Note 8. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of Preferred Stock.

May 2024 Public Offering of Common Stock

On May 9, 2024, the Company closed an underwritten public offering of 3,450,000 shares of its common stock at a public offering price of $46.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $158.7 million, before deducting the underwriter discount and other offering expenses, totaling approximately $9.7 million.

October 2023 Public Offering of Common Stock and Concurrent Private Placement of Common Stock and Pre-Funded Warrants

On October 2, 2023, the Company closed an underwritten public offering of 3,450,000 shares of its common stock at a public offering of $20.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares. The gross proceeds of the public offering were $69.0 million, before deducting the underwriting discount and other offering expenses. Concurrently, the Company also completed the closing of approximately $60.0 million for 1,825,000 shares of its common stock and 1,175,000 pre-funded warrants in a private offering pursuant to a securities purchase agreement with certain investors, including entities affiliated with existing stockholders, at a price per share of common stock equal to the public offering price of $20.00 and a price per pre-funded warrant of $19.99. In aggregate, the Company received $129.0 million of gross proceeds less offering costs of $8.2 million. The Company is not required under any circumstance to settle any of the pre-funded warrants for cash, and therefore classified the pre-funded warrants as permanent equity.

Securities Purchase Agreement

On December 16, 2022, the Company entered into a Securities Purchase Agreement for a private placement (Private Placement) with certain entities and members of management (collectively, Purchasers). Pursuant to the Securities Purchase Agreement, the Company agreed to sell to the Purchasers warrants to purchase up to an aggregate of 22,598,870 shares of the Company’s common stock, at a purchase price of $0.4425 per warrant. The closing of the Private Placement occurred on May 8, 2023 (the Issue Date), following the satisfaction of certain closing conditions, including the completion of enrollment in the randomized withdrawal period of Study C602. The Company received gross proceeds of $10.0 million for the sale and issuance of warrants to purchase common stock.

The warrants were separated into two tranches with 8,598,870 Tranche A Warrants with an exercise price of $1.75 per share and aggregate proceeds of up to approximately $15.0 million, and 14,000,000 Tranche B Warrants with an exercise price of $2.50 per share and aggregate proceeds of up to $35.0 million. The Tranche A warrants were immediately exercisable and were required to be exercised within 30 days of announcement of positive top-line data from the randomized withdrawal period of Study C602. On September 26, 2023, the Company announced positive top-line data and subsequently received $15.0 million from the exercise of the

Tranche A warrants. The Tranche B warrants were also immediately exercisable and, following the FDA's approval of VYKAT XR, the remainder of these warrants were exercised. The Company received an aggregate of $35.0 million from the exercise of the Tranche B warrants. As of June 30, 2025, there were no remaining warrants outstanding under the Securities Purchase Agreement.

March 2022 Public Offering of Common Stock

On March 31, 2022, the Company sold 2,666,667 shares of its common stock at a public offering price of $3.75 per share, and for certain investors, in lieu of common stock, pre-funded warrants (the 2022 pre-funded warrants) to purchase 1,333,333 shares of its common stock at a public offering price $3.60 per pre-funded warrant, which represents the per share public offering price for the common stock less the $0.15 per share exercise price for each 2022 pre-funded warrant. The March 2022 pre-funded warrants are immediately exercisable and may be exercised at any time until all of the March 2022 pre-funded warrants are exercised in full. Each share of common stock or March 2022 pre-funded warrant was sold together with one, immediately exercisable, common warrant (the 2022 common warrants) with a five-year term to purchase one share of common stock at an exercise price of $4.50 per share. The net proceeds of the offering were $13.8 million, after deducting the underwriting discount and other offering expenses. The Company is not required under any circumstance to settle any of the 2022 pre-funded warrants or the 2022 common warrants for cash, and therefore classified both types of warrants as permanent equity.

Through June 30, 2025, 2,150,406 of the March 2022 common warrants had been exercised for gross proceeds of $9.7 million and 1,333,329 warrants were exercised using the cashless exercise option with no proceeds to the Company. As of June 30, 2025, 516,265 of the March 2022 common warrants remained outstanding.

At the Market Offering

In July 2024, the Company entered into the Sales Agreement with Jefferies, pursuant to which the Company may offer and sell up to $150.0 million of shares of its common stock, from time to time, through Jefferies.

The Company will pay Jefferies a commission of 3.0% of the aggregate gross proceeds from the sale of shares and has agreed to provide Jefferies with customary indemnification and contribution rights. The Company has also agreed to reimburse Jefferies for certain specified expenses. The Company is not obligated to sell any shares under the Sales Agreement. The offering of the shares pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement by Jefferies or the Company, as permitted therein.

Common Stock Warrants

Equity Incentive Plans

2014 Plan

The Company maintains the 2014 Equity Incentive Plan (the 2014 Plan). Under the 2014 Plan the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance units or performance shares to employees, directors, advisors, and consultants. Options granted under the 2014 Plan may be incentive stock options (ISOs) or nonqualified stock options (NSOs). ISOs may be granted only to Company employees, including officers and directors.

The Board has the authority to determine to whom stock options will be granted, the number of options, the term, and the exercise price. Options are to be granted at an exercise price not less than fair value. For individuals holding more than 10% of the voting rights of all classes of stock, the exercise price of an option will not be less than 110% of fair value. Performance-based grants have vesting contingent upon the achievement of certain performance criteria related to the Company’s commercialization of its therapeutics. The contractual term of an option is no longer than five years for ISOs for which the grantee owns greater than 10% of the voting power of all classes of stock and no longer than ten years for all other options. The terms and conditions governing restricted stock units is at the sole discretion of the Board.

On January 17, 2024, the Company filed a Registration Statement on Form S-8 which registered an additional 1.0 million shares which automatically became available for issuance under the 2014 Plan as of January 1, 2024. On June 6, 2024, the Company's stockholders approved the Amended and Restated 2014 Plan which included an increase of 2.0 million shares, which became immediately available for issuance. On February 28, 2025, the Company filed a Registration Statement on Form S-8 which registered an additional 1.8 million shares which automatically became available for issuance under the 2014 Plan as of January 1, 2025. As of June 30, 2025, a total of 1,104,779 shares were available for future grant under the 2014 Plan.

Inducement Plan

The Company maintains the 2020 Inducement Equity Incentive Plan (the Inducement Plan). The Inducement Plan provides for the grant of equity-based awards, including non-statutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the 2014 Plan.

In accordance with Rule 5635(c)(4) and Rule 5635(c)(3) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company, or, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules, in connection with a merger or acquisition. On January 31, 2024, the Company filed a Registration Statement on Form S-8 which registered 500,000 shares available for issuance under the Inducement Plan, which became available for issuance following approval of the Board of Directors on January 24, 2024.

As of June 30, 2025, a total of 8,318 shares were available for future grant under the Inducement Plan.

Stock-based compensation expense

The Company recognizes stock-based compensation expense related to options and restricted stock units granted to employees, directors and consultants. The compensation expense is allocated on a departmental basis, based on the classification of the award holder. No income tax benefits have been recognized in the condensed consolidated statements of operations and comprehensive loss for stock-based compensation arrangements during any of the periods presented.

After the FDA approval of VYKAT XR in March 2025, the Company began capitalizing stock-based compensation associated with the allocation of labor costs related to work performed to manufacture VYKAT XR. For the three months ended June 30, 2025, the Company capitalized $0.3 million into inventory.

Stock Options

The Company granted options to purchase 102,242 and 343,700 shares of the Company’s common stock to employees during the three months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, the Company granted options to purchase 689,403 and 3,600 shares of the Company’s stock to employees and a consultant, respectively. During the six months ended June 30, 2024, the Company granted options to purchase 1,080,380 of the Company's stock to employees and a consultant. There were no performance-based options granted during the three and six months ended June 30, 2025 and 2024, respectively. The fair value of each award granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

The Black-Scholes option-pricing model requires the use of highly subjective assumptions to estimate the fair value of stock-based awards. These assumptions include the following estimates:

The weighted-average grant date fair value of options granted was $46.61 and $36.34 per share for the six months ended June 30, 2025 and 2024, respectively. The intrinsic value of the stock options exercised was $55.6 million and $3.9 million for the six months ended June 30, 2025 and 2024, respectively. At June 30, 2025, total unrecognized employee stock-based compensation related to stock options that are likely to vest was $77.2 million, which is expected to be recognized over the weighted-average remaining vesting period of 2.7 years.

Restricted Stock Units

There were 130,955 and 32,500 restricted stock units granted to employees and directors by the Company during the three months ended June 30, 2025 and 2024, respectively, and 353,581 and 391,530 restricted stock units granted to employees and directors by the Company during the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2024, the Company granted 10,000 performance-based restricted stock units to a consultant. The shares were valued based on the Company’s common stock price on the grant date.

The weighted-average grant-date fair value of all restricted stock units granted during the six months ended June 30, 2025 and 2024 was $57.26 and $37.58, respectively. The fair value of all restricted stock units vested during the six months ended June 30, 2025 and 2024 was $40.6 million and $6.8 million, respectively. At June 30, 2025, total unrecognized employee stock-based compensation related to restricted stock units was $19.3 million, which is expected to be recognized over the weighted-average remaining vesting period of 2.2 years.

Certain directors have elected to delay the issuance of certain vested restricted stock units granted under the 2014 Plan. Certain of these RSUs have vested as of June 30, 2025 based on the applicable service periods, but the issuance of common stock has been deferred until a future date when the directors' service to the Company terminates, or there is a change in control of the Company. The grant-date fair value of these 13,000 shares is $0.6 million, which has been recognized as stock-based compensation expense over the requisite service period in the condensed consolidated statements of operations and comprehensive loss.

2014 Employee Stock Purchase Plan

The Company’s board of directors and stockholders have adopted the 2014 Employee Stock Purchase Plan (the ESPP). The ESPP has become effective, and the board of directors will implement commencement of offers thereunder in its discretion. A total of 1,864 shares of the Company’s common stock has been made available for sale under the ESPP. In addition, the ESPP provides for annual increases in the number of shares available for issuance under the plan on the first day of each year beginning in the year following the initial date that the board of directors authorizes commencement, equal to the least of:

As of June 30, 2025, there were no purchases by employees under this plan.