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Item 2. Management’s Discussion and Analysis

2025-05-19 compared with 2024-11-12 · 105 added, 181 removed, 75 unchanged (79% of the section changed)

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The following discussion and analysis of the results of operations and financial condition of Eyenovia, Inc.

(“Eyenovia,” the “Company,” “we,” “us” and “our”) as of September 30, 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.

(“Eyenovia,” the “Company,” “we,” “us” and “our”) as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 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 2024 Form 10-K, as amended by the 2024 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 the 2023 Form 10-K, 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 our Form 10-K, as filed with the SEC on April 15, 2025, as amended by our 2024 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 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.

We are an ophthalmic technology company focused on development of our Optejet® drug delivery platform as well as commercialization of advanced products in areas of unmet medical or patient/consumer needs The Optejet platform is especially useful in chronic front-of-the-eye diseases due to its ease of use, potential for improved drug safety and tolerability, and 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.

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 approximately 50%.

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

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

The lower volume also minimizes the potential for drug to enter systemic circulation, with the goal of avoiding some common side effects that are related to overdosing of the eye.

We are developing versions of the Optejet with on-board digital technology 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 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.

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.

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

MicroLine is our investigational pharmacologic treatment for presbyopia, a non-preventable, age-related hardening of the lens, which causes the gradual loss of the eye’s ability to focus on near objects and impairs near visual acuity.

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.

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.

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, expanded our launch with the hiring and onboarding of ten sales representatives through September 30, 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.

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 “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 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 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 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).

Our current commercial portfolio includes the novel ophthalmic steroid, clobetasol propionate ophthalmic suspension, 0.05%, for post-surgical pain and inflammation, and Mydcombi®, the first FDA-approved use of the Optejet technology, for mydriasis.

Presently, we are focused on submitting our Optejet user-filled device (UFD) for regulatory approval in the United States in the second half of 2025, as well as exploring strategic options to obtain the necessary resources for commercialization of our two FDA-approved products.

Betaliq Letter of Intent

On March 18, 2025, we entered into a non-binding letter of intent (the “Letter of Intent”) with Betaliq, Inc.

(“Betaliq”), a Delaware corporation, relating to a proposed business combination between Eyenovia and Betaliq.

Betaliq is a clinical stage pharmaceutical company with a therapeutic focus on Glaucoma, founded in 2018 through a collaboration with Novaliq GmbH.

The parties currently contemplate a reverse merger structure, pursuant to which (i) a newly-formed, wholly-owned subsidiary of Eyenovia would merge with and into Betaliq, with Betaliq as the surviving corporation and a wholly-owned subsidiary of Eyenovia, and (ii) Betaliq would then immediately merge with and into a second newly-formed wholly-owned subsidiary of Eyenovia (the “Second Merger Sub”), with the Second Merger Sub as the surviving corporation.

In connection with the closing of the transaction, Eyenovia expects to change its name and change its trading symbol as will be mutually agreed by Betaliq and us.

The parties are currently negotiating a business combination agreement consistent with the provisions of the Letter of Intent as well as other terms and conditions typical for transactions of this nature.

During the binding exclusivity period set forth in the Letter of Intent, which was originally scheduled to end on May 16, 2025, has been extended to June 7, 2025, and is subject to further extension, the parties have agreed not to solicit or encourage submission of, or participate in discussions or enter into any agreement regarding any other acquisition proposal.

We are excited about an opportunity to partner with Betaliq to create an advanced ophthalmic company with added industry experience, licensing relationships and wider product offerings and reach.

However, we believe that the Company’s Optejet device provides for multiple opportunities with consumers, patients, prescribers and existing as well as potential license partners.

Other Company Developments

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 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.

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

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

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

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

Our net losses were $7.9 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.

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).

On April 29, 2025, we received a notice from the Staff of the Nasdaq stating that the Company’s stockholders’ equity as reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 was below the minimum $2,500,000 required for continued listing under Listing Rule 5550(b)(1) (the “Minimum Equity Requirement”).

The Notice had no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market.

In accordance with the Nasdaq Listing Rules, the Company has 45 calendar days, or until June 13, 2025, to submit a plan to regain compliance with the Minimum Equity Requirement.

The Company intends to submit a plan to regain compliance with the Nasdaq Listing Rules.

If the plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the Notice for the Company to regain compliance, or until October 26, 2025.

If the Staff does not accept our plan, we will have the opportunity to appeal that decision to a Hearings Panel.

With the restructuring that took place during the fourth quarter of 2024 and the first three months of 2025, our net losses were reduced to $3.5 million as compared to $9.9 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had a working capital deficiency and an accumulated deficit of approximately $9.9 million and $198.8 million, respectively.

Financial Overview

Revenue and Cost of Revenue

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.

Revenue is earned from the sale of our products.

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

Sales in the first quarter of 2025 primarily consisted of clobetasol propionate.

Cost of sales consisted of the cost of the production of the products that were sold.

Research and Development Expenses

Research and development expenses are incurred in connection with the research and development of our microdose therapeutics and consist primarily of personnel-related expenses.

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

Given where we are in our life cycle, we do not separately track research and development expenses by project.

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● 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 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.

● 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.

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.

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 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 Bausch + Lomb and Formosa transactions);

and (d) interest expense incurred on our indebtedness.

Selling, 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.

Results of Operations

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

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Revenue and Cost of Revenue

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.

Revenue for the three months ended March 31, 2025 totaled $14,720, which was partially offset by cost of revenues of $48.

Revenue for the three months ended March 31, 2024 totaled $4,993, which was offset by cost of revenues of $203,027.

Research and Development Expenses

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 for the three months ended March 31, 2025 totaled $0.7 million, a decrease of $3.8 million, or 85%, as compared to $4.4 million recorded for the three months ended March 31, 2024.

Research and development expenses consisted of the following:

For the Three Months Ended September 30,

Personnel-related expenses

For the Three Months Ended

Salaries and benefits

Direct clinical and non-clinical expenses

Depreciation expense

Facilities expenses

Non-cash stock based compensation expenses

Other expenses

Supplies and materials

Other expenses

Depreciation expense

Total research and development 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 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.

The decrease in salaries and benefits was primarily due to the layoffs that occurred in the fourth quarter of 2024.

The decrease in direct clinical and non-clinical expenses was primarily due to the wind down of clinical trials and studies.

The decrease in facilities expense was primarily due to the impairment of right-of-use (ROU) assets in the fourth quarter of 2024, which lowered non-cash rent expense.

The decrease in non-cash stock-based compensation expenses was primarily due to reduced stock option awards that resulted from the layoffs in the fourth quarter of 2024.

The decrease in supplies and materials was primarily due to expenses that were incurred in 2024 that were not incurred in the first quarter of 2025.

These include (a) the expensing of Gen-1 MicroPine vials and cartridges as a result of the reacquisition of the Bausch license rights;

(b) drug formulation engineering batches;

and (c) the purchase of parts for the Gen-2 device that were used during the period in 2024.

The decrease in depreciation expense was primarily due to the full impairment of fixed assets that occurred in the fourth quarter of 2024.

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

General and administrative expenses for the three months ended March 31, 2025 totaled $2.4 million, a decrease of $1.3 million, or 35%, as compared to $3.6 million recorded for the three months ended March 31, 2024.

General and administrative expenses consisted of the following:

For the Three Months Ended March 31,

Professional fees

Salaries and benefits

Non-cash stock based compensation

Sales and marketing

Insurance expense

Travel, lodging and meals

Facilities expense

Investor relations

Director fees and expense

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

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

Revenue and Cost of Revenue

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 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 Nine Months Ended September 30,

Personnel-related expenses

Direct clinical and non-clinical 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 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 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

Non-cash stock based compensation

Director fees and expense

Facilities expense

Sales and marketing

Insurance expense

Travel, lodging and meals

Facilities expense

FDA PDUFA fees

Investor relations

Director fees and expense

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 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.

Total general and administrative expenses

The increase in professional fees was primarily due to the increased legal fees this quarter related to the Reverse Split and costs associated with potential strategic transactions.

The decrease in salaries and benefits, and the decrease in non-cash stock-based compensation was primarily due to the layoffs that occurred in the fourth quarter of 2024.

The decrease in facilities expense was primarily due to the impairment of ROU assets in the fourth quarter of 2024, which lowered non-cash rent expense.

