Item 9A. Controls and Procedures
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance,
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management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As of December 31, 2022, our management, with the participation of our Chief Executive Officer and Vice President, Finance and Administration, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Vice President, Finance and Administration, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Vice President, Finance and Administration concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Exchange Act Rules 13a-15(f) and 15(d) -15(f) as a process designed by, or under the supervision of, our Chief Executive Officer and Vice President, Finance and Administration to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Because of inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2022, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013) (the “2013 Framework”). In adopting the 2013 Framework, management assessed the applicability of the principles within each component of internal control and determined whether or not they have been adequately addressed within the current system of internal control and adequately documented. Based on this assessment, management, under the supervision and with the participation of our Chief Executive Officer and Vice President, Finance and Administration, concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on those criteria.
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to SEC rules that permit us to provide only management’s report in this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting.
An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President, Finance and Administration, of any changes in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control
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over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICATIONS THAT PREVENT INSPECTIONS
None.
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
MANAGEMENT
The following table sets forth information about our executive officers and directors as of March 1, 2023.
Name
Age
Position(s)
Brian Varnum, Ph.D.
63
Chief Executive Officer
Mina Pastagia, M.D.
48
Chief Medical Officer
Erin Butler
44
Vice President, Finance and Administration
Non-Employee Directors
Jules Haimovitz (3)(4)
72
Chairman of the Board of Directors
Odysseas D. Kostas, M.D. (3)(4)
48
Director
Robin C. Kramer (1)
57
Director
Joseph M. Patti, Ph.D.(2)(3)
58
Director
Todd C. Peterson, Ph.D. (1)
65
Director
Sarah J. Schlesinger, M.D.(2)
63
Director
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Corporate Governance Committee.
(4) Serves as a designee of Innoviva under the Investor Rights Agreement.
Brian Varnum, Ph.D. has served as our Chief Executive Officer since August 2021. Prior to that, he served as President and Chief Development Officer since the Merger. He previously served at C3J as its Vice President of Product Development starting in 2012 and became its Chief Development Officer in 2014, serving in that role until the Merger in May 2019. Dr. Varnum is a biotech veteran with more than 20 years of experience. Dr. Varnum began his career with Amgen Inc. and spent more than 18 years at the biotech pioneer as that company grew from a start-up to a large and successful biotechnology company. He started in discovery research where his team purified novel growth factors and advanced antibodies and small molecules into clinical studies. Dr. Varnum also worked in development, assisting with clinical development of proteins, antibodies and small molecules. In this capacity, he contributed to key regulatory filings, market research and product launch, giving him experience in drug discovery and development from the lab bench to product launch and marketing. After retiring from Amgen Inc. in 2007, Dr. Varnum turned his focus to the start-up landscape, working in several capacities, including assisting investors, entrepreneurs and start-ups in the assessment of technologies for funding or in-licensing. In these capacities, he established research strategies and plans, and served as Chief Scientific Officer for several companies, securing funding, and executing research contracts with large and mid-sized pharmaceutical companies. Dr. Varnum obtained his Ph.D. from UCLA studying oncogenes, and his drug development research experience includes hematopoietic growth factor discovery, oncology, auto-immune/inflammatory disorders, personalized medicine in inflammatory bowel disease and infectious diseases.
Mina Pastagia, M.D. has served as our Chief Medial Officer since January 2023. Prior to that, she served as Senior Vice President of Clinical Development since October 2020. Prior to joining Armata, Dr. Pastagia served as Senior Medical Director, Infectious Diseases and Vaccines at Janssen Biopharma, a member of the Janssen Pharmaceutical Companies of Johnson & Johnson. Since 2017, she let the design and execution of clinical trials for Janssen’s antiviral, antibacterial and immunology assets, and served as clinical leader for Respiratory Syncytial Virus, hepatitis B, and pathogen-specific bacteriophage therapy for certain indications. Prior to Janssen, Dr. Pastagia served as Translational Medicine Leader in Infectious Diseases, Immunology and Inflammation at Hoffmann-La Roche. During that time, Dr. Pastagia served as antibiotic therapeutic head and leader of disease area strategy, as well as team lead for the development of baloxavir for influenza. Her prior experience also includes serving as Medial Director at Clinilabs, a global, full-service contract research organization, and as Associate Director of Clinical Development at ContraFect
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Corporation, where she was responsible for the development of biologic anti-infectives, including bacteriophage lysin targeting Staphylococcus aureus bacteremia. Prior to ContraFect, Dr. Pastagia served as an Instructor of Clinical Investigation in Bacterial Pathogenesis and Immunology at The Rockefeller University. Dr. Pastagia previously held adjunct appointments in the Division of Microbiology at The Rockefeller University and in the Division of Infectious Diseases at Weill Cornell Medical Center.
Dr. Pastagia is board certified in Internal Medicine and Infectious Disease, and is also a registered pharmacist in the State of New York. She received her medical degree from SUNY Downstate Medical Center, completed her internship and residency in internal medicine at Boston University, and completed her fellowship in infectious diseases at Mount Sinai Medical Center. Most recently she earned her Master’s degree in Clinical and Translational Science from The Rockefeller University. Dr. Pastagia is a member of the Infectious Diseases Society of America (IDSA), American Society for Microbiology (ASM), the Association for Clinical and Translational Science (ACTS), and the Network on Antimicrobial Resistance in S. aureous (NARSA).
Erin Butler has served as our Vice President of Finance and Administration since March 2022 and prior to her appointment, she served as our Senior Director, Corporate Controller since September 2017. From June 2016 to September 2017, Ms. Butler served as Assistant Controller of Inovio, Inc., a publicly traded biotechnology company focused on developing and commercializing DNA medicines for protection from infectious diseases and treatment of various cancers and HPV-associated diseases. Ms. Butler’s previous experience includes serving as Assistant Controller of Apricus Biosciences, a publicly traded pharmaceutical company focused on innovative medicines in urology and rheumatology, and as an auditor for Deloitte and Touche, LLP, a public accounting firm.
Non-Employee Directors
J ules Haimovitz joined the board of directors of Armata Pharmaceuticals in April 2021, and in June 2021 was elected as the Company’s Chairman of the Board. At Innoviva, Inc. (NASDAQ: INVA), a company with a portfolio of royalties that include respiratory assets partnered with Glaxo Group Limited, Mr. Haimovitz has served as a member of the Board of Directors since February 2018 and is currently a member of the Audit Committee, the chair of the Compensation Committee and a member of the Nominating/Corporate Governance Committee. Mr. Haimovitz is currently President of Haimovitz Consulting, Inc. He previously served as a member of the board of directors of Ariad Pharmaceuticals, where he was also a member of its audit committee; Dial Global, Inc., where he was also member of its audit committee; and Imclone Pharmaceuticals, where he served as chairperson of its audit committee. Mr. Haimovitz has also served as Chief Executive Officer or Chief Operating Officer of the following companies: Spelling Entertainment, Inc., King World Productions and VJN, Inc. Mr. Haimovitz holds a B.S. and M.A. degree in Mathematics from Brooklyn College.
Director Qualifications . Mr. Haimovitz was selected as a director because of his extensive leadership experience with biotechnology companies and his in-depth knowledge of the industry, as well as his experience serving on the boards of directors of various public and private companies.
Odysseas D. Kostas has served as a member of our board of directors since February 2020. He also currently serves as a director of Innoviva, Inc. He is a Partner and Senior Managing Director at Sarissa Capital Management LP. Sarissa Capital focuses on improving the strategies of companies to enhance stockholder value. Prior to joining Sarissa Capital, Dr. Kostas served as a Director at Evercore ISI (formerly ISI), covering the biotechnology and pharmaceutical industries. Previously, he practiced internal medicine as part of the Yale New Haven Health System and was engaged as a consultant to various biotechnology companies. Dr. Kostas also previously served on the board of directors of Enzon Pharmaceuticals. Dr. Kostas has a B.S from Massachusetts Institute of Technology (MIT) and a M.D. from University of Texas Southwestern Medical School. Dr. Kostas has demonstrated leadership in his field, and his knowledge of and experience in our industry contributed to our conclusion that he should serve as a director.
Director Qualifications . Dr. Kostas was selected as a director because of his extensive leadership experience with biotechnology companies and his in-depth knowledge of our business, strategy and management team, as well as his experience serving as a public company director.
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Robin C. Kramer h as served as Senior Vice President, Chief Accounting Officer and Head of Global Business Services and Treasury of Biogen, a biopharma company, since January 2021. Ms. Kramer served as Biogen’s Vice President, Chief Accounting Officer from November 2018 to December 2020. Prior to joining Biogen, Ms. Kramer served as the Senior Vice President and Chief Accounting Officer of Hertz Global Holdings, Inc., a car rental company, from May 2014 to November 2018. Prior to that, Ms. Kramer was an audit partner at Deloitte & Touche LLP (Deloitte), a professional services firm, from 2007 to 2014, including serving in Deloitte’s National Office Accounting Standards and Communications Group from 2007 to 2010. From 2005 to 2007 Ms. Kramer served as Chief Accounting Officer of Fisher Scientific International, Inc., a laboratory supply and biotechnology company, and from 2004 to 2005 Ms. Kramer served as Director, External Reporting, Accounting and Control for the Gillette Company, a personal care company. Ms. Kramer also held partner positions in the public accounting firms of Ernst & Young LLP and Arthur Andersen LLP. Ms. Kramer is a licensed certified public accountant (CPA) in Massachusetts. She is a member of the Massachusetts Society of CPAs and the American Institute of CPAs. She has served as a Board member of the Center for Women and Enterprise from August 2020 – Present. She previously served as a Board Member of Samsung Bioepis Co., LTD. from July 2020 to April 2022, the Massachusetts State Board of Accountancy from September 2011 to December 2015 and Probus Insurance Company Europe DAC, from 2016 to 2018.
Director Qualifications . Ms. Kramer was selected as a director because of her years of experience in biotechnology and life sciences research and development and her in-depth knowledge of the industry. She has financial expertise, including a thorough understanding of financial statements, corporate finance and accounting and extensive experience with public companies, all of which makes her a valued member of the board of directors .
Joseph M. Patti , has served as a member of the board of directors since the consummation of the Merger in May 2019. In June 2022, Dr. Patti was appointed President and Chief Executive Officer and director of Evecxia Therapeutics, Inc., and since February 2018, has been the President of JP Biotech Advisors, Inc., which provides strategic growth and drug development advice to emerging biotechnology companies. Dr. Patti was Executive Chairman of AgilVax, Inc. from November 2018 until August 2019, when he was appointed President and Chief Executive Officer and director, until July 2021. From November 2012, Dr. Patti served as Aviragen Therapeutics, Inc.’s Executive Vice President of Corporate Development and Strategy until October 2014, when he was appointed the company’s President and Chief Executive Officer and director. He served in those roles until February 2018, when Aviragen merged with Vaxart, Inc. Prior to joining Aviragen, Dr. Patti co-founded Inhibitex, Inc. in 1994 and served as its Chief Scientific Officer and Senior Vice President of Research and Development from 2007 until it was acquired by Bristol Myers Squibb in February 2012. He also served as its Chief Scientific Officer and Vice President of Research and Development from 2005 to 2007 and as Vice President, Preclinical Development prior to that. Dr. Patti was a director of Inhibitex from 1998 to 2005. Before co-founding Inhibitex, Dr. Patti was an Assistant Professor at Texas A&M’s Institute of Biosciences and Technology and served on the faculty at the University of Texas Health Science Center Graduate School of Biomedical Sciences. Dr. Patti received a B.S. in Microbiology from the University of Pittsburgh, a M.S.P.H. from the University of Miami, School of Medicine, and a Ph.D. in Biochemistry from the University of Alabama at Birmingham. Dr. Patti was a director of SciStem Therapeutics, Inc., a privately held biotechnology company from 2012 to 2015.
Director Qualifications . Dr. Patti was selected as a director because of his scientific knowledge and background and experience in developing numerous preclinical and clinical biopharmaceutical product candidates, as well as his senior management experience over the past decade in developing and implementing the business and financial strategies of emerging, publicly-traded biopharmaceutical companies and serving as a public company director.
Todd C. Peterson has served as a member of the board of directors since October 2019. Dr. Peterson is Founder and Principal at GenApex Bio (GenApex Biotechnology Consulting), a board practice, investment and advisory services LLC based in Coronado, California. He has over 35 years of experience in biotechnology and life sciences research and development across the areas of molecular and cell biology, nucleic acids and genomics product and technology development. His experience encompasses clinical diagnostics, life science research tools and drug discovery technologies, products, and markets. Previously, Dr. Peterson was Chief Scientific Officer at The Allen Institute in
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Seattle, Washington, overseeing science and technology strategy and growth initiatives across unit Institutes for Brain Science, Cell Science, Immunology, and the Paul G. Allen Frontiers Group. Prior to joining the Allen Institute, Dr. Peterson was Chief Technology Officer at Synthetic Genomics, Inc., a leader in synthetic biology and applied genomics technologies developing a robust portfolio of breakthrough solutions addressing major global issues. Prior to joining SGI, Dr. Peterson led Genomics and Synthetic Biology R&D at Invitrogen/Life Technologies (now Thermo Fisher Scientific), a global leader in life science tools. Prior to Life Technologies, Dr. Peterson held R&D positions with increasing leadership responsibilities and scope at Genicon Sciences, Trega Biosciences, Hybritech and Gen-Probe where he focused on technology research, product development and commercialization. Dr. Peterson was a postdoctoral fellow at the Max Planck Institute in Cologne Germany after receiving his Ph.D. in Microbiology at the University of Southern California School of Medicine. He obtained his M.A. in Biological Sciences and B.A. in Molecular Biology and Biochemistry at the University of California, Santa Barbara. Dr. Peterson is co-founder of Barrier Bio, serves on numerous Scientific Advisory Boards, and serves on the Board of Directors of: Molecular Assemblies, NanoCellect BioMedical, Inc. and the Center of Excellence for Engineering Biology.
Director Qualifications . Dr. Peterson was selected as a director because of his years of experience in biotechnology and life sciences research and development, his in-depth knowledge of the industry and pre-clinical / early-stage scientific requirements, and his experience and understanding of our bacteriophage platform.
Sarah J. Schlesinger , M.D. has served as a member of our board of directors since February 2020. She also currently serves as a member of the board of directors of Innoviva, Inc., and serves on its Compensation Committee and is the chairperson of the Nominating/Corporate Governance Committee. Dr. Schlesinger is an Associate Professor of Clinical Investigation at Rockefeller University and Senior Attending Physician at Rockefeller University Hospital. Dr. Schlesinger was The Clinical Director of the laboratory of Dr. Ralph Steinman (Nobel Laureate 2011) from 2002 until his death in 2011. Dr. Schlesinger led the Dendritic Cell section of the Division of Retrovirology at the Walter Reed Army Institute of Research and was also a member of the Division of Infectious and Parasitic Disease Pathology at the Armed Forces Institute of Pathology from 1994 to 2002. In 2002, Dr. Schlesinger rejoined Rockefeller University and began working with the International AIDS Vaccine Initiative as a Scientist in Vaccine Research and Design. Dr. Schlesinger has been a member of Rockefeller University Hospital’s Institutional Review Board (“Rockefeller IRB”) (Ethics Committee) since 2003 and previously served as Rockefeller IRB’s vice-chairperson. In 2017 she assumed the position of chairperson of the Rockefeller IRB. She is currently the director of the education and training programs at Rockefeller University Center for Clinical and Translational Science. Dr. Schlesinger currently serves on the board of two non-profit organizations: the AIDS Vaccines Advocacy Coalition, and The Hastings Center, the pre-eminent center for the study of bioethics. Dr. Schlesinger served as an independent corporate director of Ariad Pharmaceuticals from 2013 until its sale to Takeda Pharmaceutical Company Limited in 2017. She also served as an independent corporate director of The Medicines Company from 2018 until its acquisition by Novartis in 2020. Dr. Schlesinger has a B.A. from Wellesley College and a M.D. from Rush Medical College in Chicago, Illinois. She trained in Anatomic Pathology at The New York Hospital where she served as Chief Resident. Dr. Schlesinger has demonstrated leadership in her field and her substantial knowledge of our industry contributed to our conclusion that she should serve as a director.
Director Qualifications . Dr. Schlesinger was selected as a director because of her extensive leadership experience with biotechnology companies and her in-depth knowledge of the industry, as well as her experience serving on the boards of directors of various public and private companies.
Our Nominating and Corporate Governance Committee seeks to assemble a board of directors (“Board of Directors”) that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise and high-level management experience necessary to oversee and direct our business. To that end, the Nominating and Corporate Governance Committee has identified and evaluated nominees in the broader context of the Board of Directors’ overall composition, with the goal of recruiting members who complement and strengthen the skills of other members and who also exhibit integrity, collegiality, sound business judgment and other qualities that the Nominating and Corporate Governance Committee views as critical to effective functioning of the Board of Directors. The brief biographies below include information regarding the specific and particular experience, qualifications, attributes or skills of each nominee that led the Nominating and Corporate Governance Committee to recommend that person as a nominee. However, each of the members of the Nominating and Corporate Governance Committee may have
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a variety of reasons why he or she believes a particular person would be an appropriate nominee for the Board of Directors, and these views may differ from the views of other members.
Board Composition
Our business and affairs are organized under the direction of our Board of Directors, which currently consists of eight members. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our Board of Directors meets on a regular basis and on an ad hoc basis as required.
As required under the NYSE American exchange listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our Board of Directors consults with our counsel to ensure that the board of directors’ determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of the NYSE American exchange, as in effect from time to time.
Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and us, our senior management and our independent auditors, the board affirmatively determined that Jules Haimovitz, Odysseas D. Kostas, M.D., Robin C. Kramer, Joseph M. Patti, Ph.D., Todd C. Peterson, Ph.D., and Sarah J. Schlesinger, M.D. and are independent directors within the meaning of the applicable NYSE American exchange listing standards. In making this determination, our Board of Directors found that none of these directors or nominees for director had a material or other disqualifying relationship with us. The Board of Directors concluded that Dr. Varnum is not an independent director within the meaning of the applicable NYSE American exchange listing standards. Dr. Varnum is not independent director under these rules given their role as our Chief Executive Officer.
As required under applicable NYSE American rules, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.
Our amended and restated bylaws provide that the Board of Directors will consist of not less than one nor more than nine members, as fixed from time to time by a resolution of the Board of Directors. The authorized size of our board of directors is currently eight members.
Board Leadership Structure
Our Board of Directors has an independent Chairman, Jules Haimovitz, who has authority, among other things, to call and preside over meetings of the Board of Directors, to set meeting agendas and to determine materials to be distributed to the Board of Directors. Accordingly, the Chairman has substantial ability to shape the work of the Board of Directors. We have a separate chair for each committee of the Board of Directors. As a general policy, the Board of Directors believes that separation of the positions of Chairman and Chief Executive Officer reinforces the independence of the Board of Directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of the Board of Directors as a whole. We expect and intend the positions of Chairman of the Board of Directors and Chief Executive Officer to continue to be held by separate individuals in the future.
Role of the Board in Risk Oversight
One of the principal functions of our Board of Directors is to provide oversight concerning the assessment and management of risk related to our business. The Board of Directors is involved in risk oversight through direct decision-making authority with respect to fundamental financial and business strategies and major corporate activities.
While the Board of Directors oversees our risk management, our management is responsible for day-to-day risk management processes, including, without limitation, strategic, operational, financial, regulatory and cyber-security risks that may exist from time to time. The Board of Directors expects management to consider the risks of, and risk
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management in, each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies adopted by the Board of Directors and its committees. In connection with this responsibility, members of management provide regular reports to the Board of Directors regarding business operations and strategic planning, financial planning and budgeting and regulatory matters, including any material risk to our company related to such matters. Although the Board of Directors does not have a formal risk oversight policy, the Board of Directors does, as a whole and through its various committees, oversee the proper functioning of our internal risk management processes. In its risk oversight role, the Board of Directors evaluates whether management has reasonable controls in place to address material risks we currently face and those we may face in the future.
The Board of Directors has delegated oversight for specific areas of risk exposure to committees of the Board of Directors as follows:
● The Audit Committee is primarily responsible for overseeing our financial risk management processes on behalf of the Board of Directors. The Audit Committee is responsible for discussing our overall risk assessment and risk management policies with management and our independent registered public accounting firm, as well as our plans to monitor and control any financial risk exposure. The Audit Committee is also responsible for primary risk oversight related to our internal control over financial reporting, disclosure controls and procedures, and legal and regulatory compliance. In addition, the Audit Committee reviews all related-person transactions, including the risks related to those transactions impacting our company. Going forward, we expect that the Audit Committee will receive reports from management regarding its assessment of risks at least quarterly.
● The Compensation Committee oversees our compensation programs and reviews the conduct incentivized by those programs, including any impact on risk-taking by our executive officers and employees .
● The Nominating and Corporate Governance Committee oversees the organization, membership and structure of our Board of Directors and our corporate governance practices. The committee members report to the full Board of Directors on material developments in their areas of oversight.
We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our Board of Directors’ leadership structure, which also emphasizes the independence of our Board of Directors in its oversight of our business and affairs, supports this approach .
T he Board of Directors and its committees meet at regularly scheduled and special meetings throughout the year at which management reports to the board concerning the results of our risk management activities, as well as external changes that may change the levels of business risk to which we are exposed. At each regular meeting of our Board of Directors, the chairperson of each committee reports to the full board regarding the matters reported and discussed at any committee meetings, including any matters related to risk assessment or risk management. Upon the request of the committees, our principal executive officer and principal financial officer attend meetings of these committees when they are not in executive session, and often report on matters that may not be otherwise addressed at these meetings. In addition, our directors are encouraged to communicate directly with members of management regarding matters of interest, including matters related to risk, at times when meetings are not being held.
In connection with the ongoing COVID-19 pandemic, the Audit Committee and management, has monitored our efforts to mitigate business continuity, financial, human capital, and cybersecurity risk exposures associated with the pandemic.
Board Committees
The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee operates under a written charter, the adequacy of which each respective committee regularly reviews and reassesses. A copy of each charter is available under the heading “Corporate Governance” of the Investor
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Relations section of our website at https://investor.armatapharma.com/corporate-governance. Our board of directors may establish additional committees from time to time in accordance with our bylaws.
Below is a description of each committee of the Board of Directors. The Board of Directors has determined that each member of each committee meets the applicable NYSE American exchange rules and regulations regarding “independence” and each member is free of any relationship that would impair the member’s individual exercise of independent judgment with regard to our Company.
Audit Committee
The Board of Directors reviews the NYSE American exchange listing standards definition of independence for Audit Committee members on an annual basis and has determined that each of the members of our Audit Committee as of the record date satisfies the NYSE American exchange listing requirements and SEC independence requirements.
Our Audit Committee consists of Robin C. Kramer (chair) and Todd C. Peterson. Our Board of Directors has determined that Ms. Kramer qualifies as an audit committee financial expert within the meaning of SEC regulations. In making this determination, our Board of Directors has considered Ms. Kramer’s formal education and previous and current experience in financial roles. Both our independent registered public accounting firm and management periodically meet privately with our Audit Committee.
The primary purpose of the Audit Committee is to oversee our corporate accounting and financial reporting processes and audits of its financial statements. The functions of the Audit Committee include, among other things:
● evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors and to present its conclusion to our Board of Directors;
● reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;
● monitoring the rotation of partners of our independent auditors on our audit engagement team as required by law;
● prior to engagement of any independent auditor, and, at least annually thereafter, reviewing relationships that may reasonably be thought to bear on the auditor’s independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditor;
● reviewing our annual and quarterly financial statements and reports, including disclosures relating to Environmental, Social, and Governance (“ESG”) and disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management;
● reviewing with our independent auditors and management critical audit matters and significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of our internal control over financial reporting;
● reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;
● establishing procedures for the receipt, retention and treatment of complaints received by us regarding internal accounting controls, accounting or auditing matters and other matters;
● preparing the report that the SEC requires in our annual proxy statement;
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● reviewing and providing oversight of any related-person transactions in accordance with our related-person transactions policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of business conduct and ethics;
● reviewing on a periodic basis our investment policy; and
● reviewing and evaluating on an annual basis its own performance, including its compliance with its charter.
Compensation Committee
Our Compensation Committee consists of Dr. Patti (Chair) and Dr. Schlesinger. Our Board of Directors has determined that each of the members of our Compensation Committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, an outside director, as defined pursuant to Section 162(m) of the Code, and satisfies the NYSE American exchange listing independence requirements.
The functions of this committee include, among other things:
● reviewing, modifying and approving (or, if it deems appropriate, making recommendations to the full Board of Directors regarding) our overall compensation strategy and policies;
● reviewing and approving (or, if it deems appropriate, making recommendations to the full Board of Directors regarding) the compensation and other terms of employment of our executive officers, including the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements for our executive officers;
● reviewing and approving (or, if it deems appropriate, making recommendations to the full Board of Directors regarding) performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives;
● reviewing and approving (or, if it deems appropriate, making recommendations to the full Board of Directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs;
● evaluating (including, if it deems appropriate, with the input of some or all of the other members of the Board of Directors) risks associated with our compensation policies and practices and assessing whether risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on us;
● reviewing and making recommendations to the full board of directors regarding the type and amount of compensation to be paid or awarded to our non-employee board members;
● administering our equity incentive plans;
● establishing policies with respect to equity compensation arrangements;
● establishing policies with respect to votes by our stockholders to approve executive compensation as required by Section 14A of the Exchange Act and determining our recommendations regarding the frequency of advisory votes on executive compensation, to the extent required by law;
● reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act;
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● reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us;
● reviewing the adequacy of its charter on a periodic basis;
● reviewing with management and approving our compensation-related disclosures and related tables in our periodic reports or proxy statements to be filed with the SEC;
● preparing the report that the SEC requires in our annual proxy statement, if required by then-applicable SEC rules; and
● reviewing and assessing on an annual basis its own performance.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Mr. Haimovitz (Chair) Dr. Kostas and Dr. Patti Our board of directors has determined that each of the members of this committee satisfies the NYSE American exchange listing independence requirements.
The Nominating and Corporate Governance Committee of the Board of Directors is responsible for, among other things:
● identifying, reviewing and evaluating candidates to serve on our Board of Directors consistent with criteria approved by our Board of Directors;
● assessing the performance of management and the Board of Directors, including board committees, seeking input from senior management, the full Board of Directors and others, which assessment shall include, among other things, an evaluation of the Board of Directors’ contribution as a whole and overall Board of Directors composition and makeup, including the reelection of current Board of Directors members;
● evaluating, nominating and recommending individuals for membership on our Board of Directors;
● evaluating nominations by stockholders of candidates for election to our Board of Directors;
● considering and assessing the independence of members of our Board of Directors;
● developing a set of corporate governance policies and principles, periodically reviewing and assessing these policies and principles and their application and recommending to our Board of Directors any changes to such policies and principles;
● reviewing the adequacy of its charter on an annual basis; and
● reviewing and assessing on an annual basis its own performance.
Limitation of Liability and Indemnification
Sections 23B.08.510 and 23B.08.570 of the Washington Business Corporation Act authorize Washington corporations to indemnify directors and officers under certain circumstances against expenses (including legal expenses) and liabilities incurred in legal proceedings in which they are involved by reason of being a director or officer, as applicable. Section 23B.08.560 of the Washington Business Corporation Act authorizes a corporation, if authorized by its articles of incorporation or by a provision in the corporation’s bylaws approved by its stockholders, to indemnify or agree to indemnify a director made a party to a proceeding, or obligate itself to advance or reimburse expenses incurred in a proceeding, without regard to the limitations imposed by Sections 23B.08.510 through 23B.08.550; provided that no
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such indemnity shall indemnify any director from or on account of (a) acts or omissions of the director finally adjudged to be intentional misconduct or a knowing violation of law, (b) conduct of the director finally adjudged to be in violation of Section 23B.08.310 of the Washington Business Corporation Act (which section relates to unlawful distributions) or (c) any transaction with respect to which it was finally adjudged that such director personally received a benefit in money, property or services to which the director was not legally entitled.
Article 11 of our current articles of incorporation, provides that, to the fullest extent that the Washington Business Corporation Act permits the limitation or elimination of the liability of a director, a director shall not be liable to us or our stockholders for monetary damages for conduct as a director. Section 10 of our amended and restated bylaws requires us to indemnify every present or former director or officer against expenses, liabilities and losses incurred in connection with serving as a director or officer, as applicable, and to advance expenses of such director or officer incurred in defending any proceeding covered by the indemnity.
We maintain a policy of directors’ and officers’ liability insurance that insures the directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances. We have also entered into indemnification agreements with our executive officers and directors that provide for the indemnification of directors and executive officers to the fullest extent permitted by the Washington Business Corporation Act against expenses reasonably incurred by such persons in any threatened, pending or completed action, suit, investigation or proceeding in connection with their service as (i) a director or officer or (ii) a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, at our request. In addition, the indemnification agreements we are obligated to advance expenses pursuant to the indemnification agreements under certain circumstances and the agreements also provide for procedural protections, including a determination by a reviewing party as to whether the indemnitee is permitted to be indemnified under applicable law. In addition, we have agreed that we will be the indemnitor of first resort should the indemnitee have rights to indemnification provided by other persons.
The limitation of liability and indemnification provisions in our articles of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
We believe that these provisions in our articles of incorporation and amended and restated bylaws and our indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Code of Ethics
We have adopted a code of ethics for directors, officers (including our principal executive officer and principal financial and accounting officer) and employees, known as the Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available at our website at https://www.armatapharma.com under the Corporate Governance section of our Investor Relations page. We will promptly disclose on our website (i) the nature of any amendment to the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial and accounting officer, or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the Code of Business Conduct and Ethics that is granted to one of these specified individuals that is required to be disclosed pursuant to SEC rules and regulations, the name of such person who granted the waiver, and the date of the waiver.
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DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers and any persons beneficially holding more than 10% of our common stock to report their initial ownership of our common stock and any subsequent changes in that ownership to the SEC. Our executive officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Specific due dates for these reports have been established and we are required to identify those persons who failed to timely file these reports. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations from our directors and officers that no other reports were required, during the fiscal year ended December 31, 2022, all of our directors, officers and greater than 10% stockholders complied with the Section 16(a) filing requirements.
Item 11. EXECUTIVE COMPENSATION
Set forth below is certain information regarding the historical compensation of our named executive officers during the year ended December 31, 2022 and 2021. For additional information about our current officers and directors, see the section titled “Management.”
Executive Compensation
The named executive officers as of December 31, 2022 were:
◾ Brian Varnum, Ph.D., Chief Executive Officer;
◾ Mina Pastagia, M.D., Senior Vice President, Clinical Development
◾ Erin Butler, Vice President, Finance and Administration
Summary Compensation Table
The following table provides information regarding the compensation paid during the last two fiscal years to the named executive officers.
Non-Equity
Name and
Option
Incentive Plan
All Other
Principal Position
Year
Salary ($)
Bonus ($)
Awards ($) (1)
Compensation ($)
Compensation ($)
Total ($)
Brian Varnum, Ph. D.
2022
525,000
210,000
904,908
—
—
1,639,908
Chief Executive Officer
2021
463,688
231,844
780,403
—
—
1,475,935
Mina Pastagia, M.D.
2022
420,000
117,600
301,636
—
—
839,236
Senior Vice President, Clinical Development (2)
2021
—
—
—
—
—
—
Erin Butler
2022
275,000
66,000
188,522
—
—
529,522
Vice President, Finance & Administration (3)
2021
—
—
—
—
—
—
Steve Martin
2022
389,340
—
—
—
—
389,340
Former Chief Financial Officer (4)
2021
370,800
148,320
135,685
—
—
654,805
(1) In accordance with SEC rules, this column represents the aggregate grant date fair value of the option awards granted during 2022 and 2021 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 for stock-based compensation transactions. Assumptions used in the calculation of these amounts are included in Note 13 to the consolidated financial statements included in this Annual Report. These
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amounts do not reflect the actual economic value that will be realized by the named executive officer upon the vesting of the stock options, the exercise of the stock options, or the sale of the common stock underlying such stock options.
(2) Dr. Pastagia was appointed Chief Medical Officer in January 2023. Prior to that, she served as Senior Vice President of Clinical Development since October 2020. See the section “ Agreements with our Named Executive Officers ” for the terms of her compensation.
(3) Ms. Butler was appointed to serve as Vice President, Finance and Administration on April 1, 2022 and Principal Financial and Accounting Officer effective July 1, 2022. Prior to her appointments, Ms. Butler served as the Company’s Senior Director, Corporate Controller since 2017. See the action Agreements with our Named Executive Officers for the terms of her compensation.
(4) Mr. Martin retired from his role as Chief Financial Officer on June 30, 2022. See the section Agreements with our Named Executive Officers for terms of his advisory compensation subsequent to June 30, 2022.
Base Salary
The base salaries of the named executive officers in 2022, as applicable, were generally determined and approved by the board of directors, based on the recommendation of the Compensation Committee.
● Dr. Varnum’s annual base salary for 2022 was $525,000.
● Dr. Pastagia’s annual base salary for 2022 was $420,000.
● Ms. Butler’s annual base salary was $230,000 for the period January 1, 2022 through March 31, 2022. Effective April 1, 2022 with the promotion to Vice President, Finance and Administration, Ms. Butler’s annual base salary was adjusted to $290,000.
Annual Bonus
In addition to base salaries, the named executive officers are eligible to receive annual performance-based cash bonuses, which are designed to provide appropriate incentives to our executives to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals. The performance-based bonus generally is based on the extent to which we achieved the specified corporate goals that our board of directors or Compensation Committee established. After the end of the year, the board of directors and/or Compensation Committee review our performance against the established corporate goals and approve the extent to which we achieved such goals.
Under the terms of his amended offer letter agreement described below, Dr. Varnum was eligible to receive an annual performance-based bonus for 2022 equal to, at target, 50% of his earned salary based on our achievement of certain performance goals. Dr. Pastagia was eligible to receive an annual performance-based bonus for 2022 equal to, at target, 35% of her annual salary based on our achievement of certain performance goals. Ms. Butler was eligible to receive an annual performance-based bonus for 2022 equal to, at target, 30% of her annual salary based on our achievement of certain performance goals.
The annual performance-based bonus opportunities are based entirely on the extent to which we achieved corporate goals relating to capital raising, partner and grant funding and progress with clinical development and manufacturing for the fiscal years ending December 31, 2022. The corporate goals were established so that target attainment is not assured. Instead, our executives are required to demonstrate significant effort, dedication, and achievement to attain payment for performance at target or above.
In December 2022, the Compensation Committee reviewed performance results against the corporate goals and made a recommendation, that the board approved to authorize payout for the 2022 performance-based bonuses at the 80% achievement level. As a result, the named executive officers received the following performance-based bonuses for
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2022: Dr. Varnum - $210,000; Dr. Pastagia - $117,600, and Ms. Butler - $66,000. Mr. Martin retired from his position as Chief Financial Officer on June 30, 2022 and was not eligible to receive a 2022 performance-based bonus. These amounts are listed in the “Bonus” column of the Summary Compensation Table.
Equity-Based Awards
Our equity-based incentive awards were designed to align our interests with those of our employees and consultants, including the named executive officers. Our board of directors or our Compensation Committee approve equity grants. Vesting of equity awards was generally tied to continuous service and serves as an additional retention measure. Our executives may have been awarded an initial new hire grant upon commencement of service and have received additional grants, as the board of directors or Compensation Committee determined appropriate, in order to incentivize and/or reward such executives.
We traditionally granted stock options to the named executive officers under our equity incentive plans. Please see “Outstanding Equity Awards at Fiscal Year End” below.
Agreements with our Named Executive Officers
Below are descriptions of our employment agreements with the named executive officers governing the terms of their service with us. For a discussion of the severance pay and other benefits that may be provided in connection with a termination of service and/or a change in control under the arrangements with the named executive officers, please see “Payments and Benefits upon Termination or Change in Control” below.
On August 1, 2021, the Company and Dr. Varnum entered into an amended employment agreement. Dr. Varnum’s employment under the agreement is at will and is terminable by us or Dr. Varnum at any time. Under the terms of the agreement, Dr. Varnum currently receives an annual base salary of $525,000 which may be further adjusted from time to time by the board of directors, and an annual target performance bonus of 50% of his annual salary based on our achievement of certain performance objectives. Dr. Varnum is also entitled to certain severance benefits as described below under the section entitled “Payments and Benefits upon Termination or Change in Control.”
On October 15, 2020, the Company and Dr. Pastagia entered into an employment agreement. Dr. Pastagia’s employment under the agreement is at will and is terminable by us or Dr. Pastagia at any time. Under the terms of the agreement, Dr. Pastagia currently receives an annual base salary of $420,000 which may be further adjusted from time to time by the board of directors, and an annual target performance bonus of 35% of her annual salary based on our achievement of certain performance objectives. Dr. Pastagia is also entitled to certain severance benefits as described below under the section entitled “Payments and Benefits upon Termination or Change in Control.”
On March 28, 2022, the Company and Ms. Butler entered into an amended employment agreement. Ms. Butler’s employment under the agreement is at will and is terminable by us or Ms. Butler at any time. Under the terms of the agreement, Ms. Butler currently receives an annual base salary of $290,000 which may be further adjusted from time to time by the board of directors, and an annual target performance bonus of 30% of her annual salary based on our achievement of certain performance objectives. Ms. Butler is also entitled to certain severance benefits as described below under the section entitled “Payments and Benefits upon Termination or Change in Control.”
On March 25, 2022, Steve R. Martin notified the Company that he intended to retire as Senior Vice President and Chief Financial Officer of the Company effective as of June 30, 2022 and the Company and Mr. Martin entered into an advisory letter agreement, which amends his employment agreement and sets forth the terms and conditions of his continuing relationship with the Company. Under the terms of the advisory letter agreement, Mr. Martin received an annual base salary of $389,340 and remained eligible for all fringe benefit plans available to other employees through December 31, 2022. Mr. Martin was not eligible to receive grants of equity awards or to participate in the annual bonus program for the 2022 fiscal year. Under the terms of the advisory letter agreement, Mr. Martin’s equity awards will continue to vest through December 31, 2022. Subject to completion of the advisory services through December 31, 2022, Mr. Martin then received full vesting in one half of the then unvested Company stock options and all vested equity securities shall be exercisable in full for their full remaining term. The advisory letter agreement replaces and supersedes
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the offer letter agreement between Mr. Martin and the Company dated as of January 18, 2016, as amended as of April 1, 2017.
Payments and Benefits upon Termination or Change in Control
Dr. Varnum. Under the terms of his amended offer letter agreement, if Dr. Varnum is terminated without cause or resigns for good reason (in each case as defined in the agreement), then he will be entitled to severance payments equal to six months of continued base salary, and additionally, if such termination or resignation occurred in connection with a change in control, full acceleration of his time-based equity awards, provided that in either case, he executes an effective release of claims.
Dr. Pastagia. Under the terms her amended offer letter agreement, if Dr. Pastagia is terminated without cause or resigns for good reason (in each case as defined in the agreement), then she will be entitled to severance payments equal to six months of continued base salary, and additionally, if such termination or resignation occurred in connection with a change in control, full acceleration of her time-based equity awards, provided that in either case, she executes an effective release of claims.
Ms. Butler. Under the terms her amended offer letter agreement, if Ms. Butler is terminated without cause or resigns for good reason (in each case as defined in the agreement), then she will be entitled to severance payments equal to six months of continued base salary, and additionally, if such termination or resignation occurred in connection with a change in control, full acceleration of her time-based equity awards, provided that in either case, she executes an effective release of claims.
All of the named executive officers held stock options under our equity incentive plans that were granted subject to the general terms of our equity incentive plans and form of stock option agreements. The specific vesting terms of each of the named executive officer’s stock options are described below under “Outstanding Equity Awards at Fiscal Year End.”
If within 1 month prior to, or within 12 months after, a change in control, the named executive officer is terminated due to an involuntary termination (not including death or disability) without cause or due to a voluntary termination with good reason, then any unvested stock options held by that officer will vest in full.
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Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information regarding all outstanding equity awards held by the named executive officers as of December 31, 2022.
Number of
Number of
Securities
Securities
Underlying
Underlying
Unexercised
Option
Unexercised
Options
Exercise
Option
Options
(#)
Price
Expiration
Name
(#) Exercisable
Unexercisable
($)
Date
Dr. Varnum
15,193
(1)
—
38.12
4/21/2024
4,932
(1)
—
38.12
12/8/2024
224,043
(2)
74,681
(2)
3.15
5/21/2029
23,000
(3)
—
3.15
12/7/2030
28,000
(2)
84,000
(2)
5.14
3/25/2031
31,250
(2)
93,750
(2)
3.82
8/2/2031
—
240,000
(2)
5.11
4/12/2032
326,418
492,431
Ms. Pastagia
6,250
(2)
18,750
(2)
5.14
3/25/2031
0
80,000
(2)
5.11
4/12/2032
6,250
98,750
Ms. Butler
714
(1)
0
14.28
9/15/2027
11,250
(2)
3,750
(2)
3.15
5/21/2029
7,500
(2)
22,500
(2)
5.14
3/25/2031
0
50,000
(2)
5.11
4/12/2032
19,464
76,250
Mr. Martin
713
(1)
0
399.00
1/17/2026
9,928
(1)
0
12.74
9/6/2027
130,692
(2)
0
3.15
5/21/2029
23,000
(3)
0
3.15
12/7/2030
35,000
(2)
0
5.14
3/25/2031
199,333
0
(1) Twenty-five percent of the shares vest one year after grant date, with the balance vesting in equal monthly installments thereafter over the next four years, subject to continued service and the potential vesting acceleration described in the option agreement.
(2) Twenty-five percent of the shares vest on each anniversary of the grant date, subject to continued service and the potential vesting acceleration described in the option agreement.
(3) Fifty percent of the shares vest on each anniversary of the grant date, subject to continued service and the potential vesting acceleration described in the option agreement
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Equity Incentive Plans
2016 Equity Incentive Plan
The 2016 Plan was approved by our board of directors in April 2016 and subsequently approved by the stockholders in June 2016, and was most recently amended and restated effective as of May 8, 2019. We continue to grant awards under the 2016 Plan. The plan provides for the issuance of incentive awards in the form of non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance-based stock awards. The awards may be granted by our board of directors to employees, including officers, non-employee directors and consultants who provide services to us or to a subsidiary of ours.
Employee Stock Purchase Plan
Additional long-term equity incentives are provided through the employee stock purchase plan (“ESPP”), which became effective in connection with our 2016 Annual Meeting of Stockholders in May 2016 and which we continue to use pursuant to the terms described herein. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code. Our board of directors has delegated its authority to administer the ESPP to our Compensation Committee. Under the ESPP, all of our regular employees (including the named executive officers) may participate and may contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of our common stock. The ESPP is implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, we may specify offerings with a duration of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which our common stock will be purchased for employees participating in the offering. Unless otherwise determined by our Compensation Committee, shares are purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of our common stock on the first date of an offering or (b) 85% of the fair market value of our common stock on the date of purchase.
Non-Employee Director Compensation
The following table and related footnotes show the compensation paid during the year ended December 31, 2022 to our non-employee directors.
Fees Earned
or Paid in
Option
All Other
Name
Cash ($)
Awards ($) (1)
Compensation ($)
Total ($)
Jules Haimovitz
78,000
121,111
—
199,111
Odysseas Kostas
44,000
121,111
—
165,111
Robin C. Kramer
57,000
121,111
—
178,111
Todd Patrick (2)
38,300
121,111
—
159,411
Joseph Patti
56,000
121,111
—
177,111
Todd Peterson
48,000
121,111
—
169,111
Sarah J. Schlesinger
46,000
121,111
—
167,111
(1) In accordance with SEC rules, this column represents the aggregate grant date fair value of the option awards granted during 2022 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 for stock-based compensation transactions. Assumptions used in the calculation of these amounts are included in Note 13 to the consolidated financial statements included in this Annual Report. The aggregate number of option awards outstanding (including exercisable and unexercisable stock options) as of December 31, 2022, for each non-employee director was as follows:
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Board of Directors:
Stock Options Outstanding
Stock Options Exercisable
Jules Haimovitz
63,000
15,000
Odysseas Kostas
111,383
64,383
Robin C. Kramer
91,000
44,000
Todd Patrick
486,530
331,099
Joseph Patti
111,383
64,383
Todd Peterson
111,383
64,383
Sarah J. Schlesinger
111,383
64,383
(2) Mr. Todd Patrick retired from the Board of Directors effective November 15, 2022.
In September 2015, the board of directors approved a revised compensation structure for non-employee directors and the board of directors elected to retain the current cash compensation schedule in May 2019. In 2022, the chairman of our board of directors received an annual cash retainer of $70,000 and each other non-employee director received an annual cash retainer of $40,000. For the Audit Committee, the committee chair received an additional annual cash retainer of $17,000 and each member received an additional annual cash retainer of $8,000. For the Compensation Committee, the committee chair received an additional annual cash retainer of $12,000 and each member received an additional annual cash retainer of $6,000. For the Nominating and Corporate Governance Committee, the committee chair received an additional annual cash retainer of $8,000 and each member received an additional annual cash retainer of $4,000 .
Limitation of Liability and Indemnification
Sections 23B.08.510 and 23B.08.570 of the Washington Business Corporation Act authorize Washington corporations to indemnify directors and officers under certain circumstances against expenses (including legal expenses) and liabilities incurred in legal proceedings in which they are involved by reason of being a director or officer, as applicable. Section 23B.08.560 of the Washington Business Corporation Act authorizes a corporation, if authorized by its articles of incorporation or by a provision in the corporation’s bylaws approved by its stockholder s, to indemnify or agree to indemnify a director made a party to a proceeding, or obligate itself to advance or reimburse expenses incurred in a proceeding, without regard to the limitations imposed by Sections 23B.08.510 through 23B.08.550; provided that no such indemnity shall indemnify any director from or on account of (a) acts or omissions of the director finally adjudged to be intentional misconduct or a knowing violation of law, (b) conduct of the director finally adjudged to be in violation of Section 23B.08.310 of the Washington Business Corporation Act (which relates to unlawful distributions) or (c) any transaction with respect to which it was finally adjudged that such director personally received a benefit in money, property or services to which the director was not legally entitled.
Article 11 of our articles of incorporation provides that, to the fullest extent that the Washington Business Corporation Act permits the limitation or elimination of the liability of a director, a director shall not be liable to us or our stockholders for monetary damages for conduct as a director. Section 10 of our bylaws requires us to indemnify every present or former director or officer against expenses, liabilities and losses incurred in connection with serving as a director or officer, as applicable, and to advance expenses of such director or officer incurred in defending any proceeding covered by the indemnity; provided, however, that any indemnity is in accordance with Washington law and does not include indemnification of intentional misconduct, knowing violation of law, or other violations of Washington law, including receipt of benefits in which a director of officer is not entitled.
We maintain a policy of directors’ and officers’ liability insurance that insures the directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances. We have also entered into indemnification agreements with our executive officers and directors that provide for the indemnification of directors and executive officers to the fullest extent permitted by the Washington Business Corporation Act against expenses reasonably incurred by such persons in any threatened, pending or completed action, suit, investigation or proceeding in connection with their service as (i) a director or officer of us or (ii) a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, at our request. In addition, we are obligated to advance expenses pursuant to the indemnification agreements
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under certain circumstances, and the agreements also provide for procedural protections, including a determination by a reviewing party as to whether the indemnitee is permitted to be indemnified under applicable law.
The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
We believe that these provisions in our articles of incorporation and bylaws and our indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding beneficial ownership of our capital stock by:
● each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;
● each of our directors;
● each of our named executive officers; and
● all of our current executive officers and directors as a group.
The percentage ownership information in the table below is based on 36,144,706 shares of common stock outstanding as of March 1, 2023.
Information with respect to beneficial ownership provided in the table below is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G and Form 4 filed with the SEC. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable on or before April 30, 2023, which is 60 days after March 1, 2023. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
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Except as otherwise noted below, the address for each person or entity listed in the table is c/o Armata Pharmaceuticals, Inc., 4503 Glencoe Avenue, Marina del Rey, California 90292.
Beneficial Ownership
Number of
Percent of
Beneficial Owner
Shares
Total
Greater than 5% Stockholders
Innoviva, Inc.
64,704,574
(1)
85.4
%
Directors and Named Executive Officers
Jules Haimovitz (Director)
64,751,074
(2)
85.4
%
Odysseas D. Kostas, M.D. (Director)
64,785,457
(3)
85.4
%
Robin C. Kramer (Director)
60,500
(4)
*
%
Joseph M. Patti, Ph.D. (Director)
80,883
(5)
*
%
Todd C. Peterson, Ph.D. (Director)
80,883
(6)
*
%
Sarah J. Schlesinger, M.D. (Director)
64,785,457
(7)
85.4
%
Brian Varnum, Ph. D. (Chief Executive Officer)
445,624
(8)
1.20
%
Mina Pastagia, M.D. (Senior Vice President, Clinical Development)
75,810
(9)
*
%
Erin Butler (Vice President, Finance and Administration)
39,464
(10)
*
%
All current executive officers and directors as a group (9 persons)
65,696,004
(11)
85.7
%
*
Represents beneficial ownership of less than 1%.
(1) The shares listed were reported on a Schedule 13D/A filed with the SEC on January 10, 2023, with respect to shares of common stock held by Innoviva, Inc. and Innoviva Strategic Opportunities, LLC. Innoviva, Inc. holds 8,710,800 shares of common stock and warrants to acquire an additional 8,710,800 shares of common stock. Innoviva Strategic Opportunities, LLC holds 16,365,969 shares of common stock, warrants to acquire an additional 10,653,847 shares of common stock, and 20,263,158 shares of common stock the entity has the right to acquire from us within 60 days of March 1, 2023, pursuant to a convertible credit agreement. The principal business address of the reporting persons is c/o Innoviva, Inc., 1350 Old Bayshore Highway, Suite 400, Burlingame, CA 94010. Innoviva designated Jules Haimovitz and Odysseas Kostas, M.D., two of the members of the board of directors of Innoviva, to serve on the Board. Additionally, Sarah Schlesinger, M.D., is a member of the board of directors of Innoviva. As such, solely for purposes of Section 16 of the Exchange Act of 1934, as amended, Innoviva, Inc. and Innoviva Strategic Opportunities, LLC may be deemed to be directors by deputization. For purposes of the exemption under Rule 16b-3 promulgated under the Exchange Act, the Board approved the acquisition of any direct or indirect pecuniary interest in any shares of common stock, including any shares of common stock issuable upon the exercise of the aforementioned warrants.
(2) Consists of a) 46,500 shares of common stock that Mr. Haimovitz has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options, (b) 8,710,800 shares of common stock and warrants exercisable for 8,710,800 shares of common stock held by Innoviva, Inc., and (c) 16,365,969 shares of common stock, warrants exercisable for 10,653,847 shares of common stock, and the right to acquire 20,263,158 shares of common stock pursuant to a convertible credit agreement held by Innoviva Strategic Opportunities, LLC. Innoviva, Inc and Innoviva Strategic Opportunities, LLC are entities with which Mr. Haimovitz is affiliated due to his position as a director of Innoviva, Inc. Mr. Haimovitz may be deemed to have shared voting and dispositive power over the shares beneficially owned by Innoviva, Inc. and Innoviva Strategic Opportunities, LLC, but disclaims such beneficial ownership except to the extent of their pecuniary interest therein, if any.
(3) Consists of (a) 80,883 shares of common stock that Dr. Kostas has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options, (b) 8,710,800 shares of common stock and warrants exercisable for 8,710,800 shares of common stock held by Innoviva, Inc., and (c) 16,365,969 shares of common stock, warrants exercisable for 10,653,847 shares of common stock, and the right to acquire 20,263,158 shares of common stock pursuant to a convertible credit agreement held by Innoviva Strategic Opportunities, LLC.
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Innoviva, Inc and Innoviva Strategic Opportunities, LLC are entities with which Dr. Kostas is affiliated due to his position as a director of Innoviva, Inc. Dr. Kostas may be deemed to have shared voting and dispositive power over the shares beneficially owned by Innoviva, Inc. and Innoviva Strategic Opportunities, LLC, but disclaims such beneficial ownership except to the extent of their pecuniary interest therein, if any.
(4) Consists of 60,500 shares of common stock that Ms. Kramer has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options.
(5) Consists of 80,883 shares of common stock that Dr. Patti has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options.
(6) Consists of 80,883 shares of common stock that Dr. Peterson has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options.
(7) Consists of (a) 80,883 shares of common stock that Dr. Schlesinger has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options, (b) 8,710,800 shares of common stock and warrants exercisable for 8,710,800 shares of common stock held by Innoviva, Inc., and (c) 16,365,969 shares of common stock, warrants exercisable for 10,653,847 shares of common stock, and the right to acquire 20,263,158 shares of common stock pursuant to a convertible credit agreement held by Innoviva Strategic Opportunities, LLC. Innoviva, Inc and Innoviva Strategic Opportunities, LLC are entities with which Dr. Schlesinger is affiliated due to her position as a director of Innoviva, Inc. Dr. Schlesinger may be deemed to have shared voting and dispositive power over the shares beneficially owned by Innoviva, Inc. and Innoviva Strategic Opportunities, LLC, but disclaims such beneficial ownership except to the extent of their pecuniary interest therein, if an y .
(8) Consists of (a) 615 shares of common stock, (b) 30,591 restricted shares of common stock and (c) 414,418 shares of common stock that Dr. Varnum has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options.
(9) Consists of (a) 43,310 shares of common stock and (b) 32,500 shares of common stock that Dr. Pastagia has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options.
(10) Consists of 39,464 shares of common stock that Ms. Butler has the right to acquire from us within 60 days of March 1, 2023, pursuant to the exercise of stock options .
(11) Represents beneficial ownership of our common stock held by our current directors and executive officers as a group as of March 1, 2023, including any options and warrants exercisable within 60 days of March 1, 2023.
Equity Compensation Plan Information
In March 2009, our Board of Directors and stockholders adopted our 2009 Stock Incentive Plan, or the 2009 Plan. There are no shares of common stock remaining for future awards under the 2009 Plan.
In October 2012, our Board of Directors approved and adopted our 2012 Stock Incentive Plan, or the 2012 Plan. There are no shares of common stock remaining for future awards under the 2012 Plan.
In December 2013, our Board of Directors adopted the 2013 Stock Incentive Plan, or the 2013 Plan. Our stockholders approved the 2013 Plan in February 2014 and an amendment to the plan in August 2015. The 2013 Plan replaced the 2012 Plan. There are no shares of common stock remaining for future awards under the 2013 Plan.
In April 2016, our Board of Directors adopted our 2016 Equity Incentive Plan, or the 2016 Plan. In connection with the Merger, the name of the 2016 Plan was changed to the Armata Pharmaceuticals, Inc. 2016 Equity Incentive Plan. In connection with the Merger, the Company assumed the C3J Jian, Inc. Amended 2006 Stock Option Plan (the “Assumed 2006 Plan”) and the C3J Therapeutics, Inc. 2016 Stock Plan (the “Assumed 2016 Plan”). These plans provided for stock
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option and restricted stock awards (“RSAs”) to C3J employees in years prior to the Merger with AmpliPhi. Pursuant to the Merger Agreement, all of the outstanding C3J stock options and restricted stock awards granted under the Assumed 2006 Plan and the Assumed 2016 Plan were converted into and became stock options and restricted stock awards in the Company.
In June 2019, the Company added 987,354 shares of common stock to the shares authorized for issuance under the 2016 Plan pursuant to an amendment to such plan approved by the Company’s stockholders at a special meeting held on May 8, 2019. In addition, 115,336 shares of common stock were automatically added to the shares authorized for issuance under the 2016 Plan on January 1, 2019 pursuant to an “evergreen” provision contained in the 2016 Plan.
The following table provides information as of December 31, 2022 with respect to our equity compensation plans:
Number of
securities remaining
Weighted-
available for
Number of securities
average
future issuance
to be issued upon
exercise
under equity
exercise
price of
compensation plans
of outstanding options,
outstanding
(excluding securities
warrants
options, warrants
reflected in
Plan Category
and rights
and rights
column (a)
(a)
(b)
(c)
Equity compensation plans approved by security holders
3,352,803
$
5.32
570,570
Equity compensation plans not approved by security holders
—
—
—
Total
3,352,803
$
5.32
570,570
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related-Person Transactions Policy and Procedures
We have adopted a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and oversight of “related-person transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants involving an amount that exceeds $120,000 (or such lower threshold as may be applicable to us from time to time pursuant to the rules and regulations of the SEC or the NYSE American exchange).
Transactions involving compensation for services provided to us by an employee, consultant or director are not considered related-person transactions under this policy. A related person is any person who is, or at any time since the beginning of our last fiscal year, was, an executive officer, director or director nominee, any holder of more than 5% of our common stock, any of the foregoing’s immediate family members and any entity owned or controlled by any such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to our Audit Committee (or, where review by our Audit Committee would be inappropriate, to another independent body of our Board of Directors) for approval. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative sources for comparable services or products are available. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors, director nominees and certain significant stockholders. In considering related-person transactions, our Audit Committee or other independent body of our Board of Directors takes into account the relevant available facts and circumstances including, but not limited to:
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● the risks, costs and benefits to us;
● the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
● the terms of the transaction; and
● the terms available to or from, as the case may be, unrelated third parties.
In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberation and approval.
Certain Related-Person Transactions
Described below are any transactions occurring since January 1, 2016, and any currently proposed transactions, to which C3J or Armata was a party and in which:
◾ The amounts involved exceeded or will exceed the lesser of (i) $120,000 and (ii) 1% of the average of the respective company’s total assets at year-end for the last two completed fiscal years; and
◾ A director, director nominee, executive officer, holder of more than 5% of the outstanding capital stock of the respective company, or any member of such person’s immediate family had or will have a direct or indirect material interest.
Financing Transaction
February 2020 Private Placement
On January 27, 2020, we entered into the Securities Purchase Agreement with Innoviva, pursuant to which the Company agreed to issue and sell to Innoviva, in a private placement, up to 8,710,800 newly issued shares of our common stock (the “Private Placement Shares”) and warrants to purchase up to 8,710,800 shares of common stock, with an exercise price per share of $2.87 (the “Private Placement”). Each share of common stock was sold together with one warrant, and the per-unit purchase price is $2.87.
First Closing : The Private Placement occurred in two tranches. The first closing (the “First Closing”) occurred on February 12, 2020, at which time Innoviva purchased 993,139 Private Placement Shares and 993,139 Common Warrants, which was the maximum number of Private Placement Shares and Common Warrants issuable to Innoviva in compliance with any and all applicable laws and without the requirement for the prior receipt of the stockholders’ approval under the listing requirements of the NYSE American, in exchange for an aggregate gross cash payment of approximately $2.8 million. The First Closing was subject to the satisfaction of certain previously disclosed closing conditions (including obtaining voting agreements (the “ Voting Agreements ”) from stockholders of the Company representing at least 50.1% of the outstanding shares of common stock).
Second Closing : At the closing of the second tranche (the “Second Closing”), Innoviva purchased 7,717,661 Private Placement Shares and 7,717,661 Common Warrants for an aggregate purchase price of approximately $22.2 million.
Registration Rights Agreement and Investor Rights Agreement : As part of the First Closing of the Private Placement, the Company entered into a registration rights agreement and an investor rights agreement (the “Investor Rights Agreement”) with Innoviva. Pursuant to such registration rights agreement, on April 1, 2020, the Company filed a registration statement on Form S-3 covering the resale of the securities issued and sold pursuant to the Securities Purchase Agreement with the SEC, which was declared effective on April 8, 2020. The Investor Rights Agreement provides that for so long as Innoviva and its affiliates hold at least 12.5% of the outstanding shares of our common stock on a fully-diluted basis, Innoviva has the right to designate two (2) directors to our board of directors and for so long as Innoviva and its affiliates hold at least 8% but less than 12.5% of the outstanding shares
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of Common Stock on a fully-diluted basis, Innoviva has the right to designate one (1) director to our board of directors, subject to certain qualifications and conditions in the Investor Rights Agreement. The Investor Rights Agreement also provides for participation rights for Innoviva to participate in our future offerings of equity securities.
January 2021 Private Placement
On January 26, 2021, we entered into the Securities Purchase Agreement with Innoviva SO, a wholly-owned subsidiary of Innoviva, Inc. (collectively, “Innoviva”), pursuant to which we agreed to issue and sell to Innoviva, in the 2021 Private Placement, 6,153,847 newly issued shares of our common stock and warrants to purchase 6,153,847 shares of common stock, with an exercise price per share of $3.25. Each share of common stock was sold together with one warrant granting the warrant holder the right to purchase an additional share of common stock at $3.25 per share. The January 2021 Private Placement occurred in two tranches.
First Closing: The First Closing occurred on January 26, 2021. Innoviva purchased 1,867,912 shares and warrants to purchase 1,867,912 shares of common stock for an aggregate purchase price of approximately $6.1 million.
Second Closing : The Second Closing occurred on March 17, 2021. Innoviva purchased 4,285,935 shares and warrants to purchase 4,285,935 shares of common stock for an aggregate purchase price of approximately $13.9 million.
Registration Rights Agreement and Investor Rights Agreement:
As part of the First Closing of the 2021 Private Placement, we entered into a registration rights agreement and an amended and restated investor rights agreement (the “A&R IRA”) with Innoviva.
Pursuant to such Registration Rights Agreement, on May 13, 2021, the Company filed a registration statement on Form S-3 covering the resale of the securities issued and sold pursuant to such Securities and Purchase Agreement with the SEC, which was declared effective on May 20, 2021.
The A&R IRA provides that for so long as Innoviva and its affiliates hold at least 12.5% of the outstanding shares of common stock of Armata on a fully-diluted basis, Innoviva shall have the right to designate two directors to our Board of Directors and for so long as Innoviva and its affiliates hold at least 8%, but less than 12.5%, of the outstanding shares of common stock of the Company on a fully-diluted basis, Innoviva shall have the right to designate one director, subject to certain conditions and qualifications set forth in the A&R IRA. The A&R IRA also provides Innoviva with certain subscription rights in the event of any new issuances.
October 2021 Private Placement
On October 28, 2021, the Company entered into a securities purchase agreement (the “October 2021 Securities Purchase Agreement”) with the Cystic Fibrosis Foundation (“CFF”), a Delaware corporation, the Company’s partner for its lead Phase 1b/2a clinical development program, and Innoviva SO, a wholly-owned subsidiary of Innoviva, Inc., for the private placement of newly issued shares of common stock of the Company. Pursuant to the October 2021 Securities Purchase Agreement, the Company issued and sold 909,091 shares to CFF and 1,212,122 shares of its common stock to Innoviva, each at a per share price of $3.30 (the “October 2021 Private Placements”).
Registration Rights Agreement and Investor Rights Agreement:
As part of the October 2021 Private Placement, the Company also entered into a registration rights agreement (the “October 2021 Registration Rights Agreement”) with the Purchasers. Pursuant to the October 2021 Registration Rights Agreement, on March 29, 2022, the Company filed a registration statement on Form S-3 covering the resale of the securities issued and sold pursu pursuant to the Securities Purchase Agreement with the SEC, which was declared effective on April 6, 2022.
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The Company also entered into an Amended and Restated Voting Agreement with Innoviva (the “October 2021 Voting Agreement”), pursuant to which Innoviva agreed not to vote or take any action by written consent with respect to shares of common stock of the Company held by Innoviva, or any of its subsidiaries which represent, in the aggregate, more than 49.5% of the total number of shares of common stock issued and outstanding of the Company as of any given record date for voting (such shares, for purposes of this paragraph, the “Excess Shares”) on matters related to the election of directors to the Board of Directors or removal of directors from the Board of Directors (for the purposes of this paragraph, “Board Matters”) presented at any meeting of the stockholders of the Company (or any adjournment or postponement thereof) or for their action by written consent, in each case, unless the Board of Directors authorizes Innoviva to vote such Excess Shares with respect to Board Matters.
Februay 2022 Private Placement
On February 9, 2022, the Company entered into a securities purchase agreement to sell its common stock and warrants to Innoviva (“February 2022 Private Placement”). The gross proceeds to the Company from the transaction were $45 million, before deducting estimated offering expenses.
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 stockholder s 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.
Registration Rights Agreement and Investor Rights Agreement:
As part of the first closing of the February 2022 Private Placement, the Company entered into an amended and restated investor rights agreement (the “Second A&R IRA”), which amended and restated in its entirety that certain Investor Rights Agreement, dated February 12, 2020, as amended and restated as of January 26, 2021, by and among Innoviva, Innoviva, Inc. and the Company. Pursuant to the Second A&R IRA, for so long as Innoviva and its affiliates hold at least 12.5% of the outstanding shares of common stock of the Company on a fully-diluted basis, Innoviva and its affiliates shall have the right to designate two directors to the Board of Directors of the Company and for so long as Innoviva and its affiliates hold at least 8%, but less than 12.5%, of the outstanding shares of common stock of the Company on a fully-diluted basis, Innoviva and its affiliates shall have the right to designate one director to the Board of Directors, subject to certain conditions and qualifications set forth in the Second A&R IRA. The Second A&R IRA also provides Innoviva and its affiliates with certain subscription rights in the event of any new issuances .
The Company also entered into a registration rights agreement with Innoviva. Pursuant to the Registration Rights Agreement, on May 16, 2022, the Company filed a registration statement on Form S-3 covering the resale of the securities issued and sold pursuant such Securities Purchase Agreement with the SEC, which was effective on May 31, 2022.
The Company also entered into an amended and restated voting agreement with Innoviva and Innoviva, Inc. (the “February 2022 Voting Agreement”), which amended and restated in its entirety that certain Voting Agreement dated January 26, 2021, as amended and restated as of October 28, 2021, pursuant to which Innoviva and its affiliates agreed not to vote or take any action by written consent with respect to shares of common stock of the Company held by Innoviva or any of its subsidiaries which represent, in the aggregate, more than 49.5% of the total number of shares of common stock voting with respect to certain matters (such shares, for purposes of this paragraph, the “Excess Shares”) related to the election of directors to the Board of Directors, removal of directors from the Board of Directors or amendment of the bylaws of the Company to reduce the maximum number of directors or set the number of directors who may serve on the Board of Directors (for the purposes of this paragraph,
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“Board Matters”) presented at any meeting of the stockholders of the Company (or any adjournment or postponement thereof) or for their action by written consent, in each case, unless the Board of Directors authorizes Innoviva or its affiliates to vote such Excess Shares with respect to Board Matters .
Director and Executive Officer Compensation
The compensation of our directors and named executive officers, including employment agreements and other compensatory arrangements with executive officers and stock option grants to executive officers and directors, is more fully described in the section above entitled “Executive Compensation.”
Indemnification Agreements
We have entered, and intend to continue to enter, into separate indemnification agreements with each of our directors and executive officers, as described in the section above entitled “Executive Compensation — Limitation of Liability and Indemnification.” In addition, the Merger Agreement provided that, for a period of six years following the effective time of the Merger, we will indemnify and hold harmless each person who is, has been, or who became prior to the effective time of the Merger, a director, officer, fiduciary or agent of us and our subsidiaries or C3J, respectively, against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that such person is or was a director, officer, fiduciary or agent of C3J or us or any of its or our respective subsidiaries, whether asserted or claimed prior to, at or after the effective time, in each case, to the fullest extent permitted under applicable law. Each such person will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit, proceeding or investigation from us.
The Merger Agreement also provided that the provisions relating to the indemnification, advancement of expenses and exculpation of our present and former directors and officers set forth in our articles of incorporation and bylaws will not be amended, repealed or otherwise modified for a period of six years from the effective time of the Merger in any manner that would adversely affect the rights of individuals who, at the effective time of the Merger, were our officers or directors. The Merger Agreement required that, after the closing of the Merger, our articles of incorporation and bylaws were to contain provisions at least as favorable as the provisions relating to the indemnification, advancement of expenses and exculpation of present and former directors and officers set forth in our articles of incorporation and bylaws prior to the Merger.
Prior to the effective time of the Merger, we secured and prepaid, at C3J’s expense, a six year “tail policy” on our then-existing directors’ and officers’ liability insurance policy.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees incurred for Ernst & Young LLP services for the years ended December 31, 2022 and 2021:
Fiscal Year
Fiscal Year
Ended
Ended
December 31,
December 31,
2022
2021
Armata Pharmaceuticals, Inc.
Audit Fees
$
415,000
$
370,000
Audit Related Fees
26,000
10,000
Tax Fees
—
—
All Other Fees
10,000
—
Total
$
451,000
$
380,000
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Representatives of Ernst & Young LLP attended all of the meetings of the Audit Committee occurring during the years ended December 31, 2022 and 2021.
The Audit Committee approves in advance the engagement and fees of the independent registered public accounting firm for all audit services and non-audit services, based upon independence, qualifications and, if applicable, performance. The Audit Committee may form and delegate to subcommittees of one or more members of the Audit Committee the authority to grant pre-approvals for audit and permitted non-audit services, up to specific amounts. All audit services provided by Ernst & Young LLP for the periods presented were pre-approved by the Audit Committee.
PART IV
Item 15. EXHIBITS
(1) The following is an index of the financial statements required by this item that are included in this Form 10-K:
Page
Report of Independent Registered Public Accounting Firm
86
Consolidated Balance Sheets
88
Consolidated Statements of Operations
89
Consolidated Statements of Stockholders’ Equity
90
Consolidated Statements of Cash Flows
91
Notes to Consolidated Financial Statements
92
(2) Financial Statement Schedules. Financial statement schedules are not included herein as the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and accompanying notes included in this Form 10-K
(3) Exhibits. The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report.
Exhibit Index
Exhibit
Number
Description of Document
3.1
Amended and Restated Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on November 16, 2015).
3.2
Articles of Amendment to Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (File No. 001-37544), filed with the SEC on April 24, 2017
3.3
Articles of Amendment to Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed on November 8, 2018).
3.4
Articles of Amendment to Amended and Restated Articles of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37544), filed with the SEC on May 10, 2019).
3.5
Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.5 to the Quarterly Report on Form 10-Q (File No. 001-37544), filed with the SEC on August 14, 2019).
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3.6
Articles of Merger, dated as of May 9, 2019 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-37544), filed with the SEC on May 10, 2019).
3.7
Articles of Amendment to Articles of Incorporation of the registrant, dated as of December 10, 2019 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37544), filed with the SEC on December 11, 2019).
3.8
Amendment to Amended and Restated Bylaws of the registrant (December 10, 2019) (incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-37544), filed with the SEC on December 11, 2019).
3.9
Amendment to Amended and Restated Bylaws of the registrant (February 24, 2020) (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37544), filed with the SEC on February 26, 2020).
3.10
Articles of Amendment to Articles of Incorporation of the Company (effective March 26, 2020) (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-37544), filed with the SEC on March 30, 2020).
4.1
Reference is made to Exhibits 3.1 through 3.8.
4.2
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (File No. 333-217563), filed on May 1, 2017).
4.3
Form of Common Stock Warrant issued to purchasers in March 2015 private placement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on March 19, 2015).
4.4
Form of Warrant to Purchase Shares of Common Stock issued in connection with the Company’s acquisition of certain assets of Novolytics Limited in February 2016 (incorporated by reference to Exhibit 4.13 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2016).
4.5
Form of Warrant to Purchase Common Stock issued to purchasers in May 2017 (incorporated by reference to Exhibit 4.18 to the Company’s Registration Statement on Form S-1 (File No. 333-217169)).
4.6
Form of Common Stock Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 29, 2020).
4.7
Registration Rights Agreement, dated January 26, 2021, by and between the Company and Innoviva (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on January 27, 2021)
4.8
Form of Common Stock Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 27, 2021)
4.9
Description of the Company’s securities registered under Section 12 of the Exchange Act.
4.10
Form of Common Stock Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 11, 2022)
9.1
Form of Voting Agreement, by and between the Company and Innoviva (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K, filed on January 27, 2021 ).
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10.1+
Targeted Genetics Corporation 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form 10 (File No. 000-23930), filed December 16, 2013, as amended).
10.2+
AmpliPhi Biosciences Corporation 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form 10 (File No. 000-23930), filed December 16, 2013, as amended).
10.3+
Form of Stock Option Agreement under AmpliPhi Biosciences Corporation 2012 Stock Incentive Plan (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form 10 (File No. 000-23930), filed December 16, 2013, as amended).
10.4+
AmpliPhi Biosciences Corporation 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form 10 (File No. 000-23930), filed December 16, 2013, as amended).
10.5+
Form of Grant Notice and Stock Option Agreement under AmpliPhi Biosciences Corporation 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2016).
10.6+
Armata Pharmaceuticals, Inc. 2016 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the registrant’s Registration Statement on Form S-8, filed with the SEC on June 10, 2019).
10.7+
Form of Stock Option Grant Notice, Option Agreement and Notice of Exercise under the Armata Pharmaceuticals, Inc. 2016 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2019).
10.8+
Armata Pharmaceuticals, Inc. 2016 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2019).
10.9+
Form of Indemnity Agreement with the Company’s Directors and Executive Officers (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the SEC on January 19, 2016).
10.10 +
Form of Director Appointment Letter (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K, filed with the SEC on May 10, 2019).
10.11*
Research Collaboration and Option to License Agreement, effective as of May 24, 2017, by and between Synthetic Genomics, Inc. and Merck Sharp & Dohme Corp. (incorporated herein by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2019).
10.12*
Asset Purchase Agreement, dated as of February 14, 2018, by and between C3J Therapeutics, Inc., Synthetic Genomics, Inc. and Synthetic Genomics Vaccines, Inc., as amended by Amendment to Asset Purchase Agreement, made and entered into as of December 20, 2018 (incorporated herein by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q, filed with the SEC on August 14, 2019).
10.13
Securities Purchase Agreement, dated January 26, 2021, by and between the Company and Innoviva (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on January 27, 2021).
10.14
Amended and Restated Investor Rights Agreement, dated January 26, 2021, by and between the Company and Innoviva Strategic Opportunities LLC (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed with the SEC on January 27, 2021).
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10.15*
Letter Agreement, dated as of March 10, 2020, by and between Armata Pharmaceuticals, Inc. and the Cystic Fibrosis Foundation (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed with the SEC on May 14, 2020).
10.16+
Employment Agreement, dated as of January 18, 2012, by and between C3 Jian, Inc. and Brian Varnum (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, filed with the SEC on May 14, 2020).
10.17+
Employment Agreement, dated August 1, 2021, between Armata Pharmaceuticals, Inc. and Brian Varnum, Ph.D. (incorporated herein by reference to Exhibit 10.22 to the Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2021) .
10.18
Securities Purchase Agreement, dated October 29, 2021, by and among the Company, Innoviva, and CFF (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on October 29, 2021) .
10.19
Registration Rights Agreement, dated October 29, 2021, by and among the Company, Innoviva, and CFF (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on October 29, 2021) .
10.20
Amended and Restated Voting Agreement, dated October 29, 2021, by and among the Company, Innoviva, and Innoviva, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on October 29, 2021) .
10.21
Lease Agreement, dated October 28, 2021, by and between the Company and 5005 McConnell Avenue, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 2, 2021 ).
10.22
Assignment and First Amendment of Office Lease, dated as of April 2020, by and among Armata Pharmaceuticals, Inc., C3 Jian, Inc. and Marina Business Center, LLC (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q, filed with the SEC on May 14, 2020).
10.23
Securities Purchase Agreement, dated February 9, 2022, by and among the Company and Innoviva (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 11, 2022).
10.24
Amended and Restated Investor Rights Agreement, dated February 9, 2022, by and among the Company and Innoviva (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on February 11, 2022).
10.25
Registration Rights Agreement, dated February 9, 2022, by and among the Company and Innoviva (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on February 11, 2022).
10.26
Second Amended and Restated Voting Agreement, dated February 9, 2022, by and among the Company and Innoviva (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the SEC on February 11, 2022).
10.27
Advisory Agreement, dated March 28, 2022, between the Company and Mr. Martin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 25, 2022).
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10.28
Employment Agreement, dated March 28, 2022, between the Company and Ms. Butler. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on March 25, 2022 )
10.29
Letter Agreement, dated December 14, 2022, by and between the Company and Todd R. Patrick (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2022).
10.30
Secured Convertible Credit and Security Agreement, dated January 10, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 10, 2023).
16.1
Letter from PricewaterhouseCoopers LLP to the U.S. Securities and Exchange Commission, dated May 10, 2019 (incorporated herein by reference to Exhibit 16.1 to the Current Report on Form 8-K, filed with the SEC on May 10, 2019).
21.1
Subsidiaries of the Company.
23.1
Consent of Independent Registered Public Accounting Firm.
24.1
Power of Attorney (contained on the signature page).
31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+ Indicates management contract or compensatory plan or arrangement.
* Indicates that certain identified information in the exhibit has been omitted because it is both (i) not material, and (ii) would likely cause competitive harm if publicly disclosed.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
ARMATA PHARMACEUTICALS, INC.
Date: March 16, 2023
By:
/s/ Brian Varnum
Name: Brian Varnum, Ph.D.
Title: Chief Executive Officer
(Principal Executive Officer)
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SIGNATURES AND POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brian Varnum, and Erin Butler, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and all documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them, or his or her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Brian Varnum
Chief Executive Officer and Director
March 16, 2023
Brian Varnum, Ph.D.
(Principal Executive Officer)
/s/ Erin Butler
Vice President, Finance and Administration
March 16, 2023
Erin Butler
(Principal Financial and Accounting Officer)
/s/ Jules Haimovitz
Chairman of the Board of Directors
March 16, 2023
Jules Haimovitz
/s/ Odysseas D. Kostas, M.D
Director
March 16, 2023
Odysseas D. Kostas, M.D.
/s/ Robin Kramer
Director
March 16, 2023
Robin Kramer
/s/ Joseph M. Patti, Ph.D.
Director
March 16, 2023
Joseph M. Patti, Ph.D.
/s/ Todd C. Peterson, Ph.D.
Director
March 16, 2023
Todd C. Peterson, Ph.D.
/s/ Sarah J. Schlesinger, M.D.
Director
March 16, 2023
Sarah J. Schlesinger, M.D.
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