SCYNEXIS INC 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating results for the year ended December 31, 2022, are not necessarily indicative of results that may occur in future fiscal years. Some of the statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to our management and involve significant elements of subjective judgment and analysis. Words such as “expects,” “will,” “anticipates,” “targets,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “potential,” “should,” “could,” variations of such words, and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed under the caption “Special Note Regarding Forward Looking Statements” and in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this Annual Report. Overview SCYNEXIS, Inc. is pioneering innovative medicines to overcome and prevent difficult-to-treat and drug-resistant infections. We are developing our lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (IV)/oral agent for severe, hospital-based indications. In June 2021 and December 2022, we announced that the U.S. Food and Drug Administration (FDA) approved BREXAFEMME (ibrexafungerp tablets) for treatment of patients with vulvovaginal candidiasis (VVC), also known as vaginal yeast infection, and for the reduction in the incidence of recurrent vulvovaginal candidiasis (RVVC), respectively. In October 2022, we announced that were actively pursuing a U.S. commercialization partner to out-license BREXAFEMME in order to refocus our resources on the clinical development of ibrexafungerp for severe, hospital-based indications, while keeping BREXAFEMME on the market and available to patients, and we have ceased actively promoting BREXAFEMME. Ibrexafungerp, the first representative of a novel class of antifungal agents called triterpenoids, is a structurally distinct glucan synthase inhibitor and has shown in vitro and in vivo activity against a broad range of human fungal pathogens such as Candida and Aspergillus genera, including multidrug-resistant strains, as well as Pneumocystis , Coccidioides , Histoplasma and Blastomyces genera. Candida and Aspergillus genera are the fungi responsible for approximately 85% of all invasive fungal infections in the United States (U.S.) and Europe. To date, we have characterized the antifungal activity, pharmacokinetics, and safety profile of the oral and IV formulations of ibrexafungerp in multiple in vitro, in vivo, and clinical studies. The FDA has granted Qualified Infectious Disease Product (QIDP) and Fast Track designations to ibrexafungerp for the indications of VVC (including the prevention of recurrent VVC), invasive candidiasis (IC) (including candidemia), and invasive aspergillosis (IA), and has granted Orphan Drug designations for the IC and IA indications. The European Medicines Agency has granted Orphan Medicinal Product designation to ibrexafungerp for IC. These designations may provide us with additional market exclusivity and expedited regulatory paths. Corporate Strategy Update In October 2022, we announced a new corporate strategic direction by refocusing our resources on the further clinical development of ibrexafungerp for severe, hospital-based indications with both the oral and liposomal IV formulations, as multiple ongoing Phase 3 studies are progressing for a potential first approval in hospital indications in 2024 and a Phase 2 study of the IV formulation of ibrexafungerp is planned for 2023. Additionally, we concluded the partnership with our contracted commercial sales partner, Amplity Health (Amplity), on November 30, 2022, and we completed a workforce reduction primarily in the commercial function. On March 30, 2023, we entered into a license agreement (the License Agreement) with GlaxoSmithKline Intellectual Property (No. 3) Limited (GSK). Pursuant to the terms of the License Agreement, we granted GSK an exclusive (even as to us and our affiliates), royalty-bearing, sublicensable license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in all countries other than Greater China and certain other countries already licensed to third parties (the GSK Territory). If the existing licenses granted to or agreements with third parties are terminated with respect to any country, GSK will have an exclusive first right to negotiate with us to add those additional countries to the GSK Territory. We retain rights to all other assets, with GSK receiving a right of first negotiation (ROFN) to any other enfumafungin-derived compounds or products that we may control. The consummation of the transactions under the License Agreement is subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act); provided, that either we or GSK may terminate the License Agreement if expiration or termination of the applicable waiting period under the HSR Act has not occurred within nine months of the signing of the License Agreement. The parties expect the transactions contemplated by the License Agreement to close in the second quarter of 2023. 49 Under the terms of the License Agreement, we will receive an upfront payment of $90 million. We are also eligible to receive potential: • regulatory approval milestone payments of up to $70 million; • commercial milestone payments of up to $115 million based on first commercial sale in invasive candidiasis (U.S./EU); • and sales milestone payments of up to $242.5 million based on annual net sales, with a total of $77.5 million to be paid upon achievement of multiple thresholds up through $200 million; a total of $65 million to be paid upon achievement of multiple thresholds between $300 million and $500 million; and $50 million to be paid at each threshold of $750 million and $1 billion. We will be responsible for the execution and costs of the ongoing clinical studies of ibrexafungerp but will have the potential to receive up to $75.5 million in success-based development milestones, which are comprised of up to $65 million for the achievement of three interim milestones associated with our continued performance of the ongoing MARIO Study and $10.5 million for the successful completion of the MARIO Study. See further details of the License Agreement, including financial terms, as described in Note 16 of Item 8 on this Annual Report. We, Hercules Capital, Inc. (Hercules Capital) and Silicon Valley Bridge Bank, N.A. (SVB) are party to a Loan and Security Agreement dated as of May 13, 2021 (the Loan Agreement), pursuant to which Hercules Capital, SVB and each of the other lenders from time-to-time party to the Loan and Security Agreement (collectively, the Lenders) loaned to us $35 million. In connection with the entering into of the License Agreement, we entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to which the Lenders consented to us entering into the License Agreement and we agreed to pay to the Lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by us will become due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. Dr. Marco Taglietti, our former President and Chief Executive Officer, retired on December 31, 2022 and stepped down from the Board of Directors. David Angulo, M.D., who had served as Chief Medical Officer for the past seven years, became President and Chief Executive Officer and joined the Board of Directors, effective January 1, 2023. Additionally, Ivor Macleod joined as Chief Financial Officer on October 24, 2022. Mr. Macleod has more than thirty years of experience in the life sciences industry, including most recently as Chief Financial Officer of Athersys, Inc. The role of Chief Commercial Officer was eliminated in November 2022, and Christine Coyne, who had served in this leadership role since May 2021, transitioned from us to pursue other opportunities. BREXAFEMME Update In June 2021, the FDA approved BREXAFEMME for use in women with VVC. This approval was based on positive results from two Phase 3, randomized, double-blind, placebo-controlled, multi-center studies (VANISH-303 and VANISH-306), in which oral ibrexafungerp demonstrated statistically superior efficacy compared to placebo and a favorable tolerability profile in women with VVC. The FDA granted BREXAFEMME five years of exclusivity extension under the Generating Antibiotic Incentives Now (GAIN) Act, which will be added to any other applicable exclusivity periods, such as the five years of new chemical entity (NCE) exclusivity, for a combined ten-year period of regulatory exclusivity. BREXAFEMME also is protected by multiple patents, including a composition-of-matter patent covering the ibrexafungerp molecule. With patent term extension, this patent is expected to expire in 2035, providing an expected 13 years of protection from generic competitors in the U.S. In December 2022, we announced that the FDA approved a second indication for BREXAFEMME for the reduction in the incidence of RVVC, with the potential for peak U.S. sales combined for the treatment of VVC and RVVC estimated over $400 million. On March 30, 2023, we entered into the License Agreement with GSK. Pursuant to the terms of the License Agreement, we granted GSK an exclusive (even as to us and our affiliates), royalty-bearing, sublicensable license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in the GSK Territory. Ibrexafungerp Update Enrollment is continuing in our prospective, randomized, double-blind, global Phase 3 study to evaluate the efficacy, safety and tolerability of oral ibrexafungerp as a step-down therapy for patients with IC including candidemia following IV echinocandin therapy in the hospital compared to currently available therapies (the MARIO study). Eligible patients with IC will receive treatment with IV echinocandin and will then be switched to either oral ibrexafungerp or a standard of care option, either oral fluconazole or best available therapy for subjects with infections caused by fluconazole non-susceptible strains, once 50 step-down criteria are met. Approximately 220 patients will be enrolled and randomized in the study, and we expect topline results in the first half of 2024 and a potential approval by the end of 2024. The primary objective of the study is to determine whether treatment of IC with IV echinocandins followed by oral ibrexafungerp is as effective as treatment with IV echinocandins followed by oral fluconazole (or BAT), the current standard of care. The primary end point of the study will be all-cause mortality at 30 days after initiation of antifungal therapy. Approximately 35,000 cases of IC in the U.S. per year are caused by the Candida isolates that are resistant to azoles, a population for which ibrexafungerp could provide a much-needed oral alternative. We achieved a target enrollment of 200 patients in our Phase 3 FURI study investigating the potential of ibrexafungerp as a treatment for fungal infections that are refractory or intolerant to other antifungals, including infections caused by Candida auris ( C. auris ), and anticipate study completion activities in the first half of 2023 with a Data Review Committee review and topline data in the first half of 2024. We also achieved a target enrollment of 30 patients in our Phase 3 CARES study, focused on patients with infections caused by C. auris which will follow similar completion and reporting timing to the Phase 3 FURI study. The data from the MARIO study along with data from FURI and CARES studies are intended to be supportive of an NDA submission in 2024 with an anticipated first approval for an indication in the hospital setting later in 2024. If the License Agreement closes, such NDA submission would be made by GSK and any resulting approval would be held by GSK. We completed our Phase 1 randomized, double-blind, placebo-controlled single and multiple ascending dose study evaluating the safety, tolerability, and pharmacokinetics of the liposomal IV formulation of ibrexafungerp in 64 healthy subjects with treatment durations of up to seven days. The liposomal IV formulation of ibrexafungerp was designed to optimize tolerability and address dose-limiting infusion site irritation adverse events observed with previous formulations. The liposomal IV formulation of ibrexafungerp was generally well tolerated with no serious adverse events reported. The most common adverse events were mostly mild (few moderate) reactions at the infusion site. The dosing was successfully progressed until the target exposure was achieved (i.e., exposure associated with efficacy from animal models). If the License Agreement does not occur, we are planning to begin a Phase 2 study of the liposomal IV formulation in 2023. We have completed the enrollment of SCYNERGIA, although the number of patients is smaller than initially projected. The prioritization of hospital resources toward addressing COVID-19 has impacted the ability of many institutions to focus on screening and enrolling patients into some clinical trials, including SCYNERGIA. We expect to provide topline data for SCYNERGIA in the first half of 2023. In the second quarter of 2022, enrollment began in a new Phase 3b, open-label, multicenter study (VANQUISH) to evaluate the efficacy, safety and tolerability of oral ibrexafungerp as a treatment for complicated VVC in patients who have failed treatment with fluconazole, based on mycological and clinical outcomes. The VANQUISH study will enroll approximately 150 complicated VVC patients who will receive 600 mg of oral ibrexafungerp for one, three or seven consecutive days determined by their underlying complicating condition, including immunocompromised state. Complicated patients include patients with recurrent VVC, those with VVC caused by non-albicans Candida species and those with diabetes, immunocompromising conditions (e.g., HIV), or immunosuppressive therapy (e.g., corticosteroids). The VANQUISH study will be conducted in approximately 25 centers in the U.S. and we are targeting to have data from this study in the first half of 2024. In the fourth quarter of 2022, we announced that a $3.0 million National Institutes of Health (NIH) grant was awarded to Case Western Reserve University researchers to study our second generation fungerp (SCY-247). SCY-247 is a broad-spectrum, antifungal under development by us and has as a potential oral and IV systemic therapeutic option for multiple drug-resistant pathogens. The grant is intended to further characterize the potential of SCY-247 to fight Candida auris , a multidrug-resistant pathogen named as an “urgent threat” by the Centers for Disease Control (CDC) and included in the “critical priority group” on the World Health Organization (WHO) fungal priority pathogens list (FPPL). Previous preclinical investigations with SCY-247 have reported potent antifungal activity in in vitro studies, favorable pharmacokinetic profile and promising efficacy in mice models of IC. We plan to continue progressing the development of SCY-247 as a next generation fungerp in the fight against life-threatening fungal diseases. Liquidity We have operated as a public entity since we completed our initial public offering in May 2014, which we refer to as our IPO. We also completed a follow-on public offering of our common stock in April 2015 and public offerings of our common stock and warrants in June 2016, March 2018, December 2019, December 2020, and April 2022. Our principal source of liquidity is cash, cash equivalents, and short-term investments which totaled $73.5 million as of December 31, 2022 and we have the availability to issue up to $46.2 million of our common stock under our at-the-market facility with Cantor Fitzgerald & Co. (Cantor) and Ladenburg Thalmann & Co. Inc. (Ladenburg). We received $30.0 million in 2021 and received $5.0 million in 2022 under our Loan Agreement with Hercules and Silicon Valley Bank. In March 2023, in connection with the entering into of the License Agreement with GSK, we, Hercules and SVB entered into a First Amendment and Consent to Loan and Security Agreement pursuant to which the lenders under the Loan Agreement consented to us entering into the License 51 Agreement and we agreed to pay to the lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by us will become due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. See “Liquidity and Capital Resources” below for amounts sold under the ATM with Cantor and Ladenburg, and the amounts sold under our common stock purchase agreement with Aspire Capital which expired in October 2022. We have incurred net losses since our inception, including the year ended December 31, 2022. As of December 31, 2022, our accumulated deficit was $422.3 million. We expect we will continue to incur significant research and development expense as we continue to execute our research and drug development strategy. Consistent with our operating plan, we also expect that we will continue to incur significant selling, general and administrative expenses to support our public reporting company operations and ongoing operations, but that our selling, general and administrative expenses will decrease as we have ceased the active promotional activities associated with BREXAFEMME for the VVC indication. As a result, we will need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, other non-dilutive third-party funding (e.g., grants), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our effective shelf registration statements, including under our ATM. Components of Operating Results Revenue Revenue primarily consists of product sales of BREXAFEMME and a non-refundable upfront payment received under our license agreement with Hansoh. Cost of Product Revenue Cost of product revenue consists primarily of distribution, freight expenses, royalties due to Merck, and other manufacturing costs associated with BREXAFEMME. Prior to the regulatory approval of BREXAFEMME on June 1, 2021, we expensed as research and development the costs associated with the third-party manufacture of BREXAFEMME. Research and Development Expense Research and development expense consists of expenses incurred while performing research and development activities to discover, develop, or improve potential product candidates we seek to develop. This includes conducting preclinical studies and clinical trials, manufacturing and other development efforts, and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consists of: • costs related to executing preclinical studies and clinical trials, including development milestones, drug formulation, manufacturing and other development; • salaries and personnel-related costs, including benefits and any stock-based compensation for personnel performing research and development functions; • fees paid to clinical research organizations (CROs), vendors, consultants and other third parties who support our product candidate development and intellectual property protection; • other costs in seeking regulatory approval of our products; and • allocated overhead. Ibrexafungerp was the only key research and development project during the periods presented. We expect to continue to incur significant research and development expense for the foreseeable future as we continue our effort to develop ibrexafungerp, and to potentially develop our other product candidates, subject to the availability of additional funding. The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates. Selling, General and Administrative Expense Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation. This includes personnel in executive, accounting and finance, commercial, human resources, business development, medical affairs, and administrative support functions. Other expenses include facility-related 52 costs not otherwise allocated to research and development expense, professional fees for accounting, auditing, tax and legal services, consulting costs for general and administrative purposes, information systems maintenance and marketing efforts. Other Expense (Income) Substantially all of our other expense (income) during the periods reported consists of costs associated with: • fair value adjustments to our warrant and derivative liabilities; • interest expense; • amortization of debt issuance costs and discount; • other income associated with research and development tax credits; • interest income associated with our held-to-maturity short-term investments and money market account; and • the expense recognized for the extinguishment of debt. Income Tax Benefit To date, we have not been required to pay U.S. federal income taxes because of our current and accumulated net operating losses. For the year ended December 31, 2022, our income tax benefit recognized consists primarily of an income tax benefit associated with the sale of our NOLs and research and development credits. Results of Operations for the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021, and period-to-period percentage change (dollars in thousands): Years Ended December 31, 2022 2021 Period-to-Period Change Revenue: Product revenue, net $ 4,988 $ 1,113 3,875 348.2 % License agreement revenue 103 12,050 (11,947 ) (99.1 )% Total revenue 5,091 13,163 (8,072 ) (61.3 )% Operating expenses: Cost of product revenue 628 312 316 101.3 % Research and development 27,259 23,773 3,486 14.7 % Selling, general and administrative 62,961 49,916 13,045 26.1 % Total operating expenses 90,848 74,001 16,847 22.8 % Loss from operations (85,757 ) (60,838 ) (24,919 ) 41.0 % Other (income) expense: Loss on extinguishment of debt — 2,725 (2,725 ) (100.0 )% Amortization of debt issuance costs and discount 1,589 1,303 286 21.9 % Interest income (1,415 ) (24 ) (1,391 ) 5795.8 % Interest expense 5,198 2,660 2,538 95.4 % Other income (3 ) (13 ) 10 (76.9 )% Warrant liabilities fair value adjustment (22,301 ) (30,365 ) 8,064 (26.6 )% Derivative liabilities fair value adjustment (1,316 ) (1,170 ) (146 ) 12.5 % Total other income (18,248 ) (24,884 ) 6,636 (26.7 )% Loss before taxes (67,509 ) (35,954 ) (31,555 ) 87.8 % Income tax benefit 4,700 3,088 1,612 52.2 % Net Loss $ (62,809 ) $ (32,866 ) $ (29,943 ) 91.1 % Revenue. For the year ended December 31, 2022, revenue consists primarily of product sales of BREXAFEMME, for which we began commercialization in the second half of 2021. For the year ended December 31, 2021, revenues consists primarily of a non-refundable upfront payment received under our license agreement with Hansoh. Cost of Product Revenues. For the year ended December 31, 2022, cost of product revenue consists primarily of distribution, freight, and royalty costs associated with BREXAFEMME. Prior to the regulatory approval of BREXAFEMME on June 1, 2021, we expensed $3.4 million as research and development expense the costs associated with the third-party manufacture of BREXAFEMME which was recognized primarily in 2020. We expect that these quantities of BREXAFEMME previously expensed prior to June 1, 2021, will be sold by us or GSK over approximately the next 12 months. 53 Research and Development. For the year ended December 31, 2022, research and development expenses increased to $27.3 million from $23.8 million for the year ended December 31, 2021. The increase of $3.5 million, or 14.7%, was primarily driven by an increase of $3.0 million in clinical development expense, an increase of $1.0 million in preclinical expense, an increase of $0.5 million in both salary and stock compensation expense, offset by a decrease of $1.3 million in chemistry, manufacturing, and controls (CMC) expense, and a $0.2 million decrease in other research and development expense. The $3.0 million increase in clinical development expense for the year ended December 31, 2022, was primarily driven by an increase of $5.3 million in expense associated with the costs for the MARIO study which was initiated in the fourth quarter of 2021, an increase of $1.3 million in expense associated with the VANQUISH study, offset in part by a $3.4 million decrease in expense associated with the CANDLE Phase 3 study which was substantially complete in the first quarter of 2022. The $1.0 million increase in preclinical expense was primarily associated with the expense recognized for certain preclinical studies associated with the IV liposomal formulation conducted in the current period. The $0.5 million increase in both salary and stock compensation expense is primarily driven by the increase in employees in comparison to the prior period and by the increase in restricted stock unit grants made in the first quarter of 2022, respectively. The $1.3 million decrease in CMC expense for the year ended December 31, 2022, was primarily driven by a $0.9 million decrease in expense for third-party drug product manufacturing in the current period. Selling, General and Administrative . For the year ended December 31, 2022, selling, general and administrative expenses increased to $63.0 million from $49.9 million for the year ended December 31, 2021. The increase of $13.0 million, or 26.1%, was primarily driven by a $8.6 million increase in commercial related expense, an increase of $1.6 million in salary and payroll related costs, and an increase of $1.5 million in professional fees, all primarily due to the costs recognized to support the commercialization of BREXAFEMME, an increase of $1.0 million in stock compensation expense, and an increase of $1.9 million primarily in severance expense associated with our reduction in workforce, offset in part by a decrease of $0.9 million in medical affairs expense and a $0.7 million decrease in business development expense due to the Hansoh license agreement entered into in 2021. Loss on Extinguishment of Debt . For the year ended December 31, 2021, we recognized a $2.7 million loss on extinguishment of debt associated with the January 2021 conversation of our remaining April 2020 convertible notes. Amortization of Debt Issuance Costs and Discount. For the years ended December 31, 2022 and 2021, we recognized $1.6 million and $1.3 million in amortization of debt issuance costs and discount. The 2022 and 2021 debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees, issuance costs, and the initial fair value of the derivative liability. The 2022 and 2021 debt issuance costs and discount for our Loan Agreement with Hercules Capital, Inc. and Silicon Valley Bank (the Loan Agreement) comprised issuance and commitment costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Loan Agreement. Interest Income. For the years ended December 31, 2022 and 2021, we recognized $1.4 million and $24,000, respectively, in interest income associated with our money market account and short-term investments. The increase in interest income was primarily due to the increase in the interest rate on our money market account. Interest Expense. For the years ended December 31, 2022 and 2021, we recognized $5.2 million and $2.7 million, respectively, in interest expense associated with our Loan Agreement and convertible debt. The increase in interest expense was primarily driven by the increase in the interest rate associated with the Loan Agreement entered into in May 2021. Other Income. For the years ended December 31, 2022 and 2021, we recognized $3,000 and $13,000 in other income associated with certain research and development tax credits. Warrant Liabilities Fair Value Adjustment . For the years ended December 31, 2022 and 2021, we recognized gains of $22.3 million and $30.4 million, respectively, for the fair value adjustment for warrant liabilities primarily due to the decrease in our stock price during the periods. Derivative Liabilities Fair Value Adjustment. For the years ended December 31, 2022 and 2021, we recognized gains of $1.3 million and $1.2 million, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the decrease in our stock price during the periods. Income Tax Benefit. For the year ended December 31, 2022, we recognized a $4.7 million income tax benefit associated with the sale of a portion of our NOLs and research and develop1ent credits. For the year ended December 31, 2021, we recognized a $4.1 million income tax benefit associated with the sale of a portion of our NOLs and research and development credits and $1.1 million of tax withholding expense primarily associated with the upfront payment received from Hansoh. 54 Liquidity and Capital Resources Sources of Liquidity As of December 31, 2022, we had cash, cash equivalents, and short-term investments of approximately $73.5 million, compared to cash and cash equivalents of $104.5 million as of December 31, 2021. The decrease in our cash, cash equivalents, and short-term investments was primarily due to the selling, general and administrative expenses in part to support the commercial launch of BREXAFEMME and the continued development costs associated with ibrexafungerp, offset in part due to the $41.8 million in net proceeds we raised from our public offering of our common stock and warrants in April 2022. We have incurred net losses since our inception, including the year ended December 31, 2022. As of December 31, 2022, our accumulated deficit was $422.3 million. We anticipate that we will continue to incur losses for at least the next several years. As a result, we will need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, or other non-dilutive third-party funding (e.g., grants), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our Form S-3 shelf registration statements. During the year ended December 31, 2022, we sold 137,610 shares of our common stock and received net proceeds of $0.7 million under our at-the-market (ATM) facility, sold 425,000 shares of our common stock and received net proceeds of $1.6 million under our common stock purchase agreement with Aspire Capital, and in February 2022, we received a cash receipt of $4.7 million from a third party for the sale of a portion of our unused New Jersey Net Operating Losses (NOLs) and research and development credits. Cash Flows The following table sets forth the significant sources and uses of cash for the years ended December 31, 2022 and 2021 (dollars in thousands): Years Ended December 31, 2022 2021 Cash, cash equivalents, and restricted cash, January 1 $ 104,702 $ 93,314 Net cash used in operating activities (79,883 ) (54,560 ) Net cash used in investing activities (27,389 ) (1,172 ) Net cash provided by financing activities 48,602 67,120 Net (decrease) increase in cash, cash equivalents, and restricted cash (58,670 ) 11,388 Cash, cash equivalents, and restricted cash, December 31 $ 46,032 $ 104,702 Operating Activities The $25.3 million increase in net cash used in operating activities for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to the increase in selling, general and administrative expenses to support the commercial launch of BREXAFEMME and the continued development costs associated with ibrexafungerp. In the prior comparable period, we received a cash receipt of $10.0 million from Hansoh, as consideration for the licenses under our agreement with Hansoh in February 2021, that offset selling, general and administrative expenses to support the commercial launch of BREXAFEMME and the continued development costs associated with ibrexafungerp and ongoing operations. Consistent with our operating plan, we also expect that we will continue to incur significant selling, general and administrative expenses to support our public reporting company operations and ongoing operations, but that our selling, general and administrative expenses will decrease as we wind down the promotional activities associated with BREXAFEMME for the VVC indication. Net cash used in operating activities of $79.9 million for the year ended December 31, 2022, primarily consisted of the $62.8 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $22.3 million and stock-based compensation expense of $3.7 million, the gain on change in fair value of the derivative liabilities of $1.3 million, and the amortization of debt issuance costs and discount of $1.6 million, plus a net favorable change in operating assets and liabilities of $0.8 million. The net favorable change in operating assets and liabilities consisted primarily of an increase in accrued expenses, other liabilities and other of $2.3 million due to the increase of $2.4 million in other liabilities associated with the long term deferred fees due to Amplity, a decrease in prepaid expenses, other assets deferred costs and other of $1.6 million primarily due to a $1.1 million decrease in prepaid inventory, offset in part due to a decrease in accounts payable of $1.5 million and an increase in accounts receivable of $1.2 million. Net cash used in operating activities of $54.6 million for the year ended December 31, 2021, primarily consisted of the $32.9 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $30.4 million and stock-based compensation expense of $2.1 million, the gain on change in fair value of the derivative liabilities of $1.2 million, the loss on extinguishment of debt of $2.7 million, and the amortization of debt issuance costs and discount of $1.3 million, plus a net favorable change in operating assets and liabilities of $3.1 million. The net favorable 55 change in operating assets and liabilities consisted of an increase in accounts payable and accrued expenses of $7.7 million, offset in part by an increase in prepaid expenses, other assets, and deferred costs, accounts receivable, and inventory of $4.6 million. The $7.7 million increase in accounts payable and accrued expenses was primarily due to the increase in accounts payable of $2.6 million as of December 31, 2021 and an increase of $3.4 million for other liabilities associated with the long term deferred fees due to Amplity. The $4.6 million increase in prepaid expenses, other assets, and deferred costs, accounts receivable, and inventory is primarily due to an increase in inventory of $5.3 million, and an increase in accounts receivable of $0.9 million, offset in part by a decrease of $2.9 million in other assets for a receivable that was fully collected in February 2021. Investing Activities Net cash used in investing activities of $27.4 million for the year ended December 31, 2022, consisted of purchases of short-term investments. Net cash used in investing activities of $1.2 million for the year ended December 31, 2021, consisted solely of purchases of intangible assets associated with implementation costs for internal use software. Financing Activities Net cash provided by financing activities of $48.6 million for the year ended December 31, 2022, consisted primarily of the gross proceeds of $45.0 million from the April 2022 public offering, the $2.2 million in gross proceeds from common stock issued under our ATM and common stock purchase agreement, and the $5.0 million received from the Loan Agreement, offset in part by payments of offering costs and underwriting discounts and commissions of $3.6 million. Net cash provided by financing activities of $67.1 million for the year ended December 31, 2021, consisted primarily of (a) gross proceeds from common stock of $32.8 million from the exercise of outstanding warrants in addition to $5.7 million in gross proceeds from common stock sold under our ATM and Aspire facilities, partially offset by related underwriting discounts and commissions and offering expenses totaling $0.2 million, and (b) during the period we received $30.0 million under our Loan Agreement, offset by $1.3 million in payments of loan payable issuance costs associated with the Loan Agreement. Future Cash Needs and Funding Requirements To date, we have generated minimal revenue from product sales. We do not know if or when we will be able to generate significant revenue from product sales. In addition, we expect to incur expenses in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our product candidates. We anticipate that we will need substantial additional funding in connection with our continuing future operations. As discussed in Note 1 to the financial statements included in this Annual Report on Form 10-K, we have incurred significant losses and negative cash flows from operations and have limited capital resources to fund ongoing operations which raises substantial doubt about our ability to continue as a going concern. We received $30.0 million in 2021 and received $5.0 million in 2022 under our Loan Agreement with Hercules and Silicon Valley Bank. In March 2023, in connection with the entering into of the License Agreement with GSK, we, Hercules and SVB entered into a First Amendment and Consent to Loan and Security Agreement pursuant to which the lenders under the Loan Agreement consented to us entering into the License Agreement and we agreed to pay to the lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $35.4 million), (ii) the prepayment fee payable under Loan Agreement ($262,500), (iii) the final payment payable under Loan Agreement ($1,382,500), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by us will become due upon the earliest of (A) one business day following receipt by us of the $90 million upfront payment payable to us under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. We are continually evaluating our operating plan and assessing the optimal cash utilization for our ibrexafungerp development strategy. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses necessary to complete the development of product candidates. Our future capital requirements will depend on many factors, including: • our ability to close the transactions contemplated by the License Agreement with GSK; • the progress, costs, and the clinical research and development of ibrexafungerp; • the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; • the ability of our product candidates to progress through clinical development successfully; 56 • our need to expand our research and development activities; • the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities; • our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; • our need and ability to hire additional management and scientific and medical personnel; • our need to implement additional, as well as to enhance existing, internal systems and infrastructure, including financial and reporting processes and systems; and • the economic and other terms, timing and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of net proceeds from equity offerings, debt financings, or other non-dilutive third-party funding (e.g., grants), strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, similar to our Loan Agreement or the convertible senior notes we sold in March 2019 and April 2020, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through sales of assets, other third-party funding, strategic alliances and licensing or collaboration arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Critical Accounting Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of our consolidated financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our assumptions and estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements for the year ended December 31, 2022, included in this Annual Report, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements and understanding and evaluating our reported financial results. Revenue Recognition Product Revenue, Net We account for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606). Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of goods and services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods and services. We perform the following five steps to recognize revenue under ASC Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only recognize revenue when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services that will be transferred to the customer. The transaction price for product sales is reduced by variable consideration related to certain gross to net (GTN) adjustments, including chargebacks, rebates, discounts, incentives, and returns, and we will estimate the amount of this variable consideration that should be included in the transaction price using the expected value method. Information from external sources is used to estimate GTN adjustments. Our estimate of inventory at the wholesalers is based on the projected prescription demand-based sales for our products, as well as our analysis of third-party information, including written and oral information obtained from certain wholesalers with respect to their inventory levels and sell-through to customers and third-party market research data, and our internal information. The inventory information received from 57 wholesalers is a product of their recordkeeping process and excludes inventory held by intermediaries to whom they sell, such as retailers. We also use information from external sources to identify prescription trends, patient demand and average selling prices. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information was itself in the form of estimates, and reflect other limitations including lags between the date as of which third-party information is generated and the date on which we receive third-party information. Our significant GTN adjustments are further described below: • Voluntary Patient Assistance Programs – Through vendors, we offer copay assistance to provide financial assistance to patients for the portion of their prescription cost that is not covered by payors. The reduction in product revenue due to the copay programs is based on an estimate of claims and costs per claim that we expect to receive associated with product revenue that have been recognized. This includes potential product revenue that remains in the distribution channel at the end of a reporting period. • Wholesaler Fees and Trade Discounts – We offer discounts and pays certain distributor service fees primarily at contracted rates. These are recorded as a reduction in product revenue based on distributors’ purchases and the applicable discount rate. • Chargebacks - For certain entities, pricing on BREXAFEMME is extended below wholesaler list price. Entities that purchase BREXAFEMME from wholesalers at the lower program price then remit us the difference between their acquisition cost and the lower program price, resulting in a reduction of product revenue. Accounts receivable is reduced for the estimated amount of unprocessed chargeback claims attributable to sale. • Commercial Rebates – We contract with commercial payors such as insurers and PBMs and offer rebates for utilization and formulary status. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue. License Agreement Revenue We have entered into arrangements involving the sale or license of intellectual property and the provision of other services. When entering into any arrangement involving the sale or license of intellectual property rights and other services, we determine whether the arrangement is subject to accounting guidance in ASC 606, Revenue from Contracts with Customers, as well as ASC 808, Collaborative Arrangements (Topic 808). If we determine that an arrangement includes goods or services that are central to our business operations for consideration, we will then identify the performance obligations in the contract using the unit-of-account guidance in Topic 606. For a distinct unit-of-account that is within the scope of Topic 606, we will apply all of the accounting requirements in Topic 606 to that unit-of-account, including the recognition, measurement, presentation and disclosure requirements. For a distinct unit-of-account that is not within the scope of Topic 606, we will recognize and measure the distinct unit-of-account based on other authoritative ASC Topics or on a reasonable, rational, and consistently applied policy election. In arrangements that include the sale or license of intellectual property and other promised services, we first identify if the licenses are distinct from the other promises in the arrangement. If the license is not distinct, the license is combined with other services into a single performance obligation. For the sale of intellectual property that is distinct, fixed consideration and variable consideration are included in the transaction price and recognized in revenue immediately to the extent that it is probable that there would not be a significant reversal of cumulative revenue in the future. If the sale or license of intellectual property is not distinct, revenue is deferred and recognized over the estimated period of our combined performance obligation. Research and Development Accruals We are required to estimate our expenses resulting from our obligations under contracts with CROs, clinical site agreements, vendors, and consultants in connection with conducting ibrexafungerp clinical trials and preclinical studies and other development activities. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. Our objective is to reflect the appropriate development and trial expenses in our consolidated financial statements by matching those expenses with the period in which the services and efforts are expended by our service providers. For clinical trials, we account for these expenses according to the progress of the trial as measured by actual hours expended by CRO personnel, investigator performance or completion of specific tasks, patient progression, or timing of various aspects of the trial. For preclinical development services performed by outside service providers, we determine accrual estimates through financial models, taking into account development progress data received from outside service providers and discussions with our knowledgeable internal personnel and service provider personnel. During the course of a clinical trial or preclinical study or development project, we adjust our rate of trial or project expense recognition if actual results differ from our estimates. We make estimates of our accrued expenses as of each balance sheet date within our consolidated financial 58 statements based on the facts and circumstances known to us at that time. Our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates in any particular period. We have not experienced any significant adjustments to our estimates to date. Stock-Based Compensation We record the fair value of stock options issued as of the grant date as compensation expense. We recognize compensation expense over the requisite service period, which is equal to the vesting period. Stock-based compensation expense has been reported in our statements of operations as follows (dollars in thousands): Years Ended December 31, 2022 2021 Research and development $ 1,076 $ 631 Selling, general and administrative 2,436 1,457 Total $ 3,512 $ 2,088 On December 31, 2022, the aggregate intrinsic value of outstanding options to purchase shares of our common stock was zero, based upon the $1.56 closing sales price per share of our common stock as reported on the Nasdaq Global Market on that date. Determination of the Fair Value of Stock-based Compensation Grants We calculate the fair value of stock-based compensation arrangements using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions, including volatility of our common stock, the expected term of our stock options, the risk free interest rate for a period that approximates the expected term of our stock options, and the fair value of the underlying common stock on the date of grant. In applying these assumptions, we considered the following factors: • we estimate expected volatility based on the volatility of our own common stock trading history and implied volatility; • the assumed dividend yield is based on our expectation of not paying dividends on our underlying common stock for the foreseeable future; • we determine the average expected life of stock options based on the simplified method in accordance with SEC Staff Accounting Bulletin Nos. 107 and 110. We expect to use the simplified method until we have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term; • we determine the risk-free interest rate by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant; and • we recognize forfeitures as they are incurred. The assumptions used in the Black-Scholes option-pricing model for the years ended December 31, 2022 and 2021 are set forth below: Employee Stock Options Years Ended December 31, 2022 2021 Weighted average risk-free interest rate 2.45 % 0.64 % Weighted average expected term (in years) 6.04 5.15 Weighted average expected volatility 73.80 % 62.10 % Non-Employee Stock Options Years Ended December 31, 2022 2021 Weighted average risk-free interest rate 3.18 % 0.74 % Weighted average expected term (in years) 5.63 5.79 Weighted average expected volatility 74.20 % 69.56 % Warrant Liabilities We account for the outstanding warrants associated with the March 2018, December 2019, December 2020, and April 2022 public offerings as well as the Loan Agreement warrants associated with the remaining unfunded tranches as liabilities measured at fair value. The fair values of these warrants have been determined using the Black-Scholes valuation model. We determine the risk-free interest rate by reference to implied yields available from U.S. Treasury securities and utilize the remaining term of the warrant as the expected term. We estimate expected volatility using the historical volatility of our 59 common stock given we have sufficient history to support the expected terms of the warrants and implied volatility. See Note 2 to our consolidated financial statements on this Annual Report for further details. Convertible Debt and Derivative Liabilities For the convertible notes, we account for the bifurcated embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, as long-term derivative liabilities in our consolidated balance sheet. The derivative liabilities are remeasured at each reporting period using the binomial lattice model with changes in fair value recorded in the consolidated statements of operations in other (income) expense. We used the binomial lattice valuation model to value the derivative liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as stock price, contractual terms, dividend yield, risk-free rate, adjusted equity volatility, credit rating, market credit spread, and estimated yield. See Note 2 to our consolidated financial statements on this Annual Report for further details. ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURE ABOUT MARKET RISK This item is not applicable to smaller reporting companies. 60 ITEM 8. CONSOLIDATED FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 62 Consolidated Balance Sheets as of December 31, 2022 and 2021 64 Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 65 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2022 and 2021 66 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 67 Notes to the Consolidated Financial Statements 68 61 REPORT OF INDEPENDENT REGI STERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of SCYNEXIS, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SCYNEXIS, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred significant losses and negative cash flows from operations and has limited capital resources to fund ongoing operations which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Gross-to-net rebate accruals — Refer to “Note 2 – Summary of Significant Accounting Policies” and “Note 11 – Revenue” to the financial statements Critical Audit Matter Description As more fully disclosed in Note 2 and Note 11 of the financial statements, the Company’s product revenue is recognized in accordance with Accounting Standards Codification Topic 606 ("ASC 606") upon the transfer of control of the Company’s product to a customer and is measured as the amount of consideration the Company expects to receive in exchange for 62 transferring the product to a customer (“transaction price”). The transaction price for product sales is reduced by variable consideration related to certain gross-to-net (“GTN”) adjustments, including chargebacks, rebates, discounts, incentives, and returns, and the Company will estimate the amount of this variable consideration that should be included in the transaction price using the expected value method. The amount of variable consideration that is included in the transaction price may be constrained and is included in net sales only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. These estimates take into consideration prescription demand from commercial providers, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns, and historical trends. We identified management’s estimation of certain GTN adjustments, specifically copay and commercial rebates (“GTN rebates”) as a critical audit matter, given the complexity involved in determining the significant assumptions used in estimating the transaction price. Auditing these estimates involved especially subjective judgment and audit effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the accounting for the Company’s GTN rebates included the following, among others: • We evaluated management's significant accounting policies related to GTN rebates for reasonableness and consistency. • We evaluated the appropriateness and consistency of the Company’s methods and assumptions used to calculate GTN rebates. • We tested the mathematical accuracy of GTN rebates. • We tested the overall reasonableness of GTN rebates recorded at period end by developing an expectation for comparison to actual recorded balances. • We tested GTN rebate claims processed by the Company, including evaluating those claims for consistency with the conditions and terms of the Company’s contractual arrangements. /s/ DELOITTE & TOUCHE LLP Morristown, New Jersey March 31, 2023 We have served as the Company's auditor since 2000. 63 SCYNEXIS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 45,814 $ 104,484 Short-term investments 27,689 — Prepaid expenses and other current assets 2,503 3,569 Accounts receivable, net 2,101 861 Inventory, net 899 463 Restricted cash 55 — Total current assets 79,061 109,377 Other assets 5,511 6,235 Deferred offering costs 73 150 Restricted cash 163 218 Intangible assets, net 408 1,056 Operating lease right-of-use asset (Note 9) 2,594 2,801 Total assets $ 87,810 $ 119,837 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 5,937 $ 7,848 Accrued expenses 5,628 5,698 Other liabilities, current portion (See Note 8) 5,771 — Operating lease liability, current portion (Note 9) 282 70 Total current liabilities 17,618 13,616 Other liabilities — 3,345 Warrant liabilities 18,644 18,062 Convertible debt and derivative liability (Note 8) 11,001 11,607 Loan payable (Note 8) 34,393 28,745 Operating lease liability (Note 9) 2,921 3,204 Total liabilities 84,577 78,579 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.001 par value, authorized 5,000,000 shares as of December 31, 2022 and December 31, 2021; 0 shares issued and outstanding as of December 31, 2022 and December 31, 2021 — — Common stock, $ 0.001 par value, 150,000,000 shares authorized as of December 31, 2022 and 100,000,000 shares as of December 31, 2021; 32,682,342 and 28,705,334 shares issued and outstanding as of December 31, 2022, and December 31, 2021, respectively 36 32 Additional paid-in capital 425,485 400,705 Accumulated deficit ( 422,288 ) ( 359,479 ) Total stockholders’ equity 3,233 41,258 Total liabilities and stockholders’ equity $ 87,810 $ 119,837 The accompanying notes are an integral part of the financial statements. 64 SCYNEXIS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Years Ended December 31, 2022 2021 Revenue: Product revenue, net $ 4,988 $ 1,113 License agreement revenue 103 12,050 Total revenue 5,091 13,163 Operating expenses: Cost of product revenue 628 312 Research and development 27,259 23,773 Selling, general and administrative 62,961 49,916 Total operating expenses 90,848 74,001 Loss from operations ( 85,757 ) ( 60,838 ) Other (income) expense: Loss on extinguishment of debt — 2,725 Amortization of debt issuance costs and discount 1,589 1,303 Interest income ( 1,415 ) ( 24 ) Interest expense 5,198 2,660 Other income ( 3 ) ( 13 ) Warrant liabilities fair value adjustment ( 22,301 ) ( 30,365 ) Derivative liability fair value adjustment ( 1,316 ) ( 1,170 ) Total other income ( 18,248 ) ( 24,884 ) Loss before taxes ( 67,509 ) ( 35,954 ) Income tax benefit 4,700 3,088 Net loss $ ( 62,809 ) $ ( 32,866 ) Net loss per share – basic and diluted $ ( 1.47 ) $ ( 1.25 ) Weighted average common shares outstanding – basic and diluted 42,613,510 26,384,713 The accompanying notes are an integral part of the financial statements. 65 SCYNEXIS, INC. CONSOLIDATED STATEMENTS OF CHANGES I N STOCKHOLDERS' EQUITY (in thousands, except share data) Shares of Common Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Balances as of December 31, 2020 19,663,698 $ 20 $ 349,351 $ ( 326,613 ) $ 22,758 Net loss — — — ( 32,866 ) ( 32,866 ) Stock-based compensation expense — — 2,088 — 2,088 Common stock issued through employee stock purchase and stock option plans 4,943 — 22 — 22 Common stock issued, net of expenses 8,067,562 11 41,029 — 41,040 Common stock issued for conversion of April 2020 Notes 959,080 1 7,452 — 7,453 Common stock issued for vested restricted stock units 10,051 — ( 3 ) — ( 3 ) Vested Loan Agreement warrants — — 766 — 766 Balances as of December 31, 2021 28,705,334 $ 32 $ 400,705 $ ( 359,479 ) $ 41,258 Net loss — — — ( 62,809 ) ( 62,809 ) Stock-based compensation expense — — 3,685 — 3,685 Common stock issued through employee stock purchase and stock option plans 6,834 — 18 — 18 Common stock issued, net of expenses 3,895,943 4 21,006 — 21,010 Common stock issued for vested restricted stock units 74,231 — — — — Vested Loan Agreement warrants — — 71 — 71 Balances as of December 31, 2022 32,682,342 $ 36 $ 425,485 $ ( 422,288 ) $ 3,233 The accompanying notes are an integral part of the financial statements. 66 SCYNEXIS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 62,809 ) $ ( 32,866 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 606 379 Stock-based compensation expense 3,686 2,088 Accretion of investment discount ( 309 ) — Amortization of debt issuance costs and discount 1,589 1,303 Change in fair value of warrant liabilities ( 22,301 ) ( 30,365 ) Change in fair value of derivative liabilities ( 1,316 ) ( 1,170 ) Noncash operating lease expense for right-of-use asset 207 198 Loss on extinguishment of debt — 2,725 Changes in operating assets and liabilities: Prepaid expenses, other assets, deferred costs, and other 1,636 1,597 Accounts receivable ( 1,240 ) ( 861 ) Inventory ( 436 ) ( 5,292 ) Accounts payable ( 1,481 ) 2,763 Accrued expenses, other liabilities, and other 2,285 4,941 Net cash used in operating activities ( 79,883 ) ( 54,560 ) Cash flows from investing activities: Purchase of intangible assets ( 9 ) ( 1,172 ) Purchase of investments ( 27,380 ) — Net cash used in investing activities ( 27,389 ) ( 1,172 ) Cash flows from financing activities: Proceeds from common stock issued 47,248 38,552 Payments of offering costs and underwriting discounts and commissions ( 3,638 ) ( 205 ) Proceeds from loan payable 5,000 30,000 Payments of loan payable issuance costs ( 26 ) ( 1,253 ) Proceeds from employee stock purchase plan issuances 18 22 Repurchase of shares to satisfy tax withholdings — 4 Net cash provided by financing activities 48,602 67,120 Net (decrease) increase in cash, cash equivalents, and restricted cash ( 58,670 ) 11,388 Cash, cash equivalents, and restricted cash at beginning of period 104,702 93,314 Cash, cash equivalents, and restricted cash at end of period $ 46,032 $ 104,702 Supplemental cash flow information: Cash paid for interest $ 5,190 $ 2,255 Cash received for interest $ 1,106 $ 24 Noncash financing and investing activities: Purchased intangible assets included in accounts payable and accrued expenses $ — $ 78 Deferred offering and issuance costs included in accounts payable $ — $ 430 Deferred offering costs reclassified to additional paid-in capital $ 77 $ 86 Common stock issued for settlement of senior convertible notes $ — $ 7,452 Reclass of warrant liability to additional paid in capital $ 71 $ 298 Reclass of deferred asset associated with issuance of loan payable to debt discount $ 206 $ 390 Settlement of liability for exercise of warrants $ — $ 3,091 The accompanying notes are an integral part of the financial statements. 67 SCYNEXIS, INC. NOTES TO THE CONSOLIDATED FINA NCIAL STATEMENTS 1. Description of Business and Basis of Preparation Organization SCYNEXIS, Inc. (“SCYNEXIS” or the “Company”) is a Delaware corporation formed on November 4, 1999. SCYNEXIS is a biotechnology company, headquartered in Jersey City, New Jersey, and is pioneering innovative medicines to overcome and prevent difficult-to-treat and drug-resistant infections. The Company is developing its lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (“IV”)/oral agent for severe, hospital-based indications. In June 2021, the U.S. Food and Drug Administration (“FDA”) approved BREXAFEMME® (ibrexafungerp tablets) for treatment of patients with vulvovaginal candidiasis (“VVC”), also known as vaginal yeast infection. In December 2022, the Company announced that the FDA approved a second indication for BREXAFEMME for the reduction in the incidence of recurrent vulvovaginal candidiasis ("RVVC"). In October 2022, the Company announced that it was actively pursuing a U.S. commercialization partner to out-license BREXAFEMME in order to refocus its resources on the clinical development of ibrexafungerp for severe, hospital-based indications. As a result, the Company has wound down its promotional activities associated with BREXAFEMME, while keeping BREXAFEMME on the market and available to patients, and has ceased actively promoting BREXAFEMME. Additionally, the Company concluded the partnership with its contracted commercial sales partner, Amplity Health ("Amplity"), on November 30, 2022, and the Company undertook a workforce reduction. In March 2023, the Company entered into a license agreement (the "License Agreement") with GlaxoSmithKline Intellectual Property (No. 3) Limited ("GSK"), subject to customary closing conditions, in which the Company granted GSK an exclusive (even as to the Company and its affiliates), royalty-bearing, sublicensable license for the development and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in all countries other than Greater China and certain other countries already licensed to third parties (See Note 16). The Company is party to a Loan and Security Agreement, dated May 13, 2021, with Hercules Capital, Inc. ("Hercules Capital") and Silicon Valley Bridge Bank, N.A. (“SVB”) (the Loan Agreement), pursuant to which Hercules Capital, SVB and each of the other lenders from time-to-time party to the Loan Agreement (collectively, the “Lenders”) loaned to the Company $ 35 million as of December 31, 2022. In connection with the entering into of the License Agreement, the Company entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to the Lenders consented to the Company entering into the License Agreement and the Company agreed to pay to the Lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement, (ii) the prepayment fee payable under Loan Agreement (approximately $ 0.3 million), (iii) the final payment payable under Loan Agreement (approximately $ 1.4 million), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by the Company will become due upon the earliest of (A) one business day following receipt by the Company of the $ 90 million upfront payment payable to the Company under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation. Liquidity and Going Concern The Company has funded its operations primarily through a combination of net proceeds from equity offerings, debt financings, and other non-dilutive third-party funding (e.g., grants), strategic alliances and licensing arrangements. To date, the Company has generated minimal revenue from product sales. The Company does not know if or when the Company will be able to generate significant revenue from product sales. In addition, the Company expects to incur expenses in connection with the Company's ongoing development activities, particularly as the Company continues the research, development and clinical trials of, and seek regulatory approval for, its product candidates. The Company anticipates that it will need substantial additional funding in connection with its continuing future operations. As of the date the accompanying consolidated financial statements were issued (the “issuance date”), management evaluated the significance of the following negative financial conditions in accordance with ASC 205-40, Going Concern : • The Company has incurred recurring losses since its inception, including net losses of $ 62.8 million and $ 32.9 million for the years ended December 31, 2022 and 2021, respectively. In addition, as of December 31, 2022, the Company had an accumulated deficit of $ 422.3 million. The Company expects to continue to generate operating losses for the foreseeable future. 