UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
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 |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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☐ |
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☒ |
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Smaller reporting company |
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Emerging growth company |
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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 the close of business on July 26, 2024, the registrant had
Table of Contents
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Page |
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3 |
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PART I. |
5 |
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Item 1. |
5 |
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5 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) |
6 |
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Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) |
7 |
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9 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
10 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
32 |
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Item 4. |
32 |
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PART II. |
33 |
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Item 1. |
33 |
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Item 1A. |
33 |
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Item 2. |
34 |
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Item 3. |
34 |
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Item 4. |
34 |
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Item 5. |
34 |
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Item 6. |
35 |
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36 |
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 June 30, 2024 (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:
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,
3
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, 2023 filed with the Securities and Exchange Commission (the "SEC") on March 13, 2024 (our "Annual Report"), 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 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 upon 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)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Accrued and other current liabilities |
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Current portion - long-term debt, net |
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Total current liabilities |
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Long-term debt, net |
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Other noncurrent liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in-capital |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended |
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Six Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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( |
) |
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( |
) |
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( |
) |
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( |
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Investment income |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Loss on debt extinguishment |
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( |
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Other expense, net |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Loss before income taxes |
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( |
) |
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( |
) |
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( |
) |
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( |
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Provision for income taxes |
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Net loss and comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Net loss per share attributable to common stockholders, basic and diluted |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
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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)
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Three Months Ended June 30, 2024 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Withholding taxes on net share settlement of restricted stock units |
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— |
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— |
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( |
) |
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— |
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( |
) |
Employee stock purchase plan purchases |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2024 |
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( |
) |
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Six Months Ended June 30, 2024 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at December 31, 2023 |
|
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$ |
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$ |
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$ |
( |
) |
|
$ |
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||||
Issuance of common stock upon exercise of stock options |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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( |
) |
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— |
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— |
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Withholding taxes on net share settlement of restricted stock units |
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— |
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— |
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( |
) |
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— |
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( |
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Warrant issuance |
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— |
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— |
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— |
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Employee stock purchase plan purchases |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2024 |
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( |
) |
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||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
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Three Months Ended June 30, 2023 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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Withholding taxes on net share settlement of restricted stock units |
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— |
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— |
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( |
) |
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— |
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( |
) |
Employee stock purchase plan purchases |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2023 |
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( |
) |
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Six Months Ended June 30, 2023 |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance at December 31, 2022 |
|
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$ |
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$ |
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$ |
( |
) |
|
$ |
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Issuance of common stock upon exercise of stock options |
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|
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— |
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— |
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Issuance of common stock upon vesting of restricted stock units |
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— |
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— |
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|||
Withholding taxes of net share settlement of restricted stock units |
|
|
— |
|
|
|
— |
|
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( |
) |
|
|
— |
|
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( |
) |
Employee stock purchase plan purchases |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
|
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( |
) |
Balance at June 30, 2023 |
|
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|
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( |
) |
|
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The accompanying notes are an integral part of these condensed consolidated financial statements.
8
SIGHT SCIENCES, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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Six Months Ended |
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June 30, |
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2024 |
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2023 |
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Cash flows from operating activities |
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Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Accretion of debt discount and amortization of debt issuance costs |
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Stock-based compensation expense |
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Provision for credit losses |
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Provision for excess and obsolete inventories |
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( |
) |
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Noncash operating lease expense |
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Loss on disposal of property and equipment |
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Noncash loss on extinguishment of debt |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
) |
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( |
) |
Inventory |
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( |
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Prepaid expenses and other current assets |
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Other noncurrent assets |
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( |
) |
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( |
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Accounts payable |
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Accrued compensation |
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( |
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Accrued and other current liabilities |
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( |
) |
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Other noncurrent liabilities |
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( |
) |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Net cash used in investing activities |
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( |
) |
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( |
) |
Cash flows from financing activities |
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Net proceeds from Hercules Loan Agreement |
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Repayment of MidCap Loan Agreement |
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( |
) |
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Debt issuance costs |
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( |
) |
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Proceeds from employee stock purchase plan purchases |
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Taxes paid on net share settlement of restricted stock units |
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( |
) |
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( |
) |
Proceeds from exercise of common stock options |
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Net cash (used in) provided by financing activities |
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( |
) |
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Net change in cash and cash equivalents |
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( |
) |
|
|
( |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Supplemental noncash disclosure of investing and financing activities |
|
|
|
|
|
|
||
Acquisition of property and equipment included in accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
Common stock warrants issued upon execution of Hercules Loan Agreement |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
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. The Company’s mission is to develop transformative, interventional technologies that allow eyecare providers to procedurally elevate the standards of care—empowering people to keep seeing.
The Company's product portfolio aligns with its two reportable operating segments: Surgical Glaucoma and Dry Eye. The products for the Surgical Glaucoma segment include the OMNI® Surgical System ("OMNI"), which is an implant-free, handheld, single-use, therapeutic technology that enables ophthalmic surgeons to perform a comprehensive procedure to reduce intraocular pressure in adult patients with primary open angle glaucoma, and the SION® Surgical Instrument ("SION"), a bladeless, manually operated device used in ophthalmic surgical procedures to excise trabecular meshwork. The product portfolio for the Dry Eye segment consists of the TearCare® System ("TearCare") for ophthalmologists and optometrists. TearCare is a proprietary, interventional, dry eye device designed to melt and facilitate the comprehensive removal of meibomian gland obstructions and restore gland functionality and healthy oil production for adult patients with evaporative dry eye disease due to meibomian gland dysfunction (“MGD”) when used in conjunction with manual expression of the meibomian glands, enabling clearance of gland obstructions by physicians to address the leading cause of dry eye disease.
Significant Risks and Uncertainties
Since inception, the Company has incurred losses and negative cash flows from operations. As of June 30, 2024, the Company had an accumulated deficit of $
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 unaudited condensed consolidated financial statements. Any failure to generate increased revenue, 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
Basis of Presentation
The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") applicable to interim periods and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sight Sciences UK, Ltd and Sight Sciences GmbH. All intercompany balances and transactions have been eliminated in consolidation.
The unaudited condensed consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements. In the opinion of management, the unaudited condensed 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 sheet as of December 31, 2023 is derived from the Company's consolidated audited financial statements as of that date. These interim condensed consolidated financial statements do not include all disclosures required by US GAAP and should be read in conjunction with the Company's audited consolidated financial statements and the accompanying
10
notes thereto for the fiscal year ended December 31, 2023, which are contained in the Annual Report. The Company's results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with US 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 expense during the reporting period. The most significant estimates related to the provision for credit losses, inventory excess and obsolescence, 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 Recently Adopted
During the six-month period ended June 30, 2024, there were no significant Accounting Standard Updates ("ASUs") issued that were adopted.
Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The ASU is effective for fiscal years beginning after December 15, 2023, and interim period within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this ASU on its disclosures.
