Alimera Sciences
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K(Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018or¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number: 001-34703 Alimera Sciences, Inc.(Exact name of registrant as specified in its charter) Delaware 20-0028718(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification Number)6120 Windward Parkway, Suite 290Alpharetta, GA 30005(Address of principal executive offices) (Zip Code)(678) 990-5740(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Common Stock, $0.01 par value per share The Nasdaq Stock Market LLC(Title of each class) (Name of each exchange on which registered)Securities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, oremerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filero Accelerated filerx Non-accelerated filero Smaller reporting companyx Emerging growth companyoIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No xAs of June 30, 2018, the last business day of the registrant’s last completed second quarter, the aggregate market value of the Common Stock held bynon-affiliates of the registrant was approximately $60,577,309 based on the closing price of the registrant’s Common Stock, on June 30, 2018, as reported bythe Nasdaq Global Market. For the purposes of this disclosure, shares of Common Stock held by each executive officer, director and stockholder known bythe registrant to be affiliated with such individuals based on public filings and other information known to the registrant have been excluded since suchpersons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.As of February 22, 2019, there were 70,968,630 shares of the registrant’s Common Stock issued and outstanding. Table of ContentsDOCUMENTS INCORPORATED BY REFERENCESpecified portions of the registrant’s proxy statement with respect to the registrant’s 2019 Annual Meeting of Stockholders, which is to be filedpursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2018, are incorporated by reference into Part IIIof this annual report on Form 10-K.Table of ContentsAlimera Sciences, Inc.Form 10-KTable of Contents Page Part I Special Note Regarding Forward-Looking Statements and Projections4Item 1.Business5Item 1A.Risk Factors19Item 1B.Unresolved Staff Comments42Item 2.Properties42Item 3.Legal Proceedings42Item 4.Mine Safety Disclosures42 Part II Item 5.Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities43Item 6.Selected Consolidated Financial Data44Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations45Item 7A.Qualitative and Quantitative Disclosures about Market Risk60Item 8.Financial Statements and Supplementary Data60Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure60Item 9A.Controls and Procedures61Item 9B.Other Information64 Part III Item 10.Directors, Executive Officers and Corporate Governance65Item 11.Executive Compensation65Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters66Item 13.Certain Relationships and Related Transactions and Director Independence67Item 14.Principal Accountant Fees and Services67 Part IV Item 15.Exhibits and Financial Statements Schedules68Item 16.Form 10-K Summary68Signatures 115Index to Financial Statements 69Exhibit Index 110The term “ILUVIEN” is our registered trademark. All other trademarks, trade names and service marks appearing in this annual report on Form 10-K are theproperty of their respective owners.3Table of ContentsPART ISPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONSVarious statements in this report of Alimera Sciences, Inc. (we, our, Alimera or the Company) are “forward-looking statements” within the meaning ofthe Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial risks and uncertainties. All statements, other thanstatements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenues, projected costs,prospects, plans and objectives of management are forward-looking statements. These statements are subject to risks and uncertainties and are based oninformation currently available to our management. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “contemplates,”“predict,” “project,” “target,” “likely,” “potential,” “continue,” “ongoing,” “will,” “would,” “should,” “could,” or the negative of these terms and similarexpressions or words, identify forward-looking statements. The events and circumstances reflected in our forward-looking statements may not occur andactual results could differ materially from those projected in our forward-looking statements. Meaningful factors that could cause actual results to differinclude:•a slowdown or reduction in our sales in due to a reduction in end user demand, unanticipated competition, regulatory issues, or otherunexpected circumstances;•uncertainty regarding our ability to achieve profitability and positive cash flow through the commercialization of ILUVIEN® in the U.S., theEuropean Economic Area (EEA) and other regions of the world where we sell ILUVIEN;•dependence on third-party manufacturers to manufacture ILUVIEN or any future products or product candidates in sufficient quantities andquality;•uncertainty regarding the pricing and reimbursement guidelines for ILUVIEN or any future products or product candidates, includingILUVIEN in new markets;•our ability to successfully obtain the indication for non-infectious posterior uveitis in the EU, which may be delayed significantly or notoccur at all;•our ability to meet any post-market requirements for non-infectious posterior uveitis in the EU if we obtain the indication;•our ability to successfully commercialize ILUVIEN following regulatory approval in additional markets;•delay in or failure to obtain regulatory approval of ILUVIEN or any future products or product candidates in additional countries;•our anticipated launches of ILUVIEN by Alimera’s distribution partners in Spain and France may be delayed or may not occur;•the possibility that we may again fail to comply with the continuing listing standards of the Nasdaq Global Market because the closing bidprice of our common stock on the Nasdaq Global Market is below $1.00 for 30 consecutive business days;•our ability to operate our business in compliance with the covenants and restrictions in our credit facility;•current and future laws and regulations; and•our possible need to raise additional financing.All written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by thecautionary statements contained or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or thatare made on our behalf. We undertake no obligation and specifically decline any obligation, to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise. Please see, however, any further disclosures we make on related subjects in any annual, quarterly orcurrent reports that we may file with the Securities and Exchange Commission (SEC).We encourage you to read the discussion and analysis of our financial condition and our consolidated financial statements contained in this annualreport on Form 10-K. We also encourage you to read Item 1A of Part 1 of this annual report on Form 10-K, entitled “Risk Factors,” which contains a moredetailed discussion of some of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of this report,other unknown or unpredictable factors also could affect our results. There can be no assurance that we will in fact achieve the actual results or developmentswe anticipate or, even if we do substantially realize them, that they will have the expected consequences to, or effects on, us. Therefore, we can give noassurances that we will achieve the outcomes stated in those forward-looking statements and estimates.4Table of ContentsITEM 1. BUSINESSOverviewAlimera Sciences, Inc., and its subsidiaries (we or Alimera), is a pharmaceutical company that specializes in the commercialization and development ofprescription ophthalmic pharmaceuticals. Alimera was incorporated on June 4, 2003 under the laws of the State of Delaware. We presently focus on diseasesaffecting the back of the eye, or retina, because we believe these diseases are not well treated with current therapies and represent a significant marketopportunity.Our only commercial product is ILUVIEN®, an intravitreal implant that treats patients by delivering a continuous microdose of the non-proprietarycorticosteroid fluocinolone acetonide (FAc) in the eye, for up to 36 months. “Intravitreal” refers to the space inside the eye behind the lens that contains thejelly-like substance called vitreous. ILUVIEN was initially developed to treat diabetic macular edema (DME). DME is a disease of the retina that affectsindividuals with diabetes and can lead to severe vision loss and blindness. ILUVIEN has received marketing authorization in the United States (U.S.), Austria,Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Lebanon, Luxembourg, the Netherlands, Norway, Poland, Portugal,Spain, Sweden, the United Arab Emirates and the United Kingdom. In the U.S., Canada, Lebanon and the United Arab Emirates, ILUVIEN is indicated for thetreatment of DME in patients who have been previously treated with a course of corticosteroids and did not have a clinically significant rise in intraocularpressure (IOP). In the European Economic Area (EEA) countries in which ILUVIEN has received marketing authorization, it is indicated for the treatment ofvision impairment associated with DME considered insufficiently responsive to available therapies. As part of the approval process in Europe, we committedto conduct a five-year, post-authorization, open label registry study in 800 patients treated with ILUVIEN. Due to our post market safety surveillance notshowing any unexpected safety signals, we requested and received approval to modify our protocol to cap enrollment in the study. Enrollment wascompleted with 562 patients. We anticipate this study to be completed in early 2020.We commercially market ILUVIEN in the U.S., Germany, the United Kingdom, Portugal, Austria and Ireland.In addition, we have entered into various agreements under which distributors are providing or will provide regulatory, reimbursement or sales andmarketing support for ILUVIEN in France, Italy, Spain, Australia, New Zealand, Canada and several countries in the Middle East. In 2016, our Middle Eastdistributor launched ILUVIEN and initiated named patient sales in the United Arab Emirates. “Named patient sales” refers to the ability of a retinal specialistto prescribe ILUVIEN because the patient has a special need for a drug that lacks a general market authorization. Our Italian distributor launched ILUVIEN inItaly in 2017. Our Spanish distributor began selling on a named patient basis in 2017 and after receiving reimbursement in 2018, plans a full-scale launch in2019. Our French and Canadian distributors are currently pursuing reimbursement in their respective countries. As of December 31, 2018, we have recognizedrevenue from sales of ILUVIEN to the Company’s international distributors in the Middle East, France, Italy and Spain.In December 2017, we filed an application for a new indication for ILUVIEN for the treatment of non-infectious posterior uveitis (NIPU) in the 17 EEAcountries where ILUVIEN is currently approved for the treatment of DME. Uveitis is an inflammatory disease of the uveal tract, which is comprised of the iris,ciliary body and choroid, that can lead to severe vision loss and blindness. In 2018, the regulatory authorities requested additional follow-up data from theclinical trials to support the application. We submitted this additional follow-up data in October 2018. We expect to obtain approval of our application forNIPU in the first half of 2019, although we can provide no assurances that we can do so.ILUVIEN is inserted into the back of the patient’s eye in a non-surgical procedure employing a device with a 25-gauge needle, which allows for a self-sealing wound. We believe that corticosteroids provide the best option in the treatment of DME and NIPU because they reduce the inflammatory aspects ofthe disease. Further, we believe that ILUVIEN’s CONTINUOUS MICRODOSING™ delivery makes it the only approved drug therapy for DME that candeliver consistent daily therapeutic levels of corticosteroid. The delivery mechanism of ILUVIEN provides lower daily and aggregate exposure tocorticosteroids than any other intraocular dosage forms currently available, which we believe mitigates the typical risks associated with corticosteroidtherapy. Further, ILUVIEN, which is non-bioerodible, provides consistent delivery as a result of its constant surface area. This provides a sustainedtherapeutic effect on DME and NIPU. Other therapies that physicians currently use to treat DME, such as anti-VEGF treatments and other corticosteroids, areacute (short-acting) therapies that provide a higher initial daily dose but then rapidly decline, requiring frequent reinjection by the physician to maintain orreestablish the therapeutic effect.Our strategy is to establish ILUVIEN as a leading therapy for DME patients and subsequently for other indications for which ILUVIEN is proven safeand effective because of its ability to treat retinal diseases consistently and continuously every day for up to three years. We intend to capitalize on ourmanagement’s experience, the breadth of our commercial resources in both the U.S. and Europe, and our marketing expertise to commercialize ILUVIEN. Weintend to use those same strengths to acquire, obtain regulatory approval for and commercialize other potential eye care products.5Table of ContentsBusiness StrategyWe presently focus on diseases affecting the back of the eye, or retina, because we believe these diseases are not well treated with current therapies andrepresent a significant market opportunity. Our business strategy is to: •Maximize the Commercial Success of ILUVIEN. We commercially market ILUVIEN directly in the U.S., Germany, the United Kingdom, Portugal,Austria and Ireland. We began selling ILUVIEN in Austria in the first quarter of 2017 and in Ireland in the fourth quarter of 2017. We have approvalin 12 additional countries in the EEA and we are pursuing opportunities to sell ILUVIEN in some of these countries. Our Italian distributor launchedILUVIEN in Italy in 2017. Our Spanish distributor began selling on a named patient basis in 2017, with plans for a formal launch in 2019. OurFrench distributor is currently pursuing reimbursement at the national level. In addition, outside the EEA, we have established distributionrelationships in Canada and the Middle East. Our distributor in the Middle East began selling ILUVIEN in the United Arab Emirates in 2016, andhas plans to begin selling on a named patient basis in several other Middle Eastern countries in 2019. Our distributor in Canada received regulatoryapproval in 2018 and is currently pursuing reimbursement with plans to sell on a named patient basis beginning in mid-2019.•Obtain approval for ILUVIEN for NIPU. We filed an application for a new indication for ILUVIEN for the treatment of NIPU in the 17 EEA countrieswhere ILUVIEN is currently approved for the treatment of DME. We will evaluate seeking approval for the treatment of NIPU in other countries inthe Middle East and Africa where we have the license to use ILUVIEN.•Pursue Approval for ILUVIEN for DME in Additional Countries. We plan to pursue regulatory approval for ILUVIEN for the treatment of DME,directly or with a partner, in other countries. We have entered into an agreement to distribute ILUVIEN in Australia and New Zealand. Pursuant tothis agreement, our distributor has filed for approval in those countries. In addition, under a Mutual Recognition Procedure (MRP) available in theEEA, we can submit ILUVIEN for approval in any or all of the remaining 12 European Union (EU) countries where we do not have marketingapproval.•Assess the Effectiveness of ILUVIEN for Additional Retinal Diseases. We believe that ILUVIEN has the potential to address additional retinaldiseases other than DME and NIPU, including Non-Proliferative Diabetic Retinopathy (NPDR), retinal vein occlusion (RVO), dry age-relatedmacular degeneration (AMD) and wet AMD.•Expand Our Ophthalmic Product Pipeline. We believe there are further unmet medical needs in the treatment of ophthalmic diseases. We intend tocontinue to evaluate in-licensing and acquisition opportunities for compounds and technologies with potential treatment applications for diseasesaffecting the eye.Disease Overview and Market OpportunityDiabetes and Diabetic RetinopathyDiabetes mellitus, with its systemic and ophthalmic complications, represents a global public health threat. The International Diabetes Federation (IDF)estimated prevalence of diabetes worldwide in 2017 increased to 425 million people and is expected to increase to 629 million people by 2045.The 2017 National Diabetes Statistics Reports published by the U.S. Centers for Disease Control and Prevention (CDC) reported that as of 2015, 30.3million Americans, or 9.4% of the U.S. population, have diabetes and that there were 1.5 million new cases of diabetes diagnosed among people ages 18 andolder. Nearly 1 in 4 four adults living with diabetes, 7.2 million Americans, did not know they had the condition and are therefore not being monitored andtreated to control their disease and prevent systemic and ophthalmic complications. The report also identified that around 84.1 million people haveprediabetes, a condition that if not treated often leads to type 2 diabetes within five years. In this population, only 11.6% of adults know they hadprediabetes. The IDF estimates that there are approximately 58.0 million people in Europe with diabetes and that 22.0 million remain undiagnosed. In theMiddle East, it is estimated there are approximately 23.0 million people with diabetes and 10.0 million remain undiagnosed.All patients with diabetes are at risk of developing some form of diabetic retinopathy, an ophthalmic complication of diabetes with symptomsincluding the swelling and leakage of blood vessels within the retina or the abnormal growth of new blood vessels on the surface of the retina. According tothe CDC Vision Health Initiative, diabetic retinopathy causes approximately 12,000 to 24,000 new cases of blindness in the U.S. each year; making diabetesthe leading cause of new cases of blindness in adults aged 20 to 74. Diabetic retinopathy can be divided into either non-proliferative or proliferativeretinopathy. Non-proliferative retinopathy develops first and causes increased capillary permeability, micro aneurysms, hemorrhages, exudates (when fluidleaks into spaces between vessels), macular ischemia (lack of oxygen) and macular edema6Table of Contents(thickening of the retina caused by fluid leakage from capillaries). Proliferative retinopathy is an advanced stage of diabetic retinopathy that, in addition tocharacteristics of non-proliferative retinopathy, results in the growth of new blood vessels. These new blood vessels are abnormal and fragile, growing alongthe retina and along the surface of the clear, vitreous gel that fills the inside of the eye. By themselves, these blood vessels do not cause symptoms or visionloss. However, these blood vessels have thin, fragile walls that are prone to leakage and hemorrhage.Diabetic Macular EdemaWhen the blood vessel leakage of diabetic retinopathy leads to the build-up of fluid, or edema, in a region of the retina called the macula, the conditionis called DME. This area of the eye is important for the sharp, straight-ahead vision that is used for reading, recognizing faces, and driving. There are anestimated 750,000 people with DME in the U.S., according to the National Eye Institute. DME is the most common cause of vision loss among people withdiabetic retinopathy and about 30% of people with diabetic retinopathy will develop DME. It is more likely to occur as diabetic retinopathy worsens,although it may occur at any stage of the disease. The onset of DME is painless and may go undetected by the patient until it manifests with the blurring ofcentral vision or acute vision loss. The severity of this blurring may range from mild to profound loss of vision.Studies have shown that DME is a multifactorial disease that is underpinned by inflammatory cytokine activity in the eye. Of the currently approvedpharmacotherapies used to treat DME, only corticosteroids, including fluocinolone acetonide found in the ILUVIEN implant, affect these cytokines.As the incidence of diabetes continues to increase worldwide, the incidence of DME and other complications is predicted to rise as well. Most patientswho suffer from diabetes do not meet glycemic (glucose or blood sugar) targets, resulting in hyperglycemia (elevated levels of glucose in the blood). This, inturn, leads to the development of micro-vascular complications, which manifest in the eye as diabetic retinopathy, as well as elevated cytokines that breakdown the blood-retina barrier, leading to macular edema (DME) in many diabetic retinopathy patients.UveitisUveitis means inflammation of the uvea track, which is a layer of tissue located between the outer layer (cornea and sclera) and the inner layer (theretina) of the eye. The front portion (anterior) of the uveal tract contains the iris, and the back portion (posterior) of the uveal tract contains the choroid andthe stroma of the ciliary body. Inflammation of the uvea encompasses approximately 30 inflammatory disorders characterized by intraocular inflammation, amajor cause of visual loss in people of working age in both developed and developing countries. It can affect people of all ages, producing swelling anddestroying eye tissues, which can lead to severe vision loss and blindness. According to the classification scheme recommended by the International UveitisStudy Group, the disease can be classified on the basis of anatomic locations: anterior, intermediate, posterior or pan uveitis. Uveitis can be caused by anumber of factors such as infection (infectious uveitis) or other autoimmune diseases or conditions. Posterior uveitis is a persistent and recurrent disease thatalso commonly affects the retina. Additionally, it commonly affects vision, more so than anterior uveitis, and macular edema is the most common mechanismof visual loss, affecting 44% patients with posterior uveitis.There are two forms of uveitis:•infectious uveitis (bacterial, viral, fungal, or parasitic), which is treated with an appropriate antimicrobial drug as well as corticosteroids andcycloplegics; and•NIPU, where corticosteroids are used to reduce inflammation and prevent adhesions in the eye.Current Treatments for DMEAnti-vascular endothelial growth factor (VEGF) therapies are the current standard of care for the treatment of DME. Lucentis (ranibizumab) and Eylea(aflibercept) are the only approved anti-VEGF therapies marketed for the treatment of vision loss associated with DME in the EEA and for the treatment ofDME in the U.S. Off-label injections of the anti-VEGF therapy Avastin (bevacizumab) are also used to treat DME. However, anti-VEGF therapies are acutetherapies and are limited by a need for multiple and frequent injections to achieve the same therapeutic effect reported in randomized controlled trials.Further, DME is a multi-factorial disease and anti-VEGF therapy does not address all of these factors. As a result, many patients either do not achieve asufficient response or are unable to routinely attend clinic appointments, meaning that anti-VEGF therapy is not optimally administered. When not optimallyadministered, these acute therapies allow for a recurrence of the edema. In addition, these therapies have safety profiles that include an increased risk ofendophthalmitis, a serious eye infection that must be treated with high doses of antibiotics. This risk of endophthalmitis is associated with any intravitrealinjection. There is evidence that intravitreal anti-VEGF therapy affects systemic VEGF levels, which may have cardiovascular complications.7Table of ContentsIntravitreal corticosteroid therapies are also used to treat DME. Acute corticosteroids typically have peak effects within three months, and there is aneed for repeated injections. Similarly, without optimized treatment frequency, macular edema is allowed to recur when the effect of acute corticosteroidsdissipates. Ozurdex (dexamethasone), a short-acting corticosteroid, is marketed for the treatment of vision loss associated with DME in the EEA and for thetreatment of DME in the U.S. Triamcinolone acetonide is another short-acting steroid used off-label to treat DME. In contrast to the dexamethasone implantand triamcinolone acetonide, which are both acute therapies, ILUVIEN is a long-term persistent and continuous steroid delivery therapy. The steroid in theILUVIEN implant, fluocinolone acetonide, or FAc, is a key component that allows a single implant to deliver a sustained daily dose for up to 36 months asdiscussed in more detail below. Corticosteroids have historically been associated with significant increases in IOP, which may increase the risk of glaucoma.Additionally, corticosteroids are associated with the acceleration of cataract formation. We believe the low dose of ILUVIEN mitigates these side effects andmakes them more manageable. Additionally, the side effects of ILUVIEN are consistent with and predictable following the use of shorter duration or acutecorticosteroid therapies, increasing the physician’s ability to manage those side effects.Laser photocoagulation is a retinal procedure in which a laser is used to apply a burn, or a pattern of burns, to cauterize leaky blood vessels to reduceedema. Visual acuity gains are less frequently seen with this therapy, as it is used to prevent or slow the loss of vision. Further, this destructive procedure hasundesirable side effects including partial loss of peripheral and night vision.Current Treatments for NIPUThe treatment of uveitis varies according to the type of uveitis. The inflammation in non-infectious posterior uveitis or NIPU is at the back of the eye,and drops do not effectively reach the affected area. This means that treatment of NIPU uveitis focuses on (a) the localized delivery of therapies, usually asteroid, or (b) systemic therapy, administered in a tablet form or via injection. Systemic therapies very often lead to side effects that impact the whole body,unlike eye drops and injections into the eye.Patients with NIPU are initially treated with systemic steroids, which are very effective, but when used at high doses for extended periods can lead toserious side effects. These side effects include acne, weight gain, sleep and mood disorders, hypertension and osteoporosis, which can limit the sustained useof systemic steroids. Patients then often progress to steroid-sparing therapies with systemic immune suppressants or biologics, which themselves can havesevere side effects, including an increased risk of cancer and infections. In addition, periocular or intraocular steroids may be used to try to locally controlinflammation in NIPU.One problem for patients and clinicians is that recurrence of NIPU is very common. In chronic NIPU, recurrence often occurs within six months ofwithholding treatment, and patients and clinicians are forced to go through cycles of treatment initiation and cessation with the accompanying complexity ofmanaging several drug classes, and their side effects, at once.For patients with recurrent NIPU, locally delivered (intravitreal) steroids present an attractive treatment strategy allowing for effective delivery ofsteroid therapy at the point of need, while minimizing the risk of systemic side effects. For intravitreal treatment, the short-acting Ozurdex implant ismarketed in the EEA for the treatment of adult patients with inflammation of the posterior segment of the eye presenting as non-infectious uveitis and for thetreatment of non-infectious uveitis. ILUVIEN has been shown in clinical trials to significantly reduce the recurrence of NIPU, while at the same time reducingthe need for adjunctive treatments, including systemic drug treatment. In January 2018 we announced we had submitted a Type II variation to our license inthe EEA to add the indication of “recurrent and persistent non-infectious uveitis affecting the posterior segment” across all registered markets in the EEA, asdiscussed in more detail below in “Uveitis.”In addition to corticosteroids, other therapies may be used to treat NIPU, including immunosuppressive drugs and tumor necrosis factor (TNF)antagonists.8Table of ContentsILUVIENOverviewOur only commercial product is ILUVIEN, a sustained release corticosteroid intravitreal implant. ILUVIEN consists of a tiny non-bioerodible polyimidetube with a permeable membrane cap on one end and an impermeable silicone cap on the other end that is filled with 190 micrograms of FAc in a polyvinylalcohol matrix. Both polyimide and the polyvinyl alcohol matrix have been demonstrated to be biocompatible with ocular tissues and have histories of safeuse within the eye. ILUVIEN, which is non-bioerodible, provides consistent delivery as a result of its constant surface area which allows it to deliver acontinuous microdose of FAc up to 36 months. ILUVIEN is inserted in the back of the patient’s eye in a non-surgical procedure using a sterile preloadedapplicator (the ILUVIEN applicator) employing a 25-gauge needle, which allows for a self-sealing wound. This procedure is similar to that commonlyemployed by retinal specialists in the administration of other intravitreal therapies and commonly used in clinical practice.ILUVIEN delivers continuous daily sub-microgram levels of FAc in both in vitro and in vivo release kinetic studies for up to 36 months, making it theonly single injection therapy available to treat the retina consistently every day for up to three years, while reducing the recurrence of edema. The deliverymechanism of ILUVIEN provides lower daily and aggregate exposure to corticosteroids than any other intraocular dosage forms currently available for DMEin the U.S. and in the other countries in which we have approval, which we believe mitigates the typical risks associated with corticosteroid therapy.Additionally, the side effects of ILUVIEN are consistent with and predictable following the use of shorter duration or acute corticosteroid therapies,increasing the physician’s ability to manage those side effects.ILUVIEN has received marketing authorization in the U.S., Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany,Ireland, Italy, Lebanon, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United Arab Emirates and the United Kingdom. In theU.S., Canada, Lebanon and the United Arab Emirates, ILUVIEN is indicated for the treatment of DME in patients who have been previously treated with acourse of corticosteroids and did not have a clinically significant rise in IOP. In the EEA countries in which ILUVIEN has received marketing authorization,ILUVIEN is indicated for the treatment of vision impairment associated with DME considered insufficiently responsive to available therapies.The ILUVIEN technology has also demonstrated a therapeutic effect in the treatment of NIPU in two phase 3 trials. In December 2017, we filed anapplication for a new indication for ILUVIEN for the treatment of NIPU in the 17 EEA countries where ILUVIEN is currently approved for the treatment ofDME. In mid 2018, the regulatory authorities requested additional follow-up data from the clinical trials to support the application. We submitted thisadditional follow-up data in October 2018. We expect that we will obtain approval of our application for NIPU in the first half of 2019, although we canprovide no assurances that we can do so. In addition, if we receive approval of ILUVIEN for NIPU, it is likely that we will be required to conduct certain post-market activities to maintain the approval. These required activities could include a post-market safety or efficacy study of ILUVIEN in patients treated withILUVIEN for NIPU. We will also be required to conduct a study assessing ILUVIEN in pediatric patients with NIPU that have been treated with ILUVIEN.Fluocinolone Acetonide (FAc)FAc, a non-proprietary corticosteroid, is the active compound in ILUVIEN and a member of the class of steroids known as corticosteroids.Corticosteroids have demonstrated a range of pharmacological actions, including inhibition of inflammation, inhibition of leukostasis, up regulation ofoccludin, inhibition of the release of certain inflammatory cytokines and suppression of VEGF secretion. Leukostasis refers to the accumulation of whiteblood cells at a particular site, which leads to further tissue damage. Occludin is an important protein in maintaining and reinforcing the tight junctionsbetween cells. These pharmacological actions have the potential to treat various ocular conditions, including DME, NIPU, NPDR, RVO, dry AMD and wetAMD. However, FAc shares many of the same “class effect” side effects seen with other corticosteroids that are currently available for intraocular use. The twomain side effects of using corticosteroids to treat ocular conditions are (a) increased IOP, which may increase the risk of glaucoma, and (b) the acceleration ofcataract formation. FAc is uniquely lipophilic, making it very effective at penetrating retina tissue, and allowing it to achieve a therapeutic effect at a verylow dose, typically lower than other corticosteroids.9Table of ContentsILUVIEN for Other Diseases of the EyeAlthough we are not actively conducting clinical trials, we believe that ILUVIEN has the potential to address other ophthalmic diseases such as RVO,NPDR, dry AMD and wet AMD. Details regarding the rationale for these other indications are as follows:•Macular edema associated with RVO. According to GlobalData, a provider of global business intelligence, 16 million adults are affected byRVO around the world. In September 2009, Allergan, Inc. introduced Ozurdex (a short duration corticosteroid) as the first approved productfor macular edema following RVO. The FDA approval of Ozurdex provides evidence that corticosteroids work effectively to treat RVO.•Moderately severe to severe non-proliferative diabetic retinopathy (NPDR) progression to proliferative diabetic retinopathy (PDR). NPDRis the most at-risk stage of diabetic retinopathy for risk of progression to PDR. Prevention of progression to PDR is clinically important, asthe risks of severe vision loss, blindness and retinal detachment increase when diabetic retinopathy progresses from NPDR to PDR. A recentpaper published by Charles C. Wykoff in the Journal of Ophthalmology reported that treatment of DME patients with ILUVIEN over a 36-month period, slowed both the development of PDR and the progression of diabetic retinopathy.•Dry age-related macular degeneration (AMD). Dry AMD patients account for 90% of AMD patients, with the greatest unmet need amongthese patients being a treatment for geographic atrophy for which there are currently no treatments available. Pre-clinical studies in twoestablished rat models of retinal degeneration reported at the Association for Research in Vision and Ophthalmology meetings in 2006,2007 and 2008 described the efficacious effects of a miniaturized version of ILUVIEN in retinal degeneration. While there are no standardpreclinical models of geographic atrophy, we believe these results support the exploration of ILUVIEN to treat this condition.•Wet AMD. The size of the wet AMD market was $2 billion in 2008 according to VisionGain, an independent competitive intelligenceorganization. According to the American Academy of Ophthalmology, more than 11 million people in America are affected by AMD andare now benefiting from advanced treatment options such as anti-VEGF agents and photodynamic therapy (PDT). Anti-VEGF antibodiesrequire persistent dosing to maintain a therapeutic effect, which is a burden on both the patient and the physician. Estimates as of March2015 of the global cost of visual impairment due to AMD is $343 billion, including $255 billion in direct health care costs according toBrightFocus Foundation. We believe ILUVIEN has the potential to complement the market leading anti-VEGF antibody therapies in thetreatment of wet AMD, given that corticosteroids, including FAc, have been shown to suppress the production of VEGF.ILUVIEN Regulatory StatusDiabetic Macular EdemaILUVIEN has received marketing authorization in the U.S., Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany,Ireland, Italy, Lebanon, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United Arab Emirates and the United Kingdom. In theU.S., Canada, Lebanon and the United Arab Emirates, ILUVIEN is indicated for the treatment of DME in patients who have been previously treated with acourse of corticosteroids and did not have a clinically significant rise in IOP. In the EEA countries in which ILUVIEN has received marketing authorization, itis indicated for the treatment of vision impairment associated with DME considered insufficiently responsive to available therapies. As part of the approvalprocess in Europe, we committed to conduct a five-year, post-authorization, open label registry study in 800 patients treated with ILUVIEN. Due to our postmarket safety surveillance not showing any unexpected safety signals, we requested and received approval to modify our protocol to cap enrollment in thestudy. Enrollment was completed with 562 patients. We anticipate this study to be completed in early 2020.We or our distributors are currently pursuing regulatory approval in certain Middle East countries, Australia and New Zealand.UveitisWe do not currently have a regulatory license for ILUVIEN to treat uveitis in the EEA or the U.S., and we do not have the right to pursue approval in theU.S. In January 2018, we announced that we had applied for a Type II variation to our license for the indication of “recurrent and persistent non-infectiousuveitis affecting the posterior segment” across all registered markets in the EEA. This submission is based on the positive results of two phase 3 trialsconducted by EyePoint to assess the safety and efficacy of an equivalent of the ILUVIEN insert for the treatment of posterior uveitis. These studies are10Table of Contentsrandomized, sham injection-controlled, double-masked trials. The primary endpoint for both trials was the rate of recurrence of posterior uveitis during sixmonths, with patients being evaluated for up to three years. The first Phase 3 trial enrolled 129 patients in 16 centers in the U.S. and 17 centers outside theU.S. and achieved its primary efficacy endpoint. Likewise, the second trial enrolled 153 patients in 15 centers in India and also met its primary endpoint. Wereceived formal acceptance of our Type II variation submission for ILUVIEN, which was submitted through the Mutual Recognition Procedure to the UnitedKingdom’s Medicines and Healthcare Regulatory Agency (MHRA). The United Kingdom is the Reference Member State, which is the country that preparesan assessment report on the medicinal product and then shares the report with the other countries in the EEA in which the applicant has applied for amarketing authorization. The submission to the MHRA and 16 additional European states seeks to add the indication of recurrent and persistent NIPU to theILUVIEN label in Europe. All 17 regulatory bodies have accepted the submission, which is currently under review. We expect to obtain approval of ourapplication for NIPU in the first half of 2019, although we can provide no assurance that we can do so.CommercializationILUVIEN is the only intraocular therapy to treat DME designed to deliver a continuous microdose of FAc for up to 36 months, enabling the physicianto treat DME consistently and continuously every day with a single dose. Our commercialization strategy is to establish ILUVIEN as a leading therapy for thetreatment of DME and subsequently for other indications for which ILUVIEN may prove safe and effective. We commercially market ILUVIEN in the U.S.,Germany, the United Kingdom, Portugal, Austria and Ireland. We began selling ILUVIEN in Austria and Ireland in 2017. Our Italian distributor launchedILUVIEN in Italy in 2017. Our Spanish distributor began selling ILUVIEN on a named patient basis in 2017, and after receiving reimbursement, plans aformal launch in early 2019. We also plan to commercialize ILUVIEN, directly or with a partner, in other EEA and non-EEA countries pending the receipt ofreimbursement and future applicable regulatory approvals. Although we anticipate that ILUVIEN will be administered as a standalone therapy, it is possiblethat ILUVIEN will be used in conjunction with other therapies. Our commercialization strategy in any jurisdiction is subject to and depends upon theapproval of ILUVIEN by the applicable regulatory authorities.Sales and MarketingOur sales personnel focus on physician offices, pharmacies and hospitals in the U.S. and in European countries where we seek to persuade end users topurchase ILUVIEN.We have various agreements under which distributors are providing or will provide regulatory, reimbursement or sales and marketing support forcommercialization of ILUVIEN in Italy, Spain, France, Canada, Australia and New Zealand and in several countries in the Middle East. Pursuant to theseagreements, our distributors assisted or will assist us in obtaining approval or reimbursement, or they will seek approval or reimbursement with our oversightin those countries, if such approval or reimbursement has not already been obtained.We develop our medical marketing, promotion and communication materials with the goal of ensuring that influential retinal specialists are presentingour data from the pivotal Phase 3 clinical trials that supported our approval in the U.S. and Europe (the FAME studies), clinicians’ real world data, includingour most recent post-market study in the U.S. (the USER study), and messages at key meetings in the U.S. and the EEA.ManufacturingWe do not have an in-house manufacturing capability for our products. As a result, we depend and expect to continue to depend exclusively on third-party contract manufacturers to produce and package ILUVIEN. We manage the quality of our product produced by these manufacturers through qualityagreements and our quality system to ensure that they produce active pharmaceutical ingredients (APIs) and finished drug products in accordance with theFDA’s current Good Manufacturing Practices (cGMP) and all other applicable laws and regulations. We maintain agreements with potential and existingmanufacturers that include confidentiality and intellectual property provisions to protect our proprietary rights related to ILUVIEN.Third party manufacturers are responsible for the commercial-scale production of ILUVIEN and the ILUVIEN applicator. We have agreements with asingle third-party manufacturer for each of:•the manufacture of the ILUVIEN implant and final assembly and packaging of ILUVIEN (Alliance Medical Products Inc., a SiegfriedCompany (Alliance))•the manufacturer of the components of the ILUVIEN applicator (FlexMedical or an affiliate of Flextronics International, Ltd. (Flextronics))•the manufacture of ILUVIEN’s active pharmaceutical ingredient (FARMABIOS SpA/Byron Chemical Company Inc.) and11Table of Contents•the quality release testing of ILUVIEN in the EEA including the United Kingdom, post Brexit (AndersonBrecon Limited trading asPackaging Coordinators, Inc.).Although we may seek alternative providers in the future, we do not currently have alternate providers for any of these activities. The manufacturingprocess for ILUVIEN consists of filling the polyimide tube with a paste consisting of 190 micrograms of FAc in an aqueous slurry of polyvinyl alcohol,cutting the tubes, capping the tubes with a permeable membrane cap on one end and an impermeable silicone cap on the other end, curing at hightemperature, loading ILUVIEN inside the ILUVIEN applicator, packaging and sterilizing the product. This process has been validated at Alliance.Under our agreement with Alliance, which we entered into in 2010 and amended and restated in 2016, we are responsible for supplying Alliance withthe ILUVIEN applicator and the API. We purchased certain equipment at Alliance’s facility that Alliance uses solely to manufacture and package ILUVIENfor us. We have agreed to order from Alliance at least 80% of our total requirements for new units of ILUVIEN in the U.S., Canada and Europe in a calendaryear, provided that Alliance is able to fulfill our supply requirements and is not in breach of its agreements or obligations to us. Currently, we order 100% ofour global requirements for ILUVIEN units from Alliance because we do not have an alternate supplier. Unless terminated earlier in accordance with itsprovisions, the amended and restated agreement has a remaining term through February 2021 and will automatically renew for successive terms of one yearunless either party delivers written notice of non-renewal to the other at least 12 months before the end of the then current term.Under our agreement with Flextronics, which we entered into in 2012, Flextronics agreed to manufacture the components of the ILUVIEN applicator forus at its facility located near Tijuana, Mexico. We purchased certain equipment for Flextronics’ facility that Flextronics uses solely to manufacture thecomponents of the ILUVIEN applicator for us. Unless terminated earlier in accordance with the terms of the agreement, our agreement with Flextronicsautomatically renews for successive terms of one year unless either party delivers written notice of non-renewal to the other at least 18 months prior to the endof the then current term.Business SegmentsOur business has three segments: U.S., International and Other. Financial information about our business segments can be found in this annual report onForm 10-K in (a) Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - SegmentReview” and (b) Note 18 of the accompanying consolidated financial statements.CustomersOur revenues for the fiscal years ended December 31, 2018 and 2017 were generated from product sales primarily in the U.S., Germany and the UnitedKingdom. In the U.S., two large pharmaceutical distributors accounted for 69% and 73% of our consolidated revenues for the years ended December 31, 2018and 2017, respectively. These distributors maintain inventories of ILUVIEN and sell to physician offices, pharmacies and hospitals. Internationally, incountries where we sell direct, our customers are hospitals, clinics and pharmacies. We sometimes refer to physician offices, pharmacies, hospitals and clinicsas end users. In international countries where we sell to distributors, these distributors maintain inventory levels of ILUVIEN and sell to their customers.CompetitionThe development and commercialization of new drugs and drug delivery technologies is highly competitive. We face competition with respect toILUVIEN and any products or product candidates we may develop or commercialize in the future from major pharmaceutical companies, specialtypharmaceutical companies and biotechnology companies worldwide, many of whom have substantially greater financial and other resources than we do.In the countries in which ILUVIEN has received or been recommended for marketing authorization or becomes approved for use in the treatment ofDME, it competes or will compete against the use of anti-VEGF therapies, short duration corticosteroids and laser photocoagulation or other therapies thatmay be approved in the future. Other companies are working to develop other drug therapies and sustained delivery platforms for DME and other indications.These competitive therapies may result in pricing pressure even if ILUVIEN is otherwise viewed as a preferable therapy. We believe that the following drugsand treatments provide competition to ILUVIEN:•Lucentis© (ranibizumab injection), marketed by Genentech (Roche) in the U.S. and Novartis in the rest of the world and Avastin(bevacizumab), an oncology product marketed by the Roche group, are both antibodies that inhibit VEGF signaling pathways. Lucentis iscurrently approved for the treatment of DME, the treatment of diabetic retinopathy in patients with DME, the treatment of neovascular wetAMD and the treatment of macular12Table of Contentsedema following RVO in the U.S. In the EEA, the indications are similar except for the indication to treat diabetic retinopathy in patients withDME.•Avastin©, is used by retinal specialists in both the U.S. and in certain countries of the EEA in the treatment of numerous retinal diseases offlabel but is not formulated or approved for any ophthalmic use.•Eylea© (aflibercept), marketed by Regeneron in the U.S. and by Bayer in the EEA, is a VEGF antagonist that is approved for the treatment ofDME, diabetic retinopathy in patients with DME, neovascular wet AMD and RVO in the U.S. In the EEA, the indication does not includediabetic retinopathy.•Ozurdex© (dexamethasone intravitreal implant), marketed by Allergan, is a short duration biodegradable implant that delivers thecorticosteroid dexamethasone. Ozurdex is approved for the treatment of DME, macular edema following branch or central RVO and non-infectious uveitis in the U.S. In the EEA, the indication for DME is for visual impairment due to diabetic macular edema in persons who arepseudophakic (persons who have had an artificial lens implanted after the natural eye lens has been removed) or who are consideredinsufficiently responsive to, or unsuitable for non-corticosteroid therapy. It is also indicated for macular edema following either BranchRetinal Vein Occlusion (BRVO) or Central Retinal Vein Occlusion (CRVO) and inflammation of the posterior segment of the eye presentingas non-infectious uveitis.•Humira© (adlimumab), marketed by Abbvie, is a TNF-blocker that has an ophthalmic indication. It works by targeting and blocking a specificsource of inflammation that plays a role in non-infectious uveitis. In the U.S., Humira is indicated for the treatment of non-infectiousintermediate, posterior and panuveitis. In the EEA, Humira is indicated for the treatment of chronic non-infectious anterior uveitis in childrenaged two years or older who have had an inadequate response to or are intolerant to conventional therapy.•YUTIQ™ (fluocinolone acetonide intravitreal implant) 180 micrograms, for intravitreal injection, marketed by Eyepoint, is a non-bioerodibleintravitreal micro-insert that contains 180 micrograms of FAc that is designed to release .25 micrograms/day over the course of 36 months.YUTIQ is indicated for the treatment of chronic NIPU, in the U.S. It is not approved for any indication in Europe and EyePoint does not havethe right to pursue any approval in Europe, where we are currently pursuing the approval of ILUVIEN for NIPU. YUTIQ is very similar toILUVIEN, although the amount of FAc in the YUTIQ implant is slightly less and it utilizes a different injector. The two drugs are approved fordifferent indications in the U.S., with ILUVIEN being approved for the treatment of DME and YUTIQ being approved for the treatment ofchronic NIPU.•Intravitreal triamcinolone is used by some physicians for the treatment of DME although it is not approved for DME.•Laser photocoagulation is currently used to treat DME and may be used in conjunction with drug therapies as well. Other laser or surgicaltreatments for DME may also compete against ILUVIEN.In addition, a number of other companies, including Alcon/ Novartis, Ampio Pharmaceuticals, Aerpio, Aerie, Allegro, and Clearside are developingdrug therapies or sustained delivery platforms for the treatment of retinal diseases. Specifically, Alcon/ Novartis is developing Brolucizumab, a VEGF-targeted single-chain antibody fragment in development for retinal diseases including DME.We believe we will be less likely to face a generic competitor for ILUVIEN for the treatment of DME because of the bioequivalency requirements of ageneric form of ILUVIEN. A generic pharmaceutical competitor to ILUVIEN would need to establish bioequivalency through the demonstration of anequivalent pharmacodynamic endpoint in a clinical trial. We believe conducting such a clinical trial would be cost-prohibitive and time-consuming,although we cannot provide any assurances in that regard.The licensing and acquisition of pharmaceutical products, which is part of our strategy, is a highly competitive area. A number of more establishedcompanies are also pursuing strategies to license or acquire products. These established companies may have a competitive advantage over us due to, amongother factors, their size, cash flow and institutional experience.The active pharmaceutical ingredient in ILUVIEN is FAc, which is not patent protected. As a result, our competitors could develop an alternativeformulation or delivery mechanisms to treat diseases of the eye with FAc. For a description of our license of proprietary insert technology for ILUVIEN, seethe section immediately below.13Table of ContentsLicenses and AgreementsEyePoint Pharmaceuticals US, Inc.In 2005, we entered into an agreement with EyePoint Pharmaceuticals US, Inc. (EyePoint), formerly known as pSivida US, Inc., for the use of FAc inEyePoint’s proprietary insert technology. In July 2017, we amended and restated the EyePoint agreement in the Second Amended and RestatedCollaboration Agreement (New Collaboration Agreement). The New Collaboration Agreement provides us with a license to utilize certain underlyingtechnology used in the development and commercialization of ILUVIEN. Before entering into the New Collaboration Agreement, we held a worldwidelicense from EyePoint for the use of steroids, including FAc, in EyePoint’s proprietary insert technology for the treatment of all ocular diseases other thanuveitis. The New Collaboration Agreement expands the license to include uveitis, including NIPU, in Europe, the Middle East and Africa.The New Collaboration Agreement provides us with a license to develop and sell EyePoint’s proprietary insert technology to deliver othercorticosteroids to the back of the eye for the treatment and prevention of eye diseases in humans or to treat DME by delivering a compound to the back of theeye through a direct delivery method through an incision required for a 25-gauge or larger needle. We do not have the right to develop and sell EyePoint’sproprietary insert technology for indications for diseases outside of the eye anywhere in the world, or for the treatment of uveitis outside of Europe, theMiddle East and Africa. EyePoint retained the right to develop and sell EyePoint’s proprietary insert technology for indications and countries not licensed tous. Further, our agreement with EyePoint permits EyePoint to grant to any other party the right to use its intellectual property (a) to treat DME through anincision smaller than that required for a 25-gauge needle, unless using a corticosteroid delivered to the back of the eye, (b) to deliver any compound outsidethe back of the eye unless it is to treat DME through an incision required for a 25-gauge or larger needle, or (c) to deliver non-corticosteroids to the back ofthe eye, unless it is to treat DME through an incision required for a 25-gauge or larger needle.Before we entered into the New Collaboration Agreement, we were required to share 20% of our net profits on a country-by-country basis. We werepermitted to offset up to 20% of this amount with our commercialization costs incurred during unprofitable calendar quarters in each country. The NewCollaboration Agreement converts this profit share obligation to a royalty payable on global net revenues of ILUVIEN. We began paying a 2% royalty on netrevenues and other related consideration to EyePoint effective July 1, 2017. This royalty amount increased to 6% effective December 12, 2018. We will payan additional 2% royalty on global net revenues and other related consideration in excess of $75.0 million in any year. During 2018, we recognizedapproximately $998,000 of royalty expense. During 2017, we recognized approximately $621,000 of royalty and profit share expense.Following the signing of the New Collaboration Agreement, we retained a right to offset $15.0 million of future royalty payments. This offset will bereduced by up to $5.0 million upon the earlier of the approval of ILUVIEN for posterior uveitis in any EU country or January 1, 2020, unless certainconditions under the New Collaboration Agreement are not met. As of December 31, 2018, the balance of the Future Offset was approximately $14.9 million.We valued the additional rights we acquired under the New Collaboration Agreement utilizing a present value analysis of approximately $2,851,000.Because there was no approved indication for ILUVIEN for uveitis at the time, we expensed the $2,851,000 as a non-cash charge as in-process research anddevelopment expense in 2017. We also recognized $2,851,000 for recoverable collaboration costs for the value of the right of offset as a reduction ofoperating expenses. As a result, there was no impact on our operating loss or net loss for 2017.Our license rights to EyePoint’s proprietary insert technology could revert to EyePoint if we were to:(a) fail twice to cure our breach of an obligation to make certain payments to EyePoint following receipt of written notice of the breach;(b) fail to cure other breaches of material terms of our agreement with EyePoint within 30 days after notice of such breaches or such longer period (up to90 days) as may be reasonably necessary if the breach cannot be cured within such 30-day period;(c) file for protection under the bankruptcy laws, make an assignment for the benefit of creditors, appoint or suffer appointment of a receiver or trusteeover our property, file a petition under any bankruptcy or insolvency act or have any such petition filed against us and such proceeding remains undismissedor unstayed for a period of more than 60 days; or(d) notify EyePoint in writing of our decision to abandon our license with respect to a certain product using EyePoint’s proprietary insert technology.We were not in breach of our agreement with EyePoint as of December 31, 2018.14Table of ContentsGovernment RegulationGeneral OverviewGovernment authorities in the U.S. and other countries extensively regulate, among other things the research, development, testing, quality, efficacy,safety (pre- and post-marketing), manufacturing, labeling, storage, record-keeping, advertising, promotion, export, import, marketing and distribution ofpharmaceutical products. In addition, although third parties manufacture ILUVIEN for us, these manufacturing operations and our research and developmentactivities must follow applicable environmental laws and regulations. The cost to comply with these environmental laws and regulations is not currentlysignificant, but in the future complying with these environmental laws and regulations could increase our costs for manufacturing, research and development.U.S.In the U.S., the FDA, under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and other federal and local statutes and regulations, subjectspharmaceutical products to review. If we do not comply with applicable regulations, the government may refuse to approve or place our clinical studies onclinical hold, refuse to approve our marketing applications, refuse to allow us to manufacture or market our products, seize our products, impose injunctionsand monetary fines on us, and prosecute us for criminal offenses.To obtain approval of a new product from the FDA, we must, among other requirements, submit data supporting the safety and efficacy as well asdetailed information on the manufacture and composition of the product and proposed labeling.The testing and collection of data and the preparation of the necessary applications are expensive and time consuming. The FDA may not act quicklyor favorably in reviewing these applications, and we may encounter significant difficulties or costs in our efforts to obtain FDA approval that could delay orpreclude us from marketing additional products. Once approved by the FDA, a drug requires an annual product and establishment fee, which wasapproximately $310,000 as of our last renewal in October 2018.Post-Marketing RequirementsWe are required to meet post-marketing safety surveillance requirements to continue marketing an approved product. We must report any adverseevents with the product to the FDA and the FDA could impose market restrictions through labeling changes or in product removal. The FDA may withdrawproduct approvals if we fail to maintain compliance with regulatory requirements or if problems concerning safety and/or efficacy of the product occurfollowing approval. The FDA may, at its discretion, also require post-marketing testing and surveillance to monitor the effects of approved products or placeconditions on any approvals that could restrict the commercial applications of these products. The FDA did not require any post-marketing testing as part ofits approval of ILUVIEN. As part of the approval process in Europe, we committed to conduct a five-year, post-authorization, open label registry study in 800patients treated with ILUVIEN. Due to our post market safety surveillance not showing any unexpected safety signals, we requested and received approval tomodify our protocol to cap enrollment in the study. Enrollment was completed with 562 patients. We anticipate this study to be completed in early 2020.U.S. FDA RegulationsWith respect to product advertising and promotion of marketed products, the FDA imposes a number of complex regulations that include standards fordirect-to-consumer advertising, off-label promotions, industry-sponsored scientific and educational activities and Internet promotional activities. The FDAhas very broad enforcement authority under the FD&C Act, and failure to abide by these regulations can result in (a) penalties, (b) the issuance of warningletters directing the sponsor to correct deviations from FDA standards, a requirement that future advertising and promotional materials must be pre-cleared bythe FDA, and (d) federal civil and criminal investigations and prosecutions (as well as state prosecutions).The manufacturing facility that produces our product must maintain compliance with the FDA’s cGMP and is subject to periodic inspections by theFDA. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal and regulatory action, including WarningLetters, seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations and civil andcriminal penalties.Foreign RegulationsForeign regulatory systems, although varying from country to country, include risks similar to those associated with FDA regulations in the U.S.Under the EU regulatory system, applications for drug approval may be submitted either in a centralized or decentralized procedure. Under thecentralized procedure, a single application to the European Medicines Evaluation Agency, if approved,15Table of Contentswould permit marketing of the product throughout the EU (currently 27 member states). The decentralized procedure provides for applications to besubmitted for marketing authorization in a select number of EU countries. The process is managed by a Reference Member State that coordinates the reviewprocess with the other countries in the EEA in which the applicant has applied for marketing authorization.A mutual recognition procedure of nationally approved decisions is available to pursue marketing authorizations for a product in the remaining EUcountries. Under the mutual recognition procedure, the holders of national marketing authorization in one of the countries within the EU may submit furtherapplications to other countries within the EU, who will be requested to recognize the original authorization.We chose to pursue the decentralized procedure for ILUVIEN for DME and used the mutual recognition procedure due to our limited resources.Through this procedure, we obtained marketing authorizations in the 17 countries in the EEA discussed above. For ILUVIEN for NIPU, we filed a type IIvariation in these 17 countries in the EEA using the same procedure.Third-Party Reimbursement and Pricing ControlsIn the U.S., the EEA and elsewhere, sales of pharmaceutical products depend in significant part on the availability of reimbursement to the consumerfrom third-party payers, such as government and private insurance plans. Third-party payers are increasingly challenging the prices charged for medicalproducts and services.The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (together, theACA), significantly changed the way healthcare is financed by both governmental and private insurers. The provisions of the ACA became effectivebeginning in 2010, although the current presidential administration and Congress have attempted to repeal it and replace it with a different health care lawand have affected some of its key provisions through the Tax Cuts and Jobs Act enacted in December 2017. While we cannot predict what impact on federalreimbursement policies this law or any replacement law will have in general or specifically on any product we commercialize, the ACA or any replacementmay result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of new products. Any rebates,discounts, taxes costs or regulatory or systematic changes on healthcare resulting from the ACA or its replacement may have a significant effect on ourprofitability in the future. We cannot predict whether the ACA will continue or what other laws or proposals will be made or adopted, or what impact theseefforts may have on us.We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and stategovernments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects andreduce our profitability.In many foreign markets, including the countries in the EEA, pricing of pharmaceutical products is subject to governmental control. In the U.S., therehave been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing control. While wecannot predict whether such legislative or regulatory proposals will be adopted, the adoption of those proposals could have a material adverse effect on ourbusiness, financial condition and profitability.Patents and Proprietary RightsOur success depends in part on our ability to obtain and maintain proprietary protection for ILUVIEN or any future products or product candidates,technology and know-how, to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights.Because we license certain intellectual property relating to ILUVIEN from third parties, we depend on their ability to obtain and maintain such protection.Where we have conducted our own research, our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patentapplications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on tradesecrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.16Table of ContentsAs of December 31, 2018, we owned or licensed seven U.S. utility patents, one U.S. design patent and one U.S. patent application as well as numerousforeign counterparts to many of these patents and patent applications relating to ILUVIEN or the ILUVIEN applicator. We licensed our seven utility patentrights relating to ILUVIEN from EyePoint. Pursuant to our agreement with EyePoint, our ILUVIEN-related patent rights are only for diseases of the human eyein Europe, the Middle East and Africa and for diseases of the human eye, excluding uveitis in the rest of the world. In addition to the U.S. patents licensedfrom EyePoint, we also license two European patents from EyePoint. We have a patent application pending directed to our applicator system for ILUVIEN.Our licensed patent portfolio includes U.S. patents (with no currently pending or issued corresponding European applications or patents) with claims directedto methods for administering a corticosteroid with an implantable sustained delivery device to deliver the corticosteroid to the vitreous of the eye whereinaqueous corticosteroid concentration is less than vitreous corticosteroid concentration during release.U.S. utility patents generally have a term of 20 years from the date of filing. The utility patent rights relating to ILUVIEN that EyePoint licensed to usinclude seven U.S. patents that expire between March 2019 and August 2027 and counterpart filings to these patents in a number of other jurisdictions. Thetwo European patents that EyePoint licensed to us that are directed to our low-dose device expire in April 2021 and October 2024. No patent term extensionor supplementary protection certificate will be available for any of these U.S. or European patents or applications.The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain andsolidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We donot know whether any of our patent applications or those patent applications that we license will result in the issuance of any patents. Our issued patents andthose that may issue in the future, or those licensed to us, may be challenged, invalidated or circumvented, which could limit our ability to stop competitorsfrom marketing related products or the length of term of patent protection that we may have for our products. In addition, the rights granted under any issuedpatents may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitorsmay independently develop similar technologies or duplicate any technology we develop. Because of the extensive time required for development, testingand regulatory review of a potential product, it is possible that, before such product can be commercialized, any related patent may expire or remain in forcefor only a short period following commercialization, thereby reducing any advantage of the patent.We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect ourproprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and other contractors. Theseagreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or beindependently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in theirwork for us, disputes may arise as to the rights in related or resulting know-how and inventions.Research and DevelopmentWe invested $1.1 million and $4.2 million in research and development during 2018 and 2017, respectively. The 2017 investment includes a $2.9million non-cash charge as in-process research and development expense for the additional rights we acquired under the New Collaboration Agreement withEyePoint.EmployeesAs of January 31, 2019, we had 124 employees, all of whom were full-time employees.Corporate InformationWe are a Delaware corporation incorporated on June 4, 2003. Our principal executive office is located at 6120 Windward Parkway, Suite 290,Alpharetta, Georgia 30005 and our telephone number is (678) 990-5740. Our website address is www.alimerasciences.com. The information contained in ourwebsite, or that can be accessed through our website, is not part of this report and should not be considered part of this report.17Table of ContentsAvailable InformationWe file annual, quarterly and current reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under theSecurities Exchange Act of 1934, as amended (the Exchange Act). Also, the SEC maintains an Internet website that contains reports, proxy and informationstatements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file withthe SEC at www.sec.gov. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q and Form 8-K, and all amendments to those reports, can beviewed and downloaded free of charge at our website, www.alimerasciences.com, as soon as reasonably practicable after the reports and amendments areelectronically filed with or furnished to the SEC. Our code of ethics, other corporate policies and procedures, and the charters of our Audit Committee,Compensation Committee and Nominating and Corporate Governance Committee are also available through our website.18Table of ContentsITEM 1A. RISK FACTORSInvesting in our common stock involves risk. You should carefully consider the risks described below as well as all the other information in this annualreport on Form 10-K, including the consolidated financial statements and the related notes appearing at the end of this report, before making an investmentdecision. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presentlyknown to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, resultsof operations and financial condition could suffer. In that event, the trading price of our common stock could decline, and you may lose all or part of yourinvestment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in theseforward-looking statements.RISKS RELATED TO OUR BUSINESS, INCLUDING OUR DEPENDENCE ON ILUVIENMaterials necessary to manufacture ILUVIEN may not be available on commercially reasonable terms, or at all.We rely on our manufacturers to purchase materials from third-party suppliers necessary to produce ILUVIEN. Suppliers may not sell these materials toour manufacturers when needed or on commercially reasonable terms. We do not have any control over the process or timing of our manufacturers’acquisition of these materials. If our manufacturers are unable to obtain these materials in sufficient amounts, our sales of ILUVIEN would be hampered orthere would be a shortage in supply, which would materially affect our ability to generate the revenues from the sale of ILUVIEN that we expect. Moreover,although we have agreements with our suppliers for the commercial production of the ILUVIEN implant, the commercial production of the ILUVIENapplicator and the supply of the active pharmaceutical ingredient in ILUVIEN, the suppliers may be unable to meet their contractual or quality requirementsor choose not to supply us in a timely manner or in the minimum guaranteed quantities. If our manufacturers are unable to obtain these essential supplies,their ability to manufacture ILUVIEN and thus our supply of ILUVIEN for sale would be delayed, which could significantly reduce our sales of ILUVIEN andhave an adverse impact on our business.We depend on the commercial success of our only product, ILUVIEN, which in the near term will depend almost entirely on our ability tosuccessfully commercialize ILUVIEN on our own in the countries where we sell direct, and on our distributors’ ability to successfully commercializeILUVIEN in other countries.We are a pharmaceutical company with only one product available for commercial sale in a limited number of markets. Because we do not currentlyhave any products or product candidates available for sale or in clinical development other than ILUVIEN, our future success depends on our and ourdistributors’ successful commercialization of ILUVIEN. We launched ILUVIEN in Germany and the United Kingdom in 2013 and in the U.S. and Portugal in2015. We began selling ILUVIEN in Austria and Ireland in 2017. Our distributors in Italy and Spain generated revenues for us in 2017 through sales ofILUVIEN, as did our distributor in the Middle East. We expect that our distributors in France and Spain will launch ILUVIEN in their respective countries in2019, although the timing and success of the commercial launch of ILUVIEN in any new country depends on each specific pricing and reimbursementtimeline established by the applicable regulatory authority in that country. In December 2017, we filed an application for a new indication for ILUVIEN forthe treatment of non-infectious posterior uveitis (NIPU) in the 17 EEA countries where ILUVIEN is currently approved for the treatment of DME. We expectto obtain approval of our application for NIPU in the first half of 2019, although we can provide no assurances that we can do so.We have incurred and expect to continue to incur significant expenses and to use a substantial portion of our cash resources:•to continue to support our sales efforts in the U.S., Austria, Germany, Ireland, Portugal and the United Kingdom,•to pursue the approval of and reimbursement for ILUVIEN in other countries and•to grow our operational capabilities.These investments represent a significant investment in the commercial and regulatory success of ILUVIEN, which is uncertain.If we or our distributors do not successfully increase our sales in countries where we are approved to sell ILUVIEN or our distributors do notsuccessfully commence and grow our sales of ILUVIEN in other countries where we are seeking to begin selling ILUVIEN, our business may be seriouslyharmed. We and our distributors may not be able to commercialize ILUVIEN successfully, which would have a material adverse effect on our business andprospects. In the near term, we may experience delays and unforeseen difficulties in the commercialization of ILUVIEN, including unfavorable pricing orreimbursement levels in certain countries that could negatively affect our ability to increase revenues.19Table of ContentsThe United Kingdom’s vote to leave the EU, or “Brexit,” could have a material adverse effect on us.On June 23, 2016, the United Kingdom held a referendum and voted in favor of leaving the EU (Brexit). After the referendum, the United Kingdom setthe Brexit date as March 29, 2019. This result has created political and economic uncertainty, particularly in the United Kingdom and the EU, and thisuncertainty may last for years. Our business in the United Kingdom, the EU and worldwide could be adversely affected during this period of uncertainty, andperhaps longer, by the United Kingdom’s referendum decision. There are many ways in which our business could be adversely affected, only some of whichwe can identify.We currently operate in Europe through a subsidiary based in the United Kingdom, which currently provides us with certain operational and otherbenefits. The United Kingdom’s withdrawal from the EU could adversely affect our ability to realize those benefits, and we may incur costs and sufferdisruptions in our European operations as a result, including changing our base of operations or part of our operations from the United Kingdom to anothercountry in the EU.For example, our reference member state for our marketing authorization in the EEA for ILUVIEN is the United Kingdom’s MHRA. Because of Brexit,we likely need to select a new reference member state for the EU, which will require filing and receiving acceptance from such member state to make suchchange. A change in our reference member state may require us to modify our marketing authorization in the 17 countries in the EEA where we currently havemarket authorization for ILUVIEN. In addition, the quality release testing of ILUVIEN for the EEA occurs in the United Kingdom. Due to Brexit, we will needto establish a quality release-testing site for ILUVIEN in a different location in the EEA. In addition to the cost and risk of establishing a new testing site, thischange will also require a modification to our marketing authorization in the 17 countries where we have a license. Any delay in the acceptance bygovernmental authorities of these modifications, or any other changes to our marketing authorizations or how we conduct business caused by Brexit maydisrupt our operations or limit our ability to sell ILUVIEN in the EEA for a period of time, which could adversely affect our operating results and growthprospects.In addition, Brexit may continue to cause significant volatility in global financial markets, including in global currency and debt markets. Thisvolatility could cause a slowdown in economic activity in the United Kingdom, Europe or globally, which could adversely affect our operating results andgrowth prospects. Our business could be negatively affected by new trade agreements between the United Kingdom and other countries, including the U.S.,and by the possible imposition of trade or other regulatory barriers in the United Kingdom. These possible negative impacts, and others resulting from theUnited Kingdom’s actual or threatened withdrawal from the EU, may adversely affect our operating results and growth prospects.The regulatory approval of ILUVIEN in any additional countries is uncertain, and our regulatory approval in certain countries is contingent on ourability to sell ILUVIEN in an appropriate time frame. Failure to obtain regulatory approval in additional foreign jurisdictions or maintain regulatoryapproval in jurisdictions where we have received regulatory approval but have not yet sold ILUVIEN would prevent us from marketing andcommercializing ILUVIEN in additional markets, which may have an adverse effect on our business and results of operations.ILUVIEN has received marketing authorization in the U.S., Canada, Lebanon, the United Arab Emirates and in the following countries of the EEA:Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain,Sweden and the United Kingdom. We have launched ILUVIEN in the U.S., Germany, the United Kingdom, Portugal, Ireland and Austria. Our distributors willcontinue to sell ILUVIEN in Italy and Spain in 2019. When we received marketing authorization in the remaining countries in the EEA, those marketingauthorizations required that we sell at least one ILUVIEN in those countries within three years or our license in those countries could be revoked unless wenegotiate to extend the deadline. We intend to either sell one ILUVIEN in each of those countries or negotiate to extend the deadline, but we may not be ableto make such a sale or extend the deadline, in which case our license in that country could be revoked. If our license in any of these countries is revoked, wewill need to pursue marketing authorization again for that country, and we may be unsuccessful in that effort. The withdrawal of an approval could harm ourbusiness materially.We intend to continue to pursue market authorizations for ILUVIEN internationally in additional jurisdictions. To market our products in foreignjurisdictions, we will be required to obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. We may notreceive necessary approvals to commercialize ILUVIEN in any additional market.The process of obtaining regulatory approvals and clearances in jurisdictions where ILUVIEN is not approved will require us to expend substantial timeand capital. Despite the time and expense incurred, regulatory approval is never guaranteed. The number of preclinical and clinical tests that will be requiredfor regulatory approval varies depending on the drug candidate, the disease or condition for which the drug candidate is in development, the jurisdiction inwhich we are20Table of Contentsseeking approval and the regulations applicable to that particular drug candidate. Regulatory agencies can delay, limit or deny approval of a drug candidatefor many reasons, including that:•regulatory agencies may interpret data from preclinical and clinical testing in different ways than we do;•regulatory agencies may not approve of our manufacturing processes;•a drug candidate may not be safe or effective;•regulatory agencies may conclude that the drug candidate does not meet quality standards for stability, quality, purity and potency; and•regulatory agencies may change their approval policies or adopt new regulations.The applicable regulatory authorities may make requests or suggestions regarding our clinical trials, resulting in an increased risk of difficulties ordelays in obtaining regulatory approval. For example, the regulatory authorities may not approve of certain of our methods for analyzing our trial data,including how we evaluate the relationship between risk and benefit. Additionally, the foreign regulatory approval process may include all of the risksassociated with obtaining FDA approval. For all of these reasons, we may not obtain additional foreign regulatory approvals on a timely basis, if at all.Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authoritydoes not ensure approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA.Even if we do receive additional regulatory approvals for ILUVIEN, regulatory agencies may impose limitations on the indicated uses for whichILUVIEN may be marketed, which would be adverse to our business.Regulatory agencies generally approve products for particular indications, or the conditions that make a particular treatment or procedure advisable. Ifa regulatory agency approves ILUVIEN for a limited indication, the size of our potential market for ILUVIEN will be reduced. ILUVIEN has receivedmarketing authorization in Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway,Poland, Portugal, Spain, Sweden and the United Kingdom for the treatment of vision impairment associated with chronic DME considered insufficientlyresponsive to available therapies. In the U.S., Canada, Lebanon and the United Arab Emirates, the indication for ILUVIEN is different, as ILUVIEN isindicated for the treatment of DME in patients who have been previously treated with a course of corticosteroids and did not have a clinically significant risein intraocular pressure (IOP). Either of these indications or future indications may limit the use of ILUVIEN to a narrower segment of the DME populationthan we believe is warranted. As a result, our potential revenues are now and may be in the future less that they would be with broader indications forILUVIEN.We rely on a single manufacturer for ILUVIEN, a single manufacturer for the ILUVIEN applicator and a single manufacturer for ILUVIEN’s activepharmaceutical ingredient. Our business would be seriously harmed if any of these third parties are unable to satisfy our demand and alternative sourcesare not available.We do not have, nor do we currently intend to establish, in-house manufacturing capability. We depend entirely on, and have agreements with, a singlethird-party manufacturer for each of:•the manufacture of the ILUVIEN implant, final assembly of the injector with the implant and release testing for the U.S. (Alliance MedicalProducts, Inc., a Siegfried Company (Alliance)),•the manufacture of the ILUVIEN applicator (FlexMedical or an affiliate of Flextronics International, Ltd. (Flextronics)),•the manufacture of ILUVIEN’s active pharmaceutical ingredient (FARMABIOS SpA./Byron Chemical Company Inc. (FARMABIOS)),•the sterilization of the final product, and•the quality release testing of ILUVIEN in the European Economic Area (EEA) including the United Kingdom, post Brexit (AndersonBreconLimited trading as Packaging Coordinators, Inc. (PCI)).If any of the third-party manufacturers (a) breach their agreements, (b) are unable to meet their contractual or quality requirements or (c) becomeunwilling to perform for any reason, we may be unable, or may be unable in a timely manner, to locate alternative acceptable manufacturers, enter intofavorable agreements with them and ensure that they are approved by the applicable regulatory authorities, such as the U.S. Food and Drug Administration(FDA). Further, all of our manufacturers rely on additional third parties for the manufacture of component parts. Any inability to acquire sufficient quantitiesof ILUVIEN implants, the ILUVIEN applicator or the active pharmaceutical ingredient in a timely manner from these third parties could21Table of Contentsdelay commercial production of ILUVIEN and adversely affect our ability to fulfill demand for ILUVIEN, which could in turn adversely affect our revenue,operations and cash flow.The manufacture and packaging of pharmaceutical products such as ILUVIEN are subject to the requirements of the FDA and similar foreignregulatory entities. If we or our third-party manufacturers fail to satisfy these requirements, our product development and commercialization efforts maybe materially harmed.The FDA and similar foreign regulatory agencies regulate the manufacture and packaging of pharmaceutical products such as ILUVIEN, which must beconducted in accordance with the FDA’s cGMP and comparable requirements of foreign regulatory agencies. Only a limited number of manufacturers thatoperate under these cGMP regulations are both capable of manufacturing ILUVIEN and willing to do so. If we or our third-party manufacturers fail to complywith applicable regulations, requirements or guidelines, the regulatory agencies could refuse to grant marketing approval of ILUVIEN or any future productsor product candidates and could impose sanctions on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, licenserevocation, seizures or recalls of product, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business.Failure of our manufacturers to maintain compliance could interrupt the production of ILUVIEN, resulting in delays and additional costs that couldsignificantly and adversely affect our business. Any significant delays in the manufacture of ILUVIEN or issues with the quality of the product couldmaterially harm our business and prospects.Changes in certain aspects of the manufacturing process or procedures require prior FDA review or approval of the manufacturing process andprocedures in accordance with the FDA’s cGMP regulations. There are comparable foreign requirements as well. This review may be costly and timeconsuming and could delay or prevent the launch of a product. If we elect to manufacture products at another facility, we would need to ensure that the newfacility and the manufacturing process comply with cGMP and comparable foreign regulations. Any such new facility would also be subject to inspection. Inaddition, we would be required to demonstrate by physical and chemical methods, which are costly and time consuming, that the product made at any newfacility is equivalent to the product made at the former facility. The FDA or a foreign regulatory agency may require clinical testing to prove equivalency ofthe product manufactured at any new facility compared to the old facility, which would result in additional costs and delay.Further, we are required to complete testing on both the active pharmaceutical ingredient and on the finished product in the packaging that we proposefor commercial sales. This includes testing of stability, identification of impurities and testing of other product specifications by validated test methods. Inaddition, our manufacturers are required to consistently produce our product in commercial quantities and of specified quality in a reproducible manner anddocument their ability to do so. This requirement is referred to as process validation. The FDA and similar foreign regulatory agencies may also implementnew standards, or change their interpretation and enforcement of existing standards and requirements, for the manufacture, packaging, or testing of productsat any time.The terms of our 2018 Loan and Security Agreement with Solar Capital Ltd. require us to meet certain operating covenants and place restrictions onour operating and financial flexibility.Our $40.0 million Loan and Security Agreement (2018 Loan Agreement) with Solar Capital Ltd. (Solar Capital) contains certain operating covenantsand restricts our operating and financial flexibility. The 2018 Loan Agreement is secured by a lien covering all of our U.S. assets (and certain ownershipinterests in one of our foreign subsidiaries), other than our intellectual property. The 2018 Loan Agreement contains customary affirmative and negativecovenants and events of default. Affirmative covenants include covenants requiring us to comply with applicable laws, maintain our legal existence, delivercertain financial reports and maintain insurance coverage. Negative covenants restrict our ability to transfer any part of our business or property, to changeour business or key management, to incur additional indebtedness, to engage in mergers or acquisitions, to pay dividends or make other distributions, tomake investments, to create other liens on our assets and to allow revenues from the sale of ILUVIEN to fall below certain minimums, in each case subject tocustomary exceptions.If an event of default under our 2018 Loan Agreement occurs, Solar Capital may accelerate all of our repayment obligations and take control of ourpledged assets, potentially requiring us to raise additional financing, renegotiate the 2018 Loan Agreement on terms less favorable to us or immediatelycease operations. Any declaration by Solar Capital of an event of default could significantly harm our business and prospects and could cause the price of ourcommon stock to decline significantly after we publicly disclose that event in an SEC filing. Further, if we are liquidated, Solar Capital’s right to repaymentwould be senior to the rights of our stockholders.Our existing cash may be inadequate to fund our operations and support our growth.As of December 31, 2018, we had approximately $13.0 million in cash and cash equivalents. Whether this amount will be sufficient to fund ouroperations and support our growth will be determined by many factors, some of which are beyond our22Table of Contentscontrol, and we may need capital to fund our operations and support our growth sooner than we might anticipate. These factors include:•the level of success of the commercialization of ILUVIEN in the U.S., and in our international markets,•expenses relating to the commercialization of ILUVIEN;•our research, development and general and administrative expenses;•the timing of approvals, if any, of ILUVIEN for additional indications or in additional jurisdictions;•the extent to which we enter into, maintain and derive revenues from licensing agreements, including agreements to out-license ILUVIEN,research and other collaborations, joint ventures and other business arrangements;•the extent to which we acquire, and our success in integrating, technologies or companies;•regulatory changes and technological developments in our markets; and•the extent to which we can manage the use of cash in our business operations.If we need additional capital to fund our operations and support our growth and we are unable to obtain that capital as noted below, our business maysuffer.If we seek to raise additional capital, we may be unable to do so on commercially reasonable terms, the terms on which we obtain the capital mayrestrict our operations and if the capital we raise is equity or a debt security that is convertible into equity, our stockholders’ investment could be diluted.For the reasons described above, we may need to raise alternative or additional financing to fund our operations and support growth. General marketconditions or the market price of our common stock may not support capital-raising transactions such as an additional public or private offering of ourcommon stock or other securities. In addition, our ability to raise additional capital may depend on our stock being quoted on the Nasdaq Stock Market orupon obtaining stockholder approval. There can be no assurance that we will be able to satisfy the criteria for continued listing on Nasdaq or that we will beable to obtain stockholder approval if it is necessary. If we need additional financing, we may seek to fund our operations through the sale of equitysecurities, additional debt financing and strategic collaboration agreements. We cannot be sure that additional financing from any of these sources will beavailable when needed or that, if available, the additional financing will be obtained on terms favorable to us or our stockholders. If we raise additional fundsby selling shares of our capital stock, the ownership interest of our current stockholders will be diluted. If we attempt to raise additional funds throughstrategic collaboration agreements, we may not be successful in obtaining collaboration agreements, or in receiving milestone or royalty payments underthose agreements. If we raise additional funds by incurring additional debt (assuming Solar Capital would permit such debt, which would be subordinated tothe debt outstanding under our 2018 Loan Agreement), the terms of the debt may include significant installment payments as well as covenants and specificfinancial ratios that may restrict our ability to commercialize ILUVIEN or any future products or product candidates or otherwise successfully operate ourbusiness.ILUVIEN and any future products or product candidates may not be commercially viable in the U.S. if we fail to obtain or maintain an adequatelevel of reimbursement for these products from any of the following: private insurers, the Medicare and Medicaid programs or other third-party payers.Our revenue from sales of ILUVIEN in the U.S. depends on our ability to maintain pricing and reimbursement guidelines at our desired levels. Thoseguidelines, however, may fall well below our current expectations. The same could also occur for any future products or product candidates we may developthat receive approval, if any.Our list pricing in the U.S. for ILUVIEN is based upon the burden of diabetic macular edema (DME), the current pricing of approved therapies for DME,our perception of the overall cost to benefit ratio of ILUVIEN and the current pricing of other therapies. Due to numerous factors beyond our control,including efforts to provide for containment of health care costs, the U.S. may not support our current level of governmental pricing and reimbursement forILUVIEN, which would reduce our anticipated revenue from ILUVIEN.In the U.S., the Medicare and Medicaid programs currently provide reimbursement for ILUVIEN, but the reimbursement amount for ILUVIEN could bemodified in the future, and the types of patients for whom ILUVIEN is reimbursed could be reduced to a smaller subset of patients. In addition, in some states,Medicare reimburses physicians for less than the cost of ILUVIEN. In recent years, through legislative and regulatory actions, the federal government hasmade substantial changes to various payment systems under the Medicare program. Comprehensive reforms to the U.S. healthcare system were recentlyenacted, including changes to the methods for, and amounts of, Medicare reimbursement. The current presidential23Table of Contentsadministration and Congress have indicated they may further reform the Medicare program and the U.S. healthcare system, but have not made any definitiveproposals that allow us to gauge the impact of such potential reforms, if any, on our business and operations. Some of these changes and proposed changesand reforms could result in reduced reimbursement rates for ILUVIEN and our future product candidates, which would adversely affect our business strategy,operations and financial results. Our business could also be adversely affected if retinal specialists are not reimbursed for the cost of the procedure in whichthey administer ILUVIEN at a level that is satisfactory to them. Limitations on coverage could also be imposed at the local Medicare carrier level or by fiscalintermediaries. Our business could be materially adversely affected if the Medicare program, local Medicare carriers or fiscal intermediaries were to makesuch a determination and deny or limit the reimbursement of ILUVIEN. If the local contractors that administer the Medicare program are slow to reimburseretinal specialists for ILUVIEN, that delay could ultimately affect the timing of payments to us, which would in turn adversely affect our working capital.In the U.S., almost all private insurers, including managed care organizations, have agreed to reimburse for ILUVIEN, but the reimbursement amountcould be modified in the future, and the types of patients for whom ILUVIEN is reimbursed could be reduced to a smaller subset of patients. We expect thatprivate insurers will consider the efficacy, cost effectiveness and safety of ILUVIEN in determining whether to maintain approval for reimbursement forILUVIEN in the U.S. and at what level. Maintaining these approvals can be a time consuming and expensive process. Our business would be materiallyadversely affected if we do not maintain approval for reimbursement of ILUVIEN from private insurers on a timely or satisfactory basis or such approvals arechanged to reduce the level of reimbursements.We expect to experience pricing pressures in connection with the sale of ILUVIEN due to the potential healthcare reforms discussed above, as well asthe trend toward programs aimed at reducing health care costs, the increasing influence of health maintenance organizations, additional legislative proposalsand the economic health of the U.S. economy. If reimbursement for our products is unavailable, limited in scope or amount or if pricing is set at unsatisfactorylevels, our business could be materially harmed.ILUVIEN and any future products or product candidates may not be commercially viable in the European Economic Area if we fail to obtain ormaintain an adequate level of reimbursement for these products from any of the following: governments, private insurers or other third-party payers.In the EEA, each country has a different reviewing body that evaluates reimbursement dossiers submitted by marketing authorization holders of newdrugs and then makes recommendations as to whether or not the drug should be reimbursed. In these countries, pricing negotiations with governmentalauthorities can take 12 months or longer after the receipt of regulatory approval. For example, in February 2017 we announced that the Italian governmenthad published a change in the reimbursement status of ILUVIEN, allowing ILUVIEN to be hospital-administered and that ILUVIEN should be fullyreimbursed for pseudophakic patients. The negotiation for this reimbursement change took more than 15 months. In some countries, to obtain reimbursementor pricing approval at a level that we believe is appropriate, we may be required to conduct a clinical trial that compares the cost-effectiveness of ILUVIEN toother available therapies. Limitations on reimbursement could be imposed at the national, regional or local level or by fiscal intermediaries in each country,either through the initial authorization process or at some point in the future. For example, in November 2016 we began a review process with The NationalInstitute for Health and Care Excellence (NICE) in the United Kingdom. This review could result in beneficial or detrimental changes to the limitations onthe use of ILUVIEN in England and Wales. Our business could be materially adversely affected if NICE imposes those limitations.In addition, due to price referencing within the EEA and certain other countries, existing pricing in our current markets could be negatively affected bya change in pricing in a country where we currently have reimbursement or by a new price in a country where we obtain reimbursement in the future. Forexample, if we were to obtain pricing in France that is lower than our current established price in Portugal, the Portuguese government may choose to revisitthe current level of reimbursement. This could have a material adverse effect on our business.Our business could also be adversely affected if governments, private insurers or other reimbursing bodies or payers (a) limit the indications forreimbursement to a smaller subset than we believe ILUVIEN is effective in treating or (b) establish a limit on the frequency with which ILUVIEN may beadministered that is less often than we believe would be effective. (An “indication” is a condition that makes a particular treatment or procedure advisable.)Those actions could limit our revenues and harm our business.Failure to comply with government regulations regarding the sale and marketing of our products could harm our business.Our and our distribution partners’ activities, including the sale and marketing of our products, are subject to extensive government regulation andoversight, including regulation under the federal Food, Drug and Cosmetic Act and other federal24Table of Contentsand state statutes, along with requirements in Europe, such as the Medicines Act of 1968 in the United Kingdom In the U.S., we are also subject to theprovisions of the Federal Anti-Kickback Statute, the Federal False Claims Act and several similar state laws, which prohibit payments intended to inducephysicians or others either to purchase or arrange for or recommend the purchase of healthcare products or services. While the federal law applies only toproducts or services for which payment may be made by a federal healthcare program, state laws may apply regardless of whether federal funds may beinvolved. These laws constrain the sales, marketing and other promotional activities of manufacturers of drugs by limiting the kinds of financialarrangements, including sales programs, we may have with hospitals, physicians and other potential purchasers of drugs. Other federal and state lawsgenerally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent, or are for items or services that were not provided as claimed. Anti-kickback and false claims laws prescribe civil andcriminal penalties for noncompliance that can be substantial, including the possibility of exclusion from federal healthcare programs (including Medicareand Medicaid).Pharmaceutical and biotechnology companies have been the target of lawsuits and investigations alleging violations of government regulation,including claims asserting antitrust violations, violations of the Federal False Claim Act, the Anti-Kickback Statute, the Prescription Drug Marketing Act andother violations in connection with off-label promotion of products and Medicare and/or Medicaid reimbursement and claims under state laws, includingstate anti-kickback and fraud laws. In Europe, each country has different regulations that govern the promotional claims and activities of pharmaceutical andbiotechnology companies. The violation and enforcement of these regulations by each country may result in heavy fines, further legal action, publicreprimand, injunction and may include the loss of market authorization.While we have implemented a compliance program to assist with monitoring and complying with these activities and we strive to comply with thesecomplex requirements, interpretations of the applicability of these laws to marketing practices are ever evolving. If any such actions are instituted against usor our partners and we or they are not successful in defending those actions or asserting our rights, those actions could have a significant and material adverseeffect on our business, including the imposition of significant fines or other sanctions. Even an unsuccessful challenge could cause adverse publicity and becostly to respond to, and thus could have a material adverse effect on our business, results of operations and financial condition.If we fail to successfully manage our international operations, our business, operating results and financial condition could suffer.Our international operations require significant management attention and financial resources. In addition, there are many risks inherent ininternational business activities, including:•extended collection timelines for accounts receivable and greater working capital requirements;•multiple legal systems and unexpected changes in legal requirements;•tariffs, export restrictions, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certainforeign markets;•trade laws and business practices favoring local competition;•potential tax issues, including restrictions on repatriating earnings, multiple and conflicting and complex tax laws and regulations;•weaker intellectual property protection in some countries;•political instability, including war and terrorism or the threat of war and terrorism; and•adverse economic conditions, including the stability and solvency of business financial markets, financial institutions and sovereign nations.In addition, compliance with foreign and U.S. laws and regulations that are applicable to our international operations is complex and may increase ourcost of doing business in international jurisdictions, and our international operations could expose us to fines and penalties if we fail to comply with theseregulations. These laws and regulations include import and export requirements, U.S. laws such as the Foreign Corrupt Practices Act and local lawsprohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures designed to help ensure compliance withthese laws, there can be no assurance that our employees, partners and other persons with whom we do business will not take actions in violation of ourpolicies or these laws. Any violations of these laws could subject us to civil or criminal penalties, including substantial fines or prohibitions on our ability tooffer our products in one or more countries, and could also materially and adversely harm our business and financial condition.25Table of ContentsMaintaining our commercial infrastructure is a significant undertaking that requires substantial financial and managerial resources, and we maynot be successful in our efforts or we may experience difficulties with these efforts. We may also encounter unexpected or unforeseen challenges, whichmay negatively affect our commercial efforts for ILUVIEN.We anticipate that in the near term our ability to generate revenues will depend almost entirely on our ability to successfully commercialize ILUVIEN.We launched ILUVIEN in Germany and the United Kingdom in 2013, and in the U.S. and Portugal in 2015. We launched ILUVIEN in Ireland and Austria in2017. A commercial launch of this size is a significant undertaking that requires substantial financial and managerial resources. We anticipate that ourdistributors in Italy, the Middle East, Spain and France will continue to generate revenues for us in 2019, if they are able to continue to successfullycommercialize ILUVIEN in those territories.As of January 31, 2019, we had 124 employees, all of whom were full-time employees. As our commercialization plans and strategies evolve beyondour initial planned EEA launches, we will need to further expand the size of our organization by recruiting additional managerial, operational, sales,marketing, financial and other personnel.We may not be able to maintain and expand our commercial operation in a cost-effective manner or realize a positive return on this investment. Inaddition, we have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factorsthat may inhibit our efforts to commercialize our products include:•our inability to recruit and retain adequate numbers of effective personnel;•the inability of sales personnel to obtain access to or persuade adequate numbers of ophthalmologists to prescribe our products;•the lack of complementary products or additional labeled indications for ILUVIEN to be offered by sales personnel, which may put us at acompetitive disadvantage relative to companies with more extensive product lines; and•unforeseen costs and expenses associated with creating a commercial organization.If we are not successful in recruiting and retaining sales and marketing personnel or in maintaining our sales and marketing infrastructure or if we donot successfully enter into additional collaboration arrangements with third parties, we will have difficulty commercializing ILUVIEN or any future productsor product candidates, which would adversely affect our business, operating results and financial condition.We may not be successful in maintaining and expanding our commercial operations for numerous reasons, including the failure to attract, retain andmotivate the necessary skilled personnel and failing to develop a successful marketing strategy. Failure to maintain and expand our commercial operationswill have a negative outcome on our ability to commercialize ILUVIEN and generate revenue.Additionally, we may encounter unexpected or unforeseen delays in expanding our commercial operations that delay the commercial launch in one ormore countries in which ILUVIEN has received or been recommended for marketing authorization. These delays may increase the cost of and the resourcesrequired for successful commercialization of ILUVIEN. Further, a delay in the commercial launch of ILUVIEN could result in the withdrawal of our marketingor regulatory authorization for ILUVIEN in certain jurisdictions, including certain EU member states where ILUVIEN has already received marketingauthorization.In addition, there are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and researchorganizations actively engaged in research and development of products, some of which may target the same indications as ILUVIEN or any future productsor product candidates. Our competitors include larger, more established, fully integrated pharmaceutical companies and biotechnology companies that havesubstantially greater capital resources, existing competitive products, larger research and development staffs and facilities, greater experience in drugdevelopment and in obtaining regulatory approvals and greater marketing capabilities than we do.26Table of ContentsIf we fail to comply with our obligations in the agreements under which we license development or commercialization rights to products ortechnology from third parties, we could lose license rights that are material to our business.Our licenses are material to our business, and we may enter into additional licenses in the future. We hold a license from EyePoint to intellectualproperty relating to ILUVIEN. Our ability to pursue the development and commercialization of ILUVIEN depends upon the continuation of our license fromEyePoint. This license imposes various commercialization, milestone payment, royalty payments, insurance and other obligations on us, including the rightby EyePoint to audit. If we fail to comply with these obligations, EyePoint may have the right to terminate the license. Our license rights to EyePoint’sproprietary insert technology could revert to EyePoint if we:(a)fail twice to cure our breach of an obligation to make certain payments to EyePoint following receipt of written notice of the breach;(b)fail to cure other breaches of material terms of our agreement with EyePoint within 30 days after notice of such breaches or such longer period (upto 90 days) as may be reasonably necessary if the breach cannot be cured within such 30-day period;(c)file for protection under the bankruptcy laws, make an assignment for the benefit of creditors, appoint or suffer appointment of a receiver or trusteeover our property, file a petition under any bankruptcy or insolvency act or have any such petition filed against us and such proceeding remainsundismissed or unstayed for a period of more than 60 days; or(d)notify EyePoint in writing of our decision to abandon our license with respect to a certain product using EyePoint’s proprietary delivery device.If our license with EyePoint, or any other current or future material license agreement, were terminated, we would be unable to market the applicableproducts, such as ILUVIEN, that may be covered by such license, which would materially and adversely affect our business, results of operations and futureprospects.Regulatory approval for any approved product is limited by the regulatory authorities to those specific indications for which clinical safety andefficacy have been demonstrated.Any regulatory approval is limited to those specific diseases and indications for which a product is deemed to be safe and effective by the applicableregulatory authorities, including the FDA in the U.S. and various regulatory authorities in Europe. In addition to approval required for new formulations, anynew indication for an approved product also requires regulatory approval. If we are unable to obtain regulatory approval for any desired future indications forour products, including NIPU for ILUVIEN in the EEA, our ability to effectively market and sell our products may be reduced and our opportunity for futuregrowth could be limited.While physicians may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested inclinical studies and approved by the regulatory authorities, our ability to promote the products is limited to those indications that are specifically approvedby regulatory authority. These “off-label” uses by physicians are common across medical specialties and may constitute an appropriate treatment for somepatients in some circumstances. Regulatory authorities generally do not regulate the behavior of physicians in their choice of treatments. Regulatoryauthorities do restrict, however, communications by pharmaceutical companies on the subject of off-label use. If our promotional activities fail to complywith these regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In addition, our failure to followregulatory authority rules and guidelines relating to promotion and advertising may cause the regulatory authority to suspend or withdraw an approvedproduct from the market in the applicable country, require a recall or payment of fines, or impose sanctions that could include disgorgement of money,operating restrictions, injunctions or criminal prosecution, any of which could harm our business.We may not be able to obtain regulatory approval for ILUVIEN for the NIPU Indication in the EEA, or if we do obtain regulatory approval, we maynot be able to meet any post-marketing requirements for such approval; if we fail to obtain that approval or do not meet any requirements, our opportunityfor future growth could be limited.On December 12, 2017, we filed a Type II Variation for ILUVIEN through the Mutual Recognition Procedure with the MHRA in the United Kingdom asthe reference member state. The submission to the MHRA and the appropriate bodies of the 16 European states seeks to add to the ILUVIEN label in thesecountries the indication of recurrent and persistent non-infectious uveitis affecting the posterior segment. All 17 bodies have accepted the submission.Although we believe that the uveitis clinical trials demonstrated the benefits of ILUVIEN for NIPU, the regulatory agencies may not agree, and they may notapprove the use of ILUVIEN for NIPU. In addition, if we receive approval of ILUVIEN for NIPU, it is likely that we will be required to conduct certain post-market activities to maintain the approval. These required activities could include a post-27Table of Contentsmarket safety or efficacy study of ILUVIEN in patients treated with ILUVIEN for NIPU. We will also be required to conduct a study assessing ILUVIEN inpediatric patients with NIPU that have been treated with ILUVIEN. Implementing and maintaining these studies could be costly. If we are unable to meet anyrequirements, we could lose our approval. If we do not receive approval for NIPU for ILUVIEN in these countries, if the approval process is delayedsignificantly, or if we are unable to meet any post-market requirements, we could face adverse publicity, which could negatively affect our reputation and ouroperations and could have a material adverse effect on our business. If we gain approval for NIPU but it is subsequently revoked and we are required toremove ILUVIEN for NIPU from the EEA market, our opportunity for future growth could be limited.We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully thanwe do.The development and commercialization of new drugs is highly competitive, and the commercial success of ILUVIEN or any of our future products orproduct candidates will depend on several factors, including our ability to differentiate ILUVIEN or any of our future products or product candidates from ourcompetitors’ current or future products. We will face competition from major pharmaceutical companies, specialty pharmaceutical companies andbiotechnology companies worldwide with respect to ILUVIEN and to any future products or product candidates that we may develop or commercialize in thefuture.Our commercial opportunities for ILUVIEN will be reduced or eliminated if our competitors develop or market products that:•are more effective;•receive better reimbursement terms;•have higher rates of acceptance by physicians;•have fewer or less severe adverse side effects;•are better tolerated;•are more adaptable to various modes of dosing;•have better distribution channels;•are easier to administer; or•are less expensive, including a generic version of ILUVIEN.Many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations activelyengaged in research and development of products, some of which may target the same indications as ILUVIEN or any future products or product candidates.Our competitors include larger, more established, fully integrated pharmaceutical companies and biotechnology companies that have substantially greatercapital resources, existing competitive products, larger research and development staffs and facilities, greater experience in drug development and inobtaining regulatory approvals and greater marketing capabilities than we do.We may not be successful in our efforts to expand our portfolio of ophthalmic products.In the future, we may choose to commercialize a portfolio of new ophthalmic drugs in addition to ILUVIEN. We may seek to do so through our internalresearch programs and through licensing or otherwise acquiring the rights to potential new products and future product candidates for the treatment ofophthalmic disease.A significant portion of the research that we may choose to conduct may involve new and unproven technologies. Research programs to identify newdisease targets and product candidates require substantial technical, financial and human resources, whether or not we ultimately identify any candidates.Any future research programs may initially show promise in identifying potential products or product candidates, yet fail to yield products or productcandidates for clinical development for a number of reasons, including:•the research methodology used may not be successful in identifying potential products or product candidates; or•we may learn after further study that potential products or product candidates have harmful side effects or other characteristics that indicatethey are unlikely to be effective drugs.We may be unable to license or acquire suitable products or product candidates or products from third parties for a number of reasons. In particular, thelicensing and acquisition of pharmaceutical products is highly competitive. Several more28Table of Contentsestablished companies are also pursuing strategies to license or acquire products in the ophthalmic field. These established companies may have acompetitive advantage over us due to their size, cash resources and greater development and commercialization capabilities. Other factors that may preventus from licensing or otherwise acquiring suitable products or product candidates include the following:•we may be unable to license or acquire the relevant technology on terms that would allow us to make an appropriate return from the product;•we may need to obtain our lender’s consent to any significant payment or potential payment in conjunction with a license of acquisition oftechnology;•companies that perceive us to be their competitors may be unwilling to assign or license their product rights to us; or•we may be unable to identify suitable products or product candidates within our areas of expertise.Additionally, it may take greater human and financial resources to develop suitable potential products or product candidates through internal researchprograms or by obtaining rights than we will possess, thereby limiting our ability to develop a diverse product portfolio.If we are unable to develop suitable potential product candidates through internal research programs or by obtaining rights to novel therapeutics fromthird parties, opportunity for future growth could be limited.We may acquire additional businesses or form strategic alliances in the future, and we may not realize the benefits of those acquisitions or alliances.We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement oraugment our existing business, including adding new products in the ophthalmic field. If we acquire businesses with promising markets or ophthalmicproducts, we may be unable to realize the benefit of acquiring those businesses if we are unable to successfully integrate them with our existing operationsand company culture. We may have difficulty in developing, manufacturing and marketing the ophthalmic products of a newly acquired company thatenhances the performance of our combined businesses or product lines to realize value from expected synergies. We cannot assure that, following anacquisition, we will achieve the revenues or specific net income that justifies the acquisition.If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, it will impair our ability to identify, develop andcommercialize ILUVIEN and any future products or product candidates.We depend on the principal members of our management team, including Richard S. Eiswirth, Jr., our President and Chief Executive Officer, PhilipAshman, Ph.D., our Chief Operating Officer and Senior Vice President Commercial Operations Europe, J. Philip Jones, our Chief Financial Officer, and DaveHolland, our Chief Marketing Officer and Senior Vice President Corporate Communications and Managed Markets. These executives have significantophthalmic, regulatory industry, sales and marketing, operational and/or corporate finance experience. The loss of any such executives or any other principalmember of our management team may impair our ability to identify, develop and market ILUVIEN and any future ophthalmic products or product candidates.Kenneth Green, Ph.D., our Chief Scientific Officer, will retire on March 31, 2019, although he will serve as a consultant to us for at least one year.In addition, our growth will require us to hire a significant number of qualified technical, commercial and administrative personnel. We face intensecompetition from other companies and research and academic institutions for the qualified personnel we need in our business. If we cannot continue to attractand retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we may not be able to sustain or grow ouroperations.We have incurred operating losses in each year since our inception and may continue to incur substantial and increasing losses.We are not currently generating enough revenues to cover our current expenses or our anticipated future expenses. ILUVIEN is our only productcurrently approved for commercial sale. As a result of these factors, we are uncertain when or if we will achieve profitability and, if so, whether we will be ableto sustain it. As of December 31, 2018, we had accumulated a deficit of $377.1 million. Our ability to generate significant revenue and achieve profitabilitydepends on our ability to successfully market and sell ILUVIEN and expand the geographic areas where we or our distributors can sell ILUVIEN, and tocomplete the development of and obtain necessary regulatory approvals for future ophthalmic products or product candidates. We cannot assure you that wewill be profitable even if we successfully commercialize ILUVIEN or future products or product candidates. Failure to become and remain profitable mayadversely affect the market price of our common stock and our ability to raise capital and continue operations.29Table of ContentsOur recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. In that regard, the audit report issued byour independent registered public accounting firm for the audit of our 2018 financial statements included an explanatory paragraph describing the existenceof conditions that raise substantial doubt about our ability to continue as a going concern.There is no assurance that sufficient financing will be available to us when needed to allow us to continue as a going concern. The perception that wemay not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractualobligations.Our quarterly operating results and cash flows may fluctuate significantly.We expect our operating results and cash flows to continue to be subject to quarterly fluctuations. The revenues we generate and our operating resultswill be affected by numerous factors, including:•the commercial success of ILUVIEN, including its timing;•inconsistent timing and ordering patterns from our U.S. distributors;•seasonality caused by insurance renewals for patients in the U.S., and by doctor and or patient absences due to holidays and vacations;•sales, marketing and medical affairs expenses;•the timing and amount of royalties, milestone payments or product purchases by our distributors;•our ability to obtain regulatory approval of ILUVIEN in additional jurisdictions or for additional indications, such as NIPU;•regulatory developments affecting ILUVIEN, our future product candidates or our competitors’ products;•the emergence of products or treatments that compete with ILUVIEN;•sales and marketing expenses;•variations in the level of expenses related to our products or future development programs;•the status of our preclinical and clinical development programs;•our execution of collaborative, licensing or other arrangements, and the timing of payments we may make or receive under thesearrangements;•any lawsuit or intellectual property infringement in which we are or may become involved; and•the timing and recognition of stock-based compensation expense.If our operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any fluctuations in our operating results or cash flows may, in turn, cause significant volatility in the price of our stock. We believe thatcomparisons of our quarterly financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.Exchange rate fluctuations of foreign currencies relative to the U.S. Dollar could materially and adversely affect our business.A substantial majority of our international revenues and expenses are denominated in British Pounds and Euros, and as such are sensitive to changes inexchange rates. We also have balances, such as cash, accounts receivable, accounts payable and accruals that are denominated in foreign currencies. Theseforeign currency transactions and balances are sensitive to changes in exchange rates. Fluctuations in exchange rates of the British Pound and Euro inrelation to the U.S. Dollar could materially reduce our future revenues as compared to prior periods. We do not seek to mitigate this exchange rate effect byusing derivative financial instruments. To the extent we are unable to match revenues received in foreign currencies with costs paid in the same currency,exchange rate fluctuations in that currency could have a material adverse effect on our business and results of operations.30Table of ContentsOur ability to use our net operating loss carry-forwards may be limited.As of December 31, 2018, we had U.S. federal and state net operating loss (NOL) carry-forwards of approximately $122.5 million and $153.3 million,respectively, which expire at various dates beginning in 2020 through 2038, subject to further limitation based upon the final results of our Internal RevenueCode sections 382 and 383 analyses. Sections 382 and 383 of the Internal Revenue Code limit the annual use of NOL carry-forwards and tax credit carry-forwards, respectively, following an ownership change. NOL carry-forwards may be subject to annual limitations under Section 382 (or comparableprovisions of state law) if certain changes in ownership of our company were to occur. In general, an ownership change occurs for purposes of Section 382 ifthere is a more than 50% change in ownership of a company over a 3-year testing period. We have determined that a Section 382 change in ownershipoccurred in December of 2015. As a result of this change in ownership, we estimated that approximately $18.6 million of our federal NOLs and approximately$382,000 of federal tax credits generated prior to the change in ownership will not be utilized in the future. We are currently in the process of refining andfinalizing these calculations, and upon finalization, will determine if a write-off is necessary. The reduction to our NOL deferred tax asset due to the annualSection 382 limitation and the NOL carryforward period would result in an offsetting reduction in valuation allowance recorded against the NOL deferred taxasset. Therefore, the limitation does not affect the statements of operations for the periods presented. Any future changes in our ownership or sale of our stockcould further limit the use of our NOLs in the future. If we need to obtain alternative or additional financing to meet our liquidity requirements under our2018 Loan Agreement with Solar Capital and we raise such funds by selling additional equity, this could further limit the use of our NOLs in the future.We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to comply withvarious securities laws and regulations and Nasdaq listing requirements.As a public company, we incur significant accounting, legal and other expenses. The Sarbanes-Oxley Act of 2002, as well as rules subsequentlyimplemented by the SEC and Nasdaq, has imposed various requirements on public companies, including requiring establishment and maintenance ofeffective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel are required to devote asubstantial amount of time to legal compliance. Moreover, these rules and regulations require substantial costs related to legal and financial compliance andto director and officer liability insurance.If we fail to maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our businesscould be harmed.The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls andprocedures. In particular, pursuant to Section 404 of the Sarbanes-Oxley Act (Section 404), we are required to perform system and process evaluation andtesting of our internal controls over financial reporting. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemedto be material weaknesses. Our compliance with Section 404 requires us to incur substantial accounting expense and expend significant management efforts.We currently do not have an internal audit group. Moreover, if we are unable to comply with the requirements of Section 404 in a timely manner or if weidentify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could declineand we could be subject to sanctions or investigations by Nasdaq, SEC or other regulatory authorities, which would require additional financial andmanagement resources.If the interpretations, estimates or judgments we use to prepare our financial statements prove to be incorrect, we may be required to restate ourfinancial results, which could have a number of material adverse effects on us.We are also subject to complex tax laws, regulations, accounting principles and interpretations thereof. The preparation of our financial statementsrequires us to interpret accounting principles and guidance and to make estimates and judgments that affect the reported amounts of assets and liabilities andthe disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurredduring the reporting periods. We base our interpretations, estimates and judgments on our historical experience and on various other factors that we believeare reasonable under the circumstances, the results of which form the basis for the preparation of our financial statements. Generally accepted accountingprinciples presentation is subject to interpretation by the SEC, the Financial Accounting Standards Board and various other bodies formed to interpret andcreate appropriate accounting principles and guidance. If one of these bodies disagrees with our accounting recognition, measurement or disclosure or any ofour accounting interpretations, estimates or assumptions, it may have a significant effect on our reported results and may retroactively affect previouslyreported results. Any restatement of our financial results could, among other potential adverse effects:•result in us incurring substantial costs,•affect our ability to timely file our periodic reports until the restatement is completed,31Table of Contents•divert the attention of our management and employees from managing our business,•result in material changes to our historical and future financial results,•result in investors losing confidence in our operating results,•subject us to securities class action litigation, and•cause our stock price to decline.Product liability lawsuits could divert our resources, reduce the commercial potential of our products and result in substantial liabilities, whichinsurance may not cover.Our business exposes us to the risk of product liability claims, which is inherent in the manufacturing, testing and marketing of drugs and relatedproducts. We face an increased risk of product liability as we further commercialize ILUVIEN, especially in the U.S. If the use of ILUVIEN or one or more ofour future products causes physical harm, we may be subject to costly and damaging product liability claims. We believe that we may be at a greater risk ofproduct liability claims relative to other pharmaceutical companies because ILUVIEN is inserted into the eye, and it is possible that we may be held liable foreye injuries of patients who receive ILUVIEN. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend.In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forego further commercialization ofILUVIEN or one or more of our future products. Even if we are not held liable, product liability lawsuits could cause adverse publicity and decrease thedemand for ILUVIEN, which could have a material adverse effect on our business, results or operations and financial condition. To date we have not had anymaterial claims against us.Although we maintain product liability insurance covering our clinical trial activities and our product sales, our aggregate coverage limit under theseinsurance policies is limited to $10 million in most jurisdictions, and while we believe this amount of insurance is sufficient to cover our product liabilityexposure, these limits may not be high enough to fully cover potential liabilities. The insurance provides worldwide coverage where allowed by law. As wegenerate product revenue in new countries, we intend to obtain compulsory coverage in those countries that require it. However, we may not be able to obtainor maintain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims. If we are unable to obtaininsurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materiallyand adversely affect our business and financial position. These liabilities could prevent or interfere with our product development and commercializationefforts.Our internal information technology systems, or those of our third-party CROs or other contractors or consultants, may fail or suffer securitybreaches, loss or leakage of data and other disruptions, which could result in a material disruption of certain parts of our business, compromise sensitiveinformation related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affectingour business.We depend on information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store andtransmit confidential information, including intellectual property, proprietary business information and personal information. We must maintain theconfidentiality and integrity of that confidential information. We also have outsourced elements of our operations to third parties, and as a result we workwith a number of third party contractors that have access to some of our confidential information.Although we have implemented security, backup and recovery measures, our internal information technology systems and those of our third-partymanufacturers, contract research organizations (CROs) and other contractors or consultants are potentially vulnerable to breakdown or other damage orinterruption from:•service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as securitybreaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners or other third parties, and•cyber-attacks by malicious third parties, including cyber-related threats of spoofed or manipulated electronic communications that lead tomisdirected or fraudulent payments, the deployment of harmful malware or ransomware, malicious websites, denial-of-service attacks, andsocial engineering and other means to adversely affect service reliability and threaten the confidentiality, integrity and availability ofinformation.Any of the foregoing may compromise our system infrastructure or lead to data leakage.While we have not experienced any such cyber-related fraud, system failure, accident or security breach to date that has materially affected ourbusiness, we cannot assure that our and our vendors’ data protection efforts and our and our vendors’32Table of Contentsinvestment in information technology will prevent cyber-attacks by malicious third parties, significant breakdowns, data leakages, breaches in our systems orother cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition. For example, if such an eventwere to occur and cause interruptions in our operations or a direct financial loss due to misdirected or fraudulent payments, it could result in a materialdisruption of our business operations, including, distribution and manufacturing, or to a direct financial loss.For example, we sell ILUVIEN in the U.S. primarily to two distributors and in Europe use two logistics providers, and a security breach that impairsthese distribution or logistics operations could significantly impair our ability to deliver our products to healthcare providers. In addition, ILUVIEN ismanufactured and tested by third parties, and a security breach that impairs these third parties could significantly impair our ability to manufacture ILUVIENand deliver it to our distributors in a timely manner. There can be no assurance that our or their efforts will detect, prevent or fully recover systems or datafrom all breakdowns, service interruptions, attacks or breaches of systems, any of which could adversely affect our business and operations and/or result in theloss of critical or sensitive data, which could result in financial, legal, business or reputational harm to us or impact our stock price.In addition, the loss of clinical trial data for our product candidates or our post-market studies could result in delays in our regulatory approval effortsand significantly increase our costs to recover or reproduce the data. Furthermore, significant disruptions or security breaches of our internal informationtechnology systems or our vendors’ technology systems could adversely affect or result in the loss of, misappropriation of, unauthorized access to, use of,disclosure of or the prevention of access to our confidential information, including trade secrets or other intellectual property, proprietary businessinformation and personal information of our employees and patients in studies conducted on our behalf, which could result in financial, legal, business andreputational harm to us. For example, any such event that leads to unauthorized access to, use of or disclosure of personal information, including personalinformation regarding our employees or information we may have regarding patients, could harm our reputation directly, compel us to comply with federaland state breach notification laws and foreign law equivalents, subject us to mandatory corrective action and otherwise subject us to liability under laws andregulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputationaldamages that could potentially have an adverse effect on our business.If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.Our research and development activities may involve the controlled use of potentially hazardous substances, including chemical and biologicalmaterials. In addition, our operations may produce hazardous waste products. Federal, state and local laws and regulations in the U.S. govern the use,manufacture, storage, handling and disposal of hazardous materials. Although we believe that our procedures for use, handling, storing and disposing of thesematerials comply with legally prescribed standards, we may incur significant additional costs to comply with applicable laws in the future. Also, even if wecomply with applicable laws, we cannot completely eliminate the risk of contamination or injury resulting from hazardous materials, and we may incurliability as a result of any such contamination or injury. If an accident occurs, we could be held liable for damages or penalized with fines, and the liabilitycould exceed our resources. We do not have any insurance for liabilities arising from hazardous materials. Compliance with applicable environmental lawsand regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which couldharm our business, operating results and financial condition.Prolonged economic uncertainties or downturns, as well as unstable market, credit and financial conditions, may exacerbate certain risks affectingour business and have serious adverse consequences on our business.Economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control. Sales of our products willdepend, in large part, on reimbursement from government health administration authorities, private health insurers, distribution partners and otherorganizations in the U.S., Germany, Portugal and the United Kingdom and other countries. Negative trends in the general economy in any of the jurisdictionsin which we may do business may cause these organizations to be unable to satisfy their reimbursement obligations or to delay payment. In addition, healthauthorities in some jurisdictions may reduce reimbursements, and private insurers may increase their scrutiny of claims. A reduction in the availability orextent of reimbursement could negatively affect our product sales and revenue.In addition, we rely on third parties for several important aspects of our business. During challenging and uncertain economic times and in tight creditmarkets, there may be a disruption or delay in the performance of our third party contractors, suppliers or partners. If those third parties are unable to satisfytheir commitments to us, our business and results of operations would be adversely affected. We sell to two large pharmaceutical distributors in the U.S. andthey accounted for 69% and 73% of our consolidated revenues for the years ended December 31, 2018 and 2017, respectively.33Table of ContentsThe term loan under our 2018 Loan and Security Agreement matures on July 1, 2022, and our interest rate is based on LIBOR. As a result, we areexposed to the risks associated with the expected replacement for LIBOR by the anticipated January 1, 2022 deadline.The term loan under our 2018 Loan Agreement matures on July 1, 2022, and our interest rate is based on LIBOR, which is expected to be replaced byJanuary 1, 2022. As a result, we are exposed to the risks associated with the expected replacement for LIBOR, which could result in our paying a higherinterest rate during the first six months of 2022 than we would have otherwise paid if LIBOR had not been replaced.EyePoint has received regulatory approval in the U.S. for a drug to treat uveitis with fluocinolone acetonide (FAc), the active pharmaceuticalingredient in ILUVIEN. EyePoint’s drug, YUTIQ, also uses the same insert technology as ILUVIEN, but with their own inserter. If EyePoint subsequentlycommercializes this drug, our opportunity for future growth could be limited.Our license agreement with EyePoint permits EyePoint to develop a drug to treat chronic non-infectious uveitis affecting the posterior segment of theeye (NIPU) using the technology of the polyimide insert, but not the ILUVIEN inserter. EyePoint has conducted clinical trials with such a drug, namedYUTIQ, for the treatment of NIPU and received approval from the FDA in the fourth quarter of 2018 for the treatment of NIPU. When EyePointcommercializes YUTIQ in the U.S., its similarities to ILUVIEN may create confusion in the market place. In addition, EyePoint is seeking pricing andreimbursement for YUTIQ that are lower than ILUVIEN, which could ultimately result in lower reimbursement levels for ILUVIEN. This potential marketplace confusion or any impact to our reimbursement for ILUVIEN could have a material adverse effect on our revenues, business and operations.RISKS RELATED TO INTELLECTUAL PROPERTY AND OTHER LEGAL MATTERSIf we or our licensors are unable to obtain and maintain protection for the intellectual property incorporated into our products, the value of ourtechnology and products will be adversely affected.Our success depends largely on our ability or the ability of our licensors to obtain and maintain protection in the U.S. and other countries for theintellectual property incorporated into our products. The patent situation in the field of biotechnology and pharmaceuticals generally is highly uncertain andinvolves complex legal and scientific questions. We or our licensors may be unable to obtain additional issued patents relating to our technology. Oursuccess will depend in part on the ability of our licensors to obtain, maintain (including making periodic filings and payments) and enforce patent protectionfor their intellectual property, in particular, those patents to which we have secured exclusive rights. Under our license with EyePoint, EyePoint controls thefiling, prosecution and maintenance of all patents. Our licensors may not successfully prosecute or continue to prosecute the patent applications to which weare licensed. Even if patents are issued in respect of these patent applications, we or our licensors may fail to maintain these patents, may determine not topursue litigation against entities that are infringing upon these patents, or may pursue such litigation less aggressively than we ordinarily would. Withoutprotection for the intellectual property that we own or license, other companies might be able to offer substantially identical products for sale, which couldadversely affect our competitive business position and harm our business prospects. Moreover, FAc is an off-patent active ingredient that is commerciallyavailable in several forms, including the extended release ocular implant Retisert.Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketingsimilar products or limit the length of term of patent protection that we may have for our products. In addition, our patents and our licensors’ patents may notafford us protection against competitors with similar technology.Litigation or third-party claims of intellectual property infringement would require us to divert resources and may prevent or delay ourcommercialization of ILUVIEN or the development or regulatory approval of other product candidates.ILUVIEN or any future products or product candidates may infringe upon other parties’ intellectual property rights that are protected by patents orpatent applications. Third parties may now or in the future own or control these patents and patent applications in the U.S. and abroad. These third partiescould bring claims against us or our collaborators that would cause us to incur substantial expenses or divert substantial employee resources from ourbusiness. If those claims are successful, we could be required to pay substantial damages or could be prevented from developing any future productcandidates. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay manufacturing,sales, research or development of the product or product candidate that is the subject of the suit.34Table of ContentsSeveral issued and pending U.S. patents claiming methods and devices for the treatment of eye diseases, including through the use of steroids, implantsand injections into the eye, purport to cover aspects of ILUVIEN. For example, one of our potential competitors holds issued and pending U.S. patents and apending European patent application with claims covering injecting an ocular implant into a patient’s eye similar to the ILUVIEN applicator. There is also anissued U.S. patent with claims covering implanting a steroidal anti-inflammatory agent to treat an inflammation-mediated condition of the eye. If these or anyother patents were held by a court of competent jurisdiction to be valid and to cover aspects of ILUVIEN, then the owners of such patents would be able toblock our ability to commercialize ILUVIEN unless and until we obtain a license under such patents (which license might require us to pay royalties or granta cross-license to one or more patents that we own), until those patents expire or unless we are able to redesign our product to avoid any such valid patents.As a result of patent infringement claims, or in order to avoid potential claims, we or our collaborators may choose to seek, or be required to seek, alicense from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptableterms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to thesame intellectual property. Ultimately, we could be forced to cease some aspect of our business operations, or be prevented from commercializing a productif, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harmour business significantly.There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical andbiotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, includinginterference proceedings declared by the U.S. Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectualproperty rights with respect to our products and technology. The cost to us of any litigation or other proceeding, regardless of its merit, even if resolved in ourfavor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings better than we can because of theirsubstantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have amaterial adverse effect on our ability to compete in the marketplace. Intellectual property litigation and other proceedings may, regardless of their merit, alsoabsorb significant management time and employee resources.If our efforts to protect the proprietary nature of the intellectual property related to our products are inadequate, we may not be able to competeeffectively in our markets.The strength of our patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. Inaddition to the rights we have licensed from EyePoint relating to ILUVIEN, we rely upon intellectual property we own, including patents, patent applicationsand trade secrets. Our patent applications may be challenged or fail to result in issued patents and our existing or future patents may be too narrow to preventthird parties from developing or designing around these patents. The patent rights relating to ILUVIEN licensed to us from EyePoint include seven U.S.patents that expire between March 2019 and August 2027, two European patents expiring in April 2021 and October 2024 and counterpart filings to thesepatents in a number of other jurisdictions. No patent term extension will be available for any of these U.S. patents, European patents or any of our licensedU.S. or European pending patent applications. After these patents expire in August 2027 in the U.S. and October 2024 in Europe, we will not be able to blockothers from marketing FAc in an implant similar to ILUVIEN. Moreover, it is possible that a third party could successfully challenge the scope (i.e., whether apatent is infringed), validity and enforceability of our licensed patents before patent expiration and obtain approval to market a competitive product.Further, the patent applications that we license or have filed may fail to result in issued patents. Patent examiners have rejected some claims in pendingpatent applications that we have filed or licensed. We may need to amend these claims. Even after amendment, a patent may not be permitted to issue.Further, the existing or future patents to which we have rights based on our agreement with EyePoint may be too narrow to prevent third parties fromdeveloping or designing around these patents. Additionally, we may lose our rights to the patents and patent applications we license in the event of a breachor termination of our license agreement with EyePoint. Manufacturers may also seek to obtain approval to sell a generic version of ILUVIEN before theexpiration of the relevant licensed patents. If the sufficiency of the breadth or strength of protection provided by the patents we license with respect toILUVIEN or the patents we pursue related to ILUVIEN or any future product candidate is threatened, it could dissuade companies from collaborating with usto commercialize ILUVIEN and develop any future product candidates. Further, if we encounter delays in our clinical trials for any future product candidate,the period during which we could market those product candidates under patent protection would be reduced.We rely on trade secret protection and confidentiality agreements to protect certain proprietary know-how that is not patentable, for processes for whichpatents are difficult to enforce and for any other elements of our development processes with respect to ILUVIEN that involve proprietary know-how,information and technology that is not covered by patent applications. While we require all of our employees, consultants, advisors and any third parties whohave access to our35Table of Contentsproprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that this know-how, information andtechnology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalentinformation and techniques. Further, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the U.S. As a result,we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad. If we are unable to protect ordefend the intellectual property related to our technologies, we will not be able to establish or maintain a competitive advantage in our market.Third-party claims of intellectual property infringement may prevent or delay our commercialization efforts with respect to ILUVIEN and ourdiscovery, development or commercialization efforts with respect to any future product candidates.Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. Third parties may assert that weare employing their proprietary technology without authorization. In addition, at least several issued and pending U.S. patents claiming methods and devicesfor the treatment of eye diseases, including through the use of steroids, implants and injections into the eye, purport to cover aspects of ILUVIEN.Although we are not currently aware of any litigation or other proceedings or third-party claims of intellectual property infringement related toILUVIEN, the pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may inthe future allege that our activities infringe their patents or that we are employing their proprietary technology without authorization. We may not haveidentified all the patents, patent applications or published literature that could potentially affect our business either by blocking our ability to commercializeour products or product candidates, by preventing the patentability of one or more aspects of our products or those of our licensors or by covering the same orsimilar technologies that may affect our ability to market our product. We cannot predict whether we would be able to obtain a license on commerciallyreasonable terms, if at all. Any inability to obtain such a license under the applicable patents on commercially reasonable terms, or at all, may have a materialadverse effect on our ability to commercialize ILUVIEN or any future products or product candidates until such patents expire.In addition, third parties may obtain patents in the future and claim that use of ILUVIEN, our technologies or future products or product candidatesinfringes upon these patents. Furthermore, parties making claims against us may obtain injunctive or other equitable relief, which could effectively block ourability to further commercialize ILUVIEN or develop and commercialize any future product candidates. Defense of these claims, regardless of their merit,would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claimof infringement against us, we may have to pay substantial damages, obtain one or more licenses from third parties or pay royalties, or we may be enjoinedfrom further commercializing ILUVIEN or developing and commercializing any future product candidates or technologies. In addition, even in the absenceof litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of ILUVIEN or any future productcandidate, and we have done so from time to time. We may fail to obtain future licenses at a reasonable cost or on reasonable terms, if at all. In that event, wemay be unable to further commercialize ILUVIEN or develop and commercialize any future product candidates, which could harm our business significantly.We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming andunsuccessful.Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or ourlicensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not coverthe technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated orinterpreted narrowly and could put our patent applications at risk of not issuing.Interference proceedings brought by the U.S. Patent and Trademark Office may be necessary to determine the priority of inventions with respect to ourpatents and patent applications or those of our collaborators or licensors. An unfavorable outcome could require us to cease using the technology or toattempt to license rights to it from the prevailing party. Our business could be harmed if a prevailing party does not offer us a license on terms that areacceptable to us. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distraction of our managementand other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our proprietary rights, particularly in countries wherethe laws may not protect those rights as fully as in the U.S.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation. In36Table of Contentsaddition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts orinvestors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could beadversely affected.In addition to patented technology, we rely upon unpatented proprietary technology, processes, trade secrets and know-how. Any involuntarydisclosure or misappropriation by third parties of our confidential or proprietary information could enable competitors to quickly duplicate or surpass ourtechnological achievements, thus eroding our competitive position in our market. We seek to protect confidential or proprietary information in part byconfidentiality agreements with our employees, consultants and third parties. While we require all of our employees, consultants, advisors and any thirdparties who have access to our proprietary know-how, information and technology to enter into confidentiality agreements, we cannot be certain that thisknow-how, information and technology will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently developsubstantially equivalent information and techniques. These agreements may be terminated or breached, and we may not have adequate remedies for any suchtermination or breach. Furthermore, these agreements may not provide meaningful protection for our trade secrets and know-how in the event of unauthorizeduse or disclosure. To the extent that any of our staff were previously employed by other pharmaceutical or biotechnology companies, those employers mayallege violations of trade secrets and other similar claims in relation to their drug development activities for us.RISKS RELATED TO THE OWNERSHIP OF OUR COMMON STOCKThe failure to maintain a minimum closing share price of $1.00 per share of our common stock could result in the delisting of our shares on theNasdaq Global Market, which could materially reduce the liquidity of the common stock and have an adverse effect on its market price.To retain our listing on the Nasdaq Global Market, we must maintain a minimum bid price of $1.00 per share. Our stock price is currently above $1.00.If the minimum bid price of our common stock were to fall below $1.00 per share for 30 consecutive business days, as has occurred twice within the past ninemonths, we would likely receive notification from the Nasdaq Global Market that we were not in compliance with the $1.00 minimum bid price rule, in whichcase we could be subject to delisting from the Nasdaq Global Market unless our common stock closed at or above $1.00 per share for 10 consecutive businessdays during the 180 days immediately following failure to maintain the minimum bid price. If our stock price did not achieve that level, our stock could bedelisted from the Nasdaq Global Market, transferred to a listing on the Nasdaq Capital Market, or delisted from the Nasdaq markets altogether.Twice within the past nine months, we have received notice from Nasdaq that we failed to comply with the Nasdaq Global Market’s minimum bidrequirement because our stock price was below $1.00 per common share for 30 consecutive business days. In each case we were able to regain compliance,first in July 2018 and again in February 2019, when the closing bid price of our common stock equaled or exceeded the $1.00 minimum bid pricerequirement for 10 consecutive business days. We cannot provide any assurances, however, that we will continue to comply with Nasdaq’s $1.00 minimumbid price requirement or if we fail to do so, we will again be able to regain compliance by the applicable deadline.The delisting of our shares from the Nasdaq Global Market could materially reduce the liquidity of our common stock and have an adverse effect on itsmarket price. Further, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as theOTCQB. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policiespreventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would besubject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks,coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higherpercentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. A delistingwould also likely make it more difficult for us to obtain financing through the sale of our equity. Any such sale of equity would likely be more dilutive to ourcurrent stockholders than would be the case if our shares were listed. For these reasons and others, delisting would adversely affect the liquidity, tradingvolume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financialcondition and results of operations, including our ability to attract and retain qualified employees and to raise capital.37Table of ContentsOur stock price has been and may continue to be volatile, and the value of an investment in our common stock may decline.The realization of any of the risks described in these risk factors or other unforeseen risks could have a dramatic and adverse effect on the market priceof our common stock. The trading price of our common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in responseto various factors, some of which are beyond our control. These factors include:•our ability to successfully commercialize ILUVIEN in the U.S., Austria, Germany, Ireland, Portugal and the United Kingdom;•the ability of our distributors to commercialize ILUVIEN in the countries where they have obtained distribution rights;•whether ILUVIEN is approved for sale in any additional jurisdiction;•whether our filing for a Type II variation for ILUVIEN for NIPU in 17 countries in the EEA is approved;•whether ILUVIEN or any future products or product candidates, if approved in additional jurisdictions, achieves and maintains commercialsuccess;•FDA or international regulatory actions, including failure to receive or maintain regulatory approval for ILUVIEN or any future products orproduct candidates;•quarterly variations in our results of operations or those of our competitors;•announcements by us or our competitors of acquisitions, regulatory approvals, clinical milestones, new products, significant contracts,commercial relationships or capital commitments;•third-party coverage and reimbursement policies and levels;•our ability to meet our repayment and other obligations under our loan agreements;•additions or departures of key personnel;•commencement of, or our involvement in, litigation;•the impact of Brexit on our business;•changes in governmental regulations or in the status of our regulatory approvals;•changes in earnings estimates or recommendations by securities analysts;•any major change in our board of directors or management;•results from our clinical trial programs;•our ability to develop and market new and enhanced products or product candidates on a timely basis;•general economic conditions and slow or negative growth of our markets; and•political instability, natural disasters, war and/or events of terrorism.From time to time, we estimate the timing of the accomplishment of various regulatory, scientific, clinical and other product development goals ormilestones. These milestones may include:•the submission of regulatory filings,•the notification of the results of regulatory filings,•the anticipated commercial launch of ILUVIEN in various new jurisdictions or for new or expanded indications,•any future products or product candidates, and•the commencement or completion of scientific studies and clinical trials.38Table of ContentsAlso, from time to time, we expect that we will publicly announce the anticipated timing of some of these milestones. All of these milestones are based on avariety of assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control.If we do not meet these milestones as publicly announced, our stock price may decline and the further commercialization of ILUVIEN or any future productsor product candidates may be delayed.In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to theoperating performance of publicly traded companies. Broad market and industry factors may seriously affect the market price of companies’ stock, includingours, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock. In addition, in thepast, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has oftenbeen initiated against these companies. This litigation, if brought against us, could result in substantial costs and a diversion of our management’s attentionand resources.Holders of our Series A Convertible Preferred Stock have the ability to significantly influence the outcome of matters submitted for stockholderapproval and may have interests that differ from those of our other stockholders.Investors that participated in our Series A Convertible Preferred Stock financing, including some of our large shareholders and our executive officers,key employees, directors and their affiliates, beneficially own, in the aggregate, a majority of the outstanding voting power of our common stock. As a result,these stockholders, if acting together, may be able to exercise significant influence over all matters requiring stockholder approval, including the election ofdirectors and the approval of significant corporate transactions, and this concentration of voting power may have the effect of delaying or impeding actionsthat could be beneficial to you, including actions that our Board of Directors may support.In addition, the terms of the Series A Convertible Preferred Stock provide that certain corporate actions require the prior consent of the holders of atleast 70% of the then outstanding shares of Series A Convertible Preferred Stock.Significant sales of our common stock could depress or reduce the market price of our common stock, or cause our shares of common stock to tradebelow the prices at which they would otherwise trade, or impede our ability to raise future capital.A small number of institutional investors and private equity funds hold a significant number of shares of our common stock and all of our shares ofSeries A Convertible Preferred Stock and Series C Convertible Preferred Stock. Sales by these stockholders of a substantial number of common shares, or theexpectation of such sales, could cause a significant reduction in the market price of our common stock. Additionally, a small number of investors have rights,subject to certain conditions, to require us to file registration statements to permit the resale of their shares in the public market or to include their shares inregistration statements that we may file for ourselves or other stockholders.We may sell our shares in registered public offerings. For example, in August 2016, we sold an aggregate of 18,900,000 shares of our common stock at aprice of $1.40 each, resulting in gross proceeds of approximately $26.5 million, before deducting underwriting fees, commissions and offering expenses.We also may elect to sell shares of our common stock through an at-the-market offering. Any sale of additional shares of common stock in the future, ifwe determined it was appropriate or necessary to do so, could cause a significant reduction in the market price of our common stock.In addition to our outstanding common stock, as of December 31, 2018, we were obligated to issue: (a) a total of 12,447,355 shares of common stockupon the exercise of outstanding common stock options (b) a total of 900,252 shares of common stock upon the vesting of restricted stock units (RSUs),under which 889,752 shares of common stock were issued in early 2019; and (c) a total of 1,795,663 shares of common stock upon the exercise ofoutstanding common stock warrants. Upon the exercise of the stock options and vesting of the RSUs in accordance with their respective terms, the shares soacquired may be resold freely, subject to restrictions imposed on our affiliates under the SEC’s Rule 144. The shares acquired upon exercise of warrants canbe sold under Rule 144. If significant sales of these shares occur in short periods, these sales could reduce the market price of our common stock. Anyreduction in the trading price of our common stock could impede our ability to raise capital on attractive terms.Actual or perceived significant sales of our common stock could depress or reduce the market price of our common stock, cause our shares of commonstock to trade below the prices at which they would otherwise trade or impede our ability to raise future capital.39Table of ContentsFuture sales and issuances of our equity securities or rights to purchase our equity securities, including pursuant to our equity incentive plans, wouldresult in dilution of the percentage ownership of our stockholders and could cause our stock price to fall.To the extent we raise additional capital by issuing equity securities; our stockholders may experience substantial dilution. We may sell commonstock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell commonstock, convertible securities or other equity securities in more than one transaction, whether in public or private offerings, investors may be diluted bysubsequent sales. Those sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to existingstockholders. In addition, the Series A Convertible Preferred Stock is entitled to price-based anti-dilution protection in connection with certain financings,which has the potential to further dilute our other stockholders.Pursuant to our 2010 Equity Incentive Plan, our Board of Directors is authorized to grant various types of equity-based awards, including stock optionsand RSUs to our employees, directors and consultants. The number of shares available for future grant under our 2010 Equity Incentive Plan increases eachyear by an amount equal to the lesser of 4% of all shares of our capital stock outstanding as of January 1st of each year, 2,000,000 shares, or such lessernumber as determined by our Board of Directors. On January 1, 2019, an additional 2,000,000 shares became available for future issuance under our 2010Equity Incentive Plan in accordance with the annual increase. In addition, as of January 1, 2019, a total of 494,422 shares of our common stock wereavailable for issuance under our 2010 Employee Stock Purchase Plan. The number of shares eligible for purchase under our Employee Stock Purchase Plan isautomatically increased as of January 1st of each year by the number of shares of common stock necessary to cause the number of shares of common stockthen available for purchase to be restored to 494,422 shares.The Series A Convertible Preferred Stock contains covenants that may limit our business flexibility.For so long as at least 37.5% of the shares of Series A Convertible Preferred Stock originally issued to the investors at the closing of our Series AConvertible Preferred Stock financing in October 2012 are held by the initial investors or their affiliates, we may not, without first obtaining the approval ofthe holders of at least 70% of the then outstanding shares of Series A Convertible Preferred Stock:•increase or decrease the authorized number of shares of Series A Convertible Preferred Stock;•authorize, create, issue or obligate us to issue (by reclassification, merger or otherwise) any security (or any class or series thereof) or anyindebtedness, in each case that has any rights, preferences or privileges senior to, or on a parity with, the Series A Convertible Preferred Stock,or any security convertible into or exercisable for any such security or indebtedness, subject to limited exceptions for certain debttransactions;•amend our certificate of incorporation or the certificate of designation of the Series A Convertible Preferred Stock, in each case in a mannerthat adversely affects the rights, preference or privileges of the Series A Convertible Preferred Stock;•redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of common stock or preferredstock; provided, however, that this restriction shall not apply to (A) the redemption of rights issued pursuant to any “poison pill” rights planor similar plan we adopt in the future or (B) the repurchases of stock from former employees, officers, directors or consultants who performedservices for us in connection with the cessation of such employment or service pursuant to the terms of existing agreements with suchindividuals;•declare or pay any dividend or distribution on any shares of capital stock; provided, however, that this restriction shall not apply to(A) dividends payable to holders of common stock that consist solely of shares of common stock for which adjustment to the conversion priceof the Series A Convertible Preferred Stock is made pursuant to the certificate of designation or (B) dividends or distributions issued pro ratato all holders of capital stock (on an as-converted basis) in connection with our implementation of a “poison pill” rights plan or similar plan;•authorize or approve any increase to the number of aggregate shares of capital stock reserved for issuance pursuant to stock option, stockpurchase plans or other equity incentive plans such that the total aggregate number of shares issued under such plans and reserved forissuance under such plans (on an as-converted basis) exceeds the number of shares issued and reserved for issuance under such plans (on anas-converted basis) on the date of the closing of the Series A Convertible Preferred Stock financing by more than 20% (as adjusted for stocksplits, combinations, stock dividends, recapitalizations and the like), provided that any increases resulting solely from the annual increasesresulting from the “evergreen” provisions of equity incentive plans in effect in40Table of ContentsOctober 2012 shall not be subject to this restriction and shall not be included for purposes of determining whether such 20% increase hasoccurred;•issue stock or other equity securities of any subsidiary (other than to us or another of our wholly-owned subsidiaries);•declare or pay any dividend or other distribution of cash, shares or other assets or redemption or repurchase of shares of any subsidiary; or•incur any secured indebtedness other than certain limited debt transactions.There is no guarantee that the holders of the Series A Convertible Preferred Stock would approve any such restricted action, even where such an action wouldbe in the best interests of our stockholders. Any failure to obtain such approval could harm our business and result in a decrease in the value of our commonstock.Anti-takeover provisions in our charter and bylaws and in Delaware law could prevent or delay acquisition bids for us that stockholders mightconsider favorable and could entrench current management.We are a Delaware corporation. The anti-takeover provisions of the Delaware General Corporation Law may deter, delay or prevent a change in controlby prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interestedstockholder, even if a change in control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and bylawsmay discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our restated certificate ofincorporation and bylaws:•authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;•do not provide for cumulative voting in the election of directors, which would allow holders of less than a majority of our outstandingcommon stock to elect some directors;•establish a classified Board of Directors, as a result of which the successors to the directors whose terms have expired will be elected to servefrom the time of election and qualification until the third annual meeting following their election;•require that directors only be removed from office for cause;•provide that vacancies on the Board of Directors, including newly created directorships, may be filled only by a majority vote of directorsthen in office;•contain certain protective provisions in favor of the holders of Series A Convertible Preferred Stock;•limit who may call special meetings of stockholders;•prohibit common stockholder action by written consent, requiring all actions of the holders of common stock to be taken at a meeting of thestockholders; and•establish advance notice requirements for nominating candidates for election to the Board of Directors or for proposing matters that can beacted upon by stockholders at stockholder meetings.If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price andtrading volume could decline.The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business,our market or our competitors. If one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of theseanalysts ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volumeto decline.41Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTSNot applicable.ITEM 2. PROPERTIESIn our U.S. segment, our U.S. headquarters are located in Alpharetta, Georgia, consisting of approximately 18,000 square feet of office space. Our leasefor this facility expires in September 2021. In our international segment, our EEA headquarters are located in Aldershot, United Kingdom, consisting ofapproximately 6,000 square feet of office space. Our lease for this facility expires in December 2024, but is cancelable without penalty in December 2019. Inour international segment, we lease approximately 1,000 square feet of office space in each of Dublin, Ireland, Berlin, Germany, and Lisbon, Portugal. Ourleases for these facilities in Ireland, Germany and Portugal expire in June 2019, June 2021 and March 2020, respectively. We anticipate that following theexpiration of the leases, we will be able to lease additional or alternative space at commercially reasonable terms.ITEM 3. LEGAL PROCEEDINGSOn December 22, 2016, Cantor Fitzgerald & Co. (Cantor Fitzgerald) filed a complaint against us in the Supreme Court of the State of New York, Countyof New York (the Court). This complaint mirrored a complaint that Cantor Fitzgerald filed against us in November 2016 in the United States District Court forthe Southern District of New York and then voluntarily dismissed.In the operative complaint, Cantor Fitzgerald alleged breach of a letter agreement pursuant to which we had engaged Cantor Fitzgerald to assist us inobtaining bank or loan financing. Cantor Fitzgerald alleged that our agreement in October 2016 with Hercules Capital, Inc. (Hercules) to restructure andamend our then existing $35 million debt facility with Hercules and to secure an additional $10 million in debt financing required the payment to CantorFitzgerald of an advisory fee of 2% of $45 million, or $900,000, plus expenses of $24,890. Cantor Fitzgerald sought compensatory and punitive damages,pre- and post-judgment interest, plus attorneys’ fees and costs.On January 12, 2017, we filed a counterclaim against Cantor Fitzgerald for breach of contract. We alleged in the counterclaim, among other things, thatCantor Fitzgerald failed to meet its obligations to provide services to us as required under the letter agreement. We sought compensatory and other damages,arising from, among other things, our additional out-of-pocket costs incurred as a result of Cantor Fitzgerald’s breach.The litigation with Cantor Fitzgerald was settled by agreement of the parties on October 31, 2018.Previous developments in the foregoing litigation were reported in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2018, June 30,2018 and September 30, 2018.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.42Table of ContentsPART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESOur common stock has been trading on The Nasdaq Global Market (Nasdaq) under the symbol “ALIM” since our IPO on April 22, 2010. Before then,there was no established public trading market for our common stock.Stockholder DataAs of February 22, 2019, there were 33 holders of record of our common stock, and there were 70,968,630 shares of our common stock issued andoutstanding.DividendsWe have not declared or paid any cash dividends on our common stock since our inception. We do not plan to pay dividends in the foreseeable future.Further, the rights and preferences of our Series A Convertible Preferred Stock also place limitations on our ability to declare or pay any dividend ordistribution on any shares of capital stock. We currently intend to retain earnings, if any, to finance our growth. Consequently, stockholders will need to sellshares of our common stock to realize a return on their investment, if any.Recent Sales of Unregistered SecuritiesIn 2016, 2017 and 2018, we did not sell any shares of stock that were not registered under the Securities Act of 1933, as amended, other than those salespreviously reported in a Current Report on Form 8-K.43Table of ContentsITEM 6. SELECTED CONSOLIDATED FINANCIAL DATABecause we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of theExchange Act, with respect to this Annual Report on Form 10-K, we are not required to provide the information required by this Item.44Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis should be read in conjunction with our audited annual consolidated financial statements and the related notesthat appear elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations thatinvolve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors,including those set forth in the section entitled “Risk Factors” and elsewhere in this annual report on Form 10-K. For further information regardingforward-looking statements, please refer to the “Special Note Regarding Forward-Looking Statements and Projections” at the beginning of Part I of thisannual report on Form 10-K.OverviewAlimera Sciences, Inc., and its subsidiaries (we or Alimera) is a pharmaceutical company that specializes in the commercialization and development ofprescription ophthalmic pharmaceuticals. We presently focus on diseases affecting the back of the eye, or retina, because we believe these diseases are notwell treated with current therapies and represent a significant market opportunity.Our only commercial product is ILUVIEN®, which has received marketing authorization in the U.S., Austria, Belgium, Canada, the Czech Republic,Denmark, Finland, France, Germany, Ireland, Italy, Lebanon, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United ArabEmirates and the United Kingdom. In the U.S., Canada, Lebanon and the United Arab Emirates, ILUVIEN is indicated for the treatment of diabetic macularedema (DME) in patients who have been previously treated with a course of corticosteroids and did not have a clinically significant rise in intraocularpressure (IOP). In the European Economic Area (EEA) countries in which ILUVIEN has received marketing authorization, it is indicated for the treatment ofvision impairment associated with DME considered insufficiently responsive to available therapies.We commercially market ILUVIEN in the U.S., Germany, the United Kingdom, Portugal, Austria and Ireland. We began selling ILUVIEN in Austria andIreland in 2017.In addition, we have entered into various agreements under which distributors are providing or will provide regulatory, reimbursement or sales andmarketing support for ILUVIEN in France, Italy, Spain, Australia, New Zealand, Canada and several countries in the Middle East. In 2016, our Middle Eastdistributor launched ILUVIEN and initiated named patient sales in the United Arab Emirates. Our Italian distributor launched ILUVIEN in Italy in 2017. OurSpanish distributor began selling on a named patient basis in 2017 and upon receiving reimbursement, plans a full-scale launch in 2019. Our French andCanadian distributors are currently pursuing reimbursement in their respective countries. As of December 31, 2018, we have recognized sales of ILUVIEN tothe Company’s international distributors in the Middle East, France, Italy and Spain.In July 2017, we amended and restated our license agreement with EyePoint Pharmaceuticals US, Inc. (EyePoint), formerly known as pSivida US, Inc.,which was made effective July 1, 2017 (the New Collaboration Agreement). Under the New Collaboration Agreement, the technology underlying ILUVIENnow includes the treatment of uveitis, including non-infectious posterior uveitis (NIPU) in Europe, the Middle East and Africa. In December 2017, we filed anapplication for a new indication for ILUVIEN for the treatment of non-infectious posterior uveitis (NIPU) in the 17 EEA countries where ILUVIEN is currentlyapproved for the treatment of DME. Uveitis is an inflammatory disease of the uveal tract, which is comprised of the iris, ciliary body and choroid, that canlead to severe vision loss and blindness. The regulatory authorities requested additional follow-up data from the clinical trials to support the application.This additional follow-up data was submitted in October 2018. We expect that we will obtain approval of our application for NIPU in the first half of 2019,although we can provide no assurances that we can do so.Before we entered into the New Collaboration Agreement, we were required to share 20% of our net profits on a country-by-country basis. We werepermitted to offset up to 20% of this amount with accumulated commercialization costs incurred in previous quarters. The New Collaboration Agreementconverted the profit share obligation to a royalty payable on global net revenues of ILUVIEN. We began paying a 2% royalty on net revenues and otherrelated consideration to EyePoint effective July 1, 2017. The royalty amount increased to 6% as of December 12, 2018. We will pay an additional 2% royaltyon global net revenues and other related consideration in excess of $75.0 million in any year. During 2018, we recognized approximately $998,000 ofroyalty expense. During 2017, we recognized approximately $621,000 of royalty and profit share expense.Following the signing of the New Collaboration Agreement, we retained a right to offset $15.0 million of future royalty payments. This offset will bereduced by up to $5.0 million upon the earlier of the approval of ILUVIEN for posterior uveitis in any EU country or January 1, 2020, unless certainconditions under the New Collaboration Agreement are not met.45Table of ContentsWe commenced operations in June 2003. Since our inception we have incurred significant losses. As of December 31, 2018, we had accumulated adeficit of $377.1 million. We expect to incur substantial losses through the continued commercialization of ILUVIEN as we:•continue the commercialization of ILUVIEN in the U.S. and EEA, where we sell direct, and in other countries in the EEA and the Middle East,where we sell through our distributors;•continue to seek regulatory approval of ILUVIEN for other indications and in other jurisdictions;•evaluate the use of ILUVIEN for the treatment of other diseases; and•advance the clinical development of any future products or product candidates either currently in our pipeline, or that we may license oracquire in the future.As of December 31, 2018, we had approximately $13.0 million in cash and cash equivalents.On January 5, 2018, we entered into a $40.0 million Loan and Security Agreement (2018 Loan Agreement) with Solar Capital Ltd. (Solar Capital).Under the 2018 Loan Agreement, we borrowed the entire $40.0 million as a term loan that matures on July 1, 2022 (Solar Capital Loan). We used theproceeds of the Solar Capital Loan to refinance the then outstanding loan (Hercules Loan) under our previous loan agreement with Hercules Capital, Inc.(Hercules Loan Agreement) and to pay closing expenses associated with the 2018 Loan Agreement. We expect to use the remaining loan proceeds to provideadditional working capital for general corporate purposes. (See Note 10 of our notes to consolidated financial statements below.)Our revenues for the fiscal years ended December 31, 2018 and 2017 were generated from product sales primarily in the U.S., Germany and the UnitedKingdom. In the U.S., two large pharmaceutical distributors accounted for 69% and 73% of our consolidated revenues for the years ended December 31, 2018and 2017, respectively. These U.S.-based distributors purchase ILUVIEN from us, maintain inventories of ILUVIEN and sell downstream to physician offices,pharmacies and hospitals. Internationally, in countries where we sell direct, our customers are hospitals, clinics and pharmacies. We sometimes refer tophysician offices, pharmacies, hospitals and clinics as end users. In international countries where we sell to distributors, these distributors maintain inventorylevels of ILUVIEN and sell to their customers.46Table of ContentsResults of Operations - Year ended December 31, 2018 compared to year ended December 31, 2017 Years Ended December 31, 2018 2017 (In thousands, except share and per share data)NET REVENUE$46,970 $35,912COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND AMORTIZATION(4,679) (3,438)GROSS PROFIT42,291 32,474 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES11,274 12,844GENERAL AND ADMINISTRATIVE EXPENSES14,525 13,039SALES AND MARKETING EXPENSES23,517 23,210DEPRECIATION AND AMORTIZATION2,645 2,684RECOVERABLE COLLABORATION COSTS— (2,851)OPERATING EXPENSES51,961 48,926NET LOSS FROM OPERATIONS(9,670) (16,452) INTEREST EXPENSE AND OTHER(4,775) (5,579)UNREALIZED FOREIGN CURRENCY (LOSS) GAIN, NET(65) 5LOSS ON EARLY EXTINGUISHMENT OF DEBT(1,766) —CHANGE IN FAIR VALUE OF DERIVATIVE WARRANT LIABILITY— 188NET LOSS BEFORE TAXES(16,276) (21,838)PROVISION FOR TAXES(106) (163)NET LOSS(16,382) (22,001)GAIN ON EXTINGUISHMENT OF PREFERRED STOCK38,330 $—NET INCOME (LOSS) AVAILABLE TO STOCKHOLDERS$21,948 $(22,001)NET INCOME (LOSS) PER SHARE — Basic$0.25 $(0.33)WEIGHTED AVERAGE SHARES OUTSTANDING — Basic88,002,208 66,993,649NET INCOME (LOSS) PER SHARE — Diluted$0.25 $(0.33)WEIGHTED AVERAGE SHARES OUTSTANDING — Diluted88,737,788 66,993,649RevenueWe began generating revenue from ILUVIEN in 2013. In addition to generating revenue from product sales, we intend to seek to generate revenue fromother sources such as upfront fees, milestone payments in connection with collaborative or strategic relationships, and royalties resulting from the licensingof ILUVIEN or any future product candidates and other intellectual property. Additionally, revenue from our international distributors fluctuates dependingon the timing of the shipment of ILUVIEN to the distributors and the distributors’ sales of ILUVIEN to their customers.Net revenue increased by approximately $11.1 million, or 31%, to approximately $47.0 million for 2018, compared to approximately $35.9 million for2017. The increase was attributable to increased sales volume in the U.S. and international segments, including increases in both the markets where we selldirect and the markets where we sell to distributors.Cost of Goods Sold, Excluding Depreciation and Amortization, and Gross ProfitGross profit is affected by costs of goods sold, which includes (a) costs of manufactured goods sold and (b) payments to EyePoint in the form of (1)royalty payments under the New Collaboration Agreement (after July 1, 2017), and (2) payments based on a percentage of net profits under our previousagreement with EyePoint (before July 1, 2017). Additionally, cost of goods sold from our international distributors fluctuates depending on the timing of theshipment of ILUVIEN to the distributor.47Table of ContentsCost of goods sold, excluding depreciation and amortization increased by approximately $1.3 million, or 38%, to approximately $4.7 million for 2018,compared to approximately $3.4 million for 2017. The increase was primarily attributable to our increased sales volume and an increase of approximately$380,000 in royalty expense payable to EyePoint in 2018 compared to profit share and royalty expenses payable to EyePoint in 2017.Gross profit increased by approximately $9.8 million, or 30%, to approximately $42.3 million for 2018, compared to approximately $32.5 million for2017. Gross margin was 90% for both years. As our revenues to our international distributors increase and our royalty expense payable to EyePoint increases,we expect our gross margin to decrease.Research, Development and Medical Affairs ExpensesCurrently, our research, development and medical affairs expenses are primarily focused on activities that support ILUVIEN and includes salaries andrelated expenses for research and development and medical affairs personnel, including medical sales liaisons, costs related to the provision of medical affairssupport, including symposia development for physician education, and costs related to compliance with FDA, EEA or other regulatory requirements. Until wereach profitability, if at all, we do not expect to change the focus of these activities. We expense both internal and external development costs as they areincurred.Research, development and medical affairs expenses decreased by approximately $1.5 million, or 12%, to approximately $11.3 million for 2018,compared to approximately $12.8 million for 2017. The decrease was primarily attributable to a $2.9 million non-cash charge during 2017 for in-processresearch and development expense for the additional rights to uveitis acquired from EyePoint; we had no such expense in 2018. This decrease was partiallyoffset by increases of approximately $510,000 in costs associated with ongoing clinical studies, $490,000 in personnel costs and $180,000 in scientificcommunication costs.General and Administrative ExpensesGeneral and administrative expenses consist primarily of compensation for employees in executive and administrative functions, including finance,accounting, information technology and human resources. Other significant costs include facilities costs and professional fees for accounting and legalservices, including legal services associated with obtaining and maintaining patents. We expect to continue to incur significant costs to comply with thecorporate governance, internal control and similar requirements applicable to public companies.General and administrative expenses increased by approximately $1.5 million, or 12%, to approximately $14.5 million for 2018, compared toapproximately $13.0 million for 2017. The increase was primarily attributable to increases of approximately $600,000 for one-time non-cash accruedseverance expenses due to the transition of our previous chief executive officer to a consulting role, $310,000 in audit and legal fees, and $250,000 of statefranchise taxes.Sales and Marketing ExpensesSales and marketing expenses consist primarily of professional fees and compensation for employees for the commercial promotion, the assessment ofthe commercial opportunity of, the development of market awareness for, the pursuit of market reimbursement for and the execution of launch plans forILUVIEN. Other costs include professional fees associated with developing plans for ILUVIEN or any future products or product candidates and maintainingpublic relations.Sales and marketing expenses increased by approximately $300,000, or 1%, to approximately $23.5 million for 2018, compared to approximately$23.2 million for 2017. The increase was primarily attributable to increased personnel costs.Recoverable Collaboration CostsSee “Other Segment” below for a discussion of this line item.Operating ExpensesAs a result of the changes in expenses described above, total operating expenses increased by approximately $3.1 million, or 6%, to approximately$52.0 million for 2018, compared to approximately $48.9 million for 2017. The increase was primarily attributable to an increase of approximately $1.5million in general and administrative expenses and the increases in research, development and medical affairs expenses described above.48Table of ContentsInterest Expense and OtherFor 2017, interest expense consisted primarily of interest and amortization of deferred financing costs and debt discounts associated with the HerculesLoan Agreement. As described in Overview above, we entered into a new loan facility with Solar Capital on January 5, 2018 and refinanced the HerculesLoan with the proceeds. For 2018, interest expense consisted of interest and amortization of deferred financing costs and debt discounts associated with theSolar Capital Loan. Interest income consisted primarily of interest earned on our cash, cash equivalents and investments.Interest expense and other. Interest expense and other decreased by approximately $800,000, or 14%, to approximately $4.8 million for 2018,compared to approximately $5.6 million for 2017. The decrease was primarily attributable to the lower effective interest rate on the Solar Capital Loancompared to the effective interest rate on the Hercules Loan.Loss on early extinguishment of debtWe recorded a loss on early extinguishment of debt of approximately $1.8 million for 2018 as a result of refinancing the Hercules Loan by entering intothe 2018 Loan Agreement on January 5, 2018.Change in Fair Value of Derivative Warrant LiabilityWarrants to purchase our Series A Convertible Preferred Stock or common stock that do not meet the requirements for classification as equity, inaccordance with the Derivatives and Hedging Topic of the Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC), areclassified as liabilities. We record these derivative financial instruments as liabilities in our balance sheet measured at their fair value. We record the changesin fair value of such instruments as non-cash gains or losses in the consolidated statements of operations.During 2017, we recognized a gain of approximately $188,000 related to the decrease in fair value of our derivative warrant liability. The change in fairvalue was primarily due to the reduction in time remaining to exercise the warrants. The right to exercise the related warrants expired on October 1, 2017.Gain on Extinguishment of Preferred StockOn September 4, 2018, the Company entered into and closed a Series B Preferred Stock Exchange Agreement (Exchange Agreement) with the holdersof all of the outstanding approximately 8,416 shares of Series B Preferred Stock. Under the Exchange Agreement, the holders of Series B Preferred Stockexchanged their shares of Series B Preferred Stock for an aggregate of 10,150 shares of Series C Convertible Preferred Stock, par value $0.01 per share (SeriesC Preferred Stock). We determined that the Exchange Agreement resulted in an extinguishment of the Series B Preferred Stock. As a result, we recognized again of $38,330,000 on the extinguishment of preferred stock during 2018. (See Note 12 to our notes to consolidated financial statements below.)Basic and Diluted Net Income (Loss) Applicable to Common Stockholders per Share of Common StockWe calculated net Income (loss) per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing netincome (loss) available to stockholders by the weighted average number of shares outstanding for the period. Diluted earnings per share is calculated inaccordance with ASC 260 by adjusting weighted average shares outstanding for the dilutive effect of common stock options, restricted stock units andwarrants.We had net income available to stockholders for 2018 due to the gain on extinguishment of preferred stock. (See Note 12 to our notes to consolidatedfinancial statements below.)49Table of ContentsBasic and diluted earnings per share attributable to shares of common stock and shares of preferred stock that are convertible into common stock(participating securities) are as follows: Years EndedDecember 31, 2018 2017 (In thousands, except share and per share data)Net income (loss) available to stockholders$21,948 $(22,001)Allocation of undistributed earnings (loss): Earnings (loss) attributable to common stock$17,459 $(22,001)Earnings attributable to participating securities$4,489 $— Basic shares: Weighted average common shares70,002,901 66,993,649Weighted average participating shares17,999,307 —Total basic weighted average shares88,002,208 66,993,649 Diluted shares: Weighted average common shares70,002,901 66,993,649Dilutive weighted average shares735,580 —Total dilutive weighted common shares70,738,481 66,993,649Weighted average participating shares17,999,307 —Total dilutive weighted average shares88,737,788 66,993,649 Basic EPS$0.25 $(0.33)Diluted EPS$0.25 $(0.33)Common stock equivalent securities that would potentially dilute basic EPS in the future, but were not included in the computation of diluted EPSbecause they were either classified as participating or would have been anti-dilutive, totaled approximately 14.2 million and 31.7 million for 2018 and 2017,respectively.Potentially dilutive common stock equivalents are excluded from the diluted earnings per share denominator for periods of net loss because of theiranti-dilutive effect. Therefore, for 2017, the weighted average shares used to calculate both basic and diluted loss per share were the same.50Table of ContentsResults of Operations - Segment ReviewThe following selected unaudited financial and operating data are derived from our consolidated financial statements. The results and discussions thatfollow reflect how executive management monitors the performance of our reporting segments.We allocate certain operating expenses between our reporting segments based on activity-based costing methods. These activity-based costingmethods require us to make estimates that affect the amount of each expense category that is attributed to each segment. Changes in these estimates willdirectly affect the amount of expense allocated to each segment and therefore the operating profit of each reporting segment. There were no significantchanges in our expense allocation methodology during 2018 or 2017.U.S. Segment Years EndedDecember 31, 2018 2017 (In thousands)NET REVENUE$32,337 $26,146COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND AMORTIZATION(3,246) (2,482)GROSS PROFIT29,091 23,664 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES6,457 5,780GENERAL AND ADMINISTRATIVE EXPENSES8,147 7,580SALES AND MARKETING EXPENSES16,569 16,588OPERATING EXPENSES31,173 29,948SEGMENT LOSS FROM OPERATIONS$(2,082) $(6,284)U.S. Segment - Year ended December 31, 2018 compared to year ended December 31, 2017Net Revenue. Net revenue increased by approximately $6.2 million, or 24%, to approximately $32.3 million for 2018, compared to approximately$26.1 million for 2017. The increase was primarily attributable to a 16% increase in end user demand.Cost of goods sold, excluding depreciation and amortization. Cost of goods sold, excluding depreciation and amortization increased by approximately$700,000, or 28%, to approximately $3.2 million for 2018 compared to approximately $2.5 million for 2017. The increase was primarily attributable to ourincreased sales volume.Research, development and medical affairs expenses. Research, development and medical affairs expenses increased by approximately $700,000, or12%, to approximately $6.5 million for 2018, compared to approximately $5.8 million for 2017. The increase was primarily attributable to increased costsassociated with ongoing clinical studies.General and administrative expenses. General and administrative expenses increased by approximately $500,000, or 7%, to approximately $8.1million for 2018, compared to approximately $7.6 million for 2017. The increase was primarily attributable to increases of $270,000 in audit and legal fees,and $250,000 of state franchise taxes.Sales and marketing expenses. Sales and marketing expenses were approximately $16.6 million for both 2018 and 2017.51Table of ContentsInternational Segment Years EndedDecember 31, 2018 2017 (In thousands)NET REVENUE$14,633 $9,766COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND AMORTIZATION(1,433) (956)GROSS PROFIT13,200 8,810 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES3,946 3,314GENERAL AND ADMINISTRATIVE EXPENSES3,259 2,605SALES AND MARKETING EXPENSES5,910 5,394OPERATING EXPENSES13,115 11,313SEGMENT INCOME (LOSS) FROM OPERATIONS$85 $(2,503)International Segment - Year ended December 31, 2018 compared to year ended December 31, 2017Net Revenue. Net revenue increased by approximately $4.8 million, or 49%, to approximately $14.6 million for 2018, compared to approximately $9.8million for 2017. The increase was primarily attributable to increased sales volume in both the markets where we sell direct and the markets where we sell todistributors.Cost of goods sold, excluding depreciation and amortization. Cost of goods sold, excluding depreciation and amortization increased by approximately$440,000, or 46%, to approximately $1.4 million for 2018, compared to approximately $960,000 for 2017. The increase was primarily attributable to ourincreased sales volume.Research, development and medical affairs expenses. Research, development and medical affairs expenses increased by approximately $600,000, or18%, to approximately $3.9 million for 2018, compared to approximately $3.3 million for 2017. The increase was primarily attributable to increases ofapproximately $370,000 in personnel costs and $180,000 in scientific communication costs.General and administrative expenses. General and administrative expenses increased by approximately $700,000, or 27%, to approximately $3.3million for 2018, compared to approximately $2.6 million for 2017. The increase was primarily attributable to increased personnel costs.Sales and marketing expenses. Sales and marketing expenses increased by approximately $500,000, or 9%, to approximately $5.9 million for 2018,compared to approximately $5.4 million for 2017. The increase was primarily attributable to increases of approximately $310,000 in marketing costs and$290,000 in personnel costs.52Table of ContentsOther Segment Years EndedDecember 31, 2018 2017 (In thousands)RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES$871 $3,750GENERAL AND ADMINISTRATIVE EXPENSES3,119 2,854SALES AND MARKETING EXPENSES1,038 1,228DEPRECIATION AND AMORTIZATION2,645 2,684RECOVERABLE COLLABORATION COSTS— (2,851)OPERATING EXPENSES7,673 7,665SEGMENT LOSS FROM OPERATIONS$(7,673) $(7,665)Our chief operating decision maker manages and evaluates our U.S. and International segments based on net loss from operations adjusted for certainnon-cash items, such as stock-based compensation expense and depreciation and amortization. Therefore, these non-cash expenses included in Research,Development and Medical Affairs Expenses, General and Administrative Expenses, and Sales and Marketing Expenses are classified within the Othersegment within our Consolidated Financial Statements.Within the respective financial statement line items included in the Other segment, stock-based compensation expense, collectively, decreased byapproximately $600,000, or 12%, to $4.4 million for 2018, compared to $5.0 million for 2017. Additionally, within general and administrative expenses wehad an increase of approximately $600,000 of one-time non-cash accrued severance expenses due to the transition of our previous chief executive officer to aconsulting role.Depreciation and amortization decreased by approximately $100,000, or 4%, to approximately $2.6 million for 2018, compared to approximately $2.7million for 2017.In July 2017, we acquired the license rights to uveitis from EyePoint for Europe, the Middle East and Africa and restructured our collaborationagreement. The New Collaboration Agreement included a conversion of our obligation to share profits from the commercialization of ILUVIEN to a royaltyon net revenue. As consideration for the uveitis rights and the profit share conversion, we agreed to reduce our right to utilize EyePoint’s share of previouslosses associated with the commercialization of ILUVIEN that could have been used to partially offset future profit sharing payments under the priorcollaboration agreement. This right of offset was previously fully reserved on our financial statements due to the uncertainty of future realizability. Wevalued the transaction utilizing a present value analysis at approximately $2.9 million. Because there was no approved indication for ILUVIEN for uveitis atthe time, we expensed the $2.9 million as a non-cash charge as in-process Research and Development Expense during 2017. We also recognized a Recoveryof Prior Collaboration Costs of $2.9 million for the value of the right of offset as a reduction of operating expenses in the same period. As a result, there wasno impact on our operating loss or net loss for 2017.53Table of ContentsLiquidity and Capital ResourcesSince inception, we have incurred recurring losses, negative cash flow from operations and have accumulated a deficit of $377.1 million throughDecember 31, 2018. We have funded our operations through the public and private placement of common stock, convertible preferred stock, warrants, thesale of certain assets of the non-prescription business in which we were previously engaged and certain debt facilities.In September 2014, we entered into a sales agreement with Cowen and Company, LLC (Cowen) to offer shares of our common stock from time to timethrough Cowen, as our sales agent for the offer and sale of the shares up to an aggregate offering price of $35.0 million. We paid a commission equal to 3% ofthe gross proceeds from the sales of shares of our common stock under the sales agreement. During 2017, we sold 4,203,015 shares of our common stock at aweighted average price of $1.43 per share through an at-the-market offering, for total gross proceeds of approximately $6.0 million, reduced byapproximately $180,000 of related commissions, issuance costs and placement agent fees. We used the net proceeds from this offering for general corporatepurposes and working capital. Our sales agreement with Cowen to sell additional shares expired on August 13, 2017.On January 5, 2018, we entered into the $40.0 million 2018 Loan Agreement with Solar Capital. Under the 2018 Loan Agreement, we borrowed theentire $40.0 million as a term loan that matures on July 1, 2022.We used the proceeds of the 2018 Loan Agreement to refinance the then existing HerculesLoan and for related expenses. We expect to use the remaining proceeds of the Solar Capital Loan to provide additional working capital for general corporatepurposes. (See Note 10 of our notes to consolidated financial statements below.)As of December 31, 2018, we had approximately $13.0 million in cash and cash equivalents. We commercially market ILUVIEN in the U.S., Germany,the United Kingdom, Portugal, Austria and Ireland. We began selling ILUVIEN in Austria and Ireland in 2017. We may have to raise additional capital tofund the continued commercialization of ILUVIEN. If we are unable to raise additional financing, we will need to adjust our commercial plans so that we cancontinue to operate with our existing cash resources. The actual amount of funds that we will need will depend on many factors, some of which are beyondour control. We may need funds sooner than currently anticipated.We cannot be sure that additional financing will be available when needed or that, if available, the additional financing would be obtained on termsfavorable to us or our stockholders. If we were to raise additional funds by issuing equity securities, substantial dilution to existing stockholders would likelyresult and the terms of any new equity securities may have a preference over our common stock. If we were to attempt to raise additional funds throughstrategic collaboration agreements we may not be successful in obtaining collaboration agreements, or in receiving milestone or royalty payments underthose agreements. If we were to attempt to raise additional funds through debt financing, (a) the terms of the debt may involve significant cash paymentobligations as well as covenants and specific financial ratios that may restrict our ability to commercialize ILUVIEN or any future products or productcandidates or operate our business; and (b) we would be required to obtain the permission or participation of Solar Capital, which we might not be able toobtain. Our recurring losses and any potential needs to raise capital create substantial doubt about our ability to continue as a going concern for the next 12months following the issuance of the financial statements.For 2018, net cash used in our operations of $11.6 million was primarily due to our net loss of $16.4 million, which is subject to further adjustment fornon-cash items. These items included charges of approximately $4.4 million for stock compensation expense, $2.6 million of depreciation and amortizationexpense, a $1.8 million charge for the loss on early extinguishment of debt and $840,000 of amortization costs associated with our debt discount. Furtherreducing cash from operations was a $6.0 million increase in accounts receivable which was driven by increased revenue and a $930,000 increase ininventory. This reduction was offset by a $1.4 million increase in accounts payable and accrued expenses and other current liabilities.For 2017, net cash used in our operations of $12.9 million was primarily due to our net loss of $22.0 million, which is subject to further adjustment fornon-cash items. These items included charges of approximately $5.0 million for stock compensation expense, $2.7 million of depreciation and amortizationexpense and $1.4 million of amortization costs associated with our debt discount. Further reducing cash from operations was a $1.1 million increase ininventory. This reduction was offset by a $2.6 million decrease in accounts receivable.For 2018, net cash used in our investing activities was approximately $175,000, which was primarily due to the purchase of equipment and software.For 2017, net cash used in our investing activities was approximately $240,000, which was primarily due to the purchase of manufacturing equipmentand software.54Table of ContentsFor 2018, net cash provided by our financing activities was approximately $950,000, which was primarily due to entering into the $40.0 million 2018Loan Agreement with Solar Capital, offset by paying off the $35.0 million Hercules Loan and related debt costs of $3.7 million.For 2017, net cash provided by our financing activities was approximately $5.7 million. In the second and third quarters of 2017, we sold a total of4,203,015 shares of our common stock through our at-the-market offering, resulting in total gross proceeds of approximately $6.0 million, prior to thepayment of $180,000 of related commissions, issuance costs and placement agent fees.55Table of ContentsCritical Accounting Policies and EstimatesOur discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements that have beenprepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimatesand judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and judgments,including those described below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under thecircumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readilyapparent from other sources. Actual results and experiences may differ materially from these estimates. We believe that the following accounting policies arethe most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates thatwe use in the preparation of our consolidated financial statements.Revenue RecognitionNet RevenueWe sell our products to major pharmaceutical distributors, pharmacies, hospitals and wholesalers (collectively, our Customers). In addition todistribution agreements with Customers, we enter into arrangements with healthcare providers and payors that provide for government-mandated and/orprivately-negotiated rebates, chargebacks, and discounts with respect to the purchase of our products. All of our current contracts have a single performanceobligation, as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and is, therefore, not distinct.Currently, all of our revenue is derived from product sales. We recognize revenues from product sales when the Customer obtains control, typicallyupon delivery. We accrue for fulfillment costs when the related revenue is recognized. Taxes collected from Customers relating to product sales and remittedto governmental authorities are excluded from revenues.As of December 31, 2018 and 2017, we had received a total of $1.0 million and $500,000, respectively of payments that have not been recognized asrevenue based on our analysis in connection with Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Thesedeferred revenues are included as a component of other non-current liabilities on our balance sheets.Estimates of Variable ConsiderationRevenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for reservesrelated to statutory rebates to State Medicaid and other government agencies; commercial rebates and fees to Managed Care Organizations (MCOs), GroupPurchasing Organizations (GPOs), distributors, and specialty pharmacies; product returns; sales discounts (including trade discounts); distributor costs;wholesaler chargebacks; and allowances for patient assistance programs relating to sales of our products.These reserves are based on estimates of the amounts earned or to be claimed on the related sales. Our estimates take into consideration historicalexperience, current contractual and statutory requirements, specific known market events and trends, industry data, and Customer buying and paymentpatterns. Overall, these reserves reflect our best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amountof variable consideration included in the net sales price is limited to the amount that is probable not to result in a significant reversal in the amount of thecumulative revenue recognized in a future period. If actual results vary, we may adjust these estimates, which could have an effect on earnings in the periodof adjustment.Consideration Payable to CustomersDistribution service fees are payments issued to distributors for compliance with various contractually-defined inventory management practices orservices provided to support patient access to a product. Distribution service fees reserves are based on the terms of each individual contract and are classifiedwithin accrued expenses and are recorded as a reduction of revenue.Product ReturnsOur policies provide for product returns in the following circumstances: (a) expiration of shelf life on certain products; (b) product damaged while inthe Customer’s possession; and (c) following product recalls. Generally, returns for expired product are accepted three months before and up to one year afterthe expiration date of the related product, and the related product is destroyed after it is returned. We may either refund the sales price paid by the Customerby issuance of a credit, or exchange the returned product with replacement inventory. We typically do not provide cash refunds. We estimate the proportionof recorded revenue that will result in a return by considering relevant factors, including historical returns experience, the estimated level of inventory in thedistribution channel, the shelf life of products and product recalls, if any.56Table of ContentsThe estimation process for product returns involves, in each case, a number of interrelating assumptions, which vary for each Customer. We estimate theamount of our product sales that may be returned by our Customers and record this estimate as a reduction of revenue from product sales in the period therelated revenue is recognized, and because this returned product cannot be resold, there is no corresponding asset for product returns. To date, product returnshave been minimal.Other RevenueWe enter into agreements in which we license certain rights to our products to partner companies that act as distributors. The terms of thesearrangements may include payment to us of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercialmilestone payments; payments for manufacturing supply services we provide; and a revenue share on net sales of licensed products. Each of these paymentsis recognized as other revenues.As part of the accounting for these arrangements, we must develop estimates that require judgment to determine the stand-alone selling price for eachperformance obligation identified in the contract. Performance obligations are promises in a contract to transfer a distinct good or service to the Customer,and we recognize revenue when, or as, performance obligations are satisfied. We use key assumptions to determine the stand-alone selling price; theseassumptions may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical,regulatory and commercial success.Certain of these agreements include consideration in the form of milestone payments. At the inception of each arrangement that includes milestonepayments, we evaluate the recognition of milestone payments. Typically, milestone payments are associated with events that are not entirely within ourcontrol or the licensee, such as regulatory approvals; are included in the transaction price; and are subject to a constraint until it is probable that there willnot be a significant revenue reversal, typically upon achievement of the milestone. At the end of each reporting period, we re-evaluate the probability ofachievement of such milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price.Customer Payment ObligationsWe receive payments from our Customers based on billing schedules established in each contract, which vary across locations, but generally rangebetween 30 to 120 days. Occasionally, the timing of receipt of payment for our international Customers can be extended. Amounts are recorded as accountsreceivable when our right to consideration is unconditional. We do not assess whether a contract has a significant financing component if the expectation isthat our Customer will pay for the product or services within one year or less of receiving those products or services.Additional Critical Accounting Policies and EstimatesResearch and Development CostsResearch and development expenditures are expensed as incurred, pursuant to ASC 730, Research and Development. Costs to license technology to beused in our research and development that have not reached technological feasibility, defined as regulatory approval for ILUVIEN or any future products orproduct candidates, and have no alternative future use are expensed when incurred. Payments to licensors that relate to the achievement of preapprovaldevelopment milestones are recorded as research and development expense when incurred.Clinical Trial Prepaid and Accrued ExpensesWe record prepaid assets and accrued liabilities related to clinical trials associated with contract research organizations (CROs), clinical trialinvestigators and other vendors based upon amounts paid and the estimated amount of work completed on each clinical trial. The financial terms ofagreements vary from vendor to vendor and may result in uneven payment flows. As such, if we have advanced funds exceeding our estimate of the workcompleted, we record a prepaid asset. If our estimate of the work completed exceeds the amount paid, an accrued liability is recorded. All such costs arecharged to research and development expenses based on these estimates. Our estimates may or may not match the actual services performed by theorganizations as determined by patient enrollment levels and related activities. We monitor patient enrollment levels and related activities to the extentpossible through internal reviews, correspondence and discussions with our CROs and review of contractual terms. However, if we have incomplete orinaccurate information, we may underestimate or overestimate activity levels associated with various clinical trials at a given point in time. In this event, wecould record significant research and development expenses in future periods when the actual level of activities becomes known. To date, we have notexperienced material changes in these estimates. Additionally, we do not expect material adjustments to research and development expenses to result fromchanges in the nature and level of clinical trial activity and related expenses that are currently subject to estimation. In the future, as we expand our clinicaltrial activities, we expect to have increased levels of research and development costs that will be subject to estimation.57Table of ContentsStock-Based CompensationWe have stock-based compensation under which various types of equity-based awards may be granted, including restricted stock units (RSUs) andstock options, to employees, directors and consultants or other service providers. The exercise prices of stock options generally equal the fair values of ourcommon stock at the dates of grant. We recognize compensation cost for all stock-based awards based on the grant date fair value in accordance with theprovisions of ASC 718, Compensation — Stock Compensation. We recognize the grant date fair value as compensation cost of employee stock-based awardsusing the straight-line method over the actual vesting period, adjusted for our estimates of forfeiture. Typically, we grant stock options with a requisiteservice period of four years from the grant date. We have elected to use the Black-Scholes option pricing model to determine the fair value of stock-basedawards.We concluded that this was the most appropriate method by which to value our share-based payment arrangements, but if any share-based paymentinstruments should be granted for which the Black-Scholes method does not meet the measurement objective as stated within ASC 718, we will use a moreappropriate method for valuing that instrument. However, we do not believe that any instruments granted to date and accounted for under ASC 718 wouldrequire a method other than the Black-Scholes method.Our determination of the fair market value of share-based payment awards on the grant date using option valuation models requires the input of highlysubjective assumptions, including the expected price volatility and option life. Changes in these input variables would affect the amount of expenseassociated with equity-based compensation. Expected volatility is based on the historical volatility of our common stock over the expected term of the stockoption grant. To estimate the expected term, we use the “simplified” method for “plain vanilla” options as discussed within the SEC’s Statement ofAccounting Bulletin (SAB) 107. We believe that all factors listed within SAB 107 as pre-requisites for utilizing the simplified method are true for us and forour share-based payment arrangements. We intend to use the simplified method for the foreseeable future until more detailed information about exercisebehavior will be more widely available. The risk-free interest rate is based on U.S. Treasury Daily Treasury Yield Curve Rates corresponding to the expectedlife assumed at the date of grant. Dividend yield is zero as there are no payments of dividends made or expected.Income TaxesWe recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets andliabilities in accordance with ASC 740, Income Taxes. We evaluate the positive and negative evidence bearing upon the realizability of our deferred taxassets on an annual basis. Significant management judgment is involved in determining the provision for income taxes, deferred tax assets and liabilities, andany valuation allowance recorded against net deferred tax assets. Due to uncertainties with respect to the realization of our U.S. deferred tax assets resultingfrom our history of operating losses, we have established a valuation allowance against our U.S. deferred tax asset balances to reduce the net carrying value toan amount that is more likely than not to be realized. As a result, we have fully reserved against the U.S. deferred tax asset balances. The valuation allowancesare based on our estimates of taxable income in the jurisdictions in which we operate and the period over which deferred tax assets will be recoverable. Ifactual results differ from these estimates or we adjust these estimates in future periods, a change in the valuation allowance may be needed, which couldmaterially impact our financial position and results of operations.Our deferred tax assets primarily consist of net operating loss (NOL) carry-forwards. As of December 31, 2018, we had federal NOL carry-forwards ofapproximately $122.5 million and state NOL carry-forwards of approximately $153.3 million, respectively, subject to further limitation based upon the finalresults of our Internal Revenue Code (IRC) sections 382 and 383 analyses. These NOLs are available to reduce future income otherwise taxable. If notutilized, the federal NOL carry-forwards will expire at various dates between 2029 and 2037, our federal NOL created in 2018 will carry forward indefinitelyand the state NOL carry-forwards will expire at various dates between 2020 and 2038.Sections 382 and 383 of the Internal Revenue Code limit the annual use of NOL carry-forwards and tax credit carry-forwards, respectively, following anownership change. NOL carry-forwards may be subject to annual limitations under IRC Section 382 (Section 382) (or comparable provisions of state law) inthe event that certain changes in ownership were to occur. We periodically evaluate our NOL carry-forwards and whether certain changes in ownership haveoccurred that would limit our ability to utilize a portion of our NOL carry-forwards. If it is determined that significant ownership changes have occurred sincewe generated our NOL carry-forwards, it may be subject to annual limitations on the use of these NOL carry-forwards under Section 382 (or comparableprovisions of state law). We have determined that a Section 382 change in ownership occurred in late 2015. As a result of this change in ownership, weestimated that approximately $18.6 million of our federal NOLs and approximately $382,000 of federal tax credits generated prior to the change inownership will not be utilized in the future. We are currently in the process of refining and finalizing these calculations, and upon finalization, will determineif a write-off is necessary. The reduction to our NOL deferred tax asset due to the annual Section 382 limitation and the NOL carryforward period would resultin an offsetting reduction in valuation allowance recorded against the NOL deferred tax asset.58Table of ContentsIf we were to determine that we are able to realize any of our net deferred tax assets in the future, an adjustment to the valuation allowance wouldincrease net income in the period in which we make that determination. We believe that the most significant uncertainty affecting the determination of ourvaluation allowance will be our estimation of the extent and timing of future net income, if any.We considered our income tax positions for uncertainty in accordance with ASC 740. The balance of unrecognized tax benefits as of December 31,2018 and December 31, 2017 are approximately $68,000 and $52,000, respectively. Both balances relate to research and development tax credits. Inaccordance with ASC 740-10, such attributes are reduced to the amount that is expected to be recognized in the future. We do not accrue interest or penalties,as there is no risk of additional tax liability due to significant NOLs available. We do not expect any decreases to the unrecognized tax benefits within thenext twelve months due to any lapses in statute of limitations. Tax years from 2015 to 2018 remain subject to examination in California, Georgia, Kentucky,New Jersey, Tennessee, Texas and on the federal level, provided that assessment of NOL carry-forwards available for use can be examined for all years since2009. The statute of limitations on these years will close when the NOLs expire or when the statute closes on the years in which we use the NOLs.Foreign Currency TranslationThe U.S. dollar is the functional currency of Alimera Sciences, Inc. The Euro is the functional currency for the majority of our subsidiaries operatingoutside of the U.S.Our foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary balance sheetaccounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period,except for those expenses related to the non-monetary balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreigncurrency remeasurement are included in income.The financial statements of the foreign subsidiaries whose functional currency is not the U.S. dollar have been translated into U.S. Dollars in accordancewith ASC 830-30, Translation of Financial Statements. For the subsidiaries operating outside of the U.S. that are denominated in the Euro, assets andliabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period in which the activitytook place. Equity is translated at historical rates and the resulting cumulative translation adjustments are included as a component of accumulated othercomprehensive income.Off-Balance Sheet ArrangementsWe do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or specialpurpose entities, that would have been established to facilitate off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of SEC RegulationS-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we hadengaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our own performance and theperformance of our subsidiaries.New Accounting PronouncementsSee Note 2 of our notes to consolidated financial statements below for a description of recent accounting pronouncements, including the expecteddates of adoption and expected effects on results of operations and financial condition, if known.59Table of ContentsITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKBecause we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of theExchange Act, with respect to this Annual Report on Form 10-K, we are not required to provide the information required by this Item.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe consolidated financial statements and related consolidated financial statement schedules required to be filed are indexed on page 69 and areincorporated herein.ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.60Table of ContentsITEM 9A. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresUnder the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, weevaluated the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) asof the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that ourdisclosure controls and procedures were effective as of December 31, 2018.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executiveand principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples and includes those policies and procedures that: •pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations ofour management and directors; and•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that couldhave a material effect on our financial statements.Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internalcontrol over financial reporting as of December 31, 2018, based on criteria for effective internal control over financial reporting established in the 2013Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Based on this assessment, our management concluded that we maintained effective internal control over financial reporting as of December 31, 2018.The independent registered public accounting firm of Grant Thornton LLP, as auditor of the consolidated balance sheets of Alimera Sciences Inc. andits subsidiaries as of December 31, 2018 and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cashflows for 2018, has issued an attestation report on our internal control over financial reporting, which is included on page 62.Changes in Internal Control over Financial ReportingThere has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during thefourth quarter of 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Limitations on the Effectiveness of ControlsControl systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that theobjectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatementsdue to error or fraud may occur and not be detected.61Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersAlimera Sciences, Inc.Opinion on internal control over financial reportingWe have audited the internal control over financial reporting of Alimera Sciences, Inc.(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2018,based on criteria established in the 2013 Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission(“COSO”). In our opinion, the Company maintained, in all material respects, effectiveinternal control over financial reporting as of December 31, 2018, based on criteriaestablished in the 2013 Internal Control—Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States) (“PCAOB”), the consolidated financialstatements of the Company as of and for the year ended December 31, 2018, and ourreport dated February 25, 2019 expressed an unqualified opinion on those financialstatements.Basis for opinionThe Company’s management is responsible for maintaining effective internal controlover financial reporting and for its assessment of the effectiveness of internal controlover financial reporting, included in the accompanying Management’s Report onInternal Controls over Financial Reporting. Our responsibility is to express an opinionon the Company’s internal control over financial reporting based on our audit. We are apublic accounting firm registered with the PCAOB and are required to be independentwith respect to the Company in accordance with the U.S. federal securities laws andthe applicable rules and regulations of the Securities and Exchange Commission andthe PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Thosestandards require that we plan and perform the audit to obtain reasonable assuranceabout whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal controlover financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on theassessed risk, and performing such other procedures as we considered necessary inthe circumstances. We believe that our audit provides a reasonable basis for ouropinion.62Table of ContentsDefinition and limitations of internal control over financial reportingA company’s internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generally acceptedaccounting principles. A company’s internal control over financial reporting includesthose policies and procedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of the company’sassets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or proceduresmay deteriorate./s/ GRANT THORNTON LLPAtlanta, GAFebruary 25, 201963Table of ContentsITEM 9B. OTHER INFORMATIONNone.64Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this item regarding our directors, including the audit committee and audit committee financial experts, our executiveofficers, our corporate governance, our code of conduct and compliance with Section 16(a) of the Exchange Act will be included in our Proxy Statement forthe 2019 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of fiscal year ended December 31, 2018(2019 Proxy Statement) and is incorporated herein by reference.ITEM 11. EXECUTIVE COMPENSATIONThe information required by this item regarding executive compensation will be included in our 2019 Proxy Statement and is incorporated herein byreference.65Table of ContentsITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this item regarding security ownership and certain beneficial owners and management will be included in our 2019 ProxyStatement and is incorporated herein by reference.Equity Compensation Plan InformationThe following table provides information as of December 31, 2018, with respect to shares of our common stock that may be issued, subject to certainvesting requirements, under our existing equity compensation plans, including our 2010 Equity Incentive Plan (2010 Plan), 2005 Equity Incentive Plan(2005 Plan), 2004 Equity Incentive Plan (2004 Plan) and our 2010 Employee Stock Purchase Plan (ESPP). A B C Number of Securities to beIssued Upon Exercise ofOutstanding Options,Warrants, and Rights Weighted-Average ExercisePrice of Outstanding Options,Warrants and Rights Number of SecuritiesRemaining Available forFuture Issuance Under EquityCompensation Plans(Excluding SecuritiesReflected in Column (A)) Plan Category Equity compensation plans approved bysecurity holders13,347,607(1)$2.63(2)666,271(3)Equity compensation plans not approvedby security holders— — — Total13,347,607 $2.63 666,271 (1)Of these shares, 12,241,009 were subject to options then outstanding under the 2010 Plan, 154,058 were subject to options then outstanding underthe 2005 Plan, 52,288 were subject to options then outstanding under the 2004 Plan and 900,252 were outstanding restricted stock units thenoutstanding under the 2010 Plan. (2)The weighted-average exercise price does not take into account restricted stock units, which do not have an exercise price. (3)Represents 263,498 shares of common stock available for issuance under our 2010 Plan and 402,773 shares of common stock available for issuanceunder our ESPP. No shares are available for future issuance under the 2005 Plan or 2004 Plan. In addition, our 2010 Plan provides for annualincreases in the number of shares available for issuance thereunder on the first day of each fiscal year equal to the least of: (1) 2,000,000 shares ofour common stock; (2) 4% of the shares of common stock outstanding at that time; and (3) such other amount as our board of directors maydetermine. On January 1, 2019, an additional 2,000,000 shares became available for future issuance under our 2010 Plan in accordance with theannual increase. In addition, our ESPP provides for annual increases in the number of shares available for issuance thereunder equal to such numberof shares necessary to restore the number of shares reserved thereunder to 494,422 shares of our common stock. As such, on January 1, 2019, anadditional 91,649 shares became available for future issuance under our ESPP. These additional shares from the annual increase under the 2010Plan and the ESPP are not included in the table above.66Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this item regarding certain relationships and related transactions and director independence will be included in our 2019Proxy Statement and is incorporated herein by reference.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this item regarding principal accounting fees and services will be included in our 2019 Proxy Statement and isincorporated herein by reference.67Table of ContentsPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES(a) The following documents are filed as part of, or incorporated by reference into, this annual report on Form 10-K:1.Financial Statements. See Index to Financial Statements under Item 8 of this annual report on Form 10-K.2.Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is notapplicable or is shown in the financial statements or related notes.3.Exhibits. We have filed, or incorporated into this annual report on Form 10-K by reference, the exhibits listed on the accompanyingExhibit Index immediately following the financial statements contained in this annual report on Form 10-K.(b) Exhibits. See Item 15(a)(3) above.(c) Financial Statement Schedules. See Item 15(a)(2) above.ITEM 16. FORM 10-K SUMMARYNot applicable.68Table of ContentsALIMERA SCIENCES, INC.INDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm70Consolidated Financial Statements as of December 31, 2018 and 2017 and for the years ended December 31, 2018 and 2017: Consolidated Balance Sheets72Consolidated Statements of Operations73Consolidated Statements of Comprehensive Loss74Consolidated Statements of Changes in Stockholders’ Equity75Consolidated Statements of Cash Flows76Notes to Consolidated Financial Statements7769Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersAlimera Sciences, Inc.Opinion on the financial statementsWe have audited the accompanying consolidated balance sheets of Alimera Sciences,Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31,2018 and 2017, the related consolidated statements of operations, comprehensive loss,changes in stockholders’ equity, and cash flows for each of the two years in the periodended December 31, 2018, and the related notes (collectively referred to as the“financial statements”). In our opinion, the financial statements present fairly, in allmaterial respects, the financial position of the Company as of December 31, 2018 and2017, and the results of their operations and their cash flows for each of the two yearsin the period ended December 31, 2018, in conformity with accounting principlesgenerally accepted in the United States of America.We also have audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States) (“PCAOB”), the Company’s internal controlover financial reporting as of December 31, 2018, based on criteria established in the2013 Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (“COSO”), and our report dated February25, 2019 expressed an unqualified opinion.Going concernThe accompanying consolidated financial statements have been prepared assumingthe Company will continue as a going concern. As discussed in Note 4 to theconsolidated financial statements, the Company has incurred recurring losses, negativecash flows from operations, and has an accumulated deficit of $377,127,000 as ofDecember 31, 2018. These conditions, along with the other matters as set forth in Note4, raise substantial doubt about the Company’s ability to continue as a going concern.Management’s plans in regard to these matters are also described in Note 4. Theconsolidated financial statements do not include any adjustments that might result fromthe outcome of this uncertainty.Basis for opinionThese financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on the Company’s financial statements based onour audits. We are a public accounting firm registered with the PCAOB and are requiredto be independent with respect to the Company in accordance with the U.S. federalsecurities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.70Table of ContentsWe conducted our audits in accordance with the standards of the PCAOB. Thosestandards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement, whether dueto error or fraud. Our audits included performing procedures to assess the risks ofmaterial misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures includedexamining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide areasonable basis for our opinion./s/ GRANT THORNTON LLPWe have served as the Company’s auditor since 2012.Atlanta, GeorgiaFebruary 25, 201971Table of ContentsALIMERA SCIENCES, INC.CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2018 AND 2017 December 31, 2018 2017 (In thousands, except share and per share data)CURRENT ASSETS: Cash and cash equivalents$13,043 $24,067Restricted cash32 34Accounts receivable, net17,259 11,435Prepaid expenses and other current assets2,109 2,278Inventory (Note 5)2,405 1,508Total current assets34,848 39,322NON-CURRENT ASSETS: Property and equipment, net1,355 1,410Intangible asset, net16,723 18,664Deferred tax asset1,182 528TOTAL ASSETS$54,108 $59,924CURRENT LIABILITIES: Accounts payable$6,355 $5,905Accrued expenses (Note 8)3,643 3,582Capital lease obligations236 184Total current liabilities10,234 9,671NON-CURRENT LIABILITIES: Note payable (Note 10)37,873 34,365Capital lease obligations — less current portion305 203Other non-current liabilities2,974 766COMMITMENTS AND CONTINGENCIES (Note 11) STOCKHOLDERS’ EQUITY: Preferred stock, $.01 par value — 10,000,000 shares authorized at December 31, 2018 and 2017: Series A Convertible Preferred Stock, 1,300,000 authorized and 600,000 issued and outstanding atDecember 31, 2018 and 2017; liquidation preference of $24,000 at December 31, 2018 and 201719,227 19,227Series B Convertible Preferred Stock, 0 authorized and outstanding at December 31, 2018; 8,417authorized and 8,416.251 issued and outstanding at December 31, 2017; liquidation preference of $0and $50,750 at December 31, 2018 and 2017, respectively— 49,568Series C Convertible Preferred Stock, 10,150 authorized issued and outstanding at December 31, 2018;0 authorized and outstanding at December 31, 2017; liquidation preference of $10,150 and $0 atDecember 31, 2018 and 2017, respectively11,117 —Common stock, $.01 par value — 150,000,000 shares authorized, 70,078,878 shares issued andoutstanding at December 31, 2018 and 69,146,381 shares issued and outstanding at December 31, 2017701 691Additional paid-in capital346,108 341,622Common stock warrants3,707 3,707Accumulated deficit(377,127) (399,075)Accumulated other comprehensive loss — foreign currency translation adjustments(1,011) (821)TOTAL STOCKHOLDERS’ EQUITY2,722 14,919TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$54,108 $59,924See Notes to Consolidated Financial Statements.72Table of ContentsALIMERA SCIENCES, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 Years Ended December 31, 2018 2017 (In thousands, except share and per share data)NET REVENUE$46,970 $35,912COST OF GOODS SOLD, EXCLUDING DEPRECIATION AND AMORTIZATION(4,679) (3,438)GROSS PROFIT42,291 32,474 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRS EXPENSES11,274 12,844GENERAL AND ADMINISTRATIVE EXPENSES14,525 13,039SALES AND MARKETING EXPENSES23,517 23,210DEPRECIATION AND AMORTIZATION2,645 2,684RECOVERABLE COLLABORATION COSTS— (2,851)OPERATING EXPENSES51,961 48,926NET LOSS FROM OPERATIONS(9,670) (16,452) INTEREST EXPENSE AND OTHER(4,775) (5,579)UNREALIZED FOREIGN CURRENCY (LOSS) GAIN, NET(65) 5LOSS ON EARLY EXTINGUISHMENT OF DEBT(1,766) —CHANGE IN FAIR VALUE OF DERIVATIVE WARRANT LIABILITY— 188NET LOSS BEFORE TAXES(16,276) (21,838)PROVISION FOR TAXES(106) (163)NET LOSS(16,382) (22,001)GAIN ON EXTINGUISHMENT OF PREFERRED STOCK38,330 $—NET INCOME (LOSS) AVAILABLE TO STOCKHOLDERS$21,948 $(22,001)NET INCOME (LOSS) PER SHARE — Basic$0.25 $(0.33)WEIGHTED AVERAGE SHARES OUTSTANDING — Basic88,002,208 66,993,649NET INCOME (LOSS) PER SHARE — Diluted$0.25 $(0.33)WEIGHTED AVERAGE SHARES OUTSTANDING — Diluted88,737,788 66,993,649See Notes to Consolidated Financial Statements.73Table of ContentsALIMERA SCIENCES, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 Years Ended December 31, 2018 2017 (In thousands)NET LOSS$(16,382) $(22,001) OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation adjustments(190) 451TOTAL OTHER COMPREHENSIVE (LOSS) INCOME(190) 451COMPREHENSIVE LOSS$(16,572) $(21,550)See Notes to Consolidated Financial Statements.74Table of ContentsALIMERA SCIENCES, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 Common Stock Series AConvertiblePreferred Stock Series BConvertiblePreferred Stock Series CConvertiblePreferred Stock AdditionalPaid-InCapital CommonStockWarrants AccumulatedDeficit AccumulatedOtherComprehensiveLoss Total Shares Amount Shares Amount Shares Amount Shares Amount (In thousands, except share data)BALANCE —December 31,201664,862,904 $649 600,000 $19,227 8,416 $49,568 — $— $330,781 $3,707 $(377,074) $(1,272) $25,586Issuance ofcommonstock, net ofissuance costs4,282,748 42 — — — — — — 5,859 — — — 5,901Exercise ofstock options729 — — — — — — — 1 — — — 1Stock-basedcompensation— — — — — — — — 4,981 — — — 4,981Net loss— — — — — — — — — — (22,001) — (22,001)Foreigncurrencytranslationadjustments— — — — — — — — — — — 451 451BALANCE —December 31,201769,146,381 $691 600,000 $19,227 8,416 $49,568 — $— $341,622 $3,707 $(399,075) $(821) $14,919Issuance ofcommonstock, net ofissuance costs930,934 10 — — — — — — 73 — — — 83Exercise ofstock options1,563 — — — — — — — 2 — — — 2Preferredstockexchange, netof transactioncosts (Note12)— — — — (8,416) (49,568) 10,150 11,117 — — 38,330 — (121)Stock-basedcompensation— — — — — — — — 4,411 — — — 4,411Net loss— — — — — — — — — — (16,382) — (16,382)Foreigncurrencytranslationadjustments— — — — — — — — — — — (190) (190)BALANCE —December 31,201870,078,878 $701 600,000 $19,227 — $— 10,150 $11,117 $346,108 $3,707 $(377,127) $(1,011) $2,722See Notes to Consolidated Financial Statements.75Table of ContentsALIMERA SCIENCES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 Years Ended December 31, 2018 2017 (In thousands)CASH FLOWS FROM OPERATING ACTIVITIES: Net loss$(16,382) $(22,001)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization2,645 2,684Unrealized foreign currency transaction loss65 (5)Amortization of debt discount842 1,416Deferred taxes (benefit)(653) (92)Loss on early extinguishment of debt1,766 —Stock compensation expense4,411 4,981Change in fair value of derivative warrant liability— (188)Changes in assets and liabilities: Accounts receivable(5,995) 2,610Prepaid expenses and other current assets129 (67)Inventory(933) (1,018)Accounts payable556 644Accrued expenses and other current liabilities1,547 (271)Other long-term liabilities449 (1,567)Net cash used in operating activities(11,553) (12,874)CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment(175) (238)Net cash used in investing activities(175) (238)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options2 1Proceeds from sale of common stock83 6,084Payment of issuance cost of common stock— (183)Issuance of debt40,000 —Payment of principal on notes payable(35,000) Payment of extinguishment of debt costs(2,544) —Payment of deferred financing costs(1,142) —Payment of preferred stock exchange costs(122) —Payments on capital lease obligations(327) (182)Net cash provided by financing activities950 5,720EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH(248) 483NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH(11,026) (6,909)CASH AND CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of year24,101 31,010CASH AND CASH EQUIVALENTS AND RESTRICTED CASH — End of year$13,075 $24,101SUPPLEMENTAL DISCLOSURES: Cash paid for interest$3,571 $4,117Cash paid for income taxes$239 $74Supplemental schedule of noncash investing and financing activities: Property and equipment acquired under capital leases$575 $282The Company paid no dividends during the years ended December 31, 2018 and 2017.See Notes to Consolidated Financial Statements.76Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1.NATURE OF OPERATIONSAlimera Sciences, Inc., together with its wholly-owned subsidiaries (the Company), is a pharmaceutical company that specializes in thecommercialization, research and development of ophthalmic pharmaceuticals. The Company was formed on June 4, 2003 under the laws of the State ofDelaware.The Company is presently focused on diseases affecting the back of the eye, or retina, because the Company’s management believes these diseases arenot well treated with current therapies and represent a significant market opportunity. The Company’s only commercial product is ILUVIEN®, which hasreceived marketing authorization in the United States (U.S.), Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Ireland,Italy, Lebanon, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, the United Arab Emirates and the United Kingdom. In the U.S.,Canada, Lebanon and the United Arab Emirates, ILUVIEN is indicated for the treatment of diabetic macular edema (DME) in patients who have beenpreviously treated with a course of corticosteroids and did not have a clinically significant rise in intraocular pressure (IOP). In the European Economic Area(EEA) countries in which ILUVIEN has received marketing authorization, it is indicated for the treatment of vision impairment associated with DMEconsidered insufficiently responsive to available therapies.As part of the approval process in Europe, the Company committed to conduct a five-year, post-authorization, open label registry study in 800 patientstreated with ILUVIEN. Due to its post market safety surveillance not showing any unexpected safety signals, the Company requested and received approvalto modify its protocol to cap enrollment in the study. Enrollment was completed with 562 patients enrolled in this study. The Company anticipates this studyto be completed in early 2020.The Company commercially markets ILUVIEN in the U.S., Germany, the United Kingdom, Portugal, Austria and Ireland.In addition, the Company has entered into various agreements under which distributors provide or will provide regulatory, reimbursement or sales andmarketing support for ILUVIEN in France, Italy, Spain, Australia, New Zealand, Canada and several countries in the Middle East. In 2016, the Company’sMiddle East distributor launched ILUVIEN and initiated named patient sales in the United Arab Emirates. The Company’s Italian distributor launchedILUVIEN in Italy in 2017. The Company’s Spanish distributor began selling on a named patient basis in 2017 and is currently pursuing reimbursement at thenational level. The Company’s French and Canadian distributors are currently pursuing reimbursement in their respective countries. As of December 31,2018, the Company has recognized sales of ILUVIEN to the Company’s international distributors in the Middle East, France, Italy and Spain.In July 2017, the Company amended its license with EyePoint Pharmaceuticals US, Inc. (EyePoint), formerly known as pSivida US, Inc., for thetechnology underlying ILUVIEN to include the treatment of uveitis, including non-infectious posterior uveitis (NIPU) in Europe, the Middle East and Africa(Note 9). Uveitis is an inflammatory disease of the uveal tract, which is comprised of the iris, ciliary body and choroid, that can lead to severe vision loss andblindness. In December 2017, the Company filed an application for a new indication for ILUVIEN for NIPU in the 17 EEA countries where ILUVIEN iscurrently approved for the treatment of DME. The regulatory authorities requested additional follow-up data from the clinical trials to support theapplication. The Company submitted this additional follow-up data in October 2018. The Company expects to obtain approval of its application for NIPU inthe first half of 2019, although the Company can provide no assurances that it can do so.77Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUse of Estimates in Financial StatementsThe financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and, as such,include amounts based on informed estimates and judgments of management. Actual results could differ from those estimates.Principles of ConsolidationThe consolidated financial statements include the accounts of Alimera Sciences, Inc. and its wholly-owned subsidiaries. All significant inter-companybalances have been eliminated in consolidation.Cash, Cash Equivalents and Restricted CashCash equivalents include highly liquid investments that are readily convertible into cash and have a maturity of 90 days or less when purchased.Generally, cash and cash equivalents held at financial institutions are in excess of federally insured limits. Cash and cash equivalents were $13,043,000 and$24,067,000 as of December 31, 2018 and 2017, respectively, with approximately 82.0% and 93.0% of these balances, respectively held in U.S.-basedfinancial institutions.Product RevenueSee Note 3 for expanded disclosures regarding the Company’s revenues and how the Company accounts for revenue.Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are generated through sales primarily to major pharmaceutical distributors, pharmacies, hospitals and wholesalers. The Companydoes not require collateral from its customers for accounts receivable. The carrying amount of accounts receivable is reduced by an allowance for doubtfulaccounts that reflects management’s best estimate of the amounts that will not be collected. In addition to reviewing delinquent accounts receivable,management considers many factors in estimating its general allowance, including historical data, experience, customer types, credit worthiness andeconomic trends. From time to time, management may adjust its assumptions for anticipated changes in any of those or other factors expected to affectcollectability. A provision for doubtful accounts is charged to operations when management determines the accounts may become uncollectable. TheCompany writes off accounts receivable when management determines they are uncollectable and credits payments subsequently received on suchreceivables to bad debt expense in the period received. As of December 31, 2018 and 2017, the Company had no reserve for doubtful accounts.InventoryInventories are stated at the lower of cost or net realizable value with cost determined under the first in, first out (FIFO) method. Included in inventorycosts are component parts, work-in-progress and finished goods. The Company relies on third party manufacturers for the production of all inventory anddoes not capitalize any internal costs. The Company periodically reviews inventories for excess, obsolete or expiring inventory and writes down obsolete orotherwise unmarketable inventory to its estimated net realizable value.Intangible AssetsThe cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, which approximates astraight-line basis, over the estimated periods benefited. The Company estimated the useful life of its intangible asset at approximately thirteen years (seeNote 7).Property and EquipmentProperty and equipment are stated at cost. Additions and improvements are capitalized while repairs and maintenance are expensed. Depreciation isprovided on the straight-line method over the useful life of the related assets beginning when the asset is placed in service. The estimated useful lives of theindividual assets are as follows: furniture, fixtures and manufacturing equipment, five years; automobiles, three years or the related lease life; software andinformation technology hardware, three years; and office equipment and leasehold improvements are amortized over the shorter of their estimated useful livesor the related lease life.78Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)ImpairmentProperty and equipment and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. When indicators of impairment are present, the Company evaluates the carrying amount of such assets inrelation to the operating performance and future estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered tobe impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Theassessment of the recoverability of assets will be impacted if estimated future operating cash flows are not achieved.Income TaxesThe Company provides for income taxes based on pretax income and applicable tax rates available in the various jurisdictions in which it operates.Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in theapplication of accounting principles and complex tax laws. Deferred income taxes are recorded for the expected tax consequences of temporary differencesbetween the bases of assets and liabilities, as well as for loss and tax credit carryforwards for financial reporting purposes and amounts recognized for incometax purposes. A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount of future tax benefit that is more likely than not tobe realized.The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained uponexamination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements for aparticular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (UTBs) is adjustedas appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxingauthorities, new information obtained during a tax examination, or resolution of an examination. The Company recognizes both accrued interest andpenalties, where appropriate, related to UTBs in income tax expense.Research and Development CostsResearch and development costs are expensed as incurred. Research and development expenses were $1,096,000 and $4,216,000 for 2018 and 2017,respectively. During 2017, the Company expensed $2,851,000 of in-process Research and Development Expense in connection with the New CollaborationAgreement (see Note 9).Stock-Based CompensationThe Company has stock-based compensation plans under which various types of equity-based awards are granted, including restricted stock units(RSUs) and stock options. The fair values of RSUs and stock option awards, which are subject only to service conditions with graded vesting, are recognizedas compensation expense, generally on a straight-line basis over a service period, net of estimated forfeitures.Compensation expense is recognized for all share-based awards based on the grant date fair value in accordance with the provisions of the FinancialAccounting Standards Board (FASB) Accounting Standard Codification (ASC) 718, Compensation — Stock Compensation. The fair values for the optionsare estimated at the dates of grant using a Black-Scholes option-pricing model.Additionally, the Company sponsors an employee stock purchase plan (ESPP) under which U.S.-based employees may elect payroll withholdings tofund purchases of the Company’s stock at a discount. The Company estimates the fair value of the option to purchase shares of the Company’s common stockusing the Black-Scholes valuation model and recognizes compensation expense in accordance with the provisions of ASC 718-50, Employee Share PurchasePlans.79Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Derivative Financial InstrumentsThe Company generally does not use derivative instruments to hedge exposures to cash flow or market risks. However, certain warrants to purchaseSeries A Convertible Preferred Stock or common stock that did not meet the requirements for classification as equity, in accordance with the Derivatives andHedging Topic of the ASC, were classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when theterms of the underlying contracts do not provide for a net-cash settlement. These warrants were considered derivative instruments at issuance because thewarrant agreements (a) provided for settlement in Series A Convertible Preferred Shares or common shares at the option of the holder; (b) provided for futureadjustment to the warrant exercise price for common shares; and (c) contained anti-dilution provisions whereby the number of shares for which the warrantswere exercisable and/or the exercise price of the warrants were subject to change in the event of certain issuances of stock at prices below the then-effectiveexercise price of the warrants. Because the rights to exercise these warrants expired on October 1, 2017, the warrant exercise price no longer can be adjusted.The primary underlying risk exposure pertaining to the warrants was the change in fair value of the underlying common stock.Fair Value of Financial InstrumentsThe carrying amounts of the Company’s financial instruments, including cash and cash equivalents and current assets and liabilities approximate theirfair value because of their short maturities. The weighted average interest rate of the Company’s notes payable approximates the rate at which the Companycould obtain alternative financing; therefore, the carrying amount of the note approximates the fair value. The Company uses the Black-Scholes optionpricing model and assumptions that consider, among other variables, the fair value of the underlying stock, risk-free interest rate, volatility, expected life anddividend rates in estimating fair value for the warrants considered to be derivative instruments.Foreign Currency TranslationThe net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S.dollars using applicable exchange rates. The U.S. dollar effects that arise from translating net assets of these subsidiaries at changing rates are recognized inaccumulated other comprehensive loss and is the only adjustment recognized in accumulated other comprehensive loss. The earnings of these subsidiariesare translated into U.S. dollars using average exchange rates.80Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Earnings Per Share (EPS)The Company follows ASC 260, Earnings Per Share (ASC 260), which requires the reporting of both basic and diluted earnings per share. Because theCompany’s preferred stockholders participate in dividends equally with common stockholders (if the Company were to declare and pay dividends), theCompany uses the two-class method to calculate EPS. Basic EPS is computed by dividing net income (loss) available to stockholders by the weightedaverage number shares outstanding for the period. Diluted EPS is calculated in accordance with ASC 260 by adjusting weighted average shares outstandingfor the dilutive effect of common stock options, restricted stock units and warrants.The Company had net income available to stockholders for 2018 due to the gain on extinguishment of preferred stock (Note 12).Basic and diluted earnings per share attributable to common and participating shares of common stock for 2018 and 2017 were as follows: Years Ended December 31, 2018 2017 (In thousands, except share and per share data)Net income (loss) available to stockholders$21,948 $(22,001)Allocation of undistributed earnings (loss): Earnings (loss) attributable to common stock$17,459 $(22,001)Earnings attributable to participating securities$4,489 $— Basic shares: Weighted average common shares70,002,901 66,993,649Weighted average participating shares17,999,307 —Total basic weighted average shares88,002,208 66,993,649 Diluted shares: Weighted average common shares70,002,901 66,993,649Dilutive weighted average shares735,580 —Total dilutive weighted common shares70,738,481 66,993,649Weighted average participating shares17,999,307 —Total dilutive weighted average shares88,737,788 66,993,649 Basic EPS$0.25 $(0.33)Diluted EPS$0.25 $(0.33)Common stock equivalent securities that would potentially dilute basic EPS in the future, but were not included in the computation of diluted EPSbecause they were either classified as participating or would have been anti-dilutive, were as follows: Years Ended December 31, 2018 2017Series A convertible preferred stock— 9,022,556Series B convertible preferred stock— 8,416,251Common stock warrants1,795,663 1,795,663Stock options12,447,355 11,595,510Restricted stock units— 839,285Total14,243,018 31,669,26581Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Reporting SegmentsThe Company determines segments in accordance with its internal operating structure. The Company’s chief operating decision maker is the ChiefExecutive Officer (CEO). While the CEO is apprised of a variety of financial metrics and information, the business is principally managed and organizedbased upon geographic and regulatory environment. Each segment is separately managed and is evaluated primarily on net loss from operations adjusted forcertain non-cash items, such as stock-based compensation expense and depreciation and amortization. The Company does not report balance sheetinformation by segment because it is not reviewed by the Company’s chief operating decision maker. The Company has three reportable segments, U.S.,International and Other. See Note 18.Adoption of New Accounting StandardsIn May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts withCustomers (Topic 606), which amends the guidance for the recognition of revenue from contracts with customers to transfer goods and services. The FASBsubsequently issued an additional, clarifying ASU to address issues arising from implementation of the new revenue recognition standard, which becameeffective for interim and annual periods beginning on January 1, 2018. The new standard was required to be adopted using either a full-retrospective or amodified-retrospective approach. The Company adopted the new revenue guidance on January 1, 2018 using the modified-retrospective approach. TheCompany elected the practical expedient to apply the new revenue standard only to contracts that were not completed as of January 1, 2018.Adoption did not have a material impact on the Company’s financial statements on an ongoing basis. See Note 3 for additional information regardingthe Company’s revenues and how the company accounts for revenue.In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230). ASU 2016-15 is intended toadd or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows and to eliminate the diversity in practicerelated to such classifications. The standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted. TheCompany adopted this standard effective January 1, 2018, and the adoption of this guidance did not have a material impact on the Company’s financialstatements.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash. ASU 2016-18 requires a statement of cashflows to explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cashequivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents whenreconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for interim and annualreporting periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018, and theadoption of this guidance did not have a material impact on the Company’s financial statements. The Company’s condensed consolidated statement of cashflows for the year ended December 31, 2017 has been reclassified for this ASU.In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope Modification Accounting. The newstandard clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. This standard becameeffective on January 1, 2018, and the Company adopted it on that date. The adoption of this guidance did not have a material impact on the Company’sfinancial statements.Accounting Standards Issued but Not Yet EffectiveIn February 2016, the FASB issued ASU 2016-02, Leases (ASC 842), to increase transparency and comparability among organizations for leaserecognition and disclosure. ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet, while recognizing expenses onthe income statements in a manner similar to current guidance. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, includinginterim periods within those fiscal years, with early adoption permitted. The Company did not early adopt this standard and therefore the standard will beeffective for the Company in the first quarter of 2019. ASU 2016-02 requires that leases be recognized and measured as of the earliest period presented, usinga modified retrospective approach, with all periods presented being adjusted and presented under the new standard. In July 2018, the FASB issued ASU 2018-11, Leases (ASC 842): Targeted Improvements, which provides companies an optional adoption method to ASU 2016-02 whereby a company does not haveto adjust comparative period financial statements for the new standard.82Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The Company will adopt this ASU on January 1, 2019 and will not restate comparative periods. The Company is substantially complete with itsimplementation plan. The Company plans to elect the transition package of three practical expedients permitted within the standard. In accordance with thepackage of practical expedients, the Company will not reassess initial direct costs, lease classification, or whether its contracts contain or are leases. TheCompany also made an accounting policy election to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less, unless theleases include options to renew or purchase the underlying asset that are reasonably certain to be exercised.Based on the Company’s lease portfolio as of December 31, 2018, the Company plans to recognize an operating lease liability and related right-of-useasset on our balance sheet of approximately $1,250,000, which represents the present value of our future minimum lease payments related to operating leases,primarily related to leases of real estate. The Company expects the deferred tax impacts of the adjustment to be nominal.In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, to allowreclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Uponadoption of the ASU, entities will be required to describe the accounting policy for releasing income tax effects from accumulated other comprehensiveincome. The standard is required to be adopted for periods beginning after December 15, 2018, with early adoption available. The Company will adopt thisstandard effective January 1, 2019, and the Company does not believe the adoption of this standard will have a material impact on the Company’s financialstatements.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit losses (Topic 326): Measurement of Credit Losses on FinancialInstruments. This ASU replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology thatreflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, todevelop credit loss estimates. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annualperiods, with early adoption available. The Company has implemented process controls and systems to ensure compliance with this standard. The Companyis in the process of determining the effect that the adoption will have on its financial statements.In June 2018, the FASB issued ASU No. 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting, whichamends the existing accounting standards for share-based payments to nonemployees. This ASU aligns much of the guidance on measuring and classifyingnonemployee awards with that of awards to employees. Under the new guidance, the measurement of nonemployee equity awards is fixed on the grant date.Entities will apply the ASU by recognizing a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption. TheCompany will adopt this standard effective January 1, 2019, and the Company does not believe the adoption of this standard will have a material impact onthe Company’s financial statements.83Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)3. REVENUE RECOGNITIONNet RevenueThe Company sells its products to major pharmaceutical distributors, pharmacies, hospitals and wholesalers (collectively, its Customers). In addition todistribution agreements with Customers, the Company enters into arrangements with healthcare providers and payors that provide for government-mandatedand/or privately-negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products. All of the Company’s currentcontracts have a single performance obligation, as the promise to transfer the individual goods is not separately identifiable from other promises in thecontracts and is, therefore, not distinct.Currently, all of the Company’s revenue is derived from product sales. The Company recognizes revenues from product sales at a point in time whenthe Customer obtains control, typically upon delivery. The Company accrues for fulfillment costs when the related revenue is recognized. Taxes collectedfrom Customers relating to product sales and remitted to governmental authorities are excluded from revenues.As of December 31, 2018 and 2017, the Company had received a total of $1,000,000 and $500,000, respectively, of payments that it has notrecognized as revenue based on the Company’s analysis in connection with Topic 606. These deferred revenues are included as a component of other non-current liabilities on the Company’s balance sheets.Estimates of Variable ConsiderationRevenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for reservesrelated to statutory rebates to State Medicaid and other government agencies; commercial rebates and fees to Managed Care Organizations (MCOs), GroupPurchasing Organizations (GPOs), distributors, and specialty pharmacies; product returns; sales discounts (including trade discounts); distributor costs;wholesaler chargebacks; and allowances for patient assistance programs relating to the Company’s sales of its products.These reserves are based on estimates of the amounts earned or to be claimed on the related sales. Management’s estimates take into considerationhistorical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and Customer buying andpayment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of thecontract. The amount of variable consideration included in the net sales price is limited to the amount that is probable not to result in a significant reversal inthe amount of the cumulative revenue recognized in a future period. If actual results vary, the Company may adjust these estimates, which could have aneffect on earnings in the period of adjustment.Consideration Payable to CustomersDistribution service fees are payments issued to distributors for compliance with various contractually-defined inventory management practices orservices provided to support patient access to a product. Distribution service fees reserves are based on the terms of each individual contract and are classifiedwithin accrued expenses and are recorded as a reduction of revenue.Product ReturnsThe Company’s policies provide for product returns in the following circumstances: (a) expiration of shelf life on certain products; (b) productdamaged while in the Customer’s possession; and (c) following product recalls. Generally, returns for expired product are accepted three months before andup to one year after the expiration date of the related product, and the related product is destroyed after it is returned. The Company may either refund thesales price paid by the Customer by issuance of a credit, or exchange the returned product with replacement inventory. The Company typically does notprovide cash refunds. The Company estimates the proportion of recorded revenue that will result in a return by considering relevant factors, includinghistorical returns experience, the estimated level of inventory in the distribution channel, the shelf life of products and product recalls, if any.The estimation process for product returns involves, in each case, a number of interrelating assumptions, which vary for each Customer. The Companyestimates the amount of its product sales that may be returned by its Customers and records this estimate as a reduction of revenue from product sales in theperiod the related revenue is recognized, and because this returned product cannot be resold, there is no corresponding asset for product returns. To date,product returns have been minimal.84Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Other RevenueThe Company enters into agreements in which it licenses certain rights to its products to partner companies that act as distributors. The terms of thesearrangements may include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory andcommercial milestone payments; payments for manufacturing supply services the Company provides; and a revenue share on net sales of licensed products.Each of these payments is recognized as other revenues.As part of the accounting for these arrangements, the Company must develop estimates that require judgment to determine the stand-alone selling pricefor each performance obligation identified in the contract. Performance obligations are promises in a contract to transfer a distinct good or service to theCustomer, and the Company recognizes revenue when, or as, performance obligations are satisfied. The Company uses key assumptions to determine thestand-alone selling price; these assumptions may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount ratesand probabilities of technical, regulatory and commercial success.Certain of these agreements include consideration in the form of milestone payments. At the inception of each arrangement that includes milestonepayments, the Company evaluates the recognition of milestone payments. Typically, milestone payments are associated with events that are not entirelywithin the control of the Company or the licensee, such as regulatory approvals; are included in the transaction price; and are subject to a constraint until it isprobable that there will not be a significant revenue reversal, typically upon achievement of the milestone. At the end of each reporting period, the Companyre-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts its estimate of the overall transactionprice.Customer Payment ObligationsThe Company receives payments from its Customers based on billing schedules established in each contract, which vary across the Company’slocations, but generally range between 30 to 120 days. Occasionally, the timing of receipt of payment for the Company’s international Customers can beextended. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether acontract has a significant financing component if the expectation is that the Customer will pay for the product or services in one year or less of receivingthose products or services.85Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)4. GOING CONCERNThe accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets andthe satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might result fromthe outcome of this uncertainty.To date the Company has incurred recurring losses, negative cash flow from operations and has accumulated a deficit of $377,127,000 from theCompany’s inception through December 31, 2018. As of December 31, 2018, the Company had approximately $13,043,000 in cash and cash equivalents.The Company’s ability to achieve profitability and positive cash flow depends on its ability to increase revenue and contain its expenses.Further, the Company must maintain compliance with the debt covenants of its $40,000,000 Loan and Security Agreement dated January 5, 2018 withSolar Capital Ltd. as Collateral Agent, and the parties signing the 2018 Loan Agreement from time to time as Lenders, including Solar Capital in its capacityas a Lender (see Note 10). In management’s opinion, the uncertainty regarding future revenues raises substantial doubt about the Company’s ability tocontinue as a going concern without access to additional debt and/or equity financing, over the course of the next twelve months.To meet the Company’s future working capital needs, the Company may need to raise additional debt or equity financing. While the Company hashistorically been able to raise additional capital through issuance of equity and/or debt financing, and while the Company has implemented a plan to controlits expenses in order to satisfy its obligations due within one year from the date of issuance of these financial statements, the Company cannot guarantee thatit will be able to maintain debt compliance, raise additional equity, contain expenses, or increase revenue. Accordingly, there is substantial doubt about theCompany’s ability to continue as a going concern within one year after these financial statements are issued.86Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)5. INVENTORYInventory consisted of the following: December 31, 2018 2017 (In thousands)Component parts (1)$129 $404Work-in-process (2)924 587Finished goods1,352 517Total inventory2,405 1,508(1) Component parts inventory consisted of manufactured components of the ILUVIEN applicator.(2) Work-in-process consisted of completed units of ILUVIEN that are undergoing, but have not completed, quality assurance testing as required by U.S. orEEA regulatory authorities.6. PROPERTY AND EQUIPMENTProperty and equipment consisted of the following: December 31, 2018 2017 (In thousands)Furniture and fixtures$392 $392Office equipment869 864Automobiles870 663Software1,275 1,122Leasehold improvements474 482Manufacturing equipment1,087 1,088Total property and equipment4,967 4,611Less accumulated depreciation and amortization(3,612) (3,201)Property and equipment — net$1,355 $1,410Depreciation and amortization expense associated with property and equipment totaled $705,000 and $744,000 for the years ended December 31, 2018and 2017, respectively.87Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)7. INTANGIBLE ASSETAs a result of the U.S. Food and Drug Administration’s (FDA) approval of ILUVIEN in September 2014, the Company was required to pay EyePoint amilestone payment of $25,000,000 (the EyePoint Milestone Payment) in October 2014 (see Note 9).The gross carrying amount of the intangible asset is $25,000,000, which is being amortized over approximately 13 years from the acquisition date. Thenet book value of the intangible asset was $16,723,000 and $18,664,000 as of December 31, 2018 and 2017, respectively, and amortization expense was$1,940,000 for both the years ended December 31, 2018 and 2017, respectively.The estimated remaining amortization as of December 31, 2018 is as follows (in thousands):Years Ending December 31 2019$1,94020201,94620211,94020221,94020231,940Thereafter7,017Total$16,7238. ACCRUED EXPENSESAccrued expenses consisted of the following: December 31, 2018 2017 (In thousands)Accrued clinical investigator expenses$781 $696Accrued compensation expenses1,427 511Accrued rebate, chargeback and other revenue reserves346 305Accrued End of Term Payment (see Note 10)— 1,400Other accrued expenses1,089 670Total accrued expenses$3,643 $3,58288Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)9. LICENSE AGREEMENTSEyePoint AgreementIn February 2005, the Company entered into an agreement with EyePoint (formerly known as pSivida US, Inc.) for the use of fluocinolone acetonide(FAc) in EyePoint’s proprietary insert technology. This agreement was subsequently amended a number of times (as amended, the EyePoint Agreement). TheEyePoint Agreement provides the Company with a worldwide exclusive license to utilize certain underlying technology used in the development andcommercialization of ILUVIEN.2008 Amended and Restated Collaboration AgreementPursuant to the payment terms of the 2008 Amended and Restated Agreement (the 2008 Agreement), the Company was required to share with EyePoint20% of the net profits of ILUVIEN, determined on a cash basis, and 33% of any lump sum milestone payments received from a sub-licensee of ILUVIEN. Inconnection with this Agreement, the Company was entitled to recover out of EyePoint’s share of the net profits of ILUVIEN, 20% of ILUVIEN’scommercialization costs (as defined in the EyePoint Agreement) that were incurred prior to product profitability. (The Company’s future rights to recoverthese amounts from EyePoint are referred to as the Future Offset.) In connection with the New Collaboration Agreement discussed below, the Future Offsetwas further amended.New Collaboration Agreement - Second Amended and Restated Collaboration AgreementOn July 10, 2017, the Company and EyePoint entered into a Second Amended and Restated Collaboration Agreement (the New CollaborationAgreement), which amends and restates the EyePoint Agreement.Prior to entering into the New Collaboration Agreement, the Company held the worldwide license from EyePoint for the use of EyePoint’s proprietaryinsert technology for the treatment of all ocular diseases other than uveitis. The New Collaboration Agreement expands the license to include uveitis,including NIPU, in Europe, the Middle East and Africa and also allows the Company to pursue an indication for posterior uveitis for ILUVIEN in thoseterritories.The New Collaboration Agreement converted the Company’s obligation to share 20% of its net profits to a royalty payable on global net revenues ofILUVIEN. The Company began paying a 2% royalty on net revenues and other related consideration to EyePoint on July 1, 2017. This royalty amountincreased to 6% effective December 12, 2018. Pursuant to the New Collaboration Agreement the Company is required to pay an additional 2% royalty onglobal net revenues and other related consideration in excess of $75,000,000 in any year. During 2018, the Company recognized approximately $998,000 ofroyalty expense, which is included in cost of goods sold, excluding depreciation and amortization. As of December 31, 2018, approximately $428,000 of thisroyalty expense was included in the Company’s accounts payable. During 2017, the Company recognized approximately $621,000 of royalty and profitshare expense.In connection with the New Collaboration Agreement, the Company and EyePoint first agreed to cap the Future Offset amount at $25,000,000 as ofJune 30, 2017 and the Company agreed to forgive $10,000,000 of the total $25,000,000 of the Future Offset at the July 10, 2017 amendment date. Followingthe signing of the New Collaboration Agreement, the Company retains a right to recover up to $15,000,000 of the Future Offset. Due to the uncertainty offuture net profits, the Company has fully reserved the Future Offset in these financial statements. As of December 31, 2018, the balance of the Future Offsetwas approximately $14,937,000. The Company will be able to recover this as a reduction of future royalties as follows:•In the first two years following the increase in royalty amount to 6%, the royalty will be reduced to 4% for net revenues and other relatedconsideration up to $75,000,000 annually and 5% for net revenues and other related consideration in excess of $75,000,000 on an annualbasis; and•Beginning with the third year following the increase in royalty amount to 6%, the royalty will be reduced to approximately 5.2% for netrevenues and other related consideration up to $75,000,000 annually and to approximately 6.8% for net revenues and other relatedconsideration in excess of $75,000,000 on an annual basis.The Company will forgive up to $5,000,000 of the remaining $15,000,000 of Future Offsets upon the earlier of the approval of ILUVIEN for posterioruveitis in any EU country or January 1, 2020, unless certain conditions under the New Collaboration Agreement are not met. The Company expects that itwill obtain approval of its application for NIPU in the first half of 2019. If the amounts recoverable by the Company associated with the Future Offsets are lessthan $5,000,000 at that time, the Company will pay EyePoint the difference in cash.The Company valued the New Collaboration Agreement utilizing a present value analysis at approximately $2,851,000.89Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Possible Reversion of the Company’s License Rights to EyePointThe Company’s license rights to EyePoint’s proprietary delivery device could revert to EyePoint if the Company were to:(i)fail twice to cure its breach of an obligation to make certain payments to EyePoint following receipt of written notice thereof;(ii)fail to cure other breaches of material terms of the EyePoint Agreement within 30 days after notice of such breaches or such longer period (up to90 days) as may be reasonably necessary if the breach cannot be cured within such 30-day period;(iii)file for protection under the bankruptcy laws, make an assignment for the benefit of creditors, appoint or suffer appointment of a receiver ortrustee over its property, file a petition under any bankruptcy or insolvency act or have any such petition filed against it and such proceedingremains undismissed or unstayed for a period of more than 60 days; or(iv)notify EyePoint in writing of its decision to abandon its license with respect to a certain product using EyePoint’s proprietary insert technology.90Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)10. LOAN AGREEMENTSHercules Loan AgreementIn April 2014, Alimera Sciences Limited (Alimera UK), a subsidiary of the Company, entered into a loan and security agreement (Hercules LoanAgreement) with Hercules Capital, Inc. (Hercules) providing for a term loan of up to $35,000,000 (Hercules Loan). The Company amended the Hercules LoanAgreement several times. On October 20, 2016 Alimera UK and Hercules entered into a fourth amendment to the Hercules Loan Agreement (the Fourth LoanAmendment), which provided the operative loan agreement terms during 2017. On January 5, 2018 the Company paid off the Hercules Loan on behalf ofAlimera UK.The Fourth Loan Amendment provided for interest only payments that were scheduled through November 30, 2018. Pursuant to the Fourth LoanAmendment, interest on the Hercules Loan accrued at a floating per annum rate equal the greater of (i) 11.0% and (ii) the sum of (A) 11.0% plus (B) the primerate as reported in The Wall Street Journal, or if not reported, the prime rate most recently reported in The Wall Street Journal, minus 3.5%. In addition to theinterest described above, the principal balance of the Hercules Loan bore “payment-in kind” interest at the rate of 1.0% (PIK Interest), which PIK Interest wasto be added to the outstanding principal balance of the Hercules Loan. The interest rate on the Hercules Loan was 12.0% as of December 31, 2017.Under the Hercules Loan Agreement as amended by the Fourth Loan Amendment, any principal prepayment of the Hercules loan triggered aprepayment penalty based on when the prepayment occurred. Because the Company prepaid the Hercules Loan Agreement on January 5, 2018, the Companypaid 2.0% of the principal amount repaid, or $709,000, which is included in loss on early extinguishment of debt for 2018. Before Alimera UK entered intothe Fourth Loan Agreement, Alimera UK was already obligated to pay an end of term payment of $1,400,000, which was paid when the Company paid off theHercules loan on January 5, 2018.2014 WarrantIn connection with Alimera UK entering into the 2014 Loan Agreement, the Company issued a warrant that granted Hercules the right to purchase up to285,016 shares of the Company’s common stock at an exercise price of $6.14 per share (the 2014 Warrant). The Company amended the 2014 Warrant anumber of times to increase the number of shares issuable upon exercise to 1,258,993 and decrease the exercise price to $1.39 per share. The right to exercisethis warrant expires on November 2, 2020.2016 WarrantIn connection with Alimera UK entering into the Fourth Loan Amendment, the Company agreed to issue a new warrant to Hercules (the 2016 Warrant)that granted Hercules the right to purchase up to 458,716 shares of the Company’s common stock at an exercise price of $1.09 per share. The right to exercisethis warrant expires on October 20, 2021.Solar Capital Loan AgreementOn January 5, 2018, the Company entered into a $40,000,000 Loan and Security Agreement (2018 Loan Agreement) with Solar Capital Ltd. (SolarCapital), as Collateral Agent (Agent), and the parties signing the 2018 Loan Agreement from time to time as Lenders, including Solar Capital in its capacityas a Lender (collectively, the Lenders). Under the 2018 Loan Agreement, the Company borrowed the entire $40,000,000 as a term loan that matures on July 1,2022.The Company used the proceeds of the term loan to refinance the Hercules Loan Agreement and pay related expenses. The Company expects to use theremaining loan proceeds to provide additional working capital for general corporate purposes.Interest on the 2018 Loan Agreement is payable at one-month LIBOR plus 7.65% per annum. The 2018 Loan Agreement provides for interest onlypayments for the first 30 months ending on July 1, 2020, followed by 24 months of payments of principal and interest. If the Company meets certain revenuethresholds and no event of default shall have occurred and is continuing, the Company can extend the interest only period an additional six months endingon January 1, 2021, followed by 18 months of payments of principal and interest. As of December 31, 2018, the interest rate on the 2018 Loan Agreement wasapproximately 10.0%.As part of the fees and expenses incurred in conjunction with the 2018 Loan Agreement discussed above, the Company paid Solar Capital a $400,000fee at closing. The Company is obligated to pay a $1,800,000 fee upon repayment of the term loan in full ($2,000,000 if the interest only period has beenextended to 36 months). The Company may elect to prepay the outstanding principal balance of the 2018 Loan Agreement in increments of $10,000,000 ormore. The Company must pay a91Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)prepayment premium upon any prepayment of the 2018 Loan Agreement before its maturity date, whether by mandatory or voluntary prepayment,acceleration or otherwise, equal to:a.2.00% of the principal amount prepaid for a prepayment made on or after January 5, 2018 through and including January 5, 2019;b.1.00% of the principal amount prepaid for a prepayment made after January 5, 2019 through and including January 5, 2020; andc.0.50% of the principal amount prepaid for a prepayment made after January 5, 2020 and greater than 30 days before the maturity date.The Company is also obligated to pay additional fees under the Exit Fee Agreement (Exit Fee Agreement) dated as of January 5, 2018 by and amongthe Company, Solar Capital as Agent, and the Lenders. The Exit Fee Agreement survives the termination of the 2018 Loan Agreement and has a term of 10years. The Company is obligated to pay up to, but no more than, $2,000,000 in fees under the Exit Fee Agreement.Specifically, the Company is obligated to pay an exit fee of $2,000,000 on a “change in control” (as defined in the Exit Fee Agreement). To the extentthat Alimera has not already paid the $2,000,000 fee, the Company is also obligated to pay a fee of $1,000,000 on achieving each of the followingmilestones:a.first, if the Company achieves revenues of $80,000,000 or more from the sale of its ILUVIEN product in the ordinary course of business tothird party customers, measured on a trailing 12-month basis during the term of the agreement, tested at the end of each month; andb.second, if the Company achieves revenues of $100,000,000 or more from the sale of its ILUVIEN product in the ordinary course of business tothird party customers, measured in the same manner.The Company agreed, for itself and its subsidiaries, to customary affirmative and negative covenants and events of default in connection with the 2018Loan Agreement. The occurrence of an event of default could result in the acceleration of the Company’s obligations under the 2018 Loan Agreement and anincrease to the applicable interest rate, and would permit Solar Capital to exercise remedies with respect to the collateral under the 2018 Loan Agreement.The Company’s obligations to Agent and the Lenders are secured by a first priority security interest in substantially all of the assets, excludingintellectual property, of the Company and its wholly owned subsidiary, Alimera Sciences (DE), LLC (Alimera DE), which is a guarantor of the loan, providedthat only 65% of the voting interests in AS C.V., a Dutch subsidiary owned by the Company and Alimera DE, are pledged to the Lenders, and no assets orequity interests in the direct or indirect subsidiaries of AS C.V. are subject to the Lenders’ security interests. The Lenders do, however, maintain a negativepledge on the property of the Company and all of its subsidiaries, including the Company’s intellectual property, requiring the Lenders’ consent for any liens(other than typical permitted liens) on or the sale of such property.Extinguishment of DebtIn accordance with the guidance in ASC 470-50, Debt, the Company accounted for the extinguishment of the Hercules Loan Agreement as anextinguishment and recognized a loss on early extinguishment of debt of approximately $1,766,000 within the consolidated statements of operations for2018. The loss on early extinguishment consisted primarily of the early termination fee paid to Hercules and unamortized debt discounts including theremaining portion of warrant values and debt issuance costs.Fair Value of DebtAs of December 31, 2018 and 2017, the weighted average interest rates of the Company’s notes payable approximate the rate at which the Companycould obtain alternative financing and the fair value of the warrants that were issued in connection with the Company’s notes payable are immaterial.Therefore, the carrying amount of the notes approximated their fair value at December 31, 2018 and 2017.92Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)11. COMMITMENTS AND CONTINGENCIESTerm Note PayableUnder the 2018 Loan Agreement with Solar Capital (see Note 10), as of December 31, 2018, the Company was obligated to make future minimumprincipal payments, excluding the $1,800,000 fee that will be due upon repayment of the term loan in full, as follows: Years Ending December 31(In thousands)2019$—20208,333202120,000202211,667Total40,000Less unamortized repayment fee(1,296)Less unamortized deferred financing costs(831)Less current portion—Non-current portion$37,873As of December 31, 2018 and 2017, the Company had $345,000 and $363,000 accrued and unpaid interest payable under the 2018 Loan Agreementwith Solar Capital and the Hercules Loan Agreement, respectively. These amounts are included in accounts payable on the Company’s Consolidated BalanceSheets.Operating LeasesThe Company leases office space and equipment under non-cancelable agreements accounted for as operating leases. The leases generally require thatthe Company pay taxes, maintenance and insurance. Management expects that in the normal course of business, leases that expire will be renewed orreplaced by other leases. In August 2014, the Company signed a lease for office space in the U.S. through September 2021. In December 2014, Alimera UKsigned a lease for office space in the United Kingdom through December 24, 2024, although the lease is cancellable after December 17, 2019. The lease has acontingent escalation clause based on inflation beginning in 2020. The Company also leases office space in Ireland, Germany and Portugal under leases thatexpire in June 2019, June 2021 and March 2020, respectively. As of December 31, 2018, a schedule by year of future minimum payments under all of theCompany’s operating leases is as follows:Years Ending December 31(In thousands)2019$56420204212021300Total$1,285Rent expense under all operating leases totaled approximately $509,000 and $499,000 for the years ended December 31, 2018 and 2017, respectively.93Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Capital LeasesThe Company leases equipment under capital leases. The property and equipment is capitalized at the lesser of fair market value or the present value ofthe minimum lease payments at the inception of the leases using the Company’s incremental borrowing rate.As of December 31, 2018, a schedule by year of future minimum payments under capital leases, together with the present value of minimum leasepayments, is as follows (in thousands):Years Ending December 31(In thousands)2019$3282020297202176Total701Less amount representing interest(42)Less amount representing executory costs(118)Present value of minimum lease payments541Less current portion(236)Non-current portion$305Property and equipment under capital leases, which are included in property and equipment (Note 6), consisted of the following: December 31, 2018 2017 (In thousands)Automobiles$870 $663Office equipment60 63Less accumulated depreciation(315) (311)Total$615 $415Depreciation expense associated with property and equipment under capital leases was approximately $281,000 and $172,000 for the years endedDecember 31, 2018 and 2017, respectively.Significant AgreementsIn February 2010, the Company entered into an agreement with a third party manufacturer for the manufacture of the ILUVIEN implant, the assembly ofthe ILUVIEN applicator and the packaging of the completed ILUVIEN commercial product. The Company is responsible for supplying the ILUVIENapplicator and the active pharmaceutical ingredient. In accordance with the terms of the agreement, the Company must order at least 80% of the ILUVIENunits required in the U.S., Canada and the EEA from the third party manufacturer. This agreement had an initial term of six years. After that six-year termended, the agreement automatically renewed for successive one-year periods. In February 2016, the Company and the third party manufacturer amended andrestated this agreement to extend the term by five years, at which point the agreement will automatically renew for successive one-year periods unless eitherparty delivers notice of non-renewal to the other party at least 12 months before the end of the term or any renewal term.In May 2013, the Company entered into an agreement with the first of three contract research organizations (CROs) for clinical and data managementservices to be performed in connection with the five-year, post-authorization, open label registry study in patients treated with ILUVIEN per the labeledindication in the EEA. Since May 2013, the company has entered into twelve additional agreements for work with these CROs. For the years endedDecember 31, 2018 and 2017, the Company incurred $141,000 and $101,000, respectively, of expense associated with these agreements. As of December 31,2018 and 2017, $4,000 and $67,000, respectively, is included in accrued expenses (Note 8). As of December 31, 2018, the Company expects to incur anadditional $210,000 of expense associated with these agreements through December 31, 2019.94Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Employment AgreementsThe Company is party to employment agreements with four executives. The agreements generally provide for annual salaries, bonuses and benefits andfor the “at-will” employment of such executives. Effective January 1, 2019, the Company is party to four agreements with annual salaries ranging from$332,000 to $525,000. If any of the agreements are terminated by the Company without cause, or by the employee for good reason, as defined in theagreements, the Company will be liable for one year to 18 months of salary and benefits. Certain other employees have general employment contracts thatinclude stipulations regarding confidentiality, Company property, severance in an event of change of control and miscellaneous items.95Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)12. PREFERRED STOCKSeries A Convertible Preferred StockOn October 2, 2012, the Company closed its preferred stock financing in which it sold units consisting of 1,000,000 shares of Series A ConvertiblePreferred Stock (Series A Preferred Stock) and warrants to purchase 300,000 shares of Series A Preferred Stock for gross proceeds of $40,000,000, prior to thepayment of approximately $560,000 of related issuance costs. The powers, preferences and rights of the Series A Preferred Stock are set forth in the certificateof designation for the Series A Preferred Stock filed by the Company with the Delaware Secretary of State as part of the Company’s certificate ofincorporation. Each share of Series A Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder at therate equal to $40.00 divided by $2.66 (Conversion Price). The initial Conversion Price was subject to adjustment based on certain customary price-basedanti-dilution adjustments. These adjustment features lapsed in September 2014. Each share of Series A Preferred Stock shall automatically be converted intoshares of common stock at the then-effective Conversion Price upon the date on which the Company consummates an equity financing transaction pursuantto which the Company sells to one or more third party investors either (a) shares of common stock or (b) other equity securities that are convertible into sharesof common stock and that have rights, preference or privileges, senior to or on a parity with, the Series A Preferred Stock, in each case having an as-convertedper share of common stock price of not less than $10.00 and that results in total gross proceeds to the Company of at least $30,000,000. The rights andpreferences of Series A Preferred Stock also place limitations on the Company’s ability to declare or pay any dividend or distribution on any shares of capitalstock.Each unit sold in the preferred stock financing included a warrant to purchase 0.30 shares of Series A Preferred Stock at an exercise price equal to$44.00 per share. At the election of the holder of a warrant, the warrant could have been exercised for the number of shares of common stock then issuableupon conversion of the Series A Preferred Stock that would otherwise be issued upon such exercise at the then-effective Conversion Price. The rights toexercise these warrants expired on October 1, 2017.These warrants were considered derivative instruments because the agreements provided for settlement in Series A Preferred Stock shares or commonstock shares at the option of the holder, an adjustment to the warrant exercise price for common shares at some point in the future, and contain anti-dilutionprovisions whereby the number of shares for which the warrants were exercisable and/or the exercise price of the warrants was subject to change in the eventof certain issuances of stock at prices below the then-effective exercise price of the warrants. Therefore, the warrants were recorded as a liability at issuance.The warrant anti-dilution provisions lapsed in September 2014. During 2017, the Company recorded a gain of $188,000 as a result of the change in fair valueof the warrantsIn 2014, 6,015,037 shares of common stock were issued pursuant to the conversion of 400,000 shares of Series A Convertible Preferred Stock. As ofDecember 31, 2018, there were 600,000 shares of Series A Convertible Preferred Stock issued and outstanding.Series B Convertible Preferred StockOn December 12, 2014, the Company closed a preferred stock financing in which it sold 8,291.873 shares of Series B Convertible Preferred Stock(Series B Preferred Stock) for a purchase price of $6,030 per share, or an aggregate purchase price of $50,000,000, prior to the payment of approximately$432,000 of related issuance costs. The Company issued an additional 124.378 shares of Series B Preferred Stock as a subscription premium to thepurchasers. On September 4, 2018, all of the outstanding shares of Series B Preferred Stock were exchanged for shares of Series C Convertible Preferred Stock(see below).The powers, preferences and rights of the Series B Preferred Stock were set forth in the certificate of designation for the Series B Preferred Stock filed bythe Company with the Delaware Secretary of State as part of the Company’s certificate of incorporation. Each share of Series B Preferred Stock wasconvertible into 1,000 shares of the Company’s common stock at any time at the option of the holder, provided that the holder was prohibited fromconverting Series B Preferred Stock into shares of the Company’s common stock if, as a result of such conversion, the holder, together with its affiliates,would own more than 9.98% of the total number of shares of the Company’s common stock then issued and outstanding. The Series B Preferred Stock rankedjunior to the Company’s existing Series A Preferred Stock and senior to the Company’s common stock, with respect to rights upon liquidation. The Series BPreferred Stock ranked junior to all existing and future indebtedness. Except as otherwise required by law (or with respect to approval of certain actions), theSeries B Preferred Stock did not have voting rights. The Series B Preferred Stock was not redeemable at the option of the holder. The Series B Preferred Stockwas not subject to any price-based or other anti-dilution protections and did not provide for any accruing dividends.The Company determined that the conversion option of the Series B Preferred Shares represented a beneficial conversion feature, as the conversionfeature had intrinsic value to the holder on the commitment date as a result of the subscription96Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)premium. Therefore, the Company recorded a beneficial conversion feature of $750,000 as an increase in additional paid in capital. Because the Series BPreferred Stock was immediately convertible into common stock at the option of the holder at issuance, the Company immediately accreted the full value ofthe beneficial conversion feature to the carrying value of the Series B Preferred Stock on that date.On September 4, 2018, following the closing of the exchange of all outstanding shares of Series B Preferred Stock for shares of Series C ConvertiblePreferred Stock, the Company filed with the Delaware Secretary of State a Certificate of Elimination of Series B Convertible Preferred Stock of AlimeraSciences, Inc., which eliminated from the Company’s amended and restated certificate of incorporation, as amended, the Alimera Sciences, Inc. Certificate ofDesignation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock. As a result, all shares of the Company’s preferred stock previouslydesignated as Series B Convertible Preferred Stock were eliminated and returned to the status of authorized but unissued shares of preferred stock, withoutdesignation as to series.Series C Convertible Preferred StockOn September 4, 2018, the Company entered into and closed a Series B Preferred Stock Exchange Agreement (Exchange Agreement) with the holdersof all of the outstanding approximately 8,416 shares of Series B Preferred Stock. Under the Exchange Agreement, the holders of Series B Preferred Stockexchanged their shares of Series B Preferred Stock for an aggregate of 10,150 shares of Series C Convertible Preferred Stock, par value $0.01 per share (SeriesC Preferred Stock). The powers, preferences and rights of the Series C Preferred Stock are set forth in the certificate of designation filed by the Company withthe Delaware Secretary of State as part of the Company’s certificate of incorporation, as amended. All of the outstanding shares of Series B Preferred Stockwere canceled in the exchange. The Company incurred approximately $122,000 in legal costs related to the Exchange Agreement.The 10,150 issued and outstanding shares of Series C Preferred Stock have an aggregate stated value of $10,150,000 and are convertible into shares ofthe Company’s common stock at $1.00 per share, or 10,150,000 shares of the Company’s common stock in total, at any time at the option of the holder,provided that the holder will be prohibited from converting shares of Series C Preferred Stock into shares of the Company’s common stock if, as a result ofsuch conversion, the holder, together with its affiliates, would own more than 9.98% of the total number of shares of the Company’s common stock thenissued and outstanding. The Series C Preferred Stock is not redeemable at the option of the holder. In the event of a liquidation, dissolution or winding up ofthe Company and in the event of certain mergers, tender offers and asset sales, the holders of the Series C Preferred Stock will receive the greater of (a) theliquidation preference equal to $10,150,000 in the aggregate, plus any declared but unpaid dividends, or (b) the amount such holders would receive had allshares of the Series C Preferred Stock been converted into the Company’s common stock immediately before such event. With respect to rights uponliquidation, the Series C Preferred Stock ranks junior to the Company’s Series A Preferred Stock and senior to the Company’s common stock. The Series CPreferred Stock ranks junior to all existing and future indebtedness. Except as otherwise required by law (or with respect to approval of certain actions), theSeries C Preferred Stock does not have voting rights. The Series C Preferred Stock is not subject to any price-based anti-dilution protections and does notprovide for any accruing dividends.The Company determined that the Exchange Agreement resulted in an extinguishment of the Series B Preferred Stock. As a result, the Companyrecognized a gain of $38,330,000 on the extinguishment of preferred stock during 2018. As of the transaction date, the Company made an assessment of thefair market value of the Series C Preferred Stock and calculated the value to be $11,239,000, prior to the payment of approximately $122,000 of relatedtransaction costs. This Company recorded this gain within stockholders’ equity and as an increase to earnings available to stockholders for 2018. The$38,330,000 gain on extinguishment of preferred stock was derived by the difference in the fair market value of the Series C Preferred Stock and the carryingvalue of the Series B Preferred Stock.97Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)13. STOCK INCENTIVE PLANSThe Company has stock option and stock incentive plans that provide for grants of shares to employees and grants of options to employees anddirectors to purchase shares of the Company’s common stock at exercise prices generally equal to the fair values of such stock at the dates of grant. Awardsthat can be granted under these plans include stock options, restricted stock units (RSUs) and restricted stock. The Company also has an employee stockpurchase plan (see Note 17). Options granted to employees typically become exercisable over a four-year vesting period and have a ten-year contractual term.Initial options granted to directors typically vest over a four-year period and have a ten-year contractual term. Annual option grants to directors typically vestimmediately and have a ten-year contractual term. Upon the exercise of stock options, the Company may issue the required shares out of authorized butunissued common stock or out of treasury stock at management’s discretion.A summary of stock option transactions under the plans are as follows: Years Ended December 31, 2018 2017 Options WeightedAverageExercisePrice Options WeightedAverageExercisePriceOptions outstanding at beginning of period11,595,510 $2.90 10,804,412 $3.22Grants2,111,375 1.07 2,336,300 1.25Forfeitures(1,257,967) 2.54 (1,544,473) 2.63Exercises(1,563) 1.06 (729) 1.49Options outstanding at year end12,447,355 2.63 11,595,510 2.90Options exercisable at year end9,138,544 3.09 8,085,064 3.25Weighted average per share fair value of options granted during the year$0.71 $0.94 The following table provides additional information related to outstanding stock options, fully vested stock options, and stock options expected tovest as of December 31, 2018: Shares WeightedAverageExercisePrice WeightedAverageContractualTerm AggregateIntrinsicValue (In thousands)Outstanding12,447,355 $2.63 6.25 years $—Exercisable9,138,544 3.09 5.37 years —Outstanding, vested and expected to vest12,044,311 2.67 6.16 years — 98Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The Company estimated the fair value of options granted using the Black-Scholes option pricing model. Use of a valuation model requires theCompany to make certain assumptions with respect to selected model inputs. Changes in these input variables would affect the amount of expense associatedwith equity-based compensation. Expected volatility is based on the historical volatility of the Company’s common shares over the expected term of thestock option grant. To estimate the expected term, the Company utilizes the “simplified” method for “plain vanilla” options as discussed within the SEC’sStatement of Accounting Bulletin 107. The Company intends to utilize the simplified method for the foreseeable future until more detailed informationabout exercise behavior will be more widely available. The risk-free interest rate is based on U.S. Treasury Daily Treasury Yield Curve Rates corresponding tothe expected life assumed at the date of grant. Dividend yield is zero as there are no payments of dividends made or expected. The weighted-averageassumptions used for option grants were as follows: Years Ended December 31, 2018 2017Risk-free interest rate2.63% 2.06%Volatility factor72.60% 90.49%Grant date fair value of common stock options$0.71 $0.94Weighted-average expected life6.02 years 6.02 yearsAssumed forfeiture rate10.00% 10.00%Employee stock-based compensation expense related to stock options recognized in accordance with ASC 718 was as follows: Years Ended December 31, 2018 2017 (In thousands)Sales and marketing$685 $907Research, development and medical affairs565 643General and administrative2,130 2,510Total employee stock-based compensation expense related to stock options$3,380 $4,060As of December 31, 2018, there was approximately $2,993,000 of total unrecognized compensation cost related to outstanding stock option awardsthat will be recognized over a weighted average period of 2.25 years. The total fair value of shares vested during 2018 was approximately $3,400,000.The total estimated fair value of options granted during the years ended December 31, 2018 and 2017 was $2,268,000 and $2,186,000, respectively.The total estimated intrinsic value of options exercised was less than $1,000 for both the years ended December 31, 2018 and 2017, respectively.As of December 31, 2018, the Company was authorized to grant options to purchase up to an additional 263,498 shares under the 2010 EquityIncentive Plan. The Company’s 2010 Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of eachfiscal year equal to the lesser of: (1) 2,000,000 shares of common stock; (2) 4% of the shares of common stock outstanding at that time; and (3) such otheramount as our board of directors may determine. On January 1, 2019, an additional 2,000,000 shares became available for future issuance under the 2010Plan. These additional shares from the annual increase under the 2010 Plan are not included in the foregoing discussion.99Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Restricted Stock UnitsA summary of RSU transactions under the plans are as follows: Years Ended December 31, 2018 2017 RSUs WeightedAverage GrantDate Fair Value RSUs WeightedAverage GrantDate Fair ValueRestricted stock units outstanding at beginning of period839,285 $1.21 — $—Grants1,091,712 1.15 964,720 1.21Vested units(839,285) 1.21 — —Forfeitures(191,460) 1.15 (125,435) 1.18Restricted stock units outstanding at year end900,252 1.15 839,285 1.21As of December 31, 2018, there was approximately $169,000 of total unrecognized compensation cost related to outstanding RSUs that will berecognized during the first quarter of 2019.Employee stock-based compensation expense related to RSUs recognized in accordance with ASC 718 was $1,002,000 and $883,000 for the yearsended December 31, 2018, and 2017, respectively.100Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)14. COMMON STOCK WARRANTSThe Company has issued warrants to purchase common stock to various members of the board of directors, third parties for services, and lenders.Warrants to purchase a total of 1,795,663 shares of common stock were outstanding as of December 31, 2018 and 2017. As of December 31, 2018, theexercise prices ranged from $1.09 to $11.00 per share. The warrants are exercisable for a period between 5 and 10 years from the issuance date.In connection with Alimera UK entering into the Hercules Loan Agreement (Note 10), the Company entered into the 2014 Warrant, which grantedHercules the right to purchase up to 285,016 shares of the Company’s common stock at an exercise price of $6.14 per share. The Company amended the 2014Warrant a number of times to increase the number of shares issuable upon exercise to 1,258,993 and decrease the exercise price to $1.39 per share. The rightto exercise this warrant expires on November 2, 2020.In connection with Alimera UK entering into the Fourth Loan Amendment with Hercules, the Company agreed to issue the 2016 Warrant, which grantedHercules the right to purchase up to 458,716 shares of the Company’s common stock at an exercise price of $1.09 per share. The right to exercise this warrantexpires on October 20, 2021.101Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)15. CONCENTRATIONS AND CREDIT RISKFor the years ended December 31, 2018 and 2017, there were three customers within the U.S. segment. Two of these customers, which are largepharmaceutical distributors, accounted for approximately 69% and 73%, respectively, of the Company’s total consolidated revenues. These two customersaccounted for approximately 73% and 81% of the Company’s consolidated accounts receivable as of December 31, 2018 and 2017, respectively.For the years ended December 31, 2018 and 2017 one of the Company’s third-party manufacturers of ILUVIEN comprised approximately 13.7% and10.5%, respectively, of the Company’s total purchases, and there were no other vendors that comprised more than 10% of the Company’s total purchases. TheCompany relies on a single manufacturer for ILUVIEN, a single manufacturer for the ILUVIEN applicator and a single active pharmaceutical ingredientmanufacturer for ILUVIEN’s active pharmaceutical ingredient.102Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)16. INCOME TAXESOn December 22, 2017, the United States enacted major tax reform legislation, Public Law No. 115-97, commonly referred to as the Tax Cuts and JobsAct (2017 Tax Act). The more significant attributes of the 2017 Tax Act impose a repatriation tax on accumulated earnings of foreign subsidiaries, implementa territorial tax system together with a current tax on certain foreign earnings and lower the general corporate income tax rate to 21%.Following guidance provided by SEC Staff Accounting Bulletin No. 118, which in March 2018 was codified by the FASB in ASU 2018-05, IncomeTaxes (Topic 740) the Company remeasured certain net deferred and other tax liabilities based on the tax rate at which they are expected to reverse, which isnow 21% instead of 35%. The net impact of the 2017 Tax Act was $0 due to a full valuation allowance recorded against the U.S. deferred tax assets. During2018, the Company continued to analyze other provisions of the 2017 Tax Act and as of December 31, 2018, we have completed our accounting for theeffects of the 2017 Tax Act.The components of net loss before taxes are as follows: Years Ended December 31, 2018 2017 (In thousands)United States$(2,908) $(1,890)Foreign(13,368) (19,948)Loss before provision for income taxes$(16,276) $(21,838)In accordance with ASC 740, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basisand the tax basis of assets and liabilities at the enacted tax rates in effect for the year in which the differences are expected to reverse. The Company records avaluation allowance against the net deferred tax asset to reduce the net carrying value to an amount that is more likely than not to be realized.The provision for income taxes consists of the following components: Years Ended December 31, 2018 2017 (In thousands)Current expense (benefit): Federal$— $—State— —Foreign759 255Current income tax expense759 255 Deferred expense (benefit): Federal256 549State411 3,330Foreign(654) (92) 13 3,787Valuation allowance(666) (3,879)Deferred income tax benefit(653) (92)Total income tax expense$106 $163103Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The following summarizes activity related to the Company’s valuation allowance: Years Ended December 31, 2018 2017 (In thousands)Valuation allowance at beginning of period$(41,485) $(55,968)Income tax provision(666) (3,879)U.S. Tax Reform— 18,362Valuation allowance at end of period$(42,151) $(41,485)Worldwide net deferred tax assets and liabilities are as follows: December 31, 2018 2017Deferred tax assets(In thousands)Depreciation and amortization$55 $44Other deferred tax assets1,382 707NOL carry-forwards34,217 33,980Research and development costs813 1,340Equity compensation4,485 3,686Collaboration agreement receivable reserves2,381 2,256Valuation allowance(42,151) (41,485)Total deferred tax assets$1,182 $528A reconciliation from the federal statutory rate to the total provision for income taxes is as follows: Years Ended December 31, 2018 2017 Amount Percent Amount Percent (in thousands, except percentages)Federal tax benefit at statutory rate$(3,463) 21.0 % $(7,425) 34.0 %State tax — net of federal benefit1 — (3,783) 17.3Permanent items and other528 (3.2) 686 (3.1)Foreign rate differential2,946 (17.9) 6,880 (31.5)U.S. tax reform— — 18,362 (84.1)Deferred rate change(438) 2.7 (212) 1.0Other(134) 0.8 138 (0.6)Change in valuation allowance666 (4.0) (14,483) 66.3Total tax expense (benefit)$106 (0.6)% $163 (0.7)%The change in state taxes in 2017, net of federal benefit, was a result of the Company filing additional state income tax returns in 2017. This resulted inapproximately $3.8 million of state NOLs being generated. During 2018, there was no additional impact of the one-time, non-cash deferred rate change as aresult of the 2017 Tax Act. The U.S. corporate tax rate change and state NOLs are fully offset by a valuation allowance recorded against U.S. federal and stateincome taxes; therefore, the overall impact of these items is zero to income tax expense.104Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)A rollforward of the Company’s uncertain tax positions is as follows: Years Ended December 31, 2018 2017 (In thousands)Balance of uncertain tax positions at beginning of period$52 $59Gross increases - tax positions in current period13 4Gross increases - tax positions in prior period10 —Gross decreases - tax positions in prior period(7) (11)Settlements— —Lapse of statute of limitations— —Balance of uncertain tax positions at end of period$68 $52Included in the balance of unrecognized tax benefits as of December 31, 2018 and 2017 are approximately $68,000 and $52,000, respectively, of taxbenefits related to research and development tax credits. In accordance with ASC 740-10, such attributes are reduced to the amount that is expected to berecognized in the future. The Company does not accrue interest or penalties, as there is no risk of additional tax liability due to significant NOLs available.The Company does not expect any decreases to the unrecognized tax benefits within the next twelve months due to any lapses in statute of limitations. Taxyears from 2014 to 2017 remain subject to examination in California, Georgia, Kentucky, Tennessee, Texas and on the federal level, with the exception of theassessment of NOL carry-forwards available for utilization, which can be examined for all years since 2009. The statute of limitations on these years will closewhen the NOLs expire or when the statute closes on the years in which the NOLs are utilized.Significant management judgment is involved in determining the provision for income taxes, deferred tax assets and liabilities, and any valuationallowance recorded against net deferred tax assets. Due to uncertainties with respect to the realization of U.S. deferred tax assets due to the history ofoperating losses, a valuation allowance has been established against the entire net U.S. deferred tax asset balance. The valuation allowance is based onmanagement’s estimates of taxable income in the jurisdictions in which the Company operates and the period over which deferred tax assets will berecoverable. If actual results differ from these estimates or the Company adjusts these estimates in future periods, a change in the valuation allowance may beneeded, which could materially impact the Company’s financial position and results of operations.As of December 31, 2018 and 2017, the Company had federal net operating loss (NOL) carry-forwards of approximately $122,455,000 and$121,413,000, and state NOL carry-forwards of approximately $153,333,000, and $161,753,000 respectively, subject to further limitation based upon thefinal results of our Internal Revenue Code (IRC) sections 382 and 383 analyses. These NOLs are available to reduce future income unless otherwise taxable. Ifnot utilized, the federal NOL carry-forwards will expire at various dates between 2029 and 2037, the Company’s federal NOL created in 2018 will carryforward indefinitely and the state NOL carry-forwards will expire at various dates between 2020 and 2038.Sections 382 and 383 of the Internal Revenue Code limit the annual use of NOL carry-forwards and tax credit carry-forwards, respectively, following anownership change. NOL carry-forwards may be subject to annual limitations under IRC Section 382 (Section 382) (or comparable provisions of state law) ifcertain changes in ownership were to occur. The Company periodically evaluates its NOL carry-forwards and whether certain changes in ownership haveoccurred that would limit the Company’s ability to utilize a portion of its NOL carry-forwards. If it is determined that significant ownership changes haveoccurred since the Company generated its NOL carry-forwards, the Company may be subject to annual limitations on the use of these NOL carry-forwardsunder Section 382 (or comparable provisions of state law). The Company has determined that a Section 382 change in ownership occurred in late 2015. As aresult of this change in ownership, the Company estimated that approximately $18.6 million of the Company’s federal NOLs and approximately $382,000 offederal tax credits generated prior to the change in ownership will not be utilized in the future. The Company is currently in the process of refining andfinalizing these calculations, and upon finalization, will determine if a write-off is necessary. The reduction to the Company’s NOL deferred tax asset due tothe annual Section 382 limitation and the NOL carryforward period would result in an offsetting reduction in valuation allowance recorded against the NOLdeferred tax asset.105Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)As of December 31, 2018, the Company had cumulative book losses in foreign subsidiaries of approximately $126,648,000. The Company has notrecorded a deferred tax asset for the excess of tax over book basis in the stock of its foreign subsidiaries. The Company anticipates that its foreign subsidiarieswill be profitable and have earnings in the future. Once the foreign subsidiaries do have earnings, the Company intends to indefinitely reinvest in its foreignsubsidiaries all undistributed earnings of and original investments in such subsidiaries. As a result, the Company does not expect to record deferred taxliabilities in the future related to excesses of book over tax basis in the stock of its foreign subsidiaries in accordance with ASC 740-30-25.106Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)17. EMPLOYEE BENEFIT PLANSThe Company has a salary deferral 401(k) plan that covers substantially all U.S. employees of the Company. The Company matches participantcontributions subject to certain plan limitations. Compensation expense associated with the Company’s matching plan totaled $274,000 and $187,000 forthe years ended December 31, 2018 and 2017, respectively. The Company may also make an annual discretionary profit-sharing contribution. No suchdiscretionary contributions were made during the years ended December 31, 2018 and 2017, respectively.In April 2010, the Company established an Employee Stock Purchase Plan (the Purchase Plan). Under the Company’s Purchase Plan, eligibleemployees can participate and purchase common stock semi-annually through accumulated payroll deductions. The Purchase Plan is administered by theCompany’s board of directors or a committee appointed by the Company’s board of directors. Under the Purchase Plan eligible employees may purchasestock at 85% of the lower of the fair market value of a share of common stock on the offering date or the exercise date. The Purchase Plan provides for two six-month purchase periods generally starting on the first trading day on or after October 31 and April 30 of each year. Eligible employees may contribute up to15% of their eligible compensation. A participant may purchase a maximum of 2,500 shares of common stock per purchase period. The value of the sharespurchased in any calendar year may not exceed $25,000.The Purchase Plan was effective upon the completion of the Company’s initial public offering in 2010, at which time a total of 494,422 shares of theCompany’s common stock were made available for sale. As of January 1 of each year, the number of available shares is automatically restored to the originallevel. A total of 91,649 and 79,733 shares of the Company’s common shares were acquired through the Purchase Plan during the years ended December 31,2018 and 2017, respectively. As such, on January 1, 2019 and 2018, respectively, an additional 91,649 and 79,733 shares became available for futureissuance under the Purchase Plan. In accordance with ASC 718-50, the ability to purchase stock at 85% of the lower of the fair market value of a share ofCommon Stock on the offering date or the exercise date represents an option. The Company estimates the fair value of such options at the inception of eachoffering period using the Black-Scholes valuation model. In connection with the Purchase Plan, the Company recorded $31,000 and $38,000 ofcompensation expense for the years ended December 31, 2018 and 2017, respectively.107Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)18. SEGMENT INFORMATIONFor the years ended December 31, 2018 and 2017, there were three customers within the U.S. segment. Two of these customers, which are largepharmaceutical distributors, accounted for 69% and 73% of the Company’s consolidated revenues for the years ended December 31, 2018 and 2017,respectively. These same two customers within the U.S. segment accounted for approximately 73% and 81% of the Company’s consolidated accountsreceivable at December 31, 2018 and 2017, respectively.The Company’s chief operating decision maker is the Chief Executive Officer (CEO). While the CEO is apprised of a variety of financial metrics andinformation, the business is principally managed and organized based upon geographic and regulatory environment. Each segment is separately managedand is evaluated primarily upon segment income or loss from operations. Non-cash items, including stock-based compensation expense and depreciation andamortization, are categorized as Other within the tables below.The following table presents a summary of the Company’s reporting segments for the years ended December 31, 2018 and 2017: Year Ended December 31, 2018 U.S. International Other Consolidated (In thousands)NET REVENUE$32,337 $14,633 $— $46,970COST OF GOODS SOLD, EXCLUDING DEPRECIATION ANDAMORTIZATION(3,246) (1,433) — (4,679)GROSS PROFIT29,091 13,200 — 42,291 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRSEXPENSES6,457 3,946 871 11,274GENERAL AND ADMINISTRATIVE EXPENSES8,147 3,259 3,119 14,525SALES AND MARKETING EXPENSES16,569 5,910 1,038 23,517DEPRECIATION AND AMORTIZATION— — 2,645 2,645OPERATING EXPENSES31,173 13,115 7,673 51,961SEGMENT LOSS FROM OPERATIONS(2,082) 85 (7,673) (9,670)OTHER INCOME AND EXPENSES, NET (6,606) (6,606)NET LOSS BEFORE TAXES $(16,276)108Table of ContentsALIMERA SCIENCES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Year Ended December 31, 2017 U.S. International Other Consolidated (In thousands)NET REVENUE$26,146 $9,766 $— $35,912COST OF GOODS SOLD, EXCLUDING DEPRECIATION ANDAMORTIZATION(2,482) (956) — (3,438)GROSS PROFIT23,664 8,810 — 32,474 RESEARCH, DEVELOPMENT AND MEDICAL AFFAIRSEXPENSES5,780 3,314 3,750 12,844GENERAL AND ADMINISTRATIVE EXPENSES7,580 2,605 2,854 13,039SALES AND MARKETING EXPENSES16,588 5,394 1,228 23,210DEPRECIATION AND AMORTIZATION— — 2,684 2,684RECOVERABLE COLLABORATION COSTS— — (2,851) (2,851)OPERATING EXPENSES29,948 11,313 7,665 48,926SEGMENT LOSS FROM OPERATIONS(6,284) (2,503) (7,665) (16,452)OTHER INCOME AND EXPENSES, NET (5,386) (5,386)NET LOSS BEFORE TAXES $(21,838)109Table of ContentsEXHIBIT INDEX Exhibit ExhibitNumber Title 3.1 Restated Certificate of Incorporation of Registrant, as amended on various dates (filed as Exhibit 3.1 to the Registrant’s QuarterlyReport on Form 10-Q, as filed on November 9, 2018, and incorporated herein by reference) 3.2 Amended and Restated Bylaws of the Registrant, as amended (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K,as filed on November 5, 2015, and incorporated herein by reference) 4.4 Warrant to Purchase Stock dated October 14, 2010 issued to Silicon Valley Bank (filed as Exhibit 4.1 to the Registrant’s CurrentReport, as filed on October 18, 2010, and incorporated herein by reference) 4.5 Warrant to Purchase Stock dated October 14, 2010 issued to MidCap Funding III, LLC (filed as Exhibit 4.2 to the Registrant’sCurrent Report, as filed on October 18, 2010, and incorporated herein by reference) 4.6 Warrant to Purchase Stock dated May 16, 2011 issued to MidCap Funding III, LLC (filed as Exhibit 4.1 to the Registrant’s CurrentReport, as filed on May 17, 2011, and incorporated herein by reference) 4.7 Warrant to Purchase Stock dated May 16, 2011 issued to Silicon Valley Bank (filed as Exhibit 4.2 to the Registrant’s CurrentReport, as filed on May 17, 2011, and incorporated herein by reference) 4.8.A Warrant to Purchase Shares of Series A Preferred issued to Sofinnova Venture Partners VIII, L.P. (filed as Exhibit 4.10.A to theRegistrant’s Current Report on Form 8-K, as filed on October 2, 2012, and incorporated herein by reference) 4.8.B Warrant to Purchase Shares of Series A Preferred issued to Growth Equity Opportunities Fund III, LLC (filed as Exhibit 4.10.B to theRegistrant’s Current Report on Form 8-K, as filed on October 2, 2012, and incorporated herein by reference) 4.8.C Warrant to Purchase Shares of Series A Preferred issued to Micro Cap Partners, L.P. (filed as Exhibit 4.10.C to the Registrant’sCurrent Report on Form 8-K, as filed on October 2, 2012, and incorporated herein by reference) 4.8.D Warrant to Purchase Shares of Series A Preferred issued to Palo Alto Healthcare Master Fund, L.P. (filed as Exhibit 4.10.D to theRegistrant’s Current Report on Form 8-K, as filed on October 2, 2012, and incorporated herein by reference) 4.8.E Warrant to Purchase Shares of Series A Preferred issued to Palo Alto Healthcare Master Fund II, L.P. (filed as Exhibit 4.10.E to theRegistrant’s Current Report on Form 8-K, as filed on October 2, 2012, and incorporated herein by reference) 4.9 Registration Rights Agreement dated October 2, 2012 between the Registrant and Palo Alto Healthcare Master Fund, L.P., PaloAlto Healthcare Master Fund II, L.P., Micro Cap Partners, L.P., Sofinnova Venture Partners VIII L.P. and Growth EquityOpportunities Fund III, LLC (filed as Exhibit 4.11 to the Registrant’s Current Report on Form 8-K, as filed on October 2, 2012, andincorporated herein by reference) 4.10 Amendment No. 1 to Warrant to Purchase Stock dated May 7, 2013 by and between Silicon Valley Bank and the Registrant (filedas Exhibit 4.10 to the Registrant’s Quarterly Report on Form 10-Q, as filed on August 14, 2013, and incorporated herein byreference) 4.11 Irrevocable Waiver of Rights to Designate Series A Director dated May 16, 2014 (filed as Exhibit 4.11 to the Registrant’s CurrentReport on Form 8-K, as filed on May 16, 2014, and incorporated herein by reference) 4.12 Warrant Agreement dated as of April 24, 2014 issued to Hercules Technology Growth Capital, Inc. (filed as Exhibit 4.11 to theRegistrant’s Quarterly Report on Form 10-Q, as filed on August 11, 2014, and incorporated herein by reference) 4.13 Amendment No. 1 to Warrant Agreement dated November 2, 2015 by and among the Registrant and Hercules Technology GrowthCapital, Inc. (filed as Exhibit 4.13 to the Registrant’s Annual Report on Form 10-K, as filed on March 15, 2016, and incorporatedherein by reference) 4.14 Amendment No. 2 to Warrant Agreement dated March 14, 2016 by and among the Registrant and Hercules Technology GrowthCapital, Inc. (filed as Exhibit 4.14 to the Registrant’s Quarterly Report on Form 10-Q, as filed on May 6, 2016, and incorporatedherein by reference) 110Table of Contents4.15 Amendment No. 3 to Warrant Agreement dated July 21, 2016 by and among the Registrant and Hercules Capital, Inc. f/k/a HerculesTechnology Growth Capital, Inc. (filed as Exhibit 4.15 to the Registrant’s Quarterly Report on Form 10-Q, as filed on November 4,2016, and incorporated herein by reference) 4.16 Warrant Agreement dated October 20, 2016 by and among the Registrant and Hercules Capital, Inc. f/k/a Hercules TechnologyGrowth Capital, Inc. (filed as Exhibit 4.16 to the Registrant’s Quarterly Report on Form 10-Q, as filed on November 4, 2016, andincorporated herein by reference) 10.1 Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (filed as Exhibit 10.1 tothe Registrant’s Registration Statement on Form S-1 (SEC File No. 333-162782), as filed on October 30, 2009, and incorporatedherein by reference) 10.2 Alimera Sciences, Inc. 2004 Incentive Stock Plan, as amended (filed as Exhibit 10.7 to the Registrant’s Registration Statement onForm S-1 (SEC File No. 333-162782), as filed on October 30, 2009, and incorporated herein by reference) 10.3 Form of Option Certificate under the Alimera Sciences, Inc. 2004 Incentive Stock Plan (filed as Exhibit 10.7.A to the Registrant’sRegistration Statement on Form S-1 (SEC File No. 333-162782), as filed on October 30, 2009, and incorporated herein byreference) 10.4 Alimera Sciences, Inc. 2005 Incentive Stock Plan (filed as Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1(SEC File No. 333-162782), as filed on October 30, 2009, and incorporated herein by reference) 10.5 Form of Option Certificate under the Alimera Sciences, Inc. 2005 Incentive Stock Plan (filed as Exhibit 10.8.A to the Registrant’sRegistration Statement on Form S-1 (SEC File No. 333-162782), as filed on October 30, 2009, and incorporated herein byreference) 10.6 2010 Equity Incentive Plan (filed as Exhibit 10.9 to Amendment No. 4 to the Registrant’s Registration Statement on Form S-1 (SECFile No. 333-162782), as filed on April 6, 2010, and incorporated herein by reference) 10.7 2010 Employee Stock Purchase Plan (filed as Exhibit 10.10 to Amendment No. 4 to the Registrant’s Registration Statement onForm S-1 (SEC File No. 333-162782), as filed on April 6, 2010, and incorporated herein by reference) 10.7.A Amendment No. 1 to 2010 Employee Stock Purchase Plan (filed as Exhibit 10.7.A to the Registrant’s Annual Report on Form 10-K,as filed March 13, 2015, and incorporated herein by reference) 10.8 Management Cash Incentive Plan (filed as Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (SEC File No. 333-162782), as filed on October 30, 2009, and incorporated herein by reference) 10.9 Compensation Program for Non-Employee Directors (filed as Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1(SEC File No. 333-162782), as filed on October 30, 2009, and incorporated herein by reference) 10.10‡ Amended and Restated Collaboration Agreement by and between pSivida, Inc. (f/k/a/Control Delivery Systems, Inc.) and AlimeraSciences, Inc., dated as of March 14, 2008 (filed as Exhibit 10.13 to Amendment No. 5 to the Registrant’s Registration Statementon Form S-1 (SEC File No. 333-162782), as filed on April 16, 2010, and incorporated herein by reference) 10.11* Office Lease by and between Rubicon, L.C. and Alimera Sciences, Inc., dated as of May 27, 2003, as amended on various datesthrough August 14, 2014 10.13 Form of Notice of Stock Option Grant and Stock Option Agreement under 2010 Equity Incentive Plan (filed as Exhibit 10.30 toRegistrant’s Annual Report on Form 10-K, as filed on March 25, 2011, and incorporated herein by reference) 10.15 Form of Notice of Stock Unit Award and Stock Unit Agreement under 2010 Equity Incentive Plan (filed as Exhibit 10.34 toRegistrant’s Annual Report on Form 10-K, as filed on March 30, 2012, and incorporated herein by reference) 10.16‡ Manufacturing Agreement by and between the Registrant and Flextronics Medical Sales and Marketing, Ltd. (filed as Exhibit10.35 to Registrant’s Quarterly Report on Form 10-Q, as filed on August 14, 2012, and incorporated herein by reference) 10.17 Securities Purchase Agreement dated July 17, 2012 (filed as Exhibit 10.36 to the Registrant’s Current Report, as filed on July 18,2012, and incorporated herein by reference) 111Table of Contents10.18 Amendment No. 1 to Securities Purchase Agreement dated September 21, 2012 (filed as Exhibit 10.37 to the Registrant’s CurrentReport, as filed on October 2, 2012, and incorporated herein by reference) 10.19 UK Sub-Plan of the 2010 Equity Incentive Plan of Alimera Sciences, Inc. (filed as Exhibit 10.38 to the Registrant’s QuarterlyReport on Form 10-Q, as filed on November 7, 2012, and incorporated herein by reference and replaced by exhibit 10.46) 10.20 Form of UK Sub-Plan Notice of Stock Option Grant and Stock Option Agreement (filed as Exhibit 10.39 to the Registrant’sQuarterly Report on Form 10-Q, as filed on November 7, 2012, and incorporated herein by reference) 10.21 Form of France Sub-Plan of the 2010 Equity Incentive Plan of Alimera Sciences, Inc. (filed as Exhibit 10.21 to the Registrant’sAnnual Report on Form 10-K, as filed on March 15, 2016, and incorporated herein by reference) 10.22 Employment Contract dated November 3, 2012 by and between the Registrant and Philip Ashman (filed as Exhibit 10.40 to theRegistrant’s Annual Report on Form 10-K, as filed on March 28, 2013) 10.29 Securities Purchase Agreement dated January 27, 2014 (filed as Exhibit 10.42 to the Registrant’s Current Report, as filed onJanuary 28, 2014, and incorporated herein by reference) 10.30 Loan and Security Agreement dated as of April 24, 2014 by and among Alimera Sciences Limited, the several banks and otherfinancial institutions or entities from time to time parties thereto and Hercules Technology Growth Capital, Inc. (filed as Exhibit10.49 to the Registrant’s Quarterly Report on Form 10-Q, as filed on August 11, 2014, and incorporated herein by reference) 10.31 First Amendment to Loan and Security Agreement dated November 2, 2015 by and among Alimera Sciences Limited, HerculesCapital Funding Trust and Hercules Technology Growth Capital, Inc. (filed as Exhibit 10.31 to the Registrant’s Annual Report onForm 10-K, as filed on March 15, 2016, and incorporated herein by reference) 10.32 Unconditional Guaranty entered into as of April 24, 2014 by the Registrant in favor of Hercules Technology Growth Capital, Inc.(filed as Exhibit 10.50 to the Registrant’s Quarterly Report on Form 10-Q, as filed on August 11, 2014, and incorporated herein byreference) 10.33 Unconditional Guaranty entered into as of April 24, 2014 by Alimera Sciences B.V. in favor of Hercules Technology GrowthCapital, Inc. (filed as Exhibit 10.51 to the Registrant’s Quarterly Report on Form 10-Q, as filed on August 11, 2014, andincorporated herein by reference) 10.34 Unconditional Guaranty entered into as of April 24, 2014 by AS C.V. in favor of Hercules Technology Growth Capital, Inc. (filed asExhibit 10.52 to the Registrant’s Quarterly Report on Form 10-Q, as filed on August 11, 2014, and incorporated herein byreference) 10.35 Sales Agreement dated September 22, 2014 (filed as Exhibit 10.53 to the Registrant’s Current Report on Form 8-K, as filed onSeptember 22, 2014, and incorporated herein by reference) 10.36† Amended and Restated Employment Agreement, effective as of October 23, 2014, by and between the Registrant and C. DanielMyers (filed as Exhibit 10.53 to the Registrant’s Current Report on Form 8-K, as filed on October 23, 2014, and incorporated hereinby reference) 10.37† Amended and Restated Employment Agreement, effective as of October 23, 2014, by and between the Registrant and Richard S.Eiswirth, Jr. (filed as Exhibit 10.54 to the Registrant’s Current Report on Form 8-K, as filed on October 23, 2014, and incorporatedherein by reference) 10.38† Amended and Restated Employment Agreement, effective as of October 23, 2014, by and between the Registrant and KennethGreen, Ph.D. (filed as Exhibit 10.55 to the Registrant’s Current Report on Form 8-K, as filed on October 23, 2014, and incorporatedherein by reference) 10.39† Amended and Restated Employment Agreement, effective as of October 23, 2014, by and between the Registrant and DavidHolland (filed as Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K, as filed on March 13, 2015, and incorporatedherein by reference) 10.40 Securities Purchase Agreement dated November 26, 2014 (filed as Exhibit 10.56 to the Registrant’s Current Report on Form 8-K, asfiled on November 28, 2014, and incorporated herein by reference) 10.41‡ First Amended and Restated Commercial Contract Manufacturing Agreement dated as of February 5, 2016 by and between AlimeraSciences, Inc. and Alliance Medical Products, Inc. d.b.a. Siegfried Irvine (filed as Exhibit 10.41 to the Registrant’s Quarterly Reporton Form 10-Q, as filed on May 6, 2016, and incorporated herein by reference) 112Table of Contents10.42 Second Amendment to Loan and Security Agreement dated March 14, 2016 by and among Alimera Sciences Limited, HerculesCapital Funding Trust and Hercules Capital, Inc. f/k/a Hercules Technology Growth Capital, Inc. (filed as Exhibit 10.42 to theRegistrant’s Quarterly Report on Form 10-Q, as filed on May 6, 2016, and incorporated herein by reference) 10.43 Third Amendment to Loan and Security Agreement dated May 26, 2016 by and among Alimera Sciences Limited, Hercules CapitalFunding Trust and Hercules Capital, Inc. f/k/a Hercules Technology Growth Capital, Inc. (filed as Exhibit 10.43 to the Registrant’sCurrent Report on Form 8-K, as filed on May 27, 2016, and incorporated herein by reference) 10.44 Waiver by Hercules Capital, Inc. of Certain Defaults under Loan and Security Agreement dated July 21, 2016 (filed as Exhibit10.45 to the Registrant’s Quarterly Report on Form 10-Q, as filed on November 4, 2016 and incorporated herein by reference) 10.45 Fourth Amendment to Loan and Security Agreement dated October 20, 2016 by and among Alimera Sciences Limited, HerculesCapital Funding Trust and Hercules Capital, Inc. f/k/a/ Hercules Technology Growth Capital, Inc. (filed as Exhibit 10.45 to theRegistrant’s Quarterly Report on Form 10-Q, as filed on November 4, 2016 and incorporated herein by reference) 10.46 (2017) UK Sub-Plan of the 2010 Equity Incentive Plan of Alimera Sciences, Inc. (filed as Exhibit 10.46 to the Registrant’s AnnualReport on Form 10-K, as filed on March 3, 2017, and incorporated herein by reference) 10.47 Forms of Notice of Restricted Stock Unit Award and restricted Stock Unit Agreement under 2010 Equity Incentive Plan for the U.S.,Germany, Portugal and the United Kingdom (filed as Exhibit 10.47 to the Registrant’s Annual Report on Form 10-K, as filed onMarch 3, 2017, and incorporated herein by reference) 10.48 2017 Amendment to Amended and Restated Collaboration Agreement dated May 3, 2017 by and between Alimera Sciences Inc.and pSivida US, Inc. (f/k/a pSivida, Inc.) (filed as Exhibit 10.48 to the Registrant’s Quarterly Report on Form 10-Q, as filed onAugust 8, 2017, and incorporated herein by reference) 10.49 Fifth Amendment to Loan and Security Agreement dated May 5, 2017 by and among Alimera Sciences Limited, Hercules CapitalFunding Trust and Hercules Capital, Inc. f/k/a Hercules Technology Growth Capital, Inc. (filed as Exhibit 10.49 to the Registrant’sQuarterly Report on Form 10-Q, as filed on August 8, 2017, and incorporated herein by reference) 10.50‡ Second Amended and Restated Collaboration Agreement by and between pSivida US Inc. and Alimera Sciences, Inc. dated July 10,2017 (filed as Exhibit 10.23 to pSivida Corp.’s Annual Report on Form 10-K for the year ended June 30, 2017 (SEC File No. 000-51122), as filed September 13, 2017, and incorporated herein by reference) 10.51 Common Stock Sales Agreement by and between Alimera Sciences, Inc. and H.C. Wainwright & Co., LLC dated October 20, 2017(filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on October 20, 2017, and incorporated herein byreference) 10.52‡ Loan and Security Agreement dated as of January 5, 2017, among Alimera Sciences, Inc., Solar Capital Ltd., as Collateral Agent,and the parties signatory thereto from time to time as Lenders, including Solar in its capacity as a Lender (filed as exhibit 10.1 tothe Registrant’s Current Report on Form 8-K, as filed January 8, 2018, and incorporated herein by reference) 10.53 Exit Fee Agreement dated as of January 5, 2018 by and among Alimera Sciences, Inc., Solar Capital Ltd. as collateral agent, and theLenders (filed as exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed January 8, 2018, and incorporated herein byreference) 10.54 Series B Preferred Stock Exchange Agreement, dated as of September 4, 2018, by and among Alimera Sciences, Inc., and DeerfieldSpecial Situations Fund, L.P., Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P. and DeerfieldPrivate Design Fund III, L.P. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed on September 5, 2018and incorporated herein by reference) 10.55 Succession and Consulting Agreement, dated as of November 28, 2018, by and between Alimera Sciences, Inc. and C. Daniel Myers(filed as exhibit 10.1 to the Registrant’s Current Report on Form 8-K, as filed November 29, 2018, and incorporated herein byreference) 10.56 Succession and Consulting Agreement, dated as of November 28, 2018, by and between Alimera Sciences, Inc. and Kenneth Green,Ph.D. (filed as exhibit 10.2 to the Registrant’s Current Report on Form 8-K, as filed November 29, 2018, and incorporated herein byreference) 21.1* List of subsidiaries of the Registrant (including jurisdiction of organization and names under which subsidiaries do business)113Table of Contents 23.1* Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm 31.1* Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of the Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certifications of the Chief Executive Officer and Chief Financial Officer as required by 18 U.S.C. 1350 101.INS+* XBRL Instance Document 101.SCH+* XBRL Taxonomy Extension Schema Document 101.CAL+* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF+* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB+* XBRL Taxonomy Extension Label Linkbase Document 101.PRE+* XBRL Taxonomy Extension Presentation Linkbase Document __________________†Compensation Arrangement.‡Confidential treatment has been granted with respect to certain portions of this document.*Filed herewith.114Table of ContentsSignaturesPursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this annualreport on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Alpharetta, Georgia, on February 25, 2019. ALIMERA SCIENCES, INC. By:/s/ Richard S. Eiswirth, Jr. Name:Richard S. Eiswirth, Jr. Title:President and Chief Executive OfficerPursuant to the requirements of the Securities Act of 1934, this annual report on Form 10-K has been signed below by the following persons on behalfof the registrant and in the capacities and on the dates indicated. Signature Title Date/s/ Richard S. Eiswirth, Jr.Richard S. Eiswirth, Jr. President, Chief Executive Officer and Director (PrincipalExecutive Officer) February 25, 2019/s/ J. Philip JonesJ. Philip Jones Chief Financial Officer (Principal Financial and AccountingOfficer) February 25, 2019/s/ C. Daniel MyersC. Daniel Myers Chairman of the Board of Directors February 25, 2019/s/ James LargentJames Largent Lead Independent Director February 25, 2019/s/ Mark J. BrooksMark Brooks Director February 25, 2019/s/ Brian K. HalakBrian K. Halak, Ph.D. Director February 25, 2019/s/ Garheng KongGarheng Kong, M.D., Ph.D. Director February 25, 2019/s/ Peter J. Pizzo, IIIPeter J. Pizzo, III Director February 25, 2019/s/ Calvin W. RobertsCalvin W. Roberts, M.D. Director February 25, 2019/s/ Mary T. SzelaMary T. Szela Director February 25, 2019115Exhibit 10.11OFFICE LEASERUBICON IN WINDWARD6120 WINDWARD PARKWAYALPHARETTA, GEORGIA 30005 Landlord: Rubicon, L.C.; a Georgia Limited Liability Company Tenant: Alimera Sciences, Inc. Date: May 27, 2003  TABLE OF CONTENTS SECTION Demising clause Term 1. Rent2. Services3. Quiet Enjoyment4. Certain Rights Reserved To The Landlord5. Estoppel Certificates6. Indemnification And Waiver Of Certain Claims7. Liability Insurance8. Holding Over9. Assignment And Subletting10. Condition Of Premises11. Use Of Premises12. Repairs13. Untenantability14. Eminent Domain15. Landlord’s Remedies16. Subordination Of Lease17. Commencement Of Possession18. Notices And Consents19. No Estate In Land20. Invalidity Of Particular Provisions21. Miscellaneous Taxes22. Security Deposit23. Substitute Premises24. Brokerage25. Limitation Of Liability26. Special Stipulations27. Attorney’s Fees28. Construction Of Lease29. Entire Agreement30. Interpretation And Enforcement31. Rider32. Exhibits Exhibit “A” - the Premises Exhibit “B”-Rider Exhibit “C” -Rules and Regulations  RUBICON IN WINDWARDLEASE AGREEMENT This agreement (“Lease”), made and entered into as of this 27 day of May, 2003, by and between Rubicon, L.C., a Georgia limited liability company(“Landlord”) and Alimera Sciences, Inc. (“Tenant”);WITNESSETH: Landlord, for and in consideration of the rents, covenants, agreements, and stipulations hereinafter mentioned, reserved and contained, to be paid, kept andperformed by the Tenant, and by these presents does lease and rent unto the said Tenant, and said Tenant hereby agrees to lease and take upon the terms andconditions which hereinafter appear, the premises (“Premises”) as shown either outlined or with cross-hatched lines on Exhibit “A” attached hereto andincorporated herein, known as Suite 290 , in the office building (the “Building”) — referred to sometimes herein as “Rubicon in Windward”. The Premises issituated on the 2nd floor(s) of the Building and contains approximately 5,079 rentable square feet. The Building, together with the land containingapproximately ten (10) acres on which it is located and all other improvements thereon — sometimes referred to herein as the “Property” and sometimes asthe “Project” — is located at 6120 Windward Parkway in Alpharetta, Georgia 30005. The term of this Lease shall be for a period of Three (3) Years beginning on June 1, 2003, and ending at midnight May 31, 2006 hence, except as otherwiseexpressly provided in this Lease. The term (“Term”) of this Lease shall be for a period of: A) If the Commencement Date occurs on the first day of theCalendar month: 3 years beginning on the Commencement Date and ending at midnight on the day preceding the 3rd anniversary of the CommencementDate; B) if the Commencement Date occurs on any other day of the Calendar month: 3 years and the remainder of the partial month during which theanniversary date of the Commencement Date occurs, beginning on the Commencement Date and ending at midnight on the last day of the calendar monthduring which the 3rd anniversary of the Commencement Date occurs; except as otherwise expressly provided in this Lease. The term “Commencement Date” shall mean and refer to the date of the beginning of the Lease as set forth above, except as otherwise set forth in section17 hereof. The Premises are to be used for general office use and related purposes and for no other purpose without the prior written consent of Landlord.1. RENT (a) The Tenant shall pay to the Landlord as Base Rent, in legal tender, at the Landlord’s office as set forth in Exhibit “B”, or as directed from time to timeby Landlord’s notice, the annual amount set forth in Exhibit “B” payable in equal monthly payments as set forth in Exhibit “B” promptly on the first day ofevery calendar month of the term, except for the first month’s rent which is due and payable on execution of this Lease, and pro rata, in advance for anypartial month, without demand, the same being hereby waived and without any set-off or deduction whatsoever. For any rent payment not made when due,Tenant shall pay — except as otherwise provided for herein — a late charge equal to the greater of: i) $100.00 or ii) ten percent (10%) of the overdue amount.The parties agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of such late payment. Thecovenants herein to pay a late charge shall be independent of any other covenant set forth in this Lease and shall be paid without deduction or set-off. (b) It is understood that the Base Rent specified in Paragraph (a) was negotiated in anticipation that the amount of Operating Expenses on the Propertywould not exceed $271,970.00 during any calendar year of the term hereof. Therefore, in order that the rental payable throughout the term of the Lease shallreflect any increase in such costs, the parties agree as hereinafter in this Section set forth. The annual Base Rent payable pursuant to Paragraph (a) as increasedpursuant to Paragraph (b) of this Section is hereinafter called the “Rent”. Certain terms are defined as follows: Tenant’s Share: The amount of Tenant’s pro rata share of the increase in Taxes and Operating Expenses over $271,970.00 during each calendar year.Tenant’s pro rata share of such increase is agreed to be 10% . (A) Operating Expenses shall consist of all expenses, costs and disbursements (but not specific costs billed to specific tenants of the Property) of everykind and nature, computed on the accrual basis, relating to or incurred or paid in connection with the ownership and operation of the Property, including butnot limited to, the following: (i) wages and salaries of all on and off-site employees engaged in the operation, maintenance or access control of the Property, including taxes, insuranceand benefits relating to such employees, allocated1based upon the time such employees are engaged directly in providing such services; (ii) all supplies, tools, equipment and materials used in the operation and maintenance of the Property; (iii) cost of all utilities for the Property including but not limited to the cost of water and power for heating, lighting, air conditioning and ventilating inthe common areas; (iv) cost of all maintenance and service agreements for the Property and the equipment therein, including but not limited to security service, garageoperators, window cleaning, elevator maintenance, janitorial service and landscaping maintenance; (v) cost of management, not to exceed five per cent (5%), of actual base rent received; (vi) cost of repairs and general maintenance of the Property (excluding repairs, alterations and general maintenance paid by proceeds of insurance orattributable solely to tenants of the Property other than Tenant); (vii) amortization (together with reasonable financing charges) of the cost of installation of capital investment items which are installed for the purpose ofreducing operating expenses, promoting safety, complying with governmental requirements or maintaining the first class nature of the Property, other thancapital items installed in connection with Lessor’s initial construction of the Property; (viii) the cost of all insurance on the Property, including, but not limited to, the cost of casualty, rental abatement and liability insurance applicable to theProperty and Lessor’s personal property used in connection therewith; and (ix) all taxes, assessments and governmental charges, whether or not directly paid by Lessor, whether federal, state, county or municipal and whether theybe by taxing districts or authorities presently taxing the Property or by other subsequently created or otherwise, and any other taxes and assessmentsattributable to the Property or its operation, excluding, however, federal and state taxes on income, death taxes, franchise taxes, and any taxes imposed ormeasured on or by the income of Lessor from the operation of the Property or imposed in connection with any change of ownership of the Property; provided,however, that if at any time during the term of this Lease, the present method of taxation or assessment shall be so changed that the whole or any part of thetaxes, assessments, levies, impositions or charges now levied, assessed or imposed on real estate and the improvements thereof shall be discontinued and as asubstitute therefor, or in lieu of an addition thereto, taxes, assessments, levies, impositions or charges shall be levied, assessed and/or imposed wholly orpartially as a capital levy or otherwise on the rents received from the Property or the rents reserved herein or any part thereof, then such substitute oradditional taxes, assessments, levies, impositions or charges, to the extent so levied, assessed or imposed, shall be deemed to be included within the operatingexpenses to the extent that such substitute or additional tax would be payable if the Property were the only property of the Lessor subject to such tax. (B) In order to provide for current payments on account of an increase in the annual Operating Expenses in excess of $271,970.00 , the Tenant agrees, atLandlord’s request, to pay, as additional rent, Tenant’s Share due for the ensuing twelve (12) months, as estimated by Landlord from time to time, in twelve(12) monthly installments, each in an amount equal to 1/12th of Tenant’s Share so estimated by Landlord commencing on the first day of the monthfollowing the month, in which Landlord notifies Tenant of the amount of such estimated Tenant’s Share. If, as finally determined, Tenant’s Share shall begreater than or be less than the aggregate of all installments so paid on account to the Landlord for such twelve (12) month period, then Tenant shall pay toLandlord the amount of such underpayment, or the Landlord shall credit Tenant for the amount of such overpayment, as the case may be. It is the intentionhereunder to estimate the amount of Operating Expenses for each year and then to adjust such estimate in the following year based on actual OperatingExpenses incurred and/or paid by Landlord. The obligation of the Tenant with respect to the payment of Rent shall survive the termination of this Lease. Anypayment, refund, or credit made pursuant to this Paragraph (b) shall be made without prejudice to any right of the Tenant to dispute the statement underParagraph (d) of this Section, or of the Landlord to correct, any item(s) as billed pursuant to the provisions hereof. If the term remaining is less than a fullcalendar year, then Tenant shall only owe the increase in the Operating Expenses for the full year appropriately adjusted for the period remaining in theTenant’s Term. (C) Upon receipt of the Landlord’s statement, Tenant does hereby covenant and agree promptly to pay the increases in Rent pursuant to Paragraph (b) ofthis Section as and when the same shall become due and payable, without further demand therefore, and without any set-off or deduction whatsoever. Failureto give such statement shall not constitute a waiver by Landlord of its right to require an increase in Rent pursuant to the provisions hereof. (D) Within thirty (30) days after receipt of such statement, Tenant or its authorized employee shall have the right to inspect the books of Landlord atreasonable times during the business hours of Landlord at Landlord’s office in the2Building or, at Landlord’s option, at such other location that Landlord may specify, for the purpose of verifying information in such statement. Unless Tenantasserts specific errors within thirty (30) days after delivery of such statement, the statement shall be deemed to be correct. Such inspection or audit shall beconducted by Tenant or tenant’s employee or Tenant’s auditor; but in no event shall the audit be conducted by a third party whose compensation iscontingent upon the results of such audit or the amount of any refund received by Tenant. Tenant hereby agrees to keep the results of any such auditconfidential and to require Tenant’s auditor and its employees and each of their respective attorneys and advisors to likewise keep the results of such audit instrictest confidence. In particular, but without limitation, Tenant agrees that: (i) Tenant shall not disclose the results of any such audit to any past, current, orprospective tenant of the Property, and (ii) Tenant shall require, that its auditors, attorneys and anyone associated with such parties shall not disclose theresults of such audit to any past, current or prospective tenant in the Property; provided, however, that Landlord hereby agrees that nothing in items (i) or(ii) above shall preclude Tenant from disclosing the results of such audit in any judicial proceeding, or pursuant to any court order or discovery request, or toany agent, representative, or employee or Landlord who or which request the same. (E) No decrease in Operating Expenses shall reduce Tenant’s Rent below the annual Base Rent set forth in Paragraph (a) of this Section. (F) All costs and expenses which Tenant assumes or agrees to pay to Landlord pursuant to this Lease shall be deemed additional rent and, in the event ofnon-payment thereof, Landlord shall have all the rights and remedies herein provided for in case of non-payment of Rent.2. SERVICES As long as Tenant is not in default under any of the covenants or provisions of this Lease, Landlord shall maintain the Premises and the public andcommon areas of the Property, such as lobbies, stairs, atriums, landscaping, corridors and restrooms in good order and condition except for damageoccasioned by the act of Tenant, its employees, agents or invitees, and Landlord shall also provide the following services during reasonable and usualbusiness hours for the term of this Lease as follows: (a) Air conditioning and heat for normal purposes only, to provide in Landlord’s judgment, comfortable occupancy Monday through Friday from 8:00 a.m.to 6:00 p.m. and Saturday from 8:00 a.m. to 12:00 p.m., Sundays and holidays excepted. Tenant agrees not to use any apparatus or device, in or upon or aboutthe Premises which in any way may increase the amount of such services usually furnished or supplied to tenants in the Building, and Tenant further agreesnot to connect any apparatus or device with the conduits or pipes, or other means by which such services are supplied, for the purpose of using additional orunusual amounts of such services, without written consent of Landlord. Should Tenant use such services under this provision to excess, Landlord reserves theright to charge for such services. The charge shall be payable as additional rental. Should Tenant refuse to make payment upon demand of Landlord, suchexcess charge shall constitute a breach of the obligation to pay rent under this Lease and shall entitle Landlord to the rights hereinafter granted for suchbreach. (b) Electric power for lighting and operation of office machines, air conditioning and heating as may be required for comfortable occupancy of thePremises between Monday and Friday from 8:00 a.m. to 6:00 p.m., and Saturday from 8:00 a.m. to 12:00 p.m., Sundays and holidays excepted. Electric powerfurnished by the Landlord is intended to be that consumed in normal office use for lighting, heating, ventilating, air-conditioning and small office machines.Landlord reserves the right, if consumption of electricity exceeds that required for normal office use as specified, to include a charge for such electricity as anaddition to the monthly rental with such charge to be based upon the average cost per unit of electricity for this Building applied to the excess use asdetermined by an independent engineer selected by the Landlord, or at Landlord’s option, to be determined by a submeter to be furnished and installed atTenant’s expense. If the Tenant refuses to pay upon demand of Landlord such excess charge, such refusal shall constitute a breach of the obligation to payrent under this Lease and shall entitle Landlord to the rights hereinafter granted for such breach. (c) Lighting replacement, public restroom supplies, window washing with reasonable frequency, and janitor service to the Premises during the times and inthe manner that such janitor services are customarily furnished in general office buildings in the area. (d) Taxes and insurance on the Premises, except as otherwise provided herein. (e) Parking will be provided on the parking lots on the Property on an unallocated basis, unless Landlord, within its discretion assigns reserved spaces tosome or all tenants or other parties. (f) Landlord agrees to maintain the exterior and interior of the Building and Property to include lawn and shrub care, snow removal, maintenance of thestructure, roof, mechanical and electrical equipment, architectural finish, security, and so on, excluding only those items specifically excepted elsewhere inthe Lease.3(g) Landlord may (i) close the Building during the period from: 6:00 p.m. until the following 7:00 a.m. each weekday; (ii) open the Building at 8:00 a.m. andclose the Building at 12:00 p.m. on Saturday, (iii) close the Building all day Sunday, and reopen the following Monday morning at 7:00 am, (iii) close theBuilding all holidays, or (iv) close the Building at such other hours as Landlord may from time to time reasonably determine; after which hour admittancemay be gained only under such regulations as may from time to time be prescribed by Landlord. (h) Passenger elevator service, if normally provided for Building, daily from 7:00 a.m. to 6:00 p.m., and Saturday from 8:00 a.m. to 12:00 p.m., Sunday andholidays excepted. Automatic elevator service shall be deemed “elevator services” within the meaning of this paragraph. Landlord shall make reasonable effort to provide the foregoing services, but in any event, shall not be liable for damages, nor shall the rental hereinreserved be abated for failure to furnish or any delay in furnishing any of the foregoing services when there are disturbances or labor disputes of any character,or by inability to secure electricity, fuel, supplies, machinery, equipment or labor, or by the making of necessary repairs or improvements to Premises, orunavailability of utilities due to governmental restrictions or any other conditions beyond Landlord’s control nor shall the temporary failure to furnish any ofsuch services be construed as an eviction of Tenant or relieve Tenant from the duty of observing and performing any of the provisions of this Lease, providedLandlord uses reasonable efforts to cure such interruption.3. QUIET ENJOYMENT So long as the Tenant shall observe and perform the covenants and agreements binding on it hereunder, the Tenant shall, at all times during the termherein granted, peacefully and quietly have and enjoy possession of the Premises without any encumbrance or hindrance by, from or through the Landlord.4. CERTAIN RIGHTS RESERVED TO THE LANDLORD The Landlord reserves the following rights: (a) To name the Building and to change the name or street address of the Building. (b) To install and maintain a sign or signs on the exterior or interior of the Building. (c) To designate, limit, restrict or prohibit all sources furnishing sign painting and lettering, ice, drinking water, towels, toilet supplies, shoe shining,vending machines, mobile vending service, catering, and like services used on the Premises or in the Building. (d) During the last ninety (90) days of the term, if during or prior to that time the Tenant vacates the Premises, to decorate, remodel, repair, alter orotherwise prepare the Premises for reoccupancy, without affecting Tenant’s obligation to pay rental for the Premises. (e) To constantly have pass keys to the Premises. (f) On reasonable prior notice to the Tenant, to exhibit the Premises to prospective tenants during the last twelve (12) months of the term, and to anyprospective purchaser, mortgagee, or assignee of any mortgage on the Property and to others having a legitimate interest at any time during the term. (g) At any time in the event of an emergency, and otherwise at reasonable times, to take any and all measures, including inspections, repairs, alterations,additions and improvements to the Premises or to the Building, as may be necessary or desirable for the safety, protection or preservation of the Premises orthe Building or the Landlord’s interests, or as may be necessary or desirable in the operation or improvement of the Building or in order to comply with alllaws, orders and requirements of governmental or other authority. (h) To install vending machines of all kinds in the Premises, and to provide mobile vending service therefore, and to receive all of the revenue derivedtherefrom, provided, however, that no vending machines shall be installed by Landlord in the Premises nor shall any mobile vending service be providedtherefore, unless Tenant so requests.5. ESTOPPEL CERTIFICATES The Tenant shall, within ten (10) days after written request of Landlord, execute, acknowledge, and deliver to the Landlord or to Landlord’s mortgagee,proposed mortgagee, Land Lessor or proposed purchaser of the Property or any part thereof, any estoppel certificates requested by Landlord from time to time,which estoppel certificates shall show whether the Lease is in full force and effect and whether any changes may have been made to the original Lease;whether the term of the Lease has commenced and full rental is accruing; whether there are any defaults by Landlord4and, if so, the nature of such defaults, whether possession has been assumed and all improvements to be provided by Landlord have been completed; andwhether rent has been paid more than thirty (30) days in advance and that there are no liens, charges, or offsets against rental due or to become due and thatthe address shown on such estoppel is accurate.6. INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS (a) The Tenant, to the extent permitted by law, waives all claims it may have against the Landlord, and against the Landlord’s agents and employees fordamage to person or property sustained by the Tenant or by any occupant of the Premises, or by any other person, resulting from any part of the Property orany equipment or appurtenances becoming out of repair, or resulting from any accident in or about the Property or resulting directly or indirectly from anyact or neglect of any tenant or occupant of any part of the Property or of any other person, unless such damage is a result of the negligence of Landlord, orLandlord’s agents or employees, subject, however, to the provisions of paragraph (b) below. If any damage results from any act or neglect of the Tenant, theLandlord may, at the Landlord’s option, repair such damage and the Tenant shall thereupon pay to the Landlord the total cost of such repair. All personalproperty belonging to the Tenant or any occupant of the Premises that is in or any part of the Property shall be there at the risk of the Tenant or of such otherperson only, and the Landlord, its agents and employees shall not be liable for any damage thereto or for the theft or misappropriation thereof. The Tenantagrees to hold the Landlord harmless and indemnified against claims and liability for injuries to all persons and for damage to or loss of property occurring inor about the Property, due to any negligent act or failure to act by the Tenant, its contractors, agents or employees, or default by Tenant under this Lease. (b) Landlord shall not be liable for any damage or loss to fixtures, equipment, merchandise or other personal property of Tenant located anywhere in or onthe leased Premises caused by theft, fire, water, explosion, sewer backup or any other hazards, regardless of the cause thereof, and Tenant does herebyexpressly release Landlord of and from any and all liability for such damages or loss. Landlord shall not be liable for any damage or loss resulting frombusiness interruption at the leased Premises and Tenant does hereby expressly release Landlord of and from any and all liability for such damages or loss.Landlord shall not be liable for any damages to the leased Premises or any part thereof caused by fire or other insurable hazards, regardless of the causethereof, and Tenant does hereby expressly release Landlord of and from any and all liability for such damages or loss. To the extent that any of the risks orperils described in this paragraph (b) are in fact covered by insurance, each party shall cause its insurance carriers to waive all rights of subrogation againstthe other party.7. LIABILITY INSURANCE Tenant shall, at its expense, maintain during the term, comprehensive public liability insurance, contractual liability insurance and property damageinsurance under policies issued by insurers of recognized responsibility, with limits of not less than $500,000 for personal injury, bodily injury, death, or fordamage or injury to or destruction of property (including the loss of use thereof) for any one occurrence. Tenant’s policies shall name Landlord, its agents,servants and employees as additional insureds. Tenant shall furnish at Landlord’s request, a certificate evidencing such coverage.8. HOLDING OVER Unless otherwise agreed to in writing by Landlord and Tenant, if the Tenant retains possession of the Premises or any part thereof after the termination ofthe term, the Tenant shall pay the Landlord Rent at double the monthly rate in effect immediately prior to the termination of the term for the time the Tenantthus remains in possession and, in addition thereto, Tenant shall pay the Landlord for all damages, consequential as well as direct, sustained by reason of theTenant’s retention of possession. The provisions of this Section do not exclude the Landlord’s rights of re-entry or any other right hereunder. No suchholding over shall be deemed to constitute a renewal or extension of the term hereof.9. ASSIGNMENT AND SUBLETTING The Tenant shall not, without the Landlord’s prior written consent, (a) assign, convey, mortgage, pledge, encumber or otherwise transfer (whethervoluntarily or otherwise) this Lease or any interest under it; (b) allow any transfer thereof by operation of law; (c) sublet the Premises or any part thereof, or(d) permit the use or occupancy of the Premises or any part thereof by anyone other than the Tenant. If the assignment, transfer, or subletting is approved and rents under the sublease are greater than the rents provided for herein, then landlord shall have thefurther option either (a) to convert the sublease into a prime lease and receive all of the rents, in which case Tenant will be relieved of further liabilityhereunder and under the proposed sublease, or (b) to require Tenant to remain liable under this Lease, in which event Tenant shall be entitled to retain suchexcess rents. If this Lease is assigned or if the Premises or any part thereof are sublet or occupied by anybody other than the5Tenant, Landlord may, after default by Tenant, collect rent from the assignee, subtenant or occupant, and apply the net amount collected to the Rent hereinreserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of any of the Tenant’s covenants contained in this Lease orthe acceptance of such assignee, subtenant or occupant as Tenant, or a release of Tenant from further performance by tenant of covenants on the part ofTenant herein contained.10. CONDITION OF PREMISES Except as otherwise agreed to in writing, Tenant’s taking possession of the Premises shall be conclusive evidence as against the Tenant that the Premiseswere in good order and satisfactory condition when the Tenant took possession. No promise of the Landlord to alter, remodel, repair or improve the Premisesor the Building and no representation respecting the condition of the Premises or the Building have been made by Landlord to Tenant, other than as may becontained herein or in a separate agreement signed by Landlord and Tenant. Tenant shall, at the termination or expiration of this Lease or upon Tenant’sabandonment of the Premises, (i) surrender the Premises to Landlord in broom-clean and in good condition and repair, and if not returned to Landlord inbroom-clean and good condition, then Tenant shall pay Landlord the cost to restore the Premises to broom-clean and good condition and repair thereof onLandlord’s demand; (ii) return all keys to Landlord; (iii) at its sole expense, remove any equipment which may cause contamination of the property;(vi) clean up any existing contamination in compliance with all Environmental Requirements; and (v) leave the Premises totally free of any HazardousSubstances.11. USE OF PREMISES The Tenant agrees to comply with the following rules and regulations and with such reasonable modifications thereof and additions thereto as theLandlord may hereafter from time to time make for the Building. The Landlord shall not be responsible for the nonobservance by any other tenant or any ofsaid rules and regulations. (a) The Tenant shall not exhibit, sell or offer for sale on the Premises or in the Building any article or thing except those articles and things essentiallyconnected with the stated use of the Premises by the Tenant without the advance consent of the Landlord. (b) The Tenant will not make or permit to be made any use of the Premises or any parts thereof which would violate any of the covenants, agreements,terms, provisions and conditions of this Lease or which directly or indirectly is forbidden by public law, ordinance or governmental regulation or which maybe dangerous to life, limb or property, or which may invalidate or increase the premium cost of any policy of insurance carried on the Building or covering itsoperation, or which will suffer or permit the Premises or any part thereof to be used in any manner or anything to be brought into or kept therein which, in thejudgment of Landlord, shall in any way impair or tend to impair the character, reputation or appearance of the Property as a high quality office building, orwhich will impair or interfere with any of the services performed by Landlord for the Property. (c) The Tenant shall not display, inscribe, print, paint, maintain or affix on any place in or about the Building any sign, notice, legend, direction, figure oradvertisement, except on the doors of the Premises and on the Directory Board, and then only such name(s) and matter, and in such color, size, place andmaterials, as shall first have been approved by the Landlord. The listing of any name other than that of the Tenant, whether on the doors of the Premises, onthe Building directory, or otherwise, shall not operate to vest any right or interest in this Lease or in the Premises or be deemed to be the written consent ofLandlord mentioned in Section 9, it being expressly understood that any such listing is a privilege extended by Landlord revocable at will by written noticeto Tenant. (d) The Tenant shall not advertise the business, profession or activities of the Tenant conducted in the Building in any manner which violates the letter orspirit of any code of ethics adopted by any recognized association or organization pertaining to such business address of the Tenant, and shall never use anypicture or likeness of the Building in any circulars, notices, advertisements or correspondence without the Landlord’s consent. (e) No additional locks or similar devices shall be attached to any door or window without Landlord’s prior written consent. No keys for any door otherthan those provided by the Landlord shall be made. If more than two keys for one lock are desired, the Landlord will provide the same upon payment by theTenant. All keys and key cards must be returned to the Landlord at the expiration or termination of the Lease. Tenant shall pay Landlord Landlord’s actualcost for any key cards furnished to Tenant to provide Tenant access to the Building after ordinary hours of operation. (f) The Tenant shall not make any alterations, improvements or additions to the Premises including, but not limited to, wall coverings and special lightinginstallations, without the Landlord’s advance written consent in each and every instance. In the event Tenant desires to make any alterations, improvementsor additions; Tenant shall first submit to Landlord Plans and Specifications therefor and obtain Landlord’s written approval thereof prior to commencing anysuch work. All alterations, improvements or additions, whether temporary or permanent in character, made by Landlord or Tenant in or upon the Premisesshall become Landlord’s property and shall remain upon the Premises at the termination6of this Lease without compensation to Tenant (except only Tenant’s movable office furniture, trade fixtures, office and professional equipment). Any damagecaused by or resulting from the removal of Tenant’s office furniture, trade fixtures, and office and professional equipment may be repaired by the Landlord atTenant’s cost and expense. (g) All persons entering or leaving the Building after hours on Monday through Friday, or at any time on Saturdays, Sundays, or holidays, may be requiredto do so under such regulations as the Landlord may impose. The Landlord may exclude or expel any peddler. (h) The Tenant shall not overload any floor. The Landlord may direct the time and manner of delivery, routing and removal, and the location, of safes andother heavy articles. (i) Unless the Landlord gives advance written consent, the Tenant shall not install or operate any steam or internal combustion engine, boiler, machinery,refrigerating or heating device or air-conditioning apparatus in or about the Premises, or carry on any mechanical business therein, or use the Premises forhousing accommodations or lodging or sleeping purposes, or do any cooking therein, or use any illumination other than electric light, or use or permit to bebrought into the Building any inflammable fluids such as gasoline, kerosene, naphtha, and benzine, or any explosives, radioactive materials or other articlesdeemed extra hazardous to life, limb or property. The tenant shall not use the Premises for any illegal or immoral purpose. (j) The Tenant shall cooperate fully with the Landlord to assure the effective operation of the Building’s common area air conditioning and heatingsystem; and leave closed, except for purposes of ingress and egress, the doors from the Premises to the common area hallways, and the entrance doors to theBuilding when the common area’s air-conditioning and heating system is in use. (k) The Tenant shall not contract for any work or service which might involve the employment of labor incompatible with the building employees oremployees of contractors doing work or performing services by or on behalf of the Landlord. (l) The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by the Tenant or used for any purpose other than foringress to and egress from its Premises. The halls, passages, exits, entrances, elevators, stairways and roof are not for the use of the general public and theLandlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of the Landlord, shall beprejudicial to the safety, character, reputation and interests of the Building and its tenants, provided that nothing herein contained shall be construed toprevent such access to persons with whom the Tenant normally deals in the ordinary course of Tenant’s business unless such persons are engaged in illegalactivities. Neither Tenant nor any employees or invitees of Tenant shall go upon the roof or mechanical floors of the Building. (m) Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to beoccupied or used in manner offensive or objectionable to the Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, orinterfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Property. (n) Tenant shall see that all doors, and windows, if operable, of the Premises are closed and securely locked before leaving the Building and must observestrict care and caution that all water faucets or water apparatus in the Premises are entirely shut-off before Tenant or Tenant’s employees leave the Building,so as to prevent waste or damage. (o) Tenant agrees that it will not violate any Environmental Requirements or cause or permit any Hazardous Substances to be present, generated, treated,stored, released, used or disposed of in, on, at or under the Premises, Building, or Project. Notwithstanding the foregoing, Tenant may, upon written consentof Landlord (which may be granted or withheld in Landlord’s sole discretion) and solely as an incident to its business operations, use certain materials andsubstances which may contain Hazardous Substances provided that same are of a type and in the quantities customarily found or used in similar officeenvironments, such as packaging materials, commercial cleaning fluids, photocopier fluids and similar substances and further provided that all such use is intotal compliance with all Environmental Requirements. Tenant covenants and agrees to defend, indemnify, and hold harmless Landlord and beneficiaries,Landlord’s lenders or mortgage holders, officers, directors, servants, agents, successors, assigns, and employees thereof, respectively (collectively,“Landlord’s Affiliates”), both in their capacities as corporate representatives and as individuals, from and against any and all liabilities, actions,responsibilities, obligations, environmental impairment damages, fines, losses, damages, and claims, and all costs and expenses (including but not limited toattorneys’ fees and expenses) (collectively, “Losses”) in any manner whatsoever incurred, which: i) relate in any way to Tenant’s failure or alleged failure tocomply with any Environmental Requirements; ii) related to the actual or threatened release, generation, treatment, presence, storage, use, or disposition ofany Hazardous Substances, pollutants, or contaminants which have resulted from or are related to Tenant’s activities on the Premises; iii) the violation orthreatened violation of Tenant’s covenants herein; or iv) otherwise arise pursuant to any Environmental Requirements.7 (p) Tenant shall also comply with Rules and Regulations as set forth in Exhibit “C”. The term “Environmental Requirements” shall mean all federal, state, and local laws (including the common law), statutes, ordinances, rules, regulations,and other requirements (including, without limiting the generality of the foregoing, judicial orders, administrative orders, consent agreements, and permitconditions) now or hereafter promulgated, relating to health, safety, welfare, hazardous substances as defined in Section 3.5 of this Lease, or the protection ofthe environment. The term “Hazardous Substances” shall mean all substances, elements, materials, compounds, wastes, or byproducts of whatever kind or nature defined orclassified as hazardous, dangerous, toxic, radioactive, or restricted under any Environmental Requirements now or hereafter promulgated, or as amended,(including, without limiting the generality of the foregoing. The Comprehensive Environmental Response, Compensation, and Liability Act; The ToxicSubstances Control Act; The Resource Conservation and Recovery Act; Rules and Regulations of the Environmental Protection Agency; The Clean WaterAct; The Clean Air Act; Superfund Amendments and Reauthorization Act). In addition to all other liabilities for breach of any covenant of this Section, the Tenant shall pay to the Landlord an amount equal to any increase ininsurance premiums payable by the Landlord or any other tenant in the Building, caused by such breach. Tenant, on its own behalf and on behalf of its successors and assigns, hereby releases and forever discharges Landlord and Landlord’s Affiliates, both intheir capacities as corporate representatives and as individuals, for any and all Losses, whether now or hereafter claimed or known, which Tenant now has ormay have in the future against the Landlord arising from or relating in any way to releases or threatened releases of Hazardous Substances or violation of anyEnvironmental Requirement which may occur as a result of Tenant’s activities on the Premises, or which arise from Tenant’s failure or alleged failure tocomply with any Environmental Requirements.12. REPAIRS Tenant shall give to Landlord prompt written notice of any damage, or defective condition, of any part or appurtenance of the Building’s plumbing,electrical, heating, air-conditioning or other systems serving, located in, or passing through the Premises. Subject to the provisions of Sections 2 and 13, theTenant shall, at the Tenant’s own expense, keep the Premises in good order, condition and repair during the term, and the Tenant, at the Tenant’s expense,shall comply with all laws and ordinances and all rules and regulations of all governmental authorities and of all insurance bodies at any time in force,applicable to the Premises or to the Tenant’s use thereof, except that the Tenant shall not hereby be under any obligation to comply with any law, ordinance,rule or regulation requiring any structural alteration of or in connection with the Premises, unless such alteration is required by reason of a condition whichhas been created by, or at the instance of, the Tenant, or is required by reason of a breach of any of the Tenant’s covenants and agreements hereunder.Landlord shall not be required to repair any injury or damage by fire or other cause, or to make any repairs or replacements of any panels, decoration, officefixtures, railing, ceiling, floor covering, partitions, or any other property installed in the Premises by the Tenant.13. UNTENANTABILITY In the event the Premises, Building or Project are damaged by fire or other insured casualty and the insurance proceeds have been made available thereforeby the holder or holders of any mortgages or deeds of trust, the damage shall be repaired by and at the expense of Landlord to the extent of such insuranceproceeds available therefore, provided such repairs can, in Landlord’s sole opinion, be made within one hundred twenty (120) days after the occurrence ofsuch damage without the payment of overtime or other premiums. Until such repairs are completed, the rent shall be abated in proportion to the part of thePremises which is unusable by Tenant in the conduct of its business. If repairs cannot, in Landlord’s sole opinion be made within one hundred twenty (120)days, Landlord may at its option make these within a reasonable time and, if agreed to by Tenant, this Lease shall continue in effect. In the case of repairs,which in Landlord’s opinion cannot be made within one hundred twenty (120) days Landlord shall notify Tenant within thirty (30) days of the date ofoccurrence of such damage as to whether or not Landlord elects to make such repairs and if no such repairs and if no such notice is given, Landlord shall bedeemed to have elected to make such repairs. If Landlord elects not to make such repairs or if said repairs cannot be made within one hundred twenty(120) days of notice, then either party may, by written notice to the other, cancel this Lease as of the date of the occurrence of such damage and Tenant mustvacate the Premises within thirty (30) days of such notice. Except as provided in this Section, there shall be no abatement of rent and no liability of Landlordby reason of any injury to, damage or interference with Tenant’s business or property arising from any such fire or other casualty or from the making or notmaking of any repairs, alterations or improvements in or to any portion of the Premises, Building or Project or in or to fixtures, appurtenances and equipmenttherein. Tenant understands that Landlord will not carry insurance of any kind on Tenant’s furniture or furnishings or on any fixtures or equipment removableby Tenant under the provisions of this Lease8and that Landlord shall not be obliged to repair any damage thereto or replace the same. Landlord shall not be required to repair any injury or damage causedby fire or other cause, or to make any repairs or replacements to or of improvements installed in the Premises by or for Tenant.14. EMINENT DOMAIN (a) In the event that title to the whole or any part of the Premises shall be lawfully condemned or taken in any manner for any public or quasi-public use,this Lease and the term and estate hereby granted shall forthwith cease and terminate as of the date of vesting of title and the Landlord shall be entitled toreceive the entire award, the Tenant hereby assigning to the Landlord the Tenant’s interest therein, if any. However, nothing herein shall be deemed to giveLandlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for the taking of personal property or fixtures belonging toTenant or for the interruption of or damage to Tenant’s business or for Tenant’s moving expenses. (b) In the event that title to a part of the Building other than the Premises shall be so condemned or taken, the Landlord may terminate this Lease and theterm and estate hereby granted by notifying the Tenant of such termination within sixty (60) days following the date of vesting of title, and this Lease and theterm and estate hereby granted shall expire on the date specified in the notice of termination, not less than sixty (60) days after the giving of such notice, asfully and completely as if such date were the date hereinbefore set for the expiration of the term of this Lease, and the Rent hereunder shall be apportioned asof such date. (c) In the event of any condemnation or taking of any portion of the parking area of the Property, which does not result in a reduction of the parking ratioto less than one space for each 375 square feet of leased area, the terms of this Lease shall continue in full force and effect. If more of the Property is taken,either party shall have the right to terminate this Lease upon giving written notice to the other party within thirty (30) days of such taking. (d) For the purpose of this Section 14, a sale to a public or quasi-public authority under threat of condemnation shall constitute a vesting of title and shallbe constructed as a taking by such condemning authority.15. LANDLORD’S REMEDIES 15.1 The occurrence of any of the following is an event of default under this Lease: (a) Landlord does not receive punctually on the date due any payment of the full amount of rent (Whether Base Rent, additional rent or any adjustment torent) or any other sum required to be paid by Tenant. (b) Tenant fails to fully and punctually comply and fully perform any covenant, agreement, provision or condition of this Lease and such default shallcontinue for a period of fifteen (15) days after written notice from Landlord to Tenant. (c) Tenant or any guarantor of Tenant’s obligations under this Lease shall become insolvent or shall make a transfer in fraud of creditors or make anassignment for the benefit of creditors. (d) The levy of a writ of execution or attachment on or against the property of Tenant that is not released or discharged within thirty (30) days thereafter. (e) The institution by or against Tenant of a bankruptcy or insolvency proceeding, an assignment for benefit of creditors, reorganization, liquidation orinvoluntary dissolution by or against Tenant or any guarantor of Tenant’s obligation not dismissed within thirty (30) days. (f) A receiver, trustee or liquidator has been appointed for the Premises or for all or substantially all of the assets of Tenant or any guarantor of Tenant’sobligations under this Lease and has not been dismissed or discharged within thirty (30) days. (g) Tenant fails to take possession or occupancy of the Premises or abandons, deserts or vacates all or any portion of the Premises. (h) Tenant shall do or permit to be done anything which creates a lien or claim of lien on the Premises or Building and the same is not fully released withinthirty (30) days. (i) Tenant shall breach or fail to comply with any of the Rules and Regulations, such breach or failure to continue for more than ten (10) days after noticefrom the Landlord.9 (j) Tenant shall violate any law, statute, rule, any Environmental Requirements or any regulation of any governmental authority, bureau, or agency andsuch violation is not totally cured as required by such law, statute, rule or regulation. (k) Tenant assigns or subleases all or any part of its interest in this Lease without complying with the provisions of Section 9 hereof. (l) Tenant has made any materially misleading or untrue statement, representation or warranty to Landlord under this Lease or with respect to the net worth,assets, liabilities, or financial condition of Tenant or any guarantor of Tenant’s obligations under this Lease. 15.2 In the event of a default, Landlord and Landlord’s Affiliates shall have the option to pursue any one or more of the following rights or remedieswithout notice or demand, which rights or remedies shall be in addition to and shall not waive any other remedies or rights Landlord or Landlord’s Affiliatesmay have at law, equity or under any Environmental Requirements. All rights and remedies of the Landlord herein enumerated shall be cumulative, and noneshall exclude any other right or remedy allowed by law. In addition to the other remedies in this Lease provided, the Landlord shall be entitled to the restraintby injunction of the violation or attempted violation of any of the covenants, agreements or conditions of this Lease. (a) Landlord may enjoin any failure of Tenant to fully and punctually comply and fully perform any covenant, agreement, provision or condition of thisLease. (b) Landlord may terminate this Lease without further notice and without prejudice or waiver of any other remedy or right available to Landlord, in whichevent Tenant shall immediately surrender Premises and, if Tenant fails to do so, Landlord may re-enter upon, take possession of Premises, expel or removeTenant and any other occupant of Premises or any part thereof and remove all property on the Premises, by force, if necessary, without being liable forprosecution or any claim of damage or injury therefore. Tenant shall indemnify and hold Landlord harmless from any loss, costs, or damages occasioned byLandlord and no entry or re-entry by Landlord shall be considered or construed to be a forcible entry. (c) Enter upon and take possession of Premises and expel or remove Tenant and any other occupant of the Premises or any part thereof, and remove allproperty on the Premises, without terminating this Lease, without being liable for prosecution or any claim of damage of injury therefore. Tenant shallindemnify and hold Landlord harmless from any loss, costs, or damages occasioned by Landlord and no entry or re-entry by Landlord shall be considered orconstrued to be a forcible entry. (d) Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided forby law; it may either terminate this Lease or it may from time to time, without terminating this Lease, re-let the Premises or any part thereof for such terms andat such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable, with the right to make alterationsand repairs to Premises or grant rental or other concessions to any successor tenant. Landlord shall not be responsible for nor required to re-let the Premisesand Tenant waives any and all rights to contend that Landlord’s failure to re-let, the terms, conditions or concessions of such re-letting, or the failure tocollect rent in any way reduce, diminish or mitigate Tenant’s obligations to Landlord. Landlord may elect in its sole discretion to apply rentals received byit: (i) to the payment of any indebtedness; (ii) to the payment of any cost of such re-letting including but not limited to any broker’s commissions or fees,attorneys fees and costs in connection therewith; (iii) to the payment of the cost of any alterations and repairs to the Premises; (iv) to the payment of rent dueand unpaid hereunder; and, (v) the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payablehereunder. Should such rentals received from such re-letting after application by Landlord to the payments described in foregoing clauses (i) through(v) during any month be less than that agreed to be paid during the month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord. Suchdeficiency shall be calculated and paid monthly to Landlord by Tenant. (e) In lieu of electing to receive and apply rentals as provided above, Landlord shall have the right, at Landlord’s election, to recover from Tenant alldamages incurred by reason of such Tenant’s default including, without limitation, a sum equal to the then-present value (using a discount rate of sevenpercent (7%) per annum) of the excess, if any, of the total Base Annual Rent and additional rent and all other sums which would have been payable hereunderby Tenant for the remainder of the Lease Term (as if there had been no default and no termination of the Lease due to Tenant’s default), less (1) the aggregatereasonable rental value of the Premises for the same period, determined as set forth below, plus (2) the costs of recovering and restoring the Premises to thecondition set forth in Section 10 hereof at the termination of the Lease, and all other reasonable expenses incurred by Landlord due to Tenant’s default,including, without limitation, reasonable attorney’s fees plus (3) the unpaid Base Annual Rental and additional rental or any other sums due by Tenant underthis Lease as of the date of such termination, with interest thereon at the rate of 10 % per annum. In determining the aggregate reasonable rental10value pursuant to item (1) above, the parties hereby agree that all relevant factors shall be considered as of the time Landlord seeks to enforce such remedy,including, but not limited to, (A) the length of time remaining in the Lease Term, (B) the then-current market conditions in the general area in which thePremises are located, (C) the likelihood of reletting the Premises for a period of time equal to the remainder of the Lease Term, (D) the net effective rental rates(taking into account all concessions) then being obtained for space of similar type and size in similar type buildings in the general area in which the Premisesare located, (E) the vacancy levels in comparable quality buildings in the general area in which the Building is located, and (F) current levels of newconstruction that will be completed during the remainder of the Lease Term and the degree to which such new construction will likely affect vacancy ratesand rental rates in comparable quality buildings in the general area in which the Premises are located. Tenant agrees to pay the total amount calculated asaforesaid under this subparagraph to Landlord within ten (10) calendar days following Landlord’s written demand therefor, together with all Base AnnualRent and additional rent and all charges and assessments theretofore due, at the same address where Tenant is to pay Landlord the Base Rent of this Lease;provided, however, that such payment shall not constitute a penalty or forfeiture but shall constitute liquidated damages for Tenant’s failure to comply withthe terms and provisions of this Lease, Landlord and Tenant hereby agreeing that Landlord’s actual damages in such event would be impossible to ascertainand that the amount set forth above is a reasonable estimate thereof. (f) No such re-entry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a writtennotice of same is given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such re-lettingwithout termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. (g) Nothing herein contained shall limit or prejudice the right of Landlord at its option to provide for and obtain as damages by reason of any suchtermination of this Lease or of possession an amount equal to the maximum allowed by any statute or rule of law in effect at the time when such terminationtakes place, whether or not such amount be greater, equal to or less than the amounts of damages which Landlord may elect to receive as set forth above. (h) Landlord may, in addition to any other remedy at law or in equity or elsewhere in this Lease, cure Tenant’s default at reasonable expense, whichexpense shall be paid to Landlord by Tenant upon demand. (i) All rights of Landlord under this Lease or at law may be exercised by persons acting on behalf of Landlord, under authority granted by Landlord, withfull right of reimbursement. Tenant unconditionally releases and waives any right it has or may have to seek damages for injury to person or property againstLandlord or persons acting on Landlord’s behalf by the exercise of the rights granted in this Lease or at law or equity. Tenant covenants and agrees, waivingall rights to assert, and shall not interpose, any counterclaim or claim for offset or deduction in any summary proceeding brought by Landlord to recoverpossession of the Premises. (j) Any deposits, rents or funds of Tenant held by Landlord at the time of default by Tenant, may be applied by Landlord to any damages provided hereinor at law. (k) Neither the commencement of any action or proceeding, nor the settlement thereof, nor entry of judgment thereon shall bar Landlord from bringingsubsequent actions or proceedings from time to time, nor shall the failure to include in any action or preceding any sum or sums then due be a bar to themaintenance of any subsequent actions or proceedings for the recovery of such sum or sums so omitted. (l) Tenant hereby appoints as its agent to receive service of all dispossessory or distress proceedings and notices thereunder the person in charge ofPremises at the time, and if no person is then in charge of Premises, then such service or notice may be made by attaching the same to the entrance ofPremises, provided that a copy of any such proceedings or notices shall be mailed to Tenant at the Premises.16. SUBORDINATION OF LEASE This Lease is and shall be subject and subordinate to any and all mortgages or deeds of trust now existing upon or that may be hereafter placed upon thePremises and the Property and to all advances made or to be made thereon and all renewals, modifications, consolidations, replacements or extensions thereofand the lien of any such mortgages, deeds of trust and land leases shall be superior to all rights hereby or hereunder vested in Tenant, to the full extent of allsums secured thereby. This provision shall be self-operative and no further instrument of subordination shall be necessary to effectuate such subordinationand the recording of any such mortgage or deed of trust shall have preference and precedence and be superior and prior in lien to this Lease, irrespective ofthe date of recording. In confirmation of such subordination, Tenant shall on request of Landlord or the holder of any such mortgage or deed of trust executeand deliver to Landlord within ten (10) days any instrument that Landlord or such holder may reasonably request. If Landlord seeks a new loan (“New Loan”)secured by the Property, the Building or the Premises, and obtains a11commitment for the New Loan, then Landlord shall make a good faith effort to obtain a non-disturbance agreement (the “Non-disturbance Agreement”) fromthe lender (“Lender”); but if the Lender, after being requested by Landlord, refuses to enter into a Non-disturbance Agreement for any reason, then Landlordshall not be required to obtain a non-disturbance agreement from the Lender before entering into the New Loan. A “Non-disturbance Agreement” shall meanan agreement - by the Lender or holder of a security deed, mortgage or deed of trust encumbering the Premises and Property - that in the event of foreclosureof such security deed, mortgage or deed of trust, Tenant shall remain undisturbed under this Lease so long as Tenant complies with all of the terms,obligations and conditions hereunder.17. COMMENCEMENT OF POSSESSION If the Landlord shall be unable to give possession of the Premises on the date of the commencement of the term hereof because the Premises shall not beready for occupancy, the Landlord shall not be subject to any liability for the failure to give possession on said date. Under such circumstances, unless thedelay is the fault of Tenant, the Rent shall not commence until the Premises are ready for occupancy by the Tenant, and in such event, the beginning andtermination dates of the term hereof shall be adjusted accordingly, which adjustment will be evidenced by notice from Landlord to Tenant setting forth theadjusted beginning and termination dates. If, at Tenant’s request the Landlord shall make the Premises available to Tenant prior to the date of commencementof the term for the purpose of decorating, furnishing, and equipping the Premises, the use of the Premises for such work shall not create a Landlord-Tenantrelationship between the parties, nor constitute occupancy of the Premises within the meaning of the next sentence, but the provisions of Section 6 of thisLease shall apply. If, with the consent of Landlord, the Tenant shall enter into occupancy of the Premises to do business therein prior to the date ofcommencement of the term, all provisions of this Lease, including but not limited to the date for expiration of the term thereof, shall apply and the rent shallaccrue and be payable at the first rate specified in Paragraph (a) of Section I from the date of occupancy.18. NOTICES AND CONSENTS Any notice, demands, requests, consents or approvals from Landlord to Tenant or from Tenant to Landlord must be served by: a) mailing by registered orcertified mail, or b) by facsimile sent to the facsimile numbers indicated below with a copy sent on the same day by ordinary mail, or c) by reputable localcourier service or overnight delivery service such as Federal Express or Airborne addressed to Tenant as set forth herein or to Landlord at the place from timeto time established for the payment of rent, with payment of postage if sent by certified or registered mail or ordinary mail or proper provision for payment ifsent by courier or overnight service. Notice shall be deemed made on: (a) the second day after mailing, if sent by registered or certified mail, (b) the first dayafter being sent by facsimile as long as a copy is sent on the same day by mail, or (c) the first day after delivery to the courier or overnight service. As of theDate of this Lease, unless later changed, notice shall be sent to the Landlord at the address set forth below unless Landlord designates another address, as itmay from time to time, by notice to the Tenant. LANDLORD TENANT Rubicon, L.C. Alimera Sciences, Inc.3060 Peachtree, N.W., Suite 210 6120 Windward Parkway, Suite 290Atlanta, Ga. 30305 Alpharetta, GA 30005Facsimile: 404.816.3601 Facsimile: Once Tenant takes possession of the Premises, then notice to Tenant may be sent to the Tenant addressed to the address of the Premises, or at such place asTenant may from time to time designate by notice to the Landlord. All consents and approvals provided for herein must be in writing to be valid. If the term Tenant as used in this Lease refers to more than one person, anynotice, consent, approval, request, bill, demand or statement, given as aforesaid to any one of such persons shall be deemed to have been duly given toTenant.19. NO ESTATE IN LAND This contract and Lease shall create the relationship of landlord and tenant between Landlord and Tenant; no estate shall pass out of Landlord; and Tenanthas only a usufruct which is not subject to levy and sale.20. INVALIDITY OF PARTICULAR PROVISIONS If any clause or provision of this Lease is or becomes illegal, invalid, or unenforceable because of present or later laws or any rule, decision, or regulationof any governmental body or entity, the intention of the parties hereto is that the remaining parts of this Lease shall not be affected thereby.1221. MISCELLANEOUS TAXES Tenant shall pay prior to delinquency all taxes assessed against or levied upon its occupancy of the Premises, or upon the fixtures, furnishings, equipmentand all other personal property of Tenant located in the Premises, if nonpayment thereof shall give rise to a lien on the real estate, and when possible Tenantshall cause said fixtures, furnishings, equipment and other personal property to be assessed and billed separately from the property of Landlord. In the eventany or all of Tenant’s fixtures, furnishings, equipment and other personal property, or upon Tenant’s occupancy of the Premises, shall be assessed and taxedwith the property of Landlord, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement inwriting setting forth the amount of such taxes applicable to Tenant’s fixtures, furnishings, equipment or personal property.22. SECURITY DEPOSIT Tenant has deposited with Landlord the sum of Three Thousand seven hundred thirty seven dollars and fifty cents Dollars ($ 3,737.50 ) as security for thefull and faithful performance of every provision of this Lease to be performed by Tenant. If Tenant defaults with respect to any provision of this Lease,including but not limited to the provisions relating to the payment of Rent, Landlord may use, apply or retain all or any part of this security deposit for thepayment of any Rent or any other sum in default or for the payment of any other amount which Landlord may spend or become obligated to spend by reasonof Tenant’s default, or to compensate Landlord for any other loss, cost or damage which landlord may suffer by reason of Tenant’s default. If any portion ofsaid deposit is so use or applied, Tenant shall, within five (5) days after written demand therefore, deposit cash with Landlord in an amount sufficient torestore the security deposit to its original amount and Tenant’s failure to do so shall be a breach of this Lease. Landlord shall not, unless otherwise requiredby law, be required to keep this security deposit separate from its general funds, nor pay interest to Tenant. If Landlord is required to maintain said deposit inan interest bearing account, Landlord will retain the maximum amount permitted under applicable law as a bookkeeping and administrative charge. If Tenantshall fully and faithfully perform every provision of this Lease to be performed by it, the security deposit or any balance thereof shall be returned to Tenant(or, at Landlord’s option, to the last transferee of Tenant’s interest hereunder) at the expiration of the Lease term and upon Tenant’s vacation of the Premises.In the event the Building is sold, the security deposit will be transferred to the new owner and the new owner will be solely responsible for the return of thesecurity deposit to the Tenant.23. SUBSTITUTE PREMISES Landlord shall have the right at any time during the term hereof, upon giving Tenant not less than sixty (60) days prior written notice, to provide andfurnish Tenant with space elsewhere in the Building of approximately the same size as the Premises and remove and place Tenant in such space withLandlord to pay all reasonable costs and expenses incurred as a result of such removal of Tenant. Should Tenant refuse to permit Landlord to move Tenant tosuch new space at the end of said sixty (60) day period, Landlord shall have the right to cancel and terminate this Lease effective ninety (90) days from thedate of original notification by Landlord. If Landlord moves Tenant to such new space, this Lease and each and all of its terms, covenants and conditionsshall remain in full force and effect and be deemed applicable to such new space, and such new space shall thereafter be deemed to be the Premises as thoughLandlord and Tenant had entered into an express written amendment of this Lease with respect thereto.24. BROKERAGE Tenant represents and warrants that is has dealt with no broker, agent or other person in connection with this transaction except for Lavista Associates andN/A and that no broker, agent or other person brought about this transaction, other than Lavista Associates and N/A , and Tenant agrees to indemnify andhold Landlord harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation byvirtue of having dealt with Tenant with regard to this leasing transaction. The provisions of this Section shall survive the termination of this Lease.25. LIMITATION OF LIABILITY Landlord’s obligations and liability to Tenant with respect to this Lease shall be limited solely to Landlord’s interest in the Building, and neitherLandlord nor any joint venturer, partner, officer, director or shareholder of Landlord or any of the joint venturers of Landlord shall have anypersonal liability whatsoever with respect to this Lease.26. SPECIAL STIPULATIONS (a) No receipt of money by the Landlord from the Tenant after the termination of this Lease or after the service of any notice or after the commencement ofany suit, or after final judgment for possession of the Premises shall reinstate,13 continue or extend the term of this Lease or affect any such notice, demand or suit or imply consent for any action for which Landlord’s consent is required. (b) No waiver of any default of the Tenant hereunder shall be implied from any omission by the Landlord to take any action on account of such default ifsuch default persists or be repeated, and no express waiver shall affect any default other than the default specified in the express waiver and that only for thetime and to the extent therein stated. (c) The term “Landlord” as used in this Lease, so far as covenants or agreements on the part of the Landlord are concerned, shall be limited to mean andinclude only the owner or owners of the Landlord’s interest in this Lease at the time in question, and in the event of any transfer or transfers of such interestthe Landlord herein named (and in case of any subsequent transfer, the then transferor) shall be automatically freed and relieved from and after the date ofsuch transfer of all personal liability as respects the performance of any covenants or agreements on the part of the Landlord contained in this Lease thereafterto be performed. (d) It is understood that the Landlord may occupy portions of the building in the conduct of the Landlord’s business. In such event, all references herein toother tenants of the Building shall be deemed to include the Landlord as an occupant. (e) The term “City” as used in this Lease shall be understood to mean the City and/or County in which the Property is located. (f) All of the covenants of the Tenant hereunder shall be deemed and construed to be “conditions” as well as “covenants” as though the words specificallyexpressing or importing covenants and conditions were used in each separate instance. (g) This Lease shall not be recorded by either party without the consent of the other. (h) Neither party has made any representations or promises, except as contained herein, or in some further writing signed by the party making suchrepresentation or promise. (i) In event of variation or discrepancy, the Landlord’s original copy of the Lease shall control. (j) Each provision hereof shall extend to and shall, as the case may require, bind and inure to the benefit of the Landlord and the Tenant and theirrespective heirs, legal representatives, successors, and assigns. (k) If because of any act or omission of Tenant, its employees, agents, contractors, or subcontractors, any mechanic’s lien or other lien, charge or order forthe payment of money shall be filed against Landlord, or against all or any portion of the Premises, or the Building of which the Premises are a part, Tenantshall, as its own cost and expense, cause the same to be discharged off record, within thirty (30) days after the filing thereof, and Tenant shall indemnify andsave harmless Landlord against and from all costs, liabilities, suits, penalties, claims and demands, including reasonable attorney’s fees resulting therefrom. (l) It is understood and agreed that this Lease shall not be binding until and unless all parties have signed it.27. ATTORNEY’S FEES If any person not a party to this Lease shall institute an action against Tenant in which Landlord shall be made a party, Tenant shall indemnify and saveLandlord harmless from all liability by reason thereof, including reasonable attorney’s fees, and all costs incurred by Landlord in such action. If any actionshall be brought by Landlord to recover any rental under this Lease, or for or on account of any breach of or to enforce or interpret any of the terms, covenantsor conditions of this Lease, or for the recovery of possession of the premises, Landlord shall be entitled to recover from the Tenant, as a part of Landlord’scosts, a reasonable attorney fee, the amount of which shall be fixed by the court and shall be made a part of any judgment in favor of the Landlord.28. CONSTRUCTION OF LEASE This Lease has been fully negotiated by and between the Landlord and the Tenant. The language in all parts of this Lease shall in all cases be construed asa whole according to its fair meaning and not strictly for or against either Landlord or Tenant. Headings in this Lease are for convenience only and are not tobe construed as a part of this Lease or in any way defining, limiting or amplifying the provisions hereof. Time is of the essence of this Lease and of everyterm, covenant and condition hereof. The words “Landlord” and “Tenant,” as used herein, shall include the plural as well as the singular. The neuter genderincludes the masculine and feminine. In the event there is more than one tenant, the14obligations to be performed shall be joint and several.29. ENTIRE AGREEMENT This Lease, together with any attached exhibits and any written addenda contains the entire agreement between the parties.30. INTERPRETATION AND ENFORCEMENTThis Lease shall be interpreted, governed and enforced in all respects under the laws of the State of Georgia.31. RIDER A rider consisting of One page, with paragraphs number 1 and 2, is attached hereto and made a part hereof. If any conflicts exist between any of the termsof such Rider and any of the printed terms of this Lease Agreement, the terms of such Rider will take precedence and be controlling.32. EXHIBITS Exhibits to this Lease agreement are as follows and attached hereto:Exhibit “A” — The PremisesExhibit “B” — RiderExhibit “C” — Rules and RegulationsIN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this Lease as of the day and year first above written. LANDLORD: Rubicon,L.C., A Georgia Limited Liability Company By: /s/ Garett A. Backman Garett A. Backman Its: Operating Member TENANT: Alimera Sciences, Inc. By: /s/ Dan Myers Title: President/CEO 1516EXHIBIT “B”RIDERThe Lease Agreement between Rubicon, L.C., a Georgia Limited Liability Company, as Landlord and Alimera Sciences, Inc. as Tenant for the Premisescontaining approximately 5,038 rentable square feet known as Suite 290 at 6120 Windward Parkway Alpharetta, Georgia 30005.This Rider to the Lease is made and entered into contemporaneously with the Lease Agreement described above, and is incorporated into the Lease. In thecase of any conflict between the terms and conditions of this Rider to the Lease and the terms and conditions of the Lease, the terms and conditions of thisRider shall control. All terms used herein shall be the same as defined in the Lease. 1. Rental Schedule The Base Rent for the Premises shall be as follows: Period Monthly Amount Annual Amount6/1/03-11/31/03 $3,737.50 N/A12/1/03- 5/31/04 $5,819.69 N/A6/1/04-5/31/05 $5,993.22 $71,918.646/1/05-5/31/06 $6,171.00 $74,052.00 2. Termination Option Provided that Tenant is not in material default of this Lease beyond any applicable cure period, Tenant shall have the Option to Terminate thisLease (the “Termination Option”) on November 30, 2003 by giving Landlord no less than two (2) months advance written notice of Tenant’s intentto exercise its Termination Option. If Tenant gives no notice to Landlord of its intent to exercise its Termination Option Tenant must fulfill itsobligations under this Lease throughout the term. In the event Tenant exercises its Termination Option Tenant must pay a Termination Penalty (the“Termination Penalty”) of $10,000.00 at the time Tenant notifies Landlord of its intent to exercise its Termination Option. If Tenant fails to pay theTermination Penalty at the time it notifies Landlord of its intent to exercise its Termination Option the Termination Option shall be null and voidand Tenant must fulfill its obligations under this Lease throughout the term.17Exhibit “C”RULES AND REGULATIONS ATTACHED TOAND MADE PART OF THIS LEASE 34.16.1 The sidewalks, passages, exits and entrances shall not be obstructed by Tenant or used by Tenant for any purpose other than for ingress to andegress from the Premises. Any balconies or patios shall be left clear except for patio furniture approved by Landlord, such furniture to be of first class material,design and manufacture and of a design that complements the aesthetic qualities of the building’s exterior. Any patio furniture approved by Landlord shallbe kept clean and of a neat appearance. 34.16.2 The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than for which they were constructed and noforeign substance of any kind whatsoever shall be thrown therein and to the extent caused by Tenant or its employees or invitees, the expenses of anybreakage, stoppage or damage resulting from the violation of this rule shall be borne by Tenant. 34.16.3 Electronic key cards, individually identified, are provided to the Tenant at a reasonable fee per card to permit Tenant and Tenant’s employees togain access to the Building outside of ordinary working hours, subject to: (i) Tenant supplying the name of each employee being given a card; (ii) Tenantrequiring that the card earmarked for that employee is actually given to that employee and not to another party, (iii) Tenant obtaining a return of said cardfrom any current or former employee in the event that the employee leaves the company’s employ or no longer works in the Building; (iv) Tenant promptlynotifying Landlord of any current or former employee in the event that the employee leaves the company’s employ or no longer works in the Building . Uponthe termination of the tenancy, Tenant shall deliver to the Landlord all keys or electronic key cards and passes for the Premises. In the event of loss of anykeys or electronic key cards furnished by Landlord, Tenant shall pay the Landlord therefore. Tenant shall not make or cause to be made any such keys orelectronic key cards and shall order all such keys or electronic key cards solely from Landlord for any additional such keys or electronic key cards over andabove the keys or electronic key cards furnished by Landlord at occupancy. 34.16.4 Without the prior written consent of Landlord, no assignee, subtenant or successor in interest of Tenant shall use the name of the Project or anypicture of the Project or Building in connection with or in promoting or advertising the business of Tenant except Tenant may use the address of the Buildingas the address of its business. 34.16.5 Tenant shall allow no animals or pets to be brought to or remain in the Premises or any part thereof, without the prior written consent of Landlord. 34.16.6 Tenant agrees that it and its employees will cooperate fully with Project employees in the implementation of any security procedures for theProject. 34.16.7 Landlord reserves the right to exclude or expel from the Project any person who, in the judgement of Landlord is intoxicated or under theinfluence of liquor or drugs or who shall in any manner do any act in violation of any of the rules and regulations of the Project. 34.16.8 No vending machines of any description shall be installed, maintained or operated in a place on the Premises visible from outside the Premises,without the written consent of Landlord. 34.16.9 Tenant shall not: 34.16.9.1 place any radio or television antennae on the roof or on any part or the outside of the Premises orelsewhere on the Project without Landlord’s prior written consent; 34.16.9.2 operate or permit to operate any musical or sound producing instrument or device inside oroutside the Premises which may be heard from outside the Premises; 34.16.9.3 use any illumination or power for the operation of any equipment or device other than electricity;or 34.16.9.4 operate any electrical device from which may emanate electrical waves which may interfere withor impair radio or television broadcasting or reception from or in the Project.18 34.16.9.5 smoke cigarettes in non-designated smoking areas. 34.16.9.6 dispose of cigarette “butts” in non-designated smoking areas or anywhere else on the grounds,including the grass and landscaping, 34.16.10 If Tenant’s employee, agent, or invitees is found smoking or to have improperly disposed of cigarette waste in landscaped areas, parking areas, oranywhere else other than designated smoking areas, there is a $10.00 cleanup charge assessed for each violation, which is deemed part of additional rentowed under this Lease. 34.16.11 Tenant and its employees shall and shall cause its invitees and licensees to park only in areas, which are clearly marked for parking. 34.16.12 [INTENTIONALLY DELETED] 34.16.13 Landlord reserves the following rights, exercisable without notice and without liability to Tenant for damage or injury to property, person orbusiness and without effecting an eviction, constructive or actual or disturbance of Tenant’s use of possession or giving rise to any claim for set-off orabatement of rent: 34.16.13.1 To change the Project’s name or street address; 34.16.13.2 To install, affix and maintain any and all signs on the exterior and interior or the Project; 34.16.13.3 To retain at all times, and to use in appropriate instances, keys to all doors within and into thePremises. No locks or bolts shall be altered, changed or added without the prior written consent ofLandlord; 34.16.13.4 To decorate or to make repairs, alterations, additions or improvements, whether structural orotherwise, in and about the Premises, Building and Project, or any part thereof, and for such purpose to enterupon the Premises, and during the continuance of said work to temporarily close doors, entryways andpublic spaces in the Project and to interrupt or temporarily suspend Project services and facilities; 34.16.13.5 To prescribe the location and style of the suite number and identification sign or lettering of thePremises occupied by Tenant; 34.16.13.6 To control and prevent access to common areas and other non-general public areas; 34.16.13.7 From time to time to make and adopt such reasonable rules and regulations, in addition to orother than or by way of amendment or modification of the rules and regulations contained herein or othersections of this Lease, for the protection and welfare of the Project and its tenants and occupants, as theLandlord may determine, and the Tenant agrees to abide by all such rules and regulations; 34.16.13.8 The Premises shall not be used for any retail or wholesale business inviting the general public.19FIRST AMENDMENT TO LEASE AGREEMENTTHIS FIRST AMENDMENT TO LEASE AGREEMENT (“Agreement”) dated as of the day of July 16, 2004, by and between THEMANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.), a Michigan corporation (“Landlord”); and ALIMERA SCIENCES, INC. a Delawarecorporation (“Tenant”).WITNESSETH:WHEREAS, Rubicon, L.C., predecessor-in-interest to Landlord (“Rubicon”) and Tenant entered into that certain Office Lease for 6120 WindwardParkway dated May 27, 2003 (the “Initial Lease”) for certain premises known as Suite 290, containing approximately 5,079 rentable square feet of space (the“Premises”) in the building located at 6120 Windward Parkway, Fulton County, Georgia (the “Building”).WHEREAS, Landlord and Tenant desire to enter into this Agreement for the purpose of evidencing their mutual understanding and agreementregarding the extension of the lease term and expansion of the Premises and certain other matters relating thereto as set forth hereinbelow.NOW, THEREFORE, for and in consideration of the premises hereto, the keeping and performance of the covenants and agreements hereinaftercontained, and for Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, Landlord and Tenant, intending to be legally bound, agree as follows:1.Defined Terms. All terms used herein and denoted by their initial capitalization shall have the meanings set forth in the Leaseunless set forth herein to the contrary.2.Extension of the Lease Term. The Lease Term is hereby extended for a period of twenty-six (26) months (the “ExpansionTerm”). The Expiration Date, as defined in the Initial Lease, shall now mean August 30, 2008.3.Expansion of the Premises. Commencing September 1, 2004, the Premises shall be expanded by 4,711 rentable square feet (the“Expansion Premises”) for a revised total of 9,790 rentable square feet (the “Premises”) as more particularly described in Exhibit “A” attached hereto andincorporated herein.4.Base-Rent. The Base Rent for the Extension Term shall be as follows:Lease PeriodRentalRateBase RentPer AnnumMonthly InstallmentsOf Base RentSept. 1, 2004 – August 31, 2005$15.00/RSF$146,850.00$12,237.50Sept. 1, 2005 – August 31, 2006$15.45/RSF$151,255.00$12,604.62Sept. 1, 2006 – August 31, 2007$15.91/RSF$155,758.00$12,979.90Sept. 1, 2007 – August 31, 2008$16.39/RSF$160,458.10$13,371.505.Tenant Improvement Allowance. Landlord will renovate the Premises (“Leasehold Improvements”) in accordance with thosePricing Plans and Specifications prepared by Veenendaal Cave, Inc. (the “Plans and Specifications”) dated May 28, 2004 prior to September 1, 2004.6.Brokerage Commissions. Tenant warrants and represents to Landlord that it has had no dealings with any real estate broker,agent or finder in connection with negotiation of this Agreement, excepting only Lavista Associates, Inc. (the “Tenant’s Broker” and “Landlord’s Broker”).Landlord and Tenant consent to said dual agency. Tenant covenants and agrees to defend, indemnify and hold the Landlord harmless from and against anyand all loss, liability, damage, claim, judgment, cost or expense (including, but not limited to, attorneys’ fees and expenses and court costs) that may beincurred or suffered by the other because of any claim for any fee, commission or similar compensation with respect to this Agreement made by any broker,agent or finder claiming to have dealt with the Tenant. Landlord agrees to pay the commission due the Tenant’s Broker and Landlord’s Broker in connectionwith this Agreement pursuant to separate written commission agreements.7. Option to Renew. Tenant shall have the option (the “Option”) to extend the Term of this Lease for one additional period of three (3)years (the “Option Period”) during which all of the non-economic terms and conditionsPAGE 2of this Lease shall control and apply, except that the Base Rent and Tenant Improvement Allowance due under the Lease shall be the then market rental rate.The Option Period shall commence immediately upon the termination of the Term. Tenant shall not have the right to exercise the Option if at the time ofexercise Tenant is in default under any of the terms or conditions of this Lease. Tenant may exercise the Option by giving Landlord written notice (in themanner provided for notice in this Lease) at least one hundred eighty (180) but no more than two hundred forty (240) days prior to the expiration date of theinitial Term. Failure to give such notice shall terminate Tenant’s Option hereunder. If Tenant does timely exercise the Option, Tenant may not thereafterrevoke said exercise.Within thirty (30) days of Landlord’s receipt of Tenant’s notice exercising the Option, Landlord shall give notice to Tenant of the Base Rent thatshall be due and payable during the Option Period. Tenant shall have thirty (30) days after receipt of Landlord’s notice within which to notify Landlord inwriting that Tenant agrees to pay, during the Option Period. the Base Rent determined by Landlord hereunder. If Tenant fails to so notify Landlord of itsagreement. the Option shall automatically terminate.Tenant shall have no other right to extend or renew the Term of the Lease beyond the Option Period.Time shall be of the essence with respect to the exercise of the Option.8.Letter of Credit. Tenant shall deliver to Landlord, with the execution and delivery of The First Amendment to Lease, anirrevocable, unconditional letter of credit in favor of Landlord in the amount of $50,000.00 in a form acceptable to Landlord, in Landlord’s sole judgment,and issued by a bank in the Atlanta, Georgia metropolitan area. If Tenant defaults or otherwise fails to comply with the terms of the Lease for any reason,Landlord may immediately draw upon and receive payment under said letter of credit, and partial draws shall be permitted under the terms of said letter ofcredit, it being the express intent of Landlord and Tenant that the letter of credit be used either to cure existing defaults on the part of Tenant under the Lease,and/or as a security deposit, securing the full and complete performance by Tenant of Tenant obligations under the Lease. Such letter of credit shall permittransfers of the payee thereunder if Landlord transfers its interest in the Building. The letter of credit shall be open and may be drawn upon for a period whichexpires two (2) months after the scheduled expiration of the Term; provided however, that such letter of credit may be of a duration shorter than said period,so long as the letter of credit has an “evergreen” provision for the benefit of Landlord, and Tenant replaces said letter of credit with a new letter of credit, onthe same terms and conditions, and in the same amount, as the prior letter of credit, at least one (1) month prior to the expiration of the prior letter of credit;and further provided, if Tenant is then in full compliance with the Lease and Landlord has not previously drawn upon such letter of credit as of December 31,2005. Tenant may replace said letter of credit with a new letter of credit, on the same terms and conditions or the prior letter of credit, in the amount of$21,471.74. If Tenant fails to replace a prior letter of credit within the period required herein, then Landlord shall be immediately authorized and entitled todemand and receive payment under said letter of credit, and to apply and hold the proceeds therefrom as a security deposit under the terms and conditions ofParagraph 22 of this Lease.9.Binding Effect. This Agreement shall he governed by and construed in accordance with the laws of the State of Georgia and shallbe binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, representatives and assigns, but always subject, in the caseof Tenant, to the limitations on assignment and sublease set forth in the Lease. In the event of any inconsistency or conflict between the terms of thisAgreement and of the Lease, the terms hereof shall control. Time is of the essence of all of the terms of this Agreement.10.Continued Validity. Except as hereinabove provided, all other terms and conditions of the Lease shall remain unchanged andin full force and effect and are hereby ratified and confirmed by Landlord and Tenant. Tenant hereby acknowledges and agrees that, to the best of itsknowledge, as of the date hereof, the Lease is subject to no offsets, claims, counterclaims or defenses of any nature whatsoever and any improvements to thePremises required to be constructed and/or financed by Landlord have been completed to Tenant’s satisfaction.11.Modifications. This Agreement may not be changed, modified, discharged or terminated orally in any manner other than by anagreement in writing signed by Landlord and Tenant or their respective heirs, representatives, successors and permitted assigns.12.Authority. Tenant does hereby personally represent and warrant that Tenant is a validly existing corporation and is fullyauthorized and qualified to do business in the State of Georgia, that the corporation has full right and authority to enter into this Agreement, and that theundersigned, who is signing on behalf of the corporation is a duly authorized officer of the corporation and is authorized to sign on behalf of the corporation.PAGE 3IN WITNESS WHEREOF, the parties have set their hands and affixed their seals to this Agreement to be effective as of the day and year first above written.“LANDLORD”:THE MANUFACTURERS LIFE INSURANCE COMPANY(U.S.A.), a Michigan corporation/s/ [Name]By: /s/ Terry L. GilliamWitness as to signingName: Terry L. GilliamBy LandlordTitle: Regional Director“TENANT”:ALIMERA SCIENCES, INC., a Delaware corporation/s/ [Name]By: /s/ Dan MyersWitness as to signingName: Dan MyersBy TenantTitle: Pres., CEOLEASE SUMMARY6120 Windward ParkwaySuite 290Alpharetta, GA 30005Tenant:Alimera Sciences, Inc.Size (RSF)5,079Term:Three Years, (6/1/03-5/31/06)Base Rent:6/1/03-11/31/03 $3,737.50/mo ($14.95/rsf on only 3,000rsf)12/1/03-5/31/04 $5,819.69/mo ($13.75/rsf on 5,079rsf)6/1/04-5/31/05 $5,993.22/mo $71,918.64/yr (14.16/rsf)6/1/05-5/31/06 $6,171.00/mo $74,052.00/yr ($14.58/rsf)Tenants Share:10%Operating Expense:Tenant to pay its pro-rated share of Operating Expenses above a $5.50/sf ($271,970.00) expense stop.Insurance:Tenant to carry Liability and Property Damage Insurance notLess than $500,000.00Escalation:3% in years 2 and 3Concessions:Termination Option: Tenant may terminate this lease on November 30, 2003 with two months advancewritten notice to Landlord along with a termination penalty of $10,000.00 due at time Tenant informs Landlord of its intent to terminate the lease.During the first 6 months Tenant to only pay rent on 3,000rsf and if it does not terminate it must pay on the entire square footage.TenantImprovements:NoneCommissions:Lavista Associates as Landlord Broker/No Tenant BrokerSecurity Deposit:$3,737.50SECOND AMENDMENT TO LEASE AGREEMENTTHIS SECOND AMENDMENT TO LEASE AGREEMENT (“Agreement”) dated as of the 1st day of July 2005, by and between JOHN HANCOCK LIFEINSURANCE COMPANY (U.S.A.), a wholly owned subsidiary of Manulife Financial Corporation, having a local regional office at 1170 Peachtree Street, Suite 565, in the cityof Atlanta, Georgia 30309 (“Landlord”); and ALIMERA SCIENCES, INC. a Delaware corporation (“Tenant”).WITNESSETH:WHEREAS, Rubicon, L.C., predecessor-in-interest to Landlord (“Rubicon”) and Tenant entered into that certain Office Lease for 6120 Windward Parkway dated May27, 2003 (the “Initial Lease”) and amended by that certain First Amendment to Lease for 6120 Windward Parkway dated July 16, 2004 (the “First Amendment) for certain premisesknown as Suite 290, containing approximately 9,790 rentable square feet of space (the “Premises”) in the building located at 6120 Windward Parkway, Fulton County, Georgia (the“Building”).WHEREAS, Landlord and Tenant desire to enter into this Agreement for the purpose of evidencing their mutual understanding and agreement regarding the extension ofthe lease term and expansion of the Premises and certain other matters relating thereto as set forth hereinbelow.NOW, THEREFORE, for and in consideration of the premises hereto, the keeping and performance of the covenants and agreements hereinafter contained, and for Tenand No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to belegally bound, agree as follows:1.Defined Terms. All terms used herein and denoted by their initial capitalization shall have the meanings set forth in the Lease unless set forthherein to the contrary.2.Extension of the Lease Term. The Lease Term is hereby extended for a period of twelve (12) months (the “Expansion Term”). The ExpirationDate, as defined in the Initial Lease, shall now mean August 30, 2009.3.Expansion of the Premises. Commencing September 1, 2005, the Premises shall be expanded by 4,423 rentable square feet (the “ExpansionPremises”) for a revised total of 14,213 rentable square feet (the “Premises”) as more particularly described in Exhibit “A” attached hereto and incorporated herein.4.Base Rent. The Base Rent for the Extension Term shall be as follows:Lease PeriodRentalRateBase RentPer AnnumMonthly InstallmentsOf Base RentSeptember 1, 2005 – October 31, 2005$0.00/RSF$0.00$0.00November 1, 2005 – August 30, 2006$15.45/RSF$219,590.85$18,299.23September 1, 2006 – August 30, 2007$15.91/RSF$226,128.83$18,844.06September 1, 2007 – August 30, 2008$16.39/RSF$232,951.07$19,412.58September 1, 2008 – August 30, 2009$16.88/RSF$239,915.44$19,992.955.Taxes and Operating Expenses. Notwithstanding anything in Article 1 (b) of the Initial Lease and that Letter Agreement dated March 1, 2005 byand between Landlord and Tenant to the contrary, effective January 1, 2006 Tenant’s ProRata Share of increases in “controllable” Operating Expenses (as that term is hereinafterdefined) for any calendar year during the Lease Term shall not include a portion of such “controllable” Operating Expenses for such year to the extend the amount of such“controllable” Operating Expenses exceeds the product of (i) comparable “controllable” Operating Expenses incurred by Landlord in the Base Year multiplied by (ii) 105% perannum compounded annually from the Base Year. For the purposes of this subparagraph, “non-controllable” Operating Expenses are defined to be all Operating Expenses otherthan those expenses the increase in which is beyond the reasonable control of Landlord. By way of illustration and not limitation, examples of increases in Operating Expenses thatare beyond the reasonable control of Landlord include all increases in minimum wages and benefits that affect wages and benefit paid to employees and contractor employees), taxesand assessment, including, without limitation, Property Taxes, insurance and utilities.PAGE 26.Tenant Improvement Allowance. Landlord will renovate the Premises (“Leasehold Improvements”) in accordance with those Pricing Plans andSpecifications prepared by Veenendaal Cave, Inc. (the “Plans and Specifications”) dated May 23, 2005 prior to September 1, 2005.7.First Right of Refusal. Landlord shall not lease all or any part of the area of the building designated as Suite 220 and marked “First Right ofRefusal Space” on Exhibit “B” of approximately 5,232 rentable square feet to any other party without first offering said space to Tenant.Landlord shall provide written notice to Tenant of Landlord’s desire to rent said Expansion Space to another party and Tenant shall have three (3) days after such notice to indicatein writing its agreement to lease the Expansion Space at mutually acceptable economic terms and conditions as determined by Landlord and Tenant.If Tenant does not indicate its willingness to lease the Expansion Space in writing within three (3) days thereafter and execute a lease or lease amendment in form similar to thislease or lease amendment within four (4) days thereafter, Landlord thereafter shall have the right to lease all or part of the Expansion Space to any party and Tenant shall have noright with regard to the Expansion Space.Tenant shall have no rights under this paragraph whatsoever should Tenant be in default under the terms of this lease.8.Brokerage Commissions. Tenant warrants and represents to Landlord that it has had no dealings with any real estate broker, agent or finder inconnection with negotiation of this Agreement, excepting only Lavista Associates, Inc. (“Landlord’s Broker”) and Kilburn Commercial Properties, LLC (“Tenant’s Broker”).Tenant covenants and agrees to defend, indemnify and hold the Landlord harmless from and against any and all loss, liability, damage, claim, judgment, cost or expense (including,but not limited to, attorneys’ fees and expenses and court costs) that may be incurred or suffered by the other because of any claim for any fee, commission or similar compensationwith respect to this Agreement made by any broker, agent or finder claiming to have dealt with the Tenant. Landlord agrees to pay the commission due the Tenant’s Broker andLandlord’s Broker in connection with this Agreement pursuant to separate written commission agreements.9.Letter of Credit. Tenant has delivered to Landlord, with the execution and delivery of The First Amendment to Lease, an irrevocable,unconditional letter of credit in favor of Landlord in the amount of $50,000.00 in a form acceptable to Landlord, in Landlord’s sole judgment, and issued by a bank in the Atlanta,Georgia metropolitan area. If Tenant defaults or otherwise fails to comply with the terms of the Lease for any reason, Landlord may immediately draw upon and receive paymentunder said letter of credit, and partial draws shall be permitted under the terms of said letter of credit, it being the express intent of Landlord and Tenant that the letter of credit beused either to cure existing defaults on the part of Tenant under the Lease, and/or as a security deposit, securing the full and complete performance by Tenant of Tenant obligationsunder the Lease. Such letter of credit shall permit transfers of the payee thereunder if Landlord transfers its interest in the Building. The letter of credit shall be open and may bedrawn upon for a period which expires two (2) months after the scheduled expiration of the Term; provided however, that such letter of credit may be of a duration shorter than saidperiod, so long as the letter of credit has an “evergreen” provision for the benefit of Landlord, and Tenant replaces said letter of credit with a new letter of credit, on the same termsand conditions, and in the same amount, as the prior letter of credit, at least one (1) month prior to the expiration of the prior letter of credit; and further provided, if Tenant is then infull compliance with the Lease and Landlord has not previously drawn upon such letter of credit as of December 31, 2005, Tenantmay replace said letter of credit with a cashSecurity Deposit delivered to Landlord on or before December 31, 2005 in the amount of nineteen thousand nine hundred ninety-two and 95/100 Dollars ($19,992.95). SaidSecurity Deposit shall be governed under the terms and conditions outlined in Article 22 of the Initial Lease. If Tenant fails to replace a prior letter of credit with the cash SecurityDeposit outlined above within the period required herein, then Landlord shall be immediately authorized and entitled to demand and receive payment under said letter of credit, andto apply and hold the proceeds therefrom as a security deposit under the terms and conditions of Paragraph 22 of this Lease.10. Monument Sign. Tenant shall have the right at Tenant’s expense to add its identification on the Project Monument on Windward Parkway to Landlordand Tenant’s mutually acceptable specifications. This right is granted so long as the size of its Premises is not reduced, and Tenant is not in default of this Lease.PAGE 311.Binding Effect. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia and shall be bindingupon and inure to the benefit of the parties hereto and their respective heirs, successors, representatives and assigns, but always subject, in the case of Tenant, to the limitations onassignment and sublease set forth in the Lease. In the event of any inconsistency or conflict between the terms of this Agreement and of the Lease, the terms hereof shall control.Time is of the essence of all of the terms of this Agreement.12.Continued Validity. Except as hereinabove provided, all other terms and conditions of the Lease shall remain unchanged and in full force andeffect and are hereby ratified and confirmed by Landlord and Tenant. Tenant hereby acknowledges and agrees that, to the best of its knowledge, as of the date hereof, the Lease issubject to no offsets, claims, counterclaims or defenses of any nature whatsoever and any improvements to the Premises required to be constructed and/or financed by Landlordhave been completed to Tenant=s satisfaction.13.Modifications. This Agreement may not be changed, modified, discharged or terminated orally in any manner other than by an agreement inwriting signed by Landlord and Tenant or their respective heirs, representatives, successors and permitted assigns.14.Authority. Tenant does hereby personally represent and warrant that Tenant is a validly existing corporation and is fully authorized and qualifiedto do business in the State of Georgia, that the corporation has full right and authority to enter into this Agreement, and that the undersigned, who is signing on behalf of thecorporation is a duly authorized officer of the corporation and is authorized to sign on behalf of the corporation.IN WITNESS WHEREOF, the parties have set their hands and affixed their seals to this Agreement to be effective as of the day and year first above written.“LANDLORD”:JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.), a wholly owned subsidiary of Manulife Financial Corporation/s/ [Name]By: /s/ Terry L. GilliamWitness as to signingName: Terry L. GilliamBy LandlordTitle: Regional Director“TENANT”:ALIMERA SCIENCES, INC., a Delaware corporation/s/ [Name]By: /s/ Dan MyersWitness as to signingName: Dan MyersBy TenantTitle: Pres., CEOPAGE 4THIRD AMENDMENT TO LEASE AGREEMENTTHIS THIRD AMENDMENT TO LEASE AGREEMENT (“Agreement”) dated as of the ___th day of May 2009, by and between JOHN HANCOCK LIFEINSURANCE COMPANY (U.S.A.), a wholly owned subsidiary of Manulife Financial Corporation, having a local regional office at 1170 Peachtree Street, Suite 565, in the cityof Atlanta, Georgia 30309 (“Landlord”); and ALIMERA SCIENCES, INC. a Delaware corporation (“Tenant”).WITNESSETH:WHEREAS, Landlord and Tenant entered into that certain Office Lease for 6120 Windward Parkway dated May 27, 2003 (the “Original Lease”), and thereafter the FirstAmendment To Lease (the “First Amendment”) dated July 16, 2004 for certain premises known as Suite 290, containing approximately 14,213 rentable square feet of space (the“Premises”) in the building located at 6120 Windward Parkway, Fulton County, Georgia (the “Building”).WHEREAS, the Original Lease, the First Amendment, the Second Amendment, and this Third Amendment are collectively referred to as the “Lease”;WHEREAS, Landlord and Tenant desire to and hereby shall, by this Third Amendment to Lease, modify and amend the terms of the Lease, in the manner and for thepurpose herein set forth.NOW, THEREFORE, for and in consideration of the premises hereto, the keeping and performance of the covenants and agreements hereinafter contained, and for Tenand No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to belegally bound, agree as follows:1.Defined Terms. All capitalized terms not defined herein shall have the same meaning as set forth in the Lease.2.Expansion of the Premises. Commencing on September 1, 2009 the Premises shall become 14,462 rentable square feet.3.Extension of Lease Term. The term of the Lease for the Leased Premises is hereby extended to include the period from September 1, 2009through May 31, 2010 (the “Second Extension Term”).4.Rent. The Tenant shall, without demand, deduction or right of offset, pay to the Landlord during the Second Extension Term as rental (herein called“Basic Rent”), the sum of One Hundred Eighty-Eight Thousand, Six Hundred Twenty and 65/100 Dollars ($188,620.65) of lawful money of the jurisdiction in which the LeasedPremises are located, in equal monthly installments of Twenty Thousand, Nine Hundred Fifty-Seven and 85/100 Dollars ($20,957.85) each in advance on the first day of eachmonth during the Term, the first payment to be made on the first day of September, 2009. Tenant shall also be obligated to and shall continue to pay Landlord during this periodTenant’s Share of Operating Costs above the Initial Operating Costs, as set forth in Article 3 of the lease.PeriodRate PSFAnnual RentalMonthly RentalSeptember 1, 2009 — May 31, 2010$17.39$251,494.18*$20,957.85*Based on a 12-month period.5.Binding Effect. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia and shall be binding uponand inure to the benefit of the parties hereto and their respective heirs, successors, representatives and assigns, but always subject, in the case of Tenant, to the limitations onassignment and sublease set forth in the Lease. In the event of any inconsistency or conflict between the terms of this Agreement and of the Lease, the terms hereof shall control.Time is of the essence of all of the terms of this Agreement.6. Continued Validity. Except as hereinabove provided, all other terms and conditions of the Lease shall remain unchanged and in full force and effect andare hereby ratified and confirmed by Landlord and Tenant. Tenant hereby acknowledges and agrees that, as of the date hereof, the Lease is subject to no offsets, claims,counterclaims or defenses of any nature whatsoever.17.Modifications. This Agreement may not be changed, modified, discharged or terminated orally in any manner other than by an agreement inwriting signed by Landlord and Tenant or their respective heirs, representatives, successors and permitted assigns.8.Authority. The persons executing this Agreement on behalf of Landlord and Tenant do hereby personally represent and warrant that they eachhave the full right and authority to enter into this Agreement.IN WITNESS WHEREOF, the parties have set their hands and affixed their seals to this Agreement to be effective as of the day and year first above written.“LANDLORD”:JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.),wholly owned subsidiary of Manulife Financial CorporationPer: /s/ Terry L. GilliamName: Terry L. GilliamTitle: AVP, Regional Director“TENANT”:ALIMERA SCIENCES, INC., a Delaware corporationBy: /s/ Dan MyersName: Dan MyersTitle: Pres., CEO2FOURTH AMENDMENT TO LEASE AGREEMENTTHIS FOURTH AMENDMENT TO LEASE AGREEMENT (“Agreement”) dated as of the 25th day of May 2010, by and between JOHN HANCOCK LIFEINSURANCE COMPANY (U.S.A.), a wholly owned subsidiary of Manulife Financial Corporation, having a local regional office at 1170 Peachtree Street, Suite 565, in the cityof Atlanta, Georgia 30309 (“Landlord”); and ALIMERA SCIENCES, INC. a Delaware corporation (“Tenant”).WITNESSETH:WHEREAS, Landlord and Tenant entered into that certain Office Lease for 6120 Windward Parkway dated May 27, 2003 (the “Original Lease”), and thereafter the FirstAmendment To Lease (the “First Amendment”) dated July 16, 2004 for certain premises known as Suite 290, containing approximately 14,213 rentable square feet of space (the“Premises”) in the building located at 6120 Windward Parkway, Fulton County, Georgia (the “Building”).WHEREAS, the Original Lease, the First Amendment, the Second Amendment, the Third Amendment, and this Fourth Amendment are collectively referred to as the“Lease”;WHEREAS, Landlord and Tenant desire to and hereby shall, by this Fourth Amendment to Lease, modify and amend the terms of the Lease, in the manner and for thepurpose herein set forth.NOW, THEREFORE, for and in consideration of the premises hereto, the keeping and performance of the covenants and agreements hereinafter contained, and for Tenand No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to belegally bound, agree as follows:1.Defined Terms. All capitalized terms not defined herein shall have the same meaning as set forth in the Lease.2.Expansion of the Premises. Commencing on September 1, 2009 the Premises became 14,462 rentable square feet, which shall remain in effect forthis extension term, and is more particularly described in Exhibit “A” attached hereto and incorporated herein.3.Extension of Lease Term. The term of the Lease for the Leased Premises is hereby extended to include the period from June 1, 2010 throughDecember 31, 2011 (the “Third Extension Term”).4.Rent. The Tenant shall, without demand, deduction or right of offset, pay to the Landlord during the Third Extension Term as rental (herein called“Basic Rent”), the annual sum of Two Hundred Fifty-One Thousand, Four Hundred Ninety-Four and 100 Dollars ($251,493.18) of lawful money of the jurisdiction in which theLeased Premises are located, in equal monthly installments of Twenty Thousand, Nine Hundred Fifty-Seven and 85/100 Dollars ($20,957.85) each in advance on the first day ofeach month during the Term, the first payment to be made on the first day of June, 2010. Tenant shall also be obligated to and shall continue to pay Landlord during this periodTenant’s Share of Operating Costs above the Initial Operating Costs, as set forth in Article 3 of the lease. The Basic Rent shall escalate according to the following schedule:PeriodRate PSFAnnual RentalMonthly RentalJune 1, 2010— August 31, 2010$17.39$251,494.18*$20,957.85September 1, 2010- August 31, 2011$17.91$259,014.42$21,584.54September 1, 2011- December 31, 2011$18.45$266,823.90$22,235.33*Based on a 12-month period.5.First Right of Refusal. Landlord shall not lease all or any part of the area of the building designated as Suite 220 and marked “First Right ofRefusal Space” on Exhibit “B” of approximately 5,323 rentable square feet to any other party without first offering said space to Tenant.Landlord shall provide written notice to Tenant of Landlord’s desire to rent said Expansion Space to another party and Tenant shall have three (3) days after such notice to indicatein writing its agreement to lease the1Expansion Space at mutually acceptable economic terms and conditions as determined by Landlord and Tenant.If Tenant does not indicate its willingness to lease the Expansion Space in writing within three (3) days thereafter and execute a lease or lease amendment in form similar to thislease or lease amendment within four (4) days thereafter, Landlord thereafter shall have the right to lease all or part of the Expansion Space to any party and Tenant shall have noright with regard to the Expansion Space.Tenant shall have no rights under this paragraph whatsoever should Tenant be in default under the terms of this lease.6.Binding Effect. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia and shall be binding uponand inure to the benefit of the parties hereto and their respective heirs, successors, representatives and assigns, but always subject, in the case of Tenant, to the limitations onassignment and sublease set forth in the Lease. In the event of any inconsistency or conflict between the terms of this Agreement and of the Lease, the terms hereof shall control.Time is of the essence of all of the terms of this Agreement.7.Continued Validity. Except as hereinabove provided, all other terms and conditions of the Lease shall remain unchanged and in full force andeffect and are hereby ratified and confirmed by Landlord and Tenant. Tenant hereby acknowledges and agrees that, as of the date hereof, the Lease is subject to no offsets, claims,counterclaims or defenses of any nature whatsoever.8.Modifications. This Agreement may not be changed, modified, discharged or terminated orally in any manner other than by an agreement inwriting signed by Landlord and Tenant or their respective heirs, representatives, successors and permitted assigns.9.Authority. The persons executing this Agreement on behalf of Landlord and Tenant do hereby personally represent and warrant that they eachhave the full right and authority to enter into this Agreement.IN WITNESS WHEREOF, the parties have set their hands and affixed their seals to this Agreement to be effective as of the day and year first above written.“LANDLORD”:JOHN HANCOCK LIFE INSURANCE COMPANY(U.S.A.), a wholly owned subsidiary of Manulife Financial CorporationPer: /s/ Terry L. GilliamName: Terry L. GilliamTitle: AVP, Regional Director“TENANT”:ALIMERA SCIENCES, INC., a Delaware corporationPer: /s/ Dan MyersName: Dan MyersTitle: Pres., CEO234FIFTH AMENDMENT TO LEASE AGREEMENTTHIS FIFTH AMENDMENT TO LEASE AGREEMENT (this “Fifth Amendment”) is made and entered into as of the28th day of December 2011, by and between JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.), a wholly ownedsubsidiary of Manulife Financial Corporation, a Michigan corporation (“Landlord”), and ALIMERA SCIENCES, INC., aDelaware corporation (“Tenant”).WITNESSETH:WHEREAS, Rubicon, L.C. (“Original Landlord”) and Tenant entered into that certain Office Lease (the “Original Lease”)dated May 27, 2003, as amended by that certain First Amendment to Lease Agreement (the “First Amendment”) dated July 16,2004, • as further amended by that certain Second Amendment to Lease Agreement (the “Second Amendment”) dated July 1, 2005,as further amended by that certain Third Amendment to Lease Agreement dated May [sic], 2009, and as further amended by thatcertain Fourth Amendment to Lease Agreement (the “Fourth Amendment”) dated May 25, 2010 (collectively, as so amended,together with all modifications and supplements thereto, the “Lease”) for certain premises in the building located at 6120 WindwardParkway, Alpharetta, Georgia 30005 (the “Building”), consisting of approximately 14,462 rentable square feet of space on the 2ndfloor of the Building known as Suite 290 (the “Premises”);WHEREAS, Landlord acquired the Building and has succeeded to the interest of Original Landlord as the “Landlord” underthe Lease;WHEREAS, the term of the Lease is scheduled to expire on December 31, 2011, and the parties desire to further extend theterm of the Lease to December 31, 2012; andWHEREAS, Landlord and Tenant desire to evidence the terms of such extension and to amend certain other terms andconditions of the Lease by means of this Fifth Amendment.NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration,the receipt, adequacy and sufficiency of which are hereby acknowledged, the Lease is hereby amended, and the parties hereto dohereby agree as follows:1.Defined Terms. All terms and definitions, capitalized or otherwise, used herein and not otherwise defined herein shallhave the meanings ascribed to them in the Lease.2. Extension of Lease Term. The term of the Lease is hereby further extended for a period of twelve (12) monthscommencing on January 1, 2012 and expiring on December 31, 2012 (the “Fourth Extension Term”), unless sooner terminatedpursuant to the terms of the Lease, as amended herein. There shall be no additional renewal or extension terms unless5otherwise mutually agreed to in writing by Landlord and Tenant. Tenant shall remain subject to all the terms and conditions of theLease, as amended herein, during the Fourth Extension Term.3.Rent. Tenant shall, without demand, deduction or right of offset, continue to pay to Landlord during the FourthExtension Term as Base Rent, the annual sum of Two Hundred Sixty-Six Thousand, Eight Hundred Twenty-Three and 90/100Dollars ($266,823.90), in equal monthly installments of Twenty-Two Thousand Two Hundred Thirty-Five and 33/100 Dollars($22,235.33) each in advance on the first day of each month during the Fourth Extension Term, the first payment to be made onJanuary 1, 2012. Tenant shall also be obligated to and shall continue to pay Landlord during the Fourth Extension Term, Tenant’sShare of increases in Taxes and Operating Expenses over $356,040.00, as set forth in Article 1(b) of the Original Lease, as amendedby Paragraph 5 (Taxes and Operating Expenses) of the Second Amendment.4.Acceptance of Premises. Tenant hereby accepts the Premises in its “AS IS” condition during the Fourth ExtensionTerm and acknowledges and agrees Landlord shall have no obligation to construct any tenant improvements to the Premises or makeany alterations or additions thereto, and Landlord shall have no obligation to provide any tenant improvement allowance, rentabatement, credit, set-off, or other concession to Tenant.5.Tenant Termination Options.(a)Notwithstanding anything to the contrary contained in the Lease, provided Tenant is not in an event ofdefault under the Lease (as amended herein) regardless of any notice or cure period, Tenant shall have a first option (the “FirstTermination Option”) to terminate the Lease, effective as of June 30, 2012 (the “First Termination Date”), by providing Landlordwith written notice of such First Termination Option election (the “First Termination Notice”). Such First Termination Notice shallbe effective only if it is given to Landlord on or before March 31, 2012 (the “First Termination Notice Deadline”); accordingly, ifTenant has not given its First Termination Notice to Landlord prior to the First Termination Notice Deadline, this First TerminationOption shall expire and be of no further force or effect, and Tenant shall have no right or option to terminate the Lease pursuant to thissubparagraph (a) of this Paragraph 5 at any time after the First Termination Notice Deadline. If Tenant complies with this Paragraph5 (including subparagraph (c) hereof), Tenant shall continue to be liable for its obligations under the Lease to and through the FirstTermination Date, including, without limitation, additional rent that accrues pursuant to the terms of the Lease, with all of suchobligations surviving the early termination of the Lease.(b)Notwithstanding anything to the contrary contained in the Lease, provided Tenant is not in an event ofdefault under the Lease (as amended herein) regardless of any notice or cure period, Tenant shall have a second option (the “SecondTermination Option”) to terminate the Lease, effective as of September 30, 2012 (the “Second Termination Date”), by providingLandlord with written notice of such Second Termination Option election (the “Second Termination Notice”). Such SecondTermination Notice shall be effective only if it is given to Landlord on or before June 30, 2012 (the “Second Termination NoticeDeadline”); accordingly, if Tenant has not given its Second Termination Notice to Landlord prior to the Second Termination2Notice Deadline, this Second Termination Option shall expire and be of no further force or effect, and Tenant shall have no right oroption to terminate the Lease pursuant to this Paragraph 5 at any time after the Second Termination Notice Deadline. If Tenantcomplies with this Paragraph 5 (including subparagraph (c) hereof), Tenant shall continue to be liable for its obligations under theLease to and through the Second Termination Date, including, without limitation, additional rent that accrues pursuant to the terms ofthe Lease, with all of such obligations surviving the early termination of the Lease.(c)As a condition precedent to a termination of the Lease pursuant to the provisions of this Paragraph 5,simultaneously with Tenant’s delivery of either the First Termination Notice or the Second Termination Notice, as applicable, Tenantmust deliver to Landlord the Termination Fee (as hereinafter defined). As used herein, the “Termination Fee” shall mean an amountequal to the unamortized portion (amortized with an interest rate of ten percent (10%) per annum) as of the applicable TerminationDate of any leasing commissions paid by Landlord in connection with this Fifth Amendment. It is hereby acknowledged that any suchamount required to be paid by Tenant in connection with such early termination is not a penalty but a reasonable pre-estimate of thedamages which would be incurred by Landlord as a result of such early termination of the Lease (which damages are impossible tocalculate more precisely) and, in that regard, constitutes liquidated damages with respect to such loss.(d)The rights granted to Tenant under this Paragraph 5 are personal to the named Tenant, and in the event ofany assignment of the Lease or sublease by Tenant, the First Termination Option and the Second Termination Option shall thenceforthbe void and of no further force or effect. Tenant’s rights under this Paragraph 5 shall be effective only if Tenant is not in default(regardless of any notice and/or cure period) under the Lease, as amended hereby, nor has any event occurred which with the giving ofnotice or the passage of time, or both, would constitute an event of default under the Lease (regardless of any notice and/or cureperiod), as amended hereby, either at the time of the delivery of the First Termination Notice or the Second Termination Notice, or asof the First Termination Date or the Second Termination Date.6.Deleted Provisions. As of date of this Fifth Amendment, the Lease is hereby amended by deleting the followingprovisions in their entirety:(a)Paragraph No. 2 of the Rider contained in Exhibit “B” to the Original Lease;(b)Paragraph No. 7 of the First Amendment;(c)Paragraph No. 7 of the Second Amendment and Exhibit B to the Second Amendment; and(d)Paragraph No. 5 of the Fourth Amendment and Exhibit B to the Fourth Amendment.7. Brokers. Tenant represents and warrants to Landlord that neither it nor its officers or agents nor anyone acting on its behalfhas dealt with any real estate broker other than Lavista Associates, Inc. (“Landlord’s Broker’), which represented Landlord, andICON Commercial Interests, LLC (“Tenant’s Broker’), which represented Tenant, in the negotiating and making of3this Fifth Amendment, and Tenant agrees to indemnify and hold Landlord, its agents, employees, partners, directors, shareholders andindependent contractors harmless from all liabilities, costs, demands, judgments, settlements, claims, and losses, including reasonableattorneys’ fees and costs, incurred by Landlord in conjunction with any such claim or claims of any other broker or brokers claiming tohave interested Tenant in the Building or Premises or claiming to have caused Tenant to enter into this Fifth Amendment. Landlordagrees to pay the commission due to Landlord’s Broker and Tenant’s Broker in connection with this Fifth Amendment pursuant toseparate written commission agreements.8.Notices; Rent Payment Address.(a)Notices to Landlord. Landlord acknowledges that its current address for any notice, demands, requests,consents or approvals from Tenant to Landlord under the Lease, as amended herein, is as follows:LANDLORDJohn Hancock Life Insurance Company (U.S.A.)c/o Manulife FinancialAtlanta Real Estate Office1170 Peachtree Street, Suite 565Atlanta, Georgia 30309Attn: Lease Administration(b)Rent Payment Address. Landlord acknowledges that its current address for rent payments under the Lease, asamended herein, is as follows:John Hancock Life Insurance Company (U.S.A.)c/o Manulife FinancialDepartment AP.O. Box 5147Buffalo, New York 14240-5147Attn: Real Estate Division9.No Defaults. Tenant hereby agrees that there are, as of the date hereof, regardless of the giving of notice or thepassage of time, or both, no defaults or breaches on the part of Landlord or Tenant under the Lease.10.Headings. The headings used herein are provided for convenience only and are not to be considered in construingthis Fifth Amendment,11. Entire Agreement. This Fifth Amendment represents the entire agreement between the parties with respect to the subjectmatter hereof. Landlord and Tenant agree that there are no collateral or oral agreements or understandings between them with respectto the Premises or the Building other than the Lease and this Fifth Amendment. This Fifth Amendment supersedes all priornegotiations, agreements, letters or other statements with respect to Tenant’s further extension of the term of the Lease412.Binding Effect. This Fifth Amendment shall not be valid and binding on Landlord and Tenant unless and until it hasbeen completely executed by and delivered to both parties.13.Confirmation of Lease. Except as expressly amended and modified by this Fifth Amendment, the Lease shallotherwise remain unmodified and in full force and effect, and the parties hereto hereby ratify and confirm the same. To the extent ofany inconsistency between the Lease and this Fifth Amendment, the terms of this Fifth Amendment shall control,IN WITNESS WHEREOF, the undersigned parties have duly executed this Fifth Amendment under seal as of the day andyear first above written.LANDLORD:JOHN HANCOCK LIFE INSURANCECOMPANY (U.S.A.), a wholly ownedsubsidiary of Manulife FinancialCorporationBy: /s/ Terry L. GilliamTerry L. GilliamManaging Director, Southeastern USManulife FinancialDate: December 28, 20115TENANT:ALIMERA SCIENCES, INC.,a Delaware corporationBy: /s/ Richard S. Eiswirth, Jr.Print Name: Richard S. Eiswirth, Jr.Title: Chief Operating Officer and Chief Financial OfficerDate: December 12, 20116SIXTH AMENDMENT TO LEASE AGREEMENTTHIS SIXTH AMENDMENT TO LEASE AGREEMENT (this “Sixth Amendment”) is made and entered into as of the6th day of November 2012, by and between JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.), a wholly ownedsubsidiary of Manulife Financial Corporation, a Michigan corporation (“Landlord”), and ALIMERA SCIENCES, INC., aDelaware corporation (“Tenant”).WITNESSETH:WHEREAS, Rubicon, L.C. (“Original Landlord”) and Tenant entered into that certain Office Lease (the “Original Lease”)dated May 27, 2003, as amended by that certain First Amendment to Lease Agreement dated July 16, 2004, as further amended by thatcertain Letter Agreement dated March 1, 2005, as further amended by that certain Second Amendment to Lease Agreement (the“Second Amendment”) dated July 1, 2005, as further amended by that certain Third Amendment to Lease Agreement dated May[sic], 2009, as further amended by that certain Fourth Amendment to Lease Agreement dated May 25, 2010, and as further amendedby that certain Fifth Amendment to Lease Agreement (the “Fifth Amendment”) dated December 28, 2011 (collectively, as soamended, together with all modifications and supplements thereto, the “Lease”) for certain premises in the building located at 6120Windward Parkway, Alpharetta, Georgia 30005 (the “Building”), consisting, of approximately 14,462 rentable square feet of spaceon the 2nd floor of the Building known as Suite 290 (the “Premises”):WHEREAS, Landlord acquired the Building and has succeeded to the interest of Original Landlord as the “Landlord” underthe Lease;WHEREAS, the term of the Lease is scheduled to expire on December 31, 2012, and the parties desire to further extend theterm of the Lease to January 31, 2015; andWHEREAS, Landlord and Tenant desire to evidence the terms of such extension and to amend certain other terms andconditions of the Lease by means of this Sixth Amendment.NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration,the receipt, adequacy and sufficiency of which are hereby acknowledged, the Lease is hereby amended, and the parties hereto dohereby agree as follows;1.Defined Terms. All terms and definitions, capitalized or otherwise, used herein and not otherwise defined herein shallhave the meanings ascribed to them in the Lease.2. Extension of Lease Term. The term of the Lease is hereby further extended for a period of twenty-five (25) monthscommencing on January 1, 2013 (the “Fifth Extension Term Commencement Date”) and expiring at midnight on January 31, 2015(the “Fifth Extension Term”), unless sooner terminated pursuant to the terms of the Lease, as amended herein. As of7the Fifth Extension Term Commencement Date, there shall be no additional renewal or extension terms unless otherwise mutuallyagreed to in writing by Landlord and Tenant. Tenant shall remain subject to all the terms and conditions of the Lease, as amendedherein, during the Fifth Extension Term.3.Base Rent. During the Fifth Extension Term, Base Rent for the Premises shall be as follows:PeriodRentalRateBase RentPer Annum*Monthly InstallmentsOf Base Rent01/01/13 — 12/31/13$18.25$263,931,48$21,994,2901/01/14 — 12/31/14$18.80$271,885.56$22,657.1301/01/15 — 01/31/15$19.36N/A$23,332.03*Base Rent Per Annum is Monthly Installments of Base Rent multiplied by 12.Notwithstanding the foregoing rent schedule, so long as Tenant is not in an event of default under the Lease, as amendedherein, beyond any applicable notice and cure period, all Rent (including, additional rent) for the first (1st) month of this FifthExtension Term (the “Abatement Period”) shall be abated (the “Abatement”). Notwithstanding any other remedy set forth in theLease, as amended herein, if Tenant defaults at any time during the Fifth Extension Term such that Landlord terminates the Lease, asamended herein, or Tenant’s possession under the Lease, the unamortized portion of the foregoing Abatement shall be cancelled andall Rent which would have otherwise been due during such period shall be immediately due and payable by Tenant to Landlord as acomponent of Landlord’s damages under the Lease, as amended herein,4.Taxes and Operating Expenses. In addition to the Base Rent, as previously set forth in the Lease, the parties agreethat Tenant’s Share of increases in Taxes and Operating Expenses will now be paid over the actual Taxes and Operating Expensesincurred in the Base Year 2013 rather than over an expense stop.5. Acceptance of Premises. Tenant hereby accepts the Premises in its “AS IS” condition during the Fifth Extension Term andacknowledges and agrees Landlord shall have no obligation to construct any tenant improvements to the Premises or make anyalterations or additions thereto, and Landlord shall have no obligation to provide any tenant improvement allowance, credit, set-off, orother concession to Tenant, except as set forth herein. Landlord shall provide to Tenant as a tenant improvements allowance up to FourDollars (S4.00) per rentable square foot of the Premises (i.e., up to $57,848.00) (the “Allowance”), which shall be applied byLandlord to its construction management fee and to the following work in and to the Premises (the “Work”): (a) to steam clean thecarpet in the Premises, (b) to repaint the Premises. using materials and colors approved by Landlord, and (c) such other work as may beapproved by Landlord (subject to Landlord’s possible requirement of a work letter and construction drawings depending upon thenature and scope of such work), Landlord will coordinate the Work and will receive a construction management fee of five percent(5%) of the cost of the Work, which fee will be paid from the Allowance. Tenant will be solely responsible2for moving, Tenant’s furniture, trade fixtures and equipment (“FF&E”) as reasonably necessary to accommodate the Work, the costsfor which may be paid from the Allowance, if available. If the contractor performing the Work is responsible for moving the FF&E,the costs thereof will be paid by Landlord from the Allowance directly to the contractor. If Tenant does not engage the contractor tomove its FF&E, any costs associated therewith may be paid from the Allowance, if available, within thirty (30) days of Landlord’sreceipt of paid invoices or receipts. Tenant will reasonably cooperate with Landlord to accommodate performance of the Work, andLandlord will reasonably cooperate with Tenant to minimize the disruption to Tenant’s operations caused by the performance of theWork. However, Tenant will not be entitled to any abatement or reduction of Rent by reason of any interruption to Tenant’s operationscaused by the performance of the Work. Tenant agrees that Landlord will not be liable in any way for any injury, loss, or damagewhich may occur to any of Tenant’s property placed or installations made in the Premises during the performance of the Work, thesame being at Tenant’s sole risk. Tenant shall be responsible for all costs of the Work in excess of the Allowance, if any. Any unusedportion of the Allowance may be applied toward the cost of FF&E for the Premises so long. as Landlord is provided with invoicesdetailing such costs and appropriate detail of backup satisfactory to Landlord. Landlord agrees, upon receipt of such written evidence(including paid invoices) of such costs, to reimburse Tenant for the FF&E cost up to the remaining amount of the Allowance. Anyunused portion of the Allowance must be utilized by or on behalf of Tenant for the purposes set forth herein on or before March 31,2013. If not. Landlord will be entitled to retain any remaining balance of the Allowance and Tenant will forfeit all rights with respectthereto. In no event shall any portion of the Allowance be used toward the payment of or as a credit or set-off against any Renthereunder or under the Lease.6.Deleted Provision. As of the date of this Sixth Amendment, the Lease is hereby amended by deleting Paragraph 5 ofthe Fifth Amendment in its entirety.7.Brokers. Tenant represents and warrants to Landlord that neither it nor its officers or agents nor anyone acting on itsbehalf has dealt with any real estate broker other than Lavista Associates, Inc. (“Landlord’s Broker”), which represented Landlord.and ICON Commercial Interests, LLC (“Tenant’s Broker”), which represented Tenant, in the negotiating and making of this SixthAmendment, and Tenant agrees to indemnify and hold Landlord, its agents, employees, partners, directors, shareholders andindependent contractors harmless from all liabilities, costs, demands, judgments, settlement, claims, and losses, including reasonableattorneys’ fees and costs, incurred by Landlord in conjunction with any such claim or claims of any other broker or brokers claiming tohave interested Tenant in the Building or Premises or claiming to have caused Tenant to enter into this Sixth Amendment. Landlordagrees to pay the commission due to Landlord’s Broker and Tenant’s Broker in connection with this Sixth Amendment pursuant toseparate written commission agreements.8.No Defaults. Tenant hereby agrees that to the best of its knowledge, there are, as of the date hereof, regardless of thegiving of notice or the passage of time, or both, no defaults or breaches on the part of Landlord or Tenant under the Lease.9. Headings. The headings used herein are provided for convenience only and are not to be considered in construing thisSixth Amendment.310.Entire Agreement. This Sixth Amendment represents the entire agreement between the parties with respect to thesubject matter hereof. Landlord and Tenant agree that there are no collateral or oral agreements or understandings between them withrespect to the Premises or the Building other than the Lease and this Sixth Amendment. This Sixth Amendment supersedes all priornegotiations, agreements, letters or other statements with respect to Tenant’s further extension of the term of the Lease.11.Binding Effect. This Sixth Amendment shall not be valid and binding on Landlord and Tenant unless and until it hasbeen completely executed by and delivered to both parties.12.Authorization. The person signing this Sixth Amendment on behalf of Tenant hereby represents and warrants that (i)he/she is authorized to execute this Sixth Amendment on behalf of Tenant, (ii) he/she possesses the requisite power and authority tobind Tenant to the terms and provisions hereof, (iii) Tenant has taken all actions necessary to authorize the execution, delivery andperformance of this Sixth Amendment by Tenant, and (iv) Tenant has been duly organized and is qualified or authorized to dobusiness in the State in which the Premises is located. Furthermore, Tenant agrees to take any and all necessary action to keep itsexistence as an entity in good standing throughout the term of the Lease as extended herein, in the State in which Tenant has beenorganized as well as to remain qualified to do business within the State in which the Premises are located.13.Confirmation of Lease. Except as expressly amended and modified by this Sixth Amendment, the Lease shallotherwise remain unmodified and in full force and effect, and the parties hereto hereby ratify and confirm the same. To the extent ofany inconsistency between the Lease and this Sixth Amendment the terms of this Sixth Amendment shall control.[SIGNATURES BEGIN ON NEXT PAGE.]4IN WITNESS WHEREOF, the undersigned parties have duly executed this Sixth Amendment under seal as of the day andyear first above written.LANDLORD:JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.), a wholly owned subsidiary of Manulife Financial CorporationBy: /s/ Terry L. GilliamTerry L. GilliamManaging Director, Southeastern USManulife FinancialDate: October 6th, 2012[SIGNATURES CONTINUED ON NEXT PAGE]5TENANT:ALIMERA SCIENCES, INC.,a Delaware corporationBy: /s/ Richard S. Eiswirth, Jr.Print Name: Richard S. Eiswirth, Jr.Title: Chief Operating Officer and Chief Financial OfficerDate: October ___, 20126AMENDED AND RESTATED SEVENTH AMENDMENT TO LEASE AGREEMENTTHIS AMENDED AND RESTATED SEVENTH AMENDMENT TO LEASE AGREEMENT (this “Amendment”)is made and entered into as of the 14th day of August 2014, by and between JOHN HANCOCK LIFE INSURANCE COMPANY(U.S.A.), a wholly owned subsidiary of Manulife Financial Corporation, a Michigan corporation (“Landlord”), and ALIMERASCIENCES, INC. a Delaware corporation (“Tenant”).WITNESSETH:WHEREAS, Rubicon, L.C. (“Original Landlord”) and Tenant entered into that certain Office Lease (the “Original Lease”)dated May 27, 2003, as amended by that certain First Amendment to Lease Agreement by and between The Manufacturers LifeInsurance Company (“Interim Landlord”), as successor-in-interest to Original Landlord, and Tenant dated July 16, 2004, as furtheramended by that certain Letter Agreement (the “Letter Agreement”) dated March 1, 2005, as further amended by that certain SecondAmendment to Lease Agreement by and between Landlord, as successor-in-interest to Interim Landlord, and Tenant (the “SecondAmendment”) dated July 1, 2005, as further amended by that certain Third Amendment to Lease Agreement dated May [sic], 2009,as further amended by that certain Fourth Amendment to Lease Agreement dated May 25, 2010, as further amended by that certainFifth Amendment to Lease Agreement dated December 28, 2011, and as further amended by that certain Sixth Amendment to LeaseAgreement (the “Sixth Amendment”) dated November 6, 2012 (collectively, as so amended, the “Lease”), for certain premises in thebuilding known as and located at 6120 Windward Parkway, Alpharetta, Georgia 30005 (the “Building”), consisting of approximately14,462 rentable square feet of space located on the 2nd floor of the Building and known as Suite 290, which premises are moreparticularly described in the Lease (the “Original Premises”);WHEREAS, Landlord and Tenant entered into that certain Seventh Amendment to Lease Agreement dated July 16, 2014,amending the Lease by expanding the Premises and extending the Term of the Lease (the “Prior Seventh Amendment”);WHEREAS, Landlord and Tenant desire to amend and restate the Prior Seventh Amendment in its entirety pursuant to theterms hereof.NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration,the receipt, adequacy and sufficiency of which are hereby acknowledged, the Lease is hereby amended, and the parties hereto dohereby agree as follows:1.Recitals; Capitalized Terms. The recitals set forth herein above are incorporated herein as if restated in their entireties.All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Lease.2. Extension of Lease Term. The Term of the Lease is hereby recast and extended for a period of eighty-four (84) months,plus any partial month occasioned by the Effective Date (as hereinafter defined) occurring on any day other than the first (1st) day of acalendar month (the “Sixth Extension Term”), commencing on that date (the “Effective Date”) which is the earlier of (i) September27, 2014, and (ii) the business day immediately succeeding the date Landlord receives the Contingency Satisfaction Notice (as definedin Paragraph 13 below), and expiring at1midnight on the last day of the eighty-fourth (84th) full calendar month beginning on or after the Effective Date, unless soonerterminated or extended pursuant to the terms of the Lease, as amended herein. All references in the Lease to the Term shall hereafter bedeemed to include the Sixth Extension Term. Tenant shall remain subject to all the terms and conditions of the Lease, as amendedherein, during the Term, as extended by the Sixth Extension Term. Except as set forth in Paragraph 11 below, there shall be noadditional renewal or extension terms unless otherwise mutually agreed to in writing by Landlord and Tenant and therefore, all priorrenewal or extension options, if any, are hereby terminated and deemed null and void and are hereby deleted in their entireties (exceptthe heading) and replaced with the words “Intentionally Deleted”.3.Expansion; Grant of Expansion Space. As of the Effective Date, Landlord agrees to lease to Tenant and Tenantagrees to lease from Landlord, for the entire Term, as extended herein and as may be further extended, and subject to and inaccordance with the terms of the Lease, as amended by this Amendment, an additional 3,632 rentable square feet of space on the first(1st) floor of the Building known as Suite 180, as shown on Exhibit A attached hereto and by this reference made a part hereof (the“Expansion Space”). As of the Effective Date: (a) the Expansion Space shall be subject to all of the terms and conditions of theLease, as amended herein, for the entire Term, as extended herein and as may be further extended; (b) all references in the Lease to the“Premises” shall be deemed to include the Original Premises and the Expansion Space; and (c) the total rentable square feet of spaceleased pursuant to the Lease shall be 18,094 rentable square feet on the 1st and 2nd floors of the Building. Tenant’s notice address shallremain as set forth in Section 18 of the Original Lease.4.Base Rent. From and after the Effective Date, Base Rent with respect to the Premises, including the ExpansionSpace, shall be as follows (prorated for any partial month pursuant to the terms of the Lease):Period*AnnualRate/RSFAnnualBase RentMonthlyBase RentMonths 1 —12**$17.00$307,598.04$25,633.17Months 13 — 24$17.43$315,378.48$26,281.54Months 25 — 36$17.87$323,339.76$26,944.98Months 37 — 48$18.32$331,482.12$27,623.51Months 49 — 60$18.78$339,805.32$28,317.11Months 61 — 72$19.25$348,309.48$29,025.79Months 73 — 84$19.73$356,994.60$29,749.55*Calculated from the Effective Date**Plus any partial month occasioned by the Effective Date occurring on anyday other than the first (1st) day of a calendar monthNotwithstanding the foregoing rent schedule, so long as Tenant is not in default hereunder beyond any applicable notice and cureperiod, all Rent (including Additional Rent, as hereinafter defined) for the initial eight (8) months of the Sixth Extension Termcommencing on the Effective Date (the “Abatement Period”) shall be abated (the “Abatement”). In addition to, and not in lieu of,any other remedy set forth in the Lease, as amended herein, if Tenant fails to take possession of the Expansion Space or otherwisedefaults at any time during the Sixth Extension Term such that Landlord terminates the Lease, as amended herein, or Tenant’spossession under the Lease, as2amended herein, the unamortized portion of the foregoing Abatement (amortized over the period commencing upon expiration of theAbatement Period and running through and including the last day of the Sixth Extension Term) shall be cancelled and all Rent whichwould have otherwise been due during such period shall be immediately due and payable by Tenant to Landlord as a component ofLandlord’s damages under the Lease, as amended herein.5.Taxes and Operating Expenses.(a)Base Year. During the Term, as extended herein, Tenant shall continue to pay Tenant’s Share (determined inaccordance with Paragraph 5(b) herein below) of Taxes and Operating Expenses over those incurred in a Base Year (in lieu of anexpense stop), as set forth in Paragraph 4 of the Sixth Amendment; provided, however, that from and after the Effective Date, the BaseYear shall be deemed to be calendar year 2014. Furthermore, with respect to the calculation of Operating Expenses under the Lease, asamended herein, (i) the “gross up” provisions set forth in the Letter Agreement (wherein all references to “Operating Costs” shallhereafter be deemed to refer to “Operating Expenses” and all references to “Fiscal Period” shall hereafter be deemed to refer to“calendar year”) and (ii) the cap on “controllable” Operating Expenses set forth in Paragraph 5 of the Second Amendment, which shallhenceforth be calculated on a cumulative, compounding basis notwithstanding anything in the Second Amendment to the contrary,shall both continue in full force and effect through the Term, as extended by the Sixth Extension Term and as may be further extended.(b)Tenant’s Share. As of the Effective Date, the second (2nd) grammatical paragraph of Section 1(b) of theOriginal Lease is hereby deleted in its entirety and replaced with the following:“Tenant’s Share” shall be determined by dividing the rentable square footage of the Premises by the rentable squarefootage of the Building, subject to adjustment (as determined solely by Landlord and notified to Tenant in writing) for physicalincreases or decreases in the total rentable square footage of the Building, provided that the total rentable square footage of theBuilding and the Premises shall exclude areas designated (whether or not rented) for parking and for storage.”Accordingly, as of the Effective Date, Tenant’s Share is deemed to be thirty-six and eighty-three hundredths percent (36.83%).6. Security Deposit. As a further inducement for Landlord to enter into this Amendment, contemporaneously with theexecution of this Amendment by Tenant, Tenant shall deposit with Landlord the amount of One Thousand Nine Hundred Two and72/100 Dollars ($1,902.72), which shall be added to Tenant’s current security deposit of $23,730.45, for a total security deposit ofTwenty-Five Thousand Six Hundred Thirty-Three and 17/100 Dollars ($25,633.17) (the “Security Deposit”), to be held and appliedby Landlord in accordance with the terms of Section 22 of the Original Lease. All other terms and conditions of the Lease shallcontinue to apply to the Security Deposit, as so increased.37.Signage. As of the Effective Date, Landlord hereby agrees to provide and install, at Tenant’s sole cost and expense,but subject to the application of the Allowance, the Expansion Space entry signage, and to update Tenant’s Building directory signage.8.Parking. Notwithstanding anything in the Lease to the contrary, from and after the Effective Date, Tenant shall havethe right to use up to eighty (80) unreserved parking spaces in the parking facilities serving the Building, all of which shall be availableto Tenant on an unassigned, “first come-first served” basis during the Term (the “Permitted Parking Spaces”). Tenant shall notutilize any parking spaces other than the Permitted Parking Spaces. Tenant and its employees and invitees shall not park in any spacesreserved for another tenant and marked for reserved use. Landlord has and reserves the right to alter the methods used to controlparking and the right to establish such controls and rules and regulations (such as parking stickers to be affixed to vehicles) regardingparking that Landlord may deem desirable. Without liability, Landlord will have the right to tow or otherwise remove vehiclesimproperly parked, blocking ingress or egress lanes, or violating parking rules, at the expense of the offending tenant and/or owner ofthe vehicle. Tenant’s right to use the parking facilities pursuant to the Lease, as amended herein, are subject to the followingconditions: (i) Landlord has no obligation to provide a parking attendant and Landlord shall have no liability on account of any loss ordamage to any vehicle or the contents thereof, Tenant hereby agreeing to bear the risk of loss for same; and (ii) if and when sorequested by Landlord, Tenant shall furnish Landlord with the license plate numbers of any vehicles of Tenant and its employees andinvitees using the parking facilities.9.Acceptance of Premises; Allowance.(a)Tenant hereby accepts the Premises, as expanded herein, in its “AS IS,” “WHERE IS” condition, WITHALL FAULTS, and without any representations or warranties (express or implied) whatsoever, during the Term, as extended by theSixth Extension Term, and hereby acknowledges and agrees Landlord shall have no obligation to construct any tenant improvementsto the Premises, and Landlord shall have no obligation to provide any tenant improvement allowance, credit, set-off, or otherconcession to Tenant, except as expressly set forth in Paragraph 9(b) below.(b) Landlord shall provide to Tenant as a tenant improvements allowance up to Twelve and No/100 Dollars ($12.00)per rentable square foot of the Premises, as expanded herein (i.e., up to $217,128.00 in the aggregate) (the “Allowance”), which maybe applied to all construction/alteration costs as follows (collectively, the “Construction Costs”) and construction management fees:(i) for certain improvements in and to the Premises based upon a mutually agreeable space plan (the “Improvements”), (ii)design/architecture costs, (iii) construction, (iv) engineering, (v) professional fees, (vi) permitting, if any, and (vii) soft costs for theconstruction of or alterations to the Premises. Tenant shall be responsible for all Construction Costs in excess of the Allowance, if any,and shall reimburse Landlord for such difference promptly upon receipt of invoices for the same. Additionally, if, prior tocommencement of construction, the parties anticipate that the total Construction Costs shall be more than the Allowance (a“Shortfall”), Tenant shall pay to Landlord such Shortfall prior to the commencement of the Improvements. Landlord or its designeeshall serve as construction manager (“Construction Manager”). The Construction Manager, on behalf of Landlord and Tenant, shall(1) coordinate architectural and engineering planning; (2) solicit bids from at least three (3) qualified contractors and conduct any4permitting processes; (3) award the bid to the lowest qualified general contractor(s)/subcontractor(s); (4) supervise the construction ofthe Improvements in the Premises, and (5) pay the Allowance to all contractors and subcontractors directly. The Construction Managershall be paid a fee of five percent (5%) of the Construction Costs with such fee to be deducted from the Allowance by Landlord. If theentire Allowance is not exhausted in constructing the Improvements, then, subject to the terms and provisions of this Paragraph 9(b)and so long as Tenant is not in an event of default beyond any applicable notice and cure period, such unused and remaining portionup to, but in no event in excess of, Fifty Thousand and No/100 Dollars ($50,000.00) (the “Excess Allowance”) may be used toreimburse Tenant for reasonable costs actually incurred by Tenant with respect to the acquisition and installation of furniture andtelecommunications equipment and cabling specifically for the Premises, subject to the terms of this Paragraph 9(b). The ExcessAllowance, if any, shall be disbursed to Tenant within sixty (60) days after Tenant’s request for same (but, in any event, any suchrequest may not be delivered until after the Effective Date), together with copies of invoices along with paid receipts evidencing suchcosts to the reasonable satisfaction of Landlord. Any unused portion of the Allowance, including the Excess Allowance, must beutilized by Tenant for the purposes set forth herein within six (6) months from the Effective Date. If not, Landlord will be entitled toretain any remaining balance of the Allowance and Tenant will forfeit all rights with respect thereto. Tenant acknowledges that theImprovements in the Premises shall be performed while Tenant is in occupancy of the Premises and that Landlord shall use reasonableefforts not to interfere with Tenant’s use of the Premises during the performance of the construction of or any alterations to thePremises, but that some such interference may occur and shall not be a default by Landlord under the Lease. Prior to commencementof the Improvements, the Construction Manager will coordinate the schedule for the completion of the Improvements with Tenant (orTenant’s designee). Landlord shall not be required to incur overtime costs and expenses in performing the Improvements in thePremises.(c)Landlord and Tenant acknowledge and agree that the Improvements shall include a renovation of theentrance door to the Premises, such that the Premises entryway is full height and compliant with all applicable laws, codes, andordinances, including but not limited to the Americans with Disabilities Act and any other law pertaining to disabilities andarchitectural barriers (collectively, “ADA”).10. Termination Option. Notwithstanding anything to the contrary contained in the Lease, as amended herein, Tenant shallhave the one-time option (the “Termination Option”) to terminate the Lease, as amended herein, effective as of the last day of thesixtieth (60th) full calendar month of the Sixth Extension Term (the “Termination Date”), by providing Landlord with written noticeof such Termination Option election (the “Termination Notice”). Such Termination Notice shall be effective only if it is given toLandlord on or before the last day of the fifty-first (51st) full calendar month of the Sixth Extension Term (the “Termination NoticeDeadline”); accordingly, if Tenant has not given its Termination Notice to Landlord prior to the Termination Notice Deadline, thisTermination Option shall expire and be of no further force or effect, and Tenant shall have no right or option to terminate this Leasepursuant to this Paragraph 10 at any time after the Termination Notice Deadline. As a condition precedent to any termination of thisLease pursuant to the provisions of this Paragraph 10, in addition to Tenant’s delivery of its Termination Notice, Tenant must havedelivered to Landlord with its Termination Notice an amount as a termination fee (collectively, the “Termination Fee”) equal to thesum of (i) one (1) months of Base Rent and Additional Rent that would have been in effect during the month5following the Termination Date had the Lease not been terminated, plus (ii) all unamortized Transaction Costs, as hereinafter defined,incurred in connection with this Amendment and incurred by Landlord for any other expansion space leased by Tenant, all amortizedusing an interest rate of eight percent [8%] per annum over the applicable time period as further described below, and (iii) legal feesincurred by Landlord in connection with this Amendment and any future amendment whereby Tenant is leasing additional space.“Transaction Costs” shall include generally, without limitation, any tenant improvement allowance, turnkey construction costs,leasing commissions, free rent and cash allowances or similar costs and expenses provided to Tenant or incurred by Landlord. Forpurposes of this Amendment, Transaction Costs will include the Allowance, the Abatement, and the leasing commissions incurred inconnection with the Premises, as expanded herein, which shall be amortized over the period commencing on the expiration of theAbatement Period and running through and including the last day of the Sixth Extension Term. With respect to any future expansionspace, the Transaction Costs will be amortized over the period commencing on the date Tenant commences paying rent for suchexpansion space through the expiration date of Tenant’s lease of such expansion space. It is hereby acknowledged that any suchamount required to be paid by Tenant in connection with such early termination is not a penalty but a reasonable pre-estimate of thedamages which would be incurred by Landlord as a result of such early termination of this Lease (which damages are impossible tocalculate more precisely) and, in that regard, constitutes liquidated damages with respect to such loss. Tenant shall continue to be liablefor its obligations under the Lease, as amended herein, to and through the Termination Date, including, without limitation, AdditionalRent that accrues pursuant to the terms of this Lease, with all of such obligations surviving the early termination of the Lease. Therights granted to Tenant under this Paragraph 10 are personal to the named Tenant, and in the event of any assignment of this Leaseor sublease by Tenant, this Termination Option shall thenceforth be void and of no further force or effect. Tenant’s rights under thisParagraph 10 shall be effective only if Tenant is then current in the payment of all Rent then due under the Lease, and no event ofdefault exists, both at the time of the delivery of the Termination Notice and as of the Termination Date. Notwithstanding anythingherein to the contrary, this Termination Option shall be null and void and of no further force or effect upon the giving of any ExtensionNotice, as defined in Paragraph 11 below.11. Option to Extend. Subject to the rights of existing tenants in the Building as of the date of this Amendment and so long asthe Lease, as amended herein, is in full force and effect and Tenant is not in default beyond applicable notice and cure periods in theperformance of any of the covenants or terms and conditions of the Lease, as amended, at the time of notification to Landlord or at thetime of commencement of the Seventh Extension Term, as that term is hereinafter defined, Tenant shall have the option (the “7thAmendment Extension Option”) to extend the Term, as extended herein by the Sixth Extension Term, for the entire Premises, asexpanded herein by the Expansion Space, for one (1) additional period of five (5) years (the “Extension Term”), at the PrevailingMarket Rate, as that term is hereinafter defined, subject to the terms and conditions set forth in this Paragraph 11. Tenant shallprovide Landlord with written notice on or before the last day of the seventy-fifth (75th) full calendar month of the Sixth ExtensionTerm, but in no event before the last day of the seventy-second (72nd) full calendar month of the Sixth Extension Term, of its exerciseof the 7th Amendment Extension Option (the “Extension Notice”). Landlord shall provide Tenant with a written proposal setting forthits determination of the Prevailing Market Rate to extend the Term within thirty (30) days of receipt of such Extension Notice. Tenantshall have ten (10) days from its receipt of Landlord’s proposal6to either accept such proposal or to not extend the Term. The “Prevailing Market Rate” shall mean the then prevailing market ratefor lease renewals and extensions in the Building and in similar buildings in the vicinity of the Building comparable to the Lease, asamended hereby, and the Premises, which shall be determined by Landlord in its sole but reasonable discretion. If Landlord andTenant are unable to reasonably agree upon the Prevailing Market Rate within such 10-day period after Tenant’s receipt of Landlord’sproposal, then Tenant’s exercise of the 7th Amendment Extension Option shall be null and void and of no further force or effect.Notwithstanding anything herein to the contrary, this 7th Amendment Extension Option shall be null and void and of no further forceor effect upon the giving of any Termination Notice, as defined in Paragraph 10 above.12.Landlord’s Notice Address. From and after the date hereof and notwithstanding anything to the contrary in theLease, Landlord acknowledges that its current address for notices under the Lease is as follows:John Hancock Life Insurance Company (U.S.A.)c/o Manulife FinancialAtlanta Real Estate Office1170 Peachtree Street, Suite 1865Atlanta, Georgia 30309Attn: Property Manager13. CONTINGENCY; TERMINATION OF AMENDMENT. NOTWITHSTANDING ANYTHING IN THIS AMENDMENT TOTHE CONTRARY, TENANT SHALL HAVE THE RIGHT TO VOID THIS AMENDMENT (THE “CONTINGENCY”) BY GIVING LANDLORD WRITTENNOTICE (THE “CONTINGENCY TERMINATION NOTICE”) ON OR BEFORE SEPTEMBER 26, 2014 (THE “CONTINGENCY DEADLINE”);ACCORDINGLY, IF TENANT HAS NOT GIVEN ITS CONTINGENCY TERMINATION NOTICE TO LANDLORD PRIOR TO THE CONTINGENCYDEADLINE, THIS CONTINGENCY SHALL EXPIRE AND BE OF NO FURTHER FORCE OR EFFECT, AND TENANT SHALL HAVE NO RIGHT OROPTION TO VOID THIS AMENDMENT PURSUANT TO THIS PARAGRAPH 13 OR OTHERWISE AT ANY TIME AFTER THE CONTINGENCYDEADLINE. FURTHERMORE, TENANT SHALL HAVE THE RIGHT, EXERCISED BY WRITTEN NOTICE TO LANDLORD DELIVERED ANY TIMEPRIOR TO THE CONTINGENCY DEADLINE (THE “CONTINGENCY SATISFACTION NOTICE”), TO WAIVE THE CONTINGENCY AND TENANT’SRIGHT TO VOID THIS AMENDMENT PURSUANT TO THE CONTINGENCY. THE CONTINGENCY SATISFACTION NOTICE SHALL BEIRREVOCABLE. AS A CONDITION PRECEDENT TO ANY TERMINATION OF THIS AMENDMENT PURSUANT TO THE PROVISIONS OF THISPARAGRAPH 13, IN ADDITION TO TENANT’S DELIVERY OF ITS CONTINGENCY TERMINATION NOTICE, TENANT MUST HAVE DELIVERED TOLANDLORD WITH ITS CONTINGENCY TERMINATION NOTICE AN AMOUNT AS A REIMBURSEMENT TO LANDLORD (COLLECTIVELY, THE“CONTINGENCY FEE”) EQUAL TO THE SUM OF ALL ARCHITECTURAL FEES, PERMITTING FEES, AND ATTORNEYS’ FEES INCURRED BYLANDLORD IN CONNECTION WITH THIS AMENDMENT AND THE EXPANSION AND EXTENSION CONTEMPLATED HEREIN THROUGH THE DATEOF THE CONTINGENCY TERMINATION NOTICE. IF TENANT DULY AND TIMELY GIVES THE CONTINGENCY TERMINATION NOTICE AND PAYSTHE CONTINGENCY FEE, THEN (A) THIS AMENDMENT SHALL TERMINATE, PROVIDED THAT THIS PARAGRAPH 13 SHALL SURVIVE SUCHTERMINATION, AND (B) THE LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT, THE SAME AS THOUGH THIS AMENDMENT HAD NEVERBEEN ENTERED INTO (I.E., THE PREMISES SHALL REMAIN 14,462 RENTABLE SQUARE FEET AND THE TERM SHALL EXPIRE AT MIDNIGHT ONJANUARY 31, 2015,7SUBJECT TO AND IN ACCORDANCE WITH THE LEASE). OTHERWISE, THE LEASE, AS AMENDED HEREIN, SHALL CONTINUE IN FULL FORCEAND EFFECT IN ACCORDANCE WITH THE TERMS HEREOF. TENANT ACKNOWLEDGES AND AGREES THAT: (A) AS A RESULT OF THECONTINGENCY, AND IN ORDER TO MINIMIZE THE CONTINGENCY FEE DUE HEREUNDER, LANDLORD SHALL NOT COMMENCECONSTRUCTION OF THE IMPROVEMENTS UNTIL SUCH TIME AS THE CONTINGENCY HAS EXPIRED AND TENANT HAS NO FURTHER RIGHT TOTERMINATE OR VOID THIS AMENDMENT (PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT PROHIBIT LANDLORD FROMPREPARING FOR CONSTRUCTION OF THE IMPROVEMENTS, INCLUDING BUT NOT LIMITED TO THE PREPARATION OF A SPACE PLAN ANDCONSTRUCTION DOCUMENTS AND THE PULLING OF ANY APPLICABLE PERMITS, AND PROVIDED FURTHER THAT THE COSTS INCURRED BYLANDLORD IN CONNECTION WITH ANY SUCH PREPARATION SHALL BE INCLUDED IN THE CONTINGENCY FEE); AND (B) IN CONSIDERATIONFOR TENANT’S RIGHT TO VOID THIS AMENDMENT PURSUANT TO THE CONTINGENCY, IF TENANT (1) DOES NOT DELIVER THECONTINGENCY TERMINATION NOTICE AND THE CONTINGENCY FEE TO LANDLORD ON OR BEFORE THE CONTINGENCY DEADLINE, OR (2)DELIVERS THE CONTINGENCY SATISFACTION NOTICE TO LANDLORD PRIOR TO THE CONTINGENCY DEADLINE, TENANT SHALLCOMMENCE PAYING RENT (INCLUDING, WITHOUT LIMITATION, BASE RENT AND TENANT’S SHARE OF INCREASES IN TAXES ANDOPERATING EXPENSES) FOR THE PREMISES (AS EXPANDED BY THE EXPANSION SPACE) ON THE EFFECTIVE DATE, SUBJECT TO THEABATEMENT, DESPITE THAT THE IMPROVEMENTS HAVE NOT YET BEEN CONSTRUCTED.14.Brokers. Tenant represents and warrants to Landlord that neither it nor its officers or agents nor anyone acting on itsbehalf has dealt with any real estate broker other than LaVista Associates, Inc. which represented Landlord, and ICON CommercialInterests, L.L.C., which represented Tenant, in the negotiating and making of this Amendment, and Tenant agrees to indemnify andhold Landlord, its agents, employees, partners, directors, shareholders and independent contractors harmless from all liabilities, costs,demands, judgments, settlements, claims, and losses, including reasonable attorneys’ fees and costs, incurred by Landlord inconjunction with any such claim or claims of any other broker or brokers claiming to have interested Tenant in the Building, theOriginal Premises or the Expansion Space or claiming to have caused Tenant to enter into this Amendment.15.Authority. The person signing this Amendment on behalf of Tenant hereby represents and warrants that (i) he/she isauthorized to execute this Amendment on behalf of Tenant, (ii) he/she possesses the requisite power and authority to bind Tenant to theterms and provisions hereof, (iii) Tenant has taken all actions necessary to authorize the execution, delivery and performance of thisAmendment by Tenant, and (iv) Tenant has been duly organized and is qualified or authorized to do business in the State in which thePremises are located. Furthermore, Tenant agrees to take any and all necessary action to keep its existence as an entity in good standingthroughout the Term, as extended herein and as may be further extended, in the State in which Tenant has been organized as well as toremain qualified to do business within the State in which the Premises are located.16. No Defaults. Tenant hereby agrees that there are, as of the date hereof, regardless of the giving of notice or the passage oftime, or both, no defaults or breaches on the part of Landlord or Tenant under the Lease.817.Headings. The headings used herein are provided for convenience only and are not to be considered in construingthis Amendment.18.Entire Agreement. This Amendment represents the entire agreement between the parties with respect to the subjectmatter hereof. Landlord and Tenant agree that there are no collateral or oral agreements or understandings between them with respectto the Original Premises, the Expansion Space or the Building other than the Lease and this Amendment. This Amendment supersedesall prior negotiations, agreements, letters or other statements with respect to the matters addressed herein.19.Binding Effect. This Amendment shall not be valid and binding on Landlord and Tenant unless and until it has beencompletely executed by and delivered to both parties.20.Restatement; Confirmation of Lease. From and after the date of this Amendment, the Prior Seventh Amendmentshall be null and void and of no further force or effect. From and after the date of this Amendment, Tenant’s occupancy of thePremises, as described and expanded herein, and the relationship of landlord and tenant between Landlord and Tenant, shall begoverned by the provisions of the Lease, as amended by this Amendment, which Amendment shall completely supersede the PriorSeventh Amendment as of such date. All rights and obligations of Landlord and Tenant for periods prior to the date of thisAmendment shall continue to be governed by the Lease. Except as expressly amended and modified by this Amendment, the Leaseshall otherwise remain unmodified and in full force and effect, the parties hereto hereby ratifying and confirming the same. To theextent of any inconsistency between the Lease and this Amendment, the terms of this Amendment shall control.[SIGNATURES BEGIN ON THE FOLLOWING PAGE]9IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment under seal as of the day and yearfirst above written.LANDLORD:JOHN HANCOCK LIFE INSURANCECOMPANY (U.S.A.), a wholly owned subsidiary ofManulife Financial CorporationBy: /s/ Richard J. StromPrint Name: Richard J. StromTitle: Managing Director, Southeast USReal Estate Asset Management[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]10[SIGNATURES CONTINUED FROM PREVIOUS PAGE]TENANT:ALIMERA SCIENCES, INC.,a Delaware corporationBy: /s/ Dan MyersName: Dan MyersTitle: President/CEO11EXHIBIT 21.1Alimera Sciences, Inc.List of SubsidiariesName of Wholly-Owned SubsidiaryJurisdiction of OrganizationName under which the subsidiary conductsbusinessAlimera Sciences LimitedUnited KingdomAlimera Sciences LimitedAlimera Sciences B.V.The NetherlandsAlimera Sciences B.V.AS C.V.The NetherlandsAS C.V.Alimera Sciences (DE) LLCUnited StatesAlimera Sciences (DE) LLCAlimera Sciences Opthamologie GmbHGermanyAlimera Sciences Opthamologie GmbHAlimera Sciences Europe LimitedIrelandAlimera Sciences Europe LimitedEXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe have issued our reports dated February 25, 2019 with respect to the consolidated financial statements and internal control overfinancial reporting included in the Annual Report of Alimera Sciences, Inc. on Form 10-K for the year ended December 31, 2018. Weconsent to the incorporation by reference of said reports in the Registration Statements of Alimera Sciences, Inc. on Forms S-8 (File No.333-166822, File No. 333-173095, File No. 333-180567, File No. 333- 187600, File No. 333-194381, File No. 333-201606, File No.333-209035, File No. 333-215451, File No. 333-222508, File No. 333-229280) and Form S-3 (File No. 333-221061)./s/ GRANT THORNTON LLPAtlanta, GeorgiaFebruary 25, 2019EXHIBIT 31.1CERTIFICATIONI, Richard S. Eiswirth, Jr., certify that: 1.I have reviewed this annual report on Form 10-K of Alimera Sciences, Inc.; 2.Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: February 25, 2019 /s/ Richard S. Eiswirth, Jr. Richard S. Eiswirth, Jr.President and Chief Executive Officer(Principal Executive Officer)EXHIBIT 31.2CERTIFICATIONI, J. Philip Jones, certify that: 1.I have reviewed this annual report on Form 10-K of Alimera Sciences, Inc.; 2.Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision; to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: February 25, 2019 /s/ J. Philip Jones J. Philip JonesChief Financial Officer(Principal Financial and Accounting Officer)EXHIBIT 32.1CERTIFICATIONIn connection with the Annual Report of Alimera Sciences, Inc. (the “Registrant”) on Form 10-K for the annual period ended December 31, 2018 as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Richard S. Eiswirth, Jr., President, Chief Executive Officer, andDirector of the Company, and J. Philip Jones, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002, that to their respective knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theRegistrant. Date: February 25, 2019 /s/ Richard S. Eiswirth, Jr. Richard S. Eiswirth, Jr. President and Chief Executive Officer(Principal Executive Officer) Date: February 25, 2019 /s/ J. Philip Jones J. Philip Jones Chief Financial Officer(Principal Financial and Accounting Officer)This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any otherpurpose. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant andfurnished to the United States Securities and Exchange Commission or its staff upon request.This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before orafter the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

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