68 • As of December 31, 2022, the Company had approximately $ 73.5 million of unrestricted cash, cash equivalents and short-term investments available to fund the Company’s operations. • The Company expects to incur substantial expenditures to fund its operations and ongoing development activities for the foreseeable future. In order to fund its operations and ongoing development activities, the Company will need to secure additional sources of outside capital. As noted above and as further disclosed in Note 16, the Company entered into a License Agreement with GSK in March 2023, in which the Company granted GSK with an exclusive license for the development and commercialization of ibrexafungerp, including the approved product BREXAFEMME. The closing of the License Agreement is subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and therefore the related cash flows, including the upfront payment of $ 90 million, were not included in the Company’s ASC 205-40 analysis as of the issuance date. Management expects the License Agreement to close during the second quarter of 2023. • In the event the License Agreement does not close, the Company may be unable to meet its obligations as they become due over the next twelve months beyond the issuance date. In that regard, management will be required to seek other strategic alternatives, which may include, raising additional capital through equity offerings, including utilizing our existing facility, debt financings, or other non-dilutive third-party funding. While the Company has a history of successfully raising capital in this manner, management can provide no assurance that additional capital will be secured or on terms that are acceptable to the Company. In the event the Company is unable to secure additional capital, management will be required to seek other strategic alternatives, which may include, among others, delaying expenditures, reducing the scope of its research and development programs, significant changes to its operating plan, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy. • As disclosed in Note 8, the Company is required to maintain compliance with certain covenants prescribed by the Term Loan. The first covenant pertains to a minimum cash requirement whereby the Company must maintain a minimum amount of unrestricted and unencumbered cash in accounts with the lender at all times that represents at least 50 % of the outstanding principal on the Term Loan (the “minimum cash”). In the event the minimum cash is not maintained, the second covenant requires the Company to maintain compliance with a trailing three-month net product revenue threshold (the “revenue covenant”). As of December 31, 2022 and through the issuance date, the Company met the minimum cash requirement. However, management can provide no assurance that the minimum cash will be maintained for at least twelve months beyond the issuance date. If the Company does not meet the minimum cash requirement and, as such, must maintain compliance with the revenue covenant, management does not expect the Company will be able to comply with the revenue covenant for any period over the next twelve months beyond the issuance date. If the Company is required to comply with, but does not maintain compliance with, the revenue covenant, management may seek a waiver from the lender or refinance the outstanding borrowings under the Term Loan with another lender. However, management can provide no assurance a waiver will be granted by the lender or on terms that are acceptable to the Company. Similarly, management can provide no assurance that the Company will be able to refinance the amounts outstanding on the Term Loan or obtain a new loan on terms that are acceptable to the Company. In the event a waiver is not granted, or the Term Loan is not refinanced, the lender may exercise any and all of its rights and remedies provided for under the borrowing agreement which may include, among others, entering into a forbearance agreement, demanding payment, and/or seizing the underlying assets secured by the Term Loan. • Further, as noted above, the Company entered into an amendment to the Loan Agreement in March 2023, which amends the original terms of the Loan Agreement to require that the outstanding principal and accrued and unpaid interest amounts, the prepayment fee and the final payment will become due and payable at the earliest of (A) one business day following receipt by the Company of the upfront payment payable to the Company under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. While management expects that the License Agreement will close during the second quarter of 2023, if the License Agreement were unable to close or were to close at a later date than originally expected, the amendment to the Loan agreement would require the Company to repay the amounts due under the Loan Agreement potentially prior to the close of the License Agreement. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for twelve months following the issuance date. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties. 69 Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and judgments include: revenue recognition including gross to net estimates and the identification of performance obligations in licensing arrangements; determination of the fair value of stock-based compensation grants; the estimate of services and effort expended by third-party research and development service providers used to recognize research and development expense; and the estimates and assumptions utilized in measuring the fair values of the warrant and derivative liabilities each reporting period. 2. Summary of Significant Accounting Policies Concentration of Credit Risk Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of cash on deposit, cash equivalents, short-term investments, and accounts receivable. The Company's money market fund investment (recognized as cash and cash equivalents) and short-term investments are with what the Company believes to be high quality issuers. The Company has not experienced any significant losses in such accounts. See Note 11 for concentrations of credit risk associated with the Company’s accounts receivable and revenue with customers. As of December 31, 2022, the Company held cash, cash equivalents, and short-term investments at Silicon Valley Bank (“SVB”). On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. As of the closure of SVB on March 10, 2023, the Company held approximately $ 0.3 million in cash on deposit and approximately $ 7.0 million in a money market account with SVB who was administering the account as our agent. The Company's remaining cash, cash equivalents and short-term investments are primarily held in a money market account and in U.S. treasury securities that are unaffiliated with SVB and held with another financial institution acting as custodian, but which SVB administers on the Company's behalf. The Company is able to access all cash, cash equivalents and short-term investments held at or through SVB and at our financial institution custodians. The Company has not experienced any losses in such accounts. Cash and Cash Equivalents The Company considers any highly liquid investments with a remaining maturity of three months or less when purchased to be cash and cash equivalents. The Company reported cash, cash equivalents, and restricted cash of $ 46.0 million and $ 104.7 million as of December 31, 2022 and 2021, respectively. See Note 9 for further details on the nature of the restricted cash. Short-Term Investments The Company's held-to-maturity short-term investments in U.S. government securities are carried at amortized cost and any premiums or discounts are amortized or accreted through the maturity date of the investment. Any impairment that is not deemed to be temporary is recognized in the period identified. Accounts Receivable, Net Accounts receivable are reported on the accompanying consolidated balance sheet at outstanding amounts due from customers for product sales net of discounts, chargebacks, and wholesaler distribution fees. The Company evaluates the collectability of accounts receivable on a regular basis, by reviewing the financial condition and payment history of its customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. An allowance for doubtful accounts is recorded when a receivable is deemed to be uncollectible. The Company did no t record an allowance for doubtful accounts as of December 31, 2022. Inventory, Net Inventory is stated at the lower of cost or net realizable value. Inventory on the accompanying balance sheet includes costs related to the raw material, third party manufacturing, and packaging for BREXAFEMME. Raw material inventory includes the costs associated with the manufacture of ibrexafungerp, the active product ingredient in BREXAFEMME. Work in process inventory includes the costs necessary to package ibrexafungerp into BREXAFEMME, at which point the inventory is then released for commercial use and considered a finished good that is available to be sold. Inventory that is not expected to be sold within one year of the reporting period is classified as long term in other assets on the consolidated balance sheet. Prior to the regulatory approval of an investigational drug, the Company recognizes as research and development expense costs related to the manufacture of an investigational drug when incurred. Upon regulatory approval, the Company begins capitalizing such production and manufacturing expenses as inventory. For BREXAFEMME, capitalization of costs as inventory began upon regulatory approval on June 1, 2021. Revenue Recognition 70 The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of goods and services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods and services. The Company performs the following five steps to recognize revenue under ASC Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer. Product Revenue, Net The Company sells BREXAFEMME primarily to wholesalers in the United States and are initially invoiced at contractual list prices. These wholesalers subsequently resell BREXAFEMME to specialty and other retail pharmacies. In addition to agreements with the wholesalers, the Company enters into arrangements with third-party payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks, and discounts for the purchase of BREXAFEMME. The transaction price for product sales is reduced by variable consideration related to certain gross to net (“GTN”) adjustments, including chargebacks, rebates, discounts, incentives, and returns, and the Company will estimate the amount of this variable consideration that should be included in the transaction price using the expected value method. Specific considerations around the Company’s product revenue gross to net GTN adjustments are as follows: • Voluntary Patient Assistance Programs – Through vendors, the Company offers copay assistance to provide financial assistance to patients for the portion of their prescription cost that is not covered by payors. The reduction in product revenue due to the copay programs is based on an estimate of claims and costs per claim that the Company expects to receive associated with product revenue that has been recognized. This includes potential product revenue that remains in the distribution channel at the end of a reporting period. • Trade Discounts and Wholesaler Fees – The Company offers discounts and pays certain distributor service fees. These are recorded as a reduction in product revenue based on distributors’ purchases and the applicable discount rate. • Product Stocking Fees – During the initial launch of BREXAFEMME, the Company offered additional fees to wholesalers and certain indirect customers to incent stocking at wholesalers and pharmacies. These were recorded as a reduction in product revenue based on these customer’s purchases during the eligible period and limited to a certain volume. • Product Returns - Generally, the Company’s customers have the right to return products during the 18-month period beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. Since the Company has a limited history of BREXAFEMME returns, the Company estimated returns based on industry data for comparable products in the market. As the Company distributes its product and establishes historical sales over a longer period of time (i.e., two to three years), the Company will be able to place more reliance on historical purchasing, demand and return patterns of its customers when evaluating its reserves for product returns. BREXAFEMME has a thirty-month shelf life. • Chargebacks - For certain entities, pricing on BREXAFEMME is extended below wholesaler list price. Entities that purchase BREXAFEMME from wholesalers at the lower program price then remit the Company the difference between their acquisition cost and the lower program price, resulting in a reduction of product revenue. Accounts receivable is reduced for the estimated amount of unprocessed chargeback claims attributable to sale. • Commercial Rebates – The Company contracts with commercial payors such as insurers and PBMs and offer rebates for utilization and formulary status. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue. • Government Rebates – The Company is subject to discount obligations under state Medicaid programs, Medicare, and other government programs. Provisions for government rebates are based on the estimated amount of rebates and incentives to be claimed on the related sales from the period. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue. For Medicare, the Company must also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. The Company determined that performance obligations are satisfied and product revenue is recognized when a customer takes control of the Company’s product, which occurs at a point in time. This occurs upon delivery of the BREXAFEMME to customers, at which point the Company recognizes revenue. Payment is typically received 70 to 90 days after satisfaction of the Company’s performance obligations. 71 Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer (“transaction price”). The transaction price for product sales is reduced by variable consideration related to chargebacks, rebates, discounts, incentives, and returns. The Company will estimate the amount of variable consideration that should be included in the transaction price using the expected value method. These estimates take into consideration prescription demand from commercial providers, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns, and historical trends. These provisions reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in net sales only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Sales commissions and other incremental costs of obtaining customer contracts are expensed as incurred as the amortization periods would be less than one year . License Agreement Revenue The Company has entered into arrangements involving the sale or license of intellectual property and the provision of other services. When entering into any arrangement involving the sale or license of intellectual property rights and other services, the Company determines whether the arrangement is subject to accounting guidance in ASC 606, Revenue from Contracts with Customers , as well as ASC 808, Collaborative Arrangements ("Topic 808"). If the Company determines that an arrangement includes goods or services that are central to the Company’s business operations for consideration, the Company will then identify the performance obligations in the contract using the unit of account guidance in Topic 606. For a distinct unit of account that is within the scope of Topic 606, the Company applies all of the accounting requirements in Topic 606 to that unit of account, including the recognition, measurement, presentation and disclosure requirements. For a distinct unit of account that is not within the scope of Topic 606, the Company will recognize and measure the distinct unit of account based on other authoritative ASC Topics or on a reasonable, rational, and consistently applied policy election. Analyzing the arrangement to identify performance obligations requires the use of judgment. In arrangements that include the sale or license of intellectual property and other promised services, the Company first identifies if the licenses are distinct from the other promises in the arrangement. If the license is not distinct, the license is combined with other services into a single performance obligation. Factors that are considered in evaluating whether a license is distinct from other promised services include, for example, whether the counterparty can benefit from the license without the promised service on its own or with other readily available resources and whether the promised service is expected to significantly modify or customize the intellectual property. The Company classifies non-refundable upfront payments, milestone payments and royalties received for the sale or license of intellectual property as revenues within its statements of operations because the Company views such activities as being central to its business operations. For the sale of intellectual property that is distinct, fixed consideration and variable consideration are included in the transaction price and recognized in revenue immediately to the extent that it is probable that there would not be a significant reversal of cumulative revenue in the future. For the license of intellectual property that is distinct, fixed and variable consideration (to the extent there will not be a significant reversal in the future) are also recognized immediately in income, except for consideration received in the form of royalty or sales-based milestones, which is recorded when the customer’s subsequent sales or usages occur. If the sale or license of intellectual property is not distinct, revenue is deferred and recognized over the estimated period of the Company’s combined performance obligation. For contractual arrangements that meet the definition of a collaborative arrangement under Topic 808, consideration received for any units-of-account that are outside the scope of Topic 606 are recognized in the statements of operations by considering (i) the nature of the arrangement, (ii) the nature of the Company’s business operations, and (iii) the contractual terms of the arrangement. Cost of Product Revenues The cost of product revenues consists primarily of distribution, freight costs, royalty costs, and other manufacturing costs. Prior to the regulatory approval of BREXAFEMME on June 1, 2021, the Company expensed as research and development the costs associated with the third-party manufacture of BREXAFEMME. Warrant Liabilities The Company accounts for the warrants associated with the March 2018 public offering, December 2019 public offering, December 2020 public offering, and April 2022 public offering and remaining warrants under the Loan Agreement as liabilities measured at fair value. The fair values of these warrants have been determined using the Black-Scholes valuation model ("Black-Scholes"). The warrants are subject to remeasurement at each balance sheet date, using Black-Scholes, with any changes in the fair value of the outstanding warrants recognized in the accompanying consolidated statements of operations. Loan Payable 72 The Company initially reviews loan payables to identify the units of account for recognition purposes. The Company identifies the units of account by identifying each freestanding financial instrument included in the debt arrangement. For freestanding equity-linked financial instruments that are not in the form of shares, liability classification is used if the instrument embodies an obligation to repurchase the Company’s shares that may require the use of cash or other assets or the instrument may require the issuance of a variable number of the Company’s shares with a monetary value that is predominately based on a fixed value, based on variations in variables other than the fair value of the Company’s stock, or based on variations inversely related to the fair value of the Company’s stock. The Company will then review for embedded features within the debt instrument to evaluate whether the embedded features require bifurcation from the debt host instrument. Embedded features typically include conversion or exchange features, redemption features, or other embedded features. The identified embedded feature is bifurcated from the debt host instrument if the criteria in ASC 815-15-25-1 are met. Debt arrangements are classified on the consolidated balance sheet as current if the obligation of the debt arrangement is reasonably expected to be liquidated within twelve months. The Company's loan payable is recorded net of debt discount which comprised issuance costs, customary closing and final fees, and the fair value of the additional warrants issued in conjunction with the loan payable. See Note 8 for further details. Convertible Debt and Derivative Liability In connection with the Company’s issuance of its March 2019 6.0 % Convertible Senior Notes (the “March 2019 Notes”), the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with FASB ASC 815, Derivatives and Hedging . The convertible debt and the derivative liability associated with the March 2019 Notes is presented in total on the consolidated balance sheet as the convertible debt and derivative liability. The convertible debt is carried at amortized cost. The derivative liability will be remeasured at each reporting period using the binomial lattice model with changes in fair value recorded in the consolidated statements of operations in other expense (income). See Note 8 and 14 for further details. Research and Development Major components of research and development costs include clinical trial activities and services, including related drug formulation, manufacturing, and other development, preclinical studies, cash compensation, stock-based compensation, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf, materials and supplies, legal services, and regulatory compliance. The Company is required to estimate its expenses resulting from its obligations under contracts with clinical research organizations, clinical site agreements, vendors, and consultants in connection with conducting ibrexafungerp clinical trials and preclinical development. The financial terms of these contracts are subject to negotiations which vary from contract to contract, and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The Company’s objective is to reflect the appropriate development and trial expenses in its consolidated financial statements by matching those expenses with the period in which the services and efforts are expended. For clinical trials, the Company accounts for these expenses according to the progress of the trial as measured by actual hours expended by CRO personnel, investigator performance or completion of specific tasks, patient progression, or timing of various aspects of the trial. For preclinical development services performed by outside service providers, the Company determines accrual estimates through financial models, taking into account development progress data received from outside service providers and discussions with applicable Company and service provider personnel. Patent Expenses Costs related to filing and pursuing patent applications, as well as costs related to maintaining the Company's existing patent portfolio, are recorded as expense as incurred since recoverability of such expenditures is uncertain. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability. The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to 73 their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows: • Level 1 — Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 — Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and • Level 3 — Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Amortization of Debt Issuance Costs and Discount The Company’s convertible debt is recorded net of debt issuance costs and discount which comprised issuance costs and an advisory fee, and the discount initially recognized for the fair value of the bifurcated derivative liability. The portion of the debt issuance costs allocated to the convertible debt, based on the amount of proceeds allocated between the convertible debt and the derivative liability, is being amortized over the term of the convertible debt using the effective interest method in addition to the discount initially recognized for the fair value of the bifurcated derivative liability from the convertible debt. The Company’s loan payable was recorded net of debt discount which comprised issuance costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the loan payable. The resulting debt discount is being amortized over the term of the loan payable using the effective interest method. The amortization of debt issuance costs and discount is included in other expense within the accompanying consolidated statements of operations. Income Taxes The Company provides for deferred income taxes under the asset and liability method, whereby deferred income taxes result from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that the Company believes is more likely than not to be realized. The Company recognizes uncertain tax positions when the positions will be more likely than not sustained based solely upon the technical merits of the positions. Stock-Based Compensation The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, officers, directors, and non-employees based on the estimated fair values of the awards as of grant date. The Company values equity instruments and stock options granted to employees and non-employees using the Black-Scholes valuation model. The value of the portion of the award that is ultimately expected to vest is recorded as expense over the requisite service periods. The Company recognize forfeitures as they are incurred. Basic and Diluted Net Loss per Share of Common Stock The Company calculates net loss per common share in accordance with ASC 260, Earnings Per Share . Basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Per ASC 260, Earnings Per Share , the weighted average number of common shares outstanding utilized for determining the basic net loss per common share for the year ended December 31, 2022 includes the outstanding prefunded warrants to purchase 11,666,667 and 3,200,000 shares of common stock issued in the April 2022 Public Offering and December 2020 public offering, respectively. The weighted average number of common shares outstanding utilized for determining the basic net loss per common share for the year ended December 31, 2021 includes the outstanding prefunded warrants to purchase 3,200,000 shares of common stock issued in the December 2020 public offering. 74 The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for all periods as the result would be anti-dilutive: December 31, 2022 2021 Outstanding stock options 1,740,308 1,542,126 Outstanding restricted stock units 633,270 133,834 Warrants to purchase common stock associated with March 2018 public offering - Series 2 798,810 798,810 Warrants to purchase common stock associated with December 2020 public offering - Series 2 6,800,000 6,800,000 Warrants to purchase common stock associated with April 2022 Public Offering 15,000,000 — Common stock associated with the March 2019 Notes 1,138,200 1,138,200 Warrants to purchase common stock associated with Loan Agreement 198,811 170,410 Warrants to purchase common stock associated with Danforth 50,000 50,000 Total 26,359,399 10,633,380 Segment and Geographic Information Operating segments are defined as components of an enterprise (business activity from which it earns revenue and incurs expenses) about which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company views its operations and manages its business as one operating segment. The material assets of the Company were held in the United States for the years ended December 31, 2022 and 2021. In July 2019, the Company incorporated SCYNEXIS Pacific Pty Ltd, a wholly-owned subsidiary, in Sydney, Australia, for the initial purpose of conducting certain clinical trials and other research and development activities. Although all operations are primarily based in the United States, the Company generated a portion of its revenue from the license agreement with Hansoh located outside of the United States for the years ended December 31, 2022 and 2021. All sales, including sales outside of the United States, are denominated in United States dollars. Reclassification of Prior Year Amounts Certain prior year amounts have been reclassified for consistency with the current year presentation. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which revised the effective dates for ASU 2016-13 for public business entities that meet the SEC definition of a smaller reporting company to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company does not believe that ASU 2016-13 will have a material impact on its consolidated financial statements. In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in and Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 reduce the number of accounting models for convertible debt instruments and revises certain guidance relating to the derivative scope exception and earnings per share. The amendments in ASU 2020-06 are effective for public business entities that meet the definition of a SEC filer and a smaller reporting company for fiscal years beginning after December 15, 2023, and interim periods within those years. As a smaller reporting company, the Company is currently evaluating the impact ASU 2020-06 will have on its consolidated financial statements. 75 3. Short-term Investments Short-term investments consisted of the following (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Fair Value As of December 31, 2022 U.S. government securities $ 27,689 $ — $ ( 160 ) $ 27,529 Total short-term investments $ 27,689 $ — $ ( 160 ) $ 27,529 The Company’s evaluated the unrealized loss position in U.S. government securities as of the balance sheet date and did not consider it to be indicative of an other-than-temporary impairment as the securities are highly-rated and the Company expects to realize the full principal amount at maturity. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands): December 31, 2022 2021 Prepaid research and development services $ 635 $ 247 Prepaid insurance 622 505 Other prepaid expenses 1,184 2,813 Other current assets 62 4 Total prepaid expenses and other current assets $ 2,503 $ 3,569 5. Inventory Inventory consisted of the following (in thousands): December 31, 2022 2021 Raw materials $ 5,093 $ 5,162 Work in process 610 3 Finished goods 24 127 Total inventory $ 5,727 $ 5,292 As of December 31, 2022, the Company’s inventory consisted of $ 4.9 million of raw material that is not expected to be sold in one year and is classified as long term within other assets on the consolidated balance sheet. 6. Intangible Assets Intangible assets consisted of the following (in thousands): December 31, 2022 2021 Intangible assets $ 1,282 $ 1,250 Less: accumulated amortization ( 874 ) ( 194 ) Total intangible assets, net $ 408 $ 1,056 For the years ended December 31, 2022 and 2021, the Company recognized $ 0.7 million and $ 0.2 million in amortization expense, respectively. Intangible assets consist primarily of software implementation costs purchased in 2021 and are 76 amortized over a useful life of three years . The estimated remaining amortization expense of $ 0.4 million will be recognized in 2023. 7. Accrued Expenses Accrued expenses consisted of the following (in thousands): December 31, 2022 2021 Accrued research and development expenses $ 786 $ 1,498 Accrued employee bonus compensation 1,628 2,012 Other accrued expenses 1,313 1,078 Accrued severance 688 — Accrued co-pay rebates 595 836 Accrued other rebates 618 274 Total accrued expenses $ 5,628 $ 5,698 8. Borrowings Loan Agreement On May 13, 2021, the Company entered into the loan and security agreement (“Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), as administrative agent and collateral agent and a lender, and Silicon Valley Bank (“SVB”), for an aggregate principal amount of $ 60.0 million (the “Term Loan”). Pursuant to the Loan Agreement, the Term Loan is available to the Company in four tranches, subject to certain terms and conditions. Under the terms of the Loan Agreement, the Company received an initial tranche of $ 20.0 million from the Lenders on the closing date. The second tranche of the Term Loan, consisting of up to an additional $ 10.0 million, became available to the Company upon receipt of approval from the FDA of ibrexafungerp for the treatment of vaginal yeast infections (the “First Performance Milestone”) and was funded in June 2021. The third tranche of the Term Loan, consisting of an additional $ 5.0 million, was available to the Company upon (a) the First Performance Milestone and (b) the achievement of the primary endpoint from the Phase 3 study of ibrexafungerp in patients with recurrent VVC, and was funded in March 2022. The fourth tranche of the Term Loan, consisting of up to an additional $ 25.0 million, will be available to the Company from January 1, 2022 through December 31, 2023 in $ 5.0 million increments, subject to certain terms and conditions, including in maintaining a ratio of total outstanding Term Loan principal to net product revenues for BREXAFEMME below a certain specified level for a given draw period. The Company estimated the fair value of the loan payable using a credit spread valuation model and Level 3 inputs which included an implied secured spread, risk free rate, and secured yield of 9.84 %, 4.37 %, and 14.21 %, respectively. At December 31, 2022, the fair value of the loan payable is $ 34.4 million. The Term Loan will mature on March 3, 2025 (the “Maturity Date”); provided that, the Maturity Date shall be automatically extended to May 1, 2025 subject to the occurrence of certain conditions set forth in the Loan Agreement. The Term Loan bears interest at a variable annual rate equal to the greater of (a) 9.05 % and (b) the Prime Rate (as reported in the Wall Street Journal) plus 5.80 % (the “Interest Rate”). The Company may make payments of interest only through November 1, 2023, which may be extended to May 1, 2024 upon the achievement of the First Performance Milestone prior to November 1, 2023, and which is further extendable in quarterly increments until the Maturity Date, subject to continued compliance with the financial covenant of the Loan Agreement (the “interest-only period”). After the interest-only period, the principal balance and related interest will be required to be repaid in equal monthly installments and continuing until the Maturity Date. In connection with the entry into the Loan Agreement, the Company issued to each of Hercules and SVB a warrant (collectively, the “Warrants”) to purchase shares of the Company’s common stock, par value $ 0.001 per share (the “Shares”). The amount of shares that may be purchased for the Warrants, collectively between Hercules and SVB, will not exceed 0.04 multiplied by the aggregate amount of the term loan advance, divided by the exercise price of the Warrants. The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default, and representations, warranties and covenants, including a financial covenant requiring the Company to maintain certain levels of trailing three-month net product revenue solely from the sale of ibrexafungerp commencing on June 30, 2022. The financial covenant will be waived at any time in which the Company maintains unrestricted and unencumbered cash in accounts maintained with SVB and another financial institution equal to at least 50.0 % of the total outstanding Term Loan principal amount, subject to certain requirements. Subject to certain exceptions, the Company's obligations under the Loan Agreement are secured by a first priority security interest on substantially all of the Company's personal property, other than intellectual property. The final closing fee of $ 1.4 million is recognized as a debt discount and is being accreted into the amortization of debt issuance costs and discount using the effective interest rate method over the term of the loan payable. 77 The initial Loan Agreement tranche of $ 20.0 million, the funding of the additional Term Loan tranches, the initial warrants and the additional warrants, were identified as freestanding instruments that were legally detachable and separately exercisable from each other. At the closing of the Loan Agreement, the Company issued 113,607 of warrants to purchase shares of the Company’s common stock and recognized the initial warrants at their relative fair value of $ 0.5 million in shareholder's equity. In accordance with ASC 815-40, the additional remaining warrants to purchase shares of the Company’s common stock at the closing of the Loan Agreement were recognized at their fair value as warrant liabilities given the variable settlement amount of the warrant shares. The additional remaining warrants under the Loan Agreement are considered an outstanding instrument at close of the Loan Agreement. The additional remaining warrants will vest and become exercisable upon the funding of the remaining term loan tranches available under the Loan Agreement and the amount of additional warrants will not exceed 0.04 multiplied by the aggregate amount of the term loan tranche, divided by the exercise price of the Warrants. The fair value of the initial warrant liabilities of approximately $ 0.7 million was recorded as a deferred asset and is reclassified to debt discount proportionately upon the funding of a Term Loan tranche. Upon the funding of the $ 10.0 million and $ 5.0 million for the second and third tranches in June 2021 and March 2022, the associated warrant liabilities of $ 0.3 million and $ 0.1 million were reclassed to additional paid in capital at settlement and 56,803 and 28,401 of warrants to purchase shares of the Company's common stock vested, respectively. Future principal debt payments on the currently outstanding loan payable as of December 31, 2022 are as follows (in thousands): 2024 23,562 2025 11,438 Total principal payments 35,000 Final fee due at maturity 1,383 Total principal and final fee payment 36,383 Unamortized discount and debt issuance costs ( 1,990 ) Less current portion — Loan payable, long term $ 34,393 April 2020 Note Purchase Agreement On April 9, 2020 , the Company entered into the April 2020 note purchase agreement with Puissance Life Science Opportunities Fund VI (“Puissance”) and issued and sold to Puissance $ 10.0 million aggregate principal amount of its April 2020 6.0 % Convertible Senior Notes (the "April 2020 Notes"), resulting in net proceeds of approximately $ 9.5 million after deducting $ 0.5 million for an advisory fee and other issuance costs. In January 2021, Puissance converted the remaining $ 6.0 million of the April 2020 Notes for 959,080 shares of common stock. Upon conversion of the $ 6.0 million of the April 2020 Notes, the Company recognized a $ 2.7 million extinguishment loss which represents the difference between the total net carrying amount of the convertible debt and derivative liability of $ 4.8 million and the fair value of the consideration issued of $ 7.5 million. March 2019 Note Purchase Agreement On March 7, 2019 , the Company entered into a Senior Convertible Note Purchase Agreement (the “March 2019 Note Purchase Agreement”) with Puissance. Pursuant to the March 2019 Note Purchase Agreement, on March 7, 2019, the Company issued and sold to Puissance $ 16.0 million aggregate principal amount of its March 2019 Notes, resulting in $ 14.7 million in net proceeds after deducting $ 1.3 million for an advisory fee and other issuance costs. As of December 31, 2022 and 2021, the Company’s March 2019 Notes consists of the convertible debt balance of $ 11.0 million and $ 10.2 million, both presented net of the unamortized debt issuance costs allocated to the convertible debt of $ 0.3 million, and the bifurcated embedded conversion option derivative liability of $ 42,000 and $ 1.4 million, respectively. In connection with the Company’s issuance of its March 2019 Notes, the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging , at its initial fair value of $ 7.0 million as the interest make-whole provision is settled in shares of common stock. For both the years ended December 31, 2022 and 2021, the Company recognized gains of $ 1.3 million on the fair value adjustment for the derivative liability. For the years ended December 31, 2022 and 2021, the Company recognized $ 0.7 million and $ 0.9 million, respectively, in amortization of debt issuance costs and discount, related to the March 2019 Notes. The Company estimated the fair value of the convertible debt and derivative liability for the March 2019 Notes using a binomial lattice valuation model and Level 3 inputs. At December 31, 2022 and 2021, the fair value of the convertible debt and derivative liability for the March 2019 Notes is $ 10.8 million and $ 12.3 million, respectively. The March 2019 Notes were issued and sold for cash at a purchase price equal to 100 % of their principal amount, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the 78 “Securities Act”), due to the March 2019 Notes being issued to one financially sophisticated investor. The March 2019 Notes bear interest at a rate of 6.0 % per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2019. The March 2019 Notes will mature on March 15, 2025 , unless earlier converted, redeemed or repurchased. The March 2019 Notes constitute general, senior unsecured obligations of the Company. The holder of the March 2019 Notes may convert their March 2019 Notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2025 into shares of the Company’s common stock. The initial conversion rate is 73.9096 shares of common stock per $ 1,000 principal amount of March 2019 Notes, which is equivalent to an initial conversion price of approximately $ 13.53 and is subject to adjustment in certain events described in the March 2019 Note Purchase Agreement. The Holder upon conversion may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in shares of common stock. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate if the holder elects to convert its March 2019 Notes in connection with such a corporate event. Subject to adjustment in the conversion rate, the number of shares that the Company may deliver in connection with a conversion of the March 2019 Notes, including those delivered in connection with an interest make-whole payment, will not exceed a cap of 81 shares of common stock per $ 1,000 principal amount of the March 2019 Notes. On or after March 15, 2022 , the Company has the right, at its election, to redeem all or any portion of the March 2019 Notes not previously converted if the last reported sale price per share of common stock exceeds 130 % of the conversion price on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. The redemption price will be 100 % of the principal amount of the March 2019 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If a “fundamental change” (as defined in the March 2019 Note Purchase Agreement) occurs, then, subject to certain exceptions, the Company must offer to repurchase the March 2019 Notes for cash at a repurchase price of 100 % of the principal amount of the March 2019 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. Other Liabilities In February 2021, the Company partnered with Amplity for the commercial launch of BREXAFEMME for the treatment of VVC. Under the terms of the agreement with Amplity, the Company was to utilize Amplity’s commercial execution and resources for sales force, remote engagement, training, market access and select operations services. In October 2022, the Company announced that it was actively pursuing a U.S. commercialization partner to out-license BREXAFEMME in order to refocus the Company's resources on the further clinical development of ibrexafungerp for severe, hospital-based indications. As a result, the Company wound down its promotional activities associated with BREXAFEMME, while keeping BREXAFEMME on the market and available to patients. On November 30, 2022, the Company terminated the agreement with Amplity. Under the terms of the original agreement, Amplity deferred a portion of its direct service fees in the first two years (2021 and 2022) that accrued interest at an annual rate of 12.75 % (“Deferred Fees”). As of December 31, 2022, Deferred Fees of $ 5.8 million, which includes a portion of the $ 1.5 million termination fee that was unpaid as of December 31, 2022, are recognized as short term other liabilities in the consolidated balance sheets. The $ 5.8 million of Deferred Fees as of December 31, 2022 was fully paid as of February 2023. Additionally, as a result of the reduction in internal workforce in the Company's commercial function in 2022, the Company recognized $ 1.3 million in severance costs during the year ended December 31, 2022. 9. Commitments and Contingencies Leases On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 842 (the “Lease”). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $ 7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company furnished a security deposit in the form of a standby letter of credit in the amount of $ 0.3 million, which will be reduced by fifty-five thousand dollars every two years for ten years after the commencement of the lease . The security deposit is classified as restricted cash in the accompanying consolidated balance sheets. The consideration in the Lease allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The Lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating 79 lease liability. The incremental borrowing rate utilized approximated the prevailing market interest rate the Company would incur to borrow a similar amount equal to the total Lease payments on a collateralized basis over the term of the Lease. The following table summarizes certain quantitative information associated with the amounts recognized in the accompanying consolidated financial statements for the Lease (dollars in thousands): Years Ended December 31, 2022 2021 Operating lease cost $ 664 $ 664 Variable lease cost 49 38 Total operating lease expense $ 713 $ 702 Cash paid for amounts included in the measurement of operating lease liability $ 527 $ 517 December 31, 2022 December 31, 2021 Remaining Lease term (years) 6.59 7.59 Discount rate 15 % 15 % Future minimum lease payments for all operating leases as of December 31, 2022 are as follows (in thousands): December 31, 2022 2023 $ 715 2024 730 2025 744 2026 759 2027 774 Thereafter 1,256 Total $ 4,978 The presentation of the operating lease liability as of December 31, 2022 is as follows (in thousands): December 31, 2022 Present value of future minimum lease payments $ 3,203 Operating lease liability, current portion $ 282 Operating lease liability, long-term portion 2,921 Total operating lease liability $ 3,203 Difference between future minimum lease payments and discounted cash flows $ 1,775 License Arrangements with Potential Future Expenditures As of December 31, 2022, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, as amended, that involves potential future expenditures. Under the license arrangement, executed in May 2013, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. In January 2014, Merck assigned the patents related to ibrexafungerp that it had exclusively licensed to the Company. Ibrexafungerp is the Company's lead product candidate. Pursuant to the terms of the license agreement, Merck was originally eligible to receive milestone payments from the Company that could total $ 19.0 million upon occurrence of specific events, including initiation of a Phase 2 clinical study, new drug application, and marketing approvals in each of the U.S., major European markets, and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of ibrexafungerp. The aggregate royalties are mid- to high-single digits. In December 2014, the Company and Merck entered into an amendment to the license agreement that deferred the remittance of a milestone payment due to Merck, such that no amount would be due upon initiation of the first Phase 2 clinical trial of a product containing the ibrexafungerp compound (the “Deferred Milestone”). The amendment also increased, in an amount equal to the Deferred Milestone, the milestone payment that would be due upon initiation of the first Phase 3 clinical trial of a product containing the ibrexafungerp compound. In December 2016 and January 2018, the Company entered into second and third amendments to the license agreement with Merck which clarified what would constitute the initiation of a 80 Phase 3 clinical trial for the purpose of milestone payment. In January 2019, a milestone payment became due to Merck as a result of the initiation of the VANISH Phase 3 VVC program and was paid in March 2019. On December 2, 2020, the Company entered into a fourth amendment to the license agreement with Merck. The amendment eliminates two cash milestone payments that the Company would have paid to Merck upon the first filing of a NDA, triggered by the FDA acceptance for filing of its NDA for ibrexafungerp for the treatment of VVC, and first marketing approval in the U.S., in June 2021 for the Company’s NDA for ibrexafungerp for the treatment of VVC. Such cash milestone payments would have been creditable against future royalties owed to Merck on net sales of ibrexafungerp. With the amendment, these milestones will not be paid in cash and, accordingly, credits will not accrue. Pursuant to the amendment, the Company will also forfeit the credits against future royalties that it had accrued from a prior milestone payment already paid to Merck. All other key terms of the license agreement are unchanged. Clinical Development Arrangements The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its clinical trials, preclinical research studies, and other services related to its development activities. The scope of the services under these agreements can generally be modified at any time, and the agreement can be terminated by either party after a period of notice and receipt of written notice. 10. Stockholders’ Equity Authorized, Issued, and Outstanding Common Shares The Company’s authorized common stock has a par value of $ 0.001 per share and consists of 150,000,000 shares as of December 31, 2022 and 100,000,000 shares as of December 31, 2021; 32,682,342 and 28,705,334 shares were issued and outstanding at December 31, 2022 and 2021, respectively. In September 2022, the Company amended its Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of common stock from 100,000,000 to 150,000,000 . Shares Reserved for Future Issuance The Company had reserved shares of common stock for future issuance as follows: December 31, 2022 2021 Outstanding stock options 1,740,308 1,542,126 Outstanding restricted stock units 633,270 133,834 Warrants to purchase common stock associated with March 2018 public offering - Series 2 798,810 798,810 Warrants to purchase common stock associated with December 2020 public offering - Series 2 6,800,000 6,800,000 Prefunded warrants to purchase common stock associated with December 2020 public offering 3,200,000 3,200,000 Warrants to purchase common stock associated with April 2022 Public Offering 15,000,000 — Prefunded warrants to purchase common stock associated with April 2022 Public Offering 11,666,667 — Warrants to purchase common stock associated with Loan Agreement 198,811 170,410 Warrants to purchase common stock associated with Danforth 50,000 50,000 For possible future issuance for the conversion of the March 2019 Notes 1,138,200 1,138,200 For possible future issuance under 2014 Plan (Note 13) 712,020 295,220 For possible future issuance under employee stock purchase plan — 3,893 For possible future issuance under 2015 Plan (Note 13) 550,964 235,000 Total common shares reserved for future issuance 42,489,050 14,367,493 Liquidation Rights In the event of any liquidation or dissolution of the Company, the holders of the common stock are entitled to the remaining assets of the Company legally available for distribution. Dividends and Voting Rights The holders of the common stock are entitled to receive dividends if and when declared by the Company. 81 Preferred Stock On May 7, 2014, the Company amended and restated its articles of incorporation relating to its approved capital structure. The Company’s board of directors has authorized the Company, subject to limitations prescribed by Delaware law, to issue up to 5,000,000 shares of preferred stock with a par value of $ 0.001 per share in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions. The Company’s board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by the stockholders. The Company’s board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. There were no shares of preferred stock issued and outstanding as of December 31, 2022 and 2021. Common Stock Purchase Agreement and Sales Agreements On April 10, 2020, the Company entered into the Common Stock Purchase Agreement with Aspire Capital (the “Common Stock Purchase Agreement”) pursuant to which the Company had the right to sell to Aspire Capital from time to time in its sole discretion up to $ 20.0 million in shares of the Company’s common stock, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. The Common Stock Purchase Agreement expired in October 2022. During the years ended December 31, 2022 and 2021, the Company sold 425,000 and 400,000 shares of its common stock under the Common Stock Purchase Agreement for gross proceeds of $ 1.6 million and $ 2.6 million, respectively. During the years ended December 31, 2022, and 2021, the Company sold 137,610 and 494,406 shares of its common stock and received net proceeds of $ 0.7 million and $ 3.1 million, respectively, under the Controlled Equity OfferingSM Sales Agreements with Cantor Fitzgerald & Co. and Ladenburg Thalmann & Co. Inc. (the “Sales Agreements”). April 2022 Public Offering On April 22, 2022, the Company entered into an Equity Underwriting Agreement (the “Underwriting Agreement”) with Guggenheim Securities, LLC, as representative of the several underwriters (the “Underwriters”), relating to the offering, issuance and sale (the “April 2022 Public Offering”) of (a) 3,333,333 shares of the Company’s common stock, par value $ 0.001 per share, (b) prefunded warrants, in lieu of common stock, to purchase 11,666,667 shares of the Company’s common stock, par value $ 0.001 per share, and (c) warrants, which will accompany the common stock or prefunded warrants, to purchase up to an aggregate of 15,000,000 shares of the Company’s common stock. The prefunded warrants entitle the holders to purchase up to 11,666,667 shares of common stock and have an unlimited term and an exercise price of $ 0.001 per share. The warrants entitle the holders to purchase up to an aggregate of 15,000,000 shares of common stock and have a seven-year term and an exercise price of $ 3.45 per share. The warrants that accompany the prefunded warrants have an additional provision entitling the holder thereof to purchase a prefunded warrant rather than a share of common stock at the warrant exercise price less the exercise price of the prefunded warrant purchased. Each warrant is exercisable immediately upon issuance, subject to certain limitations on beneficial ownership. The price to the public in the April 2022 Public Offering was $ 3.00 per share of common stock and accompanying warrants, or in the case of prefunded warrants, $ 2.999 per prefunded warrant and accompanying warrants, which resulted in $ 41.8 million of net proceeds to the Company after deducting the underwriting discount and offering expenses. The prefunded warrants are classified as equity in accordance with ASC 815, Derivatives and Hedging , given the prefunded warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in equity. The prefunded warrants were recorded at their relative fair value at issuance in the stockholders’ equity section of the balance sheet and the prefunded warrants are considered outstanding shares in the basic earnings per share calculation for the year ended December 31, 2022 given their nominal exercise price. December 2020 Public Offering Warrants On December 17, 2020, the Company completed a public offering (the “December 2020 Public Offering”) of its common stock and warrants pursuant to the Company’s effective shelf registration. The Company sold an aggregate of (a) 8,340,000 shares of the Company’s common stock, par value $ 0.001 per share, (b) prefunded warrants, in lieu of common stock, to purchase 5,260,000 shares of the Company’s common stock, par value $ 0.001 per share, and (c) two series of warrants, which will accompany the common stock or prefunded warrants, to purchase up to an aggregate of 13,600,000 shares of the Company’s common stock. The prefunded warrants entitle the holders to purchase up to 5,260,000 shares of common stock and have an unlimited term and an exercise price of $ 0.001 per share. During the year ended December 31, 2021, 2,060,000 of the prefunded warrants were exercised for proceeds of $ 2,000 . Each of the two series of warrants entitle the holders to purchase up to an aggregate of 6,800,000 shares of common stock. The prefunded warrants are classified as equity in accordance with ASC 815, Derivatives and Hedging , given the prefunded warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in 82 equity. The prefunded warrants were recorded at their relative fair value at issuance in the stockholders’ equity section of the balance sheet and the prefunded warrants are considered outstanding shares in the basic earnings per share calculation for the years ended December 31, 2022 and 2021 given their nominal exercise price. The Series 1 warrants had a one-year term and an exercise price of $ 7.33 per share, and the Series 2 warrants have a three-and-a-half-year term and an exercise price of $ 8.25 per share. There is not expected to be any trading market for the prefunded warrants, the Series 1 warrants, or the Series 2 warrants issued in the offering. Each warrant is exercisable immediately upon issuance, subject to certain limitations on beneficial ownership. The Series 1 and Series 2 warrants that accompany the prefunded warrants have an additional provision, if certain beneficial ownership limitations are met, entitling the holder thereof to purchase a prefunded warrant rather than a share of common stock at the warrant exercise price less the exercise price of the prefunded warrant purchased. The price to the public in the offering was $ 6.25 per share of common stock and accompanying warrants, or in the case of prefunded warrants, $ 6.249 per prefunded warrant and accompanying warrants. In June 2021, 360,134 of the December 2020 Series 1 public offering warrants were exercised for proceeds of $ 2.6 million. On December 21, 2021, the Board of Directors approved a modified exercise price of $ 6.25 per common share for up to 6,100,000 of the Series 1 warrants. 5,980,800 of the Series 1 warrants were repriced at $ 6.25 per common share and 3,370,800 were exercised for gross proceeds of $ 21.1 million which was received by the Company in December 2021. Of the 3,370,800 warrants exercised by the warrant holders, 2,390,000 warrants were held by 5 % beneficial owners of the Company for gross proceeds of $ 14.9 million. The 3,370,800 Series 1 warrants were ultimately fair valued with the resulting change in fair value recognized in earnings. The resulting fair value of the 3,370,800 was $ 1.9 million and the Company recognized the change in fair value in earnings of $ 1.4 million. On the settlement date, the contractual liability value of $ 1.9 million for the 3,370,800 Series 1 warrants was derecognized and included in additional paid in capital as part of the settlement. The remaining Series 1 warrants expired unexercised on December 21, 2021 and the remaining liability balance was derecognized. On November 24, 2021, an investor provided a conversion notice of 160,000 shares for gross proceeds to the Company of $ 1.2 million which was received in November 2021. As a result, the 160,000 Series 1 warrants were fair valued with the resulting change in fair value recognized in earnings. The resulting fair value of the 160,000 Series 1 warrants was $ 0.1 million and the Company recognized the change in fair value in earnings of $ 0.1 million. On the settlement date, the contractual liability value of $ 0.1 million for the 160,000 Series 1 warrants was derecognized and included in additional paid in capital as part of the settlement. December 2019 Public Offering Warrants On December 12, 2019, the Company completed a public offering (the “December 2019 Public Offering”) of its common stock and warrants pursuant to the Company's effective Shelf Registration. The Company sold an aggregate of 3,888,888 shares of the Company’s common stock and warrants to purchase up to an aggregate of 3,888,888 shares of the Company’s common stock at a public offering price of $ 9.00 per share and accompanying warrant. Net proceeds from the December 2019 Public Offering were approximately $ 32.5 million, after deducting the underwriting discount and offering expenses. The warrants to purchase shares of common stock are immediately exercisable and expire on the earlier of (i) such date that is six months after the Company publicly announces the approval from the U.S. Food and Drug Administration for ibrexafungerp for the treatment of vulvovaginal candidiasis and (ii) June 12, 2023 , and have an exercise price of $ 11.0 per share. There is not expected to be any trading market for the warrants. Each warrant is exercisable immediately upon issuance, subject to certain limitations on beneficial ownership. On November 26, 2021, the Board of Directors approved a modified exercise price of $ 6.50 per common share for 1,111,111 of the warrants issued to a 5 % beneficial owner and investor of the Company and no other terms of the original warrant were modified. On November 30, 2021, the investor provided a notice to exercise 1,111,111 of 2019 Warrants for proceeds of $ 7.2 million which was received by the Company on December 1, 2021. On the settlement date, the contractual liability value of $ 0.2 million for the 1,111,111 warrants was derecognized and included in additional paid in capital as part of the settlement. Additionally, on December 2, 2021, the Board of Directors also approved a reduced exercise price of $ 6.50 per common share for 361,111 , 827,777 , 194,444 , and 111,111 of the warrants issued to certain investors. On December 2, 2021, one investor provided a notice to exercise 111,111 of the warrants for proceeds of $ 0.7 million which was received by the Company in December 2021. As a result, the 111,111 warrants were fair valued on December 2, 2021 with the resulting change in fair value recognized in earnings. The resulting fair value of the 111,111 warrants was $ 19,000 and the Company recognized the change in fair value in earnings of $ 18,000 . On the settlement date, the contractual liability value of $ 19,000 for the 111,111 warrants was derecognized and included in additional paid in capital as part of the settlement. The remaining 2019 Warrants expired unexercised (including the 2019 Warrants that had a revised exercise price that went unexercised) on December 2, 2021 and the remaining liability balance was derecognized. March 2018 Public Offering Warrants 83 On March 8, 2018, the Company completed a public offering (the “March 2018 Public Offering”) of its common stock and warrants pursuant to the Company’s effective shelf registration. The Company sold an aggregate of 1,775,150 shares of the Company’s common stock and warrants to purchase up to 2,130,180 shares of the Company’s common stock at a public offering price of $ 16.90 per share. Each purchaser received a warrant to purchase 0.75 of a share of common stock (the “March 2018 Series 1 warrants”) and 0.45 of a share of common stock (the “March 2018 Series 2 warrants”) for each share purchased in the March 2018 Public Offering. The March 2018 Series 1 warrants to purchase in the aggregate up to 1,331,370 shares of common stock had a 53 -week term and an exercise price of $ 18.5 per share, and the March 2018 Series 2 warrants to purchase in the aggregate up to 798,810 shares of common stock have a five-year term and an exercise price of $ 20.0 per share. There is not expected to be any market for the warrants and each warrant is exercisable immediately upon issuance, subject to certain limitations on beneficial ownership. Public Offering Warrant Liabilities The March 2018, December 2019, and December 2020 warrants contain a provision where the warrant holder has the option to receive cash, equal to the Black-Scholes fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). Due to this provision, ASC 480, Distinguishing Liabilities from Equity , requires that these warrants be classified as liabilities. The fair values of these warrants have been determined using the Black-Scholes valuation model, and the changes in the fair value are recorded in the accompanying consolidated statements of operations. The outstanding warrants associated with the April 2022 Public Offering meet the definition of a derivative pursuant to ASC 815, Derivatives and Hedging , and do not meet the derivative scope exception given the warrants do not qualify under the indexation guidance. As a result, the April 2022 Public Offering warrants were initially recognized as liabilities and measured at fair value using the Black-Scholes valuation model. During the years ended December 31, 2022 and 2021, the Company recorded gains of $ 22.3 million and $ 30.4 million , respectively, due to the change in fair value of the warrant liabilities. Issuance costs of $ 1.7 million initially allocated to the April 2022 Public Offering warrant liabilities were written off upon settlement and were recognized in the gain on the fair value adjustment for the warrant liabilities for the year ended December 31, 2022. As of December 31, 2022, the fair value of the warrant liabilities was $ 18.6 million. Warrant Associated with Danforth Advisors Pursuant to a consulting agreement with Danforth Advisors (“Danforth”) entered into in November 2021, the Company issued to Danforth a warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $ 5.50 per share. The warrant will expire five years from the date of the grant and will vest ratably over 24 months from the date of grant. The warrant was classified as equity and was initially fair valued using the Black-Scholes model on the grant date. In accordance with ASC 718, the Company recognized consulting expense for the non-employee share-based payment over the period the Company received Danforth’s services. 11. Revenue Product Revenue, Net Net product revenue was $ 5.0 million and $ 1.1 million for the years ended December 31, 2022 and 2021, respectively. Products are sold primarily to wholesalers and specialty pharmacies. Revenue is reduced from wholesaler list price at the time of recognition for expected chargebacks, rebates, discounts, incentives, and returns, which are referred to as gross to net (“GTN”) adjustments. These reductions are currently attributed to various commercial arrangements. Chargebacks and discounts are recognized as a reduction in accounts receivable or as accrued expenses based on their nature and settled through the issuance of credits to the customer or through cash payments to the customer, respectively. All other returns, rebates, and incentives are reflected as accrued expenses and settled through cash payments to the customer. Three wholesalers comprised 45 %, 28 %, and 21 % of the Company’s gross revenue for the year ended December 31, 2022, and 47 %, 25 %, and 23 % of the Company’s gross revenue for the year ended December 31, 2021. The following table summarizes activity in each of the Company’s product revenue provision and allowance categories as of December 31, 2022 and 2021 (in thousands): 84 Discounts and Chargebacks (1) Product Returns (2) Rebates and Incentives (3) Total Balance as of December 31, 2020 $ — $ — $ — $ — Provision related to current period revenue 720 21 2,365 3,106 Changes in estimate related to prior period revenue — — — — Credit/payments ( 471 ) — ( 1,255 ) ( 1,726 ) Balance as of December 31, 2021 $ 249 $ 21 $ 1,110 $ 1,380 Provision related to current period revenue 1,493 52 3,916 5,461 Changes in estimate related to prior period revenue — — — — Credit/payments ( 1,487 ) — ( 3,813 ) ( 5,300 ) Balance as of December 31, 2022 $ 255 $ 73 $ 1,213 $ 1,541 (1) Discounts and chargebacks include fees for wholesaler fees, prompt pay and other discounts, and chargebacks. Discounts and chargebacks are deducted from gross revenue at the time revenues are recognized and are included as a reduction in accounts receivable or as an accrued expense based on their nature on the Company’s consolidated balance sheet. (2) Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are included in accrued expenses on the Company’s consolidated balance sheet. (3) Rebates and incentives include rebates and co-pay program incentives. Provisions for rebates and incentives are deducted from gross revenues at the time revenues are recognized and are included in accrued expenses on the Company’s consolidated balance sheets. License Agreement Revenue In February 2021, the Company entered into an Exclusive License and Collaboration Agreement (the “Agreement”) with Hansoh (Shanghai) Health Technology Co., Ltd., and Jiangsu Hansoh Pharmaceutical Group Company Limited (collectively, “Hansoh”), pursuant to which the Company granted to Hansoh an exclusive license to research, develop and commercialize ibrexafungerp in the Greater China region, including mainland China, Hong Kong, Macau, and Taiwan (the “Territory”). The Company also granted to Hansoh a non-exclusive license to manufacture ibrexafungerp solely for development and commercialization in the Territory. Under the terms of the Agreement, Hansoh shall be responsible for the development, regulatory approval and commercialization of ibrexafungerp in the Territory. Pursuant to the terms of the Agreement, the Company received as consideration for the licenses a nonrefundable upfront cash payment of $ 10.0 million and is entitled to an additional payment that was payable upon the transfer of certain data related to the manufacturing license. In addition, the Company will also be eligible to receive up to $ 110.0 million in potential development and commercial milestones. In addition, during the term of the licensing agreement, the Company is entitled to low double-digit royalties on net product sales. The obligation to pay royalties with respect to sales in a specified region will continue until the later of the date of expiration of all intellectual property and regulatory exclusivity for the product in the region and ten years from the first commercial sale, unless earlier terminated by Hansoh with advanced notice for convenience or under other specified circumstances. The Company is also eligible to receive a milestone related to the successful completion of a manufacturing batch by Hansoh. The Company evaluated the Agreement and concluded that it was subject to ASC 606 as the Company viewed the Agreement as a contract with a customer as the activities were central to its business operations. As such, the Company assessed the terms of the Agreement and identified one performance obligation for the licenses to research, develop, manufacture and commercialize ibrexafungerp in the Territory, including the underlying know-how related to such licenses. The Company also evaluated options for additional goods and services included in the Agreement related to (1) optional technical assistance related to development, regulatory or manufacturing activities and (2) a supply agreement for ibrexafungerp. Such options for additional goods or services were not considered to contain material rights as pricing approximated standalone selling prices and therefore the Company concluded that such options did not represent performance obligations and will be accounted for as separate transactions if and when they occur in the future. 85 The Company determined that the transaction price of $ 12.1 million included the fixed upfront cash payment of $ 10.0 million, an additional amount that was payable upon the transfer of certain data related to the manufacturing license, and $ 1.1 million related to withholding tax obligations that Hansoh remitted on behalf of the Company. The remaining amounts related to the successful completion of a manufacturing batch by Hansoh and potential development milestones represent variable consideration and were constrained as it was concluded that it was not probable that a significant reversal in cumulative revenue recognized will not occur and therefore not included in the transaction price as of December 31, 2022 and 2021. Potential commercial milestones and royalties on net product sales will be recognized in the same period that the underlying net product sales occur as they were determined to relate to the license. The transaction price was recorded in revenue during the year ended December 31, 2021 at a point in time upon control of the license transferring to Hansoh. The Company will reevaluate the transaction price at the end of each reporting period as uncertain events or resolved, or as other changes in circumstances occur. Additionally, pursuant to the Agreement, both the Company and Hansoh agreed to make reasonable efforts to account for applicable taxes, fees, duties, levies, or similar amounts imposed on net income, franchise taxes and profits arising directly or indirectly from the activities of the Agreement. To the extent Hansoh is required by applicable laws to withhold or deduct any tax on any payment to the Company, Hansoh agreed to make certain increases on payments to the Company to ensure that the Company receives a sum equal to what the Company would have received had there been no deduction or withholding. As a result, the Company has recorded revenue and tax withholding expense primarily associated with the up-front payment received by the Company on a gross basis. For the year ended December 31, 2021, the Company recognized $ 1.1 million in revenue and $ 1.1 million in income tax expense to account for the tax withholding expense primarily on the $ 10.0 million up-front that the Company is responsible to remit under applicable tax law. In July 2016, the Company entered into an asset purchase agreement with UK-based Cypralis Limited (or "Cypralis"), a life sciences company, for the sale of its cyclophilin inhibitor assets. Cypralis also acquired all patents, patent applications and know-how related to the acquired portfolio. In connection with the asset purchase agreement, the Company is eligible to receive milestone payments upon the successful progression of Cypralis clinical candidates into later stage clinical studies and royalties payable upon product commercialization. The Company retains the right to repurchase the portfolio assets from Cypralis if abandoned or deprioritized. For the years ended December 31, 2022 and 2021, there was no revenue recognized associated with this agreement given the variable consideration associated with the sale of intellectual property to Cypralis was fully constrained as of December 31, 2022. Additionally, in October 2014 the Company entered into a license agreement with Waterstone Pharmaceutical HK Limited (or “Waterstone”) and granted Waterstone an exclusive, worldwide license to develop and commercialize certain non-strategic compounds. The Company is entitled to receive potential milestones and royalties from Waterstone; however, there was no revenue recognized by the Company in 2022 and 2021 associated with this agreement given the variable consideration was fully constrained as of December 31, 2022 and 2021. 12. Income Taxes The Company’s consolidated financial statements include a total tax benefit of $ 4.7 million and $ 3.1 million on loss before taxes of $ 67.5 million and $ 36.0 million for the years ended December 31, 2022 and 2021, respectively. The income tax benefit consisted of the following (dollars in thousands): Years Ended December 31, 2022 2021 Current (benefit) expense U.S. $ ( 4,700 ) $ ( 4,188 ) Non-U.S — 1,100 Total current (benefit) $ ( 4,700 ) $ ( 3,088 ) 86 Reconciliations of the differences between the benefit for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows (dollars in thousands): 2022 2021 Amount Percent of Pretax Income Amount Percent of Pretax Income Income taxes from continuing operations at statutory rate $ ( 13,176 ) 21.0 % $ ( 7,781 ) 21.0 % State income taxes ( 319 ) 0.5 % ( 1,144 ) 3.1 % State effect of permanent items ( 114 ) 0.2 % ( 906 ) 2.4 % Foreign withholding taxes — — 1,100 ( 3.0 )% Stock-based compensation 123 ( 0.2 )% 114 ( 0.3 )% Deferred rate change 379 ( 0.6 )% 339 ( 0.9 )% Warrants issuance ( 4,960 ) 7.9 % ( 6,622 ) 17.9 % Other 713 ( 1.2 )% ( 489 ) 1.3 % NOL sale 237 ( 0.4 )% 214 ( 0.6 )% R&D credit adjustment — — — — Increase in valuation allowance 12,417 ( 19.8 )% 12,087 ( 32.6 )% Total income tax (benefit) $ ( 4,700 ) 7.4 % $ ( 3,088 ) 8.3 % The components of deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (in thousands): December 31, 2022 2021 Noncurrent deferred tax assets (liabilities) Accrued expenses $ 578 $ 1,264 Stock-based compensation 2,675 2,554 Lease liability 689 789 Other 4,398 ( 757 ) Net operating loss carryforwards 88,363 80,453 Research and development credits 6,839 6,839 Total deferred tax assets 103,542 91,142 Valuation allowances ( 103,542 ) ( 91,142 ) Net deferred tax assets $ — $ — As of December 31, 2022 and 2021, the Company had available federal net operating loss (“NOL”) carryforwards of approximately $ 405.0 million and $ 348.4 million, respectively, and state and net operating loss carryforwards of approximately $ 116.8 million and $ 186.3 million, respectively. Approximately $ 169.6 million of the federal NOLs can be carried forward to future tax years and expire at various times through 2037 . The federal NOLs generated in December 31, 2022 and 2021 of approximately $ 56.6 million and $ 55.7 million, respectively, are carried forward indefinitely and do not expire. The Company’s state and net operating loss carryforwards began to expire in 2019 . As of December 31, 2022, the Company had available federal research and development credit carryforwards of $ 6.6 million which began to expire in 2022 . The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey (“NJ”) up to a maximum lifetime benefit of $ 20.0 million per business. As of December 31, 2022, the Company has received approximately $ 18.8 million under the program. In February 2022 and April 2021, the Company received cash receipts of $ 4.7 million and $ 4.1 million, respectively, from the sale of its NJ state NOLS. The Company recognized an income tax benefit of $ 4.7 million and $ 4.1 million for the years ended December 31, 2022 and 2021, respectively, in the statement of operations. As part of the license agreement with Hansoh, the Company and Hansoh agreed to make reasonable efforts to account for applicable taxes, fees, duties, levies, or similar amounts imposed on net income, franchise taxes and profits arising directly or indirectly from the activities of the license agreement. To the extent Hansoh is required by applicable laws to withhold or deduct any tax on any payment to the Company, Hansoh agreed to make certain increases on payments to the Company to ensure that the Company receives a sum equal to what the Company would have received had there been no deduction or withholding. As a result, the Company has recorded revenue and tax withholding expense primarily associated with the up-front payment received by the Company on a gross basis. For the year ended December 31, 2021, the Company recognized $ 1.1 million in license agreement revenue and $ 1.1 million in income tax expense to account for the tax withholding expense primarily on the $ 10.0 million up-front that the Company is responsible to remit under applicable tax law. 87 On December 22, 2017, the “Tax Cuts and Jobs Act” was signed into law. The tax reform has the following effects on the Company: (1) permanently reduces the maximum corporate income tax rate from 35 % to 21 % effective for tax years beginning after December 31, 2017, (2) allows temporary 100 % expensing for certain business assets and property placed in service after September 27, 2018 and before January 1, 2023, (3) disallows NOL carrybacks but allows for the indefinite carryforward of those NOLs which applies to losses arising in tax years beginning after December 31, 2018 and, (4) limits NOL deductions for each year equal to the lesser of the available carryover or 80 % of a taxpayer’s pre-NOL deduction taxable income. This applies to losses arising in tax years ending on or after December 31, 2017. As of December 31, 2022 and 2021, the Company has concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets due to its history of losses. Accordingly, the net deferred tax assets have been fully reserved. In accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a change in equity ownership of greater than 50% within a three-year period results in an annual limitation on the Company’s ability to utilize its NOL carryforwards created during the tax periods prior to the change in ownership. The Company has determined that ownership changes have occurred and as a result, a portion of the Company’s NOL carryforwards are limited. Because the Company has incurred cumulative net operating losses since inception, all tax years remain open to examination by U.S. federal and state income tax authorities. The Company applies ASC 740-10-25-5, Income Taxes , formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes , as amended, on January 1, 2009. The difference between the tax benefit recognized in the financial statements and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits as of December 31, 2022 and 2021 (in thousands): December 31, 2022 2021 Unrecognized tax benefit—January 1 $ 436 $ 436 Additions for tax positions of current period — — Additions for tax positions of prior periods — — Deferred rate change — — Unrecognized tax benefit—December 31 $ 436 $ 436 None of the unrecognized tax benefits would, if recognized, affect the effective tax rate because the Company has recorded a valuation allowance to fully offset federal and state deferred tax assets. The Company has no tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the coming year. The Company has $ 0 provided for interest and penalties associated with uncertain tax positions. 13. Stock-based Compensation 2009 Stock Option Plan The Company had a share-based compensation plan (the “2009 Stock Option Plan”) under which the Company granted options to purchase shares of common stock to employees, directors, and consultants as either incentive stock options or nonqualified stock options. Incentive stock options could be granted with exercise prices not less than 100 % to 110 % of the fair market value of the common stock. Options granted under the plan generally vest over three to four years and expire in 10 years from the date of grant. 2014 Equity Incentive Plan In February 2014, the Company’s board of directors adopted the 2014 Equity Incentive Plan (“2014 Plan”), which was subsequently ratified by its stockholders and became effective on May 2, 2014 (the “Effective Date”). The 2014 Plan, as amended on June 18, 2014 and February 25, 2015, is the successor to and continuation of the 2009 Stock Option Plan. As of the Effective Date, no additional awards will be granted under the 2009 Stock Option Plan, but all stock awards granted under the 2009 Stock Option Plan prior to the Effective Date will remain subject to the terms of the 2009 Stock Option Plan. All awards granted on and after the Effective Date will be subject to the terms of the 2014 Plan. The 2014 Plan provides for the grant of the following awards: (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards, and (vi) other stock awards. Employees, directors, and consultants are eligible to receive awards. Options granted under the plan generally vest over three to four years and expire in 10 years from the date of grant. Under the 2014 Plan, after giving effect to the increases to the share reserve approved by the Company’s stockholders in September 2014, and June 2015, but excluding the automatic increases discussed below, the aggregate number of shares of common stock that could be issued from and after the Effective Date (the “share reserve”) could not exceed the sum of (i) 88 112,273 new shares, (ii) the shares that represented the 2009 Stock Option Plan’s available reserve on the Effective Date, and (iii) any returning shares from the 2009 Stock Option Plan. Under the 2014 Plan, the share reserve will automatically increase on January 1st of each year, for a period of not more than 10 years , commencing on January 1, 2015, and ending on January 1, 2024, in an amount equal to 4.0 % of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year. The board of directors may act prior to January 1st of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur. Pursuant to the terms of the 2014 Plan, on January 1, 2022 and 2021, the Company automatically added 1,148,213 and 786,547 shares to the total number shares of common stock available for future issuance under the 2014 Plan, respectively. As of December 31, 2022, there were 712,020 shares of common stock available for future issuance under the 2014 Plan. 2015 Inducement Plan On March 26, 2015, the Company's board of directors adopted the 2015 Inducement Plan (“2015 Plan”). The 2015 Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of equity compensation (collectively, stock awards), all of which may be granted to persons not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to the individuals’ entering into employment with the Company within the meaning of NASDAQ Listing Rule 5635I(4). The 2015 Plan had an initial share reserve covering 45,000 shares of common stock. On June 9, 2019, April 30, 2021, and October 18, 2022, the Company’s board of directors amended the 2015 Plan, and the initial share reserve for the 2015 Plan was increased from 45,000 to 90,000 , from 90,000 to 500,000 , and from 500,000 to 900,000 shares of common stock, respectively. During the years ended December 31, 2022 and 2021, there were 279,000 and 187,800 granted options of the Company’s common stock under the 2015 Plan, respectively. As of December 31, 2022 and 2021, there were 550,964 and 235,000 shares of common stock available for future issuance under the 2015 Plan, respectively. Option Valuation Method The fair value of a stock option is estimated using an option-pricing model that takes into account as of the grant date the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the expected term of the option. The Company has used the simplified method in calculating the expected term of all option grants based on the vesting period. Compensation costs related to share-based payment transactions are recognized in the financial statements upon satisfaction of the requisite service or vesting requirements and forfeitures are recorded as incurred. The Company has elected to use the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable rather than for use in estimating the fair value of stock options subject to vesting and transferability restrictions. Using the Black-Scholes option-pricing model, the weighted-average fair value of options granted during 2022 and 2021 was $ 2.47 and $ 4.63 per option, respectively. The aggregate fair value of options granted during 2022 and 2021 was $ 2.1 million and $ 4.0 million, respectively. The assumptions used to estimate fair value and the resulting grant date fair values are as follows: Employees Non-employee Years Ended December 31, Years Ended December 31, 2022 2021 2022 2021 Weighted average expected volatility 73.80 % 62.10 % 74.20 % 69.56 % Weighted average risk-free interest rate 2.45 % 0.64 % 3.18 % 0.74 % Weighted average expected term (in years) 6.04 5.15 5.63 5.79 The activity for the 2009 Plan, 2014 Plan and 2015 Plan for the years ended December 31, 2022 is summarized as follows: Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (in years) Aggregate Intrinsic Value ($000) Outstanding — December 31, 2021 1,542,126 $ 14.89 7.45 $ 42 Granted 834,000 $ 3.76 Forfeited/expired ( 635,818 ) $ 7.62 Outstanding — December 31, 2022 1,740,308 $ 12.21 6.16 $ — Exercisable — December 31, 2022 1,188,912 $ 15.85 4.83 $ — Vested or expected to vest —December 31, 2022 1,740,308 $ 12.21 6.16 $ — 89 The intrinsic values in the table above represent the total intrinsic value (the difference between the Company’s closing stock price as of December 31, 2022, and the exercise price multiplied by the number of options). The total fair value of shares vested for both the years ended December 31, 2022 and 2021 was $ 1.6 million. As of December 31, 2022, there was approximately $ 1.5 million of total unrecognized compensation cost related to unvested options granted under the plans. That cost is expected to be recognized over a weighted-average period of 2.5 years. Restricted stock unit ("RSU") activity under the 2014 Plan and 2015 Plan for the years ended December 31, 2022, is summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share Non-vested at December 31, 2021 133,834 $ 7.98 Granted 958,465 $ 5.30 Vested ( 117,831 ) $ 6.67 Forfeited ( 341,198 ) $ 5.90 Non-vested at December 31, 2022 633,270 $ 5.29 The fair value of RSUs is based on the market price of the Company's common stock on the date of grant. RSUs generally vest 25 % annually over a four year period from the date of grant. Upon vesting, the RSUs are net share settled to cover the required withholding tax with the remaining shares issued to the holder. The Company recognizes compensation expense for such awards ratably over the corresponding vesting period. As of December 31, 2022, there was approximately $ 2.0 million of total unrecognized compensation cost related to unvested RSU share-based compensation. That cost is expected to be recognized over a weighted-average period of 1.5 years. 2014 Employee Stock Purchase Plan In February 2014, the Company’s board of directors adopted the 2014 Employee Stock Purchase Plan (“2014 ESPP”), which was subsequently ratified by the Company’s stockholders and became effective on May 2, 2014. The purpose of the 2014 ESPP is to provide means by which eligible employees of the Company and of certain designated related corporations may be given an opportunity to purchase shares of the Company’s common stock, and to seek and retain services of new and existing employees and to provide incentives for such persons to exert maximum efforts for the success of the Company. Common stock that may be issued under the 2014 ESPP will not exceed 4,779 shares, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of ten years , commencing on January 1, 2015 and ending on January 1, 2024, in an amount equal to the lesser of (i) 0.8 % of the total number of shares of outstanding common stock on December 31 of the preceding calendar year, and (ii) 2,941 shares of common stock. Similar to the 2014 Plan, the board of directors may act prior to January 1st of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur. The 2014 ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code. During the years ended December 31, 2022 and 2021, the Company issued 6,834 and 4,943 shares of common stock under the 2014 ESPP, respectively. During the years ended December 31, 2022 and 2021, the number of shares of common stock available for issuance under the ESPP was automatically increased by 2,941 shares. As of December 31, 2022 and 2021, there were zero and 3,893 shares of common stock available for future issuance under the 2014 ESPP, respectively. Compensation Cost The compensation cost that has been charged against income for stock awards under the 2009 Stock Option Plan, the 2014 Plan, the 2015 Plan, and the 2014 ESPP was $ 3.5 million and $ 2.1 million for the years ended December 31, 2022 and 2021, respectively. Additionally, during the year ended December 31, 2022, the Company recognized $ 0.2 million in stock based compensation associated with the Danforth warrant. The total income tax benefit recognized in the consolidated statements of operations for share-based compensation arrangements was $ 0 for the years ended December 31, 2022 and 2021, respectively. Cash received from options exercised was zero for the years ended December 31, 2022 and 2021, respectively. 90 Stock-based compensation expense related to stock options and stock awards is included in the following line items in the accompanying statements of operations (in thousands): Years Ended December 31, 2022 2021 Research and development $ 1,076 $ 631 Selling, general and administrative 2,436 1,457 Total stock-based compensation expense $ 3,512 $ 2,088 14. Fair Value Measurements The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period, pursuant to the policy described in Note 2. This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of December 31, 2022 and 2021 for financial instruments measured at fair value on a recurring basis (in thousands): Fair Value Hierarchy Classification Balance Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2022 Cash $ 415 $ 415 — — Restricted cash 218 218 — — Money market funds 45,399 45,399 — — Total assets $ 46,032 $ 46,032 — — Warrant liabilities $ 18,644 — — $ 18,644 Derivative liability 42 — — 42 Total liabilities $ 18,686 — — $ 18,686 December 31, 2021 Cash $ 310 $ 310 — — Restricted cash 218 218 — — Money market funds 104,187 104,187 — — Total assets $ 104,715 $ 104,715 — — Warrant liabilities $ 18,062 — — $ 18,062 Derivative liability 1,358 — — 1,358 Total liabilities $ 19,420 — — $ 19,420 The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Level 3 financial liabilities consist of the warrant liabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company uses the Black-Scholes option valuation model to value the Level 3 warrant liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. The unobservable input for all of the Level 3 warrant liabilities includes volatility. The historical and implied volatility of the Company, using its closing common stock prices and market data, is utilized to reflect future volatility over the expected term of the warrants. At December 31, 2022, the range and weighted average of the Level 3 volatilities utilized in the Black-Scholes model to fair value the warrant liabilities were 101.8 % to 91 113.0 % and 102.1 %, respectively. The Company utilizes a probability assessment to estimate the likelihood of vesting for the remaining Loan Agreement warrants and allocated the probability of occurrence percentage to the fair values calculated. The Company uses the binomial lattice valuation model to value the Level 3 derivative liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, dividend yield, risk-free rate, historical volatility, credit rating, market credit spread, and estimated effective yield. The unobservable inputs associated with the Level 3 derivative liability are adjusted equity volatility, market credit spread, and estimated yield. As of December 31, 2022, these inputs were 68.5 %, 1,495 basis points, and 19.3 %, respectively. The senior convertible notes are initially fair valued using the binomial lattice model and with the straight debt fair value calculated using the discounted cash flow method. The discount for lack of marketability, zero and 6.7 % as of December 31, 2022 and 2021, respectively, is applied to the value of the March 2019 Notes. The residual difference represents the fair value of the embedded derivative liability and the fair value of the embedded derivative liabilities are reassessed using the binomial lattice valuation model on a quarterly basis. A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands): Warrant Liabilities Balance – January 1, 2022 $ 18,062 April 2022 Public Offering warrant issuance 24,704 Loan Agreement warrants ( 71 ) Gain adjustment to fair value ( 24,051 ) Balance – December 31, 2022 $ 18,644 Derivative Liabilities Balance – January 1, 2022 $ 1,358 Gain adjustment to fair value ( 1,316 ) Balance – December 31, 2022 $ 42 15. Employee Benefit Plan The Company has a 401(k) retirement plan, which covers all U.S. employees scheduled for and working more than 20 hours per week. The Company may provide a discretionary match with a maximum amount of 50 % of the first 6 % of eligible participant’s compensation, which vests ratably over four years . Contributions under the plan were approximately $ 0.2 million and $ 0.3 million for the years ended December 31, 2022 and 2021, respectively. 16. Subsequent Events License Agreement with GSK On March 30, 2023, the Company entered into a license agreement (the “License Agreement”) with GlaxoSmithKline Intellectual Property (No. 3) Limited (“GSK”). Pursuant to the terms of the License Agreement, the Company granted GSK an exclusive (even as to SCYNEXIS and its affiliates), royalty-bearing, sublicensable license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, for all indications, in all countries other than Greater China and certain other countries already licensed to third parties (the “GSK Territory”). If the existing licenses granted to or agreements with third parties are terminated with respect to any country, GSK will have an exclusive first right to negotiate with the Company to add those additional countries to the GSK Territory. The Company retains rights to all other assets, with GSK receiving a right of first negotiation (“ROFN”) to any other enfumafungin-derived compounds or products that the Company may control. Under the terms of the License Agreement, the Company will receive an upfront payment of $ 90 million. The Company is also eligible to receive potential: • regulatory approval milestone payments of up to $ 70 million; • commercial milestone payments of up to $ 115 million based on first commercial sale in invasive candidiasis (U.S./EU); • and sales milestone payments of up to $ 242.5 million based on annual net sales, with a total of $ 77.5 million to be paid upon achievement of multiple thresholds up through $200 million; a total of $ 65 million to be paid upon achievement of multiple thresholds between $300 million and $500 million; and $ 50 million to be paid at each threshold of $750 million and $1 billion. 92 The Company will be responsible for the execution and costs of the ongoing clinical studies of ibrexafungerp but will have the potential to receive up to $ 75.5 million in success-based development milestones, which are comprised of up to $ 65 million for the achievement of three interim milestones associated with the Company's continued performance of the ongoing MARIO Study and $ 10.5 million for the successful completion of the MARIO Study. In the case of each of the above milestones, such milestone events are defined in the License Agreement. GSK will also pay royalties based on cumulative annual sales to the Company in the mid-single digit to mid-teen range. These royalty rates are subject to reduction, including in the event of third-party licenses, entry of a generic product, or the expiration of licensed patents. A joint development committee will be established between GSK and the Company to coordinate and review ongoing development activities of ibrexafungerp. Unless earlier terminated, the License Agreement will expire on a product-by-product and country-by-country basis at the end of the royalty term for such product in such country. The Company has the right to terminate the License Agreement upon an uncured material breach by, or bankruptcy of, GSK. GSK has the right to terminate the License Agreement at any time for convenience in its entirety or on a product-by-product and country-by-country basis, upon an uncured material breach by, or bankruptcy of, the Company, or for safety reasons. The consummation of the transactions under the License Agreement is subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act”); provided, that either the Company or GSK may terminate the License Agreement if expiration or termination of the applicable waiting period under the HSR Act has not occurred within nine months of the signing of the License Agreement. The parties expect the transactions contemplated by the License Agreement to close in the second quarter of 2023. Loan Agreement Amendment The Company, Hercules Capital, Inc. (“Hercules Capital”) and Silicon Valley Bridge Bank, N.A. (“SVB”) are party to a Loan and Security Agreement dated as of May 13, 2021 (the “Loan Agreement”), pursuant to which Hercules Capital, SVB and each of the other lenders from time-to-time party to the Loan and Security Agreement (collectively, the “Lenders”) loaned to the Company $ 35 million. In connection with the entering into of the License Agreement, the Company entered into a First Amendment and Consent to Loan and Security Agreement with the Lenders pursuant to which the Lenders consented to SCYNEXIS entering into the License Agreement and SCYNEXIS agreed to pay to the Lenders an amount equal to the sum of (i) all outstanding principal plus all accrued and unpaid interest with respect to the amounts loaned under the Loan Agreement (approximately $ 35.4 million), (ii) the prepayment fee payable under Loan Agreement ($ 262,500 ), (iii) the final payment payable under Loan Agreement ($ 1,382,500 ), and (iv) all other sums, if any, that shall have become due and payable with respect to loan advances under the Loan Agreement. These payments by SCYNEXIS will become due upon the earliest of (A) one business day following receipt by SCYNEXIS of the $ 90 million upfront payment payable to SCYNEXIS under the License Agreement, (B) June 1, 2023, or (C) the termination of the License Agreement. 2014 Plan and 2014 ESPP Share Issuance Pursuant to the terms of the 2014 Plan (see Note 13), on January 1, 2023, the Company automatically added 1,901,960 shares to the total number shares of common stock available for future issuance under the 2014 Plan. Pursuant to the terms of the 2014 ESPP (see Note 13), on January 1, 2023, the Company automatically added 2,941 shares to the total number shares of common stock available for future issuance under the 2014 ESPP. 93 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.