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Table of Contents

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, 2021

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: (917) 289-1117

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 28,398,789 as of November 10, 2021.

Table of Contents

EYENOVIA, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Condensed Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020

2

Unaudited Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

3

Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 

4

Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

6

Notes to Unaudited Condensed Financial Statements

8

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

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

26

Item 4. Controls and Procedures.

26

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.

27

Item 5. Other Information.

27

Item 6. Exhibits.

27

SIGNATURES

28

1

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

EYENOVIA, INC.

Condensed Balance Sheets

    

September 30, 

    

December 31, 

 

2021

 

2020

 

(unaudited)

Assets

 

  

 

  

 

  

 

  

Current Assets:

 

  

 

  

Cash and cash equivalents

$

13,500,871

$

28,371,828

Restricted cash

7,875,000

Deferred license costs

1,600,000

License fee and expense reimbursements receivables

960,180

2,966,039

Prepaid expenses and other current assets

 

1,123,289

 

453,478

 

 

Total Current Assets

 

23,459,340

 

33,391,345

 

 

Property and equipment, net

 

1,413,201

 

396,380

Security deposit

 

119,035

 

119,035

 

  

 

  

Total Assets

$

24,991,576

$

33,906,760

 

  

 

  

Liabilities and Stockholders’ Equity

 

  

 

  

 

  

 

  

Current Liabilities:

 

  

 

  

Accounts payable

$

1,684,733

$

1,461,665

Accrued compensation

 

1,184,236

 

1,150,672

Accrued expenses and other current liabilities

 

552,336

 

1,480,692

Deferred rent - current portion

16,037

7,809

Deferred license fee

10,000,000

14,000,000

Notes payable - current portion

7,282,037

97,539

 

 

Total Current Liabilities

 

20,719,379

 

18,198,377

 

 

Deferred rent - non-current portion

 

26,059

 

38,684

Notes payable - non-current portion

365,814

 

 

Total Liabilities

 

20,745,438

 

18,602,875

 

  

 

  

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, 2021 and December 31, 2020, respectively

 

 

Common stock, $0.0001 par value, 90,000,000 shares authorized; 25,963,185 and 24,978,585 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

2,597

 

2,498

Additional paid-in capital

 

97,446,125

 

92,742,306

Accumulated deficit

 

(93,202,584)

 

(77,440,919)

 

 

Total Stockholders’ Equity

 

4,246,138

 

15,303,885

 

 

Total Liabilities and Stockholders’ Equity

$

24,991,576

$

33,906,760

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

2

Table of Contents

EYENOVIA, INC.

Condensed Statements of Operations

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

Operating Income

Revenue

$

$

$

4,000,000

$

Cost of revenue

(1,600,000)

Gross Profit

2,400,000

Operating Expenses:

 

 

 

 

Research and development

3,470,188

3,363,759

11,334,296

9,913,296

General and administrative

 

2,435,141

 

1,728,366

 

7,082,659

 

5,669,311

Total Operating Expenses

 

5,905,329

 

5,092,125

 

18,416,955

 

15,582,607

 

 

 

 

Loss From Operations

 

(5,905,329)

 

(5,092,125)

 

(16,016,955)

 

(15,582,607)

 

  

 

  

 

  

 

  

Other Income (Expense):

 

 

 

Small Business Administration Economic Injury Disaster Grant

10,000

Extinguishment of PPP 7(a) loan

463,353

463,353

Other expense

(8,010)

(8,010)

Interest expense

(119,212)

 

(4,945)

(202,407)

(14,977)

Interest income

 

600

 

540

 

2,354

 

24,579

 

 

 

 

Net Loss

$

(5,568,598)

$

(5,096,530)

$

(15,761,665)

$

(15,563,005)

 

  

 

  

 

  

 

  

Net Loss Per Share

 

  

 

  

 

  

 

  

- Basic and Diluted

$

(0.21)

$

(0.23)

$

(0.61)

$

(0.79)

 

  

 

  

 

  

 

  

Weighted Average Number of Common Shares Outstanding

 

  

 

  

 

  

 

  

- Basic and Diluted

 

26,053,532

 

22,206,195

 

25,773,098

 

19,802,999

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

3

Table of Contents

EYENOVIA, INC.

Condensed Statements of Changes in Stockholders’ Equity

(unaudited)

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.

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EYENOVIA, INC.

Condensed Statements of Changes in Stockholders’ Equity (Continued)

(unaudited)

For the Three and Nine Months Ended September 30, 2020

Additional

Total

Common Stock

Paid-In

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

Balance - January 1, 2020

17,100,726

$

1,710

$

69,409,949

$

(57,671,052)

$

11,740,607

Issuance of common stock and warrants in private placement [1]

2,675,293

267

5,451,475

5,451,742

Stock-based compensation

583,865

583,865

  

  

  

  

  

Net loss

(5,450,910)

(5,450,910)

Balance - March 31, 2020

19,776,019

1,977

75,445,289

(63,121,962)

12,325,304

Exercise of stock warrants

167,664

17

376,404

376,421

Stock-based compensation

633,146

633,146

Net loss

(5,015,565)

(5,015,565)

Balance -June 30, 2020

19,943,683

1,994

76,454,839

(68,137,527)

8,319,306

Issuance of common stock in public offering [2]

3,833,334

383

12,495,325

12,495,708

Exercise of stock warrants

1,080,497

108

2,269,562

2,269,670

Exercise of stock options

26,737

3

52,134

52,137

Stock-based compensation

609,930

609,930

Net loss

(5,096,530)

(5,096,530)

Balance – September 30, 2020

24,884,251

$

2,488

$

91,881,790

$

(73,234,057)

$

18,650,221

[1] Includes gross proceeds of $5,984,931, less total issuance costs of $533,189.

[2] Includes gross proceeds of $13,800,002, less total issuance costs of $1,304,294.

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

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EYENOVIA, INC.

Condensed Statements of Cash Flows

(unaudited)

For the Nine Months Ended

September 30, 

    

2021

    

2020

Cash Flows From Operating Activities

 

  

 

  

Net loss

$

(15,761,665)

$

(15,563,005)

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

 

  

 

  

Depreciation of property and equipment

 

148,245

 

71,628

Amortization of debt discount

41,944

Extinguishment of PPP 7(a) Loan

(463,353)

Stock-based compensation

 

2,071,735

 

1,826,941

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other current assets

 

35,549

 

(231,194)

License fee and expense reimbursements receivables

2,005,859

Deferred license costs

1,600,000

(1,600,000)

Accounts payable

 

223,068

 

(76,596)

Accrued compensation

 

33,564

 

(172,318)

Accrued expenses and other current liabilities

 

(928,356)

 

(106,471)

Deferred license fee

(4,000,000)

4,000,000

Security deposit

(1,235)

Deferred rent

 

(4,397)

 

(1,119)

 

 

Net Cash Used In Operating Activities

 

(14,997,807)

 

(11,853,369)

 

  

 

  

Cash Flows From Investing Activities

Purchases of property and equipment

(1,165,066)

(202,046)

Net Cash Used In Investing Activities

(1,165,066)

(202,046)

Cash Flows From Financing Activities

 

  

 

  

Proceeds from sale of common stock and warrants in private placement [1]

 

 

5,569,136

Proceeds from sale of common stock in public offering [2]

12,734,002

Proceeds from exercise of stock warrants

2,103,991

2,646,091

Proceeds from PPP 7(a) Loan

463,353

Proceeds from SVB loan

7,500,000

Repayments of notes payable

 

(547,259)

 

(368,289)

Payment of offering issuance costs

 

 

(329,038)

Payment of loan issuance costs

(66,618)

Proceeds from exercise of stock options

176,802

52,137

Net Cash Provided By Financing Activities

 

9,166,916

 

20,767,392

Net (Decrease) Increase in Cash and Cash Equivalents

 

(6,995,957)

 

8,711,977

Cash and cash equivalents - Beginning of Period

 

28,371,828

 

14,152,601

Cash and cash equivalents - End of Period

$

21,375,871

$

22,864,578

[1] Includes gross proceeds of $5,984,931, less issuance costs of $415,795 deducted directly from the private placement.

[2] Includes gross proceeds of $13,800,002, less issuance costs of $1,066,000 deducted directly from the offering proceeds.

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EYENOVIA, INC.

Condensed Statements of Cash Flows (Continued)

(unaudited)

Cash and restricted cash consisted of the following:

    

    

Cash

$

13,500,871

$

22,864,578

Restricted cash

7,875,000

$

21,375,871

$

22,864,578

Supplemental Disclosure of Cash Flow Information:

    

  

    

  

Cash paid during the periods for:

Interest

$

131,839

$

7,961

Income taxes

$

$

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Accrual of public offering costs

$

$

(26,650)

Purchase of insurance premium financed by note payable

$

(705,360)

$

(475,216)

Issuance of SVB stock warrants

$

(351,390)

$

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

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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 clinical stage ophthalmic biopharmaceutical company developing a pipeline of microdose array print (MAP™) therapeutics. Eyenovia aims to achieve clinical microdosing of next-generation formulations of well-established ophthalmic pharmaceutical agents using its high-precision targeted ocular delivery system branded the Optejet®, which has the potential to replace conventional eye dropper delivery and improve safety, tolerability, patient compliance and topical delivery success for ophthalmic eye treatments. In the clinic, the Optejet has demonstrated the ability to horizontally deliver ophthalmic medication with a success rate significantly higher than that of traditional eye drops (~ 90% vs. ~ 50%). Using its proprietary delivery technology, Eyenovia is developing the next generation of smart ophthalmic therapies which target new indications or new combinations where there are currently no comparable drug therapies approved by the U.S. Food and Drug Administration (the “FDA”). Eyenovia’s microdose therapeutics follow the FDA-designated pharmaceutical registration and regulatory process.

On October 25, 2021, the Company announced the reclassification of the Company’s proprietary, first-in-class combination microdose formulation of tropicamide and phenylephrine for in-office pupil dilation, (“MydCombi” or “MicroStat”) as a drug-device combination product by the FDA in a Complete Response Letter (“CRL”) received on October 22, 2021, following a change in the agency’s legal interpretation of its authorities imposed by a recent court ruling. The Company is preparing the necessary documents for expedited resubmission of the new drug application for MydCombi in response to the CRL. The Company believes that its other product candidates will similarly be classified by the FDA as drug-led combination products that would be subject to marketing approval via new drug applications.

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, 2021 and for the three and nine months ended September 30, 2021 and 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year ending December 31, 2021 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, 2020 and for the year then ended, which were included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2021.

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, 2020, there have been no material changes to the Company’s significant accounting policies, except as disclosed below.

Liquidity and Going Concern

As of September 30, 2021, the Company had unrestricted cash and cash equivalents of approximately $13.5 million and an accumulated deficit of approximately $93.2 million. For the nine months ended September 30, 2021 and 2020, the Company incurred net losses of approximately $15.8 million and $15.6 million, respectively, and used cash in operations of approximately $15.0 million and $11.9 million, respectively. Pursuant to the At-The-Market Offering (see Note 9 – Stockholders’ Equity – At-The-Market Offering and Note 11 – Subsequent Events – At-The-Market Offering), the Company commenced sales of its common stock on October 6, 2021. As of the filing date, the Company has received approximately $12.8 million in gross proceeds and $12.4 million in net proceeds from the sale of 2,435,604 shares of its common stock. 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 generate sufficient recurring revenues or the Company’s ability to raise further capital, through 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

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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 generate sufficient recurring revenues or secure additional capital, it may be required to curtail its research and development initiatives and take additional measures to reduce costs in order to conserve its cash.

Cash, Cash Equivalents and Restricted Cash

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 Loan and Security Agreement, dated May 7, 2021 with Silicon Valley Bank (“SVB”), as amended on September 29, 2021 by the First Amendment to the Loan and Security Agreement. See Note 6 - Notes Payable - Silicon Valley Bank Loan. In connection with which the Company pledged to establish and maintain a collateralized money market account in the amount of $7,875,000.

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, 2021 and December 31, 2020, the Company had cash balances in excess of FDIC insurance limits of $21,125,871 and $28,121,828, 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 weighted average vested but unsettled restricted stock units. 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, 

    

2021

    

2020

Options

 

4,305,980

 

3,410,540

Warrants

 

1,226,183

 

2,095,993

Total potentially dilutive shares

 

5,532,163

 

5,506,533

Revenue Recognition

Our 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 our 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.

We analyze our 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”), we allocate 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”). Our policy is to recognize amounts allocated to joint operating activities as a reduction in research and development expense.

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

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.

We must make significant judgments in our 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. We assess if these options provide a material right to the customer and if so, they are considered performance obligations.

For upfront license fees, we 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 Health Companies, Inc. (“Bausch Health”). Each license has three revenue components: 1) an upfront license fee; 2) milestone payments; and 3) royalty payments. See Note 7 – Commitments and Contingencies for additional details.

Recently Adopted Accounting Standards

In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements based on the concepts in the FASB Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for fiscal years beginning after December 15, 2020. The Company adopted ASU 2018-13 effective January 1, 2021. This standard did not have a material impact on the Company’s financial position, results of operations or cash flow.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU No. 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. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02, as amended, is now effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The FASB issued ASU No. 2019-01 “Leases (Topic 842) Codification Improvements” in March 2019 and ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” in July 2018, and ASU No.

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

2018-20 “Leases (Topic 842) - Narrow Scope Improvements for Lessors” in December 2018. ASU 2019-01, ASU 2018-10 and ASU 2018-20 provide certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating ASU 2016-02 and its impact on its financial position, results of operations, and cash flows.

On May 3, 2021, the Financial Accounting Standards Board (the “FASB”) issued 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. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating ASU 2021-04 and its impact on its financial position, results of operations, and cash flows.

Note 3 – Prepaid Expenses and Other Current Assets

As of September 30, 2021 and December 31, 2020, prepaid expenses and other current assets consisted of the following:

    

September 30, 

    

December 31, 

 

2021

 

2020

Payroll tax receivable

$

297,494

$

151,942

Prepaid insurance expenses

413,648

110,094

Prepaid research and development expenses

 

30,542

 

Prepaid general and administrative expenses

105,941

Prepaid licenses and subscriptions

31,440

57,051

Prepaid patent expenses

34,809

Prepaid conference expenses

52,041

29,403

Prepaid board of directors fees

77,000

68,250

Prepaid rent and security deposit

 

32,254

 

25,004

Other

 

48,120

 

11,734

Total prepaid expenses and other current assets

$

1,123,289

$

453,478

Note 4 – Accrued Compensation

As of September 30, 2021 and December 31, 2020, accrued compensation consisted of the following:

    

September 30, 

    

December 31, 

 

2021

 

2020

Accrued bonus expenses

$

895,253

$

938,873

Accrued payroll expenses

 

288,983

 

211,799

Total accrued compensation

$

1,184,236

$

1,150,672

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Note 5 – Accrued Expenses and Other Current Liabilities

As of September 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

    

September 30, 

    

December 31, 

 

2021

 

2020

Accrued research and development expenses

$

181,241

$

348,254

Accrued consulting and professional services

243,979

235,355

Credit card payable

 

44,204

 

50,002

Accrued franchise tax

39,300

32,480

Accrued licensing fees

804,447

Accrued interest

31,250

3,068

Accrued expense reimbursements

6,441

5,459

Other

 

5,921

 

1,627

Total accrued expenses and other current liabilities

$

552,336

$

1,480,692

Note 6 – Notes Payable

As of September 30, 2021 and December 31, 2020, notes payable consisted of the following:

September 30, 2021

    

December 31, 2020

Current

Non-Current

Current

Non-Current

    

Portion

    

Portion

    

Total

    

Portion

    

Portion

    

Total

BankDirect Capital Finance loan

$

158,101

$

$

158,101

$

$

$

Paycheck Protection Program loan

97,539

365,814

463,353

Silicon Valley Bank loan

7,123,936

7,123,936

Total

$

7,282,037

$

$

7,282,037

$

97,539

$

365,814

$

463,353

BankDirect Capital Finance Loan

On February 24, 2021, the Company issued a note payable for the purchase of a directors and officers liability insurance policy. The note payable is payable in nine monthly payments consisting of principal and interest amounting to $79,343 for an aggregate principal amount of $705,360. The note accrues interest at a rate of 2.96% per year and matures on November 24, 2021.

Paycheck Protection Program Loan

On May 8, 2020, the Company received cash proceeds of $463,353 pursuant to a loan provided in connection with the Paycheck Protection Program under the CARES Act (the “PPP Loan”). The PPP Loan provided for monthly installment payments of $19,508 beginning in August 2021 with the remaining balance due on May 3, 2022, the maturity date. The PPP Loan incurred interest at a fixed rate of 1.00% per annum.

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company was eligible to apply for and receive forgiveness for all or a portion of its PPP Loan. The Company applied for loan forgiveness on the PPP Loan in March 2021. The Company received notification in August 2021 that it had received approval for full loan forgiveness of the PPP Loan in the amount of $463,353. The Company has recorded this extinguishment as other income in the condensed statement of operations for the three and nine months ended September 30, 2021. The Company also received notification of forgiveness of accrued interest payable of $5,738, which has been reversed from interest expense.

Silicon Valley Bank Loan

On May 7, 2021 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “Loan”) with Silicon Valley Bank (“SVB”) for an aggregate principal amount of up to $25.0 million. The Loan bears interest at an annual rate equal to the greater of (a) the sum of 1.25% plus the prime rate as reported in The Wall Street Journal and (b) 5.00%. The Loan is secured by all of the Company’s tangible assets. The Loan matures on May 1, 2025. The Loan requires monthly interest-only payments until June 1, 2022. The interest-only period can be extended to June 1, 2023, upon the occurrence of a milestone event. Upon the end of the interest-only

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

period, the Company will make regular monthly amortizing payments of principal and interest through the maturity date. The Loan indicates a prepayment fee of 1.0% to 3.0%, as follows: i) prepayment fee of 3.0% of the principal balance made on or prior to the first anniversary of the Effective Date; ii) prepayment fee of 2.0% of the principal balance made on or prior to the second anniversary of the Effective Date; or iii) prepayment fee of 1.0% of the principal balance made on or prior to the third anniversary of the Effective Date. The Loan also provides for a final payment. The final payment is in addition to and not a substitution for the regular monthly payments of principal plus accrued interest due on the earliest to occur of the loan maturity date, the repayment of the loan in full or the termination of the Loan Agreement, in an amount equal to the original aggregate principal amount of the multiplied by 5.0%.The Company is accreting the final payment as accrued interest over the term of the Loan.

The initial tranche of the Loan, in the amount of $7.5 million was received by the Company on May 7, 2021. In connection with the Loan, the Company issued warrants to SVB to purchase 91,884 shares of common stock at an exercise price per share equal to $4.76. The warrants are exercisable for a period of ten years from the date of issuance. At the Company’s option, the Company has the ability to draw down the remaining $17.5 million in gross proceeds in two tranches over the next two years based upon the achievement of several milestones in accordance with the terms of the Loan. On September 29, 2021, the Company and SVB executed the First Amendment to the Loan and Security Agreement (the “Amendment”). In accordance with the Amendment, the Company must maintain a collateralized money market account in the amount of $7,875,000. The Company has recorded this amount as Restricted Cash. See Note 2 - Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash. This account must be maintained until the Release Event occurs (defined as when the Company has received approval by the FDA of the MydCombi product and achieved the minimum equity raise under the terms of the amended agreement, on or prior to November 30, 2021). Given the FDA’s recent reclassification of MydCombi as a drug-device combination and the need to resubmit a new drug application in early 2022, (See Note 11 - Subsequent Events), the restricted cash will become callable on November 30, 2021, at SVB’s election, to satisfy the Loan obligations. Therefore, the Loan has been fully classified as a current note payable.

During the three and nine months ended September 30, 2021, the Company recorded interest expense relating to the Loan of $95,833 and $150,349, respectively.

The Company determined that the warrants should be equity-classified and that the relative fair value was $354,539, by using the Black-Scholes option pricing methodology using the following assumptions: stock price of $4.76; expected term of 10.0 years; volatility of 89.0% and a risk-free interest rate of 1.60%. The Company incurred $66,618 of debt issuance costs, of which $63,469 was allocated to the debt and $3,149 was allocated to the warrants. The relative fair value of the warrants and the issuance costs allocated to the debt were recorded as debt discount and are being amortized over the four-year term of the note. See the table below for additional details:

    

September 30, 2021

Gross loan proceeds

$

7,500,000

Debt discount:

 

Relative fair value of warrants

 

(354,539)

Relative fair value of issuance costs

 

(63,469)

Amortization of debt discount

 

41,944

$

7,123,936

Note 7 – Commitments and Contingencies

See Note 8 - Related Party Transactions for certain commitments and contingencies entered into with certain related parties.

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.

Arctic Vision License Agreement

On August 10, 2020, the Company entered into the Arctic Vision License Agreement pursuant to which Arctic Vision may develop and commercialize MicroPine for the treatment of progressive myopia and MicroLine for the treatment of presbyopia in Greater China (mainland China, Hong Kong, Macau and Taiwan) and South Korea.

13

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EYENOVIA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

Under the terms of the Arctic Vision License Agreement, the Company received a non-refundable, upfront payment of $4.0 million, before any payments to Senju Pharmaceutical Co., Ltd. (“Senju”), due under the Exclusive License Agreement between the Company and Senju, as amended on April 8, 2020 and a Letter Agreement dated August 10, 2020 (the “Senju License Agreement”). The Company had recorded the $4.0 million payment as a deferred license fee until the payment is earned. The Company considers payment earned once certain trial data has been fully submitted to Arctic Vision, permitting Arctic Vision to seek regulatory approval with the National Medical Products Administration of China. The trial data for one of the two products (MicroPine) was fully submitted to Arctic Vision in March 2021. As a result, the Company recognized $2.0 million of deferred license fees (one-half of the $4.0 million upfront license fee) and recognized $0.8 million of deferred license costs related to the Senju payment during the three months ended March 31, 2021. The trial data for the other product (MicroLine) was fully submitted to Arctic Vision in June 2021. As a result, the Company recognized the remaining $2.0 million of deferred license fees and recognized the remaining $0.8 million of deferred license costs related to the Senju payment during the three months ended June 30, 2021.

In addition, the Company may receive up to a total of $43.75 million in additional payments, based on various development and regulatory milestones, including the initiation of clinical research and regulatory approvals in Greater China and South Korea (up to $39.75 million), and development costs (up to $4.0 million). In December 2020, the Company satisfied a performance obligation which resulted in the Company recognizing $2.0 million of milestone revenues, pursuant to the Arctic Vision License Agreement. The $2.0 million was received from Arctic Vision in December 2020.

The milestone revenue referred to above includes $2.0 million related to the MicroStat product resulting from Amendment 1 to the Arctic Vision License Agreement. On September 14, 2021, the Company and Arctic Vision executed this amendment which provides for a one-time upfront payment of $250,000 and milestone payments of $2.0 million based on the achievement of filing for and receiving regulatory approval separately from China and South Korea for the MicroStat Product. The Company anticipates the Marketing Authorization Application (MAA) filings to occur in December 2023 and the receipt of regulatory approval to occur in December 2024. The Company didn’t recognize revenue for the $250,000 upfront payment because it was passed through to Senju. See Note 8 - Related Party Transactions for additional information.

Arctic Vision also will purchase its supply of MicroPine, MicroLine and MicroStat from the Company or, for such products not supplied by the Company, pay the Company a mid-single digit percentage royalty on net sales of such products, subject to certain adjustments. No royalty payments were earned through September 30, 2021. The Company will pay a mid-double digit percentage of such payments, royalties, or net proceeds of such supply to Senju pursuant to the Senju License Agreement. See Note 8 – Related Party Transactions- Senju License Agreement for additional details.

Bausch License Agreement

On October 9, 2020, the Company entered into the Bausch License Agreement pursuant to which Bausch Health may develop and commercialize the Bausch Licensed Product in the Licensed Territory.

In connection with the Bausch License Agreement, Bausch Health paid the Company a non-refundable, upfront payment of $10.0 million. The Company has recorded this payment as a deferred license fee until the payment is earned. The Company will consider payment earned once certain administrative functions are transferred to Bausch Health, permitting Bausch Health to assume supervisory oversight of the ongoing MicroPine study (the CHAPERONE study). The upfront payment has not been earned as of September 30, 2021.

Bausch Health could also pay the Company up to an aggregate of approximately $35.0 million in additional payments, depending on the achievement of certain regulatory and launch-based milestones. No milestone payments were earned through September 30, 2021.

Under the terms of the Bausch License Agreement, on a country-by-country basis and Bausch Licensed Product-by- Bausch Licensed Product basis, Bausch Health will pay the Company royalties on