0001410578-22-003306.txt : 20221114 0001410578-22-003306.hdr.sgml : 20221114 20221114120537 ACCESSION NUMBER: 0001410578-22-003306 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 61 CONFORMED PERIOD OF REPORT: 20220930 FILED AS OF DATE: 20221114 DATE AS OF CHANGE: 20221114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EYENOVIA, INC. CENTRAL INDEX KEY: 0001682639 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 471178401 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38365 FILM NUMBER: 221382616 BUSINESS ADDRESS: STREET 1: 295 MADISON AVENUE, STREET 2: SUITE 2400 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 813-766-9539 MAIL ADDRESS: STREET 1: 295 MADISON AVENUE, STREET 2: SUITE 2400 CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 eyen-20220930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2022

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                              to                                

COMMISSION FILE NUMBER: 001-38365

EYENOVIA, INC.

(Exact name of Registrant as Specified in Its Charter)

DELAWARE

    

47-1178401

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

295 Madison Avenue, Suite 2400
NEW YORK, NY

 

10017

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (833) 393-6684

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, $0.0001 Par Value

 

EYEN

 

Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No 

The number of outstanding shares of the registrant’s common stock was 36,112,987 as of November 10, 2022.

EYENOVIA, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

2

Condensed Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021

2

Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

3

Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 

4

Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

5

Notes to Unaudited Condensed Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

18

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

24

Item 4. Controls and Procedures.

24

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

26

Item 1A. Risk Factors.

26

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

26

Item 3. Defaults Upon Senior Securities.

26

Item 4. Mine Safety Disclosures.

26

Item 5. Other Information.

26

Item 6. Exhibits.

27

SIGNATURES

28

1

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

EYENOVIA, INC.

Condensed Balance Sheets

    

September 30, 

    

December 31, 

 

2022

 

2021

 

(unaudited)

Assets

 

  

 

  

 

  

 

  

Current Assets:

 

  

 

  

Cash and cash equivalents

$

17,398,605

$

19,461,850

Restricted cash

7,875,000

7,875,000

Deferred clinical supply costs

1,871,096

License fee and expense reimbursements receivable

809,430

1,805,065

Prepaid expenses and other current assets

 

1,463,020

 

721,438

 

 

Total Current Assets

 

29,417,151

 

29,863,353

Property and equipment, net

 

1,342,657

 

1,271,225

Security deposits

 

200,153

 

132,539

Equipment deposits

 

445,530

 

391,941

Total Assets

$

31,405,491

$

31,659,058

 

 

  

Liabilities and Stockholders’ Equity

 

 

  

 

 

  

Current Liabilities:

 

 

  

Accounts payable

$

1,104,959

$

1,614,104

Accrued compensation

 

1,268,009

 

1,543,618

Accrued expenses and other current liabilities

 

1,384,803

 

845,719

Deferred rent - current portion

28,999

18,685

Notes payable

7,229,013

7,150,368

Total Current Liabilities

 

11,015,783

 

11,172,494

Deferred rent - non-current portion

 

60,540

 

19,949

 

 

Total Liabilities

 

11,076,323

 

11,192,443

 

  

 

  

Commitments and contingencies (Note 7)

 

  

 

  

 

  

 

  

Stockholders’ Equity:

 

  

 

  

Preferred stock, $0.0001 par value, 6,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021

 

 

Common stock, $0.0001 par value, 90,000,000 shares authorized; 35,525,689 and 28,426,616 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

3,553

 

2,844

Additional paid-in capital

 

132,432,682

 

110,683,077

Accumulated deficit

 

(112,107,067)

 

(90,219,306)

Total Stockholders’ Equity

20,329,168

20,466,615

Total Liabilities and Stockholders’ Equity

$

31,405,491

$

31,659,058

The accompanying notes are an integral part of these condensed financial statements.

2

EYENOVIA, INC.

Condensed Statements of Operations

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Operating Income

Revenue

$

$

$

$

4,000,000

Cost of revenue

(1,600,000)

Gross Profit

2,400,000

Operating Expenses:

 

 

 

 

Research and development

3,876,876

3,552,068

11,176,326

11,559,364

General and administrative

 

3,353,352

 

2,372,999

 

10,362,907

 

6,914,481

Total Operating Expenses

 

7,230,228

 

5,925,067

 

21,539,233

 

18,473,845

 

 

 

 

Loss From Operations

 

(7,230,228)

 

(5,925,067)

 

(21,539,233)

 

(16,073,845)

 

 

 

 

Other Income (Expense):

 

 

 

Extinguishment of PPP 7(a) loan

463,353

463,353

Other income, net

70,277

11,728

96,580

48,880

Interest expense

(177,138)

 

(119,212)

(475,811)

(202,407)

Interest income

 

28,093

 

600

 

30,703

 

2,354

 

 

 

 

Net Loss

$

(7,308,996)

$

(5,568,598)

$

(21,887,761)

$

(15,761,665)

 

 

 

 

  

Net Loss Per Share - Basic and Diluted

$

(0.21)

$

(0.21)

$

(0.67)

$

(0.61)

 

  

 

  

 

  

 

  

Weighted Average Number of Common Shares Outstanding - Basic and Diluted

 

34,631,774

 

26,053,532

 

32,778,551

 

25,773,098

The accompanying notes are an integral part of these condensed financial statements.

3

EYENOVIA, INC.

Condensed Statements of Changes in Stockholders’ Equity

(unaudited)

For the Three and Nine Months Ended September 30, 2022

Additional

Total

Common Stock

Paid-In

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance - January 1, 2022

 

28,426,616

$

2,844

$

110,683,077

$

(90,219,306)

$

20,466,615

Issuance of common stock and warrants in registered direct offering [1]

 

3,000,000

 

300

 

14,897,608

 

 

14,897,908

Issuance of common stock in At the Market offering [2]

 

252,449

 

25

 

860,340

 

 

860,365

Stock-based compensation

 

 

 

908,987

 

 

908,987

Issuance of common stock related to vested restricted stock units

 

19,359

 

2

 

(2)

 

 

Net loss

(7,339,665)

(7,339,665)

Balance - March 31, 2022

31,698,424

$

3,171

$

127,350,010

$

(97,558,971)

$

29,794,210

Exercise of stock warrants

1,870,130

187

18,514

18,701

Stock-based compensation

1,036,926

1,036,926

Issuance of common stock related to vested restricted stock units

54,499

5

(5)

Net loss

(7,239,100)

(7,239,100)

Balance - June 30, 2022

33,623,053

$

3,363

$

128,405,445

$

(104,798,071)

$

23,610,737

Issuance of common stock in At the Market offering [3]

1,876,314

188

3,098,506

3,098,694

Stock-based compensation

928,733

928,733

Issuance of common stock related to vested restricted stock units

26,322

2

(2)

Net loss

(7,308,996)

(7,308,996)

Balance - September 30, 2022

 

35,525,689

$

3,553

$

132,432,682

$

(112,107,067)

$

20,329,168

[1]

Includes gross proceeds of $14,981,299 less total issuance costs of $83,391.

[2]

Includes gross proceeds of $886,974, less total issuance costs of $26,609.

[3]

Includes gross proceeds of $3,194,530, less total issuance costs of $95,836.

For the Three and Nine Months Ended September 30, 2021

Additional

Total

Common Stock

Paid-In

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance - January 1, 2021

24,978,585

$

2,498

$

92,742,306

$

(77,440,919)

$

15,303,885

Exercise of stock warrants

644,992

65

1,530,925

1,530,990

Stock-based compensation

656,913

656,913

Net loss

(5,351,667)

(5,351,667)

Balance - March 31, 2021

25,623,577

$

2,563

$

94,930,144

$

(82,792,586)

$

12,140,121

Exercise of stock warrants

232,022

23

572,978

573,001

Exercise of stock options

91,047

9

130,081

130,090

Issuance of SVB warrants [1]

351,390

351,390

Stock-based compensation

637,355

637,355

Net loss

(4,841,400)

(4,841,400)

Balance - June 30, 2021

25,946,646

$

2,595

$

96,621,948

$

(87,633,986)

$

8,990,557

Exercise of stock options

16,539

2

46,710

46,712

Stock-based compensation

777,467

777,467

Net loss

(5,568,598)

(5,568,598)

Balance – September 30, 2021

25,963,185

$

2,597

$

97,446,125

$

(93,202,584)

$

4,246,138

[1]

Allocated fair value of warrants of $354,539, less allocated issuance costs of $3,149.

The accompanying notes are an integral part of these condensed financial statements.

4

EYENOVIA, INC.

Condensed Statements of Cash Flows

(unaudited)

For the Nine Months Ended

September 30, 

    

2022

    

2021

Cash Flows From Operating Activities

 

  

 

  

Net loss

$

(21,887,761)

$

(15,761,665)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Stock-based compensation

2,874,646

2,071,735

Depreciation of property and equipment

 

228,898

 

148,245

Amortization of debt discount

78,645

41,944

Write-off of property and equipment

209,040

Extinguishment of PPP 7(a) Loan

 

 

(463,353)

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other current assets

 

(66,250)

 

35,549

License fee and expense reimbursements receivables

995,635

2,005,859

Deferred clinical supply costs

(1,871,096)

Deferred license costs

1,600,000

Security deposits

(67,614)

Accounts payable

 

(509,145)

 

223,068

Accrued compensation

 

(275,609)

 

33,564

Accrued expenses and other current liabilities

 

539,084

 

(928,356)

Deferred license fee

(4,000,000)

Deferred rent

 

50,905

 

(4,397)

Net Cash Used In Operating Activities

 

(19,700,622)

 

(14,997,807)

 

 

Cash Flows From Investing Activities

Purchases of property and equipment

(509,370)

(1,165,066)

Vendor deposits for property and equipment

(53,589)

Net Cash Used In Investing Activities

(562,959)

(1,165,066)

Cash Flows From Financing Activities

 

 

Proceeds from sale of common stock and warrants in registered direct offering [1]

 

14,981,299

 

Net issuance of common stock in At the Market Offering [2]

3,959,059

Proceeds from exercise of stock warrants

18,701

2,103,991

Proceeds from SVB loan

7,500,000

Repayments of notes payable

(675,332)

(547,259)

Payment of offering issuance costs

(83,391)

Payment of loan issuance costs

(66,618)

Proceeds from exercise of stock options

176,802

Net Cash Provided By Financing Activities

 

18,200,336

 

9,166,916

Net Decrease in Cash and Cash Equivalents and Restricted Cash

 

(2,063,245)

 

(6,995,957)

Cash, cash equivalents and restricted cash - Beginning of Period

 

27,336,850

 

28,371,828

Cash, cash equivalents and restricted cash - End of Period

$

25,273,605

$

21,375,871

[1]

Includes gross proceeds of $14,981,299, of which $5,741,299 is pre-funded warrants.

[2]

Includes gross proceeds of $4,081,504, less total issuance costs of $122,445.

5

Cash, cash equivalents and restricted cash consisted of the following:

    

    

Cash and cash equivalents

$

17,398,605

$

13,500,871

Restricted cash

7,875,000

7,875,000

$

25,273,605

$

21,375,871

Supplemental Disclosure of Cash Flow Information:

    

  

    

  

Cash paid during the periods for:

Interest

$

315,550

$

131,839

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Purchase of insurance premium financed by note payable

$

675,332

$

705,360

Issuance of SVB stock warrants

$

$

351,390

Issuance of common stock related to vested restricted stock units

$

9

$

The accompanying notes are an integral part of these condensed financial statements.

6

Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 – Business Organization, Nature of Operations and Basis of Presentation

Eyenovia, Inc. (“Eyenovia” or the “Company”) is a pre-commercial ophthalmic technology company developing the Optejet® delivery system for use both in combination with its own drug-device therapeutic programs as well as out-licensing for additional indications. The Company aims to achieve precision in ophthalmic drug delivery of novel and existing ophthalmic pharmaceutical agents. The precise delivery of a low-volume columnar spray by the Optejet® device also minimizes contamination with a non-protruding nozzle and self-closing shutter. The Company believes that this technology could ultimately replace eye droppers by advancing drug delivery beyond the limitations of patient coordination, drug overexposure, gravity, contamination potential, and discomfort towards a more precise, comfortable, and successful drug administration for improved patient care. The ergonomic and functional design of the Optejet® delivers microdroplets horizontally faster than the blink reflex to minimize instillation discomfort and overflow spillage, providing a more comfortable experience. In the clinic, the Optejet® has demonstrated that its targeted delivery achieves a significantly high rate of successful administration of 98% upon first attempt compared to the established rate reported with traditional eye drops of ~ 50%. The diagnostics and therapeutics in the Company’s pipeline have been tested in randomized controlled trials and demonstrated significant results in improving the benefit to risk profile for drug delivery. For example, the Company’s deliberately designed technology provides a 75% reduction in ocular drug and preservative exposure to significantly improve the therapeutic index in drugs used for presbyopia, mydriasis and intraocular pressure (“IOP”) lowering through eight clinical trials. Eyedrops expose the ocular surface to approximately 300% more medication and preservatives that can lead to unintended effects and induce collateral tissue damage. Drug delivery via the Optejet device reduces ocular exposure to preservatives comparable to that of non-preserved formulations demonstrating potentially less surface damage from ocular stress. To address unmet medical needs, the Company is developing the next generation of smart ophthalmic therapeutics to target new indications or new combinations where there are currently no or few drug therapies approved by the U.S. Food and Drug Administration (“FDA”). The Company’s investigational products are classified by the FDA as drug-device combination products with drug primary mode of action, meaning that the Center for Drug Evaluation and Research (“CDER”) is designated as the lead center with primary jurisdictional oversight. Accordingly, the product candidates are submitted to the FDA CDER for premarket review and approval under new drug applications (“NDAs”).

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed financial statements of the Company as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021. The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the operating results for the full year ending December 31, 2022 or any other period. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related disclosures of the Company as of December 31, 2021 and for the year then ended, which were included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2022.

Note 2 – Summary of Significant Accounting Policies

Since the date of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, there have been no material changes to the Company’s significant accounting policies.

Liquidity and Going Concern

As of September 30, 2022, the Company had unrestricted cash of approximately $17.4 million and an accumulated deficit of approximately $112.1 million. For the nine months ended September 30, 2022 and 2021, the Company incurred net losses of approximately $21.9 million and $15.8 million, respectively, and used cash in operations of approximately $19.7 million and $15.0 million, respectively. Subsequent to September 30, 2022, the Company received approximately $1.3 million in net proceeds from the sale of 587,298 shares of common stock pursuant to the Company’s At-the-Market Offering program with SVB Leerink. Also subsequent to September 30, 2022, the Company used its $7.9 million of restricted cash and $0.1 million of unrestricted cash in order to repay the Loan and Security Agreement, dated May 7, 2021 (the “SVB Loan”) with Silicon Valley Bank (“SVB”), including $7.5 million of principal, a final payment of $0.4 million and a prepayment fee of $0.1 million.

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Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The Company does not have recurring revenue and has not yet achieved profitability. The Company expects to continue to incur cash outflows from operations. The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, it will eventually need to generate significant product revenues to achieve profitability. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that these financial statements are issued. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to commercialize its products and raise further capital, through licensing transactions, the sale of additional equity or debt securities or otherwise, to support its future operations.

The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its 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 its product and service offerings. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to reduce general and administrative and sales and marketing costs in order to conserve its cash.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents in the financial statements.

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain executed agreements are recorded as Restricted Cash on the balance sheets, such as the collateralized money market account pursuant to the SVB Loan, as amended on September 29, 2021 by the First Amendment to the Loan and Security Agreement (the “First Amendment”). See Note 6 - Notes Payable. In connection with the First Amendment, the Company pledged to establish and maintain a collateralized money market account in the amount of $7,875,000. Subsequent to September 30, 2022, the Company used this entire collateralized money market account plus $0.1 million of unrestricted cash in order to repay the SVB Loan, including $7.5 million of principal, a final payment of $0.4 million and a prepayment fee of $0.1 million.

The Company has cash deposits in a financial institution which, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. As of September 30, 2022 and December 31, 2021, the Company had cash balances in excess of FDIC insurance limits of $24,773,605 and $26,836,850, respectively.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period plus fully vested shares that are subject to issuance for little or no monetary consideration. Diluted earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock.

The following securities are excluded from the calculation of weighted average diluted common shares because their inclusion would have been anti-dilutive:

September 30, 

    

2022

    

2021

Options

 

5,484,687

 

3,410,540

Warrants

 

6,087,845

 

2,095,993

Restricted stock units

 

172,800

 

105,306

Total potentially dilutive shares

 

11,745,332

 

5,611,839

8

Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Revenue Recognition

The Company’s revenues are generated primarily through research, development and commercialization agreements. The terms of such agreements may contain multiple promised goods and services, which may include (i) licenses to its intellectual property, and (ii) in certain cases, payment in connection with the manufacturing and delivery of clinical supply materials. Payments to us under these arrangements typically include one or more of the following: non-refundable, upfront license fees; milestone payments; payments for clinical product supply, and royalties on future product sales.

The Company analyzes its arrangements to assess whether such arrangements involve joint operating activities. For collaboration arrangements that are deemed to be within the scope of Accounting Standards Codification (“ASC”) Topic 808, “Collaborative Arrangements” (“ASC 808”), the Company allocates the contract consideration between such joint operating activities and elements that are reflective of a vendor-customer relationship and, therefore, within the scope of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company’s policy is to recognize amounts allocated to joint operating activities as a reduction in research and development expense.

Under ASC 606, we recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

Step 1: Identify the contract with the customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract; and
Step 5: Recognize revenue when the company satisfies a performance obligation.

The Company must make significant judgments in its revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation. In addition, arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered discretionary purchase options. The Company assesses whether these options provide a material right to the customer and if so, they are considered performance obligations.

For upfront license fees, the Company must consider how many performance obligations are in the contract and, if more than one, how to allocate the fee to those performance obligations upon satisfaction of the performance obligation(s). Milestone payments represent variable consideration that will be recognized when the performance obligation is achieved. Sales-based royalty payments derived from usage of intellectual property are recognized when those sales occur.

During 2020, the Company entered into a license agreement (the “Arctic Vision License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic Vision”) and a license agreement (the “Bausch License Agreement”) with Bausch + Lomb, Inc. (“Bausch + Lomb”). Each license has three revenue components:

1)an upfront license fee;
2)milestone payments and
3)royalty payments.

Deferred License Fee

The Company enters into license agreements which provide for the receipt of non-refundable, upfront licensing payments. These payments are recorded as deferred license fees and will be earned and recognized as revenue upon the satisfaction of performance obligations. See Note 7 – Commitments and Contingencies for additional details.

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Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Clinical Supply Arrangements

Bausch + Lomb and Arctic Vision have contracted with the Company to manufacture and supply them with the appropriate drug-device combination products to conduct their clinical trials on a cost plus 10% mark-up basis. Our licensing agreements with Bausch + Lomb and Arctic Vision represent collaborative arrangements and they are not a customer with respect to the clinical supply arrangements. The Company’s policy is to (a) defer the materials and manufacturing costs in order to properly match them up against the income from the clinical supply arrangements; and (b) to report the net income from the clinical supply arrangements as other income.

Reclassifications

Certain prior period balances have been reclassified in order to conform to current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

Recently Adopted Accounting Standards

On May 3, 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.” This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. The Company adopted ASU 2021-04 effective January 1, 2022. This standard did not have a material impact on the Company’s financial position, results of operations or cash flow.

Soon To Be Adopted Accounting Standards

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02, as amended, is now effective for emerging growth companies for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company plans to adopt ASU 2016-02 on December 31, 2022 and expects that the adoption of this ASU will have a material impact on the Company’s financial statements, primarily as a result of recording right-of-use assets and lease liabilities for its operating leases in the approximate amounts of $1.3 million and $1.4 million, respectively.

Note 3 – Prepaid Expenses and Other Current Assets

As of September 30, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following:

    

September 30, 

    

December 31, 

 

2022

 

2021

Payroll tax receivable

621,063

343,785

Prepaid insurance expenses

455,150

171,370

Prepaid general and administrative expenses

 

185,845

 

71,375

Prepaid conference expenses

100,803

12,586

Prepaid patent expenses

49,183

32,797

Other

 

32,226

 

4,525

Prepaid security deposits

18,750

18,750

Prepaid board of directors fees

66,250

Total prepaid expenses and other current assets

$

1,463,020

$

721,438

10

Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 4 – Accrued Compensation

As of September 30, 2022 and December 31, 2021, accrued compensation consisted of the following:

    

September 30, 

    

December 31, 

 

2022

 

2021

Accrued bonus expenses

$

971,159

$

1,245,795

Accrued payroll expenses

 

296,850

 

297,823

Total accrued compensation

$

1,268,009

$

1,543,618

Note 5 – Accrued Expenses and Other Current Liabilities

As of September 30, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:

    

September 30, 

    

December 31, 

 

2022

 

2021

Accrued research and development expenses

$

711,710

$

436,840

Accrued consulting and professional services

386,712

250,000

Accrued interest

152,969

94,792

Credit card payable

 

58,799

 

20,000

Accrued franchise tax

 

39,300

 

1,680

Other

 

29,647

 

42,407

Accrued travel and entertainment expenses

5,666

Total accrued expenses and other current liabilities

$

1,384,803

$

845,719

Note 6 – Notes Payable

As of September 30, 2022 and December 31, 2021, notes payable consisted of the following:

September 30, 2022

    

December 31, 2021

    

Notes Payable

    

Debt Discount

    

Net

    

Notes Payable

    

Debt Discount

    

Net

Silicon Valley Bank loan

$

7,500,000

$

(270,987)

$

7,229,013

$

7,500,000

$

(349,632)

$

7,150,368

On February 24, 2022, the Company issued a note payable for the purchase of directors and officers liability insurance policy (the “D&O Loan”). The D&O Loan had an aggregate principal balance of $675,332 and was payable in six monthly payments consisting of principal and interest amounting to $113,628 per payment. The note accrued interest at a rate of 3.26% per year and matured on August 24, 2022. During the nine months ended September 30, 2022, the Company repaid the full principal balance of $675,332 on the D&O Loan.

During the three months ended September 30, 2022, the Company recorded interest expense of $177,138, of which $176,215 is related to the SVB Loan (including amortization of debt discount of $26,214) and $923 is related to the D&O Loan. During the nine months ended September 30, 2022, the Company recorded interest expense of $475,811, of which $469,376 is related to the SVB Loan (including amortization of debt discount of $78,645) and $6,435 is related to the D&O Loan.

SVB Loan Amendment

On May 6, 2022, the Company and SVB agreed to amend the terms of the SVB Loan dated May 7, 2021. Pursuant to the amendment, the repayment term of the SVB Loan is reduced to 24 consecutive calendar months and the date that the first payment is due by the Company is extended to June 1, 2023. The amendment did not result in a 10% change in the net present value of the SVB Loan cash flows and, accordingly, the amendment was accounted for as a modification (a continuation of the original loan).

11

Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The SVB Loan was repaid in full in November 2022. See Note 10 – Subsequent Events.

Note 7 – Commitments and Contingencies

Employment Agreements

On February 14, 2022, the Compensation Committee of the Board of Directors of the Company (the “Board”) approved amendments to the Employment Agreements with its executive officers (the “Employment Agreement Addendums”). Each of the Employment Agreement Addendums provides that if the executive’s employment is terminated by the Company without “Cause” or the executive suffers an “Involuntary Termination” (each as defined in the employment agreements), provided that the executive has signed a full release of all claims, the executive will be entitled to receive: (i) severance pay equal to twelve months of his or her then-current base salary (estimated at approximately $1,517,000 in the aggregate as of the date of the Employment Agreement Addendums), and (ii) a reimbursement for health insurance benefits under COBRA for the executive and his or her spouse and dependents for a period of twelve months or until the executive becomes eligible for comparable insurance benefits from another employer, whichever is earlier.

Transition of Chief Executive Officer

On July 27, 2022, the Company announced the appointment of Michael Rowe as its new Chief Executive Officer, effective August 1, 2022, with Dr. Tsontcho Ianchulev becoming Executive Chairman of the Board. Mr. Rowe is also serving as a member of the Board.

On July 26, 2022, the Company entered into an Employment Agreement (the “Employment Agreement”) with Mr. Rowe under which he will serve as Chief Executive Officer of the Company. Under the terms of the Employment Agreement, Mr. Rowe will receive an annual salary of $575,000. He is eligible to receive a cash bonus of up to 60% of his base salary. Additionally, Mr. Rowe received an option to purchase 440,000 shares of the Company’s common stock, pursuant to the Company’s Amended and Restated 2018 Omnibus Stock Incentive Plan, as amended. Mr. Rowe will also continue to participate in any and all benefit plans, from time to time, in effect for senior management, along with vacation, sick and holiday pay in accordance with the Company’s policies established and in effect from time to time. As a result of the change of salary, the aggregate potential severance pay for the executive officers of the Company is approximately $1,004,000.

The Company also entered into an agreement with Dr. Ianchulev (the “Executive Chairman Agreement”) pursuant to which Dr. Ianchulev will provide medical expertise and consultation related to the Company’s research and development programs, and such other matters as reasonably requested by the Company for an initial period of one year. In consideration for Dr. Ianchulev’s services, the Company has agreed to provide Dr. Ianchulev with a $5,000 monthly retainer throughout the term of the agreement, in addition to the compensation payable to all non-employee members of the Board.

Operating Leases

The Company leased 953 square feet of office space in Reno, Nevada for research and development activities from a company owned by the Company’s former Vice President of Research and Development. The lease, as amended, expired on September 14, 2022 and provided for lease payments of $5,404 per month and a security deposit in the amount of $5,404. The Company has remained in the premises on a month-to-month basis at the same rental rate. Since the inception of the lease, the Company has made $112,600 of leasehold improvements related to this lease which have been fully amortized on the accompanying balance sheets. The Company’s rent expense for this space is recorded in Research and Development on the condensed statement of operations and amounted to $16,212 for the three months ended September 30, 2022 and 2021, and $48,636 for the nine months ended September 30, 2022 and 2021.

On April 8, 2022, the Company agreed to enter into a lease agreement for a new office space of 3,916 square feet commencing on June 1, 2022 in Laguna Hills, CA. The lease expires on July 31, 2027 and provides for lease payments of $9,203 per month payable on the first day of each month commencing September 1, 2022, and a security deposit of $11,400. The Company’s rent expense for this space is recorded in General and Administrative on the condensed statement of operations and amounted to $28,371 during the three months ended September 30, 2022 and $37,828 during the nine months ended September 30, 2022.

12

Table of Contents

EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

On May 19, 2022, the Company agreed to enter into a lease agreement with a non-related party for a new office space located in Reno, Nevada of 10,881 square feet commencing on May 23, 2022. The amended lease expires on September 23, 2027 with an option to extend the lease for an additional period of 60 months, and provides for lease payments ranging from $13,056 per month to $16,663 per month and a security deposit of $53,000. The Company’s rent expense for this space is recorded in Research and Development on the condensed statement of operations and amounted to $41,238 during the three months ended September 30, 2022 and $59,787 during the nine months ended September 30, 2022.

Litigations, Claims and Assessments

The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements.

Note 8 – Stockholders’ Equity

At-The-Market Offerings

December 2021 Sales Agreement

On December 14, 2021, the Company entered into a Sales Agreement (the “December 2021 Sales Agreement”) with SVB Leerink under which the Company may offer and sell, from time to time at its sole discretion, shares of common stock for gross proceeds of up to $50.0 million through SVB Leerink as its sales agent (the “At-the-Market Offering”). The Company’s prior sales agreement, with SVB Leerink, entered into in May 2021, was terminated upon the effectiveness of the December 2021 Sales Agreement. The issuance and sale of shares, if any, of common stock by the Company under the December 2021 Sales Agreement will be pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-261638) filed with the SEC on December 14, 2021 (the “Registration Statement”), and the prospectus relating to the At-the-Market Offering filed therewith that forms a part of the Registration Statement.

Subject to the terms and conditions of the December 2021 Sales Agreement, SVB Leerink may sell the common stock by any method permitted by law deemed to be an “at –the- market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended. SVB Leerink will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay SVB Leerink a commission equal to three percent (3.0)% of the gross sales proceeds of any common stock sold through SVB Leerink under the December 2021 Sales Agreement, and also has provided SVB Leerink with certain indemnification rights. Through September 30, 2022, the Company received approximately $4.0 million in net proceeds from the sale of 2,128,763 shares of its common stock pursuant to the December 2021 Sales Agreement.

Securities Purchase Agreement

On March 3, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an institutional and accredited investor (the “Purchaser”), relating to the issuance and sale of 3,000,000 shares (the “Shares”) of common stock, pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 1,870,130 shares of common stock and warrants to purchase an aggregate of 4,870,130 shares of common stock (the “Investor Warrants”) in a registered direct offering (the “March 2022 Offering”). The Company determined that the warrants qualified for equity classification.

The offering price for the Shares was $3.08 per Share and the offering price for the Pre-Funded Warrants was $3.07 per Pre-Funded Warrant, which represents the per Share public offering price less $0.01 per share exercise price for each Pre-Funded Warrant. The Investor Warrants have an exercise price of $3.54 per share and each Investor Warrant is exercisable for one share of common stock. The Investor Warrants will be exercisable beginning six months from the date of issuance and the Pre-Funded Warrants are exercisable immediately upon issuance. The Pre-Funded Warrants shall terminate when fully exercised and the Investor Warrants will terminate five years from the initial exercisability date. The aggregate gross proceeds to the Company from the March 2022 Offering were approximately $15 million with aggregate issuance costs of approximately $83,000, excluding the proceeds, if any, from the exercise of the Pre-Funded Warrants and the Investor Warrants. No underwriter or placement agent participated in the March 2022 Offering.

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The March 2022 Offering was made pursuant to an effective registration statement on Form S-3 (Registration Statement No. 333-261638), as previously filed with and declared effective by the Securities and Exchange Commission and a related prospectus.

Equity Incentive Plan

On June 16, 2022, the stockholders approved an amendment to the Company’s Amended and Restated 2018 Omnibus Stock Incentive Plan, reserving an additional 1,500,000 shares of common stock for further issuance under such plan.

Stock-Based Compensation Expense

The Company records stock-based compensation expense related to stock options and restricted stock units (“RSUs”). For the three months ended September 30, 2022 and 2021, the Company recorded expense of $928,733 ($420,619 of which was included within research and development expenses and $508,114 was included within general and administrative expenses on the statements of operations) and $777,467 ($489,121 of which was included within research and development expenses and $288,343 was included within general and administrative expenses on the statements of operations), respectively. For the nine months ended September 30, 2022 and 2021, the Company recorded expense of $2,874,646 ($1,438,469 of which was included within research and development expenses and $1,436,177 was included within general and administrative expenses on the statements of operations) and $2,071,735 ($1,138,331 of which was included within research and development expenses and $933,401 was included within general and administrative expenses on the statements of operations), respectively.

Restricted Stock Units

A summary of the restricted stock units activity during the nine months ended September 30, 2022 is presented below:

Weighted

Average

Number of

Grant Date Value

    

RSUs

    

Per Share

RSUs non-vested January 1, 2022

 

41,778

$

3.59

Granted

 

193,304

 

1.93

Vested

 

(55,319)

 

3.37

Forfeited

 

(6,963)

 

3.59

RSUs non-vested September 30, 2022

 

172,800

$

1.80

Vested RSUs undelivered September 30, 2022

 

41,086

$

3.64

To date, the RSUs have only been granted to directors in accordance with the Company’s Amended and Restated 2018 Omnibus Stock Incentive Plan. The Company’s policy is not to deliver shares underlying the RSUs until the termination of service.

As of September 30, 2022, there was $254,152 of unrecognized stock-based compensation expense related to RSUs which will be recognized over a weighted average period of 0.8 years.

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Stock Options

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following approximate assumptions:

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Expected term (years)

5.41 - 5.85

 

5.85

 

0.58 - 10.00

 

5.85 - 10.00

Risk free interest rate

2.66% - 3.02%

0.81%

0.76% - 3.35%

0.45% - 1.58%

Expected volatility

85% - 87%

92%

82% - 90%

92% - 94%

Expected dividends

0.00%

0.00%

0.00%

0.00%

The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. Option forfeitures are accounted for at the time of occurrence. The expected term is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company uses a blended volatility calculation, the components of which are the Company’s historical volatility for the period from its initial public offering through the valuation date and the average peer-group data of six comparable entities to supplement the Company’s own historical data for the preceding years in computing the expected volatility. Accordingly, the Company is utilizing an expected volatility figure based on a review of the historical volatility of comparable entities over a period of time equivalent to the expected life of the instrument being valued. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

The weighted average estimated grant date fair value of the stock options granted for the three months ended September 30, 2022 and 2021 was approximately $1.22 and $3.56 per share, respectively. The weighted average estimated grant date fair value of the stock options granted for the nine months ended September 30, 2022 and 2021 was approximately $1.61 and $4.16 per share, respectively.

A summary of the option activity during the nine months ended September 30, 2022 is presented below:

    

    

    

    

    

Weighted

    

    

 

Weighted

 

Average

 

Average

 

Remaining

 

Aggregate

 

Number of

 

Exercise

 

Life

 

Intrinsic

 

Options

 

Price

 

In Years

 

Value

Outstanding, January 1, 2022

 

4,377,398

3.89

 

  

 

  

Granted

 

1,167,310

 

2.23

 

  

 

  

Forfeited

 

(60,021)

 

4.21

 

  

 

  

Outstanding, September 30, 2022

 

5,484,687

$

3.53

 

7.4

$

375,417

Exercisable, September 30, 2022

 

3,518,147

$

3.72

 

6.5

$

188,738

15

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The following table presents information related to stock options as of September 30, 2022:

Options Outstanding

 

Options Exercisable

 

Weighted

 

Outstanding

 

Average

 

Exercisable

Exercise

 

Number of

 

Remaining Life

 

Number of

Price

    

Options

    

In Years

    

Options

$1.00 - $1.99

 

1,577,286

4.1

 

827,636

$2.00 - $2.99

 

1,010,018

7.7

 

762,034

$3.00 - $3.99

 

1,241,069

7.0

 

820,883

$4.00 - $4.99

 

385,305

8.8

 

147,760

$5.00 - $5.99

 

100,805

6.2

 

79,805

$6.00 - $6.99

 

1,005,286

7.1

 

715,111

$7.00+

 

164,918

5.5

 

164,918

5,484,687

6.5

3,518,147

As of September 30, 2022, there was $4,058,569 of unrecognized stock-based compensation expense related to stock options which will be recognized over a weighted average period of 1.6 years.

Warrants

A summary of the warrant activity for the nine months ended September 30, 2022 is presented below:

Weighted

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Life