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Item 9A. Controls and Procedures

2021-03-17 compared with 2020-03-13 · 46 added, 761 removed, 102 unchanged (89% of the section changed)

3 unchanged sentences

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

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2019 due to the material weakness described below.

As further discussed below under “ Management’s Report on Internal Control Over Financial Reporting ,” management has identified a material weakness in our information technology (“IT”) general controls (collectively, “ITGCs”) and related IT-dependent process level controls, which are part of our internal control over financial reporting.

We have developed a remediation plan for this material weakness, which is described below under “ Remediation of Material Weakness .”

Notwithstanding the identified material weakness and management’s assessment that our internal control over financial reporting was not effective as of December 31, 2019, management believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles.

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

Management’s Report on Internal Control Over Financial Reporting

3 unchanged sentences

Also, 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.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Management utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to assess the effectiveness of our internal control over financial reporting as of December 31, 2020.

Based on this evaluation, management identified a deficiency within our ITGCs related to ineffective segregation of duties within one of our IT systems, which is part of our internal control over financial reporting.

Process-level controls that were dependent upon

information derived from this IT system were also determined to be ineffective.

These deficiencies were the result of an inadequate IT risk assessment process which did not identify the risks associated with ineffective segregation of duties within the IT system.

The control deficiencies described above resulted in no misstatements in our consolidated financial statements;

however, these control deficiencies create a reasonable possibility that a material misstatement to our consolidated financial statements or disclosures would not be prevented or detected on a timely basis.

As a result, management concluded that the deficiencies represent a material weakness in our internal control over financial reporting and our internal control over financial reporting was not effective as of December 31, 2019.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting as required by Section 404(c) of the Sarbanes Oxley Act of 2002.

As disclosed in Part II Item 9A Controls and procedures in our Annual Report on Form 10-K for the year ended December 31, 2019, during the fourth quarter of 2019 management identified a material weakness in our information technology (“IT”) general controls (collectively, “ITGCs”) and related IT-dependent process level controls, which are part of our internal control over financial reporting.

We implemented our previously disclosed remediation plan for the material weakness related to ineffective segregation of duties within this IT system in 2020 by transferring key administrative access to a third-party IT vendor.

During the fourth quarter of 2020, we completed our testing of the operating effectiveness of the implemented controls and found them to be effective.

As a result, we have concluded the material weakness has been remediated as of December 31, 2020.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting pursuant to Section 404(c) of the Sarbanes Oxley Act of 2002.

Because we qualify as an emerging growth company under the JOBS Act, management's report was not subject to attestation by our independent registered public accounting firm.

1 unchanged sentence

Our Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously.

We intend to remediate the deficiency related to ineffective segregation of duties within this IT system in 2020 by transferring key administrative access to a third-party IT vendor.

Management believes that this effort will remediate the material weakness.

However, the material weakness in our internal control over financial reporting will not be considered remediated until other ITGCs and process-level controls that were dependent upon information derived from the general ledger application operate for a sufficient period of time and can be tested and concluded by management to be designed and operating effectively.

We cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

In addition, as we continue to evaluate and work to improve our internal control over financial reporting related to the identified material weakness, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.

We remediated the deficiency related to ineffective segregation of duties within this IT system in 2020 by transferring key administrative access to a third-party IT vendor.

Changes in Internal Control Over Financial Reporting

2 unchanged sentences

Not applicable.

Directors, Executive Of ficers and Corporate Governance

The following table sets forth information concerning our directors and executive officers, including their ages as of January 1, 2020.

There are no family relationships among any of our directors or executive officers.

We seek to assemble a Board of Directors that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise and high-level management experience and capability in various areas necessary to oversee and direct our business.

To that end, our Board of Directors has identified and evaluated nominees in the broader context of the overall composition of our Board of Directors, with the goal of recruiting members who complement and strengthen the skills of other members and who also exhibit integrity, experience, judgment, commitment, skills, diversity, expertise and other qualities that the Board of Directors views as critical to effective functioning of the Board of Directors.

The brief biographies below include information, as of the date of this Annual Report, regarding the specific and particular experience, qualifications, attributes or skills of each director that led the Board of Directors to believe that the director should serve on the Board of Directors.

Executive officers:

President, Chief Executive Officer and Director

Joe Bonaccorso

Chief Commercial Officer

Patrick Burnett, M.D., Ph.D.

Chief Medical Officer

Chief Financial Officer

Christopher G.

General Counsel

Non-employee directors:

Chairman of the Board of Directors

Craig Ballaron

Gary Goldenberg, M.D.

Mark Prygocki

Sean Stalfort

Executive Officers

Ted White has served as our President and Chief Executive Officer since December 2017 and as a member of our Board of Directors since May 2018.

Previously, from 2011 to September 2017, Mr.

White was the President and General Manager of Aqua Pharmaceuticals, an Almirall company.

Prior to Aqua Pharmaceuticals, Mr.

White was at Novartis from 1989 to 2010, where he served in a number of roles, most recently as a Managing Director.

White holds a M.B.A.

Joseph’s University and a B.A.

in General Arts from Villanova University.

Our Board of Directors believes that Mr.

White is qualified to serve as a director based on his role as our President and Chief Executive Officer and his extensive management experience in the pharmaceutical industry.

Joe Bonaccorso

Joe Bonaccorso has served as our Chief Commercial Officer since February 2018.

From 2012 to February 2018, Mr.

Bonaccorso started and ran the U.S.

Pharma Division for Pierre Fabre, under the name of Pierre Fabre Pharmaceuticals Inc.

Pierre Fabre Pharmaceuticals Inc.

was dedicated to both Pediatric Dermatology and Dermatology.

Prior to joining Pierre Fabre, Mr.

Bonaccorso spent 24 years at Novartis Pharmaceuticals, working in a variety of senior leadership roles in sales, marketing, national sales and training.

Bonaccorso holds an M.A./M.B.A.

from Kean University and a B.S.

in Biology from Fairleigh Dickinson University.

Patrick Burnett

Patrick Burnett has served as our Chief Medical Officer since April 2018.

Previously, Dr.

Burnett was at Sun Pharmaceuticals where he was Associate Vice President of Clinical Development from September 2015 to March 2018, with oversight of the dermatology and rheumatology pipeline.

Prior to Sun Pharmaceuticals, Dr.

Burnett was at Novartis from 2010 to August 2015, most recently as Global Program Medical Director.

He is a board certified dermatologist and was a member of the medical faculty at Vanderbilt University Medical Center as an Assistant Professor of Dermatology from 2004 to 2010.

Burnett holds an M.D.

in neuroscience from Johns Hopkins School of Medicine and a B.S.

in Biology and Biochemistry from the University of Iowa.

Brian Davis has served as our Chief Financial Officer since October 2019.

Prior to joining our company, Mr.

Davis , was the Chief Financial Officer of Strongbridge Biopharma plc, a public commercial-stage biopharmaceutical company, from March 2015 to September 2019.

Prior to joining Strongbridge, Mr.

Davis served as Senior Vice President and Chief Financial Officer at Tengion, Inc., a publicly traded regenerative medicine company, from 2010 to 2014.

In 2014, Tengion, Inc.

filed a petition for relief under Chapter 7 of Title 11 of the United States Bankruptcy Code.

From 2009 to 2010, Mr.

Davis served in a consulting capacity as Chief Financial Officer of Neose Technologies, Inc., a biopharmaceutical company.

Davis worked at Neose Technologies, Inc.

from 1994 to 2009, where he held several positions of increasing responsibility, including Senior Vice President and Chief Financial Officer.

Davis is licensed as a certified public accountant and received a B.S.

in accounting from Trenton State College and an M.B.A.

from The Wharton School at the University of Pennsylvania.

Christopher G.

Hayes has served as our General Counsel since September 2018.

Prior to joining our company, Mr.

Hayes was a practicing attorney and was the owner of the Law Office of Christopher G.

Hayes from 2001 to September 2018.

Hayes received a B.A.

in economics from Villanova University and a J.D.

from The Catholic University of America, Columbus School of Law.

Non-Employee Directors

Manning has served as the chairman of our Board of Directors since December 2017 and as a member of our Board of Directors since December 2015.

Manning is the Chairman and Chief Executive Officer of PBM Capital Group, LLC, a private equity investment firm in the business of investing in healthcare and life-science related companies, which he founded in 2010.

Prior to that, Mr.

Manning founded PBM Products in 1997, a producer of infant formula and baby food, which was sold to Perrigo Corporation in 2010.

Manning is a director of various private companies.

Within the past five years, Mr.

Manning previously served on the Board of Directors of Dova Pharmaceuticals, Inc., Perrigo Corporation, Concordia Healthcare Corp.

and AveXis, Inc.

Manning received a B.S.

in microbiology from the University of Massachusetts.

Our Board of Directors believes that Mr.

Manning should serve as a director based upon his over 30 years of managerial and operational experience in the healthcare industry and as an investor in healthcare related companies.

Craig Ballaron

Craig Ballaron has served as a member of our Board of Directors since June 2019.

Ballaron has served as an independent consultant in the pharmaceuticals, cosmeceuticals, physician dispense products and electronics fields

Ballaron was the co-founder of Aqua Pharmaceuticals Holdings, Inc.

and served as the Chief Executive Officer, President and member of the Board of Directors from 2004 to December 2015.

Prior to founding Aqua Pharmaceuticals, Mr.

Ballaron held various roles with increasing responsibilities at Bioglan Pharmaceuticals from 1999 to 2004.

Ballaron received his B.S.

in Business Management from York College.

Our Board of Directors believes that Mr.

Ballaron should serve as a director based upon his years of experience as a Chief Executive Officer in the pharmaceutical industry.

Gary Goldenberg

Gary Goldenberg has served as a member of our Board of Directors since May 2018.

Goldenberg is a medical and cosmetic dermatologist, with his medical practice at Goldenberg Dermatology PC, which he co-founded in April 2017.

Goldenberg has also served as an assistant clinical professor of dermatology at The Icahn School of Medicine at Mount Sinai Hospital in New York City since 2009.

Prior to that, he was an assistant professor of dermatology at the University of Maryland School of Medicine from 2007 to 2009.

Goldenberg holds a M.D.

from the Temple University School of Medicine and a B.A.

in biology from La Salle University.

He completed his Residency in Dermatology at Wake Forest University School of Medicine and his Dermatopathology Fellowship at University of Colorado Health Sciences Center.

Our Board of Directors believes that Dr.

Goldenberg should serve as a director based upon his extensive scientific background and experience as a practicing dermatologist.

Mark Prygocki

Mark Prygocki has served as a member of our Board of Directors since May 2018.

From January 2017 until December 2019, he served as President, Chief Executive Officer and a member of the Board of Directors of Illustris Pharmaceuticals, Inc., a privately held bio-development company.

Prior to joining Illustris, Mr.

Prygocki worked at Medicis Pharmaceutical Corporation, a biopharmaceutical company, for more than 20 years and served as President from 2010 to 2012.

Prior to that, Mr.

Prygocki held several senior-level positions at Medicis, including Chief Operating Officer, Executive Vice President, and Chief Financial Officer and Treasurer.

Since 2012, Mr.

Prygocki has served as a consultant to the pharmaceutical and retail industries through his consulting company.

Prygocki’s previous experience includes work at Citigroup, an investment banking firm, in the regulatory reporting division and several years in the audit department of Ernst & Young, LLP.

Prygocki currently serves on the Board of Directors of Clarus Therapeutics, Inc.

and is Chairman of its audit committee.

Prygocki also served on the Board of Directors of Revance Therapeutics, Inc.

within the last five years.

He is certified by the American Institute of Certified Public Accountants.

Prygocki serves on the board of Whispering Hope Ranch Foundation, a non-profit organization that assists children with special needs.

Prygocki holds a B.S.

in accounting from Pace University.

Our Board of Directors believes that Mr.

Prygocki should serve as a director based upon his operating experience and financial expertise in the biopharmaceutical industry, combined with his prior financial and board positions.

Sean Stalfort

Sean Stalfort has served as a member of our Board of Directors since December 2015.

Stalfort is the President of PBM Capital Group, LLC, a private equity investment firm in the business of investing in healthcare and life-science related companies.

Stalfort has been with PBM Capital Group, LLC since May 2010.

Prior to joining PBM Capital Group, LLC, Mr.

Stalfort was the Executive Vice President for New Business Development/M&A for PBM Products.

Stalfort is also a founding Partner of Octagon Partners and Octagon Finance, historic tax credit real estate companies.

Stalfort is a director of various private healthcare companies.

Within the past five years, Mr.

Stalfort previously served on the Board of Directors of Dova Pharmaceuticals, Inc.

Stalfort received a B.A.

in Business Economics and Political Science from Brown University.

Our Board of Directors believes that Mr.

Stalfort should serve as a director based upon his years as an investor in healthcare related companies.

Delinquent Section 16(a)

Section 16(a) of the Exchange Act requires our directors and officers and holders of more than 10% of our common stock to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5.

Directors and officers and holders of 10% of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

knowledge, based solely on a review of our records and representations made by our directors and officers regarding their filing obligations, [all Section 16(a) filing requirements were satisfied with respect to fiscal 2019, except for one Form 4 for Glenn Oclassen, which was inadvertently filed late on January 31, 2019.

Code of Business Conduct and Ethics for Employees, Executive Officers and Directors

We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors.

The Code of Conduct is available on our website at www.verrica.com.

The Nominating and Corporate Governance Committee is responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for executive officers and directors.

If we make any substantive amendments to the Code of Conduct or grants any waiver from a provision of the Code of Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

Audit Committee and Audit Committee Financial Expert

Our audit committee consists of Messrs.

Prygocki and Ballaron and Dr.

Goldenberg , with Mr.

Prygocki serving as chair of the audit committee.

Our Board of Directors has determined that each of these individuals meets the independence requirements of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, Rule 10A-3 under the Exchange Act and the applicable listing standards of Nasdaq.

Each member of our audit committee can read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements.

In arriving at this determination, the Board of Directors has examined each audit committee member’s scope of experience and the nature of their prior and/or current employment.

Our Board of Directors has determined that Mr.

Prygocki qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq Listing Rules.

In making this determination, our Board of Directors has considered Mr.

Prygocki’s level of knowledge and experience based on a number of factors, including his formal education and experience as a chief financial officer for public reporting companies .

Stockholder Recommendation of Director Nominees

Our Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders.

The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder.

Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board of Directors may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address:

Secretary, Verrica Pharmaceuticals Inc., 10 North High Street, Suite 200, West Chester, Pennsylvania 19380, at least 90 days, but not more than 120 days, prior to the anniversary date of the mailing of our proxy statement for the preceding year’s annual meeting of stockholders.

Submissions must include:

(1) the name and address of the stockholder on whose behalf the submission is made;

(2) the number of our shares that are owned beneficially by such stockholder as of the date of the submission;

(3) the full name, age, business address and residence address of the proposed candidate;

(4) a description of the proposed candidate’s principal occupation or employment;

(5) the class and number of shares of each class of capital stock of the corporation which are owned of record and beneficially by such proposed candidate;

and (6) such additional information as is required by our bylaws.

Each submission must be accompanied by the written consent of the proposed candidate to be named as a nominee and to serve as a director if elected.

Executi ve Compensation

We will file a definitive Proxy Statement for our 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”) with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year.

Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K.

Only those sections of the 2021 Proxy Statement that specifically address the items set forth herein are incorporated by reference.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is hereby incorporated by reference to the sections of the 2021 Proxy Statement under the captions "Information Regarding the Board of Directors and Corporate Governance," "Election of Directors," "Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance."

EXECUTIVE COMPENSATION

Our named executive officers for the year ended December 31, 2019, which consist of our President and Chief Executive Officer and the next two most highly compensated executive officers in 2019, are:

• Joe Bonaccorso

Summary Compensation Table

The following table sets forth information regarding compensation earned with respect to the years ended December 31, 2018 and 2019 by our named executive officers.

Bonaccorso commenced service with us in 2018 and Mr.

Davis commenced service with us in 2019.

Name and Principal Position

Non-Equity Incentive Plan Compensation

President, Chief Executive Officer and Director

Joe Bonaccorso (5)

Chief Commercial Officer

Brian Davis (6)

Chief Financial Officer

In accordance with SEC rules, these amounts reflect the grant date fair values of the restricted stock units, or RSUs, granted to each of Messrs.

White, Bonaccorso and Davis in 2019, calculated in accordance with ASC Topic 718 for stock-based compensation transactions, based on the probable outcome of the vesting conditions of these RSUs as of the grant date.

Each RSU represented the contingent right to receive one share of our common stock upon the achievement of certain performance targets, subject to the recipient’s continuous service through the vesting events.

As of the grant date, the performance vesting condition was considered not probable of occurring and, as a result, the grant date fair value of the RSUs, for purposes of this table, is $0.

Assuming that the performance vesting condition of these RSUs was met as of the grant date, the value of these RSUs would have been $1,178,250 for each of Messrs.

White and Bonaccorso and $392,750 for Mr.

The assumptions we used in valuing RSUs are described in Note 2 to our audited financial statements included in this Annual Report on Form 10-K.

The amounts reflect the full grant date fair value for awards granted during the indicated year.

The grant date fair value was computed in accordance with ASC Topic 718, Compensation—Stock Compensation.

Consistent with the calculations contained in our financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting, but assumes that the executive will perform the requisite service for the award to vest in full.

The assumptions we used in valuing options are described in Note 9 to our audited financial statements included in this Annual Report on Form 10-K.

The amounts reflect the portion of each named executive officer’s target bonus paid based on the achievement of our corporate goals, which are discussed further below under “—Narrative to Summary Compensation Table—Annual Bonus.” For Mr.

Bonaccorso, his annual bonus for 2018 was prorated based on his start date during 2018.

Davis, his annual bonus for 2019 was prorated based on his start date during 2019.

Includes our 401(k) plan matching contributions and life insurance premiums paid by us.

Bonaccorso has served as our Chief Commercial Officer since February 2018.

Davis has served as our Chief Financial Officer since October 2019.

Outstanding Equity Awards as of December 31, 2019

The following table sets forth certain information about equity awards granted to our named executive officers that remain outstanding as of December 31, 2019:

Option Awards (1)

Number of Securities Underlying Unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#) (2)

Market Value of Shares or Units of Stock That Have Not Vested ($) (3)

Joe Bonaccorso

All of the option awards granted prior to our initial public offering in June 2018 listed in the table above were granted under our 2013 Equity Incentive Plan and all of the option awards granted following the completion of our initial public offering were granted under our 2018 Equity Incentive Plan.

These shares represent restricted stock units granted in November 2019, which are subject to performance vesting.

The restricted stock units vest 50% upon receipt of regulatory approval of our new drug application for VP-102 for the treatment of molluscum, or the Approval Date, and 50% shall vest on the one year anniversary of the Approval Date subject to the holders’ continuous service through each applicable date.

The market value amount is calculated based on the closing price of our common stock of $15.89 at December 31, 2019.

The shares of common stock underlying this option vest and become exercisable over a four-year period as to 25% of the common stock underlying the option on December 11, 2018 and as to 75% of the shares of common stock underlying the option in 36 equal monthly installments thereafter, subject to the recipient’s continued service through each vesting date, and subject to full acceleration in the event of a sale event, as defined in the executive’s employment agreement, during such continued service.

The shares of common stock underlying this option vest and become exercisable over a four-year period as to 25% of the common stock underlying the option on February 28, 2020 and as to 75% of the shares of common stock underlying the option in 36 equal monthly installments thereafter, subject to the recipient’s continued service through each vesting date, and subject to full acceleration in the event of a sale event, as defined in the executive’s employment agreement, during such continued service.

The shares of common stock underlying this option vest and become exercisable over a four-year period as to 25% of the common stock underlying the option on February 7, 2019 and as to 75% of the shares of common stock underlying the option in 36 equal monthly installments thereafter, subject to the recipient’s continued service through each vesting date, and subject to full acceleration in the event of a sale event, as defined in the executive’s employment agreement, during such continued service.

The shares of common stock underlying this option vest and become exercisable over a four-year period as to 25% of the common stock underlying the option on October 18, 2020 and as to 75% of the shares of common stock underlying the option in 36 equal monthly installments thereafter, subject to the recipient’s continued service through each vesting date, and subject to full acceleration in the event of a sale event, as defined in the executive’s employment agreement, during such continued service.

Narrative to Summary Compensation Table

We review compensation annually for all employees, including our executives.

In setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders, and a long-term commitment to our company.

We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.

The Compensation Committee of our Board of Directors has historically determined our executives ’ compensation.

Our Compensation Committee typically reviews and discusses management ’ s proposed compensation with the Chief Executive Officer for all executives other than the Chief Executive Officer.

Based on those discussions and its discretion, the Compensation Committee then recommends the compensation for each executive officer.

Our Compensation Committee, without members of management present, discusses and ultimately approves the compensation of our executive officers.

Annual Base Salary

We have entered into employment agreements with each of our named executive officers that establish annual base salaries, which are generally determined, approved and reviewed periodically by our Compensation Committee in order to compensate our named executive officers for the satisfactory performance of duties to us.

The following table presents the annual base salaries for each of our named executive officers for the years indicated.

The 2020 base salaries became effective on January 1, 2020 for all of the named executive officers.

Joe Bonaccorso

We seek to motivate and reward our executives for achievements relative to our corporate goals and expectations for each fiscal year.

Each named executive officer has a target bonus opportunity, defined as a percentage of his or her annual salary.

For 2018, the target bonus for Mr.

White was 45% of his base salary and the target bonus for Mr.

Bonaccorso was 40% of his base salary.

For 2019, the target bonus for Mr.

White was 45% of his base salary and the target bonus for each of Mr.

Davis and Mr.

Bonaccorso was 40% of their respective base salaries.

For 2020, the target bonus for Mr.

White is 50% of his base salary and the target bonus for each of Mr.

Bonaccorso and Mr.

Davis is 40% of base salary.

To reinforce the importance of integrated and collaborative leadership, our executives’ bonuses have historically been solely based on company performance, and we did not include an individual performance component.

For 2018, the corporate performance goals consisted of clinical development, regulatory, commercial readiness, cultural and financial objectives.

For 2018, our Compensation Committee determined that the corporate performance goals had been achieved at a 125% level in the aggregate.

For 2019, the corporate performance goals consisted of clinical development, regulatory, commercial readiness, cultural and financial objectives.

For 2019, our Compensation Committee determined that the corporate performance goals had been achieved at a 100% level in the aggregate.

Such amounts are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

Bonaccorso and Mr.

Davis, each of their annual bonus amounts for 2018 and 2019, respectively, shown in the Summary Compensation Table reflects a prorated bonus based on their respective start dates.

Equity-Based Awards

Our equity-based incentive awards granted to our named executive officers are designed to align the interests of our named executive officers with those of our stockholders.

Vesting of equity awards is generally tied to each officer ’ s continuous service with us and serves as an additional retention measure.

Our executives generally are awarded an initial new hire grant upon commencement of employment.

Additional grants may occur periodically in order to

specifically incentivize executives with respect to achieving certain corporate goals or to reward executives for exceptional performance.

Prior to our initial public offering, we granted all equity awards pursuant to our 2013 Equity Incentive Plan, and following the closing of our initial public offering, we grant all equity awards pursuant to our 2018 Equity Incentive Plan.

In February 2020, in connection with its annual compensation review, our Board of Directors granted options to purchase shares of our common stock to our named executive officers.

The shares of common stock subject to the option grants vest as to one-fourth of the shares one year after the date of grant, with the balance of the shares vesting in 36 successive equal monthly installments thereafter, subject to the officer ’ s service with us as of each such date.

Each option had an exercise price of $11.81 per share, the closing price of our common stock on the grant date.

The following equity grants were made on February 27, 2020:

Number of Shares

Joe Bonaccorso

For additional information about equity grants made historically to our named executive officers, please see “—Outstanding Equity Awards as of December 31, 2019 ” above.

Employment Arrangements and Potential Payments upon Termination of Employment or Change in Control

We have entered into employment agreements with each of our current executive officers.

We entered into an employment agreement with Mr.

White, our Chief Executive Officer and President, on December 11, 2017, which was amended and restated on January 10, 2020.

Under the terms of the amended and restated agreement, Mr.

White is entitled to receive an annual base salary of $440,000 and an annual bonus of up to 45% of his annual base salary based upon our Board of Directors ’ assessment of Mr.

White ’ s performance and our attainment of targeted goals as set by the Board of Directors in its sole discretion.

In accordance with the original employment agreement, Mr.

White was also awarded an option to purchase 724,315 shares of our common stock at an exercise price of $6.52 per share in February 2018 under our 2013 Equity Incentive Plan.

25% of the shares subject to the option vested on December 11, 2018 (the first anniversary of Mr.

White ’ s commencement of employment) and the remaining shares vest in 36 equal monthly installments thereafter, subject to Mr.

White ’ s continued service and subject to full acceleration in the event of a sale event, as defined in Mr.

White ’ s agreement, during such continued service.

Pursuant to his amended and restated employment agreement, Mr.

White also entered into a confidentiality, inventions assignment, non-competition and non-solicitation agreement with us.

Pursuant to the terms of his amended and restated employment agreement, Mr.

White ’ s employment is at will and may be terminated at any time by us or Mr.

White ’ s employment is terminated by us without cause or by Mr.

White for good reason, then Mr.

White would be eligible to receive severance benefits.

The length of severance benefits that Mr.

White would receive depends on (i) when his employment is terminated and (ii) whether or not he is terminated in connection with a change in control.

White’s employment is terminated by us without cause or if Mr.

White resigns with good reason, then Mr.

White would be entitled to 12 months of severance benefits.

During the applicable severance period, Mr.

White would receive the following severance benefits, less applicable tax withholding:

payment of his then-current base salary in accordance with normal payroll procedures for the applicable

severance period;

payment or reimbursement of continued health coverage for Mr.

White and his dependents under COBRA for the applicable severance period.

White’s employment is terminated by us without cause or if Mr.

White resigns with good reason, in either case within 12 months following or 1 month prior to the effective date of a change in control, then Mr.

White would be entitled to the following severance benefits, less applicable tax withholding:

payment of his then-current base salary in accordance with normal payroll procedures for 12 months;

payment of a cash severance benefit equal to Mr.

White’s annual bonus at the target percentage for the year in which the termination occurs;

payment or reimbursement of continued health coverage for Mr.

White and his dependents under COBRA for 12 months;

all equity awards owned by Mr.

White will automatically vest.

We entered into an employment agreement with Mr.

Bonaccorso, our Chief Commercial Officer, in January 2018, which was amended and restated on January 10, 2020.

Under the terms of the amended and restated agreement, Mr.

Bonaccorso is entitled to receive an annual base salary of $374,500 and an annual bonus of up to 40% of his annual base salary based upon our Board of Directors ’ assessment of Mr.

Bonaccorso ’ s performance and our attainment of targeted goals as set by the Board of Directors in their sole discretion.

In connection with his original employment agreement, Mr.

Bonaccorso was also awarded an option to purchase 102,100 shares of common stock at an exercise price of $6.52 per share in February 2018 under our 2013 Equity Incentive Plan.

25% of the shares subject to the option vested on February 7, 2019 (the first anniversary of Mr.

Bonaccorso ’ s commencement of employment) and the remaining shares vest in 36 equal monthly installments thereafter, subject to Mr.

Bonaccorso ’ s continued service and subject to full acceleration in the event of a sale event, as defined in Mr.

Bonaccorso ’ s agreement, during such continued service.

Pursuant to his amended and restated employment agreement, Mr.

Bonaccorso also entered into a confidentiality, inventions assignment, non-competition and non-solicitation agreement with us.

Pursuant to the terms of his amended and restated employment agreement, Mr.

Bonaccorso ’ s employment is at will and may be terminated at any time by us or Mr.

Bonaccorso ’ s employment is terminated by us without cause or by Mr.

Bonaccorso for good reason, then Mr.

Bonaccorso would be eligible to receive severance benefits.

The length of severance benefits that Mr.

Bonaccorso would receive depends on (i) when his employment is terminated and (ii) whether or not he is terminated in connection with a change in control.

Bonaccorso’s employment is terminated by us without cause or if Mr.

Bonaccorso resigns with good reason on or before February 7, 2020, then he would be entitled to six months of severance benefits and if it occurs after February 7, 2020, then Mr.

Bonaccorso would be entitled to 12 months of severance benefits.

During the applicable severance period, Mr.

Bonaccorso would receive the following severance benefits, less applicable tax withholding:

payment of his then-current base salary in accordance with normal payroll procedures for the applicable severance period;

payment or reimbursement of continued health coverage for Mr.

Bonaccorso and his dependents under COBRA for the applicable severance period.

Bonaccorso’s employment is terminated by us without cause or if Mr.

Bonaccorso resigns with good reason, in either case within 12 months following or 1 month prior to the effective date of a change in control, then Mr.

Bonaccorso would be entitled to the following severance benefits, less applicable tax withholding:

payment of his then-current base salary in accordance with normal payroll procedures for 12 months;

payment of a cash severance benefit equal to Mr.

Bonaccorso’s annual bonus at the target percentage for the year in which the termination occurs;

payment or reimbursement of continued health coverage for Mr.

Bonaccorso and his dependents under COBRA for 12 months;

all equity awards owned by Mr.

Bonaccorso will automatically vest.

We entered into an employment agreement with Mr.

Davis, our Chief Financial Officer, in October 2019.

Under the terms of the amended and restated agreement, Mr.

Davis is entitled to receive an annual base salary of $375,000 and an annual bonus of up to 40% of his annual base salary based upon our Board of Directors ’ assessment of Mr.

Davis ’ performance and our attainment of targeted goals as set by the Board of Directors in their sole discretion.

In connection with his employment agreement, Mr.

Davis was also awarded an option to purchase 125,000 shares of our common stock at an exercise price of $14.65 per share in October 2019 under our 2018 plan.

25% of the shares subject to the option vest on October 18, 2020 (the first anniversary of Mr.

Davis’ commencement of employment) and the remaining shares vest in 36 equal monthly installments thereafter, subject to Mr.

Davis’ continued service.

The option is subject to full acceleration in the event of a change in control, as defined in Mr.

Davis’ agreement, during such continued service.

Pursuant to his employment agreement, Mr.

Davis also entered into a confidentiality, inventions assignment, non-competition and non-solicitation agreement with us.

Pursuant to the terms of his employment agreement, Mr.

Davis’ employment is at will and may be terminated at any time by us or Mr.

Davis’ employment is terminated by us without cause or by Mr.

Davis for good reason, then Mr.

Davis would be eligible to receive severance benefits.

The length of severance benefits that Mr.

Davis would receive depends on (i) when his employment is terminated and (ii) whether or not he is terminated in connection with a change in control.

Davis’ employment is terminated by us without cause or if Mr.

Davis resigns with good reason, an Involuntary Termination, on or before October 18, 2020, then he would be entitled to zero months of severance benefits.

If an Involuntary Termination occurs after October 18, 2020 and on or before October 18, 2021, then Mr.

Davis would be entitled to 6 months of severance benefits.

If an Involuntary Termination occurs after October 18, 2021, then Mr.

Davis would be entitled to 12 months of severance benefits.

During the applicable severance period, Mr.

Davis would receive the following severance benefits, less applicable tax withholding:

payment of his then-current base salary in accordance with normal payroll procedures for the applicable severance period;

payment or reimbursement of continued health coverage for Mr.

Davis and his dependents under COBRA for the applicable severance period.

Davis’ employment is terminated by us without cause or if Mr.

Davis resigns with good reason, in either case within 12 months following or 1 month prior to the effective date of a change in control, then Mr.

Davis would be entitled to the following severance benefits, less applicable tax withholding:

payment of his then-current base salary in accordance with normal payroll procedures for 12 months;

payment of a cash severance benefit equal to Mr.

Davis’ annual bonus at the target percentage for the year in which the termination occurs;

payment or reimbursement of continued health coverage for Mr.

Davis and his dependents under COBRA for 12 months;

all equity awards owned by Mr.

Davis will automatically vest.

Retirement Benefits and Other Compensation

Our named executive officers did not participate in, or otherwise receive any benefits under, any pension, retirement or deferred compensation plan sponsored by us during 2019 other than our 401(k) plan described below.

Our named executive officers were eligible to participate in our employee benefits, including health insurance and group life insurance benefits, on the same basis as our other employees.

We maintain a 401(k) plan intended to qualify as a tax-qualified plan under Section 401 of the Internal Revenue Code of 1986, as amended, or the Code, which our named executive officers are eligible to participate in on the same basis as our other employees.

Until December 31, 2019, we provided an automatic matching contribution of $0.50 per $1.00 of employee contribution in the 401(k)

plan up to a maximum of 4% of employee deferral.

Effective January 1, 2020, participants may elect to make both pre- and post-tax contributions to their accounts in the 401(k) plan, and we match 100% of those contributions up to 4% of employee deferral.

We generally do not provide perquisites or personal benefits, and we did not provide any perquisites or personal benefits to our named executive officers in 2019 other than those provided to all employees.

Equity Incentive Plans

2018 Equity Incentive Plan

In June 2018, our Board of Directors adopted and approved the 2018 Equity Incentive Plan, or the 2018 Plan, which amended and restated our prior 2013 Equity Incentive Plan, or the 2013 Plan and became effective in connection with the IPO pricing on June 14, 2018.

Prior to the effectiveness of the 2018 Plan, the 2013 Plan provided for the grant of share-based awards to our employees, directors and consultants.

As a result of the effectiveness of the 2018 Plan, no further grants can be made under the 2013 Plan.

Our 2018 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Code to our employees and our parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors.

Our 2018 Plan also provides for the grant of performance cash awards to our employees, consultants and directors.

Authorized Shares

We initially reserved 3,738,199 shares of common stock for issuance under the 2018 Plan, which is the sum of (1) 2,198,198 new shares, plus (2) the number of shares reserved for issuance under the 2013 Plan at the time the 2018 Plan became effective, plus (3) any shares subject to outstanding stock options or other stock awards that would have otherwise returned to the 2013 Plan (such as upon the expiration or termination of a stock award prior to exercise).

The number of shares of common stock reserved for issuance under the 2018 Plan automatically increases on January 1 each year, for a period of ten years, through January 1, 2028, by 4% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board of Directors.

As of December 31, 2019, 2,199,325 shares were available for grant under the 2018 Plan.

Shares issued under our 2018 Plan may be authorized but unissued or reacquired shares of our common stock.

Shares subject to stock awards granted under our 2018 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under our 2018 Plan.

Additionally, shares issued pursuant to stock awards under our 2018 Plan that we repurchase or that are forfeited, as well as shares reacquired by us as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under our 2018 Plan.

Administration

Our Board of Directors, or a duly authorized committee thereof, has the authority to administer our 2018 Plan.

Our Board of Directors has delegated its authority to administer our 2018 Plan to our compensation committee under the terms of the compensation committee’s charter.

Our Board of Directors may also delegate to one or more of our officers the authority to (i) designate employees other than officers to receive specified stock awards and (ii) determine the number of shares of our common stock to be subject to such stock awards.

Subject to the terms of our 2018 Plan, the administrator has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under our 2018 Plan.

The administrator has the power to modify outstanding awards under our 2018 Plan.

Subject to the terms of our 2018 Plan, the administrator has the authority to reprice any outstanding option or stock appreciation right, cancel

and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other consideration or take any other action that is treated as a repricing under GAAP with the consent of any adversely affected participant.

Performance Awards

Our 2018 Plan permits the grant of performance-based stock and cash awards.

Our compensation committee can structure such awards so that the stock or cash will be issued or paid pursuant to such award only following the achievement of specified pre-established performance goals during a designated performance period.

Corporate Transactions

Our 2018 Plan provides that in the event of a specified corporate transaction, including without limitation a consolidation, merger or similar transaction involving our company, the sale, lease or other disposition of all or substantially all of the assets of our company or the consolidated assets of our company and our subsidiaries, or a sale or disposition of at least 50% of the outstanding capital stock of our company, the administrator will determine how to treat each outstanding equity award.

The administrator may:

arrange for the assumption, continuation or substitution of a stock award by a successor corporation;

arrange for the assignment of any reacquisition or repurchase rights held by us to a successor corporation;

accelerate the vesting of the stock award and provide for its termination prior to the effective time of the corporate transaction;

arrange for the lapse, in whole or in part, of any reacquisition or repurchase right held by us;

cancel the stock award prior to the transaction in exchange for a cash payment, which may be reduced by the exercise price payable in connection with the stock award.

The administrator is not obligated to treat all equity awards or portions of equity awards, even those that are of the same type, in the same manner.

The administrator may take different actions with respect to the vested and unvested portions of an equity award.

Change of Control

The administrator may provide, in an individual award agreement or in any other written agreement between us and the participant, that the equity award will be subject to additional acceleration of vesting and exercisability in the event of a change of control.

In the absence of such a provision, no such acceleration of the award will occur.

Plan Amendment or Termination

Our Board of Directors has the authority to amend, suspend or terminate our 2018 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent.

No incentive stock options may be granted after the tenth anniversary of the date our Board of Directors adopted our 2018 Plan.

2013 Equity Incentive Plan

Our Board of Directors adopted and our stockholders approved our 2013 Plan, in August 2013.

We have subsequently amended our 2013 Plan, with the most recent amendment approved by our Board of Directors on February 20, 2018, the purpose of which was to increase the number of shares available for issuance under our 2013

Our stockholders approved this recent amendment on February 22, 2018.

Our 2013 Plan terminated in connection with our adoption of our 2018 Plan;

however, awards outstanding under our 2013 Plan continue in full effect in accordance with their existing terms.

Administration

Our Board of Directors has administered our 2013 Plan since its adoption, however, following this offering, the compensation committee of our Board of Directors will generally administer our 2013 Plan.

Our Board of Directors has full authority and discretion to make any determinations and take any actions it deems necessary or advisable for the administration of our 2013 Plan.

Our Board of Directors may institute the terms and conditions of any program under which outstanding awards are surrendered or cancelled in exchange for awards of the same type, awards of a different type and/or cash, participants would have the opportunity to transfer any outstanding awards to a financial institution or other person or entity selected by the Board of Directors and/or the exercise price of an outstanding award is reduced or increased.

Types of Awards

Our 2013 Plan provided for the grant of restricted shares, incentive stock options, stock appreciation rights and restricted stock units to employees, members of our Board of Directors and consultants.

Incentive stock options could only be granted to employees.

The exercise price of options granted under our 2013 Plan could not be less than 100% of the fair market value of our common stock on the grant date.

Options expire at the time determined by the administrator, but in no event more than ten years after they are granted, and generally expire earlier if the optionee’s service terminates.

Corporate Transactions

In the event of a merger or certain specified change in control transactions, each outstanding stock award will be treated as the plan administrator determines without a participant’s consent, including providing that:

stock awards will be assumed, or substantially equivalent stock awards will be substituted, by the acquiring or succeeding entity with appropriate adjustments as to the number and kind of shares and prices;

upon written notice to the participant, that the participant’s stock awards will terminate upon or immediately prior to the consummation of the merger or change in control;

outstanding stock awards will vest and become exercisable or payable, or restrictions applicable to the stock awards will lapse, in whole or in part, prior to or upon consummation of the merger or change in control, and to the extent determined by the plan administrator, the stock awards will terminate upon or immediately prior to the merger or change in control;

the stock award will terminate in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of the stock award or realization of the participant’s rights with respect to the stock award as of the date of the occurrence of the transaction (including termination for no payment if no amount would have been attained upon exercise of the stock award or realization of the participant’s rights with respect to the stock award), or the replacement of the stock award with other rights or property selected by the plan administrator in its sole discretion;

any combination of the foregoing.

Our plan administrator is not obligated to treat all stock awards, all stock awards held by a participant, or all stock awards of the same type, in the same manner.

In addition, if the successor entity does not assume or substitute for the stock awards or portion thereof, the participant will fully vest in and have the right to exercise all of his or her outstanding stock awards and all restrictions on outstanding stock awards will lapse, and, with respect to stock options, the plan administrator will notify the participant that the stock options will be exercisable for a period of time as determined by the plan administrator, and will terminate upon the expiration of that period if not exercised.

For this purpose, a stock award will be considered assumed if, following the merger or change in control, the stock award provides the right to purchase or receive, for each share subject to the stock award immediately before the merger or change in control, the consideration (including cash, stock or other securities or property) received in the merger or change in control by holders of our common stock generally.

If the consideration to be received by the holders of our common stock is not solely common stock of the successor entity or its parent, however, the plan administrator may, with the consent of the successor entity, provide for the consideration to be received upon the exercise or payout of a stock award to be solely common stock of the successor entity or its parent equal in fair market value to the per share consideration received by holders of our common stock in the merger or change in control.

Under the 2013 Plan, a change in control is generally the occurrence of (1) a change in the ownership of our company that occurs on the date that any one person, or more than one person acting as a group, acquires stock of our company that, together with the stock held by the person or group, constitutes more than 50% of the total voting power of our stock, but excluding any change in the ownership of our stock as a result of a private financing that is approved by our Board of Directors;

(2) a change in effective control of our company that occurs on the date that a majority of the members of our Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of our Board of Directors prior to the date of the appointment or election, provided that if any individual or group is already in effective control of our company, the acquisition of additional control by the same individual or group will not be considered a change in control;

or (3) a change in the ownership of a substantial portion of our assets which occurs on the date that any individual or group acquires (or has acquired during the previous twelve month period ending on the date of the most recent acquisition) assets of our company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of our assets immediately before the acquisition or acquisitions.

Changes in Capitalization

In the event of any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of our company or other change in our corporate structure affecting shares of common stock, our Board of Directors, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2013 Plan, will adjust the number and class of shares of stock that may be delivered under the 2013 Plan and/or the number, class, and price of shares of stock covered by each outstanding award.

Transferability

A participant generally may not transfer stock awards under our 2013 Plan other than by will, the laws of descent and distribution, or as otherwise provided under our 2013 Plan.

Plan Amendment or Termination

Our Board of Directors has the authority to amend the 2013 Plan, provided that such action does not impair the existing rights of any participant without such participant’s written consent.

As a result of the effectiveness of the 2018 Plan, our 2013 Plan terminated;

however, awards outstanding under our 2013 Plan continue in full effect in accordance with their existing terms.

Non-Employee Director Compensation

The following table sets forth in summary form information concerning the compensation that we paid or awarded during the year ended December 31, 2019 to each of our non-employee directors:

Craig Ballaron

Gary Goldenberg

Mark Prygocki

Sean Stalfort

Glenn Oclassen (3)

The amounts reported do not reflect the amounts actually received by our non-employee directors.

Instead, these amounts reflect the aggregate grant date fair value of each stock option granted to our non-employee directors during the fiscal year ended December 31, 2019, as computed in accordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718 for stock-based compensation transactions (ASC 718).

Assumptions used in the calculation of these amounts are included in Note [9] to our audited financial statements included in this report.

As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.

Our non-employee directors who have received options will only realize compensation with regard to these options to the extent the trading price of our common stock is greater than the exercise price of such options.

As of December 31, 2019, the estate of Mr.

Oclassen, Mr.

Prygocki, Mr.

Ballaron and Dr.

Goldenberg held options to purchase 10,208, 23,336, 17,502, 23,336 shares of our common stock, respectively.

None of our other non-employee directors held options to purchase shares of our common stock as of December 31, 2019.

None of our non-employee directors held stock awards as of December 31, 2019.

Oclassen served on the Board of Directors until his death in November 2019.

Non-Employee Director Compensation Policy

Our Board of Directors adopted a non-employee director compensation policy that became effective in June 2018 in connection with our initial public offering.

Pursuant to our policy, each of our directors who is not an employee of our company or affiliated with an entity that beneficially owns 5% or more of our outstanding shares of common stock are eligible to receive compensation for service on our Board of Directors and committees of our Board of Directors.

Ballaron, Mr.

Prygocki and Dr.

Goldenberg are eligible directors and Mr.

Oclassen was also an eligible director during 2019.

Each eligible director receives an annual cash retainer of $40,000 for serving on our Board of Directors.

The chairperson of each of the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Directors are entitled an additional annual cash retainer of $10,000.

The members of each of the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Directors, who are not the chairpersons of such committees, are entitled an additional annual cash retainer of $5,000.

All annual cash compensation amounts will be payable in equal quarterly installments in advance within the first 30 days of each quarter in which the service will occur.

In addition, each new eligible director who joins our Board of Directors will be granted a non-statutory stock option to purchase 17,502 shares of common stock under our 2018 Plan, with one-third of the shares vesting on the first anniversary of the date of grant and the remaining shares vesting in 24 equal monthly installments thereafter, subject to continued service as a director through the applicable vesting date.

On the date of each annual meeting of our stockholders, each eligible director who continues to serve as a director of our company following the meeting will be granted a non-statutory stock option to purchase 5,834 shares of our common stock under our 2018 Plan, vesting in 12 equal monthly installments following the grant date and in any event will be fully vested on the date of the next annual meeting of our stockholders, subject to continued service as a director though the applicable vesting date.

Each option awarded to eligible directors under the non-employee director compensation policy is subject to accelerated vesting upon a Change in Control (as defined in the 2018 Plan).

The exercise price per share of each stock option granted under the non-employee director compensation policy is equal to the closing price of our common stock on the Nasdaq Global Market on the date of grant.

Each stock option has a term of ten years from the date of grant, subject to earlier termination in connection with a termination of the eligible director ’ s continuous service with us (provided that upon a termination of service other than for death, disability or cause, the post-termination exercise period will be 12 months from the date of termination).

Compensation Committee

We have a separately designated standing Compensation Committee.

Our Compensation Committee is currently composed of three directors:

Ballaron, Mr.

Prygocki and Dr.

Ballaron, Mr.

Prygocki and Dr.

Goldenberg are non-employee directors, as defined in Rule 16b-3 promulgated under the Exchange Act and are “ outside directors, ” as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ” ).

Our Board of Directors has determined that Messrs.

Ballaron and Prygocki and Dr.

Goldenberg are “ independent ” as defined under the applicable Nasdaq listing standards, including the standards specific to members of a compensation committee.

We believe that the composition and functioning of our compensation committee complies with all applicable requirements of the Sarbanes-Oxley Act, and all applicable SEC and Nasdaq rules and regulations.

We intend to continue to evaluate the requirements applicable to us and we intend to comply with the future requirements to the extent that they become applicable to our compensation committee.

The information required by Item 11 is hereby incorporated by reference to the sections of the 2021 Proxy Statement under the captions "Executive Compensation" and "Non-Employee Director Compensation."

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding beneficial ownership of our capital stock as of December 31, 2019 by:

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

each of our directors;

each of our named executive officers;

all of our current executive officers and directors as a group.

The percentage ownership information shown is based upon 25,786,330 shares of common stock outstanding as of December 31, 2019.

We have determined beneficial ownership in accordance with the rules of the SEC.

These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities.

In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are exercisable on or before February 29, 2020, which is 60 days after December 31, 2019.

These shares are deemed to be outstanding and beneficially owned by the person holding those

options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G, if any, filed with the SEC.

Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

Except as otherwise noted below, the address for persons listed in the table is c/o Verrica Pharmaceuticals Inc., 10 North High Street, Suite 200, West Chester, Pennsylvania 19380.

Percentage of

Name of Beneficial Owner

Beneficially Owned

5% or greater stockholders:

Entities affiliated with Paul B.

Perceptive Life Sciences Master Fund, Ltd.

OrbiMed Private Investments VI, LP (3)

Matt Davidson (4)

Named executive officers and directors:

Ted White (5)

Sean Stalfort (6)

Mark Prygocki (7)

Gary Goldenberg (8)

Craig Ballaron

Joe Bonaccorso (9)

All current executive officers and directors as a group (10 persons)(10)

* Represents beneficial ownership of less than 1%

This information has been obtained from a Form 4 filed on February 3, 2020 by Paul B.

(a) 7,754,783 shares of common stock held directly by Paul B.

(b) 324,611 shares of common stock held by Paul and Diane Manning, JTWROS;

and (d) 1,307,219 shares of common stock held by BKB Growth Investments, LLC (“BKB”).

Manning is a co-manager of BKB and has sole voting and investment power with respect to the shares held by BKB.

Manning is President and CEO of PBMCI and has sole voting and investment power with respect to the shares held by PBMCI.

The business address for BKB, PBMCI and Mr.

Manning is 200 Garrett Street, Suite S, Charlottesville, VA 22902.

This information has been obtained from a Schedule 13G/A filed on February 14, 2020 by entities and individuals associated with Perceptive Advisors LLC (“Perceptive Advisors”).

Consists of 3,410,412 shares of common stock held by Perceptive Advisors.

The address of Perceptive Advisors is 51 Astor Place, 10 th Floor, New York.

New York 10016.

This information has been obtained from a Schedule 13G filed on June 19, 2018 by entities and individuals associated with OrbiMed Private Investments VI, LP.

Consists of 1,479,733 shares of common stock issuable upon conversion of preferred stock held by OrbiMed Private Investments VI, LP, or OPI VI.

OrbiMed Capital GP VI LLC, or GP VI, is the sole general partner of OPI VI.

OrbiMed Advisors LLC, or OrbiMed Advisors, is the managing member of GP VI.

By virtue of such relationships, GP VI and OrbiMed Advisors may be deemed to have voting and investment power with respect to the shares held by OPI VI and as a result may be deemed to have beneficial ownership of such shares.

Advisors exercises investment and voting power through a management committee comprised of Carl L.

Gordon, Sven H.

Borho and Jonathan T.

The address of these entities is 601 Lexington Avenue, 54th floor, New York, New York 10022.

This information has been obtained from a Schedule 13G filed on January 30, 2020 and consists of 2,473,160 shares of common stock held by Mr.

Consists of (a) 7,305 shares of common stock held by Mr.

White and (b) 417,337 shares of common

stock issuable upon the exercise of options.

Consists of 430,860 shares of common stock held by Mr.

Consists of 13,611 shares of common stock issuable upon the exercise of options held by Mr.

Consists of 13,611 shares of common stock issuable upon the exercise of options held by Dr.

Consists of (a) 1,000 shares of common stock held by Mr.

Bonaccorso and (b) 66,365 shares of common stock issuable upon the exercise of options.

Consist of (a) 10,082,412 shares of common stock and (b) 593,574 shares of common stock issuable upon the exercise of options.

Equity Compensation Plan Information

The following table provides certain information with respect to our equity compensation plans as of December 31, 2019.

Number of securities to

be issued upon exercise

of outstanding options, warrants and rights (1)

Weighted-average

exercise price of

outstanding options, warrants and rights (1) (b)

Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding

securities reflected in

column (a)) (2)

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Includes 300,000 shares issuable upon the settlement of restricted stock units without consideration.

The weighted average exercise price of the outstanding options and rights other than these restricted stock units is $9.14 per share.

There are no warrants outstanding under our equity compensation plan.

Includes shares issuable upon exercise of outstanding options under our 2013 Plan and 2018 Plan.

Consists of shares available under the 2018 Plan as of December 31, 2019.

On January 1 of each year, the number of shares reserved under the 2018 Plan is automatically increased by 4% of the total number of shares of common stock that are outstanding at that time, or a lesser number of shares as may be determined by our Board of Directors.

An additional 1,036,485 shares were added to the number of available shares under the 2018 Plan, effective January 1, 2020.

The information required by Item 12 is hereby incorporated by reference to the sections of the 2021 Proxy Statement under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Securities Authorized for Issuance under Equity Compensation Plans."

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The following includes a summary of transactions since January 1, 2018 to which we have been a party, in which the amount involved in the transaction exceeded $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.

Other than described below, there have not been, nor are there currently any proposed, transactions or series of similar transactions to which we have been or will be a party other than compensation arrangements, which include equity and other compensation, termination, change in control and other arrangements, which are described under “Executive Compensation” and “Non-Executive Director Compensation.”

Participation in our Initial Public Offering

In our initial public offering in June 2018, certain of our directors, executive officers and 5% stockholders and their affiliates purchased an aggregate of 1,511,500 shares of our common stock.

Each of those purchases was made through the underwriters at the initial public offering price of $15.00 per share.

The following table sets forth the aggregate number of shares of our common stock that these 5% stockholders and their affiliates purchased in our initial public offering:

Shares of Common

Entities affiliated with Paul B.

Perceptive Life Sciences Master Fund, Ltd.

OrbiMed Private Investments VI, LP

Linda Palczuk

Joe Bonaccorso

Sales of Series C Convertible Preferred Stock

In February 2018, we sold an aggregate of 4,386,926 shares of our Series C convertible preferred stock at a price of $4.559 per share for aggregate gross proceeds of $20 million, including 2,193,463 shares that were sold to Perceptive Life Sciences Master Fund, Ltd., a beneficial owner of more than 5% of our capital stock, for a purchase price of $10 million and 2,193,463 shares of which were sold to OrbiMed Private Investments VI, LP, a beneficial owner of more than 5% of our capital stock, for a purchase price of $10 million.

In March 2018, we sold an additional 219,341 shares to certain other investors, for a purchase price of $1 million, including 29,611 shares that were sold to PBM Capital Group, LLC, an affiliate of PBM VP Holdings, LLC.

Of the shares acquired by PBM Capital Group, LLC, 3,948 were sold to an unrelated third party and 25,663 shares were distributed to certain Co-Investors.

Each share of Series C convertible preferred stock converted into 0.583 shares of common stock upon the closing of our initial public offering.

Investors’ Rights Agreement

In connection with the sales of convertible preferred stock described above, we entered into an investors ’ rights agreement with the holders of preferred stock.

The provisions of the investors ’ rights agreement other than those relating to registration rights terminated upon the closing of our initial public offering.

Services Agreement with PBM Capital Group, LLC

In December 2015, we entered into a services agreement (the “ SA ” ) with PBM Capital Group, LLC, an entity controlled by Paul B.

Manning, one of our directors, to engage PBM Capital Group, LLC for certain scientific and technical, accounting, operations and back office support services.

The management fee was $2,500 per month.

In March 2018, we entered into an amendment to the SA with PBM Capital Group, LLC effective as of April 1, 2018, which extended the term of the SA until March 31, 2019 and increased the management fee we are obligated to pay to PBM Capital Group, LLC to $50,000 per month.

The SA, as amended, provides for termination by us with 30 days advance notice or a mutually agreed upon effective date for transition as individual services are cancelled with a corresponding reduction in the monthly management fee.

Pursuant to the SA, we paid $457,500 to PBM Capital Group, LLC during the year ended December 31, 2018.

On January 1, 2019 and October 1, 2019 the SA was further amended to reduce the monthly management fee to $26,333 and $5,000, respectively, as a result of a reduction in services provided by PBM Capital Group, LLC.

During the year ended December 31, 2019 and 2018, we paid $252,000 and $457,000, respectively, to PBM Capital Group, LLC.

Transition Agreement with Dr.

Pursuant to a transition agreement entered into effective as of May 31, 2018 between us and Dr.

Davidson, Dr.

Davidson resigned from his position as our Chief Scientific Officer and from our Board of Directors effective upon our initial public offering.

Davidson ’ s resignation, and pursuant to the terms of the transition agreement, Dr.

Davidson became entitled to certain benefits, including:

(i) the opportunity to continue to provide services to us, in the capacity of a consultant, pursuant to an agreed-upon consulting agreement;

(ii) costs of COBRA premiums for Dr.

Davidson and his covered dependents for up to 12 months after his resignation;

and (iii) the opportunity to serve on our scientific advisory board for one year or, if longer, the term of his consulting agreement.

The benefits provided to Dr.

Davidson under the transition agreement have been provided to Dr.

Davidson in exchange for his agreeing to a standard release of claims in favor of us.

In his role as a consultant, Dr.

Davidson provides general transition and consulting services to us until the earlier of the date that the FDA approves or rejects the NDA for VP-102 or the date that Dr.

Davidson ’ s restricted shares are fully vested.

Under the terms of the transition agreement, the shares of restricted common stock that Dr.

Davidson currently owns will continue to vest in accordance with their terms during the consulting period;

provided, however , that if we terminate the consulting agreement due to a material breach by Dr.

Davidson, any unvested stock would be forfeited, or alternatively, if we terminate such agreement for any other reason other than due to a material breach by Dr.

Davidson or if Dr.

Davidson terminates such agreement due to material breach by us, any unvested stock will become fully vested.

For the first year of the consulting period, Dr.

Davidson received a monthly consulting fee of $29,375 for his performance of transition services.

Davidson now receives $300 per hour for each additional hour of consulting services he provides.

During the years ended December 31, 2019 and 2018, Dr.

Davidson did not receive any payments pursuant to the transition agreement.

During the consulting period, Dr.

Davidson has agreed to refrain from competitive activities with us, including activities involving certain products that include cantharidin or certain other molecules and any reasonably related medicinal chemistry derivatives or analogs thereof, or any products being developed for the treatment of any of the following indications for which we are currently developing or considering:

molluscum, common warts, plantar warts, subungual warts, flat warts, actinic keratosis, genital warts and seborrheic keratosis.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers.

The indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.

Related-Person Transactions Policy and Procedures

We have adopted a related person transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related person transactions.

For purposes of our policy only, a related person transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related person are, were or will be participants in which the amount involved exceeds $120,000.

Transactions involving compensation for services provided to us as an employee or director are not covered by this policy.

A related person is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.

Under the policy, if a transaction has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the related person transaction to our Audit Committee, or, if Audit Committee approval would be inappropriate, to another independent body of our Board of Directors, for review, consideration and approval or ratification.

The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally.

Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-

person transactions and to effectuate the terms of the policy.

In addition, under our Code of Conduct, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.

In considering related person transactions, our Audit Committee, or other independent body of our Board of Directors, will take into account the relevant available facts and circumstances including:

the risks, costs and benefits to us;

the impact on a director ’ s independence in the event that the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

the availability of other sources for comparable services or products;

the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.

The policy requires that, in determining whether to approve, ratify or reject a related person transaction, our Audit Committee, or other independent body of our Board of Directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our Audit Committee, or other independent body of our Board of Directors, determines in the good faith exercise of its discretion.

Independence of the Board of Directors

Our Board of Directors has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities.

Based upon information requested from and provided by each director concerning such director’s background, employment and affiliations, including family relationships, our Board of Directors determined that Mr.

Ballaron, Mr.

Prygocki and Dr.

Goldenberg, representing three of our six directors, are “independent directors” as defined under current rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market.

Our Board of Directors also determined that Mr.

Oclassen, who served on our Board of Directors until he passed away in November 2019, was an “independent director” as defined under current rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market.

In making these determinations, our Board of Directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances that our Board of Directors deemed relevant in determining their independence.

There are no family relationships among any of our directors or executive officers.

As a result of Mr.

Oclassen’s death, we are currently not in compliance with the continued listing requirements as set forth in Nasdaq Listing Rules 5605(b)(1) regarding the composition of our board of directors because a majority of the board is not comprised of “independent directors.” We are relying on the cure periods set forth in Listing Rule 5605(b)(1)(A) of the Nasdaq Listing Rules with respect to the composition of our board of directors.

We expect to regain compliance with Listing Rule 5605 prior to the expiration of the cure period provided by Nasdaq.

The information required by Item 13 is hereby incorporated by reference to the sections of the 2021 Proxy Statement under the captions "Transactions with Related Persons" and "Independence of the Board of Directors."

PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table represents aggregate fees for professional services rendered to us for the years ended December 31, 2019 and 2018 by KPMG LLP, our independent registered public accounting firm.

Year Ended December 31,

Audit Fees (1)

Audit fees for the fiscal years ended December 31, 2019 and 2018 include fees in connection with services rendered for the audit and quarterly review of our financial statements filed with the SEC on Form 10-K and 10-Q in addition to professional services related to financial procedures performed in connection with securities offerings..

There were no audit-related, tax or other fees for the years ended December 31, 2019 and 2018.

Our Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent auditors, KPMG LLP.

The Audit Committee generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts.

Pre-approval may also be given as part of the Audit Committee ’ s approval of the scope of the engagement of the independent auditor or on an individual, explicit, case-by-case basis before the independent auditor is engaged to provide each service.

The pre-approval of services may be delegated to one or more of the Audit Committee ’ s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting.

All of the services of KPMG LLP for the years ended December 31, 2019 and 2018 described above were pre-approved in accordance with the Audit Committee pre-approval policy.

The information required by Item 14 is hereby incorporated by reference to the sections of the 2021 Proxy Statement under the caption "Ratification of Selection of Independent Auditors."

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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Description of Verrica Pharmaceuticals Inc.

Common Stock .

Common Stock (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K (File No.

001-38529), filed with the Securities and Exchange Commission on March 13, 2020).

Amended and Restated Investors’ Rights Agreement by and among the Registrant and certain of its stockholders, dated February 20, 2018 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No.

14 unchanged sentences

333-225104), filed with the Securities and Exchange Commission on May 22, 2018)

Advisor Agreement, by and between the Registrant and Glenn Oclassen, dated as of August 7, 2014 (incorporated herein by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (File No.

333-225104), filed with the Securities and Exchange Commission on May 22, 2018)

Restricted Stock Purchase Agreement, by and between the Registrant and Glenn Oclassen, dated as of August 7, 2014, as amended on January 31, 2018 (incorporated herein by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 (File No.

333-225104), filed with the Securities and Exchange Commission on May 22, 2018)

Sublease Agreement, by and between Therakos, Inc.

and the Registrant, dated as of April 9, 2018 (incorporated herein by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1 (File No.

333-225104), filed with the Securities and Exchange Commission on May 22, 2018)

Non-Employee Director Compensation Policy (incorporated herein by reference to Exhibit 10.18 to Amendment No.

1 unchanged sentence

333-225104), filed with the Securities and Exchange Commission on June 5, 2018)

Transition Agreement, by and between the Registrant and Matt Davidson, effective as of May 31, 2018 (incorporated herein by reference to Exhibit 10.19 to Amendment No.

1 the Registrant’s Registration Statement on Form S-1 (File No.

333-225104), filed with the Securities and Exchange Commission on June 5, 2018)

Supply Agreement, by and between the Registrant and Funing County Development Brucea Javanica Professional Cooperatives, dated as of July 16, 2018 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

9 unchanged sentences

001-38529), filed with the Securities and Exchange Commission on November 6, 2019).

Amended and Restated Employment Agreement, by and between the Registrant and Ted White, dated as of January 10, 2020.

Amended and Restated Employment Agreement, by and between the Registrant and Joe Bonaccorso, dated as of January 10, 2020.

Amended and Restated Employment Agreement, by and between the Registrant and Patrick Burnett, dated as of January 10, 2020 .

Amended and Restated Employment Agreement, by and between the Registrant and Ted White, dated as of January 10, 2020 (incorporated herein by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K (File No.

001-38529), filed with the Securities and Exchange Commission on March 13, 2020).

Amended and Restated Employment Agreement, by and between the Registrant and Joe Bonaccorso, dated as of January 10, 2020 (incorporated herein by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K (File No.

001-38529), filed with the Securities and Exchange Commission on March 13, 2020).

Loan and Security Agreement, by and between the Company and Silicon Valley Bank, dated as of March 10, 2020 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38529), filed with the Securities and Exchange Commission on May 7, 2020).

Mezzanine Loan and Security Agreement, by and among the Company, Silicon Valley Bank and WestRiver Innovation Lending Fund VIII, L.P., dated as of March 10, 2020 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38529), filed with the Securities and Exchange Commission on May 7, 2020).

First Amendment to Lease Agreement, by and between the Registrant and 44 West Gay LLC, dated as of March 12, 2020 (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38529), filed with the Securities and Exchange Commission on May 7, 2020).

S econd Amendment to Lease Agreement, by and between the Registrant and 44 West Gay LLC, dated as of April 27, 2020 ( incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38529), filed with the Securities and Exchange Commission on August 5, 2020 ).

Exclusive License Agreement, by and between the Registrant and Lytix Biopharma AS, dated as of August 7, 2020 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

001-38529), filed with the Securities and Exchange Commission on November 9, 2020).

First Amendment to Loan and Security Agreement, by and between the Company and Silicon Valley Bank, dated as of October 26, 2020.

First Amendment to Mezzanine Loan and Security Agreement, by and among the Company, Silicon Valley Bank and WestRiver Innovation Lending Fund VIII, L.P., dated as of October 26, 2020.

Consent of KPMG LLP, independent registered public accounting firm

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Section 1350, as adopted pursuant to section 906 of The Sarbanes-Oxley Act of 2002.

XBRL Instance Document

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Inline XBRL Taxonomy Extension Schema Document

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Indicates management contract or compensatory plan.

Confidential treatment has been granted with respect to portions of this exhibit (indicated by asterisks) and those portions have been separately filed with the Securities and Exchange Commission.

Certain portions of this exhibit, indicated by asterisks, have been omitted pursuant to Item 601(b)(10) of Regulation S-K because they are not material and would likely cause competitive harm to the registrant if publicly disclosed.

These certifications are being furnished solely to accompany this Annual Report pursuant to 18 U.S.C.

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March 17, 2021

/s/ Gary Goldenberg

Gary Goldenberg

/s/ Lawrence Eichenfield

Lawrence Eichenfield

March 17, 2021

/s Diem Nguyen

March 17, 2021

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

What changed 10-K

Item 9A. Controls and Procedures