What changed in this filing

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Item 9A. Controls and Procedures

2022-02-28 compared with 2021-03-01 · 72 added, 28 removed, 134 unchanged (43% of the section changed)

9 unchanged sentences

Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Mayer Hoffman McCann P.C., an independent registered public accounting firm, as stated in their report which is included herein.

Inherent Limitations on Controls and Procedures

14 unchanged sentences

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of the Independent Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation report from our registered public accounting firm regarding internal controls over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

We are in the process of implementing new enterprise resource planning software, Microsoft Dynamics D365 (“Dynamics”), as part of a plan to integrate and upgrade our systems and processes.

The implementation of this software is scheduled to continue in phases over a number of years.

During the second and third quarter of 2021, we completed the implementation of the financial reporting and consolidation modules and the procurement modules, respectively.

As the phased implementation of this system occurs, we expect certain changes to our processes and procedures which, in turn, will result in changes to our internal control over financial reporting.

We expect Dynamics to strengthen our internal financial controls by automating a number of accounting and reporting processes and activities, thereby decreasing the number of manual processes previously required.

Management will continue to evaluate and monitor our internal controls as processes and procedures in each of the affected areas evolve.

Other than as discussed above, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Krystal Biotech, Inc.:

Opinion on Internal Control over Financial Reporting

We have audited Krystal Biotech Inc.’s (“Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet and related statement of operations and comprehensive loss, stockholders’ equity, cash flows and the related notes of the Company and our report dated February 28, 2022 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Mayer Hoffman McCann P.C.

San Diego, California

February 28, 2022

Other Information.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Not Applicable.

Directors, Executive Officers and Corporate Governance.

Information required by this Item is hereby incorporated by reference to our Definitive Proxy Statement.

We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to our officers, directors and employees which is available on our internet website at www.krystalbio.com.

The Code of Conduct contains general guidelines for conducting the business of our company consistent with the highest standards of business ethics, and is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K.

In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.

Executive Compensation.

25 unchanged sentences

333-227632), as filed with the SEC on October 1, 2018)

4.3* Description of Common Stock (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K (File No.

001-38210), as filed with the SEC on March 10, 2020)

4.3* Description of Common Stock (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K, as filed with the SEC on March 1, 2021)

10.1# Indemnification Agreement by and between Krystal Biotech, Inc.

and each of its directors and officers listed on Schedule A thereto (incorporated by reference to Exhibit 10.1 to the Company’s Amendment No.

and each of its directors and executive officers (incorporated by reference to Exhibit 10.1 to the Company’s Amendment No.

2 to the Company’s Registration Statement on Form S-1 (Reg.

10 unchanged sentences

and Kathryn A.

10.5# Krystal Biotech, LLC 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Amendment No.

2 to the Company’s Registration Statement on Form S-1 (Reg.

333-220085), as filed with the SEC on September 14, 2017)

Romano (incorporated by refere nce to Exhibit 10.4 to the Company's Annual Rep ort on Form 10-K, as filed with the SEC on March 1, 2021)

10.5# Executive Employment Agreement, effective May 3, 20201 by and between Krystal Biotech, Inc.

and Andy Orth

10.6# Executive Employment Agreement, effective January 18, 2022, by and between Krystal Biotech, Inc.

and Jing Marantz

10.7# Krystal Biotech, Inc.

28 unchanged sentences

and Krystal Biotech, Inc.

(incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K, as filed with the SEC on March 1, 2021)

10.15 Fourth amendment to Lease Agreement, dated as of October 22, 2018, by and between Wharton Lender Associate, L.P.

and Krystal Biotech, Inc.

(incorporated by reference to Exhibit 10.1 4 to the Company's Annual Report on Form 10-K, as filed with the SEC on March 1, 2021)

10.16 Fifth amendment to Lease Agreement, dated as of December 10, 2018, by and between Wharton Lender Associate, L.P.

and Krystal Biotech, Inc.

10.16* Lease Agreement, dated as of December 26, 2019, by and between Northfield I, LLC and Krystal Biotech, Inc.

10.17* First Amendment to Lease Agreement, dated as of January 17, 2020, between Northfield I, LLC and Krystal Biotech, Inc.

10.18* Second Amendment to Lease Agreement, dated as of August 12, 2020, between Northfield I, LLC and Krystal Biotech, Inc.

10.19* Third Amendment to Lease Agreement, dated as of December 14, 2020, between Northfield I, LLC and Krystal Biotech, Inc.

(incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K, as filed with the SEC on March 1, 2021)

10.17* Sixth amendment to Lease Agreement and first amendment to storage space agreement, dated as of January 13, 2021, by and between Wharton Lender Associates, L.P.

and Krystal Biotech, Inc.

10.18* Seventh amendment to Lease Agreement, dated as of May 11, 2021, by and between Wharton Lender Associates, L.P.

and Krystal Biotech, Inc.

10.19* Eighth amendment to Lease Agreement, dated as of July 21, 2021, by and between Wharton Lender Associates, L.P.

and Krystal Biotech, Inc.

10.20* Ninth amendment to Lease Agreement, dated as of January 4, 2022, by and between Wharton Lender Associates, L.P.

and Krystal Biotech, Inc.

10.21 Purchase and Sale Agreement, dated January 29, 2021, by and between Krystal Biotech, Inc.

and Northfield I, LLC.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on February 2, 2021)

10.22 Standard Form of Contract for Construction and the corresponding General Conditions of the Contract for Construction with The Whiting-Turner Contracting Company, dated June 30, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on August 9, 2021)

10.23 Guaranteed Maximum Price Amendment to Standard Form of Contract for Construction and the corresponding General Conditions of the Contract for Construction with The Whiting-Turner Contracting Company dated September 13, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on September 16, 2021)

21.1* Subsidiaries of Krystal Biotech, Inc.

13 unchanged sentences

* Filed herewith.

** Certain information in Exhibit 10.16 has been omitted pursuant to Item 601(b)(10) of Regulation S-K because it is both not material and would be competitively harmful if publicly disclosed.

The Company undertakes to furnish, supplementally, a copy of the unredacted exhibit to the Securities and Exchange Commission upon request.

# Indicates a management contract or compensatory plan or arrangement.

1 unchanged sentence

The Company has elected to not include a summary.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on March 1, 2021.

KRYSTAL BIOTECH, INC.

7 unchanged sentences

Signature Title Date

Krishnan President and Chief Executive Officer and Director (Principal Executive Officer) March 1, 2021

Krishnan President and Chief Executive Officer and Director (Principal Executive Officer) February 28, 2022

/s/ Kathryn A.

Romano Chief Accounting Officer (Principal Financial Officer) March 1, 2021

Krishnan Chief Operating Officer and Director March 1, 2021

Romano Chief Accounting Officer (Principal Financial Officer) February 28, 2022

Krishnan Chief Operating Officer and Director February 28, 2022

/s/ Daniel S.

Janney Director March 1, 2021

Rossi Director March 1, 2021

/s/ Kirti Ganorkar Director March 1, 2021

Janney Director February 28, 2022

Rossi Director February 28, 2022

/s/ Kirti Ganorkar Director February 28, 2022

Kirti Ganorkar

/s/ Julian Gangolli Director March 1, 2021

/s/ Julian Gangolli Director February 28, 2022

Julian Gangolli

/s/ Chris Mason Director March 1, 2021

/s/ Jing Marantz Director March 1, 2021

/s/ Chris Mason Director February 28, 2022

Rand Sutherland Director February 28, 2022

Rand Sutherland

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

What changed 10-K

Item 9A. Controls and Procedures