The decrease in sales and marketing, and travel, lodging and meals was primarily due to austerity measures taken related to commercial operations.

Reacquisition of License Rights

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.

Reacquisition of license rights for the three months ended March 31, 2025 was $0, as compared to $2.0 million for the three months ended March 31, 2024.

The $2.0 million in 2024 was the amount paid to Bausch + Lomb in connection with the reacquisition of the license for MicroPine and to take control of the CHAPERONE study, which we are recording as an operating expense.

Other Income (Expense)

Other income (expense) for the three months ended March 31, 2025 totaled approximately $0.5 million of net other expense, a decrease of $0.2 million, as compared to $0.7 million of net other expense for the three months ended March 31, 2024.

Net other expense for the three months ended March 31, 2025 primarily consisted of approximately $0.6 million of interest expense and amortization of debt discounts related to the Avenue loan, partially offset by a $0.1 million gain on extinguishment and nominal interest income from cash accounts.

Net other expense for the three months ended March 31, 2024 primarily consisted of approximately $0.7 million of interest expense and amortization of debt discounts related to the Avenue loan and $0.1 million related to the charge for defective clinical supplies, partially offset by interest income 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

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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 $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.

Our net losses were $3.5 million and $10.9 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had an accumulated deficit of approximately $198.8 million.

As of March 31, 2025, we had a cash and cash equivalents balance of $3.9 million, working capital deficit of $9.9 million and stockholders’ deficiency of $9.7 million.

As of March 31, 2025 and December 31, 2024, we had $10.8 million and $10.7 million, respectively, of debt outstanding.

These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date that the financial statements included elsewhere in this Quarterly Report on Form 10-Q were issued.

Our financial statements do not include adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

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

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 generate sufficient recurring revenue, secure additional capital or complete a strategic transaction, we may be required to curtail our research and development initiatives, take additional measures to reduce costs in order to conserve cash or file for bankruptcy.

During the three months ended March 31, 2025 and 2024, our sources and uses of cash were as follows:

Net cash used in operating activities for the three months ended March 31, 2025 was approximately $4.4 million, which includes cash used to fund a net loss of $3.5 million, reduced by $0.8 million of non-cash expenses, plus $1.7 million of net cash used by changes in the levels of operating assets and liabilities.

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

Net cash used in investing activities for the three months ended March 31, 2025 was $0.

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

Net cash provided by financing activities for the three months ended March 31, 2025 totaled approximately $6.3 million, which was primarily attributable to $5.7 million of net proceeds from the sale of common stock in our “at-the-market” offering and $0.9 million of net cash proceeds from the inducement exercise of stock warrants, partially offset by $0.4 million from the repayment of notes payable and the payment of issuance costs related to debt modification.

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

Contractual Obligations and Commitments

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).

During the next twelve months we have commitments to pay (a) $5.1 million to settle our March 31, 2025 accounts payable, accrued expenses and other current liabilities, and (b) $10.8 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 an additional $0.6 million relating to our non-cancelable operating lease commitments.

Risks and Uncertainties

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

A potential negative effect on our business is the “Tariff War”, especially with China, Canada and Mexico.

The increased tariffs the U.S.

has imposed on products from these countries could have an adverse effect on our supply chain, potentially causing financial difficulty for our direct or indirect customers and reduced demand for our products.

A continuation of these tariffs could have adverse changes in international trade policies and relations.

Tariffs could increase the cost of our products and the components that go into making them.

These increased costs could adversely impact the gross margin that we earn on our products.

Tariffs could also make our products more expensive for customers, which could make our products less competitive and reduce consumer demand.

Changing our operations in accordance with new or changed trade restrictions can be expensive, time-consuming and disruptive to our operations.

We cannot predict how the events described above will evolve.

If the events continue for a significant period of time or expand to other countries, and depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in our Annual Report on Form 10-K which was filed with the SEC on April 15, 2025, including, but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending;

disruptions to our or our business partners’ global technology infrastructure, adverse changes in international trade policies and relations;

claims, litigation and regulatory enforcement;

our ability to implement and execute our business strategy;

our exposure to foreign currency fluctuations;

reputational risk;

and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The continuing worldwide implications of the war between Russia and Ukraine and the conflict in the Middle East and between India and Pakistan 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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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis