expenses related to the key-steps\u00a03 and 4;
\u2022removal of the specific regulatory condition in key step 3;
\u2022postponement by 2\u00a0years of the repayment schedule, i.e. a first repayment deadline on June\u00a030, 2024 instead of June\u00a030, 2022;
\u2022establishment of a minimum lump sum reimbursement of \u20ac819\u00a0K, or 20% of the overall received conditional advance.
The repayment schedule of the conditional advances has been updated accordingly for a total amount of \u20ac4,687\u00a0K (\u20ac4,096\u00a0K of cash received + \u20ac591\u00a0K of capitalized interests) and is as follows:
\u2022\u20ac550\u00a0K from June\u00a030, 2024;
\u2022\u20ac1,000\u00a0K from June\u00a030, 2025;
\u2022\u20ac1,500\u00a0K from June\u00a030, 2026; and
\u2022\u20ac1,637\u00a0K from June\u00a030, 2027.
Following the repayment of all of the conditional advances, the Company may be required to make additional payments over a period of two years, depending on whether the Company reaches cumulative revenues, excluding taxes, of \u20ac80.0\u00a0million. These additional repayments should correspond to the difference between 140% of the conditional advance, considering an interest rate of 1.44% and the amount already reimbursed as per the repayment schedule; and should be done within 15\u00a0years following the first year of reimbursement, i.e. 2039.
The obligation to repay these amounts is based on the technical and commercial success of the funded program, as determined by the revenues forecast or revenues deriving from direct or indirect exploitation of those products and results of its optogenetics technology platform.\u00a0In the event Bpifrance Financement determines that the program is not successful, Bpifrance Financement will meet with the Company to assess the impact on the repayments and the repayment schedule.
The Company has decided to include the future cash flows resulting from the additional payments in the calculation of the EIR, based on the first sales projections of its second product.
The current and non-current portions of the financial liability recognized in our financial statements associated with these conditional advances are determined based on the applicable reimbursement schedules at the end of each reporting period. The portion of the conditional advances for terms longer than one year are classified as non-current liabilities while the portion for terms of less than one year are classified as current liabilities.
The table below presents the details of the financial liabilities recorded on the statements of financial position:
| \n In thousands of Euros | \n\n \n | \n
| \n Balance as of January 1, 2023 | \n\n 5,214 | \n
| \n Receipts | \n\n \u2014 | \n
| \n Repayments | \n\n \u2014 | \n
| \n Other | \n\n \u2014 | \n
| \n Current portion | \n\n \u2014 | \n
| \n Accrued interest | \n\n 290 | \n
| \n Balance as of December\u00a031, 2023 | \n\n 5,504 | \n
| \n Non-current portion | \n\n 5,107 | \n
| \n Current portion | \n\n 396 | \n
11.3State-guaranteed loan
The Company obtained a \u20ac6.75\u00a0million loan from a bank syndicate formed with Cr\u00e9dit Industriel et Commercial (CIC), BNP Paribas and Bpifrance, in the form of a state-guaranteed loan (Pr\u00eat Garanti par l\u2019\u00c9tat) (the \u201cPGE\u201d).
Initiated by the French Government to support companies during the Covid-19 crisis, the PGE is a bank loan with a fixed interest rate ranging from 0.25% and 1.75% for the first 12\u00a0months. After an initial interest-only term of one year, the loan can be amortized over up to five years at the option of the Company. The French Government guarantees 90% of the borrowed amount. The Group has signed in June\u00a02021 amendments to the initial agreements, including an amortization period of three years; until mid-2024, as well as effective interest rates ranging from 1.01% to 2.25%.
This benefit, resulting from the low interest is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost.
In connection with the drawdown of Tranche 1 of the Bridge Financing and following discussions with its existing creditors, the Company has obtained waivers from our creditor banks (BNP Paribas, CIC and Bpifrance) on any provision which could trigger an early repayment of their loans to the Company and the deferral of principal payments due to them until January\u00a031, 2023. In the context of the February 2024 capital increase, the same waivers have been obtained until April 30, 2024.
11.4European Investment Bank (\u201cEIB\u201d) credit facility
The Company entered in November 2022 into a \u20ac35\u00a0million credit facility agreement with the European Investment Bank (\u201cEIB\u201d), supported by the European Fund for Strategic Investment (EFSI).
The \u20ac35\u00a0million facility is divided into three tranches: \u20ac8\u00a0million for the first tranche (\u201cTranche\u00a0A\u201d), \u20ac12\u00a0million for the second tranche (\u201cTranche\u00a0B\u201d) and \u20ac15\u00a0million for the third tranche (\u201cTranche\u00a0C\u201d). The disbursement of each tranches, including the first disbursement of Tranche\u00a0A, is subject to certain conditions.
The disbursement of Tranche A was subject to, among other things:
\u2022the execution of a warrant agreement to be entered into with the EIB,
\u2022issue of the warrants relating to Tranche A,
\u2022the full repayment of the outstanding financing with Kreos,
\u2022the successful manufacturing of one engineering batch of LUMEVOQ\u00ae,
\u2022the decision by the Company to launch the validation batches (PPQ) manufacturing campaign, and
\u2022a cash injection of \u20ac10\u00a0million, in the form of equity, convertible bonds (to the extent that their repayment would be subordinated to the EIB\u2019s debt under the terms of a subordination agreement to be concluded) or license revenues.
The disbursement of Tranche\u00a0B is subject to, among other things:
\u2022the full drawdown of Tranche\u00a0A,
\u2022the issue of the warrants relating to Tranche\u00a0B,
\u2022the successful manufacturing campaign of several PPQ batches of LUMEVOQ\u00ae, and
\u2022the submission of responses to the Day\u00a0120 List of Questions to the European Medicines Agency (EMA) (condition satisfied in October 2022).
The disbursement of Tranche\u00a0C is subject to, among other things:
\u2022the full drawdown of Tranche\u00a0B,
\u2022the issue of the warrants relating to Tranche\u00a0C,
\u2022a cash injection of at least \u20ac20\u00a0million (in addition to the aforementioned \u20ac10\u00a0million), in the form of equity, convertible bonds (to the extent that their repayment would be subordinated to the EIB\u2019s debt under the terms of a subordination agreement to be concluded) or license revenues,
\u2022the obtaining of EMA marketing authorization for LUMEVOQ\u00ae in Europe, and
\u2022a condition related to early access for patients.
The credit facility agreement will carry an annual fixed interest rate of 2% for all tranches and a decreasing fixed payment-in-kind (PIK) interest rate per tranche, with 5% for Tranche\u00a0A, 4% for Tranche\u00a0B and 3% for Tranche\u00a0C, and with a maturity of five years for each tranche. Such PIK interest shall be capitalized annually, payable at maturity and added to the outstanding principal amount of the credit and therefore bear interest.
The facility may, in certain circumstances, be prepaid, in whole or in part, with a prepayment fee, either at the election of the Company or upon the demand of EIB following certain prepayment events, including a change of control or a change in senior management of the Company.
Subject to certain terms and conditions, upon the occurrence of standard events of default (i.e. including payment default, misrepresentation, cross default), EIB may demand immediate repayment by the Company of all or part of the outstanding debt and/or cancel any undisbursed tranches.
The credit facility agreement is supplemented by an agreement to be concluded to issue warrants to the benefit of the EIB, pursuant to Article L.225-138 of the French Commercial Code, in varied amounts according to the relevant tranche.
The warrants will have a term of 20 years and will become exercisable upon the occurrence of certain events (such as a change of control or a repayment regarding one or several tranches), thus avoiding dilution for existing shareholders in the near term. Each warrant will entitle EIB to one ordinary share of the Company in exchange for the exercise price (subject to anti-dilution provisions). The exercise price for each warrant will be equal to 95% of the volume weighted average of the trading price of the Company\u2019s ordinary share over the last five trading days preceding the decision of the competent corporate body of the Company to issue such warrants. EIB shall be entitled to, as soon as the warrants become exercisable, a put option at its intrinsic value, (subject to a cap equal to the drawn amount under the facility agreement) requiring the Company to buy back all or part\u00a0of the warrants then exercisable, but not yet exercised. Furthermore, the Company shall be entitled to a call option on all outstanding warrants under certain limited circumstances.
On February\u00a06, 2023, as disbursement conditions for Tranche A were met, including in particular issuance of 1,141,096\u00a0warrants to the EIB, and the Company received the payment of \u20ac8\u00a0million under Tranche A of the unsecured credit facility executed with the EIB.
No guarantee can be given as to the satisfaction by the Company of the conditions precedent and the completion of Tranche\u00a0B and Tranche\u00a0C.
As condition precedent for the drawdown of the Tranche\u00a01 of the bridge financing entered on August\u00a02, 2023 between the Company and the Investors, the following approvals have been granted by the EIB:
\u2022waiver on any provision which could trigger early repayment of their debt until January\u00a031, 2024;
\u2022agreement on the issuance of the OCAs and their ranking, and the execution by the Investors of an accession undertaking to the subordination agreement signed by the Company, the EIB and Heights Capital on December\u00a022, 2022;
\u2022waiver of any adjustment right it has under the warrant agreement in the context of the bridge financing signed by the Company and the EIB on December\u00a022, 2022.
In the context of the February 2024 capital increase, the same waivers have been obtained until April 30, 2024.
The two financial instruments issued with respect to the drawdown of the \u20ac8\u00a0million Tranche\u00a0A (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants).
The loan has been initially recognized at fair value, i.e., the issue proceeds (fair value of the consideration received) net of transaction costs incurred and the fair value at inception date of the derivative instruments of the debt concerned. Loans are subsequently measured at amortized cost, calculated using the effective interest rate method. Any difference between initial fair value and repayment value is recognized in the statement of income (loss) over the life of the loan using the effective interest rate method.
The effective interest rate is the discount rate at which the present value of all future cash flows (including transaction costs) over the expected life of the loan, or where appropriate, over a shorter period of time, is equal to the loan\u2019s initial carrying amount.
The fair value of the warrants has been estimated based on a Black & Scholes approach, including the put option and the attached cap.
The assumptions and results are detailed in the following tables:
| \n \u00a0 | \n\n 31/12/2023 | \n
| \n Number of instruments | \n\n 1,141,096 | \n
| \n Spot | \n\n 0.46 | \n
| \n Strike | \n\n 3.45 | \n
| \n Volatility | \n\n 80% | \n
| \n Risk free rate | \n\n 2.8% | \n
| \n Valuation date | \n\n 31/12/2023 | \n
| \n Expiration | \n\n 22/12/2042 | \n
| \n Term (years) | \n\n 19.0 | \n
| \n Maturity (years) | \n\n 19.0 | \n
| \n Dividends | \n\n 0% | \n
| \n Unit fair value (\u20ac) | \n\n 0.39 | \n
As of December 31, 2023, condition precedents in relation with the waivers granted by the EIB were only partially met, and the entire debt could have become immediately repayable, at the nominal value plus accrued interests. As such, the outstanding debt has been classified in full as current liability. A waiver of\u00a0any contractual provision that could result in the early repayment of the debt, was granted in February\u00a024, subject to certain terms and conditions to be fulfilled in 2024.
The derivative instrument amounts to \u20ac0.4 million and the remaining debt to \u20ac4.9 million as of December 31, 2023.
In the absence of any event of default as of December 31, 2023, the entire debt or \u20ac4.9 million would have been classified as non-current liability.
11.5Maturity dates
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2022, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,214 | \n\n 0 | \n\n 3,176 | \n\n 2,037 | \n
| \n Corporate bonds | \n\n 7,353 | \n\n 302 | \n\n 7,051 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 3,428 | \n\n 2,195 | \n\n 1,233 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,866 | \n\n 894 | \n\n 972 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 17,861 | \n\n 3,391 | \n\n 12,433 | \n\n 2,037 | \n
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2023, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,504 | \n\n 396 | \n\n 4,277 | \n\n 831 | \n
| \n Corporate bonds | \n\n 9,131 | \n\n 9,131 | \n\n 0 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 7,474 | \n\n 7,474 | \n\n 0 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,823 | \n\n 775 | \n\n 1,048 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 23,932 | \n\n 17,777 | \n\n 5,324 | \n\n 831 | \n
(14)The deadline for the completion of the conditions has been amended pursuant to an amendment agreement dated October 31, 2023.
(15)The estimated amount from the initial payment schedule was \u20ac2,675\u00a0K. The costs occurred by the Company amounted to a lower amount than expected, therefore the amount of this milestone was reduced accordingly.
(16)The corresponding milestone occurred in November\u00a02017.
On March 7, 2023, the Company announced that, due to the occurrence of an operational issue at its manufacturing partner in the handling of the downstream process, the GMP batch scheduled before initiating the production of the validation campaign had not been terminated and subsequently scheduled the manufacturing of 3 GMP batches early August, with the first results expected through September and October 2023.
On April 20, 2023, the Company announced that the Committee for Advanced Therapies (CAT) of the Committee Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) assessed the data presented during the oral explanation held on April\u00a019, 2023 on LUMEVOQ\u00ae European regulatory dossier.
Following interactions with the CAT indicating that the data provided thus far would not be sufficient to support a positive opinion of the marketing authorization of LUMEVOQ\u00ae by EMA, the Company decided to withdraw its application ahead of a final opinion by the CAT. This decision enables the Company to discuss the best possible path forward for LUMEVOQ\u00ae with the EMA, aiming at submitting a new application addressing remaining objections as soon as possible, in Europe and other countries.
On September 18, 2023, the Company announced the successful manufacture of LUMEVOQ\u00ae GMP batch.
On November 15, 2023, the Company announced that an independent laboratory confirmed viral genome (vg) titer from the second drug substance (DS) batch of LUMEVOQ\u00ae manufactured under conditions compliant with Good Manufacturing Practice (GMP) standards.
As a result, the Company became eligible to draw down the second tranche of the bridge financing signed in August 2023 with the Investors. The drawdown of the second tranche also triggered the automatic conversion of the convertible bonds from the \u20ac6 million first tranche at a conversion price of 0.7122 euros.
On December\u00a022, 2023, the Company announced the appointment of Mrs. Laurence Rodriguez, as new Chief Executive Officer.
Clinical programs and regulatory pathway
On April 7, 2022, the Company announced a delay in the completion of the validation (PPQ) batches for LUMEVOQ\u00ae, the Company\u2019s gene therapy for the treatment of Leber Hereditary Optic Neuropathy (LHON). The delay is necessary to implement operational adjustments that will prevent the recurrence of issues with the latest PPQ campaign.
The latest campaign, which was initiated after the Company addressed an equipment issue that caused the 2021 campaign to fail, generated drug substance whose viral genome titer fell below the acceptance threshold. Resulting investigations led by external experts have traced the outcome to operational difficulties in specific stages of the downstream process. To prevent the repeat of these issues, the Company is working with its manufacturing partner to implement targeted corrections around enhanced process control and more rigorous supervision inside the manufacturing suites. In addition, the Company has decided to manufacture smaller engineering lots to confirm the robustness of the corrective actions.
On September 19, 2022, the Company announced the successful completion of the first engineering batch incorporating refinements in the manufacturing process of LUMEVOQ\u00ae. The batch was the first to implement a set of targeted corrective measures around enhanced process control and strengthened on-site supervision that were identified by the Company and its manufacturing partner in the United States in April 2022.
On November 21, 2023, the Company announced the results of an offering for a total of \u20ac4.7\u00a0million carried out in two distinct but concomitant transactions:
\u2022a private placement to a category of persons satisfying determined characteristics, for approximately \u20ac4,4\u00a0million, through the issuance of 9,718,768 new ordinary shares, and
\u2022a capital increase in favor of retail investors via the PrimaryBid platform only in France, for approximately \u20ac0.3\u00a0million, through the issuance of 573,917 new ordinary shares
As a result of the drawdown of Tranche 2 in the context of the private placement, 8,680,797 new shares have been issued upon conversion of the 2023 OCAs on the settlement date of the offering, at a conversion price of \u20ac0.7122 per 2023 OCAs.
Financing
On November 4, 2022, the Company announced that it has entered into a \u20ac35\u00a0million credit facility agreement with the European Investment Bank (\u201cEIB\u201d), supported by the European Fund for Strategic Investment (EFSI). The Company plans to use the facility toward the development of its pipeline in the field of gene therapy for the treatment of neurodegenerative retinal diseases and disorders of the central nervous system and, in particular, LUMEVOQ\u00ae\u00a0until its possible marketing in Europe.
The \u20ac35\u00a0million facility is divided into three tranches: \u20ac8\u00a0million for the first tranche (\u201cTranche\u00a0A\u201d), \u20ac12\u00a0million for the second tranche (\u201cTranche\u00a0B\u201d) and \u20ac15\u00a0million for the third tranche (\u201cTranche\u00a0C\u201d). The disbursement of each tranche, including the first disbursement of Tranche\u00a0A, is subject to certain conditions which remained to be satisfied.
On December\u00a023, 2022, the Company announced that it has signed a subscription agreement for a \u20ac12\u00a0million convertible notes financing from Heights Capital. These \u20ac12\u00a0million financing were subscribed at 90% of the nominal value i.e. 10.8\u00a0million euros, in the form of notes convertible into new shares with a 30% premium and amortized over five years, whose reimbursement is subordinated to the EIB.
In accordance with to the disbursement conditions of the Tranche A of the financing with the EIB, the Company fully repaid the financing with Kreos at the end of December\u00a02022. Early 2023, the Company met all disbursement conditions and requested to draw down Tranche A of the financing with the EIB for \u20ac8\u00a0million, which has been received in February\u00a02023.
3.9Share capital
Ordinary shares are classified under shareholders\u2019 equity. The costs of share capital transactions that are directly attributable to the issue of new shares or options are recognized in shareholders\u2019 equity as a deduction from the revenue from the issue, net of tax.
The Company\u2019s own shares bought in the context of a brokering/liquidity agreement are presented as a reduction in shareholders\u2019 equity until their cancellation, their reissuance or their disposal.
Note 10:Capital
The share capital as of December\u00a031, 2023, amounts to \u20ac1,632,726.83. It is divided into 65,309,073 fully authorized, subscribed and paid-up ordinary shares with a nominal value of \u20ac0.025.
On July\u00a013, 2016, the Company completed its Initial Public Offering (IPO) on Euronext Paris, raising \u20ac40\u00a0million in gross proceeds, and the Company issued 5,000,000 ordinary shares with a nominal value of \u20ac0.025 and a share premium of \u20ac7.975\u00a0per share.
On August\u00a010, 2016, the Company partly exercised its overallotment option as part of its IPO on Euronext Paris, raising an additional \u20ac5.2\u00a0million in gross proceeds, and the Company issued 655,859 ordinary shares with a nominal value of \u20ac0.025 and a share premium of \u20ac7.975\u00a0per share.
On June\u00a027, 2017, the Company operated a capital increase whose gross proceeds amounted to \u20ac22.5\u00a0million, by means of a private placement reserved to a category of persons, U.S. and European institutional investors specialized in healthcare and biotechnology. The majority of the new shares were allocated to U.S. investors. This increase corresponds to 3,750,000 new shares, par value \u20ac0.025 each.
On February\u00a025, 2019, GenSight Biologics announced the completion of a capital increase of \u20ac8\u00a0million subscribed entirely by Sofinnova Crossover I SLP (\u201cSofinnova\u201d). The purpose of this capital increase is to pursue the final stages of clinical development of LUMEVOQ\u00ae, and file for marketing authorization in Europe. This increase corresponds to 3,921,568 new shares, par value \u20ac0.025 each.
On December\u00a020, 2019, GenSight Biologics announced the completion of a capital increase of \u20ac9\u00a0million subscribed for by\u00a0one of its main shareholders Sofinnova Crossover I SLP (\u201cSofinnova\u201d) and by a new strategic Chinese investor Strategic International Group Limited, a wholly owned subsidiary of 3SBio\u00a0Inc. (\u201c3SBio\u201d). This increase corresponds to 3,799,071\u00a0new shares, par value \u20ac0.025 each.
On October\u00a022, 2020, GenSight completed a capital increase of \u20ac25\u00a0million. The Company has issued 5,954,650 new ordinary shares with a nominal value of \u20ac0.025 each, for total gross proceeds of approximately \u20ac25\u00a0million by means of an accelerated bookbuilding process to the benefit of categories of persons. The issue price of the New Shares is \u20ac4.20 per share, representing a 12.5% discount to the volume weighted average of the share prices on Euronext Paris for the last five trading sessions preceding the date on which the issuance price is set (i.e., October\u00a015, 16, 19, 20 and 21, 2020), in accordance with the 19th\u00a0resolution of the combined annual General Meeting of Shareholders of the Company held on April\u00a029, 2020.
On December\u00a010, 2020, GenSight received the notification by Kreos of the conversion of 50% of the convertible bonds of tranches A and B (at a price of \u20ac2.245 per share), the conversion of 50% of the additional convertible bonds of tranche B (at a price of \u20ac2.574 per share) and the exercise of all share warrants of tranches A and B (at a price of \u20ac2.245 per share), representing a total issuance of 1,182,953 new ordinary shares.
On March\u00a026, 2021, GenSight completed a capital increase of \u20ac30\u00a0million. The Company has issued 4,477,612\u00a0new ordinary shares with a nominal value of \u20ac0.025 each, for total gross proceeds of approximately \u20ac30\u00a0million by means of an accelerated bookbuilding process to the benefit of categories of persons. The book was largely oversubscribed, based on demand from new investors. The issue price of the new shares is \u20ac6.70 per share, representing a 9.0% discount to the last closing share price and a 12.7% discount to the volume weighted average of the share prices on Euronext Paris for the last five trading sessions preceding the date on which the issuance price is set (i.e., March\u00a019, 22, 23, 24 and 25, 2021), in accordance with the 19th\u00a0resolution of the combined annual General Meeting of Shareholders of the Company held on April\u00a029, 2020.
On November 21, 2023, the Company issued 9,718,768 new ordinary shares with a nominal value of \u20ac0.025 each at a price of \u20ac0.4527 per share in connection with a share capital increase without preferential subscription rights reserved to categories of persons satisfying determined characteristics for approximately \u20ac4.4 million and 573,917 new ordinary shares, at a same price, in\u00a0connection with a capital increase without shareholders' preferential subscription rights in favor of retail investors via the\u00a0PrimaryBid platform only in France for approximately \u20ac0.3\u00a0million. On the same date, the Company issued 8,680,797\u00a0new ordinary shares with a nominal value of \u20ac0.025 each pursuant to the automatic and full conversion of the 2023\u00a0OCA at a conversion price of \u20ac0.7122 per convertible bond.
The 65,309,073 outstanding shares does not include BSA, BCE and AGA. BSA are granted to investors and other individual non-employees, BCE are granted to employees only, AGA are granted to employees and/or executives.\u00a0
The table below shows the changes occurred in the share capital during the last two periods:
| \n In thousands of Euros, except for number of shares) | \n\n Share Capital | \n\n Share premium | \n\n Number of shares | \n
| \n Balance as of January\u00a01, 2022 | \n\n 1,158 | \n\n 181,175 | \n\n 46,300,591 | \n
| \n Capital increase by issuance of ordinary shares | \n\n 1 | \n\n (1) | \n\n 35,000 | \n
| \n Less cost of issuance of shares | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Issue of shares upon exercise of equity instruments (1) | \n\n \u2014 | \n\n 38 | \n\n \u2014 | \n
| \n Total as of December\u00a031, 2022 | \n\n 1,158 | \n\n 181,211 | \n\n 46,335,591 | \n
| \n (In thousands of Euros, except for number of shares) | \n\n Share Capital | \n\n Share premium | \n\n Number of shares | \n
| \n Balance as of January 1, 2023 | \n\n 1,158 | \n\n 181,211 | \n\n 46,335,591 | \n
| \n Capital increase by issuance of ordinary shares | \n\n 474 | \n\n 9,665 | \n\n 18,973,482 | \n
| \n Less cost of issuance of shares | \n\n 0 | \n\n \n | \n\n 0 | \n
| \n Issue of shares upon exercise of equity instruments (1) | \n\n 0 | \n\n 60 | \n\n 0 | \n
| \n Total as of December\u00a031, 2023 | \n\n 1,633 | \n\n 190,937 | \n\n 65,309,073 | \n
| \n (1) | \n\n The share premium includes the subscription price of non-employee warrants and the exercise price in excess of the share nominal value for employee and non-employee warrants. | \n
All the changes relating to employee warrants, non-employee warrants and free shares, as well as their impact on the profit and loss for the period are detailed in Note\u00a019.
On November 21, 2023, the Company announced the results of an offering for a total of \u20ac4.7\u00a0million carried out in two distinct but concomitant transactions:
\u2022a private placement to a category of persons satisfying determined characteristics, for approximately \u20ac4,4\u00a0million, through the issuance of 9,718,768 new ordinary shares, and
\u2022a capital increase in favor of retail investors via the PrimaryBid platform only in France, for approximately \u20ac0.3\u00a0million, through the issuance of 573,917 new ordinary shares
As a result of the drawdown of Tranche 2 in the context of the private placement, 8,680,797 new shares have been issued upon conversion of the 2023 OCAs on the settlement date of the offering, at a conversion price of \u20ac0.7122 per 2023 OCAs.
Financing
On November 4, 2022, the Company announced that it has entered into a \u20ac35\u00a0million credit facility agreement with the European Investment Bank (\u201cEIB\u201d), supported by the European Fund for Strategic Investment (EFSI). The Company plans to use the facility toward the development of its pipeline in the field of gene therapy for the treatment of neurodegenerative retinal diseases and disorders of the central nervous system and, in particular, LUMEVOQ\u00ae\u00a0until its possible marketing in Europe.
The \u20ac35\u00a0million facility is divided into three tranches: \u20ac8\u00a0million for the first tranche (\u201cTranche\u00a0A\u201d), \u20ac12\u00a0million for the second tranche (\u201cTranche\u00a0B\u201d) and \u20ac15\u00a0million for the third tranche (\u201cTranche\u00a0C\u201d). The disbursement of each tranche, including the first disbursement of Tranche\u00a0A, is subject to certain conditions which remained to be satisfied.
On December\u00a023, 2022, the Company announced that it has signed a subscription agreement for a \u20ac12\u00a0million convertible notes financing from Heights Capital. These \u20ac12\u00a0million financing were subscribed at 90% of the nominal value i.e. 10.8\u00a0million euros, in the form of notes convertible into new shares with a 30% premium and amortized over five years, whose reimbursement is subordinated to the EIB.
In accordance with to the disbursement conditions of the Tranche A of the financing with the EIB, the Company fully repaid the financing with Kreos at the end of December\u00a02022. Early 2023, the Company met all disbursement conditions and requested to draw down Tranche A of the financing with the EIB for \u20ac8\u00a0million, which has been received in February\u00a02023.
3.9Share capital
Ordinary shares are classified under shareholders\u2019 equity. The costs of share capital transactions that are directly attributable to the issue of new shares or options are recognized in shareholders\u2019 equity as a deduction from the revenue from the issue, net of tax.
The Company\u2019s own shares bought in the context of a brokering/liquidity agreement are presented as a reduction in shareholders\u2019 equity until their cancellation, their reissuance or their disposal.
Note 10:Capital
The share capital as of December\u00a031, 2023, amounts to \u20ac1,632,726.83. It is divided into 65,309,073 fully authorized, subscribed and paid-up ordinary shares with a nominal value of \u20ac0.025.
On July\u00a013, 2016, the Company completed its Initial Public Offering (IPO) on Euronext Paris, raising \u20ac40\u00a0million in gross proceeds, and the Company issued 5,000,000 ordinary shares with a nominal value of \u20ac0.025 and a share premium of \u20ac7.975\u00a0per share.
On August\u00a010, 2016, the Company partly exercised its overallotment option as part of its IPO on Euronext Paris, raising an additional \u20ac5.2\u00a0million in gross proceeds, and the Company issued 655,859 ordinary shares with a nominal value of \u20ac0.025 and a share premium of \u20ac7.975\u00a0per share.
On June\u00a027, 2017, the Company operated a capital increase whose gross proceeds amounted to \u20ac22.5\u00a0million, by means of a private placement reserved to a category of persons, U.S. and European institutional investors specialized in healthcare and biotechnology. The majority of the new shares were allocated to U.S. investors. This increase corresponds to 3,750,000 new shares, par value \u20ac0.025 each.
On February\u00a025, 2019, GenSight Biologics announced the completion of a capital increase of \u20ac8\u00a0million subscribed entirely by Sofinnova Crossover I SLP (\u201cSofinnova\u201d). The purpose of this capital increase is to pursue the final stages of clinical development of LUMEVOQ\u00ae, and file for marketing authorization in Europe. This increase corresponds to 3,921,568 new shares, par value \u20ac0.025 each.
On December\u00a020, 2019, GenSight Biologics announced the completion of a capital increase of \u20ac9\u00a0million subscribed for by\u00a0one of its main shareholders Sofinnova Crossover I SLP (\u201cSofinnova\u201d) and by a new strategic Chinese investor Strategic International Group Limited, a wholly owned subsidiary of 3SBio\u00a0Inc. (\u201c3SBio\u201d). This increase corresponds to 3,799,071\u00a0new shares, par value \u20ac0.025 each.
On October\u00a022, 2020, GenSight completed a capital increase of \u20ac25\u00a0million. The Company has issued 5,954,650 new ordinary shares with a nominal value of \u20ac0.025 each, for total gross proceeds of approximately \u20ac25\u00a0million by means of an accelerated bookbuilding process to the benefit of categories of persons. The issue price of the New Shares is \u20ac4.20 per share, representing a 12.5% discount to the volume weighted average of the share prices on Euronext Paris for the last five trading sessions preceding the date on which the issuance price is set (i.e., October\u00a015, 16, 19, 20 and 21, 2020), in accordance with the 19th\u00a0resolution of the combined annual General Meeting of Shareholders of the Company held on April\u00a029, 2020.
On December\u00a010, 2020, GenSight received the notification by Kreos of the conversion of 50% of the convertible bonds of tranches A and B (at a price of \u20ac2.245 per share), the conversion of 50% of the additional convertible bonds of tranche B (at a price of \u20ac2.574 per share) and the exercise of all share warrants of tranches A and B (at a price of \u20ac2.245 per share), representing a total issuance of 1,182,953 new ordinary shares.
On March\u00a026, 2021, GenSight completed a capital increase of \u20ac30\u00a0million. The Company has issued 4,477,612\u00a0new ordinary shares with a nominal value of \u20ac0.025 each, for total gross proceeds of approximately \u20ac30\u00a0million by means of an accelerated bookbuilding process to the benefit of categories of persons. The book was largely oversubscribed, based on demand from new investors. The issue price of the new shares is \u20ac6.70 per share, representing a 9.0% discount to the last closing share price and a 12.7% discount to the volume weighted average of the share prices on Euronext Paris for the last five trading sessions preceding the date on which the issuance price is set (i.e., March\u00a019, 22, 23, 24 and 25, 2021), in accordance with the 19th\u00a0resolution of the combined annual General Meeting of Shareholders of the Company held on April\u00a029, 2020.
On November 21, 2023, the Company issued 9,718,768 new ordinary shares with a nominal value of \u20ac0.025 each at a price of \u20ac0.4527 per share in connection with a share capital increase without preferential subscription rights reserved to categories of persons satisfying determined characteristics for approximately \u20ac4.4 million and 573,917 new ordinary shares, at a same price, in\u00a0connection with a capital increase without shareholders' preferential subscription rights in favor of retail investors via the\u00a0PrimaryBid platform only in France for approximately \u20ac0.3\u00a0million. On the same date, the Company issued 8,680,797\u00a0new ordinary shares with a nominal value of \u20ac0.025 each pursuant to the automatic and full conversion of the 2023\u00a0OCA at a conversion price of \u20ac0.7122 per convertible bond.
The 65,309,073 outstanding shares does not include BSA, BCE and AGA. BSA are granted to investors and other individual non-employees, BCE are granted to employees only, AGA are granted to employees and/or executives.\u00a0
The table below shows the changes occurred in the share capital during the last two periods:
| \n In thousands of Euros, except for number of shares) | \n\n Share Capital | \n\n Share premium | \n\n Number of shares | \n
| \n Balance as of January\u00a01, 2022 | \n\n 1,158 | \n\n 181,175 | \n\n 46,300,591 | \n
| \n Capital increase by issuance of ordinary shares | \n\n 1 | \n\n (1) | \n\n 35,000 | \n
| \n Less cost of issuance of shares | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Issue of shares upon exercise of equity instruments (1) | \n\n \u2014 | \n\n 38 | \n\n \u2014 | \n
| \n Total as of December\u00a031, 2022 | \n\n 1,158 | \n\n 181,211 | \n\n 46,335,591 | \n
| \n (In thousands of Euros, except for number of shares) | \n\n Share Capital | \n\n Share premium | \n\n Number of shares | \n
| \n Balance as of January 1, 2023 | \n\n 1,158 | \n\n 181,211 | \n\n 46,335,591 | \n
| \n Capital increase by issuance of ordinary shares | \n\n 474 | \n\n 9,665 | \n\n 18,973,482 | \n
| \n Less cost of issuance of shares | \n\n 0 | \n\n \n | \n\n 0 | \n
| \n Issue of shares upon exercise of equity instruments (1) | \n\n 0 | \n\n 60 | \n\n 0 | \n
| \n Total as of December\u00a031, 2023 | \n\n 1,633 | \n\n 190,937 | \n\n 65,309,073 | \n
| \n (1) | \n\n The share premium includes the subscription price of non-employee warrants and the exercise price in excess of the share nominal value for employee and non-employee warrants. | \n
All the changes relating to employee warrants, non-employee warrants and free shares, as well as their impact on the profit and loss for the period are detailed in Note\u00a019.
Note 2:Statement of compliance and transition to IFRS
2.1Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). As the shares of the Company are listed on Euronext Paris, in compliance with European regulation n\u00b0\u00a01606 / 2002 adopted on July\u00a019, 2002 by the European Parliament and the European Council, the Group's consolidated financial statements for the year ended December\u00a031, 2023 were prepared in accordance with IFRS, as endorsed by the European Union on the date of preparation.
The IFRS as adopted by the European Union differ in certain aspects with the IFRS published by the IASB. Nevertheless, the Group ensured that the financial information for the periods presented is not substantially different between IFRS published by the IASB and IFRS as adopted by the European Union. International accounting standards include IFRS, International Accounting Standards (IAS), as well as the interpretations issued by the Standing Interpretations Committee (SIC), and\u00a0the International Financial Reporting Interpretations Committee (IFRIC).
New standards, amendments and interpretations that became applicable to the Group from January\u00a01,\u00a02023
In the current year, the Group has applied several amendments to IFRS Standards and Interpretations issued by the IASB that are effective for an annual period that begins on or after January\u00a01, 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
| \n Amendments to IAS 1 and IFRS Practice Statement 2 | \n\n Disclosure of Accounting Policies | \n
| \n Amendments to IAS 8 | \n\n Definition of Accounting Estimates | \n
| \n Amendments to IAS 12 | \n\n Deferred Tax related to Assets and Liabilities arising from a Single Transaction | \n
New and revised IFRS Standards in issue but not yet effective
| \n Amendments to IAS 1 | \n\n Classification of Liabilities as Current or Non-Current | \n
| \n Amendments to IAS 7 and IFRS 7 | \n\n Supplier finance arrangements | \n
| \n Amendments to IFRS 16 | \n\n Lease Liability in a Sale and Leaseback | \n
| \n Amendments to IAS 21 | \n\n Lack of Exchangeability | \n
The Group has not opted for the early application of these amendments and does not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.
New standards, amendments and interpretations that became applicable to the Group from January\u00a01,\u00a02023
In the current year, the Group has applied several amendments to IFRS Standards and Interpretations issued by the IASB that are effective for an annual period that begins on or after January\u00a01, 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
| \n Amendments to IAS 1 and IFRS Practice Statement 2 | \n\n Disclosure of Accounting Policies | \n
| \n Amendments to IAS 8 | \n\n Definition of Accounting Estimates | \n
| \n Amendments to IAS 12 | \n\n Deferred Tax related to Assets and Liabilities arising from a Single Transaction | \n
New and revised IFRS Standards in issue but not yet effective
| \n Amendments to IAS 1 | \n\n Classification of Liabilities as Current or Non-Current | \n
| \n Amendments to IAS 7 and IFRS 7 | \n\n Supplier finance arrangements | \n
| \n Amendments to IFRS 16 | \n\n Lease Liability in a Sale and Leaseback | \n
| \n Amendments to IAS 21 | \n\n Lack of Exchangeability | \n
The Group has not opted for the early application of these amendments and does not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.
New standards, amendments and interpretations that became applicable to the Group from January\u00a01,\u00a02023
In the current year, the Group has applied several amendments to IFRS Standards and Interpretations issued by the IASB that are effective for an annual period that begins on or after January\u00a01, 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
| \n Amendments to IAS 1 and IFRS Practice Statement 2 | \n\n Disclosure of Accounting Policies | \n
| \n Amendments to IAS 8 | \n\n Definition of Accounting Estimates | \n
| \n Amendments to IAS 12 | \n\n Deferred Tax related to Assets and Liabilities arising from a Single Transaction | \n
Note 3:Accounting principles
3.1Consolidation scope and methods
On April\u00a028, 2017, the Group incorporated GenSight Biologics Inc. in the United States. On December\u00a030, 2021, the Company created a second subsidiary, GenSight Biologics France SAS registered and located in France.
As 100% of the voting rights and ownership interests are held by the Group, both subsidiaries are fully consolidated.
3.2Functional currency and translation of financial statements in foreign currency
The Financial Statements are presented in thousands of euros (\u201cKEuros\u201d), which is also the functional currency of the parent Company GenSight Biologics S.A. The statements of financial position of GenSight Biologics Inc. having a functional currency different from the euro are translated into euros at the closing exchange rate (spot exchange rate at the statement of financial position date), and the statements of income, statements of comprehensive income and statement of cash flow of GenSight Biologics Inc. are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption \u201cCumulative translation adjustment\u201d in the Consolidated Statement of Changes in Shareholders\u2019 Equity.
3.3Intangible assets
Pursuant to IAS 38 Intangible Assets (\u201cIAS\u00a038\u201d), intangible assets acquired are recognized as assets on the Consolidated Statement of Financial Position at their acquisition cost.
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
Because of the risks and uncertainties related to regulatory authorizations and to the research and development process, the Company believes that the six criteria stipulated by IAS 38 have not been fulfilled to date and the application of this principle has resulted in all development costs to be expensed as incurred in all periods presented.
Software
The costs related to the acquisition of licenses for software are recognized as assets on the basis of the costs incurred to acquire and to implement the software. They are amortized using the straight-line method over a period of one to three years depending on the anticipated period of use.
License
In February\u00a02013, the Company entered into a partnership agreement with Novartis Pharma AG (\u201cNovartis\u201d) which provides for exclusive in-licenses for two patent families. The Company issued 670,588 ordinary shares as consideration paid for the exclusive licenses. Given that the fair value of the licenses cannot be reliably estimated, in accordance with IFRS 2, the amount of the intangible asset being recognized has been determined by reference to the fair value of the ordinary shares that were granted by the Company, based on an independent valuation. The licenses are amortized over 15 years from the date the agreement was signed, which corresponds to the expected useful life of the licenses.
3.4Property, plant and equipment
Property, plant and equipment are recorded at their acquisition cost or, if applicable, at their production cost.
Property, plant and equipment are depreciated using the straight-line method over the estimated useful period of the property. Rented fixtures are depreciated over the term of their lifetime or over the term of the rental agreement, whichever is shorter.
The depreciation periods used are the following:
| \n Property, plant and equipment item | \n\n Depreciation\u00a0period | \n
| \n Fixtures and improvements in structures | \n\n 5 to 9\u00a0years | \n
| \n Research and development / production tools | \n\n 3 to 10 years | \n
| \n Computer equipment | \n\n 3 to 5 years | \n
| \n Office equipment and furniture | \n\n 5 years | \n
3.5Inventories
Inventories are measured at the lower of cost or net realizable value at production costs calculated using the\u00a0first-in, first-out\u00a0method. It includes acquisition costs, processing costs and other costs incurred in bringing the inventories to their present location and condition.
Inventories are exclusively composed of work in progress relating to the production of the first batches that may be used for the commercialization.
During the launch phase of a new product, any inventories of that product are written down to zero pending regulatory approval.
3.6Financial assets
Financial assets are initially measured at fair value plus directly attributable transaction costs in the case of instruments not measured at fair value through profit or loss. Directly attributable transaction costs of financial assets measured at fair value through profit or loss are recorded in the consolidated statement of income (loss).
Under IFRS 9, financial assets are classified in the following three categories:
\u2022Financial assets at amortized cost;
\u2022Financial assets at fair value through other comprehensive income (\u201cFVOCI\u201d); and
\u2022Financial assets at fair value through profit or loss.
The classification of financial assets depends on:
\u2022The characteristics of the contractual cash flows of the financial assets; and
\u2022The business model that the entity follows for the management of the financial asset.
Financial assets at amortized cost
Financial assets are measured at amortized cost when (i)\u00a0they are not designated as financial assets at fair value through profit or loss, (ii)\u00a0they are held within a business model whose objective is to hold assets in order to collect contractual cash flows and (iii)\u00a0they give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI\u201d criterion). They are subsequently measured at amortized cost, determined using the effective interest method (\u201cEIR\u201d), less any expected impairment losses in relation to the credit risk. Interest income, exchange gains and losses, impairment losses and gains and losses arising on derecognition are all recorded in the consolidated statement of income (loss).
This category primarily includes trade receivables, as well as other loans and receivables. Long-term loans and receivables that are not interest-bearing or that bear interest at a below-market rate are discounted when the amounts involved are material.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of debt instruments whose contractual cash flows represent payments of interest or repayments of principal, and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising from changes in fair value are recognized in equity within the statement of comprehensive income in the period in which they occur. When such assets are derecognized, the cumulative gains and losses previously recognized in equity are reclassified to profit or loss for the period within the line items Financial income or Financial expenses. The Company did not hold this type of instrument during the periods presented in these financial statements.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
\u2022instruments whose contractual cash flows represent payments of interest or repayments of principal, but which are managed other than with a view to collecting cash flows and/or selling the asset; and
\u2022instruments that management has designated as \u201cfair value through profit or loss\u201d on initial recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items financial income or financial expenses.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
3.7Recoverable amount of the intangible assets and property, plant and equipment
The property, plant and equipment and intangible assets that have an established lifetime are subject to an impairment test when the recoverability of their book value is called into question by the existence of indications of impairment. An impairment is recognized in the Financial Statements up to the amount of the excess of the book value over the recoverable value of the asset. The recoverable value of an asset corresponds to its fair value minus the costs of sale or its use value, whichever is higher.
3.8Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents comprise the cash that is held at the bank and petty cash as well as the short-term fixed deposits for which the maturity is less than three months.
For the purpose of establishing the statement of cash flows, cash and cash equivalents include cash in hand, demand deposits and short fixed-term deposits with banks and short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts.
Cash and cash equivalents are initially recognized at their purchase costs on the transaction date, and are subsequently measured at fair value. Changes in fair value are recognized in profit or loss.
3.9Share capital
Ordinary shares are classified under shareholders\u2019 equity. The costs of share capital transactions that are directly attributable to the issue of new shares or options are recognized in shareholders\u2019 equity as a deduction from the revenue from the issue, net of tax.
The Company\u2019s own shares bought in the context of a brokering/liquidity agreement are presented as a reduction in shareholders\u2019 equity until their cancellation, their reissuance or their disposal.
3.10Derivatives
Derivatives are recorded in the statement of financial position at their fair value. Changes in fair value are recognized in profit or loss.
Transaction costs that relate to the issue of the convertible loan are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.
Convertible Bonds
The convertible bonds are financial instruments that will be or may be settled in the entity's own equity or may be settled in equity instruments of the entity.
They include a debt component and an option component, and can be classified as :
\u2022compound instruments, including a debt component and an equity component as defined by IAS 32. An instrument is qualified as an equity instrument if it can be settled by exchanging a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments;
\u2022or hybrid instruments in other cases, including a host contract (financial liability) and one or more embedded derivatives. The conversion option can be qualified as an embedded derivative and initially measured at fair value under IFRS 9 and subsequently measured at fair value through profit or loss.
EIB credit facility and warrants
The Company entered into a credit facility with EIB in November\u00a02022 and the \u20ac8m of the Tranche\u00a01 have been received on February 2023 after all conditions, in particular the issuance of share warrants to the EIB, had been met.
This financial instrument includes two instruments (i) a host contract representing a debt component (the loans) and (ii)\u00a0warrants. The two instruments issued (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants). The financial instrument includes different options too: a call option, a prepayment option and a put option. The prepayment option is not a separate derivative instrument.
The warrants, put option and call option are each classified as derivatives on own equity instruments, because the \u201cfixed-for-fixed\u201d rule under IAS\u00a032, which provides that derivatives will be classified as equity if they can only be settled by delivering a fixed number of shares in exchange for a fixed amount of cash or another financial asset, is not met (non-cash settlement option which may result in exchanging a variable number of shares, for a variable price). The derivatives are recognized at fair value through profit and loss.
The put option can only be exercised in the framework and for the purposes of a cashless exercise of the warrants, and thus cannot be exercised on a standalone basis. The put option comes into effect upon the issuance of warrants by the Issuer and remains in effect for the lifetime of the warrants. In addition, the put option is not independently transferable from the warrants. Thus, the put option is not bifurcated and it is to be considered as part of the valuation of the warrants.
The call option is exercisable by the Company, under very specific circumstances wherein the value of the warrants increase due to a takeover bid for the Company. The Company believes it is very unlikely that it will take advantage of exercising the call option. Thus, the call option has been valued at zero and does not require bifurcation. The accounting treatment and impact on the 2023 financial year is described in Note\u00a011 - Financial liabilities.
3.11Share-based payment
Free shares (Attributions Gratuites d\u2019Actions, or \u201cAGA\u201d), stock-options (Options de souscription et/ou d\u2019achat d\u2019actions, or \u201cSO\u201d) and employee warrants (Bons de souscription de parts de cr\u00e9ateur d\u2019entreprise, or \u201cBCE\u201d) are awarded to employees or executives. Non-employee warrants (Bons de souscription d\u2019actions, or \u201cBSA\u201d) are primarily awarded to directors and scientific consultants. Pursuant to IFRS\u00a02, these awards are measured at their fair value on the date of grant. The fair value is calculated with the most relevant formula regarding the settlement and the conditions of each plan. The fair value is recorded in personnel expenses (allocated by function in the Consolidated Statement of Income) on a straight-line basis over each milestone composing the vesting period with a corresponding increase in shareholders\u2019 equity.
At each closing date, we re-examine the number of options likely to become exercisable. If applicable, the impact of the review of the estimate is recognized in the Consolidated Statement of Income with a corresponding adjustment in equity.
3.12Financial liabilities
Borrowings and other financial liabilities, excepted for derivative financial liabilities (see upon), are measured initially at their fair value and then at amortized cost, calculated on the basis of the effective interest rate (\u201cEIR\u201d) method.
The transaction expenses that are directly attributable to the acquisition or to the issue of a financial liability reduce that financial liability. These expenses are then amortized actuarially over the lifetime of the liability, on the basis of the EIR.
The EIR is the rate that equalizes the anticipated flow of future cash outflows with the current net book value of the financial liability in order to deduct its amortized cost therefrom.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. The subsidy is presented as a differed income which is amortized in the P&L over the same period.
Other financial liabilities include trade accounts payable, which are measured at fair value (which in most cases equates to face value) on initial recognition, and subsequently at amortized cost.
3.13Research tax credit, subsidies and conditional advances
Research tax credit
The research tax credit (Cr\u00e9dit d\u2019Imp\u00f4t Recherche, or \u201cCIR\u201d) (the \u201cResearch Tax Credit\u201d) is granted to companies by the French tax authorities in order to encourage them to conduct technical and scientific research. Companies that prove that they have\u00a0expenditures that meet the required criteria (research expenditures located in France or, since January\u00a01, 2005, within the European Community or in another State that is a party to\u00a0the Agreement on the European Economic Area that has\u00a0concluded a tax treaty with France that contains an administrative assistance clause) receive a tax credit that can be used for the payment of the corporate tax due for the fiscal year in which the expenditures were made and the next three fiscal years, or, as applicable, can be reimbursed in cash. The expenditures taken into account for the calculation of the Research Tax Credit involve only research expenses.
The Company has received the Research Tax Credit since its inception.
The Company received the reimbursement of the Research Tax Credit for the year 2022 in July\u00a02023 for an amount of \u20ac2,176\u00a0K. It will request the reimbursement of the 2023 Research Tax Credit in 2024 under the Community tax rules for small and medium firms in compliance with the regulatory texts in effect for the amount of \u20ac1,697\u00a0K.
The CIR is presented under other income in the Consolidated Statement of Income (Loss) as it meets the definition of government grant as defined in IAS\u00a020 Accounting for Government Grants and Disclosure of Government Assistance.
Subsidies and conditional advances
Due to the innovative nature of its product candidate development programs, the Company has benefited from certain sources of financial assistance from Bpifrance Financement whose mission is to provide financial assistance and support to emerging French enterprises to facilitate the development and commercialization of innovative technologies.
The funds received by the Company are intended to finance its research and development efforts and the recruitment of specific personnel. The Company has received such funding in the form of non-refundable subsidies and conditional advances.
Subsidies
Subsidies received are grants that are not repayable by the Company and are recognized in the Financial Statements where there exists reasonable assurance that the Company will comply with the conditions attached to the subsidies and the subsidies will be received.
Subsidies that are upfront payments are presented as deferred revenue and recognized ratably through income over the duration of the research program to which the subsidy relates.
A public subsidy that is to be received either as compensation for expenses or for losses already incurred, or for immediate financial support of the Company without associated future costs, is recognized in the Financial Statements as other income for the period in which the grant is classified as a receivable.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. This finance cost is netted with the impact of the amortization of the subsidy in the P&L.
Conditional advances
Funds received from Bpifrance Financement in the form of conditional advances are recognized as financial liabilities, as the Company has a contractual obligation to reimburse Bpifrance Financement based on a repayment schedule. Each advance is made to fund a specific development milestone. Details concerning conditional advances are provided in Note\u00a011. Receipts and reimbursements of conditional advances are reflected as cash flows from financing activities in the Consolidated Statement of Cash Flows.
The rate used to determine the amount recognized annually as a finance cost, the EIR takes into account the estimated future cash flows.
In the event of a change in payment schedule of the stipulated repayments of the conditional advances, the Company recalculates the net book value of the debt resulting from the discounting of the anticipated new future cash flows at the initial EIR. The adjustment that results therefrom is recognized in the Consolidated Statement of Income (Loss) for the period during which the modification is recognized.
The conditional advance that can be subject to this type of\u00a0modification is the advance received from Bpifrance Financement, presented in Note\u00a011.2.
3.14Retirement pension obligations
The employees of the Company receive the retirement benefits stipulated by law in France:
\u2022compensation paid by the Company to employees upon their retirement (defined-benefit plan) and;
\u2022a payment of retirement pensions by the Social Security agencies, which are financed by the contributions made by companies and employees (defined-contribution plans).
For the defined-benefit plans, the costs of the retirement benefits are estimated by using the projected credit unit method. According to this method, the cost of the retirement benefit is recognized in the Consolidated Statement of Income (Loss) so that it is distributed uniformly over the term of the services of the employees. The retirement benefit commitments are valued at the current value of the future payments estimated using, for discounting, the market rate for high quality corporate bonds with a term that corresponds to that estimated for the payment of the benefits.
The difference between the amount of the provision at the beginning of a period and at the close of that period is recognized through profit or loss for the portion representing the costs of services rendered and the net interest costs, and\u00a0through other comprehensive income for the portion representing the actuarial gains and losses.
The Company\u2019s payments for the defined-contribution plans are recognized as expenses on the Consolidated Statement of Income (Loss) of the period during which they become payable.
In April 2021, the IFRIC (\u201cIFRS Interpretations Committee\u201d) or addressed to the IAS Board (International Accounting Standards Board), for decision (approval or refusal or intermediate position), a \u201cTAD\u201d (\u201cTentative Agenda Decision\u201d or \u201cProvisional Decision\u201d) by which it proposes to modify the way of calculating the commitments relating to certain defined benefit plans. The IAS Board validated this position in early June 2021, while specifying that there was no need to modify anything in IAS\u00a019 which already allows this interpretation.
By its new position, the IFRIC considers that, from the moment when, on the one hand, no right is acquired in the event of departure before retirement age and, on the other hand, the rights are capped after a certain number of years of seniority (N), it would be the last N years of the employee\u2019s career in the company that confer rights upon departure.
In addition, according to the consensus, it is also mandatory to modify the valuation method for Companies using collective agreements whose rights are defined by age bracket. Indeed, they consider that, given the fact that the rights are defined in stages, a certain number of years of service performed by a given employee does not give rise to the allocation of rights. It is then necessary, for the evaluation, to linearize the rights over the last N years, N representing the number of years which gives rise to the allocation of rights and therefore the last level that the employee will reach at the time of his departure in retirement.
The Company implemented the changes of interpretation starting with the 2021 financial statements.
3.15Provisions for risks and expenses
The provisions for risks and lawsuits correspond to the commitments resulting from lawsuits and various risks whose due dates and amounts are uncertain.
A provision is recognized in the Financial Statements when the Group has a legal or implicit obligation to a third party resulting from a past event, which is likely or certain to cause an outflow of resources to that third party, and provided that the future outflows of liquid assets can be estimated reliably.
The amount recognized in the Financial Statements as a provision is the best estimate of the expenses necessary to extinguish the obligation.
3.16Leases
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all contracts entered into or changed on or after January\u00a01, 2019.
Applying IFRS\u00a016, for all leases (except as noted below), the Group:
(a)Recognizes right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments;
(b)Recognizes depreciation of right-of-use assets and interest on lease liabilities in profit or loss;
(c)Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) are recognized as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortized as a reduction of rental expenses generally on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS\u00a036.
For short-term leases (lease term of 12\u00a0months or less) and leases of low-value assets (such as tablet and personal computers, small items of office furniture and telephones), the Group has opted to recognize a lease expense on a straight-line basis as permitted by IFRS\u00a016. This expense is presented within \u2018other expenses\u2019 in profit or loss.
The Company defines contracts\u2019 terms as the non-cancellable period during which the Company has the right to use the underlying asset, plus any termination options that the lessee is reasonably certain not to exercise.
Lease terms used are consistent with the depreciation periods of fixtures and improvements in structures and are in line, as at 31/12 and before the closing date, with the management best estimates of the lease terms.
3.17Revenue
The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
\u2022Step 1: Identify the contract with the customer,
\u2022Step 2: Identify the performance obligations in the contract,
\u2022Step 3: Determine the transaction price,
\u2022Step 4: Allocate the transaction price to the performance obligations in the contract,
\u2022Step 5: Recognize revenue when the company satisfies a performance obligation.
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or\u00a0service that is distinct. A performance obligation meets IFRS\u00a015\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of goods or services) if both of the following criteria are met:
\u2022a good or service (or bundle of goods or services) that is distinct; or
\u2022a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
In accordance with IFRS\u00a015, variable considerations cannot be included in the estimated transaction price as long as it not highly probable that the related revenue will not reversed in the future. According to the level of uncertainty relating to the results of preclinical and clinical trials and the decisions relating to the regulatory approvals, variable considerations depending on these events are excluded from the transaction price as long as the trigger event is not highly probable. When the trigger event occurs, the corresponding milestone is added to the transaction price. Such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income (loss) in the period of adjustment.
The Company started the sale of LUMEVOQ\u00ae through the named patient Temporary Authorization for Use (\u201cATU nominative\u201d) granted by the National Drug Safety Agency (Agence Nationale de S\u00e9curit\u00e9 du M\u00e9dicament or ANSM) to the CHNO of the Quinze-Vingts. Total income solely comes from those named patient ATU. The Company will be paid a preliminary price by the hospitals, ultimately fully covered by\u00a0the health insurance. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price
Estimated rebates are considered to be variable consideration and include significant estimates.
Management determined that the agreement with the CHNO of the Quinze-Vingts includes a variable amount. At contract inception, the variable consideration is estimated based on the expected value amount of consideration expected from the transaction and constrained to the extent it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with respect the variable consideration is subsequently resolved.
The methodology and assumptions used to estimate rebates are monitored and adjusted regularly in the light of contractual and legal obligations, historical trends, past experience and projected market conditions. In 2021, in the light of changes in\u00a0legal obligations, and projected market conditions, the Company adjusted the variable considerations for which it\u2019s highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
Net revenue is recorded, net of variable consideration related to certain allowances and accruals, at the time the customer obtains control of the product.
We record a related liability, for components related to product sold during the reporting period. The discounted value of this liability is booked in the Financial Statements.
As of December\u00a031, 2023, the discounted value of the refund liability amounted to \u20ac6.2m. A 10% decrease or increase in the final price estimation would have an impact of +\u20ac0.8m and \u20ac(0.8)m respectively on the discounted refund liability amount and therefore the cumulated revenue recognized.
3.18Income tax
Deferred taxes are recognized for all the temporary differences arising from the difference between the tax basis and the accounting basis of the assets and liabilities that appear in the Financial Statements. The primary temporary differences are related to the tax losses that can be carried forward or backward. The legal tax rates as of the closing date are utilized to determine the deferred taxes.
The deferred tax assets are recognized in the Financial Statements only to the extent that it is likely that the future profits will be sufficient to absorb the losses that can be carried forward or backward. Considering its stage of development, which precludes the income projections from being sufficiently reliable to be made, the Group has not recognized deferred tax assets in relation to tax loss carryforward in the Consolidated Statement of Financial Position.
3.19Segment information
The Company operates in a single operating segment: the conducting of research and development of novel therapies for mitochondrial and neurodegenerative diseases of the eye and central nervous system in order to market them in the future. The assets, liabilities and operating loss realized are located mainly in France.
3.20Presentation of financial assets and financial liabilities measured at fair value
In accordance with IFRS\u00a07 Financial Statements: Disclosures, financial instruments are presented in three categories based on a hierarchical method used to determine their fair value:
\u2022level\u00a01: fair value calculated using quoted prices in an active market for identical assets and liabilities;
\u2022level\u00a02: fair value calculated using valuation techniques based on observable market data such as prices of similar assets and liabilities or parameters quoted in an active market; and
\u2022level\u00a03: fair value calculated using valuation techniques based wholly or partly on unobservable inputs such as prices in an inactive market or a valuation based on multiples for unlisted securities.
3.21Use of estimates
The Financial Statements are prepared in accordance with IFRS. The preparation of the Financial Statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, income and expenses during the reporting period. The Group bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Group\u2019s actual results may differ from these estimates under different assumptions or conditions.
The full extent to which the global macro-economic context will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, the supply of our products and product candidates, clinical trials and research and development costs, will depend on future developments that are highly uncertain. We have made estimates of the impact of the global macro-economic context within our financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.
These estimates and judgments involve mainly:
\u2022the estimate of the repayments of the conditional advances obtained by the Company from public institutions, such as Bpifrance Financement. The anticipated repayments of the conditional advances are analyzed at each reporting period (see Note 11), and the measurement of the conditional advances classified as financial liabilities based on the effective rate method;
\u2022the measurement of the fair value of the various equity instruments granted to employees, executives or non-employee members of the Board of Directors as well as scientific consultants and service providers, such as AGA, SO, BCE or BSA, which is performed on the basis of actuarial models; these models require the use by the Company of certain calculation assumptions such as the expected volatility of the underlying security (see Note\u00a019);
\u2022research and development expenses include estimates of the amount recognized over the year for subcontracts. At year-end closing, an analysis of the services already performed but not invoiced and / or already invoiced but not performed is carried out by the project managers and validated by the company\u2019s management (see Note\u00a018);
\u2022the measurement of the liability component of the convertible bond, calculated on the basis of the contractually agreed interest and amortization payments discounted at market interest rates (see Note\u00a011);
\u2022the measurement of the fair value of the derivatives directly linked with the convertible bonds and warrants, calculated on the basis of financial mathematic models (see Note\u00a011);
\u2022the estimate of the selling price for LUMEVOQ\u00ae to the CHNO of the Quinze-Vingts. The National Drug Safety Agency, granted to GenSight Biologics several Temporary Authorizations for Use (\u201cATU nominative\u201d). Variable consideration under IFRS\u00a015 are required to be estimated at contract inception. The Group assessed individual contracts to determine the estimated variable consideration and related constraints. In 2021, in the light of changes in legal obligations, and projected market conditions, the Company adjusted the variable considerations for which it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The valuation assumptions of variable considerations remained unchanged in 2023 compared with 2022. The total revenue presented in our financial statements as of December\u00a02022 and 2023 is therefore net from those variable considerations (see Note\u00a016);
\u2022the estimate of contingencies reserves related to ongoing confidential social and operational litigations.
3.1Consolidation scope and methods
On April\u00a028, 2017, the Group incorporated GenSight Biologics Inc. in the United States. On December\u00a030, 2021, the Company created a second subsidiary, GenSight Biologics France SAS registered and located in France.
As 100% of the voting rights and ownership interests are held by the Group, both subsidiaries are fully consolidated.
3.2Functional currency and translation of financial statements in foreign currency
The Financial Statements are presented in thousands of euros (\u201cKEuros\u201d), which is also the functional currency of the parent Company GenSight Biologics S.A. The statements of financial position of GenSight Biologics Inc. having a functional currency different from the euro are translated into euros at the closing exchange rate (spot exchange rate at the statement of financial position date), and the statements of income, statements of comprehensive income and statement of cash flow of GenSight Biologics Inc. are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption \u201cCumulative translation adjustment\u201d in the Consolidated Statement of Changes in Shareholders\u2019 Equity.
3.2Functional currency and translation of financial statements in foreign currency
The Financial Statements are presented in thousands of euros (\u201cKEuros\u201d), which is also the functional currency of the parent Company GenSight Biologics S.A. The statements of financial position of GenSight Biologics Inc. having a functional currency different from the euro are translated into euros at the closing exchange rate (spot exchange rate at the statement of financial position date), and the statements of income, statements of comprehensive income and statement of cash flow of GenSight Biologics Inc. are translated at the average period to date exchange rate. The resulting translation adjustments are included in equity under the caption \u201cCumulative translation adjustment\u201d in the Consolidated Statement of Changes in Shareholders\u2019 Equity.
3.3Intangible assets
Pursuant to IAS 38 Intangible Assets (\u201cIAS\u00a038\u201d), intangible assets acquired are recognized as assets on the Consolidated Statement of Financial Position at their acquisition cost.
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
Because of the risks and uncertainties related to regulatory authorizations and to the research and development process, the Company believes that the six criteria stipulated by IAS 38 have not been fulfilled to date and the application of this principle has resulted in all development costs to be expensed as incurred in all periods presented.
Software
The costs related to the acquisition of licenses for software are recognized as assets on the basis of the costs incurred to acquire and to implement the software. They are amortized using the straight-line method over a period of one to three years depending on the anticipated period of use.
License
In February\u00a02013, the Company entered into a partnership agreement with Novartis Pharma AG (\u201cNovartis\u201d) which provides for exclusive in-licenses for two patent families. The Company issued 670,588 ordinary shares as consideration paid for the exclusive licenses. Given that the fair value of the licenses cannot be reliably estimated, in accordance with IFRS 2, the amount of the intangible asset being recognized has been determined by reference to the fair value of the ordinary shares that were granted by the Company, based on an independent valuation. The licenses are amortized over 15 years from the date the agreement was signed, which corresponds to the expected useful life of the licenses.
Note 4:Intangible assets
The intangible assets are broken down as follows:
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Patents, licenses, trademarks | \n\n 275 | \n\n 275 | \n
| \n Software | \n\n 18 | \n\n 18 | \n
| \n Total historical cost | \n\n 293 | \n\n 293 | \n
| \n Accumulated amort. of patents, licenses and trademarks | \n\n (200) | \n\n (182) | \n
| \n Accumulated depreciation of software packages | \n\n (18) | \n\n (18) | \n
| \n Accumulated amortization and depreciation | \n\n (218) | \n\n (200) | \n
| \n Net total | \n\n 75 | \n\n 93 | \n
An intangible asset was recognized at December\u00a031, 2013 as a result of the license agreement signed with Novartis. The initial recognition cost amounted to \u20ac275\u00a0K and was determined by reference to the fair value of the 670,588 ordinary shares, \u20ac0.41\u00a0per ordinary share, issued as consideration for the license.
There has been no recognition of impairment losses in application of IAS\u00a036 Impairment of Assets over the periods presented.
3.3Intangible assets
Pursuant to IAS 38 Intangible Assets (\u201cIAS\u00a038\u201d), intangible assets acquired are recognized as assets on the Consolidated Statement of Financial Position at their acquisition cost.
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
Because of the risks and uncertainties related to regulatory authorizations and to the research and development process, the Company believes that the six criteria stipulated by IAS 38 have not been fulfilled to date and the application of this principle has resulted in all development costs to be expensed as incurred in all periods presented.
Software
The costs related to the acquisition of licenses for software are recognized as assets on the basis of the costs incurred to acquire and to implement the software. They are amortized using the straight-line method over a period of one to three years depending on the anticipated period of use.
License
In February\u00a02013, the Company entered into a partnership agreement with Novartis Pharma AG (\u201cNovartis\u201d) which provides for exclusive in-licenses for two patent families. The Company issued 670,588 ordinary shares as consideration paid for the exclusive licenses. Given that the fair value of the licenses cannot be reliably estimated, in accordance with IFRS 2, the amount of the intangible asset being recognized has been determined by reference to the fair value of the ordinary shares that were granted by the Company, based on an independent valuation. The licenses are amortized over 15 years from the date the agreement was signed, which corresponds to the expected useful life of the licenses.
Note 4:Intangible assets
The intangible assets are broken down as follows:
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Patents, licenses, trademarks | \n\n 275 | \n\n 275 | \n
| \n Software | \n\n 18 | \n\n 18 | \n
| \n Total historical cost | \n\n 293 | \n\n 293 | \n
| \n Accumulated amort. of patents, licenses and trademarks | \n\n (200) | \n\n (182) | \n
| \n Accumulated depreciation of software packages | \n\n (18) | \n\n (18) | \n
| \n Accumulated amortization and depreciation | \n\n (218) | \n\n (200) | \n
| \n Net total | \n\n 75 | \n\n 93 | \n
An intangible asset was recognized at December\u00a031, 2013 as a result of the license agreement signed with Novartis. The initial recognition cost amounted to \u20ac275\u00a0K and was determined by reference to the fair value of the 670,588 ordinary shares, \u20ac0.41\u00a0per ordinary share, issued as consideration for the license.
There has been no recognition of impairment losses in application of IAS\u00a036 Impairment of Assets over the periods presented.
3.3Intangible assets
Pursuant to IAS 38 Intangible Assets (\u201cIAS\u00a038\u201d), intangible assets acquired are recognized as assets on the Consolidated Statement of Financial Position at their acquisition cost.
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
Because of the risks and uncertainties related to regulatory authorizations and to the research and development process, the Company believes that the six criteria stipulated by IAS 38 have not been fulfilled to date and the application of this principle has resulted in all development costs to be expensed as incurred in all periods presented.
Software
The costs related to the acquisition of licenses for software are recognized as assets on the basis of the costs incurred to acquire and to implement the software. They are amortized using the straight-line method over a period of one to three years depending on the anticipated period of use.
License
In February\u00a02013, the Company entered into a partnership agreement with Novartis Pharma AG (\u201cNovartis\u201d) which provides for exclusive in-licenses for two patent families. The Company issued 670,588 ordinary shares as consideration paid for the exclusive licenses. Given that the fair value of the licenses cannot be reliably estimated, in accordance with IFRS 2, the amount of the intangible asset being recognized has been determined by reference to the fair value of the ordinary shares that were granted by the Company, based on an independent valuation. The licenses are amortized over 15 years from the date the agreement was signed, which corresponds to the expected useful life of the licenses.
3.3Intangible assets
Pursuant to IAS 38 Intangible Assets (\u201cIAS\u00a038\u201d), intangible assets acquired are recognized as assets on the Consolidated Statement of Financial Position at their acquisition cost.
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
Because of the risks and uncertainties related to regulatory authorizations and to the research and development process, the Company believes that the six criteria stipulated by IAS 38 have not been fulfilled to date and the application of this principle has resulted in all development costs to be expensed as incurred in all periods presented.
Software
The costs related to the acquisition of licenses for software are recognized as assets on the basis of the costs incurred to acquire and to implement the software. They are amortized using the straight-line method over a period of one to three years depending on the anticipated period of use.
License
In February\u00a02013, the Company entered into a partnership agreement with Novartis Pharma AG (\u201cNovartis\u201d) which provides for exclusive in-licenses for two patent families. The Company issued 670,588 ordinary shares as consideration paid for the exclusive licenses. Given that the fair value of the licenses cannot be reliably estimated, in accordance with IFRS 2, the amount of the intangible asset being recognized has been determined by reference to the fair value of the ordinary shares that were granted by the Company, based on an independent valuation. The licenses are amortized over 15 years from the date the agreement was signed, which corresponds to the expected useful life of the licenses.
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
18.1Research and development expenses
The table below shows the breakdown of research and development expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 3,741 | \n\n 3,565 | \n
| \n Sub-contracting, collaboration and consultants | \n\n 11,988 | \n\n 13,443 | \n
| \n Licensing and intellectual property | \n\n 341 | \n\n 761 | \n
| \n Travel and entertainment expenses | \n\n 193 | \n\n 424 | \n
| \n Depreciation and amortization expense | \n\n 2,757 | \n\n 405 | \n
| \n Other | \n\n 339 | \n\n 745 | \n
| \n Total R&D expenses | \n\n 19,360 | \n\n 19,343 | \n
| \n (1) | \n\n Includes \u20ac157 thousands and \u20ac(909) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
Research and development
Research costs are recorded in the Financial Statements as expenses.
In accordance with IAS 38, development costs are recognized in the Financial Statements as intangible assets only if all of the following criteria are met:
(a)it is technically feasible to complete the development of the project;
(b)intention on the part of the Company to complete the project and to utilize it;
(c)capacity to utilize the intangible asset;
(d)proof of the probability of future economic benefits associated with the asset;
(e)availability of the technical, financial and other resources for completing the project; and
(f)reliable evaluation of the development expenses.
3.4Property, plant and equipment
Property, plant and equipment are recorded at their acquisition cost or, if applicable, at their production cost.
Property, plant and equipment are depreciated using the straight-line method over the estimated useful period of the property. Rented fixtures are depreciated over the term of their lifetime or over the term of the rental agreement, whichever is shorter.
The depreciation periods used are the following:
| \n Property, plant and equipment item | \n\n Depreciation\u00a0period | \n
| \n Fixtures and improvements in structures | \n\n 5 to 9\u00a0years | \n
| \n Research and development / production tools | \n\n 3 to 10 years | \n
| \n Computer equipment | \n\n 3 to 5 years | \n
| \n Office equipment and furniture | \n\n 5 years | \n
Note 5:Property, plant and equipment
Changes in property, plant and equipment gross book values and accumulated depreciation are presented in the following table:
| \n (in thousands of Euros) | \n\n As of December\u00a031, 2022 | \n\n Increase | \n\n Decrease | \n\n Currency translation adjustment | \n\n As of December\u00a031, 2023 | \n
| \n Gross values | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Technical equipment and installations | \n\n 503 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 503 | \n
| \n IFRS 16 \u2013 Right of use \u2013 Building | \n\n 4,295 | \n\n 783 | \n\n (1,421) | \n\n (85) | \n\n 3,572 | \n
| \n Leasehold improvement | \n\n 1,366 | \n\n 0 | \n\n 0 | \n\n (21) | \n\n 1,345 | \n
| \n Office and Computer equipment | \n\n 294 | \n\n 6 | \n\n 0 | \n\n (1) | \n\n 299 | \n
| \n IFRS 16 \u2013 Right of use \u2013 Other | \n\n 19 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 19 | \n
| \n Furniture | \n\n 419 | \n\n 4 | \n\n 0 | \n\n 0 | \n\n 423 | \n
| \n Total gross property, plant and equipment | \n\n 6,896 | \n\n 793 | \n\n (1,421) | \n\n (107) | \n\n 6,161 | \n
| \n Accumulated depreciation | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Technical equipment and installations | \n\n (466) | \n\n (26) | \n\n 0 | \n\n 0 | \n\n (493) | \n
| \n IFRS 16 \u2013 Right of use \u2013 Building | \n\n (2,656) | \n\n (789) | \n\n 1,421 | \n\n 59 | \n\n (1,965) | \n
| \n Leasehold improvement | \n\n (930) | \n\n (138) | \n\n 0 | \n\n 15 | \n\n (1,053) | \n
| \n Office and computer equipment | \n\n (222) | \n\n (29) | \n\n 0 | \n\n 1 | \n\n (250) | \n
| \n IFRS 16 \u2013 Right of use \u2013 Other | \n\n (19) | \n\n 0 | \n\n 0 | \n\n 0 | \n\n (19) | \n
| \n Furniture | \n\n (334) | \n\n (21) | \n\n 0 | \n\n 0 | \n\n (356) | \n
| \n Total accumulated depreciation | \n\n (4,628) | \n\n (1,004) | \n\n 1,421 | \n\n 74 | \n\n (4,136) | \n
| \n Total net property, plant and equipment | \n\n 2,268 | \n\n (210) | \n\n (0) | \n\n (33) | \n\n 2,025 | \n
3.4Property, plant and equipment
Property, plant and equipment are recorded at their acquisition cost or, if applicable, at their production cost.
Property, plant and equipment are depreciated using the straight-line method over the estimated useful period of the property. Rented fixtures are depreciated over the term of their lifetime or over the term of the rental agreement, whichever is shorter.
The depreciation periods used are the following:
| \n Property, plant and equipment item | \n\n Depreciation\u00a0period | \n
| \n Fixtures and improvements in structures | \n\n 5 to 9\u00a0years | \n
| \n Research and development / production tools | \n\n 3 to 10 years | \n
| \n Computer equipment | \n\n 3 to 5 years | \n
| \n Office equipment and furniture | \n\n 5 years | \n
The depreciation periods used are the following:
| \n Property, plant and equipment item | \n\n Depreciation\u00a0period | \n
| \n Fixtures and improvements in structures | \n\n 5 to 9\u00a0years | \n
| \n Research and development / production tools | \n\n 3 to 10 years | \n
| \n Computer equipment | \n\n 3 to 5 years | \n
| \n Office equipment and furniture | \n\n 5 years | \n
The depreciation periods used are the following:
| \n Property, plant and equipment item | \n\n Depreciation\u00a0period | \n
| \n Fixtures and improvements in structures | \n\n 5 to 9\u00a0years | \n
| \n Research and development / production tools | \n\n 3 to 10 years | \n
| \n Computer equipment | \n\n 3 to 5 years | \n
| \n Office equipment and furniture | \n\n 5 years | \n
3.5Inventories
Inventories are measured at the lower of cost or net realizable value at production costs calculated using the\u00a0first-in, first-out\u00a0method. It includes acquisition costs, processing costs and other costs incurred in bringing the inventories to their present location and condition.
Inventories are exclusively composed of work in progress relating to the production of the first batches that may be used for the commercialization.
During the launch phase of a new product, any inventories of that product are written down to zero pending regulatory approval.
3.5Inventories
Inventories are measured at the lower of cost or net realizable value at production costs calculated using the\u00a0first-in, first-out\u00a0method. It includes acquisition costs, processing costs and other costs incurred in bringing the inventories to their present location and condition.
Inventories are exclusively composed of work in progress relating to the production of the first batches that may be used for the commercialization.
During the launch phase of a new product, any inventories of that product are written down to zero pending regulatory approval.
3.6Financial assets
Financial assets are initially measured at fair value plus directly attributable transaction costs in the case of instruments not measured at fair value through profit or loss. Directly attributable transaction costs of financial assets measured at fair value through profit or loss are recorded in the consolidated statement of income (loss).
Under IFRS 9, financial assets are classified in the following three categories:
\u2022Financial assets at amortized cost;
\u2022Financial assets at fair value through other comprehensive income (\u201cFVOCI\u201d); and
\u2022Financial assets at fair value through profit or loss.
The classification of financial assets depends on:
\u2022The characteristics of the contractual cash flows of the financial assets; and
\u2022The business model that the entity follows for the management of the financial asset.
Financial assets at amortized cost
Financial assets are measured at amortized cost when (i)\u00a0they are not designated as financial assets at fair value through profit or loss, (ii)\u00a0they are held within a business model whose objective is to hold assets in order to collect contractual cash flows and (iii)\u00a0they give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI\u201d criterion). They are subsequently measured at amortized cost, determined using the effective interest method (\u201cEIR\u201d), less any expected impairment losses in relation to the credit risk. Interest income, exchange gains and losses, impairment losses and gains and losses arising on derecognition are all recorded in the consolidated statement of income (loss).
This category primarily includes trade receivables, as well as other loans and receivables. Long-term loans and receivables that are not interest-bearing or that bear interest at a below-market rate are discounted when the amounts involved are material.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of debt instruments whose contractual cash flows represent payments of interest or repayments of principal, and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising from changes in fair value are recognized in equity within the statement of comprehensive income in the period in which they occur. When such assets are derecognized, the cumulative gains and losses previously recognized in equity are reclassified to profit or loss for the period within the line items Financial income or Financial expenses. The Company did not hold this type of instrument during the periods presented in these financial statements.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
\u2022instruments whose contractual cash flows represent payments of interest or repayments of principal, but which are managed other than with a view to collecting cash flows and/or selling the asset; and
\u2022instruments that management has designated as \u201cfair value through profit or loss\u201d on initial recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items financial income or financial expenses.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
3.10Derivatives
Derivatives are recorded in the statement of financial position at their fair value. Changes in fair value are recognized in profit or loss.
Transaction costs that relate to the issue of the convertible loan are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.
Convertible Bonds
The convertible bonds are financial instruments that will be or may be settled in the entity's own equity or may be settled in equity instruments of the entity.
They include a debt component and an option component, and can be classified as :
\u2022compound instruments, including a debt component and an equity component as defined by IAS 32. An instrument is qualified as an equity instrument if it can be settled by exchanging a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments;
\u2022or hybrid instruments in other cases, including a host contract (financial liability) and one or more embedded derivatives. The conversion option can be qualified as an embedded derivative and initially measured at fair value under IFRS 9 and subsequently measured at fair value through profit or loss.
EIB credit facility and warrants
The Company entered into a credit facility with EIB in November\u00a02022 and the \u20ac8m of the Tranche\u00a01 have been received on February 2023 after all conditions, in particular the issuance of share warrants to the EIB, had been met.
This financial instrument includes two instruments (i) a host contract representing a debt component (the loans) and (ii)\u00a0warrants. The two instruments issued (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants). The financial instrument includes different options too: a call option, a prepayment option and a put option. The prepayment option is not a separate derivative instrument.
The warrants, put option and call option are each classified as derivatives on own equity instruments, because the \u201cfixed-for-fixed\u201d rule under IAS\u00a032, which provides that derivatives will be classified as equity if they can only be settled by delivering a fixed number of shares in exchange for a fixed amount of cash or another financial asset, is not met (non-cash settlement option which may result in exchanging a variable number of shares, for a variable price). The derivatives are recognized at fair value through profit and loss.
The put option can only be exercised in the framework and for the purposes of a cashless exercise of the warrants, and thus cannot be exercised on a standalone basis. The put option comes into effect upon the issuance of warrants by the Issuer and remains in effect for the lifetime of the warrants. In addition, the put option is not independently transferable from the warrants. Thus, the put option is not bifurcated and it is to be considered as part of the valuation of the warrants.
The call option is exercisable by the Company, under very specific circumstances wherein the value of the warrants increase due to a takeover bid for the Company. The Company believes it is very unlikely that it will take advantage of exercising the call option. Thus, the call option has been valued at zero and does not require bifurcation. The accounting treatment and impact on the 2023 financial year is described in Note\u00a011 - Financial liabilities.
3.12Financial liabilities
Borrowings and other financial liabilities, excepted for derivative financial liabilities (see upon), are measured initially at their fair value and then at amortized cost, calculated on the basis of the effective interest rate (\u201cEIR\u201d) method.
The transaction expenses that are directly attributable to the acquisition or to the issue of a financial liability reduce that financial liability. These expenses are then amortized actuarially over the lifetime of the liability, on the basis of the EIR.
The EIR is the rate that equalizes the anticipated flow of future cash outflows with the current net book value of the financial liability in order to deduct its amortized cost therefrom.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. The subsidy is presented as a differed income which is amortized in the P&L over the same period.
Other financial liabilities include trade accounts payable, which are measured at fair value (which in most cases equates to face value) on initial recognition, and subsequently at amortized cost.
3.6Financial assets
Financial assets are initially measured at fair value plus directly attributable transaction costs in the case of instruments not measured at fair value through profit or loss. Directly attributable transaction costs of financial assets measured at fair value through profit or loss are recorded in the consolidated statement of income (loss).
Under IFRS 9, financial assets are classified in the following three categories:
\u2022Financial assets at amortized cost;
\u2022Financial assets at fair value through other comprehensive income (\u201cFVOCI\u201d); and
\u2022Financial assets at fair value through profit or loss.
The classification of financial assets depends on:
\u2022The characteristics of the contractual cash flows of the financial assets; and
\u2022The business model that the entity follows for the management of the financial asset.
Financial assets at amortized cost
Financial assets are measured at amortized cost when (i)\u00a0they are not designated as financial assets at fair value through profit or loss, (ii)\u00a0they are held within a business model whose objective is to hold assets in order to collect contractual cash flows and (iii)\u00a0they give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (\u201cSPPI\u201d criterion). They are subsequently measured at amortized cost, determined using the effective interest method (\u201cEIR\u201d), less any expected impairment losses in relation to the credit risk. Interest income, exchange gains and losses, impairment losses and gains and losses arising on derecognition are all recorded in the consolidated statement of income (loss).
This category primarily includes trade receivables, as well as other loans and receivables. Long-term loans and receivables that are not interest-bearing or that bear interest at a below-market rate are discounted when the amounts involved are material.
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of debt instruments whose contractual cash flows represent payments of interest or repayments of principal, and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising from changes in fair value are recognized in equity within the statement of comprehensive income in the period in which they occur. When such assets are derecognized, the cumulative gains and losses previously recognized in equity are reclassified to profit or loss for the period within the line items Financial income or Financial expenses. The Company did not hold this type of instrument during the periods presented in these financial statements.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
\u2022instruments whose contractual cash flows represent payments of interest or repayments of principal, but which are managed other than with a view to collecting cash flows and/or selling the asset; and
\u2022instruments that management has designated as \u201cfair value through profit or loss\u201d on initial recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items financial income or financial expenses.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of debt instruments whose contractual cash flows represent payments of interest or repayments of principal, and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising from changes in fair value are recognized in equity within the statement of comprehensive income in the period in which they occur. When such assets are derecognized, the cumulative gains and losses previously recognized in equity are reclassified to profit or loss for the period within the line items Financial income or Financial expenses. The Company did not hold this type of instrument during the periods presented in these financial statements.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
\u2022instruments whose contractual cash flows represent payments of interest or repayments of principal, but which are managed other than with a view to collecting cash flows and/or selling the asset; and
\u2022instruments that management has designated as \u201cfair value through profit or loss\u201d on initial recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items financial income or financial expenses.
Note 15:Financial instruments recognized in the consolidated statements of financial position and related effect on the\u00a0consolidated statement of income (loss)
| \n In thousands of euros | \n\n Book value on | \n\n Fair value | \n\n At amortized | \n\n Fair Value | \n
| \n As of December\u00a031, 2022 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current financial assets | \n\n 632 | \n\n \u2014 | \n\n 632 | \n\n 632 | \n
| \n Current financial assets | \n\n 144 | \n\n 144 | \n\n \u2014 | \n\n 144 | \n
| \n Accounts receivable and related receivables | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Cash and cash equivalents | \n\n 10,610 | \n\n \u2014 | \n\n 10,610 | \n\n 10,610 | \n
| \n Other current assets | \n\n 12,193 | \n\n \u2014 | \n\n 12,193 | \n\n 12,193 | \n
| \n Total financial assets | \n\n 23,579 | \n\n 144 | \n\n 23,435 | \n\n 23,579 | \n
| \n Financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Bond financing | \n\n 7,353 | \n\n \u2014 | \n\n 7,353 | \n\n 7,353 | \n
| \n Derivative liabilities | \n\n 3,447 | \n\n 3,447 | \n\n \u2014 | \n\n 3,447 | \n
| \n Borrowings from Banks | \n\n 3,428 | \n\n \u2014 | \n\n 3,428 | \n\n 3,428 | \n
| \n Conditional advances (non-current portion) | \n\n 5,214 | \n\n \u2014 | \n\n 5,214 | \n\n 5,214 | \n
| \n Refund liability | \n\n 7,485 | \n\n \u2014 | \n\n 7,485 | \n\n 7,485 | \n
| \n Lease liability \u2013 Buildings | \n\n 1,866 | \n\n \u2014 | \n\n 1,866 | \n\n 1,866 | \n
| \n Other non-current liabilities | \n\n 193 | \n\n \u2014 | \n\n 193 | \n\n 193 | \n
| \n Accounts payable and related payables | \n\n 7,813 | \n\n \u2014 | \n\n 7,813 | \n\n 7,813 | \n
| \n Other current liabilities | \n\n 4,339 | \n\n \u2014 | \n\n 4,339 | \n\n 4,339 | \n
| \n Provisions | \n\n 82 | \n\n \u2014 | \n\n 82 | \n\n 82 | \n
| \n Total financial liabilities | \n\n 41,219 | \n\n 3,447 | \n\n 37,773 | \n\n 41,219 | \n
| \n (1) | \n\n The fair value of financial assets classified as fair value through profit and loss corresponds to the market value of the assets. | \n
| \n (2) | \n\n The book amount of financial liabilities measured at amortized cost was deemed to be a reasonable estimation of fair value. | \n
| \n In thousands of euros | \n\n Book value on | \n\n Fair value | \n\n At amortized | \n\n Fair Value | \n
| \n As of December\u00a031, 2023 | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Financial assets | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Non-current financial assets | \n\n 502 | \n\n \u2014 | \n\n 502 | \n\n 502 | \n
| \n Current financial assets | \n\n 45 | \n\n 45 | \n\n \u2014 | \n\n 45 | \n
| \n Accounts receivable and related receivables | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Cash and cash equivalents | \n\n 2,134 | \n\n \u2014 | \n\n 2,134 | \n\n 2,134 | \n
| \n Other current assets | \n\n 4,349 | \n\n \u2014 | \n\n 4,349 | \n\n 4,349 | \n
| \n Total financial assets | \n\n 7,030 | \n\n 45 | \n\n 6,985 | \n\n 7,030 | \n
| \n Financial liabilities | \n\n \n | \n\n \n | \n\n \n | \n\n \n | \n
| \n Bond financing | \n\n 9,131 | \n\n \u2014 | \n\n 9,131 | \n\n 9,131 | \n
| \n Derivative liabilities | \n\n 559 | \n\n 559 | \n\n \u2014 | \n\n 559 | \n
| \n Borrowings from Banks | \n\n 7,474 | \n\n \u2014 | \n\n 7,474 | \n\n 7,474 | \n
| \n Conditional advances | \n\n 5,504 | \n\n \u2014 | \n\n 5,504 | \n\n 5,504 | \n
| \n Refund liability | \n\n 6,572 | \n\n \u2014 | \n\n 6,572 | \n\n 6,572 | \n
| \n Lease liability \u2013 Buildings | \n\n 1,823 | \n\n \u2014 | \n\n 1,823 | \n\n 1,823 | \n
| \n Other non-current liabilities | \n\n 0 | \n\n \u2014 | \n\n 0 | \n\n 0 | \n
| \n Accounts payable and related payables | \n\n 5,634 | \n\n \u2014 | \n\n 5,634 | \n\n 5,634 | \n
| \n Other current liabilities | \n\n 1,880 | \n\n \u2014 | \n\n 1,880 | \n\n 1,880 | \n
| \n Provisions | \n\n 1,258 | \n\n \u2014 | \n\n 1,258 | \n\n 1,258 | \n
| \n Total financial liabilities | \n\n 39,834 | \n\n 559 | \n\n 39,275 | \n\n 39,834 | \n
| \n (1) | \n\n The fair value of financial assets classified as fair value through profit and loss corresponds to the market value of the assets. | \n
| \n (2) | \n\n The book amount of financial liabilities measured at amortized cost was deemed to be a reasonable estimation of fair value. | \n
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income is mainly comprised is composed of debt instruments whose contractual cash flows represent payments of interest or repayments of principal, and which are managed with a view to collecting cash flows and selling the asset. Gains and losses arising from changes in fair value are recognized in equity within the statement of comprehensive income in the period in which they occur. When such assets are derecognized, the cumulative gains and losses previously recognized in equity are reclassified to profit or loss for the period within the line items Financial income or Financial expenses. The Company did not hold this type of instrument during the periods presented in these financial statements.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss is comprised of:
\u2022instruments whose contractual cash flows represent payments of interest or repayments of principal, but which are managed other than with a view to collecting cash flows and/or selling the asset; and
\u2022instruments that management has designated as \u201cfair value through profit or loss\u201d on initial recognition.
Gains and losses arising from changes in fair value are recognized in profit or loss within the line items financial income or financial expenses.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
3.7Recoverable amount of the intangible assets and property, plant and equipment
The property, plant and equipment and intangible assets that have an established lifetime are subject to an impairment test when the recoverability of their book value is called into question by the existence of indications of impairment. An impairment is recognized in the Financial Statements up to the amount of the excess of the book value over the recoverable value of the asset. The recoverable value of an asset corresponds to its fair value minus the costs of sale or its use value, whichever is higher.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
11.5Maturity dates
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2022, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,214 | \n\n 0 | \n\n 3,176 | \n\n 2,037 | \n
| \n Corporate bonds | \n\n 7,353 | \n\n 302 | \n\n 7,051 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 3,428 | \n\n 2,195 | \n\n 1,233 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,866 | \n\n 894 | \n\n 972 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 17,861 | \n\n 3,391 | \n\n 12,433 | \n\n 2,037 | \n
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2023, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,504 | \n\n 396 | \n\n 4,277 | \n\n 831 | \n
| \n Corporate bonds | \n\n 9,131 | \n\n 9,131 | \n\n 0 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 7,474 | \n\n 7,474 | \n\n 0 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,823 | \n\n 775 | \n\n 1,048 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 23,932 | \n\n 17,777 | \n\n 5,324 | \n\n 831 | \n
Credit risk
In order to minimize credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group\u2019s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
The credit risk related to the Group\u2019s cash and cash equivalents is not significant in light of the quality of the co-contracting financial institutions.
The Group does not have significant credit risk exposure to any single customer or any group of counterparties having similar characteristics.
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
11.5Maturity dates
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2022, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,214 | \n\n 0 | \n\n 3,176 | \n\n 2,037 | \n
| \n Corporate bonds | \n\n 7,353 | \n\n 302 | \n\n 7,051 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 3,428 | \n\n 2,195 | \n\n 1,233 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,866 | \n\n 894 | \n\n 972 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 17,861 | \n\n 3,391 | \n\n 12,433 | \n\n 2,037 | \n
Maturity dates of non-derivative financial liabilities as of December\u00a031, 2023, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Conditional advances | \n\n 5,504 | \n\n 396 | \n\n 4,277 | \n\n 831 | \n
| \n Corporate bonds | \n\n 9,131 | \n\n 9,131 | \n\n 0 | \n\n 0 | \n
| \n Borrowings from Banks | \n\n 7,474 | \n\n 7,474 | \n\n 0 | \n\n 0 | \n
| \n Lease Liability | \n\n 1,823 | \n\n 775 | \n\n 1,048 | \n\n 0 | \n
| \n Total financial liabilities | \n\n 23,932 | \n\n 17,777 | \n\n 5,324 | \n\n 831 | \n
Impairment of financial assets measured at amortized cost
The main assets involved are trade receivables and others. Trade\u00a0receivables are recognized when the Company has an unconditional right to payment by the customer. Impairment losses on trade receivables and others are estimated using the expected loss method, in order to take account of the risk of payment default throughout the lifetime of the receivables. The expected credit loss is estimated collectively for all accounts receivable at each reporting date using an average expected loss rate, determined primarily on the basis of historical credit loss rates. However, that average expected loss rate may be adjusted if there are indications of a likely significant increase in credit risk. If a receivable is subject to a known credit risk, a specific impairment loss is recognized for that receivable. The amount of expected losses is recognized in the balance sheet as a reduction in the gross amount of accounts receivable. Impairment losses on accounts receivable are recognized within Operating expenses in the consolidated statement of income (loss).
3.8Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents comprise the cash that is held at the bank and petty cash as well as the short-term fixed deposits for which the maturity is less than three months.
For the purpose of establishing the statement of cash flows, cash and cash equivalents include cash in hand, demand deposits and short fixed-term deposits with banks and short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts.
Cash and cash equivalents are initially recognized at their purchase costs on the transaction date, and are subsequently measured at fair value. Changes in fair value are recognized in profit or loss.
Note 9:Cash and cash equivalents
Cash and cash equivalents items are broken down as follows:
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Total cash and cash equivalent as reported in the statements of financial position | \n\n 2,134 | \n\n 10,610 | \n
| \n Total net cash and cash equivalents as reported in the statements of cash flows | \n\n 2,134 | \n\n 10,610 | \n
The Group does not hold any short-term investment and all of its cash balances are cash at hand deposits with high-credit quality financial institutions.
3.8Cash and cash equivalents
Cash equivalents are short-term, highly liquid investments, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents comprise the cash that is held at the bank and petty cash as well as the short-term fixed deposits for which the maturity is less than three months.
For the purpose of establishing the statement of cash flows, cash and cash equivalents include cash in hand, demand deposits and short fixed-term deposits with banks and short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts.
Cash and cash equivalents are initially recognized at their purchase costs on the transaction date, and are subsequently measured at fair value. Changes in fair value are recognized in profit or loss.
3.10Derivatives
Derivatives are recorded in the statement of financial position at their fair value. Changes in fair value are recognized in profit or loss.
Transaction costs that relate to the issue of the convertible loan are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.
Convertible Bonds
The convertible bonds are financial instruments that will be or may be settled in the entity's own equity or may be settled in equity instruments of the entity.
They include a debt component and an option component, and can be classified as :
\u2022compound instruments, including a debt component and an equity component as defined by IAS 32. An instrument is qualified as an equity instrument if it can be settled by exchanging a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments;
\u2022or hybrid instruments in other cases, including a host contract (financial liability) and one or more embedded derivatives. The conversion option can be qualified as an embedded derivative and initially measured at fair value under IFRS 9 and subsequently measured at fair value through profit or loss.
EIB credit facility and warrants
The Company entered into a credit facility with EIB in November\u00a02022 and the \u20ac8m of the Tranche\u00a01 have been received on February 2023 after all conditions, in particular the issuance of share warrants to the EIB, had been met.
This financial instrument includes two instruments (i) a host contract representing a debt component (the loans) and (ii)\u00a0warrants. The two instruments issued (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants). The financial instrument includes different options too: a call option, a prepayment option and a put option. The prepayment option is not a separate derivative instrument.
The warrants, put option and call option are each classified as derivatives on own equity instruments, because the \u201cfixed-for-fixed\u201d rule under IAS\u00a032, which provides that derivatives will be classified as equity if they can only be settled by delivering a fixed number of shares in exchange for a fixed amount of cash or another financial asset, is not met (non-cash settlement option which may result in exchanging a variable number of shares, for a variable price). The derivatives are recognized at fair value through profit and loss.
The put option can only be exercised in the framework and for the purposes of a cashless exercise of the warrants, and thus cannot be exercised on a standalone basis. The put option comes into effect upon the issuance of warrants by the Issuer and remains in effect for the lifetime of the warrants. In addition, the put option is not independently transferable from the warrants. Thus, the put option is not bifurcated and it is to be considered as part of the valuation of the warrants.
The call option is exercisable by the Company, under very specific circumstances wherein the value of the warrants increase due to a takeover bid for the Company. The Company believes it is very unlikely that it will take advantage of exercising the call option. Thus, the call option has been valued at zero and does not require bifurcation. The accounting treatment and impact on the 2023 financial year is described in Note\u00a011 - Financial liabilities.
3.10Derivatives
Derivatives are recorded in the statement of financial position at their fair value. Changes in fair value are recognized in profit or loss.
Transaction costs that relate to the issue of the convertible loan are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.
Convertible Bonds
The convertible bonds are financial instruments that will be or may be settled in the entity's own equity or may be settled in equity instruments of the entity.
They include a debt component and an option component, and can be classified as :
\u2022compound instruments, including a debt component and an equity component as defined by IAS 32. An instrument is qualified as an equity instrument if it can be settled by exchanging a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments;
\u2022or hybrid instruments in other cases, including a host contract (financial liability) and one or more embedded derivatives. The conversion option can be qualified as an embedded derivative and initially measured at fair value under IFRS 9 and subsequently measured at fair value through profit or loss.
EIB credit facility and warrants
The Company entered into a credit facility with EIB in November\u00a02022 and the \u20ac8m of the Tranche\u00a01 have been received on February 2023 after all conditions, in particular the issuance of share warrants to the EIB, had been met.
This financial instrument includes two instruments (i) a host contract representing a debt component (the loans) and (ii)\u00a0warrants. The two instruments issued (loans and warrants) on the date of issue are economically and intrinsically linked according to the IFRS\u00a09 criteria, thus the transaction is analyzed as a single hybrid instrument on issue in which there is a host contract representing a debt component (the loans) and a derivative (the warrants). The financial instrument includes different options too: a call option, a prepayment option and a put option. The prepayment option is not a separate derivative instrument.
The warrants, put option and call option are each classified as derivatives on own equity instruments, because the \u201cfixed-for-fixed\u201d rule under IAS\u00a032, which provides that derivatives will be classified as equity if they can only be settled by delivering a fixed number of shares in exchange for a fixed amount of cash or another financial asset, is not met (non-cash settlement option which may result in exchanging a variable number of shares, for a variable price). The derivatives are recognized at fair value through profit and loss.
The put option can only be exercised in the framework and for the purposes of a cashless exercise of the warrants, and thus cannot be exercised on a standalone basis. The put option comes into effect upon the issuance of warrants by the Issuer and remains in effect for the lifetime of the warrants. In addition, the put option is not independently transferable from the warrants. Thus, the put option is not bifurcated and it is to be considered as part of the valuation of the warrants.
The call option is exercisable by the Company, under very specific circumstances wherein the value of the warrants increase due to a takeover bid for the Company. The Company believes it is very unlikely that it will take advantage of exercising the call option. Thus, the call option has been valued at zero and does not require bifurcation. The accounting treatment and impact on the 2023 financial year is described in Note\u00a011 - Financial liabilities.
3.11Share-based payment
Free shares (Attributions Gratuites d\u2019Actions, or \u201cAGA\u201d), stock-options (Options de souscription et/ou d\u2019achat d\u2019actions, or \u201cSO\u201d) and employee warrants (Bons de souscription de parts de cr\u00e9ateur d\u2019entreprise, or \u201cBCE\u201d) are awarded to employees or executives. Non-employee warrants (Bons de souscription d\u2019actions, or \u201cBSA\u201d) are primarily awarded to directors and scientific consultants. Pursuant to IFRS\u00a02, these awards are measured at their fair value on the date of grant. The fair value is calculated with the most relevant formula regarding the settlement and the conditions of each plan. The fair value is recorded in personnel expenses (allocated by function in the Consolidated Statement of Income) on a straight-line basis over each milestone composing the vesting period with a corresponding increase in shareholders\u2019 equity.
At each closing date, we re-examine the number of options likely to become exercisable. If applicable, the impact of the review of the estimate is recognized in the Consolidated Statement of Income with a corresponding adjustment in equity.
Note 19:Share-based payments
The Board of Directors has been authorized by the general meeting of the shareholders to grant to employees BCE, BSA, AGA and SO and to implement share options plans as follows:
\u2022with the authorization of the General Meeting of Shareholders on February\u00a05, 2013, the Board of Directors issued:
\u2014892,000 employee warrants (BCE\u00a02013-02) on July\u00a08, 2013.
\u2014328,000 non-employee warrants (BSA\u00a02013-02) on July\u00a08, 2013.
\u2014193,800 employee warrants (BCE\u00a02013-02) on April\u00a09, 2014.
\u201433,000 non-employee warrants (BSA\u00a02013-02) on April\u00a09, 2014.
\u2022with the authorization of the General Meeting of Shareholders on June\u00a025, 2014, the Board of Directors issued 60,000 employee warrants (BCE\u00a02014-06) on December\u00a03, 2014.
\u2022with the authorization of the General Meeting of Shareholders on June\u00a029, 2015, the Board of Directors issued:
\u2014121,000 non-employee warrants (BSA\u00a02015-06) on July\u00a07, 2015.
\u2014733,298 employee warrants (BCE\u00a02015-06) on July\u00a07, 2015.
\u2022with the authorization of the General Meeting of Shareholders on May\u00a019, 2016, the Board of Directors issued:
\u2014205,000 non-employee warrants (BSA\u00a02016) on July\u00a026, 2016.
\u2014766,000 free shares (AGA\u00a02016) on July\u00a026, 2016.
\u2014593,500 free shares (AGA\u00a02016) on July\u00a027, 2017.
\u201472,500 free shares (AGA\u00a02016) on December\u00a019, 2017.
\u2014165,000 non-employee warrants (BSA\u00a02016) on July\u00a027, 2017.
\u2014220,000 stock options (SO\u00a02017) on July\u00a027, 2017.
\u2014300,000 stock options (SO\u00a02017) on December\u00a019, 2017.
\u2014175,000 stock options (SO\u00a02018) on March\u00a014, 2018.
\u2022with the authorization of the General Meeting of Shareholders on April\u00a012, 2018, the Board of Directors issued:
\u2014380,000 free shares (AGA\u00a02018) on September\u00a018, 2018.
\u201420,000 non-employee warrants (BSA\u00a02018) on September\u00a018, 2018.
\u201430,000 stock options (SO\u00a02018-1) on September\u00a018, 2018.
\u2014135,000 free shares (AGA\u00a02018) on December\u00a019, 2018.
\u2014610,000 free shares (AGA\u00a02018) on July\u00a023, 2019.
\u20141,007,500 free shares (AGA\u00a02020) on January\u00a028, 2020.
\u2014155,000 stock options (SO\u00a02018-2) on September\u00a022, 2020.
\u201420,000 stock options (SO\u00a02018-3) on February\u00a025, 2021.
\u2022with the authorization of the General Meeting of Shareholders on June\u00a011, 2019, the Board of Directors issued:
\u2014105,000 non-employee warrants (BSA\u00a02019) on July\u00a023, 2019.
\u201440,000 non-employee warrants (BSA\u00a02019) on January\u00a028, 2020.
\u2022with the authorization of the General Meeting of Shareholders on April\u00a029, 2020, the Board of Directors issued:
\u201485,000 free shares (AGA\u00a02020) on September\u00a022, 2020.
\u201480,000 non-employee warrants (BSA\u00a02020) on November\u00a02, 2020.
\u201440,000 non-employee warrants (BSA\u00a02021) on February\u00a025, 2021.
\u2014880,000 free shares (AGA\u00a02021) on February\u00a025, 2021.
\u2022with the authorization of the General Meeting of Shareholders on April\u00a029, 2021, the Board of Directors issued:
\u201430,000 non-employee warrants (BSA\u00a02021-2) on October\u00a021, 2021.
\u2014380,000 free shares (AGA\u00a02021) on October\u00a021, 2021.
\u201480,000 non-employee warrants (BSA\u00a02021-3) on December\u00a014, 2021.
\u20141,957,500 free shares (AGA\u00a02022-1 et AGA\u00a02022-2) on May\u00a023, 2022.
\u201440,000 non-employee warrants (BSA 2022-1) on May\u00a023, 2022.
\u2014250,000 stock-options (SO\u00a02022-1) on May\u00a023, 2022.
\u2022with the authorization of the General Meeting of Shareholders on May\u00a025, 2022, the Board of Directors issued:
\u2014290,000 free shares (AGA\u00a02022-3) on October\u00a020,2022.
\u201495,000 non-employee warrants (BSA\u00a02022-2) on October\u00a020,2022. These warrants have not yet been subscribed by the beneficiaries as of December\u00a031, 2022. These non-employee warrants were not yet subscribed as of December\u00a031, 2022.
\u2022with the authorization of the General Meeting of Shareholders on May\u00a025, 2022, the Board of Directors issued:
\u20141,141,096 warrants to the EIB as condition precedent to the drawdown of the first tranche of the credit facility signed in December\u00a02022.
\u201440,000 non-employee warrants (BSA\u00a02023) on March\u00a023, 2023.
\u20142,070,000 free shares (AGA\u00a02023) on March\u00a023, 2023.
\u2014310,000 stock-options (SO\u00a02023) on March\u00a023,2023.
19.2Non-employee warrants (BSA)
Vesting schedule
BSA 2013-02 and BSA 2015-06 granted may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to 1/4\u00a0on the first anniversary of the date of grant;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the first anniversary of the date of grant; and
\u2022at the latest within 10\u00a0years from the date of grant.
BSA 2016 granted may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to 100%\u00a0on the first anniversary of the date of grant; and
\u2022at the latest within 10\u00a0years from the date of grant.
BSA 2017, 2018, 2019 and 2020 granted may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to 1/4\u00a0on the date of the grant;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the date of grant; and
\u2022at the latest within 7\u00a0years from the date of grant.
BSA 2021, 2022-1, 2022-2 and 2023 granted may be exercised by the by the beneficiary on the basis of the following vesting schedule:
\u20221/3 as from the first anniversary of the allotment date;
\u20221/3 as from the second anniversary of the allotment date; and
\u20221/3 as from the third anniversary of the allotment date.
Details and main characteristics of the BSA granted to date
| \n \n | \n\n BSA 2013 | \n\n BSA 2013 | \n\n BSA 2015 | \n\n BSA 2016 | \n\n BSA 2017 | \n\n BSA 2018 | \n\n BSA 2019 | \n\n BSA 2020-1 | \n\n BSA 2020-2 | \n
| \n Date of grant | \n\n July 8, 2013 | \n\n April 9, 2014 | \n\n July 8, 2015 | \n\n July 26, 2016 | \n\n July 27, 2017 | \n\n September 18, 2018 | \n\n July 23, 2019 | \n\n January 28, 2020 | \n\n November 2, 2020 | \n
| \n Plan expiration date | \n\n July 7, 2023 | \n\n April 8, 2024 | \n\n July 7, 2025 | \n\n July 25, 2023 | \n\n July 26, 2024 | \n\n September 17, 2025 | \n\n July 22, 2026 | \n\n January 27, 2027 | \n\n November 1, 2027 | \n
| \n Number of warrants initially granted | \n\n 328,000 | \n\n 33,000 | \n\n 121,000 | \n\n 205,000 | \n\n 165,000 | \n\n 20,000 | \n\n 105,000 | \n\n 40,000 | \n\n 80,000 | \n
| \n Exercise price | \n\n \u20ac0.025 | \n\n \u20ac0.025 | \n\n \u20ac3.275 | \n\n \u20ac8.08 | \n\n \u20ac5.04 | \n\n \u20ac2.22 | \n\n \u20ac1.45 | \n\n \u20ac3.48 | \n\n \u20ac3.99 | \n
| \n Share entitlement per warrant | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Valuation method | \n\n Black & Scholes | \n||||||||
| \n Expected volatility | \n\n 42.50% | \n\n 42.50% | \n\n 76.49% | \n\n 62.46% | \n\n 49,37% | \n\n 58.02% | \n\n 78.5% | \n\n 85.7% | \n\n 83.6% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n
| \n Subscription price per warrant | \n\n \u20ac0.08 | \n\n \u20ac0.08 | \n\n \u20ac0.25 | \n\n \u20ac0.65 | \n\n \u20ac0.40 | \n\n \u20ac0.18 | \n\n \u20ac0.13 | \n\n \u20ac0.30 | \n\n \u20ac0.13 | \n
| \n Fair value per warrant (subscription price deducted) | \n\n \u20ac0.36 | \n\n \u20ac0.36 | \n\n \u20ac5.31 | \n\n \u20ac2.94 | \n\n \u20ac1.64 | \n\n \u20ac2.02 | \n\n \u20ac1.83 | \n\n \u20ac1.84 | \n\n \u20ac5.09 | \n
| \n \n | \n\n BSA 2021-1 | \n\n BSA 2021-2 | \n\n BSA 2021-3 | \n\n BSA 2022-1 | \n\n BSA 2022-2 | \n\n BSA 2023-1 | \n\n BSA 2023-2 | \n
| \n Date of grant | \n\n February 25, 2021 | \n\n October 21, 2021 | \n\n December\u00a014, 2021 | \n\n May 23, 2022 | \n\n October 20, 2022 | \n\n January 23, 2023 | \n\n March 23, 2023 | \n
| \n Plan expiration date | \n\n February 24, 2028 | \n\n October 20, 2028 | \n\n December\u00a013, 2028 | \n\n May 22, 2029 | \n\n October 19, 2029 | \n\n January 22, 2043 | \n\n March 22, 2030 | \n
| \n Number of warrants initially granted | \n\n 40,000 | \n\n 30,000 | \n\n 65,000 | \n\n 40,000 | \n\n 80,000 | \n\n 1,141,096 | \n\n 40,000 | \n
| \n Exercise price | \n\n \u20ac7.19 | \n\n \u20ac6.80 | \n\n \u20ac 5.47 | \n\n \u20ac1.85 | \n\n \u20ac3.32 | \n\n \u20ac3.43 | \n\n \u20ac2.65 | \n
| \n Share entitlement per warrant | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Valuation method | \n\n Black & Scholes | \n\n Black & Scholes | \n\n Black & Scholes | \n||||
| \n Expected volatility | \n\n 83.7% | \n\n 92.4% | \n\n 92.5% | \n\n 92.4% | \n\n 91.5% | \n\n 78.1% | \n\n 75.3% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n
| \n Subscription price per warrant | \n\n \u20ac0.63 | \n\n \u20ac0.59 | \n\n \u20ac 2.16 | \n\n \u20ac 0.16 | \n\n \u20ac 0.29 | \n\n \u20ac 0.03 | \n\n \u20ac 0.21 | \n
| \n Fair value per warrant (subscription price deducted) | \n\n \u20ac5.61 | \n\n \u20ac3.46 | \n\n \u20ac 1.03 | \n\n \u20ac 1.01 | \n\n \u20ac 2.25 | \n\n \u20ac 2.99 | \n\n \u20ac 1.22 | \n
Changes in the balances of BSA
| \n \n | \n\n BSA 2013 | \n\n BSA 2015 | \n\n BSA 2016 | \n\n BSA 2017 | \n\n BSA 2018 | \n\n BSA 2019 | \n\n BSA 2020-1 | \n\n BSA 2020-2 | \n\n BSA 2021-1 | \n
| \n Balance outstanding at January 1, 2023 | \n\n 33,000 | \n\n 121,000 | \n\n 158,000 | \n\n 135,000 | \n\n 15,000 | \n\n 83,333 | \n\n 40,000 | \n\n 80,000 | \n\n 40,000 | \n
| \n Granted during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Exercised during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Forfeited during the period | \n\n (33,000) | \n\n (7,000) | \n\n (158,000) | \n\n (10,000) | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Balance outstanding at December\u00a031, 2023 | \n\n 0 | \n\n 114,000 | \n\n 0 | \n\n 125,000 | \n\n 15,000 | \n\n 83,333 | \n\n 40,000 | \n\n 80,000 | \n\n 40,000 | \n
| \n Of which exercisable | \n\n 0 | \n\n 114,000 | \n\n 0 | \n\n 125,000 | \n\n 15,000 | \n\n 83,333 | \n\n 40,000 | \n\n 80,000 | \n\n 26,667 | \n
| \n \n | \n\n BSA 2021-2 | \n\n BSA 2021-3 | \n\n BSA 2022-1 | \n\n BSA 2022-2 | \n\n BSA 2023-1 | \n\n BSA 2023-2 | \n\n TOTAL | \n
| \n Balance outstanding at January 1, 2023 | \n\n 30,000 | \n\n 65,000 | \n\n 40,000 | \n\n 80,000 | \n\n \u2014 | \n\n \u2014 | \n\n 920,333 | \n
| \n Granted during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n 1,141,096 | \n\n 40,000 | \n\n 1,181,096 | \n
| \n Exercised during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n 0 | \n
| \n Forfeited during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n (208,000) | \n
| \n Balance outstanding at December\u00a031, 2023 | \n\n 30,000 | \n\n 65,000 | \n\n 40,000 | \n\n 80,000 | \n\n 1,141,096 | \n\n 40,000 | \n\n 1,893,429 | \n
| \n Of which exercisable | \n\n 20,000 | \n\n 43,333 | \n\n 13,333 | \n\n 26,667 | \n\n 0 | \n\n 0 | \n\n 587,333 | \n
19.3Free shares (AGA)
Vesting schedule
In July\u00a02016, the Company\u2019s Board of Directors granted an aggregate of 766,000 free shares (AGA 2016) as follows:
\u2022546,000 AGA 2016 were fully acquired by key managers, including Mr. Bernard Gilly, the Chief Executive Officer of the Company, subject to the achievement of the following performance criteria no later than July\u00a02018:
\u2014291,000 of these free shares were acquired at the completion of enrollment in RESCUE and REVERSE clinical trials in July\u00a02017; and
\u2014255,000 free shares were acquired at the enrollment of the first patient in a Phase I/II clinical trial of GS030 in RP in July\u00a02018.
\u202256,000 AGA 2016 were fully acquired in July\u00a02017 (one year after their grant date).
The AGA 2016 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
In July\u00a02017 and in December\u00a02017, the Company\u2019s Board of\u00a0Directors granted an aggregate of 666,000 additional AGA\u00a02016 as follows:
\u2022544,500 AGA 2016 were acquired by key managers, including Mr. Bernard Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below no later than July\u00a02019:
\u2014281,250 of these free shares were acquired upon receipt of the definitive results of the GS010 REVERSE clinical trial; and
\u2014the remaining 263,250 free shares were acquired upon completion of the enrollment of 50% of the patients of a Phase I/II clinical trial of GS030 in RP, on May\u00a017, 2019.
\u202232,500 AGA 2016 were fully acquired on July\u00a02018 (one\u00a0year after their grant date).
The AGA 2016 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
In September\u00a02018 and December\u00a02018, the Company\u2019s Board of Directors granted an aggregate of 515,000 additional AGA\u00a02018 as follows:
\u2022320,000 AGA\u00a02018, were fully acquired by key managers, including Mr. Bernard Gilly, subject to (i) a one\u00a0year acquisition period from the date of grant and (ii) achievement of the performance criteria described below no later than September\u00a02020:
\u2014160,000 of these free shares were acquired upon completion of the enrollment of the patients of a Phase I/II clinical trial of GS030 in RP on July\u00a029, 2020; and
\u2014the remaining 160,000 free shares were acquired upon of the production of the first PPQ Batch of GS010 on September\u00a01, 2020.
\u202240,000 AGA 2018 were fully acquired on September\u00a018, 2019 (one year after their grant date).
The AGA 2018 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
In July\u00a02019, the Company\u2019s Board of Directors granted an aggregate of 610,000 additional AGA\u00a02018 as follows:
\u2022547,500 AGA\u00a02018 were fully acquired by key managers, including Mr. Bernard Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below no later than July\u00a02021:
\u2014273,750 of these free shares were acquired upon the filing with the European Medicines Agency (EMA) of the\u00a0application for Market Authorization (MA) at the European level of LUMEVOQ\u00ae, on September\u00a014, 2020;
\u2014the remaining 273,750 of these free shares were acquired upon completion of the enrollment of the patients of a Phase I/II clinical trial of GS030 in RP on July\u00a029, 2020; and
\u202227,500 AGA\u00a02018 were fully acquired in July\u00a02020 (one year after their grant date).
The AGA\u00a02018 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
With the authorization of the General Meeting of Shareholders on April\u00a012, 2018 and of the General Meeting of Shareholders on April\u00a029, 2020, the Board of Directors granted 1,007,500\u00a0free shares (AGA\u00a02020) on January\u00a028, 2020 and 85,000 (AGA\u00a02020) on September\u00a022, 2020, respectively, among which:
\u2022437,500 AGA\u00a02020 were fully acquired on January\u00a028, 2021 (one year after their grant date). The new shares were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
\u2022As per the original plan, 652,500 (of which 347,500 were cancelled) AGA 2020 might have been fully acquired by key managers, including Mr. Gilly, subject to (i) a one year acquisition period from the date of grant and (ii)\u00a0achievement of the performance criteria described below no later than January\u00a028, 2023 as amended by the Board of Directors on September 21, 2021:
\u2014326,250 of these free shares could have been acquired upon the approval with the European Medicines Agency (EMA) of the application for market authorization (MA) at the European level of the LUMEVOQ\u00ae;
\u2014326,250 of these free shares could have been acquired upon the filing with the Food and Drug Administration (FDA) of the application for Biologics License Application (BLA) for the LUMEVOQ\u00ae.
The Group has considered that the second Performance Condition could not be achieved before the new deadline of Completion, i.e. January\u00a028, 2023 and therefore has decided to\u00a0cancel 50% of the Performance Bonus Share Plans on December\u00a031, 2021.
With the authorization of the General Meeting of Shareholders on April\u00a029, 2020, the Board of Directors granted 880,000 free shares (AGA 2021) on February\u00a025, 2021, to employees of the Company, of which:
\u2022845,000 may be fully acquired by key managers, including Mr. Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on February\u00a025, 2023:
\u201450% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u201450% will be acquired upon at the completion of the recruitment of the extension cohort of the Phase I/II clinical trial with GS030 in retinisis pigmentosa;
\u202235,000 are not subject to performance conditions and were fully acquired in February\u00a02021 (one year after their grant date)
With the authorization of the General Meeting of Shareholders on April\u00a029, 2021, the Board of Directors granted 380,000\u00a0free shares (AGA\u00a02021) on October\u00a021, 2021 to employees of the Company. They are subject to (i)\u00a0a two\u00a0years acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on February 25, 2023:
\u202250% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u202250% will be acquired upon at the completion of the recruitment of the extension cohort of the Phase I/II clinical trial with GS030 in retinisis pigmentosa.
Due to the manufacturing issues at the Company\u2019s partner in the United States, the performance conditions of free shares plans granted to management in 2020 and 2021 were unlikely to be met before the deadlines and these plans were entirely voided in 2021 and 2022.
With the authorization of the General Meeting of Shareholders on April\u00a029, 2021, the Board of Directors granted 1,957,500 free shares (AGA\u00a02022-1 and AGA\u00a02022-2) on May\u00a023, 2022, to employees of the Company, of which:
\u20221,892,500 may be fully acquired by key managers, including Mr. Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on May\u00a025, 2025:
\u201450% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u201450% will be acquired upon at the receipt of Topline results for all patients in the Pioneer Phase\u00a0I/II clinical trial of GS030;
\u202265,000 are not subject to performance conditions, but subject to a two-year vesting period.
With the authorization of the General Meeting of Shareholders on May\u00a025, 2022, the Board of Directors granted 290,000 free shares (AGA\u00a02022-3) on October 20, 2022, to employees of the Company, of which:
\u2022290,000 may be fully acquired by key managers, subject to (i)\u00a0a one-year acquisition period from the date of grant and (ii)\u00a0achievement of the performance criteria described below at the latest on May\u00a025, 2025:
\u201450% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u201450% will be acquired upon at the receipt of Topline results for all patients in the Pioneer Phase I/II clinical trial of GS030.
With the authorization of the General Meeting of Shareholders on May\u00a025, 2022, the Board of Directors granted 2,070,000 free shares (AGA\u00a02023-1 and AGA\u00a02023-2) on March\u00a023, 2023, to employees of the Company, of which:
\u20221,300,000 may be fully acquired by key managers, including Mr. Gilly, subject to (i) a one\u00a0year acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on March\u00a023, 2025:
\u201450% will be acquired upon the achievement and continued fulfillment of global and local quality requirements as holder of a marketing authorization; and
\u201450% will be acquired upon at the Completion of the examination of LUMEVOQ\u00ae by the European Medicines Agency (EMA) with a view to a decision by the Committee for Medicinal Products for Human Use (CHMP);
\u2022770,000 are not subject to performance conditions, but subject to a two-year vesting period.
Details and main characteristics of the AGA granted to date
| \n \n | \n\n AGA 2016 | \n\n AGA 2016 | \n\n AGA 2016 | \n\n AGA 2018 | \n\n AGA 2018 | \n\n AGA 2019 | \n\n AGA 2020 | \n\n AGA 2020 | \n
| \n Date of grant | \n\n July 26,2016 | \n\n July 27, 2017 | \n\n December\u00a019, 2017 | \n\n September 18, 2018 | \n\n December\u00a019,2018 | \n\n July 23,2019 | \n\n January 28, 2020 | \n\n September 22, 2020 | \n
| \n Number of Share Awards initially granted | \n\n 766,000 | \n\n 593,500 | \n\n 72,500 | \n\n 380,000 | \n\n 135,000 | \n\n 610,000 | \n\n 1,007,500 | \n\n 85,000 | \n
| \n Vesting period (in Years) | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Grant date Fair-value | \n\n \u20ac8.08 | \n\n \u20ac5.12 | \n\n \u20ac5.55 | \n\n \u20ac2.10 | \n\n \u20ac4.04 | \n\n \u20ac1.80 | \n\n \u20ac3.72 | \n\n \u20ac3.00 | \n
| \n Performance conditions (1) | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n
| \n (1) | \n\n Performance conditions concern only grants to key managers, other employees are only subject to a service condition. | \n
| \n \n | \n\n AGA 2021-1 | \n\n AGA 2021-2 | \n\n AGA 2022-1 | \n\n AGA 2022-2 | \n\n AGA 2023 | \n
| \n Date of grant | \n\n February 25, 2021 | \n\n October 21, 2021 | \n\n May 23, 2022 | \n\n October 20, 2022 | \n\n March 23, 2023 | \n
| \n Number of Share Awards initially granted | \n\n 880,000 | \n\n 380,000 | \n\n 1,957,500 | \n\n 290,000 | \n\n 2,070,000 | \n
| \n Vesting period (in Years) | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Grant date Fair-value | \n\n \u20ac8.87 | \n\n \u20ac7.16 | \n\n \u20ac 2.13 | \n\n \u20ac 3.43 | \n\n \u20ac 2.37 | \n
| \n Performance conditions (1) | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n
| \n (1) | \n\n Performance conditions concern only grants to key managers, other employees are only subject to a service condition. | \n
Changes in the balances of AGA
| \n \n | \n\n AGA 2022-1 | \n\n AGA 2022-2 | \n\n AGA 2023 | \n\n TOTAL | \n
| \n Balance outstanding at January 1, 2023 | \n\n 1,817,500 | \n\n 240,000 | \n\n \u2014 | \n\n 2,057,500 | \n
| \n Granted during the period | \n\n \u2014 | \n\n \u2014 | \n\n 2,070,000 | \n\n 2,070,000 | \n
| \n Vested during the period | \n\n \u2014 | \n\n \u2014 | \n\n \n | \n\n 0 | \n
| \n Forfeited during the period | \n\n (745,000) | \n\n \u2014 | \n\n (557,500) | \n\n (1,302,500) | \n
| \n Balance outstanding at December\u00a031, 2023 | \n\n 1,072,500 | \n\n 240,000 | \n\n 1,512,500 | \n\n 2,825,000 | \n
19.4Stock options (SO)
Vesting schedule
The SO\u00a02017 granted on July\u00a027, 2017, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to \u00bc on the date of the grant;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the date of grant; and
\u2022at the latest within seven\u00a0years from the date of grant.
The SO\u00a02017 granted on December\u00a019, 2017, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to \u00bc on the date of the grant;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the date of grant; and
\u2022at the latest within seven\u00a0years from the date of grant.
The SO\u00a02018 granted on March\u00a014, 2018, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u202225% of the Options shall vest on the first anniversary of the Vesting Commencement Date;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the date of grant; and
\u2022at the latest within seven\u00a0years from the date of grant.
The SO\u00a02018 granted on December\u00a019, 2018, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u202225% of the Options shall vest on the first anniversary of the Vesting Commencement Date;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the date of grant; and
\u2022at the latest within seven\u00a0years from the date of grant.
The SO\u00a02020 granted on September\u00a022, 2020, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u202225% of the Options shall vest on the first anniversary of the Vesting Commencement Date;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the date of grant; and
\u2022at the latest within seven\u00a0years from the date of grant.
The SO\u00a02021 granted on February\u00a025, 2021, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to 1/3 of the SO\u00a02021 on the first anniversary of the date of grant;
\u20221/3 of the SO\u00a02021 will become exercisable on the second anniversary of the date of grant and
\u2022the remaining 1/3 will become exercisable on the third anniversary of the date of grant; and
\u2022at the latest within 7 years from the date of grant.
The SO\u00a02022 granted on May\u00a023, 2022, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u202225% of the Options shall vest on the first anniversary of the Vesting Commencement Date;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month as from the first anniversary of the grant date; and
\u2022at the latest within 7 years from the date of grant.
The SO\u00a02023 granted on March\u00a023, 2023, may be exercised by the beneficiary on the basis of the following vesting schedule:
\u202225% of the Options shall vest on the first anniversary of the Vesting Commencement Date;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month as from the first anniversary of the grant date, and
\u2022at the latest within 7\u00a0years from the date of grant.
Details and main characteristics of the SO granted to date
| \n \n | \n\n SO 2017 | \n\n SO 2017 | \n\n SO 2017 | \n\n SO 2018 | \n
| \n Date of grant | \n\n July 27, 2017 | \n\n December\u00a019,2017 | \n\n March 14, 2018 | \n\n September 18, 2018 | \n
| \n Plan expiration date | \n\n July 26, 2024 | \n\n December\u00a018,2024 | \n\n March 13, 2025 | \n\n September 17, 2025 | \n
| \n Number of warrants initially granted | \n\n 220,000 | \n\n 300,000 | \n\n 175,000 | \n\n 30,000 | \n
| \n Exercise price | \n\n \u20ac 5.04 | \n\n \u20ac 5.55 | \n\n \u20ac 6.98 | \n\n \u20ac 2.19 | \n
| \n Share entitlement per stock option | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Valuation method | \n\n Black - Scholes | \n|||
| \n Expected volatility | \n\n 51.09% | \n\n 50.36% | \n\n 48.75% | \n\n 58.02% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n
| \n Fair value per option | \n\n \u20ac2.09 | \n\n \u20ac2.20 | \n\n \u20ac2.63 | \n\n \u20ac0.91 | \n
| \n \n | \n\n SO 2020 | \n\n SO 2021 | \n\n SO 2022 | \n\n SO 2023 | \n
| \n Date of grant | \n\n September 22,2020 | \n\n February 25,2021 | \n\n May 23, 2022 | \n\n March 23, 2023 | \n
| \n Plan expiration date | \n\n September 21, 2027 | \n\n February 24,2028 | \n\n May 22, 2029 | \n\n March 22, 2030 | \n
| \n Number of warrants initially granted | \n\n 155,000 | \n\n 20,000 | \n\n 250,000 | \n\n 310,000 | \n
| \n Exercise price | \n\n \u20ac 2.82 | \n\n \u20ac 7.51 | \n\n \u20ac 1.99 | \n\n \u20ac 2.65 | \n
| \n Share entitlement per stock option | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Valuation method | \n\n Black - Scholes | \n|||
| \n Expected volatility | \n\n 83.82% | \n\n 83.70% | \n\n 92.14% | \n\n 75.35% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n
| \n Fair value per option | \n\n \u20ac1.91 | \n\n \u20ac5.77 | \n\n \u20ac1.43 | \n\n \u20ac1.38 | \n
Changes in the balances of SO
| \n \n | \n\n SO 2022 | \n\n SO 2023 | \n\n TOTAL | \n
| \n Balance outstanding at January 1, 2023 | \n\n 250,000 | \n\n \u2014 | \n\n 250,000 | \n
| \n Granted during the period | \n\n \u2014 | \n\n 310,000 | \n\n 310,000 | \n
| \n Exercised during the period | \n\n \u2014 | \n\n \u2014 | \n\n 0 | \n
| \n Forfeited during the period | \n\n (20,000) | \n\n (10,000) | \n\n (30,000) | \n
| \n Balance outstanding at December\u00a031, 2023 | \n\n 230,000 | \n\n 300,000 | \n\n 530,000 | \n
| \n Of which exercisable | \n\n 91,042 | \n\n \u2014 | \n\n 91,042 | \n
19.5Reconciliation with P&L share-based expenses
| \n In thousands of Euros | \n\n As of December\u00a031, 2023 | \n\n As of December\u00a031, 2022 | \n||||||
| \n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n\n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n|
| \n Non-Employee Warrants (BSA) | \n\n 107 | \n\n 183 | \n\n 0 | \n\n 290 | \n\n 115 | \n\n 179 | \n\n 0 | \n\n 294 | \n
| \n Employee Warrants (BCE) | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n
| \n Free Shares (AGA) | \n\n 52 | \n\n (625) | \n\n 596 | \n\n 23 | \n\n (861) | \n\n (2,609) | \n\n (142) | \n\n (3,612) | \n
| \n Stock-Options (SO) | \n\n (2) | \n\n 277 | \n\n 0 | \n\n 274 | \n\n (163) | \n\n 117 | \n\n 0 | \n\n (46) | \n
| \n Share-based payment expense | \n\n 157 | \n\n (165) | \n\n 596 | \n\n 587 | \n\n (909) | \n\n (2,313) | \n\n (142) | \n\n (3,364) | \n
3.11Share-based payment
Free shares (Attributions Gratuites d\u2019Actions, or \u201cAGA\u201d), stock-options (Options de souscription et/ou d\u2019achat d\u2019actions, or \u201cSO\u201d) and employee warrants (Bons de souscription de parts de cr\u00e9ateur d\u2019entreprise, or \u201cBCE\u201d) are awarded to employees or executives. Non-employee warrants (Bons de souscription d\u2019actions, or \u201cBSA\u201d) are primarily awarded to directors and scientific consultants. Pursuant to IFRS\u00a02, these awards are measured at their fair value on the date of grant. The fair value is calculated with the most relevant formula regarding the settlement and the conditions of each plan. The fair value is recorded in personnel expenses (allocated by function in the Consolidated Statement of Income) on a straight-line basis over each milestone composing the vesting period with a corresponding increase in shareholders\u2019 equity.
At each closing date, we re-examine the number of options likely to become exercisable. If applicable, the impact of the review of the estimate is recognized in the Consolidated Statement of Income with a corresponding adjustment in equity.
3.12Financial liabilities
Borrowings and other financial liabilities, excepted for derivative financial liabilities (see upon), are measured initially at their fair value and then at amortized cost, calculated on the basis of the effective interest rate (\u201cEIR\u201d) method.
The transaction expenses that are directly attributable to the acquisition or to the issue of a financial liability reduce that financial liability. These expenses are then amortized actuarially over the lifetime of the liability, on the basis of the EIR.
The EIR is the rate that equalizes the anticipated flow of future cash outflows with the current net book value of the financial liability in order to deduct its amortized cost therefrom.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. The subsidy is presented as a differed income which is amortized in the P&L over the same period.
Other financial liabilities include trade accounts payable, which are measured at fair value (which in most cases equates to face value) on initial recognition, and subsequently at amortized cost.
3.13Research tax credit, subsidies and conditional advances
Research tax credit
The research tax credit (Cr\u00e9dit d\u2019Imp\u00f4t Recherche, or \u201cCIR\u201d) (the \u201cResearch Tax Credit\u201d) is granted to companies by the French tax authorities in order to encourage them to conduct technical and scientific research. Companies that prove that they have\u00a0expenditures that meet the required criteria (research expenditures located in France or, since January\u00a01, 2005, within the European Community or in another State that is a party to\u00a0the Agreement on the European Economic Area that has\u00a0concluded a tax treaty with France that contains an administrative assistance clause) receive a tax credit that can be used for the payment of the corporate tax due for the fiscal year in which the expenditures were made and the next three fiscal years, or, as applicable, can be reimbursed in cash. The expenditures taken into account for the calculation of the Research Tax Credit involve only research expenses.
The Company has received the Research Tax Credit since its inception.
The Company received the reimbursement of the Research Tax Credit for the year 2022 in July\u00a02023 for an amount of \u20ac2,176\u00a0K. It will request the reimbursement of the 2023 Research Tax Credit in 2024 under the Community tax rules for small and medium firms in compliance with the regulatory texts in effect for the amount of \u20ac1,697\u00a0K.
The CIR is presented under other income in the Consolidated Statement of Income (Loss) as it meets the definition of government grant as defined in IAS\u00a020 Accounting for Government Grants and Disclosure of Government Assistance.
Subsidies and conditional advances
Due to the innovative nature of its product candidate development programs, the Company has benefited from certain sources of financial assistance from Bpifrance Financement whose mission is to provide financial assistance and support to emerging French enterprises to facilitate the development and commercialization of innovative technologies.
The funds received by the Company are intended to finance its research and development efforts and the recruitment of specific personnel. The Company has received such funding in the form of non-refundable subsidies and conditional advances.
Subsidies
Subsidies received are grants that are not repayable by the Company and are recognized in the Financial Statements where there exists reasonable assurance that the Company will comply with the conditions attached to the subsidies and the subsidies will be received.
Subsidies that are upfront payments are presented as deferred revenue and recognized ratably through income over the duration of the research program to which the subsidy relates.
A public subsidy that is to be received either as compensation for expenses or for losses already incurred, or for immediate financial support of the Company without associated future costs, is recognized in the Financial Statements as other income for the period in which the grant is classified as a receivable.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. This finance cost is netted with the impact of the amortization of the subsidy in the P&L.
Conditional advances
Funds received from Bpifrance Financement in the form of conditional advances are recognized as financial liabilities, as the Company has a contractual obligation to reimburse Bpifrance Financement based on a repayment schedule. Each advance is made to fund a specific development milestone. Details concerning conditional advances are provided in Note\u00a011. Receipts and reimbursements of conditional advances are reflected as cash flows from financing activities in the Consolidated Statement of Cash Flows.
The rate used to determine the amount recognized annually as a finance cost, the EIR takes into account the estimated future cash flows.
In the event of a change in payment schedule of the stipulated repayments of the conditional advances, the Company recalculates the net book value of the debt resulting from the discounting of the anticipated new future cash flows at the initial EIR. The adjustment that results therefrom is recognized in the Consolidated Statement of Income (Loss) for the period during which the modification is recognized.
The conditional advance that can be subject to this type of\u00a0modification is the advance received from Bpifrance Financement, presented in Note\u00a011.2.
3.13Research tax credit, subsidies and conditional advances
Research tax credit
The research tax credit (Cr\u00e9dit d\u2019Imp\u00f4t Recherche, or \u201cCIR\u201d) (the \u201cResearch Tax Credit\u201d) is granted to companies by the French tax authorities in order to encourage them to conduct technical and scientific research. Companies that prove that they have\u00a0expenditures that meet the required criteria (research expenditures located in France or, since January\u00a01, 2005, within the European Community or in another State that is a party to\u00a0the Agreement on the European Economic Area that has\u00a0concluded a tax treaty with France that contains an administrative assistance clause) receive a tax credit that can be used for the payment of the corporate tax due for the fiscal year in which the expenditures were made and the next three fiscal years, or, as applicable, can be reimbursed in cash. The expenditures taken into account for the calculation of the Research Tax Credit involve only research expenses.
The Company has received the Research Tax Credit since its inception.
The Company received the reimbursement of the Research Tax Credit for the year 2022 in July\u00a02023 for an amount of \u20ac2,176\u00a0K. It will request the reimbursement of the 2023 Research Tax Credit in 2024 under the Community tax rules for small and medium firms in compliance with the regulatory texts in effect for the amount of \u20ac1,697\u00a0K.
The CIR is presented under other income in the Consolidated Statement of Income (Loss) as it meets the definition of government grant as defined in IAS\u00a020 Accounting for Government Grants and Disclosure of Government Assistance.
Subsidies and conditional advances
Due to the innovative nature of its product candidate development programs, the Company has benefited from certain sources of financial assistance from Bpifrance Financement whose mission is to provide financial assistance and support to emerging French enterprises to facilitate the development and commercialization of innovative technologies.
The funds received by the Company are intended to finance its research and development efforts and the recruitment of specific personnel. The Company has received such funding in the form of non-refundable subsidies and conditional advances.
Subsidies
Subsidies received are grants that are not repayable by the Company and are recognized in the Financial Statements where there exists reasonable assurance that the Company will comply with the conditions attached to the subsidies and the subsidies will be received.
Subsidies that are upfront payments are presented as deferred revenue and recognized ratably through income over the duration of the research program to which the subsidy relates.
A public subsidy that is to be received either as compensation for expenses or for losses already incurred, or for immediate financial support of the Company without associated future costs, is recognized in the Financial Statements as other income for the period in which the grant is classified as a receivable.
The amount resulting from the benefit of financial liabilities that do not bear interest at market rates is considered a subsidy. This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost. This finance cost is netted with the impact of the amortization of the subsidy in the P&L.
Conditional advances
Funds received from Bpifrance Financement in the form of conditional advances are recognized as financial liabilities, as the Company has a contractual obligation to reimburse Bpifrance Financement based on a repayment schedule. Each advance is made to fund a specific development milestone. Details concerning conditional advances are provided in Note\u00a011. Receipts and reimbursements of conditional advances are reflected as cash flows from financing activities in the Consolidated Statement of Cash Flows.
The rate used to determine the amount recognized annually as a finance cost, the EIR takes into account the estimated future cash flows.
In the event of a change in payment schedule of the stipulated repayments of the conditional advances, the Company recalculates the net book value of the debt resulting from the discounting of the anticipated new future cash flows at the initial EIR. The adjustment that results therefrom is recognized in the Consolidated Statement of Income (Loss) for the period during which the modification is recognized.
The conditional advance that can be subject to this type of\u00a0modification is the advance received from Bpifrance Financement, presented in Note\u00a011.2.
3.14Retirement pension obligations
The employees of the Company receive the retirement benefits stipulated by law in France:
\u2022compensation paid by the Company to employees upon their retirement (defined-benefit plan) and;
\u2022a payment of retirement pensions by the Social Security agencies, which are financed by the contributions made by companies and employees (defined-contribution plans).
For the defined-benefit plans, the costs of the retirement benefits are estimated by using the projected credit unit method. According to this method, the cost of the retirement benefit is recognized in the Consolidated Statement of Income (Loss) so that it is distributed uniformly over the term of the services of the employees. The retirement benefit commitments are valued at the current value of the future payments estimated using, for discounting, the market rate for high quality corporate bonds with a term that corresponds to that estimated for the payment of the benefits.
The difference between the amount of the provision at the beginning of a period and at the close of that period is recognized through profit or loss for the portion representing the costs of services rendered and the net interest costs, and\u00a0through other comprehensive income for the portion representing the actuarial gains and losses.
The Company\u2019s payments for the defined-contribution plans are recognized as expenses on the Consolidated Statement of Income (Loss) of the period during which they become payable.
In April 2021, the IFRIC (\u201cIFRS Interpretations Committee\u201d) or addressed to the IAS Board (International Accounting Standards Board), for decision (approval or refusal or intermediate position), a \u201cTAD\u201d (\u201cTentative Agenda Decision\u201d or \u201cProvisional Decision\u201d) by which it proposes to modify the way of calculating the commitments relating to certain defined benefit plans. The IAS Board validated this position in early June 2021, while specifying that there was no need to modify anything in IAS\u00a019 which already allows this interpretation.
By its new position, the IFRIC considers that, from the moment when, on the one hand, no right is acquired in the event of departure before retirement age and, on the other hand, the rights are capped after a certain number of years of seniority (N), it would be the last N years of the employee\u2019s career in the company that confer rights upon departure.
In addition, according to the consensus, it is also mandatory to modify the valuation method for Companies using collective agreements whose rights are defined by age bracket. Indeed, they consider that, given the fact that the rights are defined in stages, a certain number of years of service performed by a given employee does not give rise to the allocation of rights. It is then necessary, for the evaluation, to linearize the rights over the last N years, N representing the number of years which gives rise to the allocation of rights and therefore the last level that the employee will reach at the time of his departure in retirement.
The Company implemented the changes of interpretation starting with the 2021 financial statements.
18.4Personnel expenses
The Group was employing 17 people on permanent contract as of December\u00a031, 2023, compared to 46 as of December\u00a02022.
The following table shows the nature of costs included in personnel expenses:
| \n In thousands of Euros | \n\n As of December\u00a031, 2023 | \n\n As of December\u00a031, 2022 | \n||||||
| \n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n\n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n|
| \n Wages and salaries | \n\n 2,459 | \n\n 1,934 | \n\n 1,926 | \n\n 6,319 | \n\n 3,166 | \n\n 2,108 | \n\n 3,235 | \n\n 8,509 | \n
| \n Social contributions | \n\n 1,111 | \n\n 463 | \n\n 993 | \n\n 2,567 | \n\n 1,291 | \n\n 677 | \n\n 916 | \n\n 2,884 | \n
| \n Service cost (employee benefit) | \n\n 14 | \n\n 4 | \n\n 6 | \n\n 24 | \n\n 18 | \n\n 4 | \n\n 7 | \n\n 29 | \n
| \n Share-based payments | \n\n 157 | \n\n (165) | \n\n 596 | \n\n 587 | \n\n (909) | \n\n (2,313) | \n\n (142) | \n\n (3,364) | \n
| \n Total | \n\n 3,741 | \n\n 2,235 | \n\n 3,521 | \n\n 9,497 | \n\n 3,565 | \n\n 476 | \n\n 4,016 | \n\n 8,058 | \n
As of December\u00a031, 2022 and 2023, the reversal of the share-based expenses mainly relates to the forfeiture of free shares plans granted between 2020 and 2023 for which performance criteria were not or unlikely to be met before the achievement deadline. As of December\u00a031, 2023, the reversals on the R&D and S&M share-based related expenses are offset by the accelerated vesting of plans for which the presence condition has been waived by the Board for specific employees.
19.1Employee warrants (BCE)
Vesting schedule
All BCE granted may be exercised by the beneficiary on the basis of the following vesting schedule:
\u2022up to 1/4\u00a0on the first anniversary of the date of grant;
\u2022the remaining 75% becoming exercisable up to 1/36\u00a0per month from the first anniversary of the date of grant; and
\u2022at the latest within 10\u00a0years from the date of grant.
Details and main characteristics of the BCE granted to date
| \n \n | \n\n BCE 2013-02 | \n\n BCE 2015-06 | \n
| \n Date of grant | \n\n July 8, 2013 | \n\n July 8, 2015 | \n
| \n Plan expiration date | \n\n July 7, 2023 | \n\n July 7, 2025 | \n
| \n Number of warrants initially granted | \n\n 892,000 | \n\n 733,298 | \n
| \n Share entitlement per warrant | \n\n 1 | \n\n 1 | \n
| \n Exercise price | \n\n \u20ac0.025 | \n\n \u20ac3.275 | \n
| \n Valuation method | \n\n Black - Scholes | \n|
| \n Expected volatility | \n\n 42.50% | \n\n 76.49% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n
| \n Fair value per warrant | \n\n \u20ac0.44 | \n\n \u20ac5.56 | \n
Changes in the balances of BCE
| \n \n | \n\n BCE 2013-02 | \n\n BCE 2015-06 | \n\n Total | \n
| \n Balance outstanding at January 1, 2023 | \n\n 47,600 | \n\n 454,582 | \n\n 502,182 | \n
| \n Granted during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Exercised during the period | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Forfeited during the period | \n\n (47,600) | \n\n \u2014 | \n\n (47,600) | \n
| \n Balance outstanding at December\u00a031, 2023 | \n\n 0 | \n\n 454,582 | \n\n 454,582 | \n
| \n Of which exercisable | \n\n 0 | \n\n 454,582 | \n\n 454,582 | \n
3.14Retirement pension obligations
The employees of the Company receive the retirement benefits stipulated by law in France:
\u2022compensation paid by the Company to employees upon their retirement (defined-benefit plan) and;
\u2022a payment of retirement pensions by the Social Security agencies, which are financed by the contributions made by companies and employees (defined-contribution plans).
For the defined-benefit plans, the costs of the retirement benefits are estimated by using the projected credit unit method. According to this method, the cost of the retirement benefit is recognized in the Consolidated Statement of Income (Loss) so that it is distributed uniformly over the term of the services of the employees. The retirement benefit commitments are valued at the current value of the future payments estimated using, for discounting, the market rate for high quality corporate bonds with a term that corresponds to that estimated for the payment of the benefits.
The difference between the amount of the provision at the beginning of a period and at the close of that period is recognized through profit or loss for the portion representing the costs of services rendered and the net interest costs, and\u00a0through other comprehensive income for the portion representing the actuarial gains and losses.
The Company\u2019s payments for the defined-contribution plans are recognized as expenses on the Consolidated Statement of Income (Loss) of the period during which they become payable.
In April 2021, the IFRIC (\u201cIFRS Interpretations Committee\u201d) or addressed to the IAS Board (International Accounting Standards Board), for decision (approval or refusal or intermediate position), a \u201cTAD\u201d (\u201cTentative Agenda Decision\u201d or \u201cProvisional Decision\u201d) by which it proposes to modify the way of calculating the commitments relating to certain defined benefit plans. The IAS Board validated this position in early June 2021, while specifying that there was no need to modify anything in IAS\u00a019 which already allows this interpretation.
By its new position, the IFRIC considers that, from the moment when, on the one hand, no right is acquired in the event of departure before retirement age and, on the other hand, the rights are capped after a certain number of years of seniority (N), it would be the last N years of the employee\u2019s career in the company that confer rights upon departure.
In addition, according to the consensus, it is also mandatory to modify the valuation method for Companies using collective agreements whose rights are defined by age bracket. Indeed, they consider that, given the fact that the rights are defined in stages, a certain number of years of service performed by a given employee does not give rise to the allocation of rights. It is then necessary, for the evaluation, to linearize the rights over the last N years, N representing the number of years which gives rise to the allocation of rights and therefore the last level that the employee will reach at the time of his departure in retirement.
The Company implemented the changes of interpretation starting with the 2021 financial statements.
3.14Retirement pension obligations
The employees of the Company receive the retirement benefits stipulated by law in France:
\u2022compensation paid by the Company to employees upon their retirement (defined-benefit plan) and;
\u2022a payment of retirement pensions by the Social Security agencies, which are financed by the contributions made by companies and employees (defined-contribution plans).
For the defined-benefit plans, the costs of the retirement benefits are estimated by using the projected credit unit method. According to this method, the cost of the retirement benefit is recognized in the Consolidated Statement of Income (Loss) so that it is distributed uniformly over the term of the services of the employees. The retirement benefit commitments are valued at the current value of the future payments estimated using, for discounting, the market rate for high quality corporate bonds with a term that corresponds to that estimated for the payment of the benefits.
The difference between the amount of the provision at the beginning of a period and at the close of that period is recognized through profit or loss for the portion representing the costs of services rendered and the net interest costs, and\u00a0through other comprehensive income for the portion representing the actuarial gains and losses.
The Company\u2019s payments for the defined-contribution plans are recognized as expenses on the Consolidated Statement of Income (Loss) of the period during which they become payable.
In April 2021, the IFRIC (\u201cIFRS Interpretations Committee\u201d) or addressed to the IAS Board (International Accounting Standards Board), for decision (approval or refusal or intermediate position), a \u201cTAD\u201d (\u201cTentative Agenda Decision\u201d or \u201cProvisional Decision\u201d) by which it proposes to modify the way of calculating the commitments relating to certain defined benefit plans. The IAS Board validated this position in early June 2021, while specifying that there was no need to modify anything in IAS\u00a019 which already allows this interpretation.
By its new position, the IFRIC considers that, from the moment when, on the one hand, no right is acquired in the event of departure before retirement age and, on the other hand, the rights are capped after a certain number of years of seniority (N), it would be the last N years of the employee\u2019s career in the company that confer rights upon departure.
In addition, according to the consensus, it is also mandatory to modify the valuation method for Companies using collective agreements whose rights are defined by age bracket. Indeed, they consider that, given the fact that the rights are defined in stages, a certain number of years of service performed by a given employee does not give rise to the allocation of rights. It is then necessary, for the evaluation, to linearize the rights over the last N years, N representing the number of years which gives rise to the allocation of rights and therefore the last level that the employee will reach at the time of his departure in retirement.
The Company implemented the changes of interpretation starting with the 2021 financial statements.
3.15Provisions for risks and expenses
The provisions for risks and lawsuits correspond to the commitments resulting from lawsuits and various risks whose due dates and amounts are uncertain.
A provision is recognized in the Financial Statements when the Group has a legal or implicit obligation to a third party resulting from a past event, which is likely or certain to cause an outflow of resources to that third party, and provided that the future outflows of liquid assets can be estimated reliably.
The amount recognized in the Financial Statements as a provision is the best estimate of the expenses necessary to extinguish the obligation.
Note 12:Non-current provisions
Non-current provisions are exclusively composed of employee benefits relating to a compensation payable to French employees upon their retirement \u2013 Indemnit\u00e9s de Fin de Carri\u00e8re (\u201cIFC\u201d) for \u20ac39k and non-current provision for contingencies and losses for \u20ac1.2 million.
The following tables show the changes in the IFC during the last two periods:
| \n In thousands of Euros | \n\n \n | \n
| \n As of January 1, 2022 | \n\n 41 | \n
| \n Cost of services rendered (operating expense) | \n\n 29 | \n
| \n Interest expense | \n\n 1 | \n
| \n Benefits paid | \n\n \u2014 | \n
| \n Actuarial gain (loss) | \n\n (50) | \n
| \n As of December\u00a031, 2022 | \n\n \u20ac21 K | \n
| \n As of January 1, 2023 | \n\n 21 | \n
| \n Cost of services rendered (operating expense) | \n\n 24 | \n
| \n Interest expense | \n\n 1 | \n
| \n Benefits paid | \n\n \u2014 | \n
| \n Actuarial gain (loss) | \n\n (6) | \n
| \n As of December\u00a031, 2023 | \n\n \u20ac39 K | \n
The main assumptions used for the purposes of actuarial valuations are listed below:
\u2022Social security contribution: 45% in 2022 and 2023;
\u2022Salary increase: 3% in 2022 and 2023;
\u2022Discount rate: iBoxx Corporates AA+ index, 3.77% and 3.53% in 2022 and 2023, respectively:
\u2022Retirement age: 67;
\u2022Terms of retirement: voluntary retirement;
\u2022Life table: TGHF 2005;
\u2022Collective agreement: Convention Collective Nationale des Ing\u00e9nieurs et des Cadres de la M\u00e9tallurgie (National Collective Agreement for Engineers and Executives in the Metalworking Industry); and
\u2022Personnel turn-over: 10% (20-49), 0% above 50.
The other non-current provisions primarily relate to several ongoing social and operational litigations. In accordance to IAS\u00a037, given the sensitivity of the matters, management cannot provide detailed information on the nature of each dispute.
3.15Provisions for risks and expenses
The provisions for risks and lawsuits correspond to the commitments resulting from lawsuits and various risks whose due dates and amounts are uncertain.
A provision is recognized in the Financial Statements when the Group has a legal or implicit obligation to a third party resulting from a past event, which is likely or certain to cause an outflow of resources to that third party, and provided that the future outflows of liquid assets can be estimated reliably.
The amount recognized in the Financial Statements as a provision is the best estimate of the expenses necessary to extinguish the obligation.
3.16Leases
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all contracts entered into or changed on or after January\u00a01, 2019.
Applying IFRS\u00a016, for all leases (except as noted below), the Group:
(a)Recognizes right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments;
(b)Recognizes depreciation of right-of-use assets and interest on lease liabilities in profit or loss;
(c)Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) are recognized as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortized as a reduction of rental expenses generally on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS\u00a036.
For short-term leases (lease term of 12\u00a0months or less) and leases of low-value assets (such as tablet and personal computers, small items of office furniture and telephones), the Group has opted to recognize a lease expense on a straight-line basis as permitted by IFRS\u00a016. This expense is presented within \u2018other expenses\u2019 in profit or loss.
The Company defines contracts\u2019 terms as the non-cancellable period during which the Company has the right to use the underlying asset, plus any termination options that the lessee is reasonably certain not to exercise.
Lease terms used are consistent with the depreciation periods of fixtures and improvements in structures and are in line, as at 31/12 and before the closing date, with the management best estimates of the lease terms.
Note 6:IFRS\u00a016 \u2013 Leases
The main impacts on the balance sheet resulting from the application of the IFRS\u00a016 on the financial year ending December\u00a031, 2023 are the following:
Balance sheet
Right-of-use
| \n (in thousands of Euros) | \n\n As of December\u00a031, 2022 | \n\n Change in scope | \n\n Amortization | \n\n Currency translation adjutments | \n\n As of December\u00a031, 2023 | \n
| \n Right-of-use \u2013 Buildings | \n\n 1,639 | \n\n 783 | \n\n (789) | \n\n (26) | \n\n 1,608 | \n
| \n Right-of-use \u2013 Others | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n
| \n Net value of the righ-of-use | \n\n 1,639 | \n\n 783 | \n\n (789) | \n\n (26) | \n\n 1,608 | \n
As of December\u00a031, 2023, there was no indicator of impairment that would have led to the realization of an impairment test on the right-of-uses.
Lease liability
| \n (in thousands of Euros) | \n\n December\u00a031, 2022 | \n\n Change in\u00a0scope | \n\n Repayments | \n\n Currency translation adjutments | \n\n Reclassification non-current / current | \n\n December\u00a031, 2023 | \n
| \n Lease liability \u2013 Buildings | \n\n 972 | \n\n 0 | \n\n 0 | \n\n (19) | \n\n 95 | \n\n 1,048 | \n
| \n Lease liability \u2013 Others | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n
| \n Total non-current | \n\n 972 | \n\n 0 | \n\n 0 | \n\n (19) | \n\n 95 | \n\n 1,048 | \n
| \n Lease liability \u2013 Buildings | \n\n 894 | \n\n 783 | \n\n (792) | \n\n (15) | \n\n (95) | \n\n 775 | \n
| \n Lease liability \u2013 Others | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n\n 0 | \n
| \n Total current | \n\n 894 | \n\n 783 | \n\n (792) | \n\n (15) | \n\n (95) | \n\n 775 | \n
| \n Total | \n\n 1,866 | \n\n 783 | \n\n (792) | \n\n (34) | \n\n 0 | \n\n 1,823 | \n
Commitments under the scope of IFRS\u00a016
Agreement with Passage de l\u2019Innovation
On January\u00a01, 2015, we entered into a lease agreement for our headquarters premises in Paris, France with Passage de l\u2019Innovation, which was amended on October\u00a01, 2015, January\u00a01, 2016, May\u00a01, 2017, January\u00a08, 2018, July\u00a01, 2018, October\u00a01, 2018, November\u00a01, 2019, October\u00a01, 2021, January\u00a01, 2022 and July\u00a01, 2023. As the company pursued its development, additional spaces were included in the contract. The main space\u2019s lease ends in December\u00a02026, however, our engagement with smaller surfaces ends in 2024 and 2027. The agreement includes expenses for rent, rental charges and other services provided by the lessor.
The cost of associated services (e.g., reception, printers and information technology and access to meeting rooms) is proportional to the office space rented and amended accordingly at each amendment\u2019s signature.
The commitment terms used in 2023 correspond to the management best estimates of the lease terms as of December\u00a031, 2023.
U.S.- based subsidiary
The Group entered into a binding office lease agreement in New\u00a0York for its U.S.-based subsidiary on September\u00a06, 2017. The lease commencement was based upon substantial completion of the landlord\u2019s work and delivery of possession of the premises and occurred on April\u00a018, 2018. The lease term is 7 years and 5 months.
3.16Leases
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all contracts entered into or changed on or after January\u00a01, 2019.
Applying IFRS\u00a016, for all leases (except as noted below), the Group:
(a)Recognizes right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments;
(b)Recognizes depreciation of right-of-use assets and interest on lease liabilities in profit or loss;
(c)Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) are recognized as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortized as a reduction of rental expenses generally on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS\u00a036.
For short-term leases (lease term of 12\u00a0months or less) and leases of low-value assets (such as tablet and personal computers, small items of office furniture and telephones), the Group has opted to recognize a lease expense on a straight-line basis as permitted by IFRS\u00a016. This expense is presented within \u2018other expenses\u2019 in profit or loss.
The Company defines contracts\u2019 terms as the non-cancellable period during which the Company has the right to use the underlying asset, plus any termination options that the lessee is reasonably certain not to exercise.
Lease terms used are consistent with the depreciation periods of fixtures and improvements in structures and are in line, as at 31/12 and before the closing date, with the management best estimates of the lease terms.
3.17Revenue
The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
\u2022Step 1: Identify the contract with the customer,
\u2022Step 2: Identify the performance obligations in the contract,
\u2022Step 3: Determine the transaction price,
\u2022Step 4: Allocate the transaction price to the performance obligations in the contract,
\u2022Step 5: Recognize revenue when the company satisfies a performance obligation.
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or\u00a0service that is distinct. A performance obligation meets IFRS\u00a015\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of goods or services) if both of the following criteria are met:
\u2022a good or service (or bundle of goods or services) that is distinct; or
\u2022a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
In accordance with IFRS\u00a015, variable considerations cannot be included in the estimated transaction price as long as it not highly probable that the related revenue will not reversed in the future. According to the level of uncertainty relating to the results of preclinical and clinical trials and the decisions relating to the regulatory approvals, variable considerations depending on these events are excluded from the transaction price as long as the trigger event is not highly probable. When the trigger event occurs, the corresponding milestone is added to the transaction price. Such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income (loss) in the period of adjustment.
The Company started the sale of LUMEVOQ\u00ae through the named patient Temporary Authorization for Use (\u201cATU nominative\u201d) granted by the National Drug Safety Agency (Agence Nationale de S\u00e9curit\u00e9 du M\u00e9dicament or ANSM) to the CHNO of the Quinze-Vingts. Total income solely comes from those named patient ATU. The Company will be paid a preliminary price by the hospitals, ultimately fully covered by\u00a0the health insurance. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price
Estimated rebates are considered to be variable consideration and include significant estimates.
Management determined that the agreement with the CHNO of the Quinze-Vingts includes a variable amount. At contract inception, the variable consideration is estimated based on the expected value amount of consideration expected from the transaction and constrained to the extent it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with respect the variable consideration is subsequently resolved.
The methodology and assumptions used to estimate rebates are monitored and adjusted regularly in the light of contractual and legal obligations, historical trends, past experience and projected market conditions. In 2021, in the light of changes in\u00a0legal obligations, and projected market conditions, the Company adjusted the variable considerations for which it\u2019s highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
Net revenue is recorded, net of variable consideration related to certain allowances and accruals, at the time the customer obtains control of the product.
We record a related liability, for components related to product sold during the reporting period. The discounted value of this liability is booked in the Financial Statements.
As of December\u00a031, 2023, the discounted value of the refund liability amounted to \u20ac6.2m. A 10% decrease or increase in the final price estimation would have an impact of +\u20ac0.8m and \u20ac(0.8)m respectively on the discounted refund liability amount and therefore the cumulated revenue recognized.
Note 16:Income
The Company started the sale of LUMEVOQ\u00ae through the named patient Temporary Authorization for Use (\u201cATU nominative\u201d) granted by the National Drug Safety Agency (Agence Nationale de S\u00e9curit\u00e9 du M\u00e9dicament or ANSM) to the CHNO of the Quinze-Vingts on December\u00a02019. Total income as of December\u00a031, 2022 and 2023 solely comes from those named patient ATU.
Our net product revenues are recognized, net of variable consideration related to certain allowances and accruals, at the time the customer obtains control of our product, i.e. after acceptance of the delivery by the customer.
The sole component of variable consideration related to product revenues is related to the potential obligations resulting from the current regulatory framework of the Temporary Authorization for Use (ATU) with the Social Security and Family Allowance Contribution Collection Offices (URSSAF). In France, use of pharmaceutical products not yet approved with a Marketing Authorization (AMM) and not recruiting for a clinical trial requires first obtaining an ATU from the ANSM. The Company will be paid a preliminary price by the hospitals. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price.
3.17Revenue
The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
\u2022Step 1: Identify the contract with the customer,
\u2022Step 2: Identify the performance obligations in the contract,
\u2022Step 3: Determine the transaction price,
\u2022Step 4: Allocate the transaction price to the performance obligations in the contract,
\u2022Step 5: Recognize revenue when the company satisfies a performance obligation.
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or\u00a0service that is distinct. A performance obligation meets IFRS\u00a015\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of goods or services) if both of the following criteria are met:
\u2022a good or service (or bundle of goods or services) that is distinct; or
\u2022a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
In accordance with IFRS\u00a015, variable considerations cannot be included in the estimated transaction price as long as it not highly probable that the related revenue will not reversed in the future. According to the level of uncertainty relating to the results of preclinical and clinical trials and the decisions relating to the regulatory approvals, variable considerations depending on these events are excluded from the transaction price as long as the trigger event is not highly probable. When the trigger event occurs, the corresponding milestone is added to the transaction price. Such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income (loss) in the period of adjustment.
The Company started the sale of LUMEVOQ\u00ae through the named patient Temporary Authorization for Use (\u201cATU nominative\u201d) granted by the National Drug Safety Agency (Agence Nationale de S\u00e9curit\u00e9 du M\u00e9dicament or ANSM) to the CHNO of the Quinze-Vingts. Total income solely comes from those named patient ATU. The Company will be paid a preliminary price by the hospitals, ultimately fully covered by\u00a0the health insurance. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price
Estimated rebates are considered to be variable consideration and include significant estimates.
Management determined that the agreement with the CHNO of the Quinze-Vingts includes a variable amount. At contract inception, the variable consideration is estimated based on the expected value amount of consideration expected from the transaction and constrained to the extent it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with respect the variable consideration is subsequently resolved.
The methodology and assumptions used to estimate rebates are monitored and adjusted regularly in the light of contractual and legal obligations, historical trends, past experience and projected market conditions. In 2021, in the light of changes in\u00a0legal obligations, and projected market conditions, the Company adjusted the variable considerations for which it\u2019s highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
Net revenue is recorded, net of variable consideration related to certain allowances and accruals, at the time the customer obtains control of the product.
We record a related liability, for components related to product sold during the reporting period. The discounted value of this liability is booked in the Financial Statements.
As of December\u00a031, 2023, the discounted value of the refund liability amounted to \u20ac6.2m. A 10% decrease or increase in the final price estimation would have an impact of +\u20ac0.8m and \u20ac(0.8)m respectively on the discounted refund liability amount and therefore the cumulated revenue recognized.
3.17Revenue
The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
\u2022Step 1: Identify the contract with the customer,
\u2022Step 2: Identify the performance obligations in the contract,
\u2022Step 3: Determine the transaction price,
\u2022Step 4: Allocate the transaction price to the performance obligations in the contract,
\u2022Step 5: Recognize revenue when the company satisfies a performance obligation.
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or\u00a0service that is distinct. A performance obligation meets IFRS\u00a015\u2019s definition of a \u201cdistinct\u201d good or service (or bundle of goods or services) if both of the following criteria are met:
\u2022a good or service (or bundle of goods or services) that is distinct; or
\u2022a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
In accordance with IFRS\u00a015, variable considerations cannot be included in the estimated transaction price as long as it not highly probable that the related revenue will not reversed in the future. According to the level of uncertainty relating to the results of preclinical and clinical trials and the decisions relating to the regulatory approvals, variable considerations depending on these events are excluded from the transaction price as long as the trigger event is not highly probable. When the trigger event occurs, the corresponding milestone is added to the transaction price. Such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and net income (loss) in the period of adjustment.
The Company started the sale of LUMEVOQ\u00ae through the named patient Temporary Authorization for Use (\u201cATU nominative\u201d) granted by the National Drug Safety Agency (Agence Nationale de S\u00e9curit\u00e9 du M\u00e9dicament or ANSM) to the CHNO of the Quinze-Vingts. Total income solely comes from those named patient ATU. The Company will be paid a preliminary price by the hospitals, ultimately fully covered by\u00a0the health insurance. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price
Estimated rebates are considered to be variable consideration and include significant estimates.
Management determined that the agreement with the CHNO of the Quinze-Vingts includes a variable amount. At contract inception, the variable consideration is estimated based on the expected value amount of consideration expected from the transaction and constrained to the extent it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with respect the variable consideration is subsequently resolved.
The methodology and assumptions used to estimate rebates are monitored and adjusted regularly in the light of contractual and legal obligations, historical trends, past experience and projected market conditions. In 2021, in the light of changes in\u00a0legal obligations, and projected market conditions, the Company adjusted the variable considerations for which it\u2019s highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
Net revenue is recorded, net of variable consideration related to certain allowances and accruals, at the time the customer obtains control of the product.
We record a related liability, for components related to product sold during the reporting period. The discounted value of this liability is booked in the Financial Statements.
As of December\u00a031, 2023, the discounted value of the refund liability amounted to \u20ac6.2m. A 10% decrease or increase in the final price estimation would have an impact of +\u20ac0.8m and \u20ac(0.8)m respectively on the discounted refund liability amount and therefore the cumulated revenue recognized.
Note 16:Income
The Company started the sale of LUMEVOQ\u00ae through the named patient Temporary Authorization for Use (\u201cATU nominative\u201d) granted by the National Drug Safety Agency (Agence Nationale de S\u00e9curit\u00e9 du M\u00e9dicament or ANSM) to the CHNO of the Quinze-Vingts on December\u00a02019. Total income as of December\u00a031, 2022 and 2023 solely comes from those named patient ATU.
Our net product revenues are recognized, net of variable consideration related to certain allowances and accruals, at the time the customer obtains control of our product, i.e. after acceptance of the delivery by the customer.
The sole component of variable consideration related to product revenues is related to the potential obligations resulting from the current regulatory framework of the Temporary Authorization for Use (ATU) with the Social Security and Family Allowance Contribution Collection Offices (URSSAF). In France, use of pharmaceutical products not yet approved with a Marketing Authorization (AMM) and not recruiting for a clinical trial requires first obtaining an ATU from the ANSM. The Company will be paid a preliminary price by the hospitals. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price.
3.18Income tax
Deferred taxes are recognized for all the temporary differences arising from the difference between the tax basis and the accounting basis of the assets and liabilities that appear in the Financial Statements. The primary temporary differences are related to the tax losses that can be carried forward or backward. The legal tax rates as of the closing date are utilized to determine the deferred taxes.
The deferred tax assets are recognized in the Financial Statements only to the extent that it is likely that the future profits will be sufficient to absorb the losses that can be carried forward or backward. Considering its stage of development, which precludes the income projections from being sufficiently reliable to be made, the Group has not recognized deferred tax assets in relation to tax loss carryforward in the Consolidated Statement of Financial Position.
Note 21:Income tax expense
As mentioned in Note 3.12 \u2013 Accounting Principles \u2013 Research Tax Credit, subsidies and conditional advances, the French Research Tax Credit is not included in the line item income taxes but included in the line item other income.
As the Group is generating tax losses, no income tax expense has been recognized. Moreover, in accordance with the principles described in Note\u00a03.17, and with respect to the stage of development of the Company, no deferred tax assets have been recognized in the Financial Statements.
As of December\u00a031, 2023, accumulated tax loss carryforwards since inception amounted to \u20ac267 million. This tax loss can be carried forward indefinitely and charged against future profits, in accordance with current French tax laws (CGI art.\u00a0209, I-al.\u00a03 et BIC-XIV-2000s).
Reconciliation between the effective and nominal income tax expense.
The following table shows the reconciliation between the effective and nominal tax expense at the statutory French rate of 25.00% as of December\u00a031, 2022 and 2023, excluding additional contributions:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Income before taxes | \n\n (26,220) | \n\n (27,625) | \n
| \n Statutory tax rate | \n\n 25% | \n\n 25% | \n
| \n Nominal tax expense | \n\n 6,555 | \n\n 6,906 | \n
| \n Increase/decrease in tax expense arising from: | \n\n \n | \n\n \n | \n
| \n \u2022Research tax credit | \n\n (424) | \n\n (554) | \n
| \n \u2022Share-based compensation | \n\n 147 | \n\n (841) | \n
| \n \u2022Non-recognition of deferred tax assets related to tax losses and temporary differences | \n\n (6,278) | \n\n (5,506) | \n
| \n \u2022Other differences | \n\n \u2014 | \n\n \u2014 | \n
| \n Income tax expense | \n\n 0 | \n\n (5) | \n
| \n Effective tax rate | \n\n 0% | \n\n 0% | \n
3.18Income tax
Deferred taxes are recognized for all the temporary differences arising from the difference between the tax basis and the accounting basis of the assets and liabilities that appear in the Financial Statements. The primary temporary differences are related to the tax losses that can be carried forward or backward. The legal tax rates as of the closing date are utilized to determine the deferred taxes.
The deferred tax assets are recognized in the Financial Statements only to the extent that it is likely that the future profits will be sufficient to absorb the losses that can be carried forward or backward. Considering its stage of development, which precludes the income projections from being sufficiently reliable to be made, the Group has not recognized deferred tax assets in relation to tax loss carryforward in the Consolidated Statement of Financial Position.
3.19Segment information
The Company operates in a single operating segment: the conducting of research and development of novel therapies for mitochondrial and neurodegenerative diseases of the eye and central nervous system in order to market them in the future. The assets, liabilities and operating loss realized are located mainly in France.
3.19Segment information
The Company operates in a single operating segment: the conducting of research and development of novel therapies for mitochondrial and neurodegenerative diseases of the eye and central nervous system in order to market them in the future. The assets, liabilities and operating loss realized are located mainly in France.
3.20Presentation of financial assets and financial liabilities measured at fair value
In accordance with IFRS\u00a07 Financial Statements: Disclosures, financial instruments are presented in three categories based on a hierarchical method used to determine their fair value:
\u2022level\u00a01: fair value calculated using quoted prices in an active market for identical assets and liabilities;
\u2022level\u00a02: fair value calculated using valuation techniques based on observable market data such as prices of similar assets and liabilities or parameters quoted in an active market; and
\u2022level\u00a03: fair value calculated using valuation techniques based wholly or partly on unobservable inputs such as prices in an inactive market or a valuation based on multiples for unlisted securities.
The fair value of financial instruments traded on an active market is based on the market rate as of December\u00a031, 2023. The market prices used for the financial assets owned by the Company are the bid prices in effect on the market as of the valuation date.
The nominal value, less the provisions for depreciation, of the accounts receivable and current debts, is presumed to approximate the fair value of those items.
3.20Presentation of financial assets and financial liabilities measured at fair value
In accordance with IFRS\u00a07 Financial Statements: Disclosures, financial instruments are presented in three categories based on a hierarchical method used to determine their fair value:
\u2022level\u00a01: fair value calculated using quoted prices in an active market for identical assets and liabilities;
\u2022level\u00a02: fair value calculated using valuation techniques based on observable market data such as prices of similar assets and liabilities or parameters quoted in an active market; and
\u2022level\u00a03: fair value calculated using valuation techniques based wholly or partly on unobservable inputs such as prices in an inactive market or a valuation based on multiples for unlisted securities.
3.21Use of estimates
The Financial Statements are prepared in accordance with IFRS. The preparation of the Financial Statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, income and expenses during the reporting period. The Group bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Group\u2019s actual results may differ from these estimates under different assumptions or conditions.
The full extent to which the global macro-economic context will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, the supply of our products and product candidates, clinical trials and research and development costs, will depend on future developments that are highly uncertain. We have made estimates of the impact of the global macro-economic context within our financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.
These estimates and judgments involve mainly:
\u2022the estimate of the repayments of the conditional advances obtained by the Company from public institutions, such as Bpifrance Financement. The anticipated repayments of the conditional advances are analyzed at each reporting period (see Note 11), and the measurement of the conditional advances classified as financial liabilities based on the effective rate method;
\u2022the measurement of the fair value of the various equity instruments granted to employees, executives or non-employee members of the Board of Directors as well as scientific consultants and service providers, such as AGA, SO, BCE or BSA, which is performed on the basis of actuarial models; these models require the use by the Company of certain calculation assumptions such as the expected volatility of the underlying security (see Note\u00a019);
\u2022research and development expenses include estimates of the amount recognized over the year for subcontracts. At year-end closing, an analysis of the services already performed but not invoiced and / or already invoiced but not performed is carried out by the project managers and validated by the company\u2019s management (see Note\u00a018);
\u2022the measurement of the liability component of the convertible bond, calculated on the basis of the contractually agreed interest and amortization payments discounted at market interest rates (see Note\u00a011);
\u2022the measurement of the fair value of the derivatives directly linked with the convertible bonds and warrants, calculated on the basis of financial mathematic models (see Note\u00a011);
\u2022the estimate of the selling price for LUMEVOQ\u00ae to the CHNO of the Quinze-Vingts. The National Drug Safety Agency, granted to GenSight Biologics several Temporary Authorizations for Use (\u201cATU nominative\u201d). Variable consideration under IFRS\u00a015 are required to be estimated at contract inception. The Group assessed individual contracts to determine the estimated variable consideration and related constraints. In 2021, in the light of changes in legal obligations, and projected market conditions, the Company adjusted the variable considerations for which it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The valuation assumptions of variable considerations remained unchanged in 2023 compared with 2022. The total revenue presented in our financial statements as of December\u00a02022 and 2023 is therefore net from those variable considerations (see Note\u00a016);
\u2022the estimate of contingencies reserves related to ongoing confidential social and operational litigations.
Details and main characteristics of the SO granted to date
| \n \n | \n\n SO 2017 | \n\n SO 2017 | \n\n SO 2017 | \n\n SO 2018 | \n
| \n Date of grant | \n\n July 27, 2017 | \n\n December\u00a019,2017 | \n\n March 14, 2018 | \n\n September 18, 2018 | \n
| \n Plan expiration date | \n\n July 26, 2024 | \n\n December\u00a018,2024 | \n\n March 13, 2025 | \n\n September 17, 2025 | \n
| \n Number of warrants initially granted | \n\n 220,000 | \n\n 300,000 | \n\n 175,000 | \n\n 30,000 | \n
| \n Exercise price | \n\n \u20ac 5.04 | \n\n \u20ac 5.55 | \n\n \u20ac 6.98 | \n\n \u20ac 2.19 | \n
| \n Share entitlement per stock option | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Valuation method | \n\n Black - Scholes | \n|||
| \n Expected volatility | \n\n 51.09% | \n\n 50.36% | \n\n 48.75% | \n\n 58.02% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n
| \n Fair value per option | \n\n \u20ac2.09 | \n\n \u20ac2.20 | \n\n \u20ac2.63 | \n\n \u20ac0.91 | \n
| \n \n | \n\n SO 2020 | \n\n SO 2021 | \n\n SO 2022 | \n\n SO 2023 | \n
| \n Date of grant | \n\n September 22,2020 | \n\n February 25,2021 | \n\n May 23, 2022 | \n\n March 23, 2023 | \n
| \n Plan expiration date | \n\n September 21, 2027 | \n\n February 24,2028 | \n\n May 22, 2029 | \n\n March 22, 2030 | \n
| \n Number of warrants initially granted | \n\n 155,000 | \n\n 20,000 | \n\n 250,000 | \n\n 310,000 | \n
| \n Exercise price | \n\n \u20ac 2.82 | \n\n \u20ac 7.51 | \n\n \u20ac 1.99 | \n\n \u20ac 2.65 | \n
| \n Share entitlement per stock option | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Valuation method | \n\n Black - Scholes | \n|||
| \n Expected volatility | \n\n 83.82% | \n\n 83.70% | \n\n 92.14% | \n\n 75.35% | \n
| \n Expected dividend | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n\n 0.00% | \n
| \n Fair value per option | \n\n \u20ac1.91 | \n\n \u20ac5.77 | \n\n \u20ac1.43 | \n\n \u20ac1.38 | \n
Note 7:Other non-current financial assets
The non-current financial assets correspond to the deposits paid to the lessors for the registered offices of the Group in Paris and New York for \u20ac354\u00a0K. The remaining corresponds to deposits paid to the CRO\u2019s in charge of the management of the long term follow up of several of our clinical trials.
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Guarantee deposits | \n\n 502 | \n\n 632 | \n
| \n Total non-current financial assets | \n\n 502 | \n\n 632 | \n
Note 8:Other current assets
The other current assets are broken down as follows:
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Prepayments | \n\n 326 | \n\n 269 | \n
| \n Research tax credit | \n\n 1,697 | \n\n 2,176 | \n
| \n Other tax receivables | \n\n 699 | \n\n 1,314 | \n
| \n Liquidity contract | \n\n 45 | \n\n 144 | \n
| \n Prepaid expenses | \n\n 1,625 | \n\n 8,213 | \n
| \n Other current assets | \n\n 3 | \n\n 221 | \n
| \n Total | \n\n 4,394 | \n\n 12,337 | \n
Prepayments are made of advances to suppliers.
Other tax receivables essentially refers to VAT receivables.
As of December\u00a031, 2023, prepaid expenses were primarily manufacturing costs, rental and scientific and marketing collaborations.
Research Tax Credit
The Company benefits from the provisions in Articles\u00a0244 quater B and 49 septies F of the French Tax Code related to the Research Tax Credit. In compliance with the principles described in Note\u00a03.11, the Research Tax Credit is recognized in the Consolidated Statement of Income (Loss) in \u201cother income\u201d during the year in which the eligible research expenditures are incurred.
Changes in the Research Tax Credit over the last two periods are presented as follows:
| \n Opening balance sheet receivable as of January\u00a01, 2022 | \n\n 2,433 | \n
| \n Other operating income | \n\n 2,176 | \n
| \n Payment received | \n\n (2,433) | \n
| \n Closing balance sheet receivable as of December\u00a031, 2022 | \n\n 2,176 | \n
| \n Other operating income | \n\n 1,697 | \n
| \n Payment received | \n\n (2,176) | \n
| \n Closing balance sheet receivable as of December\u00a031, 2023 | \n\n 1,697 | \n
Note 7:Other non-current financial assets
The non-current financial assets correspond to the deposits paid to the lessors for the registered offices of the Group in Paris and New York for \u20ac354\u00a0K. The remaining corresponds to deposits paid to the CRO\u2019s in charge of the management of the long term follow up of several of our clinical trials.
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Guarantee deposits | \n\n 502 | \n\n 632 | \n
| \n Total non-current financial assets | \n\n 502 | \n\n 632 | \n
Note 8:Other current assets
The other current assets are broken down as follows:
| \n (in thousands of Euros) | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Prepayments | \n\n 326 | \n\n 269 | \n
| \n Research tax credit | \n\n 1,697 | \n\n 2,176 | \n
| \n Other tax receivables | \n\n 699 | \n\n 1,314 | \n
| \n Liquidity contract | \n\n 45 | \n\n 144 | \n
| \n Prepaid expenses | \n\n 1,625 | \n\n 8,213 | \n
| \n Other current assets | \n\n 3 | \n\n 221 | \n
| \n Total | \n\n 4,394 | \n\n 12,337 | \n
Prepayments are made of advances to suppliers.
Other tax receivables essentially refers to VAT receivables.
As of December\u00a031, 2023, prepaid expenses were primarily manufacturing costs, rental and scientific and marketing collaborations.
Research Tax Credit
The Company benefits from the provisions in Articles\u00a0244 quater B and 49 septies F of the French Tax Code related to the Research Tax Credit. In compliance with the principles described in Note\u00a03.11, the Research Tax Credit is recognized in the Consolidated Statement of Income (Loss) in \u201cother income\u201d during the year in which the eligible research expenditures are incurred.
Changes in the Research Tax Credit over the last two periods are presented as follows:
| \n Opening balance sheet receivable as of January\u00a01, 2022 | \n\n 2,433 | \n
| \n Other operating income | \n\n 2,176 | \n
| \n Payment received | \n\n (2,433) | \n
| \n Closing balance sheet receivable as of December\u00a031, 2022 | \n\n 2,176 | \n
| \n Other operating income | \n\n 1,697 | \n
| \n Payment received | \n\n (2,176) | \n
| \n Closing balance sheet receivable as of December\u00a031, 2023 | \n\n 1,697 | \n
Research Tax Credit
The Company benefits from the provisions in Articles\u00a0244 quater B and 49 septies F of the French Tax Code related to the Research Tax Credit. In compliance with the principles described in Note\u00a03.11, the Research Tax Credit is recognized in the Consolidated Statement of Income (Loss) in \u201cother income\u201d during the year in which the eligible research expenditures are incurred.
Changes in the Research Tax Credit over the last two periods are presented as follows:
| \n Opening balance sheet receivable as of January\u00a01, 2022 | \n\n 2,433 | \n
| \n Other operating income | \n\n 2,176 | \n
| \n Payment received | \n\n (2,433) | \n
| \n Closing balance sheet receivable as of December\u00a031, 2022 | \n\n 2,176 | \n
| \n Other operating income | \n\n 1,697 | \n
| \n Payment received | \n\n (2,176) | \n
| \n Closing balance sheet receivable as of December\u00a031, 2023 | \n\n 1,697 | \n
Note 12:Non-current provisions
Non-current provisions are exclusively composed of employee benefits relating to a compensation payable to French employees upon their retirement \u2013 Indemnit\u00e9s de Fin de Carri\u00e8re (\u201cIFC\u201d) for \u20ac39k and non-current provision for contingencies and losses for \u20ac1.2 million.
The following tables show the changes in the IFC during the last two periods:
| \n In thousands of Euros | \n\n \n | \n
| \n As of January 1, 2022 | \n\n 41 | \n
| \n Cost of services rendered (operating expense) | \n\n 29 | \n
| \n Interest expense | \n\n 1 | \n
| \n Benefits paid | \n\n \u2014 | \n
| \n Actuarial gain (loss) | \n\n (50) | \n
| \n As of December\u00a031, 2022 | \n\n \u20ac21 K | \n
| \n As of January 1, 2023 | \n\n 21 | \n
| \n Cost of services rendered (operating expense) | \n\n 24 | \n
| \n Interest expense | \n\n 1 | \n
| \n Benefits paid | \n\n \u2014 | \n
| \n Actuarial gain (loss) | \n\n (6) | \n
| \n As of December\u00a031, 2023 | \n\n \u20ac39 K | \n
The main assumptions used for the purposes of actuarial valuations are listed below:
\u2022Social security contribution: 45% in 2022 and 2023;
\u2022Salary increase: 3% in 2022 and 2023;
\u2022Discount rate: iBoxx Corporates AA+ index, 3.77% and 3.53% in 2022 and 2023, respectively:
\u2022Retirement age: 67;
\u2022Terms of retirement: voluntary retirement;
\u2022Life table: TGHF 2005;
\u2022Collective agreement: Convention Collective Nationale des Ing\u00e9nieurs et des Cadres de la M\u00e9tallurgie (National Collective Agreement for Engineers and Executives in the Metalworking Industry); and
\u2022Personnel turn-over: 10% (20-49), 0% above 50.
The other non-current provisions primarily relate to several ongoing social and operational litigations. In accordance to IAS\u00a037, given the sensitivity of the matters, management cannot provide detailed information on the nature of each dispute.
Note 13:Other non-current liabilities
13.1Refund liability
GenSight Biologics recorded a refund liability, related to the potential rebates obligations resulting from the current regulatory framework of the Temporary Authorization for Use (ATU) with the Social Security and Family Allowance Contribution Collection Offices (URSSAF). In France, use of pharmaceutical products not yet approved with a Marketing Authorization (AMM) and not recruiting for a clinical trial requires first obtaining an ATU from the ANSM. The Company will be paid a preliminary price by the hospitals. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price. A discounting effect has been recognized.
13.2Subsidy
The benefit resulting from the low interest of the State-guaranteed loan (PGE) is treated as a subsidy. This amount is recognized as financial income over the applicable repayment period.
This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost.
13.3Maturity dates
Maturity dates of other liabilities as of December\u00a031, 2022 are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Refund Liability | \n\n 7,485 | \n\n \u2014 | \n\n 7,485 | \n\n 0 | \n
| \n Subsidy | \n\n 225 | \n\n 32 | \n\n 193 | \n\n 0 | \n
| \n Total Other non-current liabilities | \n\n 7,711 | \n\n 32 | \n\n 7,678 | \n\n 0 | \n
Maturity dates of other liabilities as of December\u00a031, 2023 are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Refund Liability | \n\n 6,572 | \n\n \u2014 | \n\n 6,572 | \n\n 0 | \n
| \n Subsidy | \n\n 67 | \n\n 67 | \n\n \u2014 | \n\n 0 | \n
| \n Other | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Total Other non-current liabilities | \n\n 6,639 | \n\n 67 | \n\n 6,572 | \n\n 0 | \n
Note 13:Other non-current liabilities
13.1Refund liability
GenSight Biologics recorded a refund liability, related to the potential rebates obligations resulting from the current regulatory framework of the Temporary Authorization for Use (ATU) with the Social Security and Family Allowance Contribution Collection Offices (URSSAF). In France, use of pharmaceutical products not yet approved with a Marketing Authorization (AMM) and not recruiting for a clinical trial requires first obtaining an ATU from the ANSM. The Company will be paid a preliminary price by the hospitals. Upon obtaining full marketing authorization and completing pricing negotiations, it may be required to rebate to the URSSAF the difference between the preliminary price and the final price. A discounting effect has been recognized.
13.2Subsidy
The benefit resulting from the low interest of the State-guaranteed loan (PGE) is treated as a subsidy. This amount is recognized as financial income over the applicable repayment period.
This benefit is determined by applying a discount rate equal to the rate the Company would have to pay for a bank borrowing over a similar maturity. The implicit interest rate resulting from taking into account the whole repayments is used to determine the amount recognized annually as a finance cost.
13.3Maturity dates
Maturity dates of other liabilities as of December\u00a031, 2022 are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Refund Liability | \n\n 7,485 | \n\n \u2014 | \n\n 7,485 | \n\n 0 | \n
| \n Subsidy | \n\n 225 | \n\n 32 | \n\n 193 | \n\n 0 | \n
| \n Total Other non-current liabilities | \n\n 7,711 | \n\n 32 | \n\n 7,678 | \n\n 0 | \n
Maturity dates of other liabilities as of December\u00a031, 2023 are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Refund Liability | \n\n 6,572 | \n\n \u2014 | \n\n 6,572 | \n\n 0 | \n
| \n Subsidy | \n\n 67 | \n\n 67 | \n\n \u2014 | \n\n 0 | \n
| \n Other | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n\n \u2014 | \n
| \n Total Other non-current liabilities | \n\n 6,639 | \n\n 67 | \n\n 6,572 | \n\n 0 | \n
Note 14:Accounts payable and other current liabilities
14.1Accounts payable and related payables
With respect to accounts payable and related payables, no discounting effect has been recognized to the extent that amounts did not represent payables on terms longer than one year at the end of each period presented.
Maturity dates of accounts payables as of December\u00a031, 2023, are as follows:
| \n In thousands of Euros | \n\n Gross amount | \n\n Less than one year | \n\n One to five years | \n\n More than five years | \n
| \n Trade accounts payable | \n\n 5,634 | \n\n 5,634 | \n\n \u2014 | \n\n \u2014 | \n
14.2Other current liabilities
The following table provides the detail of other current liabilities for the presented periods:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Employee-related payable | \n\n 1,789 | \n\n 3,611 | \n
| \n Other taxes liabilities | \n\n 25 | \n\n 25 | \n
| \n Subsidy | \n\n 67 | \n\n 32 | \n
| \n Deferred Revenue | \n\n 0 | \n\n 0 | \n
| \n Other current liabilities | \n\n (0) | \n\n 671 | \n
| \n Total | \n\n 1,880 | \n\n 4,339 | \n
Note 17:Other income
Other income is detailed in the table below:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Research tax credit (see Note 8) | \n\n 1,697 | \n\n 2,217 | \n
| \n Subsidies | \n\n 0 | \n\n 0 | \n
| \n Others | \n\n 0 | \n\n 66 | \n
| \n Total | \n\n 1,697 | \n\n 2,283 | \n
Note 18:Operating expenses
18.1Research and development expenses
The table below shows the breakdown of research and development expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 3,741 | \n\n 3,565 | \n
| \n Sub-contracting, collaboration and consultants | \n\n 11,988 | \n\n 13,443 | \n
| \n Licensing and intellectual property | \n\n 341 | \n\n 761 | \n
| \n Travel and entertainment expenses | \n\n 193 | \n\n 424 | \n
| \n Depreciation and amortization expense | \n\n 2,757 | \n\n 405 | \n
| \n Other | \n\n 339 | \n\n 745 | \n
| \n Total R&D expenses | \n\n 19,360 | \n\n 19,343 | \n
| \n (1) | \n\n Includes \u20ac157 thousands and \u20ac(909) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
18.2General and administrative expenses
The table below shows the breakdown of general and administrative expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 2,235 | \n\n 476 | \n
| \n Professional Fees | \n\n 1,028 | \n\n 2,986 | \n
| \n Communication and travel expenses | \n\n 625 | \n\n 694 | \n
| \n Postal and telecommunication expenses | \n\n 6 | \n\n 14 | \n
| \n Depreciation and amortization expense | \n\n 123 | \n\n 528 | \n
| \n Attendance fees | \n\n 191 | \n\n 255 | \n
| \n Insurance | \n\n 6 | \n\n 62 | \n
| \n Others | \n\n 1,138 | \n\n 346 | \n
| \n Total G&A expenses | \n\n 5,352 | \n\n 5,361 | \n
| \n (1) | \n\n Includes \u20ac(165) thousands and \u20ac(2,313) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
18.3Sales and Marketing expenses
The table below shows the breakdown of sales and marketing expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 3,521 | \n\n 4,016 | \n
| \n Professional Fees | \n\n 3,437 | \n\n 3,441 | \n
| \n Communication and travel expenses | \n\n 68 | \n\n 208 | \n
| \n Depreciation and amortization expense | \n\n 154 | \n\n 100 | \n
| \n Others | \n\n 768 | \n\n 231 | \n
| \n Total S&M expenses | \n\n 7,947 | \n\n 7,996 | \n
| \n (1) | \n\n Includes \u20ac596 thousands and \u20ac(142) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
18.4Personnel expenses
The Group was employing 17 people on permanent contract as of December\u00a031, 2023, compared to 46 as of December\u00a02022.
The following table shows the nature of costs included in personnel expenses:
| \n In thousands of Euros | \n\n As of December\u00a031, 2023 | \n\n As of December\u00a031, 2022 | \n||||||
| \n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n\n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n|
| \n Wages and salaries | \n\n 2,459 | \n\n 1,934 | \n\n 1,926 | \n\n 6,319 | \n\n 3,166 | \n\n 2,108 | \n\n 3,235 | \n\n 8,509 | \n
| \n Social contributions | \n\n 1,111 | \n\n 463 | \n\n 993 | \n\n 2,567 | \n\n 1,291 | \n\n 677 | \n\n 916 | \n\n 2,884 | \n
| \n Service cost (employee benefit) | \n\n 14 | \n\n 4 | \n\n 6 | \n\n 24 | \n\n 18 | \n\n 4 | \n\n 7 | \n\n 29 | \n
| \n Share-based payments | \n\n 157 | \n\n (165) | \n\n 596 | \n\n 587 | \n\n (909) | \n\n (2,313) | \n\n (142) | \n\n (3,364) | \n
| \n Total | \n\n 3,741 | \n\n 2,235 | \n\n 3,521 | \n\n 9,497 | \n\n 3,565 | \n\n 476 | \n\n 4,016 | \n\n 8,058 | \n
As of December\u00a031, 2022 and 2023, the reversal of the share-based expenses mainly relates to the forfeiture of free shares plans granted between 2020 and 2023 for which performance criteria were not or unlikely to be met before the achievement deadline. As of December\u00a031, 2023, the reversals on the R&D and S&M share-based related expenses are offset by the accelerated vesting of plans for which the presence condition has been waived by the Board for specific employees.
Note 17:Other income
Other income is detailed in the table below:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Research tax credit (see Note 8) | \n\n 1,697 | \n\n 2,217 | \n
| \n Subsidies | \n\n 0 | \n\n 0 | \n
| \n Others | \n\n 0 | \n\n 66 | \n
| \n Total | \n\n 1,697 | \n\n 2,283 | \n
Note 18:Operating expenses
18.1Research and development expenses
The table below shows the breakdown of research and development expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 3,741 | \n\n 3,565 | \n
| \n Sub-contracting, collaboration and consultants | \n\n 11,988 | \n\n 13,443 | \n
| \n Licensing and intellectual property | \n\n 341 | \n\n 761 | \n
| \n Travel and entertainment expenses | \n\n 193 | \n\n 424 | \n
| \n Depreciation and amortization expense | \n\n 2,757 | \n\n 405 | \n
| \n Other | \n\n 339 | \n\n 745 | \n
| \n Total R&D expenses | \n\n 19,360 | \n\n 19,343 | \n
| \n (1) | \n\n Includes \u20ac157 thousands and \u20ac(909) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
18.2General and administrative expenses
The table below shows the breakdown of general and administrative expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 2,235 | \n\n 476 | \n
| \n Professional Fees | \n\n 1,028 | \n\n 2,986 | \n
| \n Communication and travel expenses | \n\n 625 | \n\n 694 | \n
| \n Postal and telecommunication expenses | \n\n 6 | \n\n 14 | \n
| \n Depreciation and amortization expense | \n\n 123 | \n\n 528 | \n
| \n Attendance fees | \n\n 191 | \n\n 255 | \n
| \n Insurance | \n\n 6 | \n\n 62 | \n
| \n Others | \n\n 1,138 | \n\n 346 | \n
| \n Total G&A expenses | \n\n 5,352 | \n\n 5,361 | \n
| \n (1) | \n\n Includes \u20ac(165) thousands and \u20ac(2,313) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
18.3Sales and Marketing expenses
The table below shows the breakdown of sales and marketing expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 3,521 | \n\n 4,016 | \n
| \n Professional Fees | \n\n 3,437 | \n\n 3,441 | \n
| \n Communication and travel expenses | \n\n 68 | \n\n 208 | \n
| \n Depreciation and amortization expense | \n\n 154 | \n\n 100 | \n
| \n Others | \n\n 768 | \n\n 231 | \n
| \n Total S&M expenses | \n\n 7,947 | \n\n 7,996 | \n
| \n (1) | \n\n Includes \u20ac596 thousands and \u20ac(142) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
18.4Personnel expenses
The Group was employing 17 people on permanent contract as of December\u00a031, 2023, compared to 46 as of December\u00a02022.
The following table shows the nature of costs included in personnel expenses:
| \n In thousands of Euros | \n\n As of December\u00a031, 2023 | \n\n As of December\u00a031, 2022 | \n||||||
| \n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n\n R&D | \n\n G&A | \n\n S&M | \n\n TOTAL | \n|
| \n Wages and salaries | \n\n 2,459 | \n\n 1,934 | \n\n 1,926 | \n\n 6,319 | \n\n 3,166 | \n\n 2,108 | \n\n 3,235 | \n\n 8,509 | \n
| \n Social contributions | \n\n 1,111 | \n\n 463 | \n\n 993 | \n\n 2,567 | \n\n 1,291 | \n\n 677 | \n\n 916 | \n\n 2,884 | \n
| \n Service cost (employee benefit) | \n\n 14 | \n\n 4 | \n\n 6 | \n\n 24 | \n\n 18 | \n\n 4 | \n\n 7 | \n\n 29 | \n
| \n Share-based payments | \n\n 157 | \n\n (165) | \n\n 596 | \n\n 587 | \n\n (909) | \n\n (2,313) | \n\n (142) | \n\n (3,364) | \n
| \n Total | \n\n 3,741 | \n\n 2,235 | \n\n 3,521 | \n\n 9,497 | \n\n 3,565 | \n\n 476 | \n\n 4,016 | \n\n 8,058 | \n
As of December\u00a031, 2022 and 2023, the reversal of the share-based expenses mainly relates to the forfeiture of free shares plans granted between 2020 and 2023 for which performance criteria were not or unlikely to be met before the achievement deadline. As of December\u00a031, 2023, the reversals on the R&D and S&M share-based related expenses are offset by the accelerated vesting of plans for which the presence condition has been waived by the Board for specific employees.
18.2General and administrative expenses
The table below shows the breakdown of general and administrative expenses by cost nature for the periods presented:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Personnel expenses (1) | \n\n 2,235 | \n\n 476 | \n
| \n Professional Fees | \n\n 1,028 | \n\n 2,986 | \n
| \n Communication and travel expenses | \n\n 625 | \n\n 694 | \n
| \n Postal and telecommunication expenses | \n\n 6 | \n\n 14 | \n
| \n Depreciation and amortization expense | \n\n 123 | \n\n 528 | \n
| \n Attendance fees | \n\n 191 | \n\n 255 | \n
| \n Insurance | \n\n 6 | \n\n 62 | \n
| \n Others | \n\n 1,138 | \n\n 346 | \n
| \n Total G&A expenses | \n\n 5,352 | \n\n 5,361 | \n
| \n (1) | \n\n Includes \u20ac(165) thousands and \u20ac(2,313) thousands related to share-based compensation expense as of December\u00a031, 2023 and 2022 respectively. | \n
19.3Free shares (AGA)
Vesting schedule
In July\u00a02016, the Company\u2019s Board of Directors granted an aggregate of 766,000 free shares (AGA 2016) as follows:
\u2022546,000 AGA 2016 were fully acquired by key managers, including Mr. Bernard Gilly, the Chief Executive Officer of the Company, subject to the achievement of the following performance criteria no later than July\u00a02018:
\u2014291,000 of these free shares were acquired at the completion of enrollment in RESCUE and REVERSE clinical trials in July\u00a02017; and
\u2014255,000 free shares were acquired at the enrollment of the first patient in a Phase I/II clinical trial of GS030 in RP in July\u00a02018.
\u202256,000 AGA 2016 were fully acquired in July\u00a02017 (one year after their grant date).
The AGA 2016 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
In July\u00a02017 and in December\u00a02017, the Company\u2019s Board of\u00a0Directors granted an aggregate of 666,000 additional AGA\u00a02016 as follows:
\u2022544,500 AGA 2016 were acquired by key managers, including Mr. Bernard Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below no later than July\u00a02019:
\u2014281,250 of these free shares were acquired upon receipt of the definitive results of the GS010 REVERSE clinical trial; and
\u2014the remaining 263,250 free shares were acquired upon completion of the enrollment of 50% of the patients of a Phase I/II clinical trial of GS030 in RP, on May\u00a017, 2019.
\u202232,500 AGA 2016 were fully acquired on July\u00a02018 (one\u00a0year after their grant date).
The AGA 2016 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
In September\u00a02018 and December\u00a02018, the Company\u2019s Board of Directors granted an aggregate of 515,000 additional AGA\u00a02018 as follows:
\u2022320,000 AGA\u00a02018, were fully acquired by key managers, including Mr. Bernard Gilly, subject to (i) a one\u00a0year acquisition period from the date of grant and (ii) achievement of the performance criteria described below no later than September\u00a02020:
\u2014160,000 of these free shares were acquired upon completion of the enrollment of the patients of a Phase I/II clinical trial of GS030 in RP on July\u00a029, 2020; and
\u2014the remaining 160,000 free shares were acquired upon of the production of the first PPQ Batch of GS010 on September\u00a01, 2020.
\u202240,000 AGA 2018 were fully acquired on September\u00a018, 2019 (one year after their grant date).
The AGA 2018 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
In July\u00a02019, the Company\u2019s Board of Directors granted an aggregate of 610,000 additional AGA\u00a02018 as follows:
\u2022547,500 AGA\u00a02018 were fully acquired by key managers, including Mr. Bernard Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below no later than July\u00a02021:
\u2014273,750 of these free shares were acquired upon the filing with the European Medicines Agency (EMA) of the\u00a0application for Market Authorization (MA) at the European level of LUMEVOQ\u00ae, on September\u00a014, 2020;
\u2014the remaining 273,750 of these free shares were acquired upon completion of the enrollment of the patients of a Phase I/II clinical trial of GS030 in RP on July\u00a029, 2020; and
\u202227,500 AGA\u00a02018 were fully acquired in July\u00a02020 (one year after their grant date).
The AGA\u00a02018 were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
With the authorization of the General Meeting of Shareholders on April\u00a012, 2018 and of the General Meeting of Shareholders on April\u00a029, 2020, the Board of Directors granted 1,007,500\u00a0free shares (AGA\u00a02020) on January\u00a028, 2020 and 85,000 (AGA\u00a02020) on September\u00a022, 2020, respectively, among which:
\u2022437,500 AGA\u00a02020 were fully acquired on January\u00a028, 2021 (one year after their grant date). The new shares were issued at their nominal value and are subject to a lock-up period of one year after their acquisition date.
\u2022As per the original plan, 652,500 (of which 347,500 were cancelled) AGA 2020 might have been fully acquired by key managers, including Mr. Gilly, subject to (i) a one year acquisition period from the date of grant and (ii)\u00a0achievement of the performance criteria described below no later than January\u00a028, 2023 as amended by the Board of Directors on September 21, 2021:
\u2014326,250 of these free shares could have been acquired upon the approval with the European Medicines Agency (EMA) of the application for market authorization (MA) at the European level of the LUMEVOQ\u00ae;
\u2014326,250 of these free shares could have been acquired upon the filing with the Food and Drug Administration (FDA) of the application for Biologics License Application (BLA) for the LUMEVOQ\u00ae.
The Group has considered that the second Performance Condition could not be achieved before the new deadline of Completion, i.e. January\u00a028, 2023 and therefore has decided to\u00a0cancel 50% of the Performance Bonus Share Plans on December\u00a031, 2021.
With the authorization of the General Meeting of Shareholders on April\u00a029, 2020, the Board of Directors granted 880,000 free shares (AGA 2021) on February\u00a025, 2021, to employees of the Company, of which:
\u2022845,000 may be fully acquired by key managers, including Mr. Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on February\u00a025, 2023:
\u201450% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u201450% will be acquired upon at the completion of the recruitment of the extension cohort of the Phase I/II clinical trial with GS030 in retinisis pigmentosa;
\u202235,000 are not subject to performance conditions and were fully acquired in February\u00a02021 (one year after their grant date)
With the authorization of the General Meeting of Shareholders on April\u00a029, 2021, the Board of Directors granted 380,000\u00a0free shares (AGA\u00a02021) on October\u00a021, 2021 to employees of the Company. They are subject to (i)\u00a0a two\u00a0years acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on February 25, 2023:
\u202250% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u202250% will be acquired upon at the completion of the recruitment of the extension cohort of the Phase I/II clinical trial with GS030 in retinisis pigmentosa.
Due to the manufacturing issues at the Company\u2019s partner in the United States, the performance conditions of free shares plans granted to management in 2020 and 2021 were unlikely to be met before the deadlines and these plans were entirely voided in 2021 and 2022.
With the authorization of the General Meeting of Shareholders on April\u00a029, 2021, the Board of Directors granted 1,957,500 free shares (AGA\u00a02022-1 and AGA\u00a02022-2) on May\u00a023, 2022, to employees of the Company, of which:
\u20221,892,500 may be fully acquired by key managers, including Mr. Gilly, subject to (i) a one year acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on May\u00a025, 2025:
\u201450% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u201450% will be acquired upon at the receipt of Topline results for all patients in the Pioneer Phase\u00a0I/II clinical trial of GS030;
\u202265,000 are not subject to performance conditions, but subject to a two-year vesting period.
With the authorization of the General Meeting of Shareholders on May\u00a025, 2022, the Board of Directors granted 290,000 free shares (AGA\u00a02022-3) on October 20, 2022, to employees of the Company, of which:
\u2022290,000 may be fully acquired by key managers, subject to (i)\u00a0a one-year acquisition period from the date of grant and (ii)\u00a0achievement of the performance criteria described below at the latest on May\u00a025, 2025:
\u201450% will be acquired upon the first commercial sale of the LUMEVOQ\u00ae; and
\u201450% will be acquired upon at the receipt of Topline results for all patients in the Pioneer Phase I/II clinical trial of GS030.
With the authorization of the General Meeting of Shareholders on May\u00a025, 2022, the Board of Directors granted 2,070,000 free shares (AGA\u00a02023-1 and AGA\u00a02023-2) on March\u00a023, 2023, to employees of the Company, of which:
\u20221,300,000 may be fully acquired by key managers, including Mr. Gilly, subject to (i) a one\u00a0year acquisition period from the date of grant and (ii) achievement of the performance criteria described below at the latest on March\u00a023, 2025:
\u201450% will be acquired upon the achievement and continued fulfillment of global and local quality requirements as holder of a marketing authorization; and
\u201450% will be acquired upon at the Completion of the examination of LUMEVOQ\u00ae by the European Medicines Agency (EMA) with a view to a decision by the Committee for Medicinal Products for Human Use (CHMP);
\u2022770,000 are not subject to performance conditions, but subject to a two-year vesting period.
Details and main characteristics of the AGA granted to date
| \n \n | \n\n AGA 2016 | \n\n AGA 2016 | \n\n AGA 2016 | \n\n AGA 2018 | \n\n AGA 2018 | \n\n AGA 2019 | \n\n AGA 2020 | \n\n AGA 2020 | \n
| \n Date of grant | \n\n July 26,2016 | \n\n July 27, 2017 | \n\n December\u00a019, 2017 | \n\n September 18, 2018 | \n\n December\u00a019,2018 | \n\n July 23,2019 | \n\n January 28, 2020 | \n\n September 22, 2020 | \n
| \n Number of Share Awards initially granted | \n\n 766,000 | \n\n 593,500 | \n\n 72,500 | \n\n 380,000 | \n\n 135,000 | \n\n 610,000 | \n\n 1,007,500 | \n\n 85,000 | \n
| \n Vesting period (in Years) | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Grant date Fair-value | \n\n \u20ac8.08 | \n\n \u20ac5.12 | \n\n \u20ac5.55 | \n\n \u20ac2.10 | \n\n \u20ac4.04 | \n\n \u20ac1.80 | \n\n \u20ac3.72 | \n\n \u20ac3.00 | \n
| \n Performance conditions (1) | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n
| \n (1) | \n\n Performance conditions concern only grants to key managers, other employees are only subject to a service condition. | \n
| \n \n | \n\n AGA 2021-1 | \n\n AGA 2021-2 | \n\n AGA 2022-1 | \n\n AGA 2022-2 | \n\n AGA 2023 | \n
| \n Date of grant | \n\n February 25, 2021 | \n\n October 21, 2021 | \n\n May 23, 2022 | \n\n October 20, 2022 | \n\n March 23, 2023 | \n
| \n Number of Share Awards initially granted | \n\n 880,000 | \n\n 380,000 | \n\n 1,957,500 | \n\n 290,000 | \n\n 2,070,000 | \n
| \n Vesting period (in Years) | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n\n 1 | \n
| \n Grant date Fair-value | \n\n \u20ac8.87 | \n\n \u20ac7.16 | \n\n \u20ac 2.13 | \n\n \u20ac 3.43 | \n\n \u20ac 2.37 | \n
| \n Performance conditions (1) | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n\n Yes | \n
| \n (1) | \n\n Performance conditions concern only grants to key managers, other employees are only subject to a service condition. | \n
Changes in the balances of AGA
| \n \n | \n\n AGA 2022-1 | \n\n AGA 2022-2 | \n\n AGA 2023 | \n\n TOTAL | \n
| \n Balance outstanding at January 1, 2023 | \n\n 1,817,500 | \n\n 240,000 | \n\n \u2014 | \n\n 2,057,500 | \n
| \n Granted during the period | \n\n \u2014 | \n\n \u2014 | \n\n 2,070,000 | \n\n 2,070,000 | \n
| \n Vested during the period | \n\n \u2014 | \n\n \u2014 | \n\n \n | \n\n 0 | \n
| \n Forfeited during the period | \n\n (745,000) | \n\n \u2014 | \n\n (557,500) | \n\n (1,302,500) | \n
| \n Balance outstanding at December\u00a031, 2023 | \n\n 1,072,500 | \n\n 240,000 | \n\n 1,512,500 | \n\n 2,825,000 | \n
Note 23:Relationships with related parties
Key management personnel compensation
The compensation amounts presented below, which were awarded to key management personnel which are members of the Board of Directors of the Group, were recognized as expenses during the period presented:
| \n In thousands of Euros | \n\n As December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Short-term employee benefits | \n\n 1,300 | \n\n 1,187 | \n
| \n Share-based payments benefits | \n\n (483) | \n\n (1,519) | \n
| \n Total | \n\n 817 | \n\n (332) | \n
The methods and assumptions used for the measurement of share-based payments are described in Note 18.
Liabilities to key management personnel as of December\u00a031, 2022 and 2023 are set forth below:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Variable compensation | \n\n 65 | \n\n 289 | \n
| \n Total | \n\n \u00a065 | \n\n \u00a0 289 | \n
Agreement concluded between the Company and BrainEver
IIn October 2021, the Company concluded an Agreement with BrainEver, of which Mr. Bernard Gilly, the Company\u2019s former director and Chief Executive Officer, is Chairman.
The Company and BrainEver entered into a handover agreement for a period of 9 months, from October\u00a01, 2021 for a total cost over the relevant period of \u20ac87k including social security charges for the Company. The purpose of this provision is to provide the Company with additional competence in carrying out an assessment of appropriateness and for the preparation of pre-clinical work concerning the use of MTS technology in a new program.
This regulated agreement was authorized by the Board of Directors on September\u00a021, 2021.
In June 2022, the handover agreement has been renewed for a 15 months period under the same conditions and extended to the provision of an additional employee for a 12 months period, at a total cost over the relevant period of up to \u20ac225\u00a0K including social security charges. This second provision intends to provide the Company with additional competences in the management of manufacturing issues and processes.
This regulated agreement approved by the Board of Directors on March 23, 2023 was ratified by the Shareholders\u2019 Meeting held on June 21, 2023.
This agreement ended on May 31, 2023.
As of December 31, 2023, the total costs of this agreement amounted to \u20ac220\u00a0K.
Subscription agreements with Sofinnova Partners Crossover I SLP
On August 2nd, 2023, the Company entered into a subscription agreement with Sofinnova Crossover I SLP and other investors (the \u201cInvestors\u201d), pursuant to which the Investors agreed to invest a maximum amount of \u20ac10 million to be structured in two tranches:
\u2022a first tranche of \u20ac6 million through the issuance of 60 bonds convertible into new ordinary shares with a value of \u20ac100,000 each, maturing in twelve months and bearing interest at 10% per annum; and
\u2022a second tranche of \u20ac4 million through the issuance of new ordinary shares.
In connection with the drawdown of Tranche 2, this subscription agreement has been (i) amended in October 2023 to modify the conditions of the drawdown and (ii) amended and restated in November 2023 to confirm the terms of the drawdown.
On February 7, 2024, the Company entered into a new subscription agreement with Sofinnova Crossover I SLP and other investors, pursuant to which the Investors undertook to invest, subject to certain conditions, a maximum of 5 million in the form of new shares to be issued by the Company.
Sofinnova Crossover I SLP being one of the Company\u2019s major shareholders and its management company, Sofinnova Partner being member of the Board of Directors, the subscription agreement executed on August 2023, amended, reiterated and a new subscription agreement were approved by the Board of Directors respectively on July 28, 2023, October 30, 2023, November 20, 2023 and February 7, 2024 and will be subject to the approval of the shareholders at the next general meeting of shareholders under the regulated agreements procedure.
Note 20:Financial income and expenses
The financial income and expenses are broken down as follows:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Foreign exchange gains | \n\n 35 | \n\n 1,354 | \n
| \n Net change in Derivative Financial Instrument Fair Value | \n\n 6,841 | \n\n 2,536 | \n
| \n Financial income | \n\n 6,876 | \n\n 3,890 | \n
| \n Foreign exchange losses | \n\n (248) | \n\n (702) | \n
| \n Interest expenses from borrowings and amortized costs | \n\n (3,039) | \n\n (2,532) | \n
| \n Interest expenses from Lease | \n\n (113) | \n\n (118) | \n
| \n Other | \n\n (1) | \n\n (322) | \n
| \n Financial expenses | \n\n (3,401) | \n\n (3,674) | \n
| \n TOTAL | \n\n 3,475 | \n\n 215 | \n
Foreign exchange gains and losses primarily arise from the purchase of services labeled in U.S. dollars as well as exchange gain and losses on open balance sheet positions.
Derivative financial instruments are measured at fair-value through profit. The fair value is calculated based on financial mathematic models using observable market data as of December\u00a031, 2022 and 2023. The change in the fair value per unit of the derivative instruments is mainly explained by the change in the underlying share price, as well as the impact of the full repayment of Kreos bonds in December\u00a02022.
Interest expenses from lease reflect interest on the lease liability deriving from the application of IFRS 16 standard.
Interest expenses from amortized cost (Effective Interest Method) represents the calculated interests expenses of the outstanding financial debts: Heights Capital convertible bonds, EIB loan, state-guaranteed loan and conditional advances (refer to Note 11 \u2013 Financial liabilities).
Note 22:Commitments and contingencies
22.1Commitments given
Agreement with Passage de l\u2019Innovation
Services included in the lease agreement
On January\u00a01, 2015, we entered into a lease agreement for our headquarters premises in Paris, France with Passage de l\u2019Innovation, which was amended on October\u00a01, 2015, January\u00a01, 2016, May\u00a01, 2017, January\u00a08, 2018, July\u00a01, 2018, October\u00a01, 2018, November\u00a01, 2019, October\u00a01, 2021, January\u00a01, 2022 and July 2023. The agreement includes other services provided by the lessor, among which the general management of the building, office cleaning, maintenance, electricity, reception, access to meeting rooms.
The amendment signed on July\u00a023, 2023 includes a fixed amount of \u20ac207\u00a0K to cover for the related services expenses.
Commitments under service agreement \u2013 G&A operations
The Group entered into a services contract with Passage de l\u2019Innovation in connection with human resources, legal and intellectual property services on May\u00a01, 2017, which was amended on December\u00a015, 2017, January\u00a031, 2018, December\u00a018, 2018, January\u00a01, 2020, January\u00a01, 2021. According to the last amendment terms and conditions, the annual cost is fixed at \u20ac247\u00a0K and each party can terminate the contract after a six-month notice period.
The following table discloses information about the period in which payments are due as of December\u00a031, 2023:
| \n In thousands of Euros | \n\n Total | \n\n Less than one\u00a0year | \n\n One to three\u00a0years | \n\n Four to five\u00a0years | \n\n More than five\u00a0years | \n
| \n Agreements with Passage de l\u2019Innovation | \n\n 1,082 | \n\n 354 | \n\n 728 | \n\n \u2014 | \n\n \u2014 | \n
Commitments related to R&D operations
The Company has signed various licensing and collaboration agreements:
\u2022In October\u00a02012, the Group entered into a license agreement with Inserm Transfert S.A. (\u201cInserm\u201d), a French public scientific and technological institute. The Group paid a license fee of \u20ac40\u00a0K in 2013 upon the execution of the agreement, which has been recognized as research and development expenses in the statement of income. Upon completion of development milestones, the Group has to pay non-refundable fees up to \u20ac2,750\u00a0K in the aggregate. Upon commercialization of any product covered by the licensed patents, the Group will be obligated to pay a percentage of net sales as a royalty. The royalty rate varies depending on the amount of net sales.
\u2022In December\u00a02013, the Group entered into a license agreement for use of scientific data with the Association Fran\u00e7aise contre les Myopathies, (\u201cAFM\u201d), a non-profit association, the French Muscular Dystrophy Association, Genethon and Inserm Transfert, acting as a delegate of Inserm, a French public scientific and technological institute and the Universit\u00e9 Pierre et Marie Curie, (\u201cUPMC\u201d), a French university. The Group paid a license fee of \u20ac10\u00a0K upon the execution of the agreement, which has been recognized as research and development expenses in the Consolidated Statement of Income. Upon completion of development milestones, the Group has to pay non-refundable fees up to \u20ac688\u00a0K. Upon commercialization of any product covered by the license patents, the Group will be obligated to pay an annual royalty of 1% of net sales.
\u2022In February\u00a02013, the Group entered into a license agreement with Novartis. The Company issued 670,588 ordinary shares as consideration paid for the licenses. The amount of the intangible asset recognized was \u20ac275\u00a0K (see Note\u00a04) and determined by reference to the fair value of the ordinary shares that were granted by the Company in exchange for the licenses. Upon commercialization of any product covered by the licenses, the Company will be obligated to pay a royalty of 5% of net sales.
\u2022In February\u00a02014, the Company entered into a non-exclusive license, development and commercialization agreement with Avalanche Technologies (\u201cAvalanche\u201d renamed \u201cAdverum Biotechnologies\u201d), a biotechnology company. The annual license fee payable by the Group is $30\u00a0K, which was a \u20ac26\u00a0K payment each year from 2014 to 2018 recognized as research and development expenses in the statement of income. Upon completion of development milestones, the Group has to pay specified non-refundable fees of up to\u00a0$5,900\u00a0K. As of December\u00a031, 2023, the residual commitments amount to $5,500 K. Upon commercialization of any product covered by the license patents, the Group will be obligated to pay a percentage of net sales as a royalty. The royalty rate varies depending on the amount of net sales.
\u2022In January\u00a02016, the Group entered into a license agreement with M.I.T., upon exercising an option right granted under the patent option agreement between M.I.T. and the Group, dated January\u00a09, 2015. Under the terms of this license agreement, the Group recognized as a research and development expense and agreed to pay a license issue fee of $45\u00a0K, license maintenance fees up to $100\u00a0K per year and variable payments up to $7,300\u00a0K depending on the achievement of milestone events. The contract terms have been amended in May\u00a02021, where the Company agreed to pay a license issue fee of $85\u00a0K per year in 2021 and 2022 and $75 K for the subsequent years, license maintenance fees up to $100\u00a0K per year and variable payments up to $8,890\u00a0K depending on the achievement of milestone events. As of December\u00a031, 2023 the residual commitments amount to $8,050\u00a0K. The Company will also pay running mid-single-digit royalties on future net sales.
\u2022In 2019, the Company entered into a non-exclusive license agreement with President and Fellows of Harvard College. Under the terms of this license agreement, we agreed to pay a non-refundable license issuance fee of $25\u00a0K. In addition, we agreed to pay an annual license maintenance fee as from the first commercial sale of a licensed product ranging from $25\u00a0K to $75\u00a0K (creditable against running royalties), a milestone payment of $25\u00a0K upon achievement of marketing authorization for the first licensed product in any country, and a running royalty of less than 1% on net sales for a period of 15\u00a0years from the date of the first commercial sale (on a licensed product by licensed product basis).
\u2022In 2019, GenSight Biologics entered into an exclusive license agreement with Sorbonne University, Centre National de la Recherche Scientifique (\u201cCNSR\u201d), Institut National de la Sant\u00e9 et de la Recherche M\u00e9dicale\u00a0and Satt Lutech. Under this license agreement, the Company paid the licensors a one-time license upfront payment of \u20ac30\u00a0K. The Company is also obliged to pay milestone payments upon achievement of certain development and regulatory milestone events. After the grant of a MA or BLA for the product, the Company is required to pay a fixed royalty fee for each first use of a product on a patient who has received the associated gene therapy treatment. In addition, the Company required to pay an annual license maintenance fee creditable against the total paid amount of fixed royalty fee due on the same year.
For each of these licensing and collaboration agreements, based on the significant uncertainties in the development of the product candidates as well as the Group having sole discretion to decide whether it would like to proceed with the research and development activities, the Group has concluded, based on the stage of development of its product candidates, that it is remote that a payment will be made by the Group to the parties under these licensing and collaboration agreements.
Security interests attached to our bond financing
The bonds and convertible bonds issued in relation to the Kreos Transaction occurred in December\u00a02019 and August\u00a02020 benefit from pledge agreements on our bank accounts, on our business assets, on the intellectual property rights owned by us (trademarks, patents, software, and domain names) and on our receivables.
The pledge has been fully released in January\u00a02023 following the full reimbursement of Kreos bond financing in December\u00a02022.
22.2Commitments received
The Group entered into a sublease agreement in New York for\u00a0its U.S.-based subsidiary offices on February\u00a013, 2020, amended on April\u00a017, 2020. The sublease term is 2 years and ended on March\u00a031, 2022. Sublessee delivered to the Group, an\u00a0unconditional, irrevocable, self-renewing and transferable letter of credit for a total amount of $364\u00a0K. The letter of credit has been released at the termination of the lease contract.
The Group entered into a sublease agreement in New York for its U.S.-based subsidiary offices in August 2022. The sublease term is 2\u00a0years and will end in August\u00a02024. Sublessee delivered to the Group, an unconditional, irrevocable, self-renewing and transferable letter of credit for a total amount of $117\u00a0K.
Note 22:Commitments and contingencies
22.1Commitments given
Agreement with Passage de l\u2019Innovation
Services included in the lease agreement
On January\u00a01, 2015, we entered into a lease agreement for our headquarters premises in Paris, France with Passage de l\u2019Innovation, which was amended on October\u00a01, 2015, January\u00a01, 2016, May\u00a01, 2017, January\u00a08, 2018, July\u00a01, 2018, October\u00a01, 2018, November\u00a01, 2019, October\u00a01, 2021, January\u00a01, 2022 and July 2023. The agreement includes other services provided by the lessor, among which the general management of the building, office cleaning, maintenance, electricity, reception, access to meeting rooms.
The amendment signed on July\u00a023, 2023 includes a fixed amount of \u20ac207\u00a0K to cover for the related services expenses.
Commitments under service agreement \u2013 G&A operations
The Group entered into a services contract with Passage de l\u2019Innovation in connection with human resources, legal and intellectual property services on May\u00a01, 2017, which was amended on December\u00a015, 2017, January\u00a031, 2018, December\u00a018, 2018, January\u00a01, 2020, January\u00a01, 2021. According to the last amendment terms and conditions, the annual cost is fixed at \u20ac247\u00a0K and each party can terminate the contract after a six-month notice period.
The following table discloses information about the period in which payments are due as of December\u00a031, 2023:
| \n In thousands of Euros | \n\n Total | \n\n Less than one\u00a0year | \n\n One to three\u00a0years | \n\n Four to five\u00a0years | \n\n More than five\u00a0years | \n
| \n Agreements with Passage de l\u2019Innovation | \n\n 1,082 | \n\n 354 | \n\n 728 | \n\n \u2014 | \n\n \u2014 | \n
Commitments related to R&D operations
The Company has signed various licensing and collaboration agreements:
\u2022In October\u00a02012, the Group entered into a license agreement with Inserm Transfert S.A. (\u201cInserm\u201d), a French public scientific and technological institute. The Group paid a license fee of \u20ac40\u00a0K in 2013 upon the execution of the agreement, which has been recognized as research and development expenses in the statement of income. Upon completion of development milestones, the Group has to pay non-refundable fees up to \u20ac2,750\u00a0K in the aggregate. Upon commercialization of any product covered by the licensed patents, the Group will be obligated to pay a percentage of net sales as a royalty. The royalty rate varies depending on the amount of net sales.
\u2022In December\u00a02013, the Group entered into a license agreement for use of scientific data with the Association Fran\u00e7aise contre les Myopathies, (\u201cAFM\u201d), a non-profit association, the French Muscular Dystrophy Association, Genethon and Inserm Transfert, acting as a delegate of Inserm, a French public scientific and technological institute and the Universit\u00e9 Pierre et Marie Curie, (\u201cUPMC\u201d), a French university. The Group paid a license fee of \u20ac10\u00a0K upon the execution of the agreement, which has been recognized as research and development expenses in the Consolidated Statement of Income. Upon completion of development milestones, the Group has to pay non-refundable fees up to \u20ac688\u00a0K. Upon commercialization of any product covered by the license patents, the Group will be obligated to pay an annual royalty of 1% of net sales.
\u2022In February\u00a02013, the Group entered into a license agreement with Novartis. The Company issued 670,588 ordinary shares as consideration paid for the licenses. The amount of the intangible asset recognized was \u20ac275\u00a0K (see Note\u00a04) and determined by reference to the fair value of the ordinary shares that were granted by the Company in exchange for the licenses. Upon commercialization of any product covered by the licenses, the Company will be obligated to pay a royalty of 5% of net sales.
\u2022In February\u00a02014, the Company entered into a non-exclusive license, development and commercialization agreement with Avalanche Technologies (\u201cAvalanche\u201d renamed \u201cAdverum Biotechnologies\u201d), a biotechnology company. The annual license fee payable by the Group is $30\u00a0K, which was a \u20ac26\u00a0K payment each year from 2014 to 2018 recognized as research and development expenses in the statement of income. Upon completion of development milestones, the Group has to pay specified non-refundable fees of up to\u00a0$5,900\u00a0K. As of December\u00a031, 2023, the residual commitments amount to $5,500 K. Upon commercialization of any product covered by the license patents, the Group will be obligated to pay a percentage of net sales as a royalty. The royalty rate varies depending on the amount of net sales.
\u2022In January\u00a02016, the Group entered into a license agreement with M.I.T., upon exercising an option right granted under the patent option agreement between M.I.T. and the Group, dated January\u00a09, 2015. Under the terms of this license agreement, the Group recognized as a research and development expense and agreed to pay a license issue fee of $45\u00a0K, license maintenance fees up to $100\u00a0K per year and variable payments up to $7,300\u00a0K depending on the achievement of milestone events. The contract terms have been amended in May\u00a02021, where the Company agreed to pay a license issue fee of $85\u00a0K per year in 2021 and 2022 and $75 K for the subsequent years, license maintenance fees up to $100\u00a0K per year and variable payments up to $8,890\u00a0K depending on the achievement of milestone events. As of December\u00a031, 2023 the residual commitments amount to $8,050\u00a0K. The Company will also pay running mid-single-digit royalties on future net sales.
\u2022In 2019, the Company entered into a non-exclusive license agreement with President and Fellows of Harvard College. Under the terms of this license agreement, we agreed to pay a non-refundable license issuance fee of $25\u00a0K. In addition, we agreed to pay an annual license maintenance fee as from the first commercial sale of a licensed product ranging from $25\u00a0K to $75\u00a0K (creditable against running royalties), a milestone payment of $25\u00a0K upon achievement of marketing authorization for the first licensed product in any country, and a running royalty of less than 1% on net sales for a period of 15\u00a0years from the date of the first commercial sale (on a licensed product by licensed product basis).
\u2022In 2019, GenSight Biologics entered into an exclusive license agreement with Sorbonne University, Centre National de la Recherche Scientifique (\u201cCNSR\u201d), Institut National de la Sant\u00e9 et de la Recherche M\u00e9dicale\u00a0and Satt Lutech. Under this license agreement, the Company paid the licensors a one-time license upfront payment of \u20ac30\u00a0K. The Company is also obliged to pay milestone payments upon achievement of certain development and regulatory milestone events. After the grant of a MA or BLA for the product, the Company is required to pay a fixed royalty fee for each first use of a product on a patient who has received the associated gene therapy treatment. In addition, the Company required to pay an annual license maintenance fee creditable against the total paid amount of fixed royalty fee due on the same year.
For each of these licensing and collaboration agreements, based on the significant uncertainties in the development of the product candidates as well as the Group having sole discretion to decide whether it would like to proceed with the research and development activities, the Group has concluded, based on the stage of development of its product candidates, that it is remote that a payment will be made by the Group to the parties under these licensing and collaboration agreements.
Security interests attached to our bond financing
The bonds and convertible bonds issued in relation to the Kreos Transaction occurred in December\u00a02019 and August\u00a02020 benefit from pledge agreements on our bank accounts, on our business assets, on the intellectual property rights owned by us (trademarks, patents, software, and domain names) and on our receivables.
The pledge has been fully released in January\u00a02023 following the full reimbursement of Kreos bond financing in December\u00a02022.
22.2Commitments received
The Group entered into a sublease agreement in New York for\u00a0its U.S.-based subsidiary offices on February\u00a013, 2020, amended on April\u00a017, 2020. The sublease term is 2 years and ended on March\u00a031, 2022. Sublessee delivered to the Group, an\u00a0unconditional, irrevocable, self-renewing and transferable letter of credit for a total amount of $364\u00a0K. The letter of credit has been released at the termination of the lease contract.
The Group entered into a sublease agreement in New York for its U.S.-based subsidiary offices in August 2022. The sublease term is 2\u00a0years and will end in August\u00a02024. Sublessee delivered to the Group, an unconditional, irrevocable, self-renewing and transferable letter of credit for a total amount of $117\u00a0K.
Key management personnel compensation
The compensation amounts presented below, which were awarded to key management personnel which are members of the Board of Directors of the Group, were recognized as expenses during the period presented:
| \n In thousands of Euros | \n\n As December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Short-term employee benefits | \n\n 1,300 | \n\n 1,187 | \n
| \n Share-based payments benefits | \n\n (483) | \n\n (1,519) | \n
| \n Total | \n\n 817 | \n\n (332) | \n
The methods and assumptions used for the measurement of share-based payments are described in Note 18.
Liabilities to key management personnel as of December\u00a031, 2022 and 2023 are set forth below:
| \n In thousands of Euros | \n\n As of December\u00a031, | \n|
| \n 2023 | \n\n 2022 | \n|
| \n Variable compensation | \n\n 65 | \n\n 289 | \n
| \n Total | \n\n \u00a065 | \n\n \u00a0 289 | \n
Note 24:Earnings per share
The basic earnings per share is calculated by dividing the net income for the period attributable to the shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Preferred shares had the same rights and dividends as ordinary shares for purposes of calculating earnings per share. All preferred shares were converted on a one-for-one basis into ordinary shares upon completion of the IPO on Euronext Paris in July\u00a02016.
All outstanding ordinary shares have been taken into consideration for purposes of calculating basic earnings per share. The weighted average number of ordinary shares was 46,330,303 and 48,316,339 for the years ended December\u00a031, 2022 and 2023, respectively.
The diluted earnings per share is calculated by dividing the net income for the period attributable to shareholders of the Group by the weighted average number of shares outstanding plus any potentially dilutive shares not yet issued from share-based compensation plans (see Note\u00a018).
Dilution is defined as a reduction of earnings per share or an increase of loss per share. When the exercise of outstanding share options and warrants decreases loss per share, they are considered to be anti-dilutive and excluded from the calculation of loss per share. Thus, basic and diluted earnings (loss) per share are equal as all equity instruments issued, representing 7,565,186 and 9,818,182 potential additional ordinary shares, for the years ended December\u00a031, 2022 and 2023, respectively, have been considered anti-dilutive.
| \n In thousands of Euros, except for earning (loss) per share | \n\n 2023 | \n\n 2022 | \n
| \n Net income (loss) of the reporting period | \n\n (26,220) | \n\n (27,625) | \n
| \n Adjusted weighted average number of outstanding shares | \n\n 48,316,339 | \n\n 46,330,303 | \n
| \n Basic and diluted earnings (loss) per share | \n\n (0.54) | \n\n (0.60) | \n
Note 25:Management of financial risks
The principal financial instruments held by the Group are cash and cash equivalents. The purpose of holding these instruments is to finance the ongoing business activities of the Group. It is not the Group\u2019s policy to invest in financial instruments for speculative purposes. The Group does not utilize derivatives.
For more information on financial risks, see Section 3.1 \u201cFinancial risks\u201d.
The principal risks to which the Group is exposed are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for management of the Group\u2019s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The note\u00a011.5 details the Group\u2019s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.
The Company\u2019s current financial debt consists of (i) tranche A of the EIB loan for \u20ac8.5 million (nominal amount and financial interests as of December 31, 2023), (ii) bonds convertible into new shares in favor of Heights Capital for a nominal amount of \u20ac12\u00a0million (\u20ac13,2 million in case of full redemption in cash), (iii)\u00a0state guaranteed loans from the Banks for a total outstanding amount of \u20ac2.7 million and (iv) conditional advances received from Bpifrance Financement for a total outstanding amount of \u20ac6.6 million.
Given the information presented in notes 2.2 Going concern and 11 Financial liabilities, financial liabilities excluding the effect of discounting amounts to 25.7 million euros at less than one year and 7.1 million euros at more than one year, based on contractual maturities.
As of December\u00a031, 2023, the Group has not sufficient net working capital to meet its obligations during the next 12\u00a0months. See Note\u00a02.2 Going Concern.
Foreign currency exchange risk
The Group is exposed to foreign exchange risk inherent in certain services provided in the United States, which have been invoiced in U.S. dollars. The Group does not currently have revenues in dollars nor in any other currency. Due to the relatively low level of these expenditures, the exposure to foreign exchange risk is unlikely to have a material adverse impact on the results of operations or financial position of the Group. The Group\u2019s exposure to currencies other than the U.S. dollar is negligible. For the years ended December\u00a031,2022 and 2023, approximately 36% and 34%, respectively, of its purchases and other external expenses were made in U.S. dollars, generating a net foreign exchange gains of \u20ac652\u00a0K in in 2022 and a net foreign exchange loss of \u20ac213\u00a0K in 2023. In light of these insignificant amounts, the Group has not adopted, at this stage, a hedging mechanism in order to protect its business activity against fluctuations in exchange rates. As the Group further increases its business, particularly in the United States, the Group expects to face greater exposure to exchange rate risk and would then consider adopting an appropriate policy for hedging against these risks.
Interest rate risk
The Company has low exposure to interest rate risk. The Group borrow funds at fixed interest rates. The repayment flows of the advances from Banque Publique d\u2019Investissement (\u201cBPI France\u201d) and the borrowings are not subject to interest rate risk.
Credit risk
In order to minimize credit risk, the Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group\u2019s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
The credit risk related to the Group\u2019s cash and cash equivalents is not significant in light of the quality of the co-contracting financial institutions.
The Group does not have significant credit risk exposure to any single customer or any group of counterparties having similar characteristics.
Fair value
The fair value of financial instruments traded on an active market is based on the market rate as of December\u00a031, 2023. The market prices used for the financial assets owned by the Company are the bid prices in effect on the market as of the valuation date.
The nominal value, less the provisions for depreciation, of the accounts receivable and current debts, is presumed to approximate the fair value of those items.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance. The Group\u2019s overall strategy remains unchanged from 2022.
The capital structure of the Group consists of net debt (borrowings disclosed in Note 11 after deducting cash and bank balances) and equity of the Group (comprising issued capital, reserves and retained earnings and non-controlling interests as disclosed in Note\u00a010).
The Group is not subject to any externally imposed capital requirements.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for management of the Group\u2019s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
The note\u00a011.5 details the Group\u2019s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.
The Company\u2019s current financial debt consists of (i) tranche A of the EIB loan for \u20ac8.5 million (nominal amount and financial interests as of December 31, 2023), (ii) bonds convertible into new shares in favor of Heights Capital for a nominal amount of \u20ac12\u00a0million (\u20ac13,2 million in case of full redemption in cash), (iii)\u00a0state guaranteed loans from the Banks for a total outstanding amount of \u20ac2.7 million and (iv) conditional advances received from Bpifrance Financement for a total outstanding amount of \u20ac6.6 million.
Given the information presented in notes 2.2 Going concern and 11 Financial liabilities, financial liabilities excluding the effect of discounting amounts to 25.7 million euros at less than one year and 7.1 million euros at more than one year, based on contractual maturities.
As of December\u00a031, 2023, the Group has not sufficient net working capital to meet its obligations during the next 12\u00a0months. See Note\u00a02.2 Going Concern.
Foreign currency exchange risk
The Group is exposed to foreign exchange risk inherent in certain services provided in the United States, which have been invoiced in U.S. dollars. The Group does not currently have revenues in dollars nor in any other currency. Due to the relatively low level of these expenditures, the exposure to foreign exchange risk is unlikely to have a material adverse impact on the results of operations or financial position of the Group. The Group\u2019s exposure to currencies other than the U.S. dollar is negligible. For the years ended December\u00a031,2022 and 2023, approximately 36% and 34%, respectively, of its purchases and other external expenses were made in U.S. dollars, generating a net foreign exchange gains of \u20ac652\u00a0K in in 2022 and a net foreign exchange loss of \u20ac213\u00a0K in 2023. In light of these insignificant amounts, the Group has not adopted, at this stage, a hedging mechanism in order to protect its business activity against fluctuations in exchange rates. As the Group further increases its business, particularly in the United States, the Group expects to face greater exposure to exchange rate risk and would then consider adopting an appropriate policy for hedging against these risks.
Interest rate risk
The Company has low exposure to interest rate risk. The Group borrow funds at fixed interest rates. The repayment flows of the advances from Banque Publique d\u2019Investissement (\u201cBPI France\u201d) and the borrowings are not subject to interest rate risk.
Note 26:Auditor\u2019s fees
The auditors\u2019 fees paid by the Group in 2023 amounted to \u20ac406\u00a0K.
| \n In thousands of Euros | \n\n 2023 | \n|||
| \n Becouze | \n\n Deloitte & Associ\u00e9s | \n|||
| \n Amount | \n\n % | \n\n Amount | \n\n % | \n|
| \n Audit certification | \n\n 135 | \n\n 68% | \n\n 145 | \n\n 70% | \n
| \n Reports and diligences related to Financing Operations | \n\n 35 | \n\n 18% | \n\n 35 | \n\n 17% | \n
| \n Other reports (incl. for French legal purposes) | \n\n 28 | \n\n 14% | \n\n 28 | \n\n 13% | \n
| \n Total | \n\n 198 | \n\n 100% | \n\n 208 | \n\n 100% | \n
Other reports relate to contractual diligences and reports released in relation with financing and strategic operations driven by the Company throughout the year 2023.
Note 27:Subsequent events
On January 16, 2024, the Company has acknowledged the resignation of Mr. Bernard Gilly from his position as director. The Board of Directors of the Company also announced its decision, after consultation of the Nomination Committee, to co-opt Mrs. Laurence Rodriguez as director for the remainder of Bernard Gilly\u2019s term of office (expiring at the end of the annual shareholders meeting to be held in 2024 to approve the financial statements for the financial year ending December\u00a031, 2023).
The co-optation of Laurence Rodriguez will be subject to ratification by the next shareholders\u2019 meeting of the Company.
On January 25, 2024, given the need to set aside a specific number of vials per manufacturing batch for archives and quality control samples, the Company announced that it decided to mix the two manufactured DS batches into one single Drug Product (DP) batch to increase the number of vials available to patients. The FDA confirmed in writing that they agree in principle with the mixing step. Performing the mixing step means that LUMEVOQ\u00ae vials will be released for clinical use in Q3\u00a02024.
On the same date, the Company announced that it received a written feedback from the U.S. Food and Drug Administration (FDA) on the proposed design for the Phase III trial RECOVER. This protocol had been previously shared with the European Medicines Agency (EMA) and the UK Medicines and Healthcare products Agency (MHRA). The FDA advised the Company that replacing the double sham injection control arm with a double placebo injection control arm \u201cwould help make the study an adequate and well-controlled clinical study designed to provide the primary evidence of effectiveness to support a future marketing application.\u201d The agency also had \u201cno objection to using best corrected visual acuity (BCVA) as the primary endpoint\u201d and made additional recommendations for the Company to consider. The Company plans to revise the RECOVER study design to incorporate the feedback received from the three regulatory agencies, aiming at launching a single global Phase III study that will support marketing authorization applications in the U.S. and EU. GenSight Biologics may schedule further consultations with the FDA and other agencies to reach alignment on the final RECOVER study design. As previously announced, the current data package, not necessarily including data from the RECOVER trial, could support a marketing authorization application in the UK. The Company plans further discussions with the MHRA to clarify the quickest path towards a regulatory submission.
The Company also announced that Thomas Gidoin, Chief Financial Officer since\u00a02015, has resigned, effective January\u00a026, 2024. An interim CFO was appointed until a permanent replacement is recruited.
On February 8, 2024, the Company announced the completion a capital increase of \u20ac5\u00a0million, by the issuance of 13,061,651\u00a0new shares with a nominal value of \u20ac0.025 each for a subscription price of \u20ac0.3828 each (including premium) subscribed entirely by Sofinnova Partners for \u20ac2\u00a0million, Invus for \u20ac1.75\u00a0million, UPMC for \u20ac1\u00a0million and Heights Capital for \u20ac0.25\u00a0million.
The capital increase was subject to, among other conditions, the approval of the Company, the Investors, the Company's creditor banks (BNP Paribas, CIC and Bpifrance), the European Investment Bank and Heights Capital with respect to waivers from the Banks, EIB and Heights Capital on any provision which could trigger an early repayment of their loans to the Company or convertible bonds, deferral of principal payments due to the Banks and Heights Capital, and waiver of any EIB adjustment right it has under the warrant agreement dated December 22, 2022, in each case until April\u00a030, 2024.
On the same date, the Company announced that the amendments to the terms and conditions of the convertible bonds issued on December 28, 2022 to Heights Capital were approved by the shareholders' general meeting held on January\u00a010, 2024. The new price limit equals \u20ac0.4527 corresponding to the closing price of the Company's shares on the regulated market of Euronext in Paris on the last trading day preceding the date that is three\u00a0business days prior to publication of the notice of the shareholders' general meeting held on January\u00a010, 2024 in the Bulletin d'Annonce L\u00e9gale Obligatoire, less a 10.36% discount.
An additional amendment to the Price Limit will be presented to the shareholders at the next annual shareholders general meeting if the current price limit is above the market price of the shares at the time of convening such meeting, which should reflect the Company's share price over the period comprising the last eight trading sessions at the time of convening the annual shareholders' general meeting, subject to a maximum discount of 20%.
For the year ended December 31, 2023, new borrowing obtained include the 2023 OCAs (and accrued interests) of the bridge financing signed with investors in August 2023. In November 2023, the capital increase of \u20ac4.7 million, including the \u20ac4 million Tranche 2 triggered the automatic conversion of the 2023 OCAs at a conversion price of 0.7122 euros.