What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-13 compared with 2021-11-12 · 94 added, 132 removed, 55 unchanged (80% of the section changed)

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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 September 30, 2021 and for the three and nine months ended September 30, 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 U.S.

Securities and Exchange Commission (“SEC”) on March 30, 2021.

(“Eyenovia,” the “Company,” “we,” “us” and “our”) as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 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, 2021 as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2022.

Forward Looking Statements

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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.

We are a clinical stage ophthalmic biopharmaceutical company developing a pipeline of advanced therapeutics based on our proprietary microdose array print (MAP™) therapeutics.

We aim to achieve clinical microdosing of next-generation formulations of well-established ophthalmic pharmaceutical agents using our 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 clinic, the Optejet has demonstrated the ability to horizontally deliver ophthalmic medication with a success rate significantly higher than that of traditional eye drops (~ 90% vs.

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.

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 clinic, the Optejet has demonstrated that its 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.

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 presbyopia, mydriasis and IOP lowering through six 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.

Using the Optejet, we are developing the next generation of smart ophthalmic therapeutics targeting new indications or new combinations where there are currently no or few drug therapies approved by the U.S.

Food and Drug Administration (the “FDA”).

Our microdose therapeutics follow the FDA-designated pharmaceutical registration and regulatory process.

Consistent with the recent FDA reclassification of MydCombi, we believe that most of our product candidates are, or will be, classified by the FDA as drug-led combination products.

Our pipeline is currently focused on the late-stage development of novel, potential first-in-class therapeutic indications for over an estimated five million potential patients with progressive myopia in the United States and over an estimated 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 investigational 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.

Our microdose therapeutics follow the FDA’s regulatory and approval process for combination products.

Our products are classified by the FDA as drug-device combination products with drug primary mode of action, meaning that the Center for Drug Evaluation and Research (“CDER”), is designated as the lead center with primary jurisdictional oversight of our products.

Accordingly, the product candidates are submitted to the FDA CDER for premarket review and approval under new drug applications, or NDAs.

Our pipeline is currently focused on the late-stage development of novel, potential first-in-class therapeutic indications for an estimated 25 million potential pediatric patients with progressive myopia in the United States and an estimated over 100 million potential patients with age-related near vision impairment, or presbyopia—indications where there is tremendous unmet need and, to our knowledge, there exists only one known FDA-approved therapy, developed by Allergan.

We are also developing the first microdose fixed combination ophthalmic pharmaceutical for mydriasis to address the estimated over 100 million annual comprehensive eye exams involving 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 high risk for progressive myopia.

In February 2019, the FDA accepted our investigational new drug application (“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 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.

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.

Due to the COVID-19 pandemic, there have been delays in trial enrollment as a result of supply chain issues with our third party suppliers, which in turn diminished our inventory supply.

On October 9, 2020, we entered into the Bausch License Agreement, 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 for, and has assumed the costs related to the ongoing CHAPERONE study.

MicroLine is our investigational 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 May 25, 2021, we announced positive topline data from the Phase III VISION-1 study evaluating MicroLine for the temporary improvement of near vision in adults with presbyopia.

The study achieved its primary endpoint and preparations are underway for a second Phase III registration study, VISION-2, targeted to be initiated by the end of this year.

VISION-2 will be a double-masked, placebo-controlled, cross-over superiority trial designed to enroll 120 patients randomized between 2% pilocarpine and placebo cohorts.

Topline data from VISION-2 is anticipated in mid-2022.

These studies will serve as the basis for a planned New Drug Application (NDA) submission to FDA.

VISION-1 results will be presented at a future ophthalmic-focused medical meeting.

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.

Under the terms of the Bausch License Agreement, Bausch Health assumed sponsorship of the IND as well as oversight and the costs related to the ongoing CHAPERONE study.

MicroLine (or Apersure) is our investigational 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 on near objects and impairs near visual acuity.

Allergan recently received FDA approval for and launched Vuity TM , a pilocarpine solution for the treatment of presbyopia.

We are currently enrolling our second Phase III study, VISION-2, using the same molecule, but with the advantages of our Optejet delivery system.

We anticipate top-line results from VISION-2 in mid-2022.

Mydcombi™ (or MicroStat) is our fixed combination formulation of tropicamide-phenylephrine for mydriasis, designed to be a novel approach for the estimated over 100 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, and have submitted an NDA to the FDA seeking approval to market the product in the U.S.

In October 2021, we received a complete response letter (“CRL”) in response to our NDA, which in part informed us that pre-filled or co-packaged ophthalmic drug dispenser products like Mydcombi have been reclassified as drug-device combination products.

This reclassification was based upon the U.S.

Court of Appeals for the D.C.

Circuit’s decision in Genus Medical Technologies v.

FDA, not involving Eyenovia, which ordered that products meeting the statutory definition of a device but were previously classified by the FDA as drugs must be regulated as devices.

Before this ruling, the FDA regulated pre-filled or co-packaged ophthalmic dispensers as part of the approved ophthalmic drug distributed and sold with the dispenser.

After the ruling, however, the dispenser must be considered as a distinct device constituent part of a drug-device combination product.

We are in the process of providing additional non-clinical device information and expect to file our NDA resubmission in the third quarter of 2022.

On August 10, 2020, we entered into the Arctic Vision License Agreement, which was amended on September 14, 2021, with Arctic Vision, pursuant to which Arctic Vision may develop and commercialize MicroPine, MicroLine and Mydcombi in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea.

Under the terms of the Arctic Vision License Agreement, as amended, we received an upfront payment of $4.25 million before any payments to Senju Pharmaceutical Co., Ltd.

In addition, we may receive up to a total of $43.75 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.

Milestone revenue includes $2.0 million related to the MicroStat product resulting from Amendment 1 to the Arctic Vision License Agreement between the Company and Arctic Vision which was executed on September 14, 2021.

Arctic Vision also will purchase its supply of MicroPine, MicroLine and MicroStat 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”).

The Senju License Agreement was amended further by the License Amendment 2, effective September 14, 2021 (the “Amendment 2”).

The Amendment 2 excludes Greater China and South Korea from the territory in which Senju was granted an exclusive royalty-bearing license from the Company.

In consideration for this exclusion, and upon and after the execution of Amendment 1 with Arctic Vision, the Company must make payments to Senju based on non-royalty license revenue and sales revenue, including a one-time upfront payment of $250,000 which represented an inducement to Senju to approve Amendment 1 of the Arctic Vision License Agreement related to the MicroStat Product.

This upfront payment to Senju was in addition to and separate from the previously established 40% payment on milestone revenue.

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 NDA, for MydCombi for use to achieve mydriasis in routine diagnostic procedures and in conditions where short-term pupil dilation is desired.

On October 25, 2021, the Company announced the reclassification of the Company’s proprietary, first-in-class combination microdose formulation of tropicamide and phenylephrine for in-office pupil dilation, MydCombi, as a drug-device combination product by the FDA in a Complete Response Letter (“CRL”) received on October 22, 2021, following a change in the agency’s legal interpretation of its authorities imposed by a recent court ruling.

The Company is preparing the necessary documents for expedited resubmission of the new drug application for MydCombi in response to the CRL.

We have not received U.S.

marketing approval for 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.

Arctic Vision also will purchase its supply of MicroPine, MicroLine and Mydcombi 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 between 30 and 40 percent 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.

For a description of the Senju license agreement, see Note 2— Summary of Significant Accounting Policies—Arctic Vision License Agreement and Note 10—Related Party Transactions—Senju License Agreement to our audited financial statements included in this Annual Report on Form 10-K on March 30, 2022.

Historically, we have financed our operations principally through equity offerings.

We have also generated cash through licensing arrangements and our credit facility with Silicon Valley Bank (“SVB”).

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.

However, based upon our current operating plan, there is 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 ability to continue as a going concern depends on our ability to complete additional licensing or business development transactions or 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 $5.6 million and $15.8 million for the three and nine months ended September 30, 2021.

As of September 30, 2021, we had working capital and an accumulated deficit of $2.7 million and $93.2 million, respectively.

Our net losses were $7.3 million and $5.4 million for the three months ended March 31, 2022 and 2021.

As of March 31, 2022, we had working capital and an accumulated deficit of approximately $20.0 million and $97.6 million, respectively.

Financial Overview

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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.

Pursuant to the Senju license agreement, we will pay a percentage between 30 and 40 percent of such payments from the Arctic Vision License Agreement to Senju.

Research and Development Expenses

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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 September 30, 2021 Compared with Three Months Ended September 30, 2020

Research and Development Expenses

Research and development expenses for the three months ended September 30, 2021 totaled $3.5 million, an increase of $0.1 million, or 3%, as compared to $3.4 million recorded for the three months ended, September 30, 2020.

Research and development expenses consisted of the following:

For the Three Months Ended

September 30,

Direct clinical and non-clinical expenses

Personnel-related expenses

Non-cash stock-based compensation expenses

Supplies and materials

Facilities and other expenses

Total research and development expenses

The decrease in direct clinical and non-clinical expenses was primarily due to the Vision I Study having concluded in early 2021 and significantly higher cost reimbursements from Bausch Health and Arctic Vision.

The cost reimbursements are booked as contra expense.

The increase in personnel-related expenses was primarily due to new hiring in preparation for commercialization.

The increase in non-cash stock-based compensation was due to new option grants.

The increase in supplies and materials resulted from an increase in spending on device inventory.

The increase in facilities and other expenses was primarily due to rent and utilities related to the Redwood City facility.

The main factor in these increases was the preparation for commercialization.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2021 totaled $2.4 million, an increase of $0.7 million, or 41%, as compared to $1.7 million recorded for the three months ended September 30, 2020.

This increase was primarily attributable to a $0.3 million increase in salaries and benefits resulting from new hiring in preparation for commercialization, a $0.3 million increase in sales and marketing, primarily related to the MydCombi promotional campaign, a $0.1 million increase in insurance expense related to Directors & Officer insurance and a $0.1 million increase in other G&A expense, primarily due to increased travel resulting from the lifting of COVID-19 restrictions.

This was slightly offset by a decrease of $0.1 million in professional services, primarily due to legal fees incurred for the Bausch Health and Arctic Vision licensing deals in 2020.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Three Months Ended March 31, 2022 Compared with Three Months Ended March 31, 2021

Revenue and Cost of Revenue

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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 in March 2021 and the trial data for the other product (MicroLine) was fully submitted to Arctic Vision in June 2021.

As a result, the Company recognized the $4.0 million of deferred license fees and recognized $1.6 million of deferred license costs related to the Senju payment during the nine months ended September 30, 2021.

There was no revenue for the nine months ended September 30, 2020.

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, was earned during the three months ended March 31, 2021.

No payments related to the Arctic Vision License Agreement or Senju license agreement were earned or recognized during the three months ended March 31, 2022.

Research and Development Expenses

Research and development expenses for the nine months ended September 30, 2021 totaled $11.3 million, an increase of $1.4 million, or 14%, as compared to $9.9 million recorded for the nine months ended September 30, 2020.

Research and development expenses consisted of the following:

For the Nine Months Ended

September 30,

Direct clinical and non-clinical expenses

For the Three Months Ended

Personnel-related expenses

Direct clinical and non-clinical expenses

Non-cash stock-based compensation expenses

Facilities expenses

Supplies and materials

Facilities and other expenses

Other expenses

Total research and development expenses

The decrease in direct clinical and non-clinical expenses was primarily due to significantly higher cost reimbursements from Bausch Health and Arctic Vision which are booked as contra expense.

The increase in personnel-related expenses was primarily due to new hiring in preparation of commercialization.

The increase in non-cash stock-based compensation was due to new option grants.

The decrease in supplies and materials resulted from higher costs incurred for the clinical cartridge supply in 2020.

The increase in facilities and other expenses was primarily due to rent and utilities related to the Redwood City facility and increased travel due to the lifting of COVID-19 restrictions.

Research and development expenses for the three months ended March 31, 2022 totaled approximately $3.7 million, a decrease of $0.6 million, or 14.0%, as compared to $4.3 million recorded for the three months ended March 31, 2021.

The decrease was primarily attributable to a $1.1 million decrease in direct clinical and non-clinical expenses primarily due to production and testing for Mydcombi and the formulation of MicroLine in 2021, whereas no new batches were manufactured in 2022, offset by an increase of $0.5 million in personnel-related expenses resulting from new hires and stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2021 totaled $7.1 million, an increase of $1.4 million, or 25%, as compared to $5.7 million recorded for the nine months ended September 30, 2020.

This increase was primarily attributable to a $0.8 million increase in salaries and benefits resulting from new hiring in preparation of commercialization, a $0.7 million increase in sales and marketing, primarily related to the MydCombi promotional campaign, a $0.2 million increase in insurance expense related to Directors & Officer insurance and a $0.1 million increase in other G&A expense, primarily due to increased travel resulting from the lifting of COVID-19 restrictions and higher director fees attributable to a new Board member.

This was offset by a decrease of $0.4 million in professional services, primarily due to legal fees incurred for the Bausch Health and Arctic Vision licensing deals in 2020.

For the Three Months Ended March 31,

Professional fees

Salaries and benefits

Stock-based compensation

Insurance expense

Sales and marketing

Facilities expense

Director fees and expense

General and administrative expense for the three months ended March 31, 2022 totaled $3.5 million, an increase of $1.3 million, or 59.1%, as compared to $2.2 million recorded for the three months ended March 31, 2021.

This increase was primarily attributable to a $0.7 million increase in professional fees associated with an increase of legal and accounting activity in connection with the March 2022 Offering and the At-the-Market Offering facility, and increased recruiting fees for newly hired employees and directors, a $0.4 million increase in salaries and benefits which resulted from new hires, a $0.1 million increase in non-cash stock-based compensation expense, and a $0.1 million increase in the premium for our directors and officers liability insurance policy.

Liquidity and Capital Resources;

Going Concern

We measure our liquidity in a number of ways, including the following:

Cash and cash equivalents

Restricted cash

Working capital

Notes payable (gross)

Since inception, we have experienced negative cash flows from operations.

As of September 30, 2021, our accumulated deficit since inception was $93.2 million.

As of September 30, 2021, we had a cash and cash equivalents balance of $21.4 million (of which $13.5 million is unrestricted), working capital of $2.7 million and stockholders’ equity of $4.2 million.

As of September 30, 2021 and December 31, 2020, we had $7.3 million and $0.5 million, respectively, of debt outstanding.

As of March 31, 2022, our accumulated deficit since inception was $97.6 million.

As of March 31, 2022, we had an unrestricted cash balance of $26.7 million, working capital of $20.0 million and stockholders’ equity of $29.8 million.

As of March 31, 2022 and December 31, 2021, we had $8.1 million and $7.5 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 generate sufficient recurring revenue or our ability to raise additional capital through the sale of equity or debt securities to support our future operations.

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 generate sufficient recurring revenue or 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.

During the nine months ended September 30, 2021 and 2020, our sources and uses of cash were as follows:

On May 7, 2021, the Company entered into a Loan and Security Agreement (the “Loan”) with SVB for an aggregate principal amount of up to $25.0 million.

The Loan bears interest at an 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 is secured by all of the Company’s tangible assets.

The Loan matures on May 1, 2025.

The Loan requires monthly interest-only payments until June 1, 2022.

The initial tranche of the Loan, 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 SVB 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, the Company 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 Loan.

On September 29, 2021, the Company and SVB executed the First Amendment to the Loan and Security Agreement (the “Amendment”).

In accordance with the Amendment, the Company must maintain a collateralized money market account in the amount of $7,875,000.

This account must be maintained until the Release Event occurs (defined as when the Company has received approval by the FDA of the MydCombi product and achieved the minimum equity raise under the terms of the amended agreement, on or prior to November 30, 2021).

Given the FDA’s recent reclassification of MydCombi as a drug-device combination and the need to resubmit a new drug application in early 2022, the restricted cash will become callable on November 30, 2021, at SVB’s election, to satisfy the Loan obligations.

Therefore, the Loan has been fully classified as a current note payable.

Net cash used in operating activities for the nine months ended September 30, 2021 was $15.0 million, which includes cash used to fund a net loss of $15.8 million, reduced by $1.8 million of non-cash expenses, plus $1.0 million of cash generated from changes in operating assets and liabilities.

Net cash used in operating activities for the nine months ended September 30, 2020 was $11.9 million, which includes cash used to fund a net loss of $15.6 million, reduced by $1.9 million of non-cash expenses and $1.8 million of cash used to fund changes in operating assets and liabilities.

Cash used in investing activities for the nine months ended September 30, 2021 was $1.2 million, which was related to purchases of property and equipment.

Cash used in investing activities for the nine months ended September 30, 2020 was $0.2 million, which was related to purchases of property and equipment.

Net cash provided by financing activities for the nine months ended September 30, 2021 totaled $9.2 million, which was primarily attributable to $7.5 million of proceeds from the Loan and $2.3 million from the exercise of warrants and stock options.

This was slightly offset by the repayment of notes payable and loan issuance costs of $0.6 million.

Net cash provided by financing activities for the nine months ended September 30, 2020 totaled $20.8 million, which was primarily attributable to aggregate net proceeds from the sale of our common stock and warrants in our public and private offerings of $18.0 million, $2.6 million of proceeds from the exercise of stock warrants, and $0.5 million in proceeds from a loan in connection with the Paycheck Protection Program under the CARES Act.

This was slightly offset by the repayment of notes payable of $0.4 million and payment of offering issuance costs of $0.3 million.

On October 6, 2021, the Company commenced sales of its common stock pursuant to the at-the-market offering.

As of the filing date, the Company has received approximately $12.8 million in gross proceeds and $12.4 million in net proceeds from the sale of 2,435,604 shares of its common stock.

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.

During the three months ended March 31, 2022 and 2021, our sources and uses of cash were as follows:

Net cash used in operating activities for the three months ended March 31, 2022 was $8.2 million, which includes cash used to fund a net loss of $7.3 million, reduced by $1.0 million of non-cash expenses and $1.9 million of cash used in operating assets and liabilities.

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.

Cash used in investing activities for the three months ended March 31, 2022 was $0.2 million, which was related to vendor deposits, leasehold improvement expenditures, and purchases of property and equipment.

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.

Net cash provided by financing activities for the three months ended March 31, 2022 totaled $15.7 million, which was mainly attributable to aggregate proceeds received from the March 2022 Offering and the use of the At-the-Market Offering facility.

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 warrants.

Contractual Obligations and Commitments

During the next twelve months we have commitments to pay:

(a) $2.6 million to settle our March 31, 2022 accounts payable and accrued expenses;

(b) $0.5 million relating to our non-cancelable operating lease commitments;

and (d) $8.1 million of payments due under our notes payable.

After twelve months we have commitments to pay an additional $0.2 million relating to our non-cancelable operating lease commitments.

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 and Issued Accounting Pronouncements

For a description of recently adopted and issued accounting pronouncements, 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.

Critical Accounting Estimates

For a description of our critical accounting estimates, see Item 7 – Critical Accounting Estimates in our Annual Report on Form 10-K filed on March 30, 2022.

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.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for this reporting period and are not required to provide the information required by this item.

Smaller reporting companies such as us are not required to provide the information required by this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis