HYPERION DEFI, INC. 10-Q

10-Q 1 tm2111695d1_10q.htm FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2021 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ______________________ COMMISSION FILE NUMBER: 001-38365 EYENOVIA, INC. (Exact name of Registrant as Specified in Its Charter) DELAWARE 47-1178401 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 295 Madison Avenue, Suite 2400 NEW YORK, NY 10017 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (917) 289-1117 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.0001 Par Value EYEN Nasdaq Capital Market Indicate 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 1934 during 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 filing requirements 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 of Regulation 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging 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 filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company x Emerging growth company x If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x The number of outstanding shares of the registrant’s common stock was 25,855,599 as of May 12, 2021. EYENOVIA, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements. 2 Condensed Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020 2 Unaudited Condensed Statements of Operations for the Three Months Ended March 31, 2021 and 2020 3 Unaudited Condensed Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2021 and 2020 4 Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 5 Notes to Unaudited Condensed Financial Statements 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 21 Item 4. Controls and Procedures. 21 PART II - OTHER INFORMATION Item 1. Legal Proceedings. 22 Item 1A. Risk Factors. 22 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 22 Item 3. Defaults Upon Senior Securities. 22 Item 4. Mine Safety Disclosures. 22 Item 5. Other Information. 22 Item 6. Exhibits. 23 SIGNATURES 24 1 PART I – FINANCIAL INFORMATION Item 1. Financial Statements. EYENOVIA, INC. Condensed Balance Sheets March 31, December 31, 2021 2020 (unaudited) Assets Current Assets: Cash and cash equivalents $ 24,907,048 $ 28,371,828 Deferred license costs 800,000 1,600,000 License fee and expense reimbursements receivables 908,231 2,966,039 Prepaid expenses and other current assets 1,409,929 453,478 Total Current Assets 28,025,208 33,391,345 Property and equipment, net 707,419 396,380 Security deposit 119,035 119,035 Total Assets $ 28,851,662 $ 33,906,760 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 1,815,117 $ 1,461,665 Accrued compensation 570,732 1,150,672 Accrued expenses and other current liabilities 1,189,092 1,480,692 Deferred rent - current portion 6,857 7,809 Deferred license fee 12,000,000 14,000,000 Notes payable - current portion 783,818 97,539 Total Current Liabilities 16,365,616 18,198,377 Deferred rent - non-current portion 38,634 38,684 Notes payable - non-current portion 307,291 365,814 Total Liabilities 16,711,541 18,602,875 Commitments and contingencies (Note 7) Stockholders' Equity: Preferred stock, $0.0001 par value, 6,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively - - Common stock, $0.0001 par value, 90,000,000 shares authorized; 25,623,577 and 24,978,585 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively 2,563 2,498 Additional paid-in capital 94,930,144 92,742,306 Accumulated deficit (82,792,586 ) (77,440,919 ) Total Stockholders' Equity 12,140,121 15,303,885 Total Liabilities and Stockholders' Equity $ 28,851,662 $ 33,906,760 The accompanying notes are an integral part of these condensed financial statements. 2 EYENOVIA, INC. Condensed Statements of Operations (unaudited) For the Three Months Ended March 31, 2021 2020 Operating Income Revenue $ 2,000,000 $ - Cost of revenue (800,000 ) - Gross Profit 1,200,000 - Operating Expenses: Research and development 4,247,726 3,634,287 General and administrative 2,300,327 1,836,782 Total Operating Expenses 6,548,053 5,471,069 Loss From Operations (5,348,053 ) (5,471,069 ) Other Income (Expense): Interest expense (5,148 ) (3,681 ) Interest income 1,534 23,840 Net Loss $ (5,351,667 ) $ (5,450,910 ) Net Loss Per Share - Basic and Diluted $ (0.21 ) $ (0.31 ) Weighted Average Number of Common Shares Outstanding - Basic and Diluted 25,330,563 17,308,804 The accompanying notes are an integral part of these condensed financial statements. 3 EYENOVIA, INC. Condensed Statements of Changes in Stockholders' Equity (unaudited) For the Three Months Ended March 31, 2021 Additional Total Common Stock Paid-In Accumulated Stockholders' Shares Amount Capital Deficit Equity Balance - December 31, 2020 24,978,585 $ 2,498 $ 92,742,306 $ (77,440,919 ) $ 15,303,885 Exercise of stock warrants 644,992 65 1,530,925 - 1,530,990 Stock-based compensation - - 656,913 - 656,913 Net loss - - - (5,351,667 ) (5,351,667 ) Balance - March 31, 2021 25,623,577 $ 2,563 $ 94,930,144 $ (82,792,586 ) $ 12,140,121 For the Three Months Ended March 31, 2020 Additional Total Common Stock Paid-In Accumulated Stockholders' Shares Amount Capital Deficit Equity Balance - January 1, 2020 17,100,726 $ 1,710 $ 69,409,949 $ (57,671,052 ) $ 11,740,607 Issuance of common stock and warrants in private placement [1] 2,675,293 267 5,451,475 - 5,451,742 Stock-based compensation - - 583,865 - 583,865 Net loss - - - (5,450,910 ) (5,450,910 ) Balance - March 31, 2020 19,776,019 $ 1,977 $ 75,445,289 $ (63,121,962 ) $ 12,325,304 [1] Includes gross proceeds of $5,984,931, less total issuance costs of $533,189. The accompanying notes are an integral part of these condensed financial statements. 4 EYENOVIA, INC. Condensed Statements of Cash Flows (unaudited) For the Three Months Ended March 31, 2021 2020 Cash Flows From Operating Activities Net loss $ (5,351,667 ) $ (5,450,910 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of property and equipment 33,281 28,229 Stock-based compensation 656,913 583,865 Changes in operating assets and liabilities: Prepaid expenses and other current assets (251,091 ) (189,021 ) License fee and expense reimbursements receivables 2,057,808 - Deferred license costs 800,000 - Accounts payable 353,452 (288,600 ) Accrued compensation (579,940 ) (568,864 ) Accrued expenses and other current liabilities (291,600 ) (32,623 ) Deferred license fee (2,000,000 ) - Deferred rent (1,002 ) (3 ) Net Cash Used In Operating Activities (4,573,846 ) (5,917,927 ) Cash Flows From Investing Activities Purchases of property and equipment [1] (344,320 ) (93,930 ) Net Cash Used In Investing Activities (344,320 ) (93,930 ) Cash Flows From Financing Activities Proceeds from sale of common stock and warrants in private placement [2] - 5,569,136 Proceeds from exercise of stock warrants 1,530,990 - Repayments of notes payable (77,604 ) (52,051 ) Payment of offering issuance costs - (1,738 ) Net Cash Provided By Financing Activities 1,453,386 5,515,347 Net Decrease in Cash and Cash Equivalents (3,464,780 ) (496,510 ) Cash and cash equivalents - Beginning of Period 28,371,828 14,152,601 Cash and cash equivalents - End of Period $ 24,907,048 $ 13,656,091 Supplemental Disclosure of Cash Flow Information: Cash paid during the periods for: Interest $ 3,997 $ 1,699 Supplemental Disclosure of Non-Cash Investing and Financing Activities Accrual of private placement offering costs $ - $ 115,656 Purchase of insurance premium financed by note payable $ 705,360 $ 475,216 [1] Includes $203,799 of leasehold improvements and $140,521 of equipment purchases for the three months ended March 31, 2021. [2] Includes gross proceeds of $5,984,931, less issuance costs of $415,795 deducted directly from the private placement proceeds. The accompanying notes are an integral part of these condensed financial statements. 