Optinose (OPTN) Risk Factors

As part of our business strategy, we may pursue acquisitions of assets, including preclinical, clinical or commercial-stage products or product candidates, businesses or strategic alliances and collaborations, to expand our existing technologies and operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any such transaction. We may not be able to find suitable acquisition candidates, and if we make any acquisitions, we may not be able to complete technology transfers and integrate these acquisitions successfully into our existing business and we may incur additional debt or assume unknown or contingent liabilities as part of the transaction. Integration of an acquired company or assets may also disrupt ongoing operations, require the hiring of additional personnel and the implementation of additional internal systems and infrastructure, especially the acquisition of commercial assets, and require management resources that would otherwise focus on developing our existing business. We may not be able to find suitable strategic collaborators or identify other investment opportunities, and we may experience losses related to any such investments. To finance any acquisitions or collaborations, we may choose to issue debt or shares of our common or preferred stock as consideration. Any such issuance of shares would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other assets or companies or fund a transaction using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.

Prior to 2023, we had operations in Norway and the UK and a substantial portion of our intellectual property, including certain rights to XHANCE, were owned by OptiNose AS, our Norwegian subsidiary, until 2022. We file tax returns in various jurisdictions and those returns are subject to examination by the tax authorities. During an examination, a tax authority could challenge positions taken on a return. Such a challenge could result in the loss of tax attributes or in the payment of tax which could have an unfavorable impact on our financial condition. Prior to 2023, we operated pursuant to written intercompany license, service and related agreements that establish prices for intellectual property and for services provided such as production, marketing, management, and technology development activities that are performed by one group company for another group company. The amounts paid under these intercompany agreements are commonly considered for tax purposes as transfer prices. If the affiliated companies are located in different countries, the tax laws and regulations of each country generally require that transfer prices be at arm's length as if between unrelated companies. Our transfer pricing arrangements consider requirements of the jurisdictions in which we operate but are not binding on the tax authorities. If any tax authority is successful in challenging our transfer prices, there could be an increase in taxable income in that jurisdiction which could increase our tax liabilities. Further, if the tax authority in the other country does not agree with the adjustment, both countries could tax the same income, resulting in double taxation. Any income earned by our foreign subsidiaries, including a portion of the sales of XHANCE in the U.S., may be subject to additional tax liabilities. If our foreign operations generate cash that we want to repatriate to the U.S. or if cash generated by our U.S. operations is not sufficient to fund our U.S. operations, we may face additional tax liabilities in returning or otherwise providing such cash to support our U.S. operations or other strategic opportunities in the U.S. If we are forced to repatriate any foreign-held cash, we could incur a significant tax charge, and our business, operating results or financial condition could be adversely impacted. If foreign subsidiary income is subject to the Subpart F, investment in US property or global intangible low-taxed income provisions, or similar provisions of the U.S. Internal Revenue Code, collectively referred to in this paragraph as Subpart F, the income may be subject to U.S. corporate income tax even if there is no cash distribution of those earnings to the U.S. For example, Subpart F income includes certain "passive" income, certain income from intercompany transactions, foreign subsidiary income over a legislative threshold or income of a foreign subsidiary which makes an "investment in U.S. property", such as holding the stock in a U.S. corporation. Any foreign subsidiary income subject to the Subpart F provisions would be included in determining U.S. taxable income and potentially subject to federal corporate income tax at rates up to 21%.

Our business is subject to complex and evolving U.S., state and international data and privacy protection laws. In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act) govern the collection, use, disclosure, and protection of health-related and other personal information. Compliance with these laws is difficult, constantly evolving, and time consuming. These laws may differ from each other in significant ways, thus complicating compliance efforts. Many of the state laws enable a state attorney general to bring actions and provide private rights of action to consumers as enforcement mechanisms. Failure to comply with data protection laws and regulations could result in government enforcement actions and create liability for us (which could include civil and/or criminal penalties), private litigation and/or adverse publicity. Federal regulators, state attorneys general, and plaintiffs' attorneys have been and will likely continue to be active in this space. We may also obtain health information from third parties (e.g., healthcare providers who prescribe our products) that are subject to privacy and security requirements under HIPAA, and other privacy and data security and consumer protection laws. Although we are not directly subject to HIPAA, other than potentially with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we, our affiliates, or our agents knowingly receive individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA, and could also potentially be subject to other civil and/or criminal penalties if we obtain, use or disclose information in a manner not permitted by other privacy and data security and consumer protection laws. The Federal Trade Commission (the "FTC") also sets expectations for failing to take appropriate steps to keep consumers' personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act. The FTC expects a company's data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds,the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards. With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles consumers' personal information; any failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC Act. While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions. Additionally, EU Member States, the UK and other jurisdictions where we may in the future operate, have adopted data protection laws and regulation which impose significant compliance obligations. For example, the EU General Data Protection Regulation including as implemented in the UK (collectively, "GDPR"), applies to our activities conducted from an establishment in the EU/UK or related to products and services that we may offer to EU/UK users that involve the collection, use, storage, transfer, and other processing of personal data, including personal health data. The GDPR creates a broad range of compliance obligations and restrictions on the ability to collect, analyze and transfer personal data, which could cause us to change our business practices, and has significantly increased financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements). The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with data protection authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In particular, these obligations and restrictions relate to the processing and protecting of personal data, including obligations to having a lawful basis for processing personal data (which may result in some instances in obtaining the consent of the individuals to whom the personal data relates), provide detailed information about the processing activities to the individuals, dealing with restrictions on sharing of personal data with third parties and the transferring of personal data out of the EU/UK, having contractual arrangements in place where required (such as with clinical trial sites and vendors), having appropriate technical and organizational security and confidentiality measures in place to protect the personal data we collect and process, reporting in certain instances personal data breaches to data protection authorities and/or affected individuals, appointing data protection officers, conducting data protection impact assessments, responding to privacy rights requests, and having appropriates policies and procedures in place to be able to demonstrate compliance with the obligations following the GDPR. With regard to transfer of personal data, the GDPR restricts the ability of companies to transfer personal data from the European Economic Area to the United States and other countries, which may adversely affect our ability to transfer personal data or otherwise may cause us to incur significant costs for implementing lawful transfer mechanisms, conducting data transfer impact assessments, and implementing additional measures where necessary to ensure that personal data transferred are adequately protected in a manner essentially equivalent to the EU/UK. The GDPR provides different transfer mechanisms we can use to lawfully transfer personal data from the EU/UK to countries outside the EU/UK. An example is relying on adequacy decisions of the European Commission, such as the EU-U.S. Data Privacy Framework which was adopted by the European Commission in July 2023. Another example of a lawful transfer mechanism is using the EU Standard Contractual Clauses as approved by the European Commission in June 2021, which are the most common used transfer mechanism used to transfer personal data out of the EU/UK. In order to use the EU Standard Contractual Clauses mechanism, the exporter and the importer must ensure that the importer may guarantee a level of personal data protection in the importing country's level of protection must be adequate that is essentially equivalent to that of the EEA. Compliance with EU/UK data transfer obligations involves conducting transfer impact assessments, which includes documenting detailed analyses of data access and protection laws in the countries in which data importers are located, which can be costly and time-consuming. Data importers must also expend resources in analyzing their ability to comply with transfer obligations, including implementing new safeguards and controls to further protect personal data. Data protection authorities from the different EU member states, as well as in the United Kingdom and Switzerland, have promulgated national privacy laws that impose additional requirements, which add to the complexity of processing and transferring EU personal data, with the United Kingdom and Switzerland following the EU with the publication of new Model Clauses to be incorporated in all applicable contracts within a specified timeframe in order to legitimize data transfers from those jurisdictions. Our ability to continue to transfer personal data outside of the EU, United Kingdom, or Switzerland may become significantly more costly and may subject us to increased scrutiny and liability under the GDPR or similar local laws, and we may experience operating disruptions if we are unable to conduct these transfers in the future. The California Consumer Privacy Act, or CCPA, establishes certain requirements for data use and sharing transparency and provides California residents certain rights concerning the use, disclosure, and retention of their personal data. The CCPA and its implementing regulations have already been amended multiple times since their enactment. In November 2020, California voters approved the California Privacy Rights Act ("CPRA") ballot initiative, which introduced significant amendments to the CCPA and established and funded a dedicated California privacy regulator, the California Privacy Protection Agency. The amendments introduced by the CPRA went into effect on January 1, 2023, and new implementing regulations continue to be introduced by the California Privacy Protection Agency. Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages. In addition, California residents have the right to bring a private right of action in connection with certain types of incidents. These claims may result in significant liability and damages. We implemented processes to manage compliance with the CCPA and continue to assess the impact of the CPRA, and other state legislation, on our business as additional information and guidance becomes available. These laws and regulations are evolving and subject to interpretation, and may impose limitations on our activities or otherwise adversely affect our business. Similarly, there are a number of legislative proposals in the European Union, the United States, at both the federal and state level, and in other jurisdictions that could impose new obligations or limitations in areas affecting our business. For example, other states, including Virginia, Colorado, Utah, Indiana, Iowa, Tennessee, Montana, Texas and Connecticut have enacted privacy laws similar to the CCPA that impose new obligations or limitations in areas affecting our business and we continue to assess the impact of these state legislations on our business as additional information and guidance becomes available. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services and research activities. These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions may lead to unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity, increased operating costs, diversion of management time and attention, and remedies that harm our business, including fines or demands or orders that we modify or cease existing business practices. Certain of these laws and regulations are described in greater detail in the previous section under "Business - Government Regulation - Healthcare Privacy Laws." Compliance with these laws and regulations is difficult, constantly evolving, time consuming, and requires a flexible privacy framework and substantial resources. If we, our agents, or our third party partners fail to comply or are alleged to have failed to comply with these or other applicable data protection and privacy laws and regulations, or if we were to experience a data breach involving personal information, we could be subject to government enforcement actions or private lawsuits. Any associated claims, inquiries, or investigations or other government actions could lead to unfavorable outcomes that have a material impact on our business including through significant penalties or fines, monetary judgments or settlements including criminal and civil liability for us and our officers and directors, increased compliance costs, delays or impediments in the development of new products, negative publicity, increased operating costs, diversion of management time and attention, or other remedies that harm our business, including orders that we modify or cease existing business practices.

Issues may arise involving product manufacturing of XHANCE or any of our products that may be under development, including but not limited to delays in receiving finished product or product components or raw materials, analytical testing issues, product-packaging problems and equipment malfunctions. These issues may require refinement or resolution in order to continue and not delay the commercialization of XHANCE or development of any of our products under development. In addition, quality issues may arise during commercial manufacturing processes or the scale-up of any of our products that may be under development. Any issues in our product or delivery devices could result in increased scrutiny by regulatory authorities, delays in our regulatory approval process, increases in our operating expenses, shortages in our products available for sales or clinical trial use, decreases in sales to customers, or failure to obtain or maintain approval for our products. We have initiated the process of qualifying alternate third-party suppliers for select components of XHANCE. Alternate third party suppliers of XHANCE components are subject to qualification and approval from the FDA.

We are exposed to the risk that our sales force and other employees, HUB, PPN partners, CMOs, CROs, principal investigators, collaborators, independent contractors, consultants and other vendors may engage in fraudulent or other illegal activity with respect to our business. Misconduct by these employees could include intentional, reckless and/or negligent conduct or unauthorized activity that violates: ?FDA promotion or other regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA;?manufacturing standards;?federal and state healthcare fraud and abuse laws and regulations; or ?laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve individually identifiable information, including, without limitation, the improper use of information obtained in the course of clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. Any incidents or any other conduct that leads to an employee receiving an FDA debarment could result in a loss of business from third parties and severe reputational harm. We have a Code of Business Conduct and Ethics to govern and deter such behaviors, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations.

If the cost of maintaining our patient affordability programs increases relative to our sales revenues, we could be forced to reduce the amount of co-pay support and other patient financial assistance that we offer or otherwise scale back or eliminate such programs, which could in turn have a negative impact on physicians' willingness to prescribe and patients' willingness to fill prescriptions of XHANCE. While we believe that our arrangements with PBMs and other payors will result in broader inclusion of XHANCE on healthcare plan formularies, and lower our cost of providing patient affordability programs, these arrangements generally require us to pay administrative and rebate payments to the PBMs and/or other payors and their effectiveness will ultimately depend to a large extent upon individual healthcare plan formulary decisions that are beyond the control of the PBMs. If our arrangements with PBMs and other payors do not result in increased prescriptions and reductions in our costs to provide our patient affordability programs that are sufficient to offset the administrative fees and rebate payments to the PBMs and/or other payors, our financial results may continue to be harmed.

The development and commercialization of new drugs is highly competitive and subject to rapid and significant technological change as research provides a deeper understanding of the pathology of diseases and new technologies and treatments are developed. We face competition with respect to XHANCE from prescription and over-the-counter INS, monoclonal antibodies, oral steroids and other medical management products, and will face competition with respect to any other product candidates that we may seek to develop or commercialize in the future, from many different sources, including large pharmaceutical, biotechnology, specialty pharmaceutical and, to a lesser degree, medical device companies. The key competitive factors that we expect to impact the commercial success of XHANCE and any other product candidates we may develop are likely to be their efficacy, safety and tolerability profile, reliability, convenience of administration, price and reimbursement. Nasonex™ (mometasone furoate monohydrate) is the only other branded INS drug therapy approved by the FDA for the treatment of nasal polyps. Nasonex was marketed by Merck before being removed from the prescription market, but is available over-the-counter without a prescription for other indications. Generic versions of Nasonex™, mometasone furoate monohydrate, remain available as prescription drugs. In addition, Beconase AQ™, which is an INS marketed by GlaxoSmithKline, is indicated for the prophylaxis of nasal polyps after surgical resection, SINUVA™ is a commercially available corticosteroid-eluting implant indicated for the treatment of nasal polyps in adult patients who have had ethmoid sinus surgery that can be placed in the ethmoid sinus under endoscopic visualization for up to 90 days. To date, four monoclonal antibodies have been studied in nasal polyps: omalizumab, benralizumab, mepolizumab and dupilumab. DUPIXENT™ (dupilumab), which is a monoclonal antibody marketed by Sanofi and Regeneron, was approved by the FDA in 2019 as an add-on maintenance treatment (to an intranasal steroid) in adult patients with inadequately controlled chronic rhinosinusitis with nasal polyposis; XOLAIR™ (omalizumab), which is a monoclonal antibody marketed by Genentech USA, Inc. and Novartis Pharmaceuticals Corporation, was approved by the FDA in 2020 as an add-on maintenance treatment of nasal polyps in adult patients with inadequate response to nasal corticosteroids; and NUCALA™ (mepolizumab), which is a monoclonal antibody marketed by GlaxoSmithKline, was approved by the FDA in 2021 as an add-on maintenance treatment of chronic rhinosinusitis with nasal polyps in adult patients with inadequate response to nasal corticosteroids. Although we are not aware of any drug therapy approved by the FDA or foreign regulatory agencies for the treatment of chronic rhinosinusitis (or chronic sinusitis) without nasal polyps, the above referenced monoclonal antibodies or others may be studied as potential treatments for patients with chronic rhinosinusitis without nasal polyps. In addition, Lyra Therapeutics is developing corticosteroid-eluting implants as potential treatment for patients with chronic rhinosinusitis. In addition, Insmed is studying brensocatib as a potential treatment for chronic rhinosinusitis without nasal polyps by targeting inhibition of Dipeptidyl peptidase-1 (DPP1). Even though they have not been approved for the treatment of such indications, published clinical practice guidelines do recommend the use of INS products for the treatment of chronic rhinosinusitis with and without nasal polyps in an effort to maximize medical therapy prior to surgical intervention. Currently approved branded INS products include Rhinocort™, marketed by AstraZeneca, Nasacort AQ™, marketed by Sanofi-Aventis, Beconase AQ™, Flonase™ (which contains the same active pharmaceutical ingredient as XHANCE), and Veramyst™, each marketed by GlaxoSmithKline, Qnasl™, marketed by Teva Pharmaceuticals, and Omnaris™ and Zetonna™, each marketed by Sunovion Pharmaceuticals. In lieu of prescription INS nasal sprays, physicians may recommend, and patients may elect to use, over-the-counter INS nasal sprays including over-the-counter products containing fluticasone propionate and mometasone furoate monohydrate. Most of these INS and monoclonal antibody companies, as well as other potential competitors, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a small number of our competitors. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval of drugs and achieving widespread market acceptance. Our competitors' drugs, or drugs they may develop in the future, may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render XHANCE or any of our other product candidates we may develop obsolete or non-competitive before we can recover the expenses of developing and commercializing XHANCE or any of our other product candidates. Our competitors may also obtain FDA or other regulatory approval of products more rapidly than expected or may obtain better or preferred market access by offering large rebates to payors or by other means. We may not have accurately or completely predicted the development of new and improved or low-cost surgical interventions, alternative medical therapies or other market-disrupting events. If we are unable to manufacture, distribute, stimulate demand reaching the predicted market share, overcome barriers to access or otherwise effectively commercialize the product, all of which factors may be influenced by current or future competition, then our opportunity to generate revenue from the sale of XHANCE or any of our other product candidates, if approved, will be compromised.

There has been negative publicity and inquiries from Congress and enforcement authorities regarding the use of specialty pharmacies, HUB and other patient support services providers and drug pricing. We contract with HUB and PPN partners (who may be considered specialty pharmacies) and other patient support services providers that provide certain services in connection with our patient affordability programs. These programs are in place to assist in ensuring that when a physician determines XHANCE offers a potential clinical benefit to their patients and they prescribe it for an eligible patient, financial assistance may be available to reduce the patient's out-of-pocket costs. We do not own or possess any option to purchase an ownership stake in any pharmacy that distributes XHANCE or in our HUB partner or any other patient support services provider, and our relationship with each pharmacy, our HUB partner and other patient support services providers is non-exclusive and arm's length. All of our sales are processed through pharmacies independent of us. Despite this, the negative publicity and interest from Congress and enforcement authorities regarding specialty pharmacies, HUBs or other patient support services providers may result in physicians being less willing to send prescriptions to our HUB and PPN partners or participate in our patient affordability programs and thereby limit patient access and utilization of XHANCE.

We historically operated portions of our business through our foreign subsidiaries, including through our Norwegian subsidiary, OptiNose AS, which, until 2022, owned a substantial portion of our intellectual property and conducted certain development activities. We also operated a United Kingdom subsidiary, OptiNose UK Ltd. Optinose AS was dissolved in October 2023. We are in the process of dissolving OptiNose UK, Ltd. The operations we conduct in other countries, including clinical trials, and the operations conducted by third party suppliers and vendors with whom we do business, are subject to foreign laws. We are subject to a number of risks associated with our international business operations and activities that may increase liability, costs, and require significant management attention. These risks include: ?compliance with the laws of the U.S., the United Kingdom, Norway, and other countries that apply to our international operations, including import and export legislation;?compliance with foreign data protection laws and regulations in the United Kingdom, Norway and other countries that apply to our international operations;?the complexities and expenses of administering a business abroad;?complications in compliance with, and unexpected changes in, tariffs, trade barriers, price and exchange controls and other foreign regulatory requirements, including potential trade conflicts, changes to trade agreements/treaties, and the implementation of trade restrictions;?instability in economic or political conditions, including inflation, recession and actual or anticipated military conflicts, social upheaval or political uncertainty;?production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;?uncertainties of laws and enforcement relating to the protection of intellectual property or secured technology;?litigation in foreign court systems;?language barriers;?changes in tax laws and regulations in the jurisdictions in which we operate;?compliance with tax, employment, immigration and labor laws, regulations and restrictions for employees living or traveling abroad;?difficulties staffing and managing foreign operations; and ?workforce uncertainty in countries where labor unrest is more common than in the U.S. There can be no assurance that the policies and procedures we implement to address or mitigate these risks will be successful, that our personnel will comply with them or that we will not experience these risks in the future or that they will not have a material adverse effect on our business, results of operations and financial condition.

As of September 30, 2024, we had cash and cash equivalents of $82.5 million and have $130.0 million of outstanding Pharmakon Senior Secured Notes under the A&R Note Purchase Agreement. Our accumulated deficit as of September 30, 2024 was $741.6 million. We have incurred significant net losses since inception and also expect to incur substantial losses in future periods. Our continuation as a going concern is dependent on our ability to maintain compliance with the financial covenants (including the requirement for us to achieve certain minimum trailing twelve-month consolidated XHANCE net sales and royalties thresholds, the requirement for us to maintain at least $30.0 million of cash and cash equivalents at all times (reduced to $20.0 million following the date of the first quarterly payment of principal due on September 30, 2025) and the requirement that commencing with our financial statements for the fiscal year ending December 31, 2025 that our annual and quarterly financial statements not be subject to any qualification or statement as to "going concern"), and the other provisions under the A&R Note Purchase Agreement, and our ability to generate sufficient cash flows from operations to meet our debt service obligations and to fund our operations and/or obtain additional capital through equity or debt financings, partnerships, collaborations, or other sources. The A&R Note Purchase Agreement includes a requirement that we achieve certain minimum trailing twelve-month consolidated XHANCE net sales and royalties thresholds through maturity. We believe it is probable that we will not maintain compliance with the trailing twelve-month minimum consolidated XHANCE net sales and royalties thresholds for the entire one year period after the filing of this Form 10-Q. If we fail to achieve a minimum consolidated XHANCE net sales and royalties threshold, it will constitute a default under the A&R Note Purchase Agreement if we are unable to obtain a modification or waiver of such minimum consolidated XHANCE net sales and royalties threshold. The A&R Note Purchase Agreement also requires us to maintain at all times a minimum of $30.0 million of cash and cash equivalents, which will be reduced to $20.0 million following the date of the first quarterly payment of principal due on September 30, 2025 (referred to as, the "liquidity covenant"). If we are unable to secure additional capital through equity or debt financings, partnerships, collaborations, or other sources, we believe that it is probable that we will not be able to maintain compliance with the liquidity covenant under the A&R Note Purchase Agreement once we make the second principal repayment, which is due on December 31, 2025, which will also constitute a default under the A&R Note Purchase Agreement if we are unable to obtain a waiver or modification of such liquidity covenant. Further, the A&R Note Purchase Agreement includes a requirement that commencing with the report and opinion on our consolidated financial statements commencing with our financial statements for the fiscal year ending December 31, 2025 that all of our quarterly and annual financial statements, not be subject to any statement or qualification as to "going concern" (referred to as, the "going concern covenant"). As a general matter, financial statements are subject to a "going concern" uncertainty disclosure if it is probable that the company's available capital is not sufficient to fund its operations and obligations for at least twelve months following the issuance of such financial statements including obligations that could become due during such twelve month period as a result of some future event (for instance, the potential that the Pharmakon Senior Secured Notes could become due if it is deemed probable that we will not maintain compliance with the covenants and other terms under the A&R Note Purchase Agreement during such twelve month period). If we are unable to secure additional capital through equity or debt financings, partnerships, collaborations, or other sources, we believe it is unlikely that we will be able comply with the going concern covenant commencing with our financial statements for the fiscal year ending December 31, 2025, which will constitute a default under the A&R Note Purchase Agreement if we are unable to obtain a modification or waiver of such going concern covenant. In the event of any of the foregoing defaults, the holders of the Pharmakon Senior Secured Notes may declare an event of default under the A&R Note Purchase Agreement and may elect to accelerate the repayment of all unpaid principal, accrued interest and other amounts due (which would also require us to pay an interest make-whole premium as specified in the A&R Note Purchase Agreement if the repayment of the debt is accelerated prior to May 21, 2026), which may require us to delay or curtail our operations until we obtain additional capital which may not be available on a timely basis, on favorable terms, or at all, and such capital, if obtained, may not be sufficient to meet our payment obligations or enable us to continue to implement our long-term business strategy. In such an event, our business, prospects, financial condition and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. These factors raise substantial doubt about our ability to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the fair value for such assets or less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. Additionally, if we seek additional financing to fund our debt service obligations and business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all.