The following discussion analyzes the Company's historical financial condition
and results of operations. As you read this discussion and analysis, refer to
the Company's financial statements and the notes thereto included elsewhere in
this Quarterly Report on Form 10-Q, which represents the results of operations
for the three and six months ended June 30, 2021 and 2020. Also refer to the
Company's Annual Report on Form 10-K for the year ended December 31, 2020, which
includes detailed discussions of various items impacting the Company's business,
results of operations and financial condition. The discussion and analysis below
has been organized as follows:

•Executive summary, including a description of the business and recent events
that are important to understanding the results of operations and financial
condition;
•Results of operations, including an explanation of significant differences
between the periods in the specific line items of the condensed statements of
operations;
•Financial condition addressing the Company's sources of liquidity, future
funding requirements, cash flow, sources and uses of cash, updates to
contractual obligations and commitments, and off-balance sheet arrangements; and
•Critical accounting policies, significant judgements and estimates, which are
most important to both the portrayal of the Company's results of operations and
financial condition.

Some of the information contained in the following discussion and analysis or
set forth elsewhere in this Quarterly Report on Form 10-Q, including information
with respect to the Company's plans and strategy for its business, includes
forward-looking statements within the meaning of Section 27A of the Act and
Section 21E of the Exchange Act that involve risks and uncertainties. As a
result of many factors, including those factors set forth in the "Risk Factors"
section of the Company's Annual Report on Form 10-K for the year ended December
31, 2020 and in this Quarterly Report on Form 10-Q, the Company's actual results
could differ materially from the results described in or implied by these
forward-looking statements. Please also see the section of this Quarterly Report
on Form 10-Q titled "Special Note Regarding Forward-Looking Statements."

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Executive Summary

Introduction and Overview

Oyster Point Pharma, Inc. is a clinical stage biopharmaceutical company focused
on the discovery, development and commercialization of first-in-class
pharmaceutical therapies to treat ophthalmic diseases. The Company's lead
product candidate OC-01 (varenicline) nasal spray, a highly selective nicotinic
acetylcholine receptor (nAChR) agonist, is being developed as a nasal spray to
treat the signs and symptoms of dry eye disease. Based on OC-01 (varenicline)
nasal spray's clinical trial results and its novel mechanism of action, the
Company believes OC-01 (varenicline) nasal spray, if approved by the FDA, has
the potential to become the new standard of care and redefine how dry eye
disease is treated for millions of patients.

The Company has no products approved for sale and has not generated revenue
since its inception in 2015. The Company expects to finance its operations
through private and public equity or debt financing, collaborative or other
arrangements with corporate sources or through other sources of financing. The
Company's net losses were $40.9 million and $32.0 million for the six months
ended June 30, 2021 and 2020, respectively. As of June 30, 2021, the Company had
an accumulated deficit of $195.7 million. The Company expects that its selling,
general and administrative expenses will continue to increase as the Company
prepares for the commercialization of its lead product candidate, OC-01
(varenicline) nasal spray, if approved by the FDA. Additionally, operating
expenses will increase as the Company advances its other product candidates
through preclinical and clinical development, seeks regulatory approval, and
prepares for and, if approved, proceeds to commercialization; acquires,
discovers, validates and develops additional product candidates; obtains,
maintains, protects and enforces its intellectual property portfolio; and hires
additional personnel. The Company has incurred and will continue to incur
additional costs associated with operating as a public company.

The Company plans to continue to use third-party service providers, including
clinical research organizations (CROs) and contract manufacturing organization
(CMOs), to carry out its preclinical and clinical development and to manufacture
and supply the materials to be used during the development and commercialization
of its product candidates. During the second quarter of 2021, the Company
commenced its hiring of a specialty sales force of approximately 150 to 200
field representatives.

Recent Events

Credit Facility with OrbiMed

On August 5, 2021, the Company entered into a $125 million Credit Agreement with
OrbiMed, to be funded in three separate tranches, the first $45 million tranche
to be funded no later than August 13, 2021, the second $50 million tranche to be
funded, at the option of the Company, upon FDA approval of OC-01 (varenicline)
nasal spray and the third $30 million tranche to be funded, at the option of the
Company, upon the Company receiving $40 million in net recurring revenue from
the sale and/or licensing of OC-01. The Company's obligations under the Credit
Agreement are secured by all or substantially all of its assets and property,
subject to customary exceptions.

The Credit Agreement matures on August 5, 2027. The term loans bear interest at
a rate per annum equal to the sum of (x) the daily secured overnight financing
rate as administered by the Federal Reserve Bank of New York, subject to a 0.40%
floor, plus (y) a margin of 8.10%. Commencing on the first full fiscal quarter
after the closing date, the Company is required to make quarterly revenue
interest payments to OrbiMed in an amount equal to 3% of all net revenue from
annual sales and licenses of OC-01 up to $300 million and 1% of all revenue from
annual sales and licenses of OC-01 between $300 million and $500 million,
subject to caps on such quarterly payments. These caps increase both on an
annual basis and upon funding of the second and third term loan tranches.

If the Company does not obtain OC-01 approval by June 30, 2022, the Credit
Agreement requires monthly repayments of principal starting on August 5, 2024.
Additionally, commencing with the fourth full fiscal quarter after OC-01
approval, if the Company does not meet certain minimum recurring revenue
thresholds from the sale and/or licensing of OC-01 on a quarterly basis for the
most recently ended four fiscal quarter period, the Credit Agreement requires a
$5 million repayment of principal on the interest payment date following such
fiscal quarter. The Company is permitted to prepay, in whole or in part, the
term loans, subject to the payment of a prepayment fee, an exit fee and a buyout
amount (calculated as the revenue interest cap set forth above less the amount
of royalty payments made to OrbiMed). The term loans are also required to be
mandatorily prepaid with the proceeds of certain asset sales and casualty events
(subject to payment of the prepayment fee and exit fee) and the issuance of
convertible debt.

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For further discussion of the Credit Agreement, including information pertaining
to affirmative and negative covenants of the Company, and events of default, see
Item 1 - Note 8, Subsequent Events.

Ji Xing License and Collaboration Agreement



On August 5, 2021, the Company entered into a license and collaboration
agreement (License Agreement) with Ji Xing Pharmaceuticals Limited (Ji Xing), a
biotechnology company headquartered in Shanghai and backed by RTW Investments,
LP (RTW). Pursuant to the License Agreement, the Company will grant Ji Xing an
exclusive license to develop and commercialize OC-01 (varenicline) and OC-02
(simpinicline) nasal sprays, for all prophylactic uses for, and treatment of,
ophthalmology diseases or disorders in the greater China region. Ji Xing will be
responsible for the development, regulatory, manufacturing and commercialization
activities costs in the greater China region. The Company will be responsible
for supplying the drug substance and finished products of OC-01 (varenicline)
and OC-02 (simpinicline) for Ji Xing's clinical development at quantities to be
agreed by the parties, subject to one or more separate supply agreements as
contemplated by the License Agreement. The Company will receive an upfront cash
payment consisting of $17.5 million and up to 0.75% equity interest in Ji Xing,
half of which will be subject to a pre-specified vesting condition. In addition,
the Company is eligible to receive up to $204.8 million in aggregate development
and sales-based milestone payments and tiered low teens to low twenties
royalties based on future net sales of OC-01 and OC-02 in the greater China
region. For further discussion of the License Agreement, see Item 1 - Note 8,
Subsequent Events.

Hiring of U.S. Sales Representatives in July



The Company continues to make meaningful progress toward its planned U.S. launch
of OC-01 (varenicline) nasal spray in the fourth quarter of 2021, if approved by
the FDA, by initiating the hiring of sales representatives during the month of
July, with a planned target of hiring 150-200 sales representatives. Sales
representatives are currently in the field communicating our dry eye
disease-state awareness campaign.

Preclinical Data Highlighting Potent Activity of OC-01 (varenicline) and OC-02 (simpinicline) against SARS-CoV-2 Virus and Variants.



In July 2021, the Company announced preclinical data in non-human primates and
in vitro models evaluating OC-01 (varenicline) nasal spray against SARS-CoV-2
and the alpha and beta variants, the viruses that cause COVID-19 disease.
Administration of OC-01 (varenicline) nasal spray to non-human primates was
observed to inhibit viral replication in the nose within 24 hours of infectious
SARS-CoV-2 challenge with absence of subgenomic RNA at Day 3 and Day 5
post-challenge. The results were published on the preprint server bioRxiv. In
addition, varenicline was observed to inhibit cellular entry and replication of
SARS-CoV-2 and its alpha and beta variants in multiple human cell types. Lastly,
OC-02 (simpinicline) was also observed to inhibit cellular entry and replication
of SARS-CoV-2 alpha variant in Calu-3 human cells at very low concentrations.
Additional preclinical studies with SARS-CoV-2 variants are currently underway.

2021 Inducement Plan



In July 2021, the Company's Board of Directors approved the adoption of the 2021
Inducement Plan (Inducement Plan), which is to be used exclusively for grants of
awards to individuals who were not previously employees or directors of the
Company (or following a bona fide period of non-employment) as a material
inducement to such individuals' entry into employment with the Company, pursuant
to Nasdaq Listing Rule 5635(c)(4). The Company has reserved 650,000 shares of
its common stock that may be issued under the Inducement Plan. The terms and
conditions of the Inducement Plan are substantially similar to those of the 2019
Plan.

Enrollment of First Subject in the OLYMPIA Phase 2 Clinical Trial of OC-01 (varenicline) Nasal Spray for Patients with Neurotrophic Keratopathy

In June 2021, the Company announced enrollment of the first subject in the OLYMPIA Phase 2 clinical trial of OC-01 (varenicline) nasal spray for the treatment of Stage 1 Neurotrophic Keratopathy (NK).


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Pipeline Expansion with Enriched Tear Film (ETF™) Gene Therapy to Target Ophthalmic Diseases



In June 2021, the Company announced the expansion of its pipeline with the
introduction of its proprietary ETF™ gene therapy and proof-of-concept in vivo
study results from it first gene therapy candidate, OC-101. Preclinical study
results from a 42-day proof-of-concept in vivo study demonstrated a single,
intralacrimal gland injection of an adeno-associated virus (AAV) vector that
delivers the human Nerve Growth Factor (NGF) gene. A single injection produced
statistically significant increase of NGF in tear film, as compared to control.
Preclinical study results also demonstrated that following AAV transduction of
the lacrimal gland, cholinergic activation with OC-01 (varenicline) nasal spray
produced statistically significant increase of NGF levels in tear film of a
rabbit model, as compared to control, and pre-cholinergic activation,
potentially indicating OC-01's ability to modulate lacrimal secretion of NGF. No
macroscopic or microscopic safety findings were observed associated with either
the intralacrimal gland administration of OC-01 or intranasal administration of
OC-01.

Research Collaboration with Adaptive Phage Therapeutics, Inc. to Target Ophthalmic Diseases



In May 2021, the Company entered into a research collaboration agreement with
Adaptive Phage Therapeutics (APT) for the development of potential biological
treatments for multiple ophthalmic diseases. Under the terms of the
collaboration agreement, the Company has the option and certain rights to obtain
an exclusive license to develop and commercialize APT's technology for
ophthalmic diseases and disorders. Under the license terms, if such option is
exercised, the Company would pay for potential development and regulatory
milestones, as well as the potential for sales-related milestones and tiered
royalties of net sales, if a licensed phage therapy is approved by the FDA or
certain other regulatory authorities. Pursuant to the terms of the agreement,
the Company paid a one-time, non-refundable, upfront payment of $0.5 million for
the collaboration and option agreement which was included in research and
development expense for the three and six months ended June 30, 2021.

Prescription Drug User Fee Act (PDUFA) target action date of October 17, 2021
The Company submitted a 505(b)(2) New Drug Application (NDA) for OC-01
(varenicline) nasal spray for the treatment of signs and symptoms of dry eye
disease in December 2020. The FDA has assigned a PDUFA target action date of
October 17, 2021 as the goal to complete its review of the NDA.
The Impact of the SARS-CoV-2 Virus Pandemic

During the six months ended June 30, 2021, the financial results of the Company
were not significantly affected by the SARS-CoV-2 virus pandemic. However, the
extent to which the SARS-CoV-2 virus pandemic may affect the Company's future
financial results and operations will depend on future developments which are
highly uncertain and cannot be predicted, including new information which may
emerge concerning the pandemic, the availability and effectiveness of vaccines
and treatment options, and current or future domestic and international actions
to contain it and treat it. The Company continues to evaluate the impact of the
SARS-CoV-2 virus pandemic on its trials, expected timelines and costs, as well
as potential supply-chain challenges as it prepares itself for commercialization
of the OC-01 (varenicline) nasal spray candidate and as it continues to learn
more about the impact of the SARS-CoV-2 virus pandemic on the industry. In
addition, the Company has taken a variety of measures in an effort to ensure the
availability and functioning of the Company's critical infrastructure and to
promote the safety and security of its employees, including previously
instituted remote working arrangements for employees through the second quarter
of 2021 and investing in personal protective equipment for the future return to
the office. During the second quarter of 2021, Company management instituted a
voluntary return to the Company's office located in New Jersey beginning
September 7, 2021, and continues to actively monitor and evaluate such plans as
the pandemic continues to evolve.

The Company continues to evaluate and develop pipeline candidates for the
potential treatment of various medical indications. The ongoing SARS-CoV-2 virus
pandemic may impact access to supplies necessary to conduct preclinical studies,
cause delay to the timelines to initiate or complete in vitro or in vivo animal
studies, or indirectly impact the operation of third parties that are necessary
for the Company to advance preclinical projects. If the SARS-CoV-2 virus
pandemic continues and persists for an extended period of time, the Company
could experience significant disruptions to its clinical development timelines,
which could adversely affect its business, financial condition and results of
operations.

For further discussion of the risks that the Company faces as a result of the
SARS-CoV-2 virus pandemic refer to the "Risk Factors" section of the Company's
Annual Report on Form 10-K for the year ended December 31, 2020.

                                       17
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Results of Operations

Comparison of the Results of Operations for the Three Months Ended June 30, 2021 and 2020

The following table summarizes the Company's results of operations for the periods indicated (in thousands, except percentages):


                                                  Three Months Ended June 30,
                                                    2021                  2020            $ Change             % Change
Research and development:
Clinical, preclinical                         $        2,066          $   1,881          $    185                      10  %
Chemistry, manufacturing and controls (CMC)            3,420              5,723            (2,303)                    (40) %
Other                                                  1,244                950               294                      31  %
   Total research and development                      6,730              8,554            (1,824)                    (21) %
Selling, general and administrative                   15,296              6,940             8,356                     120  %
Loss from operations                                 (22,026)           (15,494)           (6,532)                     42  %
Other income, net                                         10                 30               (20)                    (67) %

Net loss                                      $      (22,016)         $ (15,464)         $ (6,552)                     42  %

Research and Development Expenses



Research and development expenses decreased by $1.8 million during the three
months ended June 30, 2021 compared to the three months ended June 30, 2020. The
decrease was primarily driven by lower CMC expenses incurred by the Company in
the second quarter of 2021 compared to the second quarter of 2020, which
included significant pre-approval inventory costs, as well as expenses related
to the preparation of the NDA filing in December 2020.

Selling, General and Administrative Expenses



Selling, general and administrative expenses increased by $8.4 million during
the three months ended June 30, 2021 compared to the three months ended June 30,
2020. The increase was driven by higher payroll-related expenses, including
stock-based compensation of $4.8 million, due to additional headcount, as well
as higher commercial planning expenses of $1.8 million in anticipation of a U.S.
launch of OC-01 (varenicline) nasal spray, if approved, in the fourth quarter of
2021. In addition, the Company incurred higher other general and administrative
expenses of $1.0 million, related to accounting, legal, facilities, information
technology, and other office-related costs. The Company also incurred an
increase in medical affairs costs in the amount of $0.8 million during the three
months ended June 30, 2021 compared to the three months ended June 30, 2020.


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Comparison of the Six Months Ended June 30, 2021 and 2020

The following table summarizes the Company's results of operations for the periods indicated (in thousands, except percentages):


                                                      Six Months Ended June 30,
                                                       2021                  2020            $ Change            % Change
Research and development:
Clinical, preclinical                            $        4,001          $   7,993          $ (3,992)                  (50) %
Chemistry, manufacturing and controls (CMC)               9,045              9,560              (515)                   (5) %
Other                                                      (488)             2,341            (2,829)                 (121) %
   Total research and development                        12,558             19,894            (7,336)                  (37) %
Selling, general and administrative                      28,388             12,529            15,859                   127  %
Loss from operations                                    (40,946)           (32,423)           (8,523)                   26  %
Other income, net                                            21                440              (419)                  (95) %

Net loss                                         $      (40,925)         $ (31,983)         $ (8,942)                   28  %



Research and Development Expenses
Research and development expenses decreased by $7.3 million during the six
months ended June 30, 2021 compared to the six months ended June 30, 2020. The
decrease in clinical, preclinical, and CMC expense of $4.5 million was primarily
due to the completion of the ONSET-2 Phase 3 clinical trial in May 2020. The
decrease in other research and development costs of $2.8 million was primarily
driven by the application fee waiver granted to the Company in April 2021. In
December 2020, the Company paid a fee of $2.9 million to the FDA under the PDUFA
in conjunction with the filing of its NDA for OC-01 (varenicline) nasal spray.
The Company filed a request with the FDA to grant a waiver and refund the fee
under the small business waiver provision of the PDUFA. Due to the uncertainty
regarding the collectability of this refund, the Company recorded the filing fee
in research and development expense in December 2020. In February 2021, the FDA
granted the Company's request for the waiver. The refund was recorded as a
reduction in other research and development expense for the six months ended
June 30, 2021.

Selling, General and Administrative Expenses



Selling, general and administrative expenses increased by $15.9 million during
the six months ended June 30, 2021 compared to the six months ended June 30,
2020. The increase was driven by higher payroll-related expenses of
$9.4 million, inclusive of stock-based compensation in the amount of $2.6
million, due to additional headcount, as well as higher commercial planning
expenses of $3.5 million in anticipation of a U.S. launch of OC-01(varenicline)
nasal spray, if approved, in the fourth quarter of 2021. In addition, the
Company incurred higher other general and administrative expenses of
$1.7 million, related to accounting, legal, facilities, information technology,
and other office-related costs. The Company also incurred an increase in medical
affairs costs in the amount of $1.3 million during the six months ended June 30,
2021 compared to the six months ended June 30, 2020.

Other Income, Net



Other income, net decreased by $0.4 million for the six months ended June 30,
2021 compared to the six months ended June 30, 2020, due to lower rate of return
on the money market funds earned during the period, as well as lower cash
balances during the first six months of 2021 compared to the first six months of
2020.

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Liquidity and Capital Resources

Sources of Liquidity

As of June 30, 2021 and December 31, 2020, the Company had cash and cash equivalents of $154.8 million and $192.6 million, respectively.

Future Funding Requirements



Based on the current business plan, management believes that its available cash
and cash equivalents will be sufficient to fund the Company's planned operations
for at least 12 months from the filing date of this Quarterly Report on Form
10-Q.

On December 17, 2020, the Company submitted a 505(b)(2) NDA to the FDA for its
first lead product candidate, OC-01 (varenicline) nasal spray for the treatment
of signs and symptoms of dry eye disease. The Company expects to continue to
incur an increase in expense related to the Company's preparation for the
commercialization of OC-01 (varenicline) nasal spray, if approved, including
expenses for the establishment of commercial scale manufacturing arrangements,
and to prepare for market access, marketing, distribution and commercial
operations. In addition, the Company will continue to expend funds to initiate,
continue and or complete the research, development and clinical testing of its
current and future product candidates.

Since inception, the Company has incurred recurring losses and negative cash
flows from operations. The Company generated net losses of $40.9 million and
$32.0 million for the six months ended June 30, 2021 and 2020, respectively, and
had an accumulated deficit of $195.7 million as of June 30, 2021. The Company
historically financed its operations primarily through the sale and issuance of
its securities. The Company does not expect to generate any meaningful revenue
unless and until it obtains regulatory approval of and commercializes any of its
product candidates or decides to enter into collaborative agreements with third
parties. The Company is subject to all of the risks typically related to the
development of new product candidates, and it may encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors that may adversely
affect its business. The Company will require additional funds to commercialize
its products and fund operations for the foreseeable future. The Company is
unable to entirely fund these efforts with its current financial resources and
there can be no assurance that it will be able to secure such additional
financing on a timely basis, if at all, that will be sufficient to meet these
needs. If adequate funds are unavailable on a timely basis from operations or
additional sources of financing, the Company may have to delay, reduce or
eliminate certain commercial related expenses, included in selling, general and
administrative expenses, as well as delay, reduce or eliminate the scope of or
eliminate one or more of its research or development programs, which would
materially and adversely affect its business, financial condition and
operations. The Company may seek to raise capital through private or public
equity or debt financings, collaborative or other arrangement with corporate
sources, or through other sources of financing.

The Company anticipates that it will need to raise substantial additional capital, the requirements for which will depend on many factors, including:



•the scope, timing, rate of progress and costs of the Company's drug discovery
efforts, preclinical development activities, laboratory testing and clinical
trials for the Company's product candidates;
•the number and scope of clinical programs the Company decides to pursue;
•the cost, timing and outcome of preparing for and undergoing regulatory review
of the Company's product candidates;
•the scope and costs of development and commercial manufacturing activities;
•the cost and timing associated with commercializing of the Company's product
candidates, if they receive marketing approval;
•the extent to which the Company acquires or in-licenses other product
candidates and technologies;
•the costs of preparing, filing and prosecuting patent applications, maintaining
and enforcing the Company's intellectual property rights and defending
intellectual property-related claims;
•the Company's ability to establish and maintain collaborations on favorable
terms, if at all;
•its efforts to enhance operational systems and the Company's ability to
attract, hire and retain qualified personnel, including personnel to support the
development of the Company's product candidates and, ultimately, the sale of the
Company's products, following FDA approval;
•the Company's implementation of operational, financial and management systems;
•any current or future potential effects of the SARS-CoV-2 virus pandemic on the
Company's business, operations, preclinical and clinical development and
commercialization timelines and plans; and
•the costs associated with being a public company.

                                       20
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A change in the outcome of any of these or other variables with respect to the development of any of the Company's product candidates could significantly change the costs and timing associated with the development of that product candidate.



Furthermore, the Company's operating plans may change in the future, and it will
continue to require additional capital to meet operational needs and capital
requirements associated with such operating plans. If additional funds are
raised by issuing equity securities, the Company's stockholders may experience
dilution. Any future debt financing into which the Company might enter may
impose upon it additional covenants that restrict the Company's operations,
including limitations on its ability to incur liens or additional debt, pay
dividends, repurchase its common stock, make certain investments or engage in
certain merger, consolidation or asset sale transactions. Any debt financing or
additional equity that it raises may contain terms that are not favorable to the
Company or its stockholders.

Adequate funding may not be available to the Company on acceptable terms or at
all, and any uncertainty and volatility in capital markets caused by the
SARS-CoV-2 virus pandemic may negatively impact the availability and cost of
capital. The Company's failure to raise capital as and when needed could have a
negative impact on its financial condition and ability to pursue its business
strategies. If the Company is unable to raise additional funds when needed, it
may be required to delay, reduce, or terminate some or all of its development
programs and clinical trials or may also be required to sell or license to
others rights to its product candidates in certain territories or indications
that it would prefer to develop and commercialize itself. If the Company is
required to enter into collaborations and other arrangements to supplement its
funds, it may have to give up certain rights, thereby limiting its ability to
develop and commercialize the product candidates or may have other terms that
are not favorable to the Company or its stockholders, which could materially
affect its business, results of operation and financial condition.

See Item 1A. Risk Factors to the Annual Report on Form 10-K for the year ended
December 31, 2020 for additional risks associated with the Company's substantial
capital requirements.

Cash Flow Discussion

The following table sets forth the primary sources and uses of cash, cash
equivalents and restricted cash for each of the periods presented below (in
thousands):
                                                           Six Months Ended June 30,
                                                           2021                  2020              $ Change
Net cash (used in) provided by:
Operating activities                                 $      (37,085)         $  (25,098)         $  (11,987)
Investing activities                                           (994)               (342)               (652)
Financing activities                                            299             113,051            (112,752)

Net (decrease) increase in cash and cash equivalents $ (37,780)

$ 87,611 $ (125,391)

Cash Flows Used in Operating Activities



Net cash used in operating activities increased by $12.0 million for the six
months ended June 30, 2021 compared to the six months ended June 30, 2020, due
to higher net loss adjusted for non-cash items during the period in the amount
of $5.9 million, as well as a decrease in working capital of $6.0 million driven
primarily by the timing of payments to the Company's service providers. The
Company's higher net loss was driven by the continued development of the
Company's product candidates and preparation for the commercial launch of the
Company's main product candidate, OC-01 (varenicline) nasal spray, if approved,
in the fourth quarter of 2021.

Cash Flows Used in Investing Activities

Net cash used in investing activities increased by $0.7 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily related to partial payments for equipment to be used in manufacturing of OC-01 (varenicline) nasal spray, as well as purchases of laboratory equipment.


                                       21
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Cash Flows Provided by Financing Activities



Net cash provided by financing activities decreased by $112.8 million for the
six months ended June 30, 2021 compared to the six months ended June 30, 2020,
primarily due to the proceeds from the follow on public offering during the
second quarter of 2020. The decrease was partially offset by higher proceeds
received from the exercise of stock options during the six months ended June 30,
2021.

Contractual Obligations and Commitments



In February 2021, the Company entered into a lease agreement for laboratory and
office space in New Jersey for a three-year term beginning on March 1, 2021 and
ending on February 29, 2024. Total future minimum lease payments under this
agreement are $0.3 million as of June 30, 2021.

As of June 30, 2021, there have been no other material changes in the
contractual obligations and commitments from those disclosed in the financial
statements and the related notes included in the Company's Annual Report on Form
10-K for the year ended December 31, 2020.

Off-Balance Sheet Arrangements

As of June 30, 2021, the Company does not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies, Significant Judgments and Estimates



The Company's financial statements have been prepared in accordance with U.S.
GAAP. The preparation of these financial statements requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported expenses incurred during the reporting
periods. The Company bases its estimates on historical experience and on various
other assumptions that it believes are reasonable under the circumstances. The
Company evaluates its estimates and assumptions on an ongoing basis. The future
effects of the SARS-CoV-2 virus pandemic on the Company's results of operations,
cash flows, and financial position are unclear, however the Company believes it
has used reasonable estimates and assumptions in preparing the interim condensed
financial statements. Actual results may differ from these estimates under
different assumptions or conditions.

The Company's critical accounting policies and estimates are included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2020. The
Company periodically reviews its accounting policies, estimates and assumptions
and makes adjustments when facts and circumstances dictate. In addition to the
accounting policies that are described in the Company's 2020 Annual Report on
Form 10-K, the following critical accounting policy was affected by critical
accounting estimates in connection with the Company offering its employees an
option to purchase the Company's common stock under the ESPP effective April 1,
2021.

Stock-Based Compensation
As discussed in Note 4, Stockholders' Equity, effective April 1, 2021, the
Company established its first offering period under the ESPP. Stock-based
compensation expense related to purchase rights issued under the ESPP, is based
on the Black-Scholes option-pricing model fair value of the estimated number of
awards as of the beginning of the offering period. Stock-based compensation
expense is recognized using the straight-line method over the offering period.
The determination of the grant date fair value of shares purchased under the
ESPP is affected by the estimated fair value of our common stock as well as
other assumptions and judgments, which are estimated as follows:
•Expected term. The expected term for ESPP is the beginning of the offering
period to the end of each purchase period.

•Expected volatility. As the Company has a limited trading history of its common
stock, the expected volatility is estimated based on the third quartile of the
range of the observed volatilities for comparable publicly traded biotechnology
and pharmaceutical related companies over a period equal to length of the
offering period. The comparable companies are chosen based on industry, stage of
development, size and financial leverage of potential comparable companies.
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•Risk-free interest rate. The risk-free interest rate is based on the implied
yield currently available on U.S. Treasury zero-coupon issues with a remaining
term equivalent to the expected term of the offering period.

•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 zero.

Recent Accounting Pronouncements

See "Recent Accounting Pronouncements" in Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies to the Company's unaudited interim condensed financial statements included in this Quarterly Report.

JOBS Act



The Company is an "emerging growth company," as defined in the Jumpstart Our
Business Startups Act of 2012, or the JOBS Act. Section 107(b) of the JOBS Act
provides that an emerging growth company can take advantage of an extended
transition period for complying with new or revised accounting standards. Thus,
an emerging growth company can delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. The
Company has irrevocably elected not to avail itself of this extended transition
period, and, as a result, it will adopt new or revised accounting standards on
the relevant dates on which adoption of such standards is required for other
public companies. The Company intends to rely on other exemptions provided by
the JOBS Act, including without limitation, not being required to comply with
the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley
Act.

The Company will remain an emerging growth company until the earliest to occur
of: (1) the last day of its first fiscal year in which it has total annual
revenues of more than $1.07 billion; (2) the date it qualifies as a "large
accelerated filer," with at least $700.0 million of equity securities held by
non-affiliates; (3) the date on which it has issued more than $1.0 billion in
non-convertible debt securities during the prior three-year period; and (4) the
last day of the fiscal year ending after the fifth anniversary of its initial
public offering.

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