Risks Related to Our Business, Including Our Dependence on ILUVIEN

Our business depends on our own in the countries where we sell direct, and on our distributors’ ability to successfully commercialize ILUVIEN in other countries.

Our business is subject to political, economic, legal, and social risks, which could adversely affect our operations and financial position.

There are significant regulatory, economic and legal barriers in markets in the United States and outside the United States that we must overcome. Changes in United States social, political, regulatory, and economic conditions or in laws and policies governing foreign trade, manufacturing, development, and investment, and any negative sentiments towards the United States as a result of such changes, could adversely affect our business. Concerns over economic weakness, including trade wars, unemployment, and continuing inflation and interest rate increases; natural disasters, public health epidemics or pandemics, such as the COVID-19 pandemic, and actions taken in response to such events; supply chain delays and disruptions; and policy priorities of the U.S. presidential administration, to continued volatility and diminished expectations for the economy and markets. Additionally, concern over geopolitical issues may also contribute to prolonged market volatility and instability. For example, the conflict between Russia and Ukraine could lead to disruption, instability, and volatility in global markets and industries. The U.S. government and other governments in jurisdictions have imposed severe economic sanctions and export controls against Russia and Russian interests, have removed Russia from the Society for Worldwide Interbank Financial Telecommunication payment (SWIFT) system, and have threatened additional sanctions and controls. The ultimate impact of these measures, as well as potential responses to them by Russia, is unknown. Any changes related to these and other factors could adversely affect our business, both in the United States and internationally.

If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, it will impair our ability to commercialize ILUVIEN and identify develop and commercialize any future products or product candidates.

We depend on the principal members of our management team, including Richard S. Eiswirth, Jr., our President and Chief Executive Officer, Philip Ashman, Ph.D., our Chief Operating Officer and Senior Vice President Commercial Operations Europe, Russell Skibsted, our Chief Financial Officer, and David Holland, our Chief Marketing Officer and Senior Vice President Corporate Communications and Managed Markets. These executives have significant ophthalmic, regulatory industry, sales and marketing, operational and/or corporate finance experience. From time to time, there have been and may in the future be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. The loss of any such executives or any other principal member of our management team may impair our ability to market ILUVIEN and identify, develop and commercialize any future ophthalmic products or product candidates.

In addition, future growth may require us to hire a significant number of qualified technical, commercial and administrative personnel. We face intense competition from other companies and research and academic institutions for the qualified personnel we need in our business. For example, in 2019 our revenues in the U.S. market were negatively affected by a competitor’s hiring some of our key sales personnel. We may need to invest significant amounts of cash and equity to attract and retain new and existing employees and we may never realize returns on these investments. If we are not able to effectively increase and retain our talent, our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed. Employees may be more likely to leave us if the shares of our capital stock they own or the shares of our capital stock underlying their equity incentive awards have significantly reduced in value. If we cannot continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we may not be able to sustain or grow our operations.

We may not be successful in our efforts to expand the number of ophthalmic products we sell.

In the future, we may choose to commercialize one or more new ophthalmic products in addition to ILUVIEN. We may seek to do so by establishing an internal research program or through licensing or otherwise acquiring the rights to potential new products and future product candidates for the treatment of ophthalmic disease.

A significant portion of the research that we may choose to conduct may involve new and unproven technologies. Research programs to identify new disease targets and product candidates require substantial technical, financial and human resources, whether or not we ultimately identify any candidates. Any future research programs may initially show promise in identifying potential products or product candidates, yet fail to yield products or product candidates for clinical development for a number of reasons, including:

•the research methodology used may not be successful in identifying potential products or product candidates; or

•we may learn after further study that potential products or product candidates have harmful side effects or other characteristics that indicate they are unlikely to be effective.

We may be unable to license or acquire suitable products or product candidates or products from third parties for a number of reasons. In particular, the licensing and acquisition of pharmaceutical products is highly competitive. Several more established companies are also pursuing strategies to license or acquire products in the ophthalmic field. These established companies may have a competitive advantage over us due to their greater size, resources and development and commercialization capabilities. Other factors that may prevent us from licensing or otherwise acquiring suitable products or product candidates include the following:

•we may be unable to license or acquire the relevant technology on terms that would allow us to make an appropriate return from the product;

•we may need to obtain our lender’s consent to any significant payment or potential payment in conjunction with a license of acquisition of technology;

•companies that perceive us to be their competitors may be unwilling to assign or license their product rights to us; or

•we may be unable to identify suitable products or product candidates within our areas of expertise.

Additionally, it may take greater human and financial resources to develop suitable potential products or product candidates through internal research programs or by obtaining rights than we will possess, thereby limiting our ability to develop a diverse product portfolio.

If we are unable to develop suitable potential product candidates through internal research programs or by obtaining rights to novel therapeutics from third parties, opportunity for future growth could be limited.

Our internal information technology systems, or those of our third-party contract research organizations (CROs) or other contractors or consultants, may fail or suffer security breaches, loss or leakage of data and other disruptions, which could result in a material disruption of certain parts of our business, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

We depend on information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit confidential information, including intellectual property, proprietary business information and personal information. Maintaining the confidentiality and integrity of that confidential information is essential to our business. We also have outsourced elements of our operations to third parties, and as a result we work with a number of third-party contractors that have access to some of our confidential information.

Although we have implemented security, backup and recovery measures, our internal information technology systems and those of our third-party manufacturers, CROs and other contractors or consultants are potentially vulnerable to breakdown or other damage or interruption from:

•service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners or other third parties, and

•cyber-attacks by malicious third parties, including cyber-related threats of spoofed or manipulated electronic communications that lead to misdirected or fraudulent payments, the deployment of harmful malware or ransomware, malicious websites, denial-of-service attacks, and social engineering and other means to adversely affect service reliability and threaten the confidentiality, integrity and availability of information.

Any of the foregoing may compromise our system infrastructure or lead to data leakage.

While we have not experienced any such cyber-related fraud, system failure, accident or security breach through the date of this report that has materially affected our business, we cannot assure that our and our vendors’ data protection efforts and our and our vendors’ investment in information technology will prevent cyber-attacks by malicious third parties, significant breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition. For example, if such an event were to occur and cause interruptions in our operations or a direct financial loss due to misdirected or fraudulent payments, it could result in a material disruption of our business operations, including, distribution and manufacturing, or to a direct financial loss.

We sell ILUVIEN in the U.S. primarily to two distributors and in Europe we use two logistics providers, and a security breach that impairs these distribution or logistics operations could significantly impair our ability to deliver our products to healthcare providers. In addition, ILUVIEN is manufactured and tested by third parties, and a security breach that impairs these third parties could significantly impair our ability to procure ILUVIEN and deliver it to our distributors in a timely manner. There can be no assurance that our or their efforts will detect, prevent or fully recover systems or data from all breakdowns, service interruptions, attacks or breaches of systems, any of which could adversely affect our business and operations and/or result in the loss of critical or sensitive data, which could result in financial, legal, business or reputational harm to us or impact our stock price.

