10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2023

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: 001-40587

 

SIGHT SCIENCES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

80-0625749

(State or other jurisdiction of

incorporation or organization)

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

4040 Campbell Ave, Suite 100

Menlo Park, CA

94025

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (877) 266-1144

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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, par value $0.001

 

SGHT

 

The Nasdaq Global Select 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, 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 new 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 Exchange Act). Yes ☐ No

 

As of May 4, 2023, the registrant had 48,460,154 shares of Common Stock, par value $0.001 outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

3

 

 

 

PART I.

FINANCIAL INFORMATION

5

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets (Unaudited)

5

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

6

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

7

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

 

 

 

PART II.

OTHER INFORMATION

29

 

 

 

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

 

Signatures

32

 

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “Sight Sciences,” “we,” “us” and “our” refer to Sight Sciences, Inc.

This Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2023 (this "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

estimates of our total addressable market, future revenue, expenses, capital requirements, and our needs for additional financing;
our ability to enter into and compete in new markets;
the impact of pandemics on our business, our customers’ and suppliers’ businesses and the general economy;
our ability to compete effectively with existing competitors and new market entrants;
our ability to scale our infrastructure;
our ability to manage and grow our business by expanding our sales to existing customers or introducing our products to new customers;
our ability to establish and maintain intellectual property protection for our products or avoid claims of infringement;
potential effects of extensive government regulation;
our ability to obtain and maintain sufficient reimbursement for our products;
our abilities to protect and scale our intellectual property portfolio;
our ability to hire and retain key personnel;
our ability to obtain financing in future offerings;
the volatility of the trading price of our common stock;
our expectation regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”); and
our ability to maintain proper and effective internal controls.

Actual events or results may differ from those expressed in forward-looking statements. As such, you should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, prospects, strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the "SEC") on March 16, 2023 (the "2022 Form 10-K") and elsewhere in this Quarterly Report. Moreover, we operate in a highly competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking

 

3


 

statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements in this Quarterly Report are based on information available to us as of the date of this Quarterly Report. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report to reflect events or circumstances after the date of this Quarterly Report or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

 

 

4


 

PART 1. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SIGHT SCIENCES, INC.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

167,335

 

 

$

185,000

 

Accounts receivable, net of allowance for credit losses of $774 and $1,024 at March 31, 2023 and December 31, 2022, respectively

 

 

16,357

 

 

 

15,148

 

Inventory, net

 

 

7,138

 

 

 

6,114

 

Prepaid expenses and other current assets

 

 

2,822

 

 

 

3,415

 

Total current assets

 

 

193,652

 

 

 

209,677

 

Property and equipment, net

 

 

1,393

 

 

 

1,571

 

Operating lease right-of-use assets

 

 

1,372

 

 

 

1,614

 

Other noncurrent assets

 

 

224

 

 

 

211

 

Total assets

 

$

196,641

 

 

$

213,073

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,501

 

 

$

2,688

 

Accrued compensation

 

 

4,958

 

 

 

7,352

 

Accrued and other current liabilities

 

 

6,686

 

 

 

7,777

 

Total current liabilities

 

 

15,145

 

 

 

17,817

 

Long-term debt

 

 

33,457

 

 

 

33,313

 

Other noncurrent liabilities

 

 

1,663

 

 

 

1,867

 

Total liabilities

 

 

50,265

 

 

 

52,997

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock par value of $0.001 per share; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Common stock par value of $0.001 per share; 200,000,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 48,450,378 and 48,298,138 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

48

 

 

 

48

 

Additional paid-in-capital

 

 

402,638

 

 

 

399,271

 

Accumulated deficit

 

 

(256,310

)

 

 

(239,243

)

Total stockholders’ equity

 

 

146,376

 

 

 

160,076

 

Total liabilities and stockholders’ equity

 

$

196,641

 

 

$

213,073

 

 

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

 

5


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(in thousands, except share and per share data)

 

 

 

 

Three Months Ended
March 31,

 

 

 

 

2023

 

 

2022

 

 

Revenue

 

$

18,824

 

 

$

14,881

 

 

Cost of goods sold

 

 

3,048

 

 

 

3,033

 

 

Gross profit

 

 

15,776

 

 

 

11,848

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

4,669

 

 

 

5,646

 

 

Selling, general and administrative

 

 

28,675

 

 

 

28,395

 

 

Total operating expenses

 

 

33,344

 

 

 

34,041

 

 

Loss from operations

 

 

(17,568

)

 

 

(22,193

)

 

Interest expense

 

 

(1,276

)

 

 

(1,046

)

 

Other income (expense), net

 

 

1,791

 

 

 

(15

)

 

Loss before income taxes

 

 

(17,053

)

 

 

(23,254

)

 

Provision for income taxes

 

 

14

 

 

 

9

 

 

Net loss and comprehensive loss

 

$

(17,067

)

 

$

(23,263

)

 

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.35

)

 

$

(0.49

)

 

Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted

 

 

48,405,271

 

 

 

47,569,499

 

 

 

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

 

 

6


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended March 31, 2023

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2022

 

 

48,298,138

 

 

$

48

 

 

$

399,271

 

 

$

(239,243

)

 

$

160,076

 

Issuance of common stock upon exercise of stock options

 

 

46,208

 

 

 

 

 

 

49

 

 

 

 

 

 

49

 

Issuance of common stock upon vesting of restricted stock units

 

 

106,032

 

 

 

 

 

 

 

 

 

 

 

 

 

Withholding taxes on net share settlement of restricted stock units

 

 

 

 

 

 

 

 

(205

)

 

 

 

 

 

(205

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

3,523

 

 

 

 

 

 

3,523

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,067

)

 

 

(17,067

)

Balance at March 31, 2023

 

 

48,450,378

 

 

 

48

 

 

 

402,638

 

 

 

(256,310

)

 

 

146,376

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

47,504,704

 

 

$

48

 

 

$

385,060

 

 

$

(153,001

)

 

$

232,107

 

Issuance of common stock upon exercise of stock options

 

 

85,644

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,974

 

 

 

 

 

 

2,974

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(23,263

)

 

 

(23,263

)

Balance at March 31, 2022

 

 

47,590,348

 

 

 

48

 

 

 

388,127

 

 

 

(176,264

)

 

 

211,911

 

 

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

 

7


 

SIGHT SCIENCES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(17,067

)

 

$

(23,263

)

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

 

 

 

 

 

 

Depreciation

 

 

146

 

 

 

179

 

Accretion of debt discount and amortization of debt issuance costs

 

 

144

 

 

 

161

 

Stock-based compensation expense

 

 

3,523

 

 

 

2,974

 

Provision for doubtful accounts receivable

 

 

(250

)

 

 

(60

)

Provision for excess and obsolete inventories

 

 

12

 

 

 

8

 

Noncash operating lease expense

 

 

242

 

 

 

121

 

Loss on disposal of property and equipment

 

 

66

 

 

 

46

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(959

)

 

 

(1,180

)

Inventory

 

 

(1,036

)

 

 

(615

)

Prepaid expenses and other current assets

 

 

593

 

 

 

1,472

 

Other noncurrent assets

 

 

(13

)

 

 

10

 

Accounts payable

 

 

878

 

 

 

(248

)

Accrued compensation

 

 

(2,394

)

 

 

(2,129

)

Accrued and other current liabilities

 

 

(1,345

)

 

 

472

 

Other noncurrent liabilities

 

 

77

 

 

 

86

 

Net cash used in operating activities

 

 

(17,383

)

 

 

(21,966

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(126

)

 

 

(227

)

Net cash used in investing activities

 

 

(126

)

 

 

(227

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

49

 

 

 

92

 

Taxes paid on the net share settlement of restricted stock units

 

 

(205

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(156

)

 

 

92

 

Net change in cash and cash equivalents

 

 

(17,665

)

 

 

(22,101

)

Cash and cash equivalents at beginning of period

 

 

185,000

 

 

 

260,687

 

Cash and cash equivalents at end of period

 

$

167,335

 

 

$

238,586

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

1,002

 

 

$

766

 

Supplemental noncash disclosure

 

 

 

 

 

 

Acquisition of property and equipment included in accounts payable and accrued liabilities

 

$

10

 

 

$

418

 

 

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

 

8


 

SIGHT SCIENCES, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 1. Company and Nature of Business

 

Description of Business

 

Sight Sciences, Inc. (the “Company”) was incorporated in the State of Delaware in 2010 and is headquartered in Menlo Park, California. The Company is an ophthalmic medical device company focused on the development and commercialization of surgical and nonsurgical technologies for the treatment of prevalent eye diseases.

Significant Risks and Uncertainties

Since inception, the Company has incurred losses and negative cash flows from operations. As of March 31, 2023, the Company had an accumulated deficit of $256.3 million and recorded a net loss of $17.1 million for the three months then ended and expects to incur additional losses in the future. If the Company’s revenue levels from its products are not sufficient or if the Company is unable to secure additional funding when desired, the Company may need to delay the development of its products, scale back its business and operations, or change its business strategy.

The Company believes that its existing sources of liquidity will satisfy its working capital and capital requirements for at least 12 months from the issuance of its financial statements. Any failure to generate increased revenues, achieve improved gross margins, or control operating costs could require the Company to raise additional capital through equity or debt financing. Such additional financing may not be available on acceptable terms, or at all, and could require the Company to modify, delay, or abandon some of its planned future expansion or expenditures or reduce some of its ongoing operating costs, which could harm its business, operating results, financial condition, and ability to achieve its intended business objectives.

Note 2. Summary of Significant Accounting Policies

There have been no significant changes in the Company's significant accounting policies during the three months ended March 31, 2023, as compared with those disclosed in the 2022 Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (SEC) on March 16, 2023.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) applicable to interim periods and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

The unaudited consolidated financial statements have been prepared on a basis consistent with the audited financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company's financial information contained herein. The condensed consolidated balance sheets as of December 31, 2022 has been derived from the audited financial statements at that date. These interim condensed consolidated financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company's financial statements and accompanying notes for the fiscal year ended December 31, 2022, which are contained in the Company's 2022 Form 10-K filed with the SEC on March 16, 2023. The Company's results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other interim period.

The accompanying condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

 

 

9


 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates related to the provision for doubtful accounts, inventory excess and obsolescence, the selection of useful lives of property and equipment, determination of the fair value of stock option grants, and provisions for income taxes and contingencies. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements. Actual results could differ from these estimates and such differences could be material to the Company’s financial position and results of operations.

New Accounting Pronouncements

Accounting Standards Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The guidance was effective for the Company beginning in the first quarter of 2023. The amendments in ASU 2016-13 were adopted with no material impact on the Company's consolidated financial statements.

Accounting Standards Net Yet Adopted

As of March 31, 2023, there are no significant ASU's issued and not yet adopted, that are expected to have a material impact on the Company's financial statements and related disclosures.

Note 3. Fair Value Measurements

The Company reports all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair value measurement in its entirety is based on the lowest-level input that is significant to the fair value measurement in its entirety.

The Company's cash and cash equivalents included $157.3 million of treasury bills as of March 31, 2023. These securities are classified as held-to-maturity and all have been purchased with original maturities of 90 days or less. Held-to-maturity debt securities are recorded at amortized cost in the financial statements.

 

 

10


 

 

 

March 31, 2023

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Aggregate Fair Value

 

U.S. treasury securities

 

$

157,297

 

 

$

58

 

 

$

 

 

$

157,355

 

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of March 31, 2023 and December 31, 2022, total debt of $33.5 million and $33.3 million is reported at amortized cost, respectively. This outstanding debt is classified as Level 2 as it is not actively traded. The amortized cost of the outstanding debt approximates the fair value.

The financial statements as of March 31, 2023 and December 31, 2022, do not include any assets or liabilities that are measured at fair value on a nonrecurring basis.

Note 4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consist of the following (in thousands):

 

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Tools and equipment

 

$

2,085

 

 

$

2,173

 

Computer equipment and software

 

 

37

 

 

 

37

 

Furniture and fixtures

 

 

183

 

 

 

282

 

Leasehold improvements

 

 

38

 

 

 

38

 

Construction in process

 

 

429

 

 

 

475

 

 

 

2,772

 

 

 

3,005

 

Less: Accumulated depreciation

 

 

(1,379

)

 

 

(1,434

)

Property and equipment, net

 

$

1,393

 

 

$

1,571

 

 

Depreciation expense was $0.1 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.

Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):

 

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Accrued expenses

 

$

4,361

 

 

$

5,307

 

Current portion of lease liabilities

 

 

1,069

 

 

 

1,033

 

Short term interest payable

 

 

364

 

 

 

348

 

Other accrued liabilities

 

 

892

 

 

 

1,087

 

Total accrued and other current liabilities

 

$

6,686

 

 

$

7,775

 

 

Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following (in thousands):

 

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Long term interest payable

 

$

1,272

 

 

$

1,194

 

Noncurrent portion of lease liabilities

 

 

353

 

 

 

635

 

Other noncurrent liabilities

 

 

38

 

 

 

38

 

Total other noncurrent liabilities

 

$

1,663

 

 

$

1,867

 

 

 

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Note 5. Debt

The Company currently has two credit and security agreements with MidCap Financial Services (the "Lender"), which provide for a maximum $40.0 million credit facility, consisting of a $35.0 million senior secured term loan (the "Term Loan") and a $5.0 million revolving loan (the "Revolver" and collectively with the Term Loan, the “MidCap Credit Facility”).

The obligations under the MidCap Credit Facility are guaranteed by the Company's current and future subsidiaries, subject to exceptions for certain foreign subsidiaries. Obligations under the agreements are secured by substantially all assets of the Company, including material intellectual property. Additionally, the Company is subject to customary affirmative and negative covenants as defined in the credit agreements, including covenants that limit or restrict the ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. As of March 31, 2023, the Company was in compliance with all financial and non-financial covenants.

The MidCap Credit Facility agreements each contain events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross-defaults and bankruptcy and insolvency events.

As of March 31, 2023 and December 31, 2022, $5.0 million was available to be drawn under the Revolver, respectively. The Revolver had not been drawn upon as of March 31, 2023 and December 31, 2022. Long-term and short-term debt was as follows (in thousands):

 

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

Term Loan

 

$

35,000

 

 

$

35,000

 

Total principal payments due

 

 

35,000

 

 

 

35,000

 

Less: debt discount related to warrant liability and issuance costs

 

 

(1,543

)

 

 

(1,687

)

Total amounts outstanding

 

 

33,457

 

 

 

33,313

 

Less: Current portion

 

 

 

 

 

 

Total accrued and other current liabilities

 

$

33,457

 

 

$

33,313

 

 

The repayment schedule relating to the Company’s debt as of March 31, 2023, is as follows (in thousands):

 

 

 

Amount

 

2023 (remainder)

 

 

 

2024

 

 

2,917

 

2025

 

 

32,083

 

Thereafter

 

 

 

Total repayments

 

$

35,000

 

 

Note 6. Commitments and Contingencies

Operating Lease Obligations

The Company’s leases include facility leases and storage leases. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date if the rate implicit in the lease is not readily determinable. The Company estimates its incremental borrowing rate based on qualitative factors including company specific credit offers, lease term, general economics, and the interest rate environment. In determining the lease term, the Company includes all renewal options that are reasonably probable to be executed.

During the first quarter of 2021, the Company renewed its lease on its corporate headquarters in Menlo Park, California. The lease commenced in early August 2021 and is for a term of 37 months from the commencement

 

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date. The Company recorded an aggregate right-of-use ("ROU") asset and lease liability of $1.5 million. The ROU asset and corresponding lease liability were estimated using a weighted-average incremental borrowing rate of 13.59%. Total base rent is approximately $1.6 million under the lease agreement.

During the fourth quarter of 2022, the Company entered into a supply agreement that is expected to last approximately 18 months. The supply agreement contained provisions that, when evaluated, indicated an embedded lease was present within the agreement. The agreement commenced in early December 2022 and the Company recorded an aggregate ROU asset and lease liability of $0.7 million. The ROU asset and corresponding lease liability were estimated using a weighted-average incremental borrowing rate of 10.75%. Total base rent under the agreement is approximately $0.7 million.

The Company recognizes rent expense on a straight-line basis over the noncancelable lease term. The Company’s rent expense was $0.3 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the weighted average remaining lease term for the leases was 1.3 years.

Operating lease expense and supplemental cash flow information related to operating leases for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

 

2023

 

 

2022

 

 

Operating lease expense

 

$

293

 

 

$

173

 

 

Cash paid for operating leases

 

 

297

 

 

 

170

 

 

 

Aggregate future minimum lease payments at March 31, 2023, under these noncancelable operating leases were as follows (in thousands):

 

 

 

As of March 31,

 

 

 

 

2023

 

 

2023 (remainder)

 

 

887

 

 

2024

 

 

662

 

 

Total future minimum lease payments

 

$

1,549

 

 

Less: imputed interest

 

 

(127

)

 

Present value of future minimum lease payments

 

$

1,422

 

 

Less: current portion of operating lease liability

 

 

(1,069

)

 

Operating lease liabilities – noncurrent

 

$

353

 

 

 

Legal Proceedings

On September 16, 2021, the Company filed suit in the U.S. District Court for the District of Delaware (C.A. No. 1:21-cv-01317) alleging that Ivantis, Inc. ("Ivantis") directly and indirectly infringes U.S. Patent Nos. 8,287,482, 9,370,443, 9,486,361, and 10,314,742 by making, using, selling, and offering for sale the Hydrus® Microstent. The Company’s Complaint seeks money damages and injunctive relief. On January 24, 2022, Ivantis asserted counterclaims requesting declaratory judgments that the Company's asserted patents-in-suit are not infringed and/or invalid. On August 1, 2022, the Company filed an amended complaint alleging that Alcon Inc., Alcon Vision, LLC and Alcon Research, LLC (collectively, "Alcon") infringe the four originally asserted patents by making, using, selling, and offering for sale the Hydrus® Microstent, and that all defendants also infringe U.S. Patent No. 11,389,328. The defendants reasserted counterclaims requesting declaratory judgments that the Company’s asserted patents-in-suit are not infringed and/or invalid. A five-day jury trial is scheduled to commence on April 8, 2024. Ivantis and Alcon filed petitions with the U.S. Patent Office seeking inter partes review of U.S. Patent Nos. 8,287,482, 9,370,443, 9,486,361, and 10,314,742 (IPR2022-01529, IPR2022-01530, IPR2022-01533, IPR2022-01540), each of which the U.S. Patent Office denied for raising prior art reference and invalidity arguments that were cumulative of those previously considered by the Office. The Company is presently unable to

 

13


 

predict the outcome of this lawsuit or to reasonably estimate the potential financial impact of the lawsuit on the Company, if any.

The Company is subject to claims and assessments from time to time in the ordinary course of business. Accruals for litigation and contingencies are reflected in the financial statements based on management’s assessment, including the advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings, and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if the potential losses from any claims or legal proceedings are considered probable and the amounts can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. As of March 31, 2023 the Company does not believe it was a party to any legal proceedings or claims which, if determined adversely, would, individually or taken together, have a material adverse effect on its business, financial condition, operating results, liquidity or future prospects. However, regardless of the merits of the claims raised or the outcome, legal proceedings and claims may have an adverse impact on the Company as a result of defense and settlement costs, diversion of management time and resources, and other factors.

Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

The Company indemnifies each of its directors and officers (each an "Indemnitee") for certain events or occurrences, subject to certain limits, while the director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as an indemnitee may be subject to any proceeding arising out of acts or omissions of such indemnitee in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of March 31, 2023 or December 31, 2022.

 

Note 7. Stockholders' Equity

Common Stock

In connection with the IPO, the Company’s certificate of incorporation was amended and restated to provide for 200,000,000 authorized shares of common stock with a par value of $0.001 per share and 10,000,000 authorized shares of preferred stock with a par value of $0.001 per share. The holders of common stock are entitled to receive dividends whenever funds are legally available, when and if declared by the board of directors. As of March 31, 2023, no dividends have been declared to date. Each share of common stock is entitled to one vote.

 

 

14


 

At March 31, 2023 and December 31, 2022, the Company had reserved common stock for future issuances as follows:

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Common stock options issued and outstanding

 

 

5,095,956

 

 

 

4,819,906

 

Common stock available for future grant

 

 

7,258,472

 

 

 

6,099,584

 

Restricted stock units outstanding

 

 

1,840,324

 

 

 

1,014,123

 

Shares available for future purchase under ESPP

 

 

1,709,104

 

 

 

1,226,123

 

Total

 

 

15,903,856

 

 

 

13,159,736

 

 

Note 8. Equity Incentive Plans

2011 Stock Option Plan and 2021 Incentive Award Plan

In 2011, the Company established its 2011 Stock Option Plan (the “2011 Plan”) that provided for the granting of stock options to employees and nonemployees of the Company.

In July 2021, the board of directors and stockholders adopted and approved the 2021 Incentive Award Plan, (the “2021 Plan”). Under the 2021 Plan, the Company has the ability to issue incentive stock options ("ISOs"), nonqualified stock options ("NSOs"), stock appreciation rights, dividend equivalent rights, restricted stock awards, and restricted stock unit awards. Options under the 2021 Plan can typically be granted for periods of up to 10 years. For stock options granted to a grantee who, at the time the option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company (or any parent or subsidiary of the Company), the term of the stock option may be granted for periods of up to five years. The ISOs and NSOs will be granted at a price per share not less than the fair value at the date of grant. The exercise price of a stock option granted to a 10% stockholder shall not be less than 110% of the grant date fair value of the shares. Options granted to new hires generally vest over a four-year period, with 25% of the shares vesting on the first anniversary of the grant date and the remaining shares vesting in 36 equal monthly installments thereafter; options granted as merit awards generally vest in 48 equal monthly installments following the grant date.

The Company initially reserved 5,200,000 shares of common stock for future issuance under the 2021 Plan. Pursuant to the evergreen provision in the 2021 Plan, this initial reserve was increased by 2,414,907 and 2,375,235 shares on January 1, 2023 and 2022, respectively. These annual increases under the evergreen provision are equal to the lesser of (i) 5% of the aggregate number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Common Stock as determined by the Board, subject to certain limitations.

The 2011 Plan was superseded by the 2021 Plan at the time of the IPO and no further grants have been made under the 2011 Plan from the date the 2021 Plan became effective. The terms under the 2011 Plan are consistent with those described above for the 2021 Plan.

At March 31, 2023 and December 31, 2022 there were 7,258,472 and 6,099,584 shares, respectively, of common stock available for issuance under the 2021 Plan.

 

 

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Stock Option Awards

The following table summarizes stock option activity under the 2021 Plan during the periods presented:

 

 

 

Number of
Shares

 

 

Weighted-Average Exercise Price

 

 

Weighted-Average
Contractual
 Term (in years)

 

 

Average Intrinsic Value
(in thousands)

 

Balances as of December 31, 2022

 

 

4,819,906

 

 

$

9.67

 

 

 

7.7