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, 2024, 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 proprietary antifungal platform “fungerps”, a novel class of antifungal agents called triterpenoids, that are structurally distinct glucan synthase inhibitors and have generally 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 and most common mucorales species. Ibrexafungerp is the first representative of this novel class of antifungals with additional assets from the “fungerp” family under development, including SCY-247 which is currently in clinical stages of development. In June 2021 and December 2022, we announced that the United States (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. Oral ibrexafungerp is also under development for other systemic fungal diseases. SCY-247, a second-generation antifungal compound from this novel class, is in clinical development and we initiated a Phase 1 study for SCY-247 in the fourth quarter of 2024. 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. We anticipate that the FDA may grant QIDP and Fast Track designations for the IV and oral formulations of SCY-247. These designations may provide us with additional market exclusivity and expedited regulatory paths. GSK License Agreement On March 30, 2023, we entered into a license agreement (as amended in December 2023, the GSK License Agreement) with GlaxoSmithKline Intellectual Property (No. 3) Limited (GSK). Pursuant to the terms of the GSK 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 those in the Greater China region and certain other countries already licensed to third parties (the GSK Territory). The parties closed the transactions contemplated by the GSK License Agreement in May 2023 and we received an upfront payment of $90.0 million. In June 2023 and July 2024, we announced the achievement of a $25.0 million and a $10.0 million performance-based development milestone under the GSK License Agreement, respectively. On December 26, 2023, we and GSK entered into a binding memorandum of understanding (Binding MOU) for amendment to the GSK License Agreement. The GSK License Agreement was amended in connection with the delay in the commercialization of BREXAFEMME (see "Product Recall and Clinical Hold" section) and further clinical development of ibrexafungerp associated with this event. Under the terms of the updated GSK License Agreement, as amended by the Binding MOU, we are eligible to receive potential: • regulatory approval milestone payments of up to $49 million (revised from up to $70 million as provided in the GSK License Agreement); • commercial milestone payments of up to $57.5 million based on first commercial sale in IC (U.S./EU) (revised from up to $115 million as provided in the GSK License Agreement); and • and sales milestone payments of up to $179.5 / $169.75 / $145.5 million (depending on the date of GSK’s relaunch of BREXAFEMME in the U.S.) (revised from up to $242.5 million as provided in the GSK License Agreement). 47 These milestones are based on annual net sales in the GSK Territory, with a total of $64 / $54.25 / $46.5 million to be paid upon achievement of multiple sales thresholds up through $200 million; a total of $45.5 / $45.5 / $39 million to be paid upon achievement of multiple sales thresholds between $300 million and $500 million; and $35 / $35 / $30 million to be paid at each sales threshold of $750 million and $1 billion. We will continue to be responsible for the execution and costs of the ongoing clinical studies of ibrexafungerp, which at this stage is only the Phase 3 MARIO study, but will have the potential to receive up to $72.35 million in development milestones (revised from up to $75.5 million as provided in the GSK License Agreement), which comprise: $25 million already paid; $10 million already paid for the delivery to GSK of the final clinical study reports for the completed FURI, CARES, and NATURE clinical studies; up to $30 million for the achievement of two interim milestones associated with our resumption and continued performance of the MARIO study after the clinical hold is lifted; and $7.35 million for the successful completion of the Phase 3 MARIO study. In the case of each of the above milestones, such milestone events are defined in the GSK License Agreement, as amended by the Binding MOU. GSK will also pay royalties based on cumulative annual sales to us in the mid-single digit to mid-teen range. The royalty terms are not amended by the Binding MOU. Product Recall and Clinical Hold Following a review in 2023 by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, we became aware that exetimibe, a non-antibacterial beta-lactam drug substance, was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and we have not received any reports of adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, we recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study. We are in the process of destroying all of the patient-level and clinical drug product returned to date with the assistance of an experienced vendor and we are substantially complete with the product recall. In September 2023, after we announced our voluntary clinical hold, the FDA concurred with our voluntary hold and placed a clinical hold. We are working with the FDA to discuss paths for resolution of this issue. The clinical hold and recall affected the Phase 3 MARIO study. Our clinical stage compound, SCY-247, was not affected by these developments. In response to the hold on clinical studies of ibrexafungerp by the FDA due to possible beta-lactam cross contamination, we have entered into certain new manufacturing agreements with third-party contract manufacturers to produce new batches of ibrexafungerp which we believe will allow us to lift the clinical hold and restart the Phase 3 MARIO study. We are working on the resolution of this issue and we anticipate the restart of the Phase 3 MARIO study, after the FDA's lifting of the clinical hold, in the second quarter of 2025. SCY-247 We continue to progress the development activities for SCY-247. SCY-247 is a broad-spectrum antifungal with a potential oral and IV systemic therapeutic option for multiple drug-resistant pathogens. Some of these activities, including assessing the activity of the compound against multi-drug resistant pathogens such as Candida auris and Mucorales, are being supported by NIH grants. We initiated a Phase 1 study for SCY-247 in the fourth quarter of 2024. The Phase 1 study is a randomized, double-blind, placebo-controlled study of single and multiple ascending doses of oral SCY-247 in approximately 100 healthy subjects. The primary endpoint is safety and tolerability, and the secondary endpoint is pharmacokinetics. We expect to release the single ascending and multiple ascending dose data in the third quarter of 2025. Loan Agreement We, Hercules Capital, Inc. (Hercules Capital) and Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank) (SVBB) were parties to a Loan and Security Agreement dated as of May 13, 2021 (the Loan Agreement), pursuant to which Hercules Capital, SVBB and each of the other lenders from time-to-time party to the Loan Agreement (collectively, the Lenders) loaned to us $35 million. In connection with the entering into of the GSK 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 GSK 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 became due upon the earliest of (A) one business day 48 following receipt by us of the $90 million upfront payment payable to us under the GSK License Agreement, (B) June 1, 2023, or (C) the termination of the GSK License Agreement. Following the closing of the transactions under the GSK License Agreement, in May 2023, we received the upfront payment pursuant to the terms of the GSK License Agreement, which triggered the obligation of us to repay the amounts due under the terms of the First Amendment. In connection with the repayment of those amounts due, in May 2023, we and the Lenders executed a payoff letter confirming the amounts due under the First Amendment, and our confirmation that the Loan Agreement, as amended by the First Amendment, was terminated. Class Action Lawsuit On November 7, 2023, a securities class action was filed by Brian Feldman against us and certain of our executives in the United States District Court, District of New Jersey, alleging that, during the period from March 31, 2023 to September 22, 2023, we made materially false and/or misleading statements, as well as failed to disclose material adverse facts about our business, operations, and prospects, alleging specifically that we failed to disclose to investors: (1) that the equipment used to manufacture ibrexafungerp was also used to manufacture a non-antibacterial beta-lactam drug substance, presenting a risk of cross-contamination; (2) that we did not have effective internal controls and procedures, as well as adequate internal oversight policies to ensure that its vendor complied with current Good Manufacturing Practices (cGMP); (3) that, due to the substantial risk of cross-contamination, we were reasonably likely to recall its ibrexafungerp tablets and halt its clinical studies; and (4) as a result of the foregoing, our statements about our business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The complaint seeks unspecified damages, interest, fees and costs on behalf of all persons and entities who purchased and/or acquired shares of our common stock between March 31, 2023 to September 22, 2023. We have filed a motion to dismiss. On May 1, 2024, and again on June 4, 2024, purported shareholder derivative complaints were filed in the United States District Court, District of New Jersey. The complaints name our directors and certain of our officers and assert state and federal claims based on the same alleged misstatements as the securities class action complaint. These cases were consolidated and are currently stayed. We disagree with the allegations and we intend to defend these litigations vigorously. 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 investments which totaled $75.1 million as of December 31, 2024. As of December 31, 2024, our accumulated deficit was $376.5 million. We expect we will continue to incur significant research and development expense as we continue to execute our research and drug development strategy. 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. 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 or our “at-the-market” offering program pursuant to the Sales Agreement. Components of Operating Results Revenue Revenue consists of license agreement revenue associated with GSK and product sales of BREXAFEMME. Our product revenue, net comprised of sales of BREXAFEMME that we sold as principal given we control BREXAFEMME product until delivery to our wholesalers at which point control is transferred. Cost of Product Revenue Cost of product revenue consists primarily of inventory impairment expense, distribution, freight expenses, royalties due to Merck, and other manufacturing costs associated with 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: 49 • 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; • medical affairs related expense and salary that is incurred to discover, develop, or improve potential product candidates; • other costs in seeking regulatory approval of our products; and • allocated overhead. Ibrexafungerp and SCY-247 were the only key research and development projects 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 SCY-247, 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, and administrative support functions. Other expenses include facility-related 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, patent application and legal fees, 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 credits; and • interest income associated with our held-to-maturity investments and money market accounts. Income Tax Expense For the years ended December 31, 2024 and 2023, our income tax expense recognized consists primarily of income tax expense for U.S. federal and state income taxes. Results of Operations for the Years Ended December 31, 2024 and 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023, and period-to-period percentage change (dollars in thousands): 50 Years Ended December 31, 2024 2023 Period-to-Period Change Revenue: Product revenue, net $ — $ 1,044 (1,044 ) (100.0 )% License agreement revenue 3,746 139,097 (135,351 ) (97.3 %) Total revenue 3,746 140,141 (136,395 ) (97.3 %) Operating expenses: Cost of product revenue — 15,624 (15,624 ) (100.0 %) Research and development 26,405 30,928 (4,523 ) (14.6 )% Selling, general and administrative 14,458 20,920 (6,462 ) (30.9 )% Total operating expenses 40,863 67,472 (26,609 ) (39.4 )% (Loss) income from operations (37,117 ) 72,669 (109,786 ) (151.1 )% Other expense (income): Amortization of debt issuance costs and discount 1,726 2,994 (1,268 ) (42.4 )% Interest income (4,291 ) (3,954 ) (337 ) 8.5 % Interest expense 828 3,130 (2,302 ) (73.5 )% Other income (235 ) — (235 ) — Warrant liabilities fair value adjustment (13,812 ) 3,166 (16,978 ) (536.3 )% Derivative liabilities fair value adjustment (196 ) 154 (350 ) (227.3 )% Total other (income) expense (15,980 ) 5,490 (21,470 ) (391.1 )% (Loss) income before taxes (21,137 ) 67,179 (88,316 ) (131.5 )% Income tax (expense) (151 ) (138 ) (13 ) 9.4 % Net (loss) income $ (21,288 ) $ 67,041 $ (88,329 ) (131.8 )% Revenue. For the year ended December 31, 2024, revenue consists of the $3.7 million in license agreement revenue associated with the GSK License Agreement. For the year ended December 31, 2023, revenue primarily consists of the $130.1 million recognized upon the transfer of the license associated with the GSK License Agreement in May 2023. Cost of Product Revenues. For the year ended December 31, 2023, cost of product revenue consists primarily of the $14.5 million in impairment expense recognized in the period in addition to manufacturing, distribution, freight, and royalty costs associated with BREXAFEMME. Research and Development. For the year ended December 31, 2024, research and development expenses decreased to $26.4 million from $30.9 million for the year ended December 31, 2023. The decrease of $4.5 million, or 14.6%, was primarily driven by a decrease of $7.4 million in clinical expense, a decrease of $1.3 million in salary expense primarily associated with medical affairs, and a net decrease in other research and development expense of $0.4 million, offset in part by an increase of $3.9 million in chemistry, manufacturing, and controls (CMC) expense, and an increase of $0.7 million in preclinical expense. The $7.4 million decrease in clinical expense was primarily due to a $4.4 million decrease in expense for the Phase 3 MARIO study as a result of the clinical hold on ibrexafungerp, a $1.6 million decrease in the expense associated with the FURI, CARES, and SCYNERGIA studies which were substantially complete by the second quarter of 2024, a $1.0 million decrease in expense associated with a Phase 1 study of oral ibrexafungerp that was substantially completed in the prior period and is intended to support the potential NDA filing for the treatment of IC, and a $1.0 million decrease in expense associated with the Phase 1 lactation study, offset in part by a $0.8 increase in expense recognized in the year ended December 31, 2024 for the Phase 1 study for SCY-247 which was initiated in the fourth quarter of 2024. The $3.9 million increase in CMC expense is primarily associated with a $1.8 million expense for drug product purchased in the year ended December 31, 2024 and a $1.9 million increase in expense associated with the manufacturing of drug product for SCY-247 and ibrexafungerp. The $0.7 million increase in preclinical expense was primarily associated with certain preclinical costs associated with the continued development of SCY-247. Selling, General and Administrative . For the year ended December 31, 2024, selling, general and administrative expenses decreased to $14.5 million from $20.9 million for the year ended December 31, 2023. The decrease of $6.5 million, or 30.9%, was primarily driven by a decrease of $5.8 million in professional fees and a decrease of $0.9 million in commercial expense due to the costs incurred in the prior period associated with BREXAFEMME, offset by a net increase of $0.2 million in other selling, general, and administrative expense. The $5.8 million decrease in professional fees was primarily due to a $3.1 million expense incurred during the prior period for business development associated with the GSK License Agreement, a $0.8 million nonrecurring legal expense incurred in the prior period, a $0.7 million decrease in legal costs associated with the GSK License Agreement, and a $0.5 million expense recognized in the prior period to write off a deferred asset for certain commitment fees associated with the Loan Agreement. 51 Amortization of Debt Issuance Costs and Discount. For the years ended December 31, 2024 and 2023, we recognized $1.7 million and $3.0 million in amortization of debt issuance costs and discount, respectively. The decrease of $1.3 million, or 42%, was primarily driven by the recognition, in the prior period, of $1.9 million in amortization for the remaining debt issuance costs and discount associated with the Loan Agreement which was fully paid in May 2023. The debt issuance costs and discount for our March 2019 convertible notes primarily consisted of an allocated portion of advisory fees and other issuance costs and the initial fair value of the derivative liability. Interest Income. For the years ended December 31, 2024 and 2023, we recognized $4.3 million and $4.0 million, respectively, in interest income associated with our money market accounts and investments. The increase was primarily due to the interest income being earned on our money market funds and investments for the full period in 2024. Interest Expense. For the years ended December 31, 2024 and 2023, we recognized $0.8 million and $3.1 million, respectively, in interest expense associated with our Loan Agreement and convertible debt. The decrease in interest expense was primarily due to the repayment of the Loan Agreement in May 2023. Other Income. For the year ended December 31, 2024, we recognized $0.2 million in other income associated with certain research and development tax credits. Warrant Liabilities Fair Value Adjustment . For the years ended December 31, 2024 and 2023, we recognized a gain of $13.8 million and a loss of $3.2 million, respectively, for the fair value adjustment for warrant liabilities primarily due to the decrease and increase in our stock price during the periods, respectively. Derivative Liabilities Fair Value Adjustment. For the years ended December 31, 2024 and 2023, we recognized a gain of $0.2 million and a loss of $0.2 million, respectively, in the fair value adjustment related to the derivative liability primarily due to the decrease and increase in our stock price during the periods, respectively. Income Tax Expense. For the year ended December 31, 2024, we recognized $0.2 million in income tax expense primarily for U.S. federal income tax. Liquidity and Capital Resources Sources of Liquidity As of December 31, 2024, we had cash, cash equivalents, and investments of approximately $75.1 million, compared to cash, cash equivalents, and investments of $98.0 million as of December 31, 2023. We believe our capital resources are sufficient to fund our on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying consolidated financial statements. As of December 31, 2024, our accumulated deficit was $376.5 million. We anticipate that we will continue to incur losses for at least the next several years. Consistent with our operating plan, we expect to incur significant research and development expenses and selling, general and administrative expenses. As a result of our continued significant expenses, we may 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, strategic alliances and licensing or collaboration arrangements. Cash Flows The following table sets forth the significant sources and uses of cash for the years ended December 31, 2024 and 2023 (dollars in thousands): Years Ended December 31, 2024 2023 Cash, cash equivalents, and restricted cash, January 1 $ 34,593 $ 46,032 Net cash (used in) provided by operating activities (24,009 ) 60,159 Net cash provided by (used in) investing activities 6,150 (34,877 ) Net cash used in financing activities (139 ) (36,721 ) Net decrease in cash, cash equivalents, and restricted cash (17,998 ) (11,439 ) Cash, cash equivalents, and restricted cash, December 31 $ 16,595 $ 34,593 Operating Activities The $84.2 million decrease in net cash (used in) provided by operating activities for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to the $115.0 million in upfront and development milestones received under the GSK License Agreement in the prior period and the continued development costs associated with SCY-247 and ibrexafungerp in the year ended December 31, 2024, offset in part by the $10.0 million development milestone received under the GSK License Agreement in the year ended December 31, 2024. 52 Net cash used in operating activities of $24.0 million for the year ended December 31, 2024, primarily consisted of the $21.3 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $13.8 million, stock-based compensation expense of $3.3 million, accretion of investment discount of $1.3 million, and the amortization of debt issuance costs and discount of $1.7 million, plus a net favorable change in operating assets and liabilities of $7.3 million. The net favorable change in operating assets and liabilities of $7.3 million is due to a favorable change of $15.0 million due to the decrease in operating assets, offset by an unfavorable change of $7.7 million due to the decrease in operating liabilities The net $15.0 million decrease in operating assets is primarily due to a decrease of $9.9 million in the license agreement contract asset given the receipt of the $10.0 million development milestone associated with the GSK License Agreement in the year ended December 31, 2024, a $1.7 million decrease in the license agreement receivable associated with the GSK License Agreement which was collected in the year ended December 31, 2024, and a $3.4 million decrease in prepaid expenses, other assets, deferred costs, and other. The $3.4 million decrease in prepaid expenses, other assets, deferred costs, and other was primarily due to the collection of a $4.4 million unbilled receivable in the year ended December 31, 2024 from GSK. The net unfavorable change of $7.7 million in operating liabilities is primarily due to the $2.7 million decrease in accounts payable and a $3.7 million decrease in accrued expenses primarily due to the $2.1 million decrease in accrued research and development expenses and a $1.4 million decrease in accrued product recall. Net cash provided by operating activities of $60.2 million for the year ended December 31, 2023, primarily consisted of the $67.0 million net income adjusted for non-cash charges that included the loss on change in fair value of the warrant liabilities of $3.2 million, stock-based compensation expense of $2.6 million, accretion