What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-03-17 · 102 added, 102 removed, 159 unchanged (56% of the section changed)

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See “Special Note Regarding Forward-Looking Statements.” Our actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled “Risk Factors” and elsewhere in this Annual Report.

Our predecessor, C3 Jian, Inc., was incorporated under the laws of the state of California on November 4, 2005.

On February 26, 2016, as part of a reorganization transaction, C3 Jian, Inc.

merged with a wholly owned subsidiary of C3J, and as part of this process, C3 Jian, Inc.

was converted to a limited liability company organized under the laws of the State of California named C3 Jian, LLC.

On May 9, 2019, C3J completed a reverse merger with AmpliPhi, where Ceres Merger Sub, Inc., a wholly-owned subsidiary of AmpliPhi, merged with and into C3J.

Following the completion of the Merger, and a $10.0 million concurrent private placement financing, the former C3J stockholders owned approximately 76% of our common stock and the former AmpliPhi stockholders owned approximately 24% of our common stock.

Immediately prior to the Merger, AmpliPhi completed a 1-for-14 reverse stock split and changed its name to Armata Pharmaceuticals, Inc.

On May 9, 2019, our predecessor company, C3J Therapeutics, Inc.

(“C3J”) completed a reverse merger with AmpliPhi Biosciences Corporation, a bacteriophage development stage company (“AmpliPhi”), where Ceres Merger Sub, Inc., a wholly-owned subsidiary of AmpliPhi, merged with and into C3J (the “Merger”).

Immediately prior to the Merger, AmpliPhi changed its name to Armata Pharmaceuticals, Inc.

Our common stock is traded on the NYSE American exchange under the symbol “ARMP.” We are headquartered in Marina del Rey, CA, in a 35,000 square-foot research and development facility built for product development with capabilities spanning from bench to clinic.

In addition to microbiology, synthetic biology, formulation, chemistry and analytical laboratories, the facility is equipped with two licensed GMP drug manufacturing suites enabling the production, testing and release of clinical material.

In addition to microbiology, synthetic biology, formulation, chemistry and analytical laboratories, the facility is equipped with two licensed current good manufacturing practice (“cGMP”) drug manufacturing suites enabling the production, testing and release of clinical material.

Statements contained in this Annual Report that are not statements of historical fact are forward-looking statements within the meaning of the U.S.

Private Securities Litigation Reform Act of 1995.

Such forward-looking statements include, without limitation, statements concerning product development plans, commercialization of our products, the expected market opportunity for our products, the use of bacteriophages and synthetic phages to kill bacterial pathogens, having resources sufficient to fund our operations into the first quarter of 2023, future funding sources, general and administrative expenses, clinical trial and other research and development expenses, costs of manufacturing, costs relating to our intellectual property, capital expenditures, the expected benefits of our targeted phage therapies strategy, the potential market for our products, tax credits and carry-forwards, and litigation-related matters.

Such forward-looking statements include, without limitation, statements concerning product development plans, commercialization of our products, the

expected market opportunity for our products, the use of bacteriophages and synthetic phages to kill bacterial pathogens, having resources sufficient to fund our operations into the thrid quarter of 2023, future funding sources, general and administrative expenses, clinical trial and other research and development expenses, costs of manufacturing, costs relating to our intellectual property, capital expenditures, the expected benefits of our targeted phage therapies strategy, the potential market for our products, tax credits and carry-forwards, and litigation-related matters.

Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “will,” “goal,” “potential” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements necessarily contain these identifying words.

These statements are subject to risks and uncertainties.

Our actual results could differ materially from those

anticipated in these forward-looking statements as a result of various factors, including those set forth below under Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

These forward-looking statements speak only as of the date on which they were made, and we undertake no obligation to update any forward-looking statements.

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We believe that phages represent a promising means to treat bacterial infections, especially those that have developed resistance to current standard of care therapies, including the so-called multidrug-resistant or “superbug” strains of bacteria.

We are a leading developer of phage therapeutics which are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections .

We are combining our proprietary approach and expertise in identifying, characterizing and developing both naturally-occurring and engineered (synthetic) bacteriophages with our proprietary phage-specific current good manufacturing practice regulation (“cGMP”) manufacturing capabilities to advance a broad pipeline of high-quality bacteriophage product candidates.

We believe that synthetic phage, engineered using advances in sequencing and synthetic biology techniques, represent a promising means to advance phage therapy, including improving upon the ability of natural phage to treat bacterial infections, especially those that have developed resistance to current antibiotic therapies, including the multidrug-resistant or “superbug” bacterial pathogens.

We are developing and advancing our lead clinical phage candidate for Pseudomonas aeruginosa .

On October 14, 2020, Armata received the approval to proceed from the U.S.

Food and Drug Administration (“FDA”) for its Investigational New Drug application for AP-PA02.

We plan to continue to advance the “SWARM- P.a.

” study – a Phase 1b/2a, multicenter, double-blind, randomized, placebo-controlled, single ascending dose (“SAD”) and multiple ascending dose (“MAD”) clinical trial to evaluate the safety and tolerability of inhaled AP-PA02 in subjects with CF and chronic pulmonary P.

aeruginosa infection, provided that the impacts of COVID-19 do not further impede our ability to enroll subjects in this clinical trial.

This study is supported by the Cystic Fibrosis Foundation (“CFF”), which granted us a Therapeutics Development Award of up to $5.0 million.

We are also developing a phage product candidate for Staphylococcus aureus for the treatment of S.

aureus bacteremia.

On June 15, 2020, we entered into an agreement (the “MTEC Agreement”) with the Medical Technology Enterprise Consortium (“MTEC”), pursuant to which we expect to receive a $15.0 million grant and entered into a three-year program administered by the U.S Department of Defense (“DoD”) through MTEC with funding from the Defense Health Agency and Joint Warfighter Medical Research Program.

We expect to use the grant to partially fund a Phase 1/2, multi-center, randomized, double-blind, placebo- controlled dose escalation study, provided that the COVID-19 pandemic has been reduced to the point that clinical trials in patients are enrolling, that will assess the safety, tolerability, and efficacy of this development program, using our phage-based candidate, AP-SA02, for the treatment of adults with S.

We are a leading developer of phage therapeutics and are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections.

We are combining our proprietary approach and expertise in identifying, characterizing and developing both naturally-occurring and engineered (synthetic) bacteriophages with our proprietary phage-specific current good manufacturing price regulations compliant (“cGMP”) manufacturing capabilities to advance a broad pipeline of high-quality bacteriophage product candidates.

We are developing and advancing our lead clinical phage candidate for Pseudomonas aeruginosa ( “ P.

aeruginosa ” ) .

On October 14, 2020, we received the approval to proceed from the FDA for our IND application for AP-PA02.

In the first quarter of 2023, Armata announced positive topline results from the completed “SWARM- P.a.

aeruginosa infection.

Data indicate that AP-PA02 was well-tolerated with a treatment emergent adverse event profile similar to placebo.

Pharmacokinetcs (PK) findings confirm that AP-PA02 can be effectively delivered to the lungs through nebulization with minimal systemic exposure, with single ascending doses and multiple ascending doses resulting in a proportional increase in exposure as measured in induced sputum and exposure achievement relatively consistent across patient subjects.

Additionally, bacterial levels of P.

aeruginosa in the sputum measured at several timepoints suggest improvement in bacterial load reduction for subjects treated with AP-PA02 at the end of treatment as compared to placebo after ten days of dosing.

This study is supported by the Cystic Fibrosis Foundation (“CFF”), which granted Armata a Therapeutics Development Award of up to $5.0 million.

We are also developing a phage product candidate for Staphylococcus aureus (“ S.

aureus ” ) for the treatment of S.

aureus bacteremia, AP-SA02.

On June 15, 2020, we entered into an agreement (the “MTEC Agreement”) with the Medical Technology Enterprise Consortium (“MTEC”), pursuant to which we expect to receive a $15.0 million grant and entered into a three-year program administered by the U.S Department of Defense (the “DoD”) through MTEC with funding from the Defense Health Agency and Joint Warfighter Medical Research Program.

On September 29, 2022, the MTEC Agreement was modified to increase the total award by $1.3 million to $16.3 million and extend the term into the third quarter of 2024.

We expect to use the grant to partially fund a Phase 1/2, multi-center, randomized, double-blind, placebo- controlled dose escalation study that will assess the safety, tolerability, and efficacy of our phage-based candidate, AP-SA02, for the treatment of adults with S.

aureus bacteremia.

In addition to our more advanced pipeline programs, we have phage development efforts underway to target other indications including non-cystic fibrosis bronchiectasis (“NCFB”), prosthetic joint infections (“PJI”) and hospitalized pneumonia.

Our proprietary phage engineering platform serves to enhance the clinical and commercial prospects of phage therapy.

On November 17, 2021, Armata announced that it had received from the FDA the approval to proceed for our Investigational New Drug application for AP-SA02.

We plan to continue to advance the “diSArm” study provided that the impacts of COVID-19 do not impede our ability to enroll subjects in this clinical trial.

On February 22, 2022, Armata announced that it had received from the FDA the approval to proceed for our IND application for AP-PA02, in a second indication, NCFB.

The Company initiated a Phase 2 trial (“Tailwind”) in NCFB in 2022 and reported first patient dosing in the first quarter of 2023.

The "Tailwind” study is a Phase 2, multicenter, double-blind, randomized, placebo-controlled study to evaluate the safety, phage kinetics, and efficacy of inhaled AP-PA02 phage therapeutic in subjects with NCFB and chronic pulmonary Pseudomonas aeruginosa infection.

On August 1, 2022, Armata announced that it had received from the FDA the approval to proceed for our IND application for AP-SA02, in a second indication, PJI.

The Company plans to initiate a Phase 1b/2a trial in 2023, which will assess the safety and tolerability of intravenous and intra-articular AP-SA02 as an adjunct to standard of care antibiotics in adults undergoing debridement, antibiotics, and implant retention for the treatment of periprosthetic joint infections caused by S.

We are committed to conducting randomized controlled clinical trials required for FDA approval in order to move toward the commercialization of alternatives to traditional antibiotics and provide a potential method of treating patients suffering from drug-resistant and difficult-to-treat bacterial infections.

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We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the development and seeking to obtain regulatory approval of our product candidates.

We currently expect to use our existing cash and cash equivalents for the continued research and development of our product candidates, including through our targeted phage therapies strategy, and for working capital and other general corporate purposes.

We currently expect to use our existing cash and cash equivalents for the continued research and development of our product candidates and for working capital and other general corporate purposes.

We expect to continue to incur significant and increasing operating losses at least for the next several years.

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Accordingly, we will be required to obtain further funding through one or more other public or private equity offerings, debt financings, collaboration, strategic financing, grants or government contract awards, licensing arrangements or other sources.

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and potential disruptions to, and volatility in, financial markets in the United States and worldwide.

Adequate additional funding may not be available to us on acceptable terms, or at all.

If we are unable to raise capital when needed or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of assets, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether.

bankruptcy or cease operations altogether.

Any of these events could have a material adverse effect on our business, financial condition and results of operations and result in a loss of investment by our stockholders.

Business Update Regarding COVID-19

In March 2020, the World Health Organization (“WHO”) declared COVID-19 a global pandemic and the United States declared a national emergency with respect to COVID-19.

The COVID-19 pandemic has directly and indirectly impacted our business, results of operations and financial condition and is expected to continue to impact our business.

For example, the COVID-19 pandemic has resulted in delays in our clinical trials due to the implementation of COVID-19 protocols at investigator sites, which resulted in

longer than anticipated site identification and initiation activities.

In addition, while we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and the continuing response efforts may have a future impact on our third-party suppliers and partners.

It is possible that due to the continued development and manufacturing of vaccines for COVID-19, certain basic supply chain materials such as resins, vessels, vials and stoppers may be in high demand by the pharmaceutical companies developing and manufacturing vaccines and our ability to obtain these materials for our development activities could be negatively impacted.

Although we have experienced some delays of this nature during 2021, such delays have not had a material adverse impact on our business, results of operations or financial condition .

The full extent of the COVID-19 pandemic impact continues to depend on future developments that remain highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact, the identification and spread of COVID-19 variants such as the Delta and the Omicron variants, the distribution of vaccines, the acceptance of vaccines and the implementation of vaccine mandates, and the economic impact on local, regional, national and international markets.

Management continues to actively monitor the developments regarding the pandemic and the impact that the pandemic could have on our financial condition, liquidity, ability to enroll patients in our contemplated clinical trials, manufacturing and research and development operations, suppliers to our operations and suppliers to our outside clinical trial organizations, biotech industry overall, and importantly the health and safety of our workforce.

Given the continued volatility of the COVID-19 pandemic and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 pandemic on our results of operations, financial condition, or liquidity for 2022.

Any recovery from negative impacts to our business and related economic impact due to the COVID-19 pandemic may also be slowed or reversed by a number of factors, including the recent widespread resurgence in COVID-19 infections attributable to the Omicron variant, combined with the seasonal flu.

Impact of COVID-19

The healthcare challenge and other impacts surrounding the COVID-19 pandemic that emerged in late 2019 have presented significant business uncertainty and had a dramatic impact on businesses globally, including ours.

As the COVID-19 pandemic reaches an endemic state, the extent to which it may affect our clinical trials, business operations, financial condition and results of operations remains dependent on future developments, which are highly uncertain and cannot be predicted at this time.

Although COVID-19 infection rates and severity have decreased recently, the occurrence, spread, severity and duration of any new outbreaks or resurgences, including the emergence and spread of new variants of COVID-19, actions taken to contain the resurgences or variants, and economic repercussions of the virus remain uncertain.

We continue to evaluate the nature and extent to which COVID-19 may impact our business and operations .

Recent Events

NCFB Investigational New Drug (“IND”) Approval

On February 22, 2022, we announced that the U.S.

FDA has cleared Armata's IND application to initiate a clinical trial of its optimized lead therapeutic candidate, AP-PA02, in a second indication, NCFB.

The company plans to initiate a Phase 2 trial in 2022.

2023 Credit Agreement

On January 10, 2023, we entered into, as borrower, a secured convertible credit and security agreement (the “Credit Agreement”) with Innoviva Strategic Opportunities LLC (“Innoviva SO”), a wholly owned subsidiary of Innoviva, Inc.

INVA) (collectively, “Innoviva”), a principal stockholder of us.

The Credit Agreement provides for a secured term loan facility in an aggregate amount of $30 million (the “Loan”) at an interest rate of 8.0% per annum, and has a maturity date of January 10, 2024.

Repayment of the Loan is required to be guaranteed by our domestic subsidiaries and foreign material subsidiaries, and the Loan is secured by substantially all of our assets and the subsidiary guarantors.

The Credit Agreement provides that if a Qualified Financing, as defined in the Credit Agreement, occurs, the outstanding principal amount of, and all accrued and unpaid interest on, the Loan shall be converted into shares of our common stock, at a price per share equal to a 15.0% discount to the lowest price per share for our common stock paid by investors in a Qualified Financing (which price paid by investors in a Qualified Financing may not be less than a 15.0% discount to the closing price of our common stock immediately prior to the consummation of a Qualified Financing event).

The Credit Agreement also requires us to file a registration statement (the “Registration Statement”) for the resale of all securities issued to the lender in connection with any conversion under the Credit Agreement.

After the Registration Statement has been declared effective by the U.S.

Securities and Exchange Commission, any outstanding Loan amount, including all accrued and unpaid interest thereon, may be converted at the lender’s option, into shares of our common stock at a price per share equal to the greater of book value or market value per share of common stock on the date immediately preceding the effective date of the Credit Agreement, which is $1.52 (as may be appropriately adjusted for any stock split, combination or similar act).

PJI IND Approval

On August 1, 2022, we announced that the FDA has cleared Armata’s IND application for AP-SA02, in a second indication, PJI.

The Company plans to initiate a Phase 1b/2 trial in PJI in 2023.

NCFB IND Approval

On February 22, 2022, we announced that the FDA has cleared Armata’s IND application to initiate a clinical trial of its optimized lead therapeutic candidate, AP-PA02, in a second indication, NCFB.

We initiated a Phase 2 trial in NCFB in 2022 and announced first patient dosing in the first quarter of 2023.

February 2022 Private Placement

On February 9, 2022, we entered into a securities purchase agreement to sell our common stock and warrants to Innoviva Strategic Opportunities LLC, a wholly ‐ owned subsidiary of Innoviva, Inc.

INVA) (collectively, "Innoviva"), our largest shareholder.

The gross proceeds from the transaction are expected to be $45 million, before deducting estimated offering expenses.

Pursuant and subject to the terms and conditions of the securities purchase agreement and related agreements, Innoviva will purchase 9,000,000 newly issued shares of our common stock, at a price of $5.00 per share, and warrants to purchase up to 4,500,000 additional shares of our common stock, with an exercise price of $5.00 per share.

The stock purchases are expected to occur in two tranches.

Upon execution, Innoviva purchased approximately 3,614,792 shares of common stock and warrants to purchase approximately 1,807,396 shares of common stock for an aggregate purchase price of approximately $18.1 million.

At the closing of the second tranche, upon our stockholders voting in

favor of the transaction, Innoviva will purchase approximately 5,385,208 shares of common stock and warrants to purchase approximately 2,692,604 shares of common stock for an aggregate purchase price of $26.9 million.

Subject to the satisfaction of certain closing conditions, including the approval of our stockholders, the second closing contemplated by the securities purchase agreement is expected to occur near the end of the first quarter of 2022.

October 2021 Private Placements

On October 28, 2021, we entered into a securities purchase agreement (the “October 2021 Securities Purchase Agreement”) with the Cystic Fibrosis Foundation, a Delaware corporation (“CFF”), our partner for the lead Phase 1b/2a clinical development program, and Innoviva for the private placement of newly issued shares of our common stock.

Pursuant to the October 2021 Securities Purchase Agreement, we issued and sold 909,091 shares to CFF and 1,212,122 shares to Innoviva, each at a per share price of $3.30 (the “October 2021 Private Placements”).

We received aggregate gross proceeds from the October 2021 Private Placements of approximately $7.0 million, before deducting transaction expenses .

2021 Lease Agreement

On October 28, 2021, we entered into a lease for office and research and development space under a non-cancellable lease in Los Angeles, CA (the “2021 Lease”).

The leased space comprises approximately 56,000 square feet.

The 2021 Lease payment start date is May 1, 2022 and the total lease term is for 16 years and runs through 2038.

Monthly rent for 2022 and 2023 will be fully or partially abated while we and the lessor complete planned tenant improvements to the facility.

Base monthly rent will be approximately $0.25 million in 2024.

We are entitled to receive an allowance for tenant improvements of up to $7.3 million.

On February 9, 2022, we entered into a securities purchase agreement to sell our common stock and warrants to Innoviva SO, a wholly‐owned subsidiary of Innoviva, Inc., a principal stockholder of us.

Pursuant and subject to the terms and conditions of the securities purchase agreement and related agreements, Innoviva agreed to purchase 9,000,000 newly issued shares of our common stock, at a price of $5.00 per share, and warrants to purchase up to 4,500,000 additional shares of our common stock, with an exercise price of $5.00 per share.

The stock purchases were completed in two tranches.

On February 9, 2022, Innoviva purchased 3,614,792 shares of common stock and warrants to purchase 1,807,396 shares of common stock for an aggregate purchase price of approximately $18.1 million.

On March 31, 2022, upon our stockholders voting in favor of the transaction, Innoviva purchased approximately 5,385,208 shares of common stock and warrants to purchase approximately 2,692,604 shares of common stock for an aggregate purchase price of $26.9 million.

Executive Transition

On June 30, 2022, Steve R.

Martin retired as our Chief Financial Officer and Senior Vice President (and Principal Financial and Accounting Officer).

Martin has agreed to continue his employment with us as an advisor to his successor in the Principal Financial and Accounting Officer role from July 1, 2022 through December 31, 2022.

On March 25, 2022, the Board of Directors appointed Erin Butler to serve as (i) Vice President of Finance and Administration of the Company, effective April 1, 2022, and (ii) Principal Financial and Accounting Officer of the Company, effective July 1, 2022.

Selected Financial Data

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Grant Revenue

We recognized $4.5 million and $0.8 million of grant revenue during the year ended December 31, 2021 and 2020, respectively, which represents the Medical Technology Enterprise Consortium (“MTEC’s”) share of the costs incurred for the Company’s AP-SA02 program for the treatment of Staphylococcus aureus bacteremia infections.

We recognized $5.5 million and $4.5 million of grant revenue during the year ended December 31, 2022 and 2021, respectively, which represents the MTEC’s share of the costs incurred for the Company’s AP-SA02 program for the treatment of Staphylococcus aureus bacteremia infections.

Research and Development

Research and development expenses for the year ended December 31, 2022 and 2021 were $35.0 million and $20.0 million, respectively.

The net increase of $5.6 million was primarily related to an increase of $5.3 million in increased contracted research costs, laboratory supplies and consulting expenses related to ongoing clinical trials and an increase of $2.7 million in personnel costs, These increases were offset by credits to research and development expenses of $2.8 million related to our award agreement with the Cystic Fibrosis Foundation (“CFF”) and a $0.6 million tax rebate from Australian tax authorities during the year ended December 31, 2021, as compared to $1.1 million received from CFF and the the National Institute of Health (“NIH”) during the year ended December 31, 2020 .

The net increase of $15.0 million was primarily related to an increase of $7.6 million related to increased clinical trial activities and laboratory supplies expenses, $1.8 million in personnel costs, and $3.2 million in lease expenses, and a $2.2 million reduction in credits to research and development expenses related to CFF awards and Australian tax credits.

General and Administrative

General and administrative expenses for the year ended December 31, 2021 were $8.3 million, which remained largely consistent with $8.0 million for the same period during 2020.

General and administrative expenses for the year ended December 31, 2022 were $7.4 million compared with $8.3 million for the same period in 2021.

T he net decrease of $0.9 million was primarily related to a decrease of $1.2 million of salary and personnel related expenses, offset by an increase of $0.4 million of lease expenses.

Gain upon Extinguishment of Paycheck Protection Program Loan

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Other Income (Expense)

For the year ended December 31, 2021 and 2020, we recorded noncash interest expense of $0.1 million and $0.6 million, respectively, as a result of interest accretion on the time-based cash payments due in connection with the asset acquisition transaction with Synthetic Genomics, Inc.

For the year ended December 31, 2022 and 2021, we recorded noncash interest expense of $0 and $0.1 million, respectively, as a result of interest accretion on the time-based cash payments due in connection with the asset acquisition transaction with Synthetic Genomics, Inc.

There was no income tax expense or benefit for the year ended December 31, 2022 or December 31, 2021.

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Net cash used in operating activities for the year ended December 31, 2022 was $32.5 million, as compared to $23.6 million for the year ended December 31, 2021.

The increase of $5.3 million was due to a $1.0 million increase in net loss, $2.0 million net decrease in non-cash adjustments to cash used in operating activities, offset by a $2.3 million net decrease in operating assets and liabilities.

The increase of $8.9 million was due to a $13.8 million increase in net loss, $1.2 million net increase in non-cash adjustments to cash used in operating activities, offset by a $3.7 million net decrease in operating assets and liabilities.

Investing Activities

Net cash used in investing activities of $1.3 million and $0.8 million for the years ended December 31, 2021 and 2020 was related to purchases of property and equipment.

Net cash used in investing activities of $2.2 million and $1.3 million for the years ended December 31, 2022 and 2021, respectively, was related to purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $44.0 million for the year ended December 31, 2022, which was comprised of $44.4 million of net proceeds raised from the February 2022 private placement transactions with Innoviva, $0.1 million of proceeds for exercise of stock options, and a payment of $0.5 million for offering costs associated with a planned equity issuance in 2023.

Net cash provided by financing activities was $25.5 million for the year ended December 31, 2021, which was primarily comprised of $19.3 million net proceeds raised from the January 2021 private placement transactions with Innoviva, $6.9 million net proceeds raised from the October 2021 private placement transaction with CFF and Innoviva, and $0.6 million of proceeds received from stock option exercises, offset by a principal payment of $1.4 million in deferred consideration related to the time-based payment obligation in connection with the SGI asset acquisition.

Net cash provided by financing activities was $23.2 million for the year ended December 31, 2020, which was primarily comprised of $22.9 million net proceeds raised from the 2020 Private Placement transaction with Innoviva, $0.7 million proceeds from the PPP loan, and $0.2 million proceeds received from warrant and employee stock option exercises, offset by a payment of $0.6 million in deferred consideration related to the time-based payment obligation in connection with the SGI asset acquisition.

Liquidity, Capital Resources and Financial Condition

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We may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

On January 26, 2021 and October 28, 2021, we entered into the Securities Purchase Agreement in connection with the January and October 2021 Private Placements.

On February 9, 2022, we entered into the Securities Purchase Agreement in connection with the February 2022 Private Placement.

On January 26, 2021 and October 28, 2021, we entered into a securities purchase agreement in connection with the January and October 2021 Private Placements.

On February 9, 2022, we entered into a securities purchase agreement in connection with the February 2022 Private Placement.

On January 10, 2023, we entered into, as borrower, a secured convertible credit and security agreement (the “Credit Agreement”) with Innoviva SO, a wholly owned subsidiary of Innoviva, Inc., a principal stockholder of us.

The Credit Agreement provides that if a Qualified Financing, as defined in the Credit Agreement, occurs, the outstanding principal amount of, and all accrued and unpaid interest on, the Loan shall be converted into shares of our common stock at a price per share equal to a 15.0% discount to the lowest price per share for our common stock paid by investors in a Qualified Financing (which price paid by investors in a Qualified Financing may not be less than a 15.0% discount to the closing price of our common stock immediately prior to the consummation of a Qualified Financing event).

The Credit Agreement also requires us to file a registration statement for the resale of all securities issued to the lender in connection with any conversion under the Credit Agreement.

After the Registration Statement has been declared effective by the SEC, any outstanding Loan amount, including all accrued and unpaid interest thereon, may be converted at the lender’s option, into shares of our common stock at a price per share equal to the greater of book value or market value per share of our common stock on the date immediately preceding the effective date of the Credit Agreement, which is $1.52 (as may be appropriately adjusted for any stock split, combination or similar act).

See the section entitled “Business—Recent Developments” for a description of the 2021 and 2022 Private Placements, which is incorporated herein by reference.

Management believes our existing cash resources and expected proceeds from the second tranche of the February 2022 Private Placement will be sufficient to fund our planned operations into the first quarter of 2023, but not one year from the issuance of the 2021 financial statements.

Management believes our existing cash resources will be sufficient to fund our planned operations into the third quarter of 2023, but not one year from the issuance of the 2022 financial statements.

For the foreseeable future, our ability to continue our operations is dependent upon our ability to obtain additional capital.

In light of recent bank failures, the Company decided to move cash and cash equivalents previously held at regional banks to larger financial institutions.

We do not anticipate any material impact on our financial condition or operations as a result of the recent bank failures.

Future Capital Requirements

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To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to our existing stockholders.

Critical Accounting Policies and Use of Estimates

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Grants and Awards

We determined that grants and awards are out of the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) because the funding entities do not meet the definition of a “customer”, as defined by ASC 606, as there is no transfer of control of goods or services.

With respect to each grant or award, we determine if it has a collaboration in accordance with ASC Topic 808, Collaborative Arrangements (“ASC 808”).

To the extent the grant or award is within the scope of ASC 808, we recognize the award upon achievement of certain milestones as credits to

research and development expenses.

For grant and awards outside the scope of ASC 808, we apply ASC 606 or International Accounting Standards No.

20, Accounting for Government Grants and Disclosure of Government Assistance , by analogy, and revenue is recognized when we incur expenses related to the grants for the amount we are entitled to under the provisions of the contract.

We also consider the guidance in ASC Topic 730, Research and Development (“ASC 730”), which requires an assessment, at the inception of the grant or award, of whether the agreement is a liability .

If we are obligated to repay funds received regardless of the outcome of the related research and development activities, then we are required to estimate and recognize that liability.

Alternatively, if we are not required to repay the funds, then payments received are recorded as revenue or contra-expense as the expenses are incurred.

In applying the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), Armata has determined that grants and awards are out of the scope of ASC 606 because the funding entities do not meet the definition of a “customer”, as defined by ASC 606, as there is not considered to be a transfer of control of goods or services.

With respect to each grant or award, the Company determines if it has a collaboration in accordance with ASC Topic 808, Collaborative Arrangements (“ASC 808”).

To the extent the grant or award is within the scope of ASC 808, the Company recognizes the award upon achievement of certain milestones as credits to research and development expenses.

For grant and awards outside the scope of ASC 808, the Company applies ASC 606 or International Accounting Standards No.

20, Accounting for Government Grants and Disclosure of Government Assistance , by analogy, and revenue is recognized when the Company incurs expenses related to the grants for the amount the Company is entitled to under the provisions of the contract.

Armata also considers the guidance in ASC Topic 730, Research and Development (“ASC 730”), which requires an assessment, at the inception of the grant or award, of whether the agreement is a liability .

If Armata is obligated to repay funds received regardless of the outcome of the related research and development activities, then Armata is required to estimate and recognize that liability.

Alternatively, if Armata is not required to repay the funds, then payments received are recorded as revenue or contra-expense as the expenses are incurred.

Deferred grant or award liability represents award funds received or receivable for which the allowable expenses have not yet been incurred as of the balance sheet date.

Valuation of Goodwill and Intangible Assets with Indefinite Lives

Our goodwill represents the excess of the cost over the fair value of net assets acquired from our business combination.

The determination of the value of goodwill and intangible assets arising from the business combination requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired, including capitalized in-process research and development (“IPR&D”).

Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts.

Upon commercialization of the relevant research and development project, we will amortize the acquired in-process research and development over its estimated useful life or expense the acquired in-process research and development should the research and development project be unsuccessful with no future alternative use.

Goodwill and IPR&D are not amortized;

however, they are assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review.

The goodwill or IPR&D are considered to be impaired if we determine that the carrying value of the reporting unit or IPR&D exceeds its respective fair value, respectively.

Impairment of Goodwill

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We test our IPR&D asset for impairment as of December 31 of each year or more frequently if indicators of impairment are present.

The authoritative accounting guidance provides an optional qualitative assessment for any indicators that indefinite-lived intangible assets are impaired.

The authoritative accounting guidance provides an optional qualitative assessment for any

indicators that indefinite-lived intangible assets are impaired.

If it is determined that it is more likely than not that the indefinite-lived intangible assets, including IPR&D, are impaired, the fair value of the indefinite-lived intangible assets is compared with the carrying amount and impairment is recorded for any excess of the carrying amount over the fair value of the indefinite-lived intangible assets.

If and when a quantitative analysis of IPR&D assets is required based on the result of the optional qualitative assessment, the estimated fair value of IPR&D assets is calculated based on the income approach, which includes discounting expected future net cash flows associated with the assets to a net present value.

The fair value measurements

utilized to perform the impairment analysis are categorized within Level 3 of the fair value hierarchy.

The fair value measurements utilized to perform the impairment analysis are categorized within Level 3 of the fair value hierarchy.

Significant management judgment is required in the forecast of future operating results that are used in our impairment analysis.

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The right-of-use assets represent our right to use an underlying asset for the lease term and the lease liabilities represent our obligation to make lease payments arising from the lease arrangements.

Right-of-use operating lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments we will pay over the lease term.

Right-of-use operating lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments, including noncash lease payments, we will pay over the lease term.

We determine the lease term at the inception of each lease, which includes renewal options only if we conclude that such options are reasonably certain to be exercised.

As our leases do not provide an interest rate implicit in the lease,we use our incremental borrowing rate, based on the information available on the date of adoption of Topic 842, Leases , as of the lease inception date or at the lease option extension date in determining the present value of future payments.

As our leases do not provide an interest rate implicit in the lease,we use our incremental borrowing rate, based on the information available on the date of adoption of Topic 842, Leases , as of the lease inception date or at the date of remeasurement in determining the present value of future payments.

We recognize rent expense for the minimum lease payments on a straight-line basis over the expected term of the leases.

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We determine the estimated fair value of each stock option on the date of grant using the Black-Scholes valuation model which uses assumptions regarding a number of complex and subjective variables.

The risk-free interest rate is based on the U.S.

The risk-free interest rate is based on

Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant.

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The expected term represents the period that we expect our stock options to be outstanding.

The expected term assumption is estimated using the simplified method set forth in the U.S.

Securities and Exchange Commission’s (the “SEC”) Staff Accounting Bulletin 110, which is the mid-point between the option vesting date and the expiration date.

The expected term assumption is estimated using the simplified method set forth in the SEC’s Staff Accounting Bulletin 110, which is the mid-point between the option vesting date and the expiration date.

For stock options granted to parties other than employees or directors, we elect, on a grant by grant basis, to use the expected term or the contractual term of the option award.

13 unchanged sentences

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 7. Management’s Discussion and Analysis