The accompanying notes are an integral part of these condensed financial statements.
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. Its products are classified by the FDA as drugs, and not medical devices or drug-device combination products.
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, 2020 and for the three and nine months ended September 30, 2020 and 2019. The results of operations for the three
and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year ending December
31, 2020 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, 2019 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, 2020.
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, 2019, there have been no material changes to the Company’s significant
accounting policies, except as disclosed below.
Liquidity
As of September 30, 2020, the Company had
cash and cash equivalents of approximately $22.9 million and an accumulated deficit of approximately $73.2 million. For the nine
months ended September 30, 2020 and 2019, the Company incurred net losses of approximately $15.6 million and $15.9 million, respectively,
and used cash in operations of approximately $11.9 million and $14.9 million, respectively. Subsequent to September 30, 2020, the
Company entered into a License Agreement (the “Bausch License Agreement”) with a subsidiary of Bausch Health Companies
Inc. (“Bausch Health”) pursuant to which the Company received an upfront payment from Bausch Health of $10.0 million.
See Note 11 – Subsequent Events for details.
The Company believes its current cash on
hand, including the proceeds received from the Bausch License Agreement and warrant exercises, is sufficient to meet its operating
and capital requirements for at least the next twelve months from the date these financial statements are issued. Thereafter, the
Company may need to raise further capital, through the sale of additional equity or debt securities, to support its future operations.
The Company’s operating needs include the planned costs to operate its business, including amounts required to fund research
and development activities including clinical studies, 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
manufacture its products and 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 costs in order to conserve its cash.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 – Summary of Significant
Accounting Policies – Continued
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.
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, 2020 and December 31, 2019, the Company had cash balances in excess of FDIC insurance limits of $22,614,578
and $13,902,601, respectively.
Derivative Instruments
The Company evaluates its embedded conversion
options and any freestanding instruments to determine if those contracts or embedded components of those contracts qualify as derivative
financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification (“ASC”). The accounting treatment of derivative financial instruments requires that
the Company record them at their fair values as of the inception date of the agreement and at fair value as of each subsequent
balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period
at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date.
If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event
that caused the reclassification.
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. 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,
|
|
|
|
2020
|
|
|
2019
|
|
Options
|
|
|
3,410,540
|
|
|
|
2,237,438
|
|
Warrants
|
|
|
2,095,993
|
|
|
|
-
|
|
Restricted stock units
|
|
|
43,728
|
|
|
|
60,355
|
|
Total potentially dilutive shares
|
|
|
5,550,261
|
|
|
|
2,297,793
|
|
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 – Summary of Significant
Accounting Policies – Continued
Recently Adopted Accounting Pronouncements
In July 2017, the FASB issued ASU No. 2017-11,
“Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815)- Accounting for Certain Financial Instruments with
Down Round Features” (“ASU 2017-11”). Equity-linked instruments, such as warrants and convertible instruments
may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings.
Under ASU 2017-11, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion
option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market).
However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether
liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share
("EPS") reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered
by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this
ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. This standard, which the Company adopted on January 1, 2020, did not have a material impact on the Company’s financial
position, results of operations or cash flows.
In March 2020, the FASB issued ASU 2020-03,
“Codification Improvements to Financial Instruments” (“ASU 2020-03”). ASU 2020-03 improves and clarifies
various financial instruments topics. ASU 2020-03 includes seven different issues that describe the areas of improvement and the
related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing
clarifications. The Company adopted ASU 2020-03 upon issuance, which did not have a material impact on the Company’s unaudited
condensed financial statements.
Note 3 – Prepaid Expenses and
Other Current Assets
As of September 30, 2020 and December 31,
2019, prepaid expenses and other current assets consisted of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Prepaid insurance expenses
|
|
$
|
271,866
|
|
|
$
|
33,923
|
|
Payroll tax receivable
|
|
|
179,260
|
|
|
|
95,233
|
|
Arctic Vision expense reimbursement receivable
|
|
|
149,675
|
|
|
|
-
|
|
Prepaid research and development expenses
|
|
|
74,540
|
|
|
|
17,978
|
|
Prepaid Board of Director fees
|
|
|
68,250
|
|
|
|
-
|
|
Prepaid subscription fees
|
|
|
46,007
|
|
|
|
10,600
|
|
Prepaid conference expenses
|
|
|
36,529
|
|
|
|
2,463
|
|
Prepaid rent and security deposit
|
|
|
31,945
|
|
|
|
-
|
|
Prepaid patent expenses
|
|
|
29,499
|
|
|
|
12,404
|
|
Other
|
|
|
15,519
|
|
|
|
24,079
|
|
Total prepaid expenses and other current assets
|
|
$
|
903,090
|
|
|
$
|
196,680
|
|
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4 – Accrued Compensation
As of September 30, 2020 and December 31,
2019, accrued compensation consisted of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued bonus expenses
|
|
$
|
579,604
|
|
|
$
|
897,839
|
|
Accrued payroll expenses
|
|
|
164,951
|
|
|
|
19,034
|
|
Total accrued compensation
|
|
$
|
744,555
|
|
|
$
|
916,873
|
|
Note 5 – Accrued Expenses and
Other Current Liabilities
As of September 30, 2020 and December 31,
2019, accrued expenses and other current liabilities consisted of the following:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
Accrued research and development expenses
|
|
$
|
294,421
|
|
|
$
|
208,175
|
|
Accrued public offering costs
|
|
|
14,102
|
|
|
|
-
|
|
Accrued professional services
|
|
|
11,000
|
|
|
|
97,396
|
|
Accrued legal expenses
|
|
|
14,195
|
|
|
|
-
|
|
Accrued franchise tax
|
|
|
4,980
|
|
|
|
40,995
|
|
Credit card payable
|
|
|
3,507
|
|
|
|
56,979
|
|
Leasehold improvements
|
|
|
-
|
|
|
|
42,500
|
|
Accrued travel and entertainment expenses
|
|
|
1,273
|
|
|
|
7,385
|
|
Other
|
|
|
30,131
|
|
|
|
-
|
|
Total accrued expenses and other current liabilities
|
|
$
|
373,609
|
|
|
$
|
453,430
|
|
Note 6 – Notes Payable
As of September 30, 2020 and December 31,
2019, notes payable consisted of the following:
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
|
|
|
|
Portion
|
|
|
Portion
|
|
|
Total
|
|
|
Portion
|
|
|
Portion
|
|
|
Total
|
|
Paycheck Protection
Program loan
|
|
$
|
39,015
|
|
|
$
|
424,338
|
|
|
$
|
463,353
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Directors
and officers insurance policy loan
|
|
|
106,927
|
|
|
|
-
|
|
|
|
106,927
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
145,942
|
|
|
$
|
424,338
|
|
|
$
|
570,280
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
On February 24, 2020, the Company issued
a note payable (the “Note”) for the purchase of a directors’ and officers’ liability insurance policy.
The Note is payable in nine monthly payments of $53,750 for an aggregate principal amount of $475,216. The Note accrues interest
at a rate of 4.29% per year and matures on November 24, 2020. During the nine months ended September 30, 2020, the Company repaid
principal on the Note in the aggregate amount of $368,289.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6 – Notes Payable –
Continued
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 provides 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 bears 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 is eligible to apply for and receive forgiveness for all
or a portion of its PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds
for certain permissible purposes as set forth in the PPP Loan, including, but not limited to, payroll costs and mortgage interest,
rent or utility costs (collectively, “Qualifying Expenses”) incurred during the 24 weeks subsequent to funding, and
on the maintenance of employee and compensation levels following the funding of the PPP Loan. The Company intends to use the proceeds
of its PPP Loan for Qualifying Expenses. However, no assurance is provided that the Company will be able to obtain forgiveness
of its PPP Loan in whole or in part. Any amounts that are not forgiven incur interest at 1.0% per annum and monthly repayments
of principal and interest are deferred until six months after the Small Business Administration makes a determination on forgiveness.
While the PPP Loan currently has a two-year maturity, the amended law permits the borrower to request a five-year maturity from
its lender.
During
the three months ended September 30, 2020 and 2019, the Company recorded interest expense of $3,824 and $0, respectively, and $9,855
and $0 for the nine months ended September 30, 2020 and 2019, respectively.
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 a License Agreement (the “Arctic Vision License Agreement”) with Arctic Vision (Hong Kong) Limited (“Arctic
Vision”) 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.
Under the terms of the Arctic Vision License
Agreement, the Company received an upfront payment of $4.0 million, before any payments to Senju Pharmaceutical Co., Ltd. (“Senju”).
The Company will record this payment as a deferred license fee in the unaudited condensed balance sheet until the payment is earned.
The Company will consider payment earned once certain trial data has been submitted to Arctic Vision, permitting Arctic Vision
to obtain regulatory approval with the National Medical Products Administration. In addition, the Company may receive up to a total
of $41.75 million in additional payments, based on various development and regulatory milestones, including the initiation of clinical
research and approvals in Greater China and South Korea, and development costs. Arctic Vision also will purchase its supply of
MicroPine and MicroLine 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. The Company will pay a mid-double digit percentage
of such payments, royalties, or net proceeds of such supply to Senju pursuant to its Exclusive License Agreement with Senju, as
amended. See Note 8 – Related Party Transactions. During the three and nine months ended September 30, 2020, the Company
did not earn any fees related to the Arctic Vision License Agreement.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8 – Related Party Transactions
Consulting Agreements
A company in which a member of the Company’s
Board of Directors is part owner was a party to a consulting agreement with the Company, dated July 6, 2017, which provided for
the payment of $9,567 per month, and $250 per hour for any additional work, for advisory services performed by such director. The
consulting agreement was terminated on September 1, 2020. The director remains on the Board. The Company incurred expenses of $19,134
and $49,451 for the three months ended September 30, 2020 and 2019, respectively, and $57,402 and $151,853 for the nine months
ended September 30, 2020 and 2019, respectively, related to the agreement which was included within general and administrative
expenses on the unaudited condensed statements of operations.
Lease Agreements
The Company’s Vice President of Research
and Development and Manufacturing (“VP of R&D”) owns a company that entered into a lease agreement with the Company
on September 15, 2016 to lease 953 square feet of space located in Reno, NV with respect to its research and development activities.
The initial monthly base rent was $3,895 per month over the term of the lease and the security deposit was $3,895. On September
15, 2018, the Company amended the lease agreement to extend it until September 14, 2020 and increase the monthly base rent and
security deposit to $4,012. The lease agreement was amended again on April 6, 2020 to lease additional space and increase the monthly
base rent and security deposit to $5,247. On September 15, 2020, the Company agreed to extend the lease term until September 14,
2022 and increase the monthly base rent and security deposit to $5,404. The Company made $70,000 of leasehold improvements related
to this lease which are included on the balance sheet. The Company’s rent expense amounted to $15,982 and $12,036 for
the three months ended September 30, 2020 and 2019, respectively, and $43,512 and $36,108 for the nine months ended September 30,
2020 and 2019, respectively.
Research and Development Activities
The VP of R&D is the sole owner and
President of a company that performs contract engineering services for the Company. During the three and nine months ended September
30, 2020, the Company recognized research and development expense of $323,187 and $795,992, respectively, related to services provided
by such vendor. During the three and nine months ended September 30, 2019, the Company recognized research and development expense
of $197,543 and $728,103, respectively, related to services provided by such vendor. The Company had a liability of $120,584 and
$89,052 to the vendor as of September 30, 2020 and December 31, 2019, respectively.
The Company recognized $46,050 and $143,437
of compensation expense related to the VP of R&D’s salary during the three and nine months ended September 30, 2020,
respectively. The Company recognized $46,010 and $140,110 of compensation expense related to the VP of R&D’s salary during
the three and nine months ended September 30, 2019, respectively.
License Agreement
On March 8, 2015, the Company entered into
an Exclusive License Agreement (the “Exclusive License Agreement”) with Senju whereby the Company agreed to grant to
Senju an exclusive, royalty-bearing license, with rights of sublicense, for its medical device technology for the piezoelectric
delivery of ophthalmic medications to develop, make, have made, manufacture, use, import, market, sell, and otherwise distribute
such products in Asia. In consideration for the license, Senju agreed to pay to Eyenovia 5% royalties on sales (net of certain
manufacturing costs) for the term of the Exclusive License Agreement, subject to certain adjustments upon the loss of patent coverage.
The Exclusive License Agreement will continue in full force and effect, on a country-by-country basis, until the later to occur
of: (i) the tenth (10th) anniversary of the first commercial sale of such a product candidate in a country or (ii) the expiration
of the licensed patents in a country. As of the date of this filing, there had been no commercial sales of such a product in Asia,
and, therefore, no royalties had been earned. Senju is owned by the family of a former member of the Company’s Board of Directors
and, together, they beneficially own greater than 5% of the Company’s common stock.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8 – Related Party Transactions - Continued
License Agreement – Continued
On April 8, 2020, Eyenovia entered into an amendment (the “License
Amendment”) to the Exclusive License Agreement. Pursuant to the License Amendment, the Company can license to any third party
the right to research, develop, commercialize, manufacture or use certain products identified below (the “Senju Licensed
Products”) previously licensed to Senju in China (including the People’s Republic of China, Hong Kong, Macao, and Taiwan)
and South Korea (the “Territory”) if such a license is executed by the Company by April 8, 2021. The Senju Licensed
Products are those using piezo-print technology in a microdose dispenser with (i) atropine sulfate as its sole active ingredient
to treat myopia in humans and (ii) pilocarpine as its sole active ingredient to treat presbyopia in humans.
Pursuant to the License Amendment, the
Company must pay Senju (a) close to a mid-double digit percentage of revenue on any lump-sum payments the Company receives from
the third party, revenue (net of costs) obtained by the Company from contract research and/or development of the Senju Licensed
Product in the Territory, and revenue (net of costs) obtained by the Company from contract manufacture for the device of the Senju
Licensed Product in the Territory, the aggregate of which must be at least a high seven figure dollar amount minimum payment to
Senju; and (b) a lower-double digit percentage of any sales royalty revenue the Company receives from the third party. Unless a
third-party license is executed by the Company prior to April 8, 2021 (in which case, subject to early termination the License
Amendment shall remain in effect for the duration of such license), the License Amendment terminates on April 8, 2021, but may
be terminated earlier by Senju upon the Company’s material breach of the License Amendment, subject to a 60-day cure period.
The Exclusive License Agreement was further
amended in a Letter Agreement by and between the Company and Senju on August 10, 2020 (the “Letter Agreement”). Pursuant
to the Letter Agreement, the Company will pay a mid-double digit percentage of certain payments, royalties, or net proceeds received
from Arctic Vision in connection with the Arctic Vision License Agreement to Senju. During the nine months ended September 30,
2020, the Company paid Senju $1.6 million in connection with the Arctic Vision License Agreement which was recorded as deferred
license costs in the Company’s unaudited condensed balance sheet and will be recognized as expense upon earning the related
fee. See Note 7 – Commitments and Contingencies for additional details.
Note 9 – Stockholders’ Equity
Equity Incentive Plan
On April 7, 2020, the Company’s Board
of Directors approved the Company’s Amended and Restated 2018 Omnibus Stock Incentive Plan (the “Restated Plan”),
which stockholders approved on June 30, 2020. The Restated Plan makes certain changes to the Company’s 2018 Omnibus Stock
Incentive Plan, as amended (the “2018 Plan”). For example, the Restated Plan increases the number of shares of Company’s
common stock reserved for issuance under the 2018 Plan to 2,950,000 shares. The Restated Plan requires that all equity awards issued
under the Restated Plan vest at least twelve months from the applicable grant date, subject to accelerated vesting, and provides
that no dividend or dividend equivalent will be paid on any unvested equity award, although dividends with respect to unvested
portions of equity may accrue and be paid when, and if, the awards later vest and the shares are actually issued to the grantee.
In addition, the Restated Plan sets an annual limit on the grant date fair value of awards to any non-employee director, together
with any cash fees paid during the year, of $150,000, subject to certain exceptions for a non-executive chair of the Board. Finally,
the Restated Plan makes several administrative changes to the 2018 Plan, including to clarify that awards made under the Restated
Plan are intended to be exempt from or comply with Section 409(A) of the Internal Revenue Code of 1986, as amended.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9 – Stockholders’ Equity – Continued
Securities Purchase Agreement
On March 24, 2020, the Company closed on
a private placement of approximately $6.0 million of Units. Each Unit consists of (i) one share of the Company’s common stock,
(ii) a one-year warrant to purchase 0.5 of a share of common stock (“Class A Warrant”), and (iii) a five-year warrant
to purchase 0.75 of a share of common stock (“Class B Warrant”) (collectively, the Class A Warrants and Class B Warrants,
the “Warrants”). The Units were sold to the public at a price of $2.21425 per Unit and to certain directors and executive
officers at a price of $2.42625 per Unit. The Company generated approximately $5.45 million of net proceeds in the offering after
deducting placement agent fees and offering expenses of $0.53 million. In the offering, the Company issued an aggregate of 2,675,293
shares of common stock, Class A Warrants to purchase up to 1,337,659 shares of common stock, and Class B Warrants to purchase up
to 2,006,495 shares of common stock. The exercise price of the Class A Warrants issued to the public is $2.058 per share and the
exercise price of the Class A Warrants issued to the directors and officers is $2.27 per share. The exercise price of the Class
B Warrants issued to the public is $2.4696 per share and the exercise price of the Class B Warrants issued to the directors and
officers is $2.724 per share. See “Warrants” below for additional details.
In connection with the private placement,
on March 23, 2020, the Company also entered into a Registration Rights Agreement with the investors. Pursuant to the Registration
Rights Agreement, the Company agreed to file with the SEC, no later than 30 days following the date on which the Company files
its Form 10-K for the year ended December 31, 2019 with the SEC, a registration statement on Form S-3 covering the shares of common
stock issued in the offering and the shares of common stock underlying the Warrants. The Company timely filed the registration
statement on Form S-3 (Registration Statement No. 333-237790), which was declared and has remained effective with the SEC since
May 13, 2020.
Warrants
A summary of the Warrant activity during the nine months ended
September 30, 2020 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
In Years
|
|
|
Value
|
|
Outstanding January 1, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,344,154
|
|
|
|
2.33
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,248,161
|
)
|
|
|
2.19
|
|
|
|
|
|
|
|
|
|
Outstanding September 30, 2020
|
|
|
2,095,993
|
|
|
$
|
2.41
|
|
|
|
4.0
|
|
|
$
|
1,391,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable September 30, 2020
|
|
|
2,095,993
|
|
|
$
|
2.41
|
|
|
|
4.0
|
|
|
$
|
1,391,817
|
|
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9 – Stockholders’ Equity – Continued
Warrants – Continued
The following table presents information related to Warrants
as of September 30, 2020:
Warrants Outstanding
|
|
Warants Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
Warrants
|
|
|
In Years
|
|
|
Warrants
|
|
$2.0580
|
|
|
133,229
|
|
|
|
0.5
|
|
|
|
133,229
|
|
$2.2700
|
|
|
144,256
|
|
|
|
0.5
|
|
|
|
144,256
|
|
$2.4696
|
|
|
1,602,128
|
|
|
|
4.5
|
|
|
|
1,602,128
|
|
$2.7240
|
|
|
216,380
|
|
|
|
4.5
|
|
|
|
216,380
|
|
|
|
|
2,095,993
|
|
|
|
4.0
|
|
|
|
2,095,993
|
|
During the three months ended September
30, 2020, Warrants for the purchase of 1,080,497 shares of the Company’s common stock with exercise prices of either $2.058
or $2.4696 per share, respectively, were exercised for aggregate proceeds of approximately $2.3 million. During the nine months
ended September 30, 2020, Warrants for the purchase of 1,248,161 shares of the Company’s common stock with exercise prices
of either $2.058 or $2.4696 per share, respectively, were exercised for aggregate proceeds of approximately $2.6 million.
Underwritten Public Offering
On August 19, 2020, the Company entered
into an Underwriting Agreement (the “Underwriting Agreement”) with several underwriters (the “Underwriters”)
in connection with the public offering (the “Offering”) of 3,333,334 shares of the Company’s common stock at
a price of $3.60 per share, less underwriting discounts and commissions. In addition, pursuant to the terms of the Underwriting
Agreement, the Company granted the Underwriters a 30-day option to purchase up to an additional 500,000 shares of the Company’s
common stock at the same price. The Underwriting Agreement contains customary representations, warranties and covenants of the
Company and also provides for customary indemnification by the Company and the Underwriters against certain liabilities and customary
contribution provisions in respect of those liabilities.
The closing of the Offering occurred on
August 21, 2020. At closing, the Company issued 3,833,334 shares of common stock and received net proceeds of approximately $12.5
million after deducting underwriting discounts and commissions and offering expenses of approximately $1.3 million.
The Offering was made pursuant to the Company’s
effective registration statement on Form S-3 (Registration Statement No. 333-229365), including the prospectus dated February 12,
2019, as supplemented by the prospectus supplement dated August 19, 2020.
Stock Options
On January 31, 2020, the Company
granted ten-year stock options to purchase 25,000 shares of common stock to its employees under the 2018 Plan. The shares
vest over three years from the date of grant with one-third vesting on the one-year anniversary of the date of grant and the
balance vesting monthly over the remaining 24 months. The stock options have an exercise price of $4.68 per share, which
represents the Company’s closing stock price on the date of grant. The stock options had a grant date fair value of
$89,400, which the Company expects to recognize over the vesting period.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9 – Stockholders’ Equity – Continued
Stock Options - Continued
On May 28, 2020, the Company granted ten-year
stock options to purchase 263,500 shares of common stock to its employees under the Restated Plan. The shares vest over three years
from the date of grant with one-third vesting on the one-year anniversary of the date of grant and the balance vesting monthly
over the remaining 24 months. The stock options have an exercise price of $2.89 per share, which represents the Company’s
closing stock price on the date of grant. The stock options had a grant date fair value of $587,100, which the Company expects
to recognize over the vesting period.
On June 3, 2020, the Company granted ten-year
stock options to purchase 764,419 shares of common stock to its executive officers under the Restated Plan. The shares vest over
three years from the date of grant with one-third vesting on the one-year anniversary of the date of grant and the balance vesting
monthly over the remaining 24 months. The stock options have an exercise price of $2.72 per share, which represents the Company’s
closing stock price on the date of grant. The stock options had a grant date fair value of $1,603,600, which the Company expects
to recognize over the vesting period.
On July 28, 2020, the Company granted ten-year
stock options to purchase 43,000 shares of common stock to an employee under the Restated Plan. The shares vest over three years
from the date of grant with one-third vesting on the one-year anniversary of the date of grant and the balance vesting monthly
over the remaining 24 months. The stock options have an exercise price of $3.71 per share, which represents the Company’s
closing stock price on the date of grant. The stock options had a grant date fair value of $122,400, which the Company expects
to recognize over the vesting period.
On September 8, 2020, the Company granted
ten-year stock options to purchase 45,000 shares of common stock to employees and consultants under the Restated Plan. The shares
vest over three years from the date of grant with one-third vesting on the one-year anniversary of the date of grant and the balance
vesting monthly over the remaining 24 months. The stock options have an exercise price of $3.48 per share, which represents the
Company’s closing stock price on the date of grant. The stock options had a grant date fair value of $126,700, which the
Company expects to recognize over the vesting period.
On September 11, 2020, the Company granted
ten-year stock options to purchase 58,920 shares of common stock under the Restated Plan to members of its Board of Directors.
The shares vest on the earlier of (i) the one-year anniversary of the date of grant and (ii) the date of the 2021 annual stockholders
meeting, subject to the grantee remaining on the Board until then. The stock options have an exercise price of $3.43 per share,
which represents the Company’s closing stock price on the date of grant. The stock options had a grant date fair value of
$155,400, which the Company expects to recognize over the vesting period.
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,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Expected term (years)
|
|
|
5.85 - 10.00
|
|
|
|
5.85 - 10.00
|
|
|
|
5.85 - 10.00
|
|
|
|
5.85 - 10.00
|
|
Risk free interest rate
|
|
|
0.26% - 0.69%
|
|
|
|
1.42% - 1.55%
|
|
|
|
0.26% - 1.32%
|
|
|
|
1.42% - 2.53%
|
|
Expected volatility
|
|
|
98% - 99%
|
|
|
|
134%
|
|
|
|
96% - 99%
|
|
|
|
134% - 139%
|
|
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 does not have a trading history to support its historical volatility
calculations. Accordingly, the Company used a blended volatility whereby it uses its historical volatility for the period
from its IPO through the valuation date and uses the average of peer-group data of six comparable entities to supplement its
own historical data for the preceding years in computing its expected volatility. 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.
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9 – Stockholders’ Equity – Continued
Stock Options – Continued
The weighted average estimated grant date
fair value of the stock options granted for the three months ended September 30, 2020 and 2019 was approximately $2.71 and $3.11
per share, respectively. The weighted average estimated grant date fair value of the stock options granted for the nine months
ended September 30, 2020 and 2019 was approximately $2.24 and $3.10 per share, respectively.
A summary of the stock option activity during the nine months
ended September 30, 2020 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
In Years
|
|
|
Value
|
|
Outstanding January 1, 2020
|
|
|
2,237,438
|
|
|
$
|
3.51
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,199,839
|
|
|
|
2.90
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(26,737
|
)
|
|
|
1.95
|
|
|
|
|
|
|
|
|
|
Outstanding September 30, 2020
|
|
|
3,410,540
|
|
|
$
|
3.31
|
|
|
|
8.2
|
|
|
$
|
1,652,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable September 30, 2020
|
|
|
1,698,779
|
|
|
$
|
3.43
|
|
|
|
7.0
|
|
|
$
|
1,280,864
|
|
The following table presents information related to stock options
as of September 30, 2020:
Options Outstanding
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
Number of
|
|
|
Remaining Life
|
|
|
Number of
|
|
Price
|
|
Options
|
|
|
In Years
|
|
|
Options
|
|
$1.24
|
|
|
260,000
|
|
|
|
4.5
|
|
|
|
260,000
|
|
$1.95
|
|
|
673,544
|
|
|
|
6.8
|
|
|
|
673,544
|
|
$2.72
|
|
|
764,419
|
|
|
|
-
|
|
|
|
-
|
|
$2.74
|
|
|
6,000
|
|
|
|
8.3
|
|
|
|
3,333
|
|
$2.89
|
|
|
263,500
|
|
|
|
-
|
|
|
|
-
|
|
$3.11
|
|
|
681,572
|
|
|
|
8.9
|
|
|
|
275,064
|
|
$3.43
|
|
|
58,920
|
|
|
|
-
|
|
|
|
-
|
|
$3.48
|
|
|
45,000
|
|
|
|
-
|
|
|
|
-
|
|
$3.71
|
|
|
43,000
|
|
|
|
-
|
|
|
|
-
|
|
$4.00
|
|
|
2,000
|
|
|
|
8.1
|
|
|
|
1,223
|
|
$4.68
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
$5.10
|
|
|
6,000
|
|
|
|
7.9
|
|
|
|
4,000
|
|
$5.19
|
|
|
16,500
|
|
|
|
7.9
|
|
|
|
11,000
|
|
$5.25
|
|
|
26,668
|
|
|
|
6.0
|
|
|
|
26,501
|
|
$6.20
|
|
|
311,499
|
|
|
|
7.8
|
|
|
|
265,680
|
|
$6.30
|
|
|
60,000
|
|
|
|
7.8
|
|
|
|
43,333
|
|
$8.72
|
|
|
166,918
|
|
|
|
7.5
|
|
|
|
135,101
|
|
|
|
|
3,410,540
|
|
|
|
7.0
|
|
|
|
1,698,779
|
|
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 9 – Stockholders’ Equity – Continued
Stock Option Exercises
During the three and nine months ended
September 30, 2020, stock options for the purchase of 26,737 shares of the Company’s common stock with an exercise price
of $1.95 per share was exercised for proceeds of $52,137.
Restricted Stock Units
On September 11, 2020, the Company granted members of its Board
of Directors an aggregate of 43,728 restricted stock units (“RSUs”) under the Restated Plan. Each RSU is subject to
settlement into one share of the Company’s common stock. The RSUs vest on the earlier of (i) the one-year anniversary of
the date of grant and (ii) the date of the 2021 annual stockholders meeting, subject to the grantee remaining on the Board until
then. The RSUs had a grant date fair value of $150,000, which will be recognized over the vesting period.
Stock-Based Compensation Expense
The Company recorded stock-based
compensation expense related to stock options and RSUs. During the three months ended September 30, 2020 and 2019, the
Company recorded expense of $609,930 ($346,293 of which was included within research and development expenses and $263,637 of
which was included within general and administrative expenses on the condensed statement of operations) and $476,843
($255,323 of which was included within research and development expenses and $221,520 of which was included within general
and administrative expenses on the condensed statement of operations), respectively. During the nine months ended September
30, 2020 and 2019, the Company recorded expense of $1,826,941 ($1,002,149 of which was included within research and
development expenses and $824,792 was included within general and administrative expenses on the condensed statement of
operations) and $1,933,822 ($1,156,241 of which was included within research and development expenses and $777,581 was
included within general and administrative expenses on the condensed statement of operations), respectively. As of September
30, 2020, there was $4,145,595 of unrecognized stock-based compensation expense which the Company expects to recognize over a
weighted average period of 2.1 years.
Note 10 – Employee Benefit Plans
401(k) Plan
In April 2019, the Company adopted the
Eyenovia 401(k) Plan (the “Plan”), which went into effect in May 2019. All Company employees are able to participate
in the Plan, subject to eligibility requirements as outlined in the Plan documents. Under the terms of the Plan, eligible employees
are able to defer a percentage of their pay every pay period up to annual limitations set by Congress and the Internal Revenue
Service under Section 401(k) of the Internal Revenue Code. For 2020, the Company’s Board of Directors has approved a matching
contribution equal to 100% of elective deferrals up to 4% of eligible earnings with the matching contribution subject to certain
vesting requirements as outlined in the Plan documents. During the three months ended September 30, 2020 and 2019, the Company
recorded expense of $25,535 and $26,989 associated with its matching contributions, respectively. During the nine months ended
September 30, 2020 and 2019, the Company recorded expense of $106,021 and $43,032 associated with its matching contributions, respectively.
Note 11 – Subsequent Events
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 Company’s MicroPine
therapeutic candidate (the “Bausch Licensed Product”) in the United States and Canada (the “Licensed Territory”).
EYENOVIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 11 – Subsequent Events – Continued
Bausch Health License Agreement - Continued
In connection with the Bausch License
Agreement, Bausch Health paid the Company an upfront payment of $10.0 million. Bausch Health might 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. Under the terms of the Bausch License Agreement, on a country-to-country basis and Bausch Licensed Product-by- Bausch
Licensed Product basis, Bausch Health will pay the Company a royalties on a tiered basis (ranging from mid-single digit to mid-teen
percentages) on gross profits from the sales of the Bausch Licensed Product in the United States and Canada, subject to certain
adjustments in the event of generic entry, negative gross profits or patent expiration, for a period of the later to occur of
the 10th anniversary of the first commercial sale of a Bausch Licensed Product in such country in the Licensed Territory or the
expiration of the last valid patent claim for a Bausch Licensed Product in such country in the Licensed Territory. Under the terms
of the Bausch License Agreement, Bausch Health also has assumed oversight and costs related to the ongoing MicroPine study (the
CHAPERONE study).
Bausch Health may terminate the Bausch
License Agreement, with respect to the Bausch Licensed Product to either country in the Licensed Territory, at any time for convenience
upon 90 days’ written notice. Both parties have the right to terminate the Bausch License Agreement in the event of (i) an
uncured material breach after a 60-day period or (ii) a bankruptcy event.