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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~May 4, ~~2022,~~2023, the registrant had ~~47,826,239~~48,460,154 shares of Common Stock, par value $0.001 outstanding.

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

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

Actual events or results may differ from those expressed in forward-looking statements. As such, you should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, prospects, strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission (the "SEC") on March ~~24, 2022~~16, 2023 (the ~~"2021~~"2022 Form 10-K") and elsewhere in this Quarterly Report. Moreover, we operate in a highly competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events and circumstances reflected in the forward-looking

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

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

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


	June 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Assets
Current assets:
Cash and cash equivalents	$	220,097		$	260,687		$	167,335		$	185,000
Accounts receivable, net		10,474			8,709
Accounts receivable, net of allowance for credit losses of $774 and $1,024 at March 31, 2023 and December 31, 2022, respectively								16,357			15,148
Inventory, net		4,940			3,475			7,138			6,114
Prepaid expenses and other current assets		2,035			4,164			2,822			3,415
Total current assets		237,546			277,035			193,652			209,677
Property and equipment, net		1,717			1,454			1,393			1,571
Operating lease right-of-use assets		1,250			1,495			1,372			1,614
Other noncurrent assets		236			202			224			211
Total assets	$	240,749		$	280,186		$	196,641		$	213,073
Liabilities, redeemable convertible preferred stock, and Stockholders’ equity
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,725		$	3,351		$	3,501		$	2,688
Accrued compensation		6,286			5,987			4,958			7,352
Accrued and other current liabilities		5,186			4,166			6,686			7,777
Total current liabilities		14,197			13,504			15,145			17,817
Long-term debt		32,984			32,656			33,457			33,313
Other noncurrent liabilities		1,809			1,919			1,663			1,867
Total liabilities		48,990			48,079			50,265			52,997
Commitments and contingencies (Note 6)
Redeemable convertible preferred stock:
Convertible preferred stock par value of $0.001 per share; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		0			0
Stockholders’ equity:
Preferred stock par value of $0.001 per share; 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		0			0
Common stock par value of $0.001 per share; 200,000,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively; 47,819,706 and 47,504,704 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		48			48
Preferred stock par value of $0.001 per share; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively								—			—
Common stock par value of $0.001 per share; 200,000,000 shares authorized as of March 31, 2023 and December 31, 2022, respectively; 48,450,378 and 48,298,138 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively								48			48
Additional paid-in-capital		391,818			385,060			402,638			399,271
Accumulated deficit		(200,107	)		(153,001	)		(256,310	)		(239,243	)
Total stockholders’ equity		191,759			232,107			146,376			160,076
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	240,749		$	280,186
Total liabilities and stockholders’ equity							$	196,641		$	213,073

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

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Revenue	$	17,229		$	12,535		$	32,111		$	21,170		$	18,824		$	14,881
Cost of goods sold		2,736			2,305			5,768			4,606			3,048			3,033
Gross profit		14,493			10,230			26,343			16,564			15,776			11,848
Operating expenses:
Research and development		5,926	��		3,546			11,573			6,986			4,669			5,646
Selling, general and administrative		31,431			17,760			59,826			32,310			28,675			28,395
Total operating expenses		37,357			21,306			71,399			39,296			33,344			34,041
Loss from operations		(22,864	)		(11,076	)		(45,056	)		(22,732	)		(17,568	)		(22,193	)
Interest expense		(1,065	)		(1,082	)		(2,112	)		(2,166	)		(1,276	)		(1,046	)
Other income (expense), net		95			(5,435	)		80			(4,883	)		1,791			(15	)
Loss before income taxes		(23,834	)		(17,593	)		(47,088	)		(29,781	)		(17,053	)		(23,254	)
Provision for income taxes		9			22			18			74			14			9
Net loss and comprehensive loss	$	(23,843	)	$	(17,615	)	$	(47,106	)	$	(29,855	)	$	(17,067	)	$	(23,263	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.50	)	$	(1.83	)	$	(0.99	)	$	(3.12	)	$	(0.35	)	$	(0.49	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		47,701,451			9,610,408			47,635,840			9,564,096			48,405,271			47,569,499

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

Condensed Consolidated Statements of ~~Redeemable Convertible Preferred Stock and~~ Stockholders’ Equity (Unaudited)


	Three Months Ended June 30, 2022																Three Months Ended March 31, 2023
	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’			Common Stock				Additional Paid-In			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity			Shares		Amount		Capital			Deficit			Equity
Balance at March 31, 2022		0	$	0		47,590,348	$	48	$	388,127	$	(176,264	)	$	211,911
Balance at December 31, 2022																		48,298,138	$	48	$	399,271		$	(239,243	)	$	160,076
Issuance of common stock upon exercise of stock options		—		—		229,358		—		159		—			159			46,208		—		49			—			49
Issuance of common stock upon vesting of restricted stock units																		106,032		—		—			—			—
Withholding taxes on net share settlement of restricted stock units																		—		—		(205	)		—			(205	)
Stock-based compensation expense		—		—		—		—		3,532		—			3,532			—		—		3,523			—			3,523
Net loss		—		—		—		—		—		(23,843	)		(23,843	)		—		—		—			(17,067	)		(17,067	)
Balance at June 30, 2022		0		0		47,819,706		48		391,818		(200,107	)		191,759
Balance at March 31, 2023																		48,450,378		48		402,638			(256,310	)		146,376


	Six Months Ended June 30, 2022																Three Months Ended March 31, 2022
	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’			Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity			Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2021		0	$	0		47,504,704	$	48	$	385,060	$	(153,001	)	$	232,107			47,504,704	$	48	$	385,060	$	(153,001	)	$	232,107
Issuance of common stock upon exercise of stock options		—		—		315,002		—		252		—			252			85,644		—		93		—			93
Stock-based compensation expense		—		—		—		—		6,506		—			6,506			—		—		2,974		—			2,974
Net loss		—		—		—		—		—		(47,106	)		(47,106	)		—		—		—		(23,263	)		(23,263	)
Balance at June 30, 2022		0		0		47,819,706		48		391,818		(200,107	)		191,759
Balance at March 31, 2022																		47,590,348		48		388,127		(176,264	)		211,911

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

~~Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)~~

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


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2022			2021			2023			2022
Cash flows from operating activities
Net loss	$	(47,106	)	$	(29,855	)	$	(17,067	)	$	(23,263	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		375			289			146			179
Accretion of debt discount and amortization of debt issuance costs		328			346			144			161
Stock-based compensation expense		6,506			1,208			3,523			2,974
Provision for doubtful accounts receivable		105			104			(250	)		(60	)
Provision for excess and obsolete inventories		118			276			12			8
Noncash operating lease expense		246			310			242			121
Change in fair value of redeemable convertible preferred stock warrant		0			4,872
Loss on disposal of property and equipment		49			74			66			46
Changes in operating assets and liabilities:
Accounts receivable		(1,870	)		(1,628	)		(959	)		(1,180	)
Inventory		(1,583	)		(255	)		(1,036	)		(615	)
Prepaid expenses and other current assets		2,129			(1,197	)		593			1,472
Other noncurrent assets		(34	)		(3,081	)		(13	)		10
Accounts payable		(608	)		1,438			878			(248	)
Accrued compensation		299			13			(2,394	)		(2,129	)
Accrued and other current liabilities		599			1,594			(1,345	)		472
Other noncurrent liabilities		176			186			77			86
Net cash used in operating activities		(40,271	)		(25,306	)		(17,383	)		(21,966	)
Cash flows from investing activities
Purchases of property and equipment		(569	)		(369	)		(126	)		(227	)
Net cash used in investing activities		(569	)		(369	)		(126	)		(227	)
Cash flows from financing activities
Payments of costs related to initial public offering		0			(471	)
Proceeds from exercise of common stock options		250			207			49			92
Net cash provided by (used in) financing activities		250			(264	)
Taxes paid on the net share settlement of restricted stock units								(205	)		—
Net cash (used in) provided by financing activities								(156	)		92
Net change in cash and cash equivalents		(40,590	)		(25,939	)		(17,665	)		(22,101	)
Cash and cash equivalents at beginning of period		260,687			61,511			185,000			260,687
Cash and cash equivalents at end of period	$	220,097		$	35,572		$	167,335		$	238,586

Supplemental disclosure of cash flow information
Cash paid for interest	$	1,548		$	1,548		$	1,002		$	766
Supplemental noncash disclosure
Acquisition of property and equipment included in accounts payable and accrued liabilities	$	279		$	181		$	10		$	418
Unpaid initial public offering costs in accounts payable and accrued liabilities	$	0		$	2,764

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

Note 3. Fair Value Measurements

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

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

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

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

The Company's cash and cash equivalents included $~~174.7~~157.3 million of treasury bills as of ~~June 30, 2022.~~March 31, 2023. These securities are classified as held-to-maturity and all have been purchased with original maturities of 90 days or less. Held-to-maturity debt securities are recorded at amortized cost in the financial statements.

June 30, 2022

Amortized Cost

Unrealized Gains

Unrealized Losses

Aggregate Fair Value

U.S. treasury securities

$
174,711

$
2

$
(21
)

$
174,692


	March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
U.S. treasury securities	$	157,297	$	58	$	—	$	157,355

The Company measures the fair value of outstanding debt for disclosure purposes on a recurring basis. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, total debt of $~~33.0~~33.5 million and $~~32.7~~33.3 million is reported at amortized cost, respectively. This outstanding debt is classified as Level 2 as it is not actively traded. The amortized cost of the outstanding debt approximates the fair value.

The Company measured the redeemable convertible preferred stock warrants using Level 3 unobservable inputs within the Black-Scholes option-pricing model. The key assumptions included the fair value of redeemable convertible preferred stock, volatility, the risk-free interest rate, expected term (remaining contractual term of the warrants) and dividend yield. The Company had limited historical volatility information available, and the expected volatility was based on actual volatility for comparable public companies projected over the expected terms of the warrants. The Company did not apply a forfeiture rate to the warrants as there was not enough historical information available to estimate such a rate. The risk-free rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the warrants.

The Company determined the fair value of the redeemable convertible preferred stock warrants quarterly, with subsequent gains and losses from remeasurement of Level 3 financial liabilities recorded through other income (expense), net in condensed consolidated statements of operations and comprehensive loss. The redeemable convertible preferred stock warrants were converted to common stock warrants upon the closing of the IPO and subsequently settled during the third quarter of the year ended December 31, 2021.

~~A summary of the changes in the fair value of the Company’s Level 3 financial instruments for the three and six months ended June 30, 2021, is as follows (in thousands):~~

Redeemable convertible preferred stock warrants liabilities

Balance – December 31, 2020

$
2,112

Change in fair value

(555
)
Balance - March 31, 2021

1,557

Change in fair value

5,427

Balance – June 30, 2021

$
6,984

~~The~~ financial statements as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, do not include any assets or liabilities that are measured at fair value on a nonrecurring basis.

Note 4. Balance Sheet Components

Property and Equipment, Net

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


	As of June 30,			As of December 31,			As of March 31,			As of December 31,
	2022			2021			2023			2022
Tools and equipment	$	2,259		$	1,685		$	2,085		$	2,173
Computer equipment and software		100			100			37			37
Furniture and fixtures		254			254			183			282
Leasehold improvements		34			29			38			38
Construction in process		611			590			429			475
		3,258			2,658			2,772			3,005
Less: Accumulated depreciation		(1,541	)		(1,204	)		(1,379	)		(1,434	)
Property and equipment, net	$	1,717		$	1,454		$	1,393		$	1,571

Depreciation expense was $~~0.2~~0.1 million and $~~0.4~~0.2 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~respectively. Depreciation expense was $0.2~~ ~~million and $0.3~~ ~~for the three and six months ended June 30, 2021,~~ respectively.

Accrued and Other Current Liabilities

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


	As of June 30,		As of December 31,		As of March 31,		As of December 31,
	2022		2021		2023		2022
Accrued expenses	$	3,525	$	2,726	$	4,361	$	5,307
Current portion of lease liabilities		556		510		1,069		1,033
Short term interest payable		266		275		364		348
Other accrued liabilities		839		655		892		1,087
Total accrued and other current liabilities	$	5,186	$	4,166	$	6,686	$	7,775

Other Noncurrent Liabilities

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


	As of June 30,		As of December 31,		As of March 31,		As of December 31,
	2022		2021		2023		2022
Long term interest payable					$	1,272	$	1,194
Noncurrent portion of lease liabilities	$	753	$	1,040		353		635
Long term interest payable		1,018		841
Other noncurrent liabilities		38		38		38		38
Total other noncurrent liabilities	$	1,809	$	1,919	$	1,663	$	1,867

Note 5. Debt

~~In January 2019, the~~The Company ~~entered into~~currently has two credit and security agreements with MidCap Financial Services (the "Lender"), which ~~provided a maximum of $25.0~~ ~~million credit facility consisting of a $20.0~~ ~~million senior secured term loan (the "2019 Term Loan") and a $5.0~~ million 2019 revolving loan (the "2019 Revolver" and collectively with the 2019 Term Loan, the “2019 MidCap Credit Facility”). In November 2020, the Company entered into amended and restated credit and security agreements with the same institution, which replaced the 2019 MidCap Credit Facility, and providedprovide for a maximum of $40.0 million credit facility, consisting of a $35.0 million senior secured term loan (the ~~"2020 Term~~"Term Loan") and a $5.0 million revolving loan (the ~~"2020 Revolver~~"Revolver" and collectively with the ~~2020~~ Term Loan, the ~~“2020 MidCap~~“MidCap Credit Facility”).

The obligations under the MidCap Credit Facility are guaranteed by the Company's current and future subsidiaries, subject to exceptions for certain foreign subsidiaries. Obligations under the agreements are secured by substantially all assets of the Company, including material intellectual property. Additionally, the Company is subject to customary affirmative and negative covenants as defined in the credit agreements, including covenants that limit or restrict the ability to, among other things, incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. ~~The agreements also have financial covenants that relate to minimum trailing revenue targets, which began in November 2020, and are tested on a monthly basis.~~ As of ~~June 30, 2022,~~March 31, 2023, the Company was in compliance with all financial and non-financial covenants.

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

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, $5.0 million was available to be drawn under the ~~2020~~ Revolver, respectively. The ~~2020~~ Revolver had not been drawn upon as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Long-term and short-term debt was as follows (in thousands):


	As of June 30,			As of December 31,			As of March 31,			As of December 31,
	2022			2021			2023			2022
Term Loan	$	35,000		$	35,000		$	35,000		$	35,000
Total principal payments due		35,000			35,000			35,000			35,000
Less: debt discount related to warrant liability and issuance costs		(2,016	)		(2,344	)		(1,543	)		(1,687	)
Total amounts outstanding		32,984			32,656			33,457			33,313
Less: Current portion		0			0			—			—
Total accrued and other current liabilities	$	32,984		$	32,656		$	33,457		$	33,313

The repayment schedule relating to the Company’s debt as of ~~June 30, 2022,~~March 31, 2023, is as follows (in thousands):


	Amount		Amount
2022 (remainder)		0
2023		1,458
2023 (remainder)				—
2024		17,500		2,917
2025		16,042		32,083
Thereafter		0		—
Total repayments	$	35,000	$	35,000

Note 6. Commitments and Contingencies

Operating Lease Obligations

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

~~On February 5,~~During the first quarter of 2021, the Company renewed ~~the~~its lease ~~of the~~on its corporate headquarters in Menlo Park, California. The lease ~~is a noncancelable operating lease for approximately~~commenced in early ~~10,823~~ ~~square feet of primary office space. The operating lease commenced on~~ August 1, 2021 and is for a term of 37 months~~months~~ from the commencement

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

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

The Company recognizes rent expense on a straight-line basis over the noncancelable lease term. The Company’s rent expense was $0.3 million and $~~0.4~~0.2 million for the ~~six months ended June 30, 2022 and 2021, respectively. The Company’s rent expense was $0.2~~ ~~million for both the~~ three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. As of ~~June 30, 2022,~~March 31, 2023, the weighted average remaining lease term for the ~~lease~~leases was ~~2.1~~1.3 years.

Operating lease expense and supplemental cash flow information related to operating leases for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
Operating lease expense	$	173	$	178	$	346	$	353	$	293	$	173
Cash paid for operating leases		171		176		341		353		297		170
New operating lease assets obtained in exchange for operating lease liabilities		-		23		-		23

Aggregate future minimum lease payments at ~~June 30, 2022,~~March 31, 2023, under these noncancelable operating leases were as follows (in thousands):


	As of June 30,			As of March 31,
	2022			2023
2022 (remainder)		350
2023		705
2023 (remainder)					887
2024		462			662
Total future minimum lease payments	$	1,517		$	1,549
Less: imputed interest		(208	)		(127	)
Present value of future minimum lease payments	$	1,309		$	1,422
Less: current portion of operating lease liability		(556	)		(1,069	)
Operating lease liabilities - noncurrent	$	753
Operating lease liabilities – noncurrent				$	353

Legal Proceedings

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

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

The Company is subject to claims and assessments from time to time in the ordinary course of business. Accruals for litigation and contingencies are reflected in the financial statements based on management’s assessment, including the advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings, and/or the expected resolution of contingencies. Liabilities for estimated losses are accrued if the potential losses from any claims or legal proceedings are considered probable and the amounts can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period. As of ~~June 30, 2022 and December~~March 31, ~~2021,~~2023 the Company does not believe it was ~~not involved in~~a party to any ~~material~~ legal proceedings ~~except~~or claims which, if determined adversely, would, individually or taken together, have a material adverse effect on its business, financial condition, operating results, liquidity or future prospects. However, regardless of the merits of the claims raised or the outcome, legal proceedings and claims may have an adverse impact on the Company as ~~described above.~~a result of defense and settlement costs, diversion of management time and resources, and other factors.

Indemnification

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

The Company indemnifies each of its directors and officers (each an "Indemnitee") for certain events or occurrences, subject to certain limits, while the director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as ~~a director or officer~~an indemnitee may be subject to any proceeding arising out of acts or omissions of such ~~director or officer~~indemnitee in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is ~~immaterial.~~minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of ~~June 30, 2022 and~~March 31, 2023 or December 31, ~~2021.~~2022.

~~There was~~ 0 redeemable convertible preferred stock outstanding as of June 30, 2022 and December 31, 2021. In connection with the Company’s IPO in July 2021, all then-outstanding shares of redeemable convertible preferred stock were converted into ~~25,534,404~~ ~~shares of common stock. This resulted in the reclassification of the related redeemable convertible preferred stock to common stock and APIC.~~

~~There were~~ 0 warrants outstanding as of June 30, 2022 and December 31, 2021. The Company had previously issued redeemable convertible preferred stock warrants in connection with the Company's 2019 Term Loan agreement and 2020 Term Loan agreement. At initial recognition, the warrants were recorded at their estimated fair values and were subject to remeasurement at each balance sheet date. Upon completion of the IPO, the outstanding warrants were converted to common stock, resulting in the re-classification of the convertible preferred stock warrant liability to APIC. In August 2021, the warrants were net exercised and the Company issued ~~483,554~~ ~~shares of common stock.~~

Note 8. Equity Incentive Plans

2011 Stock Option Plan and 2021 Incentive Award Plan

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

In July 2021, the ~~Company’s Board~~board of ~~Directors~~directors and stockholders adopted and approved the 2021 Incentive Award Plan, (the “2021 Plan”). Under the 2021 Plan, the Company has the ability to issue incentive stock options ("ISOs"), nonqualified stock options ("NSOs"), stock

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

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

The ~~Company’s~~ 2011 ~~Stock~~ Plan was ~~terminated in connection with~~superseded by the 2021 Plan at the time of the IPO and no further grants ~~will be~~have been made under the 2011 Plan from the date the 2021 Plan became effective. The terms under the 2011 Plan are consistent with those described above for the 2021 Plan. ~~The Company had the ability to issue ISOs, NSOs, stock appreciation rights, dividend equivalent rights, restricted stock awards, and restricted stock unit awards.~~

At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 there were ~~3,576,258~~7,258,472 and ~~5,321,687~~6,099,584 shares, respectively, of common stock available for issuance under the 2021 Plan.

Stock Option Awards

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

Number of
Shares

Weighted-Average Exercise Price

Weighted-Average
Contractual
Term (in years)

Average Intrinsic Value
(in thousands)

Balances as of December 31, 2021

4,996,945

$
6.05

7.6

$
58,420

Grants

1,352,900

17.27

Forfeited/cancelled

(322,794
)

1.30

Exercised/released

(317,360
)

0.76

Balances as of June 30, 2022

5,709,691

$
9.27

8.1

$
15,844

Vested and exercisable as of June 30, 2022

2,169,525

$
4.93

6.8

$
11,389

Vested and expected to vest as of June 30, 2022

5,679,691

$
9.32

8.2

$
15,577


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Contractual Term (in years)		Average Intrinsic Value (in thousands)
Balances as of December 31, 2022		4,819,906		$	9.67		7.7	$	19,463
Grants		633,700			9.78
Forfeited/cancelled		(309,914	)		12.71
Exercised/released		(47,736	)		1.07
Balances as of March 31, 2023		5,095,956		$	9.60		7.5	$	10,891
Vested and exercisable as of March 31, 2023		2,508,970		$	7.32		6.2	$	9,076
Vested and expected to vest as of March 31, 2023		5,095,956		$	9.60		7.5	$	10,891

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $~~2.6~~2.2 million and $~~5.1~~ ~~million related to stock option awards, respectively. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation of $0.9~~ ~~million and $1.2~~2.5 million related to stock option awards, respectively. The weighted-average grant-date fair values of options granted during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ was $~~9.67~~6.91 and $~~10.42~~9.76 per share, respectively.

The aggregate intrinsic value of options exercised was $~~1.7~~ ~~million and $2.9~~0.6 million during the three ~~and six~~ months ended ~~June 30, 2022, respectively.~~March 31, 2023. The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying options and the estimated fair value of the common stock on the date of exercise. As of ~~June 30, 2022,~~March 31, 2023, the unrecognized stock-based compensation ofexpense relating to unvested options was $~~30.9~~22.0 million, which is expected to be recognized over a weighted-average period of ~~3.0~~2.4 years.

Determination of ~~fair value~~Fair Value

The Company estimated the grant date fair value of stock options using the Black-Scholes option-pricing model. The fair value of stock options is recognized on a straight-line basis over the requisite service periods of the awards. The fair value of stock options was estimated using the following weighted-average assumptions:

Three Months Ended
June 30,

Six Months Ended
June 30,

Three Months Ended
March 31,

2022

2021

2022

2021

2023

2022

Expected term (in years)

5.98 – 6.04

5.74 – 6.18

5.38 – 6.94

4.99 – 6.18

5.60 – 6.02

5.38 – 6.94

Expected volatility

58.74% – 59.24%

59.93% – 61.07%

58.74% – 60.12%

56.75% – 61.08%

79.73%

58.75% – 60.12%

Risk-free interest rate

2.82% – 3.14%

0.95% – 1.05%

1.34% – 3.14%

0.48% – 1.05%

3.66% – 3.67%

1.34% – 2.40%

Dividend yield

–

Expected Term

The expected term is calculated using the simplified method, which is available if there is insufficient historical data about exercise patterns and post vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant or for each vesting tranche for awards with graded vesting. The midpoint of the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting tranches, the time from grant until the midpoints for each of the tranches may be averaged to provide an overall expected term.

Expected Volatility

The Company used an average historical stock price volatility of a peer group of publicly traded companies to be representative of its expected future stock price volatility, as the Company did not have any trading history for its common stock. For purposes of identifying these peer companies, the Company considered the industry, stage of

development, size, and financial leverage of potential comparable companies. For each grant, the Company measured historical volatility over a period equivalent to the expected term.

Risk-Free Interest Rate

The risk-free interest rate is based on the implied yield currently available on US Treasury zero-coupon issues with remaining terms equivalent to the expected term of a stock award.

Expected Dividend Rate

The Company has not paid, and does not anticipate paying, any dividends in the near future. Accordingly, the Company has estimated the dividend yield to be 0%0%.

Restricted Stock Units

RSUs are share awards that entitle the holder to receive freely ~~tradable~~tradeable shares of the Company’s common stock upon vesting. The RSUs cannot be transferred, and the awards are subject to forfeiture if the holder’s employment terminates prior to the release of the vesting restrictions. The RSUs generally vest over a four-year period with straight-line vesting in equal amounts on an annual basis, provided the employee remains continuously employed with the Company. The fair value of the RSUs is equal to the closing price of the Company’s common stock on the grant date.

The following table summarizes restricted share award activity under the 2021 Plan:


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share		Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Outstanding, December 31, 2021		53,250		$	22.91
Outstanding, December 31, 2022							1,014,123		$	14.25
Grants		730,023			15.83		984,600			9.78
Forfeited/cancelled		(14,700	)		17.63		(52,367	)		15.47
Vested		(1,975	)		17.41		(106,032	)		17.07
Outstanding, June 30, 2022		766,598		$	16.28
Outstanding, March 31, 2023							1,840,324		$	11.66

During ~~the~~ three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, the Company recorded stock-based compensation expense of $~~0.8~~1.1 million and $~~1.3~~0.5 million related to the RSUs. ~~During the three and six months ended June 30, 2021, the Company recorded~~ 0 ~~stock-based compensation related to the RSUs.~~ As of ~~June 30, 2022,~~March 31, 2023, there was $~~11.2~~19.7 million of total unrecognized stock-based compensation ~~cost related~~expense relating to the RSUs that is expected to be recognized over a weighted-average period of ~~3.3~~3.4 years.

~~2021~~ Employee Stock Purchase Plan

In July 2021, the ~~Board~~board of ~~Directors~~directors and stockholders ~~also~~ adopted and approved the 2021 Employee Stock Purchase Plan (the “ESPP”). The Company initially reserved 850,000 shares of common stock for future issuance under the ESPP. Pursuant to the evergreen provision under the ESPP, this initial reserve was increased by 482,981 and 475,047 shares on January 1, 2023 and 2022, respectively. These annual increases pursuant to the evergreen provision are equal to the lesser of (i) 1% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the Board, subject to certain limitations.

~~During~~The Company's first six-month offering period under the ESPP began during the second quarter of ~~fiscal year 2022, the Company's first six month~~2022. The Company has two offering ~~period began,~~periods annually, running for six-months, with the first offering period beginning in the second quarter, and the second offering period beginning in the fourth quarter. The purchase of shares ~~to occur during~~for participants in the ~~fourth quarter~~ESPP occurs at the conclusion of ~~fiscal year 2022.~~ each offering period.

As of ~~June 30, 2022,~~March 31, 2023, the Company has collected payroll withholdings of $~~0.2~~0.5 million in the current offering period for the purchase of shares under the ESPP. The Company recorded $~~0.1~~0.2 million of ~~compensation expense for the three and six months ended June 30, 2022. There was~~ 0stock-based compensation expense associated with the ~~Company's~~ESPP for the quarter ended March 31, 2023. There was no stock-based compensation expense associated with the ESPP for the three ~~and six~~ months ended ~~June 30, 2021.~~ March 31, 2022.

As of ~~June 30, 2022,~~March 31, 2023, there were 01,709,104 shares of common stock ~~have been purchased~~available for issuance under the ESPP.

The fair value of shares to be issued under the Company's 2021 ESPP was estimated using the Black-Scholes valuation model with the following assumptions for the ~~three-months~~three months ended ~~June 30, 2022:~~March 31, 2023:


	Three Months Ended ~~June 30,~~March 31,
	~~2022~~	2023
Expected term (in years)	~~0.50~~0.48
Expected volatility	~~76.50~~97.38%
Risk-free interest rate	~~1.51~~4.62%
Dividend yield	–

Stock Based Compensation

The following is a summary of stock-based compensation expense by function (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
Cost of goods sold	$	42	$	17	$	78	$	24	$	59	$	36
Research and development		410		101		753		138		529		343
Selling, general and administrative		3,080		813		5,675		1,046		2,935		2,595
Total stock-based compensation expense	$	3,532	$	931	$	6,506	$	1,208	$	3,523	$	2,974

Note 9. Net Loss per Share Attributable to Common Stockholders

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period. As the Company reported a net loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~respectively, basic net loss per share is the same as diluted net loss per share asfor each of the ~~inclusion of potentially dilutive shares would have been antidilutive if included in the calculation.~~reported periods.

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Numerator:
Net loss attributable to common stockholders	$	(23,843	)	$	(17,615	)	$	(47,106	)	$	(29,855	)	$	(17,067	)	$	(23,263	)
Denominator:
Weighted-average shares of common stock outstanding—basic and diluted		47,701,451			9,610,408			47,635,840			9,564,096			48,405,271			47,569,499
Net loss per share attributable to common stockholders—basic and diluted	$	(0.50	)	$	(1.83	)	$	(0.99	)	$	(3.12	)	$	(0.35	)	$	(0.49	)

The following ~~outstanding shares of~~ potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been ~~antidilutive:~~antidilutive as a result of the net loss position:

June 30,

2022

2021

Options to purchase common stock

5,709,691

5,185,736

Restricted stock units

766,598

0

Redeemable convertible preferred stock

0

12,767,202

Redeemable convertible preferred stock warrants

0

329,514

Total

6,476,289

18,282,452


	March 31,
	2023		2022
Stock option awards		5,095,956		5,944,899
Restricted stock units		1,840,324		656,573
Total		6,936,280		6,601,472

Note ~~11.~~10. Segment Information

The Company has 2two reportable operating segments which are determined on the basis of the product portfolio: Surgical Glaucoma and Dry Eye. The operating and reportable segments were determined based on how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), views and evaluates the Company’s operations. The CODM allocates resources to and evaluates the financial performance of each operating segment primarily based on gross profit and gross profit margin.

Surgical Glaucoma segment includes sales of the Company’s OMNI® Surgical System ("OMNI") and SIONTM Surgical Instrument ("SION") for use in minimally invasive glaucoma procedures. Dry Eye segment includes sales of the Company’s TearCare® System ("TearCare") and related components and accessories for use in the treatment of Dry Eye Disease.

The following table summarizes select operating results information for each reportable segment ~~(dollars in~~(in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Revenue
Surgical Glaucoma	$	15,899		$	11,988		$	29,770		$	20,127		$	17,334		$	13,870
Dry Eye		1,330			547			2,341			1,043			1,490			1,011
Total		17,229			12,535			32,111			21,170			18,824			14,881
Cost of goods sold
Surgical Glaucoma		1,949			1,773			3,440			3,631			2,362			1,491
Dry Eye		787			532			2,328			975			686			1,542
Total		2,736			2,305			5,768			4,606			3,048			3,033
Gross profit
Surgical Glaucoma		13,950			10,215			26,330			16,496			14,972			12,379
Dry Eye		543			15			13			68			804			(531	)
Total		14,493			10,230			26,343			16,564			15,776			11,848
Operating expense		37,357			21,306			71,399			39,296			33,344			34,041
Loss from operations		(22,864	)		(11,076	)		(45,056	)		(22,732	)		(17,568	)		(22,193	)
Interest expense		(1,065	)		(1,082	)		(2,112	)		(2,166	)		(1,276	)		(1,046	)
Other income (expense), net		95			(5,435	)		80			(4,883	)		1,791			(15	)
Loss before income tax	$	(23,834	)	$	(17,593	)	$	(47,088	)	$	(29,781	)	$	(17,053	)	$	(23,254	)

The Company does not allocate any components of income and expenses beyond revenue and cost of goods sold to the reportable operating segments in its reporting to the CODM. No asset information is provided for reportable operating segments because ~~they are~~that information is not reviewed by the CODM on a segment basis. Substantially all of the Company’s revenue is generated from sales in the United ~~States, and none of its property and equipment is located outside the United~~ States.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 this Quarterly Report ~~on Form 10-Q~~ and our audited financial statements and related notes as disclosed in our ~~2021~~2022 Form ~~10-K .~~10-K. 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.

~~Sight~~Sight Sciences’ mission is to transform ophthalmology and optometry through the development and commercialization of proprietary devices that target the underlying causes of the world’s most prevalent eye diseases. We are passionate about improving patients’ lives. 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:

~~Our~~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. We have commercialized products in each of our two reportable segments; Surgical Glaucoma and Dry Eye. Our Surgical Glaucoma segment consists of sales of the ~~OMNI~~®OMNI® Surgical System, or OMNI, and the SION™ Surgical Instrument, or SION, while our Dry Eye segment includes sales of the ~~TearCare~~®TearCare® System, ~~("TearCare"),~~ and related components and accessories. ~~Both systems are~~Each product is primarily sold through a highly-involved direct sales model that offers intensive education, training and customer service. We believe this philosophy and model not only enables us to differentiate our products and our overall company from competitors, but also to expand our addressable market by educating ~~Eye Care Professionals ("ECPs"~~ophthalmologists and optometrists (together, "eyecare professionals" or "ECPs"), patients and other stakeholders on our products and evolving treatment paradigms. Outside of the U.S., we have ~~historically sold OMNI primarily through a network of distributors, although we began employing a small~~established direct ~~sales force outside of~~commercial operations in the United ~~States~~Kingdom and Germany. We sell OMNI in ~~2021.~~several other countries through distributors.

We sell OMNI and SION to facilities where ophthalmic surgeons perform outpatient procedures, mainly ambulatory ~~surgery~~service centers ("ASCs") and hospital outpatient departments ("HOPDs"), which are typically reimbursed by Medicare or private payors for procedures using our products. We sell TearCare to optometrist and ophthalmologist practices. Currently, there is no meaningful reimbursement coverage by Medicare or private payors for meibomian gland disease ("MGD") procedures, including TearCare, and patients typically pay out-of-pocket for TearCare. 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. We have dedicated meaningful resources to execute our commercial strategy and we continue to expand our sales organization through additional sales representatives and territories. The overall success of our approach to eyecare to date is evidenced by the over ~~120,000~~150,000 estimated uses of OMNI and its direct predicates in over 1,500 hospitals and ASCs in the U.S. and Europe, and over ~~20,000~~25,000 estimated uses of TearCare in over ~~750~~1,000 eyecare facilities in the U.S. through ~~June 30, 2022.~~March 31, 2023.

We currently operate no manufacturing facilities and instead contract with third parties for our production requirements. We believe our suppliers will be able to meet our current and anticipated manufacturing needs across all our products. We plan to continue to utilize third party contract manufacturers for our products and any related components.

~~Our gross margin~~Revenue in our Surgical Glaucoma segment for the three months ended ~~June 30,~~March 31, 2023 and 2022 was $17.3 million and ~~2021 was 87.7%~~$13.9 million, respectively, with gross margins for the same period of 86.4% and ~~85.2%~~89.3%, respectively. ~~Beginning with the production of finished goods inventory in the first quarter of 2021, we shifted our primary production of OMNI from a U.S.-based third-party contract manufacturer,~~The Company continues to ~~a lower cost, higher volume contract manufacturer in Asia. We are in the process of supplementing this OMNI production capacity with a U.S.-based contract manufacturer. These~~focus on cost optimization ~~initiatives contributed~~efforts to ~~the~~ increase ~~in gross~~ margins in our Surgical Glaucoma segment. ~~Our gross margin~~Revenue in our Dry Eye segment for the three months ended ~~June 30, 2022 and 2021~~March 31, 2023 was ~~40.8% and 2.7%, respectively. The TearCare System includes~~$1.5 million, with gross margin of 54.0%. In the ~~SmartHub component, which is typically only sold in initial purchase orders, and single-use SmartLids which are sold as part~~prior year comparable period, Dry Eye revenue was $1.0 million, with a gross margin of ~~initial purchase orders and through repeat orders as the ECP performs procedures over time.~~ (52.5)%. 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.

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; enhance our commercial capabilities, 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; and allow us to innovate 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 clinical studies, sales and marketing, education initiatives, market access, and product development. However, we are also focused on being disciplined in our spend, and seek to grow operating expenses at a lower rate than revenue growth. Because of these and other factors, we expect to continue to incur net losses for at least the next several fiscal years. Moreover, we expect to incur expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of the Nasdaq Stock Market, additional insurance expenses, litigation expenses, investor relations activities and other administrative and professional services. As a result of these and other factors, we may require and seek additional debt and equity financing to fund our operations and planned growth.

To date, our primary sources of capital ~~has~~have been private placements of redeemable convertible preferred stock, debt financing agreements, the sale of common stock in our ~~initial public offering ("IPO"),~~IPO, and revenue from the sale of our products. ~~In July 2021, we completed our IPO, receiving net proceeds of $252.2 million.~~ As of ~~June 30, 2022,~~March 31, 2023, we had an outstanding term loan balance of $35.0 million (excluding debt discount and amortized debt issuance costs), cash and cash equivalents of ~~$220.1~~$167.3 million and an accumulated deficit of ~~$200.1~~$256.3 million.

~~The~~From 2020 through 2022, the global COVID-19 pandemic impacted and is expected to continue to impact demand for our products, which are used in procedures and therapies that are considered elective. Although some of these governmental restrictions have since been lifted or scaled back, recent and future surges of COVID-19 mayhealthcare system faced unprecedented challenges as a result in restrictions being re-implemented in response to efforts to reduce the spread of COVID-19. As elective eyecare procedures in many facilities that utilize our products were temporarily suspended by governmental authorities, many patients avoided visiting ECPs, and, even in areas that allowed elective procedures, ECPs and healthcare facilities in general substantially reduced or in some cases halted, the scheduling and performance of such procedures. The decrease in demand for our products due to COVID-19 most significantly impacted our revenues in the latter part of the first quarter and the first half of the second quarter of 2020. As vaccine availability and the vaccinated population increases across the U.S., the recovery of our end markets resumed in the second quarter of 2021. Our normal business operations were again disrupted by resurgence of the Delta variant in the third quarter of 2021 and emergence of the Omicron variant in the fourth quarter of 2021 and into early 2022.

~~The ultimate impact~~ of the COVID-19 ~~pandemic~~situation and its impact. Although the lingering effects of COVID-19, many of which are unpredictable and impossible to quantify or measure, may have an adverse impact on the healthcare system generally and certain aspects of our business specifically, we do not expect it to have a material effect on our operations is unknown and will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 outbreak (including prevalence and effect of the delta variant and other potential COVID-19 variants), the status of health and safety actions taken to contain its spread and any additional preventative and protective actions that governments or we may direct, any resurgence of COVID-19 that may occur and how quickly and to what extent economic and operating conditions normalize within the markets in which we operate. The COVID-19 pandemic could disrupt the operations of our third-party manufacturers and other suppliers. Although we have not experienced material disruptions in our supply chain to date, we cannot predict how long the pandemic and measures intended to contain the spread of COVID-19 will continue and what effect COVID-19 and the associated

containment measures will have on our suppliers and vendors, in particular for any of our suppliers and vendors that may not qualify as essential businesses and suffer more significant disruptions to their business operations. We are working closely with our manufacturing partners and suppliers to help ensure that we are able to source key components and maintain appropriate inventory levels to meet customer demand.going forward.

We believe there are several important factors that have impacted and that will continue to impact our business and results of operations. There have been no material changes to such factors from those described in ~~our 2021~~the 2022 Form 10-K under the heading "Factors Affecting our Business and Results of Operations."

We currently derive the majority of our U.S. revenue from the sale of our OMNI and SION products to ASCs and HOPDs and our TearCare products to ophthalmology and optometry practices. During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the revenues from our Surgical Glaucoma segment ~~which included OMNI,~~ accounted for over 90% of our total revenues. Substantially all of our revenues for both periods were generated from sales within the U.S. Our ~~OMNI~~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 SmartHubs, multiple single-use SmartLids and other accessories. After utilizing their initial inventory, customers can reorder TearCare SmartLids® ("SmartLids") as needed. No single customer accounted for 10% or more of our revenue for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022.

The growth in our revenue is driven by the demand for elective surgery and treatment utilizing our products. Such demand is often lower during summer months because of ECP vacations and in winter months in certain parts of the world because of fewer business or surgery days due to holidays and adverse weather conditions.

Our products are produced by third-party 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.

We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will continue to be affected by a variety of factors, including differences in segment gross margins, changes in average selling prices, product sales mix, production and ordering volumes, manufacturing costs, product yields, and headcount. In general, we expect our gross margins to increase over the long-term to the extent our production and ordering volumes increase and to the extent 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. Our gross margins could fluctuate from quarter to quarter as we transition to new suppliers, introduce new products, and adopt new manufacturing processes and technologies.

Research and development ("R&D") expenses consist primarily of 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 – either new or enhancements of existing platforms – 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 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 program, develop new products, and improve our existing products.

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.

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

Other income (expense), net primarily consists of interest and amortization on held-to-maturity investments in treasury securities, as well as, gains and losses resulting from the remeasurement of the fair value of our redeemable convertible preferred stock warrant liability. The redeemable convertible preferred stock warrants were exercised in 2021 and the final fair value of the warrant liability was reclassified to stockholders’ equity. We will no longer record any related periodic fair value adjustments.securities.

Comparison of the Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (dollars in thousands)


	Three Months Ended June 30,						Change						Three Months Ended March 31,						Change
	2022			2021			$			%			2023			2022			$			%
	(unaudited)												(unaudited)
Revenue
Surgical Glaucoma	$	15,899		$	11,988		$	3,911			32.6	%	$	17,334		$	13,870		$	3,464			25.0	%
Percentage of total revenue		92.3	%		95.6	%								92.1	%		93.2	%
Dry Eye		1,330			547			783			143.1			1,490			1,011			479			47.4
Percentage of total revenue		7.7	%		4.4	%								7.9	%		6.8	%
Total		17,229			12,535			4,694			37.4			18,824			14,881			3,943			26.5
Cost of goods sold
Surgical Glaucoma		1,949			1,773			176			9.9			2,362			1,491			871			58.4
Dry Eye		787			532			255			47.9			686			1,542			(856	)		(55.5	)
Total		2,736			2,305			431			18.7			3,048			3,033			15			0.5
Gross profit
Surgical Glaucoma		13,950			10,215			3,735			36.6			14,972			12,379			2,593			20.9
Dry Eye		543			15			528			3,520.0			804			(531	)		1,335			251.4
Total		14,493			10,230			4,263			41.7			15,776			11,848			3,928			33.2
Gross margin
Surgical Glaucoma		87.7	%		85.2	%								86.4	%		89.3	%
Dry Eye		40.8	%		2.7	%								54.0	%		-52.5	%
Total		84.1	%		81.6	%								83.8	%		79.6	%
Operating expenses
Research and development		5,926			3,546			2,380			67.1			4,669			5,646			(977	)		(17.3	)
Selling, general and administrative		31,431			17,760			13,671			77.0			28,675			28,395			280			1.0
Total operating expenses		37,357			21,306			16,051			75.3			33,344			34,041			(697	)		(2.0	)
Loss from operations		(22,864	)		(11,076	)		(11,788	)		106.4			(17,568	)		(22,193	)		4,625			20.8
Interest expense		(1,065	)		(1,082	)		17			(1.6	)		(1,276	)		(1,046	)		(230	)		(22.0	)
Other income (expense), net		95			(5,435	)		5,530			(101.7	)		1,791			(15	)		1,806			12,040.0

Loss before income tax		(23,834	)		(17,593	)		(6,241	)		35.5			(17,053	)		(23,254	)		6,201			26.7
Provision (benefit) for income tax		9		22				(13	)		(59.1	)		14		9				5			55.6
Net loss and comprehensive loss	$	(23,843	)	$	(17,615	)	$	(6,228	)		35.4	%	$	(17,067	)	$	(23,263	)	$	6,196			26.6	%

Revenue. Revenue in the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$17.2~~$18.8 million, an increase of ~~$4.7~~$3.9 million, or ~~37.4%~~26.5%, from the prior year comparable period. The overall increase in Surgical Glaucoma revenue was primarily attributable to ~~a significant~~an increase in the number of OMNI and SION units sold in the three months ended ~~June 30, 2022 as~~March 31, 2023. This growth in units was driven by both a ~~result of~~ growth in the number of facilities ordering OMNI and SION, as well as an increase in unit utilization per ordering facility. Our Dry Eye revenues increased in the three months ended ~~June 30, 2022~~March 31, 2023 versus the comparable period in ~~2021~~2022 due to the continued growth in our installed base of facilities that have purchased TearCare. Surgical Glaucoma sales represented ~~92.3%~~92.1% and ~~95.6%~~93.2% of our total revenue generated in the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Cost of Goods Sold and Gross Profit. Cost of goods sold remained flat during the three months ended ~~June 30, 2022, increased $0.4 million~~March 31, 2023 compared to the same period in the prior year. Our Surgical Glaucoma cost of goods sold increased ~~$0.2~~$0.9 million as compared to ~~2021.~~2022. The increase was driven by increased sales activity, partially offset by lower per unit production costs as a result of ~~transitioning OMNI~~continued manufacturing ~~to a high-volume offshore contract manufacturer in early 2021.~~efficiencies. Dry Eye cost of goods sold ~~increased $0.3~~decreased $0.9 million in the three months ended ~~June 30, 2022~~March 31, 2023 over the comparable period in ~~2021, which was~~2022 driven primarily ~~driven~~ by ~~increases in sales activity.~~prior year charges associated with the voluntary recall of our SmartHub 1.0 devices.

Our total gross profit was ~~$14.5~~$15.8 million in the three months ended ~~June 30, 2022,~~March 31, 2023, an increase of ~~$4.3~~$3.9 million from the comparable period in ~~2021.~~2022. Our total gross margin ~~increased from 81.6% to 84.1% from~~for the three months ended ~~June 30, 2021~~ March 31, 2023, increased

to 83.8%, up from 79.6% in the ~~three months ended June 30, 2022. The increase~~prior year comparable period primarily related to charges from the voluntary recall in ~~gross margin was primarily due to increased sales volume in OMNI units and manufacturing efficiencies.~~our Dry Eye segment mentioned above. Gross margin in our Surgical Glaucoma segment was ~~87.7%~~86.4% for the quarter ended ~~June 30, 2022, an increase~~March 31, 2023, a decrease from ~~85.2%~~89.3% for the prior year comparable ~~period.~~period driven by a write-off of inventory components as we transitioned to our next generation OMNI device and product mix. In our Dry Eye segment, gross margin increased from ~~2.7%~~(52.5)% in the ~~second~~first quarter of ~~2021,~~2022, to ~~40.8%~~54.0% for the quarter ended ~~June 30, 2022, driven by cost efficiencies achieved through high sales volumes.~~

~~Research and Development ("R&D") Expenses~~. The $2.4 million increase in R&D expenses during the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily attributable to a $1.8 million increase in personnel expenses as a result of increased headcount, including a $0.3 million increase in stock-based compensation expense. In addition, there was a $0.3 million increase in clinical studies expense, and the remainder in other services resulted in a $0.4 million increase, driven by an overall increase in business activities.

~~Selling, General, and Administrative ("SG&A") Expenses~~. SG&A expenses were $31.4 million for the three months ended June 30, 2022, an increase of $13.7 million from the prior year comparable period. The increase was attributable to a $11.8 million increase in personnel expenses as a result of increased headcount, which included a $2.3 million increase in stock-based compensation expense. In addition, there was a $1.9 million increase in marketing expenses, a $1.3 million increase in professional services expense, including consulting and legal expenses, and a $0.6 million increase in travel expenses.

~~Interest Expense. Interest expense was consistent during the three months ended June 30, 2022 compared to the three months ended June 30, 2021.~~

~~Other Income (Expense), Net.~~ Other income (expense), net was $0.1 million for the three months ended June 30, 2022 as compared to an expense of $5.4 million in the three months ended June 30, 2021 period related to the remeasurement of our convertible preferred stock warrants and recognition of the change in fair value. As detailed in the notes to our financial statements included herein, the convertible preferred stock warrants were automatically converted into common stock warrants concurrent with our IPO and subsequently exercised in the third quarter of fiscal year 2021.

~~Comparison of the Six Months Ended June 30, 2022 and 2021 (dollars in thousands)~~

~~Revenue~~. Revenue in the six months ended June 30, 2022 was $32.1 million, an increase of $10.9 million, or 51.7%, from the prior year comparable period. The overall increase in Surgical Glaucoma revenue was attributable to a significant increase in the number of OMNI units sold in the six months ended June 30, 2022 as a result of growth in the number of facilities ordering OMNI and an increase in unit utilization per ordering facility. Our Dry Eye revenues increased in the six months ended June 30, 2022 versus the comparable period in 2021 due to the continued growth in our installed base of facilities that have purchased TearCare. Surgical Glaucoma sales represented 92.7% and 95.1% of our revenue generated in the six months ended June 30, 2022 and 2021, respectively.

~~Cost of Goods Sold and Gross Profit~~. Cost of goods sold during the six months ended June 30, 2022, increased $1.2 million compared to the same period in the prior year, as an increase in cost of goods sold in our Dry Eye segment was partially offset by a decrease within our Surgical Glaucoma segment. Dry Eye cost of goods sold increased $1.4 million in the six months ended June 30, 2022 over the comparable period in 2021, which was primarily driven by $0.9 million of charges in the 2022 period associated with the voluntary recall of our SmartHub 1.0 devices. Our Surgical Glaucoma cost of goods sold decreased $0.2 million as compared to 2021, which was primarilyMarch 31, 2023 driven by the ~~transition~~impact of ~~OMNI manufacturing to a high-volume offshore contract manufacturer~~the voluntary SmartHub recall in ~~early 2021, which lowered our production cost per unit.~~

Our total gross profit was $26.3 million in the six months ended June 30, 2022, an increase of $9.8 million from the comparable period in 2021. Our total gross margin increased from 78.2% to 82.0% from the 2021 to the 2022 period. The increase in gross margin was primarily due to increased sales volume in OMNI units and manufacturing efficiencies. Gross margin in our Surgical Glaucoma segment was 88.4% for the six months ended June 30, 2022, an increase from 82.0% for the prior year comparable period. In our Dry Eye segment, gross margin decreased from 6.5% in the first half of 2021, to 0.6% for the six months ended June 30,Q1 2022.

Research and Development ("R&D") Expenses. The ~~$4.6~~$1.0 million ~~increase~~decrease in R&D expenses during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 was primarily attributable to a ~~$3.3~~$0.4 million ~~increase~~decrease in costs associated with contract engineering and lab supplies, a $0.2 million decrease in consulting expenses, and a $0.1 million decrease in personnel expenses as a result of increased headcount, including a $0.6 million increase in stock-based compensation expense. In addition, there was a $0.6 million increase in clinical studies expense, and the remainder in other services resulted in a $0.4 million increase, driven by an overall increase in business activities.expenses.

Selling, General, and Administrative ("SG&A") Expenses. SG&A expenses were ~~$59.8~~$28.7 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, an increase of ~~$27.5~~$0.3 million from the prior year comparable period. The increase was primarily attributable to a ~~$15.9~~$2.0 million increase in personnel expenses ~~as a result of increased headcount,~~ which included a ~~$4.6~~$0.3 million increase in stock-based compensation expense. ~~In addition to personnel expense increases, our SG&A expense from 2021 to the 2022 period included~~This increase was partially offset by a ~~$2.7~~$0.9 million ~~increase~~decrease in ~~professional services expense, including~~ consulting ~~and~~expenses, as well as a $0.8 million decrease in legal ~~expenses, a $3.9 million increase in marketing expenses, a $1.3 million increase in training, events, and demos, and a $1.3 million increase in travel expenses.~~expense.

Interest Expense. Interest expense ~~was consistent~~increased $0.2 million, as the Company saw an increase in lending rates during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 compared to the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

Other Income (Expense), Net. Other income (expense), net was ~~$0.1~~$1.8 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 as compared to an expense of ~~$4.9~~$0.0 million in the ~~six~~three months ended ~~June 30, 2021 period related~~March 31, 2022. The income in the current year is attributable to the ~~remeasurement~~amortization of our convertible preferred stock warrants and recognition of the change in fair value. As detailed in the notes to our financial statements included herein, the convertible preferred stock warrants were automatically converted into common stock warrants concurrent with our IPO and subsequently exercised in the third quarter of fiscal year 2021.purchase discounts on held-to-maturity cash-equivalent investments.

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


	Six Months Ended June 30,						Three Months Ended March 31,
	2022			2021			2023			2022

Net cash used in operating activities	$	(40,271	)	$	(25,306	)	$	(17,383	)	$	(21,966	)
Net cash used in investing activities	$	(569	)	$	(369	)	$	(126	)	$	(227	)
Net cash provided by (used in) financing activities	$	250		$	(264	)
Net cash (used in) provided by financing activities							$	(156	)	$	92
Net (decrease) increase in cash	$	(40,590	)	$	(25,939	)	$	(17,665	)	$	(22,101	)

Net cash used in operating activities for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was ~~$40.3~~$17.4 million, consisting primarily of a net loss of ~~$47.1~~$17.1 million and a net change in our operating assets and liabilities of ~~$0.9~~$4.2 million, partially offset by non-cash charges of ~~$7.7~~$3.9 million. The net change in our ~~net~~ operating assets and liabilities was primarily due to a ~~$1.9~~$1.0 million increase in accounts receivable and a ~~$1.6~~$1.0 million increase in inventory to support the continued growth of our operations. The Company had a $0.9 million decrease in accounts payable, while accrued compensation and accrued and other current liabilities decreased by an aggregate of $3.7 million, primarily driven by the timing of payments on invoices and bonuses. The non-cash charges primarily consisted of $3.5 million related to stock-based compensation, $0.2 million of noncash operating lease expense, $0.1 million of depreciation, and $0.1 million of accretion of debt discount and amortization of debt issuance costs.

Net cash used in operating activities for the three months ended March 31, 2022 was $22.0 million, consisting primarily of a net loss of $23.3 million. The net change in our operating assets and liabilities during the period was $2.1 million, which was more than offset by non-cash charges of $3.4 million. The net change in our operating assets and liabilities was primarily due to a $1.2 million increase in accounts receivable and a $0.6 million increase in inventory to support the continued growth of our operations. Prepaid expenses decreased by ~~$2.1~~$1.5 million as

balances on annual prepaid contracts decreased during the period. The Company also had a ~~$0.6~~$2.1 million decrease in accrued compensation and a $0.2 million decrease in accounts payable ~~while accrued and other current liabilities increased $0.6 million,~~ driven by the timing of payments on invoices and bonuses. The non-cash charges primarily consisted of ~~$6.5~~$3.0 million related to stock-based compensation, ~~$0.4~~$0.2 million of depreciation, ~~$0.3 of accretion of debt discount and amortization of debt issuance costs, and~~ $0.2 ~~million of noncash operating lease expense.~~

Net cash used in operating activities for the six months ended June 30, 2021 was $25.3 million, consisting primarily of a net loss of $29.9 million and a net change in our operating assets and liabilities of $2.9 million, partially offset by non-cash charges of $7.5 million. The change in our net operating assets and liabilities was primarily due to a $3.1 million increase in other noncurrent assets related to the deferred offering costs associated with the IPO, a $1.6 million increase in accounts receivable, and a $1.2 million increase in our prepaid expenses to support the continued growth of our operations, partially offset by a $1.4 million increase in accounts payable and $1.6 million in accrued and other liabilities. The non-cash charges primarily consisted of $4.9 million from the fair value remeasurement of our convertible preferred stock warrants, $1.2 million related to stock-based compensation, a $0.3 million provision for excess and obsolete inventories, $0.3 million of non-cash operating lease expense related to office lease, $0.3 million of accretion of debt discount and amortization of debt issuance costs, and ~~$0.3~~$0.1 million ~~in depreciation and amortization.~~of noncash operating lease expense.

Net cash used in investing activities in the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ was ~~$0.6~~$0.1 million and ~~$0.4~~$0.2 million, respectively, in both cases for purchases of property and equipment.

Net cash used in financing activities in the three months ended March 31, 2023 of $0.2 million was primarily related to taxes paid on the net share settlement of restricted stock units, partially offset by proceeds from stock option exercises.

Net cash provided by financing activities in the ~~six~~three months ended ~~June 30,~~March 31, 2022 ~~related to proceeds from stock option exercises.~~

~~Net cash used in financing activities in the six months ended June 30, 2021~~of $0.1 million was ~~related to the payment of offering costs associated with the IPO of $0.5 million, offset by $0.2 million~~ related to proceeds from stock option exercises.

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 IPO, and revenue from the sale of our products. ~~In July 2021,~~Since our inception, we ~~completed our IPO, including the underwriters' full exercise~~have raised an aggregate of ~~their option to purchase additional shares, selling 11,500,000 shares~~approximately $402.4 million in net proceeds from sales of our redeemable convertible preferred stock and common stock ~~at $24.00 per share. Upon completion~~and borrowed $32.9 million of net proceeds under our ~~IPO, we received $252.2 million, after deducting underwriting discounts and commissions and offering costs.~~term loans.

As of ~~June 30, 2022,~~March 31, 2023, we had cash and cash equivalents of ~~$220.1~~$167.3 million, an accumulated deficit of ~~$200.1~~$256.3 million and $35.0 million outstanding under our term loan agreement (before debt discount). Based on our current planned operations, we expect revenue from sales of our products, our cash and cash equivalents and additional borrowings available under ~~the 2020 Term Loan and the 2020 Revolver~~our revolving credit facility will enable us to fund our operations for at least the next twelve ~~months.~~months and the foreseeable future.

~~In January 2019, we entered into~~We currently have two credit and security agreements with MidCap Financial Services, ~~(the "Lender"),~~ which provided a maximum of $25.0 million credit facility consisting of a $20.0 million senior secured term loan (the "2019 Term Loan") and a $5.0 million 2019 revolving loan (the "2019 Revolver" and collectively with the 2019 Term Loan, the “2019 MidCap Credit Facility”). In November 2020, we entered into amended and restated credit and security agreements with the same institution, which replaced the 2019 MidCap Credit Facility, and providedprovide for a maximum of $40.0 million credit facility, consisting of a $35.0 million senior secured term loan (the ~~"2020 Term~~"Term Loan") and a $5.0 million revolving loan (the ~~"2020 Revolver~~"Revolver" and collectively with the ~~2020~~ Term Loan, the ~~“2020 MidCap~~“MidCap Credit Facility”).

Our obligations under the ~~2020~~ MidCap Credit Facility are guaranteed by us and our future subsidiaries, subject to exceptions for certain foreign subsidiaries. Our obligations under the agreements are secured by substantially all of our assets, including our material intellectual property. Additionally, we are subject to customary affirmative and negative covenants, including covenants that limit or restrict the ability of us to, among other things,

incur indebtedness, grant liens, merge or consolidate, make investments, dispose of assets, make acquisitions, pay dividends or make distributions, repurchase stock and enter into certain transactions with affiliates, in each case subject to certain exceptions. ~~The 2020 MidCap Credit Facility agreements also have financial covenants that relate to minimum trailing revenue targets, which began in November 2020, and are tested on a monthly basis.~~ As of ~~June 30, 2022,~~March 31, 2023, we were in compliance with all financial and non-financial ~~covenants.~~covenants.

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

The ~~2020~~ Term Loan agreement ~~amended the~~includes a maturity date toof November 1, 2025 and ~~adjusted the~~includes a stated floating interest rate tothat is reserve-adjusted ~~LIBOR,~~SOFR, plus 7.00%. Outstanding principal amounts of Tranche One Loans and Tranche Two Loans borrowed under the 2019 Term Loan were designated as Tranche One Loans and Tranche Two Loans under the 2020 Term Loan. The Tranche Three Loan commitment amount was increased to $21.0 million and the full amount was drawn in November 2020. Principal payments under the ~~2020~~ Term Loan are scheduled to begin in December ~~2022.~~2023. However, if certain conditions are met, the initiation of principal payments can be delayed to ~~either~~ December 2024. We currently expect that we will be in a position to meet the conditions necessary to extend the commencement date for the initiation of principal payments under the 2020 Term Loan from December 1, 2023 orto December 1, 2024. In addition, the final payment fee ~~was amended to~~is 6.0%~~. We~~ and we are subject to certain financial and non-financial covenants.

We incurred $0.7 million of issuance costs in conjunction with the ~~2020~~ Term Loan which were netted against the borrowed funds in the balance sheet and are being accreted using the effective interest method as interest expense over the contractual period of ~~five years.~~the Term Loan.

In conjunction with the initial funding of the ~~2020~~ Term Loan in 2020, we issued a 10-year warrant to the Lender to purchase 300,000 shares of our Series F redeemable convertible preferred stock at an exercise price of $21.88 per share, or the ~~2020~~ MidCap Warrant, with the estimated fair value of $1.8 million. The ~~2020~~ MidCap Warrants were recorded at the fair value as a debt discount and as a warrant liability. The debt discount is being accreted using the effective interest method as interest expense over the contractual period of ~~four years for~~ the ~~2020~~ Term Loan. The MidCap Warrant was automatically converted into a common stock warrant in connection with the IPO and subsequently exercised in the third quarter of fiscal year 2021. Accordingly, the MidCap Warrant no longer remains outstanding.

The maturity date of the ~~2020~~ Revolver was amended to November 1, 2025 and the stated floating interest rate was adjusted to reserve-adjusted LIBOR plus 4.50%. As of ~~June 30, 2022,~~March 31, 2023, $5.0 million was available to be drawn under the 2020 Revolver which remains undrawn. ~~Other key terms of the 2020 Revolver remained substantially unchanged compared to those of 2019 Revolver.~~

Our corporate headquarters are located in Menlo Park, California, where we lease approximately ~~10,823~~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 August 31, 2024. We also lease approximately 2,040 square feet of office space, which is primarily used by our commercial leadership team, in Southlake, Texas, pursuant to a lease that commenced on April 30, 2019 and expires on May 15, 2024.

Our condensed consolidated financial statements included elsewhere in this Quarterly Report ~~on Form 10-Q~~ are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that the assumptions and estimates associated with ~~revenue recognition and~~ stock-based compensation ~~have~~has the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider ~~these~~this to be our critical accounting ~~policies~~policy and ~~estimates.~~estimate.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our consolidated financial statements for the year ended December 31, ~~2021,~~2022, included under the heading “Management’s Discussion and Analysis of Financial Condition

and Results of Operations—Critical Accounting Policies and Estimates” in our ~~2021~~2022 Form 10-K and in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly ~~Report on Form 10-Q.~~Report.

The Jumpstart Our Business Startups Act of 2012 (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 financials to those of other public companies more difficult.

As of ~~June 30, 2022,~~March 31, 2023, there are no significant Accounting Standard Updates (ASU's) issued and not yet adopted, that are expected to have a material impact on the Company's financial statements and related disclosures.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate risk and foreign currency exchange rate risk. There have been no material changes to such risks from those described in our ~~2021~~2022 Form 10-K under "Item 3 - Quantitative and Qualitative Disclosures About Market Risk."

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 (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). 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 the Company's management, including its principal executive officer, principal financial officer and principal ~~financial officers,~~accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.

Based on this evaluation, our principal executive officer and our principal financial and accounting officer concluded that, as a result of the material ~~weaknesses~~weakness in our internal control over financial reporting described below, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective. However, our management, including our principal executive officer and our principal financial and accounting officer, has concluded that, notwithstanding the identified material ~~weaknesses~~weakness in our internal control over financial reporting, the condensed consolidated financial statements in this Quarterly

Report on Form 10-Q fairly ~~presented,~~present, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with GAAP.

In connection with the preparation of our financial statements in connection with our IPO, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness related to a lack of sufficient full-time accounting personnel with requisite experience and deep technical accounting knowledge to (i) identify and resolve complex accounting issues under

GAAP, and (ii) enable appropriate segregation of duties and reviews over the financial reviews over the financial close and reporting process.

~~We have~~During the year ended December 31, 2022, our management, with the oversight of the Audit Committee of our Board of Directors, designed and implemented ~~and are in process of implementing additional~~ measures to ~~improve our internal~~remediate the control ~~over financial reporting~~deficiencies contributing to ~~remediate this~~the material weakness ~~including~~ ~~(i)~~and completed testing of internal controls. These remediation efforts, which continued initiatives that began during the ~~hiring of personnel with technical~~year ended December 31, 2021, included the following:

While significant progress has been made to ~~continuing to~~ improve ~~our internal control processes and we will continue to diligently and vigorously review our financial reporting controls and procedures.~~

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses. While we believe that our efforts have improved our internal control over financial reporting, ~~remediation~~not all aspects of our past material weakness have been sufficiently remediated. The remaining aspect of the material ~~weaknesses~~weakness relates to the lack of sufficient accounting resources with deep technical accounting knowledge to identify and resolve complex accounting issues in a timely manner. Remediation of the material weakness will require further validation and testing of the ~~design and~~ operating effectiveness of ~~internal~~the applicable remedial controls over a sustained period of financial reporting ~~cycles, and we cannot assure you that we have identified all, or that we will not in the future have additional material weaknesses.~~cycles.

Other than the changes intended to remediate the material weakness noted above, 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 most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Please refer to~~Except as set forth in Note 6, Commitments and Contingencies, in our notes to the unaudited condensed consolidated financial statements in this Quarterly Report, we do not believe we are currently a party to any legal proceedings, regulatory matters, or other disputes or claims which, if determined adversely to us, would, individually or taken together, have a material adverse effect on ~~Form 10-Q.~~our business, financial condition, operating results, liquidity or future prospects. However, regardless of the merits of the claims raised or the outcome, legal proceedings, regulatory matters, and other disputes and claims may have an adverse impact on us as a result of defense and settlement costs, diversion of management time and resources, and other factors

~~There have been no~~We are not aware of any material changes ~~with respect~~ to the risk factors ~~previously disclosed~~set forth under the heading "Risk Factors" in the ~~2021~~2022 Form ~~10-K.~~10-K, which are incorporated herein by reference. The risks described in the 2022 Form 10-K 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.

In July 2021, we completed our IPO. All shares sold were registered pursuant to a registration statement on Form S-1 (File No. 333-257320), as amended (the "Registration Statement"), declared effective by the SEC on July 14, 2021.

The net proceeds from our IPO have been used and will be used, together with our cash and cash equivalents: (i) to fund ongoing and future clinical trials of OMNI and TearCare; (ii) to support the marketing and sales efforts for our products; (iii) for research and development; and (iii) for working capital and other general corporate purposes.

There has been no material change in the intended use of proceeds from ~~our~~the IPO as described in ~~our~~the Registration Statement.

The following exhibits are filed or furnished as a part of, or incorporated by reference into, this Quarterly ~~Report on Form 10-Q.~~Report.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware	80-0625749
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4040 Campbell Ave, Suite 100 Menlo Park, CA	94025
(Address of principal executive offices)	(Zip Code)


		Page
	Special Note Regarding Forward-Looking Statements	3

PART I.	FINANCIAL INFORMATION	5

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	6
	Condensed Consolidated Statements of ~~Redeemable Convertible Preferred Stock and~~ Stockholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	98
	Notes to Condensed Consolidated Financial Statements (Unaudited)	109
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3328
Item 4.	Controls and Procedures	3328

PART II.	OTHER INFORMATION	3429

Item 1.	Legal Proceedings	3429
Item 1A.	Risk Factors	3429
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3530
Item 3.	Defaults Upon Senior Securities	3530
Item 4.	Mine Safety Disclosures	3530
Item 5.	Other Information	3530
Item 6.	Exhibits	3631
	Signatures	3732


	SIGHT SCIENCES, INC

~~August 11, 2022~~May 8, 2023	By:	/s/ Paul Badawi
		Paul Badawi
		President and Chief Executive Officer


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


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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒


	Three Months Ended June 30, 2021
	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance at March 31, 2021		12,767,202	$	117,331		9,526,044	$	9	$	1,471	$	(102,281	)	$	(100,801	)
Issuance of common stock upon exercise of stock options		—		—		205,988		—		196		—			196
Stock-based compensation expense		—		—		—		—		931		—			931
Net loss		—		—		—		—		—		(17,615	)		(17,615	)
Balance at June 30, 2021		12,767,202		117,331		9,732,032		9		2,598		(119,896	)		(117,289	)


	Six Months Ended June 30, 2021
	Redeemable Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2020		12,767,202	$	117,331		9,509,182	$	9	$	1,183	$	(90,041	)	$	(88,849	)
Issuance of common stock upon exercise of stock options		—		—		222,850		—		207		—			207
Stock-based compensation expense		—		—		—		—		1,208		—			1,208
Net loss		—		—		—		—		—		(29,855	)		(29,855	)
Balance at June 30, 2021		12,767,202		117,331		9,732,032		9		2,598		(119,896	)		(117,289	)


	June 30, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
U.S. treasury securities	$	174,711	$	2	$	(21	)	$	174,692


	Redeemable convertible preferred stock warrants liabilities
Balance – December 31, 2020	$	2,112
Change in fair value		(555	)
Balance - March 31, 2021		1,557
Change in fair value		5,427
Balance – June 30, 2021	$	6,984