What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-21 compared with 2023-03-23 · 248 added, 301 removed, 477 unchanged (54% of the section changed)

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of ARS Pharmaceuticals, Inc.

To the Stockholders and the Board of Directors of ARS Pharmaceuticals, Inc.

Opinion on the Financial Statements

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

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’

equity (deficit) and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

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These financial statements are the responsibility of the Company's management.

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

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.

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.

San Diego, California

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(In thousands, except par value and share amounts)

December 31, 2023

December 31, 2022

Current assets:

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Fixed assets, net

Liabilities, convertible preferred stock and stockholders’

equity (deficit)

Liabilities, convertible preferred stock and stockholders’ equity

Current liabilities:

Accounts payable and accrued liabilities (including related party amounts of $ 16 in 2022 and $ 159 in 2021)

Accounts payable and accrued liabilities (including related party amounts of $ 178 and $ 16 , respectively)

Lease liability, current

Contract liability, current

Note payable, current

Total current liabilities

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Contract liability, net of current portion

Note payable, net of current portion

Preferred stock warrant liability

Total liabilities

Commitments and contingencies (Note 7)

Convertible preferred stock and stockholders’

equity (deficit):

Preferred stock, $ 0.0001 par value;

Stockholders’ equity

Preferred stock, $ 0.0001 par value per share;

10,000,000 shares authorized at December 31, 2023 and 2022;

no shares issued and outstanding at December 31, 2023 and 2022

Series A convertible preferred stock, $ 0.01 par value;

no shares and 4,764,000 shares authorized at December 31, 2022 and 2021, respectively;

no shares and 4,764,000 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series B convertible preferred stock, $ 0.01 par value;

no shares and 606,060 shares authorized at December 31, 2022 and 2021, respectively;

no shares and 606,060 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series C convertible preferred stock, $ 0.01 par value;

no shares and 7,749,999 shares authorized at December 31, 2022 and 2021, respectively;

no shares and 7,692,309 shares issued and outstanding at December 31, 2022 and 2021, respectively

Series D convertible preferred stock, $ 0.01 par value;

no shares and 9,337,066 shares authorized at December 31, 2022 and 2021, respectively;

no shares and 9,337,066 shares issued and outstanding at December 31, 2022 and 2021, respectively

Stockholders’

equity (deficit)

Common stock, $ 0.0001 par value;

200,000,000 and 56,000,000 shares authorized at December 31, 2022 and 2021, respectively;

93,943,316 and 30,369,413 shares issued and outstanding at December 31, 2022 and 2021, respectively

Common stock, $ 0.0001 par value per share;

200,000,000 shares authorized at December 31, 2023 and 2022;

96,414,963 and 93,943,316 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated other comprehensive gain

Accumulated other comprehensive gain, net

Accumulated deficit

Total stockholders’

equity (deficit)

Total liabilities, convertible preferred stock and stockholders’

equity (deficit)

Total stockholders’ equity

Total liabilities, convertible preferred stock and stockholders’ equity

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

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(In thousands, except share and per share information)

Years Ended December 31,

Year Ended December 31,

Revenue under collaboration agreements

Operating expenses:

Research and development (including related party amounts of $ 2,144 in 2022 and $ 1,072 in 2021)

General and administrative (including related party amounts of $ 603 in 2022 and $ 476 in 2021)

Research and development (including related party amounts of $ 1,796 and $ 2,144 , respectively)

General and administrative (including related party amounts of $ 940 and $ 603 , respectively)

Total operating expenses

Loss from operations

Other income (expense):

Other income (expense), net

Other income, net

Change in fair value of financial instruments

Total other income (expense):

Unrealized gain on available-for-sale securities

Comprehensive loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted

Change in unrealized gains and losses on available-for-sale securities

Comprehensive loss

Net loss per share, basic and diluted

Weighted-average shares outstanding used in computing net loss per share, basic and diluted

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

ARS Pharmaceuticals, Inc.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’

EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share amounts)

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Preferred Stock

Accumulated Other

Stockholders’

Comprehensive Gain

Balance at December 31, 2020

Issuance of Series D convertible preferred stock for cash, net of issuance costs of $ 194

Vesting of restricted common stock

Exercise of stock options

Stock-based compensation

Net loss and comprehensive net loss

Additional Paid-in Capital

Accumulated Other Comprehensive Gain, Net

Accumulated Deficit

Total Stockholders’ Equity

Balance at December 31, 2021

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Balance at December 31, 2022

Exercise of common stock options, shares issued under the employee stock purchase plan, and release of restricted stock units

Stock-based compensation

Removal of retrospective insurance policy acquired in the Merger

Net loss and comprehensive loss

Balance at December 31, 2023

The accompanying notes are an integral part of these financial statements

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(In thousands)

Years Ended December 31,

Year Ended December 31,

Cash flows from operating activities:

Non-cash adjustments to reconcile net loss to net cash provided by (used) in operating activities:

Non-cash adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

Acquired in-process research and development

Amortization and accretion, net

Change in fair value of warrant liability

Depreciation, amortization and accretion expense

Changes in operating assets and liabilities:

Prepaid and other assets

Accounts payable and accrued liabilities (including related party amounts of $( 143 ) in 2022 and $ 13 in 2021)

Donation of equipment

Accounts payable and accrued liabilities (including related party amounts of $ 162 and $( 143 ), respectively)

Operating right-of-use assets and lease liabilities, net

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Cash flows from investing activities:

Purchases of short-term investments, available-for-sale

Maturities of short-term investments, available-for-sale

Purchase of property and equipment

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Cash proceeds from the Merger, net of transaction costs

Proceeds from exercise of common stock options

Proceeds from exercise of common stock options and employee stock purchase plan

Repayment of bank note payable

Proceeds from issuance of preferred stock, net

Net cash provided by financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental cash flow information:

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Reclassification of warrant liability to equity

Purchases of property and equipment included in accounts payable

Interest paid

Removal of retrospective insurance policy acquired in the Merger, included in prepaid and other current assets and other assets, and related reduction in additional paid in capital

Purchases of property and equipment included in accounts payable

Purchases of property and equipment reclassed from prepaid expenses and other current assets

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

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ARS Pharmaceuticals, Inc.

(“ARS”

or the “Company”) is focused on the development of ARS-1 (brand name neffy ®), a proprietary product candidate for the needle-free intranasal delivery of epinephrine for the emergency treatment of type 1 allergic reactions including anaphylaxis.

(“ARS”, “ARS Pharma” or the “Company”) is focused on the development of ARS-1 (brand name neffy ), a proprietary product candidate for the needle-free intranasal delivery of epinephrine for the emergency treatment of Type I allergic reactions including anaphylaxis.

The Company incorporated in Delaware in January 2016 and is located in San Diego, California.

The Company has a wholly owned subsidiary, ARS Pharmaceuticals Operations, Inc., incorporated in Delaware in August 2015 through which it conducts substantially all its operations, which survived the Merger as more fully described below.

The Company has a wholly owned subsidiary, ARS Pharmaceuticals Operations, Inc., incorporated in Delaware in August 2015, through which it conducts substantially all its operations.

ARS Pharmaceuticals Operations, Inc.

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Merger Transaction

(“ARS Pharma”), in accordance with the terms of the agreement and plan of merger and reorganization, dated July 21, 2022, as amended on August 11, 2022 and October 25, 2022 (the “Merger Agreement”), whereby Sabre Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of Silverback, merged into ARS Pharma, with ARS Pharma surviving as Silverback’s wholly-owned subsidiary.

ARS Pharma was renamed ARS Subsidiary, Inc.

On November 8, 2022 (the “Closing Date”), Silverback Therapeutics, Inc., a Delaware corporation (“Silverback”), now known as ARS Pharmaceuticals, Inc., completed its reverse merger (the “Merger”) with privately-held ARS Pharma, in accordance with the terms of the agreement and plan of merger and reorganization, dated July 21, 2022, as amended on August 11, 2022 and October 25, 2022 (the “Merger Agreement”), whereby Sabre Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of Silverback, merged into ARS Pharma, with ARS Pharma surviving as Silverback’s wholly-owned subsidiary.

ARS Pharma was renamed ARS Subsidiary, Inc., and then subsequently renamed ARS Pharmaceuticals Operations, Inc.

At the effective time of the Merger (the “Effective Time”), each share of ARS Pharma common stock outstanding immediately prior to the Effective Time, after giving effect to the automatic conversion of all shares of preferred stock of ARS Pharma into shares of ARS Pharma common stock immediately prior to the Effective Time (excluding shares held as treasury stock by ARS Pharma or held or owned by Silverback, Merger Sub or any subsidiary of Silverback or ARS Pharma and dissenting shares), was automatically converted into the right to receive shares of Silverback common stock equal to the exchange ratio of 1.1819 .

At the completion of the Merger, the prior ARS Pharma equityholders owned 62 % and the prior Silverback equityholders owned 38 % of the combined company, in each case on a fully diluted basis using the treasury stock method and excluding out-of-money options of Silverback.

The Merger was accounted for as a reverse recapitalization, with ARS Pharma being treated as the acquirer for accounting purposes.

Pursuant to the Merger Agreement, Silverback changed its name to ARS Pharmaceuticals, Inc., and changed its corporate ticker symbol on the Nasdaq Global Market to “SPRY”.

See discussions of the transactions in connection with the Merger at Note 3 - Merger and Related Transactions .

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To date, the Company has funded its operations primarily with proceeds from the Merger, the issuance of convertible preferred stock, payments earned under collaboration agreements and bank debt.

The Company’s currently available cash, cash equivalents, and investments as of December 31, 2022 are sufficient to meet its anticipated cash requirements for at least the 12 months following the date the financial statements are issued.

From August 5, 2015 (inception) through December 31, 2022, the Company has devoted substantially all of its efforts to developing intellectual property and conducting product development and clinical trials, raising capital, and building infrastructure.

The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven.

The Company’s currently available cash, cash equivalents, and short-term investments as of December 31, 2023 are sufficient to meet its anticipated cash requirements for at least the 12 months following the date these financial statements are issued.

From August 5, 2015 (inception) through December 31, 2023, the Company has devoted substantially all of its efforts to developing intellectual property, conducting product development and clinical trials, raising capital, and building infrastructure.

The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven.

If the Company does not successfully commercialize any product candidates for which it receives regulatory approval, it will be unable to generate recurring product revenue or achieve profitability.

Management expects operating expenses to increase for the foreseeable future and there can be no assurance that the Company will ever achieve profitability, or if achieved, that it will be sustained on a continuing basis.

T he novel coronavirus-2019 (“COVID-19”) epidemic and geopolitical events have resulted in a significant disruption of global financial markets.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and further disruptions to, and volatility in, the credit and financial markets in the United States, including recent bank failures, and worldwide resulting from a resurgence of COVID-19, future health epidemics or pandemics, geopolitical actions or other macroeconomic factors.

The Company’s ability to raise additional capital may be adversely impacted should the global economic conditions worsen or as a result of further disruptions to, and volatility in, the credit and financial markets in the United States, including bank failures, future health epidemics or pandemics, geopolitical actions or other macroeconomic factors.

If such further disruption occurs, the Company could experience an inability to access additional capital.

If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs.

Any of these actions could materially harm the Company’s business, results of operations, and future prospects.

Reduction in Force

On September 19, 2023, the FDA issued a CRL regarding our NDA for neffy .

On September 29, 2023, we initiated a 20 % reduction in force (“RIF”) in order to conserve our cash resources and manage operating expenses until the anticipated PDUFA target action date in the middle of the second half of 2024.

We provided severance payments, continuation of group health insurance coverage, and other benefits for a specified period to the affected employees.

We incurred costs of $ 0.6 million for termination benefits resulting from the RIF, of which $ 0.1 million remains accrued for as of December 31, 2023.

Summary of Significant Accounting Policies

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The financial statements have been prepared in conformity with U.S.

generally accepted accounting principles (“U.S.

GAAP”).

generally accepted accounting principles (“U.S.

Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S.

GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”).

The consolidated financial statements include the accounts of the Company and ARS Pharmaceuticals IRL, Limited for the year ended December 31, 2022.

GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”).

The Company’s financial statements are presented on a consolidated basis, which include the accounts of ARS Pharmaceuticals, Inc., ARS Pharmaceuticals Operations, Inc.

and ARS Pharmaceuticals IRL, Limited.

All intercompany accounts and transactions have been eliminated in consolidation.

The Company’s functional and reporting currency is the U.S.

Assets and liabilities that are not denominated in the functional currency are remeasured into U.S.

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Since ARS Pharma was determined to be the accounting acquirer in connection with the Merger, for periods prior to the Merger the consolidated financial statements were prepared on a stand-alone basis for ARS Pharma and did not include the combined entities activity or financial position.

Subsequent to the Merger, the consolidated financial statements as of and for the year ended December 31, 2022 include Silverback’s activity and Silverback’s assets and liabilities at their acquisition date fair value.

Historical share and per share figures of ARS Pharma have been retroactively restated based on the exchange ratio of 1.1819 .

For periods subsequent to the Merger, the consolidated financial statements include Silverback’s activity and Silverback’s assets and liabilities at their acquisition date fair value.

Historical share and per share figures of ARS Pharma have been retroactively restated based on the exchange ratio in the Merger of 1.1819 .

Use of Estimates

The preparation of the Company’s consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

The most significant estimates in the Company’s consolidated financial statements relate to revenue recognized for its collaboration agreements, accruals for research and development expenses and valuation of equity awards.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources.

Actual results may differ materially and adversely from these estimates.

To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Cash and Cash Equivalents

Cash and cash equivalents include cash readily available in checking, money market and sweep accounts.

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

The Company invests excess cash in investment grade intermediate-term fixed income securities.

These investments are included in short-term investments on the balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive loss.

Realized gains and losses on the sale of these securities are recognized in net loss.

Cash and cash equivalents include cash readily available in checking and money market mutual funds.

The Company considers all highly liquid investments with remaining maturities when purchased of 90 days or less to be cash equivalents.

The Company invests excess cash in investment grade fixed income securities.

Realized gains and losses on the sale of securities are recognized in net loss.

Fair Value of Financial Instruments

Cash and cash equivalents and investments are carried at fair value.

Cash, cash equivalents, and short-term investments are carried at fair value.

The carrying amounts of all prepaid expenses and other current assets, accounts payable, accrued liabilities, and contract liability, are considered to be representative of their respective fair values because of the short-term nature of those instruments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and short-term investments.

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits and limits its exposure to cash risk by placing its cash with high credit quality financial institutions.

The Company reviews its financial instruments portfolio on a quarterly basis to determine if any unrealized losses have resulted from a credit loss or other factors.

As part of the review, management considers factors such as historical experience, market data, issuer-specific factors, and current economic conditions.

This review is subjective, as it requires management to evaluate whether an event or change in circumstances has occurred in that period that may be related to credit issues.

Property and Equipment

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Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally five years.

Repairs and maintenance costs are charged to expense as incurred.

Repair and maintenance costs are charged to expense as incurred.

Impairment of Long-Lived Assets

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The Company has not recognized any impairment losses from inception through December 31, 2023 .

Effective January 1, 2021, the Company early adopted ASC No.

2016-02, Leases (Topic 842) (“ASC 842”), which supersedes the current accounting for leases, using the modified retrospective transition method.

The Company has elected to apply the practical expedients allowed by the standard for existing leases.

The new standard, while retaining two distinct types of leases, finance and operating, (i) requires lessees to record a right-of-use (“ROU”) asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (ii) eliminates current real estate specific lease provisions, (iii) modifies the lease classification criteria and (iv) aligns many of the underlying lessor model principles with those in the new revenue standard.

The Company determines the initial classification and measurement of its ROU asset and lease liabilities at the lease commencement date and thereafter, if modified.

The Company determines the initial classification and measurement of its right-of-use (“ROU”) asset and lease liabilities at the lease commencement date and thereafter, if modified.

The Company recognizes a ROU asset for its operating leases with lease terms greater than 12 months.

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Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in research and development and general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Warrant Liability

The Company has issued freestanding warrants to purchase shares of its Series C convertible preferred stock.

Prior to the Merger, the Company adjusted the carrying value of such Series C convertible preferred stock warrants to the estimated fair value at each reporting date, with any related increases or decreases in the fair value being recorded within other income (expense) in the consolidated statements of operations and comprehensive loss.

Pursuant to the Merger Agreement the Series C convertible preferred stock warrants became warrants to purchase shares of the combined company's common stock.

As a result of the Merger, the warrants no longer meet the requirements for liability accounting, as such, the Company adjusted the value of the warrants to the estimated fair value as of the Merger date and reclassified them to equity.

Revenue Recognitio n

Revenue Recognition

Our revenues generally consist of licenses and research services under license and collaboration agreements.

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Research and development are expensed in the period incurred.

Research and development costs primarily consist of salaries and related expenses for personnel, stock-based compensation expense, external research and development costs incurred under agreements with contract research organizations, investigative sites and consultants to conduct our clinical studies, costs related to compliance with regulatory requirements, costs related to manufacturing the Company’s product candidates for clinical trials and other allocated expenses.

Payments for research and development activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying consolidated balance sheets as prepaid expenses.

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The Company uses judgments and estimates to determine the prepaid or accrued balances at the end of any reporting period.

Actual results could differ from the Company’s estimates.

Costs related to filing and pursuing patent applications are recorded as general and administrative expenses in the statements of operations and expensed as incurred since recoverability of such expenditures is uncertain.

Costs incurred to acquire technology licenses and milestone payments made on existing agreements are charged to research and development expense or capitalized based upon the asset achieving technological feasibility in accordance with management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use.

Acquired in-process research and development expense

Acquired in-process research and development expense (“IPR&D”) is expensed on the acquisition date if there is no alternative future use.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration becomes payable.

Milestone payments made to third parties subsequent to regulatory approval will be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.

Stock-Based Compensation

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The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and recognizes forfeitures as they occur.

The Company’s equity incentive plans allow for the issuance of restricted stock awards that may be subject to vesting.

The unvested shares of any restricted stock awards are held in escrow as the stock award vests or until the holder’s termination of services, whichever occurs first.

In the event the holder’s services terminate, the Company has the right of repurchase, at its option, the portion of unvested stock awards.

For all early exercised unvested stock awards, a liability is established related to the cash received for the unvested portion of the stock award, which represents the Company’s repurchase rights if the award holders were to be terminated and their stock repurchased.

In the event that stock-based awards are granted in contemplation of or shortly before a planned release of material non-public information, and such information is expected to result in a material increase in the share price of our common stock, the Company may consider whether an adjustment to the observable market price is required when estimating the grant date fair value.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.

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Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

The Company’s comprehensive loss was the same as its reported net loss for all periods presented.

The Company’s comprehensive loss typically consists of the change in unrealized gains and losses on available-for-sale securities.

Segment Reporting

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Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.

For purposes of this calculation, convertible preferred stock, stock options, and preferred stock warrants are considered to be common stock equivalents but are not included in the calculations of diluted net loss per share for the periods presented as their effect would be antidilutive.

For purposes of this calculation, convertible preferred stock, stock options, and warrants are considered to be common stock equivalents but are not included in the calculations of diluted net loss per share for the periods presented as their effect would be antidilutive.

The following securities are excluded from the calculation of weighted-average dilutive common shares because their inclusion would have been anti-dilutive.

Historical share figures have been retroactively restated based on the exchange ratio of 1.1819 .

December 31, 2022

December 31, 2021

Convertible preferred stock

Warrants to purchase convertible preferred stock

As of December 31,

Warrants to purchase common stock

Common stock options granted and outstanding

Recently Issued Accounting Pronouncements —

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Restricted stock units

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which changes the accounting for recognizing impairments of financial assets.

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The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination.

This update is effective for the Company beginning January 1, 2023.

The Company is currently evaluating the impact the standard may have on its financial statements and related disclosures.

This standard was effective for the Company beginning January 1, 2023.

The adoption of this new standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements — Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (ASU 2023-07), which requires issuers to make additional disclosures with respect to segment expenses, including required disclosure on an annual and interim basis for significant segment expenses and other segment items.

ASU 2023-07 also permits the disclosure of more than one measure of a segment’s profit or loss.

ASU 2023-07 is effective for the Company as of January 1, 2024 for annual periods and as of January 1, 2025 for interim periods.

The Company is evaluating the expected impact of ASU 2023-07 on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASU 2023-09), which requires issuers to make additional disclosures on an annual basis related to specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold on an annual basis, disclose additional information about income taxes paid as well as other disaggregated disclosures.

ASU 2023-09 is effective for the Company as of January 1, 2025 for annual periods.

The Company is evaluating the expected impact of ASU 2023-09 on the consolidated financial statements.

Merger and Related Transactions

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(i) ARS Pharma stockholders own a substantial majority of the voting rights of the combined organization;

(ii) ARS Pharma has designated a majority (eight of eleven) of the initial members of the board of directors of the combined organization;

and (iii) ARS Pharma’s senior management holds all key positions in senior management of the combined organization.

(ii) ARS Pharma designated a majority (eight of eleven) of the initial members of the board of directors of the combined organization;

and (iii) ARS Pharma’s senior management holds all key positions in senior management of the combined organization.

The transaction was accounted for as a reverse recapitalization because on the effective date of the Merger, the pre-combination assets of Silverback were primarily cash and other non-operating assets.

Additionally, the Company concluded that the in-process research and development ( “

IPR&D ”

) assets that remained as of the combination were not significant when compared to the cash and investments obtained through the transaction.

Under reverse recapitalization accounting, the assets and liabilities of Silverback were recorded at their fair value which approximated book value due to the short-term nature of the instruments.

Additionally, the Company concluded that the in-process research and development (“IPR&D”) assets that remained as of the combination were not significant when compared to the cash and investments obtained through the transaction.

Under reverse recapitalization accounting, the assets and liabilities of Silverback were recorded at their fair value, which approximated book value due to the short-term nature of the instrum ents.

No goodwill or intangible assets were recognized.

Consequently, the Company's consolidated financial statements reflect the issuance of 36,535,541 shares to the former stockholders of Silverback.

Under the terms of the Merger Agreement, immediately prior to the effective time of the Merger, each share of ARS Pharma’s preferred stock was converted into a share of ARS Pharma’s common stock.

As the accounting acquirer, ARS Pharma is deemed to have assumed all of Silverback’s outstanding and unexercised stock options.

Under the terms of the Merger Agreement, immediately prior to the effective time of the Merger, each share of ARS Pharma’s preferred stock was converted into one share of ARS Pharma’s common stock.

As the accounting acquirer, ARS Pharma is deemed to have assumed all of Silverback’s outstanding and unexercised stock options.

The assumed options continue to be governed by the terms of the 2016 and 2020 Equity Incentive Plans of Silverback (as discussed more in Note 10 - Stock-Based Compensation ) under which the options were originally granted.

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ARS Pharma also obtained $ 1.1 million in IPR&D assets that have no alternative future use.

The fair value attributable to these assets was recorded as research and development expense in the Company’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.

ARS Pharma also incurred transaction costs of approximately $ 2.1 million and this amount is recorded as a reduction to additional paid-in capital in th e accompanying consolidated statement of convertible preferred stock and stockholders’

equity (deficit) for the year ended December 31, 2022.

The fair value attributable to these IPR&D assets was recorded as research and development expense in the Company’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.

ARS Pharma also incurred transaction costs of approximately $ 2.1 million and this amount was recorded as a reduction to additional paid-in capital.

During the fourth quarter ended December 31, 2023, the Company determined that the retrospective insurance policy that was recorded as an asset at the date of the Merger on November 8, 2022, should have been expensed by Silverback prior to the Merger.

As a result, the Company has made a correction of an immaterial error during the quarter ended December 31, 2023, by reversing $ 0.6 million in previously recorded amortization expense incurred from the date of the Merger through September 30, 2023, removing the asset and reducing additional paid in capital in the amount of $ 3.6 million.

Fair Value Measurements

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Level 3- Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

In 2021, based on the borrowing rates currently available to the Company for loans with similar terms, management believe the fair value of the note payable approximates its carrying value.

In 2022, the note payable was fully paid off.

The following table identifies the Company’s assets that were measured at fair value on a recurring basis (in thousands):

December 31, 2023

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Gross unrealized losses

Money market funds

Estimated Fair Value

Cash and cash equivalents - Money market mutual funds

Short-term investments - U.S.

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December 31, 2022

Money market funds

Cash and cash equivalents - Money market mutual funds

Short-term investments - U.S.

Treasury securities

There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during the periods presented.

The Company’s short-term investments portfolio contains investments in U.S.

During the year ended December 31, 2023, the Company purchased $ 272.0 million in short-term investments and there was $ 185.0 million in maturities of short-term investments.

During the year ended December 31, 2022, the Company purchased no short-term investments and there were no maturities of short-term investments.

The Company’s short-term investments portfolio contains investments in U.S.

Treasury securities that have an effective maturity date that is less than one year from the respective balance sheet date.

As of December 31, 2022, the Company did not have any investments in an unrealized loss position.

As of December 31, 2022, the Company did not have any liabilities that were measured at fair value on a recurring basis.

As a result of the Merger, the preferred stock warrant liability that was outstanding was remeasured as of the Merger date and reclassified to equity.

During 2022, the Company recorded total other expense relating to this warrant of $ 0.1 million.

There were no transfers between the Level 1 and Level 2 categories or into or out of the Level 3 category during the periods presented.

The Company's money market mutual fund holdings are highly liquid and invest primarily in cash and U.S.

Treasury securities.

There was a $ 0.4 mi llion unrealized loss on available-for-sale securities for the year ended December 31, 2023 and a $ 0.4 million unrealized gain on available-for-sale securities for the year ended December 31, 2022.

Management determined that the gross unrealized losses on the Company’s available-for-sale securities as of December 31, 2023 were primarily attributable to current economic and market conditions and not credit risk.

As of December 31, 2023 and December 31, 2022, no allowance for credit losses was recorded.

It is neither management’s intention to sell nor is it more likely than not that the Company will be required to sell any investments prior to recovery of its amortized cost basis, which is expected to be at maturity.

Accrued interest on the Company's available-for-sale securities was $ 0.7 million as of December 31, 2023 and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet.

As of December 31, 2023 and December 31, 2022, the Company did no t have any liabilities that were measured at fair value on a recurring basis.

Balance Sheet Details

Prepaid expenses and other current assets consisted of the following (in thou sands):

Prepaid expenses and other current assets consisted of the following (in thousands):

December 31, 2023

December 31, 2022

Prepaid insurance

Prepaid expenses

Prepaid insurance

Interest receivable

Prepaid development costs

Capitalized software implementation costs

Other receivables

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Less accumulated depreciation

Depreciation expense was immaterial for the years ended December 31, 2022 and 2021.

Other assets consisted of the following (in thousands):

Depreciation expense was $ 0.1 million for the years ended December 31, 2023 and 2022.

Other long-term assets consisted of the following (in thousands):

December 31, 2023

December 31, 2022

Capitalized software implementation costs

Prepaid insurance

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Accounts payable

Accrued legal and professional fees

Accrued clinical expenses

Accrued compensation

Accrued tax expenses

Accrued development expenses

Accrued legal and professional fees

Accrued pre-commercialization marketing related expenses

Accrued tax expenses

Collaboration and Out-Licensing

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Licenses of Intellectual Property .

If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, revenue is recognized from non-refundable, up-front payments allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

If the license is not a distinct performance obligation, the Company evaluates the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees.

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If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price.

Milestone payments that are not within the Company’s control, such as approvals from regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being achieved until those approvals are received or the specified event occurs.

Revenue is recognized when the underlying performance obligation has been transferred to the customer.

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Clinical and Commercial Supply .

Arrangements that include a promise for the future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options.

We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.

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Alfresa Agreement

In March 2020, the Company signed a Letter of Intent (“LOI”) with Alfresa Pharma Corporation (“Alfresa”) for the right to negotiate a definitive agreement for the exclusive license and sublicensable right to develop, register, import, manufacture and commercialize neffy in Japan in exchange for an upfront payment of $ 2.0 million.

In April 2020, the Company entered into a Collaboration and License Agreement for the rights pursuant to the LOI.

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the license for neffy and research and development services.

The Company determined the initial transaction price to be the $ 7.0 million, which includes a clinical milestone as it was deemed not probable of significant reversal at the inception of the agreement.

The Company determined the initial transaction price to be $ 7.0 million, which includes a clinical milestone as it was deemed not probable of significant reversal at the inception of the agreement.

Due to the uncertainty in the achievement of the regulatory and commercial milestones, the variable consideration associated with these future milestone payments has been fully constrained and is excluded from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur.

These estimates will be re-assessed at each reporting period.

The transaction price was allocated to the performance obligations based on the estimated stand-alone selling price of each performance obligation.

The Company recognized revenue of $ 0.1 million and $ 0.2 million for the years ended December 31, 2022 and 2021 , respectively and had a contract liability of an immaterial amount and $ 0.1 million as of December 31, 2022 and 2021, respectively.

T he transaction price was allocated to the performance obligations based on the estimated stand-alone selling price of each performance obligation.

The Company recognized revenue of less than $ 0.1 million and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively.

There was no contract liability as of December 31, 2023.

Recordati Agreement

In September 2020, the Company entered into a License and Supply Agreement (the “Recordati Agreement”) with Recordati Ireland, Ltd.

(“Recordati”) for the exclusive license and sublicensable right to develop, import, manufacture or have manufactured commercial product, file and hold regulatory approvals and commercialize neffy in Europe and certain European Free Trade Association, Russia/the Commonwealth of Independent States, Middle East and African countries (the “Recordati Territory”).

Under the Recordati Agreement, the Company is responsible for completion of any clinical studies for neffy required by the European Medicines Agency (“EMA”) before granting European Union Marketing Authorization, and by the Medicines and Healthcare products Regulatory Agency (“MHRA”) prior to granting United Kingdom Marketing Authorization.

The Company filed the initial regulatory submissions with the EMA in the fourth quarter of 2022 and will file the initial regulatory submissions with the MHRA for neffy and is responsible for the manufacturing of commercial supply.

Recordati is solely responsible all regulatory activities in the region after the Company’s initial regulatory submissions to the EMA and MHRA, for any post-approval clinical studies and commercialization activities.

Either party may terminate the Recordati Agreement for certain breaches.

Unless terminated earlier by either or both parties, the term of the Recordati Agreement will continue as long as Recordati has commercial sales of neffy in the region.

In September 2020, the Company entered into a License and Supply Agreement (the “Recordati Agreement”) with Recordati Ireland, Ltd.

Under the terms of the Recordati Agreement, the Company received an upfront payment of $ 11.8 million and a regulatory milestone payment of $ 6.0 million during 2020.

In addition, the Company is eligible to receive up to 90.0 million euros of milestone payments upon achievement of certain regulatory and commercial sales milestones.

Subject to regulatory approval, the Company will earn tiered royalties in the low double-digits on annual net sales in the region and will receive a per unit supply price for the sale of commercial supply to Recordati.

The per unit commercial supply costs are subject to a cap.

The combined tiered royalty and supply price have a low double-digit cap.

At the commencement of this collaboration, the Company identified the following performance obligations:

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Due to the uncertainty in the achievement of all the developmental and commercial milestones, at inception of the contract, the variable consideration associated with future milestone payments was fully constrained and excluded from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur.

These estimates will be re-assessed at each reporting period.

The transaction price was allocated to the performance obligations based on the estimated stand-alone selling price of each performance obligation.

In November 2020, the Company earned a regulatory milestone of $ 6.0 million.

The Company recognized revenue of $ 1.2 million and $ 2.3 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021 , there was a contract liability of $ 3.1 million and $ 4.4 million, respectively.

On February 22, 2023, the Company and Recordati entered into a termination agreement (the “Termination Agreement”), pursuant to which, among other things, the Company and Recordati agreed to terminate the Recordati Agreement and the Company will reacquire all of the Recordati’s rights under the Recordati Agreement, as described in Note 14- Subsequent Events .

Pursuant to the Termination Agreement, the Company reacquired all of the Recordati rights, paid Recordati a one-time upfront payment of € 3.0 million, and has agreed to pay additional payments upon achievement of certain milestones including:

(i) an EMA regulatory milestone payment of € 2.0 million, (ii) a milestone payment of € 5.0 million upon first commercial sale of a Recordati Licensed Product in the Recordati Territory, and (iii) royalty payments of up to € 5.0 million in the aggregate from sales of Recordati Licensed Product(s) in the Recordati Territory.

The Company determined that the Recordati rights at the time of entering into the Termination Agreement had no alternative future use and therefore recorded the € 3.0 million upfront payment to Recordati as an IPR&D expense presented within research and development expense.

The Termination Agreement ended the Company’s performance obligations pursuant to the Recordati Agreement and consequently the existing contract liability of $ 3.1 million previously received from Recordati was recorded against IPR&D expense presented within research and development expense.

Accordingly, no revenue was recognized in the year ended December 31, 2023.

The Company recognized revenue of $ 1.2 million for the year ended December 31, 2022.

Pediatrix Agreement

In March 2021, the Company entered into a Collaboration and Distribution Agreement with Pediatrix Therapeutics, Inc.

(“Pediatrix”) for the exclusive license and sublicensable right to develop, import, manufacture or have manufactured commercial product, file and hold regulatory approvals and commercialize neffy in the People’s Republic of China, Taiwan, Macau, and Hong Kong.

Under the agreement, Pediatrix is responsible, at its sole cost and expense, for all ongoing development work that is necessary for or otherwise supports regulatory approval in the defined territory, including all clinical trials, and activities related to post approval commitments and commercialization tests.

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The Company recognized revenue of the full $ 3.0 million during the year ended December 31, 2021.

A reconciliation of contract liability from collaboration agreements was as follows (in thousands):

A reconciliation of contract liability from the Alfresa, Recordati, and Pediatrix collaboration agreements was as follows (in thousands):

Balance at December 31, 2022

IPR&D expense related to the Termination Agreement

Revenue recognized

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Commitments and Contingencies

In September 2019, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank for working capital in the principal amount, as amended, of $ 10.0 million (the “Note”).

In September 2019, the Company entered into a Loan and Security Agreement with Silicon Valley Bank for working capital in the principal amount, as amended, of $ 10.0 million (the “Note”).

The Note required interest only payments through June 30, 2021 and had a maturity date of March 1, 2024.

In addition, there was a final payment (“Balloon Payment”) of $ 0.3 million at maturity.

In connection with the Note, the lender received warrants to purchase 38,460 shares of Series C convertible preferred stock at $ 2.60 per share.

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The debt discount, debt issuance costs and Balloon Payment were amortized to interest expense using the effective interest rate method over the loan term.

The Company recognized interest expense of $ 0.6 million and $ 0.8 million for the years ended December 31, 2022 and 2021 , respectively, and debt discount amortization of $ 0.3 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively.

In November 2022, as a result of the Merger, the warrants converted to warrants to purchase 45,456 shares of the Company’s common stock at $ 2.20 per share.

On November 7, 2022, the Company paid off the remaining balance of $ 5.4 million on its loans with Silicon Valley Bank, including all principal and interest and the Balloon Payment.

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Monthly rental payments due under the lease commenced on December 6, 2021 and escalate through the lease term.

The Company prepaid the first month’s rent upon execution of the lease, and the lease agreement provided full rent abatement for the second and third months of the rental term.

As of December 31, 2022, the remaining lease term of the Company’s operating lease was 26 months, and the discount rate on the Company’s operating lease was 8 %.

The Company prepaid the first month’s rent upon execution of the lease, and the lease agreement provided full rent abatement for the second and third months of the rental term.

As of December 31, 2023 , the remaining lease term of the Company’s operating lease was 14 months , and the discount rate on the Company’s operating lease was 8 %.

As there was not an implicit rate within the lease, the discount rate was determined by using a set of peer companies incremental borrowing rates.

The Company's operating lease expense was $ 0.2 million and immaterial for the years ended December 31, 2022 and 2021 , respectively.

The Company's variable lease expense was $ 0.1 million and immaterial for the years ended December 31, 2022 and 2021 , respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 0.2 million and zero for the years ended December 31, 2022 and 2021, respectively.

Future minimum noncancelable operating lease payments are as follows (in thousands):

The Company's operating lease expense was $ 0.2 million for each of the years ended December 31, 2023 and 2022.

The Company's variable lease expense was immaterial for each of the years ended December 31, 2023 and 2022.

Cash paid for amounts included in the measurement of lease liabilities was $ 0.2 million for each of the years ended December 31, 2023 and 2022.

As of December 31, 2023, future minimum noncancelable operating lease payments are as follows (in thousands):

Year ended December 31,

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On August 12, 2021, Amphastar Pharmaceuticals, Inc.

(“Amphastar”) filed a Petition for Inter Partes Review (“IPR”) with the United States Patent and Trademark Office (“USPTO”), seeking to invalidate claims 1-20 of United States Patent No.

10,682,414 (the “‘414 patent”).

The ‘414 patent issued on June 16, 2020 and is entitled “Intranasal Epinephrine Formulations and Methods for the Treatment of Disease.”

The claims of the ‘414 patent are directed to methods of treating a type-1 hypersensitivity reaction, including anaphylaxis, using an aqueous nasal spray pharmaceutical formulation containing epinephrine or a salt thereof, including the Company’s neffy product candidate, in a single dose.

On February 9, 2023, the USPTO issued a Final Written Decision finding claims 3-6 and 18-20, which encompass the Company’s neffy product candidate, patentable, and claims 1-2 and 7-17 unpatentable.

Both the Company and Amphastar have the right to file a motion for reconsideration with the USPTO in addition to a notice of appeal with the United States Court of Appeals for the Federal Circuit.

Although the results of any motion for reconsideration or notice of appeal are inherently unpredictable and uncertain, and could result in either the USPTO or the Federal Circuit finding some or all of claims 1-20 of the ‘414 patent to be invalid or unenforceable, the Company does not believe that an adverse outcome will have a material adverse effect on its business, operating results, cash flows or financial condition.

On November 5, 2021, a securities class action complaint was filed against Silverback and certain of Silverback’s former officers and directors in the U.S.

District for the Western District of Washington, captioned Dresner v.

Silverback Therapeutics, Inc., et al., Case No.

2:21-cv-01499 (the “Dresner Case”).

The court has appointed lead plaintiff and lead plaintiff's counsel, and plaintiff's counsel then filed the amended complaint on April 11, 2022.

The amended complaint alleges that between December 3, 2020 and March 31, 2022, Silverback and certain of its officers and directors violated (1) Sections 11 and 15 of the Securities Act of 1933, as amended;

and (2) Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder, by making allegedly false and misleading statements in various SEC filings and press releases regarding the clinical and commercial prospects of its product candidate, SBT6050, which is now discontinued.

The complaint seeks unspecified damages and interest, as well as attorneys’

fees and other costs.

Silverback and the other defendants filed a motion to dismiss on May 26, 2022 and lead plaintiff filed an opposition brief on July 11, 2022.

On August 10, 2022, Silverback and the other defendants filed a reply brief.

The court held a hearing on October 28, 2022 and issued an order granting defendants’

motion to dismiss without prejudice on November 4, 2022.

Plaintiffs were given leave to amend and filed a Second Amended Complaint (“SAC”) on December 5, 2022, which asserted Section 11 claims only with respect to Silverback’s December 3, 2020 IPO and Section 10(b) claims during a shorter class period of March 29, 2021 through March 31, 2022.

Defendants filed a motion to dismiss the SAC on January 2, 2023.

Lead plaintiff filed an opposition brief on January 23, 2023, and defendants filed a reply brief January 27, 2023.

The court is expected to issue a ruling on the motion to dismiss in the first half of 2023.

(“Amphastar”) filed a Petition for Inter Partes Review with the United States Patent and Trademark Office (“USPTO”), seeking to invalidate claims 1-20 of United States Patent No.

10,682,414 (the “‘414 patent”).

The ‘414 patent issued on June 16, 2020 and is entitled “Intranasal Epinephrine Formulations and Methods for the Treatment of Disease.” The claims of the ‘414 patent are directed to methods of treating a type-1 hypersensitivity reaction, including anaphylaxis, using an aqueous nasal spray pharmaceutical formulation containing epinephrine or a salt thereof in a single dose.

On February 9, 2023, the USPTO issued a Final Written Decision finding claims 3-6 and 18-20, which encompass the Company’s neffy product candidate, patentable, and claims 1-2 and 7-17 unpatentable.

On April 12, 2023, Amphastar filed a notice of appeal with the United States Court of Appeals for the Federal Circuit.

On May 15, 2023, the Company filed a motion to dismiss for lack of standing, which will be heard along with the merits of the case.

Briefing on the merits is expected to be completed in the second quarter of 2024, and a decision from the Federal Circuit is expected by mid-2025.

The results of any appeal proceedings are inherently unpredictable and uncertain, and could result in the Federal Circuit finding some or all of claims 1-20 of the ‘414 patent to be invalid or unenforceable.

On July 24, 2023, Aera A/S, an IP consultancy firm in Denmark representing an unidentified opponent, filed a notice of opposition with the European Patent Office (the “EPO”) in respect of EP 3678649 (the “EP ‘649 Patent”), which is a patent directed to a nasal spray formulation of epinephrine, and uses thereof.

We filed a response to the notice of opposition on December 15, 2023, and we will continue to vigorously defend the EP ‘649 Patent.

The results of any notice of opposition are inherently unpredictable and uncertain, and could result in the EPO finding the patent to be invalid or unenforceable.

Regardless of the outcome, involvement in legal proceedings may have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

The Company cannot predict the outcome of these suits, and failure by the Company to obtain favorable resolutions could have a material adverse effect on its business, results of operations, and financial condition.

The Company’s chances of success on the merits of either of these suits are still uncertain and any possible loss or range of loss cannot be reasonably estimated and as such the Company has not recorded a liability as of December 31, 2022.

Except as described above, the Company is not currently involved in any legal proceeding that it believes could have a materially adverse effect on its financial condition or results of operations.

Except as described above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or other body pending or, to the knowledge of the Company’s executive officers, threatened against or affecting the Company, the Company’s common stock, any of its subsidiaries or its subsidiaries’

officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

The Company’s chances of success on the merits of these suits are still uncertain and any possible loss or range of loss cannot be reasonably estimated and as such the Company has not recorded a liability as of December 31, 2023.

In-Licensing and Supply

License Agreement with Aegis

In June 2018, the Company entered into a License Agreement (the “Aegis Agreement”) with Aegis Therapeutics, LLC (“Aegis”).

Under the Aegis Agreement, the Company licensed the exclusive, worldwide, royalty-bearing, sublicensable, rights to certain proprietary Aegis technology, patent rights and know-how to develop and commercialize epinephrine products.

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The regulatory milestone payments under the Aegis Agreement will be recognized as research and development expense upon completion of the required events, as the triggering events are not considered to be probable until they are achieved.

The Company made a $ 0.5 million milestone payment to Aegis upon the achievement of a regulatory milestone during 2019, and a $ 1.0 million payment to Aegis upon the FDA’s acceptance of the Company’s New Drug Application (“NDA”) submission for neffy, which occurred in the third quarter of 2022.

The Company may be required to pay royalties based on annual net product sales in the low to mid-single digits on its or its sublicensees’

net sales of the Licensed Products (as defined in the Aegis Agreement) on a country-by-country and product-by-product basis.

The Company made a $ 0.5 million milestone payment to Aegis upon the achievement of a regulatory milestone during 2019, and a $ 1.0 million payment to Aegis upon the FDA’s acceptance of the Company’s NDA submission for neffy , which occurred in the third quarter of 2022.

The Company may be required to pay royalties based on annual net product sales in the low to mid-single digits on its or its sublicensees’ net sales of the Licensed Products (as defined in the Aegis Agreement) on a country-by-country and product-by-product basis.

The Company is responsible for reimbursing Aegis for patent costs incurred in connection with prosecuting and maintaining patent rights that are specific to epinephrine or epinephrine products.

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Unless terminated earlier by either or both parties, the term of the Aegis Agreement will continue until the final expiration of all royalty obligations under the Aegis Agreement.

In conjunction with the Aegis Agreement, the Company also entered into a Supply Agreement (the “Supply Agreement”) with Aegis that allows the Company to purchase materials for preclinical, development and commercial use at predetermined prices.

The Company may elect to have Aegis supply minimum quantities but there are no minimum or maximum purchase obligations under the Supply Agreement unless this election is made.

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The Supply Agreement term may be extended by mutual written agreement.

Expense recognized under the Supply Agreement was $ 1.0 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively.

Under the Supply Agreement, $ 0.3 million and $ 1.0 million in expense was recognized in the years ended December 31, 2023 and 2022, respectively.

Manufacturing Agreement with Renaissance

In September 2020, the Company entered into a manufacturing agreement (the “Renaissance Agreement”) with Renaissance Lakewood, LLC (“Renaissance”).

Pursuant to the Renaissance Agreement, Renaissance agreed to manufacture for, and provide to the Company, neffy nasal unit dose sprays (“Renaissance Products”).

The Company is obligated to provide Renaissance with certain supplies to manufacture the Renaissance Products and to purchase from Renaissance a mid double-digit percentage of the Company’s annual aggregate Renaissance Product requirements in the E.U., and a high double-digit percentage of the Company’s annual aggregate Renaissance Product requirements in the U.S.

In September 2020, the Company entered into a manufacturing agreement with Renaissance Lakewood, LLC (“Renaissance”), which was subsequently amended in July 2023 (the “Renaissance Agreement”).

Pursuant to the Renaissance Agreement, Renaissance agreed to manufacture for, and provide to the Company, neffy nasal unit dose sprays (“Renaissance Products”).

The Renaissance Agreement contains conventional commercial pharmaceutical manufacturing provisions including certain minimum purchase amounts to be determined in the future based on forecast needs and minimum batch size projections.

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launch date and (ii) the initial U.S.

launch date (“U.S.

Initial Term”), and (b) for Renaissance Product designated for commercial sale in the E.U.

launch date (“U.S.

Initial Term”), and (b) for Renaissance Product designated for commercial sale in the E.U.

and other countries, the earlier of the fifth anniversary of (i) the target E.U.

launch date and (ii) the initial E.U.

launch date (“E.U.

Initial Term”), in each case unless earlier terminated by one of the parties.

launch date (“E.U.

Initial Term”), in each case unless earlier terminated by one of the parties.

Initial Term and E.U.

Initial Term automatically renew for successive two-year terms (“Renewal Term”).

Either party may elect not to renew the U.S.

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during the last calendar year is withdrawn by the FDA, or (d) the Company decided in its sole discretion to cease commercializing the Renaissance Product in the U.S., (5) in the case of a force majeure event that continues for six months or more, or (6) a violation by the other party of trade control or anti-corruption laws.

Expense recognized under the Renaissance Agreement was $ 2.0 million and $ 3.1 million for the years ended December 31, 2022 and 2021 , respectively.

Convertible Preferred Stock and Common Stock and Stockholders’

Equity (Deficit)

Convertible Preferred Stock and Common Stock and Stockholders’ Equity (Deficit)

Authorized Shares

The Company’s current Amended and Restated Certificate of Incorporation authorizes 200,000,000 shares of common stock, par value $ 0.0001 per share, and 10,000,000 shares of preferred stock, par value $ 0.0001 per share.

Convertible Preferred Stock

In April 2016, the ARS Pharma issued 3,600,000 shares of Series A convertible preferred stock at $ 0.0833 per share for net cash proceeds of $ 0.3 million.

Subsequently, in July 2017, an additional 1,164,000 shares of Series A convertible preferred stock were issued at $ 0.0833 per share for net cash proceeds of $ 0.1 million.

In March, June and July 2018, ARS Pharma issued a total of 606,060 shares of Series B convertible preferred stock at $ 1.65 per share for net cash proceeds of $ 1.0 million.

In September and December 2018, ARS Pharma issued 7,692,309 shares of Series C convertible preferred stock at $ 2.60 per share for net cash proceeds of $ 19.8 million.

In August 2021, ARS Pharma issued 9,337,066 shares of Series D convertible preferred stock at $ 5.89 per share for net cash proceeds of $ 54.8 million.

Collectively, the Series A, B, C and D convertible preferred stock issuances will be referred to as “Series Convertible Preferred Stock.”

On November 8, 2022, ARS Pharma completed the Merger with Silverback in accordance with the Merger Agreement.

Under the terms of the Merger Agreement, immediately prior to the effective time of the Merger, 22,399,435 shares of ARS Pharma’s preferred stock were converted into 26,473,899 shares of ARS Pharma’s common stock.

Upon completion of the Merger on November 8, 2022, as the accounting acquirer, ARS Pharma is deemed to have issued 36,535,541 shares of its common stock to Silverback stockholders.

In November 2022, ARS Pharma completed the Merger with Silverback in accordance with the Merger Agreement.

Under the terms of the Merger Agreement, immediately prior to the effective time of the Merger, 22,399,435 shares of ARS Pharma’s convertible preferred stock were converted into 26,473,899 shares of ARS Pharma’s common stock.

In November 2022, upon completion of the Merger and as the accounting acquirer, ARS Pharma is deemed to have issued 36,535,541 shares of its common stock to Silverback stockholders.

Common stock reserved for future issuance consisted of the following:

Common stock options granted and outstanding

Restricted stock units granted and outstanding

Common stock reserved for future awards or option grants

Warrants to purchase common stock

Stock-Based Compensation

Stock-based compensation expense recognized for all equity awards has been reported in the consolidated statements of operations and comprehensive loss as follows (in thousands):

Years Ended December 31,

Year Ended December 31,

Research and development expense

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Total stock-based compensation expense

As of December 31, 2022 , the total unrecognized stock-based compensation expense was $ 4.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.48 years.

For the year ended December 31, 2022, ARS Pharma recognized $ 1.3 million in stock-based compensation expense for 236,380 performance-based option s that vested upon the closing of the Merger.

For the year ended December 31, 2021, no performance-based stock-based compensation was recognized.

In connection with the Merger, the Company repl aced (only for accounting purposes) 6,599,068 stock options and 493,456 restricted stock units held by Silverback employees and directors.

The replacement awards were revalued at their acquisition-date fair value and then attributed to pre and post-combination service.

This resulted in $ 3.1 million in expense attributed to post-combination service to be recognized as compensation cost by the Company, of which $ 3.0 million has been recognized in general and administrative expense in the accompanying consolidated statements of operations for the year ended December 31, 2022.

482,805 replaced restricted stock units vested in connection with the Merger and the remaining 10,651 are outstanding as of December 31, 2022.

As of December 31, 2023, the total unrecognized stock-based compensation expense related to outstanding employee options was $ 22.7 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.43 years.

In November 2022, in connection with the Merger, the Company assumed restricted stock units granted by Silverback, of which 10,651 were outstanding as of December 31, 2022 and 4,144 are outstanding as of December 31, 2023.

Equity Incentive Plans

In September 2018, ARS Pharma adopted the 2018 Equity Incentive Plan.

As a result of the Merger, on November 8, 2022 ARS Pharma, as the accounting acquirer, is deemed to have assumed Silverback's 2016 and 2020 Equity Incentive Plans, and Employee Stock Purchase Plan (“ESPP”).

For the year ended December 31, 2022 , ESPP activity is not material to the consolidated financial statements .

As a result of the Merger, on November 8, 2022 ARS Pharma assumed Silverback’s 2016 and 2020 Equity Incentive Plans, and Employee Stock Purchase Plan (“ESPP”).

There were 44,961 shares and an immaterial number of shares of common stock purchased under the ESPP durin g the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 , the 2016 and 2020 Equity Incentive Plans authorized a total of 16,018,660 shares, of which 5,923,521 shares are available for future grant, and 5,963,430 shares are outstanding.

As of December 31, 2023 , the 2018 Equity Incentive Plan authorized a total of 6,634,333 shares, of which 297,345 shares are available for future grant, and 5,534,195 shares are outstanding.

The Company does not intend to grant future stock options or other equity awards under the 2018 Equity Incentive Plan.

The Company does not intend to grant future stock options or other equity awards under the 2016 or 2018 Equity Incentive Plans.

Stock Options

Stock options granted under the Company’s equity incentive plans expire no later than 10 years from the date of grant and generally vest over a four-year period, with vesting either occurring at a rate of 25 % at the end of the first year and thereafter in 36 equal monthly installments or on a monthly basis.

In the case of awards granted to our non-employee board members, vesting generally occurs on a monthly basis over three years or in full on an annual basis.

The Company issues new shares of common stock upon the exercise of stock options.

A summary of the Company’s stock option activity for the year ended December 31, 2022 is as follows:

A summary of the Company’s stock option activity for the year ended December 31, 2023 is as follows:

Value (in thousands)

Outstanding at December 31, 2022

Assumed in the Merger

Outstanding at December 31, 2023

Vested and expected to vest at December 31, 2022

Exercisable at December 31, 2023

The exercisable shares subject to options outstanding at December 31, 2023 in the table above include vested and early exercisable awards.

The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the Company’s common stock for all options that were in-the-money at December 31, 2022.

The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 8.5 million and $ 1.2 million, respectively.

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The total fair value of shares vested during the years ended December 31, 2023 and 2022 was $ 4.5 million and $ 2.7 million, respectively.

The fair value of stock options granted or assumed in connection with the Merger was estimated using a Black-Scholes option-pricing model ( “Black-Scholes”) with the following weighted-average assumptions:

Years Ended December 31,

November 8, 2022

The fair value of stock options granted was estimated using a Black-Scholes option-pricing model (“Black-Scholes”) with the following weighted-average assumptions:

Year Ended December 31,

Expected term (in years)

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The fair value of stock options was determined using the Black-Scholes assumptions below.

Each of these inputs is subjective and generally requires significant judgement.

Each of these inputs is subjective and generally requires significant judgment.

Fair Value of Common Stock .

Prior to the Merger on November 8, 2022, grant date fair market value of the shares of common stock underlying stock options was determined by ARS Pharma’s Board of Directors.

Following the Merger, the fair market value of the Company's common stock is based on its closing price as reported on the date of grant on the primary stock exchange on which the Company’s common stock is traded.

Prior to the Merger, there was no public market for the ARS Pharma’s common stock, therefore the ARS Pharma Board of Directors determined the fair value of common stock at the time of grant of the option by considering a number of objective and subjective factors including independent third-party valuations of the ARS Pharma common stock, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, amongst other factors.

Prior to the Merger on November 8, 2022, grant date fair market value of the shares of common stock underlying stock options was determined by ARS Pharma’s Board of Directors.

Expected Term .

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Expected Volatility .

Given the Company’s limited historical stock price volatility data, the Company derived the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Company has limited trading history for its common stock.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

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Therefore, the Company uses an expected dividend yield of zero.

A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows (in thousands):

Years Ended December 31,

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State income taxes, net of federal benefit

Officers Compensation (Sec 162(m))

Equity compensation

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Provision for income taxes

Significant components of the Company’s net deferred tax assets were as follows (in thousands):

Years Ended December 31,

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The change in the valuation allowance for the year ended December 31, 2023 was an increase of $ 11.3 million.

At December 31, 2022, the Company had federal and state net operating loss carryforwards (“NOL”) of $ 38.9 million and $ 7.2 million, respectively.

Federal NOL carryforwards of $ 38.9 million, generated after 2017, may be carryforward indefinitely but can only be utilized to offset 80 % of future taxa ble income.

At December 31, 2023, the Company had federal and state net operating loss carryforwards (NOL) of $ 76.2 million and $ 2.5 million, respectively.

Federal NOL carryforwards of $ 76.2 million, generated after 2017, may be carried forward indefinitely but can only be utilized to offset 80 % of future taxable income.

The state NOL carryforwards begin expiring in 2036.

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The NOL and credit carryovers noted above do not include the pre-Merger amounts attributable to Silverback as noted in the IRC Section 382 disclosure in the paragraph below.

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the company's NOL and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the company's NOL and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.

The Company has not completed an ownership change analysis pursuant to IRC Section 382.

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If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance.

Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

Additionally, as part of the transaction with Silverback, certain deferred tax assets generated in the Silverback pre-Merger periods were acquired by the Company consisting of federal and state net operation loss carryovers, research tax credit carryovers, and other tax attributes.

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Unrecognized tax benefits - beginning

Gross increase –

current-period tax positions

Gross increases – tax positions in prior period

Gross increase – current-period tax positions

Unrecognized tax benefits - ending

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets.

If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance.

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets.

If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance.

The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months.

The Company files income tax returns in the United States, various states within the United States, and Ireland.

Due to the Company’s losses incurred, the Company’s income tax returns for all jurisdictions are subject to examination by tax authorities from inception.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense.

The Company files income tax returns in the United States, various states, and Ireland.

Due to the Company’s losses incurred, the Company's income tax returns for all jurisdictions are subject to examination by tax authorities from inception.

The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense.

As of December 31, 2023, there were no significant accruals for interest related to unrecognized tax benefits or tax penalties.

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Employee Benefit Plans

In June 2022, the Company adopted a retirement plan, which is qualified under section 401(k) of the Internal Revenue Code of 1986, as amended, for the Company’s U.S.

The plan allows eligible employees to defer, at the employee’s discretion, pretax compensation up to the Internal Revenue Service (the “IRS”) annual limits.

The Company matches up to 5 % of an employee’s contributions, subject to IRS limitations.

Expense associated with the Company’s matching contribution totaled $ 0.1 million for the year ended December 31, 2022 .

In June 2022, the Company adopted a retirement plan, which is qualified under section 401(k) of the Internal Revenue Code of 1986, as amended, for the Company’s U.S.

The plan allows eligible employees to defer, at the employee’s discretion, pretax compensation up to the Internal Rev enue Service (the “IRS”) annual limits.

The Company matches up to 5 % of an employee’s pay that they contribute to the plan, subject to IRS limitations.

Expenses associated with the Company’s matching contribution totaled $ 0.4 million and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively.

Related-Party Transactions

In September 2015, the Company entered into a consulting agreement, superseded in July 2022, for regulatory and development services with Pacific-Link Consulting, LLC, an entity owned by the President/Chief Executive Officer/director and the Chief Medical Officer of the Company.

In September 2015, the Company entered into a consulting agreement, superseded in July 2022, for regulatory and development services with Pacific-Link Regulatory Consulting, Inc., an entity owned by the President/Chief Executive Officer/director and his spouse, the Chief Medical Officer of the Company.

The Company incurred consulting expense related to this agreement totaling $ 1.9 million and $ 2.1 million during the years ended December 31, 2023 and 2022, respectively.

In September 2018, the Company entered into a consulting agreement with Marlinspike Group, LLC (“Marlinspike Group”) to provide management, business consulting services and business development support.

In addition, Marlinspike Group provides the use of its facilities to the Company from time to time.

The managing member of Marlinspike Group is the Chair of the Board of Directors of the Company and one of its stockholders.

The Company incurred annual expenses related to this agreement totaling $ 0.2 million for both of the years ended December 31, 2023 and 2022.

In November 2018, the Company entered into a consulting agreement for commercial and marketing consulting services with Red Team Associates, LLC (“Red Team”), an entity controlled by the Executive Vice President of Commercial Strategy of the Company.

In November 2018, the Company entered into a consulting agreement for commercial and marketing consulting services with Red Team Associates, LLC (“Red Team”), an entity controlled by the former Executive Vice President of Commercial Strategy of the Company.

The Company incurred consulting expense related to this agreement totaling $ 0.4 million and $ 0.2 million during the years ended December 31, 2023 and 2022, respectively.

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The Company incurred stock-based compensation expense related to this agreement totaling $ 0.1 million for both of the years ended December 31, 2023 and 2022.

Subsequent Events

Termination Agreement

On February 22, 2023, the Company entered into the Termination Agreement with Recordati, pursuant to which, among other things, the Company and Recordati agreed to terminate the Recordati License and Supply Agreement.

Pursuant to the Termination Agreement, the Company will reacquire all of the Recordati Rights and has agreed to pay Recordati a one-time upfront payment of €

3.0 million and additional payments upon achievement of certain milestones including:

(i) an EMA regulatory milestone payment of €

2.0 million, (ii) a milestone payment of €

5.0 million upon first commercial sale of a Recordati Licensed Product in the Recordati Territory, and (iii) milestone payments of up to €

5.0 million in the aggregate from sales of Recordati Licensed Product(s) in the Recordati Territory.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data