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Item 7. Management’s Discussion and Analysis

2025-04-15 compared with 2024-03-18 · 161 added, 131 removed, 91 unchanged (76% of the section changed)

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Actual results could differ materially because of the factors discussed in “Risk Factors” elsewhere in this Annual Report on Form 10-K, and other factors that we have not identified.

We are an ophthalmic technology company 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, and developing the Optejet® delivery system both for use in combination with our own drug-device therapeutic programs and for out-licensing for use in combination with therapeutics for additional indications.

Our aim is to improve the delivery of topical ophthalmic medication through the ergonomic design of the Optejet which facilitates ease-of-use and delivery of more physiologically appropriate medication volume, with the goal to reduce side effects and improve tolerability, and introduce digital health technology to improve therapy compliance and ultimately medical outcomes.

We are an ophthalmic technology company developing our proprietary Optejet® topical ophthalmic medication dispensing platform.

In November 2024, we received a negative clinical trial result in the development of our development-stage drug-device combination product, MicroPine.

As a result, we restructured our company to minimize expenses and engaged an investment bank to explore strategic options in order to maximize shareholder value.

We have paused the national sales roll-out of our products clobetasol propionate and Mydcombi® until additional funding is obtained.

At the same time, we accelerated our development efforts relating to the Optejet in order to potentially increase the value of that asset in any strategic transaction or capital raising activities.

The ergonomic and functional design of the Optejet allows for horizontal drug delivery and eliminates the need to tilt the head back or the manual dexterity to squeeze a bottle to administer medications.

Drug is delivered in a microscopic array of droplets faster than the blink reflex to help ensure instillation success.

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

In clinical trials, the Optejet has demonstrated that its targeted delivery achieves a high rate of successful administration, with 98% of sprays being accurately delivered upon first attempt compared to the established rate reported with traditional eye drops of ~ 50%.

A more physiologically appropriate volume of medication in the range of seven to nine microliters is delivered by the Optejet, which is approximately one-fifth of the 35 to 50 microliter dose typically delivered in a single eye drop.

Drug is delivered in a microscopic array of droplets that is both comfortable and matches the amount of fluid that the front of the eye can hold.

The precise delivery of a low-volume columnar spray by the Optejet device helps ensure instillation success while minimizing contamination risk with a non-protruding nozzle and self-closing shutter.

A more physiologically appropriate volume of medication in the range of seven to ten microliters is delivered by the Optejet, which is approximately one-fifth of the 35 to 50 microliter dose typically delivered in a single eye drop.

Lower volume of medication exposes the ocular surface to less active ingredient and preservatives, potentially reducing ocular stress and surface damage and improving tolerability.

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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.

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

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

In this way, the Optejet could serve as an extension of the physician’s office by providing information that is not currently possible to collect except through the use of diaries.

Our drug-device product line includes Mydcombi (tropicamide and phenylephrine HCL ophthalmic spray) and therapeutic programs MicroPine (atropine ophthalmic spray) and MicroLine (pilocarpine ophthalmic spray).

MicroPine is our first-in-class topical therapy for the treatment of progressive myopia, a 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 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 B+L, pursuant to which B+L 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.

B+L 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

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 January 12, 2024, we entered into a subsequent agreement with B+L to repatriate our rights to MicroPine and take control of the CHAPERONE study.

In this agreement, we agreed to pay B+L $2 million in cash and an additional $3 million in common stock upon successful transfer of the regulatory documents and study elements to Eyenovia.

We also agreed to pay B+L a 2% 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.

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.

We have received FDA clearance for using both Coastline International and our Redwood City facility for the production of Mydcombi cartridges, and FDA clearance for using 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.

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 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.

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 U.S.

Food and Drug Administration (the “FDA”) to review our clinical data to date.

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

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 are planning to expand our launch with the onboarding of ten sales representatives in early 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 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.

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 the Senju License Agreement.

We are in active discussions with manufacturers of existing and late-stage ophthalmic medications to explore whether development with the Optejet technology can solve unmet medical and business needs.

Some of those business needs could include extension of exclusivity under the Optejet patents, improvement in a drug’s tolerability profile, or potential improvement in treatment compliance.

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 $2,000,000 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.

The first commercial sale of Mydcombi occurred on August 3, 2023 as part of a targeted launch.

On July 24, 2024, we received written comments from the FDA providing direction for 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 (Eyenovia’s proprietary drug-device combination of low-dose atropine and the Optejet platform), 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.

On October 9, 2020, we entered into a license agreement (the “Bausch License Agreement”) with Bausch + Lomb (“B+L”), pursuant to which B+L 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 we 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.

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, which was a Phase III efficacy and safety trial of MicroPine.

On January 12, 2024, we entered into a subsequent agreement with B+L to repatriate our rights to MicroPine and take control of the CHAPERONE study.

In this agreement, we agreed to pay B+L $2 million in cash and an additional $3 million in common stock upon successful transfer of the regulatory documents and study elements to Eyenovia.

We also agreed to pay B+L a 2% royalty on net sales once MicroPine is commercialized in the United States, assuming receipt of regulatory approvals.

We believed that this revised arrangement was in our and our shareholders’ best interests, as it could have substantially increased 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 September 26, 2024, we announced the U.S.

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

On November 15, 2024, we announced the outcome of an independent review of the clinical results of the three-year efficacy and safety data from the MicroPine Phase III CHAPERONE study conducted by a Data Monitoring Committee (“DMC”).

The DMC, made up of independent ophthalmologists and optometrists who specialize in pediatric myopia as well as a statistician, reviewed the safety and efficacy data from all evaluable patients.

After the completion of three-year therapy for myopia with MicroPine, statistical superiority was not observed and was deemed unlikely to occur in at least one of the active dose arms compared with placebo, which was the primary efficacy endpoint of the trial.

There were no safety issues or serious adverse events identified.

As a result of this finding, we closed out the CHAPERONE study and put the project on hold in December 2024.

In light of the results from the CHAPERONE study, the Company is considering a variety of steps to maximize value to all stakeholders, to reduce expenses and to evaluate its strategic options, which may include a business combination, reverse merger, asset sales or a combination of those alternatives.

Further information will be made available once the evaluation of strategic options has been completed.

The Company implemented a reduction in force affecting approximately 75% of its workforce.

The estimated total cost of severance-related expenses relating to this reduction in force is $0.3 million.

The remaining staff will be focused on Optejet® Gen-2 development, our dry eye collaborations and clobetasol propionate commercialization.

We 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.

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.

As part of the Company’s steps to maximize value to all stakeholders, to reduce expenses and to evaluate its strategic options, we made the decision to phase out the production and sale of Mydcombi in the GEN-1 device.

As a result, we have phased out the manufacturing line at Coastline International, Inc.

located in Tijuana, Mexico, and are also modifying the use of our manufacturing facility in Reno, Nevada and our fill and finish facility in Redwood City, California to focus on Optejet® Gen-2 development, our dry eye collaborations and clobetasol propionate commercialization.

In addition to our own development programs, on August 15, 2023, we entered into a license agreement 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 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 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 Formosa License Agreement at $1.0 million.

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 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 August 7, 2024, we entered into a non-binding 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.

On November 22, 2024, we entered into the First Amendment (the “First Amendment”) to the Supplement to that certain Loan and Security Agreement, dated November 22, 2022 (the “Loan and Security Agreement”) with Avenue Capital Management II, L.P., as administrative agent and collateral agent, Avenue Venture Opportunities Fund, L.P., as a lender and Avenue Venture Opportunities Fund II, L.P., as a lender (together, “Avenue”).

Pursuant to the First Amendment, Avenue agreed to defer principal and interest payments on amounts outstanding under the Loan and Security Agreement until the end of February 2025.

On February 21, 2025, we entered into the Second Amendment (the “Second Amendment”) to the Supplement to the Loan and Security Agreement with Avenue.

Pursuant to the Second Amendment, Avenue agreed to defer principal and interest payments on amounts outstanding until the end of September 2025.

Deferred interest will accrue on the outstanding principal amount.

On December 12, 2024, we announced the engagement of Chardan, an investment bank, as the Company’s financial advisor in connection with its evaluation of strategic alternatives.

With assistance from Chardan, the Company will continue to assess a full range of strategic alternatives, including but not limited to, a business combination, sale of the Company, reverse merger, asset sale, or a combination of alternatives, while also carefully managing its expenses.

As part of restructuring to minimize expenses during this process, the Company temporarily halted sales and promotion activities and focused its development efforts on completing the verification and validation studies required for regulatory approval of the Optejet UFD.

This device is designed for users to fill with preserved artificial tears or contact lens rewetting solutions at home, providing greater flexibility while leveraging Optejet’s advanced delivery system.

As of March 2025, Eyenovia is progressing with its development of the Optejet UFD, aiming for a 510K submission in the United States in the fourth quarter of 2025.

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.

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).

On February 25, 2025, we received notice from the Staff of 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 September 18, 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.

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 March 17, 2025.

On January 31, 2025, the Company effected a reverse stock split of its common stock at a ratio of 1-for-80 (the “Reverse Split”).

Upon the effectiveness of the Reverse Split, every 80 issued shares of common stock were reclassified and combined into one share of common stock and the corresponding price per share increased by a multiple of 80.

Subsequently, the Staff determined that, from February 3 to February 14, 2025, 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).

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

We have also generated cash through licensing arrangements and our credit facilities with Leerink Partners and Avenue.

We have also generated cash through licensing arrangements and our credit facility with Avenue.

However, based upon our current operating plan, there is substantial doubt about our ability to continue as a going concern for at least one year from the date that our financial statements were issued.

Our ability to continue as a going concern depends on our ability to complete additional licensing or business development transactions or raise additional capital through the sale of equity or debt securities to support our future operations.

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives and/or take additional measures to reduce costs.

Our ability to continue as a going concern depends on our ability to complete additional licensing or business development transactions, raise additional capital through the sale of equity or debt securities to support our future operations or the completion of a transaction consistent with the strategic alternatives that we are exploring.

If we are unable to secure additional capital, we may be required to curtail our research and development initiatives, take additional measures to reduce costs or file for bankruptcy.

Our net losses were $49.8 million and $27.3 million for the years ended December 31, 2024 and 2023.

As of December 31, 2023, we had working capital and an accumulated deficit of approximately $11.2 million and $145.5 million, respectively.

As of December 31, 2024, we had working capital deficit and an accumulated deficit of approximately $13.3 million and $195.3 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.

Cost of sales consisted of the cost of the production of the Mydcombi ophthalmic spray that was sold.

Revenue is mostly earned from the sale of our products, Mydcombi and clobetasol propionate.

The first commercial sale of Mydcombi occurred on August 3, 2023 and the first sale of clobetasol propionate occurred on October 4, 2024, both as part of a targeted launch.

Cost of sales consisted mostly of the cost of the production of the products that were sold, but also write downs of our inventory to their net realizable value.

Research and Development Expenses

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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;

● 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, non-cash stock-based compensation 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.

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We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or other information our vendors provide to us.

We expect that our research and development expenses will increase with the continuation of the aforementioned initiatives.

General and Administrative Expenses

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

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.

Results of Operations

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Revenue for the year ended December 31, 2024 totaled $57,336, which was offset by cost of revenues of $3,927,228.

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 year ended December 31, 2022.

Write-down of inventories to net realizable value for the year ended December 31, 2024 totaled approximately $3.9 million, compared to $12,218 for the year ended December 31, 2023.

The $3.9 million was comprised of $0.4 million of adjustments to bring the inventory to list price or net realizable value, a $0.4 million additional write-down of short-dated inventory to net realizable value, and $3.1 million of write-downs of commercial inventory due to the uncertainty associated with the Company’s clobetasol propionate and Mydcombi products and its exploration of strategic alternatives.

Revenue for the year ended December 31, 2023 totaled $3,787, which was offset by cost of revenues of $16,005.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2023 totaled $13.0 million, a decrease of $0.4 million, or 3%, as compared to $13.4 million recorded for the year ended December 31, 2022.

Research and development expenses for the year ended December 31, 2024 totaled $14.5 million, an increase of $1.5 million, or 11.5%, as compared to $13.0 million recorded for the year ended December 31, 2023.

Research and development expenses consisted of the following:

For the Year Ended

Personnel-related expenses

Supplies and materials

Non-cash stock-based compensation expenses

Salaries and benefits

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 personnel-related expenses was primarily due to new staff additions made throughout 2023 and higher payroll tax expense due to us no longer being eligible for R&D payroll tax credits in 2023, compared to $0.3 million in 2022.

The increase in supplies and materials was primarily due to an increase in dispenser parts and materials.

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 direct clinical and non-clinical expenses was primarily due to the VISION-2 study being concluded in 2022, B+L taking over responsibility for the MicroPine clinical process and the decrease in the use of external consultants.

The increase in facilities expenses was primarily due to costs related to the new Reno facility.

The increase in depreciation expense was primarily due to increased equipment purchases.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2023 totaled $12.4 million, a decrease of $1.1 million, or 8%, as compared to $13.5 million recorded for the year ended December 31, 2022.

General and administrative expenses consisted of the following:

The increase in direct clinical and non - clinical expenses was primarily due to increased clinical studies costs in connection with the reacquisition of the CHAPERONE license, a reduction in reimbursements from Arctic Vision for GEN - 2 development costs due to GEN - 2 development nearing completion, and R&D work on GEN - 2 formulations for Mydcombi.

The increase in supplies and materials was primarily due to the reduction of engineering cost reimbursements from B+L in connection with the reacquisition of the CHAPERONE license from B+L.

The increase in depreciation expense was primarily due to a new manufacturing line placed in service during fiscal year 2023.

The decrease in personnel - related expenses was primarily due to a decrease in accrued bonuses and amortization period for older equity grants and forfeitures during fiscal year 2024.

The decrease in other expenses was primarily due to the decrease in temporary staff compared to 2023 while in the process of hiring permanent employees.

terminations in fiscal year 2024.

The decrease in facilities expenses was primarily due to lower facilities and manufacturing startup costs incurred in 2024 compared to 2023.

The decrease in non - cash stock - based compensation was primarily due to the ending of the amortization period for older equity grants and forfeitures during fiscal year 2024.

The decrease in other expenses was primarily due to the decrease in temporary staff compared to 2023 while in the process of hiring permanent employees.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2024 totaled $14.3 million, an increase of $1.9 million, or 15.0%, as compared to $12.4 million recorded for the year ended December 31, 2023.

Selling, general and administrative expenses consisted of the following:

For the Year Ended

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Professional fees

Stock-based compensation

Sales and marketing

Non-cash stock based compensation

Insurance expense

Director fees and expense

Sales and marketing

Investor relations

FDA PDUFA fees

Travel, lodging and meals

Facilities expense

The decrease in professional fees was primarily due to reduced costs for legal activity, as well as reduced recruiting expenses for 2022 director searches.

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

Director fees and expense

Total selling, general and administrative expenses

The increase in personnel-related expenses was primarily due to new staff additions related to commercialization efforts into fiscal year 2024.

The increase in professional fees was primarily due to the short-term need for temporary staff while in the process of hiring permanent employees and increased costs due to additional SEC filings in 2024.

The increase in regulatory expenses was primarily due to the FDA Prescription Drug User Fee Act (“PDUFA”) fees for Mydcombi and clobetasol propionate in 2024.

The increase in investor relations costs during 2024 was primarily due to increased filings and shareholder communications related to our January 2025 special meeting of shareholders.

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

The decrease in non-cash stock-based compensation was primarily due to the ending of the amortization period for older equity grants and forfeitures during fiscal year 2024.

The decrease in sales and marketing was primarily due to the decrease in expenditure on conferences and conference exhibits and meetings in fiscal year 2024.

The decrease in insurance expense was primarily due to a reduction in D&O insurance premiums from 2023.

The increase in other expenses was primarily due to foreign tax and development of our pharmacy network in fiscal year 2024.

Reacquisition of License Rights

Reacquisition of license rights for the year ended December 31, 2024 totaled $4.9 million, compared to no expense for the year ended December 31, 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 B+L in connection with the reacquisition of the Bausch Licensed Product (which we are recording as an operating expense), partially offset by $0.1 million allocated to the repurchase of equipment.

Asset Impairments

Asset impairments expense for the year ended December 31, 2024 was $11.2 million, compared to no expense for the year ended December 31, 2023.

Uncertainty associated with our business and our exploration of our strategic options has led us to record impairments of our intangible assets of $6.1 million, property and equipment of $2.5 million, equipment deposits of $0.7 million, prepaid expenses of $0.7 million, operating lease right-of-use asset of $0.4 million, deferred clinical supply costs of $0.4 million and other assets of $0.4 million.

Other Income (Expense)

Other income (expense) for the year ended December 31, 2023 totaled approximately $1.9 million of net other expense, an increase of $0.8 million, as compared to $1.1 million of net other expense for the year ended December 31, 2022.

Net other expense for the year ended December 31, 2023 primarily consisted of approximately $2.4 million of interest expense related to the Avenue loan and $0.4 million for the potential replacement cost for returned products, primarily offset by $0.2 million of income from the sale of clinical supplies and $0.7 million of interest income, mainly from Treasury bills.

Net other expense for the year ended December 31, 2022 primarily consisted of approximately $1.4 million of interest expense related to the SVB loan and the Avenue loan, primarily offset by $0.2 million of income from the sale of clinical supplies and $0.1 million of interest income.

Total other expense for the year ended December 31, 2024 was approximately $1.1 million, a decrease of $0.8 million, compared to approximately $1.9 million for the year ended December 31, 2023.

Total other expense for the year ended December 31, 2024 primarily consisted of approximately $2.5 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 B+L and Formosa transactions) and $0.2 million of interest income, primarily from Treasury bills.

Total other expense for the year ended December 31, 2023, primarily consisted of approximately $2.4 million of interest expense related to the Avenue loan and $0.4 million for the potential replacement cost for returned products,

primarily offset by $0.2 million of income from the sale of clinical supplies and $0.7 million of interest income, mainly from Treasury bills.

Liquidity and Going Concern

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

At December 31, 2023, our accumulated deficit since inception was approximately $145.5 million.

Our operating needs include the planned costs to operate our business, including amounts required to fund 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.

At December 31, 2024, our accumulated deficit since inception was $195.3 million.

As of December 31, 2024, we had a cash and cash equivalents balance of $2.1 million, a working capital deficit of approximately $13.1 million and stockholders’ deficiency of $12.7 million.

As of December 31, 2024 and December 31, 2023, we had $10.7 million and $15.6 million, respectively, of gross debt outstanding.

During the years ended December 31, 2024 and 2023, our sources and uses of cash were as follows:

Net cash used in operating activities for the year ended December 31, 2023 was approximately $23.8 million, which includes cash used to fund a net loss of $27.3 million, reduced by $1.4 million of net cash used by changes in the levels of operating assets and liabilities, offset by $4.9 million of non-cash expenses.

Net cash used in operating activities for the year ended December 31, 2022 was approximately $25.1 million, which includes cash used to fund a net loss of $28.0 million, reduced by $2.3 million of net cash used by changes in the levels of operating assets and liabilities, offset by $5.2 million of net non-cash expenses.

Net cash used in operating activities for the year ended December 31, 2024 was approximately $30.1 million, which includes cash used to fund a net loss of $49.8 million, increased by $0.3 million of net cash used by changes in the levels of operating assets and liabilities, partially offset by $20.0 million of non-cash expenses.

Net cash used in operating activities for the year ended December 31, 2023 was approximately $23.8 million, which includes cash used to fund a net loss of $27.3 million, increased by $1.5 million of net cash used by changes in the levels of operating assets and liabilities, partially offset by $4.9 million of non-cash expenses.

Net cash used in investing activities for the year ended December 31, 2024 was approximately $0.2 million, which was primarily related to the purchase of property and equipment.

Net cash used in investing activities for the year ended December 31, 2023 was approximately $4.0 million, which includes $2.9 million attributable to purchases of property and equipment and $1.1 million attributable to the license agreement with Formosa.

Net cash used in investing activities for the year ended December 31, 2022 was approximately $0.9 million which was attributable to purchases of property and equipment.

Net cash provided by financing activities for the year ended December 31, 2023 totaled approximately $19.8 million, which was primarily attributable to $10.9 million of net proceeds from the sale of common stock and warrants from a registered direct offering, $4.6 million of net proceeds from the sale of common stock and warrants in our at-the-market offering pursuant to the Sales Agreement with SVB Securities LLC and $4.9 million of net proceeds from the credit facility with Avenue, offset by $0.6 million from the repayment of notes payable.

Net cash provided by financing activities for the year ended December 31, 2022 totaled approximately $21.5 million, which was primarily attributable to $14.9 million of net proceeds from the sale of common stock and warrants from a registered direct offering, $5.3 million of net proceeds from the sale of common stock and warrants in our at-the-market offering pursuant to the Sales Agreement with SVB Securities LLC, or SVB Securities (formerly known as SVB Leerink LLC), and $9.5 million of net proceeds from the credit facility with Avenue, offset by $8.2 million from the repayment of notes payable.

Net cash provided by financing activities for the year ended December 31, 2024 totaled approximately $17.6 million, which was primarily attributable to $17.0 million of net proceeds from the sale of common stock and warrants in equity offerings and, $6.1 million of net proceeds from the sale of common stock in our “at-the-market” offering, partially offset by $5.5 million from the repayment of notes payable.

Net cash provided by financing activities for the year ended December 31, 2023 totaled approximately $19.8 million, which was primarily attributable to $10.9 million of net proceeds from the sale of common stock and warrants from an equity offering, $4.6 million of net proceeds from the sale of common stock in our at-the-market offering and $4.9 million of net proceeds from the credit facility with Avenue, partially offset by $0.6 million from the repayment of notes payable.

Contractual Obligations and Commitments

During the next twelve months we have commitments to pay (a) $3.7 million to settle our December 31, 2023 accounts payable, accrued expenses and other current liabilities, (b) $0.5 million relating to our non-cancelable operating lease commitments;

and (d) $5.8 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 $1.3 million relating to our non-cancelable operating lease commitments, and $9.8 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) $5.5 million to settle our December 31, 2024 accounts payable, accrued expenses and other current liabilities, (b) $0.6 million relating to our non-cancelable operating lease commitments, and (c) $10.7 million of gross payments due under our notes payable and convertible notes payable (if not previously converted).

After the next twelve months we have commitments to pay (a) $0.7 million relating to our non-cancelable operating lease commitments.

Avenue Loan and Security Agreement

As presented in Note 7 – Notes Payable and Convertible Notes Payable, on November 22, 2022, we entered into the Loan and Security Agreement with Avenue, for an aggregate principal amount of up to $15,000,000.

The initial tranche of the Loan and Security Agreement was $10,000,000.

Up to $5,000,000 of the principal amount outstanding may be converted at the option of the Lender into shares of our common stock at a conversion price of $2.148 per share, subject to typical anti-dilution adjustments.

On May 22, 2023, pursuant to the Loan and Security Agreement, we received an additional tranche of non-convertible debt funding in the amount of $5,000,000.

As discussed in Note 8 – Notes Payable and Convertible Notes Payable, on November 22, 2022, we entered into the Loan and Security Agreement with Avenue, for an aggregate principal amount of up to $15,000,000.

The initial tranche of the Loan and Security

Agreement was $10,000,000.

On May 22, 2023, pursuant to the Loan and Security Agreement, we received an additional tranche of debt funding in the amount of $5,000,000.

The Avenue Loan bears interest at an annual rate equal to the greater of (A) 7.0% and (B) the prime rate as reported in The Wall Street Journal plus 4.45%.

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We must also make a final payment equal to 4.25% of the initial and additional tranches, amounting to a premium of $637,500 on the aggregate borrowing.

If we prepay the Avenue loan, it will be required to pay a prepayment fee of 2% if the Avenue loan is prepaid during the second year and 1% if the Avenue loan is repaid during the third year.

If we prepay the Avenue Loan, we will be required to pay a prepayment fee of 2% if the Avenue Loan is prepaid during the second year and 1% if the Avenue Loan is repaid during the third year.

On November 22, 2024, we entered into an amendment of the Avenue Loan whereby the Lender agreed to defer principal and interest payments on the amounts outstanding until March 2025.

On February 21, 2025, we entered into a second amendment of the Avenue Loan whereby the Lender agreed to defer principal and interest payments on amounts outstanding until the end of September 2025.

Deferred interest will accrue on the outstanding principal amount at the interest rate stated in the original Avenue Loan.

Pursuant to the amendment, up to $10,000,000 of the principal amount outstanding may be converted at the option of the Lender into shares of our common stock at a conversion price of $1.68 per share, subject to typical anti - dilution adjustments

The Avenue Loan requires us to make and maintain representations and warranties and other agreements that are customary in Loan agreements of this type.

The Avenue Loan is secured by all of our assets globally, including intellectual property.

The Avenue loan also contains customary events of default, including non-payment of principal or interest, violations of covenants, bankruptcy and

material judgments.

The Avenue Loan also contains customary events of default, including non-payment of principal or interest, violations of covenants, bankruptcy and material judgments.

Upon the occurrence of an event of default, all interest and principal will be accelerated and immediately become due and payable.

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We expect to continue to incur cash outflows from operations.

We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will eventually need to generate significant product revenues to achieve profitability.

These circumstances raise substantial doubt about our ability to continue as a going concern for at least one year from the date that these financial statements are issued.

Implementation of our plans and our ability to continue as a going concern will depend upon our ability to generate sufficient recurring revenues or our ability to raise further capital, through the sale of additional equity or debt securities or otherwise, to support our future operations.

Implementation of our plans and our ability to continue as a going concern will depend upon our ability to generate sufficient recurring revenues, ability to raise further capital, through the sale of additional equity or debt securities or the completion of a transaction consistent with the strategic alternatives that we are exploring or otherwise, to support our future operations.

Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures.

Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.

If we are unable to generate sufficient recurring revenues or secure additional capital, we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our cash.

If we are unable to generate sufficient recurring revenues, secure additional capital, or the completion of a transaction consistent with the strategic alternatives that we are exploring.

we may be required to curtail our research and development initiatives, take additional measures to reduce costs in order to conserve our cash or file for bankruptcy.

Risks and Uncertainties

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

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.

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Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S.

We prepare our financial statements in accordance with U.S.

generally accepted accounting principles, 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.

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

Critical Accounting Policies

The following is not intended to be a comprehensive list of all of our accounting policies or estimates.

Our accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies, in our financial statements included at the end of this Annual Report.

The following represent our most critical accounting policies:

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S.

GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and the amounts disclosed in the related notes to the financial statements.

We base our estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances.

The amounts of assets and liabilities reported in our balance sheets and the amounts of expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, fair value calculations for equity securities, establishment of valuation allowances for deferred tax assets, revenue recognition, the recoverability and useful lives of long-lived assets, the realization of inventories and deferred clinical supply costs, the recovery of deferred costs and the deferral of revenues.

Certain of our estimates could be affected by external conditions, including those unique to us and general economic conditions.

It is reasonably possible that actual results could differ from those estimates.

Impairment of Long-lived Assets

We review for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable.

An impairment would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount.

Stock-Based Compensation

We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award.

The fair value of the award is measured on the grant date and the fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Upon the exercise of an option, the Company issues new shares of common stock out of the shares reserved for issuance under its equity plans.

Operating Leases

We adopted the Accounting Standards Update, or ASU 2016-02,“Leases (Topic 842)” as of December 31, 2022, effective January 1, 2022.

We lease our facilities under non-cancellable operating leases.

We evaluate the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognizes the ROU asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term.

We recognize a liability to make lease payments, the “lease liability”, and an asset representing the right to use the underlying asset during the lease term, the “right-of-use asset”.

The lease liability is measured at the present value of the remaining lease payments, discounted at our incremental borrowing rate.

Our leases do not generally contain an implicit interest rate and therefore the we use the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments.

The right-of-use asset is measured at the amount of the lease liability adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term, any unamortized initial direct costs, and any impairment of the right-of-use-asset.

Operating lease expense consists of a single lease cost calculated so that the remaining cost of the lease is allocated over the remaining lease term on a straight-line basis, variable lease payments not included in the lease liability, and any impairment of the right-of-use asset.

Recently Issued Accounting Standards

Our recently issued accounting standards are included in Note 2 – Summary of Significant Accounting Policies of our financial statements included within this Annual Report on Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis