Spero Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Management’s Annual Report on Internal Controls Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our 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 general accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2020. This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for “emerging growth companies” . Changes in Internal Control Over Financial Reporting No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. With respect to our “at-the-market” program, on March 11, 2021, we entered into a new sales agreement with Cantor relating to sales, from time to time, of the Company’s common stock up to an aggregate of $75.0 million. We will also file a new universal shelf registration statement on Form S-3, including an “at the market” prospectus relating to the foregoing, with the SEC after the filing of this Annual Report on Form 10-K. Prior to the effectiveness of our new universal shelf registration statement on Form S-3, we intend to file an Amendment to this Annual Report on Form 10-K to present the information required by Part III of Form 10-K. Our existing sales agreement with Cantor, dated December 3, 2018, will terminate automatically at such time as the SEC declares effective our new universal shelf registration statement on Form S-3. 123 PART III Item 10. Directors, Executive Officers and Corporate Governance. The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Management and Corporate Governance Matters,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Code of Conduct and Ethics” in the Company’s proxy statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 11. Executive Compensation. The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Executive Officer and Director Compensation” and “Management and Corporate Governance Matters -- Compensation Committee Interlocks and Insider Participation” in our proxy statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plans and Other Benefits Plans” in our proxy statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 13. Certain Relationships and Related Transactions, and Director Independence. The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Certain Relationships and Related Transactions” and “Management and Corporate Governance Matters” in our proxy statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Item 14. Principal Accounting Fees and Services. The response to this item is incorporated by reference from the discussion responsive thereto under the caption “Independent Public Accountants” in our proxy statement for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. 124 PART IV Item 15. Exhibits, Financial Statement Schedules. (1) Consolidated Financial Statements See Index to Consolidated Financial Statements at Item 8 herein. (2) Financial Statement Schedules All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto . (3) Exhibits The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Exhibit Number Exhibit Description Filed with this Report Incorporated by Reference herein from Form or Schedule Filing Date SEC File / Registration Number 3.1 Amended and Restated Certificate of Incorporation of the Registrant Form 8-K (Exhibit 3.1) 11/6/2017 001-38266 3.2 Amended and Restated Bylaws of the Registrant Form 8-K (Exhibit 3.2) 11/6/2017 001-38266 3.3 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock Form 8-K (Exhibit 3.1) 7/17/2018 001-38266 3.4 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock Form 8-K (Exhibit 3.1) 11/16/2018 001-38266 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock Form 8-K (Exhibit 3.1) 2/28/2020 001-38266 3.6 Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock Form 8-K (Exhibit 3.1) 9/14/2020 001-38266 4.1 Form of Common Stock Certificate Form S-1 (Exhibit 4.1) 10/6/2017 333-220858 4.2 Investors’ Rights Agreement, dated as of June 30, 2017, by and between the Registrant and the other parties thereto Form S-1 (Exhibit 4.2) 10/6/2017 333-220858 4.3 Description of Registrant’s Securities Form 10-K (Exhibit 4.3) 3/16/2020 001-38266 10.1# 2017 Stock Incentive Plan, as amended Form 10-Q (Exhibit 10.1) 12/14/2017 001-38266 10.2# Form of Stock Option Agreement under the 2017 Stock Incentive Plan, as amended Form 10-Q (Exhibit 10.2) 12/14/2017 001-38266 10.3# 2019 Inducement Equity Incentive Plan, as amended Form 10-Q (Exhibit 10.1) 8/6/2020 001-38266 10.4# Form of Stock Option Agreement under the 2019 Inducement Equity Incentive Plan, as amended Form 10-Q (Exhibit 10.2) 8/6/2020 001-38266 10.5# Form of Director and Officer Indemnification Agreement Form S-1 (Exhibit 10.4) 10/6/2017 333-220858 10.6# Non-Employee Director Compensation Policy, as amended Form 10-K (Exhibit 10.6) 3/16/2020 001-38266 125 10.7# Employment Agreement, dated October 20, 2017, by and between the Registrant and Ankit Mahadevia, M.D. Form S-1/A (Exhibit 10.5) 10/23/2017 333-220858 10.8# Employment Agreement, dated December 9, 2020, by and between the Registrant and Satyavrat Shukla X 10.9# Amended and Restated Employment Agreement, dated April 22, 2020, by and between the Registrant and Thomas Parr Jr., Ph.D. Form 10-Q (Exhibit 10.3) 8/6/2020 001-38266 10.10# Employment Agreement, dated October 20, 2017, by and between the Registrant and Cristina Larkin Form S-1/A (Exhibit 10.8) 10/23/2017 333-220858 10.11# Employment Agreement, dated December 13, 2017, by and between the Registrant and David Melnick, M.D. Form 10-K (Exhibit 10.9) 4/2/2018 001-38266 10.12# Employment Agreement, dated January 1, 2020, by and between the Registrant and Timothy Keutzer Form 10-K (Exhibit 10.12) 3/16/2020 001-38266 10.13# Employment Agreement, dated November 6, 2020, by and between the Registrant and Tamara Joseph X 10.14# Consulting Agreement, dated April 18, 2019, by and between the Registrant and David P. Southwell Form 10-K (Exhibit 10.13) 3/16/2020 001-38266 10.15# Consulting Agreement, dated November 4, 2019, by and between the Registrant and Danforth Advisors, LLC Form 10-Q (Exhibit 10.1) 5/8/2020 001-38266 10.16# Lease Agreement, dated August 24, 2015, by and between the Registrant and U.S. REIF Central Plaza Massachusetts, LLC Form S-1 (Exhibit 10.11) 10/6/2017 333-220858 10.17 First Amendment to Lease Agreement, dated January 17, 2018, by and between the Registrant and U.S. REIF Central Plaza Massachusetts, LLC Form 8-K (Exhibit 99.1) 1/23/2018 001-38266 10.18 Second Amendment to Lease Agreement, dated December 16, 2019, by and between the Registrant and U.S. REIF Central Plaza Massachusetts, LLC Form 8-K (Exhibit 99.1) 12/19/2019 001-38266 10.19 Third Amendment to Lease Agreement, dated May 4, 2020, by and between the Registrant and U.S. REIF Central Plaza Massachusetts, LLC Form 10-Q (Exhibit 10.4) 8/6/2020 001-38266 10.20 Sublease, dated July 6, 2016, by and between the Registrant and Tetraphase Pharmaceuticals, Inc. Form S-1 (Exhibit 10.12) 10/6/2017 333-220858 10.21† Stock Purchase Agreement, dated June 6, 2016, by and among Spero Cantab, Inc., the Registrant, Spero Cantab UK Limited, PBB Distributions Limited, New Pharma License Holdings Limited, Cantab Anti-Infectives Ltd and Pro Bono Bio PLC, as amended by Amendment to Stock Purchase Agreement, dated July 18, 2017 Form S-1 (Exhibit 10.13) 10/6/2017 333-220858 10.22† Assignment and License Agreement, dated May 9, 2016, by and among Spero Trinem, Inc., the Registrant and Vertex Pharmaceuticals Incorporated Form S-1/A (Exhibit 10.14) 10/23/2017 333-220858 10.23† License Agreement, dated June 14, 2017, by and between the Registrant and Meiji Seika Pharma Co., Ltd., as supplemented by Addendum to License Agreement, dated June 14, 2017 Form S-1 (Exhibit 10.15) 10/6/2017 333-220858 126 10.24† Contract Award, dated July 12, 2018, issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services Form 10-Q (Exhibit 10.1) 11/8/2018 001-38266 10.25†† Amended and Restated License Agreement, dated January 15, 2021, by and between the Registrant and Everest Medicines II Limited X 10.26 Exchange Agreement, dated November 15, 2018, by and among Spero Therapeutics, Inc. and Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS, L.P. and MSI BVF SPV LLC Form 8-K (Exhibit 10.1) 11/16/2018 001-38266 10.27 Controlled Equity Offering Sales Agreement, dated December 3, 2018, by and between the Registrant and Cantor Fitzgerald & Co. Form S-3 (Exhibit 1.2) 12/3/2018 333-228661 10.28 Controlled Equity Offering Sales Agreement, dated March 11, 2021, by and between the Registrant and Cantor Fitzgerald & Co. X 10.29 Securities Purchase Agreement, dated June 12, 2019, by and between the Registrant and Novo Holdings A/S Form 10-Q (Exhibit 10.1) 8/8/2019 001-38266 10.30 Form of Proprietary Information and Inventions Assignment Agreement Form S-1/A (Exhibit 10.17) 10/23/2017 333-220858 16.1 Letter of KPMG LLP, dated August 25, 2017, regarding changes in the Registrant's certifying accountants Form S-1 (Exhibit 16.1) 10/6/2017 333-220858 21.1 List of Subsidiaries of the Registrant Form 10-K (Exhibit 21.1) 3/16/2020 001-38266 23.1 Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm X 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32* Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Principal Executive Officer and Principal Financial Officer X 127 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X † Confidential treatment received as to portions of the exhibit. Confidential materials omitted and filed separately with the SEC. †† Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed. # Management contract or compensatory plan. * The certification attached as Exhibit 32 that accompanies this Annual Report on Form 10-K is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Spero Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing. Item 16. Form 10-K Summary. None. 128 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized . SPERO THERAPEUTICS, INC. Date: March 11, 2021 By: /s/ Ankit Mahadevia, M.D. Ankit Mahadevia, M.D. President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Ankit Mahadevia, M.D. and Sath Shukla his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated opposite his name. 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 in the capacities and on the dates indicated. Name Title Date /s/ Ankit Mahadevia, M.D. President, Chief Executive Officer and Director March 11, 2021 Ankit Mahadevia, M.D. (Principal Executive Officer) /s/ Sath Shukla Chief Financial Officer and Treasurer March 11, 2021 Sath Shukla (Principal Financial Officer and Principal Accounting Officer) /s/ Milind Deshpande, Ph.D. Director March 11, 2021 Milind Deshpande, Ph.D. /s/ Jean-François Formela, M.D. Director March 11, 2021 Jean-François Formela, M.D. /s/ Scott Jackson Director March 11, 2021 Scott Jackson /s/ John C. Pottage, M.D. Director March 11, 2021 John C. Pottage, M.D. /s/ Cynthia Smith Director March 11, 2021 Cynthia Smith /s/ Frank E. Thomas Director March 11, 2021 Frank E. Thomas /s/ Patrick Vink, M.D. Director March 11, 2021 Patrick Vink, M.D. 129