of investment discount of $1.3 million, the loss on change in fair value of the derivative liability of $0.2 million, and the amortization of debt issuance costs and discount of $3.0 million, plus a net unfavorable change in operating assets and liabilities of $30.6 million. The net unfavorable change in operating assets and liabilities was due to a net decrease in operating liabilities of $0.9 million and by a net increase of $31.5 million in operating assets. The net increase of $31.5 million in operating assets is primarily due to a $19.3 million increase in license agreement contract asset associated with the GSK License Agreement, an increase in license agreement receivable of $2.5 million, and an increase of $4.4 million in unbilled receivable due from GSK associated with the Binding MOU. The $0.9 million increase in operating liabilities was primarily due to an increase of $1.2 million in accounts payable and a decrease in accrued expenses, deferred revenue, other liabilities, and other of $0.3 million. The $0.3 million decrease in accrued expenses, deferred revenue, other liabilities, and other of $0.3 million was primarily due to the increase of deferred revenue of $3.9 million associated with GSK License Agreement and an increase of $1.8 million in accrued expenses primarily due to the $1.9 million increase for product recall, offset in part by a decrease of other liabilities of $5.8 million due to the Amplity deferred fees paid in February 2023. Investing Activities Net cash provided by investing activities of $6.2 million for the year ended December 31, 2024, consisted of purchases of $36.4 million and maturities of $42.6 million in investments. Net cash used in investing activities of $34.9 million for the year ended December 31, 2023, consisted of purchases of $85.5 million and maturities of $50.6 million in investments. Financing Activities Net cash used in financing activities of $0.1 million for the year ended December 31, 2024, consisted primarily of the $0.2 million in payments of offering costs in the year ended December 31, 2024. Net cash used in financing activities of $36.7 million for the year ended December 31, 2023, consisted primarily of the full repayment of the Loan Agreement with Hercules and SVBB in May 2023. Future Cash Needs and Funding Requirements We expect to incur expenses in connection with our efforts to further development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, product candidates. We anticipate that we will need substantial additional funding in connection with our continuing future operations. We are continually evaluating our operating plan and assessing the optimal cash utilization for our SCY-247 and 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 successfully achieve the development, regulatory, and commercial milestones under our GSK License Agreement; 53 • the progress, costs, and the clinical and preclinical research and development of ibrexafungerp and SCY-247; • 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; • 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, 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, 2024, 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 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 Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606), as well as ASC 808, Collaborative Arrangements . 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 ASC 606. For a distinct unit-of-account that is within the scope of ASC 606, we will apply all of the accounting requirements in ASC 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 ASC 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. 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, we first identify if the licenses are distinct from the 54 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. We assessed the terms of the GSK License Agreement and identified the following performance obligations which include: (1) the license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, in the GSK Territory, (2) the research and development activities for the MARIO study, and (3) performance obligations for the remaining research and development activities for the ongoing clinical and preclinical studies of ibrexafungerp. For the GSK License Agreement, we allocate the transaction price based on relative standalone selling prices of each of the performance obligations. We developed the estimated standalone selling price for the license using a Monte Carlo valuation analysis and for the research and development activities, we utilized the estimate of costs to be incurred to fulfill its obligations associated with the performance of the research and development activities, plus a reasonable margin. In developing this estimate for the license, we applied significant judgment in the determination of the significant assumptions relating to forecasted future cash flows and discount rates. Product Recall We establish reserves for product recalls on a product-specific basis when circumstances giving rise to the recall become known. We estimate product recall from consumers and customers across distribution channels, utilizing third-party data and other assumptions, and these are recorded within gross-to-net expenses on our consolidated statement of operations. Additionally, we estimate costs for any additional fees, including but not limited to freight and destruction charges for returned products and costs incurred by third party vendors. These expenses are recorded within selling, general, and administrative expenses within our consolidated statement of operations as they are in excess of the initial revenue recognized. These estimates are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses. Significant changes in the assumptions used to develop estimates for product recall reserves could affect key financial information, including inventory, accrued liabilities, net sales, gross profit, and net income (loss). 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 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. 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: 55 • 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, 2024 and 2023 are set forth below: Employee Stock Options Years Ended December 31, 2024 2023 Weighted average risk-free interest rate 4.04 % 3.98 % Weighted average expected term (in years) 6.02 6.04 Weighted average expected volatility 80.94 % 74.77 % Non-Employee Stock Options Years Ended December 31, 2024 2023 Weighted average risk-free interest rate 4.26 % 3.89 % Weighted average expected term (in years) 5.50 5.50 Weighted average expected volatility 83.83 % 80.12 % 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, 2024 2023 Research and development $ 988 $ 873 Selling, general and administrative 2,358 1,751 Total $ 3,346 $ 2,624 On December 31, 2024, the aggregate intrinsic value of outstanding options to purchase shares of our common stock was zero, based upon the $1.21 closing sales price per share of our common stock as reported on the Nasdaq Global Market on that date. Warrant Liabilities We account for the outstanding warrants associated with the December 2020 and April 2022 public offerings 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 common stock given we have sufficient history to support the expected terms of the warrants and implied volatility. At December 31, 2024, the Level 3 volatility utilized in the Black-Scholes model to fair value the April 2022 public offering warrants was 83.4%. 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. 56 ITEM 8. CONSOLIDATED FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 58 Consolidated Balance Sheets as of December 31, 2024 and 2023 59 Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 60 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2024 and 2023 61 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 62 Notes to the Consolidated Financial Statements 63 57 REPORT OF INDEPENDENT R EGISTERED 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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. 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 Matters Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Deloitte & Touche LLP Morristown, New Jersey March 12, 2025 We have served as the Company's auditor since 2000. 58 SCYNEXIS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 16,051 $ 34,050 Short-term investments (See Note 3) 43,249 40,312 Prepaid expenses and other current assets (See Note 4) 2,184 5,548 License agreement receivable 753 2,463 License agreement contract asset 9,509 19,363 Restricted cash 435 380 Total current assets 72,181 102,116 Investments (See Note 3) 15,846 23,594 Deferred offering costs 417 175 Restricted cash 109 163 Operating lease right-of-use asset (Note 7) 2,090 2,364 Total assets $ 90,643 $ 128,412 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,569 $ 7,149 Accrued expenses (See Note 5) 3,793 7,495 Deferred revenue, current portion 1,642 1,189 Operating lease liability, current portion (Note 7) 407 340 Warrant liabilities — 130 Convertible debt and derivative liability (Note 6) 13,688 — Total current liabilities 24,099 16,303 Deferred revenue 1,294 2,727 Warrant liabilities 7,998 21,680 Convertible debt and derivative liability (Note 6) — 12,159 Operating lease liability (Note 7) 2,175 2,581 Total liabilities 35,566 55,450 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.001 par value, authorized 5,000,000 shares as of December 31, 2024 and December 31, 2023; 0 shares issued and outstanding as of December 31, 2024 and December 31, 2023 — — Common stock, $ 0.001 par value, 150,000,000 shares authorized as of December 31, 2024 and 2023; 37,973,991 and 37,207,799 shares issued and outstanding as of December 31, 2024, and December 31, 2023, respectively 41 40 Additional paid-in capital 431,571 428,169 Accumulated deficit ( 376,535 ) ( 355,247 ) Total stockholders’ equity 55,077 72,962 Total liabilities and stockholders’ equity $ 90,643 $ 128,412 The accompanying notes are an integral part of the financial statements. 59 SCYNEXIS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Years Ended December 31, 2024 2023 Revenue: Product revenue, net $ — $ 1,044 License agreement revenue 3,746 139,097 Total revenue 3,746 140,141 Operating expenses: Cost of product revenue — 15,624 Research and development 26,405 30,928 Selling, general and administrative 14,458 20,920 Total operating expenses 40,863 67,472 (Loss) income from operations ( 37,117 ) 72,669 Other expense (income): Amortization of debt issuance costs and discount 1,726 2,994 Interest income ( 4,291 ) ( 3,954 ) Interest expense 828 3,130 Other income ( 235 ) — Warrant liabilities fair value adjustment ( 13,812 ) 3,166 Derivative liability fair value adjustment ( 196 ) 154 Total other (income) expense ( 15,980 ) 5,490 (Loss) income before taxes ( 21,137 ) 67,179 Income tax (expense) ( 151 ) ( 138 ) Net (loss) income $ ( 21,288 ) $ 67,041 Net (loss) income per share attributable to common stockholders – basic Net (loss) income per share – basic $ ( 0.44 ) $ 1.40 Net (loss) income per share attributable to common stockholders – diluted Net (loss) income per share – diluted $ ( 0.44 ) $ 1.39 Weighted average common shares outstanding – basic and diluted Basic 48,513,073 47,852,833 Diluted 48,513,073 48,390,582 The accompanying notes are an integral part of the financial statements. 60 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, 2022 32,682,342 $ 36 $ 425,485 $ ( 422,288 ) $ 3,233 Net income — — — 67,041 67,041 Stock-based compensation expense — — 2,624 — 2,624 Common stock issued through employee stock purchase plan 28,896 — 42 — 42 Common stock issued, net of expenses 4,150,400 4 — — 4 Common stock issued for vested restricted stock units 346,161 — 18 — 18 Balances as of December 31, 2023 37,207,799 $ 40 $ 428,169 $ ( 355,247 ) $ 72,962 Net loss — — — ( 21,288 ) ( 21,288 ) Stock-based compensation expense — — 3,346 — 3,346 Common stock issued through employee stock purchase plan 45,593 — 56 — 56 Common stock issued for vested restricted stock units 720,599 1 — — 1 Balances as of December 31, 2024 37,973,991 $ 41 $ 431,571 $ ( 376,535 ) $ 55,077 The accompanying notes are an integral part of the financial statements. 61 SCYNEXIS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2024 2023 Cash flows from operating activities: Net (loss) income $ ( 21,288 ) $ 67,041 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization — 580 Stock-based compensation expense 3,346 2,624 Accretion of investment discount ( 1,340 ) ( 1,340 ) Amortization of debt issuance costs and discount 1,726 2,994 Change in fair value of warrant liabilities ( 13,812 ) 3,166 Change in fair value of derivative liability ( 196 ) 154 Noncash operating lease expense for right-of-use asset 272 230 Inventory impairment expense — 14,577 Write off of deferred asset for commitment fees — 514 Prepayment fee for loan payable payment — 263 Changes in operating assets and liabilities: Prepaid expenses, other assets, deferred costs, and other 3,388 ( 2,971 ) License agreement contract asset 9,854 ( 19,363 ) License agreement receivable 1,710 ( 2,463 ) Accounts receivable — 2,101 Inventory — ( 8,849 ) Accounts payable ( 2,650 ) 1,172 Accrued expenses ( 3,701 ) 1,866 Deferred revenue ( 979 ) 3,916 Other liabilities and other ( 339 ) ( 6,053 ) Net cash (used in) provided by operating activities ( 24,009 ) 60,159 Cash flows from investing activities: Purchase of investments ( 36,417 ) ( 85,480 ) Maturity of investments 42,567 50,603 Net cash provided by (used in) investing activities 6,150 ( 34,877 ) Cash flows from financing activities: Payments of offering costs ( 195 ) ( 135 ) Payments of loan payable — ( 36,383 ) Payment of loan payable prepayment fee — ( 263 ) Proceeds from employee stock purchase plan issuances 56 42 Repurchase of shares to satisfy tax withholdings — 18 Net cash used in financing activities ( 139 ) ( 36,721 ) Net decrease in cash, cash equivalents, and restricted cash ( 17,998 ) ( 11,439 ) Cash, cash equivalents, and restricted cash at beginning of period 34,593 46,032 Cash, cash equivalents, and restricted cash at end of period $ 16,595 $ 34,593 Supplemental cash flow information: Cash paid for interest $ 840 $ 3,248 Cash received for interest $ 3,296 $ 3,520 Noncash financing and investing activities: Deferred offering and issuance costs included in accounts payable $ 110 $ 40 Deferred offering costs reclassified to additional paid-in capital $ — $ 73 The accompanying notes are an integral part of the financial statements. 62 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 proprietary class of enfumafungin-derived antifungal compounds (“fungerps") as broad-spectrum, systemic antifungal agents for multiple fungal indications. Ibrexafungerp is the first representative of this novel class of antifungals with additional assets from the “fungerp” family under development, including SCY-247 which is currently in clinical stages of development. 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, and 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 March 2023, the Company entered into a license agreement (as amended in December 2023, the "GSK License Agreement") with GlaxoSmithKline Intellectual Property (No. 3) Limited ("GSK") 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 9 for further details. Following a review in 2023 by GSK of the manufacturing process and equipment at the vendor that manufactures the ibrexafungerp drug substance, the Company became aware that exetimibe, a non-antibacterial beta-lactam drug substance, was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound and the Company has not received reports of any adverse events due to the possible beta-lactam cross contamination. Nonetheless, out of an abundance of caution and in line with GSK’s recommendation, the Company recalled BREXAFEMME® (ibrexafungerp tablets) from the market and placed a temporary hold on clinical studies of ibrexafungerp, including the Phase 3 MARIO study. The clinical hold and recall affected the Company's Phase 3 MARIO study. The hold did not impact the completed FURI, CARES, VANQUISH and SCYNERGIA clinical studies. The Company's clinical stage compound, SCY-247, is not affected by these developments. The Company is in the process of destroying all of the patient-level and clinical drug product returned to date with the assistance of an experienced vendor and the Company is substantially complete with the product recall. In September 2023, after the Company announced its voluntary clinical hold, the FDA concurred with the Company's voluntary hold and placed a clinical hold. The Company is working on the resolution of this issue and it anticipates the restart of the Phase 3 MARIO study, after the FDA's lifting of the clinical hold, in the second quarter of 2025. The Company had an accumulated deficit of $ 376.5 million at December 31, 2024. The Company's capital resources primarily comprised cash and cash equivalents and investments of $ 75.1 million at December 31, 2024. While the Company believes its capital resources are sufficient to fund the Company’s on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying consolidated financial statements, the Company's liquidity could be materially affected over this period by: (1) its ability to raise additional capital through equity offerings, debt financings, or other non-dilutive third-party funding; (2) costs associated with new or existing strategic alliances, or licensing and collaboration arrangements; (3) negative regulatory events or unanticipated costs related to its development of ibrexafungerp and SCY-247; (4) its ability to successfully achieve the development, regulatory, and commercial milestones under its GSK License Agreement; and (5) any other unanticipated material negative events or costs. One or more of these events or costs could materially affect the Company’s liquidity. If the Company is unable to meet its obligations when they become due, the Company may have to delay expenditures, reduce the scope of its research and development programs, or make significant changes to its operating plan. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation. 63 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 the identification of performance obligations in licensing arrangements; estimates for the relative standalone selling price and measure of progress under the input method for the GSK License Agreement; estimates for product recall reserves; 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 value of the outstanding warrants 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, investments, license agreement receivable, and the license agreement contract asset. The Company's money market accounts (recognized as cash and cash equivalents) and investments are with what the Company believes to be high quality issuers. The Company has not experienced any significant 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 $ 16.6 million and $ 34.6 million as of December 31, 2024 and 2023, respectively. Investments The Company's held-to-maturity investments in corporate and agency bonds 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. Allowance for Credit Losses The Company reviews its held-to-maturity investments for credit losses on a collective basis by major security type and in line with the Company's investment policy. As of December 31, 2024, the Company's held-to-maturity investments were in corporate bonds and agency bonds, are highly rated, and the Company does not have a history of credit losses in these investments. The Company reviews the credit quality of its license agreement receivable and license agreement contract asset by monitoring the aging of its accounts receivable, the history of write offs for uncollectible accounts, and the credit quality of its significant customers, the current economic environment/macroeconomic trends, supportable forecasts, and other relevant factors. The Company's license agreement receivable and license agreement contract asset are with a customer that does not have a history of uncollectability nor a history of significantly aged accounts receivables. As of December 31, 2024 and 2023, the Company did no t recognize a credit loss allowance for its investments, license agreement receivable, or license agreement contract asset. Revenue Recognition The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 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 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. 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 as well as ASC 808, Collaborative Arrangements . 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 ASC 606. For a distinct unit of account that is within the scope of ASC 606, the Company applies all of the accounting requirements in ASC 606 to that unit of account, including the recognition, 64 measurement, presentation and disclosure requirements. For a distinct unit of account that is not within the scope of ASC 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 license arrangements 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. For the license of intellectual property that is distinct, the Company recognizes revenue from consideration allocated to the license when the license is transferred and the customer is able to benefit from the license. 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. At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being reached. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones and any related constraint, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which will affect revenue in the period of adjustment. In an arrangement with multiple performance obligations, the Company develops estimates and assumptions that require judgment to determine the underlying standalone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the standalone selling price(s) include estimates regarding forecasted cash flows, discount rates, and estimates of costs to be incurred to fulfill its obligations associated with the performance of the research and development activities. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a performance obligation and, therefore, license agreement revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price. The Company constrains variable consideration to the extent that it is probable that it will not result in a significant revenue reversal when the uncertainty associated with the variable consideration is subsequently resolved. The Company will recognize consideration related to sales-based milestone and royalties when the subsequent sales occur pursuant to the royalty exception under ASC 606 because the license is the predominant item to which the royalties or sales-based milestone relate. 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 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 specific 65 lot expiration dates and industry data for comparable products in the market. 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 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. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer. 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 . Product Recall The Company establishes reserves for product recalls on a product-specific basis when circumstances giving rise to the recall become known. The Company estimates product recalls from consumers and customers across distribution channels, utilizing third-party data and other assumptions, and these are recorded as a reduction to revenue on the Company’s consolidated statement of operations. Additionally, the Company estimates costs for any additional fees, including but not limited to freight and destruction charges for recalled products and costs incurred by third party vendors. These expenses are recorded within selling, general, and administrative expenses within the Company’s consolidated statement of operations as they are in excess of the initial revenue recognized. These estimates are updated and reevaluated each period and the related reserves are adjusted when these factors indicate that the recall reserves are either insufficient to cover or exceed the estimated product recall expenses. Significant changes in the assumptions used to develop estimates for product recall reserves could affect key financial information, including inventory, accrued liabilities, net sales, gross profit, and net (loss) income. As of December 31, 2024 and 2023, the Company maintained a products recall reserve of $ 0.6 million and $ 1.9 million, respectively, specifically for the voluntary recall of certain lots of BREXAFEMME. The Company reviews the product recall reserve for adequacy and adjusts the product recall accrual, if necessary, based on actual experience and estimated costs to be incurred. Cost of Product Revenues The cost of product revenues consists primarily of inventory impairment expense, distribution, freight costs, royalty costs, and other manufacturing costs. In September 2023, the Company announced after becoming aware of a risk of potential cross-contamination during the manufacture of ibrexafungerp, the Company was recalling BREXAFEMME from the market and placing a temporary hold on the clinical studies of ibrexafungerp. In December 2023, the Company and GSK entered into a Binding MOU for amendment to the GSK License Agreement. The GSK License Agreement was being amended in connection with the delay in the commercialization of BREXAFEMME and further clinical development of ibrexafungerp associated with this event. 66 In evaluating the recoverability of the Company's raw material inventory on hand as of December 31, 2023 given the product recall and Binding MOU, the Company considered the likelihood that revenue will be obtained from the future sale of the related inventory, discussions with regulatory agencies, and other information currently available to the Company. For the year ended December 31, 2023, the Company recognized an impairment loss on the recoverability of its raw material inventory of approximately $ 14.6 million given the Company does not believe the inventory can be sold for commercial or development activities. The $ 14.6 million impairment expense has been recognized in cost of product revenue in the accompanying statement of operations. Warrant Liabilities The Company accounts for the warrants associated with the December 2020 public offering and April 2022 Public Offering 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. 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 derivative liability in the Company’s balance sheet in accordance with 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 6 and 12 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, certain 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 and SCY-247 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 and defending the Company's existing patent portfolio, are recorded as selling, general, and administrative 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 67 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 was being amortized over the term of the loan payable using the effective interest method until the loan payable was fully repaid in May 2023. 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) Income per Share of Common Stock The Company calculates net (loss) income per common share in accordance with ASC 260, Earnings Per Share . Basic net (loss) income per common share for the years ended December 31, 2024 and 2023 was determined by dividing net (loss) income 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) income per common share for the years ended December 31, 2024 and 2023 includes the outstanding prefunded warrants to purchase 7,516,267 and 3,200,000 shares of common stock issued in the April 2022 Public Offering and December 2020 public offering, respectively. Diluted net (loss) income per common share for the years ended December 31, 2024 and 2023 was determined as follows (in thousands, except share and per share amounts): Years Ended December 31, 2024 2023 Net (loss) income allocated to common shares $ ( 21,288 ) $ 67,041 Weighted average common shares outstanding – basic 48,513,073 47,852,833 Dilutive effect of restricted stock units — 537,749 Weighted average common shares outstanding – diluted 48,513,073 48,390,582 Net (loss) income per share – diluted $ ( 0.44 ) $ 1.39 68 The following potentially dilutive shares of common stock and outstanding restricted stock units that contain certain performance contingencies have not been included in the computation of diluted net (loss) income per share for the years ended December 31, 2024 and 2023, as the result would be anti-dilutive or the performance contingencies have not been met: Years Ended December 31, 2024 2023 Outstanding stock options 2,905,029 1,867,795 Outstanding restricted stock units 3,120,374 400,000 Warrants to purchase common stock associated with December 2020 public offering - Series 2 — 6,800,000 Warrants to purchase common stock associated with April 2022 Public Offering 15,000,000 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 198,811 198,811 Warrants to purchase common stock associated with Danforth 50,000 50,000 Total 22,412,414 25,454,806 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 net (loss) income 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, drug development. See Note 14 for further details. Reclassification of Prior Year Amounts Certain prior year amounts within the accrued expenses and income tax footnote disclosures have been reclassified for consistency with the current year presentation. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , which introduced new guidance on disclosures for reportable segments and significant segment expenses, including for entities with a single reportable segment. This guidance is effective for the Company for annual reporting periods beginning January 1, 2024 and interim periods beginning January 1, 2025. The Company adopted ASU 2023-07 in the current annual period. 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 . 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 adopted ASU 2020-06 in the current annual period. Recently Issued Accounting Pronouncements In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) , Disaggregation of Income Statement Expenses , which introduced new guidance on disclosures for specified costs and expenses. This guidance is effective for the Company for annual reporting periods beginning January 1, 2027. The Company is currently evaluating the impact ASU 2024-03 will have on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures , which introduced new guidance on disclosures for income taxes, including enhancements to the rate reconciliation and income taxes paid disclosures. This guidance is effective for the Company for annual reporting periods beginning January 1, 2025. As a smaller reporting company, the Company is currently evaluating the impact ASU 2023-09 will have on its consolidated financial statements. 69 3. Investments I nvestments consisted of the following (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Fair Value As of December 31, 2024 Maturities < 1 Year Corporate bonds $ 41,535 $ 73 $ ( 11 ) $ 41,597 Agency bonds 1,714 5 — 1,719 Total short-term investments $ 43,249 $ 78 $ ( 11 ) $ 43,316 Maturities > 1 Year Corporate bonds $ 15,846 $ 3 $ ( 41 ) $ 15,808 Total investments $ 15,846 $ 3 $ ( 41 ) $ 15,808 As of December 31, 2023 Maturities < 1 Year Corporate bonds $ 35,286 $ 25 $ ( 13 ) $ 35,298 Agency bonds 5,026 6 — 5,032 Total short-term investments $ 40,312 $ 31 $ ( 13 ) $ 40,330 Maturities > 1 Year Corporate bonds $ 23,594 $ 143 $ ( 9 ) $ 23,728 Total investments $ 23,594 $ 143 $ ( 9 ) $ 23,728 The Company carries investments at amortized cost. The fair value of the corporate and agency bonds is determined based on “Level 2” inputs, which consist of quoted prices for similar assets in active markets. The Company has evaluated the unrealized loss position in the corporate bonds as of the balance sheet dates 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, 2024 2023 Prepaid research and development services $ 514 $ 196 Prepaid insurance 267 264 Other prepaid expenses 169 182 Other current assets 1,234 4,906 Total prepaid expenses and other current assets $ 2,184 $ 5,548 5. Accrued Expenses Accrued expenses consisted of the following (in thousands): December 31, 2024 2023 Accrued research and development expenses $ 684 $ 2,830 Accrued employee bonus compensation 1,763 1,692 Other accrued expenses 788 1,040 Accrued product recall 558 1,933 Total accrued expenses $ 3,793 $ 7,495 6. Borrowings 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 70 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, 2024 and 2023, the Company’s March 2019 Notes consists of the convertible debt balance of $ 13.7 million and $ 12.0 million and the bifurcated embedded conversion option derivative liability of zero and $ 0.2 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 the years ended December 31, 2024 and 2023, the Company recognized a gain of $ 0.2 million and an expense of $ 0.2 million on the fair value adjustment for the derivative liability, respectively. For the years ended December 31, 2024 and 2023, the Company recognized $ 1.7 million and $ 1.0 million, respectively, in amortization of debt issuance costs and discount, related to the March 2019 Notes. 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 “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. Loan Agreement The Company was party to a Loan and Security Agreement, dated May 13, 2021, with Hercules Capital, Inc. ("Hercules Capital") and Silicon Valley Bridge Bank, N.A. (as successor to Silicon Valley Bank) (“SVBB”) (the "Loan Agreement"), pursuant to which Hercules Capital, SVBB and each of the other lenders from time-to-time party to the Loan Agreement (collectively, the “Lenders”) loaned to the Company $ 35.0 million as of March 31, 2023. In connection with the entering into of the GSK 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 the Company entering into the GSK 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 (approximately $ 35.4 million), (ii) the prepayment fee payable under the Loan Agreement ($ 262,500 ), (iii) the final payment payable under the 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. Upon receipt by the Company of the $ 90.0 million upfront payment from GSK in May 2023, all amounts payable under the Loan Agreement were fully paid. In connection with the repayment of those amounts due, in May 2023, the Company and the Lenders executed a payoff letter confirming the amounts due under the Loan Agreement, and the Company’s confirmation that the Loan Agreement was terminated. During the year ended December 31, 2023, the Company recognized $ 1.9 million in amortization for the remaining debt issuance costs and discount associated with the loan payable with Hercules and SVBB which was fully repaid by the Company in May 2023. 7. 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 71 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 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, 2024 2023 Operating lease cost $ 664 $ 664 Variable lease cost 62 188 Total operating lease expense $ 726 $ 852 Cash paid for amounts included in the measurement of operating lease liability $ 730 $ 715 December 31, 2024 December 31, 2023 Remaining Lease term (years) 4.58 5.59 Discount rate 15 % 15 % Future minimum lease payments for all operating leases as of December 31, 2024 are as follows (in thousands): December 31, 2024 2025 744 2026 759 2027 774 2028 790 2029 466 Total $ 3,533 The presentation of the operating lease liability as of December 31, 2024 is as follows (in thousands): December 31, 2024 Present value of future minimum lease payments $ 2,582 Operating lease liability, current portion $ 407 Operating lease liability, long-term portion 2,175 Total operating lease liability $ 2,582 Difference between future minimum lease payments and discounted cash flows $ 951 License Arrangements with Potential Future Expenditures As of December 31, 2024, 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 72 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 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. Legal Proceedings On November 7, 2023, a securities class action was filed by Brian Feldman against the Company and certain of the Company's executives in the United States District Court, District of New Jersey, alleging that, during the period from March 31, 2023 to September 22, 2023, the Company made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company's business, operations, and prospects, alleging specifically that the Company failed to disclose to investors: (1) that the equipment used to manufacture ibrexafungerp was also used to manufacture a non-antibacterial beta-lactam drug substance, presenting a risk of cross-contamination; (2) that the Company did not have effective internal controls and procedures, as well as adequate internal oversight policies to ensure that its vendor complied with current Good Manufacturing Practices (cGMP); (3) that, due to the substantial risk of cross-contamination, the Company were reasonably likely to recall its ibrexafungerp tablets and halt its clinical studies; and (4) as a result of the foregoing, the Company's statements about its business, operations, and prospects were materially misleading and/or lacked a reasonable basis. The complaint seeks unspecified damages, interest, fees and costs on behalf of all persons and entities who purchased and/or acquired shares of the Company's common stock between March 31, 2023 to September 22, 2023. The Company has filed a motion to dismiss. On May 1, 2024, and again on June 4, 2024, purported shareholder derivative complaints were filed in the United States District Court, District of New Jersey. The complaints name the Company’s directors and certain of its officers and assert state and federal claims based on the same alleged misstatements as the securities class action complaint. These cases were consolidated and are currently stayed. The Company disagrees with the allegations and intends to defend these litigations vigorously. The Company has not recognized any expense for these contingencies . 73 8. 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, 2024 and 2023; 37,973,991 and 37,207,799 shares were issued and outstanding at December 31, 2024 and 2023, respectively. Shares Reserved for Future Issuance The Company had reserved shares of common stock for future issuance as follows: December 31, 2024 2023 Outstanding stock options 2,905,029 1,867,795 Outstanding restricted stock units 3,120,374 1,886,374 Warrants to purchase common stock associated with December 2020 public offering - Series 2 — 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 15,000,000 Prefunded warrants to purchase common stock associated with April 2022 Public Offering 7,516,267 7,516,267 Warrants to purchase common stock associated with Loan Agreement 198,811 198,811 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 11) — 848,202 For possible future issuance under 2024 Plan (Note 11) 5,864,196 — For possible future issuance under employee stock purchase plan 1,431,393 1,474,045 For possible future issuance under 2015 Plan (Note 11) 637,050 633,590 Total common shares reserved for future issuance 41,061,320 40,613,284 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. 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, 2024 and 2023. Common Stock Sales Agreement On November 6, 2024, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may sell from time to time, at its option, up to an aggregate of $ 50.0 million of shares of its common stock, par value $ 0.001 , through Cantor, as sales agent. Sale of the common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at-the-market” offering as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on The Nasdaq Global Market and any other trading market for the common stock, and sales to or through a market maker other than on an exchange. The Company is not obligated to make any sales of common stock under the Sales Agreement. The offering of common stock pursuant to the Sales Agreement will terminate upon (a) the sale of all of the shares 74 of common stock subject to the Sales Agreement or (b) the termination of the Sales Agreement by the Company or by Cantor. During the year ended December 31, 2024, the Company sold zero shares of its common stock under the Sales Agreement. 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. 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 years ended December 31, 2024 and 2023 given their nominal exercise price. For the years ended December 31, 2024 and 2023, zero and 4,150,400 of the prefunded warrants from the April 2022 Public Offering were exercised for total proceeds of zero and $ 4,150 , respectively. Public Offering Warrant Liabilities The outstanding warrants associated with the December 2020 public offering 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 year ended December 31, 2024 and 2023, the Company recognized a gain of $ 13.8 million and a loss of $ 3.2 million , respectively, due to the change in fair value of the warrant liabilities. As of December 31, 2024 and 2023, the fair value of the warrant liabilities were $ 13.7 million and $ 21.8 million, respectively. 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. 9. Revenue Product Revenue, Net Net product revenue was zero and $ 1.0 million for the years ended December 31, 2024 and 2023, 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 44 %, 28 %, and 26 % of the Company’s gross revenue for the year ended December 31, 2023. 75 The following table summarizes activity in each of the Company’s product revenue provision and allowance categories as of December 31, 2024 and 2023 (in thousands): Discounts and Chargebacks (1) Product Returns (2) Rebates and Incentives (3) Product Recall (4) Total Balance as of December 31, 2022 $ 255 $ 73 $ 1,213 $ — $ 1,541 Provision related to current period revenue 1,256 307 1,320 3,057 5,940 Changes in estimate related to prior period revenue ( 11 ) 1,185 ( 86 ) — 1,088 Credit/payments ( 1,500 ) ( 1,529 ) ( 2,358 ) ( 1,125 ) ( 6,512 ) Balance as of December 31, 2023 $ — $ 36 $ 89 $ 1,932 $ 2,057 Discounts and Chargebacks (1) Product Returns (2) Rebates and Incentives (3) Product Recall (4) Total Balance as of December 31, 2023 $ — $ 36 $ 89 $ 1,932 $ 2,057 Changes in estimate related to prior period revenue — 51 ( 26 ) — 25 Credit/payments — — ( 44 ) ( 1,374 ) ( 1,418 ) Balance as of December 31, 2024 $ — $ 87 $ 19 $ 558 $ 664 (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. (4) Provisions for product recall are deducted from gross revenues to the extent of revenue recorded related to the recalled product and are included in accrued expenses on the Company’s consolidated balance sheet. GSK License Agreement On March 30, 2023 and as amended in December 2023, the Company entered into the GSK License Agreement. Pursuant to the terms of the GSK License Agreement, the Company granted GSK an exclusive (even as to the Company 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 parties closed the transactions contemplated by the GSK License Agreement in May 2023. 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 original GSK License Agreement, the Company received a nonrefundable upfront payment of $ 90 million in May 2023. The Company was initially 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 • 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. As previously disclosed, the Company became aware that a non-antibacterial beta-lactam drug substance was manufactured using equipment common to the manufacturing process for ibrexafungerp. Current FDA draft guidance recommends segregating the manufacture of non-antibacterial beta-lactam compounds from other compounds since beta-lactam 76 compounds have the potential to act as sensitizing agents that may trigger hypersensitivity or an allergic reaction in some people. In the absence of the recommended segregation, there is a risk of cross contamination. It is not known whether any ibrexafungerp has been contaminated with a beta-lactam compound. Nonetheless, in light of this risk and out of an abundance of caution, BREXAFEMME (ibrexafungerp tablets) was recalled from the market and clinical studies of ibrexafungerp were placed on temporary hold. On December 26, 2023, the Company and GSK entered into a binding memorandum of understanding ("Binding MOU") for amendment to the GSK License Agreement. The GSK License Agreement was amended in connection with the delay in the commercialization of BREXAFEMME and further clinical development of ibrexafungerp associated with this event. Under the terms of the updated GSK License Agreement, as amended by Binding MOU, the Company is now eligible to receive potential: • regulatory approval milestone payments of up to $ 49 million (revised from up to $ 70 million as provided in the GSK License Agreement); • commercial milestone payments of up to $ 57.5 million based on first commercial sale in invasive candidiasis (U.S./EU) (revised from up to $ 115 million as provided in the GSK License Agreement); and • and sales milestone payments of up to $ 179.5 / $ 169.75 / $ 145.5 million (depending on the date of GSK’s relaunch of BREXAFEMME in the U.S.) (revised from up to $ 242.5 million as provided in the GSK License Agreement). These milestones are based on annual net sales in the GSK Territory, with a total of $ 64 / $ 54.25 / $ 46.5 million to be paid upon achievement of multiple sales thresholds up through $200 million; a total of $ 45.5 / $ 45.5 / $ 39 million to be paid upon achievement of multiple sales thresholds between $300 million and $500 million; and $ 35 / $ 35 / $ 30 million to be paid at each sales threshold of $750 million and $1 billion. The Company will continue to be responsible for the execution and costs of the ongoing clinical studies of ibrexafungerp, which at this stage is only the Phase 3 MARIO study, but will have the potential to receive up to $ 72.35 million in development milestones (revised from up to $ 75.5 million as provided in the GSK License Agreement), which comprise: $ 25 million already paid; $ 10 million already paid for the delivery to GSK of the final clinical study reports for the completed FURI, CARES, and NATURE clinical studies; up to $ 30 million for the achievement of two interim milestones associated with the Company's resumption and continued performance of the Phase 3 MARIO study after the clinical hold is lifted; and $ 7.35 million for the successful completion of the Phase 3 MARIO study. In the case of each of the above milestones, such milestone events are defined in the GSK License Agreement, as amended by the Binding MOU. GSK will also pay royalties based on cumulative annual sales to us in the mid-single digit to mid-teen range. The royalty terms are not amended by the Binding MOU. 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 was established between GSK and the Company to coordinate and review ongoing development activities of ibrexafungerp. Unless earlier terminated, the GSK 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 GSK License Agreement upon an uncured material breach by, or bankruptcy of, GSK. GSK has the right to terminate the GSK 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 Company evaluated the GSK License Agreement in accordance with ASC 606 as it includes a customer-vendor relationship as defined under ASC 606 and meets the criteria to be considered a contract. The Company assessed the terms of the GSK License Agreement and identified the following performance obligations which include: (1) the license for the development, manufacture, and commercialization of ibrexafungerp, including the approved product BREXAFEMME, in the GSK Territory, (2) the research and development activities for the Phase 3 MARIO study, and (3) performance obligations for the remaining research and development activities for the ongoing clinical and preclinical studies of ibrexafungerp. The Company considers the future potential development, regulatory, and commercial milestone payments as well as sales-based milestone and royalties to be variable consideration. The Company constrains variable consideration to the extent that it is probable that it will not result in a significant revenue reversal when the uncertainty associated with the variable consideration is subsequently resolved. The Company will recognize consideration related to sales-based milestone and royalties when the subsequent sales occur pursuant to the royalty exception under ASC 606 because the license is the predominant item to which the royalties or sales-based milestone relate. The initial total transaction price was $ 136.1 million upon closing of the GSK License Agreement in May 2023, which included the initial payment of $ 90.0 million and $ 45.0 million in success-based development milestones. Given the uncertain nature of these payments, the remaining potential development, regulatory, and commercial milestone payments from the GSK License Agreement are not included in the transaction price as they were determined to be fully constrained under ASC 606. 77 The Company allocated the $ 136.1 million transaction price based on relative standalone selling prices of each of the performance obligations as $ 130.1 million for the license, $ 4.8 million for the research and development activities for the Phase 3 MARIO study and $ 1.2 million for the remaining ongoing clinical and preclinical studies of ibrexafungerp. The Company developed the estimated standalone selling price for the license using a Monte Carlo valuation analysis and for the research and development activities, the Company's utilized the estimate of costs to be incurred to fulfill its obligations associated with the performance of the research and development activities, plus a reasonable margin. In developing this estimate for the license, the Company applied significant judgment in the determination of the significant assumptions relating to forecasted future cash flows and discount rates. As of June 30, 2023, the Company provided all necessary information to GSK for it to benefit from the license under the license term. Accordingly, the Company recognized $ 130.1 million in license agreement revenue at a point in time upon the transfer of the license to GSK as of June 30, 2023. As of December 31, 2024 and December 31, 2023, the Company maintains a $ 9.5 million and $ 19.3 million license agreement contract asset associated with the success-based milestones associated with the ongoing clinical studies of ibrexafungerp. In July 2024, the Company delivered to GSK the final clinical study reports for the completed FURI, CARES, and NATURE clinical studies, and the Company billed and received a $ 10.0 million development milestone from GSK. The Company believes that the $ 9.5 million license agreement contract asset is collectible given the Company's probability assessment of achieving the milestones as defined in the GSK License Agreement, ongoing development activities, and other information available to the Company. The Company reassessed the transaction price as of December 31, 2024, including estimated variable consideration included in the transaction price and the remaining milestones continued to be constrained. The Company recognizes the revenue associated with the Phase 3 MARIO study and the remaining ongoing clinical and preclinical studies of ibrexafungerp over time using an input method. The input method is based on the actual costs incurred as a percentage of total budgeted costs towards satisfying the performance obligation as this method provides the most faithful depiction of the Company’s performance in transferring control of the services promised to GSK and represents the Company’s best estimate of the period of the obligation. For the years ended December 31, 2024 and 2023, the Company recognized $ 1.1 million and $ 1.7 million of license agreement revenue from the research and development activities associated with the Phase 3 MARIO study and the remaining ongoing clinical and preclinical studies of ibrexafungerp, respectively. As of December 31, 2024, there is $ 1.6 million and $ 1.3 million of current and long-term deferred revenue, respectively, which is expected to be recognized by the end of 2026. The Binding MOU was considered to represent a contract modification pursuant to ASC 606. As a result, the Company recorded $ 4.4 million that was included in license agreement revenue for the year ended December 31, 2023. The $ 4.4 million was recognized as an unbilled receivable as of December 31, 2023 and included in prepaid expenses and other current assets in the consolidated balance sheets and collected in 2024. Until the product recall, the Company continued to sell BREXAFEMME in the GSK Territory. The Company was the principal for these transactions under ASC 606 as the Company maintained control of the BREXAFEMME inventory that was then sold to its customers. For the year ended December 31, 2023, the Company's product revenue, net comprised of sales of BREXAFEMME that the Company sold as principal given it maintains control of BREXAFEMME product until delivery to its wholesalers at which point control is transferred. Hansoh License Agreement In February 2021, the Company entered into an Exclusive License and Collaboration Agreement (the “Hansoh License 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 Hansoh License Agreement, Hansoh shall be responsible for the development, regulatory approval and commercialization of ibrexafungerp in the Territory. Pursuant to the terms of the Hansoh License 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 Hansoh License Agreement and concluded that it was subject to ASC 606 as the Company viewed the Hansoh License Agreement as a contract with a customer as the activities were central to its business operations. 78 As such, the Company assessed the terms of the Hansoh License 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 Hansoh License 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. 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, 2024 and 2023. 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 Hansoh License 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 Hansoh 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. Cypralis and Waterstone License Agreements 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, 2024 and 2023, 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, 2024. 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 2024 and 2023 associated with this agreement given the variable consideration was fully constrained as of December 31, 2024 and 2023. 10. Income Taxes The Company’s consolidated financial statements include a tax expense of $ 0.2 million and $ 0.1 million on (loss) income before taxes of $ 21.1 million and $ 67.2 million for the years ended December 31, 2024 and 2023, respectively. The income tax expense consisted of the following (dollars in thousands): Years Ended December 31, 2024 2023 Current expense: U.S. $ 151 $ 138 Non-U.S — — Total current expense $ 151 $ 138 79 Reconciliations of the differences between the expense for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows (dollars in thousands): 2024 2023 Amount Percent of Pretax Income Amount Percent of Pretax Income Income taxes from continuing operations at statutory rate $ ( 4,439 ) 21.0 % $ 14,108 ( 21.0 )% State income taxes ( 85 ) 0.4 % 406 ( 0.6 )% State effect of permanent items ( 46 ) 0.2 % 33 — Permanent stock-based compensation 91 ( 0.4 )% ( 26 ) — Deferred rate change 104 ( 0.5 )% 1,839 ( 2.7 )% Warrants issuance ( 2,942 ) 13.9 % 697 ( 1.0 )% Expiring NOLs and credits ( 5,177 ) 24.5 % 26,355 ( 39.2 )% Milestone deferral true-up 4,285 ( 20.3 )% — — Convertible debt amortization 538 ( 2.6 )% 388 ( 0.6 )% Deferred stock-based compensation true-up 884 ( 4.2 )% — — Other 227 ( 1.1 )% 2 — R&D credit ( 1,235 ) 5.8 % ( 750 ) 1.1 % Increase in valuation allowance 7,946 ( 37.6 )% ( 42,914 ) 63.9 % Total income tax expense $ 151 ( 0.7 )% $ 138 ( 0.1 )% The components of deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows (in thousands): December 31, 2024 2023 Noncurrent deferred tax assets (liabilities) Accrued expenses $ 53 $ 75 Stock-based compensation 2,238 2,834 Lease liability 553 631 Other ( 2,300 ) ( 798 ) Capitalized Sec. 174 R&E 13,202 10,405 Net operating loss carryforwards 48,684 46,437 Research and development credits 6,145 1,044 Total deferred tax assets 68,575 60,628 Valuation allowances ( 68,575 ) ( 60,628 ) Net deferred tax assets $ — $ — As of December 31, 2024 and 2023, the Company had available federal net operating loss (“NOL”) carryforwards of approximately $ 215.7 million and $ 205.7 million, respectively, and state and net operating loss carryforwards of approximately $ 122.0 million and $ 141.2 million, respectively. The Company’s state and net operating loss carryforwards began to expire in 2019 . As of December 31, 2024, the Company had available federal research and development credit carryforwards of $ 5.6 million which began to expire in 2026 . For the years ended December 31, 2024 and 2023, the Company paid $ 0.7 million and zero for U.S. federal and state income taxes, respectively. We completed a Section 382 study of transactions in our stock through December 31, 2023 and concluded that we have experienced ownership changes since inception that we believe under Section 382 and 383 of the Code will result in limitations on our ability to use certain pre-ownership change NOLs and credits. In addition, we may experience subsequent ownership changes as a result of future equity offerings or other changes in the ownership of our stock, some of which are beyond our control. As a result, the amount of the NOLs and tax credit carryforwards presented in our consolidated financial statements are limited and the related amounts have been updated. Similar provisions of state tax law may also apply to limit the use of accumulated state tax attributes. 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 80 income. This applies to losses arising in tax years ending on or after December 31, 2017. As of December 31, 2024 and 2023, 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. All tax years remain open to examination by U.S. federal and state income tax authorities because the Company has incurred cumulative net operating losses since inception. 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, 2024 and 2023 (in thousands): December 31, 2024 2023 Unrecognized tax benefit—January 1 $ 361 $ 436 Additions for tax positions of current period — — Additions for tax positions of prior periods — — Deferred rate change ( 3 ) ( 75 ) Unrecognized tax benefit—December 31 $ 358 $ 361 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. 11. Stock-based Compensation 2024 Equity Incentive Plan In April 2024, the Company’s board of directors adopted the 2024 Equity Incentive Plan (“2024 Plan”), which was subsequently approved by the Company’s stockholders and became effective on June 19, 2024. The 2024 Plan is the successor to the 2014 Equity Incentive Plan ("2014 Plan"). The 2014 Plan terminated on February 11, 2024 and no new grants may be made under the 2014 Plan after that date, although all outstanding awards granted under the 2014 Plan will continue to be subject to the terms and conditions as set forth in the agreements evidencing such awards and the terms of the 2014 Plan. The purpose of the 2024 Plan is to allow the Company to utilize equity incentives in order to secure and retain the services of the Company's employees, directors, and consultants, and to provide long-term incentives that align the interests of the Company's employees, directors, and consultants with the interests of the Company's stockholders. The aggregate number of shares of the Company's common stock that may be issued under the 2024 Plan will not exceed the sum of (i) 6,150,000 new shares, plus (ii) certain shares subject to outstanding awards granted under the 2014 Plan that may become available for grant under the 2024 Plan as such shares become available from time to time. As of December 31, 2024, there were 5,864,196 shares of common stock available for future issuance under the 2024 Plan. Pursuant to the terms of the 2014 Plan, on January 1, 2024 and 2023, the Company automatically added 1,916,962 and 1,901,960 shares to the total number shares of common stock available for future issuance under the 2014 Plan, respectively. 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 both the years ended December 31, 2024 and 2023, there were zero granted options of the Company’s common stock under the 2015 Plan. As of December 31, 2024 and 2023, there were 637,050 and 633,590 shares of common stock available for future issuance under the 2015 Plan, respectively. 81 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 2024 and 2023 was $ 1.31 and $ 1.29 per option, respectively. The aggregate fair value of options granted during 2024 and 2023 was $ 1.4 million and $ 0.4 million, respectively. The assumptions used to estimate fair value and the resulting grant date fair values are as follows: Employee Non-employee Years Ended December 31, Years Ended December 31, 2024 2023 2024 2023 Weighted average expected volatility 80.94 % 74.77 % 83.83 % 80.12 % Weighted average risk-free interest rate 4.04 % 3.98 % 4.26 % 3.89 % Weighted average expected term (in years) 6.02 6.04 5.50 5.50 The activity for the 2014 Plan, 2024 Plan and 2015 Plan for the years ended December 31, 2024 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, 2023 1,867,795 $ 10.72 6.10 $ 184 Granted 1,070,060 $ 1.84 Forfeited/expired ( 32,826 ) $ 35.93 Outstanding — December 31, 2024 2,905,029 $ 7.16 6.62 $ — Exercisable — December 31, 2024 1,746,457 $ 10.60 5.14 $ — Vested or expected to vest —December 31, 2024 2,905,029 $ 7.16 6.62 $ — 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, 2024, and the exercise price multiplied by the number of options). The total fair value of shares vested for the years ended December 31, 2024 and 2023 was $ 0.9 million and $ 0.7 million, respectively. As of December 31, 2024, 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 2.45 years. Restricted stock unit ("RSU") activity under the 2024 Plan and 2015 Plan for the years ended December 31, 2024, is summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share Non-vested at December 31, 2023 1,886,374 $ 2.28 Granted 2,025,940 $ 1.88 Vested ( 720,599 ) $ 2.88 Forfeited ( 71,341 ) $ 1.96 Non-vested at December 31, 2024 3,120,374 $ 1.89 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 33 % annually over a three-year period from the date of grant. Upon vesting, the RSUs generally are net share 82 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, 2024, there was approximately $ 3.8 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 1.55 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. In April 2023, the Company’s board of directors amended the 2014 ESPP, which was subsequently ratified by the Company’s stockholders and became effective on June 14, 2023. Common stock that may be issued under the ESPP Plan will not exceed 1,531,248 shares of common stock, which is the sum of: (i) the 4,779 shares of common stock originally approved; (ii) 26,469 shares of common stock that were added pursuant to the annual increase provision of the ESPP Plan between 2015 and 2023; and (iii) an additional 1,500,000 shares of common stock that were approved by our stockholders at the 2023 annual meeting of stockholders. 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, 2024 and 2023, the Company issued 45,593 and 28,896 shares of common stock under the 2014 ESPP, respectively. During the years ended December 31, 2024 and 2023, the number of shares of common stock available for issuance under the ESPP was increased by 2,941 and 1,502,941 shares, respectively. As of December 31, 2024 and 2023, there were 1,431,393 and 1,474,045 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 2014 Plan, 2024 Plan, 2015 Plan, and the 2014 ESPP was $ 3.3 million and $ 2.6 million for the years ended December 31, 2024 and 2023, respectively. The total income tax benefit recognized in the consolidated statements of operations for share-based compensation arrangements was zero for both the years ended December 31, 2024 and 2023. Cash received from options exercised was zero for both the years ended December 31, 2024 and 2023. 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, 2024 2023 Research and development $ 988 $ 873 Selling, general and administrative 2,358 1,751 Total stock-based compensation expense $ 3,346 $ 2,624 12. 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. 83 This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of December 31, 2024 and 2023 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, 2024 Cash $ 3,441 $ 3,441 — — Restricted cash 544 544 — — Money market funds 12,610 12,610 — — Total assets $ 16,595 $ 16,595 — — Warrant liabilities $ 7,998 — — $ 7,998 Total liabilities $ 7,998 — — $ 7,998 December 31, 2023 Cash $ 767 $ 767 — — Restricted cash 543 543 — — Money market funds 33,283 33,283 — — Total assets $ 34,593 $ 34,593 — — Warrant liabilities $ 21,810 — — $ 21,810 Derivative liability 196 — — 196 Total liabilities $ 22,006 — — $ 22,006 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. As of December 31, 2024, the cash and cash equivalents of $ 16.1 million and the restricted cash balances of $ 0.4 million and $ 0.1 million within short and long term on the balance sheet, respectively, sum to the total of $ 16.6 million as shown in the statement of cash flows. As of December 31, 2023, the cash and cash equivalents of $ 34.1 million and the restricted cash balances of $ 0.4 million and $ 0.2 million within short and long term on the balance sheet, respectively, sum to the total of $ 34.6 million as shown in the statement of cash flows. 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, 2024, the Level 3 volatility utilized in the Black-Scholes model to fair value the warrant liability was 83.4 %. At December 31, 2023, the range and weighted average of the Level 3 volatilities utilized in the Black-Scholes model to fair value the warrant liabilities were 87.2 % to 91.0 % and 87.2 %, respectively. 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, 2023, these inputs were 99.6 %, 1,159 basis points, and 16.3 %, 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 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): 84 Warrant Liabilities Balance – January 1, 2024 $ 21,810 Gain adjustment to fair value ( 13,812 ) Balance – December 31, 2024 $ 7,998 Derivative Liability Balance – January 1, 2024 $ 196 Gain adjustment to fair value ( 196 ) Balance – December 31, 2024 $ — 13. 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 for both the years ended December 31, 2024 and 2023. 14. Segments The Company has one reportable segment which is drug development. The Company primarily derives revenue from its licensing of developed drugs in difficult-to-treat and drug-resistant infections and manages the business activities on a consolidated basis. The Company’s CODM is the Chief Executive Officer . The CODM assesses performance for the drug development segment and decides how to allocate resources based on consolidated net (loss) income that also is reported on the consolidated statement of operations. The CODM uses budget, forecast, and actual results of the consolidated net (loss) income in deciding what drug development programs to further progress with its existing and planned capital resources. The measure of segment assets is reported on the balance sheet as consolidated assets. The accounting policies of the drug development segment are the same as those described in the summary of significant accounting policies in Note 2. The drug development segment primarily derives revenues from customers by the out licensing of developed drugs which typically include development and other milestones and royalties. Although all operations are primarily based in the United States, the Company generated the majority of its revenue from the license agreement with GSK located outside of the United States for the years ended December 31, 2024 and 2023. All sales, including sales outside of the United States, are denominated in United States dollars. 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. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation. The table below provides information about the Company's drug development segment and includes the reconciliation to consolidated net (loss) income for the years ended December 31, 2024 and 2023, respectively (in thousands). 2024 2023 Revenue $ 3,746 $ 140,141 Less: Clinical expense 8,085 15,452 Preclinical expense 2,420 1,740 Chemistry, manufacturing, and controls 7,161 3,273 Selling, general, and administrative 14,458 20,920 Income tax expense 151 138 Interest expense 828 3,130 Plus: Interest income 4,291 3,954 Other segment (income) expense (1) ( 3,778 ) 32,401 Segment net (loss) income ( 21,288 ) 67,041 Reconciliation of segment net (loss) income Adjustments and reconciling items — — Consolidated net (loss) income $ ( 21,288 ) $ 67,041 (1) Other segment (income) expense includes other research and development expense, amortization of debt issuance costs and discount, other income, warrant liabilities fair value adjustment, derivative liability fair value adjustment, and cost of product revenue. 85 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.