Trevi Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2021. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. 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. 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 Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2021. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption established by the Jumpstart Our Business Startups Act of 2012 for emerging growth companies. Changes in Internal Control over Financial Reporting No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 94 No t Applicable . PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this Item 10 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 11. Executive Compensation. The information required by this Item 11 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this Item 14 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules. (1) Financial Statements 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 (PCAOB ID: 00042) F-2 Consolidated Financial Statements Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 (2) Financial Statement Schedules: All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto. (3) Exhibits. The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Exhibit Number Description 3.1 Restated Certificate of Incorporation of Trevi Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38886) filed with the SEC on May 9, 2019) 3.2 Amended and Restated Bylaws of Trevi Therapeutics, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38886) filed with the SEC on May 9, 2019) 4.1 Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 4.2 Description of Registrant’s Securities (incorporated by referred to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K (File No. 001-38886) filed with the SEC on March 16, 2020) 4.3 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) 95 4. 4 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) 4.5 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) 4.6 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) 4.7 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) 10.1 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. 333-230745) filed with the SEC on April 5, 2019) 10.2+ 2012 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.3+ Form of Nonstatutory Stock Option Agreement under the 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.4+ 2019 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.5+ Form of Stock Option Agreement under the 2019 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.6+ 2019 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.7* Non-Employee Director Compensation Policy 10.8+ Trevi Therapeutics, Inc. Executive Separation Benefits and Retention Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38886) filed with the SEC on September 24, 2019) 10.9+ Employment Agreement, dated December 4, 2012, by and between the Registrant and Jennifer L. Good (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.10+ Offer Letter, dated December 4, 2012, by and between the Registrant and Thomas R. Sciascia (incorporated by referred to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K (File No. 001-38886) filed with the SEC on March 16, 2020) 10.11+ Offer Letter, dated April 23, 2018, by and between the Registrant and Christopher J. Seiter (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019)” 10.12+ 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) 10.13+ 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. 333-230745) filed with the SEC on April 5, 2019) 10.14 Indenture of Lease, dated February 6, 2013, by and between First Niagara Bank, N.A. and the Registrant (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.15 First Amendment to Lease, dated December 5, 2017, by and between the Registrant and 195 Church Street Associates, LLC (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.16† Exclusive License Agreement, dated as of May 13, 2011, by and between the Registrant and Penwest Pharmaceuticals Co. (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 10.17 Share Purchase Agreement, dated as of May 6, 2019, by and between the Registrant and New Enterprise Associates 16, L.P. (incorporated by reference to Exhibit 10.17 to Amendment No. 3 to Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on May 7, 2019) 10.18 Loan and Security Agreement, dated as of August 13, 2020, between Silicon Valley Bank and Trevi Therapeutics, Inc. (incorporated by referred to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-38886) filed with the SEC on November 12, 2020) 10.19 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 10.20 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 96 10.2 1 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) 10.22 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) 10.23 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) 10.24 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) 10.25 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) 10.26 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) 21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-230745) filed with the SEC on April 5, 2019) 23.1* Consent of Ernst & Young LLP, independent registered public accounting firm 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document 104 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. + Management contract or compensatory plan or arrangement. † Confidential treatment has been granted as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission. Item 16. Form 10-K Summary None. 97 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . TREVI THERAPEUTICS, INC. Date: March 17, 2022 By: /s/ Jennifer Good Jennifer Good President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Jennifer Good President and Chief Executive Officer, Director March 17, 2022 Jennifer Good (Principal Executive Officer) /s/ Lisa Delfini Chief Financial Officer March 17, 2022 Lisa Delfini (Principal Financial Officer) /s/ Christopher Galletta Controller March 17, 2022 Christopher Galletta (Principal Accounting Officer) /s/ David Meeker, M.D. Chairman of the Board March 17, 2022 David Meeker, M.D. /s/ James V. Cassella, Ph.D. Director March 17, 2022 James V. Cassella, Ph.D. /s/ Dominick Colangelo Director March 17, 2022 Dominick Colangelo /s/ Michael Heffernan Director March 17, 2022 Michael Heffernan /s/ Edward Mathers Director March 17, 2022 Edward Mathers /s/ Anne VanLent Director March 17, 2022 Anne VanLent 98 Trevi Therapeutics, Inc. Index to Consolidated Financial Statements Years Ended December 31, 2021 and 2020 Contents Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Trevi Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Trevi Therapeutics, Inc. (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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2013. Hartford, Connecticut March 17, 2022 F-2 Trevi Therapeutics, Inc. Consolidated Balance Sheets (Amounts in thousands, except share and per share amounts) December 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 36,830 $ 45,001 Prepaid expenses 886 1,003 Other current assets 241 265 Total current assets 37,957 46,269 Other non-current assets 334 532 Operating lease right-of-use asset 131 227 Property, equipment and leasehold improvements, net 53 103 Total assets $ 38,475 $ 47,131 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 2,849 $ 2,016 Accrued expenses 3,808 3,426 Term loan 5,833 — Term loan derivative liability 114 — Operating lease liability 120 113 Total current liabilities 12,724 5,555 Term loan 8,652 13,954 Term loan derivative liability — 196 Operating lease liability 24 144 Total liabilities 21,400 19,849 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock: $ 0.001 par value; 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. 29 19 Additional paid-in capital 197,963 174,240 Accumulated deficit ( 180,917 ) ( 146,977 ) Total stockholders’ equity 17,075 27,282 Total liabilities and stockholders’ equity $ 38,475 $ 47,131 See accompanying notes. F-3 Trevi Therapeutics, Inc. Consolidated Statements of Operations (Amounts in thousands, except share and per share amounts) Year Ended December 31, 2021 2020 Operating expenses: Research and development $ 22,984 $ 22,328 General and administrative 9,492 10,161 Total operating expenses 32,476 32,489 Loss from operations ( 32,476 ) ( 32,489 ) Other (expense) income: Change in fair value of term loan derivative liability 82 ( 9 ) Other expense ( 375 ) — Interest income 10 178 Interest expense ( 1,202 ) ( 456 ) Total other expense, net ( 1,485 ) ( 287 ) Loss before income taxes ( 33,961 ) ( 32,776 ) Income tax benefit 21 18 Net loss $ ( 33,940 ) $ ( 32,758 ) Basic and diluted net loss per common share outstanding $ ( 1.49 ) $ ( 1.81 ) Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted 22,841,481 18,059,011 See accompanying notes. F-4 Trevi Therapeutics, Inc. Consolidated Statements of Stockholders’ Equity (Amounts in thousands, except share amounts) Common Stock Additional Paid- Accumulated Total Stockholders’ Shares Amount in Capital Deficit Equity Balance at December 31, 2019 17,834,570 $ 18 $ 168,746 $ ( 114,219 ) $ 54,545 Stock-based compensation — — 2,417 — 2,417 Issuance of common stock from exercise of stock options 18,343 — 34 — 34 Issuance of common stock from employee stock purchase plan 5,997 — 12 — 12 Issuance of common stock under the at-the-market sales agreement, net of commissions and allocated fees 687,876 1 3,031 — 3,032 Net loss — — — ( 32,758 ) ( 32,758 ) Balance at December 31, 2020 18,546,786 $ 19 $ 174,240 $ ( 146,977 ) $ 27,282 Stock-based compensation — — 2,543 — 2,543 Issuance of common stock from employee stock purchase plan 42,290 — 39 — 39 Issuance of common stock under the at-the-market sales agreement, net of commissions and allocated fees 2,895,518 3 7,092 — 7,095 Issuance of common stock to Lincoln Park Capital Fund (see Note 7) 170,088 — 375 — 375 Issuance of common stock and warrants under private placements, less issuance costs 4,225,053 4 13,674 — 13,678 Issuance of common stock from warrant exercise 2,626,069 3 — — 3 Net loss — — — ( 33,940 ) ( 33,940 ) Balance at December 31, 2021 28,505,804 $ 29 $ 197,963 $ ( 180,917 ) $ 17,075 See accompanying notes. F-5 Trevi Therapeutics, Inc. Consolidated Statements of Cash Flows (Amounts in thousands) Year Ended December 31, 2021 2020 Operating activities: Net loss $ ( 33,940 ) $ ( 32,758 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 50 47 Change in fair value of term loan derivative liability ( 82 ) 9 Accretion/accrual of term loan discounts and debt issuance costs 599 227 Other expense related to transaction with Lincoln Park Capital Fund, LLC 375 — Stock-based compensation 2,543 2,417 Changes in operating assets and liabilities: Prepaid expenses and other current assets 342 742 Accounts payable 831 417 Accrued expenses and other liabilities 336 ( 101 ) Net cash used in operating activities ( 28,946 ) ( 29,000 ) Investing activities: Purchases of property, equipment and leasehold improvements — ( 32 ) Net cash used in investing activities — ( 32 ) Financing activities: Proceeds from term loan — 14,000 Payments of financing costs of term loan ( 68 ) ( 84 ) Proceeds from at-the-market sales, net of commissions 7,505 3,135 Proceeds from exercises of stock options — 34 Proceeds from employee stock purchase plan 39 12 Proceeds from exercises of warrants 3 — Proceeds from sale of common stock and warrants under private placement, net of issuance costs 13,678 — Payments of offering costs ( 382 ) ( 377 ) Net cash provided by financing activities 20,775 16,720 Net decrease in cash and cash equivalents ( 8,171 ) ( 12,312 ) Cash and cash equivalents at beginning of period 45,001 57,313 Cash and cash equivalents at end of period $ 36,830 $ 45,001 Supplemental disclosure of cash flow information: Interest paid $ 603 $ 180 State research tax credits exchanged for cash $ 18 $ 18 Supplemental disclosure of non-cash financing activities: Offering costs included in accrued expenses $ 41 $ 11 See accompanying notes. F-6 Trevi Therapeutics, Inc. Notes to Consolidated Financial Statements (Amounts in thousands, except share and per share amounts) 1. Nature of the Business Trevi Therapeutics, Inc. (“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”). These conditions share a common pathophysiology that is mediated through opioid receptors in the central and peripheral nervous systems. Due to nalbuphine’s mechanism of action as a modulator of opioid receptors, the Company believes Haduvio has the potential to be effective in treating each of these conditions. Haduvio is an oral extended-release formulation of nalbuphine. Nalbuphine is a mixed κ-opioid receptor agonist and μ-opioid receptor antagonist that has been approved and marketed as an injectable for pain indications for more than 20 years in the United States (“U.S.”) 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. Parenteral nalbuphine is not classified as a controlled substance in the U.S. and most of Europe. Liquidity 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. 2014-15, F-7 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. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying Consolidated Financial Statements include the accounts of Trevi Therapeutics, Inc. and its wholly-owned subsidiary Trevi Therapeutics Limited. Intercompany balances and transactions have been eliminated. All amounts presented are in thousands of dollars, except share and per share amounts, unless noted otherwise. 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 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 The Company classifies short-term, highly liquid investments with an original term of three months or less at the date of purchase as cash equivalents. Fair Value Measurements 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, 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. 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. The valuation techniques included in the guidance are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions and are classified into the following fair value hierarchy: Level 1—Observable inputs—quoted prices in active markets for identical assets and liabilities. Level 2—Observable inputs other than the quoted prices in active markets for identical assets and liabilities—such as quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, or other inputs that are observable or can be corroborated by observable market data. 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. F-8 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: Level 1 Level 2 Level 3 December 31, 2021 Financial assets carried at fair value: Money market funds (1) $ 35,835 $ — $ — Financial liabilities carried at fair value: Term loan derivative liability $ — $ — $ 114 December 31, 2020 Financial assets carried at fair value: Money market funds (1) $ 44,095 $ — $ — Financial liabilities carried at fair value: Term loan derivative liability $ — $ — $ 196 (1) 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): December 31, 2021 2020 Financial liabilities Balance at beginning of period $ 196 $ 187 Change in fair value of term loan derivative liability ( 82 ) 9 Balance at end of period $ 114 $ 196 Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements (consisting of furniture, computer and office equipment and leasehold improvements) are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets ( three years for computer equipment, five years for furniture and office equipment, and the shorter of the term of the lease or useful life for leasehold improvements). Impairment of Long-Lived Assets ASC 360, Property, Plant, and Equipment, addresses the financial accounting and reporting for impairment or disposal of long-lived assets. 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, 2021 and 2020. Foreign Currency Transactions 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. 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 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. Research and Development Expenses All of the Company’s R&D 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 R&D activities on the Company’s behalf. The Company does not allocate its costs by each indication for which it is developing Haduvio, F-9 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 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 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 other non-current assets, as applicable, and are recognized as expenses as the goods are delivered or the related services are performed. Patent Costs 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. Warrants 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 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 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. For purposes of identifying these peer companies, the Company considered the industry, stage of development, size and financial leverage of potential comparable companies. Expected Dividend—The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company currently has no history or expectation of paying cash dividends on its common stock. 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 stock-based award. F-10 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. Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred income tax assets are reduced, as necessary, by a valuation allowance when management determines it is more likely than not that some or all of the tax benefits will not be realized. The Company applies the provisions of ASC 740, Income Taxe s (“ASC 740”), which prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. 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. 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. Leases 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 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. Segments The Company has one reporting segment which is also the Company’s only operating segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. All long-lived assets are maintained in the U.S. Recently Adopted Accounting Pronouncements 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 pronouncements issued during the year ended December 31, 2021, which could be expected to materially impact the Company’s Consolidated Financial Statements. 3 . Leases 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 F-11 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. Lease expense is recognized on a straight-line basis over the lease term. The Company had no new leases during the years ended December 31, 2021 and 2020. 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 lease as presented on its Consolidated Balance Sheets: December 31, 2021 December 31, 2020 Assets: Operating lease right-of-use asset $ 131 $ 227 Liabilities: Operating lease liabilities, current portion 120 113 Operating lease liabilities, long term portion 24 144 Total operating lease liabilities $ 144 $ 257 Future minimum lease payments from December 31, 2021 until the expiration of the operating lease are as follows: 2022 $ 131 2023 24 Total lease payments 155 Less: imputed discount rate ( 11 ) Carrying value of operating lease liabilities $ 144 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. 4 . Property, Equipment and Leasehold Improvements, Net Property, equipment and leasehold improvements, net consist of the following: December 31, 2021 2020 Computer, website development and office equipment $ 45 $ 45 Furniture and fixtures 60 60 Leasehold improvements 130 130 235 235 Less: Accumulated depreciation ( 182 ) ( 132 ) Total property, equipment and leasehold improvements, net $ 53 $ 103 Depreciation was $ 50 and $ 47 for the years ended December 31, 2021 and 2020, respectively. 5 . Accrued Expenses Accrued expenses consist of the following: December 31, 2021 2020 Accrued R&D projects $ 2,303 $ 1,754 Accrued compensation and benefits 1,250 954 Accrued consulting and professional fees 176 560 Accrued other 79 158 Total accrued expenses $ 3,808 $ 3,426 F-12 6 . Debt Silicon Valley Bank Term Loan On August 13, 2020 (the “Effective Date”), the Company entered into a loan and security agreement (the “SVB Loan Agreement”) with Silicon Valley Bank, as lender (“SVB”), pursuant to which SVB provided a term loan to the Company in the original principal amount of $ 14.0 million (the “SVB Term Loan”). The Company may use the proceeds from the SVB Term Loan for working capital and general corporate purposes. The SVB Term Loan bears interest at a floating rate per annum equal to the greater of (A) the prime rate plus 1.00 % and (B) 4.25 %. If SVB receives evidence satisfactory to it that the Company has (i) received positive data for the Phase 2b/3 clinical trial of Haduvio sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis, and (ii) raised sufficient financing to fund such Phase 3 clinical trial and the Company’s operations, (together, the “Phase 3 Event”), the interest rate under the SVB Term Loan will be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00 % and (B) 6.25 % (see term loan derivative liability discussion below). On the first business day of each month, the Company will be required to make monthly interest payments and commencing on March 1, 2022, the Company will be required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest. All outstanding principal and accrued and unpaid interest under the SVB Term Loan and all other outstanding obligations with respect to the SVB Term Loan are due and payable in full on February 1, 2024. The SVB Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loan, subject to a prepayment premium. Such prepayment premium would be 3.00 % of the principal amount of the SVB Term Loan if prepaid prior to the first anniversary of the Effective Date, 2.00 % of the principal amount of the SVB Term Loan if prepaid on or after the first anniversary of the Effective Date but prior to the second anniversary of the Effective Date, and 1.00 % of the principal amount of the SVB Term Loan if prepaid on or after the second anniversary of the Effective Date but prior to February 1, 2024 . Upon repayment in full of the SVB Term Loan, the Company will be required to pay a final payment fee equal to $ 1.2 million. The SVB Term Loan and related obligations under the SVB Loan Agreement are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property (which is subject to a negative pledge under the SVB Loan Agreement). 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. 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. F-13 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 $ 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. 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 (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 $ 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 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. December 31, 2021 2020 Principal outstanding under term loan $ 14,000 $ 14,000 Term loan discount-interest ( 84 ) ( 158 ) Term loan discount-unamortized deferred charges ( 76 ) ( 48 ) Term loan discount-financing costs, net of accretion ( 12 ) ( 23 ) Term loan-final payment fee 657 183 14,485 13,954 Less current portion 5,833 - Term loan payable, non-current $ 8,652 $ 13,954 F-14 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 years ended December 31, 2021 and 2020. 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, 2021 2020 Interest payments $ 603 $ 231 Accrual of the final payment fee 474 183 Accretion and amortization of term loan discounts 125 42 $ 1,202 $ 456 7 . Stockholders’ Equity 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. Common Stock 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, 2021 and 2020, the Company had reserved shares of common stock for future issuance as shown in the table below: December 31, 2021 December 31, 2020 Shares of common stock reserved for future issuance under the 2012 Stock Incentive Plan 665,720 921,824 Shares of common stock reserved for future issuance under the 2019 Stock Incentive Plan 3,400,489 2,396,922 Shares of common stock reserved for future issuance under the 2019 Employee Stock Purchase Plan 470,631 327,454 Shares to be issued upon conversion of common stock warrants and prefunded warrants 20,602,244 — Shares to be issued upon sales under the LPC Purchase Agreement 30,000,000 — 55,139,084 3,646,200 At-the-Market Offering In June 2020, the Company entered into the ATM Sales Agreement with SVB Leerink LLC, under which the Company may issue and sell shares of its common stock, from time to time, having an aggregate offering price of up to $ 12.0 million. Sales of common stock under the ATM Sales Agreement may be made by any method that is deemed an “at-the-market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. The Company is not obligated to make any sales of its common stock under the ATM Sales Agreement. The Company began making sales pursuant to the ATM Sales Agreement in July 2020, and as of December 31, 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. 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 F-15 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: Number of Warrant Shares Weighted Average Exercise Price Weighted Average Contractual Term (in years) Outstanding as of December 31, 2020 — $ — — Issued 23,228,313 $ 1.08 Exercised ( 2,626,069 ) $ 0.001 Outstanding as of December 31, 2021 20,602,244 $ 1.22 4.5 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, 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. 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, F-16 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. 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. 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-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 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. 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: Number of Option Shares Weighted Average Exercise Price Weighted Average Contractual Term Aggregate Intrinsic Value (in years) (in thousands) Outstanding as of December 31, 2020 2,171,477 $ 5.62 7.5 $ 185 Granted 1,475,875 $ 2.94 Forfeited ( 445,116 ) $ 4.30 Expired ( 272,764 ) $ 5.15 Exercised — $ — Outstanding as of December 31, 2021 2,929,472 $ 4.51 7.6 $ — Options exercisable as of December 31, 2021 1,298,540 $ 5.23 5.9 $ — Options unvested as of December 31, 2021 1,630,932 $ 3.94 8.9 $ — 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, 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 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: Year Ended December 31, 2021 2020 Risk-free interest rate 0.8 % 1.2 % Expected volatility 94.0 % 81.5 % Expected dividend yield — — Expected life of options (in years) 6.5 6.8 F-17 In April 2019, the Company’s board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”), which became effective on May 7, 2019. The 2019 ESPP is administered by the Company’s board of directors. The total number of shares of common stock that may be issued under the 2019 ESPP 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: i) 155,106 shares; plus ii) an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2020 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2029, equal to the least of (a) 526,315 shares of common stock, (b) 1 % of the number of outstanding shares of the Company’s common stock on such date, and (c) an amount determined by the Company’s board of directors. 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, 2021 2020 General and administrative expense $ 1,800 $ 2,057 Research and development expense 743 360 $ 2,543 $ 2,417 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. 8 . Income Taxes 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: Year Ended December 31, 2021 2020 Current: Federal $ — $ — State ( 21 ) ( 18 ) ( 21 ) ( 18 ) Deferred: Federal — — State — — — — Income tax benefit $ ( 21 ) $ ( 18 ) A reconciliation between income tax benefit and the expected tax benefit at the statutory rate for the years ended December 31, 2021 and 2020 is as follows: Year Ended December 31, 2021 2020 Federal statutory income tax rate 21.0 % 21.0 % State income tax benefit—net of federal tax 6.0 6.1 Change in valuation allowance ( 29.1 ) ( 29.1 ) Refundable tax credit 0.1 0.1 R&D tax credits 2.1 2.0 Effective income tax rate 0.1 % 0.1 % F-18 Significant components of the Company’s deferred tax assets and liabilities are as follows: December 31, 2021 2020 Net operating loss carryforwards $ 45,693 $ 37,048 Federal and state tax credits 4,801 4,054 Other 2,237 1,788 Deferred tax assets 52,731 42,890 Other ( 35 ) ( 61 ) Deferred tax liabilities ( 35 ) ( 61 ) Valuation allowance ( 52,696 ) ( 42,829 ) Net deferred tax asset $ — $ — For the years ended December 31, 2021 and 2020, the Company generated federal and state net operating losses (“NOLs”) of approximately $ 32.1 million and $ 30.8 million, respectively. At December 31, 2021 and 2020, the federal and state net operating loss balances were approximately $ 169.7 million and $ 137.6 million, respectively. The operating losses generated prior to 2018 will expire in years 2031 through 2037 , unless previously utilized. 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 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. Due to the Series A preferred stock financing in December 2012 and the shares issued in connection with the Company’s IPO in May 2019, the Company was subject to an “ownership change” under the Code Section 382. As a result, the Company’s ability to utilize approximately $ 91.3 million of its NOL carryforwards and approximately $ 3.0 million of research tax credits is limited. 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 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, 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. federal and state tax examinations. Income taxes are provided using the asset/liability method, in which deferred taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and tax bases of existing assets and liabilities. The Company reviews deferred tax assets for recoverability on a regular basis. In assessing the need for a valuation allowance, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. Accounting guidance states that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. The Company determined that operating losses it incurred since its inception on March 17, 2011, represented negative evidence sufficient to conclude a valuation allowance was necessary. As such, the Company has recorded a valuation allowance of $ 52.7 million and $ 42.8 million at December 31, 2021 and 2020, respectively, as a reserve against its net deferred tax assets. These balances reflect increases in the valuation allowance of $ 9.9 million and $ 9.5 million in 2021 and 2020, respectively, both representing an increase in net deferred tax assets. F-19 The Company applies the provisions of ASC 740, which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. The financial statements reflect expected future tax consequences of such positions presuming the taxing authorities possess full knowledge of the position and all relevant facts. 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. Such a study could result in an adjustment to the Company’s R&D tax credit carryforwards; however, until a study is completed and any potential adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s R&D tax credits and, if an adjustment is required in the future, this adjustment would be offset by a corresponding adjustment to the valuation allowance. For the years ended December 31, 2021 and 2020 , the Company had no unrecognized tax benefits or related interest and penalties accrued. 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 . 9 . Net Loss per Share The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company: Year Ended December 31, 2021 2020 Net loss $ ( 33,940 ) $ ( 32,758 ) Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted 22,841,481 18,059,011 Basic and diluted net loss per common share outstanding $ ( 1.49 ) $ ( 1.81 ) 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, 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, 2021 2020 Stock Options 2,929,472 2,171,477 Warrants 20,602,244 — 23,531,716 2,171,477 1 0 . Collaborative and Licensing Agreements The Company enters into collaborative and licensing agreements with pharmaceutical companies to in-license, develop, manufacture and/or market products that fit within its business strategy. Endo Pharmaceuticals Inc. 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. The Company’s royalty obligation with respect to each licensed product in each country commences upon the first commercial sale of the product in that country and extends until the later of the expiration, unenforceability or invalidation of the last valid claim of any licensed patent or application covering the licensed product in the country or the expiration of 10 years after the first commercial sale of the licensed product in the country, which period is referred to as the royalty term. Upon the expiration of the royalty term for a product in a country, the Company is thereafter obligated to pay a low single-digit know-how and trademark royalty. F-20 Under the agreement, the Company has granted Endo a non-exclusive, royalty-free (except for pass-through payments to third parties), sublicensable license under its relevant patent rights, to use any improvement the Company makes to Endo’s controlled release technology, for any product other than the products under which it is licensed by Endo. 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. 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. Upon termination of the agreement, the Company must transfer to Endo all regulatory filings and approvals relating to the development, manufacture or commercialization of the licensed products and all trademarks, other than the Company’s corporate trademarks, then being used in connection with the licensed products. 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. 1 1 . Commitments and Contingencies A significant portion of the Company’s development activities are outsourced to third parties under agreements, including with CROs and contract manufacturers in connection with the production of clinical trial materials. These arrangements may require the Company to pay termination costs to the third parties for reimbursement of costs and expenses incurred in the event of the orderly termination of contractual services. The Company also has commitments under lease and licensing agreements (Note 3 and Note 10). 1 2 . 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 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. Participants are immediately vested in their contributions, as well as any earnings thereon. 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 $ 96 and $ 68 for the years ended December 31, 2021 and 2020, respectively. 1 3 . 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. F-21