In addition, the loss of clinical trial data for our product candidates or our post-market studies could result in delays in our regulatory approval efforts or marketing efforts and significantly increase our costs to recover or reproduce the data. Furthermore, significant disruptions or security breaches of our internal information technology systems or our vendors’ technology systems could adversely affect or result in the loss of, misappropriation of, unauthorized access to, use of, disclosure of or the prevention of access to our confidential information, including trade secrets or other intellectual property, proprietary business information and personal information of our employees and patients in studies conducted on our behalf, which could result in financial, legal, business and reputational harm to us. For example, any such event that leads to unauthorized access to, use of or disclosure of

personal information, including personal information regarding our employees or information we may have regarding patients, could harm our reputation directly, compel us to comply with federal and state breach notification laws and foreign law equivalents, subject us to mandatory corrective action and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

Maintaining and growing our commercial infrastructure is a significant undertaking that requires productive, well-trained sales and marketing personnel, effective managers and substantial financial resources, and we may not be successful in our efforts to meet these needs.

We anticipate that in the near term our ability to generate revenues will depend almost entirely on our ability to continue the successful commercialization of ILUVIEN, both in the U.S. and abroad. A commercial launch of ILUVIEN is a significant undertaking that requires substantial financial and managerial resources. As our commercialization plans and strategies evolve, we will need to further expand the size of our organization by recruiting additional managerial, operational, sales, marketing, financial and other personnel.

We may not be able to maintain and expand our commercial operation in a cost-effective manner or realize a positive return on this investment. In addition, we have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize ILUVIEN or any future products include:

•our inability to recruit and retain adequate numbers of effective sales and marketing personnel or maintain our sales and marketing infrastructure;

•our inability to successfully enter into additional collaboration arrangements with third parties;

•the inability of sales personnel to obtain access to or persuade adequate numbers of ophthalmologists to prescribe our products;

•the lack of complementary products or additional labeled indications for ILUVIEN to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

•unforeseen costs and expenses associated with maintaining and growing a commercial organization.

Additionally, we may encounter unexpected or unforeseen delays in expanding our commercial operations that delay the commercial launch in one or more countries in which ILUVIEN has received marketing authorization. These delays may increase the cost of, and the resources required for successful commercialization of, ILUVIEN. Further, a delay in the commercial launch of ILUVIEN in certain jurisdictions could result in the withdrawal of our marketing or regulatory authorization for ILUVIEN in those jurisdictions, including certain EEA member states where ILUVIEN has already received marketing authorization.

Clinical trials for our products may not generate the outcomes we expect, may take longer or be more costly to complete than we anticipate.

From time to time, we initiate or participate in clinical trials for ILUVIEN and may in the future participate in clinical trials or studies for other products. The timing of patient enrollment in these trials, and related costs, can be unpredictable, and any such trials or studies may be more expensive or take longer than we expect. Data from clinical trials are not always conclusive. Even if successful, these studies and trials may fail to change physician prescribing practices.

In addition, the ongoing COVID-19 pandemic can make the conduct of clinical trials more challenging given the paramount importance of adequate safety monitoring, collection of data and distribution of study drug, all of which are traditionally achieved by in-person visits. Challenges may continue to arise from site closures, site staffing shortages, potential interruptions to the supply chain for investigational products, or other considerations if site personnel or trial participants become infected with COVID-19. We may also experience a shortage of supplies and materials or a suspension of services from third parties.

The NEW DAY Study may fail to demonstrate the efficacy of ILUVIEN as baseline therapy in patients with early DME, fail to generate data demonstrating the benefits of ILUVIEN when compared to the current leading therapy for DME, take longer or be more costly to complete than we currently anticipateor fail to change physician prescribing practices.

We are conducting our NEW DAY Study, which is a multicenter, single-masked, randomized, controlled trial designed to generate prospective data evaluating ILUVIEN as a baseline therapy in the treatment of DME and demonstrate its potential advantages over the current standard of care of repeat anti-VEGF (aflibercept) injections. The NEW DAY Study is planned to enroll approximately 300 treatment-naïve, or almost naïve, DME patients in approximately 40 sites around the U.S. As of February 28, 2023, we have enrolled 261 DME patients in this study. The NEW DAY Study may fail to demonstrate the efficacy of ILUVIEN as baseline therapy in patients with early DME, fail to generate data demonstrating the benefits of ILUVIEN when compared to the current leading therapy for DME, take longer or be more costly to complete than we currently anticipate, including due to complications from the ongoing COVID-19 pandemic, and/or fail to change physician prescribing practices despite a successful result. The occurrence of any of these events could materially and adversely affect our business, financial condition and cash flows, and results of operations. 

We may acquire additional businesses or form strategic alliances in the future, and we may not realize the benefits of those acquisitions or alliances.

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing ILUVIEN-based business, including adding new products in the ophthalmic field. The identification of suitable acquisition or alliance candidates can be difficult, time-consuming, and costly, and we may not be able to complete these transactions on favorable terms, if at all. If we acquire businesses with promising markets or ophthalmic products, we may be unable to realize the benefit of acquiring those businesses if we are unable to successfully integrate them with our existing operations and company culture. We may have difficulty in developing, manufacturing and marketing the ophthalmic products of a newly acquired company that enhances the performance of our combined businesses or product lines to realize value from expected synergies, and the process of integrating acquiredbusinesses or products may create unforeseen operating difficulties and expenditures. We cannot assure that, following an acquisition or strategic alliance, we will achieve the revenues or other results that justify the transaction.

If we fail to successfully manage our international operations, our business, operating results and financial condition could suffer.

Our international operations require significant management attention and financial resources. Our international operations today cover the U.K. and much of Europe and the Middle East. There is a high level of regulation in all markets where ILUVIEN is sold and great diversity in how those markets operate. Consequently, experience and expertise is vital in understanding the market dynamics of each country, the rules and regulations in place governing the sale of medicines, the codes of practice governing promotion of medicines, different currencies, the financial frameworks applying to taxation (both corporate and VAT) and the need to communicate in different languages. There is always a risk of loss of expertise through attrition of key roles within these international areas.

Moreover, we rely on distributors in many countries to provide adequate levels of experience and expertise on our behalf. We seek to monitor and manage these relationships appropriately, including through a quarterly “Joint Steering Committee” process to address business issues and assess risks in each of these markets.

We believe that China and the Western Pacific may become substantial markets for us under our license agreement with Ocumension Therapeutics, which is currently working through regulatory filings and plans to commence a real-world study estimated to start later in 2023. Additionally, they plan to begin a phase III study for the Chinese market in the second half of 2023. We cannot assure that these efforts will ultimately prove to be successful, however, particularly in light of the currently strained trade and other relationships between the U.S. and China.

In addition, there are many risks inherent in international business activities, including:

•extended collection timelines for accounts receivable and greater working capital requirements;

•multiple, conflicting legal systems and unexpected changes in legal requirements such as privacy and data protection laws and regulations, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

•tariffs, export restrictions, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our product in certain foreign markets;

•changes in currency exchange rates;

•currency transfer and other restrictions and regulations that may limit our ability to sell ILUVIEN or repatriate profits to the United States

•difficulties adapting to new cultures, business customs, and legal systems;

•trade laws and business practices favoring local competition;

•potential tax issues, including restrictions on repatriating earnings, resulting from multiple, conflicting and complex tax laws and regulations;

•weaker intellectual property protection in some countries;

•natural disasters, political, economic, and social instability, including the effects of ongoing United States-China diplomatic and trade friction and social unrest in China and the recent conflict between Russia and Ukraine, and global sanctions imposed in response thereto, the possibility of a wider European or global conflict, or other war or terrorist activities or the threat of war and terrorism; and

•adverse economic conditions, including increasing inflation and the stability and solvency of business financial markets, financial institutions and sovereign nations.

In addition, compliance with foreign and U.S. laws and regulations that are applicable to our international operations is complex and may increase our cost of doing business in international jurisdictions, and our international operations could expose us to fines and penalties if we fail to comply with these regulations. These laws and regulations include import and export requirements, U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures designed to help ensure compliance with these laws, there can be no assurance that our employees, partners and other persons with whom we do business will not take actions in violation of our policies or these laws. Any violations of these laws could subject us to civil or criminal penalties, including substantial fines or

prohibitions on our ability to offer our products in one or more countries, and could also materially and adversely harm our business and financial condition.

The COVID-19 pandemic has had, and may continue to have, certain negative impacts on our business, and those impacts may have an adverse effect on our results of operations, financial condition and cash flows.

The public health crisis caused by the COVID-19 pandemic and the measures taken by governments, health authorities, businesses, and the public at large to limit the COVID-19 pandemic’s spread have had, and may continue to have, certain negative effects on, and present certain risks to, our business. In 2020 and 2021, we experienced decreases in sales of ILUVIEN in the U.S. and in our international markets that have been affected by the COVID-19 pandemic, though sales recovered in 2022. The sales decreases resulted from, among other things, limitations on in-person access to physicians and patient behavior, particularly in light of governmental authorities citing diabetes as a factor that places a person at higher risk for severe illness from COVID-19. If the COVID-19 pandemic intensifies again, its negative effect on our sales and thus our liquidity and financial condition could be more prolonged and may be severe. Financial uncertainty associated with the adverse effects of the ongoing COVID-19 pandemic, and the duration of those effects, could have an impact in future periods on certain estimates used in the preparation of our quarterly financial results, including impairment of intangible assets, the income tax provision and realizability of certain receivables. Other effects or possible effects of the ongoing COVID-19 pandemic on us include:

•Limitations on travel have curtailed our in-person marketing activities in the past and may again do so if reimposed.

•Restrictions placed on regulatory and pricing bodies may delay or defer market access for ILUVIEN as we seek to secure reimbursement.

•While most of our personnel have returned to work in the office, we may in the future experience reductions in productivity and disruptions to our business routines if a large percentage of our employees again works remotely, whether in the U.S. or in Europe.

•The manufacturing or distribution of the ILUVIEN insert or applicator may be disrupted by government action related to COVID-19 or by the effect of the COVID-19 pandemic on our manufacturers’ or distributors’ workforces or supply chains, which may lead to product shortages.

•We may fail to plan appropriately to meet the demand of our customers for ILUVIEN, which could lead either to ILUVIEN being out of stock or excessive inventory.

Any of the above events could have an adverse effect on our results of operations, financial condition and cash flows.

Manufacturing Risks and Dependence on Third Parties

We rely on a single manufacturer forthird parties to manufacture and test ILUVIEN, a single manufacturer for the ILUVIEN applicator and a single manufacturer for ILUVIEN’s active pharmaceutical ingredient. Ourour business would be seriously harmed if any of these third parties areis unable to satisfy our demand, andgiven that obtaining these products or services from alternative sources are not available.

parties to manufacture, assemble and test our ILUVIEN applicators, as described in “Business—Manufacturing”. We also rely on distributors for a majority of our sales of ILUVIEN. We sell to two large pharmaceutical distributors in the U.S., which accounted for 63% of our consolidated product revenues in 2022. These same two customers accounted for approximately 71% and 68% of our consolidated accounts receivable at December 31, 2022 and 2021, respectively. Internationally, our distributors produced approximately 39% of our international product revenues in 2022. If the business relationship with any such distributor is terminated, whether through industry consolidation or otherwise, and we are unable to find a suitable replacement, or if any large customer defaults in their obligation to pay, our operations and operating results could be materially adversely affected. These distributors also are not subject to any minimum sales requirements or obligations to market ILUVIEN to their customers. In turn, distributors could reduce their sales efforts for ILUVIEN or choose to terminate their representation of us. They may also fail to perform their obligations under the agreements with us. Additionally, in the Nordic Region we operate with the support of an exclusive wholesaler to support tendering processes in hospitals. The replacement or poor performance of this wholesaler, or our inability to collect accounts receivable from this wholesaler, could also materially and adversely affect our results of operations and financial condition. If one or more of our key third-party contractors, suppliers, manufacturers and/or distributors fail or are unable to satisfy their commitments to us, or if any of these key third-party relationships are terminated, our business and results of operations could be adversely affected.

Materials necessary to manufacture ILUVIEN may not be available on commercially reasonable terms, or at all.

We rely on our manufacturers to purchase materials from third-party suppliers necessary to produce ILUVIEN. Suppliers may not sell these materials to our manufacturers when needed or on commercially reasonable terms. We do not have any control over the process or timing of our manufacturers’ acquisition of these materials. If our manufacturers are unable to obtain these materials in sufficient amounts, our sales of ILUVIEN would be hampered or there would be a shortage in supply, which would materially affect our ability to generate the revenues from the sale of ILUVIEN that we expect. Moreover, although we have agreements with our suppliers for the supply of the active pharmaceutical ingredient in ILUVIEN, the commercial production of the ILUVIEN implant and the commercial production of the ILUVIEN applicator, the suppliers may be unable to meet their contractual or quality requirements or choose not to supply us in a timely manner or in the minimum guaranteed quantities. If our manufacturers are unable to obtain these essential supplies, their ability to manufacture ILUVIEN and thus our supply of ILUVIEN for sale would be delayed, which could significantly reduce our sales of ILUVIEN and have an adverse impact on our business. We may incur higher costs in acquiring component parts for the ILUVIEN inserter and insert as a result of increases in applicable inflationary indexes specified in our contracts with manufacturers. Moreover, economic or political instability or disruptions, such as the conflict in Ukraine, could negatively affect our manufacturers’ supply chains or further increase our costs.

Financial Risks

Our existing cash may be inadequate to fund our operations and support our growth.

As of December 31, 2022, we had approximately $5.3 million in cash and cash equivalents. We raised gross proceeds of $12.0 million in March 2023 through the sale of shares of our Series B Convertible Preferred Stock and warrants to purchase common stock to certain institutional investors. Whether this amount will be sufficient to fund our operations and support our growth will be determined by many factors, some of which are beyond our control, and we may need additional capital to fund our operations and support our growth sooner than we might anticipate. These factors include:

•the level of continued success of the commercialization of ILUVIEN in the U.S., and in our international markets,

•expenses relating to the commercialization of ILUVIEN;

•our research, development and general and administrative expenses;

•the timing of approvals, if any, of ILUVIEN for additional indications or in additional jurisdictions;

•the timing of and extent to which we enter into, maintain and derive revenues from licensing agreements, including agreements to license ILUVIEN in additional countries or regions; research and other collaborations; joint ventures; and other business arrangements;

•the timing of and extent to which we acquire, and our success in integrating, products or companies;

•regulatory changes and technological developments in our markets;

•increasing inflation; and

•the extent to which we can manage the use of cash in our business operations.

If we need additional capital to fund our operations and support our growth and we are unable to obtain that capital as noted below, our business may suffer.

We may need to raise additional capital to fund and grow our business, and in that event we may be unable to do so on commercially reasonable terms, the terms on which we obtain the capital may restrict our operations and if the capital we raise is equity or a debt security that is convertible into equity, our stockholders’ investment could be diluted.

For the reasons described above, we may need to raise alternative or additional financing to fund our operations and support growth. General market conditions or the market price of our common stock may not support capital-raising transactions such as an additional public or private offering of our common stock or other securities. If we need additional financing, we may seek to

fund our operations through the sale of equity securities, additional debt financing and strategic collaboration agreements. We cannot be sure that additional financing from any of these sources will be available when needed or that, if available, the additional financing will be obtained on terms favorable to us or our stockholders. In addition, our ability to raise additional capital may depend upon obtaining stockholder approval. There can be no assurance that we will be able to obtain stockholder approval for a capital raise if it is necessary under applicable Nasdaq rules. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to fund and grow our business would be significantly limited.

If we raise additional funds by selling shares of our capital stock or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. If we attempt to raise additional funds through strategic collaboration agreements, we may not be successful in obtaining those agreements, or in receiving milestone or royalty payments under those agreements. If we raise additional funds by incurring additional debt (assuming our lenders would permit such debt, which would be subordinated to the debt outstanding under our credit facility), the terms of the debt may include significant installment payments as well as covenants and specific financial ratios that may restrict our ability to continue to commercialize ILUVIEN or commercialize any future products or product candidates or otherwise successfully operate our business.

Our ability to access any existing or future capital is also dependent on the condition of the banking system and financial markets. For example, in March 2023, the Federal Deposit Insurance Corporation (FDIC) took control and was appointed receiver of Silicon Valley Bank (SVB) and Signature Bank (Signature). As of the date of this report, we do not have direct exposure to SVB or Signature, but we cannot predict the broader impact or follow-on effects of these insolvencies. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

The terms of our credit facility require us to meet certain operating covenants and restrict our operating and financial flexibility, and any breach of the covenants in that agreement, if the lenders elected to accelerate the due date of the loan, could significantly harm our business and prospects and lead to the liquidation of our business.

Our Loan and Security Agreement dated December 31, 2019 with SLR Investment Corp. (SLR) as collateral agent, and the lenders party thereto, including SLR as a lender (as amended from time to time, the 2019 Loan Agreement) contains certain operating covenants and restricts our operating and financial flexibility. The 2019 Loan Agreement is secured by a lien covering all of our U.S. assets (and certain ownership interests in one of our foreign subsidiaries), including our intellectual property. The 2019 Loan Agreement contains customary affirmative and negative covenants and events of default. Affirmative covenants include covenants requiring us to comply with applicable laws, maintain our legal existence, deliver certain financial reports and maintain insurance coverage. Negative covenants restrict our ability to transfer any part of our business or property, to change our business or key management, to incur additional indebtedness, to engage in mergers or acquisitions, to pay dividends or make other distributions, to make investments, to create other liens on our assets and to allow revenues from the sale of ILUVIEN to fall below certain minimums, in each case subject to customary exceptions.

If an event of default under the 2019 Loan Agreement occurs, SLR may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to raise additional financing, renegotiate the 2019 Loan Agreement on terms less favorable to us or immediately cease operations. Any declaration by SLR of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline significantly. Any declaration by SLR of an unwaived event of default could significantly harm our business and prospects and could cause the price of our common stock to decline significantly. Further, if we were liquidated, the lenders’ right to repayment would be senior to the rights of our stockholders.

During each of the six-month periods ended September 30, 2021 and December 31, 2021, we did not generate sufficient revenue to meet the trailing six-month revenue covenant included in the 2019 Loan Agreement (the Revenue Covenant). For each such six-month period, the lenders provided a consent that permitted us not to maintain the Revenue Covenant as of September 30, 2021 and December 31, 2021, respectively, and waived any event of default that may have occurred or may be deemed to have occurred. We can offer no assurances, however, that the lenders will accommodate such a request for a consent and waiver if in the future we fail to meet the Revenue Covenant or any other covenant that would result in an event of default under the 2019 Loan Agreement. We expect to comply with the Revenue Covenant at the next reportable date, and throughout 2023. However, if we fail to comply with the Revenue Covenant and the lenders do not provide a consent and waiver, acceleration of the maturity of the loan is one of the remedies available to the lenders. If the lenders accelerate the maturity of the loan, we would be forced to find alternative financing or enter into an alternative agreement with the lenders. We cannot be sure that alternative financing will be available when needed or that, if available, the alternative financing could be obtained on terms that are not significantly detrimental to us or our stockholders.

We have incurred operating losses in each year since our inception and expect to continue to incur losses in 2023.

We have incurred recurring losses and negative cash flow from operations, and we have accumulated a deficit of $415.4 million from our inception through December 31, 2022. Our ability to achieve profitability and positive cash flow depends on our ability to maintain revenue and contain our expenses. We are uncertain if we will achieve profitability and, if so, whether we will be able to sustain it. Our ability to maintain and increase revenue and achieve profitability depends on our ability to continue to successfully market and sell ILUVIEN in the geographic areas where we or our distributors offer ILUVIEN. We cannot assure that we will be profitable even if we successfully commercialize ILUVIEN or future products or product candidates. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.

Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.

Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. In that regard, the audit report issued by our independent registered public accounting firm for the audit of our 2022 financial statements, included elsewhere in this report, includes an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern.

There is no assurance that sufficient financing will be available to us when needed to allow us to continue as a going concern. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.

Our quarterly operating results and cash flows are expected to fluctuate significantly.

We expect our operating results and cash flows to be subject to quarterly fluctuations. Our revenues and operating results will be affected by numerous factors, including:

•the ongoing commercial success of ILUVIEN (or lack thereof);

•inconsistent timing and ordering patterns from our U.S. distributors;

•seasonality caused by insurance renewals for patients in the U.S. and by doctor and or patient absences due to holidays and vacations;

•sales, marketing and medical affairs expenses;

•the timing and amount of royalties, milestone payments or product purchases by our distributors;

•our ability to obtain regulatory approval of ILUVIEN in additional jurisdictions or for additional indications;

•regulatory developments affecting ILUVIEN, our future product candidates or our competitors’ products;

•the emergence of products or treatments that compete with ILUVIEN;

•variations in the level of expenses related to our products or future development programs;

•the status of our clinical development programs;

•our execution of collaborative, licensing or other arrangements, and the timing of payments we may make or receive under these arrangements;

•any lawsuit or intellectual property infringement in which we are or may become involved;

•general economic and political conditions in our domestic and international markets, including inflation and fluctuations in supply chains;

•global pandemics, such as COVID-19, or other public health emergencies and the responses thereto;

•unexpected events, including those resulting from climate change or geopolitical events;

•the timing and recognition of stock-based compensation expense; and

•the timing and amount of patient enrollments in our clinical studies, including the NEW DAY Study and related expenses.

If our operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any fluctuations in our operating results or cash flows may, in turn, cause significant volatility in the price of our stock. We believe that comparisons of our quarterly financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Prolonged economic uncertainties or downturns, as well as unstable market, credit and financial conditions, may exacerbate certain risks affecting our business and have serious adverse consequences on our business.

Economic conditions, and uncertainty as to the general direction of the macroeconomic environment, are beyond our control. In recent years, the United States and other significant markets have experienced cyclical downturns and worldwide economic conditions remain uncertain, particularly as a result of increasing inflation and related market and macroeconomic responses including interest rate increases, the ongoing COVID-19 pandemic and its related resurgences and variants, and the ongoing conflict arising out of the Russian invasion of Ukraine. Economic uncertainty and associated macroeconomic conditions, including geopolitical tensions, escalating inflation, supply chain issues and the availability and cost of credit and government stimulus programs in the United States and other countries have contributed to increased market volatility or market declines,

make it extremely difficult for our partners, suppliers, and us to accurately forecast and plan future business activities. Sales of our products will depend, in large part, on reimbursement from government health administration authorities, private health insurers, distribution partners and other organizations in the U.S., Germany, Portugal, Ireland, the U.K. and other countries. Negative trends in the general economy in any of the jurisdictions in which we may do business may cause these organizations to be unable to satisfy their reimbursement obligations or to delay payment. In addition, health authorities in some jurisdictions may reduce reimbursements, and private insurers may increase their scrutiny of claims. A reduction in the availability or extent of reimbursement could negatively affect our product sales and revenue.

Exchange rate fluctuations of foreign currencies relative to the U.S. Dollar could materially and adversely affect our business.

Approximately 37% of our product revenues in 2022 were international. A substantial majority of our international revenues and expenses are denominated in British Pounds and Euros, and as such are sensitive to changes in exchange rates. We also have balances, such as cash, accounts receivable, accounts payable and accruals, that are denominated in foreign currencies. These foreign currency transactions and balances are sensitive to changes in exchange rates. Fluctuations in exchange rates of the British Pound and Euro in relation to the U.S. Dollar could materially reduce our future revenues as compared to prior periods. We do not seek to mitigate this exchange rate effect by using derivative financial instruments. To the extent we are unable to match revenues received in foreign currencies with costs paid in the same currency, exchange rate fluctuations in that currency could have a material adverse effect on our business and results of operations. As our international operations continue to grow, our risks associated with fluctuations in currency rates will become greater.

New or revised tax regulations, unfavorable resolution of tax contingencies or changes to enacted tax rates could adversely affect our tax expense.

As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application, interpretation and enforcement of which can be uncertain. Changes in tax laws or their interpretations could result in changes to enacted tax rates and may require complex computations to be performed that were not previously required, significant judgments to be made in interpretation of the new or revised tax regulations and significant estimates in calculations, as well as the preparation and analysis of information not previously relevant or regularly produced. Future changes in enacted tax rates could negatively affect our results of operations.

For example, the recently enacted Inflation Reduction Act of 2022 includes a minimum tax equal to fifteen percent of the adjusted financial statement income of certain corporations as well as a one percent excise tax on share buybacks, effective for tax years beginning in 2023. When effective, it is possible that the minimum tax could result in an additional tax liability over the regular federal corporate tax liability in a given year based on differences between book and taxable income (including as a result of temporary differences).

Relevant foreign taxing authorities may disagree with our determinations as to whether we have established a taxable nexus, often referred to as a “permanent establishment”, or the income and expenses attributable to specific jurisdictions. In addition, these authorities may take aggressive tax recovery positions that the funds flows we process are subject to value added tax or goods and services tax. If disagreements with relevant taxing authorities on other unknown matters were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

Our tax returns and positions are subject to review and audit by federal, state, local and international taxing authorities. An unfavorable outcome to a tax audit could result in higher tax expense, thereby negatively affecting our results of operations and cash flows. We have recognized estimated liabilities on the balance sheet for material known tax exposures relating to deductions, transactions and other matters involving some uncertainty as to the proper tax treatment of the item. These liabilities reflect what we believe to be reasonable assumptions as to the likely final resolution of each issue if raised by a taxing authority. While we believe that the liabilities are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be finally resolved at a financial amount no more than any related liability. An unfavorable resolution, therefore, could negatively affect our financial position, results of operations and cash flows in the current and/or future periods.

Our ability to use our net operating loss carry-forwards may be limited.

As of December 31, 2022, we had U.S. federal and state net operating loss (NOL) carry-forwards of approximately $147.2 million and $107.7 million, respectively. Except for the NOLs generated after 2017, the U.S. federal NOLs not fully utilized will expire at various dates between 2029 and 2037; most state NOL carry-forwards will expire at various dates between 2022 and 2042. Under the Tax Cuts and Jobs Act of 2017, U.S. federal NOLs and some state NOLs generated after 2017 will carry forward indefinitely. These NOLs may be subject to further limitation based upon the final results of our Internal Revenue Code sections 382 and 383 analyses. Sections 382 and 383 of the Internal Revenue Code limit the annual use of NOL carry-forwards and tax credit carry-forwards, respectively, following an ownership change. NOL carry-forwards may be subject to annual limitations under Section 382 (or comparable provisions of state law) if certain changes in ownership of our company were to occur. In

general, an ownership change occurs for purposes of Section 382 if there is a more than 50% change in ownership of a company over a 3-year testing period. We have determined that a Section 382 change in ownership occurred in December of 2015. As a result of this change in ownership, we estimated that approximately $18.6 million of our federal NOLs and approximately $382,000 of federal tax credits generated prior to the change in ownership will not be utilized in the future. We are currently in the process of refining and finalizing these calculations, and upon finalization, will determine if a write-off is necessary. The reduction to our NOL deferred tax asset due to the annual Section 382 limitation and the NOL carryforward period would result in an offsetting reduction in valuation allowance recorded against the NOL deferred tax asset. Therefore, the limitation does not affect the statements of operations for the periods presented. Any future changes in our ownership or sale of our stock, including our March 2023 financing, could further limit the use of our NOLs in the future. If we need to obtain alternative or additional financing to meet our liquidity requirements under the 2019 Loan Agreement and we raise those funds by selling additional equity, this could further limit the use of our NOLs in the future.

Because our interest rate under the 2019 Loan Agreement is based on SOFR, a floating rate, we are exposed to the risks of higher interest rates, which could decrease our liquidity and capital resources and adversely affect our financial performance.

Our interest rate under the 2019 Loan Agreement is based on SOFR, a floating rate. The Federal Reserve raised interest rates seven times in 2022 and has indicated it may continue to do so to combat the effects of inflation, which is currently higher than it has been since the early 1980s. An increase in SOFR would increase our interest costs. Significant increases in our interest costs could materially and adversely affect our results of operations and our ability to pay amounts due under the 2019 Loan Agreement, and any increase in the interest we pay would reduce our cash available for working capital, acquisitions, and other uses.

Regulatory Risks

The manufacture and packaging of pharmaceutical products such as ILUVIEN are subject to the requirements of the FDA and similar foreign regulatory entities. If we or our third-party manufacturers fail to satisfy these requirements, our product developmentcommercialization and commercializationregulatory approval efforts may be materially harmed.

Regulatory agencies may impose limitations on the indicated uses for which ILUVIEN may not be available on commercially reasonable terms,marketed, or at all.

of the procedure in which they administer ILUVIEN at a level that is satisfactory to them. Limitations on coverage could also be imposed at the local Medicare carrier level or by fiscal intermediaries. Our business could be materially adversely affected if the Federal Medicare program, or local Medicare carriers (MACS) or fiscal intermediaries were to make such a determination and deny or limit the reimbursement of ILUVIEN. If the local contractors that administer the Medicare program are slow to reimburse retinal specialists for ILUVIEN, whichthat delay could ultimately affect the timing of payments to us, which would in turn adversely affect our working capital requirements.

Europe, each country has different regulations that govern the promotional claims and activities of pharmaceutical and biotechnology companies. The violation and enforcement of these regulations by each country may result in heavy fines, further legal action, public reprimand, injunction and may include the loss of market authorization.

enacted privacy laws similar to the CCPA that impose new obligations or limitations in areas affecting our business. These laws and regulations are evolving and subject to interpretation and may impose limitations on our activities or otherwise adversely affect our business. The obligations to comply with the indicated uses for which ILUVIENCCPA and evolving legislation may involve, among other things, updates to our notices and the development of new processes. We may be marketed,subject to fines, penalties, or private actions in the event of non-compliance with such laws.

In addition, we may obtain health information from third parties (e.g., healthcare providers who prescribe our product) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, (collectively, HIPAA). HIPAA imposes privacy and security obligations on covered entity health care providers, health plans, and health care clearinghouses, as well as their “business associates”—certain persons or entities that create, receive, maintain, or transmit protected health information in connection with providing a specified service or performing a function on behalf of a covered entity. Although we are not directly subject to HIPAA, we could be subject to criminal penalties if we knowingly receive individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA.

Further at the federal level, the Federal Trade Commission (FTC) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (FTC Act). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles consumers’ personal information; any failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC Act. While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.

EU Member States and other jurisdictions where we operate have adopted data protection laws and regulations, which wouldimpose significant compliance obligations. For example, the General Data Protection Regulation (GDPR) imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. Switzerland has adopted laws that impose restrictions and obligations similar to the GDPR. The obligations and restrictions under the GDPR and Switzerland’s laws concern, in particular, in some instances the consent of the individuals to whom the personal data relate, the processing details disclosed to the individuals, the sharing of personal data with third parties, the transfer of personal data out of the European Economic Area (EEA) or Switzerland, contracting requirements (such as with clinical trial sites and vendors), and security breach notifications, as well as substantial potential fines, in some cases up to 4% of annual global turnover, for breaches of the data protection obligations. Data protection authorities from the different EU Member States and the EEA may interpret the GDPR and applicable related national laws differently which could effectively result in requirements additional to those currently understood to apply under the GDPR. In addition, guidance on implementation and compliance practices may be updated or otherwise revised, which adds to the complexity of processing personal data in the EU. When processing personal data of subjects in the EU, we have to comply with applicable data protection and electronic communications laws. In particular, as we rely on service providers processing personal data of subjects in the EU, we have to enter into suitable contract terms with such providers and receive sufficient guarantees that such providers meet the requirements of the applicable data protection laws, particularly the GDPR which imposes specific and relevant obligations. Enforcement by EU and UK regulators is active, and failure to comply with the GDPR or applicable Member State law may result in substantial fines.

Legal mechanisms to allow for the transfer of personal data from the EEA or UK to the US may impact our ability to transfer personal data or otherwise may cause us to incur significant costs to do so legally. On July 16, 2020, the European Court of Justice ruled that the Privacy Shield is an invalid data transfer mechanism and confirmed that the Standard Contractual Clauses (SCCs) remain valid. If companies are relying on the SCCs as their transfer mechanism to transfer personal information from the EEA to the US (or to other jurisdictions not recognized as adequate by the EU), they must be incorporated into new and existing agreements within prescribed timeframes. The UK adopted versions of their own SCCs. Updating agreements to incorporate these new SCCs for the EEA and UK may require significant time and resources to implement, including through adjusting our operations, conducting requisite data transfer assessments, and revising our contracts. Companies that have not taken steps to demonstrate that their SCCs and personal data recipients in the US or other non-adequate jurisdictions are suitable to receive the personal data may be subject to enforcement actions by competent authorities in the EU for failure to comply with related data privacy rules.

Additionally, the European Commission adopted a draft adequacy decision for the EU-US Data Privacy Framework, which reflects the assessment by the European Commission of the US legal framework. The draft decision concludes that the United States ensures an adequate level of protection for personal data transferred from the EU to US companies. After an approval

process, the European Commission is expected to adopt the final adequacy decision, which will allow data to flow freely from the EU to the U.S.

If we or our distributors fail to comply with applicable data privacy laws concerning, or if the legal mechanisms we or our distributors rely upon to allow, the transfer of personal data from the EEA or Switzerland to the US (or other countries not considered by the European Commission to provide an adequate level of data protection) are not considered adequate, we could be subject to government enforcement actions, including an order to stop transferring the personal data outside of the EEA and significant penalties against us. Moreover, our business could be adversely impacted if our ability to transfer personal data out of the EEA or Switzerland to the US is restricted, which could adversely impact our operating results.

Failure to comply with data protection laws and regulations could result in unfavorable outcomes, including increased compliance costs, delays or impediments in the development of new products, increased operating costs, diversion of management time and attention, government enforcement actions and create liability for us (which could include civil, administrative, and/or criminal penalties), private litigation and/or adverse publicity that could negatively affect our operating results and business.

Risks Related to Intellectual Property and Other Legal Matters

We may be adversely affected by the expiration of patents that protect key aspects of ILUVIEN in the near- to medium-term.

The patent rights relating to ILUVIEN licensed to us from EyePoint include one U.S. patent that will expire in August 2027, two European patents that expired in April 2021 and will expire in October 2024, respectively, and counterpart filings to these patents in a number of other jurisdictions. No patent term extension will be available for any of these U.S. patents, European patents or any of our business.

We do not control the regulatory authorities to those specific indications for which clinical safety and efficacy have been demonstrated.

ocular implant into a patient’s eye similar to the ILUVIEN applicator. There is also an issued U.S. patent with claims covering implanting a steroidal anti-inflammatory agent to treat an inflammation-mediated condition of the eye. If these or any other patents were held by a court of competent jurisdiction to be valid and to cover aspects of ILUVIEN, then the owners of such patents would be able to block our ability to commercialize ILUVIEN unless and until we obtain a license under such patents (which license might require us to pay royalties or grant a cross-license to one or more patents that we own), until those patents expire or unless we are able to redesign our product to avoid any such valid patents.

commercially reasonable terms, or at all, may have a material adverse effect on our ability to commercialize ILUVIEN or any future products or product candidates until such patents expire.

member country into another are expressly permitted and cannot be prohibited. Furthermore, as our distribution expands, the possibility may increase for diversion of ILUVIEN into unanticipated markets. Sales of product by other companies through parallel import or diversion may adversely affect our product revenue, business and results of operations.

Product liability lawsuits could divert our resources, reduce the commercial potential of our products and result in substantial liabilities, which insurance may not cover.

Our business exposes us to the risk of product liability claims, which is inherent in the manufacturing, testing and marketing of drugs and related products. We face an increased risk of product liability as we further commercialize ILUVIEN, especially in the U.S. If the use of ILUVIEN or one or more of our future products causes physical harm, we may be terminatedsubject to costly and damaging product liability claims. We believe that we may be at a greater risk of product liability claims relative to other pharmaceutical companies because ILUVIEN is inserted into the eye, and it is possible that we may be held liable for eye injuries of patients who receive ILUVIEN. Any product liability lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or breached,forego further commercialization of ILUVIEN or one or more of our future products. Even if we are not held liable, product liability lawsuits could cause adverse publicity and decrease the demand for ILUVIEN, which could have a material adverse effect on our business, results or operations and financial condition. Through the date of this report we have not had any material claims against us.

Although we maintain product liability insurance covering our clinical trial activities and our product sales, our aggregate coverage limit under these insurance policies is limited to $10 million in most jurisdictions, and while we believe this amount of insurance is sufficient to cover our product liability exposure, these limits may not be high enough to fully cover potential liabilities. The insurance provides worldwide coverage where allowed by law. As we generate product revenue in new countries, we intend to obtain compulsory coverage in those countries that require it. However, we may not be able to obtain or maintain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims. If we are unable to obtain insurance at acceptable cost or otherwise protect against potential product liability claims, we will be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our product development and commercialization efforts.

Certain Risks of Owning Our Common Stock

Conversion of all of our Series B Convertible Preferred Stock is contingent upon stockholder approval.

Pursuant to the listing rules of The Nasdaq Global Market (Nasdaq), until our stockholders approve the issuance of the common stock underlying our Series B Convertible Preferred Stock (the Series B Preferred Stock), the Series B Preferred Stock may not be converted if such conversion would cause (i) the aggregate number of shares of common stock that would be issued pursuant to the related securities purchase agreement and the transactions contemplated thereby to exceed 1,401,901 (19.99% of the voting power or number of shares of common stock, issued and outstanding immediately prior to the execution of the purchase agreement), which number will be reduced, on a share-for-share basis, by the number of shares of common stock issued or issuable pursuant to any transactions that may be aggregated with the transactions contemplated by the related securities purchase agreement under applicable Nasdaq rules; or (ii) the aggregate number of shares of common stock that would be issued pursuant to such conversion, when aggregated with any shares of common stock then beneficially owned by the holder (or group of holders required to be aggregated) of such shares, would result in a “change of control” under applicable Nasdaq listing rules. We have adequate remediesagreed to file a proxy statement with the SEC for the purpose of having our stockholders vote on a proposal to approve such issuances. Our stockholders may reject such a proposal, which would result in the Series B Preferred Stock to continue to accrue dividends at a rate of 6% per annum, accrued daily. For more information about the Series B Preferred Stock, see Part II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Recent Developments”.

The Series B Preferred Stock ranks senior to our common stock with respect to payments upon liquidation, dividends, and distributions.

The rights of the holders of the Series B Preferred Stock rank senior to the obligations to our common stockholders. Upon our liquidation, the holders of Series B Preferred Stock are entitled to receive $1,000.00 per share plus all accumulated and unpaid dividends (the Liquidation Preference). Until the holders of Series B Preferred Stock receive their Liquidation Preference in full, no payment will be made on any junior shares, including shares of our common stock.  Further, the holders of Series B Preferred Stock have the right to participate in any payment of dividends or other distributions made to the holders of common stock to the same extent as if they had converted such preferred shares. The existence of senior securities such as the Series B Preferred Stock could have an adverse effect on the value of our common stock.

Holders of Series B Preferred Stock have rights that may restrict our ability to operate our business.

Under the Certificate of Designation of the Series B Preferred Stock, we are subject to certain covenants that limit our ability to create new series of preferred stock, other than series junior to the S Series B Preferred Stock, and our ability to incur

certain indebtedness. Such restrictions may have an adverse effect on our ability to operate our business while the Series B Preferred Stock is outstanding.

Our common stockholders may experience significant dilution upon the issuance of common stock upon conversion of the Series B Preferred Stock or exercise of outstanding warrants to purchase common stock.

The issuance of common stock upon conversion of some or all of the Series B Preferred Stock will dilute the ownership interests of existing holders of shares of our common stock. As of March 24, 2023, if all of the Series B Preferred Stock were converted and all of our outstanding warrants to purchase common stock were exercised in full, we would have issued 11,428,572 shares of common stock (without giving effect to any limitation on conversions or exercise). The number of shares of common stock issuable upon conversion of the Series B Preferred Stock will increase as dividends continue to accrue on such shares at a rate of 6% per annum, accrued daily. The conversion price of the Series B Preferred Stock and the exercise price of the warrants to purchase common stock aresubject to certain customary adjustments, including a weighted average anti-dilution adjustment (which will remain in effect until the Series B Preferred Stock converts). If stockholder approval is obtained, the Series B Preferred Stock will automatically be converted into shares of common stock and the exercise price of the warrants will no longer be subject to a weighted average anti-dilution adjustment.

The Series B Preferred Stock contains covenants and other terms that may limit our business flexibility and affect the market price of our common stock.

For so long as at least 20% of the shares of Series B Preferred Stock are held by the initial investors or their affiliates, we may not, without first obtaining the approval of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock:

•amend the Certificate of Designation of the Series B Preferred Stock;

•amend our certificate of incorporation (including by filing any new certificate of designation or elimination) or our bylaws, in a manner that adversely affects the rights, preference or privileges of the Series B Preferred Stock;

•increase or decrease the authorized number of shares of Series B Preferred Stock or issue additional shares of Series B Preferred Stock, other than to the investors;

•authorize, create, issue or obligate us to issue (by reclassification, merger or otherwise) any security (or any class or series thereof) or any indebtedness, in each case that has any rights, preferences or privileges senior to, or on a parity with, the Series B Preferred Stock, or any security convertible into or exercisable for any such terminationsecurity or breach. Furthermore, these agreements mayindebtedness, subject to certain exceptions;

•redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of capital stock, subject to certain exceptions;

•declare or pay any dividend or distribution on any shares of capital stock; provided, however, that this restriction shall not provide meaningful protectionapply to dividends payable to holders of common stock that consist solely of shares of common stock for which adjustment to the conversion price of the Series B Preferred Stock is made pursuant to the Certificate of Designation of the Series B Preferred Stock; or

•incur any indebtedness in excess of $5,000,000 or any secured indebtedness other than as permitted by the Certificate of Designation of the Series B Preferred Stock.

There is no guarantee that the holders of the Series B Preferred Stock would approve any such restricted action, even where such an action would be in the best interests of our stockholders. Any failure to obtain such approval could harm our business and result in a decrease in the value of our common stock.

Our failure to meet the continued listing requirements of The Nasdaq Global Market could result in a delisting of our common stock and make harder for shareholders to trade in our common stock.

Our common stock is listed on Nasdaq, which imposes, among other requirements, a minimum bid price requirement and a minimum market value requirement. In 2019 we failed on three occasions to meet the standards for continued listing on Nasdaq. If the closing bid price for our trade secrets and know-howcommon stock is less than $1.00 per share for 30 consecutive business days or the total market value of our publicly held shares closes at less than $15 million for 30 consecutive business days, Nasdaq may send us a notice stating we will be provided a period of 180 days to regain compliance with these requirements or else Nasdaq may make a determination to delist our common stock.

On March 23, 2023, we received a notice (the MVPHS Notice) from Nasdaq, stating that our listed securities failed to comply with the $15 million market value of publicly held shares (Market Value of Publicly Held Shares) requirement for continued listing on The Nasdaq Global Market in accordance with Nasdaq Listing Rule 5450(b)(2)(C) based on our Market Value of Publicly Held Shares for the 30 consecutive business days prior to the date of the MVPHS Notice.

In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we have been provided a period of 180 calendar days from the date of the MVPHS Notice, or until September 19, 2023, in which to regain compliance (the Compliance Period). In order to regain compliance, our Market Value of Publicly Held Shares must close at $15.0 million or more for a minimum of ten consecutive trading days during the Compliance Period. We intend to consider our available options to resolve this noncompliance, but there can be no assurance that we will be able to regain compliance with the Market Value of Publicly Held Shares requirement or maintain compliance with other Nasdaq listing requirements.

  In the event that we do not regain compliance within the Compliance Period, we may be eligible to transfer to The Nasdaq Capital Market before the expiry of the Compliance Period. However, if it appears to Nasdaq that we will not be able to cure the deficiency, or if we are not otherwise eligible, Nasdaq will provide notice to us that our common stock will be subject to delisting. In the event of unauthorized usesuch notification, we may appeal Nasdaq’s determination to delist its securities, but there can be no assurance Nasdaq would grant our request for continued listing.

The delisting of our common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future. Such a delisting would likely have a negative effect on the price of our common stock and would impair our stockholders’ ability to sell or disclosure. To the extentpurchase our common stock when they wish to do so. Further, if we were to be delisted from Nasdaq, our common stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which we offer our securities. Even if we regain compliance, there is no assurance that any actions that we take to restore our compliance with Nasdaq's listing requirements would stabilize the market price or improve the liquidity of our staffcommon stock, prevent our common stock from remaining below the Market Value of Publicly Held Shares required for continued listing or prevent future non-compliance with Nasdaq's listing requirements. Delisting may also result in our common stock trading on the over-the-counter market, which may be a less liquid market. In such case, our stockholders’ ability to trade, or obtain quotations of the market value of, shares of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities.

In addition to the foregoing, if our common stock is delisted from Nasdaq and it trades on the over-the-counter market, the application of the “penny stock” rules could adversely affect the market price of our common stock and increase the transaction costs to sell those shares. The SEC has adopted regulations which generally define a “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The last reported trade of our common stock on The Nasdaq Global Market was at a price below $5.00 per share. If our common stock is delisted from Nasdaq and it trades on the over-the-counter market at a price of less than $5.00 per share, our common stock would be considered a penny stock. The SEC’s penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that before a transaction in a penny stock occurs, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s agreement to the transaction. If applicable in the future, these rules may restrict the ability of brokers-dealers to sell our common stock and may affect the ability of investors to sell their shares, until our common stock no longer is considered a penny stock.

As long as we remain subject to the rules of Nasdaq, we will be unable to access equity capital without stockholder approval if such equity capital sales would result in an equity issuance above regulatory thresholds and consequently, we may be unable to obtain financing sufficient to sustain our business if we are unsuccessful in soliciting requisite stockholder approvals.

Our ability to access equity capital is subject to Nasdaq Listing Rule 5653(d), commonly referred to as the Nasdaq 20% Rule, which requires stockholder approval of a transaction other than a public offering involving the sale, issuance, or potential issuance by a company of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock, or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the shares. The operation of the Nasdaq 20% Rule could limit our ability to raise capital through issuance of common stock or convertible securities without jeopardizing our listing status. If we were previously employed by other pharmaceutical or biotechnology companies, those employers may allege violations of trade secretsto violate the Nasdaq 20% Rule, our common stock would be subject to delisting from Nasdaq and other similar claims in relation to their drug development activities for us.

•the submission of regulatory filings,

We do not intend to the shares purchased under the planpay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the preceding year. As such,price of our common stock.

We have never declared or paid any cash dividend on January 1, 2018, an additional 79,733 shares became availableour common stock and do not currently intend to do so for the foreseeable future. We currently anticipate that we will retain future issuance under our 2010 Employee Stock Purchase Plan.

intended by regulatory or governing bodies for any reason, regulatory authorities may initiate legal proceedings against us, our business may be harmed and the market price of our common stock could decline.

We are a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

We are a smaller reporting company under Rule 12b-2 of the Securities Exchange Act of 1934. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on smaller reporting company exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

None.

We do not own any real estate.