As of June 30, 2024, there are no additional ASUs 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
11
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 Level 1 investments in treasury securities of $
|
|
June 30, 2024 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Aggregate Fair Value |
|
||||
U.S. treasury securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
December 31, 2023 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Aggregate Fair Value |
|
||||
U.S. treasury securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of June 30, 2024 and December 31, 2023, total debt of $
The Company measures the fair value of the unissued common stock warrants to be issued pursuant to the Hercules Loan Agreement using the Black-Scholes option pricing method. These are classified as Level 3 liabilities, with an overall value of less than $
The financial statements as of June 30, 2024 and December 31, 2023 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 June 30, |
|
|
As of December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Tools and equipment |
|
$ |
|
|
$ |
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
12
Accrued and Other Current Liabilities
Accrued and other current liabilities consist of the following (in thousands):
|
|
As of June 30, |
|
|
As of December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Accrued expenses |
|
$ |
|
|
$ |
|
||
Current portion of lease liabilities |
|
|
|
|
|
|
||
Short-term interest payable |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Total accrued and other current liabilities |
|
$ |
|
|
$ |
|
||
Other Noncurrent Liabilities
Other noncurrent liabilities consist of the following (in thousands):
|
|
As of June 30, |
|
|
As of December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Long-term interest payable |
|
$ |
|
|
$ |
|
||
Noncurrent portion of lease liabilities |
|
|
|
|
|
|
||
Other noncurrent liabilities |
|
|
|
|
|
|
||
Total other noncurrent liabilities |
|
$ |
|
|
$ |
|
||
Note 5. Debt
Hercules Capital Loan Agreement
In January 2024, the Company entered into a Loan and Security Agreement (the “Hercules Loan Agreement”), with Hercules Capital, Inc. (“Hercules”) and certain of its affiliates (collective with Hercules, the “Lenders”), which provides for a senior secured term loan facility in the aggregate principal amount of up to $
The Hercules Loan Agreement includes a maturity date of
The obligations under the Hercules Loan Agreement are guaranteed by the Company and its future subsidiaries, subject to exceptions for certain foreign subsidiaries. The obligations under the agreement are secured by substantially all of the Company's assets, including its material intellectual property. Additionally, the Company is subject to customary affirmative and negative covenants, including covenants that limit or restrict the ability of the Company 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. The Company is also subject to certain minimum cash and revenue covenants under the Hercules Loan Agreement. The Company was in compliance with all covenants as of June 30, 2024.
13
MidCap Loan Agreement
The Company had credit and security agreements with certain entities affiliated with MidCap Financial Services (such entities collectively, “MidCap”), which provided for a $
The commitment obligations under the MidCap Term Loan Agreement were guaranteed by the Company’s current and future subsidiaries, subject to exceptions for certain foreign subsidiaries, and secured by substantially all assets of the Company, including material intellectual property. The MidCap Term Loan Agreement had a maturity date of November 1, 2025, and principal payments under the Term Loan were scheduled to commence in December 2024. In addition, the MidCap Term Loan Agreement included a stated floating interest rate that was reserve-adjusted Secured Overnight Finance Rate, plus
Maturities Schedule
Long-term and short-term debt as of June 30, 2024 and December 31, 2023, respectively, was as follows (in thousands):
|
|
As of June 30, |
|
|
As of December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Hercules Initial Loan |
|
$ |
|
|
$ |
|
||
MidCap Term Loan |
|
|
|
|
|
|
||
Total principal payments due |
|
|
|
|
|
|
||
Less: debt discount related to warrant liability and issuance costs |
|
|
( |
) |
|
|
( |
) |
Total amounts outstanding |
|
|
|
|
|
|
||
Less: current portion |
|
|
|
|
|
( |
) |
|
Long-term debt, net |
|
$ |
|
|
$ |
|
||
The repayment schedule relating to the Hercules Initial Loan as of June 30, 2024, is as follows (in thousands):
|
|
Amount |
|
|
2024 (remainder) |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total repayments |
|
$ |
|
|
Note 6. Commitments and Contingencies
Operating Lease Obligations
The Company’s leases include facility leases and equipment 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’s incremental borrowing rate represents the interest rate that the Company would expect to incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located. In determining the lease term, the Company includes all renewal options that are reasonably probable to be executed.
The Company leases its corporate headquarters in Menlo Park, California. The lease commenced in August 2021 and was originally for a term of
14
entered into an amendment to the lease, extending the lease term an additional
During the fourth quarter of 2022, the Company entered into a supply agreement that was expected to last approximately
The Company recognizes rent expense on a straight-line basis over the noncancelable lease term. The Company’s rent expense was $
Operating lease expense and supplemental cash flow information related to operating leases for the three months ended June 30, 2024 and 2023 were as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cash paid for operating leases |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aggregate future minimum lease payments as of June 30, 2024, under these noncancelable operating leases were as follows (in thousands):
|
|
As of June 30, |
|
|
|
|
|
2024 |
|
|
|
2024 (remainder) |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
Total future minimum lease payments |
|
$ |
|
|
|
Less: imputed interest |
|
|
( |
) |
|
Present value of future minimum lease payments |
|
$ |
|
|
|
Less: current portion of operating lease liability |
|
|
( |
) |
|
Noncurrent portion of lease liabilities |
|
$ |
|
|
|
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) (the “Court”) alleging that Ivantis, Inc. (“Ivantis”) directly and indirectly infringes the Company’s 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 asserted counterclaims requesting declaratory judgments that the Company’s asserted patents-in-suit are not infringed and/or are invalid. In September 2022, 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 references and invalidity arguments that
15
were cumulative of those previously considered by the U.S. Patent Office. On April 26, 2024, at the conclusion of a five-day jury trial, the Company was awarded a positive jury trial verdict of $
In addition to the foregoing, from time to time, the Company is subject to legal claims, regulatory matters and contingencies in the ordinary course of business. Accruals for these matters are reflected in the financial statements based on management’s assessment, including the advice of legal counsel, of the expected outcome of these matters. Liabilities for estimated losses are accrued if the potential losses from any legal proceedings, regulatory matters or contingencies 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 legal claims, regulatory matters and contingencies, and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period.
Except as described above, as of June 30, 2024 and December 31, 2023, the Company was not a party to any legal proceedings, regulatory matters, or other disputes or claims which, if determined adversely, would, individually or taken together, have a material adverse effect on the Company’s business, financial condition, operating results, liquidity, or future prospects.
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 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 a director or officer may be subject to any proceeding arising out of acts or omissions of such director or officer 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 the fair value of these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of June 30, 2024 and December 31, 2023.
Note 7. Stockholders' Equity
Common Stock
The Company’s certificate of incorporation provides for
16
At June 30, 2024 and December 31, 2023, the Company had reserved common stock for future issuances as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Common stock available for future grants |
|
|
|
|
|
|
||
Common stock options issued and outstanding |
|
|
|
|
|
|
||
Restricted stock units outstanding |
|
|
|
|
|
|
||
Shares available for future purchase under employee stock purchase plan |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Common Stock Warrants
In conjunction with the funding of the Initial Loan under the Hercules Loan Agreement, the Company issued common stock warrants to the Lenders to purchase up to an aggregate of
If the additional Term Loans are funded, the Company will be obligated to issue to the Lenders additional warrants to purchase common stock in an amount equal to
The unissued warrants do not meet the requirements for classification in equity, and are recorded as liabilities in other noncurrent liabilities in the financial statements. The fair value of the unissued common stock warrants was calculated using the Black-Scholes option pricing method and they were recorded at fair value upon the funding of the Hercules Loan Agreement. The unissued warrants are remeasured at each reporting date after the issuance date. According to the fair value measurement criteria, the unissued warrants are considered Level 3 liabilities, with an overall value of less than $
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 ("RSUs"). Options under the 2021 Plan can typically be granted for periods of up to ten years. For stock options granted to a grantee who, at the time the option is granted, owned 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 be not 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. RSUs granted generally vest over a four-year period with straight-line vesting in equal amounts.
The Company initially reserved
17
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.
As of June 30, 2024 and December 31, 2023 there were
Stock Option Awards
The following table summarizes stock option activity under the 2021 Plan during the periods presented:
|
|
Number of |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average |
|
|
Average Intrinsic Value |
|
||||
Balances as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Grants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited/cancelled |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Exercised/released |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balances as of June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and exercisable as of June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest as of June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
During the three months ended June 30, 2024 and 2023, the Company recorded stock-based compensation expense of $
The aggregate intrinsic value of options exercised was $
Determination of Fair Value
The Company estimated the grant date fair value of stock options using the Black-Scholes option-pricing model, which requires the use of high subjective and complex valuation assumptions to determine the fair value of stock-based awards, including the option’s expected term, the expected volatility of the underlying stock, the risk-free interest rate, and the expected dividend yield. For the purposes of the Black-Scholes valuation model, the Company used the simplified method for determining the expected term of the granted options. The simplified method was used since the Company does not have adequate historical data to utilize in calculating the expected term of options.