Sight Sciences, Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information included in Part I, Item 1, “Financial Statements,” within this Quarterly Report and our audited consolidated financial statements and related notes included in Part II, Item 8, “Financial Statements and Supplementary Data,” in our Annual Report. Certain statements included in this discussion and analysis constitute “forward-looking statements” that are subject to considerable risks and uncertainties. Please see the information under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Overview

Sight Sciences’ mission is to develop transformative, interventional technologies that allow eyecare providers to procedurally elevate the standards of care – empowering people to keep seeing. We are passionate about improving patients’ lives by helping them preserve their sight. Our objective is to develop and market products for use in new treatment paradigms and to create an interventional mindset in eyecare whereby our products may be used in procedures which supplant conventional outdated approaches. Our business philosophy is grounded in the following principles:

• comprehensively understanding disease physiology;
• developing transformative technologies that are intended to preserve, protect and restore natural physiological functionality to diseased eyes;
• developing and marketing products with proven clinical evidence that achieve superior effectiveness versus current treatment paradigms while minimizing complications or side effects;
• providing intuitive, patient-friendly, interventional solutions to ophthalmologists and optometrists (together, "ECPs"); and
• delivering compelling economic value to all stakeholders, including patients, providers and third-party payors such as Medicare and commercial insurers.

Our initial product development has focused on the treatment of two of the world’s most prevalent and underserved eye diseases, glaucoma and dry eye disease (“DED”). We have commercialized products in each of our two reportable operating segments, Surgical Glaucoma and Dry Eye. Our Surgical Glaucoma revenue consists of sales of our OMNI® Surgical System family of products ("OMNI"), currently comprised of our Ergo Series OMNI Surgical System and OMNI Edge Surgical System, and the SION® Surgical Instrument ("SION"), while our Dry Eye revenue consists of sales of the TearCare® System ("TearCare"), and related components and accessories. Each product is primarily sold through a highly involved direct sales model that offers intensive education, training and customer service. We believe this model not only enables us to differentiate our products and company from competitors, but also expands our addressable market by educating ECPs, patients and other stakeholders on our products and evolving treatment paradigms. Outside of the U.S., we have established direct commercial operations in the United Kingdom and Germany. We also sell OMNI in several other countries in Europe through distributors.

We sell OMNI and SION to facilities where ophthalmic surgeons perform outpatient procedures, such as ambulatory surgery centers ("ASCs") and hospital outpatient departments ("HOPDs"), which are typically reimbursed by Medicare or private payors for procedures using our products. We are focused on educating surgeons on the clinical benefits of earlier interventions with the comprehensive OMNI procedure, engagement efforts with accounts in light of reimbursement clarity, enhanced competitive counter selling, investments in targeted commercial resources, pseudophakic standalone market development, and the recent launch of our OMNI Edge Surgical System, an expansion of the OMNI family.

We sell TearCare to ECPs. Currently, there is no meaningful reimbursement coverage by Medicare or private payors for DED procedures, including TearCare, and patients typically pay out-of-pocket for TearCare, although some payors may agree to provide case-based coverage outside of a formal policy. We are continuing our controlled commercial launch and are focused on our comprehensive, clinical data-driven, long-term market development plan that aims to improve awareness and patient access to TearCare. In the fourth quarter of 2024, we instituted a price increase for our TearCare products to reflect the clinical value of our technology as part of our strategy to establish broader coverage with commercial payors and Medicare. This increase materially reduced customer demand for

TearCare in the fourth quarter of 2024 and the first half of 2025, and we believe it will continue to impact demand in the future unless and until broader reimbursement coverage can be established.

We have dedicated meaningful resources to execute our commercial strategy, while also seeking to reduce operating expenses and improve cost efficiencies to better align our operating structure for long-term, profitable growth. The overall success of our approach to eyecare to date is evidenced by over 330,000 estimated uses of Surgical Glaucoma products and their predicates in over 2,200 hospitals and ASCs in the U.S. and Europe, and over 70,000 estimated uses of TearCare in over 1,500 eyecare facilities in the U.S. through June 30, 2025.

We do not have, and do not currently intend to develop, any internal manufacturing capabilities or infrastructure, and rely on a limited number of third-party manufacturers, many of which are single source suppliers, for the components, accessories and materials that are utilized in the assembly of our products. We believe the manufacturing capacity provided by our current suppliers will be adequate to meet our current and anticipated manufacturing needs across all of our product lines. However, as part of our long-term manufacturing strategy, we are actively expanding third party manufacturing capacity and options for our products which we expect to be available to us starting in the first quarter of 2026 for certain products. We plan to continue to utilize third party contract manufacturers for our products and any related components.

Revenue in our Surgical Glaucoma segment for the six-months ended June 30, 2025 and 2024 was $36.3 million and $38.5 million, respectively, with gross margins for the same periods of 86.1% and 88.0%, respectively. Revenue in our Dry Eye segment for the six-months ended June 30, 2025 and 2024 was $0.7 million and $2.1 million, respectively, with gross margins for the same periods of 55.8% and 44.4%, respectively. For the six-months ended June 30, 2025, we generated more than 90% of our revenue from customers in the U.S.

Our Surgical Glaucoma revenue was down for the six months ended June 30, 2025 compared to the same period in 2024 due to a number of factors, including reimbursement coverage changes and increased competition from other MIGS devices. We expect to continue to experience adverse revenue impacts arising out of the restrictions on the performance of multiple MIGS procedures in combination with cataract surgery for Medicare patients in the jurisdictions administered by the five Medicare Administrative Contractors (“MACS”) that issued the local coverage determinations (“LCDs”) containing such restrictions, which restrictions became effective in the fourth quarter of 2024. We believe that these restrictions have led to a decrease in the number of overall MIGS devices used in procedures that are being performed, including procedures utilizing our OMNI technology. In addition, we expect our Surgical Glaucoma gross margins will be adversely impacted in 2025 by the tariffs imposed by the U.S. on China, since most of our OMNI and SION products are currently produced and assembled by a Taiwan-based manufacturer in China. In the six months ended June 30, 2025, we incurred increased cost of goods sold associated with tariff-related expenses of $0.1 million.

Our Dry Eye revenue was down for the six months ended June 30, 2025 compared to the same period in 2024 due to lower demand in the Dry Eye segment resulting from our increase in TearCare component pricing which took effect on October 1, 2024, as part of our strategy to achieve reimbursed market access for the TearCare procedure, though there is no guarantee as to the timing of reimbursement decisions or the amount of reimbursement. Given the earlier stage of TearCare’s commercial development, we expect our Dry Eye segment’s gross margins to be lower than our Surgical Glaucoma segment’s gross margins for the near- and medium-term due to the allocation of fixed labor and overhead costs to the segment's cost of goods sold. In addition, our Dry Eye gross margins could be adversely impacted in future periods by the tariffs imposed by the U.S. on China, since most of our TearCare SmartLids, are produced and assembled by a Taiwan-based manufacturer in China. However, there was no tariff impact for the six months ended June 30, 2025 due to our usage of inventory purchased prior to the implementation of these tariffs.

We expect Dry Eye gross margin to improve over time as market access expands, although these improvements may be partially offset by the impact of tariffs.

We believe in the importance of continued strategic investment in initiatives that:

• further demonstrate our products’ clinical effectiveness and safety to potential customers, patients, payors and regulators, including (i) establishing OMNI and SION as standards of care of interventional glaucoma treatment among MIGS-trained surgeons, (ii) developing a standalone market segment with a focus on pseudophakic patients whose IOP is not well-controlled on two or more medications and who are at risk of disease progression, and (iii) increasing customer advocacy and pursuing equitable reimbursement including establishing coverage and/or payment rates for TearCare;
• enhance our commercial capabilities and expertise, including resources dedicated to sales, marketing and education;
• ensure the broadest possible patient access to the treatment alternatives that our products are cleared to offer;
• enhance and improve upon our existing product technologies;
• develop our existing international markets and expand into new international markets; and
• allow us to create transformational and interventional technology innovation with new products, devices or drugs, in glaucoma and ocular surface disease or in new eye disease areas.

As a result, we intend to continue to invest in product development, market access, sales and marketing, clinical studies, and education initiatives. Because of these and other factors, we expect to continue to incur net losses for at least the next several years, and we may seek additional debt and equity financing to fund our operations and planned growth.

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, debt financing agreements, the sale of common stock in our initial public offering (“IPO”), and revenue from the sale of our products. As of June 30, 2025, we had cash and cash equivalents of $101.5 million, an accumulated deficit of $372.4 million and an outstanding interest-bearing term loan balance of $40.0 million plus a $2.4 million final payment under the Hercules Loan Agreement (excluding debt discount and amortized debt issuance costs).

Factors Affecting Our Business and Results of Operations

We believe there are several important factors that have impacted and that will continue to impact our business, financial condition, and results of operations. Except as described in Part II, Item 1A, "Risk Factors," of this Quarterly Report, there have been no material changes to such factors from those described in our Annual Report under the heading "Factors Affecting Our Business and Results of Operations."

Components of Our Results of Operations

Revenue

We currently derive the majority of our U.S. revenue from the sale of our OMNI and SION products to ASCs and HOPDs and from the sale of our TearCare products to ECPs. To date, the revenue from our Surgical Glaucoma segment has accounted for over 90% of our total revenue, substantially all of which was generated from sales within the U.S. Our Surgical Glaucoma customers place orders based on their expected procedure volume and reorder as needed, typically on a biweekly, monthly or bimonthly basis. Our TearCare customers typically purchase a TearCare System which consists of one or more TearCare SmartHubs® (“SmartHubs”), multiple single-use TearCare SmartLids® (“SmartLids”) and other accessories. After utilizing their initial inventory, customers can reorder SmartLids as needed. No single customer accounted for 10% or more of our revenue for the six months ended June 30, 2025 and 2024.

The growth of our revenue is primarily driven by the demand for elective surgery and treatment utilizing our products in the United States and Europe, product reimbursement rates and coverage criteria, and competition. Such demand is often lower during summer months because of ECP vacations and in winter months because of fewer business or surgery days due to holidays and adverse weather conditions.

Cost of Goods Sold

Our components and products are produced by third-party suppliers and manufacturers. Our cost of goods sold consists primarily of amounts paid for our products to third-party manufacturers, and our manufacturing overhead costs, which consist primarily of personnel expenses, including salaries, benefits and stock-based compensation, and reserves for excess, obsolete and non-sellable inventory. Cost of goods sold also includes depreciation expenses for production equipment which we provide to our third-party manufacturers and certain direct costs, such as shipping and handling costs and tariffs on imported products and components.

Gross Profit and Gross Margin

We calculate gross profit as revenue minus cost of goods sold. We calculate gross margin as gross profit divided by revenue. Our gross profit and gross margin have been, and we believe they will continue to be, affected by a variety of factors, including differences in segment gross profit and gross margins, changes in average selling prices, changes in product reimbursement rates, product sales mix, production and ordering volumes, manufacturing, tariff and freight costs, product yields, and headcount. In general, we expect our gross profit to increase over time as our revenue increases, and we expect our gross margins to increase over the long term to the extent our production and ordering volumes increase and as we spread the fixed portion of our overhead costs over a larger number of units produced.

We intend to use our design, engineering and manufacturing know-how and capabilities to further advance and improve the efficiency of our suppliers’ manufacturing processes, which we believe will reduce costs and increase our gross margins. However, we expect our gross margins will be adversely impacted by the tariffs imposed by the U.S. on China and other manufacturing countries of origin for our products for as long as the tariffs are in effect. Most of our OMNI and SION products, as well as our TearCare SmartLids, are currently produced and assembled by a Taiwanese manufacturer out of its China manufacturing facilities; however we expect that a portion of our product volumes will be produced in additional manufacturing facilities outside of China starting with our OMNI Edge product line in the first quarter of 2026, with additional products added in 2026.

Our gross margins could fluctuate from quarter to quarter due to a number of factors, including variations in product mix, changes in product reimbursement rates or average selling prices, transitions to new suppliers, introduction of new products by us or our competitors, adoption of new manufacturing processes and technologies, and responses to evolving macroeconomic and geopolitical conditions, including the adoption of new or increased tariffs by the United States, China, and other countries.

Research and Development Expenses

Research and development ("R&D") expenses consist primarily of costs associated with engineering, product development, clinical studies to develop and support our products, including clinical trial design, clinical trial site initiation and study costs, internal and external costs associated with our regulatory compliance and quality assurance functions, medical affairs, cost of products used for clinical trials and other costs associated with products and technologies that are in development. These expenses also include personnel expenses, including salaries, benefits and stock-based compensation, supplies, consulting, prototyping, testing, materials, travel expenses, depreciation expenses for equipment and an allocation of information technology ("IT") and facility overhead expenses.

Our R&D expenses as a percentage of revenue may vary over time depending on the level and timing of new product development efforts, as well as clinical development, clinical trial and other related activities. We expect our R&D expenses to increase for the next several years as we continue to invest in our active clinical trial programs, develop new products, and improve our existing products.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation related to selling, marketing and corporate functions, allocation of IT and facility overhead expenses, bad debt expense, finance, legal and human resource costs. Other SG&A expenses include training, travel expenses, promotional activities, marketing initiatives, market research and analysis, conferences and trade shows, professional services fees (including external legal, audit, consulting and tax fees), insurance costs, and general corporate expenses.

Our SG&A expenses as a percentage of revenue may vary over time depending on the level and timing of commercial expansion efforts. We expect our SG&A expenses to increase for the next several years as we continue to invest in our commercial team and market access initiatives and launch new products.

Investment Income

Investment income primarily consists of interest and amortization on held-to-maturity investments in U.S. treasury securities and money market funds.

Interest Expense

Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the accretion of debt discount and amortization of debt issuance costs associated with the Term Loans.

Loss on Debt Extinguishment

The loss on debt extinguishment is associated with the termination and settlement of the Prior Loan Agreement.

Other Income (Expense), Net

Other income (expense), net primarily consists of income and expenses that do not originate from our primary business.

Results of Operations

Comparison of the Three Months Ended June 30, 2025 and 2024 (dollars in thousands)

(unaudited)

Revenue. Revenue was $19.6 million during the three months ended June 30, 2025, a decrease of $1.8 million, or 8.5% compared to $21.4 million in the prior year comparable period. Our Surgical Glaucoma revenue for the three months ended June 30, 2025 was $19.2 million, a decrease of $1.0 million, or 5.0%, from the prior year comparable period. The overall decrease in Surgical Glaucoma revenue was primarily attributable to a decrease in the number of OMNI units sold in the comparable periods. This decrease was primarily driven by a decrease in unit utilization per ordering facility, primarily due to the restrictions on the performance of multiple MIGS procedures in combination with cataract surgery for Medicare patients in the jurisdictions administered by the five MACS that issued the LCDs containing such restrictions, which restrictions became effective in the fourth quarter of 2024.

Our Dry Eye revenue for the three months ended June 30, 2025 was $0.3 million, a decrease of $0.8 million, or 70.4%, from the prior year comparable period. The overall decrease in Dry Eye revenue was primarily due to decreased volumes of SmartLids purchased, and fewer new customers added in the period, which led to lower SmartHub revenue. The primary reason that fewer products were sold was due to our focus on the next phase of our commercial strategy for the Dry Eye segment, which involves achieving reimbursed market access for our TearCare products instead of generating sales through a cash-pay model.

Cost of Goods Sold. Cost of goods sold was $3.0 million during the three months ended June 30, 2025, flat compared to $3.0 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold increased $0.3 million as compared to the prior year comparable period. The increase was primarily driven by higher overhead costs per unit, tariff costs, and product sales mix, partially offset by higher average selling prices. Our Dry Eye cost of goods sold decreased $0.4 million in the three months ended June 30, 2025 compared to the prior year comparable period, primarily driven by lower revenue.

Gross Profit and Gross Margin. Our total gross profit was $16.6 million in the three months ended June 30, 2025, a decrease of $1.8 million from the prior year comparable period. Our gross margin for the three months ended June 30, 2025 decreased to 84.8%, from 85.8% in the prior year comparable period. Gross margin in our Surgical Glaucoma segment was 85.6% for the three months ended June 30, 2025, a decrease from 88.0% for the prior year comparable period, primarily due to higher overhead costs per unit, tariff costs, and product sales mix. In our Dry Eye segment, gross margin decreased from 46.5% for the three months ended June 30, 2024 to 38.4% for the three months ended June 30, 2025, primarily driven by product sales mix and higher overhead costs per unit associated with lower sales volumes.

Research and Development Expenses. R&D expenses were $4.4 million for the three months ended June 30, 2025, an increase of less than $0.1 million from the prior year comparable period. R&D expenses were consistent in the comparative periods with slightly lower general R&D expenses and payroll expenses, partially offset by increased spending in other areas in the prior period.

Selling, General, and Administrative Expenses. SG&A expenses were $23.9 million for the three months ended June 30, 2025, a decrease of $2.8 million from the prior year comparable period. The decrease was primarily driven by a $2.3 million decrease in legal expenses, a $0.6 million decrease in stock-based compensation expenses, and a $0.3 million decrease in commissions and bonuses. Partially offsetting these expense decreases was a $0.4 million increase in payroll-related expenses.

Investment Income. Investment income was $1.0 million for the three months ended June 30, 2025, a decrease of $0.5 million from the prior year comparable period, due to lower investment balances as well as lower yields on held-to-maturity investments during the current period.

Interest Expense. Interest expense increased $0.1 million during the three months ended June 30, 2025 compared to the prior year comparable period, due to higher outstanding principal balances on the Hercules Loan Agreement.

Loss on Debt Extinguishment. There was no loss on debt extinguishment for either of the three months ended June 30, 2025 and 2024.

Other Income (Expense), Net. Other income (expense), net was income of less than $0.1 million for the three months ended June 30, 2025, compared to expense of less than $0.1 million for the prior year comparable period.

Comparison of the Six Months Ended June 30, 2025 and 2024 (dollars in thousands)

(unaudited)

Revenue. Revenue was $37.1 million during the six months ended June 30, 2025, a decrease of $3.6 million, or 8.8% compared to $40.6 million in the prior year comparable period. Our Surgical Glaucoma revenue for the six months ended June 30, 2025 was $36.3 million, a decrease of $2.2 million, or 5.6%, from the prior year comparable period. The overall decrease in Surgical Glaucoma revenue was primarily attributable to a decrease in the number of OMNI units sold in the current period compared to the prior year comparable period. This decrease was primarily driven by a decrease in unit utilization per ordering facility, primarily due to the restrictions on the performance of multiple MIGS procedures in combination with cataract surgery for Medicare patients in the jurisdictions administered by the five MACS that issued the LCDs containing such restrictions, which restrictions became effective in the fourth quarter of 2024.

Our Dry Eye revenue for the six months ended June 30, 2025 was $0.7 million, a decrease of $1.4 million, or 65.9%, from the prior year comparable period. The overall decrease in Dry Eye revenue was primarily due to decreased volumes of SmartLids purchased after our TearCare System price increases that went into effect on October 1, 2024 and fewer new customers added in the period, which led to lower SmartHub revenue. The primary reason that fewer products were sold was due to our focus on the next phase of our commercial strategy for the Dry Eye segment, which involves achieving reimbursed market access for our TearCare products instead of adding customers through a cash-pay model.

Cost of Goods Sold. Cost of goods sold was $5.4 million during the six months ended June 30, 2025, a decrease of $0.4 million from $5.8 million in the prior year comparable period. Our Surgical Glaucoma cost of goods sold increased $0.4 million as compared to the prior year comparable period. The increase was primarily driven by higher overhead costs per unit, tariff costs, and product sales mix.

Our Dry Eye cost of goods sold decreased $0.9 million in the six months ended June 30, 2025 compared to the prior year comparable period, primarily driven by lower revenue resulting from the shift in pricing strategy, partially offset by higher average selling prices.

Gross Profit and Gross Margin. Our total gross profit was $31.7 million in the six months ended June 30, 2025, a decrease of $3.1 million from the prior year comparable period. Our gross margin for the six months ended June 30, 2025 decreased to 85.5%, from 85.7% in the prior year comparable period. Gross margin in our Surgical Glaucoma segment was 86.1% for the six months ended June 30, 2025, a decrease from 88.0% for the prior year comparable period, primarily due to product sales mix and higher overhead costs per unit. In our Dry Eye segment, gross margin increased from 44.4% for the six months ended June 30, 2024 to 55.8% for the six months ended June 30, 2025, primarily driven by the price increase for our TearCare SmartLids.

Research and Development Expenses. R&D expenses were $8.8 million for the six months ended June 30, 2025, a decrease of $0.1 million from the prior year comparable period. R&D expenses were consistent period over period, with a slight decline in payroll expenses and general R&D expense from the prior year comparable period, which were partially offset by increased spending in other areas.

Selling, General, and Administrative Expenses. SG&A expenses were $48.4 million for the six months ended June 30, 2025, a decrease of $4.8 million from the prior year comparable period. The decrease was primarily driven by a $5.3 million decrease in legal expenses, a $1.0 million decrease in stock-based compensation expenses, and a $0.7 million decrease in commissions and bonuses. These declines were partially offset by a $1.1 million increase in sales training and marketing costs, and a $1.0 million increase in payroll-related expenses.

Investment Income. Investment income was $2.2 million for the six months ended June 30, 2025, a decrease of $1.0 million from the prior year comparable period, due to lower investment balances as well as lower yields on held-to-maturity investments during the current period.

Interest Expense. Interest expense increased $0.2 million during the six months ended June 30, 2025 compared to the prior year comparable period, due to higher outstanding principal balances associated with the Hercules Loan Agreement.

Loss on Debt Extinguishment. There was no loss on debt extinguishment for the six months ended June 30, 2025. We recognized loss on debt extinguishment of $2.0 million for the six months ended June 30, 2024, associated with refinancing the indebtedness under our prior secured credit facility (the “Prior Loan Agreement”).

Other Income (Expense), Net. Other expense, net was expense of $0.1 million for the six months ended June 30, 2025, compared to expense of less than $0.1 million for the prior year comparable period.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Net Cash Used in Operating Activities. Net cash used in operating activities for the six months ended June 30, 2025 was $19.1 million, consisting primarily of a net loss of $26.1 million, as well as a net change in our operating assets and liabilities of $2.2 million, partially offset by non-cash charges of $9.1 million. The net change in our operating assets and liabilities was primarily due to a $4.5 million decrease in accrued compensation. This change was partially offset by a $1.1 million decrease in accounts receivable, a $0.4 million increase in accounts payable, and a $0.1 million decrease in our inventory balance. The non-cash charges primarily consisted of $8.1 million related to stock-based compensation expense, $0.5 million of accretion of debt discount and debt issuance costs, $0.3 million of depreciation and amortization, and $0.2 million of noncash operating lease expense.

Net cash used in operating activities for the six months ended June 30, 2024 was $19.3 million, consisting primarily of a net loss of $28.6 million, as well as a net change in our operating assets and liabilities of $1.4 million, partially offset by non-cash charges of $10.7 million. The net change in our operating assets and liabilities was primarily due to a $5.7 million increase in accounts receivable and a $1.3 million decrease in other noncurrent liabilities. Accrued and other current liabilities increased $1.9 million, while both inventory and prepaid expenses and other current assets increased by $1.2 million. In addition, accrued compensation increased by $0.9 million and accounts payable increased by $0.6 million. The non-cash charges primarily consisted of $8.8 million related to stock-based compensation expense, $1.0 million of noncash loss on the extinguishment of debt, $0.4 million of depreciation and amortization and $0.3 million of noncash operating lease expense.

Net Cash Used in Investing Activities. Net cash used in investing activities for both the six months ended June 30, 2025 and 2024 was $0.2 million. The cash used in both periods was for purchases of property and equipment.

Net Cash (Used in) Provided by Financing Activities. Net cash provided by financing activities for the six months ended June 30, 2025 was $0.5 million, consisting primarily of proceeds from the exercise of stock options and proceeds from employee stock plan purchases. Net cash used in financing activities for the six months ended June 30, 2024 was $0.5 million, consisting primarily of the costs associated with the refinancing of the outstanding term loan agreement.

Liquidity and Capital Resources

Sources of Liquidity

To date, our primary sources of capital have been private placements of redeemable convertible preferred stock, the sale of common stock in our IPO, debt financing arrangements, and revenue from the sale of our products. In January 2024, we entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with Hercules Capital, Inc (“Hercules”) and certain of its affiliates (collectively with Hercules, the “Lenders”), which provides for a senior secured term loan facility in the aggregate principal amount of up to $65.0 million. We used the proceeds from an initial $35.0 million tranche (the “Initial Loan”) funded under the Hercules Loan Agreement to discharge our indebtedness under the Prior Loan Agreement with our prior lenders. In December 2024, we consummated the drawdown of the $5.0 million Tranche I(b) term loan advance (the "Tranche I(b) Loan") contemplated by the Hercules Loan Agreement.

As of June 30, 2025, we had cash and cash equivalents of $101.5 million, an accumulated deficit of $372.4 million, and an outstanding term loan balance of $40.0 million plus a $2.4 million final payment under the Hercules Loan Agreement (excluding debt discount and amortized debt issuance costs). Based on our current planned operations, we expect our cash and cash equivalents balance, as well as other sources of liquidity, will enable us to fund our operations for at least the next 12 months and the foreseeable future.

