What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-13 · 120 added, 142 removed, 89 unchanged (75% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Management’s Discussion and Analysis of Financial Condition and Results of Operation

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.

(“Eyenovia,” the “Company,” “we,” “us” and “our”) as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 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 the 2023 Form 10-K, as amended by the 2023 Form 10-K Amendment.

Forward Looking Statements

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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.

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 Form 10-K, as filed with the SEC on March 18, 2024, as amended by our 2023 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 Quaterly 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.

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.

We are an ophthalmic technology company focused on the late-stage development of MicroPine in the multi-billion dollar pediatric progressive myopia market while commercializing Mydcombi™ (tropicamide and phenylephrine HCL ophthalmic spray) for inducing mydriasis for routine diagnostic procedures and in conditions where short term pupil dilation is desired, and clobetasol propionate ophthalmic suspension, for the treatment of post-operative pain and inflammation following ocular surgery.

We are also 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.

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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%.

The precise delivery of a low-volume columnar spray by the Optejet device minimizes contamination risk with a non-protruding nozzle and self-closing shutter.

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.

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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.

We are developing versions of the Optejet with on-board digital technology that records the date and time of each use.

These data may be used to provide reminders via Bluetooth to smart devices and to allow healthcare practioners to monitor usage.

This information can then be used by practitioners and health care systems to measure treatment compliance and improve medical decision making.

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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.

MicroPine is our first-in-class topical therapy for the treatment of progressive myopia, a disease associated with pathologic axial elongation of the eye 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.

In February 2019, the FDA accepted our Investigational New Drug (“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.

On October 9, 2020, we entered into a license agreement with Bausch + Lomb, pursuant to which Bausch + Lomb had the rights to 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 were eligible to receive up to a total of $35.0 million in additional payments, based on the achievement of certain regulatory and launch-based milestones.

Bausch + Lomb also agreed to 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, Bausch + Lomb assumed sponsorship of the IND as well as ownership and the costs related to the ongoing CHAPERONE study.

On January 12, 2024, we entered into an agreement with Bausch + Lomb to reacquire our rights to MicroPine and take control of the CHAPERONE study.

In this agreement, we agreed to pay Bausch + Lomb $2.0 million in cash up front.

Upon transfer of the regulatory documents and study elements to us on April 11, 2024, we issued $3.0 million of our common stock, or 2,299,397 shares to Bausch + Lomb on May 3, 2024.

We also agreed to pay Bausch + Lomb a low single-digit royalty on net sales once MicroPine is commercialized in the United States, assuming receipt of regulatory approvals.

We believe that this new arrangement is in our and our shareholders’ best interests, as it may substantially increase the value of the asset through potential improvements in the conduct of the study, including a planned interim analysis of the data in late 2024.

On April 23, 2024, the Company and Bausch + Lomb entered into the Side Letter, pursuant to which the Company agreed to pay approximately $0.5 million to Bausch + Lomb related to defective clinical supply.

It was also agreed that the Company will receive approximately $0.25 million from Bausch + Lomb related to amounts previously held back that will be due upon completion of the CHAPERONE study.

In addition, the Company purchased $0.5 million of clinical supplies from Bausch + Lomb in April 2024.

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.

The FDA approved the use of both Coastline International and our Redwood City facility for the production of Mydcombi cartridges, and the use of our Reno facility for the production of technical elements such as the base unit for the Optejet device.

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.

There are two FDA-approved treatments for presbyopia which use pilocarpine, the same drug used in our investigational product.

We have completed two Phase III studies using our Optejet device.

In these studies, patients reported high satisfaction with using the device and a strong preference over using an eye dropper bottle.

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.

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.

We are planning to meet with the FDA in mid-2024 to discuss a transition of the product into our new Gen-2 Optejet device, which has a significantly lower cost to manufacture than the first generation device.

Mydcombi is the only FDA-approved fixed combination of the two leading mydriatic agents, tropicamide and phenylephrine in the United States and our first FDA-approved product.

As an ophthalmic spray delivered with Optejet technology, Mydcombi may present a number of benefits for ophthalmic surgical centers, optometric and ophthalmic offices and patients.

Those benefits may include improved cost-effectiveness in centers that employ single-use bottles for mydriasis, 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 plan to expand our launch with the onboarding of ten sales representatives in early June 2024.

We received FDA approval for our primary Mydcombi manufacturing facility in February 2024, which we believe will allow us to expand and continue to build our manufacturing operations.

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.

Under the terms of the Arctic Vision License Agreement, 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 $37.7 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 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.

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.

On August 15, 2023, we entered into a license agreement with Formosa, whereby we acquired the exclusive U.S.

rights to commercialize any product related to a novel formulation of clobetasol propionate ophthalmic suspension 0.05% (the “Licensed Product”), which was approved by the FDA, for post-operative inflammation and pain after ocular surgery, on March 4, 2024.

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 $2.0 million which consisted of (a) cash in the amount of $1.0 million and (b) 487,805 shares of common stock valued at $1.0 million.

We also capitalized $122,945 of transaction costs in connection with the License.

In addition, we agreed to pay Formosa up to $4.0 million upon the achievement of certain development milestones and up to $80 million upon the achievement of certain sales milestones.

The trigger for the initial $2.0 million development milestone payment was FDA approval of the Licensed Product and the effective date of the acceptance by the Company of the transfer and assignment of the FDA approval, which occurred on March 11, 2024.

Based on the achievement of this milestone, we paid Formosa the aggregate amount of $2.0 million, consisting of (a) cash in the amount of $1.0 million on April 26, 2024 and (b) 613,496 shares of common stock valued at $1.0 million on April 29, 2024.

The remaining $2.0 million development milestone was earned and accrued upon FDA approval, but payment will be triggered on the earlier of twelve months after FDA approval of the Licensed Product or six months following the first commercial sale of the Licensed Product.

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

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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.

Our net losses were $10.9 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had working capital and an accumulated deficit of approximately $2.0 million and $156.4 million, respectively.

Financial Overview

Revenue and Cost of Sales

Revenue and Cost of Revenue

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.

The first commercial sale of the product occurred on August 3, 2023 as part of a targeted launch and plan to expand our launch with the onboarding of ten sales representatives in early June 2024.

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.

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.

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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.

General and administrative expenses consist primarily of payroll and related expenses, legal and other professional services, insurance expense, and 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.

Reacquisition of License Rights

Reacquisition of license rights consists of the expense related to the payments that we are required to pay Bausch + Lomb in connection to the reacquisition of the license.

Other Income (Expense), Net

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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.

Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023

Revenue and Cost of Revenue

Revenue for the three months ended March 31, 2024 totaled $4,993, which was offset by cost of revenues of $4,993.

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 such time as we can roll out our second generation Optejet device and scale up production.

No revenue was earned or recognized during the three months ended March 31, 2023.

Research and Development Expenses

For the Three Months Ended September 30,

Research and development expenses for the three months ended March 31, 2024 totaled $3.9 million, an increase of $1.4 million, or 56%, as compared to $2.5 million recorded for the three months ended March 31, 2023.

Research and development expenses consisted of the following:

For the Three Months Ended March 31,

Personnel-related expenses

Direct clinical and non-clinical expenses

Non-cash stock-based compensation expenses

Facilities expenses

Supplies and materials

Other expenses

Total research and development expenses

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.

General and Administrative Expenses

For the Three Months Ended September 30,

Salaries and benefits

Professional fees

Stock-based compensation

Insurance expense

Sales and marketing

Facilities expense

Director fees and expense

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.

Research and Development Expenses

For the Nine Months Ended September 30,

Personnel-related expenses

Direct clinical and non-clinical expenses

Non-cash stock-based compensation expenses

Direct clinical and non-clinical expenses

Facilities expenses

Supplies and materials

Depreciation expense

Other expenses

Total research and development expenses

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

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.

The increase in personnel-related expenses was primarily due to new staff additions made during the last three quarters of 2023 and the first quarter of 2024.

The increase in supplies and materials expense was primarily due to (a) the expensing of Gen-1 MicroPine vials and cartridges that will now be used in Eyenovia-led clinical trials rather than being sold to Bausch as a result of the reacquisition of the Bausch license rights;

(b) drug formulation engineering batches;

and (c) the purchase of parts for the Gen-2 device that were used during the period.

The increase in direct clinical and non-clinical expenses was primarily due to increased costs related to Gen-2 R&D, MicroStat stability testing and clinical regulatory expenses.

The decrease in non-cash stock-based compensation expenses was primarily due to the ending of the amortization period for older grants.

The increase in depreciation expense was primarily due to increased equipment purchases and equipment placed in service during the last three quarters of 2023 and the first quarter of 2024.

General and Administrative Expenses

For the Nine Months Ended September 30,

Salaries and benefits

General and administrative expenses for the three months ended March 31, 2024 totaled $3.8 million, an increase of $0.9 million, or 31%, as compared to $2.9 million recorded for the three months ended March 31, 2023.

General and administrative expenses consisted of the following:

For the Three Months Ended March 31,

Personnel-related expenses

Professional fees

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Insurance expense

Writedown of commercial inventory to net realizable value

Sales and marketing

Facilities expense

Travel, lodging and meals

Investor relations

Director fees and expense

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 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

Total general and administrative expenses

The increase in personnel-related expenses was mainly due to new staff additions made during the last three quarters of 2023 and the first quarter of 2024.

The increase in professional fees was primarily due to an increase in temporary staffing.

The decrease in stock-based compensation expenses was primarily due to the ending of the amortization period for older equity grants.

The writedown of commercial inventory occurred as a result of the generation of flat gross sales margins during the early stages of the commercialization process for Mydcombi.

The increase in travel, lodging and meals was primarily due to increased travel between our New York, Nevada and California locations and an increase in the number of conferences attended.

Reacquisition of License Rights

Reacquisition of license rights for the three months ended March 31, 2024 totaled $2.0 million, as compared to no expense for the three months ended March 31, 2023.

The $2.0 million was the amount paid to Bausch + Lomb in connection to the reacquisition of the license, which we are recording as an operating expense.

Other Income (Expense)

Other income (expense) for the three months ended March 31, 2024 totaled approximately $0.7 million of net other expense, an increase of $0.4 million, as compared to $0.3 million of net other expense for the three months ended March 31, 2023.

Net other expense for the three months ended March 31, 2024 primarily consisted of approximately $0.7 million of interest expense related to the Avenue loan and $0.1 million related to the charge for the defective clinical supply settlement (see Note 8 – Commitments and Contingencies – Defective Clinical Supply), partially offset by $0.1 million of interest income primarily from Treasury bills.

Liquidity and Going Concern

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

September 30,

Cash and Cash Equivalents

Working capital

Working Capital (Deficit)

Notes Payable (Gross)

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.

Since inception, we have experienced negative cash flows from operations and our operations have primarily been funded by proceeds from equity and debt financings.

Our net losses were $10.9 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had an accumulated deficit of approximately $156.4 million.

As of March 31, 2024, we had a cash and cash equivalents balance of $8.0 million, working capital deficit of $2.0 million and stockholders’ equity of $1.8 million.

As of March 31, 2024 and December 31, 2023, we had $16.1 million and $15.6 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.

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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.

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 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.

During the three months ended March 31, 2024 and 2023, our sources and uses of cash were as follows:

Net cash used in operating activities for the three months ended March 31, 2024 was approximately $9.9 million, which includes cash used to fund a net loss of $10.9 million, reduced by $1.5 million of non-cash expenses, plus $0.5 million of net cash used by changes in the levels of operating assets and liabilities.

Net cash used in operating activities for the three months ended March 31, 2023 was approximately $7.0 million, which includes cash used to fund a net loss of $5.7 million, reduced by $1.2 million of non-cash expenses, and $2.4 million of cash used to fund changes in the balances of operating assets and liabilities.

Net cash used in investing activities for the three months ended March 31, 2024 was approximately $0.1 million, which was primarily related to the purchase of property and equipment.

Cash used in investing activities for the three months ended March 31, 2023 was $0.8 million, which was primarily related to the purchase of property and equipment.

Net cash provided by financing activities for the three months ended March 31, 2024 totaled approximately $3.1 million, which was primarily attributable to $3.2 million of net proceeds from the sale of common stock in our “at-the-market” offering pursuant to the Sales Agreement with Leerink Partners, partially offset by $0.1 million from the repayment of notes payable.

Net cash provided by financing activities for the three months ended March 31, 2023 totaled $3.4 million, which was attributable to aggregate proceeds received pursuant to the Sales Agreement with Leerink Partners in an “at-the-market” offering.

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.

During the next twelve months we have commitments to pay (a) $5.7 million to settle our March 31, 2024 accounts payable, accrued expenses and other current liabilities, (b) $0.6 million relating to our non-cancelable operating lease commitments, and (c) $8.8 million of gross payments due under our notes payable and convertible notes payable (if not previously converted).

After twelve months we have commitments to pay (a) an additional $1.1 million relating to our non-cancelable operating lease commitments, and (b) $7.3 million of gross payments due in connection with notes payable and convertible notes payable (if not previously converted).

Risks and Uncertainties

The continuing worldwide implications of the war between Russia and Ukraine and the conflict in the Middle East remain difficult to predict at this time.

The imposition of sanctions on Russia by the United States and other countries and counter sanctions by Russia, and the resulting economic impacts on oil prices and other materials and goods, could affect the price of materials used in the manufacture of our product candidates.

If the price of materials used in the manufacturing of our product candidates increase, that would adversely affect our business and the results of our operations.

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

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:

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.

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.

Critical Accounting Estimates

As described in Item 7 – Critical Accounting Estimates in our 2023 Form 10-K, as amended by our 2023 Form 10-K Amendment, we prepare our financial statements in accordance with U.S.

GAAP, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.

To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected.

We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information.

We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There are items within our financial statements that require estimation but are not deemed critical, as defined above.

Quantitative and Qualitative Disclosures About Market Risk.

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Item 2. Management’s Discussion and Analysis