HYPERION DEFI, INC. 10-Q

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 September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 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 2022 Form 10-K, as amended by our 2022 Form 10-K Amendment. Forward Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include our estimates regarding expenses, future revenue, capital requirements and our need for additional financing and other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements about the advantages of our product candidates and platform technology; estimates regarding the potential market opportunity for our product candidates and platform technology; statements regarding our clinical trials; factors that may affect our operating results; statements about our ability to establish and maintain intellectual property rights; statements about our ability to retain key personnel and hire necessary employees and appropriately staff our operations; statements related to future capital expenditures; statements related to future economic conditions or performance; and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “will,” “plan,” “project,” “seek,” “should,” “target,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain 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 sections titled “Summary Risk Factors” and “Risk Factors” included in Item 1A of Part I of our 2022 Form 10-K, as amended by our 2022 Form 10-K Amendment, and the risks discussed in our other SEC filings. Furthermore, such forward-looking statements speak only as of the date 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. License Agreement With Formosa On August 15, 2023, we entered into a license agreement (the “License”) with Formosa Pharmaceuticals Inc. (“Formosa”), whereby we acquired the exclusive U.S. rights to commercialize any product related to a novel formulation of clobetasol propionate ophthalmic nanosuspension, 0.05% (the “Licensed Product”), which is currently under review by the U.S. Food and Drug Administration (“FDA”), for ophthalmic use for inflammation and pain after ocular surgery and supplemental disease indications, if any, associated with the New Drug Application for the Licensed Product. The License will remain in effect for ten years from the date of the first commercial sale of a Licensed Product, unless earlier terminated. We paid Formosa an upfront payment in an aggregate amount of $2,000,000 which consisted of (a) cash in the amount of $1,000,000 and (b) 487,805 shares of common stock valued at $1,000,000. We also capitalized $122,945 of transaction costs in connection with the License. In addition, we must pay Formosa up to $4 million upon the achievement of certain development milestones and up to $80 million upon the achievement of certain sales milestones. FDA Approval of Mydcombi™ We received notification from the FDA on May 5, 2023 that our NDA for the Mydcombi™ product was approved. It is the only FDA-approved fixed combination of the two leading mydriatic agents in the United States. As an ophthalmic spray, Mydcombi may present a number of benefits for the optometric and ophthalmic offices as well as patients. Those benefits may include better tolerability, more efficient use of office time and resources, and an overall improved doctor-patient experience. We have begun the commercialization of Mydcombi, with the first commercial sale of the product occurring on August 3, 2023 as part of a targeted launch, and are continuing to expand the manufacturing process in preparation for a broader launch in 2024, when internal manufacturing capabilities are expected to come on-line. 20 Table of Contents Overview We are an ophthalmic technology company commercializing Mydcombi™ (tropicamide and phenylephrine HCL ophthalmic spray) for mydriasis and developing the Optejet® delivery system both for use in combination with our own drug-device therapeutic programs and for out-licensing for use in combination with therapeutics for additional indications. Our aim is to improve the delivery of topical ophthalmic medication through the ergonomic design of the Optejet which facilitates ease-of-use and delivery of more physiologically appropriate medication volume, with the goal to reduce side effects and improve tolerability, and introduce digital health technology to improve therapy compliance and ultimately medical outcomes. The ergonomic and functional design of the Optejet allows for horizontal drug delivery and eliminates the need to tilt the head back or the manual dexterity to squeeze a bottle, to administer medications. Drug is delivered in a microscopic array of droplets faster than the blink reflex to help ensure instillation success. The precise delivery of a low-volume columnar spray by the Optejet device minimizes contamination with a non-protruding nozzle and self-closing shutter. In clinical trials, the Optejet has demonstrated that its targeted delivery achieves a high rate of successful administration, with 98% of sprays being accurately delivered upon first attempt compared to the established rate reported with traditional eye drops of ~ 50%. A more physiologically appropriate volume of medication in the range of seven to nine microliters is delivered by the Optejet, which is approximately one-fifth of the 35 to 50 microliter dose typically delivered in a single eye drop. Lower volume of medication exposes the ocular surface to less active ingredient and preservatives, potentially reducing ocular stress and surface damage and improving tolerability. The lower volume also minimizes the potential for drug to enter systemic circulation, with the goal of avoiding some common side effects that are related to overdosing of the eye. We are developing versions of the Optejet with on-board digital technology to provide reminders via Bluetooth to smart devices and date and time stamp device use. This information can then be used by practitioners and health care systems to measure treatment compliance and improve medical decision making. In this way, the Optejet could serve as an extension of the physician’s office by providing information that is not currently possible to collect except through the use of diaries. Our drug-device product line includes Mydcombi (tropicamide and phenylephrine HCL ophthalmic spray) and therapeutic programs MicroPine (atropine ophthalmic spray) and MicroLine (pilocarpine ophthalmic spray). 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 the CHAPERONE study to reduce the progression of myopia in children. The first patient was enrolled in the CHAPERONE study in June 2019. On October 9, 2020, we entered into a license agreement (the “Bausch License Agreement”) with B+L, pursuant to which B+L 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. B+L also will pay royalties to Eyenovia 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, B+L assumed sponsorship of the IND as well as ownership and the costs related to the ongoing CHAPERONE study. We have also successfully expanded our manufacturing capabilities through a partnership with Coastline International, Inc. located in Tijuana, Mexico, as well as the construction of our new manufacturing facility in Reno, Nevada and the construction of our own fill and finish facility in Redwood City, California. As of the date of filing, we are up-to-date supplying clinical product for the CHAPERONE study. MicroLine is our investigational pharmacologic treatment for presbyopia, 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 launched Vuity™, a pilocarpine drug product for the treatment of presbyopia. Our second Phase III study, VISION-2, used the same drug, delivered with the advantages of our Optejet® device. We released positive top-line results from VISION-2 in the fourth quarter of 2022. We are now manufacturing registration batches for stability testing with the goal of filing a new drug application for MicroLine by the end of 2024. 21 Table of Contents Mydcombi is our fixed combination formulation of tropicamide-phenylephrine for inducing mydriasis for diagnostic procedures and in conditions where short term pupil dilation is desired. Mydcombi is a novel approach for the over 106 million office-based comprehensive and diabetic eye exams performed every year in the United States. As the only FDA-approved fixed combination of the two leading mydriatic agents in the United States and as an ophthalmic spray, Mydcombi may present a number of benefits for the optometric and ophthalmic offices as well as patients. Those benefits may include better tolerability, more efficient use of office time and resources, and an overall improved doctor-patient experience. As noted above in “FDA Approval of Mydcombi”, we received FDA approval on May 5, 2023, and are commercializing the product starting with a targeted launch and expanding in 2024 when we expect our internal manufacturing capabilities to come on-line. On August 10, 2020, we entered into a license agreement with Arctic Vision (as amended on September 14, 2021, the “Arctic Vision License Agreement”) 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. (“Senju”). In addition, we may receive up to a total of $39.7 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, MicroLine and Mydcombi from Eyenovia or, for such products not supplied by Eyenovia, pay 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 an exclusive license agreement with Senju dated March 8, 2015, as amended (the “Senju License Agreement”). We are in active discussions with manufacturers of existing and late-stage ophthalmic medications to explore whether development with the Optejet technology can solve unmet medical and business needs. Some of those business needs could include extension of exclusivity under the Optejet patents, improvement in a drug’s tolerability profile, or potential improvement in treatment compliance. Historically, we have financed our operations principally through equity offerings. We have also generated cash through licensing arrangements and our credit facilities with Leerink Partners and Avenue. 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 our financial statements were 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/or take additional measures to reduce costs. Our net losses were $7.3 million and $19.3 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, we had working capital and an accumulated deficit of $20.0 million and $137.5 million, respectively. Financial Overview Revenue and Cost of Sales Revenue is earned from the sale of our product, Mydcombi. The first commercial sale of the product occurred on August 3, 2023 as part of a targeted launch. Cost of sales consisted of the cost of the production of the MydCombi ophthalmic spray that was sold. 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 personnel-related 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; 22 Table of Contents ● 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. 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. Other Income (Expense), Net Other income (expense), net consists of (a) other income (expense) related to our sales of clinical supply to our licensees; (b) interest income earned on treasury bills; and (c) interest expense incurred on our indebtedness. Results of Operations Three Months Ended September 30, 2023 Compared with Three Months Ended September 30, 2022 Revenue and Cost of Sales Revenue for the three months ended September 30, 2023 totaled $1,198, which was offset by cost of revenues of $1,198. We expect to generate flat gross margins (after writing inventories down to net realizable value) during the early stages of the commercialization process for Mydcombi until we can roll out our second generation Optejet device and scale up production. Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ 2023 2022 Personnel-related expenses ​ $ 1,716,355 ​ $ 1,187,195 Direct clinical and non-clinical expenses ​ ​ 269,471 ​ ​ 1,619,948 Non-cash stock-based compensation expenses ​ ​ 235,731 ​ ​ 420,619 Facilities expenses ​ 333,114 ​ 212,584 Supplies and materials ​ 685,698 ​ 206,781 Other expenses ​ 337,744 ​ 229,749 Total research and development expenses ​ $ 3,578,113 ​ $ 3,876,876 ​ Research and development expenses for the three months ended September 30, 2023 totaled $3.6 million, a decrease of $0.3 million, or 8%, as compared to $3.9 million recorded for the three months ended September 30, 2022. The increase in personnel-related expenses was primarily due to salary increases and new staff additions made throughout 2023, primarily related to the anticipated Mydcombi launch. The decrease in direct clinical and non-clinical expenses was primarily due to the VISION-2 study being concluded in 2022 and the decrease in the use of external consultants. The decrease in non-cash stock-based compensation expenses was primarily due to the change in the allocation percentages applied to research and development expenses and general and administrative expenses beginning in late 2022. This resulted primarily from a change in the role of an individual from a senior executive officer role to an advisory role. ​ 23 Table of Contents General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended September 30, ​ 2023 2022 Salaries and benefits ​ $ 963,634 ​ $ 900,506 Professional fees ​ ​ 715,832 ​ ​ 793,842 Stock-based compensation ​ 377,238 ​ 508,114 Insurance expense ​ ​ 224,645 ​ ​ 269,840 Sales and marketing ​ 203,733 ​ 407,737 Facilities expense ​ 111,388 ​ 120,636 Director fees and expense ​ 96,875 ​ 113,542 Other ​ ​ 248,728 ​ ​ 239,135 ​ ​ $ 2,942,073 ​ $ 3,353,352 ​ General and administrative expenses for the three months ended September 30, 2023 totaled $2.9 million, a decrease of $0.4 million, or 12%, as compared to $3.4 million recorded for the three months ended September 30, 2022. The decrease was primarily attributable to a decrease in professional fees which resulted from legal and recruiting expenses associated with the addition of new directors in 2022 that were not incurred in the first half of 2023. The decrease in non-cash stock-based compensation expenses was primarily due to the ending of the amortization period for older grants. The decrease in sales and marketing expenses primarily resulted from the decrease in promotional expenses. Other Income (Expense), Net Net other expense for the three months ended September 30, 2023 totaled $0.8 million, an increase of $0.7 million, or 939%, as compared to $0.1 million for the three months ended September 30, 2022. The increase was primarily due to a $0.5 million increase in interest expense and a $0.4 million increase in the provision for clinical supply returns, partially offset by a $0.2 million increase in interest income. Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022 Revenue and Cost of Sales Revenue for the nine months ended September 30, 2023 totaled $1,198, which was offset by cost of revenues of $1,198. We expect to generate flat gross margins (after writing inventories down to net realizable value) during the early stages of the commercialization process for Mydcombi until we can roll out our second generation Optejet device and scale up production. Research and Development Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ 2023 2022 Personnel-related expenses ​ $ 5,078,228 ​ $ 4,159,905 Direct clinical and non-clinical expenses ​ 547,697 ​ 3,494,633 Non-cash stock-based compensation expenses ​ 647,058 ​ 1,438,469 Facilities expenses ​ 828,111 ​ 720,917 Supplies and materials ​ 1,197,692 ​ 898,683 Other expenses ​ 612,338 ​ 463,719 Total research and development expenses ​ $ 8,911,124 ​ $ 11,176,326 ​ Research and development expenses for the nine months ended September 30, 2023 totaled $8.9 million, a decrease of $2.3 million, or 20%, as compared to $11.2 million recorded for the nine months ended September 30, 2022. The increase in personnel-related expenses was primarily due to salary increases and costs related to staff additions made throughout 2022 mainly related to the ramp up for the Mydcombi launch. The decrease in direct clinical and non-clinical expenses was primarily due to the VISION-2 study being concluded in 2022 and the decrease in the use of external consultants. In addition, the decrease in direct clinical expenses related to an increase in supplies and materials expenses resulting from the prospective change in the nature of the accounting for the Gen 2.0 device from a clinical expense to a supply expense.The decrease in non-cash stock-based compensation expenses was primarily due to the change in the allocation percentages applied to research and development expenses and general and administrative expenses 24 Table of Contents beginning in January 2023. This resulted primarily from a change in the role of an individual from a senior executive officer role to an advisory role. General and Administrative Expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ 2023 2022 Salaries and benefits ​ $ 2,960,978 ​ $ 2,834,306 Professional fees ​ 2,108,656 ​ 3,061,990 Stock-based compensation ​ 1,278,607 ​ 1,436,177 Insurance expense ​ 708,639 ​ 789,629 Sales and marketing ​ 600,869 ​ 905,243 Facilities expense ​ 359,057 ​ 342,590 Director fees and expense ​ 300,625 ​ 294,375 Other ​ 711,337 ​ 698,597 ​ ​ $ 9,028,768 ​ $ 10,362,907 ​ General and administrative expenses for the nine months ended September 30, 2023 totaled $9.0 million, a decrease of $1.3 million, or 13%, as compared to $10.4 million recorded for the nine months ended September 30, 2022. The decrease was primarily attributable to a decrease in professional fees which resulted from legal and recruiting expenses associated with the addition of new directors in 2022 that were not incurred in the first half of 2023. The decrease in sales and marketing expense primarily resulted from the decrease in promotional expenses. Other Income (Expense), Net Net other expense for the nine months ended September 30, 2023 totaled $1.4 million, an increase of $1.0 million, or 289%, as compared to $0.3 million for the nine months ended September 30, 2022. The increase was primarily due to a $1.2 million increase in interest expense and a $0.4 million increase in the provision for clinical supply returns, partially offset by a $0.5 million increase in interest income. Liquidity and Capital Resources and Going Concern We measure our liquidity in a number of ways, including the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Cash and cash equivalents ​ $ 20,702,212 ​ $ 22,863,520 ​ ​ ​ ​ ​ ​ ​ Working capital ​ $ 19,984,738 ​ $ 23,130,178 ​ ​ ​ ​ ​ ​ ​ Notes payable (gross) ​ $ 15,637,500 ​ $ 10,425,000 ​ Since inception, we have experienced negative cash flows from operations. As of September 30, 2023, our accumulated deficit since inception was $137.5 million. As of September 30, 2023, we had a cash and cash equivalents balance of $20.7 million, working capital of $20.0 million and stockholders’ equity of $15.8 million. As of September 30, 2023 and December 31, 2022, we had $15.6 million and $10.4 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 were 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 25 Table of Contents 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 general and administrative and sales and marketing costs in order to conserve our cash. During the nine months ended September 30, 2023 and 2022, our sources and uses of cash were as follows: Net cash used in operating activities for the nine months ended September 30, 2023 was $17.5 million, which includes cash used to fund a net loss of $19.3 million, reduced by $3.7 million of non-cash expenses, plus $2.0 million of cash used to fund changes in operating assets and liabilities. Net cash used in operating activities for the nine months ended September 30, 2022 was $19.7 million, which includes cash used to fund a net loss of $21.9 million, reduced by $3.4 million of non-cash expenses, plus $1.2 million of cash used to fund changes in operating assets and liabilities. Cash used in investing activities for the nine months ended September 30, 2023 was $3.8 million, which was related to $2.7 million of purchases of property and equipment and a $1.1 million cash investment in an intangible asset. Cash used in investing activities for the nine months ended September 30, 2022 was $0.6 million, which was related to purchases of and vendor deposits for property and equipment. Net cash provided by financing activities for the nine months ended September 30, 2023 totaled $19.2 million, which was attributable to $12.0 million of gross proceeds received from the August 2023 Offering, $4.1 million of gross proceeds from our At-the-Market Offering Program and $5.0 million of gross proceeds from the additional tranche under the Loan and Security Agreement. This was slightly offset by the repayment of $0.6 million of notes payable in connection with the D&O Loan, $1.1 million of August 2023 Offering cash issuance costs, $0.1 million of the At-the-Market offering issuance costs and $0.1 million of issuance costs related to the additional tranche under the Loan and Security Agreement. Net cash provided by financing activities for the nine months ended September 30, 2022 totaled $18.2 million, which was attributable to $19.1 million of gross proceeds received from the March 2022 Offering (as defined in our 2022 Form 10-K, as amended by our 2022 Form 10-K Amendment) and the At-the-Market Offering Program. This was slightly offset by the repayment of $0.7 million of notes payable in connection with the D&O Loan and the $0.2 million payment of issuance costs related to the March 2022 Offering and the At-the-Market Offering Program. Contractual Obligations and Commitments During the next twelve months we have commitments to pay: (a) $3.1 million to settle our September 30, 2023 accounts payable, accrued compensation, and accrued expenses and other current liabilities; (b) $0.4 million relating to our non-cancelable operating lease commitments; and (c) $3.3 million of potential payments due under our notes payable. In addition, we would be required to pay an aggregate of $1.5 million of executive severance pay under the provisions of our executive employment agreements with three executive officers, in the event that their respective employment with us were to be terminated without cause or if there is an involuntary termination (as defined in the agreement). After twelve months we have commitments to pay an additional $1.4 million relating to our non-cancelable operating lease commitments and notes payable in the amount of $12.3 million. 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 and Estimates For a description of our critical accounting policies, including critical accounting estimates, see Item 7 – Critical Accounting Policies in our 2022 Form 10-K, as amended by our 2022 Form 10-K Amendment. Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various 26 Table of Contents other assumptions that we believe to be reasonable under the circumstances. Changes in estimates are reflected in reported results for the period in which they become known. Actual results could differ significantly from the estimates made by our management. There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our 2022 Form 10-K, as amended by our 2022 Form 10-K Amendment, except as disclosed below: (a) Inventories - Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales. The Company will periodically review for slow-moving, excess or obsolete inventories. (b) Intangible Assets - The application of the guidance in ASC 805 (“Business Combinations”) on accounting for business combinations can differ significantly depending on whether the acquired entity is considered a “business” or an “asset.” A determination of whether the transaction represented an asset acquisition or a business combination must be made. Pursuant to ASC 350 (“Intangibles – Goodwill and Other”), the payment made for the intangible asset will be capitalized as an intangible asset over the useful life of the intangible asset. 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 Eyenovia are not required to provide the information required by this Item. ​