OptiNose Inc

ITEM 1A. RISK FACTORS

Except as set forth below, theThere have been no material changes to the risk factors previously disclosed in Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 7, 2024.

We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.

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 AR Note Purchase Agreement. Our accumulated deficit as of September 30, 2024 4, which 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 filed 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 AR 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 AR 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 AR Note Purchase Agreement if we are unable to obtain a modification or waiver of such minimum consolidated XHANCE net sales and royalties threshold.

The AR 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 AR 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 AR Note Purchase Agreement if we are unable to obtain a waiver or modification of such liquidity covenant.

Further, the AR 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 AR 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 AR Note Purchase Agreement if we are unable to obtain a modification or waiver of such going concern covenant.

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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 AR 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 AR Note Purchase Agreement if the repayment of the debt is accelerated prior to SEC on 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.

Our failure to comply with the covenants or other terms of the AR Note Purchase Agreement, including as a result of events beyond our control, could result in a default under the AR Note Purchase Agreement that could materially and adversely affect the ongoing viability of our business.

Each holder of the Pharmakon Senior Secured Notes may elect to accelerate the repayment of all unpaid principal and accrued interest under such holders Pharmakon Senior Secured Notes upon consummation of a specified change of control transaction or occurrence of certain events of default (as specified in the AR Note Purchase Agreement), including, among other things:

our default in a payment obligation under the Pharmakon Senior Secured Notes;

our breach of the financial covenants, affirmative covenants, restrictive covenants or other terms of the AR Note Purchase Agreement, including (i) the trailing twelve-month minimum consolidated XHANCE net sales and royalties covenant, (ii) the requirement to maintain at least $30.0 million of cash and cash equivalents (reduced to $20.0 million following the date of the first quarterly payment of principal due on September 30, 2025) and (iii) the requirement to deliver quarterly and annual financial statements that, commencing with the fiscal period ending December 31, 2025, are not subject to a "going concern" statement or qualification;

our breach of reporting obligations;

our failure to properly maintain the collateral;

any circumstance that could reasonably be expected to have a material adverse effect (as defined in the AR Note Purchase Agreement) on us;

certain regulatory and/or commercial actions that cause an ongoing delay in commercialization of XHANCE; and

certain specified insolvency and bankruptcy-related events.

Subject to any applicable cure period set forth in the Pharmakon Senior Secured Notes, all amounts outstanding with respect to the Pharmakon Senior Secured Notes (principal and accrued interest), as well as any applicable interest make-whole payments, would become due and payable immediately upon an event of default and shall be subject to a default interest rate of an additional 3%. Our assets or cash flow may not be sufficient to fully repay our obligations under the Pharmakon Senior Secured Notes if the obligations thereunder are accelerated upon any events of default. Further, if we are unable to repay, refinance or restructure our obligations under the Pharmakon Senior Secured Notes, or obtain a waiver or modification to the financial covenants or any other terms under the AR Note Purchase Agreement as may be required in the future, the holders of such Pharmakon Senior Secured Notes could proceed to protect and enforce their rights under the Pharmakon Senior Secured Notes by exercising such remedies (including foreclosure on the assets securing our obligations under the Pharmakon Senior Secured Notes and the AR Note Purchase Agreement) as are available to the holders thereunder and in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in the Pharmakon Senior Secured Notes or in aid of the exercise of any power granted in the Pharmakon Senior Secured Notes. Any such action would materially and adversely affect the ongoing viability of our business.

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In the event that we maintain compliance with the trailing twelve-month minimum consolidated XHANCE net sales and royalties that we are required to meet each quarter, maintain at least $30.0 million of cash and cash equivalents (reduced to $20.0 million following the date of the first quarterly payment of principal due on September 30, 2025) and deliver quarterly and annual financial statements that, commencing with the fiscal period ending December 31, 2025, are not subject to a "going concern" statement or qualification, and maintain compliance with all other terms of the AR Note Purchase Agreement, in each case, to avoid an acceleration of payments due under the Pharmakon Senior Secured Notes, then we will be required to repay the notes in eight equal quarterly payments of $1rch 26.25 million starting on September 30, 2025. The Pharmakon Senior Secured Notes are guaranteed by us and certain of our subsidiaries and are secured by a pledge of substantially all of our and their assets.

We are required to achieve the following minimum trailing twelve-month XHANCE net sales and royalties under the AR Note Purchase Agreement (in thousands):

We could be delisted from Nasdaq, which would harm the liquidity of our stock and our ability to raise capital, and may cause the market price of our stock to decline.

Nasdaq requires listing issuers to comply with certain standards in order to remain listed on its exchange. On October 16, 2024, we were notified (the Notice) by Nasdaq Stock Market, LLC (Nasdaq) that on October 16, 2024, the average closing price of our common stock over the prior 30 consecutive trading days had fallen below $1.00 per share, which is the minimum average closing price required to maintain listing on Nasdaq under Nasdaq Listing Rule 5550(a)(2) (the Minimum Bid Requirement). Nasdaqs notice had no immediate effect on the listing or trading of our common stock. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we are provided an initial compliance period of 180 calendar days to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days prior to the deadline. If we do not achieve compliance with the Minimum Bid Requirement within 180 calendar days, we may be eligible for an additional 180 calendar days to regain compliance. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other Nasdaq initial listing standards, with the exception of the Minimum Bid Requirement, and provide written notice of our intention to cure the minimum bid price deficiency during the second compliance period.

If the Nasdaq staff determines that we will not be able to cure the deficiency, or if we are otherwise not eligible for such additional compliance period, Nasdaq will provide notice that our common stock will be subject to delisting. In the event we receive notice that our common stock is being delisted, Nasdaq rules permit us to appeal any delisting determination by the Nasdaq staff. There can be no assurance that the Company will be able to regain compliance with the Minimum Bid Requirement or maintain compliance with the other listing requirements.

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If, for any reason, Nasdaq were to delist our securities from trading on its exchange and we are unable to obtain listing on another reputable national securities exchange, a reduction in some or all of the following may occur, each of which could materially adversely affect our stockholders:

liquidity and marketability of our common stock;

our ability to obtain financing for the continuation of our operations;

the number of institutional and general investors that will consider investing in our common stock;

the number of market makers in our common stock;

the availability of information concerning the trading prices and volume of our common stock; and

the number of broker-dealers willing to execute trades in shares of our common stock

In addition, if we cease to be eligible to trade on Nasdaq, we may have to pursue trading on a less recognized or accepted market, such as the over the counter markets, our stock may be traded as a penny stock which would make transactions in our stock more difficult and cumbersome, and we may be unable to access capital on favorable terms or at all, as companies trading on alternative markets may be viewed as less attractive investments with higher associated risks, such that existing or prospective institutional investors may be less interested in, or prohibited from, investing in our common stock. This may also cause the market price of our common stock to further decline.