acrx20230331

acrx20230331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2023

☐	TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission File Number: 001-35068

ACELRX PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	41-2193603
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

25821 Industrial Boulevard, Suite 400

Hayward, CA 94545

(650) 216-3500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Trading symbol(s)	Name of Each Exchange on Which registered:
Common Stock, $0.001 par value	ACRX	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒

As of May 5, 2023, the number of outstanding shares of the registrant’s common stock was 10,924,294.

ACELRX PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three months ended March 31, 2023 and 2022 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION		30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults Upon Senior Securities	58

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	59

Unless the context indicates otherwise, the terms “AcelRx,” “AcelRx Pharmaceuticals,” “we,” “us” and “our” refer to AcelRx Pharmaceuticals, Inc., and its consolidated subsidiaries. “Niyad” and “Fedsyra” are trademarks, and “ACELRX” and “Zalviso” are registered trademarks, all owned by AcelRx Pharmaceuticals, Inc. This report also contains trademarks and trade names that are the property of their respective owners.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Form 10-Q, contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by that section. The forward-looking statements in this Form 10-Q are contained principally under “Part I. Financial Information - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Other Information - Item 1A. Risk Factors”. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Many important factors affect our ability to achieve our objectives, including:

	•	our ability to obtain additional required financing and to continue as a going concern;
	•	our ability to manage our operating costs and reduce our cash burn;
	•	the accuracy of our estimates regarding the sufficiency of our cash resources, future revenues, expenses, and capital requirements;
	•	our ability to maintain listing of our securities trading on the Nasdaq exchange;
	•	the historical performance and high volatility in the market price of our common stock;
	•	macroeconomic uncertainties, including inflationary pressures, domestic and global supply chain disruptions, labor shortages, significant volatility in global markets, recession risks and the worldwide COVID-19 pandemic;
	•	our ability to file for and secure a potential Emergency Use Authorization for our lead nafamostat developmental product candidate, Niyad™;
	•	our ability to conduct ourselves, or through a contract research organization, clinical trials in a timely and effective manner to advance the development of our product candidates;
	•	our ability to successfully file for and obtain regulatory approval for, and then successfully launch and commercialize our developmental product candidates;
	•	the success of our new corporate partner, Vertical Pharmaceuticals LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, in integrating and commercializing the DSUVIA asset in the United States, including their effectiveness in marketing, sales, and distribution of the DSUVIA product, itself or with potential collaborators;
	•	the extent of future sales of DSUVIA by Alora to the Department of Defense, or DoD;
	•	the size and growth potential of the potential markets for our developmental product candidates in the United States and in other jurisdictions, and our ability to serve those markets;
	•	our estimates of the existence of and commercial potential for markets for our developmental product candidates, if approved;
	•	our ability to realize the expected benefits and potential value created by the acquisition of Lowell Therapeutics, Inc., or Lowell, for our stockholders, on a timely basis or at all;
	•	our ability to develop sales and marketing capabilities in a timely fashion, whether alone through recruiting qualified employees, by engaging a contract sales organization, or with potential future collaborators;
	•	successfully establishing and maintaining commercial manufacturing and supply chain relationships with domestic and global third-party service providers;
	•	our ability to manage effectively, and the impact of any costs associated with, potential governmental investigations, inquiries, regulatory actions or lawsuits that may be, or have been, brought against us;
	•	our ability to obtain adequate government or third-party payer reimbursement for our developmental product candidates, if approved;
	•	our ability to gain access to formularies and establish and then maintain effective relationships with pharmaceutical benefit managers and/or group purchasing organizations for our developmental product candidates, if approved;
	•	our ability to attract additional collaborators with development, regulatory and commercialization expertise;
	•	our ability to identify and secure potential strategic partners to develop, secure regulatory approval for and then commercialize our developmental product candidates;
	•	our ability to successfully retain our key commercial, scientific, engineering, medical or management personnel and hire new personnel as needed;
	•	existing and future legislation and other regulatory developments in the United States and foreign countries;
	•	the performance of our third-party suppliers and manufacturers, including any supply chain impacts or work limitations;
	•	the success of competing therapies that are or become available; and
	•	our ability to obtain and maintain intellectual property protection for our approved products and product candidates.

In addition, you should refer to “Part II. Other Information - Item 1A. Risk Factors” in this Form 10-Q for a discussion of these and other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Also, forward-looking statements represent our estimates and assumptions only as of the date of this Form 10-Q. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AcelRx Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	March 31, 2023 (unaudited)			December 31, 2022⁽¹⁾
Assets
Current Assets:
Cash and cash equivalents	$	13,353		$	15,275
Restricted cash		—			5,000
Short-term investments		—			495
Prepaid expenses and other current assets		525			1,865
Assets of discontinued operations		3,476			1,931
Total current assets		17,354			24,566
Operating lease right-of-use assets		49			96
In-process research and development asset		8,819			8,819
Other assets		70			70
Assets of discontinued operations		—			13,936
Total assets	$	26,292		$	47,487

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	1,398		$	1,256
Accrued and other liabilities		1,418			2,431
Long-term debt, current portion		3,318			5,363
Operating lease liabilities, current portion		51			100
Liabilities of discontinued operations		3,278			4,620
Total current liabilities		9,463			13,770
Warrant liability		1,787			7,098
Other long-term liabilities		800			810
Liabilities of discontinued operations		—			3,995
Total liabilities		12,050			25,673

Commitments and Contingencies
Stockholders’ Equity:
Common stock, $0.001 par value—200,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 10,924,294 and 8,243,680 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		11			8
Additional paid-in capital		448,212			447,635
Accumulated deficit		(433,981	)		(425,829	)
Total stockholders’ equity		14,242			21,814
Total Liabilities and Stockholders’ Equity	$	26,292		$	47,487

(1)	The condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited financial statements as of that date included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

See notes to condensed consolidated financial statements.

AcelRx Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended March 31,
	2023			2022
Operating costs and expenses:
Research and development	$	1,047		$	836
Selling, general and administrative		4,281			4,100
Total operating costs and expenses		5,328			4,936
Loss from operations		(5,328	)		(4,936	)
Other income:
Interest expense		(119	)		(390	)
Interest income and other income, net		5,511			38
Non-cash interest income on liability related to sale of future royalties		—			673
Total other income		5,392			321
Net income (loss) from continuing operations		64			(4,615	)
Net loss from discontinued operations– See Note 3		(8,216	)		(4,059	)
Net loss	$	(8,152	)	$	(8,674	)
Net income (loss) per share attributable to stockholders:
Basic and diluted, continuing operations	$	0.00		$	(0.63	)
Basic and diluted, discontinued operations	$	(0.75	)	$	(0.56	)
Basic and diluted loss per share	$	(0.75	)	$	(1.19	)
Shares used in computing net loss per share of common stock, basic and diluted – See Note 10		10,893,954			7,281,187

See notes to condensed consolidated financial statements.

AcelRx Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share data)

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance as of December 31, 2022		8,243,680	$	8	$	447,635		$	(425,829	)	$	21,814
Stock-based compensation		—		—		569			—			569
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes		21,700		—		(22	)		—			(22	)
Exercise of prefunded warrants		2,632,898		2		—			—			2
Issuance of common stock upon ESPP purchase		26,016		1		30			—			31
Net loss		—		—		—			(8,152	)		(8,152	)
Balance as of March 31, 2023		10,924,294	$	11	$	448,212		$	(433,981	)	$	14,242

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Amount
Balance as of December 31, 2021		6,840,967	$	7	$	437,684		$	(473,584	)	$	(35,893	)
Stock-based compensation		—		—		783			—			783
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes		25,769		—		(58	)		—			(58	)
Issuance of common stock in connection with asset acquisition		481,026		—		5,511			—			5,511
Issuance of common stock upon ESPP purchase		7,671		—		58			—			58
Net loss		—		—		—			(8,674	)		(8,674	)
Balance as of March 31, 2022		7,355,433	$	7	$	443,978		$	(482,258	)	$	(38,273	)

See notes to condensed consolidated financial statements.

AcelRx Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(8,152	)	$	(8,674	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest income on liability related to royalty monetization		—			(673	)
Depreciation and amortization		262			420
Non-cash interest expense related to debt financing		38			134
Stock-based compensation		569			783
Revaluation of warrant liability		(5,311	)		—
Impairment of net assets held for sale		7,007			—
Impairment of fixed assets		1,065			—
Gain on termination of lease liabilities		(1,098	)		—
Gain on extinguishment of debt liability		(400	)		—
Other		(15	)		2
Changes in operating assets and liabilities:
Accounts receivable		33			(24	)
Inventories		61			57
Prepaid expenses and other assets		1,550			360
Accounts payable		100			249
Accrued liabilities		(960	)		(1,512	)
Operating lease liabilities		30			(56	)
Deferred revenue		(29	)		—
Net cash used in operating activities		(5,250	)		(8,934	)
Cash flows from investing activities:
Purchase of property and equipment		(100	)		(89	)
Purchase of investments		—			(6,175	)
Cash paid for asset acquisition, net of cash acquired		—			(1,156	)
Proceeds from maturities of investments		500			27,596
Net cash provided by investing activities		400			20,176
Cash flows from financing activities:
Payment of long-term debt		(2,083	)		(2,083	)
Net proceeds from issuance of common stock in connection with exercise of prefunded warrants		2			—
Net proceeds from issuance of common stock through equity plans		31			58
Payment of employee tax obligations related to vesting of restricted stock units		(22	)		(58	)
Net cash used in financing activities		(2,072	)		(2,083	)
Net change in cash, cash equivalents and restricted cash		(6,922	)		9,159
Cash, cash equivalents and restricted cash—Beginning of period		20,275			12,663
Cash, cash equivalents and restricted cash—End of period	$	13,353		$	21,822

NONCASH INVESTING ACTIVITIES:
Purchases of property and equipment in accounts payable and accrued liabilities		—		$	1,275
Asset acquisition costs in accounts payable and accrued liabilities		—		$	531
Liability for hold back shares in connection with asset acquisition in other long-term liabilities		—		$	800
Issuance of common stock in connection with asset acquisition		—		$	5,511

See notes to condensed consolidated financial statements.

AcelRx Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except where otherwise noted)

1. Organization and Summary of Significant Accounting Policies

The Company

AcelRx Pharmaceuticals, Inc., or the Company, or AcelRx, was incorporated in Delaware on July 13, 2005 as SuRx, Inc. The Company subsequently changed its name to AcelRx Pharmaceuticals, Inc. The Company’s operations are based in Hayward, California.

AcelRx is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings.

On March 12, 2023, the Company entered into an Asset Purchase Agreement, or the Purchase Agreement, with Vertical Pharmaceuticals, LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, pursuant to which Alora agreed to acquire certain assets and assume certain liabilities of AcelRx relating to its sufentanil sublingual tablet product referred to as DSUVIA or DZUVEO, or any other single-dose pharmaceutical product for use in medically supervised settings containing a sublingual tablet that includes sufentanil as the sole active ingredient, as a 30 mcg tablet or other dosage form or strength as reasonably necessary for lifecycle management, or the Product. The closing of the Purchase Agreement occurred on April 3, 2023 (see Note 3, “Discontinued Operations” and Note 11, “Subsequent Events” below).

On January 7, 2022, the Company acquired Lowell Therapeutics, Inc., or Lowell, a privately held company (see Note 4, “Asset Acquisition” below), and, as a result acquired Niyad™, a regional anticoagulant for the dialysis circuit during continuous renal replacement therapy for acute kidney injury patients in the hospital, that the Company plans to study under an investigational device exemption, or IDE, and which has received Breakthrough Device Designation status from the FDA. While not approved for commercial use in the United States, the active drug component of Niyad, nafamostat, has been approved in Japan and South Korea as a regional anticoagulant for the dialysis circuit, disseminated intravascular coagulation, and acute pancreatitis. Niyad is a lyophilized formulation of nafamostat, a broad-spectrum, synthetic serine protease inhibitor, with anticoagulant, anti-inflammatory, and potential anti-viral activities. The second intended indication for Niyad is as a regional anticoagulant for the dialysis circuit for chronic kidney disease patients undergoing intermittent hemodialysis in dialysis centers. In addition, the Company acquired LTX-608, a proprietary nafamostat formulation for direct IV infusion that it intends to develop for the treatment of acute respiratory distress syndrome, or ARDS, and disseminated intravascular coagulation, or DIC.

On July 14, 2021, the Company entered into a License and Commercialization Agreement, or the PFS Agreement, with Laboratoire Aguettant, or Aguettant, pursuant to which the Company obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States an ephedrine pre-filled syringe, or PFS, containing 10 ml of a solution of 3 mg/ml ephedrine hydrochloride for injection, and (ii) a phenylephrine PFS containing 10 ml of a solution of 50 mcg/ml phenylephrine for injection. Aguettant will supply the Company with the products for use in commercialization and, if they are approved in the U.S.

Liquidity and Going Concern

The unaudited condensed consolidated financial statements for the three months ended March 31, 2023 were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The Company has incurred recurring operating losses and negative cash flows from operating activities and expects to continue to incur operating losses and negative cash flows in the future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Considering the Company’s current cash resources and its current and expected levels of operating expenses for the next twelve months, management expects to need additional capital to fund its planned operations prior to the 12 month anniversary of the date this Quarterly Report on Form 10-Q is filed with the United States Securities and Exchange Commission, or the SEC. Management may seek to raise such additional capital through public or private equity offerings, including under the Controlled Equity Offering^SM Sales Agreement, or the ATM Agreement, with Cantor Fitzgerald & Co., or Cantor, debt securities, a new debt facility, monetizing or securitizing certain assets, entering into product development, license or distribution agreements with third parties, or divesting any of the Company’s remaining product candidates. While management believes its plans to raise additional funds will alleviate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern, these plans are not entirely within the Company’s control and cannot be assessed as being probable of occurring. Additional funds may not be available when the Company needs them on terms that are acceptable to the Company, or at all. If adequate funds are not available, the Company may be required to further reduce its workforce or delay the development of its regulatory filing plans for its product candidates in advance of the date on which the Company’s cash resources are exhausted to ensure that the Company has sufficient capital to meet its obligations and continue on a path designed to preserve stockholder value. In addition, if additional funds are raised through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish rights to its technologies, future revenue streams or product candidates, or to grant licenses on terms that may not be favorable to the Company.

Reverse Stock Split

On September 23, 2022, at a special meeting of stockholders, the Company's stockholders authorized the Company’s Board of Directors to effect a reverse stock split of all outstanding shares of common stock in a range of 1-for-10 to 1-for-30. The Board of Directors subsequently approved a reverse stock split with a ratio of 1-for-20, or the Reverse Stock Split. On October 25, 2022, following the filing of a certificate of amendment to the Company’s amended and restated certificate of incorporation, every 20 shares of the Company's common stock that were issued and outstanding automatically converted into one outstanding share of common stock. The Reverse Stock Split affected all shares of common stock outstanding immediately prior to the effective time of the Reverse Stock Split, as well as the number of shares of common stock available for issuance under the Company's equity incentive and employee stock purchase plans. Outstanding stock options, restricted stock units and warrants were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The Reverse Stock Split affected all holders of common stock uniformly and did not affect any stockholder's percentage of ownership interest. The par value of the Company's common stock remained unchanged at $0.001 per share and the number of authorized shares of common stock remained the same after the Reverse Stock Split.

As the par value per share of the Company's common stock remained unchanged at $0.001 per share, the change in the common stock recorded at par value has been reclassified to additional paid-in-capital on a retroactive basis. All references to shares of common stock, stock options, restricted stock units and warrants and per share data for all periods presented in the accompanying unaudited condensed consolidated financial statements and notes thereto have been adjusted to reflect the Reverse Stock Split on a retroactive basis.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the United States. Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or any future period. The condensed consolidated balance sheet as of December 31, 2022, was derived from the Company’s audited financial statements as of December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2023. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which includes a broader discussion of the Company’s business and the risks inherent therein.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management evaluates its estimates on an ongoing basis including critical accounting policies. Estimates are based on historical experience and on various other market-specific and other relevant assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued Topic 326, or the Credit Losses standard, which the Company adopted using a modified retrospective approach on January 1, 2023. Topic 326 requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value. The adoption of this standard did not have a material impact on the Company’s financial statements or related disclosures.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

Significant Accounting Policies

The Company’s significant accounting policies are detailed in its Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to the Company’s significant accounting policies during the three months ended March 31, 2023, from those previously disclosed in its 2022 Annual Report on Form 10-K, except as follows:

In accordance with ASC 205-20 “Presentation of Financial Statements: Discontinued Operations”, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, non-current assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes, shall be reported as components of net loss separate from the net income (loss) of continuing operations.

The Company’s DSUVIA business met the definition of a discontinued operation as of March 31, 2023. Accordingly, the Company has classified the results of the DSUVIA business as discontinued operations in its unaudited condensed consolidated statements of operations for all periods presented. All assets and liabilities associated with the DSUVIA business were classified as assets and liabilities of discontinued operations in the unaudited condensed consolidated balance sheets for the periods presented. All amounts included in the notes to the unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted. For additional information, see Note 3, “Discontinued Operations”.

2. Investments and Fair Value Measurement

Investments

The Company classifies its marketable securities as available for sale and records its investments at fair value. Available-for-sale securities are carried at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income (loss).

As of March 31, 2023, and December 31, 2022, the contractual maturity of all investments held was less than one year.

The tables below summarize the Company’s cash, cash equivalents and short-term investments (in thousands):

	As of March 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash, cash equivalents and restricted cash:
Cash	$	1,716	$	—	$	—	$	1,716
Money market funds		146		—		—		146
U.S. government agency securities		5,677		—		—		5,677
Commercial paper		5,814		—		—		5,814
Total cash, cash equivalents, and restricted cash	$	13,353	$	—	$	—	$	13,353

	As of December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash, cash equivalents and restricted cash:
Cash	$	13,275	$	—	$	—	$	13,275
Money market funds		321		—		—		321
U.S. government agency securities		2,444		—		—		2,444
Commercial paper		4,235		—		—		4,235
Total cash, cash equivalents and restricted cash		20,275		—		—		20,275

Short-term investments:
Commercial paper		495		—		—		495
Total short-term investments		495		—		—		495
Total cash, cash equivalents, restricted cash and short-term investments	$	20,770	$	—

SEC Form 10-Q filed by AcelRx Pharmaceuticals Inc.