What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-12 · 124 added, 92 removed, 441 unchanged (33% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share and per share amounts)

September 30,

Current assets:

22 unchanged sentences

$ 0.001 par value;

5,000,000 shares authorized at June 30, 2021

5,000,000 shares authorized at September 30, 2021

and December 31, 2020;

no shares issued or outstanding at June 30, 2021 or

no shares issued or outstanding at September 30, 2021 or

December 31, 2020.

1 unchanged sentence

$ 0.001 par value;

200,000,000 shares authorized at June 30, 2021

200,000,000 shares authorized at September 30, 2021

and December 31, 2020;

and 21,621,524 and 18,546,786 shares

issued and outstanding at June 30, 2021 and December 31, 2020, respectively.

issued and outstanding at September 30, 2021 and December 31, 2020, respectively.

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

10 unchanged sentences

Loss before income taxes

Income tax benefit

Income tax (expense) benefit

Basic and diluted net loss per common share outstanding

6 unchanged sentences

Stockholders’

Balance at March 31, 2021

Balance at June 30, 2021

Stock-based compensation

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

Issuance of common stock from Employee Stock Purchase Plan

Issuance of common stock to Lincoln Park Capital Fund (see Note 7)

Balance at September 30, 2021

Balance at June 30, 2020

Balance at March 31, 2020

Stock-based compensation

Issuance of common stock from exercise of stock options

Issuance of common stock from Employee Stock Purchase Plan

Balance at June 30, 2020

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

Balance at September 30, 2020

Stockholders’

4 unchanged sentences

Issuance of common stock to Lincoln Park Capital Fund (see Note 7)

Balance at June 30, 2021

Balance at September 30, 2021

Balance at December 31, 2019

2 unchanged sentences

Issuance of common stock from Employee Stock Purchase Plan

Balance at June 30, 2020

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

Balance at September 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

13 unchanged sentences

Financing activities:

Proceeds from term loan

Payments of financing costs of term loan

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

2 unchanged sentences

Payments of offering costs

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net decrease in cash and cash equivalents

27 unchanged sentences

Since inception, the Company has financed its operations primarily through private placements of convertible preferred stock and convertible notes prior to its initial public offering (“IPO”), borrowings under its prior term loan facility, proceeds from its IPO and concurrent private placement completed in May 2019, sales of its common stock pursuant to the at-the-market Sales Agreement (the “ATM Sales Agreement”) (Note 7) with SVB Leerink LLC that the Company entered into in June 2020 and the term loan facility with Silicon Valley Bank (“SVB”) that the Company entered into in August 2020.

The Company has incurred recurring losses since inception, including net losses of $ 18.2 million for the six months ended June 30, 2021 and $ 32.8 million for the year ended December 31, 2020.

As of June 30, 2021, the Company had cash and cash equivalents of $ 36.4 million compared to $ 45.0 million of cash and cash equivalents as of December 31, 2020.

The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $ 165.1 million as of June 30, 2021.

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

As of August 12, 2021, the date of issuance of these Condensed Consolidated Financial Statements, the Company expects that its cash and cash equivalents as of June 30, 2021 will not be sufficient to fund its current business plan including related operating expenses and capital expenditure requirements through at least 12 months from the date of issuance of these Condensed Consolidated Financial Statements.

The Company has incurred recurring losses since inception, including net losses of $ 25.4 million for the nine months ended September 30, 2021 and $ 32.8 million for the year ended December 31, 2020.

As of September 30, 2021, the Company had cash and cash equivalents of $ 29.3 million compared to $ 45.0 million of cash and cash equivalents as of December 31, 2020.

The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $ 172.4 million as of September 30, 2021.

The Company expects to continue to incur losses for the foreseeable future.

As of November 10, 2021, the date of issuance of these Condensed Consolidated Financial Statements, the Company believes that its cash and cash equivalents as of September 30, 2021, together with the proceeds from the Company’s October 2021 private placements (Note 12), will not be sufficient to fund its operating expenses and capital expenditure requirements for 12 months from the date of issuance of these Condensed Consolidated Financial Statements.

The Company plans to seek to address this condition by raising additional capital to finance its operations.

4 unchanged sentences

To execute its business plans, the Company will need substantial funding to support its continuing operations and pursue its growth strategy.

Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

Until such time that the Company can generate significant revenue from product sales, if ever, the Company expects

to finance its operations through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

The Company may not be able to obtain financing when needed on acceptable terms or at all.

3 unchanged sentences

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021 and 2020 included herein, have been prepared in accordance with accounting principles generally accepted in the U.S.

The accompanying unaudited interim Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2021 and 2020 included herein, have been prepared in accordance with accounting principles generally accepted in the U.S.

(“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim information.

7 unchanged sentences

All amounts presented are in thousands of dollars, except share and per share amounts, unless noted otherwise.

The Company has evaluated events occurring subsequent to June 30, 2021 for potential recognition or disclosure in the Condensed Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure.

The Company has evaluated events occurring subsequent to September 30, 2021 for potential recognition or disclosure in the Condensed Consolidated Financial Statements.

Refer to Note 12 for disclosure related to events occurring subsequent to September 30, 2021.

Use of Estimates

5 unchanged sentences

Actual results could differ from those estimates.

The inputs into the Company’s estimates also considered the economic implications of COVID-19 on the Company’s estimates.

The inputs into the Company’s estimates also considered the economic implications of the COVID-19 pandemic on the Company’s estimates.

Unaudited Interim Financial Information

The accompanying interim Condensed Consolidated Balance Sheet as of June 30, 2021 and the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Stockholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021 and 2020 are unaudited.

The unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the Company’s opinion, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statements of its financial position as of June 30, 2021 and the results of its operations and its cash flows for the three and six months ended June 30, 2021 and 2020.

The results for the three and six months ended June 30, 2021 and 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or any other interim period or any future year or period.

The accompanying interim Condensed Consolidated Balance Sheet as of September 30, 2021 and the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Stockholders’ Equity and the Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2021 and 2020 are unaudited.

The unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the Company’s opinion, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statements of its financial position as of September 30, 2021 and the results of its operations and its cash flows for the three and nine months ended September 30, 2021 and 2020.

The results for the three and nine months ended September 30, 2021 and 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or any other interim period or any future year or period.

Cash Equivalents

2 unchanged sentences

The Company’s financial instruments have consisted of cash and cash equivalents, other current assets, accounts payable, accrued expenses, term loans and term loan derivative liability (Note 6).

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

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, other current assets, 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.

8 unchanged sentences

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis and the basis for that measurement, by level within the fair value hierarchy (Note 6):

June 30, 2021

September 30, 2021

Financial assets carried at fair value:

9 unchanged sentences

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

June 30, 2021

September 30, 2021

December 31, 2020

15 unchanged sentences

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 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 financing.

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 relating to the Company’s ATM Sales Agreement were $ 162 and $ 284 as of June 30, 2021 and December 31, 2020, respectively, excluding $ 508 and $ 105 , respectively, which has been recorded as a reduction to stockholders’ equity in connection with sales under the agreement.

Research and Development Expenses

9 unchanged sentences

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 or as non-current deposits, as applicable, and are recognized as expenses as the goods are delivered or the related services are performed.

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 other non-current assets, 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.

41 unchanged sentences

In the model, the exercise price is based on a comparison with the total equity value rather than, as in the case of a regular call option, a comparison with a per share stock price.

Thus, common stock is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value

immediately after the convertible preferred stock liquidation preference is paid.

Thus, common stock is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the convertible preferred stock liquidation preference is paid.

The OPM uses the Black-Scholes option-pricing model to price the call options.

33 unchanged sentences

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements during the six months ended June 30, 2021, which could be expected to materially impact the Company’s unaudited Condensed Consolidated Financial Statements.

There have been no new accounting pronouncements during the nine months ended September 30, 2021, which could be expected to materially impact the Company’s Condensed Consolidated Financial Statements.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

3 unchanged sentences

Total prepaid expenses and other current assets

Effective March 1, 2013, the Company entered into a lease for office space in New Haven, CT and commencing March 1, 2018, the Company entered into the First Amendment to the lease.

The leased space is approximately 5,600 square feet and the lease has a term of 60 months.

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 incremental borrowing rate used on existing leases was 13.0 %.

Effective March 1, 2013, the Company entered into a lease for office space in New Haven, CT and commencing March 1, 2018, the Company entered into the First Amendment to the lease (collectively, the “Office Space Lease”).

The leased space is approximately 5,600 square feet and the Office Space Lease has a term of 60 months.

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

The incremental borrowing rate used on the Office Space Lease 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 six months ended June 30, 2021.

The Company’s current operating leases consist of real estate and the remaining term is approximately 1.7 years .

The Company had no new leases during the nine months ended September 30, 2021.

The Office Space Lease is an operating lease and the remaining term as of September 30, 2021 is approximately 1.5 years .

The Company has no financing leases.

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

June 30, 2021

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

September 30, 2021

December 31, 2020

3 unchanged sentences

Total operating lease liabilities

Future minimum lease payments from June 30, 2021 until the expiration of the operating leases are as follows:

Future minimum lease payments from September 30, 2021 until the expiration of the operating leases are as follows:

Total lease payments

1 unchanged sentence

Carrying value of operating lease liabilities

Lease expense under operating leases, including leases of office equipment, was $ 30 and $ 31 for the three months ended June 30, 2021 and 2020, respectively and $ 61 and $ 62 for the six months ended June 30, 2021 and 2020, respectively.

Lease payments made in the three months ended June 30, 2021 and 2020 were $ 35 and $ 35 , respectively and $ 69 and $ 80 for the six months ended June 30, 2021 and 2020, respectively, with such amounts reflected in the Condensed Consolidated Statements of Cash Flows in operating activities.

Lease expense under operating leases, including leases of office equipment, was $ 29 and $ 31 for the three months ended September 30, 2021 and 2020, respectively and $ 90 and $ 93 for the nine months ended September 30, 2021 and 2020, respectively.

Lease payments made in the three months ended September 30, 2021 and 2020 were $ 35 and $ 23 , respectively and $ 104 and $ 103 for the nine months ended September 30, 2021 and 2020, respectively, with such amounts reflected in the Condensed Consolidated Statements of Cash Flows in operating activities.

Accrued Expenses

Accrued expenses consisted of the following:

June 30, 2021

September 30, 2021

December 31, 2020

17 unchanged sentences

The Loan Amendment modifies the conditions under which the Company is required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement .

Under the Loan Amendment, if the Company fails to receive positive data in its Phase 2b/3 PRISM trial or to meet certain equity raise requirements, including raising at least $ 15.0 million in net proceeds from the sale of equity securities during the period from June 1, 2021 through October 31, 2021 and raising by June 30, 2022, sufficient additional net proceeds from the sale of equity securities to finance its planned second phase 3 clinical trial of Haduvio for prurigo nodularis and its ongoing operations (each a “Milestone Condition”), the Company 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.

Under the Loan Amendment, if the Company fails to receive positive data in its Phase 2b/3 PRISM trial or to raise by June 30, 2022 sufficient net proceeds from the sale of equity securities to finance its planned second phase 3 clinical trial of Haduvio for prurigo nodularis and its ongoing operations (each a “Milestone Condition”), the Company 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.

In addition, the Loan Amendment provides that if the Company fails to maintain at least $ 20.0 million in unrestricted and unencumbered cash in its accounts with SVB at any time prior to the satisfaction of all the Milestone Conditions, the Company will be required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement .

The Company would also have been required to cash collateralize all outstanding amounts owed to SVB under the SVB Loan Agreement if it did not raise at least $ 15.0 million in net proceeds from the sale of equity securities during the period from June 1, 2021 through October 31, 2021.

The Company satisfied this equity funding condition through a combination of equity issuances under the Company’s ATM Sales Agreement and two private placements, which took place in October 2021 (see Note 12).

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

1 unchanged sentence

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 and will be amortized over the life of the SVB Term Loan using the effective interest method.

Amortization of these deferred financing charges totaled $ 5 and $ 11 for the three and six months ended June 30, 2021, respectively and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

The SVB Term Loan

discount - unamortized deferred charges totaled $ 36 and $ 48 at June 30, 2021 and December 31, 2020 , respectively and is included as a direct reduction of the carrying value of the term loan payable on the Company’s Condensed Consolidated Balance Sheet s .

In connection with the Loan Amendment, the Company paid $ 68 in financing costs to a third party, which were recorded as deferred charges and will be amortized over the remaining life of the SVB Term Loan using the effective interest method.

Amortization of these deferred financing charges totaled $ 11 and $ 22 for the three and nine months ended September 30, 2021, respectively and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

The unamortized deferred charges totaled $ 93 and $ 48 at September 30, 2021 and December 31, 2020, respectively and are included as a direct reduction of the carrying value of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

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 Condensed Consolidated Balance Sheets and will be accreted over the life of the SVB Term Loan using the effective interest method.

Accretion of these loan discounts totaled $ 2 and $ 5 for the three and six months ended June 30, 2021 and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At June 30, 2021 and December 31, 2020, the loan discount-financing costs balance was $ 18 and $ 23 , respectively.

Accretion of these loan discounts totaled $ 3 and $ 8 for the three and nine months ended September 30, 2021

and is included in interest expense in the Company’s Condensed Consolidated Statements of Operations.

At September 30, 2021 and December 31, 2020 , the loan discount-financing costs balance was $ 15 and $ 23 , respectively.

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 Condensed Consolidated Balance Sheets.

At June 30, 2021 and December 31, 2020, $ 420 and $ 183 was accrued for the final payment fee, respectively.

At September 30, 2021 and December 31, 2020, $ 538 and $ 183 was accrued for the final payment fee, respectively.

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.

2 unchanged sentences

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 (expense) income, net in the Company’s Condensed Consolidated Statements of Operations.

The total fair value of this liability was determined to be $ 162 and $ 196 at June 30, 2021 and December 31, 2020, respectively.

The change in fair value of the term loan derivative liability as of June 30, 2021 as compared to the fair value at its last measurement at December 31, 2020 date was $ 34 .

The term loan derivative liability is presented as a current liability on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2021 and as a non-current liability as of December 31, 2020.

The total fair value of this liability was determined to be $ 167 and $ 196 at September 30, 2021 and December 31, 2020, respectively.

The change in fair value of the term loan derivative liability as of September 30, 2021 as compared to the fair value at December 31, 2020 was $ 29 .

The term loan derivative liability is presented as a current liability on the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021 and as a non-current liability 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 Condensed Consolidated Statements of Operations through the SVB Term Loan’s maturity date using the effective interest method.

Such amortization was $ 19 and $ 37 in the three and six months ended June 30, 2021, respectively.

At June 30, 2021 and December 31, 2020, the balance of the term loan discount – interest was $ 121 and $ 158 , respectively and is included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

Such amortization was $ 19 and $ 56 in the three and nine months ended September 30, 2021, respectively.

At September 30, 2021 and December 31, 2020, the balance of the term loan discount – interest was $ 102 and $ 158 , respectively and is included as a reduction in the balance of the term loan payable on the Company’s Condensed Consolidated Balance Sheets.

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 June 30, 2021 and 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.

As of June 30, 2021 the Company had outstanding borrowings of $ 14.0 million under the SVB Term Loan and the term loan payable balance as presented on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 was comprised as shown below.

June 30, 2021

For the fair value calculations of the term loan derivative liability at September 30, 2021 and 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.

As of September 30, 2021, the Company had outstanding borrowings of $ 14.0 million under the SVB Term Loan and the term loan payable balance as presented on the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 was comprised as shown below.

September 30, 2021

December 31, 2020

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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 three and six months ended June 30, 2021.

There was no such expense under the SVB Term Loan for the three and six months ended June 30, 2020.

Three months ended June 30,

Six Months Ended

Three Months Ended

September 30,

Nine Months Ended

September 30,

Interest payments

2 unchanged sentences

Stockholders’ Equity

As of June 30, 2021 and December 31, 2020, the Company had reserved s hares of common stock for the exercise of outstanding stock options and 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 September 30, 2021 and December 31, 2020, the Company had reserved shares of common stock for the exercise of outstanding stock options and 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:

September 30,

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

1 unchanged sentence

Shares of common stock reserved for future issuance under the 2019 Employee Stock Purchase Plan

Private Placements

On October 5, 2021 and October 18, 2021, the Company issued common stock and warrants to purchase common stock in two private placements (the “October 2021 Private Placements”).

Refer to Note 12 for additional information.

At-the-Market Offering

3 unchanged sentences

The Company began making sales pursuant to the ATM Sales Agreement in July 2020.

During the three and six months ended June 30, 2021, the Company issued and sold an aggregate of 1,365,871 and 2,733,492 shares of common stock, respectively, for gross proceeds of $ 3.0 million and $ 7.4 million, respectively, before deducting estimated commissions and allocated fees of $ 0.2 million and $ 0.6 million, respectively.

As of June 30, 2021, the Company had issued and sold an aggregate of 3,421,368 shares of common stock for gross proceeds of $ 10.6 million, before deducting estimated commissions and allocated fees of $ 0.8 million.

During the three and nine months ended September 30, 2021, the Company issued and sold an aggregate of 162,026 and 2,895,518 shares of common stock, respectively, for gross proceeds of $ 0.3 million and $ 7.7 million, respectively, before deducting estimated commissions and allocated fees of less than $ 0.1 million and $ 0.6 million, respectively.

As of September 30, 2021, the Company had issued and sold an aggregate of 3,583,394 shares of common stock for gross proceeds of $ 10.9 million, before deducting estimated commissions and allocated fees of $ 0.8 million.

Under the terms of the October 2021 Private Placements, as described in Note 12, the Company agreed not to issue or sell additional shares under the ATM Sales Agreement on or prior to January 4, 2022.

Equity Purchase Agreement

5 unchanged sentences

The agreement may be terminated by the Company at any time, at its sole discretion, without any additional cost or penalty.

Under the terms of the October 2021 Private Placements, the Company agreed to not issue or sell additional shares under the LPC Purchase Agreement on or prior to April 6, 2023.

Stock-Based Awards

3 unchanged sentences

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

The total number of shares of common stock that may be issued under the 2019 Plan and the 2012 Plan was 4,060,617 as of June 30, 2021, of which 858,240 shares remained available for grant under the 2019 Plan.

The total number of shares of common stock that may be issued under the 2019 Plan and the 2012 Plan was 4,060,617 as of September 30, 2021, of which 1,011,437 shares remained available for grant under the 2019 Plan.

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 lesser 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.

Effective January 1, 2021 and January 1, 2020, respectively, the number of shares reserved for issuance under the 2019 Plan increased pursuant to the terms of the 2019 Plan by an additional 741,871 shares and 713,383 shares, equal to 4 % of the Company’s then-outstanding common stock .

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 lesser 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.

Effective January 1, 2021 and January 1, 2020, respectively, t he number of shares reserved for issuance under the 2019 Plan increased pursuant to the terms of the 2019 Plan by an additional 741,871 shares and 713,383 shares, equal to 4 % of the Company’s then-outstanding c ommon s tock .

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

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

As of June 30, 2021 and December 31, 2020, respectively, options to purchase 2,316,959 shares and 1,249,653 shares of common stock were granted and outstanding, net of cancellations, under the 2019 Plan.

As of June 30, 2021 and December 31, 2020, options to purchase 885,418 and 921,824 shares of common stock, respectively, were granted and outstanding, net of cancellations, under the 2012 Plan.

As of September 30, 2021 and December 31, 2020, respectively, options to purchase 2,287,627 shares and 1,249,653 shares of common stock were granted and outstanding, net of cancellations, under the 2019 Plan.

As of September 30, 2021 and December 31, 2020, options to purchase 761,553 and 921,824 shares of common stock, respectively, were granted and outstanding, net of cancellations, 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.

1 unchanged sentence

The PSOs granted in February 2021, vest based on the timing and successful results of the Company’s PRISM or CANAL clinical trials.

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the six months ended June 30, 2021 is as follows:

A summary of the Company’s combined stock option activity for the 2019 Plan and the 2012 Plan for the nine months ended September 30, 2021 is as follows:

Outstanding as of December 31, 2020

Outstanding as of June 30, 2021

Options exercisable as of June 30, 2021

Options unvested as of June 30, 2021

Outstanding as of September 30, 2021

Options exercisable as of September 30, 2021

Options unvested as of September 30, 2021

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 total number of shares of common stock that may be issued under the 2019 ESPP Plan was 518,918 as of June 30, 2021, of which 503,789 shares remain available for issuance.

The total number of shares of common stock that may be issued under the 2019 ESPP Plan was 518,918 as of September 30, 2021, of which 503,789 shares remain available for issuance.

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.

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Research and development expense

General and administrative expense

During the three and six months ended June 30, 2021 and 2020, the Company maintained a full valuation allowance on deferred tax assets.

Therefore, the Company has not recorded a provision for income taxes.

During the three and nine months ended September 30, 2021 and 2020, the Company maintained a full valuation allowance on deferred tax assets.

The amounts recorded for income tax (expense) benefit during the three and nine months ended September 30, 2021 and 2020, were to align the Company’s estimates for its state research and development credits in each given year.

Net Loss per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted

2 unchanged sentences

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 common shares underlying stock options, based on stock options outstanding as of June 30, 2021 and 2020, were excluded from the calculations of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect.

The common shares underlying stock options, based on stock options outstanding as of September 30, 2021 and 2020, were excluded from the calculations of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect.

Collaborative and Licensing Agreements

9 unchanged sentences

The Company’s royalty obligation with respect to each licensed product in each country commences upon the first commercial sale of the product in that country and extends until the later of the expiration, unenforceability or invalidation of the last valid claim of any licensed patent or application covering the licensed product in the country or the expiration of 10 years after the first commercial sale of the licensed product in the country, which period is referred to as the royalty term.

Upon the expiration of the royalty term for a product in a country , the Company is thereafter obligated to pay a low single-digit know-how and trademark royalty.

Upon the expiration of the

royalty term for a product in a country , the Company is thereafter obligated to pay a low single-digit know-how and trademark royalty.

Under the agreement, the Company has granted Endo a non-exclusive, royalty-free (except for pass-through payments to third parties), sublicensable license under its relevant patent rights to use any improvement the Company makes to Endo’s controlled release technology for any product other than the products under which it is licensed by Endo.

18 unchanged sentences

Upon entering into the license agreement, the Company paid MentiNova an aggregate upfront payment of $ 0.1 million, which was recorded as R&D expense in 2018, subject to specified closing adjustments.

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.

Commitments and Contingencies

A significant portion of the Company’s development activities are outsourced to third parties under agreements, including with CROs and contract manufacturers in connection with the production of clinical trial materials.

These arrangements may require the Company to pay termination costs to the third parties for reimbursement of costs and expenses incurred in the event of the orderly termination of contractual services.

These arrangements may

require the Company to pay termination costs to the third parties for reimbursement of costs and expenses incurred in the event of the orderly termination of contractual services.

The Company also has commitments under lease and licensing agreements (Note 4 and Note 10).

Subsequent Events

On October 5, 2021, the Company issued and sold to an initial investor in a private placement priced at-the-market under Nasdaq rules, (i) 2,373,201 shares of the Company’s common stock and accompanying warrants to purchase an aggregate of 4,746,402 shares of the Company’s common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 4,926,069 shares of the Company’s common stock and accompanying warrants to purchase an aggregate of 9,852,138 shares of the Company’s common stock.

Each share of the Company’s common stock and accompanying common stock warrants were sold together at a combined price of $ 1.62 , and each pre-funded warrant and accompanying common stock warrants were sold together at a combined price of $ 1.619 , for gross proceeds of approximately $ 11.8 million.

Each pre-funded warrant has an exercise price of $ 0.001 per share, became exercisable immediately upon issuance and will continue to be exercisable until exercised in full.

Of the accompanying common stock warrants, warrants to purchase an aggregate of 7,299,270 shares will expire on April 5, 2025 , and warrants to purchase an aggregate of 7,299,270 shares will expire on October 5, 2028 .

The accompanying common stock warrants have an exercise price of $ 1.37 per share and became exercisable immediately upon issuance.

On October 18, 2021, the Company issued and sold to New Enterprise Associates 16, L.P., an existing stockholder of the Company (“NEA”) and related party, in a private placement, 1,851,852 shares of the Company’s common stock and accompanying warrants to purchase an aggregate of 3,703,704 shares of the Company’s common stock.

Each share of the Company’s common stock and accompanying common stock warrants were sold together at a combined price of $ 1.62 for gross proceeds of approximately $ 3.0 million.

Of the accompanying common stock warrants, warrants to purchase an aggregate of 1,851,852 shares of the Company’s common stock will expire on April 18, 2025 , and warrants to purchase an aggregate of 1,851,852 shares of the Company’s common stock will expire on October 18, 2028 .

The accompanying common stock warrants have an exercise price of $ 1.37 per share and became exercisable immediately upon issuance.

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-Q

Item 1. Financial Statements