Organization and Basis of Presentation

Eleven Biotherapeutics, Inc. (the “Company”), formerly known as Denovo Therapeutics, Inc. and Newco LS14, Inc., a Delaware corporation formed on February 25, 2008, is a biopharmaceutical company with a proprietary protein engineering platform, called AMP-Rx, that it applies to the discovery and development of protein therapeutics to treat diseases of the eye. The Company's most advanced product candidate, which is still in preclinical development, is EBI-031, which the Company designed, engineered and generated using its AMP-Rx platform and is developing as an intravitreal injection for diabetic macular edema, or DME, and uveitis. In 2015, the Company initiated the necessary chemistry, manufacturing and control, or CMC, development work and nonclinical safety studies of EBI-031 to support the submission of an investigational new drug application ("IND") to the United States Food and Drug Administration ("FDA").

On May 28, 2013, the Company entered into a collaboration and license agreement with ThromboGenics N.V (“ThromboGenics”). Under the agreement, the Company and ThromboGenics are collaborating to identify protein or peptide therapeutics that directly modulate any of a specified set of targets in a novel pathway in retinal disease (See Note 3).

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Liquidity

The Company has financed its operations to date primarily through private placements of its common stock and preferred stock and convertible bridge notes, venture debt borrowings and its initial public offering ("IPO") and as of December 31, 2015, the Company had cash and cash equivalents totaling approximately $36.1 million, net working capital of $28.7 million and an accumulated deficit of $125.2 million. Additionally, as described in Note 14, in January 2016, as a result of the outcome of the Company’s Phase 3 clinical trial of its lead product candidate, isunakinra (EBI-005), for the treatment of severe allergic conjunctivitis, the Company was required to fund a cash collateral account with Silicon Valley Bank ("SVB") in an amount equal to approximately $15.1 million, representing the outstanding obligations under the Loan and Security Agreement with SVB dated May 27, 2010, as amended on September 4, 2012, November 25, 2014 and December 4, 2015 (the “Loan Agreement”). In March 2016, the Company prepaid all outstanding amounts owed to SVB and terminated the Loan Agreement with existing cash on hand.

The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations. The Company is subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful discovery and development of its product candidates, raising additional capital with favorable terms, development by its competitors of new technological innovations, protection of proprietary technology and market acceptance of the Company’s products. The successful discovery and development of product candidates requires substantial working capital which may not be available to the Company on favorable terms. These factors raise substantial doubt about the Company’s ability to continue as a going concern. In order for the Company to continue operations beyond 2016 and be able to discharge its liabilities and commitments in the normal course of business, the Company has taken or will take the following steps, not all of which are entirely within the Company’s control:

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The Company engaged an investment bank to conduct a review of strategic alternatives to maximize shareholder value. Potential strategic alternatives to be explored and evaluated during the review process may include the sale of the Company, a strategic partnership with one or more parties or the licensing, sale or divestiture of some of the Company’s proprietary technologies. The Company cannot provide any commitment regarding when or if this strategic review process will result in any type of transaction and no assurance can be given that the Company will determine to pursue a potential sale, strategic partnership or licensing arrangement.


•	The Company does not see an immediate path forward for isunakinra (EBI-005) and has implemented a plan to wind down the development activities associated with isunakinra.


•	The Company has conducted a review of its operations and implemented a plan to reduce operating expenses to align with current operating conditions.


•	As described in Note 14, on March 1, 2016, the Company prepaid all outstanding amounts owed to SVB under the Loan Agreement. The Company continues to evaluate other financing alternatives to provide additional working capital on terms that are consistent with the Company’s business plans.

The Company believes that its cash and cash equivalents at December 31, 2015 of $36.1 million will be sufficient to fund the Company’s current operating plan into the fourth quarter of 2016. If the Company is unable to obtain adequate financing or engage in a strategic transaction on acceptable terms and when needed, it will be required to implement further cost reduction strategies. These factors, and the factors described above, continue to raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.