5 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Business Organization, Nature of Operations and Basis of Presentation Eyenovia, Inc. (“Eyenovia” or the “Company”) is a clinical stage ophthalmic company developing a pipeline of advanced therapeutics based on its propriety array print (MAP TM ) platform technology. Eyenovia aims to achieve clinical microdosing of next-generation formulations of novel and existing ophthalmic pharmaceutical agents using its high-precision targeted ocular delivery system, branded the Optejet ® , which has the potential to replace conventional eye dropper delivery and improve safety, tolerability, patient compliance and topical delivery success for ophthalmic eye treatments. In the clinical trials, the Optejet has demonstrated that Eyenovia’s targeted horizontal microdose delivery can achieve a significantly higher rate of successful ocular topical delivery compared to the established rate reported with traditional eye drops (~ 90% vs. ~ 50%). Using its proprietary delivery technology, Eyenovia is developing the next generation of smart ophthalmic therapies which target new indications or new combinations where there are currently no comparable drug therapies approved by the U.S. Food and Drug Administration (the “FDA”). Eyenovia’s microdose therapeutics follow the FDA-designated pharmaceutical registration and regulatory process. Its products are classified by the FDA as drugs, and not medical devices or drug-device combination products. The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed financial statements of the Company as of March 31, 2021 and for the three months ended March 31, 2021 and 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 or any other period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related disclosures of the Company as of December 31, 2020 and for the year then ended, which were included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021. Note 2 – Summary of Significant Accounting Policies Since the date of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, there have been no material changes to the Company’s significant accounting policies, except as disclosed below. Liquidity and Going Concern As of March 31, 2021, the Company had cash of approximately $24.9 million and an accumulated deficit of approximately $82.8 million. For the three months ended March 31, 2021 and 2020, the Company incurred net losses of approximately $5.4 million and $5.5 million, respectively, and used cash in operations of approximately $4.6 million and $5.9 million, respectively. The Company does not have recurring revenue and has not yet achieved profitability. The Company expects to continue to incur cash outflows from operations. The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, it will eventually need to generate significant product revenues to achieve profitability. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that these financial statements are issued. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to raise further capital, through the sale of additional equity or debt securities or otherwise, to support its future operations. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in order to conserve its cash. 6 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents in the financial statements. The Company has cash deposits in a financial institution which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. As of March 31, 2021 and December 31, 2020, the Company had cash balances in excess of FDIC insurance limits of $24,657,048 and $28,121,828, respectively. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period plus fully vested shares that are subject to issuance for little or no monetary consideration. Diluted earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. The following securities are excluded from the calculation of weighted average diluted common shares because their inclusion would have been anti-dilutive: March 31, 2021 2020 Options 3,429,342 2,262,438 Warrants 1,366,321 3,344,154 Restricted stock units 105,306 60,355 Total potentially dilutive shares 4,900,969 5,666,947 Revenue Recognition Our revenues are generated primarily through research, development and commercialization agreements. The terms of such agreements may contain multiple promised goods and services, which may include (i) licenses to our intellectual property, and (ii) in certain cases, payment in connection with the manufacturing and delivery of clinical supply materials. Payments to us under these arrangements typically include one or more of the following: non-refundable, upfront license fees; milestone payments; payments for clinical product supply, and royalties on future product sales. We analyze our arrangements to assess whether such arrangements involve joint operating activities. For collaboration arrangements that are deemed to be within the scope of Accounting Standards Codification (“ASC”) Topic 808, “Collaborative Arrangements” (“ASC 808”), we allocate the contract consideration between such joint operating activities and elements that are reflective of a vendor-customer relationship and, therefore, within the scope of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Our policy is to recognize amounts allocated to joint operating activities as a reduction in research and development expense. Under ASC 606, we recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: · Step 1: Identify the contract with the customer; · Step 2: Identify the performance obligations in the contract; · Step 3: Determine the transaction price; · Step 4: Allocate the transaction price to the performance obligations in the contract; and · Step 5: Recognize revenue when the company satisfies a performance obligation. 7 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) We must make significant judgments in our revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation. In addition, arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered discretionary purchase options. We assess if these options provide a material right to the customer and if so, they are considered performance obligations. For upfront license fees, we must consider how many performance obligations are in the contract and, if more than one, how to allocate the fee to those performance obligations upon satisfaction of the performance obligation(s). Milestone payments represent variable consideration that will be recognized when the performance obligation is achieved. Sales-based royalty payments derived from usage of intellectual property are recognized when those sales occur. During 2020, the Company entered into a license agreement (the “Arctic Vision License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”) and a license agreement (the “Bausch License Agreement”) with Bausch Health Companies, Inc. (“Bausch Health”). Each license has three revenue components: 1) an upfront license fee; 2) milestone payments; and 3) royalty payments. See Note 7 – Commitments and Contingencies for additional details. Deferred License Fee The Company enters into license agreements which provide for the receipt of non-refundable, upfront licensing payments. These payments are recorded as deferred license fees and will be earned and recognized as revenue upon the satisfaction of performance obligations. See Note 7 – Commitments and Contingencies for additional details. Deferred License Costs The Company enters into license agreements which provide for payment of license costs in connection with the Company’s receipt of license fees. These payments are recorded as deferred license costs and will be recorded as an expense when the related license fee revenue is recognized. See Note 8 – Related Party Transactions for additional details. Recently Adopted Accounting Standards In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements based on the concepts in the FASB Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for fiscal years beginning after December 15, 2020. The Company adopted ASU 2018-13 effective January 1, 2021. This standard did not have a material impact on the Company’s financial position, results of operations or cash flow. Recently Issued Accounting Standards In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02, as amended, is now effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The FASB issued ASU 2019-01 “Leases (Topic 842) Codification Improvements” in March 2019 and ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842) Targeted Improvements” in July 2018, and ASU 2018-20 “Leases (Topic 842) - Narrow Scope Improvements for Lessors” in December 2018. ASU 2019-01, ASU 2018-10 and ASU 2018-20 provide certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating ASU 2016-02 and its impact on its financial position, results of operations, and cash flows. 8 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating ASU 2019-12 and its impact on its financial position, results of operations, and cash flows. Note 3 – Prepaid Expenses and Other Current Assets As of March 31, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following: March 31, December 31, 2021 2020 Payroll tax receivable $ 270,682 $ 151,942 Prepaid insurance expenses 863,119 110,094 Prepaid general and administrative expenses 109,918 - Prepaid licenses and subscriptions - 57,051 Prepaid conference expenses 21,603 29,403 Prepaid board of directors expenses 69,353 68,250 Prepaid rent and security deposit 25,004 25,004 Other 50,250 11,734 Total prepaid expenses and other current assets $ 1,409,929 $ 453,478 Note 4 – Accrued Compensation As of March 31, 2021 and December 31, 2020, accrued compensation consisted of the following: March 31, December 31, 2021 2020 Accrued bonus expenses $ 284,698 $ 938,873 Accrued payroll expenses 286,034 211,799 Total accrued compensation $ 570,732 $ 1,150,672 9 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 5 – Accrued Expenses and Other Current Liabilities As of March 31, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following: March 31, December 31, 2021 2020 Accrued research and development expenses $ 1,119,083 $ 348,254 Accrued consulting and professional services 18,167 235,355 Credit card payable 34,523 50,002 Accrued franchise tax 13,100 32,480 Accrued licensing fees - 804,447 Accrued interest 4,219 3,068 Accrued expense reimbursements - 5,459 Other - 1,627 Total accrued expenses and other current liabilities $ 1,189,092 $ 1,480,692 Note 6 – Notes Payable As of March 31, 2021 and December 31, 2020, notes payable consisted of the following: March 31, 2021 December 31, 2020 Current Non-Current Current Non-Current Portion Portion Total Portion Portion Total BankDirect Capital Finance loan $ 627,756 $ - $ 627,756 $ - $ - $ - Paycheck Protection Program loan 156,062 307,291 463,353 97,539 365,814 463,353 Total $ 783,818 $ 307,291 $ 1,091,109 $ 97,539 $ 365,814 $ 463,353 On February 24, 2021, the Company issued a note payable for the purchase of a directors and officers liability insurance policy. The note payable is payable in nine monthly payments consisting of principal and interest amounting to $79,343 for an aggregate principal amount of $705,360. The note accrues interest at a rate of 2.96% per year and matures on November 24, 2021. On May 8, 2020, the Company received cash proceeds of $463,353 pursuant to a loan provided in connection with the Paycheck Protection Program under the CARES Act (the “PPP Loan”). The PPP Loan provides for monthly installment payments of $19,508 beginning in August 2021 with the remaining balance due on May 3, 2022, the maturity date. The PPP Loan bears interest at a fixed rate of 1.00% per annum. Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company is eligible to apply for and receive forgiveness for all or a portion of its PPP Loan. The Company applied for loan forgiveness on the PPP Loan in March 2021. Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds for certain permissible purposes as set forth in the PPP Loan, including, but not limited to, payroll costs and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”) incurred during the 24 weeks subsequent to funding, and on the maintenance of employee and compensation levels following the funding of the PPP Loan. The Company has used the proceeds of its PPP Loan for Qualifying Expenses. However, no assurance is provided that the Company will be able to obtain forgiveness of its PPP Loan in whole or in part. Any amounts that are not forgiven incur interest at 1.0% per annum and monthly repayments of principal and interest are deferred until six months after the Small Business Administration makes a determination on forgiveness. While the PPP Loan currently has a two-year maturity, the amended law permits the borrower to request a five-year maturity from its lender. During the three months ended March 31, 2021 and 2020, the Company recorded interest expense of $1,151 and $0, respectively. 10 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 7 – Commitments and Contingencies See Note 8 – Related Party Transactions for certain commitments and contingencies entered into with certain related parties. Litigations, Claims and Assessments The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements. Arctic Vision License Agreement On August 10, 2020, the Company entered into the Arctic Vision License Agreement pursuant to which Arctic Vision may develop and commercialize MicroPine for the treatment of progressive myopia and MicroLine for the treatment of presbyopia in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea. Under the terms of the Arctic Vision License Agreement, the Company received a non-refundable, upfront payment of $4.0 million, before any payments to Senju Pharmaceutical Co., Ltd. (“Senju”), due under the Exclusive License Agreement between the Company and Senju, as amended on April 8, 2020 and a Letter Agreement dated August 10, 2020 (the “Senju License Agreement”). The Company had recorded the $4.0 million payment as a deferred license fee until the payment is earned. The Company considers payment earned once certain trial data has been fully submitted to Arctic Vision, permitting Arctic Vision to obtain regulatory approval with the National Medical Products Administration. The trial data for one of the two products (MicroPine) was fully submitted to Arctic Vision by March 31, 2021. Therefore, one half of the upfront payment, or $2.0 million, has been earned. As a result, the Company will recognize $2.0 million of deferred license fees and recognize $0.8 million of deferred license costs related to the Senju payment as of March 31, 2021. In addition, the Company may receive up to a total of $41.75 million in additional payments, based on various development and regulatory milestones, including the initiation of clinical research and approvals in Greater China and South Korea, and development costs. Arctic Vision also will purchase its supply of MicroPine and MicroLine from the Company or, for such products not supplied by the Company, pay the Company a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. No royalty payments were earned through March 31, 2021. The Company will pay a mid-double digit percentage of such payments, royalties, or net proceeds of such supply to Senju pursuant to the Senju License Agreement. See Note 8 – Related Party Transactions for additional details. Bausch License Agreement On October 9, 2020, the Company entered into the Bausch License Agreement pursuant to which Bausch Health may develop and commercialize the Bausch Licensed Product in the Licensed Territory. In connection with the Bausch License Agreement, Bausch Health paid the Company a non-refundable, upfront payment of $10.0 million. The Company has recorded this payment as a deferred license fee until the payment is earned. The Company will consider payment earned once certain trial data has been fully submitted to Bausch Health and certain administrative functions are transferred to Bausch Health, permitting Bausch Health to assume supervisory oversight of the ongoing MicroPine study (the CHAPERONE study). The upfront payment had not been earned as of March 31, 2021. Bausch Health could also pay the Company up to an aggregate of approximately $35.0 million in additional payments, depending on the achievement of certain regulatory and launch-based milestones. No milestone payments were earned through March 31, 2021. Under the terms of the Bausch License Agreement, on a country-to-country basis and Bausch Licensed Product-by- Bausch Licensed Product basis, Bausch Health will pay the Company royalties on a tiered basis (ranging from mid-single digit to mid-teen percentages) on gross profits from the sales of the Bausch Licensed Product in the Licensed Territory, subject to certain adjustments in the event of generic entry, negative gross profits or patent expiration, for a period of the later to occur of the 10th anniversary of the first commercial sale of a Bausch Licensed Product in such country in the Licensed Territory or the expiration of the last valid patent claim for a Bausch Licensed Product in such country in the Licensed Territory. No royalty payments were earned through March 31, 2021. 11 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 8 – Related Party Transactions Lease Agreements The Company’s Vice President of Research and Development and Manufacturing (“VP of R&D”) owns a company that entered into a lease agreement with the Company on September 15, 2016 to lease 953 square feet of space located in Reno, Nevada with respect to its research and development activities. The initial monthly base rent was $3,895 per month over the term of the lease and the security deposit was $3,895. On September 15, 2018, the Company amended the lease agreement to extend it until September 14, 2020 and increase the monthly base rent and security deposit to $4,012. On September 15, 2020, the Company amended the lease agreement to extend it until September 14, 2022 and increase the monthly base rent and security deposit to $5,404. The Company made $82,500 of leasehold improvements related to this lease which are included on the condensed balance sheet. The Company’s rent expense for this space is recorded in Research and Development on the condensed statement of operations and amounted to $17,020 and $12,036 for the three months ended March 31, 2021 and 2020, respectively. Senju License Agreement During 2015, the Company entered into an Exclusive License Agreement with Senju whereby the Company agreed to grant to Senju an exclusive, royalty-bearing license for its microdose product candidates for Asia to sublicense, develop, make, have made, manufacture, use, import, market, sell, and otherwise distribute the microdose product candidates. In consideration for the license, Senju agreed to pay to Eyenovia five percent (5%) royalties for the term of the license agreement. The agreement will continue in full force and effect, on a country-by-country basis, until the latest to occur of: (i) the tenth (10th) anniversary of the first commercial sale of a microdose product candidate in Asia; or (ii) the expiration of the licensed patents. As of the date of this filing, there had been no commercial sales of a microdose product candidate in Asia, such that no royalties had been earned. Senju is owned by the family of a former member of the Company’s Board of Directors and, together, they beneficially own greater than 5% of the Company’s common stock. On April 8, 2020, Eyenovia entered into an amendment (the “License Amendment”) to the Exclusive License Agreement. Pursuant to the License Amendment, the Company can license to any third party the right to research, develop, commercialize, manufacture or use certain products identified below (the “Senju Licensed Products”) previously licensed to Senju in China (including the People’s Republic of China, Hong Kong, Macao, and Taiwan) and South Korea (the “Territory”) if such a license is executed by the Company by April 8, 2021. The Senju Licensed Products are those using piezo-print technology in a microdose dispenser with (i) atropine sulfate as its sole active ingredient to treat myopia in humans and (ii) pilocarpine as its sole active ingredient to treat presbyopia in humans. Pursuant to the License Amendment, the Company must pay Senju (a) close to a mid-double digit percentage of revenue on any lump-sum payments the Company receives from the third party, revenue (net of costs) obtained by the Company from contract research and/or development of the Senju Licensed Product in the Territory, and revenue (net of costs) obtained by the Company from contract manufacture for the device of the Senju Licensed Product in the Territory, the aggregate of which must be at least a high seven figure dollar amount minimum payment to Senju; and (b) a lower-double digit percentage of any sales royalty revenue the Company receives from the third party. Since the Company executed a third-party license prior to April 8, 2021, the License Amendment will remain in effect for the duration of the license, subject to early termination. The Exclusive License Agreement was further amended in a Letter Agreement by and between the Company and Senju on August 10, 2020 (the “Letter Agreement”). Pursuant to the Letter Agreement, the Company will pay a mid-double digit percentage of certain payments, royalties, or net proceeds received from Arctic Vision in connection with the Arctic Vision License Agreement to Senju. See Note 7 – Commitments and Contingencies – Arctic Vision License Agreement for additional details. 12 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 9 – Stockholders’ Equity Securities Purchase Agreement On March 24, 2020, the Company closed on a private placement of approximately $6.0 million of Units. Each Unit consists of (i) one share of the Company’s common stock, (ii) a one-year warrant to purchase 0.5 of a share of common stock (“Class A Warrant”), and (iii) a five-year warrant to purchase 0.75 of a share of common stock (“Class B Warrant”) (collectively, the Class A Warrants and Class B Warrants, the “Warrants”). The Units were sold to the public at a price of $2.21425 per Unit and to certain directors and executive officers at a price of $2.42625 per Unit. The Company generated approximately $5.3 million of net proceeds in the offering after deducting placement agent fees and offering expenses. In the offering, the Company issued an aggregate of 2,675,293 shares of common stock, Class A Warrants to purchase up to 1,337,659 shares of common stock, and Class B Warrants to purchase up to 2,006,495 shares of common stock. The exercise price of the Class A Warrants issued to the public is $2.058 per share and the exercise price of the Class A Warrants issued to the directors and officers is $2.27 per share. The exercise price of the Class B Warrants issued to the public is $2.4696 per share and the exercise price of the Class B Warrants issued to the directors and officers is $2.724 per share. In connection with the private placement, on March 23, 2020, the Company also entered into a Registration Rights Agreement with the investors. Pursuant to the Registration Rights Agreement, the Company must file with the SEC, no later than 30 days following the date on which the Company files its Form 10-K for the year ended December 31, 2019 with the SEC, a registration statement on Form S-3 covering the shares of common stock issued in the offering and the shares of common stock underlying the Warrants. The Company timely filed the registration statement on Form S-3 (Registration Statement No. 333-237790), which was declared and has remained effective with the SEC since May 13, 2020. Stock Options In applying the Black-Scholes option pricing model to stock options granted, the Company used the following approximate assumptions: For the Three Months Ended March 31, 2021 2020 Expected term (years) 5.85 5.85 Risk free interest rate 0.92 % 1.32 % Expected volatility 94 % 101 % Expected dividends 0.00 % 0.00 % The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. Option forfeitures are accounted for at the time of occurrence. The expected term is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company does not yet have a trading history to support its historical volatility calculations. Accordingly, the Company is utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. The weighted average estimated grant date fair value of the stock options granted for the three months ended March 31, 2021 and 2020 was approximately $3.82 and $4.13 per share, respectively. 13 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) A summary of the option activity during the three months ended March 31, 2021 is presented below: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Life Intrinsic Options Price In Years Value Outstanding January 1, 2021 3,427,705 $ 3.37 Granted 1,637 5.11 Outstanding March 31, 2021 3,429,342 $ 3.37 7.7 $ 7,126,014 Exercisable March 31, 2021 1,862,537 $ 3.54 6.7 $ 3,889,820 The following table presents information related to stock options as of March 31, 2021: Options Outstanding Options Exercisable Weighted Outstanding Average Exercisable Exercise Number of Remaining Life Number of Price Options In Years Options $ 1.24 260,000 4.0 260,000 $ 1.95 673,544 6.3 673,544 $ 2.72 764,419 - - $ 2.74 6,000 7.8 4,333 $ 2.89 263,500 - - $ 3.11 659,849 8.4 369,646 $ 3.43 58,920 - - $ 3.48 45,000 - - $ 3.71 43,000 - - $ 4.00 2,000 7.6 1,556 $ 4.68 25,000 8.8 9,029 $ 5.10 6,000 7.4 5,000 $ 5.11 1,637 - - $ 5.19 16,500 7.4 13,750 $ 5.25 26,668 5.5 26,668 $ 5.77 50,000 - - $ 6.20 300,387 7.3 283,298 $ 6.30 60,000 7.3 53,333 $ 8.72 166,918 7.0 162,380 3,429,342 6.7 1,862,537 14 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Warrants A summary of the Warrant activity for the three months ended March 31, 2021 is presented below: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Life Intrinsic Warrants Price In Years Value Outstanding January 1, 2021 2,011,313 $ 2.43 Exercised (644,992 ) 2.37 Outstanding March 31, 2021 1,366,321 $ 2.51 4.0 $ 3,530,228 Exercisable March 31, 2021 1,366,321 $ 2.51 4.0 $ 3,530,228 The following table presents information related to Warrants as of March 31, 2021: Warrants Outstanding Warrants Exercisable Weighted Outstanding Average Exercisable Exercise Number of Remaining Life Number of Price Warrants In Years Warrants $ 2.4696 1,149,941 4.0 1,149,941 $ 2.7240 216,380 4.0 216,380 1,366,321 4.0 1,366,321 Stock-Based Compensation Expense The Company recorded stock-based compensation expense related to stock options and restricted stock units of $656,913 ($329,713 of which was included within research and development expenses and $327,200 was included within general and administrative expenses on the condensed statements of operations) and $583,865 ($307,409 of which was included within research and development expenses and $276,456 was included within general and administrative expenses on the condensed statements of operations) during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was $3,069,508 of unrecognized stock-based compensation expense which the Company expects to recognize over a weighted average period of 1.8 years. Note 10 – Employee Benefit Plans 401(k) Plan In April 2019, the Company adopted the Eyenovia 401(k) Plan (the “Plan”), which went into effect in May 2019. All Company employees are able to participate in the Plan, subject to eligibility requirements as outlined in the Plan documents. Under the terms of the Plan, eligible employees are able to defer a percentage of their pay every pay period up to annual limitations set by Congress and the Internal Revenue Service under Section 401(k) of the Internal Revenue Code. For 2021, the Company’s Board of Directors has approved a matching contribution equal to 100% of elective deferrals up to 4% of eligible earnings with the matching contribution subject to certain vesting requirements as outlined in the Plan documents. During the three months ended March 31, 2021 and 2020, the Company recorded expense of $64,178 and $57,971 associated with its matching contributions, respectively. 