Our historical cash outflows have primarily been associated with cash used for operating activities such as sales, marketing and commercialization of our products, research and development activities, regulatory and market access activities, intellectual property enforcement and portfolio expansion, capital expenditures and debt service costs. Our cash requirements will be significantly impacted by our ability to manage and grow our business by maintaining and expanding our sales to existing customers or introducing our products to new customers; our ability to obtain and maintain sufficient reimbursement for our products, including successfully protecting reimbursement for our Surgical Glaucoma products and establishing sufficient reimbursement for our Dry Eye products; the level of our investment in commercialization and research and development activities, including clinical trials; whether we enter into any strategic acquisitions or investments, and the timing and amount of the associated capital expenditures; our entry and expansion into new markets; the outcome of our litigation against Alcon, including receipt of any final, non-appealable award thereunder; and competitive dynamics within our industry. There are numerous factors that may impact our long-term cash requirements, and we are unable to accurately predict them at this time. An extended period of global supply chain disruption, geopolitical or trade tensions, or economic uncertainty could materially affect our business, results of operations, financial condition, and access to sources of liquidity. For example, the U.S. has recently imposed tariffs that apply to all of our products and product components imported from China, which will increase the cost of our products and components and have a negative impact on our gross margins and liquidity.

We may in the future need to seek additional sources of liquidity and capital resources through equity or debt financings, such as additional securities offerings or through borrowings under a new or existing credit facility. There can be no assurance that such transactions will be available to us on favorable terms, if at all.

Hercules Capital Loan Agreement

In January 2024, we entered into the Hercules Loan Agreement with the Lenders, which provides for a maximum $65.0 million credit facility. An Initial Loan of $35.0 million was funded under the Hercules Loan Agreement on January 22, 2024, which was used to discharge our indebtedness under the Prior Loan Agreement. On December 10, 2024, we consummated the drawdown of the $5.0 million Tranche I(b) Loan under the Hercules Loan Agreement. Upon consummation of the Tranche I(b) Loan, the aggregate principal amount of borrowings under the Hercules Loan Agreement was $40.0 million.

In addition to the Initial Loan and the Tranche 1(b) Loan, the Hercules Loan Agreement provides additional tranches available to us (the “Tranche Loans,” and together with the Initial Loan and the Tranche I(b) Loan, the “Term Loans). Tranche 2 consisted of $10.0 million available to draw through September 15, 2025, contingent upon the achievement of certain performance milestones prior to June 30, 2025, which milestones were not met and thus this Tranche 2 is not available to the Company. Tranche 3 consists of $15.0 million available to draw through the interest only period in increments of $5.0 million, subject to the sole approval of Hercules' investment committee.

The Hercules Loan Agreement provides for a maturity date of July 1, 2028, with an interest only period running for the first 30 months of the agreement term. This interest-only period was extendable for an additional six months for a total of 36 months upon the achievement of certain performance milestones prior to June 30, 2025; these milestones were not met by the June 30, 2025 deadline and thus the six-month extension of the interest only period is not available to the Company. The Term Loans accrue interest at a floating annual rate equal to the greater of 10.35%, or the Wall Street Journal prime rate plus 2.35%, with the interest rate equal to 10.35% at June 30, 2025. The final payment fee is set at 5.95% of the funded balance, which is recognized as a debt discount and is being accreted into the amortization of debt issuance costs using the effective interest rate method over the term of the loan.

In conjunction with the funding of the Initial Loan, we issued warrants to the Lenders to purchase up to an aggregate of 135,686 shares of our common stock at an exercise price of $5.159 per share, which were recorded and classified as equity. On December 10, 2024, upon the funding of the Tranche I(b) Loan, we issued additional warrants to the Lenders to purchase 26,095 shares of our common stock at an exercise price of $3.83 per share. Each warrant is exercisable for a period of seven years from the date of issuance. If the additional Term Loans are funded, we will be obligated to issue to the Lenders additional warrants to purchase common stock in an amount equal to 2.0% of the funded balance of each tranche loan under the Hercules Loan Agreement, divided by the exercise price on the date we draw funds under such tranche loan. The exercise price will be calculated using the five-day volume-weighted average stock price as of such date. See Note 7, Stockholders' Equity, for additional information regarding these common stock warrants.

The obligations under the Hercules Loan Agreement are guaranteed by us and our future subsidiaries, subject to exceptions for certain foreign subsidiaries. The obligations under the agreement are secured by substantially all of our assets, including its material intellectual property. Additionally, we are subject to customary affirmative and negative covenants, including covenants that limit or restrict our 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. We are also subject to certain minimum cash and revenue covenants under the Hercules Loan Agreement. We were in compliance with all covenants as of June 30, 2025.

While any Term Loans remain outstanding under the Hercules Loan Agreement, we are required to use commercially reasonable efforts to grant to the Lenders the option to invest up to $3.0 million in our next round of equity financing, if any, that is broadly marketed to multiple investors on the same terms, conditions and pricing offered to investors in such subsequent equity financing.

Leases

Our corporate headquarters are located in Menlo Park, California, where we lease approximately 11,000 square feet of office, research and development, engineering and laboratory space pursuant to a lease that commenced on August 1, 2021 and expires on October 31, 2026.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Estimates

Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities, and the reported amounts of revenue and expense during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience, existing and known circumstances, authoritative accounting guidance, and various other factors we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report under the heading “Critical Accounting Estimates."

JOBS Act Accounting Election

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financial statements to those of other public companies more difficult.

Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, in the notes to our unaudited condensed consolidated financial statements in this Quarterly Report for recent accounting pronouncements not yet adopted as of the date hereof.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate risk. Our exposure to interest rate risk is principally confined to our cash and cash equivalents and the Hercules Loan Agreement.

As of June 30, 2025, we had cash and cash equivalents of $101.5 million, which consisted of bank deposits, money market funds, and U.S. treasury bills. We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents.

The Hercules Loan Agreement contains a floating rate equal to the greater of 10.35% or the Prime Rate plus 2.35%, with an interest rate equal to 10.35% as of June 30, 2025. Based upon the balance outstanding as of June 30, 2025, a hypothetical 1.0% (100 basis points) change in interest rates would not have a material impact on our financial statements.

There have been no material changes to such risks from those described in our Annual Report under the heading "Quantitative and Qualitative Disclosures About Market Risk."

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our principal executive officer and our principal financial and accounting officer, evaluated our disclosure controls and procedures. The term 'disclosure controls and procedures,' as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to a company's management, including its principal executive officer, and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure.

Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded that as of June 30, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, we are not aware of any material changes to the risks and uncertainties described under the heading "Risk Factors" in our Annual Report, which are incorporated herein by reference. The risks described in our Annual Report are not the only ones we face. Additional risks we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, liquidity, and future prospects.

We rely on third parties to manufacture and supply all of our products, and a substantial portion of our products and components are manufactured in China. A number of our suppliers are also single-source providers. We are subject to numerous risks relating to our reliance on such third-party suppliers, including the impact of tariffs on products imported from China.

Our business strategy depends on our ability to manufacture our current and future products in sufficient quantities, on terms acceptable to us, and on a timely basis to meet customer demand, while adhering to product quality standards, complying with regulatory requirements, and managing manufacturing and import costs. We do not have, and do not currently intend to develop, any internal manufacturing capabilities or infrastructure, and we rely on a limited number of third-party manufacturers, many of which are single-source suppliers, for the components, accessories, materials and assembly that we utilize in our products. Specifically, most of our OMNI and SION products, as well as our TearCare SmartLids, are produced and assembled by a single Taiwan-based manufacturer in China. These commercial products comprise substantially all of our current revenue. Our suppliers may be unwilling or unable to supply products or components to us reliably and at the levels we anticipate or that are required by our customers, or we may be unable to purchase these items on terms that are acceptable to us, or at all.

Our suppliers must be able to provide us with products and components in compliance with regulatory requirements, including the FDA’s Quality System Regulation (“QSR”) and other applicable laws or regulations, in accordance with agreed-upon specifications, at acceptable costs and on a timely basis. If our suppliers are unable or unwilling to meet our demand requirements, we may not have enough of our products available for delivery to support ECPs that utilize our products as part of their treatment. For instance, if the supply of our products and components from our manufacturer in China was interrupted or suspended for any significant period, we may be unable to meet customer demand for these products during that time. Our ability to obtain products and components in sufficient quantities and on a timely basis from our suppliers may be limited for several reasons, including quality issues at their manufacturing facilities, damage to their manufacturing equipment or facilities, problems with their own suppliers, inability to obtain components required for our products, their financial difficulties, our relative importance as a customer to each supplier, or prohibitive cost increases associated with importing items from certain regions where our suppliers are located. Any shortfall in the supply of our products may result in lower adoption and utilization rates of our products by ECPs, as well as harm to our reputation, either of which could have a material adverse effect on our business, financial condition and results of operations.

Geopolitical tensions between the U.S. and China, and between the U.S. and other countries, have created considerable political and economic unrest and uncertainty that may adversely impact our business. As discussed above, most of our products are produced and assembled at a manufacturing facility in China. There is currently significant uncertainty about the relationship between the U.S. and China with respect to a number of geopolitical issues, including trade policies, government regulations and tariffs, and we expect this uncertainty will continue in future periods. Commencing in February 2025, the U.S. has imposed a significant new tariff on products imported from China. The tariff rate has fluctuated significantly since its inception and may continue to vary materially in the future.

This tariff applies to all of our products and product components imported from China. China has responded with certain retaliatory tariffs, and the U.S. and China could implement additional retaliatory tariffs. The China tariff has increased the cost of our products and components and will likely have a negative impact on our gross margins for as long as it remains in effect. For instance, at the previously implemented tariff rate of 145%, we expected that our Surgical Glaucoma segment’s unmitigated tariff exposure would increase its cost of goods sold by between approximately $3.5 million and $4.5 million for full year 2025. Although this 145% tariff rate was subsequently lowered, there can be no assurance that U.S. tariff rate on products imported from China will not increase again or materially and adversely affect our cost of goods sold in the future. Any further escalation in the use of retaliatory trade tariffs between the U.S. and China could cause a further increase in the cost of our products and components. There is also the risk that new tariffs could be implemented with other U.S. trading partners. These tariffs may cause supply chain disruptions and will also likely increase the shipping and other logistical costs involved in importing our products and components, which would further adversely impact our gross margins.

To mitigate these risks, we are evaluating additional manufacturing locations to produce and assemble our products and are in the process of establishing additional manufacturing lines outside of China. We have also increased our inventory levels of certain products to reduce the impact of further China tariff increases. However, at least through 2025 and into 2026, we expect the substantial majority of our products will continue to be manufactured in China, and will therefore continue to be subject to the prevailing tariff rates.

The process of identifying and qualifying additional manufacturing facilities could be time-consuming and expensive, result in interruptions in our operations, cause delays in the supply of our products, or affect the quality or performance specifications of our products. We cannot assure you that we will be able to identify and engage additional contract manufacturers on terms similar to our current arrangements or that are otherwise favorable to us. In addition, we cannot guarantee that the cost associated with obtaining products and components from an additional manufacturer, including any associated tariffs, will be lower than the costs associated with obtaining products from our current manufacturers, or that any reduction in the costs will be sufficient to offset the cost of adding new manufacturers. Furthermore, any change in our manufacturers could require us to complete another qualification process at the manufacturer’s facility, and there is no guarantee the facility would pass our quality audit. The occurrence of any of these events could increase our operating costs or harm our ability to meet the demand for our products in a timely manner, either of which could have a material adverse effect on our business, financial condition and results of operations.

We do not typically enter into long-term supply agreements with our third-party manufacturers and do not anticipate doing so in the near term. Accordingly, we will continue to be subject to the risk that our suppliers can cancel our agreements on relatively short notice, or that we will be unable to renew or extend contracts and arrangements with such third parties on terms that are favorable to us, or at all. These risks are likely to be exacerbated by our limited experience manufacturing our current products and negotiating agreement terms with third party manufacturers.

If demand for our products increases, we will have to invest additional resources to manage the manufacturing process. If we fail to secure increased production capacity efficiently, we may not be able to respond to customer demand on a timely basis, our sales may not increase in line with our expectations, and our operating margins could fluctuate or decline. In addition, the manufacture of future products may require modification of our current production processes, the identification of new suppliers for specific components, sub-assemblies and materials, or the development of new manufacturing processes or technologies. It may not be possible for our current third-party manufacturers to produce these products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating margins, all of which could have a material adverse effect on our business, financial condition and results of operations.

We have been party to, and may in the future become a party to intellectual property litigation or administrative proceedings that could be costly, time-consuming, unsuccessful, and could interfere with our ability to sell and market our products.

Competitors may infringe our patents, or we may be required to enforce our patents to protect our technology. We may also be required to file suit to protect our trade secrets or may be involved in litigation defending against claims of infringement of the rights of others. In addition, our patents also may become involved in inventorship, priority or validity disputes. To counter or defend against such claims can be expensive and time-consuming and could divert our attention from other functions and responsibilities. In an infringement proceeding, a court may decide that a patent owned by us is invalid or unenforceable. Furthermore, even if our patents are found to be valid and infringed, a court may refuse to grant injunctive relief against the infringer and instead grant us monetary damages and/or ongoing royalties. Such monetary compensation may be insufficient to adequately offset the damage to our business caused by the infringer’s competition in the market. Adverse determinations against us in defending against infringement could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing, selling or using the product, any of which could severely harm our business. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our management and other personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on our common stock price. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.

On September 16, 2021, we 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 our 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. Our complaint sought money damages and injunctive relief. On January 24, 2022, Ivantis asserted counterclaims requesting declaratory judgments that our asserted patents-in-suit are not infringed and/or invalid. On August 1, 2022, we 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 our 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 (“USPTO”) denied for raising prior art references and invalidity arguments that were cumulative of those previously considered by the USPTO.

On April 26, 2024, at the conclusion of a five-day jury trial, we were awarded a positive jury trial verdict of $34 million, comprised of $5.5 million in lost profits damages and $28.5 million in royalty damages for commercial sales of the Hydrus Microstent for the period between its commercial launch through trial. The patents at issue were U.S. Patent Nos. 8,287,482, 9,370,443, and 11,389,328. In December 2024, the Court held an in-person hearing to hear the parties’ oral arguments on their post-trial briefings at the conclusion of which, the Court ordered the parties to engage in non-binding mediation. In early March 2025, we and Alcon informed the Court that we had not resolved our dispute through mediation and asked the Court to decide the parties’ post-trial motions and enter a judgement, which judgement will be subject to appeal. It is possible that the jury verdict that was rendered in our favor may be reduced, limited or vacated by the Court or by the appellate court if appealed.

In June 2025, Alcon filed petitions with the USPTO for ex parte reexaminations, challenging the validity of each of the three patents that we asserted in the litigation based on prior art patents and publications. The USPTO has not yet decided whether to proceed with the reexaminations. We intend to defend our patents vigorously in front of the USPTO. However, it is possible that the April 2024 jury verdict in our favor, including our ability to collect past damages and ongoing royalties, may be materially and adversely impacted if the reexamination proceedings are instituted and result in final, non-appealable judgments of invalidity of the asserted claims of the patents-in-suit before a final, non-appealable judgment is entered by the Court in the patent infringement litigation or if the asserted claims are amended during the reexamination proceedings. For example, entry of such judgements of invalidity by the USPTO could include vacating the jury verdict and finding the patents invalid. We are presently unable to predict the outcome of this lawsuit or the ex parte reexamination proceedings or to reasonably estimate the potential financial impact of the lawsuit or ex parte reexamination proceedings on us.