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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-14 · 127 added, 146 removed, 129 unchanged (68% 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 June 30, 2024 and for the three and six months ended June 30, 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.

(“Eyenovia,” the “Company,” “we,” “us” and “our”) as of September 30, 2024 and for the three and nine months ended September 30, 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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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 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.

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 the 2023 Form 10-K, 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 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.

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.

We are an ophthalmic technology company developing and commercializing advanced products leveraging our proprietary Optejet topical ophthalmic medication dispensing platform.

The Optejet is especially useful in the treatment of chronic front-of-the-eye diseases due to its ease of use, enhanced safety and tolerability, and potential for superior compliance versus standard eye drops.

Together, these benefits may combine to produce better treatment options and outcomes for patients and providers.

The company’s pre-NDA candidate, MicroPine, is being developed for pediatric progressive myopia, a global epidemic impacting hundreds of millions of children worldwide and representing a multi-billion-dollar addressable market.

The company’s current commercial portfolio includes clobetasol propionate ophthalmic suspension, 0.05%, for post-surgical pain and inflammation, and Mydcombi® for mydriasis.

Eyenovia has also secured licensing and development agreements for additional multi-billion-dollar indications where the Optejet may be advantageous, including dry eye.

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.

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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 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 (“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 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 2,299,397 shares to Bausch + Lomb on May 3, 2024 (calculated pursuant to the Letter Agreement at $3.0 million using a thirty-day volume-weighted average price on April 11, 2024, but valued at $2.3 million on the May 3, 2024 settlement date).

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 from vendors 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.

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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.

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.

Since completing these studies, the market opportunity has markedly deteriorated, and we have chosen to put this program on hold and reallocate our resources towards larger opportunities.

When and if the market improves, we have kept open the option to continue development of MicroLine which would include a meeting with the FDA to review our clinical data to date.

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.

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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, expanded our launch with the hiring and onboarding of nine sales representatives through August 1, 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 July 24, 2024, we received written comments from the FDA outlining the design of a clinical bridging study to transition Mydcombi into our new Gen-2 Optejet device, which has a significantly lower cost to manufacture than the currently approved product.

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, 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.

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.

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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 pursuant to the License Agreement at $1.0 million.

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

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

The Formosa License will remain in effect for ten years from the date of the first commercial sale of a Formosa Licensed Product, unless earlier terminated.

We also capitalized $122,945 of transaction costs in connection with the Formosa 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 14, 2024.

Based on the achievement of this milestone, we paid Formosa (a) cash in the amount of $1.0 million on April 26, 2024 and (b) 613,496 shares of common stock (calculated pursuant to the License Agreement at $1.0 million using a five-day volume-weighted average price on March 14, 2024, but valued at $0.4 million on the April 29, 2024 settlement date).

The remaining $2.0 million development milestone (to be fully paid in cash) 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.

The trigger for the initial $2.0 million development milestone payment was FDA approval of the Formosa 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 14, 2024.

Based on the achievement of this milestone, we paid Formosa (a) cash in the amount of $1.0 million on April 26, 2024 and (b) 613,496 shares of common stock (calculated pursuant to the Formosa License Agreement at $1.0 million using a five-day volume-weighted average price on March 14, 2024, but valued at $0.4 million on the April 29, 2024 settlement date).

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

On July 23, 2024, we entered into a collaboration agreement with Senju, under which the companies intend to work to develop EYEN-520, a combination of Senju’s corneal epithelial wound healing candidate with our Optejet dispensing technology, as a potential treatment for chronic dry eye disease.

The companies anticipate a meeting with the FDA in late 2024, to be followed by execution of a definitive agreement related to the further development of the product and anticipated completion of a Phase 2b study in 2025.

The companies plan to request a meeting with the FDA in late 2024, to be followed by execution of a definitive agreement related to the further development of the product and anticipated completion of a Phase 2b study in 2025.

If successful, the collaboration agreement could be expanded to bring the product into two Phase 3 studies by 2026.

On July 26, 2024, we received notice from the staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) providing notification that the Company had regained compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Listing Rule 5550(a)(2).

Previously, Nasdaq had notified us on July 2, 2024 that, for the preceding 30 consecutive business days, the closing bid price of our common stock had been below the minimum requirement of $1.00 per share.

On August 7, 2024, we entered into a collaboration agreement with Formosa under which the companies intend to work to develop EYEN-530, a combination of Formosa’s clobetasol propionate ophthalmic solution with our Optejet dispensing technology, as a potential treatment for acute dry eye flare-ups.

The companies plan to request a meeting with the FDA in late 2024, to be followed by execution of a definitive agreement related to further development of the product and anticipated initiation of two Phase 3 studies by 2026.

On September 26, 2024, we announced the U.S.

launch and commercial availability of clobetasol propionate ophthalmic suspension 0.05%.

On September 18, 2024, we received notice from the Staff of Nasdaq providing notification that the Company’s bid price had closed below the $1.00 minimum bid price requirement for continued listing on Nasdaq under Listing Rule 5550(a)(2).

The notification letter stated that we would be provided 180 calendar days to regain compliance.

In order to regain compliance, the closing bid price of our common stock had to be at least $1.00 for a minimum of 10 consecutive business days at any time before December 30, 2024.

Subsequently, the Staff determined that, from July 12 to July 25, 2024, the closing bid price of our common stock had been at $1.00 per share or greater.

Accordingly, the Company had regained compliance with Listing Rule 5550(a)(2).

In order to regain compliance, the closing bid price of our common stock has to be at least $1.00 for a minimum of 10 consecutive business days at any time before March 17, 2025.

As of November 11, 2024 the Company has not regained compliance with Listing Rule 5550(a)(2).

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 $11.1 million and $6.2 million for the three months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had a working capital deficit and an accumulated deficit of approximately $8.6 million and $167.5 million, respectively.

Our net losses were $7.9 million and $7.3 million for the three months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had a working capital deficit and an accumulated deficit of approximately $4.1 million and $175.4 million, respectively.

Financial Overview

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 and we expanded our launch with the onboarding of nine sales representatives through July 15, 2024.

Cost of sales consisted of the cost of the production of the Mydcombi ophthalmic spray that was sold and the write-down of inventories to net realizable value.

Revenue is earned from the sale of our FDA approved products, primarily Mydcombi through September 30, 2024.

The first commercial sale of FDA approved products occurred on August 3, 2023 as part of a targeted launch and we expanded our launch with the onboarding of ten sales representatives through September 30, 2024.

Cost of sales consists of the cost of the production of the FDA approved products that were sold and the write-down of inventories to net realizable value.

Research and Development Expenses

Research and development expenses are incurred in connection with the research and development of our microdose therapeutics and consist primarily of contract service expenses.

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.

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● direct clinical and non-clinical expenses, which include expenses incurred under agreements with contract research organizations, contract manufacturing organizations, and costs associated with preclinical activities, development activities and regulatory activities;

● personnel-related expenses, which include expenses related to consulting agreements with individuals that have since entered into employment agreements with us as well as salaries and other compensation of employees that is attributable to research and development activities;

● 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.

● personnel-related expenses, which include salaries and other compensation of employees that is attributable to research and development activities;

● facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, 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 these initiatives.

General and Administrative Expenses

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.

Our research and development expenses may increase with the continuation of these initiatives and the expansion of development of our Optejet technology functionality, drug compounds and indications.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of payroll and related expenses, legal and other professional services, insurance expense, marketing expense, and non-cash stock-based compensation expense.

We anticipate that our selling, general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and the commercialization of our approved products and current and future 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.

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

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) changes in fair value of equity consideration (the equity payable for the Baush + Lomb and Formosa transactions);

(b) changes in fair value of equity consideration (the equity payable for the Bausch + Lomb and Formosa transactions);

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Results of Operations

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Revenue and Cost of Revenue

Revenue for the three months ended June 30, 2024 totaled $22,625, which was offset by cost of revenues of ($490,361).

Write-down of inventories to net realizable value for the three months ended June 30, 2024 totaled approximately $0.5 million, compared to no expense for the three months ended June 30, 2023.

The $0.5 million represented the write-down of short-dated inventory to net realizable value.

The negative gross loss was primarily due to write-downs of commercial inventory that were still on the balance sheet at June 30, 2024.

No revenue was earned or recognized during the three months ended June 30, 2023.

Revenue for the three months ended September 30, 2024 totaled $1,625, which consisted primarily of revenue from the sale of Mydcombi and was offset by cost of revenues of $132,522.

Write-down of inventories to net realizable value for the three months ended September 30, 2024 totaled approximately $0.1 million, compared to $12,218 for the three months ended September 30, 2023.

The gross loss was primarily due to write-downs of commercial inventory that were still on the balance sheet at September 30, 2024.

Revenue for the three months ended September 30, 2023 totaled $1,198, which was offset by cost of revenues of $13,416.

We expect to continue to generate negative gross margins on Gen 1 Mydcombi sales during the early stage of commercialization of this product and may experience negative overall gross margins until the commercialization of other products that may generate positive gross margins.

Research and Development Expenses

Research and development expenses for the three months ended June 30, 2024 totaled $4.6 million, an increase of $1.8 million, or 64%, compared to $2.8 million recorded for the three months ended June 30, 2023.

Research and development expenses for the three months ended September 30, 2024 totaled $3.5 million, a decrease of $0.1 million, or 3%, compared to $3.6 million recorded for the three months ended September 30, 2023.

Research and development expenses consisted of the following:

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Personnel-related expenses

Supplies and materials

Non-cash stock-based compensation expenses

Direct clinical and non-clinical expenses

Facilities expenses

Depreciation expense

Facilities expenses

Non-cash stock-based compensation expenses

Other expenses

Supplies and materials

Total research and development expenses

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 are intended to be used for Eyenovia-led clinical trials.

The increase in non-cash stock-based compensation expenses was primarily due to new grants in the second quarter of 2024.

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

The decrease in supplies and materials expense was primarily due to a net overall decrease in related requirements due to the timing of Gen 1.0 and Gen 2.0 clinical production scale up and clinical testing.

The increase in direct clinical and non-clinical expenses was primarily due to increased costs related to the reacquisition of the CHAPERONE study from Bausch + Lomb, Mydcombi stability testing and clinical regulatory expenses.

The decrease in facilities expenses was due to costs incurred in 2023 related to getting the new Reno facility online that were not incurred in 2024.

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

The increase in other expenses was primarily due to increased IT expenses related to data tracking and cybersecurity.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2024 totaled $3.8 million, an increase of $0.7 million, or 19%, compared to $3.1 million recorded for the three months ended June 30, 2023.

General and administrative expenses consisted of the following:

For the Three Months Ended June 30,

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

The increase in other expenses was primarily due to increased IT expenses related to CHAPERONE data tracking and cybersecurity.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2024 totaled $3.7 million, an increase of $0.8 million, or 27%, compared to $2.9 million recorded for the three months ended September 30, 2023.

Selling, general and administrative expenses consisted of the following:

For the Three Months Ended September 30,

Salaries and benefits

Professional fees

Stock-based compensation

Insurance expense

Non-cash stock based compensation

Sales and marketing

Insurance expense

Travel, lodging and meals

Investor relations

Facilities expense

Investor relations

Director fees and expense

Total general and administrative expenses

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

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

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

The increase in other expenses is primarily due to commercial regulatory costs for Mydcombi.

Reacquisition of License Rights

Reacquisition of license rights for the three months ended June 30, 2024 totaled approximately $2.9 million, compared to no expense for the three months ended June 30, 2023.

The $2.9 million amount is comprised of the $3.0 million settled in common stock to Bausch + Lomb in the second quarter 2024 in connection with the reacquisition of the license (which we are recording as an operating expense), offset by $0.1 million of the purchase price allocated to the repurchase of equipment.

Other Income (Expense)

Other income (expense) for the three months ended June 30, 2024 totaled approximately $0.6 million of net other income, a decrease of $0.9 million, compared to ($0.3 million) of net other expense for the three months ended June 30, 2023.

Net other expense for the three months ended June 30, 2024 primarily consisted of approximately $0.7 million of interest expense related to the Avenue loan, partially offset by $1.2 million of changes in fair value of equity consideration (the equity payable for the Baush + Lomb and Formosa transactions) and $0.1 million of interest income primarily from Treasury bills.

Total selling, general and administrative expenses

The increase in personnel-related expenses was mainly due to new staff additions made to support commercialization during 2024.

The increase in other expenses is primarily due to commercial regulatory costs for Mydcombi and software licensing fees in connection with new staff additions.

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

The increase in travel, lodging and meals was primarily due to increased travel by the sales team to promote our FDA approved products.

Total Other Expense

Total other expense for the three months ended September 30, 2024 was approximately $0.6 million, a decrease of $0.2 million, compared to $0.8 million for the three months ended September 30, 2023.

Total other expense for the three months ended September 30, 2024 primarily consisted of approximately $0.6 million of interest expense related to the Avenue loan.

Results of Operations

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Revenue and Cost of Revenue

Revenue for the six months ended June 30, 2024 totaled $27,618, which was offset by cost of revenues of ($693,388).

Write-down of inventories to net realizable value for the six months ended June 30, 2024 totaled approximately $0.7 million, compared to no expense for the six months ended June 30, 2023.

The $0.7 million was comprised of the adjustment to bring the inventory to list price for the first quarter of 2024 and the write-down of short-dated inventory to net realizable value for the second quarter of 2024.

The negative gross loss was primarily due to write-downs of commercial inventory that were still on the balance sheet at June 30, 2024.

No revenue was earned or recognized during the six months ended June 30, 2023.

Revenue for the nine months ended September 30, 2024 totaled $29,243, which was offset by cost of revenues of $825,910.

Write-down of inventories to net realizable value for the nine months ended September 30, 2024 totaled approximately $0.8 million, compared to $12,218 for the nine months ended September 30, 2023.

The $0.8 million was comprised of the adjustment to bring the inventory to list price and an additional write-down of short-dated inventory to net realizable value.

The gross loss was primarily due to write-downs of commercial inventory that were still on the balance sheet at September 30, 2024.

Revenue for the nine months ended September 30, 2023 totaled $1,198, which was offset by cost of revenues of $13,416.

Research and Development Expenses

Research and development expenses for the six months ended June 30, 2024 totaled $9.0 million, an increase of $3.7 million, or 69%, compared to $5.3 million recorded for the six months ended June 30, 2023.

Research and development expenses for the nine months ended September 30, 2024 totaled $12.5 million, an increase of $3.6 million, or 40%, compared to $8.9 million recorded for the nine months ended September 30, 2023.

Research and development expenses consisted of the following:

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Personnel-related expenses

Supplies and materials

Non-cash stock-based compensation expenses

Direct clinical and non-clinical expenses

Facilities expenses

Supplies and materials

Depreciation expense

Facilities expenses

Non-cash stock-based compensation expenses

Other expenses

Total research and development expenses

The increase in direct clinical and non-clinical expenses was primarily due to increased clinical regulatory expenses incurred in connection with the reacquisition of the Bausch + Lomb license and Mydcombi stability testing.

The increase in supplies and materials expense was primarily due to the expensing of Gen-1 MicroPine clinical product and materials that will now be used in Eyenovia-led clinical trials rather than being sold to Bausch + Lomb as a result of the reacquisition of the Bausch Licensed Product;

drug formulation engineering batches related to Gen 2.0 specific formulations and future Mydcombi production.

The increase in personnel-related expenses was primarily due to new staff additions made to support commercialization during the last two 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 + Lomb 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 are intended to be used in Eyenovia-led clinical trials.

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

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

The increase in other expenses was primarily due to increased IT expenses related to data tracking and cybersecurity.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2024 totaled $7.4 million, an increase of $1.3 million, or 22%, compared to $6.1 million recorded for the six months ended June 30, 2023.

General and administrative expenses consisted of the following:

For the Six Months Ended June 30,

The increase in other expenses was primarily due to increased IT expenses related to CHAPERONE data tracking and cybersecurity.

The decrease in facilities expenses was due to costs incurred in 2023 related to getting the new Reno facility online that were not incurred in 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2024 totaled $11.1 million, an increase of $2.1 million, or 23%, compared to $9.0 million recorded for the nine months ended September 30, 2023.

Selling, general and administrative expenses consisted of the following:

For the Nine Months Ended September 30,

Salaries and benefits

Professional fees

Stock-based compensation

Insurance expense

Non-cash stock based compensation

Sales and marketing

Insurance expense

Travel, lodging and meals

Investor relations

Facilities expense

FDA PDUFA fees

Investor relations

Director fees and expense

Total general and administrative expenses

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

Other expenses

Total selling, general and administrative expenses

The increase in personnel-related expenses was mainly due to new staff additions related to commercialization efforts made during the last two quarters of 2023 and throughout fiscal year 2024.

The increase in regulatory expenses was primarily due to the FDA Prescription Drug User Fee Act (“PDUFA”) fees for Mydcombi.

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

The increase in travel, lodging and meals was primarily due to increased travel by the sales team to promote Mydcombi.

The increase in professional fees was primarily due to the short-term need for temporary staff while in the process of hiring permanent employees.

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

The increase in other expenses was primarily due to commercial regulatory costs for Mydcombi.

The increase in sales and marketing expenses was primarily due to samples initiatives for the Clobetasol launch in 2024.

The increase in other expenses was primarily due to software licensing and public filing fees.

Reacquisition of License Rights

Reacquisition of license rights for the six months ended June 30, 2024 totaled $4.9 million, compared to no expense for the six months ended June 30, 2023.

The $4.9 million in the account is comprised of the aggregate $5.0 million of payments ($2.0 million of cash and $3.0 million settled in common stock) to Bausch + Lomb in connection with the reacquisition of the license (which we are recording as an operating expense), offset by $0.1 million related to the repurchase of equipment.

Other Income (Expense)

Other income (expense) for the six months ended June 30, 2024 totaled approximately ($20,632) of net other expense, a decrease of $0.5 million, compared to $0.5 million of net other expense for the six months ended June 30, 2023.

Net other expense for the six months ended June 30, 2024 primarily consisted of approximately $1.4 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 $1.2 million of changes in fair value of equity consideration (the equity payable for the Baush + Lomb and Formosa transactions) and $0.2 million of interest income primarily from Treasury bills.

Reacquisition of license rights for the nine months ended September 30, 2024 totaled $4.9 million, compared to no expense for the nine months ended September 30, 2023.

The $4.9 million is comprised of the aggregate $5.0 million of payments ($2.0 million of cash and $3.0 million settled in common stock) to Bausch + Lomb in connection with the reacquisition of the Bausch Licensed Product (which we are recording as an operating expense), partially offset by $0.1 million related to the repurchase of equipment.

Total Other Expense

Total other expense for the nine months ended September 30, 2024 was approximately $0.6 million, a decrease of $0.8 million, compared to $1.4 million for the nine months ended September 30, 2023.

Total other expense for the nine months ended September 30, 2024 primarily consisted of approximately $2.0 million of interest expense related to the Avenue loan partially offset by $1.2 million of changes in fair value of equity consideration (the equity payable for the Bausch + Lomb and Formosa transactions) and $0.2 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 (Deficit)

Working (Deficit) Capital

Notes Payable (Gross)

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 $22.0 million and $12.0 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of approximately $167.5 million.

As of June 30, 2024, we had a cash and cash equivalents balance of $2.3 million, a working capital deficit of $8.6 million and stockholders’ deficiency of $2.4 million.

As of June 30, 2024 and December 31, 2023, we had $15.1 million and $15.6 million, respectively, of gross debt outstanding.

Our net losses were $29.9 million and $19.3 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had an accumulated deficit of approximately $175.4 million.

As of September 30, 2024, we had a cash and cash equivalents balance of $7.2 million, a working capital deficit of $4.1 million and stockholders’ equity of $3.7 million.

As of September 30, 2024 and December 31, 2023, we had $12.4 million and $15.6 million, respectively, of gross 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 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 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 and the potential for entering into collaborations with other companies to enhance or complement our product and service offerings, and to enable us to make principal and interest payments on our debt obligations in the near term, which will be necessary to avoid a default on such obligations.

Our operating needs also 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 further improve the marketability of 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.

On July 1, 2024, the Company raised $5.0 million of gross proceeds from a registered direct offering of equity securities.

Also, subsequent to June 30, 2024, the Company raised $0.8 million of gross proceeds from its ongoing “at-the-market” offering.

During the six months ended June 30, 2024 and 2023, our sources and uses of cash were as follows:

Net cash used in operating activities for the six months ended June 30, 2024 was approximately $18.1 million, which includes cash used to fund a net loss of $22.0 million, reduced by $4.6 million of net non-cash expenses, plus $0.7 million of net cash used by changes in the levels of operating assets and liabilities.

Net cash used in operating activities for the six months ended June 30, 2023 was $11.7 million, which includes cash used to fund a net loss of $12.0 million, reduced by $2.1 million of non-cash expenses, plus $1.8 million of cash used to fund changes in operating assets and liabilities.

Net cash used in investing activities for the six months ended June 30, 2024 was approximately $0.2 million, which was primarily related to the purchase of property and equipment.

Cash used in investing activities for the six months ended June 30, 2023 was $2.1 million, which was related to purchases of property and equipment.

Net cash provided by financing activities for the six months ended June 30, 2024 totaled approximately $5.7 million, which was primarily attributable to $1.9 million of net proceeds from the sale of common stock and warrants in a registered direct offering, $4.9 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 $1.1 million from the repayment of notes payable.

Net cash provided by financing activities for the six months ended June 30, 2023 totaled $8.4 million, which was attributable to $3.9 million of net proceeds received from sales under our “at-the-market” offering and $4.9 million of net proceeds from the additional tranche under the Loan and Security Agreement with Avenue.

This was partially offset by the repayment of $0.4 million of notes payable in connection with the D&O Loan.

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 selling, general and administrative costs in order to conserve our cash.

During the nine months ended September 30, 2024 and 2023, our sources and uses of cash were as follows:

Net cash used in operating activities for the nine months ended September 30, 2024 was approximately $24.0 million, which includes cash used to fund a net loss of $29.9 million, reduced by $5.8 million of net non-cash expenses, plus $0.1 million of net cash generated from changes in the levels of operating assets and liabilities.

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 investing activities for the nine months ended September 30, 2024 was approximately $0.2 million, which was primarily related to the purchase of property and equipment.

Cash used in investing activities for the nine months ended September 30, 2023 was $3.8 million, which was related to $2.7 million for purchases of property and equipment and a $1.1 million cash investment in an intangible asset.

Net cash provided by financing activities for the nine months ended September 30, 2024 totaled approximately $16.5 million, which was primarily attributable to $14.2 million of net proceeds from the sale of common stock and warrants in offerings and, $6.0 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 $3.8 million from the repayment of notes payable.

Net cash provided by financing activities for the nine months ended September 30, 2023 totaled $19.2 million, which was attributable to $10.9 million of net proceeds received from a registered direct offering, $4.0 million of net proceeds from an at-the-market offering and $4.9 million of net 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.

Contractual Obligations and Commitments

During the next twelve months we have commitments to pay (a) $5.7 million to settle our June 30, 2024 accounts payable, accrued expenses and other current liabilities, (b) $0.6 million relating to our non-cancelable operating lease commitments, and (c) $10.3 million of gross payments due under our notes payable, convertible notes payable (if not previously converted) and D&O Loan.

After the next twelve months we have commitments to pay (a) an additional $1.0 million relating to our non-cancelable operating lease commitments, and (b) $4.8 million of gross payments due in connection with notes payable and convertible notes payable (if not previously converted).

During the next twelve months, we have commitments to pay (a) $5.7 million to settle our September 30, 2024 accounts payable, accrued expenses and other current liabilities, (b) $0.6 million relating to our non-cancelable operating lease commitments, and (c) $10.1 million of gross payments due under our notes payable, convertible notes payable (if not previously converted).

After the next twelve months we have commitments to pay (a) an additional $0.3 million related to our accrued expenses and other non-current liabilities, (b) $0.8 million relating to our non-cancelable operating lease commitments, and (c) $2.3 million of gross payments due in connection with notes payable and convertible notes payable (if not previously converted).

Risks and Uncertainties

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What changed 10-Q

Item 2. Management’s Discussion and Analysis