15 EYENOVIA, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 11 – Subsequent Events Stock Warrant Exercises Subsequent to March 31, 2021, the Company issued an aggregate of 232,022 shares of common stock pursuant to the exercise of warrants for aggregate proceeds of $573,001 at an exercise price of $2.4696. Loan and Security Agreement On May 7, 2021, the Company entered into a Loan and Security Agreement (the “Loan”) with Silicon Valley Bank (the “Lender”) for an aggregate principal amount of up to $25.0 million. The Loan bears interest at annual rate equal to the greater of (a) the sum of 1.25% plus the prime rate as reported in The Wall Street Journal and (b) 5.00%. The Loan matures on May 1, 2025. The initial tranche in the amount of $7.5 million was received by the Company on May 7, 2021. In connection with the Loan, the Company issued to the Lender warrants to purchase 91,884 shares of common stock at an exercise price per share equal to $4.76. The warrants are exercisable for a period of ten years from the date of issuance. At the Company’s option, Eyenovia has the ability to draw down the remaining $17.5 million in gross proceeds in two tranches over the next two years based upon the achievement of several milestones in accordance with the terms of the agreement. 16 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the results of operations and financial condition of Eyenovia, Inc. (“Eyenovia,” the “Company,” “we,” “us” and “our”) as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 should be read in conjunction with our unaudited condensed financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021. Forward Looking Statements This report contains “forward-looking statements.” Specifically, all statements other than statements of historical facts included in this report, including regarding our financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These forward-looking statements are based on the beliefs of management at the time these statements were made, as well as assumptions made by and information currently available to management. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “might,” “will,” “continue” “intend,” and “plan” and words or phrases of similar import are intended to identify forward-looking statements. These statements reflect our current view with respect to future events and are subject to risks, uncertainties and assumptions related to various factors that could cause actual results and the timing of events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included in our most recent Annual report on Form 10-K filed with the SEC. Furthermore, such forward-looking statements speak only as of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Overview We are a clinical stage ophthalmic company developing a pipeline of advanced therapeutics based on our proprietary microdose array print (MAP™) platform technology. We aim to achieve clinical microdosing of next-generation formulations of novel and existing ophthalmic pharmaceutical agents using our high-precision targeted ocular delivery system, branded the Optejet®. Optejet µ-therapeutics have the potential to replace conventional eye dropper delivery and improve safety, tolerability, patient compliance and topical delivery success for ophthalmic eye treatments. In the clinical trials, the Optejet has demonstrated that our targeted horizontal microdose delivery can achieve a significantly higher rate of successful ocular topical delivery compared to the established rate reported with traditional eye drops (~ 90% vs. ~ 50%). Our technology is designed to achieve single-digit µl-volume physiologic drug delivery with up to a 75% reduction in ocular drug and preservative topical dosing and has demonstrated significant improvement in the therapeutic index in drugs used for mydriasis and IOP lowering through three Phase II and Phase III trials. Conventional eye formulations lack high-precision micro-volume delivery and expose the ocular surface to approximately 300% more medication and preservatives than are physiologically indicated leading to clinically recognized ocular and non-ocular side effects. Using the Optejet, we are developing the next generation of smart ophthalmic therapeutics which target new indications or new combinations where there are currently no comparable drug therapies approved by the U.S. Food and Drug Administration, or the FDA. Our microdose therapeutics follow the FDA-designated pharmaceutical registration and regulatory process. Our products are classified by the FDA as drugs, and not medical devices or drug-device combination products. Our pipeline is currently focused on the late-stage development of novel, potential first-in-class therapeutic indications for an estimated over five million potential patients with progressive myopia in the United States and estimated over one hundred million potential patients with age-related near vision impairment, or presbyopia – indications where there is tremendous unmet need and no known existing FDA-approved therapies. We are also developing the first microdose fixed combination ophthalmic pharmaceutical for mydriasis to address the estimated over 100 million annual comprehensive eye exams with pupil dilation. MicroPine is our first-in-class topical therapy for the treatment of progressive myopia, a back-of-the-eye ocular disease associated with pathologic axial elongation and sclero-retinal stretching. In the United States, myopia is estimated to affect approximately 25 million children, with up to five million considered to be at risk for high myopia. In February 2019, the FDA accepted our investigational new drug application, or IND, to initiate a Phase III registration trial of MicroPine (the CHAPERONE study) to reduce the progression of myopia in children. We enrolled the first patient in the CHAPERONE study in June 2019. Due to the COVID-19 pandemic, we previously experienced delays in trial enrollment and initiation as a result of reduced clinical trial activities and operations at investigator sites. However, we have since been able to resume enrollment in the CHAPERONE study. 17 On October 9, 2020, we entered into a License Agreement (the “Bausch License Agreement”) with a subsidiary of Bausch Health Companies Inc. (“Bausch Health”) pursuant to which Bausch Health may develop and commercialize MicroPine in the United States and Canada. Under the terms of the Bausch License Agreement, we received an upfront payment of $10.0 million and we may receive up to a total of $35.0 million in additional payments, based on the achievement of certain regulatory and launch-based milestones. Bausch Health also will pay us royalties on a tiered basis (ranging from mid-single digit to mid-teen percentages) on gross profits from sales of MicroPine in the United States and Canada, subject to certain adjustments. Under the terms of the Bausch License Agreement, Bausch Health is in the process of assuming oversight and has assumed the costs related to the ongoing CHAPERONE study. MicroLine is our pharmacologic treatment for presbyopia. Presbyopia is a non-preventable, age-related hardening of the lens, which causes the gradual loss of the eye’s ability to focus at near and impairs near visual acuity. There currently are no known FDA-approved drugs for the improvement of near vision in patients with presbyopia, although other companies have related therapies in their pipeline. We have two planned Phase III VISION trials for MicroLine, and initiated the first of these trials in December 2020. On August 10, 2020, we entered into a License Agreement (the “Arctic Vision License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”), pursuant to which Arctic Vision may develop and commercialize MicroPine and MicroLine in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea. Under the terms of the Arctic Vision License Agreement, we received an upfront payment of $4.0 million before any payments to Senju Pharmaceutical Co., Ltd. (“Senju”). In addition, we may receive up to a total of $41.75 million in additional payments, based on various development and regulatory milestones, including the initiation of clinical research and approvals in Greater China and South Korea, and development costs. Arctic Vision also will purchase its supply of MicroPine and MicroLine from us or, for such products not supplied by us, pay us a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. We will pay a mid-double digit percentage of such payments, royalties, or net proceeds of such supply to Senju pursuant to the Exclusive License Agreement with Senju dated March 8, 2015, as amended by the License Amendment dated April 8, 2020, and a Letter Agreement dated August 10, 2020 (the “Senju License Agreement”). MydCombi™ (or MicroStat) is our fixed combination formulation of phenylephrine-tropicamide for mydriasis, designed to be a novel approach for the estimated over one hundred million office-based comprehensive and diabetic eye exams performed every year in the United States. We have completed two Phase III trials for MydCombi and announced positive results from these studies, known as MIST-1 and MIST-2. In March 2021, the FDA accepted our new drug application, or NDA, for MydCombi with an expected Prescription Drug User Fee Act, or PDUFA, date of October 28, 2021. We have not completed development of any product candidate and we have therefore not generated any revenues from product sales. Historically, we have financed our operations principally through equity offerings, including our initial public offering, numerous public offerings in 2018, 2019 and August 2020, and our private placement that closed in March 2020. Recently we also have generated cash through licensing arrangements and our credit facility with Silicon Valley Bank. However, based upon our current operating plan, there is substantial doubt about our ability to continue as a going concern for a period of at least the next twelve months. Our ability to continue as a going concern depends on our ability to raise additional capital, through the sale of equity or debt securities to support our future operations. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs. Our net losses were $5.4 million for the three months ended March 31, 2021. As of March 31, 2021, we had working capital and an accumulated deficit of $11.7 million and $82.8 million, respectively. Financial Overview Revenue and Cost of Revenue In August and October 2020, we entered into the Arctic Vision License Agreement and Bausch License Agreement, respectively. Both of these agreements provide for the Company to earn revenue from an upfront licensing fee, the achievement of various development and regulatory milestones, and royalty income on sales of licensed products. Pursuant to the Senju License Agreement, we will pay a mid-double digit percentage of such payments from the Arctic Vision License Agreement to Senju. See Note 7 – Commitments and Contingencies and Note 8 – Related Party Transactions. 18 Research and Development Expenses Research and development expenses are incurred in connection with the research and development of our microdose-therapeutics and consist primarily of contract service expenses. Given where we are in our life cycle, we do not separately track research and development expenses by project. Our research and development expenses consist of: · direct clinical and non-clinical expenses, which include expenses incurred under agreements with contract research organizations, contract manufacturing organizations, and costs associated with preclinical activities, development activities and regulatory activities; · personnel-related expenses, which include expenses related to consulting agreements with individuals that have since entered into employment agreements with us as well as salaries and other compensation of employees that is attributable to research and development activities; and · facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, marketing, insurance and other supplies used in research and development activities. We expense research and development costs as incurred. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or other information our vendors provide to us. In addition, our license agreements with Arctic Vision and Bausch Health require them to assume or reimburse us for specified research and development costs. We expect that our research and development expenses will increase with the continuation of the aforementioned initiatives. General and Administrative Expenses General and administrative expenses consist primarily of payroll and related expenses, legal and other professional services, as well as non-cash stock-based compensation expense. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and the potential commercialization of our product candidates. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements. In addition, director and officer insurance premiums and investor relations costs associated with being a public company are expected to increase in future periods. Results of Operations Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020 Revenue and Cost of Revenue In August 2020, we received a $4.0 million upfront payment under the Arctic Vision License Agreement, and made a related payment of $1.6 million to Senju. This upfront payment was recorded as $4.0 million of deferred license fee and $1.6 million of deferred cost of revenue. The trial data for one of the two products (MicroPine) was fully submitted to Arctic Vision during the three months ended March 31, 2021. Therefore, one half of the upfront payment, or $2.0 million, has been earned. As a result, the Company will recognize $2.0 million of deferred license fees and recognize $0.8 million of deferred license costs related to the Senju payment for the three months ended March 31, 2021. There was no revenue or cost of revenue for the three months ended March 31, 2020. 19 Research and Development Expenses Research and development expenses for the three months ended March 31, 2021 totaled $4.2 million, an increase of $0.6 million, or 17%, as compared to $3.6 million recorded for the three months ended March 31, 2020. Research and development expenses consisted of the following: For the Three Months Ended March 31, 2021 2020 Direct clinical and non-clinical expenses $ 2,537,027 $ 1,902,164 Personnel-related expenses 1,200,991 915,148 Supplies and materials 149,767 497,596 Non-cash stock-based compensation expenses 329,713 307,409 Other 30,228 11,970 Total research and development expenses $ 4,247,726 $ 3,634,287 The increase in direct clinical and non-clinical expenses was primarily due to an increase in production and testing for MydCombi and the formulation of MicroLine and fewer COVID–19 restrictions. The increase in personnel-related expenses was primarily due to new hires. The decrease in supplies and materials was primarily due to there already being an adequate supply of materials required for the Chaperone study. The increase in non-cash stock-based compensation expense was primarily due to the amortization of several stock options granted in the second half of 2020. General and Administrative Expenses General and administrative expense for the three months ended March 31, 2021 totaled $2.3 million, an increase of $0.5 million, or 25%, as compared to $1.8 million recorded for the three months ended March 31, 2020. This increase was primarily attributable to a $0.2 million increase in personnel-related expenses which resulted from new hires and the increase in non-cash stock-based compensation expense, a $0.2 million increase in sales and marketing expenses mainly due to an increase in promotional materials and a $0.1 million increase in directors and officers insurance premium. Liquidity and Capital Resources Since inception, we have experienced negative cash flows from operations. As of March 31, 2021, our accumulated deficit since inception was $82.8 million. As of March 31, 2021, we had a cash balance of $24.9 million, working capital of $11.7 million and stockholders’ equity of $12.1 million. As of March 31, 2021 and December 31, 2020, we had $1.1 million and $0.5 million, respectively, of debt outstanding. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date that the financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. Our financial statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital through the sale of equity or debt securities to support our future operations. Our operating needs include the planned costs to operate our business, including amounts required to fund research and development activities including clinical studies, working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash. 20 During the three months ended March 31, 2021 and 2020, our sources and uses of cash were as follows: Net cash used in operating activities for the three months ended March 31, 2021 was $4.6 million, which includes cash used to fund a net loss of $5.4 million, reduced by $0.7 million of non-cash expenses and $0.1 million of cash provided by changes in operating assets and liabilities. Net cash used in operating activities for the three months ended March 31, 2020 was $5.9 million, which includes cash used to fund a net loss of $5.5 million, reduced by $0.6 million of non-cash expenses, plus $1.1 million of cash used to fund changes in operating assets and liabilities. Cash used in investing activities for the three months ended March 31, 2021 was $0.3 million, which was related to leasehold improvement expenditures and the purchase of property and equipment. There was less than $0.1 million used in investing activities for purchases of leasehold improvements and property and equipment for the three months ended March 31, 2020. Net cash provided by financing activities for the three months ended March 31, 2021 totaled $1.5 million, which was mainly attributable to aggregate proceeds from the exercise of stock warrants. Cash provided by financing activities for the three months ended March 31, 2020 totaled $5.5 million, which was primarily attributable to aggregate proceeds from the sale of common stock and warrants in a private placement. On May 7, 2021, the Company entered into a Loan and Security Agreement (the “Loan”) with Silicon Valley Bank (the “Lender”) for an aggregate principal amount of up to $25.0 million. The Loan bears interest at annual rate equal to the greater of (a) the sum of 1.25% plus the prime rate as reported in The Wall Street Journal and (b) 5.00%. The Loan matures on May 1, 2025. The initial tranche in the amount of $7.5 million was received by the Company on May 7, 2021. In connection with the Loan, the Company issued to the Lender warrants to purchase 91,884 shares of common stock at an exercise price per share equal to $4.76. The warrants are exercisable for a period of ten years from the date of issuance. At the Company’s option, Eyenovia has the ability to draw down the remaining $17.5 million in gross proceeds in two tranches over the next two years based upon the achievement of several milestones in accordance with the terms of the agreement. Off-Balance Sheet Arrangements There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. Critical Accounting Policies For a description of our critical accounting policies, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q. Recently Adopted Accounting Standards For a description of recently adopted accounting standards, including adoption dates and estimated effects, if any, on our condensed financial statements, see Note 2 – Summary of Significant Accounting Policies in Part 1, Item 1 of this Quarterly Report on Form 10-Q. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Smaller reporting companies such as us are not required to provide the information required by this item. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on their evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of March 31, 2021, our disclosure controls and procedures were designed to, and were effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures as of March 31, 2021. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting that occurred during the first quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 21 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None . Item 1A. Risk Factors. Smaller reporting companies such as us are not required to provide the information required by this item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 3. Defaults upon Senior Securities. Not applicable. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. None. 22 Item 6. Exhibits. Exhibit Incorporated by Reference (Unless Otherwise Indicated) Number Exhibit Description Form File No. Exhibit Filing Date 10.1# Amendment to Executive Employment Agreement, dated February 1, 2021, by and between the Company and Michael M. Rowe 8-K 001-38365 10.1 February 3, 2021 31.1 Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — — — Filed herewith 31.2 Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — — — Filed herewith 32.1 Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — — — Filed herewith 32.2 Certification of the Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — — — Filed herewith 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Condensed Balance Sheets as of March 31, 2021 and December 31, 2020; (ii) Condensed Statements of Operations for the Three Months Ended March 31, 2021 and 2020; (iii) Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020; Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020; and (iv) Notes to Condensed Financial Statements — — — Filed herewith. # Management contract or other compensatory plan. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EYENOVIA, INC. Date: May 14, 2021 By: /s/ John Gandolfo John Gandolfo Chief Financial Officer (Principal Financial and Accounting Officer) 24