What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-31 compared with 2020-03-13 · 414 added, 487 removed, 844 unchanged (52% of the section changed)

4 unchanged sentences

Because of the inherent limitations surrounding internal controls over financial reporting, our disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure

controls and procedures.

The design of any disclosure controls and procedures also 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.

Our management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting and disclosure controls and procedures as of December 31, 2019 .

In making this assessment, management used the updated criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on our assessment under the COSO Internal Control-Integrated Framework, management believes that, as of December 31, 2019 , our disclosure controls and procedures and internal control over financial reporting were not effective, as described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

In connection with the preparation of our financial statements for the year ended December 31, 2019 , we identified a material weakness in internal controls over our information technology general controls ("ITGC") related to change and access management process, and as a result, internal controls related to substantially all underlying financial statement accounts and disclosures are ineffective.

2014-09 “Revenue from Contracts with Customers” (Topic 606), or ASC 606.

which, taken together, led us to determine that we had a material weakness in the revenue recognition process.

These material weaknesses created a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

No material financial statement misstatements were identified in relation to these material weaknesses in our internal control over financial reporting.

Management intends to implement remediation plans to address the control deficiencies that led to these material weaknesses, and will continue to evaluate and take actions to improve the company's internal control over financial reporting.

Our remediation plan with respect to our controls over ITGC will include reevaluating our risk assessment and IT control environment within the finance department, developing an IT policy with a clear description on how the controls are designed to operate, and establishing or enhancing controls over system access, administration, and system changes.

Our remediation plan with respect to our controls over our revenue recognition process includes, beginning with the first quarter of 2020, performing and retaining sufficient documentation of our operating controls.

Our remediation plan with respect to ASC 606 implementation will involve instances of control execution with respect to any new and existing collaboration agreements and the allocation of up-front consideration to the identified performance obligations.

Our management, under the supervision of and with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting and disclosure controls and procedures as of December 31, 2020.

In making this assessment, management used the updated criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework.

Based on our assessment under the COSO Internal Control-Integrated Framework, management believes that, as of December 31, 2020, our disclosure controls and procedures and internal control over financial reporting were effective.

Remediation of Material Weakness from 2019

As previously disclosed, in connection with the preparation of our financial statements for the year ended December 31, 2018, we concluded that we had a material weakness relating to our income tax provision process, including the evaluation of any changes resulting from the recent tax laws.

To remediate the material weakness identified, we performed the following actions during 2019:

Developed and documented formal policies regarding the income tax provision process, including the identification of key controls and necessary steps by which management can evaluate the use of third party specialists.

Developed and utilized a detailed checklist to identify significant transactions and/or events that may require further evaluation by tax advisors or tax specialists as part of the quarterly and annual tax provision process.

Ensured that management's oversight of external advisors was appropriate, including that adequate resources were available and that sufficient preparation and review activities occurred when calculating the quarterly and annual tax provision.

This included the ability to engage and involve certain tax specialists to assist in the assessment and evaluation of certain tax matters, as needed.

Prepared documentation that was sufficiently reviewed by our external tax advisors and by finance management that addressed all significant tax matters identified for each reporting period.

As the implementation of the enhanced policies, procedures and controls have functioned effectively for multiple quarters, we concluded that we have remediated the aggregated material weakness previously disclosed from 2018.

Notwithstanding the new material weaknesses identified as of December 31, 2019, we have concluded that the financial statements and other financial information included in this Annual Report on Form 10-K, fairly present in all material respects our financial condition, results of operations and cash flows as of, and for, the periods presented.

As previously disclosed, in connection with the preparation of our financial statements for the year ended December 31, 2019, we concluded that we had a material weakness in internal controls over our information technology general controls (ITGCs) related to change and access management processes, and that as a result, internal controls related to substantially all underlying financial statement accounts and disclosures were ineffective.

We also identified deficiencies in internal controls over our quarterly revenue recognition procedures in that they were not operating effectively for a sufficient period of time in 2019 and certain controls related to the implementation of ASC 606 which, taken together, led us to determine that we had a material weakness in the revenue recognition process.

To remediate the material weaknesses identified, we performed the following actions during 2020:

• With respect to the material weakness in ITGCs, we have reevaluated our risk assessment and IT control environment within the finance department, developed an IT policy with a clear description on how the controls are designed to operate and established more rigorous controls over system access, administration and system changes.

• With respect to the material weakness in the revenue recognition controls, we have implemented improved policies and enhanced the rigor of our review documentation with regards to internal controls over our revenue recognition process.

As the enhanced policies, procedures and controls have functioned effectively for multiple quarters, we concluded that we have remediated the material weaknesses previously disclosed from 2019.

Management, including our principal executive officer and principal financial officer, has concluded that the financial statements and other financial information included in this Annual Report on Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows as of, and for, the periods presented.

Changes in Internal Control over Financial Reporting

Except for material weaknesses and remediation activities described above, there have been no changes in internal control over financial reporting identified in connection with the evaluation of such internal control required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the fourth quarter of 2019 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of Registered Public Accounting Firm

The effectiveness of our internal controls over financial reporting as of December 31, 2019 has been audited by our independent registered accounting firm, Ernst & Young LLP, as stated in their attestation report.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Pieris Pharmaceuticals, Inc.:

Opinion on Internal Control over Financial Reporting

We have audited Pieris Pharmaceutical, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, Pieris Pharmaceuticals, Inc.

(the Company) has not maintained effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment.

Management has identified material weaknesses in accounting for revenue and over information technology general controls and as a result, internal controls related to substantially all underlying financial statement accounts and disclosures are ineffective.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and December 30, 2018, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and this report does not affect our report dated March 13, 2020, which expressed an unqualified opinion thereon.

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 Evaluation of Disclosure Controls and Procedures in Item 9a.

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

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/ Ernst & Young LLP

March 13, 2020

Except for the remediation activities described above, there have been no changes in internal control over financial reporting identified in connection with the evaluation of such internal control required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the fourth quarter of 2020 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

12 unchanged sentences

The following documents are filed as part of this Annual Report on Form 10-K:

Item 15(a)(1) and (2)

See “Index to Consolidated Financial Statements” on page F-1 to this Annual Report on Form 10-K.

Item 15(a)(1) and (2) See “Index to Consolidated Financial Statements” on page F-1 to this Annual Report on Form 10-K.

Other financial statement schedules have not been included because they are not applicable or the information is included in the financial statements or notes thereto.

Item 15(a)(3)

Item 15(a)(3) Exhibits

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

Exhibit Description

Incorporated by

Exhibit Description Incorporated by

Reference herein

Acquisition Agreement, dated as of December 17, 2014, by and among the Registrant, Pieris AG and the former stockholders of Pieris AG named therein

Form 8-K (Exhibit 2.1)

December 18, 2014

Amended and Restated Articles of Incorporation of the Registrant

Form 8-K (Exhibit 3.1)

December 18, 2014

Certificate of Designation of Series A Convertible Preferred Stock

Form 10-Q (Exhibit 3.1)

August 11, 2016

Certificate of Designation of Series B Convertible Preferred Stock

Form 8-K (Exhibit 3.1)

February 4, 2019

Certificate of Designation of Series C Convertible Preferred Stock

Form 8-K (Exhibit 3.1)

November 4, 2019

Amended and Restated Bylaws of the Registrant

Form 8-K (Exhibit 3.2)

December 18, 2014

Amendment to the Amended and Restated Bylaws of the Registrant

Form 8-K (Exhibit 3.1)

September 3, 2019

Form of Common Stock certificate

Form 8-K (Exhibit 4.1)

December 18, 2014

Form of Common Stock certificate

Form 10-K (Exhibit 4.2)

March 23, 2016

Description of Registered Securities

2014 Employee, Director and Consultant Equity Incentive Plan

Form 8-K (Exhibit 10.1)

December 18, 2014

Form of Stock Option Award Agreement under the Registrant’s 2014 Employee, Director and Consultant Equity Incentive Plan

Form 8-K (Exhibit 10.2)

December 18, 2014

2016 Employee, Director and Consultant Equity Incentive Plan

Form 8-K (Exhibit 10.1)

Form of Stock Option Award Agreement under the Registrant’s 2016 Employee, Director and Consultant Equity Incentive Plan

Form 10-K (Exhibit 10.4)

March 30, 2017

2018 Employee, Director and Consultant Equity Incentive Plan

Form 8-K (Exhibit 10.1)

July 26, 2018

Form of Stock Option Award Agreement under the Registrant’s 2018 Employee, Director and Consultant Equity Incentive Plan

Form S-8 (Exhibit 10.2)

August 9, 2018

2018 Employee Stock Purchase Plan

Form 8-K (Exhibit 10.2)

July 26, 2018

2019 Employee, Director and Consultant Equity Incentive Plan

Form 8-K (Exhibit 10.1)

July 31, 2019

Research and Licensing Agreement by and between Pieris AG and Technische Universität München, dated as of July 26, 2007

Form 10-K (Exhibit 10.10)

March 30, 2015

License and Transfer Agreement by and between the Company and Enumeral Biomedical Holdings, Inc dated as of April 18, 2016

Form 10-Q/A (Exhibit 10.1)

July 20, 2016

Schedule Filing Date SEC File /

Acquisition Agreement, dated as of December 17, 2014, by and among the Registrant, Pieris AG and the former stockholders of Pieris AG named therein Form 8-K (Exhibit 2.1) December 18, 2014 333-190728

Amended and Restated Articles of Incorporation of the Registrant Form 8-K (Exhibit 3.1) December 18, 2014 333-190728

Certificate of Designation of Series A Convertible Preferred Stock Form 10-Q (Exhibit 3.1) August 11, 2016 001-37471

Certificate of Designation of Series B Convertible Preferred Stock Form 8-K (Exhibit 3.1) February 4, 2019 001-37471

Certificate of Designation of Series C Convertible Preferred Stock Form 8-K (Exhibit 3.1) November 4, 2019 001-37471

3.5 Certificate of Designation of Series D Convertible Preferred Stock Form 8-K (Exhibit 3.1) April 6, 2020 001-37471

3.6 Amended and Restated Bylaws of the Registrant Form 8-K (Exhibit 3.2) December 18, 2014 333-190728

3.7 Amendment to the Amended and Restated Bylaws of the Registrant Form 8-K (Exhibit 3.1) September 3, 2019 001-37471

Form of Common Stock certificate Form 8-K (Exhibit 4.1) December 18, 2014 333-190728

Form of Common Stock certificate Form 10-K (Exhibit 4.2) March 23, 2016 001-37471

4.3 Description of Registered Securities Form 10-K (Exhibit 4.3) March 13, 2020 001-37471

2014 Employee, Director and Consultant Equity Incentive Plan # Form 8-K (Exhibit 10.1) December 18, 2014 333-190728

Form of Stock Option Award Agreement under the Registrant’s 2014 Employee, Director and Consultant Equity Incentive Plan # Form 8-K (Exhibit 10.2) December 18, 2014 333-190728

2016 Employee, Director and Consultant Equity Incentive Plan # Form 8-K (Exhibit 10.1) July 1, 2016 001-37471

Form of Stock Option Award Agreement under the Registrant’s 2016 Employee, Director and Consultant Equity Incentive Plan # Form 10-K (Exhibit 10.4) March 30, 2017 001-37471

2018 Employee, Director and Consultant Equity Incentive Plan # Form 8-K (Exhibit 10.1) July 26, 2018 001-37471

Form of Stock Option Award Agreement under the Registrant’s 2018 Employee, Director and Consultant Equity Incentive Plan # Form S-8 (Exhibit 10.2) August 9, 2018 333-226733

2018 Employee Stock Purchase Plan # Form 8-K (Exhibit 10.2) July 26, 2018 001-37471

2019 Employee, Director and Consultant Equity Incentive Plan # Form 8-K (Exhibit 10.1) July 31, 2019 001-37471

10.9 2020 Employee, Director and Consultant Equity Incentive Plan # Form 8-K (Exhibit 10.1) June 29, 2020 001-37471

Research and Licensing Agreement by and between Pieris AG and Technische Universität München, dated as of July 26, 2007 ± Form 10-K (Exhibit 10.10) March 30, 2015 333-190728

10.11 License and Transfer Agreement by and between the Company and Enumeral Biomedical Holdings, Inc dated as of April 18, 2016 ± Form 10-Q/A (Exhibit 10.1) July 20, 2016 001-37471

10.12 Definitive License and Transfer Agreement by and between the Company and Enumeral Biomedical Holdings, Inc.

dated as of June 6, 2016

Form 10-Q (Exhibit 10.1)

August 11, 2016

dated as of June 6, 2016 ± Form 10-Q (Exhibit 10.1) August 11, 2016 001-37471

Amendment No.1 to Definitive License and Transfer Agreement by and between the Company and Enumeral Biomedical Holdings, Inc.

effective as of January 3, 2017

Form 10-K (Exhibit 10.14)

March 30, 2017

Collaboration Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH, Les Laboratoires Servier and Institut de Recherches Internationales Servier, dated as of January 4, 2017

Form 10-K/A (Exhibit 10.15)

April 26, 2018

Non-Exclusive Anticalin Platform Technology License Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH, Les Laboratoires Servier and Institut de Recherches Internationales Servier, dated as of January 4, 2017

Form 10-K/A (Exhibit 10.16)

April 26, 2018

effective as of January 3, 2017 Form 10-K (Exhibit 10.14) March 30, 2017 001-37471

Collaboration Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH, Les Laboratoires Servier and Institut de Recherches Internationales Servier, dated as of January 4, 2017 ± Form 10-K/A (Exhibit 10.15) April 26, 2018 001-37471

First Amendment to the License and Collaboration Agreement by and between Les Laboratoires Servier, Institut de Recherches Internationales Servier, Pieris Pharmaceuticals, Inc.

and Pieris Pharmaceuticals GmbH, effective as of June 16, 2017

Form 10-Q/A (Exhibit 10.4)

April 26, 2018

and Pieris Pharmaceuticals GmbH, effective as of June 16, 2017 ± Form 10-Q/A (Exhibit 10.4) April 26, 2018 001-37471

Letter Amendment to the License and Collaboration Agreement by and between Les Laboratoires Servier, Institut de Recherches Internationales Servier, Pieris Pharmaceuticals, Inc.

and Pieris Pharmaceuticals GmbH, effective as of January 3, 2020

Exclusive Option Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH and ASKA Pharmaceutical Co., Ltd., dated as of February 27, 2017

Form 10-Q/A (Exhibit 10.3)

April 26, 2018

and Pieris Pharmaceuticals GmbH, effective as of January 3, 2020 + Form 10-K (Exhibit 10.16) March 13, 2020 001-37471

Exclusive Option Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH and ASKA Pharmaceutical Co., Ltd., dated as of February 27, 2017 ± Form 10-Q/A (Exhibit 10.3) April 26, 2018 001-37471

License & Collaboration Agreement by and between Pieris Pharmaceuticals Inc., Pieris Pharmaceuticals GmbH & Pieris Australia Pty.

Limited and AstraZeneca AB, dated as of May 2, 2017

Form 10-Q/A (Exhibit 10.1)

April 26, 2018

Limited and AstraZeneca AB, dated as of May 2, 2017 ± Form 10-Q/A (Exhibit 10.1) April 26, 2018 001-37471

Non-Exclusive Anticalin® Platform Technology License Agreement, by and between Pieris Pharmaceuticals Inc., Pieris Pharmaceuticals GmbH and Pieris Australia Pty.

Limited and AstraZeneca AB, dated as of May 2, 2017

Form 10-Q/A (Exhibit 10.2)

April 26, 2018

License and Collaboration Agreement by and among the Registrant, Pieris GmbH and Seattle Genetics, Inc., dated February 8, 2018

Form 10-Q (Exhibit 10.1)

Non-Exclusive Anticalin Platform Technology License Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH and Seattle Genetics, Inc., dated February 8, 2018

Form 10-Q (Exhibit 10.2)

Form of Indemnification Agreement by and between the Registrant and each of its current directors and executive officers

Form 8-K (Exhibit 10.10)

December 18, 2014

Limited and AstraZeneca AB, dated as of May 2, 2017 ± Form 10-Q/A (Exhibit 10.2) April 26, 2018 001-37471

License and Collaboration Agreement by and among the Registrant, Pieris GmbH and Seagen, Inc., dated February 8, 2018 ± Form 10-Q (Exhibit 10.1) May 10, 2018 001-37471

Amendment No.

1 to License and Collaboration Agreement by and among the Registrant, Pieris GmbH and Seagen, Inc., dated June 2, 2020 Form 10-Q (Exhibit 10.2) August 10, 2020 001-37471

Non-Exclusive Anticalin Platform Technology License Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH and Seagen, Inc., dated February 8, 2018 ± Form 10-Q (Exhibit 10.2) May 10, 2018 001-37471

Amendment No.

1 to Non-Exclusive Anticalin Platform Technology License Agreement by and among the Registrant, Pieris Pharmaceuticals GmbH and Seagen, Inc., dated June 2, 2020 Form 10-Q (Exhibit 10.3 August 10, 2020 001-37471

Clinical Trial Collaboration and Supply Agreement by and among the Registrant and Eli Lilly and Company, dated August 10, 2020 Form 10-Q (Exhibit 10.1) November 4, 2020 001-37471

Form of Indemnification Agreement by and between the Registrant and each of its current directors and executive officers # Form 8-K (Exhibit 10.10) December 18, 2014 333-190728

Employment Agreement by and between the Registrant and Stephen S.

Yoder, dated as of December 17, 2014

Form 8-K (Exhibit 10.15)

December 18, 2014

Yoder, dated as of December 17, 2014 # Form 8-K (Exhibit 10.15) December 18, 2014 333-190728

Employment Agreement by and between the Registrant and Louis A.

Matis, M.D., dated as of July 20, 2015

Form 10-Q (Exhibit 10.1)

November 13, 2015

Matis, M.D., dated as of July 20, 2015 # Form 10-Q (Exhibit 10.1) November 13, 2015 001-37471

Letter Agreement by and between the Registrant and Louis A.

Matis, M.D., dated as of January 8, 2020

Non-Employee Director Compensation Policy, as amended

Lease Agreement by and between Pieris AG and Födergesellschft IZB mbH, dated as of May 4, 2011

Form 8-K (Exhibit 10.23)

December 18, 2014

Agreement of Sublease by and between Berenberg Capital Markets LLC and the Registrant, dated as of August 27, 2015

Form 10-Q (Exhibit 10.3)

November 13, 2015

Subtenant Recognition and Attornment Agreement, by and among Pieris Pharmaceuticals, Inc., 225 State Street, LLC, and Berenberg Capital Markets LLC, dated as of May 31, 2019

Form 10-Q (Exhibit 10.29.1)

August 9, 2019

Lease Agreement by and between Pieris GmbH and Hallbergmoos Grundvermögen GmbH, dated October 24, 2018

Form 10-K (Exhibit 10.30)

March 18, 2019

Matis, M.D., dated as of January 3, 2020 # Form 10-K (Exhibit 10.25) March 13, 2020 001-37471

Non-Employee Director Compensation Policy, as amended # Form 10-K (Exhibit 10.26) March 13, 2020 001-37471

Lease Agreement by and between Pieris AG and Födergesellschft IZB mbH, dated as of May 4, 2011 Form 8-K (Exhibit 10.23) December 18, 2014 333-190728

Agreement of Sublease by and between Berenberg Capital Markets LLC and the Registrant, dated as of August 27, 2015 Form 10-Q (Exhibit 10.3) November 13, 2015 001-37471

Subtenant Recognition and Attornment Agreement, by and among Pieris Pharmaceuticals, Inc., 225 State Street, LLC, and Berenberg Capital Markets LLC, dated as of May 31, 2019 Form 10-Q (Exhibit 10.29.1) August 9, 2019 001-37471

Lease Agreement by and between Pieris GmbH and Hallbergmoos Grundvermögen GmbH, dated October 24, 2018 Form 10-K (Exhibit 10.30) March 18, 2019 001-37471

Amendment No.

1 to Lease Agreement by and between Pieris GmbH and Hallbergmoos Grundvermögen GmbH, dated May 21, 2019 (English translation)

1 to Lease Agreement by and between Pieris GmbH and Hallbergmoos Grundvermögen GmbH, dated May 21, 2019 (English translation) Form 10-K (Exhibit 10.31) March 13, 2020 001-37471

Amendment No.

2 to Lease Agreement by and between Pieris GmbH and Hallbergmoos Grundvermögen GmbH, dated February 13, 2020 (English translation)

Form of Securities Purchase Agreement, dated December 17, 2014, by and among the Registrant and the Purchasers

Form 8-K (Exhibit 10.1)

December 23, 2014

Form of Registration Rights Agreement, dated December 17, 2014, by and among the Registrant and the investors party thereto

Form 8-K (Exhibit 10.2)

December 23, 2014

Form of Warrant to Purchase Common Stock, dated December 17, 2014, issued by the Registrant

Form 8-K (Exhibit 10.3)

December 23, 2014

Securities Purchase Agreement, dated June 2, 2016, by and among the Registrant and the Investors named therein

Form 8-K (Exhibit 10.1)

Registration Rights Agreement, dated June 2, 2016, by and among the Registrant and the Investors named therein

Form 8-K (Exhibit 10.3)

Form of Warrant to purchase Common Stock, dated June 2, 2016, issued by the Registrant

Form 8-K (Exhibit 10.2)

Securities Purchase Agreement, dated November 2, 2019, by and among the Company and the Investors named therein

Form 8-K (Exhibit 10.1)

November 4, 2019

Registration Rights Agreement, dated November 2, 2019, by and among the Company and the Investors named therein

Form 8-K (Exhibit 10.3)

November 4, 2019

Form of Warrant to purchase Common Stock, dated November 2, 2019, issued by the Registrant

Form 8-K (Exhibit 10.2)

November 4, 2019

2 to Lease Agreement by and between Pieris GmbH and Hallbergmoos Grundvermögen GmbH, dated February 13, 2020 (English translation) Form 10-K (Exhibit 10.32) March 13, 2020 001-37471

Form of Securities Purchase Agreement, dated December 17, 2014, by and among the Registrant and the Purchasers Form 8-K (Exhibit 10.1) December 23, 2014 333-190728

Form of Registration Rights Agreement, dated December 17, 2014, by and among the Registrant and the investors party thereto Form 8-K (Exhibit 10.2) December 23, 2014 333-190728

Form of Warrant to Purchase Common Stock, dated December 17, 2014, issued by the Registrant Form 8-K (Exhibit 10.3) December 23, 2014 333-190728

Securities Purchase Agreement, dated June 2, 2016, by and among the Registrant and the Investors named therein Form 8-K (Exhibit 10.1) June 6, 2016 001-37471

Registration Rights Agreement, dated June 2, 2016, by and among the Registrant and the Investors named therein Form 8-K (Exhibit 10.3) June 6, 2016 001-37471

Form of Warrant to purchase Common Stock, dated June 2, 2016, issued by the Registrant Form 8-K (Exhibit 10.2) June 6, 2016 001-37471

Securities Purchase Agreement, dated November 2, 2019, by and among the Company and the Investors named therein Form 8-K (Exhibit 10.1) November 4, 2019 001-37471

Registration Rights Agreement, dated November 2, 2019, by and among the Company and the Investors named therein Form 8-K (Exhibit 10.3) November 4, 2019 001-37471

Form of Warrant to purchase Common Stock, dated November 2, 2019, issued by the Registrant Form 8-K (Exhibit 10.2) November 4, 2019 001-37471

Exchange Agreement, dated January 30, 2019, by and among the Registrant and Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., and Biotechnology Value Trading Fund OS, L.P.

Form 8-K (Exhibit 10.1)

February 4, 2019

Form 8-K (Exhibit 10.1) February 4, 2019 001-37471

Exchange Agreement, dated March 31, 2020, by and among the Registrant and Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., and Biotechnology Value Trading Fund OS, L.P.

Form 8-K (Exhibit 10.1) April 6, 2020 001-37471

Open Market Sale Agreement, dated as of August 9, 2019, by and between Pieris Pharmaceuticals, Inc.

and Jefferies LLC

Form 10-Q (Exhibit 10.1)

August 9, 2019

Managing Director Services Agreement by and between Pieris Pharmaceuticals GmbH and Hitto Kaufmann, Ph.D., dated as of August 30, 2019

Form 10-Q (Exhibit 10.2)

November 12, 2019

Non-Qualified Stock Option Agreement by and between the Registrant and Hitto Kaufmann, Ph.D., dated as of August 30, 2019

Form 10-Q (Exhibit 10.3)

November 12, 2019

and Jefferies LLC Form 10-Q (Exhibit 10.1) August 9, 2019 001-37471

Managing Director Services Agreement by and between Pieris Pharmaceuticals GmbH and Hitto Kaufmann, Ph.D., dated as of August 30, 2019 # Form 10-Q (Exhibit 10.2) November 12, 2019 001-37471

Non-Qualified Stock Option Agreement by and between the Registrant and Hitto Kaufmann, Ph.D., dated as of August 30, 2019 # Form 10-Q (Exhibit 10.3) November 12, 2019 001-37471

Corporate Code of Ethics and Conduct and Whistleblower Policy *

6 unchanged sentences

Yoder, Chief Executive Officer and President, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.

Section 1350 **

Certification of Thomas Bures, Vice President of Finance, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Section 1350 **

101.INS XBRL Instance Document *

101.SCH XBRL Taxonomy Extension Schema Document *

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB XBRL Taxonomy Extension Label Linkbase Document *

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

* Filed herewith

10 unchanged sentences

PIERIS PHARMACEUTICALS, INC.

March 13, 2020

March 31, 2021 By:

/s/ Stephen S.

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below and on the dates indicated.

Signature Title Date

/s/ Stephen S.

President, Chief Executive Officer and

March 13, 2020

Director (Principal Executive Officer )

/s/ Thomas Bures

Vice President, Finance and

March 13, 2020

Treasurer (Principal Financial and Accounting Officer )

Yoder President, Chief Executive Officer and March 31, 2021

Yoder Director (Principal Executive Officer )

/s/ Thomas Bures Vice President, Finance and March 31, 2021

Thomas Bures Treasurer (Principal Financial and Accounting Officer )

/s/ James Geraghty

Chairman of the Board of Directors

March 13, 2020

Chairman of the Board of Directors March 31, 2021

James Geraghty

/s/ Jean-Pierre Bizzari, M.D.

March 13, 2020

Jean-Pierre Bizzari, M.D.

/s/ Michael Richman

March 13, 2020

Director March 31, 2021

Michael Richman

March 13, 2020

Director March 31, 2021

/s/ Peter Kiener, D.Phil.

March 13, 2020

Director March 31, 2021

Peter Kiener, D.Phil.

/s/ Christopher Kiritsy

March 13, 2020

Director March 31, 2021

Christopher Kiritsy

/s/ Ann Barbier, M.D., Ph.D.

March 13, 2020

Director March 31, 2021

Ann Barbier, M.D., Ph.D.

1 unchanged sentence

Sherman, M.D.

March 13, 2020

Director March 31, 2021

Sherman, M.D.

10 unchanged sentences

We have audited the accompanying consolidated balance sheets of Pieris Pharmaceuticals, Inc.

(the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 13, 2020 expressed an adverse opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2020 due to the adoption of Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606) , and related amendments.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842), and related amendments.

2018-18, Collaborative Arrangements:

Clarifying the Interaction Between Topic 808 and Topic 606.

Basis for Opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

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.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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.

1 unchanged sentence

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

2 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued and Prepaid Clinical Trial Expenses

Description of the Matter As discussed in Note 2 to the consolidated financial statements, the Company records research and development expenses, which include expenses related to clinical trials, as incurred.

The Company’s determination of clinical trial costs incurred, as well as the related accrued and prepaid expenses at each reporting period incorporates judgment and utilizes various assumptions.

Such judgments and assumptions include an evaluation of the information provided to the Company by third parties on actual costs incurred but not yet billed, estimated project timelines and patient enrollment.

Payments for these activities are based on the terms of the individual arrangements, which differ from the pattern of costs incurred.

Auditing the Company’s accrued and prepaid clinical trial expenses was especially challenging due to the large volume of information received from multiple sources that perform service on the Company’s behalf.

While the Company’s estimates of accrued and prepaid clinical trial expenses are primarily based on information received related to each study from its vendors, the Company may need to make an estimate for additional costs incurred based on management judgment.

Additionally, due to the duration of the work performed under clinical trials and the timing of invoices received from vendors, the actual amounts incurred are not typically known at the time the financial statements are issued.

How We Addressed the Matter in Our Audit

To evaluate the accrued and prepaid clinical trial expenses, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimates and evaluating the significant assumptions that are used by management to estimate the recorded accruals and prepayments.

We corroborated the progress of research and development activities associated with clinical trials through discussion with the Company’s research and development personnel that oversee the research and development activities.

We inspected the Company’s third-party contracts, amendments, and any pending change orders to assess the impact on amounts recorded.

We also reviewed information received by the Company directly from certain third parties, which indicated the third parties’ estimate of costs incurred to date.

In addition, we performed analytics over fluctuations in accruals and prepaids by vendor throughout the period subject to audit and compared subsequent invoices received from third parties to amounts accrued.

/s/ Ernst & Young LLP

14 unchanged sentences

Other non-current assets 3,309 3,146

Total assets $ 105,010 $ 141,097

Liabilities and stockholders’ equity

9 unchanged sentences

Stockholders’ equity:

Preferred stock, $0.001 par value per share, 10,000,000 shares authorized at December 31, 2019 and 2018, respectively

Series A Convertible, 2,907 shares issued and outstanding at December 31, 2019 and 2018, respectively

Series B Convertible, 5,000 and 0 shares issued and outstanding at December 31, 2019 and 2018, respectively.

Series C Convertible, 3,522 and 0 shares issued and outstanding at December 31, 2019 and 2018, respectively.

Preferred stock, $ 0.001 par value per share, 10,000,000 shares authorized and 14,429 and 11,429 shares issued and outstanding at December 31, 2020 and 2019, respectively

Common stock, $ 0.001 par value per share, 300,000,000 shares authorized and 56,002,815 and 55,212,437 issued and outstanding at December 31, 2020 and 2019, respectively

9 unchanged sentences

Years Ended December 31,

Customer revenue $ 23,911 $ 32,065

Collaboration revenue 5,412 14,214

Total revenue 29,323 46,279

Operating expenses

4 unchanged sentences

Interest income 511 1,714

Other (expense) income, net

Other expense, net ( 3,656 ) ( 26 )

Loss before income taxes ( 37,066 ) ( 25,469 )

Benefit for income tax

Income tax provision 164 —

Net loss ( 37,230 ) ( 25,469 )

Foreign currency translation 1,630 973

Unrealized gain on available-for-sale securities, net of taxes of $0 and $164, respectively

Unrealized gain on available-for-sale securities 70 14

Comprehensive loss $ ( 35,530 ) $ ( 24,482 )

Reconciliation of net loss to net loss attributable to common stockholders:

Net loss $ ( 37,230 ) $ ( 25,469 )

Accretion of Series C convertible preferred stock — ( 2,830 )

8 unchanged sentences

(In thousands)

Convertible series A

preferred shares

Convertible series B

preferred shares

Convertible series C

preferred shares

Common Shares

preferred shares Common shares Additional

capital Accumulated

comprehensive

loss Accumulated

deficit Total equity

Balance as of January 1, 2019 3 — 54,151 54 189,929 ( 2,982 ) ( 147,066 ) 39,935

Net loss — — — — — — ( 25,469 ) ( 25,469 )

Foreign currency translation adjustment — — — — — 973 — 973

Unrealized gain on investments, net of $164 tax provision

Unrealized gain on investments — — — — — 14 — 14

Adoption of ASC 606, Revenue from Contracts with Customers

— — — — — — ( 1,641 ) ( 1,641 )

Stock based compensation expense — — — — 5,374 — — 5,374

Issuance of common stock resulting from exercise of stock options — — 279 — 553 — — 553

Issuance of common stock resulting from purchase of employee stock purchase plan shares — — 113 — 369 — — 369

Issuance of common stock resulting from exercise of warrants — — 176 — 246 — — 246

Issuance of common stock net $3,374 in offering costs

Preferred stock conversion

Issuance of common stock and Series C preferred stock resulting from offering, net of $ 1.0 million in offering costs

4 5,493 6 30,992 — — 30,998

Preferred stock conversion (Series B) 5 — ( 5,000 ) ( 5 ) 5 — — —

Balance as of December 31, 2019 11 $ — 55,212 $ 55 $ 227,468 $ ( 1,995 ) $ ( 174,176 ) $ 51,352

Net loss — — — — — — ( 37,230 ) ( 37,230 )

Foreign currency translation adjustment — — — — — 1,630 — 1,630

Unrealized gain on investments — — — — — 70 — 70

Adoption of ASC 606, Revenue from Contracts with Customers

Stock based compensation expense — — — — 5,090 — — 5,090

1 unchanged sentence

Issuance of common stock resulting from purchase of employee stock purchase plan shares — — 70 — 200 0 0 200

Issuance of common stock resulting from exercise of warrants

Issuance of common stock resulting from offering, net of $1,005 in offering costs

Preferred stock conversion

Issuance of common stock pursuant to at-the-market offering program, net of $ 0.4 million in offering costs

— 3,571 4 9,620 — — 9,624

Preferred stock conversion (Series D) 3,000 — ( 3,000 ) ( 3 ) 3 — — —

Balance as of December 31, 2020 14 — 56,003 56 242,672 ( 295 ) ( 211,406 ) 31,027

The accompanying notes are an integral part of these consolidated financial statements.

4 unchanged sentences

Operating activities:

Net loss $ ( 37,230 ) $ ( 25,469 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 2,311 632

Right-of-use asset amortization ( 184 ) 408

1 unchanged sentence

Other non-cash transactions ( 133 ) ( 69 )

Realized investment gains

Deferred tax benefit

Realized investment gain/loss 471 ( 1,161 )

Deferred tax liability 164 —

Foreign currency re-measurement loss ( 8 ) ( 61 )

12 unchanged sentences

Purchase of investments ( 41,499 ) ( 59,317 )

Net cash provided by/(used in) investing activities

Net cash provided by investing activities 39,212 9,838

Financing activities:

10 unchanged sentences

Accretion of Series C convertible preferred stock $ — $ 2,830

Cash paid for income taxes

Net unrealized gain on investments $ 70 $ —

9 unchanged sentences

The Company moved its research facility to Hallbergmoos, Germany in February 2020.

Pieris's clinical pipeline includes an inhaled IL-4Rα antagonist Anticalin protein to treat uncontrolled asthma and an immuno-oncology, or IO, bispecific targeting HER2 and 4-1BB.

Pieris's clinical pipeline includes an inhaled IL-4Rα antagonist Anticalin protein to treat moderate-to-severe asthma and an immuno-oncology, or IO, bispecific targeting 4-1BB and HER2.

The Company’s core Anticalin technology and platform was developed in Germany, and the Company has partnership arrangements with several major multi-national pharmaceutical companies.

As of December 31, 2019 , the Company had cash, cash equivalents and investments of $104.2 million .

T he Company expects that its existing cash, cash equivalents, and investments, are sufficient to support operating expense and capital expenditure requirements for at least 12 months from the date of this filing .

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, the need for additional capital, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval and reimbursement for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development of technological innovations by competitors, reliance on third party manufacturers and the ability to transition from pilot-scale production to large-scale manufacturing of products.

As of December 31, 2020, cash and cash equivalents were $ 70.4 million.

In March 2021, the Company amended its strategic collaboration agreement with Seagen which resulted in their purchase of $ 13.0 million of the Company’s common stock (See Note 3).

In March 2021, the Company earned a $ 13.0 million milestone from AstraZeneca related to the initiation of the phase 2a study for PRS-060/AZD1402 and AstraZeneca agreed to purchase $ 10.0 million of the Company's common stock (See Note 3).

The Company’s net loss was $ 37.2 million and $ 25.5 million for the years ended December 31, 2020 and 2019, respectively.

The Company has incurred net losses since inception and had an accumulated deficit of $ 211.4 million as of December 31, 2020.

Net losses and negative cash flows have had, and will continue to have, an adverse effect on the Company’s stockholders’ equity and working capital.

The Company expects to continue to incur operating losses for at least the next several years.

The future success of the Company is dependent on its ability to identify and develop its product candidates, expand its corporate infrastructure and ultimately upon its ability to attain profitable operations.

The Company has devoted substantially all of its financial resources and efforts to research and development and general and administrative expenses to support such research and development.

The Company has several research and development programs underway in varying stages of development and it expects that these programs will continue to require increasing amounts of cash for development, conducting clinical trials, and testing and manufacturing of product material.

Cash necessary to fund operations will increase significantly over the next several years as the Company continues to conduct these activities necessary to pursue governmental regulatory approval of clinical-stage programs and other product candidates.

The Company plans to raise additional capital to fulfill its operating and capital requirements through public or private equity financings, utilization of its current ATM program, strategic collaborations, licensing arrangements, and/or the achievement of milestones under its collaborative agreements.

The funding requirements of the Company’s operating plans, however, are based on estimates that are subject to risks and uncertainties and may change as a result of many factors currently unknown.

Although management continues to pursue these funding plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Until such time as the Company can generate substantial product revenues, if ever, the Company expects to finance its cash needs through a combination of equity offerings, debt financings, strategic partnerships and licensing arrangements.

The terms of any future financing may adversely affect the holdings or the rights of the Company’s existing stockholders.

The Company believes that its currently available funds will be sufficient to fund the Company’s operations through at least the next twelve months from the issuance of this Annual Report on Form 10-K.

The Company's belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties.

If actual results are different from management’s estimates, the Company may need to seek additional funding.

If the Company is unable to obtain additional

funding on acceptable terms when needed, it may be required to defer or limit some or all of its research, development, and/or clinical projects.

Summary of Significant Accounting Policies

6 unchanged sentences

GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures at the date of the financial statements and during the reporting period.

Significant estimates are used for, but are not limited to, revenue recognition;

Significant estimates are used for, but are not limited to, assumptions used to estimate its ability to continue as a going concern;

revenue recognition;

deferred tax assets, deferred tax liabilities and valuation allowances;

determination of the incremental borrowing rate to calculate right-of-use assets and lease liabilities;

beneficial conversion features;

19 unchanged sentences

Evidence considered in this assessment includes reasons for the impairment, the severity and the duration of the impairment, and changes in value subsequent to period end.

As of December 31, 2019 , there were no investments with a fair value that was significantly lower than the amortized cost basis or any investments that had been in an unrealized loss position for a significant period.

Concentration of Credit Risk and Off-Balance Sheet Risk

2 unchanged sentences

The Company’s cash, cash equivalents, and investments are held in accounts with financial institutions that management believes are creditworthy.

The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentration of credit risk.

The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company

believes minimizes the exposure to concentration of credit risk.

The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds.

29 unchanged sentences

Maintenance and repairs to these assets are charged to expenses as occurred.

During the year ended December 31, 2020, the Company added material assets related to the February 2020 move to a new research and development facility in Hallbergmoos, Germany.

The Company expanded its presentation of property and equipment to be more descriptive and updated the useful life for one asset category on a prospective basis.

The disclosures for property and equipment, net as of December 31, 2019 have

been reclassified to conform with the current period presentation.

The estimated useful life of the different groups of property and equipment is as follows:

Asset Classification

Estimated useful life (in years)

Leasehold improvements

shorter of useful life or remaining life of the lease

Laboratory equipment

Office and computer equipment

Asset Classification Estimated useful life (in years)

Leasehold improvements shorter of useful life or remaining life of the lease

Laboratory furniture and equipment 8 - 14

Office furniture and equipment 5 - 13

Computer and equipment 3 - 7

Impairment of Long-lived Assets

20 unchanged sentences

The Company classifies payments received as revenue and payments made as a reduction of revenue in the period in which they are earned.

In November 2018, the FASB issued ASU 2018-18, which makes targeted improvements to U.S.

GAAP for collaborative arrangements, including:

clarification that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers , or ASC 606, when the collaborative arrangement participant is a customer in the context of a unit of account;

adding unit-of-account guidance in ASC 808 to align with the guidance in ASC 606;

and a requirement that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under ASC 606 is precluded if the collaborative arrangement participant is not a customer.

The guidance per ASU 2018-18 was adopted retrospectively to the date of initial application of ASC 606.

The Company adopted ASU 2018-18 in the first quarter of 2020.

The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements;

however, revenue recognized under a collaborative arrangement involving a participant that is not a customer (Collaboration revenue) is now

presented separately from Customer revenue.

This change has been reflected in the consolidated statement of operations and the 2019 amounts were adjusted to conform to ASC 808 as follows:

Twelve Months Ended December 31, 2019

As reported pre-adoption ASC 808 Adoption Adjustment As reported post-adoption

Customer revenue $ 43,646 $ ( 11,581 ) $ 32,065

Collaboration revenue 2,633 11,581 14,214

Total Revenue $ 46,279 $ — $ 46,279

Revenue from Contracts with Customers

26 unchanged sentences

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations or in the case of certain variable consideration to one or more performance obligations.

The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract.

The Company must develop

assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract.

The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation.

amounts allocated to each performance obligation are consistent with the amount the Company would expect to receive for each performance obligation.

Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amount the Company would expect to receive for each performance obligation.

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price, excluding estimates of variable consideration that are constrained, that is allocated to that performance obligation on a relative standalone selling price basis.

21 unchanged sentences

Certain costs to obtain customer contracts, including success-based fees paid to third-party service providers, and costs to fulfill customer contracts are capitalized in accordance with FASB ASC 340, Other Assets and Deferred Costs , or ASC 340.

These costs are amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

costs are amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

The Company will expense the amortization of costs to obtain customer contracts to general and administrative expense and costs to fulfill customer contracts to research and development expense.

Impact of Adopting ASC 606 on the Financial Statements

As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to the consolidated balance sheet as of January 1, 2019:

As Reported, December 31, 2018

ASC 606 Adjustment

Adjusted, January 1, 2019

Consolidated Balance Sheet Data (in thousands):

Prepaid expenses and other current assets

Other non-current assets

Deferred revenue, net of current portion

Total Liabilities

Accumulated deficit

Total stockholders' equity

Total liabilities and stockholders' equity

These changes were primarily caused by the differences in determining and allocating transaction price under ASC 606 and costs to obtain certain contracts under ASC 340.

The adoption of ASC 606 did not impact income taxes, as the Company fully reserves its net deferred tax assets.

Therefore, the change to the Company's net deferred tax asset position due to adoption was offset by a corresponding change to the valuation allowance.

The following table compares the reported consolidated balance sheet and statement of operations, as of December 31, 2019 and for the twelve months ended December 31, 2019 , to the pro-forma amounts had the previous guidance been in effect:

December 31, 2019

As Reported, ASC 606

Adjusted Balance, ASC 605

Consolidated Balance Sheet Data (in thousands):

Prepaids and other current assets

Other non-current assets

Deferred revenues, current portion

Deferred revenue, net of current portion

Total Liabilities

Accumulated Deficit

Total stockholders' equity

Total liabilities and stockholders' equity

December 31, 2019

As Reported, ASC 606

Adjusted Balance, ASC 605

Consolidated Statement of Operations Data (in thousands):

General and administrative expenses

Loss from operations

Loss before income taxes

Comprehensive loss

These changes were primarily caused by the revenue recognition and related cost amortization patterns due to differences in the determination and allocation of transaction price under ASC 606 and costs to obtain certain contracts under ASC 340.

The application of ASC 606 did not have an impact on the Company’s net cash used in operating activities for the twelve months ended December 31, 2019 but did result in offsetting adjustments to net loss, change in other current and non-current assets, and the change in deferred revenue presented within the consolidated statements of cash flows for that period.

Research and Development

19 unchanged sentences

Due to the limited operating history of the Company as a public entity and a lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded.

selecting these public companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical

When selecting these public companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical

share price information sufficient to meet the expected term of the stock-based awards.

13 unchanged sentences

The Company adopted ASC 842 in the fourth quarter of 2019 using the required modified retrospective approach, effective January 1, 2019.

As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases, or ASC 840.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard expedients which allows the Company to not reassess previous accounting conclusions around whether arrangements are or contain leases, the classification of its existing leases as of the transition date, and the treatment of initial direct costs.

15 unchanged sentences

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification.

A lease modification results in a separate contract when the modification grants the lessee an additional right

of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use.

A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use.

When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

The adoption of the new standard resulted in recording a transition adjustment on January 1, 2019 of right-of-use assets of $0.9 million and lease liabilities of $0.9 million for operating leases and the derecognition of deferred rent originally accounted for under legacy guidance.

The adoption did not have a material impact on the consolidated statement of operations.

See Note 12 for additional details.

Impact of Adopting ASC 842 on the Financial Statements

As Reported, December 31, 2018

ASC 842 Adjustment

Adjusted, January 1, 2019

Consolidated Balance Sheet Data (in thousands):

Operating lease right-of-use assets (1)

Deferred rent (2)

Current operating lease liabilities (3)

Non-current operating lease liabilities (3)

(1) Represents capitalization of operating lease right-of-use assets.

(2) Represents reclassification of deferred rent to operating lease right-of-use assets.

(3) Represents recognition of operating lease liabilities.

Contingencies

13 unchanged sentences

Recent Accounting Pronouncements Not Yet Adopted

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):Clarifying the Interaction between Topic 808 and Topic 606 , or ASU 2018-18.

ASU 2018-18 makes targeted improvements to generally accepted

accounting principles for collaborative arrangements, including:

clarification that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account;

adding unit-of-account guidance in Topic 808 to align with the guidance in ASC 606;

This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year.

The Company is currently evaluating the impact of adoption, but this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No.

6 unchanged sentences

Subsequently, in November 2018, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses , or ASU 2018-19, which clarifies codification and corrects unintended application of the guidance.

2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses , which clarifies codification and corrects unintended application of the guidance.

In November 2019, the FASB issued ASU No.

2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses , or ASU 2019-11 which clarifies or addresses specific issues about certain aspects of ASU 2016-13.

2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses , which clarifies or addresses specific issues about certain aspects of ASU 2016-13.

In November 2019 the FASB also issued ASU No.

2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates , or ASU 2019-10, which delays the effective date of ASU 2016-13 by three years for certain smaller reporting companies such as the Company.

Effective Dates , which delays the effective date of ASU 2016-13 by three years for certain smaller reporting companies such as the Company.

The guidance in ASU 2016-13 is effective for the Company for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted.

The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

The Company is still evaluating the impact of the adoption of this standard.

The Company has considered other recent accounting pronouncements and concluded that they are either not applicable to the business, or that the effect is not expected to be material to the unaudited consolidated financial statements as a result of future adoption.

1 unchanged sentence

The Company has generated revenue from contracts with customers (option, license and collaboration agreements), which include upfront payments for licenses or options to obtain licenses, payments for research and development services and milestone payments.

During the years ended December 31, 2019 and 2018 , respectively, the Company recognized revenues as follows (in thousands):

Years Ended December 31,

Revenue from contract with customers

Collaboration revenue

Other revenues

Total Revenue

During the years ended December 31, 2020 and 2019, respectively, the Company recognized revenue from the following strategic partnerships and other license agreements (in thousands):

Years Ended December 31,

Seattle Genetics

AstraZeneca $ 8,308 $ 25,828

Seagen 9,702 2,493

Servier 11,313 15,048

Other — 2,910

Total Revenue $ 29,323 $ 46,279

Under the Company´s existing strategic partnerships and other license agreements, the Company could receive the following potential milestone payments (in millions):

Research, Development, Regulatory & Commercial Milestones

Sales Milestones

Seattle Genetics

Under the Company´s existing strategic partnerships and other license agreements, the Company could receive the following potential milestone payments (in millions) as of December 31, 2020:

Research, Development, Regulatory & Commercial Milestones Sales Milestones

AstraZeneca $ 1,111 $ 960

Servier 247 221

Seagen 764 450

Total potential milestone payments $ 2,122 $ 1,631

Strategic Partnerships

Seattle Genetics

On February 8, 2018, the Company entered into a license and collaboration agreement, or the Seattle Genetics Collaboration Agreement, and a non-exclusive Anticalin platform technology license agreement, or the Seattle Genetics Platform License, and together with the Seattle Genetics Collaboration Agreement, the Seattle Genetics Agreements, with Seattle Genetics, Inc., or Seattle Genetics, pursuant to which the parties will develop multiple targeted bispecific IO treatments for solid tumors and blood cancers.

Under the terms of the Seattle Genetics Agreements, the companies will pursue multiple antibody-Anticalin fusion proteins during the research phase.

The Seattle Genetics Agreements provide Seattle Genetics a base option to select up to three programs for further development.

On February 8, 2018, the Company entered into a license and collaboration agreement, or the Seagen Collaboration Agreement, and a non-exclusive Anticalin platform technology license agreement, or the Seagen Platform License, and together with the Seagen Collaboration Agreement, the Seagen Agreements, with Seagen, Inc., or Seagen, pursuant to which the parties will develop multiple targeted bispecific IO treatments for solid tumors and blood cancers.

Under the terms of the Seagen Agreements, the companies will pursue multiple antibody-Anticalin fusion proteins during the research phase.

The Seagen Agreements provide Seagen a base option to select up to three programs for further development.

Prior to the initiation of a pivotal trial, the Company may opt into global co-development and U.S.

commercialization of the second program and share in global costs and profits on an equal basis.

Seattle Genetics will solely develop, fund and commercialize the other two programs.

Seattle Genetics may also decide to select additional candidates from the initial research phase for further development in return for the payment to us of additional fees, milestone payments, and royalties

The Seattle Genetics Platform License grants Seattle Genetics a non-exclusive license to certain intellectual property related to the Anticalin platform technology.

Upon signing the Seattle Genetics Agreements, Seattle Genetics paid the Company a $30.0 million upfront fee and an additional $4.9 million was estimated to be paid for research and development services as reimbursement to the Company through the end of the research term.

Seagen will solely develop, fund and commercialize the other two programs.

Seagen may also decide to select additional candidates from the initial research phase for further development in return for the payment to us of additional fees, milestone payments, and royalties

The Seagen Platform License grants Seagen a non-exclusive license to certain intellectual property related to the Anticalin platform technology.

Upon signing the Seagen Agreements, Seagen paid the Company a $ 30.0 million upfront fee and an additional $ 4.9 million was estimated to be paid for research and development services as reimbursement to the Company through the end of the research term.

In addition, the Company may receive tiered royalties on net sales up to the low double-digits and up to $ 1.2 billion in total success-based research, development, commercial, and sales milestones payments across the product candidates, depending on the successful development and commercialization of those candidates.

If Seattle Genetics exercises its option to select additional candidates from the initial research phase for further development, payment to Pieris of additional fees, milestone payments, and royalties would result.

The term of each of the Seattle Genetics Agreements ends upon the expiration of all of Seattle Genetics’ payment obligations under each agreement.

The Seattle Genetics Collaboration Agreement may be terminated by Seattle Genetics on a product-by-product basis for convenience beginning 12 months after its effective date upon 90 days' notice or, for any program where a pivotal study has been initiated, upon 180 days' notice.

Any program may be terminated at Seattle Genetics' option.

If any program is terminated by Seattle Genetics after a pre-defined pre-clinical stage, the Company will have full rights to continue such program.

If any program is terminated by Seattle Genetics prior to such pre-defined pre-clinical stage, the Company will have the right to continue to develop such program, but will be obligated to offer a co-development option to Seattle Genetics for such program.

The Seattle Genetics Collaboration Agreement may also be terminated by Seattle Genetics or the Company for an uncured material breach by the other party upon 90 days' notice, subject to extension for an additional 90 days if the material breach relates to diligence obligations and subject, in all cases, to dispute resolution procedures.

The Seattle Genetics Collaboration Agreement may also be terminated due to the other party’s insolvency and may in certain instances, including for reasons of safety, be terminated on a product-by-product basis.

Each party may also terminate the Seattle Genetics Agreements if the other party challenges the validity of any patents licensed under the Seattle Genetics Agreements, subject to certain exceptions.

The Seattle Genetics Platform License will terminate upon termination of the Seattle Genetics Collaboration Agreement, whether in its entirety or on a product-by-product basis.

The Company determined that the Seattle Genetics Agreements should be combined and evaluated as a single arrangement under ASC 606 as they were executed on the same date.

The arrangement with Seattle Genetics provides for the transfer of the following

goods or services:

If Seagen exercises its option to select additional candidates from the initial research phase for further development, payment to Pieris of additional fees, milestone payments, and royalties would result.

The term of each of the Seagen Agreements ends upon the expiration of all of Seagen's payment obligations under each agreement.

The Seagen Collaboration Agreement may be terminated by Seagen on a product-by-product basis for convenience beginning 12 months after its effective date upon 90 days' notice or, for any program where a pivotal study has been initiated, upon 180 days' notice.

Any program may be terminated at Seagen's option.

If any program is terminated by Seagen after a pre-defined pre-clinical stage, the Company will have full rights to continue such program.

If any program is terminated by Seagen prior to such pre-defined pre-clinical stage, the Company will have the right to continue to develop such program, but will be obligated to offer a co-development option to Seagen for such program.

The Seagen Collaboration Agreement may also be terminated by Seagen or the Company for an uncured material breach by the other party upon 90 days' notice, subject to extension for an additional 90 days if the material breach relates to diligence obligations and subject, in all cases, to dispute resolution procedures.

The Seagen Collaboration Agreement may also be terminated due to the other party’s insolvency and may in certain instances, including for reasons of safety, be terminated on a product-by-product basis.

Each party may also

terminate the Seagen Agreements if the other party challenges the validity of any patents licensed under the Seagen Agreements, subject to certain exceptions.

The Seagen Platform License will terminate upon termination of the Seagen Collaboration Agreement, whether in its entirety or on a product-by-product basis.

The Company determined that the Seagen Agreements should be combined and evaluated as a single arrangement under ASC 606 as they were executed on the same date.

The arrangement with Seagen provides for the transfer of the following goods or services:

(i) three candidate research licenses that each consist of a non-exclusive platform technology license, a co-exclusive candidate research license, and research and development services, (ii) research, development and manufacturing services associated with each candidate research license, (iii) participation on various governance committees, and (iv) two antibody target swap options which were assessed as material rights.

1 unchanged sentence

The Company determined that the licenses granted, at arrangement inception, should be combined with the research and development services to be provided for the related antibody target programs as they are not capable of being distinct.

A third party would not be able to provide the research and development services due to the specific nature of the intellectual property and knowledge required to perform the services, and Seattle Genetics could not benefit from the licenses without the corresponding services.

A third party would not be able to provide the research and development services due to the specific nature of the intellectual property and knowledge required to perform the services, and Seagen could not benefit from the licenses without the corresponding services.

The Company determined that the participation on the various governance committees was distinct as the services could be performed by an outside party.

As a result, management concluded there are six separate performance obligations at the inception of the Seattle Genetics Agreements:

(i) three combined performance obligations, each comprised of a non-exclusive platform technology license, a co-exclusive candidate research license, and research and development services for the first three approved Seattle Genetics antibody target programs, (ii) two performance obligations each comprised of a material right for an antibody target swap option for the first and the second approved Seattle Genetics antibody target for no additional consideration, and (iii) one performance obligation comprised of the participation on the various governance committees.

As a result, management concluded there are six separate performance obligations at the inception of the Seagen Agreements:

(i) three combined performance obligations, each comprised of a non-exclusive platform technology license, a co-exclusive candidate research license, and research and development services for the first three approved Seagen antibody target programs, (ii) two performance obligations each comprised of a material right for an antibody target swap option for the first and the second approved Seagen antibody target for no additional consideration, and (iii) one performance obligation comprised of the participation on the various governance committees.

The Company allocated consideration to the performance obligations based on the relative proportion of their standalone selling prices.

8 unchanged sentences

As of December 31, 2020, there was $ 20.7 million of aggregate transaction price allocated to remaining performance obligations.

Under the Seattle Genetics Agreements, the Company is eligible to receive various research, development, commercial and sales milestones.

In June 2020, Seagen and the Company entered into amendments to the Seagen Agreements, or together, the First Seagen Amendment.

The Seagen Amendment extended the deadline for Seagen to nominate a second and third antibody target.

As a result of the Seagen Amendment, which completed the remaining performance obligations under the research term for the first antibody target, the Company recorded $ 4.2 million of previously deferred revenue for the year ended December 31, 2020.

The Company also recorded $ 5.0 million of milestone revenue in June 2020.

Under the Seagen Agreements, the Company is eligible to receive various research, development, commercial and sales milestones.

There is uncertainty that the events to obtain the research and development milestones will be achieved given the nature of clinical development and the stage of the Company’s technology.

The Company has thus determined that all research and development milestones will be constrained until it is deemed probable that a significant revenue reversal will not occur.

As of December 31, 2019 , there is $4.5 million and $16.0 million of current and non-current deferred revenue, respectively, related to the Seattle Genetics Agreements.

As of December 31, 2020, there is $ 5.7 million and $ 11.8 million of current and non-current deferred revenue, respectively, related to the Seagen Agreements.

On March 24, 2021, the Company announced that Seagen made a strategic equity investment in Pieris, and that the companies had entered into a combination study agreement, or the Combination Study Agreement, to evaluate the safety and efficacy of combining Pieris’ cinrebafusp alfa with Seagen’s tucatinib, a small-molecule tyrosine kinase HER2 inhibitor, for the treatment of gastric cancer patients expressing lower HER2 levels (IHC2+/ISH- & IHC1+) as part of the upcoming phase 2 study to be conducted by Pieris.

The companies have also entered into an Amended and Restated License and Collaboration Agreement, or the Second Seagen Amendment, in which their existing immuno-oncology collaboration agreement has been amended relating to joint development and commercial rights for the second program in the alliance.

Specifically, under the Second Seagen Amendment, Pieris’ option to co-develop and co-commercialize the second of three programs in the collaboration has been converted to a co-promotion option in the United States, with Seagen solely responsible for the development and overall commercialization of that program.

Pieris will also be entitled to increased royalties from that program in the event that it chooses to exercise the co-promotion option.

In connection with the agreements described above, the Company and Seagen entered into a subscription agreement, or the Seagen Subscription Agreement, pursuant to which the Company agreed to issue to Seagen, and Seagen agreed to acquire from the Company, 3,706,174 shares of the Company’s common stock for a total purchase price of $ 13.0 million, or $ 3.51 per share, in a private placement transaction pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Seagen Subscription Agreement includes a requirement that the Company file a registration statement to register the resale of the shares issued to Seagen within 60 calendar days of the issuance of the shares.

On May 2, 2017, the Company entered into a license and collaboration agreement, or the AstraZeneca Collaboration Agreement, and a non-exclusive Anticalin platform technology license agreement, or AstraZeneca Platform License, and together with the AstraZeneca Collaboration Agreement, the AstraZeneca Agreements with AstraZeneca AB, or AstraZeneca, which became effective on June 10, 2017, following expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

30 unchanged sentences

The arrangement with AstraZeneca, including the impact of any modifications, provides for the transfer of the following goods and services:

(i) five non-exclusive platform technology licenses, (ii) research and development license for the AstraZeneca Lead Product, (iii) commercial license for the AstraZeneca Lead Product, (iv) development and manufacturing services for the AstraZeneca Lead Product (or the phase 1 services), (v) technology transfer services for the AstraZeneca Lead Product, (vi) research services related to the AstraZeneca Lead Product, (vii) participation on each of the committees, (viii) four research licenses for the AstraZeneca Collaboration Products, (ix) four commercial licenses for the AstraZeneca Collaboration Products, (x) research services for the AstraZeneca Collaboration Products and (xi) certain

phase 2a services for the AstraZeneca Lead Product.

Additionally, as the development licenses on the four AstraZeneca Collaboration Products may be granted at a discount in the future, the Company determined such discounts should be assessed as material rights at inception.

6 unchanged sentences

As a result, management concluded that there were 16 performance obligations:

(i) combined performance obligation comprised of a non-exclusive platform technology license, research and development license, and commercial licenses for the AstraZeneca Lead Product and research services for the AstraZeneca Lead Product, (ii) combined performance obligation comprised of development and manufacturing services, and technology transfer services for the AstraZeneca Lead Product, (iii) committee participation, (iv-vii) four combined performance obligations each comprised of a non-exclusive platform technology license, research licenses, and research services for each AstraZeneca Collaboration Product (viii-xi) four performance obligations comprised of a material right to acquire the development licenses granted for the AstraZeneca Collaboration Products, (xii-xv) four performance obligations comprised of the commercial licenses granted for the AstraZeneca Collaboration Products and (xvi) phase 2a services.

Collaboration Products, (xii-xv) four performance obligations comprised of the commercial licenses granted for the AstraZeneca Collaboration Products and (xvi) phase 2a services.

The Company allocated consideration to the performance obligations based on the relative proportion of their standalone selling prices.

11 unchanged sentences

The amounts allocated to the performance obligation for phase 2a services for the AstraZeneca Lead Product will be recognized on a proportionate performance basis over an estimated term of 12 months.

The amounts allocated to the performance obligation for participation on each of the committees will be recognized

on a straight-line basis over the expected term of development of the AstraZeneca Lead Product and the AstraZeneca Collaboration Products.

The amounts allocated to the performance obligation for participation on each of the committees will be recognized on a straight-line basis over the expected term of development of the AstraZeneca Lead Product and the AstraZeneca Collaboration Products.

The term of performance is approximately five years .

12 unchanged sentences

As of December 31, 2020, the remaining balance of the asset recognized from transaction costs to obtain the AstraZeneca contract is $ 0.7 million.

Amortization during the year ended December 31, 2019 , was $0.4 million .

Amortization during the year ended December 31, 2020 was de minimis.

On March 29, 2021, the Company and AstraZeneca entered into (1) Amendment No.

1 to the Non-exclusive Anticalin ® Platform License Agreement dated May 2, 2017 and (2) Amendment No.

2 to the License and Collaboration Agreement dated May 2, 2017, as previously amended by Amendment No.

1 dated September 14, 2020, collectively, the Amended Collaboration Agreement.

Under the Amended Collaboration Agreement, the parties agreed to restructure certain commercial economics for the AZD1402/PRS-060 program by increasing potential sales milestones and reducing potential sales royalties, while fundamentally maintaining the overall value split between AstraZeneca and the Company.

In connection with the Amended Collaboration Agreement, the Company and AstraZeneca entered into a Subscription Agreement pursuant to which the Company agreed to issue to AstraZeneca, and AstraZeneca agreed to acquire from the Company, 3,584,230 shares of the Company’s common stock for a total purchase price of $ 10.0 million, or $ 2.79 per share, in a private placement transaction pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Subscription Agreement will close on April 1, 2021 and includes a requirement that the Company file a registration statement to register the resale of the shares issued to AstraZeneca within 60 calendar days of the issuance of the shares.

Also in March 2021, the Company earned a $ 13.0 million milestone from AstraZeneca related to the initiation of the phase 2a study for PRS-060/AZD1402.

On January 4, 2017, the Company entered into a license and collaboration agreement, or Servier Collaboration Agreement, and a non-exclusive Anticalin platform license agreement, or Servier Platform License, and together with the Servier Collaboration Agreement, the Servier Agreements with Les Laboratoires Servier and Institut de Recherches Internationales Servier, or Servier, pursuant to which the Company and Servier agreed to initially pursue five bispecific therapeutic programs.

15 unchanged sentences

In addition to the JEC, the Servier Collaboration Agreement requires the participation of both parties on:

(i) a JSC, (ii) a JDC, (iii) a joint intellectual property committee, or JIPC, and (iv) a joint research committee, or JRC.

(i) a JSC, (ii) a JDC, (iii) a joint intellectual property committee, or JIPC, and (iv) a joint

research committee, or JRC.

The responsibilities of these committees vary, depending on the stage of development and commercialization of the Collaboration Products.

10 unchanged sentences

The Servier Platform License will terminate upon termination of the Servier Collaboration Agreement, on a product-by-product and/or country-by-country basis.

In February 2020, the research term was extended for another 12 months.

In February 2020, the research term was extended for 12 months.

The research term was then extended for another 12 months in February 2021.

As the Company and Servier are considered to be active participants in the Servier Agreements and are exposed to significant risks and rewards, certain units of account within the Servier Agreements are within the scope of ASC 808.

11 unchanged sentences

The following performance obligations are within the scope of ASC 606:

(i) two separate performance obligations each comprised of a combined non-exclusive platform technology license, research license and research and development services for each Servier Worldwide

Collaboration Product, and (ii) two combined performance obligations comprised of the development and commercial licenses granted for the Servier Worldwide Collaboration Products (and corresponding discounts) upon the achievement of specified preclinical activities, resulting in material rights.

(i) two separate performance obligations each comprised of a combined non-exclusive platform technology license, research license and research and development services for each Servier Worldwide Collaboration Product, and (ii) two combined performance obligations comprised of the development and commercial licenses granted for the Servier Worldwide Collaboration Products (and corresponding discounts) upon the achievement of specified preclinical activities, resulting in material rights.

The Company allocated consideration to the performance obligations based on the relative proportion of their standalone selling prices.

18 unchanged sentences

The Company does not presently intend to continue development of PRS-332 but retains full rights to advance the development and commercialization of the product on a world-wide basis in the future.

Servier’s termination of the co-development of the PRS-332 program does not impact the remainder of the Pieris-Servier alliance and the parties continue to advance PRS-344 through IND-enabling activities.

The Pieris-Servier alliance includes three additional programs beyond PRS-344, all of which are in active preclinical development.

In addition, effective in January 2020, Servier and the Company agreed to extend the research collaboration term for one year.

This extension includes reimbursement for the Company's internal efforts and an extension of the research license.

In February 2020, the research term was extended for 12 months.

The Company updated the transaction price for the extension for revenue recognition purposes and allocated it ratably over all unsatisfied performance obligations.

As part of the expiration of the initial research term, the option to expand the collaboration beyond the initial five committed programs also expired.

In March 2020, Servier notified the Company of its decision to discontinue co-development of two earlier preclinical stage programs for strategic reasons based upon an extensive portfolio review.

The notification required a 60-day period to complete remaining obligations on the programs;

however, the Company determined that the material rights to acquire development and commercial licenses for one Co-Development Collaboration Product and for one Servier Developed Collaboration Products lapsed in March 2020 and recognized $ 7.1 million of previously deferred revenue associated with these material rights during 2020.

The discontinuation of the two earlier preclinical stage programs decreased the future potential milestone payments the Company could achieve.

The parties continue to advance the development of two preclinical programs:

PRS-344, a 4-1BB/PD-L1 bispecific designed as a co-development program, and PRS-352, which addresses undisclosed targets and for which Servier has worldwide rights.

In February 2021, the research term was extended for another 12 months.

As of December 31, 2020, there is $ 6.0 million and $ 5.5 million of current and non-current deferred revenue, respectively, related to the Servier Agreements.

9 unchanged sentences

With the formal delivery of the final results in November 2019, the full $ 2.75 million revenue that was previously constrained was recognized in connection with this arrangement for the year ended December 31, 2019.

No revenue under this arrangement was recognized 2018 .

On January 20, 2020 ASKA notified us that it does not intend to exercise its option to obtain an exclusive license to develop and commercialize the PRS-080.

No revenue under this arrangement was recognized in 2020.

On January 20, 2020 ASKA notified the Company that it does not intend to exercise its option to obtain an exclusive license to develop and commercialize the PRS-080.

The term of the ASKA Option Agreement ended as of the date of ASKA’s notification of its decision not to exercise its option rights.

In connection with obtaining the contract with ASKA, the Company additionally incurred $ 0.3 million in third-party service fees which were capitalized in accordance with ASC 340.

Amortization during the twelve months ended December 31, 2019 was $0.3 million and thus, as of December 31, 2019 , there was no remaining balance of the asset recognized from costs to obtain the ASKA contract.

These costs were fully amortized as of December 31, 2019.

Contract Balances

3 unchanged sentences

Amounts are recorded as accounts receivable when the Company’s right is unconditional.

There were no additions to deferred revenue during the twelve months ended December 31, 2019 and reductions to deferred revenue were $32.2 million for the twelve months ended December 31, 2019 .

There were $ 1.6 million of additions to deferred revenue during the twelve months ended December 31, 2020 and reductions to deferred revenue were $ 15.0 million for the twelve months ended December 31, 2020.

Collaboration agreements

In August 2020, the Company entered into a Clinical Trial Collaboration and Supply Agreement, or the Lilly Agreement, with Eli Lilly and Company, or Lilly, pursuant to which the Company and Lilly will collaborate on a phase 2 clinical study, or the Study, to determine the safety and efficacy of the Company's cinrebafusp alfa in combination with the standard of care regimen for the second-line treatment of advanced or metastatic gastric cancer, ramucirumab (CYRAMZA®) and paclitaxel for the second-line treatment of HER2+ gastric cancer.

Under the terms of the non-exclusive Lilly Agreement, the Company will sponsor the Study and Lilly will supply the Company with ramucirumab as well as provide input on certain clinical and regulatory aspects of the Study in exchange for jointly owning clinical data and inventions relating to the combination regimen that may arise from the Study.

Any material changes to

the protocol for the Study, and any changes relating to ramucirumab, will require Lilly’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

The Lilly Agreement will expire upon completion of the parties’ contractual obligations.

The Lilly Agreement may also be terminated (a) by either party for an uncured material breach by the other party upon 60 days’ notice, subject to a reasonable extension if such material breach requires more than 60 days to cure;

(b) by either party in the event that the Study unreasonably affects patient safety, provided that the terminating party promptly notifies the other party and the other party is given the opportunity to propose modifications to the Study to address the safety issues;

(c) by either party, following 15 days’ written notice, if regulatory action is taken preventing the terminating party from providing its compound or if the terminating party decides to discontinue development of its compound;

(d) by either party, immediately upon written notice to the other party for breach by the other party of its material obligations under certain sections of the Lilly Agreement, or breach of certain of the other party's representations and warranties;

and (e) by Lilly in the event of certain safety concerns related to the use of ramucirumab in the Study.

The Company concluded that the Lilly Agreement is within the scope of ASC 808, which defines collaborative arrangements and addresses the presentation of the transactions between the two parties in the income statement and related disclosures.

However, ASC 808 does not provide guidance on the recognition of consideration exchanged or accounting for the obligations that may arise between the parties.

The Company has concluded that ASC 730, Research and Development, should be applied by analogy.

There is no financial statement impact for the Lilly Agreement as the value of the drug supply received from Lilly is offset against the drug supply cost.

Cash, Cash Equivalents and Investments

2 unchanged sentences

The following table presents the cash equivalents and investments carried at fair value in accordance with the hierarchy defined in Note 2 at December 31, 2020 and 2019 (in thousands):

Quoted prices in active markets (Level 1)

Significant other observable inputs (Level 2)

Significant unobservable inputs

Total Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs

December 31, 2020

Money market funds, included in cash equivalents $ 63,951 $ 63,951 $ — $ —

Investments - US treasuries

Investments - Asset-backed securities

Investments - Corporate bonds

Quoted prices in active markets (Level 1)

Significant other observable inputs (Level 2)

Significant unobservable inputs

Total $ 63,951 $ 63,951 $ — $ —

Total Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs

December 31, 2019

Money market funds, included in cash equivalents $ 47,384 $ 47,384 $ — $ —

Corporate bonds, included in cash equivalents

Investments - US treasuries 5,300 5,300 — —

1 unchanged sentence

Investments - Corporate bonds 28,644 — 28,644 —

Total $ 89,278 $ 52,684 $ 36,594 $ —

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data.

4 unchanged sentences

Contractual maturity

Amortized Cost

Unrealized gains

Unrealized losses

US treasuries

Asset-backed securities

Corporate bonds

Investments at December 31, 2018 consist of the following (in thousands):

Contractual maturity

Amortized Cost

Unrealized gains

Unrealized losses

(in days) Amortized Cost Unrealized gains Unrealized losses Fair Value

US treasuries 46 - 182

$ 5,293 $ 25 $ ( 18 ) $ 5,300

Asset-backed securities 49 - 106

7,962 12 ( 24 ) 7,950

Corporate bonds 2 - 204

There were $0.3 million and $1.0 million of realized gains for the year ended December 31, 2019 and 2018, respectively.

28,709 20 ( 85 ) 28,644

Total $ 41,964 $ 57 $ ( 127 ) $ 41,894

There were $ 0.6 million of realized losses for the year ended December 31, 2020 and $ 0.3 million of realized gains for the year ended December 31, 2019.

Property and Equipment, Net

2 unchanged sentences

Laboratory equipment

Office and computer equipment

$ 11,188 $ 11,635

Office furniture and equipment 2,120 479

Computer equipment 394 245

Leasehold improvements

14,159 10,710

Property and equipment at cost

27,861 23,069

Accumulated depreciation

( 5,815 ) ( 3,567 )

Property and equipment, net

$ 22,046 $ 19,502

Depreciation expense was $ 2.1 million and $ 0.6 million for the years ended December 31, 2020 and 2019, respectively.

3 unchanged sentences

Years Ended December 31,

Accrued accounts payable

Compensation expense $ 2,759 $ 2,870

Research and development fees 2,001 1,048

Accrued accounts payable 1,220 4,251

Lease liabilities 1,030 733

Accrued license obligations 358 62

Audit and tax fees 128 522

Other current liabilities 235 458

Accrued license obligations

Total $ 7,731 $ 9,944

The Company reported a loss before income taxes consisting of the following (in thousands):

Years Ended December 31,

Domestic $ ( 12,134 ) $ ( 12,063 )

Foreign ( 24,932 ) ( 13,406 )

Loss before income taxes $ ( 37,066 ) $ ( 25,469 )

The components of the (benefit) provision for income taxes are as follows (in thousands):

The components of the provision for income taxes are as follows (in thousands):

Years Ended December 31,

Federal $ — $ —

Foreign 164 —

Total current 164 —

Total deferred — —

(Benefit) provision for income taxes

Provision for income taxes $ 164 $ —

The reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:

Federal income tax rate 21.0 % 21.0 %

Tax Reform - Change in enacted rate

Foreign rate differential 1.9 1.9

3 unchanged sentences

Permanent items ( 2.4 ) ( 1.0 )

Other ( 0.4 ) 0.8

Rate change - trade tax NOL — ( 6.4 )

8 unchanged sentences

Depreciation and other 297 53

Deferred revenue

Unrealized foreign currency 771 90

3 unchanged sentences

Right-of-use asset ( 4,235 ) ( 4,043 )

Unrealized gain on investments

Total deferred tax liabilities ( 4,235 ) ( 4,043 )

valuation allowance:

( 43,733 ) ( 33,966 )

Net deferred tax asset $ — $ —

4 unchanged sentences

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable

income, and tax-planning strategies in making this assessment.

Management believes it is more likely than not that the results of future operations will not generate sufficient taxable income in the United States or in its foreign jurisdictions to realize the full benefits of its deferred tax assets.

3 unchanged sentences

Our intention is to reinvest the earnings of the foreign subsidiaries indefinitely.

The increase in the valuation allowance of deferred tax assets of $3.2 million was primarily influenced by the operating losses generated in current tax year.

The increase in the valuation allowance of deferred tax assets of $ 9.8 million was primarily a result of the operating losses generated in current tax year.

As of December 31, 2020, the Company had net operating loss carryforwards for U.S.

federal income tax purposes of $ 27.3 million and net operating loss carryforwards for state income tax purposes of $ 33.2 million.

Federal tax loss carryforwards that were created prior to December 31, 2017 expire through 2037, U.S.

federal created after that date do not expire.

Federal tax loss carryforwards that were created prior to December 31, 2017 expire through 2037 and federal losses created after that date do not expire.

State loss carryforwards expire starting in 2035.

7 unchanged sentences

The Company is currently under examination in Germany for 2014 through 2017;

however, the Company not under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

however, the Company is not under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

As of December 31, 2020, the Company had German corporate income tax and trade tax net operating loss carryforwards of approximately $ 116.6 million and $ 115.1 million respectively.

Under current German laws, tax loss carryforwards may only be used to offset any relevant later assessment period (calendar year) $1.2 million plus 60% of the exceeding taxable income and trade profit of such period and do not expire.

Under current German laws, tax loss carryforwards may only be used to offset any relevant later assessment period (calendar year) of $ 1.2 million plus 60% of the exceeding taxable income and trade profit of such period and do not expire.

In addition, certain transactions, including transfers of shares or interest in the loss holding entity, may result in the partial or total forfeiture of tax losses existing at that date.

13 unchanged sentences

Stockholders’ equity

During the year ended December 31, 2019 , the Company issued 279,075 shares of common stock upon exercise of stock options, resulting in cash proceeds of $0.6 million .

During the year ended December 31, 2018 , the Company issued 596,269 shares of common stock upon exercise of stock options, resulting in cash proceeds of $1.0 million .

During the year ended December 31, 2019 , the Company issued 176,071 net shares of common stock due to warrant exercises.

Net exercises of 127,065 shares of common stock underlying the warrants resulted in the issuance of 52,833 shares of common stock.

Additionally, 123,238 warrants were exercised resulting in cash proceeds of $0.2 million .

During the year ended December 31, 2018 , the Company issued 156,888 shares of common stock due to warrant exercises, resulting in cash proceeds of $0.3 million .

The Company had no such net issuances of common stock due to warrant exercises during the year ended December 31, 2018 .

The Company has issued multiple tranches of preferred stock that consist of the following:

• Series A Convertible, 2,907 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively.

• Series B Convertible, 5,000 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively.

• Series C Convertible, 3,522 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively.

• Series D Convertible, 3,000 and zero shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively.

Each share of the Company’s common stock is entitled to one vote and all shares rank equally as to voting and other matters.

5 unchanged sentences

Each unit consisted of (i) one share of the Company’s common stock or non-voting series A convertible preferred stock, or the Series A Preferred Stock, which are convertible into one -thousand shares of common stock, (ii) one warrant to purchase 0.4 shares of common stock at an exercise price of $ 2.00 per share and (iii) one warrant to purchase 0.2 shares of common stock at an exercise price of $ 3.00 per share.

The warrants will be exercisable for a period of five years from the date of issuance.

The warrants will be exercisable for a period of 5 years from the date of issuance.

Each share of Series A Preferred Stock was issued at a price of $ 2.015 per share, and is convertible into 1,000 shares of common stock, provided the holder and/or its affiliates do not own greater than 9.99 % of the total number of Pieris common stock then outstanding.

13 unchanged sentences

• senior to all of the Company's common stock;

senior to any class or series of capital stock of the Company created after the designation of the Series B Preferred Stock specifically ranking by its terms junior to the Series B Preferred Stock, or the Junior Securities;

on parity with all shares of Series A Preferred Stock and any class or series of capital stock of the Company created after the designation of the Series B Preferred Stock specifically ranking by its terms on parity with the Series B Preferred Stock, or the Parity Securities;

junior to any class or series of capital stock of the Company created after the designation of the Series B Preferred Stock specifically ranking by its terms senior to the Series B Preferred Stock, or the Senior Securities;

• senior to any class or series of capital stock of the Company created after the designation of the Series B Preferred Stock specifically ranking by its terms junior to the Series B Preferred Stock;

• on parity with all shares of Series A Preferred Stock and any class or series of capital stock of the Company created after the designation of the Series B Preferred Stock specifically ranking by its terms on parity with the Series B Preferred Stock;

• junior to any class or series of capital stock of the Company created after the designation of the Series B Preferred Stock specifically ranking by its terms senior to the Series B Preferred Stock;

in each case, as to distributions of assets upon the Company’s liquidation, dissolution or winding up whether voluntarily or involuntarily and/or the right to receive dividends.

17 unchanged sentences

As the Series C Preferred Shares are immediately convertible upon issuance and do not include a stated redemption date, the discount was immediately accreted as a deemed dividend.

Series D Preferred Stock Conversion

On March 31, 2020, the Company and certain entities affiliated with BVF entered into an exchange agreement pursuant to which, on April 1, 2020, BVF exchanged an aggregate of 3,000,000 shares of the Company’s common stock owned by BVF for an aggregate of 3,000 shares of Series D Preferred Stock.

The Company designated 3,000 shares of its authorized and unissued preferred stock as Series D Preferred Stock and filed a Certificate of Designation of Series D Convertible Preferred Stock of Pieris Pharmaceuticals, Inc., or the Series D Certificate of Designation, with the Nevada Secretary of State.

Each share of Series D Preferred Stock is convertible into 1,000 shares of Common Stock (subject to adjustment as provided in the Series D Certificate of Designation) at any time at the option of the holder, provided that the holder is prohibited from converting the Series D Preferred Stock into shares of Common Stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99 % of the total number of shares of Common Stock then issued and outstanding.

The holder may reset the Beneficial Ownership Limitation to a higher or lower number (not to exceed 19.99 % of the total number of Common Shares issued and outstanding immediately after giving effect to a conversion) upon providing written notice to the Company.

Any such notice providing for an increase to the Beneficial Ownership Limitation will be effective 61 days after delivery to the Company.

In the event of the Company’s liquidation, dissolution, or winding up, subject to the rights of holders of Senior Securities (defined below), holders of Series D Preferred Stock are entitled to receive a payment equal to $ 0.001 per share of Series D Preferred Stock before any proceeds are distributed to the holders of Common Stock and Junior Securities (defined below) and pari passu with any distributions to the holders of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares.

However, if the assets of the Company are insufficient to comply with the preceding sentence, then all remaining assets of the Company shall be distributed ratably to holders of the shares of the Series D Preferred Stock and Parity Securities (defined below).

Shares of Series D Preferred Stock generally have no voting rights, except as required by law and except that the consent of holders of a majority of the then outstanding Series D Preferred Stock is required to amend the terms of the Series D Certificate of Designation.

Holders of Series D Preferred Stock are entitled to receive any dividends payable to holders of Common Stock, and rank:

• senior to all of the Common Stock;

• senior to any class or series of capital stock of the Company created after the designation of the Series D Preferred Stock specifically ranking by its terms junior to the Series D Preferred Stock;

• on parity with all shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and any class or series of capital stock of the Company created after the designation of the Series D Preferred Stock specifically ranking by its terms on parity with the Series D Preferred Stock;

• junior to any class or series of capital stock of the Company created after the designation of the Series D Preferred Stock specifically ranking by its terms senior to the Series D Preferred Stock,

in each case, as to distributions of assets upon the Company’s liquidation, dissolution or winding up whether voluntarily or involuntarily and/or the right to receive dividends.

Open Market Sale Agreement

In August 2019, the Company entered into a sale agreement pursuant to which the Company may offer and sell shares of its common stock, from time to time, up to an aggregate gross sales proceeds of $50.0 million through an “at the market offering” program under a shelf registration statement on Form S-3.

To date, the Company has not sold any shares under this agreement.

In August 2019, the Company entered into a sale agreement pursuant to which the Company may offer and sell shares of its common stock, from time to time, up to an aggregate gross sales proceeds of $ 50.0 million through an “at the market offering” program, the ATM Program, under a shelf registration statement on Form S-3.

In the third quarter of 2020, the Company sold 3,571,428 shares at a price of $ 2.80 per share under the ATM Program.

The transaction resulted in gross proceeds of $ 10.0 million, less a 3 % contractual commission incurred for the sales agent, resulting in $ 9.7 million in net proceeds to the Company.

Subsequent Event Equity Issuances

Additionally, the Company completed two transactions subsequent to December 31, 2020, with two partners, Seagen and AstraZeneca, which included equity transactions as part of the agreements.

Additional details regarding these transactions are included in Footnote 3 .

Net Loss per Share

6 unchanged sentences

Employee, Director and Consultant Equity Incentive Plans

At the Annual Shareholder Meeting, held on July 31, 2019, the shareholders approved the 2019 Employee, Director and Consultant Equity Incentive Plan, or the 2019 Plan.

Upon approval of the 2019 Plan, the 2018 Employee, Director and Consultant Equity Incentive Plan, or the 2018 Plan, was terminated and no additional awards will be made thereunder, however, all outstanding awards under the 2018 Plan will remain in effect.

The 2019 Plan, similar to the 2018 Plan, provided for the grant of stock options, restricted and unrestricted stock awards, and other stock-based awards to employees of the Company, non-employee directors of the Company, and certain other consultants performing services for the Company as designated by either the Board of Directors or the compensation committee of the Board of Directors.

Previously, upon approval of the 2018 Plan, the 2016 Employee, Director and Consultant Equity Incentive Plan, or the 2016 Plan, was terminated and no additional awards were made thereunder, however, all outstanding awards under the 2016 Plan remained and will continue to remain in effect.

At the Annual Shareholder Meeting, held on June 23, 2020, the shareholders approved the 2020 Employee, Director and Consultant Equity Incentive Plan, or the 2020 Plan.

The 2020 Plan permits the Company to issue up to 3,500,000 shares of common stock pursuant to awards granted under the 2020 Plan.

Upon approval of the 2020 Plan, the 2019 Employee, Director and Consultant Equity Incentive Plan, or the 2019 Plan, was terminated;

all unissued options were canceled and no additional awards will be made thereunder.

All outstanding awards under the 2019 Plan will remain in effect and any awards forfeited from the outstanding awards will be allocated back into the 2020 Plan.

The 2020 Plan, similar to the 2019 Plan, provided for the grant of stock options, restricted and unrestricted stock awards, and other stock-based awards to employees of the Company, non-employee directors of the Company, and certain other consultants performing services for the Company as designated by either the Board of Directors or the compensation committee of the Board of Directors.

Previously, upon approval of the 2016 Plan, the 2014 Employee, Director and Consultant Equity Incentive Plan, or the 2014 Plan, was terminated and no additional awards were made thereunder, however, all outstanding awards under the 2014 Plan remained and continue to remain in effect.

There were approximately 1,579,678 shares remaining and available for grant under the 2019 Plan that terminated pursuant to the approval of the 2020 Plan.

The 2019 Plan permits the Company to issue up to 5,750,000 shares, including 2,750,000 shares reserved for issuance pursuant to the 2019 Plan and up to 3,000,000 additional shares which may be issued if awards outstanding under the Registrant’s 2018 Plan are canceled or expire.

The 2020 Plan permits the Company to issue up to 3,500,000 shares reserved for issuance pursuant to the 2020 Plan and any additional shares which may be issued if awards outstanding under the Registrant’s 2014, 2016, 2018 and 2019 Plans are canceled or expire.

The Company’s stock options have a maximum term of 10 years from the date of grant.

5 unchanged sentences

1.41 % - 2.60 %

2.40% - 3.06%

Expected term (in years) 5.00 - 5.73

2 unchanged sentences

81.7 % - 81.8 %

77.1% - 80.5%

The weighted-average fair value of the 2,311,481 and 2,489,269 options granted during the years ended December 31, 2020 and 2019 was $ 1.92 and $ 2.31 , respectively.

1 unchanged sentence

The following table summarizes stock option activity for employees and non-employees:

Options Weighted-

Price Weighted-

Life Aggregate

(in thousands)

Outstanding, December 31, 2019 8,259,915 $ 3.60 $ 7,987

Outstanding, December 31, 2019

Vested or expected to vest, December 31, 2019

Exercisable, December 31, 2019

Granted 2,311,481 3.15 —

Exercised 149,406 1.95 97

Canceled 830,867 4.58 101

Outstanding, December 31, 2020 9,591,123 $ 3.44 6.84 years $ 2,303

Vested or expected to vest, December 31, 2020 9,591,123 $ 3.44 6.84 years $ 2,303

Exercisable, December 31, 2020 6,123,532 $ 3.28 5.81 years $ 2,269

Periodically, the Company grants inducement options, which are awards outside of approved stock option plans, and which are material awards to the executive officers or other personnel entering senior leadership roles with the Company.

2 unchanged sentences

The following table summarizes stock option activity for these inducement options (in thousands):

Options Weighted-

Price Weighted-

Life Aggregate

(in thousands)

Outstanding, December 31, 2019 1,200,000 $ 4.36 $ 130

Outstanding, December 31, 2019

Vested or expected to vest

Exercisable, December 31, 2019

Granted — $ — $ —

Canceled or Expired 779,687 $ 4.01 $ —

Outstanding, December 31, 2020 420,313 $ 5.00 8.12 years $ —

Vested or expected to vest 420,313 $ 5.00 8.12 years $ —

Exercisable, December 31, 2020 214,063 $ 5.34 7.60 years $ —

Employee Stock Purchase Plans

2 unchanged sentences

The Company has reserved 500,000 shares of common stock for the administration of the 2018 ESPP.

Total shares purchased under the plan for the year ended December 31, 2019 were 113,112 .

No purchases were made under the plan for the year ended December 31, 2018 .

Total shares purchased under the plan were 69,544 and 113,112 for the years ended December 31, 2020 and 2019, respectively.

The fair value of shares expected to be purchased under the 2018 ESPP using the Black-Scholes model with the following assumptions:

1 unchanged sentence

Risk free interest rate 0.10 % - 0.18 %

Expected term (in years)

Expected term (in years) 0.5 years 0.5 years

Dividend yield — —

Expected volatility 74.36 % - 120.89 %

Total Stock-based Compensation Expense

Total stock-based compensation expense is recorded in operating expenses based upon the functional responsibilities of the individuals holding the respective options as follows (in thousands):

11 unchanged sentences

These discussions may also lead to an increase in the Company's collaborative research activities with TUM.

The Company recorded the probable expected impact of the amendment in research and development expense as of December 31, 2018 , which was an increase in its financial obligations associated with the TUM License of approximately $2.3 million , for amounts that would be due in 2019 for 2018 and 2017 sub-licensing activities.

This liability was paid in full during the year ended December 31, 2019 .

Commitments and Contingencies

The Company currently leases office space in Boston, Massachusetts.

1 unchanged sentence

The sublease expires on February 27, 2022 or such earlier date pursuant to the termination provisions of the sublease.

The Company also leases approximately 19,000 square feet of office and laboratory space in Freising, Germany under four agreements, the Freising Leases, including three leases for space on three floors of the same building and a letter agreement for additional conference room space within the building.

The Freising Leases all terminate on March 31, 2020.

In October 2018, Pieris GmbH entered into a new lease for office and laboratory space located in Hallbergmoos, Germany, or the Hallbergmoos Lease.

In October 2018, Pieris GmbH entered into a lease for office and laboratory space located in Hallbergmoos, Germany, or the Hallbergmoos Lease.

Pieris GmbH moved its operations, formerly conducted in Freising, Germany, to the Hallbergmoos facility in February 2020.

Under the Hallbergmoos Lease, Pieris GmbH will rent approximately 105,000 square feet, of which approximately 96,400 square feet were delivered by the lessor in February 2020 and approximately 8,600 square feet is expected to be delivered by the lessor by May 2020.

Under the Hallbergmoos Lease, Pieris GmbH rents approximately 105,000 square feet, of which approximately 96,400 square feet were delivered by the lessor in February 2020 and approximately 8,600 square feet were delivered by the lessor by May 2020.

An additional approximately 22,300 square feet is expected to be delivered by the lessor by October 2024.

6 unchanged sentences

In addition to the base rent, Pieris GmbH is also responsible for certain administrative and operational costs in accordance with the Hallbergmoos Lease.

Pieris GmbH provided a security deposit of $0.8 million as of December 31, 2018.

Pieris GmbH provided a security deposit of $ 0.8 million at upon signing the lease agreement.

The Company will serve as a guarantor for the Hallbergmoos Lease.

1 unchanged sentence

The date of the construction coincided with the lease commencement date for accounting purposes under ASC 840, which did not change with the adoption off ASC 842.

The Company capitalized the leasehold incentives which are included in Property and equipment, net on the Consolidated Balance Sheet and are amortized on a

straight-line basis over the shorter of the useful life or the remaining lease term.

The Company capitalized the leasehold incentives which are included in Property and equipment, net on the Consolidated Balance Sheet and are amortized on a straight-line basis over the shorter of the useful life or the remaining lease term.

The lease incentive allowance was also factored in as a reduction to the right-of-use asset upon the adoption of ASC 842.

The following table summarizes operating lease costs included in operating expenses for the twelve months ended December 31, 2019 (in thousands):

Twelve Months Ended December 31, 2019

The Company also leased approximately 19,000 square feet of office and laboratory space in Freising, Germany under four agreements, the Freising Leases, including three leases for space on three floors of the same building and a letter agreement for additional conference room space within the building.

The Freising Leases all terminated on March 31, 2020.

The following table summarizes operating lease costs included in operating expenses (in thousands):

Years Ended December 31,

Operating lease costs $ 1,509 $ 1,524

2 unchanged sentences

(1) Variable lease costs include certain additional charges for operating costs, including insurance, maintenance, taxes, utilities, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage.

During the year ended December 31, 2018 , the Company recognized rent expense in an amount of $0.5 million under the previous guidance in ASC 840.

The following table summarizes the weighted-average remaining lease term and discount rate as of December 31, 2019 :

The following table summarizes the weighted-average remaining lease term and discount rate:

As of December 31,

1 unchanged sentence

Weighted-average discount rate 10.5 % 10.5 %

Cash paid for amounts included in the measurement of the lease liabilities were $0.5 million for the twelve months ended December 31, 2019 .

Cash paid for amounts included in the measurement of the lease liabilities were $ 2.2 million and $ 0.5 million for the twelve months ended December 31, 2020 and 2019, respectively.

As of December 31, 2020, the maturities of the Company’s operating lease liabilities and future minimum lease payments were as follows (in thousands):

Thereafter 14,556

Total undiscounted lease payments 26,948

2 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures