What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-17 compared with 2021-03-25 · 304 added, 477 removed, 490 unchanged (61% of the section changed)

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Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Because of the inherent limitations in all control systems, no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

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Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

No t Applicable .

Directors, Executive Officers and Corporate Governance.

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The following documents are included on pages F-1 through F-21 attached hereto and are filed as part of this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements

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Consolidated Statements of Operations

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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

Form of Pre-Funded Warrant dated October 5, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 1, 2021)

Form of 7-Year Common Stock Warrant dated October 5, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 1, 2021)

Form of 3.5-Year Common Stock Warrant dated October 5, 2021 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 1, 2021)

Form of 7-Year Common Stock Warrant dated October 18, 2021 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 19, 2021)

Form of 3.5-Year Common Stock Warrant dated October 18, 2021 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 19, 2021)

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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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.

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

Offer Letter, dated June 17, 2021, by and between the Registrant and Lisa Delfini (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38886) filed with the SEC on August 12, 2021)

Form of Indemnification Agreement between the Registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.12 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)

Exclusive License Agreement between the Registrant and Rutgers, the State University of New Jersey, effective November 6, 2018 (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (File No.

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

Share Purchase Agreement, dated as of May 6, 2019, by and between the Registrant and New Enterprise Associates 16, L.P.

5 unchanged sentences

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

First Amendment to Loan and Security Agreement, dated July 6, 2021, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on July 7, 2021

Second Amendment to Loan and Security Agreement, dated August 13, 2021, by and between Silicon Valley Bank and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38886) filed with the SEC on November 10, 2021

Purchase Agreement, dated as of June 18, 2021, by and between the Registrant and Lincoln Park Capital Fund, LLC (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on June 21, 2021)

Registration Rights Agreement, dated as of June 18, 2021, by and between the Registrant and Lincoln Park Capital Fund, LLC (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on June 21, 2021)

Form of Securities Purchase Agreement dated September 30, 2021 (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 1, 2021)

Form of Registration Rights Agreement dated September 30, 2021 (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 1, 2021)

Form of Securities Purchase Agreement dated October 15, 2021 (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 19, 2021)

Form of Registration Rights Agreement dated October 15, 2021 (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K (File No.

001-38886) filed with the SEC on October 19, 2021)

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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XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed herewith.

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(Principal Executive Officer)

/s/ Christopher Seiter

/s/ Lisa Delfini

Chief Financial Officer

March 17, 2022

Christopher Seiter

(Principal Financial Officer)

/s/ Frank Muscolo

/s/ Christopher Galletta

March 17, 2022

Frank Muscolo

Christopher Galletta

(Principal Accounting Officer)

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/s/ Michael Heffernan

Lead Director

March 17, 2022

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Consolidated Statements of Operations

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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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.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations , stockholders' equity and cash flows for the years then ended, 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, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has negative cash flows from operations, an accumulated deficit, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We have served as the Company’s auditor since 2013.

Stamford, Connecticut

Hartford, Connecticut

March 17, 2022

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Cash and cash equivalents

Tax credit and other receivables

Prepaid expenses

Other current assets

Total current assets

Deferred offering costs

Other non-current assets

Operating lease right-of-use asset

Security deposits and other non-current assets

Property, equipment and leasehold improvements, net

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Accrued expenses

Operating lease liability - current portion

Term loan derivative liability

Operating lease liability

Total current liabilities

Term loan derivative liability

Operating lease liability - long term portion

Operating lease liability

Total liabilities

Commitments and contingencies (Note 11)

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

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

Preferred stock:

$ 0.001 par value;

5,000,000 shares authorized at

December 31, 2020 and 2019;

no shares issued or outstanding

at December 31, 2020 or 2019.

5,000,000 shares authorized at December 31, 2021 and December 31, 2020;

no shares issued or outstanding at December 31, 2021 or December 31, 2020.

Common stock:

$ 0.001 par value;

200,000,000 shares authorized at December 31, 2021 and December 31, 2020;

and 28,505,804 and 18,546,786 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively.

Additional paid-in capital

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

For the Year Ended December 31,

Year Ended December 31,

Operating expenses:

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Loss from operations

Other income (expense):

Change in fair value of obligation for loan success fee

Other (expense) income:

Change in fair value of term loan derivative liability

Other expense

Interest income

Interest expense

Total other income (expense), net

Loss before income tax benefit

Total other expense, net

Loss before income taxes

Income tax benefit

Accretion of redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

Adjusted net loss attributable to common stockholders

Basic and diluted net loss per common share outstanding

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Trevi Therapeutics, Inc.

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(Amounts in thousands, except share amounts)

Preferred Stock

Stockholders’

Equity (deficit)

Balance at December 31, 2019

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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

to common stock in connection with initial public

Issuance of common stock upon completion of initial

public offering, net of underwriting discounts and

commissions, and issuance costs

Issuance of common stock upon completion of private

placement, net of private placement agent fees

Issuance of common stock from employee stock purchase plan

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

Balance at December 31, 2020

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

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

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

Issuance of common stock and warrants under private placements, less issuance costs

Issuance of common stock from warrant exercise

Balance at December 31, 2021

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(Amounts in thousands)

For the Year Ended December 31,

Year Ended December 31,

Operating activities:

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

Changes in fair value of obligation for loan success fee

Changes in fair value of term loan derivative liability

Change in fair value of term loan derivative liability

Accretion/accrual of term loan discounts and debt issuance costs

Other expense related to transaction with Lincoln Park Capital Fund, LLC

Stock-based compensation

Changes in operating assets and liabilities:

Prepaid expenses

Prepaid expenses and other current assets

Accounts payable

Accrued expenses and other

Accrued expenses and other liabilities

Net cash used in operating activities

Investing activities:

Acquisitions of property, equipment and leasehold improvements

Purchases of property, equipment and leasehold improvements

Net cash used in investing activities

Financing activities:

Payment of loan success fee

Proceeds from term loan

Financing costs of term loan

Payments of 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

issuance costs

Proceeds from issuance of common shares upon completion of initial public offering, net

of underwriting commissions and discounts

Proceeds from private placement, net of private placement agent fees

Proceeds from employee stock purchase plan

Proceeds from exercises of warrants

Proceeds from sale of common stock and warrants under private placement,

net of issuance costs

Payments of offering costs

Net cash provided by financing activities

Net cash increase (decrease) for year

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

Interest paid

Income taxes paid

State research tax credits exchanged for cash

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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 Haduvio (nalbuphine ER) to treat serious neurologically mediated conditions.

(“Trevi” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of the investigational therapy 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.

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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.

The κ- and μ-opioid receptors are known to be critical mediators of itch, cough and certain movement disorders.

Nalbuphine’s mechanism of action also mitigates the risk of abuse associated with μ-opioid agonists because it antagonizes or blocks, the μ-opioid receptor.

Nalbuphine is currently the only opioid approved for marketing that is not classified as a controlled substance in the United States and most of Europe.

On April 22, 2019, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a one-for-9.5 reverse stock split of the Company’s common stock, which resulted in a proportional adjustment to the existing conversion ratios for each series of the Company’s redeemable convertible preferred stock.

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.

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.

In addition, as of December 31, 2020, the Company had an accumulated deficit of $147.0 million.

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

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.

Parenteral nalbuphine is not classified as a controlled substance in the U.S.

and most of Europe.

In accordance with Accounting Standards Update (“ASU”) No.

2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) (“ASU No.

2014-15”), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the 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 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, the term loan facility with Silicon Valley Bank (“SVB”) that the Company entered into in August 2020 (Note 6) and the private placements completed in October 2021 (Note 7).

The Company has incurred recurring losses since inception, including net losses of $ 33.9 million and $ 32.8 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, the Company had cash and cash equivalents of $ 36.8 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 $ 180.9 million as of December 31, 2021.

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

As of March 17, 2022, the date of issuance of these Consolidated Financial Statements, the Company believes that its cash and cash equivalents as of December 31, 2021, will not be sufficient to fund its operating expenses and capital expenditure requirements for 12 months from the date of issuance of these Consolidated Financial Statements, even without giving effect to the potential collateralization of the outstanding SVB term loan (Note 6) and, therefore, substantial doubt exists about the Company’s ability to continue as a going concern.

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

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

Although the Company has been successful in raising capital in the past, there is no assurance that it will be successful in obtaining such additional financing.

Therefore, it is not considered probable, as defined in ASU No.

that the Company’s plans to raise additional capital will alleviate the substantial doubt regarding its ability to continue as a going concern.

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

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.

The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

If the Company is unable to obtain funding, the Company could be forced to delay, reduce or abandon its product development programs or commercialization efforts, which could adversely affect its business prospects.

Summary of Significant Accounting Policies

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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 December 31 , 2020 for potential recognition or disclosure in the Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure other than those provided.

Certain prior year balances have been reclassified to conform to the current year presentation.

Such reclassifications did not affect loss from operations or net loss.

The Company has evaluated events occurring subsequent to December 31, 2021 for potential recognition or disclosure in the Consolidated Financial Statements and concluded there were no subsequent events that required recognition or disclosure other than those provided in Note 13.

Use of Estimates

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 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.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

(“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, the valuation of stock-based awards and the valuation allowance of deferred tax assets resulting from net operating losses.

In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.

Changes in estimates are recorded in the period in which they become known.

Actual results could differ from those estimates.

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

Cash Equivalents

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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, term loans, term loan derivative liability and obligation for loan success fee (Note 7).

The Company’s financial instruments have consisted of cash and cash equivalents, other current assets, accounts payable, accrued expenses, term loans, term loan derivative liability and warrants to acquire the Company’s common stock.

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 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.

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 the term loan derivative liability is estimated utilizing a probability-weighted cash flow approach.

The warrants to acquire the Company’s common stock are not required to be accounted for at fair value.

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 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 :

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020, and the basis for that measurement, by level within the fair value hierarchy:

December 31, 2021

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Money market funds (1)

Financial liabilities carried at fair value:

Term loan derivative liability

Included in cash and cash equivalents on the Consolidated Balance Sheets.

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

Financial liabilities

Balance at beginning of year (1)

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, 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.

Balance at beginning of period

Change in fair value of term loan derivative liability

Balance at end of period

Property, Equipment and Leasehold Improvements

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The Company reviews the recorded values of long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable.

There was no impairment or disposal of long-lived assets during the years ended December 31, 2020 and 2019, respectively.

There was no impairment or disposal of long-lived assets during the years ended December 31, 2021 and 2020.

Foreign Currency Transactions

The Company, at times, contracts with vendors and consultants outside of the United States, resulting in liabilities denominated in foreign currency.

The Company, at times, contracts with vendors and consultants outside of the U.S., resulting in liabilities denominated in foreign currency.

The transactions are recorded in U.S.

dollars on the transaction dates and any currency fluctuation through the payment date is recorded as currency gains or losses in the Consolidated Statements of Operations.

Net foreign currency gains and losses in 2020 and 2019 were insignificant.

Deferred Offering Costs

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 financings.

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 $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 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 Haduvio, as a significant amount of the Company’s development activities broadly support all indications.

All of the Company’s R&D expenses consist of expenses incurred in connection with the development of Haduvio.

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.

The Company expenses both internal and external R&D expenses as they are incurred.

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.

The estimated costs of research and development provided, but not yet invoiced, are included in accrued expenses on the Consolidated Balance Sheet.

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

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

The estimated costs of R&D provided, but not yet invoiced, are included in accrued expenses on the Consolidated Balance Sheets.

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.

The Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meet liability classification in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and then in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), depending on the specific terms of the warrant agreement.

Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or must or may require settlement by issuing variable number of shares.

If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.

If the warrants do not require liability classification under ASC 815, in order to conclude equity classification, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP.

After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity.

Liability classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded in the statements of operations as a gain or loss.

For equity classified warrants, no changes in fair value are recognized after the issuance date.

Stock-Based Compensation

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.

The Company’s determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option-pricing model for stock options with time-based vesting, and is impacted by the price of its common stock as well as changes in assumptions regarding a number of complex and subjective variables.

These variables include expected term that options will remain outstanding, expected common stock price volatility over the term of the option awards, risk-free interest rates and expected dividends.

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.

Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized.

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

The Company’s determination of the fair value of stock-based awards on the date of grant utilizes the Black-Scholes valuation model for stock options with time-based and performance-based vesting and is impacted by the price of its common stock as well as changes in assumptions regarding a number of subjective variables.

These variables include the expected term that stock options will remain outstanding, expected common stock price volatility over the term of the stock options, risk-free interest rates and expected dividends.

Changes in the variables can materially affect the fair value and ultimately how much stock-based compensation expense is recognized.

These inputs are subjective and generally require analysis and judgment to develop.

Expected Term—The expected term assumption represents the weighted average period that the stock-based awards are expected to be outstanding.

The Company has elected to use the “simplified method” for estimating the expected term of the options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

The Company has elected to use the “simplified method” for estimating the expected term of its stock options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock option.

Expected Volatility—For all stock options granted to date, the volatility data was estimated based on a study of publicly traded industry peer companies.

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Risk-Free Interest Rate—The risk-free interest rate is based on the yield available on U.S.

Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award.

Prior to the Company’s IPO in May 2019, the estimated fair value of the common stock underlying the Company’s stock options was determined at each grant date by the Company’s board of directors, with input from management.

All options to purchase shares of common stock were intended to be exercisable at a price per share not less than the per share fair value of the Company’s common stock underlying those options on the date of grant.

In the absence of a public trading market for the Company’s common stock prior to the Company’s IPO in May 2019, on each grant date, the Company developed an estimate of the fair value of its common stock based on the information known to the Company on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the common stock, and in part on input from an independent third-party valuation.

As is provided for in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company generally relied on valuations for up to twelve months unless the Company had experienced a material event that would have affected the estimated fair value of its common stock.

The valuations of the Company’s common stock performed prior to the Company’s IPO in May 2019, were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

The methodology to determine the fair value of common stock included estimating the fair value of the enterprise using a market approach, which estimates the fair value of the Company by including an estimation of the value of the business based on guideline public companies under a number of different scenarios.

The assumptions used to determine the estimated fair value of the Company’s common stock were based on numerous objective and subjective factors, combined with management judgment, including external market conditions affecting the pharmaceutical and biotechnology industry and trends within the industry;

the Company’s stage of development;

the rights, preferences and privileges of the Company’s convertible preferred stock relative to those of the Company’s common stock;

the prices at which the Company sold shares of convertible preferred stock;

the Company’s financial condition and operating results, including the Company’s levels of available capital resources;

the progress of the Company’s research and development efforts, stage of development and business strategy;

equity market conditions affecting comparable public companies;

market conditions;

and the lack of marketability of the Company’s common stock.

The Practice Aid identifies various available methods for allocating enterprise value across classes and series of capital stock to determine the estimated fair value of common stock at each valuation date.

In accordance with the Practice Aid, the Company considered the following methods:

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.

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

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.

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

This model defines the securities’ fair values as functions of the current fair value of a company and uses assumptions, such as the anticipated timing of a potential liquidity event and the estimated volatility of the equity securities.

Probability Weighted Expected Return Method (“PWERM”)—Under the PWERM methodology, the fair value of common stock is estimated based upon an analysis of future values for the company, assuming various outcomes.

The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock.

The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock.

Hybrid Method—The hybrid method is a PWERM where the equity value in one of the scenarios is calculated using an OPM.

In the hybrid method used by the Company, it considered an IPO as the other potential future liquidity event.

The equity value for the IPO scenario was determined using the guideline public company (“GPC”), method under the market approach.

The relative probability of the IPO scenario was determined based on an analysis of market conditions at the time and expectations as to the timing and likely prospects of the IPO at each valuation date.

In application of the GPC method, the Company considered publicly traded companies in the biopharmaceutical industry that had a similar profile to the Company’s as well as recently completed IPOs as indicators of estimated future value in an IPO.

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

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.

The estimated fair value of the Company’s common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

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.

Treasury zero-coupon issues similar in duration to the expected term of the stock-based award.

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

For performance-based vesting, the fair value is also recognized on a straight-line basis over the requisite service period based on whether the performance conditions are probable.

The Company reassesses the probability of achieving the performance conditions at each reporting date.

Forfeitures are accounted for as they occur.

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

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These Consolidated Financial Statements reflect expected future tax consequences of such positions presuming the taxing authorities possess full knowledge of the position and all relevant facts.

It is the opinion of Company management that there are no material uncertainties regarding the tax positions that the Company has taken through December 31, 2020 and December 31, 2019.

There are no material uncertainties regarding the tax positions that the Company has taken through December 31, 2021 and December 31, 2020.

The Company does not have any interest or penalties accrued related to tax positions as it does not have any unrecognized tax benefits.

In the event the Company determines that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of interest expense.

Redeemable Convertible Preferred Shares

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.

The Company was accounting for its shares of preferred stock under the requirements of ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.

The carrying value of the shares of preferred stock was presented as temporary equity and was adjusted by periodic accretions so that the carrying amount would equal the redemption amount at the estimated date that the shares of preferred stock would be redeemed.

These adjustments were effected through charges against additional paid-in capital, to the extent it was available, or accumulated deficit.

For all preferred stock issuances, the difference between the amount invested by the holders of the shares of preferred stock, net of issuance costs and premiums (or discounts), as compared to the redemption value was recorded as accretion over the redemption period of the shares of preferred stock.

The accretion was added to net loss to arrive at the net loss available to common stockholders in the calculation of net loss per common share.

All redeemable convertible preferred stock shares were converted into common stock as of the date of the Company’s IPO.

Under ASC 842, Leases (“ASC 842”), the Company determines if an arrangement is a lease at its inception.

If an operating lease has a term greater than one year, the lease is recognized in the balance sheet as a right-of-use asset and an operating lease liability at lease commencement.

The Company elected the short-term lease practical expedient, therefore, if an operating lease has a term less than one year, the Company will not recognize the lease on its balance sheet.

The operating right-of-use asset represents the Company’s right of use to an underlying asset for the term of the lease and the operating liability represents the Company’s obligation to make lease payments arising from the lease.

Operating lease right-of-use assets and operating lease liabilities are determined and recognized on the commencement date of the lease based on the present value of lease payments over the term of the lease.

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.

Basic and Diluted Net Income (Loss) per Common Share

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 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.

Basic and diluted net loss per common share outstanding is determined by dividing net loss by the weighted average common shares outstanding during the period.

Basic shares outstanding includes the weighted average effect of the Company’s outstanding prefunded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock.

For all periods presented, shares issuable upon exercise of stock options and warrants to purchase shares of common stock 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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Management uses one measurement of profitability and does not segregate its business for internal reporting.

All long-lived assets are maintained in the United States.

All long-lived assets are maintained in the U.S.

Recently Adopted Accounting Pronouncements

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

On January 1, 2021 , the Company adopted ASU No.

2019-12 Income Taxes (Topic 740) , which simplifies the accounting for income taxes.

The adoption of the new guidance did not affect the Company’s Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

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

Prepaid expenses consist of the following:

As of December 31,

Prepaid R&D payments

Prepaid corporate insurance

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 approximates 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.

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

If an operating lease has a term greater than one year, the lease is recognized in the balance sheet as a right-of-use asset and an operating lease liability at lease commencement.

The Company elected the short-term lease practical expedient;

therefore, if an operating lease has a term less than one year, the Company will not recognize the lease on its balance sheet.

The operating right-of-use asset represents the Company’s right of use to an underlying asset for the term of the lease, and the operating liability represents the Company’s obligation to make lease payments arising from the lease.

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

There have been no new pronouncements issued during the year ended December 31, 2021, which could be expected to materially impact the Company’s Consolidated Financial Statements.

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 approximates 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 $ 12 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.

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The Company had no new leases during the years ended December 31, 2021 and 2020.

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

The Office Space Lease is an operating lease and the remaining term as of December 31, 2021 is approximately 1.2 years.

The Company has no financing leases.

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

As of December 31,

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

December 31, 2021

December 31, 2020

Operating lease right-of-use asset

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Total operating lease liabilities

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

As of December 31,

Future minimum lease payments from December 31, 2021 until the expiration of the operating lease are as follows:

Total lease payments

imputed discount

imputed discount rate

Carrying value of operating lease liabilities

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

Lease expense under operating leases, including leases of office equipment, was $ 120 and $ 124 for the years ended December 31, 2021 and 2020, respectively.

Lease payments made were $ 139 and $ 138 in the years ended December 31, 2021 and 2020, respectively, with such amounts reflected in the Consolidated Statements of Cash Flows in operating activities.

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Property, equipment and leasehold improvements, net consist of the following:

As of December 31,

Computer, website development and office equipment

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Leasehold improvements

Less accumulated depreciation

Accumulated depreciation

Total property, equipment and leasehold improvements, net

Depreciation was $ 50 and $ 47 for the years ended December 31, 2021 and 2020, respectively.

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Accrued expenses consist of the following:

As of December 31,

Accrued R&D projects

Accrued consulting and professional fees

Accrued compensation and benefits

Accrued consulting and professional fees

Accrued other

Total accrued expenses

Silicon Valley Bank Term Loan

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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.

On July 6, 2021, the Company and SVB entered into a First Amendment (the “Loan Amendment”) to the SVB Loan Agreement.

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 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 7).

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.

The SVB Loan Agreement also restricts the payment of dividends on the Company’s common stock.

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.

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 $ 40 and $ 9 for the years ended December 31, 2021 and 2020, respectively and is included in interest expense in the Company’s Consolidated Statements of Operations.

The unamortized deferred charges totaled $ 76 and $ 48 at December 31, 2021 and 2020, respectively and are included as a direct reduction of the carrying value of the term loan payable on the Company’s 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 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.

Accretion of these loan discounts totaled $ 11 and $ 4 for the years ended December 31, 2021 and 2020, respectively and is included in interest expense in the Company’s Consolidated Statements of Operations.

At December 31, 2021 and 2020, the loan discount-financing costs unamortized balance was $ 12 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 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.

At December 31, 2021 and 2020, $ 657 and $ 183 was accrued for the final payment fee, respectively.

Upon SVB receiving evidence satisfactory to it that the Company has (i) received positive data for the Phase 2b/3 PRISM trial sufficient to advance Haduvio into a second Phase 3 clinical trial for chronic pruritus associated with prurigo nodularis and (ii) raised sufficient financing to fund such Phase 3 clinical trial and the Company’s operations, 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.

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 Consolidated Statements of Operations.

The total fair value of this liability was determined to be $ 114 and $ 196 at December 31, 2021 and 2020, respectively.

The change in fair value of the term loan derivative liability as of December 31, 2021 as compared to the fair value at December 31, 2020 was $ 82 .

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

Such amortization was $ 74 and $ 29 for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021 and 2020, the balance of the term loan discount – interest was $ 84 and $ 158 , respectively and is included as a reduction in the balance of the term loan payable on the Company’s 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 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.

For the fair value calculations of the term loan derivative liability at December 31, 2021 and 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.

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

Principal outstanding under term loan

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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 year ended December 31, 2020.

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

As of December 31, 2021 and 2020, the interest rate applicable to borrowings under the SVB Term Loan was 4.25 %.

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, 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.

The Exit Event included, among other things, the completion of a public offering of common stock.

The amount of the Success Fee was equal to 4.5% of the $15.0 million Term Loan funded.

The Success Fee Agreement was scheduled to terminate on the earlier to occur of (a) payment in full of the Success Fee pursuant to its terms, or (b) December 29, 2021.

The completion of the IPO on May 9, 2019 (see Note 8) triggered the Success Fee payment obligation and the Company made payments to its Lenders totaling $675 in May 2019.

Upon such payments, the Success Fee Agreement terminated.

The Success Fee Agreement represented a free-standing financial instrument.

Accordingly, the Company accounted for the Success Fee provision as a derivative under ASC 815, Derivatives and Hedging , and therefore recorded an obligation for the Success Fee at its fair value on the closing date of each advance under the Loan Agreement.

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.

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, 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.

Accretion and amortization of term loan discounts

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, 2021 and 2020, the Company’s restated certificate of incorporation authorized the Company to issue 5,000,000 shares of preferred stock, with a par value of $ 0.001 per share.

As of December 31, 2021 and 2020, 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 future issuance under the 2012 Stock

Incentive Plan

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

Incentive Plan

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

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”.

As of December 31, 2021 and 2020, the Company had reserved shares of common stock for future issuance as shown in the table below:

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

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

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

Shares to be issued upon conversion of common stock warrants and prefunded warrants

Shares to be issued upon sales under the LPC Purchase Agreement

At-the-Market Offering

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The Company began making sales pursuant to the ATM Sales Agreement in July 2020, and as of December 31, 2021, the Company had issued and sold an aggregate of 3,583,394 shares of common stock for gross proceeds of $ 11.0 million, before deducting estimated commissions and allocated fees of $ 0.8 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.

Under the terms of the October 2021 Private Placements, as described below, 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

On June 18, 2021, the Company entered into a common stock purchase agreement (“LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

The LPC Purchase Agreement provides that, subject to the terms and conditions therein, the Company has the right, but not the obligation, to sell, at its discretion, to Lincoln Park up to $ 15.0 million of shares of common stock over a 24 -month period commencing on July 23, 2021.

In addition, under the LPC Purchase Agreement, the Company issued 170,088 shares of common stock to Lincoln Park as consideration for Lincoln Park’s commitment to purchase shares of the Company’s common stock under the LPC Purchase Agreement.

The purchase price per share of the shares sold will be based on the market prices prevailing immediately preceding the time of sale as computed under the LPC Purchase Agreement.

Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s common stock.

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.

Private Placements

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 had an exercise price of $ 0.001 per share, became exercisable immediately upon issuance and was 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.

Total net proceeds from the two October private placements were $ 13.7 million, after deducting issuance costs of $ 1.1 million .

Warrant activity, including activity related to the pre-funded warrants, for the year ended December 31, 2021 is shown in the table below:

Outstanding as of December 31, 2020

Outstanding as of December 31, 2021

Only pre-funded warrants were exercised in 2021.

Subsequent to December 31, 2021, the remaining pre-funded warrants to purchase 2,300,000 shares of the Company’s common stock were exercised at a price of $ 0.001 per share.

The pre-funded and common stock warrants are classified as equity in accordance with ASC 815 given that the pre-funded and common stock warrants are indexed to the Company’s own shares of common stock and meet the requirements to be classified in permanent equity.

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 2019 Plan provides for the grant of incentive stock options, non-statutory 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:

The total number of shares of common stock that may be issued under the 2019 Plan and the 2012 Stock Incentive Plan (the “2012 Plan”) was 4,066,209 and 3,318,746 as of December 31, 2021 and 2020, respectively, of which 1,136,737 and 1,147,269 shares remained available for grant under the 2019 Plan, respectively.

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;

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.

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.

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

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.

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

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:

Options granted to employees, officers and non-employees generally vest over four years based on varying vesting schedules that primarily include:

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.

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

As of December 31, 2021 and 2020, respectively, options to purchase 2,263,752 and 1,249,653 shares of common stock were granted and outstanding, net of cancelations, under the 2019 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.

As of December 31, 2021 and 2020, respectively, options to purchase 665,720 and 921,824 shares of common stock were granted and outstanding, net of cancellations, under the 2012 Plan.

In February 2021, the compensation committee of the Company’s board of directors approved the grant of 450,875 stock options with performance-based vesting (“PSOs”) to employees of the Company.

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 year ended December 31, 2021 is as follows:

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The weighted average grant-date fair value per share of stock options granted was $ 2.28 and $ 3.68 for the years ended December 31, 2021 and 2020, 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 fair value of stock options that vested during the years ended December 31, 2021 and 2020 was $ 2.4 million and $ 2.2 million, 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 aggregate intrinsic value of stock options exercised during the year ended December 31, 2020 was $ 81 .

No stock options were exercised during the year ended December 31, 2021.

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:

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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 total number of shares of common stock that may be issued under the 2019 ESPP was 518,918 as of December 31, 2021, of which 470,631 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:

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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.

Effective January 1, 2021 and January 1, 2020, respectively, 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 185,467 shares and 178,345 shares, equal to 1 % of the Company’s then-outstanding common stock.

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

Research and development expense

As of December 31, 2021, total unrecognized compensation cost related to the unvested share-based awards was $ 3.8 million, which is expected to be recognized over a weighted average period of 2.1 years.

Redeemable Convertible Preferred Stock

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.

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.

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%.

The redemption amount per share for a share of redeemable convertible preferred stock was the greater of (A) the applicable original issue price per share for such series of redeemable convertible preferred stock, plus any of the dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon, and (B) the fair market value per share of redeemable convertible preferred stock, as described below under Redemption Rights.

The Company accounted for its redeemable convertible preferred stock under the requirements of ASC 480, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.

The carrying value of the redeemable convertible preferred stock was presented as temporary equity and was adjusted by periodic accretions so that the carrying amount equaled the redemption amount at the estimated date that the redeemable convertible preferred stock would be redeemed.

These adjustments were effected through charges against additional paid-in capital, to the extent it was available, or accumulated deficit.

For all issuances of redeemable convertible preferred stock, the difference between the amount invested by the holders of the redeemable convertible preferred stock, net of issuance costs and premiums (or discounts), as compared to the redemption value, was recorded as accretion over the redemption period of the redeemable convertible preferred stock.

The accretion was added to net loss to arrive at the net loss available to common stockholders in the calculation of net loss per common share.

Issuance of Series A Redeemable Convertible Preferred Stock

On December 4, 2012, the Company entered into the Series A Preferred Stock Purchase Agreement (the “Series A Purchase Agreement”) with TPG Biotechnology Partners III, L.P.

(“TPG”) and nine other holders of the Company’s convertible notes that were issued in 2011 and 2012 (the “Series A Investors”).

Pursuant to the Series A Purchase Agreement, the Company issued 6,000,000 shares (the “Series A Initial Closing”) of Series A Preferred Stock to TPG at a purchase price of $1.00 per share, resulting in proceeds, net of $128 in issuance costs, of $5.9 million (the “Series A Financing”).

Concurrently, convertible notes held by the Series A Investors totaling $564, including accrued interest, were automatically converted at a conversion price of $0.467 per share in accordance with calculations specified in the applicable note purchase agreement, and the Company issued 1,207,923 shares of Series A Preferred Stock in settlement of the convertible notes.

The Series A Purchase Agreement also provided for the sale of 4,000,000 additional shares of Series A Preferred Stock (the “Series A Milestone Shares”) to TPG at a purchase price of $1.00 per share upon the Company’s achievement of specified Milestone Events, as defined in the Series A Purchase Agreement, involving the Company’s Phase 1b clinical trial in uremic pruritus and a pending patent application.

In the event the Milestone Events were not achieved, TPG had the right to purchase the Series A Milestone Shares, in full or in part, under the same terms and conditions as the Series A Initial Closing, including the $1.00 per share purchase price, on or before June 30, 2014.

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 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.

This agreement also provided that the Company could sell up to 2,000,000 additional shares at $1.00 per share to existing stockholders deemed accredited investors within 45 days of the December 26, 2013 closing.

In January 2014, the Company issued 1,680,000 shares of Series A Preferred Stock to eight of the Series A Investors at $1.00 per share, as provided for as Additional Closings under the Series A Extension Purchase Agreement, resulting in proceeds, net of $7 in issuance costs, of $1.7 million.

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 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.

(See Liquidation Preferences note below.)

Issuance of Series B Redeemable Convertible Preferred Stock

On May 23, 2014, the Company entered into the Series B Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) with TPG.

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 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.

In the event the Milestone Events were not achieved, TPG had the right to purchase the Series B Milestone Shares, in full or in part, under the same terms and conditions as the Series B Initial Closing, at a purchase price of $ 1.15 per share, on or before November 30, 2015.

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 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.

This agreement also provided for the Company to sell 869,565 additional shares of Series B Preferred Stock at $1.15 per share to an existing stockholder.

The Series B Second Closing resulted in proceeds, net of $19 in issuance costs, of $11.0 million.

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 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.

(See Liquidation Preferences note below.)

Issuance of Series C Redeemable Convertible Preferred Stock

On July 14, 2017, the Company entered into the Series C Purchase Agreement with TPG and other institutional investors (the “Series C Initial Purchasers”) for the issuance of $50.5 million of its Series C Preferred Stock.

The Series C Purchase Agreement provided for the Company’s Series C Preferred Stock to be issued in two tranches, with the closing of the first tranche on July 14, 2017 (the “First Tranche Closing”) and the closing of the second tranche to occur following a determination by the Company’s board of directors that the Company’s cash and cash equivalents at such time are not sufficient to fund its operations for a period of three months following such determination (the “Second Tranche Closing”).

Upon the First Tranche Closing, the Company issued 20,547,946 shares of its Series C Preferred Stock at a purchase price of $1.46 per share, resulting in proceeds of $29.7 million, net of issuance costs of $291.

Also party to the Series C Purchase Agreement were eleven holders of the Company’s Convertible Notes (together with the Initial Purchasers and the Series C Additional Purchasers, as defined below, the “Series C Investors”).

Concurrently with the First Tranche Closing and pursuant to the Series C Purchase Agreement, the outstanding principal on the Company’s Convertible Notes, totaling $10.6 million, and all accrued interest thereon, totaling $564, were automatically converted at the Mandatory Conversion Price of $1.095 per share, and the Company issued 10,181,233 shares of its Series C Preferred Stock in full settlement of the Convertible Notes.

The Series C Purchase Agreement provided for a subsequent closing (the “Special Closing”), on the same terms and conditions as the First Tranche Closing, including the $1.46 per share purchase price, and on October 11, 2017, the Special Closing occurred, resulting in the issuance to two additional investors (the “Series C Additional Purchasers”) of 101,707 shares of the Company’s Series C Preferred Stock, at a purchase price of $1.46 per share, resulting in proceeds of $129, net of issuance costs of $19.

On November 12, 2017, one of the Series C Additional Purchasers purchased its second tranche shares pursuant to an election under the Series C Purchase Agreement, resulting in the issuance of 55,621 shares of the Company’s Series C Preferred Stock at a purchase price of $ 1.46 per share, resulting in proceeds of $ 81 .

On August 28, 2018, the Company amended the Series C Purchase Agreement to provide that a portion of the shares of Series C Preferred Stock that would otherwise be issued and sold at the Second Tranche Closing would instead be issued and sold at a third tranche closing (the “Third Tranche Closing”), with such closing to occur following a determination by the Company’s board of directors that the Company’s cash and cash equivalents at such time are not sufficient to fund its operations for a period of three months following such determination.

On August 30, 2018, the Company completed the Second Tranche Closing, resulting in the issuance of 7,211,165 shares of the Company’s Series C Preferred Stock, at a purchase price of $1.46 per share, resulting in proceeds of $10.5 million, net of issuance costs of $32.

On January 18, 2019, the Company completed the Third Tranche Closing, resulting in the issuance of 6,849,315 shares of the Company’s Series C Preferred Stock, at a purchase price of $1.46 per share, resulting in proceeds of $10.0 million, net of issuance costs of $37.

At such time, the Series C redeemable convertible preferred stock liability of $1.1 million was reclassified as Series C Preferred Stock.

Series C Redeemable Convertible Preferred Stock Liability and Changes in Fair Value

As discussed above, the Series C Purchase Agreement provided for the issuance and sale of Series C Preferred Stock in three separate tranches.

The tranches represented a freestanding financial instrument under ASC 480 and required fair value accounting until they were settled.

The Company recognized a liability on its Consolidated Balance Sheet for the obligations under this financial instrument.

The Company adjusted this liability to fair value at each reporting date, as applicable, and recognized any changes in fair value of the Series C Preferred Stock in its Consolidated Statements of Operations as a component of other income (expense).

The Company continued to recognize any changes in the fair value of this liability through the closing of the third tranche.

Accordingly, for the year ended December 31, 2018, the Company recorded the Series C redeemable convertible preferred stock liability at its fair value of $2.1 million, with a corresponding charge to other income (expense) in the Company’s Consolidated Statement of Operations.

Upon the Second Tranche Closing in August 2018, as described above, $1.0 million was reclassified to Series C Preferred Stock.

As a result, at December 31, 2018, the fair value of this liability, relating to the outstanding third tranche, was determined to be $1.1 million and was reclassified to Series C Preferred Stock upon the Third Tranche Closing in January 2019.

The fair value of the Series C redeemable convertible preferred stock liability was estimated as the excess, if any, of the fair value per share of the Company’s Series C Preferred Stock, as described below under Redemption Rights, over the purchase price of any outstanding tranches to be sold pursuant to the Series C Purchase Agreement.

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

(See Liquidation Preferences note below.)

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.

However, Accruing Dividends on the Company’s outstanding redeemable convertible preferred stock were payable only when, as and if declared by the Company’s board of directors, or upon liquidation, redemption or conversion.

No dividends were payable to the holders of the Company’s common stock unless equivalent dividends had been declared and paid on the Company’s outstanding Series A, Series B and Series C Preferred Stock.

No dividends had been declared or paid by the Company through the date of the IPO.

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

Liquidation Preferences

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of shares of Series C Preferred Stock then outstanding were entitled to be paid out of the assets of the Company that were available for distribution to its stockholders, before any payments were to be made to the holders of Series A Preferred Stock, Series B Preferred Stock or common stock by reason of their ownership thereof, an amount per share equal to the Series C Preferred Stock original issue price of $1.46 per share, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon.

If upon any such liquidation, dissolution or winding up of the Company or deemed liquidation event, the assets of the Company available for distribution to its stockholders were insufficient to pay the holders of shares of Series C Preferred Stock the full amount to which they were entitled, the holders of Series C Preferred Stock were entitled to share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series C Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, the holders of shares of Series A Preferred Stock and Series B Preferred Stock then outstanding were entitled to be paid out of the assets of the Company available for distribution to its stockholders after the payment of all preferential amounts required to be paid to the holders of shares of Series C Preferred Stock but before any payments were made to the holders of common stock by reason of their ownership thereof, (i) an amount per share equal to the Series A original issue price of $1.00 per share in the case of the Series A Preferred Stock, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon, and (ii) an amount per share equal to the Series B original issue price of $1.15 per share in the case of the Series B Preferred Stock, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon.

If upon any such liquidation, dissolution or winding up of the Company or deemed liquidation event, the assets of the Company available for distribution to its stockholders were insufficient to pay the holders of shares of Series A Preferred Stock and Series B Preferred Stock the full amount to which they were entitled (after the payment in full of all preferential amounts required to be paid to the holders of shares of Series C Preferred Stock), the holders of shares of Series A Preferred Stock and Series B Preferred Stock were entitled to share ratably in any distribution of the assets available for distribution in respect of such shares in proportion to the respective amounts which would otherwise be payable in respect of the share of Series A Preferred Stock and Series B Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or deemed liquidation event, after the payment of all preferential amounts required to be paid to the holders of shares of redeemable convertible preferred stock, the remaining assets of the Company available for distribution to its stockholders were to be distributed among the holders of the shares of redeemable convertible preferred stock and common stock, in proportion to the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted into common stock pursuant to the terms of the Company’s certificate of incorporation immediately prior to such dissolution, liquidation or winding up of the Company.

Redemption Rights

The Company’s certificate of incorporation provided that, unless prohibited by Delaware law governing distributions to stockholders, shares of the redeemable convertible preferred stock were to be redeemed by the Company in three annual installments commencing not more than 60 days after receipt by the Company, at any time on or after July 14, 2020, of written notice from the holders of at least a majority of the outstanding shares of redeemable convertible preferred stock, voting together as a single class on an as-converted basis, requesting redemption of all shares of redeemable convertible preferred stock (a “Redemption Request”).

In that event, unless prohibited by Delaware law governing distributions to stockholders, generally in connection with an insolvent corporation, shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, respectively, were to be redeemed by the Company at a price equal to the greater of (A) the applicable original issue price per share for such series of redeemable convertible preferred stock, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon, and (B) the fair market value per share of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the case may be, as of the date of the Company’s receipt of the Redemption Request.

For purposes of these redemption rights, the fair market value per share of the Series A Preferred Stock was defined as the value per share of Series A Preferred Stock as mutually agreed upon by the Company and the holders of 60 % of the shares of Series A 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 A Preferred Stock then outstanding;

the fair market value per share of the Series B Preferred Stock was defined as the value per share of Series B Preferred Stock as mutually agreed upon by the Company and the holders of 60 % of the shares of Series B 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 B Preferred Stock then outstanding;

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, 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.

The accretion included cumulative unpaid and undeclared Accruing Dividends as well as additional increases, if any, when the fair value of the redeemable convertible preferred stock exceeded the liquidation value at any point during the Redemption Period.

Upon the IPO, all redeemable convertible preferred shares and Accruing Dividends thereon converted to common shares and all previously unaccreted amounts were fully accreted to the expected redemption value.

At December 31, 2018, the fair values of the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock were determined utilizing a probability-weighted modeling approach that included both IPO and non-IPO based scenarios.

The non-IPO based scenarios included the fair value estimates of the Company’s common stock, before marketability discount, of $0.47, and each issue of its redeemable convertible preferred stock of:

$0.82 for its Series A Preferred Stock;

$0.86 for its Series B Preferred Stock;

and $1.44 for its Series C Preferred Stock, each calculated at December 31, 2017, as there were no clinical development milestones either achieved or not achieved during the period, and it was deemed that the Company’s total equity value had not changed to any significant degree through the December 31, 2018 measurement date.

Additional significant inputs utilized for the non-IPO based scenario was a probability factor of 60% and a marketability discount of 20% applied in arriving at the fair value of the common stock.

The IPO-based scenario utilized an expected pre-money valuation upon IPO;

cost of equity estimate of 15%;

estimated time to IPO date of 0.38 years;

and a probability factor of 40%.

At December 31, 2017, the fair value of the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock was determined utilizing the OPM;

whereby each class of stock is modeled as a call option with a unique claim on the assets of the Company.

Stock characteristics that were incorporated directly into the option valuation model include liquidation preferences, participation features, convertibility features and ratios, and value-sharing between classes of stock.

The Company’s equity value was estimated by employing a back-solving approach to determine its implied equity value at December 31, 2017 based on the initial closing of the Series C Preferred Stock financing completed in July 2017.

A Black-Scholes options pricing approach was utilized under the OPM to determine the fair value of each security, with significant inputs including a $1.44 fair value of the Series C Preferred Stock, a risk-free rate of 1.95%, volatility of 78.0% and a probability-weighted estimate of time to liquidity event of 2.71 years.

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 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 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 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 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 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

Each holder of Series A, Series B or Series C Preferred Stock was able to convert any or all of such holder’s redeemable convertible preferred stock into common stock at any time.

Each share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock was convertible into such number of shares of common stock as determined by dividing the original issue price of such series by the conversion price for such series in effect at the time of conversion.

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, 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.

The conversion prices for Series A, Series B or Series C Preferred Stock were subject to adjustment based on certain events specified in the Company’s certificate of incorporation, including anti-dilution adjustments.

Mandatory Conversion

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, 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

Prior to the IPO, and except as otherwise provided by law or by the other provisions of the Company’s certificate of incorporation, the holders of redeemable convertible preferred stock were entitled to vote as one class with the holders of common stock on any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of a meeting), and each holder of outstanding shares of redeemable convertible preferred stock was entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of redeemable convertible preferred stock held by such holder were convertible as of the record date for determining stockholders entitled to vote on the matter.

The holders of record of the shares of the Company’s Series B Preferred Stock, exclusively and as a separate class, were entitled to elect two directors of the Company, the holders of record of the shares of Series C Preferred Stock, exclusively, and as a separate class, were entitled to elect three directors of the Company, and the holders of record of the shares of common stock of the Company, exclusively and as a separate class, were entitled to elect two directors of the Company.

Registration Rights

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.

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.

During each of the years ended December 31, 2021 and 2020, the Company recorded an income tax benefit related to state research and development tax credits of $21 and $18, respectively.

The components of income tax (benefit) for the years ended December 31, 2021 and 2020, are as follows:

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R&D tax credits

Lease Standard Adoption

Effective income tax rate

Significant components of the Company’s deferred tax assets are as follows:

Year Ended December 31,

Significant components of the Company’s deferred tax assets and liabilities are as follows:

Net operating loss carryforwards

Federal and state tax credits

Deferred tax assets

Deferred tax liabilities

Valuation allowance

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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.

At December 31, 2020 and 2019, the federal R&D tax credits were approximately $3.9 million and $3.2 million, respectively.

The Company also generated federal R&D tax credits for the years ended December 31, 2021 and 2020 of approximately $ 702 and $ 671 , respectively.

At December 31, 2021 and 2020, the federal R&D tax credit carryforwards were approximately $ 4.6 million and $ 3.9 million, respectively.

These credits will expire in years 2032 through 2041 , unless previously utilized.

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The Company also generated state research tax credits for the years ended December 31, 2021 and 2020 of approximately $ 149 and $ 133 , respectively.

The Company applied to exchange most of these credits for cash under a state-run program.

The Company applied to exchange a portion of these credits for cash under a state-run program.

These amounts, $ 21 and $ 18 for the years ended December 31, 2021 and 2020, respectively, were recognized as current income tax benefits in the Company’s Consolidated Statements of Operations.

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.

At each of December 31, 2021 and 2020, the Company’s Consolidated Balance Sheets reflect income tax receivables of $ 21 and $ 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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The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:

As of December 31,

Accretion of redeemable convertible preferred stock

Dividends accrued on redeemable convertible preferred stock

Adjusted net loss attributable to common stockholders

Weighted average common shares used in net loss per share

attributable to common stockholders, basic and diluted

Year Ended December 31,

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

Basic and diluted net loss per common share outstanding

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, 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.

Basic shares outstanding includes the weighted average effect of the Company’s pre-funded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock.

The Company determined the exercise price of the warrant was nominal and, as such, have considered the 4,926,069 shares underlying the pre-funded warrants to be outstanding effective on October 5, 2021, for the purposes of calculating basic EPS.

The Company’s potential dilutive securities, which include stock options and warrants, 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:

Outstanding stock options

The following potential common shares, presented based on shares outstanding as of December 31, 2021 and 2020, respectively, 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:

Shares as of December 31,

Stock Options

Collaborative and Licensing Agreements

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Endo Pharmaceuticals Inc.

In May 2011, the Company entered into an agreement with Penwest Pharmaceuticals Co.

(“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 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 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 May 2011, the Company entered into an agreement with Penwest Pharmaceuticals Co., which subsequently merged into its parent, Endo Pharmaceuticals Inc.

(“Endo”), for an exclusive worldwide sublicensable license under certain patent rights and know-how controlled by Endo 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 Endo a non-creditable, non-refundable upfront license fee.

The Company may also become obligated to make milestone payments to Endo of $ 0.3 million, 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 $ 0.8 million, which would become due upon the marketing approval of a licensed product in the U.S.

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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Both the Company and Endo have the right to terminate the agreement if the other party materially breaches the agreement and fails to cure the breach within specified cure periods.

Endo also has the right to terminate in the event the Company undergoes specified bankruptcy, insolvency or liquidation events, and the Company has the right to terminate the agreement at its convenience at any time on 180 days’ notice to Endo.

Endo also has the right to terminate in the event the Company undergoes specified bankruptcy, insolvency or liquidation events.

The Company has the right to terminate the agreement at its convenience at any time on 180 days’ notice to Endo.

Additionally, if the Company or any of the Company’s sublicensees challenge the validity or enforceability of any licensed patent rights covering a licensed product and that challenge is not terminated within a specified period, the agreement will immediately terminate and all licenses granted under the agreement shall be revoked.

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If the agreement is terminated under certain specified circumstances, the Company will be deemed to have granted Endo a perpetual, royalty-free (except for pass-through payments to third parties), worldwide, exclusive, sublicensable license, under any improvements the Company made to the licensed know-how and any related patent rights the Company has, to manufacture and commercialize the licensed products.

Exclusive License Agreement with Rutgers

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.

The Company may become obligated to make milestone payments to Rutgers in the aggregate of up to $331 based on the achievement of certain clinical, regulatory and sales milestones.

The Company has also agreed to pay Rutgers a low single-digit percentage of certain income it receives from sublicensees and to pay tiered low single-digit royalties based on net sales of licensed products by the Company and its affiliates and sublicensees.

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

Upon the expiration of the royalty term for a licensed product in a country, the license granted to the Company under the agreement shall become perpetual, fully paid-up, irrevocable and royalty-free in such country.

The royalty is subject to reduction in certain circumstances.

Restructuring Agreement with MentiNova, LLC

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 $1.2 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 clinical research organizations, and contract manufacturers in connection with the production of clinical trial materials.

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.

The Company also has commitments under lease and licensing agreements (Note 3 and Note 10).

Retirement Plan and Other Employee Benefits

Retirement Plan

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.

All eligible employees of the Company immediately participate in the plan (with an entry date of the first day of any month), with no minimum service requirement.

All eligible employees of the Company are able to immediately participate in the plan (with an entry date of the first day of any month), with no minimum service requirement.

The 401(k) plan provides that the Company make non-discretionary matching contributions of 50 % of the first 6 % of elective contributions.

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Vesting in the employer match contribution portion of their accounts, as well as any earnings thereon, is based on years of credited service, vesting over a four-year period, with 25 % vesting per completed year.

The Company’s expense under the 401(k) plan, representing its employer matching contributions and additional contributions in accordance with regulatory compliance requirements, totaled $68 and $111 in the years ended December 31, 2020 and 2019, respectively.

Health Care and Life Insurance Benefits

The Company offers health care and life insurance benefits to all eligible and active employees.

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

The Company’s expense under the 401(k) plan, representing its employer matching contributions and additional contributions in accordance with regulatory compliance requirements, totaled $ 96 and $ 68 for the years ended December 31, 2021 and 2020, respectively.

Subsequent Events

On January 10, 2022, the Company received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, for the prior 30 consecutive business days, the bid price for the Company’s common stock had closed below the $ 1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company was provided a period of 180 calendar days, or until July 11, 2022 (the “Compliance Date”), to regain compliance with the Bid Price Requirement.

If, at any time before the Compliance Date, the bid price for the Company’s common stock closed at $ 1.00 or more for a minimum of 10 consecutive business days as required under the Compliance Period Rule, the Staff would provide written notification to the Company that it had regained compliance with the Bid Price Requirement, unless the Staff chose to exercise its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

On March 16, 2022, the Company received a letter from the Staff indicating that it had regained compliance with the Bid Price Requirement as of such date.

Although the Company was able to regain compliance with the Bid Price Requirement within the manner and time period prescribed by Nasdaq, there can be no assurance that the Company will be able to maintain compliance with the Bid Price Requirement or other Nasdaq continued listing requirements in the future or that the Company will be able to regain compliance with respect to any future deficiencies.

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