Eyenovia(EYEN) - 2020 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited condensed financial statements, detailed notes, and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements. This section presents the unaudited condensed financial statements for Eyenovia, Inc., including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with comprehensive notes detailing the company's business, accounting policies, and financial activities for the periods ended September 30, 2020, and December 31, 2019 Condensed Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of September 30, 2020, and December 31, 2019 | Metric | Sep 30, 2020 (Unaudited) ($) | Dec 31, 2019 ($) | | :---------------------------------- | :----------------------- | :----------- | | Assets | | | | Cash and cash equivalents | $22,864,578 | $14,152,601 | | Total Current Assets | $25,367,668 | $14,349,281 | | Total Assets | $25,847,659 | $14,697,619 | | Liabilities | | | | Total Current Liabilities | $6,736,677 | $2,911,661 | | Total Liabilities | $7,197,438 | $2,957,012 | | Stockholders' Equity | | | | Total Stockholders' Equity | $18,650,221 | $11,740,607 | | Total Liabilities and Stockholders' Equity | $25,847,659 | $14,697,619 | Condensed Statements of Operations This section outlines the company's financial performance, including operating expenses, net loss, and net loss per share for the three and nine months ended September 30, 2020 and 2019 | Metric | Three Months Ended Sep 30, 2020 ($) | Three Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $3,363,759 | $3,201,196 | $9,913,296 | $10,778,114 | | General and administrative | $1,728,366 | $1,489,739 | $5,669,311 | $5,241,608 | | Total Operating Expenses | $5,092,125 | $4,690,935 | $15,582,607 | $16,019,722 | | Loss From Operations | $(5,092,125) | $(4,690,935) | $(15,582,607) | $(16,019,722) | | Net Loss | $(5,096,530) | $(4,649,378) | $(15,563,005) | $(15,915,274) | | Net Loss Per Share - Basic and Diluted ($/share) | $(0.23) | $(0.29) | $(0.79) | $(1.19) | | Weighted Average Number of Common Shares Outstanding (shares) | 22,206,195 | 16,270,728 | 19,802,999 | 13,422,667 | Condensed Statements of Changes in Stockholders' Equity This section details changes in the company's equity, including common shares, additional paid-in capital, and accumulated deficit for the nine months ended September 30, 2020 and 2019 | Metric | Balance - Jan 1, 2020 ($) | Balance - Sep 30, 2020 ($) | | :------------------------------------------------- | :-------------------- | :--------------------- | | Common Shares (shares) | 17,100,726 | 24,884,251 | | Common Stock Amount | $1,710 | $2,488 | | Additional Paid-In Capital | $69,409,949 | $91,881,790 | | Accumulated Deficit | $(57,671,052) | $(73,234,057) | | Total Stockholders' Equity | $11,740,607 | $18,650,221 | - During the nine months ended September 30, 2020, the company issued 2,675,293 common shares and warrants in a private placement, generating $5,451,742 in total stockholders' equity, which included gross proceeds of $5,984,931 less issuance costs of $533,189[19] - The company issued 3,833,334 common shares in a public offering, contributing $12,495,708 to total stockholders' equity, which included gross proceeds of $13,800,002 less issuance costs of $1,304,294[19] Condensed Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019 | Metric | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Used In Operating Activities | $(11,853,369) | $(14,899,112) | | Net Cash Used In Investing Activities | $(202,046) | $(43,478) | | Net Cash Provided By Financing Activities | $20,767,392 | $13,510,352 | | Net Increase (Decrease) in Cash and Cash Equivalents | $8,711,977 | $(1,432,238) | | Cash and cash equivalents - End of Period | $22,864,578 | $18,295,962 | - Financing activities in 2020 included $5,569,136 from a private placement, $12,734,002 from a public offering, $2,646,091 from warrant exercises, and $463,353 from a PPP 7(a) Loan[24] Notes to Unaudited Condensed Financial Statements This section provides detailed explanations of the company's accounting policies, financial instruments, and significant transactions supporting the condensed financial statements Note 1 – Business Organization, Nature of Operations and Basis of Presentation This note describes Eyenovia, Inc.'s core business as a clinical-stage ophthalmic biopharmaceutical company and its innovative drug delivery system - Eyenovia, Inc. is a clinical-stage ophthalmic biopharmaceutical company developing microdose array print (MAP™) therapeutics using its high-precision Optejet® ocular delivery system[28] - The Optejet® system has demonstrated a significantly higher success rate (~90%) for ophthalmic medication delivery compared to traditional eye drops (~50%)[28] - Eyenovia's products are classified by the FDA as drugs, not medical devices or drug-device combination products[28] Note 2 – Summary of Significant Accounting Policies This note outlines the key accounting principles and methods applied in preparing the financial statements, including policies for liquidity, cash, derivatives, and net loss per share Liquidity This section assesses the company's ability to meet short-term obligations, detailing cash position, accumulated deficit, and net losses | Metric | As of Sep 30, 2020 ($) | For Nine Months Ended Sep 30, 2020 ($) | For Nine Months Ended Sep 30, 2019 ($) | | :----------------------- | :----------------- | :--------------------------------- | :--------------------------------- | | Cash and cash equivalents | ~$22.9 million | - | - | | Accumulated deficit | ~$73.2 million | - | - | | Net losses | - | ~$15.6 million | ~$15.9 million | | Cash used in operations | - | ~$11.9 million | ~$14.9 million | - Subsequent to September 30, 2020, the Company received an upfront payment of $10.0 million from the Bausch License Agreement, which is expected to bolster liquidity[31] - The Company believes its current cash, including proceeds from the Bausch License Agreement and warrant exercises, is sufficient for at least the next twelve months, but may require additional capital thereafter[32] Cash and Cash Equivalents This section defines cash equivalents and reports cash balances, including amounts exceeding FDIC insurance limits - The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents[35] | Metric | As of Sep 30, 2020 ($) | As of Dec 31, 2019 ($) | | :------------------------------------ | :----------------- | :----------------- | | Cash balances in excess of FDIC limits | $22,614,578 | $13,902,601 | Derivative Instruments This section describes the company's accounting policy for derivative instruments, including valuation and recognition of fair value changes - The Company evaluates embedded conversion options and freestanding instruments for derivative classification, recording them at fair value at inception and each subsequent balance sheet date, with changes in fair value recognized as non-operating income or expense[37] Net Loss Per Common Share This section explains the calculation of basic net loss per common share and lists potentially dilutive securities - Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding[38] | Potentially Dilutive Securities (shares) | 2020 | 2019 | | :------------------------------ | :------- | :------- | | Options | 3,410,540 | 2,237,438 | | Warrants | 2,095,993 | - | | Restricted stock units | 43,728 | 60,355 | | Total potentially dilutive shares | 5,550,261 | 2,297,793 | Recently Adopted Accounting Pronouncements This section details the adoption of new accounting standards and their impact on the company's financial statements - The Company adopted ASU No. 2017-11 (Accounting for Certain Financial Instruments with Down Round Features) on January 1, 2020, which did not materially impact its financial statements[40] - The Company adopted ASU 2020-03 (Codification Improvements to Financial Instruments) upon issuance in March 2020, which also did not materially impact its financial statements[41] Note 3 – Prepaid Expenses and Other Current Assets This note provides a breakdown of various prepaid expenses and other current assets as of September 30, 2020, and December 31, 2019 | Prepaid Expense Category | Sep 30, 2020 (Unaudited) ($) | Dec 31, 2019 ($) | | :---------------------------------- | :----------------------- | :----------- | | 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 | | Total prepaid expenses and other current assets | $903,090 | $196,680 | Note 4 – Accrued Compensation This note details the company's accrued compensation liabilities, including bonus and payroll expenses, for the specified periods | Accrued Compensation Category | Sep 30, 2020 (Unaudited) ($) | Dec 31, 2019 ($) | | :---------------------------- | :----------------------- | :----------- | | Accrued bonus expenses | $579,604 | $897,839 | | Accrued payroll expenses | $164,951 | $19,034 | | Total accrued compensation | $744,555 | $916,873 | Note 5 – Accrued Expenses and Other Current Liabilities This note presents a breakdown of accrued expenses and other current liabilities, such as R&D costs and professional services | Accrued Expense Category | Sep 30, 2020 (Unaudited) ($) | Dec 31, 2019 ($) | | :----------------------------------------- | :----------------------- | :----------- | | Accrued research and development expenses | $294,421 | $208,175 | | Accrued public offering costs | $14,102 | - | | Accrued professional services | $11,000 | $97,396 | | Total accrued expenses and other current liabilities | $373,609 | $453,430 | Note 6 – Notes Payable This note details the company's outstanding notes payable, including the Paycheck Protection Program loan and directors and officers insurance policy loan | Note Type | Current Portion (Sep 30, 2020) ($) | Non-Current Portion (Sep 30, 2020) ($) | Total (Sep 30, 2020) ($) | | :----------------------------------- | :----------------------------- | :--------------------------------- | :------------------- | | 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 | - The PPP Loan of $463,353 was received on May 8, 2020, bears 1.00% interest, and is eligible for forgiveness based on use for Qualifying Expenses[50][51] - Interest expense for notes payable was $3,824 for the three months and $9,855 for the nine months ended September 30, 2020[52] Note 7 – Commitments and Contingencies This note outlines the company's legal proceedings, claims, assessments, and significant licensing agreements Litigations, Claims and Assessments This section describes the company's policy for recording legal costs and accruing for probable and estimable settlements - The Company records legal costs for loss contingencies as incurred and accrues for probable and estimable settlements[54] Arctic Vision License Agreement This section details the licensing agreement with Arctic Vision for the development and commercialization of MicroPine and MicroLine in specific Asian markets - On August 10, 2020, Eyenovia entered into a License Agreement with Arctic Vision for the development and commercialization of MicroPine and MicroLine in Greater China and South Korea[55] - The Company received an upfront payment of $4.0 million, recorded as a deferred license fee, and may receive up to $41.75 million in additional development and regulatory milestone payments[56] - Eyenovia will pay a mid-double digit percentage of these payments, royalties, or net proceeds to Senju Pharmaceutical Co., Ltd. as per an existing exclusive license agreement[56] Note 8 – Related Party Transactions This note discloses transactions with related parties, including consulting agreements, lease agreements, R&D activities, and licensing arrangements Consulting Agreements This section reports on a terminated consulting agreement with a company partly owned by a Board member, including incurred expenses - A consulting agreement with a company partly owned by a Board member was terminated on September 1, 2020, with expenses incurred of $19,134 for the three months and $57,402 for the nine months ended September 30, 2020[59] Lease Agreements This section details a lease agreement with a company owned by the VP of R&D, including lease terms and rent expenses - The Company leases space from a company owned by its VP of R&D, with the lease extended to September 14, 2022, and monthly base rent increasing to $5,404[60] | Metric | Three Months Ended Sep 30, 2020 ($) | Three Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :----------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Rent expense | $15,982 | $12,036 | $43,512 | $36,108 | Research and Development Activities This section reports on R&D expenses related to contract engineering and compensation for the VP of R&D | Metric | Three Months Ended Sep 30, 2020 ($) | Three Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | R&D expense for contract engineering | $323,187 | $197,543 | $795,992 | $728,103 | | Compensation expense for VP of R&D | $46,050 | $46,010 | $143,437 | $140,110 | License Agreement (Senju) This section describes the exclusive license agreement with Senju Pharmaceutical Co., Ltd., including royalty terms and amendments for third-party licensing - Eyenovia has an Exclusive License Agreement with Senju Pharmaceutical Co., Ltd. (a related party) for its medical device technology in Asia, entitling Senju to 5% royalties on sales[63] - An amendment on April 8, 2020, allows Eyenovia to license Senju Licensed Products (atropine sulfate for myopia, pilocarpine for presbyopia) to third parties in China and South Korea, with Eyenovia paying Senju a mid-double digit percentage of lump-sum payments and a lower-double digit percentage of sales royalties[66][67] - A Letter Agreement on August 10, 2020, specifies that Eyenovia will pay Senju a mid-double digit percentage of payments, royalties, or net proceeds received from the Arctic Vision License Agreement[68] - During the nine months ended September 30, 2020, Eyenovia paid Senju $1.6 million in connection with the Arctic Vision License Agreement, recorded as deferred license costs[68] Note 9 – Stockholders' Equity This note details changes in stockholders' equity, including equity incentive plans, securities purchase agreements, warrants, public offerings, stock options, and restricted stock units Equity Incentive Plan This section outlines the Amended and Restated 2018 Omnibus Stock Incentive Plan, including reserved shares and vesting requirements - The Amended and Restated 2018 Omnibus Stock Incentive Plan, approved by stockholders on June 30, 2020, increased shares reserved for issuance to 2,950,000[69] - The Restated Plan requires equity awards to vest at least twelve months from the grant date (with exceptions for accelerated vesting) and sets an annual limit of $150,000 on grant date fair value of awards to non-employee directors[69] Securities Purchase Agreement This section describes the private placement of Units, including common shares and warrants, and the net proceeds generated - On March 24, 2020, the Company closed a private placement of approximately $6.0 million in Units, each consisting of one common share, a one-year Class A Warrant, and a five-year Class B Warrant[72] - The offering generated approximately $5.45 million in net proceeds after deducting $0.53 million in fees and expenses[72] - An aggregate of 2,675,293 common shares, 1,337,659 Class A Warrants, and 2,006,495 Class B Warrants were issued[72] Warrants This section provides a summary of warrant activity, including grants, exercises, and outstanding warrants with their exercise prices and intrinsic value | Metric | Number of Warrants (warrants) | Weighted Average Exercise Price ($/share) | Average Remaining Life In Years (years) | Aggregate Intrinsic 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 | - During the nine months ended September 30, 2020, warrants for 1,248,161 shares were exercised, generating approximately $2.6 million in proceeds[77] Underwritten Public Offering This section details the public offering of common shares, including the number of shares issued, offering price, and net proceeds - On August 19, 2020, Eyenovia entered into an Underwriting Agreement for a public offering of 3,333,334 common shares at $3.60 per share[78] - The Company granted underwriters a 30-day option to purchase an additional 500,000 shares[78] - The offering closed on August 21, 2020, with 3,833,334 common shares issued, yielding approximately $12.5 million in net proceeds after $1.3 million in discounts and expenses[79] Stock Options This section summarizes stock option grants to employees and directors, including exercise prices, vesting terms, and fair values - Multiple stock option grants were made to employees, executive officers, and Board members during 2020, with exercise prices ranging from $2.72 to $4.68 per share and vesting over three years (or earlier for Board members)[81][84][85][86][87][88] | Metric | Three Months Ended Sep 30, 2020 ($/share) | Three Months Ended Sep 30, 2019 ($/share) | Nine Months Ended Sep 30, 2020 ($/share) | Nine Months Ended Sep 30, 2019 ($/share) | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Weighted average estimated grant date fair value | ~$2.71 per share | ~$3.11 per share | ~$2.24 per share | ~$3.10 per share | | Metric | Number of Options (options) | Weighted Average Exercise Price ($/share) | Weighted Average Remaining Life In Years (years) | Aggregate Intrinsic 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 | Restricted Stock Units This section reports on restricted stock units granted to Board members, including their fair value and vesting conditions - On September 11, 2020, 43,728 restricted stock units (RSUs) were granted to Board members, with a grant date fair value of $150,000, vesting on the earlier of one year or the 2021 annual stockholders meeting[98] Stock-Based Compensation Expense This section details the total stock-based compensation expense, broken down by R&D and G&A portions, and unrecognized expense | Metric | Three Months Ended Sep 30, 2020 ($) | Three Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total stock-based compensation expense | $609,930 | $476,843 | $1,826,941 | $1,933,822 | | R&D portion | $346,293 | $255,323 | $1,002,149 | $1,156,241 | | G&A portion | $263,637 | $221,520 | $824,792 | $777,581 | - As of September 30, 2020, there was $4,145,595 of unrecognized stock-based compensation expense, expected to be recognized over a weighted average period of 2.1 years[99] Note 10 – Employee Benefit Plans This note describes the company's 401(k) plan, including employee deferrals and company matching contributions 401(k) Plan This section outlines the Eyenovia 401(k) Plan, including employee eligibility, deferral options, and company matching contributions - The Eyenovia 401(k) Plan, adopted in April 2019, allows eligible employees to defer a percentage of their pay[100] - For 2020, the Company approved a matching contribution equal to 100% of elective deferrals up to 4% of eligible earnings, subject to vesting requirements[100] | Metric | Three Months Ended Sep 30, 2020 ($) | Three Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Matching contributions expense | $25,535 | $26,989 | $106,021 | $43,032 | Note 11 – Subsequent Events This note discloses significant events occurring after the reporting period, specifically the Bausch License Agreement Bausch License Agreement This section details the licensing agreement with Bausch Health for the development and commercialization of MicroPine in the United States and Canada - On October 9, 2020, Eyenovia entered into a License Agreement with Bausch Health for the development and commercialization of MicroPine in the United States and Canada[101] - Bausch Health paid an upfront payment of $10.0 million and may pay up to $35.0 million in additional regulatory and launch-based milestone payments[104] - Bausch Health will pay tiered royalties (mid-single digit to mid-teen percentages) on gross profits from MicroPine sales and has assumed oversight and costs for the ongoing CHAPERONE study[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on Eyenovia's financial condition and results of operations, highlighting the company's clinical-stage biopharmaceutical focus, pipeline progress, financial performance, and liquidity. It details changes in operating expenses and outlines future capital needs Overview This section introduces Eyenovia as a clinical-stage ophthalmic biopharmaceutical company, its product pipeline, and funding reliance - Eyenovia is a clinical-stage ophthalmic biopharmaceutical company developing microdose array print (MAP™) therapeutics using its Optejet® delivery system[109] - The company's pipeline includes MicroPine for progressive myopia (Phase III CHAPERONE study), MicroLine for presbyopia (planned Phase III VISION trials in 2020), and MicroStat (Mydcombi™) for mydriasis (NDA filing on track for 2020)[109][110][113][115] - Eyenovia has not generated product sales revenue and relies on equity offerings and licensing arrangements for funding[116][117] | Metric | As of Sep 30, 2020 ($) | For Three Months Ended Sep 30, 2020 ($) | For Nine Months Ended Sep 30, 2020 ($) | | :------------------ | :----------------- | :---------------------------------- | :--------------------------------- | | Working capital | $18.6 million | - | - | | Accumulated deficit | $73.2 million | - | - | | Net losses | - | $5.1 million | $15.6 million | Financial Overview This section summarizes the company's revenue expectations and trends in research and development and general and administrative expenses Revenue This section discusses the company's lack of product sales revenue and its reliance on successful product development and licensing agreements for future income - The Company has not generated revenue from product sales since inception and expects future revenues to depend on successful development, regulatory approval, and commercialization of its product candidates[119] - Recent licensing agreements are expected to generate upfront payments and additional milestone-based fees[120] Research and Development Expenses This section details the components of R&D expenses, their accounting treatment, and expected future trends - R&D expenses primarily consist of contract service expenses, direct clinical and non-clinical expenses, personnel-related expenses, and facilities and other expenses[121][122] - R&D costs are expensed as incurred, with some development activities recorded based on progress to completion[123] - The Company expects R&D expenses to increase with the continuation of its initiatives[124] General and Administrative Expenses This section analyzes the changes in general and administrative expenses, attributing increases to professional services and patent costs, and decreases to travel - General and administrative expenses increased by $0.5 million (8%) to $5.7 million for the nine months ended September 30, 2020, compared to $5.2 million in 2019[125] - The increase was driven by a $0.4 million rise in professional services for business development, a $0.3 million increase in patent-related expenses, and a $0.1 million increase in liability insurance[125] - This increase was partially offset by a $0.3 million decrease in travel and entertainment expenses due to the COVID-19 pandemic[125] Results of Operations This section provides a comparative analysis of the company's operating expenses and financial performance for the three and nine months ended September 30, 2020 and 2019 Three Months Ended September 30, 2020 Compared with Three Months Ended September 30, 2019 This section compares the company's financial performance for the three-month periods, focusing on changes in research and development and general and administrative expenses Research and Development Expenses This section analyzes the 5% increase in R&D expenses, driven by clinical activities and hiring, partially offset by COVID-19 related delays | R&D Expense Category | Sep 30, 2020 ($) | Sep 30, 2019 ($) | | :---------------------------------- | :----------- | :----------- | | Direct clinical and non-clinical expenses | $1,745,880 | $1,649,931 | | Personnel-related expenses | $890,771 | $729,010 | | Non-cash stock-based compensation expenses | $346,294 | $255,323 | | Supplies and materials | $325,517 | $563,544 | | Facilities and other expenses | $55,297 | $3,388 | | Total research and development expenses | $3,363,759 | $3,201,196 | - The 5% increase in R&D expenses for the three months ended September 30, 2020, was primarily due to increased activities for MicroPine and MicroLine studies, hiring of additional employees, and higher depreciation on new assets[126] - This was partially offset by a decrease in supplies and materials due to delays in clinical trials from the COVID-19 pandemic[126] General and Administrative Expenses This section examines the 16% increase in G&A expenses, primarily due to professional services and patent costs, with some offset from reduced travel - General and administrative expenses increased by $0.2 million (16%) to $1.7 million for the three months ended September 30, 2020, compared to $1.5 million in 2019[128] - The increase was mainly due to a $0.15 million rise in professional services for business development and a $0.1 million increase in patent and advertising/marketing expenses[128] - This was slightly offset by a $0.05 million decrease in travel expenses due to the COVID-19 pandemic[128] Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019 This section compares the company's financial performance for the nine-month periods, focusing on changes in research and development and general and administrative expenses Research and Development Expenses This section analyzes the 8% decrease in R&D expenses, mainly due to COVID-19 impacts, partially offset by increased personnel and facilities costs | R&D Expense Category | Sep 30, 2020 ($) | Sep 30, 2019 ($) | | :---------------------------------- | :----------- | :------------ | | Direct clinical and non-clinical expenses | $5,076,662 | $6,059,900 | | Personnel-related expenses | $2,533,439 | $2,253,951 | | Non-cash stock-based compensation expenses | $1,002,150 | $1,156,241 | | Supplies and materials | $1,108,021 | $1,295,806 | | Facilities and other expenses | $193,024 | $12,216 | | Total research and development expenses | $9,913,296 | $10,778,114 | - R&D expenses decreased by $0.9 million (8%) for the nine months ended September 30, 2020, primarily due to reduced activities and supplies related to the COVID-19 pandemic[129] - This decrease was partially offset by increased personnel-related and facilities expenses due to hiring additional employees and expanding R&D activities in late 2019[129] General and Administrative Expenses This section examines the 8% increase in G&A expenses, driven by professional services and patent costs, offset by reduced travel - General and administrative expenses increased by $0.5 million (8%) to $5.7 million for the nine months ended September 30, 2020, driven by a $0.4 million increase in professional services and a $0.3 million increase in patent-related expenses[130] - This was offset by a $0.3 million decrease in travel and entertainment expenses due to the COVID-19 pandemic[130] Liquidity and Capital Resources This section assesses the company's cash position, working capital, and financing activities, outlining its ability to fund operations and future capital needs | Metric | As of Sep 30, 2020 ($) | As of Dec 31, 2019 ($) | | :------------------ | :----------------- | :----------------- | | Cash balance | $22.9 million | $14.2 million | | Working capital | $18.6 million | $14.3 million | | Stockholders' equity | $18.7 million | $11.7 million | | Debt outstanding | $0.6 million | $0 | - Recent financing activities include $4.0 million upfront from Arctic Vision License Agreement, $18.3 million net proceeds from public and private offerings, $2.6 million from warrant exercises, and $0.5 million from a PPP Loan[133] - Subsequent to September 30, 2020, the Company received a $10.0 million upfront payment from the Bausch License Agreement[133] - The Company expects current cash to be sufficient for the next twelve months but may need to raise further capital through equity or debt to support future operations, including R&D and clinical studies[134] | Cash Flow Activity | Nine Months Ended Sep 30, 2020 ($) | Nine Months Ended Sep 30, 2019 ($) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $11.9 million | $14.9 million | | Net cash used in investing activities | $0.2 million | < $0.1 million | | Net cash provided by financing activities | $20.8 million | $13.5 million | Off-Balance Sheet Arrangements This section confirms the absence of off-balance sheet arrangements with a material effect on the company's financial condition or results of operations - The Company has no off-balance sheet arrangements that are reasonably likely to have a material effect on its financial condition or results of operations[138] Critical Accounting Policies This section refers to Note 2 for a detailed description of the company's critical accounting policies - A description of critical accounting policies is provided in Note 2 – Summary of Significant Accounting Policies[139] Recently Adopted Accounting Pronouncements This section refers to Note 2 for information on recently adopted accounting pronouncements and their impact - Information on recently adopted accounting pronouncements, including adoption dates and effects, is detailed in Note 2 – Summary of Significant Accounting Policies[140] Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, Eyenovia, Inc. is not required to provide quantitative and qualitative disclosures about market risk - Smaller reporting companies are exempt from providing quantitative and qualitative disclosures about market risk[142] Item 4. Controls and Procedures. This section details management's evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of September 30, 2020 - As of September 30, 2020, management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective[148] - These controls are designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely, and communicated to management for disclosure decisions[148] Changes in Internal Control over Financial Reporting This section reports that there were no material changes in internal control over financial reporting during the third quarter of 2020 - There were no material changes in internal control over financial reporting during the third quarter of 2020[149] PART II - OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings. Eyenovia, Inc. reported no legal proceedings for the period - There are no legal proceedings to report[152] Item 1A. Risk Factors. As a smaller reporting company, Eyenovia, Inc. is not required to provide risk factor disclosures in this report - Smaller reporting companies are exempt from providing risk factor information[154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Eyenovia, Inc. reported no unregistered sales of equity securities or purchases of equity securities by the issuer and affiliated purchasers - There were no recent sales of unregistered securities[156] - There were no purchases of equity securities by the issuer and affiliated purchasers[157] Item 3. Defaults Upon Senior Securities. This item is not applicable to Eyenovia, Inc. for the reporting period - This item is not applicable[159] Item 4. Mine Safety Disclosures. This item is not applicable to Eyenovia, Inc. for the reporting period - This item is not applicable[161] Item 5. Other Information. Eyenovia, Inc. reported no other information for the period - There is no other information to report[163] Item 6. Exhibits. This section lists the exhibits filed as part of the Form 10-Q, including various agreements, certifications, and interactive data files - Key exhibits include the Amended and Restated 2018 Omnibus Stock Incentive Plan, Letter Agreement with Senju Pharmaceutical Co., Ltd., and License Agreement with Arctic Vision (Hong Kong) Limited[165] - Certifications from the Principal Executive Officer and Principal Financial and Accounting Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) are filed herewith[165] - Interactive data files (XBRL) for the financial statements are also included[165] SIGNATURES The report is duly signed on behalf of Eyenovia, Inc. by its Chief Financial Officer, John Gandolfo, on November 12, 2020 - The report was signed by John Gandolfo, Chief Financial Officer (Principal Financial and Accounting Officer), on November 12, 2020[170]