What changed in this filing

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Item 9A. Controls and Procedures

2021-03-25 compared with 2020-03-16 · 274 added, 259 removed, 693 unchanged (43% of the section changed)

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Management’s Report on Internal Control over Financial Reporting

This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption established by the Jumpstart Our Business Startups Act of 2012 for emerging growth companies.

Changes in Internal Control over Financial Reporting

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333-230745) filed with the SEC on April 5, 2019)

Description of Registrant’s Securities

Description of Registrant’s Securities (incorporated by referred to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K (File No.

001-38886) filed with the SEC on March 16, 2020)

Second Amended and Restated Investors’ Rights Agreement dated as of July 14, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No.

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333-230745) filed with the SEC on April 5, 2019)

Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 (File No.

333-230745) filed with the SEC on April 5, 2019)

Non-Employee Director Compensation Policy

Trevi Therapeutics, Inc.

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Offer Letter, dated December 4, 2012, by and between the Registrant and Thomas R.

Sciascia (incorporated by referred to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K (File No.

001-38886) filed with the SEC on March 16, 2020)

Indefinite Term Employment Contract, dated August 29, 2018, by and between the Registrant and Yann Mazabraud (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (File No.

333-230745) filed with the SEC on April 5, 2019)

Offer Letter, dated August 29, 2018, by and between the Registrant and Yann Mazabraud (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (File No.

333-230745) filed with the SEC on April 5, 2019)”

Offer Letter, dated April 23, 2018, by and between the Registrant and Christopher J.

Seiter (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 (File No.

333-230745) filed with the SEC on April 5, 2019)”

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333-230745) filed with the SEC on May 7, 2019)

Loan and Security Agreement, dated as of August 13, 2020, between Silicon Valley Bank and Trevi Therapeutics, Inc.

(incorporated by referred to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38886) filed with the SEC on November 12, 2020)

List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registrant’s Registration Statement on Form S-1 (File No.

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Cassella, Ph.D.

/s/ Dominick Colangelo

March 25, 2021

Dominick Colangelo

/s/ Michael Heffernan

Lead Director

March 25, 2021

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Edward Mathers

/s/ Annie Mitsak, Ph.D.

March 16, 2020

Annie Mitsak, Ph.D.

/s/ Anne VanLent

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Notes to Consolidated Financial Statements

Report of Independent Regist ered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Trevi Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the consolidated accompanying balance sheets of Trevi Therapeutics, Inc.

(the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations , redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Trevi Therapeutics, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations , redeemable convertible preferred stock and stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S.

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Operating lease right-of-use asset

Security deposit

Security deposits and other non-current assets

Property, equipment and leasehold improvements, net

Liabilities, redeemable convertible preferred stock and stockholders’ equity

Liabilities and stockholders’ equity

Current liabilities:

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Total current liabilities

Obligation for loan success fee

Series C redeemable convertible preferred stock liability

Term loan derivative liability

Operating lease liability - long term portion

Commitments and contingencies (Note 12)

Series A redeemable convertible preferred stock:

no shares and 15,387,923

shares authorized, issued and outstanding at December 31, 2019 and

2018, respectively;

liquidation preference of $0 and $20,469 at

December 31, 2019 and 2018, respectively.

Series B redeemable convertible preferred stock:

no shares and 22,608,695 shares

authorized, issued and outstanding at December 31, 2019 and

2018, respectively;

liquidation preference of $0 and $32,900 at December 31,

2019 and 2018, respectively.

Series C redeemable convertible preferred stock:

no shares and 48,200,412

shares authorized at December 31, 2019 and 2018, respectively;

no shares and 38,097,672 shares issued and outstanding at December 31,

2019 and 2018, respectively;

liquidation preference of $0 and

$59,798 at December 31, 2019 and 2018, respectively.

Stockholders’ equity (deficit):

Stockholders’ equity:

Common stock:

$0.001 par value;

200,000,000 shares authorized at

December 31, 2020 and 2019;

18,546,786 and 17,834,570 shares

authorized at December 31, 2019 and 2018, respectively;

17,834,570 and 438,600 shares issued and outstanding at

December 31, 2019 and 2018, respectively.

issued and outstanding at December 31, 2020 and 2019, respectively.

Preferred stock:

$0.001 par value;

5,000,000 shares and no shares authorized at

December 31, 2019 and 2018, respectively;

no shares issued or

outstanding at December 31, 2019 or 2018.

5,000,000 shares authorized at

December 31, 2020 and 2019;

no shares issued or outstanding

at December 31, 2020 or 2019.

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities, redeemable convertible preferred stock and stockholders’

equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes.

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Other income (expense):

Change in fair value of Series C redeemable convertible preferred

stock liability

Change in fair value of obligation for loan success fee

Change in fair value of term loan derivative liability

Interest income

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convertible preferred stock

Balance at December 31, 2018

Stock-based compensation

Issuance of common stock from exercise of stock options

Issuance of Series C redeemable convertible

preferred stock, net of issuance costs

Dividends accrued on redeemable convertible preferred

Accretion (amortization) of premium (discount) on

issuance of redeemable convertible preferred stock

Accretion of discount on investor rights/obligation

Adjustment for excess (shortfall) of fair value over

liquidation value of redeemable convertible preferred

Accretion of issuance costs on redeemable

convertible preferred stock

Conversion of redeemable convertible preferred stock

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Balance at December 31, 2019

Stock-based compensation

Issuance of common stock from exercise of stock options

Issuance of common stock from employee stock purchase plan

Issuance of common stock under at-the-market sales agreement, net of commissions and allocated fees

Balance at December 31, 2020

See accompanying notes.

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Adjustments to reconcile net loss to net cash used in operating activities:

Changes in fair value of Series C redeemable convertible preferred stock liability

Changes in fair value of obligation for loan success fee

Changes in fair value of term loan derivative liability

Accretion/accrual of term loan discounts and debt issuance costs

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Accounts payable

Accrued expenses

Security deposit

Deferred lease obligation

Accrued expenses and other

Net cash used in operating activities

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Financing activities

Repayments of term loan

Payment of final fees on term loan

Payment of loan success fee

Proceeds from term loan

Financing costs of term loan

Proceeds from at-the-market sales, net of commissions

Proceeds from exercises of stock options

Proceeds from the employee stock purchase plan

Proceeds from sale of Series C redeemable convertible preferred stock, net of

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of underwriting commissions and discounts

Payments of initial public offering costs

Proceeds from private placement, net of private placement agent fees

Payments of offering costs

Net cash provided by financing activities

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Supplemental disclosure of non-cash financing activities

Dividends accrued on redeemable convertible preferred stock

Series C redeemable convertible preferred stock liability reclassified to

Series C Preferred Stock

Offering costs included in accrued expenses

Accretion on redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

See accompanying notes.

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Trevi Therapeutics, Inc.

(“Trevi” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of nalbuphine ER to treat serious neurologically mediated conditions.

The Company is currently developing nalbuphine ER for the treatment of chronic pruritus, chronic cough in patients with idiopathic pulmonary fibrosis (“IPF”), and levodopa-induced dyskinesia (“LID”) in patients with Parkinson’s disease.

(“Trevi” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of Haduvio (nalbuphine ER) to treat serious neurologically mediated conditions.

The Company is currently developing Haduvio for the treatment of chronic pruritus associated with prurigo nodularis and chronic cough in patients with idiopathic pulmonary fibrosis (“IPF”).

The Company is also in the planning stages for developing Haduvio in levodopa-induced dyskinesia (“LID”) in patients with Parkinson’s disease.

These conditions share a common pathophysiology that is mediated through opioid receptors in the central and peripheral nervous systems.

Due to nalbuphine’s mechanism of action as a modulator of opioid receptors, the Company believes nalbuphine ER has the potential to be effective in treating each of these conditions.

Nalbuphine ER is an oral extended release formulation of nalbuphine.

Due to nalbuphine’s mechanism of action as a modulator of opioid receptors, the Company believes Haduvio has the potential to be effective in treating each of these conditions.

Haduvio is an oral extended release formulation of nalbuphine.

Nalbuphine is a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist that has been approved and marketed as an injectable for pain indications for more than 20 years in the United States and Europe.

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Accordingly, all share and per share amounts in the Consolidated Financial Statements have been retrospectively adjusted, where applicable, to reflect the effect of the reverse stock split and adjustments of the redeemable convertible preferred stock conversion for all periods presented.

On May 9, 2019, the Company completed its initial public offering (“IPO”) and a concurrent private placement in which it issued and sold an aggregate of 7,000,000 shares of common stock at an offering price of $10.00 per share, for net proceeds of $62.1 million, after deducting aggregate underwriting discounts and commissions and private placement agent fees of $4.9 million and other offering expenses of $3.0 million.

The Company’s common stock began trading on The Nasdaq Global Market on May 7, 2019 under the ticker symbol “TRVI”.

Upon the closing of the IPO, the Company’s outstanding redeemable convertible preferred stock, including the accrued dividends thereon, automatically converted into shares of the Company’s common stock.

Upon such conversion of the redeemable convertible preferred stock, the Company reclassified the carrying values of the redeemable convertible preferred stock to common stock and additional paid-in capital.

The accompanying financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

Since inception, the Company has financed its operations primarily through private placements of its redeemable convertible preferred stock and convertible notes as well as borrowings under term loan facilities, with proceeds from the Company’s initial public offering (“IPO”) and concurrent private placement completed in May 2019 and with sales of common stock under the Company’s sales agreement with SVB Leerink LLC (the “ATM Sales Agreement”).

The Company has incurred recurring losses since inception, including net losses attributable to the Company of $32.8 million and $26.1 million for the years ended December 31, 2020 and 2019, respectively.

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The Company expects to continue to generate operating losses for the foreseeable future.

As of March 16, 2020, the issuance date of these Consolidated Financial Statements, the Company expects that its cash and cash equivalents of $57.3 million as of December 31, 2019, will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these Consolidated Financial Statements.

As of March 25, 2021, the issuance date of these Consolidated Financial Statements, the Company expects that its cash and cash equivalents of $45.0 million as of December 31, 2020, in addition to proceeds from the ATM Sales Agreement subsequent to December 31, 2020, will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these Consolidated Financial Statements.

Summary of Significant Accounting Policies

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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of the expenses during the reporting periods.

Significant estimates and assumptions reflected in these Consolidated Financial Statements include, but are not limited to the recognition of research and development (“R&D”) expenses and the valuation of redeemable convertible preferred stock, common stock and stock-based awards.

Significant estimates and assumptions reflected in these Consolidated Financial Statements include, but are not limited to the recognition of research and development expenses (“R&D”) and the valuation of redeemable convertible preferred stock, common stock and stock-based awards.

On an ongoing basis, management evaluates its estimates in light of changes in circumstances, facts and experience.

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Fair Value Measurements

The Company’s financial instruments have consisted of cash and cash equivalents, tax credit and other receivables, accounts payable, accrued expenses, obligation for loan success fee and Series C redeemable convertible preferred stock liability (Note 7 and Note 9).

The Company’s financial instruments have consisted of cash and cash equivalents, tax credit and other receivables, accounts payable, accrued expenses, term loans, term loan derivative liability and obligation for loan success fee (Note 7).

Fair value estimates of these instruments are made at a specific point in time, based on relevant market information.

The carrying amounts of cash and cash equivalents, tax credit and other receivables, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

The carrying amount of the term loan approximates its fair value due to its floating market-based interest rate.

The fair value of the term loan derivative liability is estimated utilizing a probability-weighted cash flow approach (Note 7).

The fair value of the obligation for loan success fee was estimated utilizing a probability-weighted income approach, including variables for the timing of the success event and other probability estimates.

The fair value of Series C redeemable convertible preferred stock liability at December 31, 2018 was estimated as the excess, if any, of the fair value of the Company’s Series C redeemable convertible preferred stock (“Series C Preferred Stock”) over the purchase price of any outstanding tranches that had not been sold pursuant to the Series C Preferred Stock purchase agreement (the “Series C Purchase Agreement”) as of December 31, 2018.

Current accounting guidance defines fair value, establishes a framework for measuring fair value in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures , and requires certain disclosures about fair value measurements.

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Level 3—Unobservable inputs—includes amounts derived from valuation models where one or more significant inputs are unobservable and require the company to develop relevant assumptions.

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of December 31, 2018, and the basis for that measurement, by level within the fair value hierarchy (Note 7 and Note 9).

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019 , and the basis for that measurement, by level within the fair value hierarchy (Note 7 ).

There were no such financial liabilities as of December 31, 2019 :

Financial liabilities

Series C redeemable convertible preferred stock liability

Obligation for loan success fee

December 31, 2020

Financial assets carried at fair value:

Money market funds

Financial liabilities carried at fair value:

Term loan derivative liability

December 31, 2019

Financial assets carried at fair value:

Money market funds

The following table represents a roll-forward of the fair value of Level 3 instruments (significant unobservable inputs):

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Balance at beginning of year (1)

Unrealized loss on Series C redeemable convertible preferred stock

Term loan derivative liability

Unrealized loss on obligation for loan success fee

Unrealized loss on obligation for term loan derivative

Net settlements (2)

Ending balance

The balance at January 1, 2018 relates to the obligation for the loan success fee.

The balance at January 1, 2019 relates to the $460 obligation for the loan success fee and the $1,096 fair value of the Series C redeemable convertible preferred stock liability at the time of the third tranche of the Series C Preferred Stock financing in January 2019.

The net settlements in the year ended December 31, 2019 relate to the $1,096 fair value of the Series C redeemable convertible preferred stock liability at the time of the third tranche of the Series C Preferred Stock financing in January 2019 and the payment of the $675 obligation for the loan success fee in May 2019.

The net settlements in 2018 relate to the $1,009 fair value of the Series C redeemable convertible preferred stock liability at the time the second tranche of Series C redeemable convertible preferred stock shares was issued.

Property, Equipment and Leasehold Improvements

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The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of an equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering.

Should the planned equity financing no longer be considered probable of being consummated, the deferred offering costs are expensed immediately as a charge to operating expenses.

Deferred offering costs capitalized as of December 31, 2018 were $1,534.

The Company’s IPO was completed in May 2019 and these costs, as well as additional IPO costs incurred in 2019, were recorded as a reduction to stockholders’ equity (deficit).

As a result, as of December 31, 2019, the Company did not have any deferred offering costs.

Deferred offering costs relating to the Company’s ATM Sales Agreement were $284 as of December 31, 2020, excluding $105, which has been recorded as a reduction to stockholders’ equity in connection with sales under the agreement.

The Company’s IPO was completed in May 2019 and IPO costs incurred in 2019 were recorded as a reduction to stockholders’ equity.

As a result, deferred offering costs were $0 as of December 31, 2019.

Research and Development Expenses

All of the Company’s research and development expenses consist of expenses incurred in connection with the development of nalbuphine ER.

All of the Company’s research and development expenses consist of expenses incurred in connection with the development of Haduvio.

These expenses include certain payroll and personnel expenses, including stock-based compensation, consulting costs, contract manufacturing costs and fees paid to clinical research organizations (“CROs”) to conduct certain research and development activities on the Company’s behalf.

The Company does not allocate its costs by each indication for which it is developing nalbuphine ER, as a significant amount of the Company’s development activities broadly support all indications.

In addition, several of the Company’s departments support the Company’s nalbuphine ER drug candidate development program and the Company does not identify internal costs for each potential indication.

The Company does not allocate its costs by each indication for which it is developing Haduvio, as a significant amount of the Company’s development activities broadly support all indications.

In addition, several of the Company’s departments support the Company’s Haduvio drug candidate development program and the Company does not identify internal costs for each potential indication.

The Company expenses both internal and external research and development expenses as they are incurred.

Accrued Research and Development

The Company has entered into agreements with CROs, contract manufacturing organizations (“CMOs”) and other companies.

Accrued Research and Development Expenses

The Company has entered into agreements with CROs, contract manufacturing organizations (“CMOs”) and other companies that provide services in connection with the Company’s research and development activities.

The Company’s research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs.

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If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly.

Payments made to CROs, CMOs and other companies under these arrangements in advance of the performance of the related services are recorded as prepaid expenses.

Payments made to CROs, CMOs and other companies under these arrangements in advance of the performance of the related services are recorded as prepaid expenses or as non-current deposits, as applicable, and are recognized as expenses as the goods are delivered or the related services are performed.

All patent-related costs in connection with filing and prosecuting patent applications are expensed to general and administrative expense as incurred, as recoverability of such expenditures is uncertain.

Stock-Based Compensation

The Company accounts for stock-based compensation arrangements with employees in accordance with ASC 718, Stock Compensation (“ASC 718”).

The Company accounts for stock-based compensation arrangements with employees and non-employees for consultancy services in accordance with ASC 718, Stock Compensation (“ASC 718”).

ASC 718 requires the recognition of compensation expense, using a fair value based method, for costs related to all stock-based payments including stock options.

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The fair value is recognized over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period (usually the vesting period) on a straight-line basis.

Forfeitures are accounted for as they occur.

Estimating the fair value of equity-settled awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of complex variables.

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Option Pricing Method (“OPM”)—The OPM treats common stock and convertible preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

Under this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the liquidation preferences at the time of a liquidity event, such as a strategic sale or merger.

Under this method,

the common stock has value only if the funds available for distribution to stockholders exceed the value of the liquidation preferences at the time of a liquidity event, such as a strategic sale or merger.

The common stock is modeled as a call option on the underlying equity value at a predetermined exercise price.

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The Company then discounted that future value back to the valuation date at an appropriate discount rate.

Based on the Company’s early stage of development and other relevant factors, the board of directors determined that the OPM was the most appropriate method for allocating enterprise value to determine the estimated fair value of the Company’s common stock for the valuation performed for December 2017, which resulted in the board of directors determining that the fair value of common stock was $3.33.

Following its determination in early 2018 that the Company should explore a potential IPO, the Company’s board of directors determined that the Hybrid Method was the most appropriate method for allocating the enterprise value to determine the estimated fair value of common stock for valuations performed for April 2018, September 2018 and December 2018, which resulted in the fair value of common stock being $6.65, $9.12 and $9.31, respectively .

In determining the estimated fair value of the Company’s common stock prior to Company’s IPO in May 2019, the board of directors also considered the fact that the Company’s stockholders could not freely trade the Company’s common stock in the public markets.

In determining the estimated fair value of the Company’s common stock prior to Company’s IPO in May 2019, the board of directors considered the fact that the Company’s stockholders could not freely trade the Company’s common stock in the public markets.

Accordingly, the Company’s board of directors applied discounts to reflect the lack of marketability of common stock based on the weighted-average expected time to liquidity.

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Subsequent to the completion of the Company’s IPO in May 2019, the fair value of the Company’s common stock has been determined based on the closing price of the Company’s common stock as reported on the date of grant on the primary stock exchange on which the Company’s common stock is traded.

The Company has awarded stock options to non-employees for consultancy services.

The Company has adopted Accounting Standards Update (“ASU”) No.

2018-07 titled Compensation—Stock Compensation (Topic 718):

Improvements to Non-Employee Share-Based Payment Accounting, with effect from January 1, 2018, which requires that non-employee share-based payment transactions be measured at the grant-date fair value and no longer remeasured at the then-current fair values at each reporting date until the stock options have vested.

The Company accounts for income taxes using the asset and liability method.

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Redeemable Convertible Preferred Shares

As of December 31, 2018 and prior to the Company’s IPO, shares of the Company’s redeemable convertible preferred stock were redeemable at the option of the holder on or after July 14, 2020 and carried a cumulative coupon dividend rate of 6%.

Prior to the Company’s IPO in May 2019, shares of the Company’s redeemable convertible preferred stock were redeemable at the option of the holder on or after July 14, 2020 and carried a cumulative coupon dividend rate of 6%.

The redemption amount was the greater of the liquidation value (invested amount plus accruing dividends) or the fair value of the shares of preferred stock on the date of redemption.

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Basic and diluted net loss per common share outstanding is determined by dividing net loss, as adjusted for accretion and accrued dividends on redeemable convertible preferred stock, by the weighted average common shares outstanding during the period.

For all periods presented, outstanding shares of Series A redeemable convertible preferred stock (“Series A Preferred Stock”), shares of Series B redeemable convertible preferred stock (“Series B Preferred Stock”), shares of Series C Preferred Stock, if any, and shares issuable upon exercise of stock options have been excluded from the calculation because their effects would be anti-dilutive.

For all periods presented, outstanding shares of Series A redeemable convertible preferred stock (“Series A Preferred Stock”), shares of Series B redeemable convertible preferred stock (“Series B Preferred Stock”), shares of Series C redeemable convertible preferred stock (“Series C Preferred Stock”), if any, and shares issuable upon exercise of stock options have been excluded from the calculation because their effects would be anti-dilutive.

Therefore, the weighted average common shares used to calculate both basic and diluted net loss per share are the same for each of the periods presented.

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Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-02 titled Leases (“ASU 2016-02”), which requires rights and obligations arising from both operating and capital leases to be reported on the Consolidated Balance Sheet, and to disclose quantitative and qualitative information about lease transactions (such as information about variable lease payments and options to renew and terminate leases).

ASU 2016-02 was effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

The Company adopted this new guidance as of January 1, 2019, which included an assessment of the impact of the new guidance on the Consolidated Financial Statements.

The Company utilized the transition practical expedient added by the FASB, which eliminated the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.

The Company elected to use the package of practical expedients that allowed the Company to not reassess:

(1) whether any expired or existing contracts were or contained leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases.

The Company additionally used the practical expedient that allows lessees to treat the lease and non-lease components of leases as a single lease component.

The adoption of this standard resulted in the recognition of a right-of-use asset of $379 and related lease liabilities of $424 related to the Company’s operating lease commitments on the Consolidated Balance Sheet as of January 1, 2019 (Note 4).

The impact of adoption of the new leasing standard did not have a material impact on the Consolidated Statement of Operations during year ended December 31, 2019.

There have been no new accounting pronouncements adopted during the year ended December 31, 2020.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

The list of changes is comprehensive and many will not have a significant effect on the Company’s consolidated financial reporting.

The changes include removing exceptions to incremental intraperiod tax allocation of losses and gains from different financial statement components, exceptions to the method of recognizing income taxes on interim period losses and exceptions to deferred tax liability recognition related to foreign subsidiary investments.

In addition, ASU 2019-12 requires that entities recognize franchise tax based on an incremental method, requires an entity to evaluate the accounting for step-ups in the tax basis of goodwill as inside or outside of a business combination, and removes the requirement to allocate the current and deferred tax provision among entities in stand-alone financial statement reporting.

ASU 2019-12 also now requires that an entity reflect enacted changes in tax laws in the annual effective rate, and other codification adjustments have been made to employee stock ownership plans.

For public business entities, the amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for public business entities for periods for which financial statements have not yet been issued.

An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Additionally, an entity that elects early adoption must adopt all the amendments in the same period.

The Company is currently evaluating whether to early adopt ASU 2019-12 in the first interim period of the year ending December 31, 2020.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , which changes the way credit losses on certain financial instruments are estimated.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company does not expect that the adoption of ASU 2016-13 will have a material effect on its Consolidated Financial Statements.

There have been no new accounting pronouncements issued during the year ended December 31, 2020, which could be expected to materially impact the Company’s Consolidated Financial Statements.

Prepaid Expenses

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The lease requires monthly payments ranging from approximately $10 to $11 through February 1, 2023 and provides for two designated months of free rent.

The Company has the option to terminate the lease after 36 months by providing six months notice along with a payment to the landlord in an amount representing the unamortized cost of tenant improvements plus the unamortized broker’s commission, both of which had been paid by the landlord, and as defined in the agreement.

Under ASC 842, the Company determines if an arrangement is a lease at its inception.

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As the Company’s leases do not provide an implicit rate within the lease, the Company uses its incremental borrowing rate, which is updated periodically, based on information available at the commencement date of the lease to determine the present value of the lease payments.

The incremental borrowing rate used on existing leases was 13.0% as of December 31, 2019.

The right-of-use asset also includes any payments related to initial direct costs and prepayments, and excludes lease incentives.

The incremental borrowing rate used on existing leases as of December 31, 2020 was 13.0% .

The right-of-use asset also includes any lease payments related to initial direct costs and prepayments, and excludes lease incentives.

Lease expense is recognized on a straight line basis over the lease term.

The Company had no new leases during the year ended December 31, 2019.

The Company’s operating leases consist of real estate and equipment, and have remaining terms ranging from approximately 1 to 3 years.

The Company had no new leases during the years ended December 31, 2020 and 2019.

The Company’s operating leases consist of real estate and equipment and have remaining terms of approximately 2 years and 3 months.

The Company has no financing leases.

The following table summarizes the Company’s operating leases as presented on its Consolidated Balance Sheet as of December 31, 2019:

The following table summarizes the Company’s operating leases as presented on its Consolidated Balance Sheets:

As of December 31,

Operating lease right-of-use asset

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Future minimum lease payments under the operating leases are as follows as of December 31, 2020:

As of December 31,

Total lease payments

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Carrying value of operating lease liabilities

Lease expense under operating leases, including leases of office equipment, was $124 and $112 for the years ended December 31, 2019 and 2018, respectively.

Lease payments made were $125 and $117 in the years ended December 31, 2019 and 2018 respectively, with such amounts reflected in the Consolidated Statement of Cash Flows in operating activities.

Lease expense under operating leases, including leases of office equipment, was $124 for each of the years ended December 31, 2020 and 2019.

Lease payments made were $138 and $125 in the years ended December 31, 2020 and 2019, respectively, with such amounts reflected in the Consolidated Statements of Cash Flows in operating activities.

Property, Equipment and Leasehold Improvements, Net

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As of December 31,

Accrued research projects

Accrued professional fees

Accrued R&D projects

Accrued consulting and professional fees

Accrued compensation and benefits

Term Loan Payable

Silicon Valley Bank Term Loan

On August 13, 2020 (the “Effective Date”), the Company entered into a loan and security agreement (the “SVB Loan Agreement”) with Silicon Valley Bank, as lender (“SVB”), pursuant to which SVB provided a term loan to the Company in the original principal amount of $14.0 million (the “SVB Term Loan”).

The Company may use the proceeds from the SVB Term Loan for working capital and general corporate purposes.

The SVB Term Loan bears interest at a floating rate per annum equal to the greater of (A) the prime rate plus 1.00% and (B) 4.25%.

If SVB receives evidence satisfactory to it that the Company has (i) received positive data for the Phase 2b/3 clinical trial of Haduvio sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis, and (ii) raised sufficient financing to fund such Phase 3 clinical trial and the Company’s operations, (together, the “Phase 3 Event”), the interest rate under the SVB Term Loan will be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25% (see term loan derivative liability discussion below).

On the first business day of each month, the Company will be required to make monthly interest payments and commencing on March 1, 2022, the Company will be required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest.

All outstanding principal and accrued and unpaid interest under the SVB Term Loan and all other outstanding obligations with respect to the SVB Term Loan are due and payable in full on February 1, 2024.

The SVB Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loan, subject to a prepayment premium.

Such prepayment premium would be 3.00% of the principal amount of the SVB Term Loan if prepaid prior to the first anniversary of the Effective Date, 2.00% of the principal amount of the SVB Term Loan if prepaid on or after the first anniversary of the Effective Date but prior to the second anniversary of the Effective Date, and 1.00% of the principal amount of the SVB Term Loan if prepaid on or after the second anniversary of the Effective Date but prior to February 1, 2024.

Upon repayment in full of the SVB Term Loan, the Company will be required to pay a final payment fee equal to $1.2 million.

The SVB Term Loan and related obligations under the SVB Loan Agreement are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property (which is subject to a negative pledge under the SVB Loan Agreement).

If the Company fails to meet certain equity raise requirements under the SVB Loan Agreement, it will

be required to deposit unrestricted and unencumbered cash equal to 100 % of the principal amount of the SVB Term Loan then outstanding in a cash collateral account with SVB, which can be used by SVB to prepay the SVB Term Loan at any time.

The SVB Loan Agreement contains customary representations, warranties, events of default and covenants.

The occurrence and continuation of an event of default could cause interest to be charged at the rate that is otherwise applicable plus 5.00 % (unless SVB elects to impose a smaller increase) and would provide SVB with the right to accelerate all obligations under the SVB Loan Agreement, and exercise remedies against the Company and the collateral securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including foreclosure against assets securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including the Company’s cash.

In August 2020, in connection with the SVB Term Loan, the Company paid $57 in financing costs to a third party, which were recorded as deferred charges—loan and will be amortized over the life of the SVB Term Loan using the effective interest method.

Amortization of these deferred financing charges totaled $9 for the year ended December 31, 2020, and is included in interest expense in the Company’s Consolidated Statements of Operations.

Loan discount—unamortized deferred charges totaled $48 for the year ended December 31, 2020, and is included as a direct reduction of the carrying value of the term loan payable on the Company’s Consolidated Balance Sheet.

In August 2020, in connection with the execution of the SVB Loan Agreement, the Company paid $27 in financing costs to SVB, which were recorded as loan discounts.

These loan discounts are included as a reduction in the balance of the term loan payable on the Company’s Consolidated Balance Sheet and will be accreted over the life of the SVB Term Loan using the effective interest method.

Accretion of these loan discounts totaled $4 for the year ended December 31, 2020, and is included in interest expense in the Company’s Consolidated Statements of Operations.

At December 31, 2020 the loan discount-financing costs balance was $23.

In connection with the SVB Loan Agreement, the Company is obligated to pay a final payment fee of $1.2 million upon repayment in full of the SVB Term Loan.

The final payment fee is being accrued over the life of the SVB Term Loan using the effective interest method and is included as an increase in the balance of the term loan payable on the Company’s Consolidated Balance Sheet.

For the year ended December 31, 2020, $183 was accrued for the final payment fee, with such amount included in interest expense in the Company’s Consolidated Statements of Operations.

Upon the occurrence of the Phase 3 Event, the interest rate on the SVB Term Loan will increase by 2.00% (the “Contingent Interest Rate Increase”) as described above.

The Contingent Interest Rate Increase represents a free-standing financial instrument.

Accordingly, the Company accounted for the Contingent Interest Rate Increase as a derivative under ASC 815, Derivatives and Hedging , and therefore, recorded a term loan derivative liability for the Contingent Interest Rate Increase at its fair value of $187 on the Effective Date of the SVB Loan Agreement.

The Company adjusts this liability to fair value at each reporting date it remains outstanding, with such adjustments recorded as non-cash charges in other income (expense) in the Company’s Consolidated Statements of Operations.

The total fair value of this liability was determined to be $196 at December 31, 2020.

The change in fair value of the term loan derivative liability as of December 31, 2020 as compared to the fair value at its last measurement date (its date of inception) was $9.

The term loan derivative liability is presented as a non-current liability in the Company’s Consolidated Balance Sheet as of December 31, 2020.

Upon recording such term loan derivative liability, the Company also recorded an offsetting term loan discount – interest, to be amortized to interest expense in the Company’s Consolidated Statements of Operations through the SVB Term Loan’s maturity date using the effective interest method.

Such amortization was $29 for the year ended December 31, 2020.

At December 31, 2020, the balance of the term loan discount – interest was $158 and is included as a reduction in the balance of the term loan payable on the Company’s Consolidated Balance Sheet as of December 31, 2020.

Fair values of the term loan derivative liability are estimated utilizing a probability-weighted cash flow approach, including variables for the timing of the Phase 3 Event and other probability estimates.

For the fair value calculations of the term loan derivative liability at its inception and at December 31, 2020, significant inputs included the Contingent Interest Rate Increase of 2.00%, a discount rate of 12.0%;

and the SVB Term Loan maturity date of February 1, 2024.

For the year ended December 31, 2020, interest expense under the SVB Term Loan totaled $456, which includes amortization of deferred financing charges, accretion of loan discount-financing costs, accrual of the final payment fee, amortization of the term loan discount-interest and the stated interest on the SVB Term Loan, all as described above.

There was no such interest expense on the SVB Term Loan for the year ended December 31, 2019.

As of December 31, 2020, the Company had outstanding borrowings of $14.0 million under the SVB Term Loan and the term loan payable balance as presented in the Company’s Consolidated Balance Sheet as of December 31, 2020 was comprised as shown below.

There were no outstanding borrowings under the SVB Term Loan as of December 31, 2019.

Principal outstanding under term loan

Term loan discount - interest

Term loan discount - unamortized deferred charges

Term loan discount - financing costs, net of accretion

Term loan-final payment fee

Less current portion

Term loan payable, non current

Interest expense on the SVB Term Loan, which is comprised of interest payments, accretion and amortization of term loan discounts and the accrual of the final payment fee, is shown below for the year ended December 31, 2020.

There was no such expense under the SVB Term Loan for the year ended December 31, 2019.

Year Ended December 31,

Interest payments

Accretion and amortization of term loan discounts

Accrual of the final payment fee

Solar Capital Term Loan

On December 29, 2014, the Company entered into a loan and security agreement (the “Loan Agreement”) with Solar Capital, Ltd.

(“Solar”) and Square 1 Bank (“Square 1”), together (the “Lenders”), which provided $15.0 million in debt financing (the “Term Loan”).

On June 29, 2018, the maturity date of the Loan Agreement, the Company made its final payments of principal and interest due to the Lenders in connection with the Term Loan, as well as $450 in full payment of the final fee and $82 in full payment of the amendment fee.

As a result, there were no outstanding borrowings under the Term Loan as of December 31, 2019 or 2018, and the Company’s obligations to the Lenders under the Loan Agreement, other than the obligations under the Success Fee Agreement as described below, were terminated.

On June 29, 2018, the maturity date of the Loan Agreement, the Company made its final payments of principal, interest and all final fees due to the Lenders in connection with the Term Loan.

As a result, there were no outstanding borrowings under the Term Loan as of December 31, 2020 and 2019, and the Company’s obligations to the Lenders under the Loan Agreement, other than the obligations under the Success Fee Agreement as described below, were terminated.

Under the terms of the Loan Agreement, the Company was obligated to pay the Lenders a Success Fee (“Success Fee”) under a Success Fee Agreement (“Success Fee Agreement”) upon the first occurrence of an Exit Event, as defined.

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Upon recording such obligations for the Success Fee, the Company also recorded an offsetting loan discount, which was accreted to interest expense in the Company’s Statements of Operations through the Term Loan’s maturity date.

The Company adjusted these liabilities for the Success Fee to fair value at each reporting date

they remained outstanding.

The Company adjusted these liabilities for the Success Fee to fair value at each reporting date they remained outstanding.

As discussed above, the Success Fee was paid in May 2019;

and therefore, the total fair value of the Success Fee liabilities was $0 at December 31, 2019.

The total fair value of these liabilities was determined to be $460 at December 31, 2018.

and therefore, the total fair value of the Success Fee liabilities was $0 at December 31, 2020 and 2019.

The Company recorded non-cash charges in the amount of $0 and $215 for the years ended December 31, 2020 and 2019, respectively, representing the changes in the fair value of these liabilities since their last measurement date.

The fair values of the obligation for the Success Fee were estimated utilizing a probability-weighted cash flow approach, including variables for the timing of the Exit Event and other probability estimates.

The non-cash charges are included in other income (expense) in the Company’s Consolidated Statements of Operations.

The obligation for the Success Fee is presented as a non-current liability in the Company’s Consolidated Balance Sheet as of December 31, 2018.

The fair values of the obligation for the Success Fee were estimated utilizing a probability-weighted income approach, including variables for the timing of the success event and other probability estimates.

For the fair value calculations at December 31, 2018, significant inputs included the Success Fee rate of 4.5% of the Term Loan funded;

a discount rate of 13.0%;

weighted estimated time to Exit Event ranging from 0.4 to 3.1 years and probability estimates of several potential Exit Events ranging from 5.0% to 40.0%.

Interest expense on the Term Loan, comprised of interest payments, amortization of financing costs, accrual of final and amendment fees, and accretion of the Success Fee are shown below for the year ended December 31, 2018.

There was no such interest expense on the Term Loan for the year ended December 31, 2019.

Year Ended December 31,

Interest payments

Amortization of financing costs

Accrual of final and amendment fees

Accretion of the Success Fee

As of December 31, 2019 and 2018, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 200,000,000 shares and 101,929,904 shares of common stock, respectively, with a par value of $0.001 per share.

As of December 31, 2019, the Company had reserved 2,778,812 shares of common stock for the exercise of outstanding stock options and the number of shares of common stock remaining available for future stock-based awards under the Company’s 2012 Stock Incentive Plan, 2019 Stock Incentive Plan and 2019 Employee Stock Purchase Plan, as shown in the table below.

As of December 31, 2018, the Company had reserved 10,690,261 shares of common stock for the conversion of outstanding shares of redeemable convertible preferred stock and accrued dividends thereon, the exercise of outstanding stock options, and the number of shares of common stock remaining available for future stock-based awards under the Company’s 2012 Stock Incentive Plan as shown below ( Note 10 ):

Stockholders’ Equity

Preferred Stock

As of December 31, 2020 and 2019, the Company’s restated certificate of incorporation authorized the Company to issue 5,000,000 shares of preferred stock.

As of December 31, 2020 and 2019, the Company’s restated certificate of incorporation authorized the Company to issue 200,000,000 shares of common stock, with a par value of $0.001 per share.

As of December 31, 2020 and 2019, the Company had reserved 3,646,200 and 2,778,812 shares of common stock, respectively, for the exercise of outstanding stock options and the number of shares of common stock remaining available for future stock-based awards under the Company’s 2012 Stock Incentive Plan, 2019 Stock Incentive Plan and 2019 Employee Stock Purchase Plan, as shown in the table below:

As of December 31,

Shares of common stock reserved for conversion of Series A preferred stock

Shares of common stock reserved for conversion of Series B preferred stock

Shares of common stock reserved for conversion of Series C preferred stock

Shares of common stock reserved for future issuance under the 2012 Stock

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Stock Purchase Plan

Initial Public Offering and Concurrent Private Placement

On May 9, 2019, the Company completed its IPO and a concurrent private placement in which it issued and sold an aggregate of 7,000,000 shares of common stock at an offering price of $10.00 per share, for net proceeds of $62.1 million, after deducting aggregate underwriting discounts and commissions and private placement agent fees of $4.9 million and other offering expenses of $3.0 million.

The Company’s common stock began trading on The Nasdaq Global Market on May 7, 2019 under the ticker symbol “TRVI”.

At-the-Market Offering

In June 2020, the Company entered into the ATM Sales Agreement with SVB Leerink LLC, under which the Company may issue and sell shares of its common stock, from time to time, having an aggregate offering price of up to $12.0 million.

Sales of common stock under the ATM Sales Agreement may be made by any method that is deemed an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended.

The Company is not obligated to make any sales of its common stock under the ATM Sales Agreement.

The Company began making sales pursuant to the ATM Sales Agreement in July 2020, and as of December 31, 2020, the Company had issued and sold an aggregate of 687,876 shares of common stock for gross proceeds of $3.2 million, before deducting estimated commissions and allocated fees of $0.2 million.

Subsequent to December 31, 2020, and through March 24, 2021, the Company had issued and sold an additional 1,367,621 shares of common stock for gross proceeds of $4.4 million, before deducting estimated commissions and allocated fees of $0.3 million under the ATM Sales Agreement.

Stock Based Awards

In April 2019, the Company’s board of directors adopted the 2019 Stock Incentive Plan (the “2019 Plan”), which became effective on May 7, 2019.

The 2019 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards.

The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2019 Plan.

The 2019 Plan is administered by the Company’s board of directors.

As of December 31, 2020 awards may be made under the 2019 Plan for up to such number of shares of the Company’s common stock as is equal to the sum of:

i) 1,578,947 shares;

plus ii) the number of shares (up to 1,157,894 shares) equal to the number of shares of the Company’s common stock subject to outstanding awards under the 2012 Stock Incentive Plan (the “2012 Plan”) that expire, terminate or are otherwise cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right;

plus iii) an annual increase to be added on the first day of each fiscal year, beginning with 2020 and continuing through 2029, equal to the least of (a) 2,105,623 shares of common stock, (b) 4% of the number of outstanding shares of the Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors.

The number of shares reserved for issuance under the 2019 Plan increased, pursuant to the terms of the 2019 Plan, by an additional 713,383 shares, equal to 4% of the Company’s then-outstanding common stock, effective as of January 1, 2020.

The 2012 Plan was adopted by the Company’s board of directors and stockholders.

The Company’s board of directors administers the 2012 Plan.

The 2012 Plan provides for the issuance of stock-based awards to the Company’s employees, officers and directors, as well as non-employee/consultants and advisors to the Company.

Options granted under the 2019 Plan and the 2012 Plan have a maximum term of ten years.

Options granted to employees, officers and non-employee consultants vest over four years based on varying vesting schedules including:

25% vesting on the first anniversary date of grant and the balance ratably over the next 36 months or vesting in equal monthly or quarterly installments over four years.

Options granted to directors generally vest over up to one to two years.

As of December 31, 2020 and 2019, respectively, options to purchase 1,249,653 and 631,234 shares of common stock were granted and outstanding, net of cancelations, under the 2019 Plan.

As of December 31, 2020 and 2019, respectively, options to purchase 921,824 and 1,043,992 shares of common stock were granted and outstanding, net of cancelations, under the 2012 Plan.

In April 2019, the Company’s board of directors adopted a resolution effective on May 7, 2019 that no further stock options or other equity-based awards may be granted under the 2012 Plan.

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the year ended December 31, 2020 is as follows:

(in thousands)

Outstanding as of December 31, 2019

Outstanding as of December 31, 2020

Options exercisable as of December 31, 2020

Options unvested as of December 31, 2020

The weighted average grant-date fair value per share of stock options granted was $3.68 and $5.06 for the years ended December 31, 2020 and 2019, respectively.

The aggregate fair value of stock options that vested during the years ended December 31, 2020 and 2019 was $2.2 million and $688, respectively.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2020 and 2019 was $81 and $105, respectively.

The assumptions that the Company used to determine the fair value of the stock options granted were as follows, presented on a weighted average basis:

Year Ended December 31,

Risk-free interest rate

Expected volatility

Expected dividend yield

Expected life of options (in years)

In April 2019, the Company’s board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”), which became effective on May 7, 2019.

The 2019 ESPP is administered by the Company’s board of directors.

The Company recognized $5 of stock-based compensation expense for the 2019 ESPP during the year ended December 31, 2020.

During the year ended December 31, 2019, there was no activity under the 2019 ESPP.

The number of shares of the Company’s common stock that have been approved to be issued under the 2019 ESPP is equal to the sum of:

i) 155,106 shares;

plus ii) an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2029, equal to the least of (a) 526,315 shares of common stock, (b) 1% of the number of outstanding shares of the Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors.

The aggregate number of shares of the Company’s common stock that may be issued under the 2019 ESPP increased, pursuant to the terms of the 2019 ESPP, by an additional 178,345 shares, equal to 1% of the Company’s then-outstanding common stock, effective as of January 1, 2020.

All of the Company’s employees are eligible to participate in the 2019 ESPP, provided that:

such person is customarily employed by the Company for more than 20 hours a week and for more than five months in a calendar year;

such person has been employed by the Company for at least three months prior to enrolling in the 2019 ESPP;

such person was an employee of the Company on the first day of the applicable offering period under the 2019 ESPP.

The following table summarizes the classifications of stock-based compensation expenses for the 2012 Plan, the 2019 Plan and the 2019 ESPP recognized in the Consolidated Statements of Operations:

Year Ended December 31,

Research and development expense

General and administrative expense

As of December 31, 2020, total unrecognized compensation cost related to the unvested share-based awards was $4.4 million, which is expected to be recognized over a weighted average period of 2.5 years.

Redeemable Convertible Preferred Stock

As of December 31, 2019 and 2018, under the Company’s certificate of incorporation, the authorized number of shares of redeemable convertible preferred stock was 0 and 86,197,030, respectively.

See Note 1 with respect to the Company’s IPO and the conversion of its outstanding redeemable convertible preferred stock into shares of its common stock.

As of December 31, 2019 and 2018, under the Company’s restated certificate of incorporation effective May 9, 2019, the authorized number of shares of preferred stock was 5,000,000 and 0, respectively.

Upon the closing of the IPO, the Company’s outstanding redeemable convertible preferred stock, including the accrued dividends thereon, automatically converted into an aggregate of 10,381,234 shares of the Company’s common stock.

Prior to the conversion into common stock as noted above, the Company’s redeemable convertible preferred stock was redeemable on or after July 14, 2020 and carried a cumulative coupon dividend rate of 6%.

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In addition, TPG had the right to purchase, under the same terms and conditions as the Series A Initial Closing, including the $1.00 per share purchase price, the lesser of 2,500,000 additional shares of Series A Preferred Stock (the “Additional Series A Preferred Shares”) and the number of shares of Series A Preferred Stock equal to 25% of the total number of shares of Series A Preferred Stock it previously purchased for cash under the Series A Purchase Agreement.

This additional right was exercisable until the date six months after the completion date of the Company’s Phase 2b/3 clinical trial of nalbuphine ER in patients with uremic pruritus.

This additional right was exercisable until the date six months after the completion date of the Company’s Phase 2b/3 clinical trial of Haduvio in patients with uremic pruritus.

On December 26, 2013, TPG purchased under a Series A Extension Preferred Stock Purchase Agreement (the “Series A Extension Purchase Agreement”) 6,500,000 additional shares of Series A Preferred Stock at $1.00 per share, which consisted of the Series A Milestone Shares and the Additional Series A Preferred Shares discussed above, resulting in proceeds, net of $39 in issuance costs, of $6.5 million.

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The Company recorded this issuance at its fair value of $1.08 per share, totaling $1.8 million before financing costs, resulting in a discount on this issuance in the amount of $134, which amount was being amortized out of the carrying value of Series A Preferred Stock over the expected redemption period, which was three years from July 14, 2017, the date of the First Tranche Closing of the Series C Preferred Stock Financing (each such term as defined below), or July 14, 2020 (the “Redemption Period”).

Such amortization totaled $7 and $4 for the years ended December 31, 2019 and 2018, respectively, which, for the year ended December 31, 2019, includes $5 of previously unaccreted discount on issuance at the time of conversion to shares of common stock.

Such amortization totaled $7 for the year ended December 31, 2019 which includes $5 of previously unaccreted discount on issuance at the time of conversion to shares of common stock.

There was no such amortization for the year ended December 31, 2020.

Holders of Series C Preferred Stock had a higher liquidation preference than the holders of Series A Preferred Stock and Series B Preferred Stock.

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Pursuant to the Series B Purchase Agreement, the Company issued 13,043,478 shares (the “Series B Initial Closing”) of Series B Preferred Stock to TPG at a purchase price of $1.15 per share, resulting in proceeds, net of $56 in issuance costs, of $15.0 million.

The Series B Purchase Agreement also provided for the sale of 4,347,826 additional shares of Series B Preferred Stock (the “Series B Milestone Shares”) to TPG at a purchase price of $1.15 per share upon the Company’s achievement of specified Milestone Events, as defined in the Series B Purchase Agreement, involving the Company’s Phase 2b/3 clinical trial of nalbuphine ER in patients with uremic pruritus;

its planned Phase 2 clinical trial of nalbuphine ER in patients with pruritus associated with prurigo nodularis;

The Series B Purchase Agreement also provided for the sale of 4,347,826 additional shares of Series B Preferred Stock (the “Series B Milestone Shares”) to TPG at a purchase price of $ 1.15 per share upon the Company’s achievement of specified Milestone Events, as defined in the Series B Purchase Agreement, involving the Company’s Phase 2b/3 clinical trial of Haduvio in patients with uremic pruritus;

its planned Phase 2 clinical trial of Haduvio in patients with pruritus associated with prurigo nodularis;

and a pending patent application.

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In addition, TPG had the right to purchase, on the same terms and conditions as the Series B Initial Closing, including the $1.15 per share purchase price, the lesser of 4,347,826 additional shares of Series B Preferred Stock and the number of shares equal to 25% of the total number of shares it previously purchased for cash under the Series B Purchase Agreement (the “Additional Series B Shares”).

This additional right was exercisable until the date six months after the completion date of the Company’s Phase 2b/3 clinical trial of nalbuphine ER in patients with uremic pruritus.

This additional right was exercisable until the date six months after the completion date of the Company’s Phase 2b/3 clinical trial of Haduvio in patients with uremic pruritus.

On October 30, 2014, TPG exercised its rights described above and purchased under an Additional Closing Agreement (the “Series B Second Closing”) 8,695,652 additional shares of Series B Preferred Stock at $1.15 per share, which consisted of the Series B Milestone Shares and the Additional Series B Shares.

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The Company recorded this issuance at its fair value of $1.10 per share, totaling $10.5 million, net of financing costs, resulting in a premium on this issuance in the amount of $478 which amount was being accreted into the carrying value of the Series B Preferred Stock over the Redemption Period.

Such accretion totaled $31 and $20 for the years ended December 31, 2019 and 2018, respectively, which includes $22, for the year ended December 31, 2019 of unaccreted premium on issuance at the time of conversion to shares of common stock.

Such accretion totaled $31 for the year ended December 31, 2019 which includes $22 of unaccreted premium on issuance at the time of conversion to shares of common stock.

There was no such accretion for the year ended December 31, 2020.

Holders of Series C Preferred Stock had a higher liquidation preference than the holders of Series A Preferred Stock and Series B Preferred Stock.

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(See Liquidation Preferences note below.)

As of December 31, 2019, there were no shares of redeemable convertible preferred stock outstanding as a result of the conversion into common stock in connection with the IPO.

As of December 31, 2018, redeemable convertible preferred stock consisted of the following (in thousands, except share amounts).

As of December 31, 2018

Series A redeemable convertible preferred stock

Series B redeemable convertible preferred stock

Series C redeemable convertible preferred stock

As of December 31, 2020 and 2019, there were no shares of redeemable convertible preferred stock outstanding as a result of the conversion into common stock in connection with the IPO.

Dividends on outstanding shares of Series A, Series B and Series C Preferred Stock accrued at a rate of 6% per annum on their original purchase price of $1.00, $1.15 and $1.46 per share, respectively (the “Accruing Dividends”), whether or not declared, and were cumulative.

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Accruing Dividends totaled $18.4 million through the date of the IPO, at which time they were converted into common shares.

Accruing Dividends totaled $16.2 million as of December 31, 2018.

Such amounts are included in the carrying values of Series A, Series B and Series C Preferred Stock, and in the accumulated deficit on the Company’s Consolidated Balance Sheet at December 31, 2018.

Liquidation Preferences

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and the fair market value per share of the Series C Preferred Stock was defined as the value per share of Series C Preferred Stock as mutually agreed upon by the Company and the holders of 66 2/3 % of the shares of Series C Preferred Stock then outstanding, and, in the event that they were unable to reach agreement, by a third-party appraiser agreed to by the Company and the holders of a majority of the shares of Series C Preferred Stock then outstanding.

As a result of the redemption rights described above, the carrying values of Series A Preferred Stock of $21.0 million, Series B Preferred Stock of $33.7 million, and Series C Preferred Stock of $61.0 million as of December 31, 2018, have been classified as temporary equity, and are presented between liabilities and stockholders’ equity (deficit) on the Company’s Consolidated Balance Sheets in accordance with ASC 480.

As a result of the redemption rights described above, the carrying values of Series A Preferred Stock of $21.0 million, Series B Preferred Stock of $33.7 million, and Series C Preferred Stock of $61.0 million as of December 31, 2018, were classified as temporary equity, and were presented between liabilities and stockholders’ equity (deficit) on the Company’s Consolidated Balance Sheets in accordance with ASC 480.

The Company was accreting the carrying value of the redeemable convertible preferred stock up to the expected redemption value over the estimated Redemption Period.

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Financing costs of approximately $ 166 that were netted against the proceeds from the 2013 and 2012 Series A Preferred Stock financings were being accreted to Series A Preferred Stock over the period from their respective issuance dates to the earliest redemption date of July 14, 2020.

The Company recorded $7 and $5 in accretion for financing costs for the years ended December 31, 2019 and 2018, respectively, which, for the year ended December 31, 2019 includes $5 of previously unaccreted financing costs at the time of the conversion of the Series A Preferred Stock into shares of the Company’s common stock.

The Company recorded $ 7 in accretion for financing costs for the year ended December 31, 2019 which includes $ 5 of previously unaccreted financing costs at the time of the conversion of the Series A Preferred Stock into shares of the Company’s common stock.

There was no such accretion for the year ended December 31, 2020.

In addition, the investor rights/obligation that was allocated from proceeds from the Series A Preferred Stock financings of $ 2.8 million, less $ 520 representing its fair value on the date of its exercise as noted above, was being accreted over the Redemption Period.

The Company recorded $84 and $54 in accretion of investor rights/obligation in the years ended December 31, 2019 and 2018, respectively, which, for the year ended December 31, 2019 includes $61 of previously unaccreted investor rights/obligations at the time of the conversion of the Series A Preferred Stock into shares of the Company’s common stock.

The Company recorded $ 84 in accretion of investor rights/obligation in the year ended December 31, 2019 which includes $ 61 of previously unaccreted investor rights/obligations at the time of the conversion of the Series A Preferred Stock into shares of the Company’s common stock.

There was no such accretion for the year ended December 31, 2020 .

Financing costs of approximately $76 that were netted against the proceeds from the 2014 Series B Preferred Stock financings were being accreted to Series B Preferred Stock over the period from their respective issuance dates to the earliest redemption date of July 14, 2020.

The Company recorded $4 and $3 in accretion for financing costs in the years ended December 31, 2019 and 2018, respectively, which, for the year ended December 31, 2019 includes $3 of previously unaccreted financing costs at the time of conversion of the Series B Preferred Stock into shares of the Company’s common stock.

The Company recorded $4 in accretion for financing costs in the year ended December 31, 2019 which includes $3 of previously unaccreted financing costs at the time of conversion of the Series B Preferred Stock into shares of the Company’s common stock.

There was no such accretion for the year ended December 31, 2020.

In addition, the investor rights/obligation that was allocated from proceeds from the Series B Preferred Stock financings of $2.0 million was being accreted over the remaining Redemption Period discussed above.

The Company recorded $117 and $76 in accretion of Series B Preferred Stock investor rights/obligation in the years ended December 31, 2019 and 2018, respectively, which, for the year ended December 31, 2019 includes $85 of previously unaccreted investor rights/obligations at the time of the conversion of the Series B Preferred Stock into shares of the Company’s common stock.

The Company recorded $117 in accretion of Series B Preferred Stock investor rights/obligation in the year ended December 31, 2019 which includes $85 of previously unaccreted investor rights/obligations at the time of the conversion of the Series B Preferred Stock into shares of the Company’s common stock.

There was no such accretion for the year ended December 31, 2020.

Financing costs of approximately $379 that were netted against the proceeds from the 2017, 2018 and 2019 Series C Preferred Stock financings were being accreted to Series C Preferred Stock over the period from their respective issuance dates to the earliest redemption date of July 14, 2020.

The Company recorded $223 and $109 in accretion for financing costs in the years ended December 31, 2019 and 2018, respectively, which, for the year ended December 31, 2019 includes $164 of previously unaccreted financing costs at the time of conversion of the Series C Preferred Stock into shares of the Company’s common stock.

The Company recorded $223 in accretion for financing costs in the year ended December 31, 2019 which includes $164 of previously unaccreted financing costs at the time of conversion of the Series C Preferred Stock into shares of the Company’s common stock.

There was no such accretion for the year ended December 31, 2020.

Optional Conversion

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As of December 31, 2018, each share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock was convertible into common stock at a one-to-one conversion ratio.

As of December 31, 2019, there were no redeemable convertible preferred shares outstanding as a result of the conversion into common shares in connection with the IPO.

As of December 31, 2020 and 2019, there were no redeemable convertible preferred shares outstanding as a result of the conversion into common shares in connection with the IPO.

In addition, upon conversion of shares of Series A, Series B or Series C Preferred Stock, a holder was entitled to receive, at the election of the holder, either (i) payment in cash of any Accruing Dividends declared but unpaid thereon, or (ii) such number of shares of common stock as determined by dividing the Accruing Dividends for such share of Series A, Series B or Series C Preferred Stock, by the applicable conversion price for such series of redeemable preferred stock in effect at the time of conversion.

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Upon the closing of a qualified public offering of common stock, as defined in the Company’s certificate of incorporation, or approval of (i) the holders of at least 60% of the Series A Preferred Stock then outstanding, voting separately as a class, (ii) the holders of at least 60% of the Series B Preferred Stock then outstanding, voting separately as a class and (iii) the holders of at least 66 2/3% of the Series C Preferred Stock then outstanding, voting separately as a class, all outstanding shares of redeemable convertible preferred stock would have automatically converted into common stock at the then-applicable conversion rate for such shares.

At December 31, 2019, there were no redeemable convertible preferred shares outstanding as a result of the conversion into common shares at a one-for-9.5 conversion ratio, in connection with the IPO.

At December 31, 2020 and 2019, there were no redeemable convertible preferred shares outstanding as a result of the conversion into common shares at a one-for-9.5 conversion ratio, in connection with the IPO.

Voting Rights

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The holders of shares of the Company’s common stock issued upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock have certain registration rights as set forth in an investors’ rights agreement between the Company and certain of its stockholders.

Stock-Based Awards

In April 2019, the Company’s board of directors adopted the 2019 Stock Incentive Plan (the “2019 Plan”), which became effective on May 7, 2019.

The 2019 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards.

The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2019 Plan.

The 2019 Plan is administered by the Company’s board of directors.

Awards may be made under the 2019 Plan for up to such number of shares of the Company’s common stock as is equal to the sum of:

i) 1,578,947 shares;

plus ii) the number of shares (up to 1,157,894 shares) equal to the number of shares of the Company’s common stock subject to outstanding awards under the 2012 Plan that expire, terminate or are otherwise cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right;

The Company’s 2012 Stock Incentive Plan (the “2012 Plan”), as amended, was adopted by the Company’s board of directors and stockholders.

The Company’s board of directors administers the 2012 Plan.

The 2012 Plan provides for the issuance of stock-based awards to the Company’s employees, officers and directors, as well as non-employee/consultants and advisors to the Company.

Options granted under the 2019 Plan and the 2012 Plan have a maximum term of ten years.

Options vest over four years based on varying vesting schedules including:

25% vesting on the first anniversary date of grant and the balance ratably over the next 36 months or vesting in equal monthly or quarterly installments over four years.

As of December 31, 2019, options to purchase 631,234 shares of common stock were granted and outstanding, net of cancelations, under the 2019 Plan.

As of December 31, 2019 and 2018, respectively, options to purchase 1,043,992 and 1,077,148 shares of common stock were granted and outstanding, net of cancelations, under the 2012 Plan.

In April 2019, the Company’s board of directors adopted a resolution effective on May 7, 2019 that no further stock options or other equity-based awards may be granted under the 2012 Plan.

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the year ended December 31, 2019 is as follows:

(in thousands)

Outstanding as of December 31, 2018

Outstanding as of December 31, 2019

Options exercisable as of December 31, 2019

Options unvested as of December 31, 2019

The weighted average grant-date fair value per share of stock options granted was $5.06 and $4.85 for the years ended December 31, 2019 and 2018, respectively.

The aggregate fair value of stock options that vested during the years ended December 31, 2019 and 2018 was $688 and $336, respectively.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was $105 and $6, respectively.

The assumptions that the Company used to determine the fair value of the stock options granted were as follows, presented on a weighted average basis:

Year Ended December 31,

Risk-free interest rate

Expected volatility

Expected dividend yield

Expected life of options (in years)

The following table summarizes the classifications of stock-based compensation expenses for the 2012 Plan and the 2019 Plan recognized in the Consolidated Statements of Operations:

Year Ended December 31,

Research and development expense

General and administrative expense

As of December 31, 2019, total unrecognized compensation cost related to the unvested share-based awards was $3.9 million, which is expected to be recognized over a weighted average period of 3.0 years.

In April 2019, the Company’s board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”), which became effective on May 7, 2019.

The 2019 ESPP is administered by the Company’s board of directors.

As of December 31, 2019, there has been no activity under the 2019 ESPP.

The number of shares of the Company’s common stock that have been approved to be issued under the 2019 ESPP is equal to the sum of:

i) 155,106 shares;

All of the Company’s employees are eligible to participate in the 2019 ESPP, provided that:

such person is customarily employed by the Company for more than 20 hours a week and for more than five months in a calendar year;

such person has been employed by the Company for at least three months prior to enrolling in the 2019 ESPP;

such person was an employee of the Company on the first day of the applicable offering period under the 2019 ESPP.

During the years ended December 31, 2019 and 2018, the Company recorded an income tax benefit related to state research and development tax credits of $18 and $124, respectively.

During each of the years ended December 31, 2020 and 2019, the Company recorded an income tax benefit related to state research and development tax credits of $18, respectively.

The components of income tax (benefit) for the years ended December 31, 2020 and 2019, are as follows:

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State income tax (benefit)—net of federal tax

Permanent differences

Change in valuation allowance

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The operating losses generated prior to 2018 will expire in years 2031 through 2037, unless previously utilized.

The operating losses generated in 2019 and 2018 can be carried forward indefinitely, however will only offset 80% of taxable income in a carryforward year.

The operating losses generated in 2018 or later can be carried forward indefinitely, however will only offset 80% of taxable income in a carryforward year.

The Company also generated federal R&D tax credits in 2020 of approximately $671.

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These amounts, $18 and $18 for the years ended December 31, 2020 and 2019, respectively, were recognized as current income tax benefits in the Company’s Consolidated Statements of Operations.

At December 31, 2019 and 2018, the Company’s Consolidated Balance Sheets reflect income tax receivable of $18 and $124, respectively, related to these credits.

At each of December 31, 2020 and 2019, the Company’s Consolidated Balance Sheets reflect income tax receivable of $18 respectively, related to these credits.

Because of the net operating loss and research credit carryforwards, tax years 2011 through 2020 remain open to U.S.

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As a result of the implementation of ASC 740, the Company recognized no adjustment for unrecognized income tax benefits.

The Company has not, as of yet, conducted a study of R&D tax credit carryforwards.

The Company has not, as of yet, conducted a study of R&D tax credit

carryforwards.

Such a study could result in an adjustment to the Company’s R&D tax credit carryforwards;

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As of December 31,

Dividends accrued on redeemable convertible preferred stock

Accretion of redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

Adjusted net loss attributable to common stockholders

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Accretion and dividends included in the table above were calculated through the IPO date.

The Company’s potential dilutive securities, which include stock options and redeemable convertible preferred stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders whenever the effect of including them would be to reduce the net loss per share.

The Company’s potential dilutive securities, which include stock options and, for 2019 through the IPO date, redeemable convertible preferred stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders whenever the effect of including them would be to reduce the net loss per share.

In periods where there is a net loss, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The following potential common shares, presented based on shares outstanding as of December 31, 2020 and 2019, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Series A redeemable convertible preferred stock

Series B redeemable convertible preferred stock

Series C redeemable convertible preferred stock

Outstanding stock options

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(“Penwest”) (subsequently merged into its parent, Endo Pharmaceuticals Inc.

(“Endo”) for an exclusive worldwide sublicensable license under certain patent rights and know-how controlled by Penwest to develop and commercialize products incorporating nalbuphine hydrochloride in any formulation, including an extended release formulation such as nalbuphine ER, in all fields and for any use.

(“Endo”)) for an exclusive worldwide sublicensable license under certain patent rights and know-how controlled by Penwest to develop and commercialize products incorporating nalbuphine hydrochloride in any formulation, including an extended release formulation such as Haduvio, in all fields and for any use.

Under the license agreement, the Company paid Penwest a non-creditable, non-refundable upfront license fee of $ 25 .

The Company may also become obligated to make milestone payments to Endo of $250, which would become due upon the successful completion of the first Phase 3 clinical trial of a licensed product candidate, such as the PRISM trial, and $750, which would become due upon the marketing approval of a licensed product in the United States, and to pay mid-single-digit royalties based on net sales of the licensed products by the Company, its affiliates and sublicensees.

The Company may also become obligated to make milestone payments to Endo of $ 250 , which would become due upon the successful completion of the first Phase 3 clinical trial of a licensed product candidate, such as the Phase 2b/3 PRISM trial, and $ 750 , which would become due upon the marketing approval of a licensed product in the United States, and to pay mid-single-digit royalties based on net sales of the licensed products by the Company, its affiliates and sublicensees.

In addition, the Company is obligated to pay Endo a low-to-mid double-digit percentage of certain income it receives from sublicensees, based on the date of the definitive agreement under which the sublicense was granted.

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Exclusive License Agreement with Rutgers

On November 6, 2018, the Company entered into an agreement with Rutgers, The State University of New Jersey (“Rutgers”) for an exclusive, worldwide, sublicensable license under certain patent rights controlled by Rutgers and for a non-exclusive, worldwide, sublicensable license under certain know-how controlled by Rutgers, in each case to develop and commercialize products incorporating nalbuphine for any human or animal use.

In November 2018, the Company entered into an agreement with Rutgers, The State University of New Jersey (“Rutgers”) for an exclusive, worldwide, sublicensable license under certain patent rights controlled by Rutgers and for a non-exclusive, worldwide, sublicensable license under certain know-how controlled by Rutgers, in each case to develop and commercialize products incorporating nalbuphine for any human or animal use.

Upon entering into the license agreement, the Company paid Rutgers a minimal upfront license issue fee, which was recorded as R&D expense in 2018 and agreed to pay Rutgers a minimal annual license fee.

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Restructuring Agreement with MentiNova, LLC

On November 6, 2018, concurrent with the signing of the agreement with Rutgers described above, the Company entered into a restructuring agreement with MentiNova, LLC (“MentiNova”) for the purchase of specified information and know-how, specified contractual rights and benefits, and all books and records of MentiNova related thereto (collectively, the “Acquired Assets”).

In November 2018, concurrent with the signing of the agreement with Rutgers described above, the Company entered into a restructuring agreement with MentiNova, LLC (“MentiNova”) for the purchase of specified information and know-how, specified contractual rights and benefits, and all books and records of MentiNova related thereto (collectively, the “Acquired Assets”).

Upon entering into the license agreement, the Company paid MentiNova an aggregate upfront payment of $119, which was recorded as R&D expense in 2018, subject to specified closing adjustments.

The Company may become obligated to make milestone payments to MentiNova in the aggregate of up to $1,188 based on the achievement of certain clinical and regulatory milestones as well as tiered low single-digit royalties based on net sales of products containing nalbuphine as the sole active pharmaceutical ingredient that are developed by the Company using the Acquired Assets or the intellectual property licensed to the Company under the Rutgers agreement described above (the “Rutgers IP”) for indications that are within the scope of the Rutgers IP.

The Company may become obligated to make milestone payments to MentiNova in the aggregate of up to $1.2 million based on the achievement of certain clinical and regulatory milestones as well as tiered low single-digit royalties based on net sales of products containing nalbuphine as the sole active pharmaceutical ingredient that are developed by the Company using the Acquired Assets or the intellectual property licensed to the Company under the Rutgers agreement described above (the “Rutgers IP”) for indications that are within the scope of the Rutgers IP.

The royalty is subject to reduction in certain circumstances.

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The Company also has commitments under lease and licensing agreements (Note 4 and Note 11).

Retirement Plan Other Employee Benefits

Retirement Plan and Other Employee Benefits

In March 2013, the Company adopted and became a participating employer of a multiple employer defined contribution retirement plan that complies with Section 401(k) of the Code.

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Costs incurred for these benefits totaled $407 and $289 during the years ended December 31, 2020 and 2019, respectively.

Subsequent Events

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures