Savara Inc 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2021, pursuant to and as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief 59 Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that (i) information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2021 based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO. As a smaller reporting company, we were not required to obtain an audit on the effectiveness of our internal control over financial reporting as of December 31, 2021. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during Savara’s quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. Not applicable. 60 PART III Certain information required by Part III of this report is omitted from this report pursuant to General Instruction G(3) of Form 10-K because we will file a definitive proxy statement pursuant to Regulation 14A for our 2021 annual meeting of stockholders (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report, and the information included in the Proxy Statement that is required by Part III of this report is incorporated herein by reference. Item 10. Directors, Executive Off icers, and Corporate Governance. Code of Ethics We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, as well as all of our other officers, directors, and employees. This code of ethics is a part of our code of business conduct and ethics, and is available on our corporate website at www.savarapharma.com. We intend to disclose future amendments to, or waivers of, certain provisions of our code of ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions on our corporate website within four business days following such amendment or waiver. The other information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference. Item 11. Executiv e Compensation. The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference. Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters. The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference. Item 14. Principal Accoun ting Fees and Services. The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference. 61 PART IV Item 15. Exhibits, Financ ial Statement Schedules. (a) Documents Filed . The following documents are filed as part of this report: (1) Financial Statements. The following report of RSM US LLP and financial statements: • Report of Independent Registered Public Accounting Firm • Consolidated Balance Sheets as of December 31, 2021 and 2020 • Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020 • Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 • Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 • Notes to Consolidated Financial Statements (2) Financial Statement Schedules. See subsection (c) below. (3) Exhibits. See subsection (b) below. (b) Exhibits. The exhibits filed or furnished with this report are set forth on the Exhibit Index immediately following the signature page of this report, which Exhibit Index is incorporated herein by reference. (c) Financial Statement Schedules . All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Item 16. Form 10-K Summary. Not applicable. 62 Exhibit Index Exhibit Number Description 2.1 Agreement and Plan of Merger and Reorganization, dated January 6, 2017, by and among the Registrant, Aravas Inc. (formerly Savara Inc.) and Victoria Merger Corp. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2017.) 2.2 Business Transfer Agreement, dated May 13, 2016, between Aravas Inc. (formerly Savara Inc.) and Serendex Pharmaceuticals A/S (Incorporated by reference to Exhibit 2.6 to the Registrant’s Registration Statement on Form S-4 filed on February 10, 2017.) 2.3 Amendment dated May 27, 2019 to the Business Transfer Agreement Between Savara Inc. and Serendex Pharmaceuticals A/S, dated May 13, 2016, between Savara Inc. and Serendex Pharmaceuticals A/S. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed on August 8, 2019.) 3.1 Composite Amended and Restated Certificate of Incorporation, as amended, of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-3 filed on July 6, 2021.) 3.2 Composite Amended and Restated Bylaws, as amended, of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on March 26, 2014.) 4.1 Form of common stock certificate of the Registrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K filed on March 14, 2018.) 4.2 Warrant to Purchase Shares of Common Stock of the Registrant issued to Life Science Loans II, LLC on April 28, 2017 (Incorporated by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q filed on May 5, 2017.) 4.3 Warrant to Purchase Shares of Common Stock of the Registrant issued to Silicon Valley Bank on April 28, 2017 (Incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed on May 5, 2017.) 4.4 Amendment to Warrant to Purchase Shares of Common Stock of the Registrant issued to Life Science Loans II, LLC on June 26, 2017. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2017.) 4.5 Amendment to Warrant to Purchase Shares of Common Stock of the Registrant issued to SVB Financial Group on June 26, 2017. (Incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2017.) 4.6 Warrant to Purchase Shares of Common Stock of the Registrant issued to Life Science Loans II, LLC on June 26, 2017. (Incorporated by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2017.) 4.7 Warrant to Purchase Shares of Common Stock of the Registrant issued to Silicon Valley Bank on June 26, 2017. (Incorporated by reference to Exhibit 4.4 to the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2017.) 4.8 Form of Pre-Funded Warrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on October 25, 2017.) 4.9 Warrant to Purchase Shares of Common Stock of the Registrant issued to Life Science Loans II, LLC on December 4, 2018. (Incorporated by reference to Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K filed on March 13, 2019.) 4.10 Warrant to Purchase Shares of Common Stock of the Registrant issued to Silicon Valley Bank on December 4, 2018. (Incorporated by reference to Exhibit 4.20 to the Registrant’s Annual Report on Form 10-K filed on March 13, 2019.) 4.11 Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on December 20, 2019.) 4.12 Form of Pre-Funded Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on December 20, 2019.) 4.13 Second Amendment to Warrant to Purchase Common Stock dated January 31, 2020, to Warrant to Purchase Common Stock of the Registrant issued to Life Science Loans II, LLC on April 28, 2017 (as amended by that certain Amendment to Warrant to Purchase Common Stock dated as of June 26, 2017) (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 63 4.14 Second Amendment to Warrant to Purchase Common Stock dated January 31, 2020, to Warrant to Purchase Common Stock of the Registrant issued to Silicon Valley Bank on April 28, 2017 (as amended by that certain Amendment to Warrant to Purchase Common Stock dated as of June 26, 2017) (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 4.15 Amendment to Warrant to Purchase Common Stock of the Registrant dated January 31, 2020, to Warrant to Purchase Common Stock of the Registrant issued to Life Science Loans II, LLC on June 26, 2017 (Incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 4.16 Amendment to Warrant to Purchase Common Stock of the Registrant dated January 31, 2020, to Warrant to Purchase Common Stock of the Registrant issued to Silicon Valley Bank on June 26, 2017 (Incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 4.17 Amendment to Warrant to Purchase Common Stock of the Registrant dated January 31, 2020, to Warrant to Purchase Common Stock of the Registrant issued to Life Science Loans II, LLC on December 4, 2018 (Incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 4.18 Amendment to Warrant to Purchase Common Stock of the Registrant dated January 31, 2020, to Warrant to Purchase Common Stock of the Registrant issued to Silicon Valley Bank on December 4, 2018 (Incorporated by reference to Exhibit 4.6 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 4.19 Description of Registered Securities (Incorporated by reference to Exhibit 4.25 to the Registrant’s Annual Report on Form 10-K filed on March 12, 2020.) 4.20 Form of Pre-Funded Warrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2021.) 10.1 Loan and Security Agreement, dated April 28, 2017, among Savara Inc., Aravas Inc. and Silicon Valley Bank (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on May 5, 2017.) 10.2 First Amendment dated October 31, 2017, to Loan and Security Agreement, dated April 28, 2017, among Savara Inc., Aravas Inc. and Silicon Valley Bank. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on November 8, 2017.) 10.3 Second Amendment, dated December 4, 2018, to Loan and Security Agreement, dated April 28, 2017, as amended on October 31, 2017, among Savara Inc., Aravas Inc. and Silicon Valley Bank. (Incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K filed on March 13, 2019.) 10.4 Third Amendment, dated January 31, 2020, to Loan and Security Agreement, dated April 28, 2017, as amended on October 31, 2017 and December 4, 2018, among the Registrant, Aravas Inc. and Silicon Valley Bank (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 3, 2020.) 10.5 Fourth Amendment, dated March 30, 2021, to Loan and Security Agreement, dated April 28, 2017, as amended on October 31, 2017, December 4, 2018 and January 31, 2021, between the Registrant, Aravas Inc. and Silicon Valley Bank (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 1, 2021.) 10.6 # Savara Inc. Amended and Restated 2015 Omnibus Incentive Plan, as amended (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on June 1, 2020.) 10.7 # Form of Non-Statutory Stock Option Grant Agreement—Director (for grants to non-employee directors) under the 2015 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 16, 2015.) 10.8 # Form of Incentive Stock Option Grant Agreement – Exempt Employees under the 2015 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on June 16, 2015.) 10.9 # Form of Incentive Stock Option Grant Agreement – Non-Exempt Employees under the 2015 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on June 16, 2015.) 10.10 # Form of Non-Statutory Stock Option Grant Agreement – General under the 2015 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K filed on March 14, 2018.) 10.11 # Form of Incentive Stock Option Grant Agreement – Exempt Employees, in accordance with Danish employment law, under the 2015 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K filed on March 10, 2021.) 10.12 # Form of Grant of Restricted Stock Units under the 2015 Omnibus Incentive Plan. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on November 8, 2017.) 64 10.13 # Aravas Inc. (formerly Savara Inc.) Stock Option Plan (Incorporated by reference to Exhibit 10.53 to the Registrant’s Registration Statement on Form S-4 filed on February 10, 2017.) 10.14 # Aravas Inc. (formerly Savara Inc.) Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.54 to the Registrant’s Registration Statement on Form S-4 filed on February 10, 2017.) 10.15 Savara Inc. 2021 Inducement Equity Incentive Plan (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 filed on July 6, 2021.) 10.16 Form of Non-Statutory Stock Option Agreement – Under the 2021 Inducement Equity Incentive Plan 10.17 Form of Restricted Stock Unit Agreement (Inducement Award) – Under the 2021 Inducement Equity Incentive Plan 10.18 # Executive Employment Agreement, dated March 9, 2017, between Aravas Inc. (formerly Savara Inc.) and David Lowrance (Incorporated by reference to Exhibit 10.58 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-4 filed on March 13, 2017.) 10.19 # Form of Director and Officer Indemnification Agreement (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 23, 2006.) 10.20 + Commercial Supply Agreement dated April 24, 2015 between PARI Pharma GmbH and Serendex Pharmaceuticals A/S (Incorporated by reference to Exhibit 10.62 to the Registrant’s Registration Statement on Form S-4 filed on February 10, 2017.) 10.21 + Research Collaboration and License Agreement dated November 7, 2014 between PARI Pharma GmbH and Serendex Pharmaceuticals A/S (Incorporated by reference to Exhibit 10.63 to the Registrant’s Registration Statement on Form S-4 filed on February 10, 2017.) 10.22 Settlement Agreement between Savara Inc. and Serenova A/S dated September 1, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 8, 2017.) 10.23 + Amendment No. 1, effective May 23, 2018, to the Research Collaboration and License Agreement between Savara Inc. (as successor in interest to Serendex Pharmaceuticals A/S) and PARI Pharma GmbH dated November 7, 2014 (Incorporated by reference to Exhibit 10.3 of the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2018.) 10.24 # Amendment to Executive Employment Agreement, dated as of August 3, 2018, by and among Savara Inc. and Dave Lowrance (Incorporated by reference to Exhibit 10.5 of the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2018.) 10.25 Securities Purchase Agreement (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 20, 2019.) 10.26 Registration Rights Agreement (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 20, 2019.) 10.27 + Manufacture and Supply Agreement, dated as of April 26, 2019, between Savara ApS and GEMABIOTECH SAU (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q filed on May 9, 2019.) 10.28 + Master Manufacturing Services Agreement, dated June 26, 2019, between Savara ApS and Patheon UK Limited. (Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q filed on August 8, 2019.) 10.29 Non-statutory Stock Option Agreement (Inducement Award) between Badrul Chowdhury and Savara Inc. dated November 26, 2019 (Incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K filed on March 12, 2020.) 10.30 + License and Collaboration Agreement between Savara Inc. and Grifols, S.A, dated January 7, 2020, as amended by Amendment No. 1, dated February 18, 2020, and Amendment No. 2, dated March 31, 2020 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 7, 2020.) 10.31 Amended and Restated Executive Employment Agreement, dated December 8, 2020, between Savara Inc. and Matthew Pauls (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 10, 2020.) 65 10.32 Executive Employment Agreement, dated March 9, 2021, between Savara Inc. and Badrul Chowdhury (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 10, 2021.) 10.33 Form of Warrant Repurchase Agreement (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 11, 2021.) 10.34 + Master Services Agreement by and between Savara Inc. and Parexel International (IRL) Limited, effective January 6, 2021 (Incorporated by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q filed on May 13, 2021.) 10.35 + Work Order under Master Services Agreement by and between Savara Inc. and Parexel International (IRL) Limited, effective January 6, 2021 (Incorporated by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q filed on May 13, 2021.) 10.36 Office Lease, dated June 3, 2021, between the Registrant and Overlook at Rob Roy Owner, LLC (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 4, 2021.) 10.37 Sales Agreement, dated July 6, 2021, between the Registrant and Evercore Group L.L.C. (Incorporated by reference to Exhibit 1.2 of the Registrant’s Registration Statement on Form S-3 filed on July 6, 2021.) 21.1 List of Subsidiaries 23.1 Consent of RSM US LLP, Independent Registered Public Accounting Firm 24.1 Power of Attorney included on page of this Form 10-K 31.1 Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) 31.2 Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) 32.1 ** Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) # Indicates management contract or compensatory plan + Indicates confidential treatment has been granted to certain portions of this exhibit, which portions have been omitted and filed separately with the SEC. ** These certifications are being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing. 66 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Savara Inc. Date: March 30, 2022 By: /s/ Matthew Pauls Matthew Pauls Chief Executive Officer and Chair of the Board of Directors POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Matthew Pauls and Dave Lowrance, and each of them acting individually, as his or her attorney-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said Report. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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/ Matthew Pauls Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) March 29, 2022 Matthew Pauls /s/ Dave Lowrance Chief Financial Officer (Principal Financial and Accounting Officer) March 29, 2022 Dave Lowrance /s/ David Ramsay Director March 29, 2022 David Ramsay /s/ Joseph McCracken Director March 29, 2022 Joseph McCracken /s/ Nevan Elam Director March 29, 2022 Nevan Elam /s/ Rick Hawkins Director March 29, 2022 Rick Hawkins /s/ An Van Es-Johansson Director March 29, 2022 An Van Es-Johansson /s/ Ricky Sun Director March 29, 2022 Ricky Sun 67 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm (PCAOB ID: 49 ) F- 2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 4 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021 and 2020 F- 5 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021 and 2020 F- 6 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F- 7 Notes to Consolidated Financial Statements F- 8 F- 1 Report of Independent Regist ered Public Accounting Firm To the Stockholders and the Board of Directors of Savara Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Savara Inc and its subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assses the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrued Research and Development Costs As described in Note 2 to the consolidated financial statements, the Company records expenses of research and development activities, including nonclinical studies, and third-party contract services for clinical trials and manufacturing development. Clinical trials and contract manufacturing activities performed by third parties are expensed based upon estimates of work completed with respective contract research organizations (“CROs”) or contract manufacturing organizations (“CMOs”) and other third-party vendors. Though expenses are based on signed agreements, the complexity involved in determining expenses arises from agreements containing multiple milestones that require management’s careful analysis with external parties to determine period expenses and potential contractual milestone expenses based on the progress made against benchmarks including but not limited to patients enrolled, services performed and equipment purchased. During 2021, the Company incurred $29.0 million of research and development expenses. The Company recorded an accrued liability of $1.6 million for expenses incurred, but not yet invoiced, and a prepaid expense of $1.9 million for F- 2 payments made to vendors in excess of costs incurred. Given the significant judgments and estimates in accounting for accrued research and development costs, we have determined this area a critical audit matter. Our audit procedures related to the Company’s accrued research and development costs included the following among others: • We obtained an understanding, and evaluated the design and implementation, of controls relating to accrued or prepaid research and development costs, including controls over the review of contracts, and the accumulation of information from external service providers on actual costs incurred. • We evaluated, on a sample basis, the reasonableness of management’s methods and assumptions used in developing the accrued or prepaid research and development costs by: – Agreeing key milestones and completion terms, activities, timing and costs per management-provided schedules to signed and executed CMO and CRO contracts – Obtaining evidence from third parties of the research and development activities performed for significant clinical trials and contract manufacturing services – Inquiring of financial and clinical personnel on the status of the clinical trials, progress to completion of clinical trials, method of allocating contractual charges to specific tasks performed during the clinical trials and the status of change orders – Retrospective review of quarterly analysis to assess the historical accuracy of management’s analysis /s/ RSM US LLP We have served as the Company's auditor since 2019. Austin, Texas March 30, 2022 F- 3 Savara Inc. and Subsidiaries Consolidated Ba lance Sheets (in thousands, except for share and per share amounts) As of December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 34,012 $ 22,880 Short-term investments 127,159 59,308 Prepaid expenses and other current assets 3,829 2,933 Total current assets 165,000 85,121 Property and equipment, net 73 156 In-process R&D 11,274 12,218 Other non-current assets 251 250 Total assets $ 176,598 $ 97,745 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 1,443 $ 2,595 Accrued expenses and other current liabilities 4,884 5,579 Current portion of long-term debt 8,333 — Total current liabilities 14,660 8,174 Long-term liabilities: Long-term debt 17,323 25,104 Other long-term liabilities 117 84 Total liabilities 32,100 33,362 Commitments and contingencies (Note 11) Stockholders’ equity: Common stock, $ 0.001 par value, 300,000,000 and 200,000,000 shares authorized as of December 31, 2021 and 2020, respectively; 114,036,892 and 54,152,955 shares issued and outstanding as of December 31, 2021 and 2020, respectively 116 55 Additional paid-in capital 444,898 320,893 Accumulated other comprehensive income 5 942 Accumulated deficit ( 300,521 ) ( 257,507 ) Total stockholders’ equity 144,498 64,383 Total liabilities and stockholders' equity $ 176,598 $ 97,745 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Savara Inc. and Subsidiaries Consolidated Statem ents of Operations and Comprehensive Loss (in thousands, except for share and per share amounts) Years ended December 31, 2021 2020 Milestone revenue $ — $ 257 Operating expenses: Research and development 28,991 35,038 General and administrative 12,350 14,264 Depreciation and amortization 136 255 Total operating expenses 41,477 49,557 Loss from operations ( 41,477 ) ( 49,300 ) Other expense, net: Interest expense, net ( 2,282 ) ( 1,482 ) Foreign currency exchange (loss) gain ( 99 ) 158 Tax credit income 844 893 Change in fair value of financial instruments — 116 Total other expense, net ( 1,537 ) ( 315 ) Net loss $ ( 43,014 ) $ ( 49,615 ) Net loss per share: Basic and diluted $ ( 0.32 ) $ ( 0.84 ) Weighted-average common shares outstanding: Basic and diluted 133,919,145 59,309,090 Other comprehensive loss: (Loss) gain on foreign currency translation ( 887 ) 1,006 Unrealized loss on short-term investments ( 50 ) ( 47 ) Total comprehensive loss $ ( 43,951 ) $ ( 48,656 ) The accompanying notes are an integral part of these consolidated financial statements. F- 5 Savara Inc. and Subsidiaries Consolidated Statements o f Changes in Stockholders’ Equity Years Ended December 31, 2021 and 2020 (in thousands, except share amounts) Stockholders’ Equity Common Stock Accumulated Number of Shares Amount Additional Paid-In Capital Accumulated Deficit Other Comprehensive Income (Loss) Total Balance on December 31, 2019 50,790,441 $ 52 $ 309,555 $ ( 207,892 ) $ ( 17 ) $ 101,698 Issuance of common stock for licensing of assets 1,000,000 1 2,119 — — 2,120 Issuance of common stock upon at the market offerings, net 942,825 1 2,289 — — 2,290 Issuance of common stock upon exercise of Milestone Warrants, net 1,303,088 1 1,826 — — 1,827 Issuance of common stock upon exercise of stock options 67,476 — 88 — — 88 Issuance of common stock for settlement of RSUs 49,125 — — — — — Closing costs for previous issuance of securities in private placement — — ( 120 ) — — ( 120 ) Incremental cost due to modification of detachable warrants previously issued with debt instrument — — 29 — — 29 Stock-based compensation — — 5,107 — — 5,107 Foreign exchange translation adjustment — — — — 1,006 1,006 Unrealized loss on short-term investments — — — — ( 47 ) ( 47 ) Net loss — — — ( 49,615 ) — ( 49,615 ) Balance on December 31, 2020 54,152,955 $ 55 $ 320,893 $ ( 257,507 ) $ 942 $ 64,383 Issuance of common stock and pre- funded warrants in public offering, net of offering costs (1) 57,479,978 57 122,174 — — 122,231 Repurchase of outstanding pre-funded warrants — — ( 3,909 ) — — ( 3,909 ) Issuance of common stock upon exercise of stock warrants, net 1,737,450 2 2,544 — — 2,546 Issuance of common stock upon exercise of stock options 285,576 1 15 — — 16 Issuance of common stock for settlement of RSUs 443,897 1 ( 1 ) — — — Repurchase of shares for minimum tax withholdings ( 62,964 ) — ( 78 ) ( 78 ) Stock-based compensation — — 3,260 — — 3,260 Foreign exchange translation adjustment — — — — ( 887 ) ( 887 ) Unrealized loss on short-term investments — — — — ( 50 ) ( 50 ) Net loss — — — ( 43,014 ) — ( 43,014 ) Balance on December 31, 2021 114,036,892 $ 116 $ 444,898 $ ( 300,521 ) $ 5 $ 144,498 (1) As discussed in Note 10. Stockholders’ Equity , the Company sold (i) an aggregate of 57,479,978 shares of the Company’s common stock, par value $ 0.001 per share and (ii) pre-funded warrants to purchase an aggregate of 32,175,172 shares of the Company's common stock at an exercise price, equal to the par value, of $ 0.001 per share. The accompanying notes are an integral part of these consolidated financial statements. F- 6 Savara Inc. and Subsidiaries Consolidated Statem ents of Cash Flows (in thousands) Years ended December 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 43,014 ) $ ( 49,615 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 136 255 Amortization of right-of-use assets 231 438 Acquired in-process research and development (Note 8) — 5,367 Change in fair value of financial instruments — ( 116 ) Non-cash interest (income) expense ( 103 ) 29 Foreign currency loss (gain) 99 ( 158 ) Amortization of debt issuance costs 552 507 Amortization on premium to short-term investments, net 1,604 55 Stock-based compensation 3,260 5,107 Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 1,039 ) ( 134 ) Accounts payable and accrued expenses and other current liabilities ( 1,763 ) ( 1,140 ) Long-term liabilities ( 44 ) ( 431 ) Net cash used in operating activities ( 40,081 ) ( 39,836 ) Cash flows from investing activities: Purchase of property and equipment ( 57 ) ( 47 ) Purchase of in-process research and development (Note 8) — ( 3,247 ) Purchase of available-for-sale securities, net ( 161,069 ) ( 86,083 ) Maturity of available-for-sale securities 83,470 89,650 Sale of available-for-sale securities, net 8,200 8,780 Net cash (used in) provided by investing activities ( 69,456 ) 9,053 Cash flows from financing activities: Repurchase of outstanding pre-funded warrants ( 3,909 ) — Repayment of long-term debt — ( 514 ) Issuance of common stock and pre-funded warrants in public offering, net of offering costs 122,231 — Issuance of common stock upon at the market offerings, net — 2,290 Issuance of common stock upon exercise of warrants, net 2,546 1,827 Proceeds from exercise of stock options 16 86 Repurchase of shares for minimum tax withholdings ( 78 ) — Net cash provided by financing activities 120,806 3,689 Effect of exchange rate changes on cash and cash equivalents ( 137 ) 170 Increase (decrease) in cash and cash equivalents 11,132 ( 26,924 ) Cash and cash equivalents beginning of period 22,880 49,804 Cash and cash equivalents end of period $ 34,012 $ 22,880 Non-cash transactions: Common stock issued for acquired in-process research and development, net $ — $ 2,120 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,969 $ 2,470 The accompanying notes are an integral part of these consolidated financial statements. F- 7 Savara Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Description of Business and Basis of Presentation Description of Business Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. The Company’s lead program, molgramostim nebulizer solution (“molgramostim”), is an inhaled granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). Previously, the Company’s pipeline included molgramostim for nontuberculous mycobacterial (NTM) lung infection in both non-cystic fibrosis (“CF”) and CF patients, vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus (“MRSA”) lung infection in people living with CF and inhaled liposomal ciprofloxacin (“Apulmiq”) for non-CF bronchiectasis. The Company and its wholly-owned subsidiaries operate in one segment with its principal office in Austin, Texas. Since inception, Savara has devoted substantially all of its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital. Savara has incurred operating losses and negative cash flow from operations and has no product revenue from inception to date. The Company has not yet commenced commercial operations. Basis of Presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (the “FASB”). Certain prior year amounts have been reclassified for consistency with the current period presentation. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements of the Company are stated in U.S. dollars. These financial statements include the accounts of the Company and its wholly-owned subsidiaries. The financial statements of the Company’s wholly-owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated other comprehensive income . All intercompany transactions and accounts have been eliminated in consolidation. Liquidity As of December 31, 2021, the Company had an accumulated deficit of approximately $ 300.5 million . The Company used cash from operations of approximately $ 40.1 million for the year ended December 31, 2021. The cost to further develop and obtain regulatory approval for any drug is substantial and, as noted below, the Company may have to take certain steps to maintain a positive cash position. Although the Company has sufficient capital to fund many of its planned activities, it may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, its product candidate and begin to commercialize any approved product. The Company is currently focused on the development of molgramostim for the treatment of aPAP and believes such activities will result in the continued incurrence of significant research and development and other expenses related to this program. If the clinical trial for the Company’s product candidate fails or produces unsuccessful results and the product candidate does not gain regulatory approval or, if approved, fails to achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. The Company intends to cover its future operating expenses through cash and cash equivalents on hand, short-term investments, and through a combination of equity offerings, debt financings, government or other third-party funding, and other collaborations and strategic alliances with partner companies. The Company cannot be sure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its stockholders. The Company had cash and cash equivalents of $ 34.0 million and short-term investments of $ 127.2 million as of December 31, 2021, which is sufficient to fund the Company's operations for the twelve months subsequent to the issuance date of its consolidated financial statements for the year ended December 31, 2021. The Company may continue to raise additional capital as needed through the issuance of additional equity securities and potentially through borrowings and strategic alliances with partner companies. However, if such additional financing is not available timely F- 8 and at adequate levels, the Company may need to reevaluate its long-term operating plans. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management’s estimates include those related to the accrual of research and development and general and administrative costs, certain financial instruments recorded at fair value, stock-based compensation, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates. Risks and Uncertainties The product candidate being developed by the Company require approval from the U.S. Food and Drug Administration (the “FDA”) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s product candidate will receive the necessary approvals. If the Company is denied regulatory approval of its product candidate, or if approval is delayed, it will have a material adverse impact on the Company’s business, results of operations, and financial position. The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of drug candidates, raising additional capital, development of competing drugs and therapies, protection of proprietary technology, and market acceptance of the Company’s products. As a result of these and other factors and the related uncertainties, there can be no assurance of the Company’s future success. Cash and Cash Equivalents Cash and cash equivalents consist of cash and institutional bank money market accounts with original maturities of three months or less when acquired and are stated at cost, which approximates fair value. Short-term Investments The Company has classified its investments in debt securities with readily determinable fair value as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive income within stockholders’ equity. The fair value of the investments is based on the specific quoted market price of the securities or comparable securities at the balance sheet dates. Investments in debt securities are considered to be impaired when a decline in fair value is judged to be other than temporary because the Company either intends to sell or it is more-likely-than not that it will have to sell the impaired security before recovery. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. Refer to Note 5. Short-term Investments for additional discussion. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and short-term investments held in money market accounts. The Company places its cash and cash equivalents and money market accounts with a limited number of financial institutions and at times may exceed the amount of insurance provided on such deposits. Accrued Research and Development Costs The Company records the costs associated with research, nonclinical and clinical trials, and manufacturing development as incurred. These costs are a significant component of the Company’s research and development expenses, with a substantial portion of the Company’s on-going research and development activities conducted by third party service providers, including contract research and manufacturing organizations. The Company accrues for expenses resulting from obligations under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which materials or services are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. The Company makes significant judgments and estimates in determining the accrual F- 9 balance in each reporting period. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid asset which will be amortized or expensed as the contracted services are performed. As actual costs become known, the Company adjusts its prepaids and accruals. Inputs, such as the services performed, the number of patients enrolled, or the trial duration, may vary from the Company’s estimates, resulting in adjustments to research and development expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations. To date, the Company has not experienced any material deviations between accrued and actual research and development expenses. Refer to Note 4. Accrued Expenses and Other Current Liabilities for additional discussion. Business Combinations The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , and as further defined by Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) , which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of drug development, particularly by development-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value. License and Collaboration Agreements The Company entered into a license and collaboration agreement and may continue to enter into license and collaboration agreements with third parties whereby the Company purchases the rights to develop, market, sell and/or distribute the underlying pharmaceutical products or drug candidates. Pursuant to these agreements, the Company is generally required to make up-front payments, milestone payments contingent upon the achievement of certain pre-determined criteria, royalty payments based on specified sales levels of the underlying products and/or certain other payments. Up-front payments are either expensed immediately as research and development or capitalized. The determination to capitalize amounts related to licenses is based on management’s judgments with respect to stage of development, the nature of the rights acquired, alternative future uses, developmental and regulatory issues and challenges, the net realizable value of such amounts based on projected sales of the underlying products, the commercial status of the underlying products, and/or various other competitive factors. Milestone payments made prior to regulatory approval are generally expensed as incurred and milestone payments made subsequent to regulatory approval are generally capitalized as an intangible asset. Royalty payments are expensed as incurred. Other payments made pursuant to license and collaboration agreements, which are generally related to research and development activities, are expensed as incurred. Refer to Note 8. License Agreement for additional discussion. Goodwill and Acquired In-Process Research and Development In accordance with ASC Topic 350, Intangibles – Goodwill and Other , the Company's acquired IPR&D and goodwill, when applicable, is determined to have indefinite lives and, therefore, is not amortized. Instead, it is tested for impairment annually and between annual tests if the Company becomes aware of an event or a change in circumstances that would indicate the carrying value may be impaired. For instance, based upon the ultimate scope and scale of the COVID-19 global pandemic, there may be materially negative impacts to the assumptions made with respect to our IPR&D assets that could result in an impairment of such assets. With respect to the impairment testing of acquired IPR&D, ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment , and ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment , provides for a two-step impairment process with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more-likely-than not (that is, a likelihood of more than 50%) that acquired IPR&D is impaired. If the Company chooses to first assess qualitative factors and it determines that it is more-likely-than not acquired IPR&D is not impaired, the Company is not required to take further action to test for impairment. ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , outlines an impairment model providing us the option to implement a one-step method for determining impairment of goodwill, thereby simplifying the subsequent measurement of goodwill by eliminating Step 2 (quantitative calculation of measuring a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that F- 10 goodwill) from the goodwill impairment test. Under the amendments in this guidance, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. When the Company performs a quantitative assessment of acquired IPR&D, it compares its carrying value to its estimated fair value to determine whether an impairment exists. Due to a lack of Level 1 or Level 2 inputs, the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach, was used to estimate the fair value of acquired IPR&D when performing a quantitative assessment. Under the MPEEM, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life. The Company evaluates potential impairment of its acquired IPR&D annually on September 30, utilizing a qualitative approach and determining if it was more-likely-than not that the fair value was impaired. We evaluate potential impairment of our acquired goodwill, if any, annually on or around June 30, performing the quantitative analysis based upon market capitalization. Our determinations as to whether, and if so, the extent to which goodwill and acquired IPR&D become impaired are highly judgmental and, in the case of applying the MPEEM approach to estimate fair value, are based on significant assumptions regarding our projected future financial condition and operating results, changes in the manner of our use of the acquired assets, development of our acquired assets or our overall business strategy, and regulatory, market, and economic environment and trends . If the associated research and development effort is abandoned, the related asset will be written-off, and the Company will record a non-cash impairment loss on its consolidated statements of operations and comprehensive loss. For those products that reach commercialization, the IPR&D asset will be amortized over its estimated useful life. Refer to Note 9. Fair Value Measurements—Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis for additional discussion. Leases The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset's economic benefits. Lease right-of-use assets and liabilities are initially recorded on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. Leases may include renewal, purchase or termination options that can extend or shorten the term of the lease. The exercise of those options is at the Company's sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required. In addition to rent, the leases may require the Company to pay additional amounts for taxes, insurance, maintenance, and other expenses, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Rent expense is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the consolidated statements of operations and comprehensive loss. The Company has made an accounting policy election providing that leases with an initial term of 12 months or less are not recorded as a lease right-of-use asset liability; those lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term. Refer to Note 11. Commitments—Operating Leases for additional discussion. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. Our chief operating decision maker is the chief executive officer. We have one operating segment, specialty pharmaceuticals within the respiratory system. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which range from three to five years . Repairs and maintenance that do F- 11 not improve or extend the useful life of the respective asset are charged to expense as incurred. Refer to Note 6. Property and Equipment, net for additional discussion. Patents and Intellectual Property As the Company’s products are currently under research and development and are not currently approved for market, costs incurred in connection with patent applications are expensed as incurred due to the uncertainty of the future economic benefits of the underlying patents and intellectual property. Fair Value of Financial Instruments The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability. The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows: • Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and • Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. Financial instruments carried at fair value include cash and cash equivalents, short-term investments, and foreign exchange derivatives not designated as hedging instruments. Financial instruments not carried at fair value include accounts payable and accrued liabilities. The carrying amounts of these financial instruments approximate fair value due to the highly liquid nature of these short-term instruments. Refer to Note 9. Fair Value Measurements for additional discussion. Revenue Recognition The Company records revenue based on a five-step model in accordance with ASC 606, Revenue from Contracts with Customers . To date, the Company has not generated any product revenue. The Company’s ability to generate product revenues, which the Company does not expect will occur in the next several years, if ever, will depend heavily on the successful development, regulatory approval, and eventual commercialization of the Company’s product candidates. Milestone Revenue The Company entered into a license agreement related to its molgramostim product candidate, which includes certain milestone payments to be remunerated by the licensee to Savara. In exchange, the Company granted the licensee an exclusive right to import, market, sell, distribute and promote molgramostim in Japan for the treatment of aPAP. Pursuant to the license agreement, the Company identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) the performance obligation is satisfied. The Company identifies the performance obligations included within the license agreement and evaluates which performance obligations are distinct. The milestone payments are a form of variable consideration as the payments are contingent upon achievement of a substantive event. The milestone payments are estimated and included in the transaction price when the Company determines, under the variable consideration constraint, that it is probable that there will not be a significant reversal of cumulative revenue recognized in future periods. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price. F- 12 In October 2018, the Company achieved a milestone payment pursuant to this license agreement resulting in the receipt of $ 0.2 million from the licensee which was recorded as deferred revenue in Accrued expenses and other current liabilities in the Company’s consolidated balance sheet. On February 21, 2020, the Company received notification from the licensee of its intent to terminate this license agreement. Accordingly, this license agreement terminated on August 21, 2020 , upon which the Company recognized revenue related to this $ 0.3 million milestone payment, which increased from $ 0.2 million due to changes in foreign currency exchange rates, as the Company has determined that all of the performance obligations under this license agreement have been met. Net Loss per Share Basic net loss attributable to common stockholders per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and pre-funded warrants outstanding during the period without consideration of common stock equivalents. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods presented as the inclusion of all potential dilutive securities would have been antidilutive. Refer to Note 15. Net Loss per Share for additional discussion. Stock-Based Compensation The Company recognizes the cost of stock-based awards granted to employees based on the estimated grant-date fair value of the awards. The value of the portion of the award is recognized as expense ratably over the requisite service period. The Company recognizes the compensation costs for awards that vest over several years on a straight-line basis over the vesting period. Forfeitures are recognized when they occur, which may result in the reversal of compensation costs in subsequent periods as the forfeitures arise. In addition, the Company accounts for any modifications to stock-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation . Refer to Note 13. Stock-Based Compensation for additional discussion. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in the period that includes the enactment date. A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more-likely-than not to be realized. Refer to Note 14. Income Taxes for additional discussion. Recent Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which applies to all entities and aims to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods therein. ASU No. 2019-12 did not have a material impact on the Company's consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) which reduces the number of accounting models for convertible debt instruments and convertible preferred stock to simplify the accounting for convertible instruments and reduce the complexity. ASU 2020-06 also made targeted improvements to the disclosures for convertible instruments and earnings per share guidance. ASU 2020-06 was early adopted on January 1, 2021 and did not have a material impact on the Company's consolidated financial statements. 3. Prepaid Expenses and Other Current Asset s Prepaid expenses, consisted of (in thousands): December 31, 2021 2020 Prepaid contracted research and development costs $ 1,902 $ 591 R&D tax credit receivable 838 1,042 VAT receivable 306 653 Prepaid insurance 427 453 Deposits and other 356 194 Total prepaid expenses and other current assets $ 3,829 $ 2,933 F- 13 Prepaid Contracted Research and Development Costs As of December 31, 2021 Prepaid contracted research and development costs are primarily comprised of contractual prepayments associated with the Company's clinical trial for molgramostim for the treatment of aPAP. This includes prepaid amounts paid under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities. Tax Credit Receivable The Company has recorded a Danish tax credit earned by its subsidiary, Savara ApS, as of December 31, 2021 . Under Danish tax law, Denmark remits a research and development tax credit equal to 22 % of qualified research and development expenditures, not to exceed established thresholds. During the year ended December 31, 2020 , the Company generated a Danish tax credit of $ 0.9 million which was received in the fourth quarter of 2021. During the year ended December 31, 2021 , the Company generated a Danish tax credit of $ 0.8 million which is expected to be received in the fourth quarter of 2022. The Company also recorded an Australian tax credit as provided by the Australian Taxation Office for qualified research and development expenditures incurred through our subsidiary, Savara Australia Pty. Limited. Under Australian tax law, Australia remits a research and development tax credit equal to 43.5 % of qualified research and development expenditures, not to exceed established thresholds. During the year ended December 31, 2020 , the Company generated an Australian tax credit of $ 0.1 million which was received during the third quarter of 2021. The tax credit receivable recorded during the year ended December 31, 2021 was not significant. 4. Accrued Expenses and Other Current Liabilities Accrued expenses and other liabilities, consisted of (in thousands): December 31, 2021 2020 Accrued compensation $ 2,526 $ 1,920 Accrued contracted research and development costs 1,623 2,627 Accrued general and administrative costs 600 853 Lease liability 135 179 Total accrued expenses and other current liabilities $ 4,884 $ 5,579 Accrued Compensation As of December 31, 2021 Accrued compensation includes amounts to be paid to employees for salary, vacation and non-equity performance-based compensation. At the end of any period, the amount accrued for such compensation may vary due to many factors including, but not limited to, timing of payments to employees and vacation usage. Accrued Contracted Research and Development Costs As of December 31, 2021 Accrued contracted research and development costs are primarily comprised of costs associated with molgramostim for the treatment of aPAP, including expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities. F- 14 5. Short-term Investments Short-term Investments in Available-for-Sale Securities The Company’s investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. The following table summarizes, by major security type, the Company’s investments (in thousands): As of December 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Short-term investments U.S. government securities $ 12,205 $ — $ ( 15 ) $ 12,190 Asset backed securities 11,349 — ( 3 ) 11,346 Corporate securities 49,095 — ( 29 ) 49,066 Commercial paper 54,557 — — 54,557 Total short-term investments $ 127,206 $ — $ ( 47 ) $ 127,159 As of December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Short-term investments U.S. government securities $ 13,296 $ 1 $ — $ 13,297 Asset backed securities 2,559 — — 2,559 Corporate securities 19,479 3 ( 3 ) 19,479 Commercial paper 23,973 — — 23,973 Total short-term investments $ 59,307 $ 4 $ ( 3 ) $ 59,308 The Company has classified its investments as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive income in the consolidated balance sheet . Classification as short-term or long-term is based upon whether the maturity of the debt securities is less than or greater than twelve months. There were no significant realized gains or losses related to investments for the years ended December 31, 2021 and 2020 . 6. Property and Equipment, Net Property and equipment, net consisted of (in thousands): December 31, 2021 2020 Research and development equipment $ 1,102 $ 1,102 Equipment 746 760 Furniture and fixtures 151 122 Leasehold improvements 153 145 Total property and equipment 2,152 2,129 Less accumulated depreciation ( 2,079 ) ( 1,973 ) Property and equipment, net $ 73 $ 156 Depreciation expense for the years ended December 31, 2021 and 2020 was $ 0.1 million and $ 0.3 million, respectively. F- 15 7. Debt Facility On April 28, 2017, the Company entered into a loan and security agreement with Silicon Valley Bank, as amended by the First Amendment to the Loan and Security Agreement on October 31, 2017 , the Second Amendment to the Loan and Security Agreement on December 4, 2018 , and the Third Amendment on January 31, 2020 (the “Loan Agreement”), pursuant to which Silicon Valley Bank provided a term loan to the Company in the principal amount of $ 25 million. The Company executed a fourth amendment (the “Fourth Amendment”) to the Loan Agreement on March 30, 2021 . The Fourth Amendment provided that if by June 30, 2021, the Company did not yet have an ongoing Phase 3 clinical trial evaluating its molgramostim product for the treatment of aPAP in which the first patient has been identified and dosed (the “Trial Requirement”), the interest-only period under the Loan Agreement would expire and principal plus interest would be due in equal monthly installments over 24 months. The first payment due on July 1, 2021 would include three principal payments. If the Trial Requirement is met, the first payment of principal plus interest would be due on July 1, 2022 . Prior to the effective time of the Fourth Amendment, the interest-only period would expire if the Trial Requirement had not been met by March 31, 2021. Additionally, the Fourth Amendment increased the final payment percentage from 6.0 % to 6.2 %. On June 30, 2021, the Company announced, in a Current Report on Form 8-K filed with the SEC, that the Trial Requirement had been met. As a result, the interest only-period will continue until June 30, 2022, as set forth in the Fourth Amendment. Silicon Valley Bank has been granted a perfected first priority lien in all of the Company's assets with a negative pledge on intellectual property. The Loan Agreement, as amended, contains customary affirmative and negative covenants, including among others, covenants limiting the Company's ability and its subsidiaries’ ability to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to certain exceptions. Additionally, the Loan Agreement, as amended, contains an affirmative covenant requiring us to deliver evidence by June 30, 2021 of the receipt of gross cash proceeds of at least $ 25 million from the exercise of currently outstanding warrants or the issuance of other equity securities, which was satisfied upon completion of the Public Offering, as defined and discussed in Note 10. Stockholders’ Equity . The loan bears interest at the greater of (i) the prime rate reported in The Wall Street Journal, plus a spread of 3.0 % or (ii) 7.75 %. The Loan Agreement, as amended, also requires a prepayment fee ( 2.0 % of funded amounts in months 13-24, and 1.0 % thereafter), and an end of term charge equal to 6.2 % of the amount of principal borrowed. The Company paid minimal legal costs directly attributable to the original issuance of the debt instrument underlying the Loan Agreement and subsequent amendments. Such charges were accounted for as debt issuance costs and are being amortized to interest expense using the effective interest method through the scheduled maturity date. Summary of Carrying Value The following table summarizes the components of the long-term debt carrying value, which approximates the fair value (in thousands): Future minimum payments due during the year ended December 31, 2022 8,333 2023 18,167 Total future minimum payments 26,500 Unamortized end of term charge ( 694 ) Debt issuance costs ( 85 ) Debt discount related to warrants ( 65 ) Total debt 25,656 Current portion of long-term debt ( 8,333 ) Long-term debt $ 17,323 8. License Agreement Effective March 31, 2020, the Company entered into a license and collaboration agreement (the “License”) that provided Savara an exclusive, worldwide, royalty-bearing license to develop and sell or otherwise commercialize pharmaceutical preparations containing a type of inhaled liposomal ciprofloxacin (“Licensed Product”), as described in more detail in the Current Report on Form 8-K filed with the SEC on April 2, 2020. During the year ended December 31, 2020, the Company paid the licensor (i) an upfront cash payment of approximately $ 3.3 million and (ii) an upfront payment of one million shares of the Company’s common stock valued at approximately F- 16 $ 2.1 million on the date of issuance upon effectiveness of the License, which was immediately recognized as research and development expense since the Licensed Product had not yet achieved regulatory approval and there is deemed to be no alternative future use. 9. Fair Value Measurements The Company measures and reports certain financial instruments at fair value on a recurring basis and evaluates its financial instruments subject to fair value measurements on a recurring and nonrecurring basis to determine the appropriate level in which to classify them in each reporting period. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments. Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace. The fair value of these instruments as of December 31, 2021 and 2020 was as follows (in thousands): Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total As of December 31, 2021 Cash equivalents: U.S. Treasury money market funds $ 30,853 $ — $ — $ 30,853 Short-term investments: U.S. government securities 12,190 — — 12,190 Asset backed securities — 11,346 — 11,346 Corporate securities — 49,066 — 49,066 Commercial paper — 54,557 — 54,557 As of December 31, 2020 Cash equivalents: U.S. Treasury money market funds $ 21,872 $ — $ — $ 21,872 Short-term investments: U.S. government securities 13,297 — — 13,297 Asset backed securities — 2,559 — 2,559 Corporate securities — 19,479 — 19,479 Commercial paper — 23,973 — 23,973 The Company did no t transfer any assets measured at fair value on a recurring basis to or from Level 1, Level 2, and Level 3 during the years ended December 31, 2021 and 2020. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments annually or whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired IPR&D and other long-lived assets that are written down to fair value if they are impaired. As of December 31, 2021, the Company had IPR&D of approximately $ 11.3 million . At December 31, 2021 , the Company performed an impairment analysis and concluded that the impact of COVID-19 or other factors did not trigger any impairment indicators. As of December 31, 2020, the Company considered whether a triggering event had occurred due to the Company’s market cap being below carrying value. The Company completed a qualitative and quantitative impairment testing of its IPR&D and concluded that there was no impairment. For the years ended December 31, 2021 and 2020 , the Company experienced a decrease of approximately $ 0.9 million and an increase of approximately $ 1.1 million, respectively, in the carrying value of IPR&D, which was due to foreign currency translation. F- 17 10. Stockholders’ Equity Private Placement On December 24, 2019, the Company completed a private placement in a public entity (the “Private Placement” or “PIPE”) under a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional and accredited investors (the “Investors”), pursuant to which we issued and sold to the Investors 9,569,430 shares of our common stock at a price of $ 1.745 per share and pre-funded warrants (“Pre-Funded PIPE Warrants”) to purchase an aggregate of 5,780,537 shares of common stock at $ 1.744 per share (or $ 1.745 minus par value of $ .001 ). The net proceeds after deducting placement fees and offering expenses were approximately $ 25.2 million. We also issued accompanying warrants (the “Milestone Warrants”), with an exercise price of $ 1.48 per share, to purchase an aggregate of up to 32,577,209 additional shares of common stock and may receive up to approximately $ 48.2 million from the exercise of the Milestone Warrants prior to their expiration, totaling potential aggregate gross proceeds of up to approximately $ 75.0 million from the PIPE before deducting placement agent fees and estimated offering expenses. The Milestone Warrants are exercisable at any time prior to the earlier of thirty days following the achievement of a defined clinical milestone or two years after the closing date of the Private Placement. The Pre-Funded PIPE Warrants are exercisable at any time after their original issuance and will not expire. We intend to use the net proceeds from the Private Placement to fund a new clinical trial of molgramostim for the treatment of aPAP and for other general corporate purposes. The net proceeds from the Private Placement were allocated among the instruments based upon their relative fair values at December 24, 2019 resulting in carry values of the respective instruments as follows (in thousands): Financial instruments Relative Fair Value Common stock and Pre-Funded PIPE Warrants $ 11,713 Milestone Warrants 13,534 Total Net Proceeds from Private Placement $ 25,247 Milestone Warrants Immediately prior to the March 15, 2021 Public Offering, discussed below, the Company entered into separate, privately-negotiated warrant repurchase agreements with certain holders of its outstanding Milestone Warrants. The Company paid $ 3.9 million ($ 0.15 per share of Common Stock underlying each milestone warrant) to repurchase milestone warrants with 26,061,769 shares of Common Stock underlying such warrants, and the warrants were terminated. The warrant repurchase was accounted for as an equity transaction and resulted in a reduction to Additional paid-in capital in the consolidated statement of stockholders’ equity. On August 13, 2021, thirty days following the achievement of a defined clinical milestone, the remaining 3,474,902 milestone warrants expired and therefore such milestone warrants were terminated and no longer outstanding or exercisable . Public Offering of Common Stock On March 15, 2021, the Company sold (i) an aggregate of 57,479,978 shares of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”) for $ 1.45 per share, of which 11,694,150 shares were issued pursuant to the underwriters’ option to purchase additional shares, and (ii) pre-funded warrants to purchase an aggregate of 32,175,172 shares of Common Stock at an exercise price of $ 0.001 per share (the “2021 Pre-Funded Warrants”) for $ 1.449 per warrant (collectively, the “Public Offering”). The Company determined that the securities issued in the Public Offering were free-standing and that the 2021 Pre-Funded Warrants did not contain any settlement obligations that would result in liability classification under ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Contracts in Entity’s Own Equity . The shares encompassed in the 2021 Pre-Funded Warrants were sold at the same price as the underlying common stock, less $ 0.001 (which represents the exercise price of the warrants). The Public Offering resulted in net proceeds to the Company of approximately $ 122.2 million , after deducting final underwriting discounts, commissions and offering expenses, as follows (in thousands): Financial instruments Proceeds Common stock $ 83,346 2021 Pre-funded Warrants 46,622 Total 129,968 Offering expenses ( 7,737 ) Net proceeds $ 122,231 F- 18 Wainwright Common Stock Sales Agreement On April 28, 2017, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, which was amended by Amendment No. 1 to the Common Stock Agreement (the “Amendment”) on June 29, 2018 (the “Wainwright Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Wainwright, shares of Savara’s common stock, par value $ 0.001 per share (the “Shares”), having an aggregate offering price of not more than $ 60.0 million, in addition to the $ 2.3 million in shares sold prior to the Amendment. The Amendment was effective on July 13, 2018, the date the Company’s shelf registration statement on Form S-3, as filed with the Securities and Exchange Commission on June 29, 2018, was declared effective (“2018 Registration Statement”) by the Securities and Exchange Commission. The Shares were offered and sold pursuant to the 2018 Registration Statement. Subject to the terms and conditions of the Wainwright Sales Agreement, Wainwright used its commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has provided Wainwright with customary indemnification rights, and Wainwright was entitled to a commission at a fixed commission rate equal to 3.0 % of the gross proceeds per Share sold. Sales of the Shares, if any, under the Wainwright Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has no obligation to sell any of the Shares and may at any time suspend sales under the Wainwright Sales Agreement or terminate the Wainwright Sales Agreement . On July 2, 2021, the Company delivered written notice to Wainwright that it was terminating the Wainwright Sales Agreement effective July 12, 2021 . Evercore Common Stock Sales Agreement On July 6, 2021, the Company entered into a Common Stock Sales Agreement with Evercore Group L.L.C., (“Evercore”), as sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of Savara’s common stock, par value $ 0.001 per share (the “Shares”), having an aggregate offering price of not more than $ 60 million. The Agreement was effective on July 16, 2021 (“New Registration Statement”), the date the Company’s shelf registration agreement on Form S-3, as filed with the SEC on July 6, 2021, was declared effective by the SEC. The Shares will be offered and sold pursuant to the New Registration Statement. Subject to the terms and conditions of the Sales Agreement, Evercore will use commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has provided Evercore with customary indemnification rights, and Evercore will be entitled to a commission at a fixed commission rate equal to 3 % of the gross proceeds per Share sold. Sales of the Shares, if any, under the Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has no obligation to sell any of the Shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement. During the year ended December 31, 2021 , the Company did no t sell any shares of common stock under either the Wainwright Sales Agreement or the Evercore Sales Agreement. During the year ended December 31, 2020, the Company sold 942,825 shares of common stock under the Wainwright Sales Agreement for net proceeds of approximately $ 2.3 million. Common Stock The Company’s amended and restated certificate of incorporation, as amended in June 2021, authorizes the Company to issue 301 million shares of capital stock, consisting of 300 million shares of common stock with $ 0.001 par value per share and one million shares of preferred stock with $ 0.001 par value per share. The following is a summary of the Company’s common stock at December 31, 2021 and 2020: December 31 2021 2020 Common stock authorized 300,000,000 200,000,000 Common stock outstanding 114,036,892 54,152,955 F- 19 The Company’s shares of common stock reserved for issuance as of December 31, 2021 and 2020 were as follows: December 31, 2021 2020 Warrants acquired in April 2017 merger — 403,927 Warrants converted in connection with April 2017 merger — 72,869 April 2017 Warrants 24,725 24,725 June 2017 Warrants 41,736 41,736 December 2018 Warrants 11,332 11,332 2017 Pre-funded Warrants 775,000 775,000 Pre-funded PIPE Warrants 5,780,537 5,780,537 Milestone Warrants — 31,274,121 2021 Pre-funded Warrants 32,175,172 — Stock options outstanding 6,218,841 6,240,342 Issued and non-vested RSUs 1,272,375 509,397 Total shares reserved 46,299,718 45,133,986 Warrants The following table summarizes the outstanding warrants for the Company’s common stock as of December 31, 2021: Expiration Date Shares Underlying Outstanding Warrants Exercise Price October 2024 775,000 $ 0.01 April 2027 24,725 $ 2.87 June 2027 41,736 $ 2.87 December 2028 11,332 $ 2.87 None 37,955,709 $ 0.001 38,808,502 Accumulated Other Comprehensive Income (Loss) Information The components of accumulated other comprehensive income (loss) as of the dates indicated and the change during the period were (in thousands): Foreign Exchange Translation Adjustment Unrealized Gain (Loss) on ST Investments Total Accumulated Other Comprehensive Income (Loss) Balance, December 31, 2019 $ ( 65 ) $ 48 $ ( 17 ) Change 1,006 ( 47 ) 959 Balance, December 31, 2020 941 1 942 Change ( 887 ) ( 50 ) ( 937 ) Balance, December 31, 2021 $ 54 $ ( 49 ) $ 5 11. Commitments Operating Leases The Company has entered into operating leases for real estate in multiple locations. The Company’s leases have lease terms that include options to extend (in some cases, for up to 36 months ). The exercise of lease renewal and termination options are at the Company’s sole discretion. For purposes of calculating operating lease liabilities, the Company’s leases are deemed not to include an option to extend the lease term until it is reasonably certain that the Company will exercise that option. The Company has operating lease agreements with lease and non-lease components that are accounted for as a single lease component. The Company previously subleased office space pursuant to a sublease that expired at the end of July 2021 . On June 3, 2021 , the Company entered into a lease agreement (the “TX Lease”) with the same landlord for a different office suite located in the same building and relocated its headquarters to this location. The TX Lease commencement date was August 1, 2021 and will continue through December 31, 2022 . On commencement of the TX Lease, the Company recorded an operating lease liability and corresponding right-of-use asset of approximately $ 0.1 million. F- 20 On July 7, 2021, the Company entered into a lease agreement (the “PA Lease”) for an office space in Langhorne, Pennsylvania. The PA Lease commencement date was October 1, 2021 and will continue through September 30, 2024 . On commencement of the PA Lease, the Company recorded an operating lease liability and corresponding right-of-use asset of approximately $ 0.2 million. The Company also terminated a lease agreement during the fourth quarter of 2021 . As a result of the termination, the Company paid a fee of approximately $ 20,000 that would have otherwise been payable as part of the property's annual base rent. This termination resulted in a reduction of right-of-use operating lease assets and operating lease liabilities of approximately $ 0.1 million. The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of December 31, 2021 (in thousands): Year ending December 31, 2022 135 2023 63 2024 54 Total future minimum lease payments $ 252 Less imputed interest ( 21 ) Total $ 231 Operating cash flows from operating leases $ 241 Weighted-average remaining lease term (in months) - operating leases 26.5 Weighted-average discount rate - operating leases 8.3 % As of December 31, 2021 , the carrying value of the right-of-use assets for the operating leases was $ 0.3 million, which is reflected in Other non-current assets , and the carrying value of the lease liabilities for operating leases was $ 0.3 million, of which approximately $ 0.2 million related to the current portion of the lease liabilities is recorded in Accrued expenses and other current liabilities , and $ 0.1 million related to the non-current portion of the lease liabilities is recorded in Other long-term liabilities . Manufacturing and Other Commitments and Contingencies The Company is subject to various royalties and manufacturing and development payments related to its product candidate, molgramostim. Under a manufacture and supply agreement with the active pharmaceutical ingredients (“API”) manufacturer for molgramostim, Savara must make certain payments to the API manufacturer upon achievement of the milestones outlined in the table set forth below. Additionally, upon first receipt of marketing approval by Savara from a regulatory authority in a country for a product containing the API for therapeutic use in humans and ending the earlier of (i) ten (10) years thereafter or (ii) the date a biosimilar of such product is first sold in such country, Savara shall pay the API manufacturer a royalty equal to low-single digits of the net sales in that country. The Company is also subject to certain contingent milestone payments, disclosed in the following table, payable to the manufacturer of the nebulizer used to administer molgramostim. The change in the amount of the milestone payments from December 31, 2020 to December 31, 2021 was related to the removal of approximately $ 5.0 million of milestones related to a nebulizer system no longer considered for use. In addition to these milestones, the Company will owe a royalty of three-and one-half percent ( 3.5 %) to the manufacturer of the nebulizer based on net sales. Manufacturing, Development, and Other Contingent Milestone Payments (in thousands): December 31, 2021 Molgramostim manufacturer: Achievement of certain milestones related to validation of API and regulatory approval of molgramostim $ 2,300 Molgramostim nebulizer manufacturer: Achievement of various development activities and regulatory approval of nebulizer utilized to administer molgramostim 566 Total manufacturing and other commitments $ 2,866 The milestone commitments disclosed above reflect the activities that have (i) not been met or incurred; (ii) not been remunerated; and (iii) not accrued, as the activities are not deemed probable or reasonably estimable, as of December 31, 2021. F- 21 On December 10, 2020, the Company announced that the Phase 3 trial of vancomycin in people living with cystic fibrosis who have MRSA lung infection did not meet the primary endpoint. On January 7, 2021 the Company issued a termination notice to GlaxoSmithKline Trading Services Limited (“GSK”), which manufactures the drug product from bulk vancomycin powder. On January 26, 2021, the Company and GSK entered a change order for termination costs associated with the closeout and wind down of vancomycin activities. During the year ended December 31, 2021, the Company paid approximately $ 0.8 million of research and development expense related to the termination of the manufacturing agreement. Contract Research On March 5, 2021, the Company entered into a Master Services Agreement (“MSA”) with Parexel International (IRL) Limited (“Parexel”) pursuant to which Parexel will provide contract research services related to clinical trials. Contemporaneously with entering the MSA, a work order was executed with Parexel, under which they will provide services related to the IMPALA-2 trial. Under that work order and subsequent change orders, the Company will pay Parexel service fees and pass-through expenses estimated to be approximately $ 32 million over the course of the IMPALA-2 clinical trial. Risk Management The Company maintains various forms of insurance that the Company's management believes are adequate to reduce the exposure to these risks to an acceptable level. Employment Agreements On December 8, 2020, the Company entered into an employment agreement with the CEO whereby the CEO is entitled to payments and benefits upon certain events. Upon termination (i) without cause or as a result of the CEO’s disability, (ii) termination due to the CEO’s death, or (iii) the CEO’s resignation for good reason, the CEO is entitled to receive (i) continued monthly payment of base salary for 12 months from the date of termination, (ii) a lump sum payment equal to 100 % of his target bonus, (iii) a pro-rated portion of the unpaid target bonus, (iv) reimbursement for continued coverage under medical benefit plans for 12 months or until covered under a separate plan from another employer, and (v) the immediate and full vesting of outstanding non-vested Company equity awards. Additionally, all of the CEO’s outstanding stock options will be exercisable through the earlier of (x) the 12-month anniversary of the termination date or (y) the original expiration date. Upon a termination other than for cause, death or disability or resignation for good reason within three months following a change in control, the CEO is entitled to receive (i) a lump sum payment of an amount equal to 24 months of base salary, plus 100% of the unpaid target bonus, plus a pro-rated portion of any unpaid bonus earned during the relevant performance period, (ii) reimbursement for continued coverage under medical benefit plans for 24 months or until covered under a separate plan from another employer, and (iii) the immediate and full vesting of outstanding non-vested Company equity awards. Additionally, all of the CEO’s outstanding stock options will be exercisable through the earlier of (x) the 24-month anniversary of the termination date or (y) the original expiration date. Each of the Company’s Chief Financial Officer (“CFO”) and Chief Medical Officer (“CMO”) is entitled to payments and benefits if the CFO or CMO, respectively, is terminated without cause or resigns for good reason. Upon termination without cause, and not as a result of death or disability or resignation for good reason, the CFO or CMO is entitled to receive a payment of base salary for 12 months and a pro-rated portion of the unpaid bonus, and is entitled to reimbursement for continued coverage under medical benefit plans for six months or until covered under a separate plan from another employer. Upon a termination other than for cause or resignation for good reason within 12 months following a change in control, the CFO or CMO is entitled to receive a payment of base salary for 18 months and 100% of the unpaid bonus and be entitled to a payment equal to the amount required to continue coverage under medical benefit plans for 12 months and will also be entitled to full acceleration of outstanding non-vested options at the time of such termination. 12. Related Parties As an investor with the right to designate a member of the Company’s board of directors, Bain has significant influence over the Company and is thereby considered a related party. Pursuant to the Public Offering on March 15, 2021 (as further discussed in Note 10. Stockholders' Equity ), Bain acquired 19,517,241 shares of the Company’s common stock and 17,175,172 2021 Pre-Funded Warrants. F- 22 13. Stock-Based Compensation A. Equity Incentive Plans 2008 Stock Option Plan The Company adopted the Savara Stock Option Plan (the “2008 Plan”), pursuant to which the Company had reserved shares for issuance to employees, directors, and consultants. The 2008 Plan includes (i) the option grant program providing for both incentive and non-qualified stock options, as defined by the Internal Revenue Code, and (ii) the stock issuance program providing for the issuance of awards that are valued based upon common stock, including restricted stock, dividend equivalents, stock appreciation rights, phantom stock, and performance units. The 2008 Plan also allows eligible persons to purchase shares of common stock at an amount determined by the plan administrator. Upon a participant’s termination, the Company retains the right to repurchase non-vested shares issued in conjunction with the stock issuance program at the fair market value per share as of the date of termination. The Company had previously issued incentive and non-qualified options and restricted stock to employees and non-employees under the 2008 Plan. The terms of the stock options, including the exercise price per share and vesting provisions, were determined by the board of directors. Stock options were granted at exercise prices not less than the estimated fair market value of the Company’s common stock at the date of grant based upon objective and subjective factors including: third-party valuations, preferred stock transactions with third parties, current operating and financial performance, management estimates and future expectations. The Company no longer issues stock-based awards under the 2008 Plan. 2015 Omnibus Incentive Option Plan The Company operates the 2015 Omnibus Incentive Plan (the “2015 Plan”), as amended and restated with approval by our stockholders in June 2018 and May 2020. The 2015 Plan provides for the grant of incentive and non-statutory stock options, as well as share appreciation rights, restricted shares, restricted stock units, performance units, shares and other stock-based awards. Share-based awards are subject to terms and conditions established by our board of directors or the compensation committee of our board of directors. As of December 31, 2021 , the number of shares of our common stock available for grant under the 2015 Plan was 202,362 shares. Shares of common stock that are subject to awards granted under the 2015 Plan shall be counted against the shares available for issuance under this plan as one share for each share subject to a stock option or stock appreciation right and as 1.34 shares for each share subject to an award other than a stock option or a stock appreciation right such as a restricted stock unit (“RSU”). If any shares of common stock subject to an award granted under any of our stockholder-approved, equity-based incentive plans are forfeited, or an award expires or is settled for cash pursuant to the terms of an award, the shares subject to the award may be used again for awards under the 2015 Plan to the extent of the forfeiture, expiration or cash settlement. The shares of common stock will be added back as one share for every share of common stock if the shares were subject to a stock option or stock appreciation right, and as 1.34 shares for every share of common stock if the shares were subject to an award other than a stock option or stock appreciation right. Under the 2015 Plan, the purchase price of shares of common stock covered by a stock option cannot be less than 100 % of the fair market value of the common stock on the date the stock option is granted. Fair market value of the common stock is generally equal to the closing price for the common stock on the principal securities exchange on which the common stock is traded on the date the stock option is granted (or if there was no closing price on that date, on the last preceding date on which a closing price was reported). Under the 2008 and 2015 Plan, stock option grants typically vest quarterly over four years and expire ten years from the grant date and restricted stock unit grants typically vest quarterly over four years or cliff vest after two years . Inducement Plan The Company has granted equity awards under inducement grants filed in accordance with Nasdaq Listing Rule 5635(c)(4) exclusively to the Company’s CMO as an inducement for the CMO to enter into employment with the Company. 2021 Inducement Equity Incentive Plan The Company adopted the 2021 Inducement Equity Incentive Plan (the “Inducement Plan”) with approval by the Company's board of directors in May 2021. The Inducement Plan provides for the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units or performance shares. Each award under the Inducement Plan is intended to qualify as an employment inducement grant in accordance with Nasdaq Listing F- 23 Rule 5635(c)(4). As of December 31, 2021 , the number of shares of common stock available for grant under the 2021 Plan was 270,000 shares. Under the Inducement Plan, stock option grants typically vest quarterly over four years and expire ten years from the grant date and restricted stock unit grants typically cliff vest after two years . B. Stock Options and Restricted Stock Units The Company values stock options using the Black-Scholes-Merton option pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected life, expected stock price volatility, and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected term of the Company’s employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. The Company uses the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the stock options. The Company assumes no dividend yield because dividends are not expected to be paid in the future, consistent with the Company’s history of not paying dividends. The valuation of stock options is also impacted by the valuation of common stock. Restricted stock units are valued at the closing market price of the Company’s common stock on the date of grant. C. Fair Value Assumptions for 2015 Plan The following table summarizes the assumptions used for estimating the fair value of stock options granted to employees for the years ended December 31, 2021 and 2020: 2021 2020 Risk-free interest rate 0.77 % - 1.27 % . 36 % - . 66 % Expected term (years) 6.06 - 6.07 6.08 - 6.24 Expected volatility 79.7 % - 91.2 % 78.9 % - 96.4 % Dividend yield 0 % 0 % D. Stock-Based Award Activity The following tables provide a summary for stock option and RSU activity for the year ended December 31, 2021: Stock Options: Shares Underlying Option Awards Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value (in 000's) Outstanding at December 31, 2020 6,240,343 $ 2.66 7.52 $ 190 Granted 2,060,000 1.23 6.06 Exercised ( 889,178 ) 1.38 574 Expired/cancelled/forfeited ( 1,192,324 ) 3.25 Outstanding at December 31, 2021 6,218,841 $ 2.25 8.59 $ 354 Options exercisable at December 31, 2021 2,279,007 $ 3.70 7.48 $ 69 Vested and expected to vest at December 31, 2021 6,218,841 $ 2.25 8.59 $ 354 RSUs: Shares Underlying Option Awards Weighted-Average Grant Date Fair Value Outstanding at December 31, 2020 509,397 $ 1.78 Granted 1,250,000 1.19 Vested ( 443,897 ) 1.35 Expired/cancelled/forfeited ( 43,125 ) 6.06 Outstanding at December 31, 2021 1,272,375 $ 1.20 The weighted-average grant date fair values for the Company’s stock options granted during the years ended December 31, 2021 and 2020 were $ 0.88 per share and $ 0.95 per share, respectively. The total compensation cost related to non-vested stock options not yet recognized as of December 31, 2021 was $ 3.5 million, which will be recognized over a weighted-average period of approximately 2.8 years. Stock options to purchase 285,576 shares and 67,476 shares were exercised during the years ended December 31, 2021 and 2020, respectively. F- 24 The total compensation cost related to unvested RSUs not yet recognized as of December 31, 2021 was $ 1.4 million, which will be recognized over a weighted-average period of 1.9 years. During the years ended December 31, 2021 and 2020 , the Company did no t grant any options to purchase shares of common stock to non-employees. The Company recorded a minimal amount of stock-based compensation expense for options issued to non-employees for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 , options to purchase 39,376 shares were held by non-employees, of which options to purchase 29,376 shares were vested and outstanding. E. Stock-Based Compensation and Stock Option Modification Effective September 11, 2020, the Company’s Chief Executive Officer (“CEO”) who also served as Chairman of the Board of Directors (“Chairman”) as well as the Chief Business Officer (together, the “Former Executives”) resigned, and Matthew Pauls was appointed as the Company’s Interim Chief Executive Officer (“Interim CEO”) and Chairman and subsequently confirmed as CEO. As part of the termination of employment of the Former Executives, certain supplementary modifications to the Former Executives’ vested and non-vested stock option awards including additional acceleration of non-vested shares, voluntary forfeiture of certain stock option awards, and the extension of the post-termination exercise period of certain stock option awards. During the year ended December 31, 2020, the Company recorded a one-time, non-cash incremental compensation expense net of the required reversal of previously recognized compensation attributed to non-vested shares in the amount of $ 0.8 million which is included in General and administrative expenses related to these stock option award modifications. The Company accounted for the resulting net incremental stock option award modification compensation under ASC Topic 718, Compensation—Stock Compensation . Stock-based compensation expense is included in the following line items in the accompanying statements of operations and comprehensive loss for the years ended December 31, 2021 and 2020 (in thousands): Year ended December 31, 2021 2020 Research and development $ 1,286 $ 1,626 General and administrative 1,974 3,481 Total stock-based compensation $ 3,260 $ 5,107 14. Income Taxes The components of loss before income taxes for the years ended December 31, 2021 and 2020 are as follows (in thousands): December 31, 2021 2020 Domestic $ ( 28,705 ) $ ( 30,396 ) Foreign ( 14,309 ) ( 19,219 ) Total $ ( 43,014 ) $ ( 49,615 ) The Company did no t record a federal tax benefit or expense for the year ended December 31, 2021 . The Company recorded no state provision for income taxes for the years ended December 31, 2021 and 2020 due to revenues below the minimum tax threshold. The components of the benefit for income taxes are as follows for the years ended December 31, 2021 and 2020 (in thousands): December 31, 2021 2020 Current: Federal $ — $ — State — — Foreign — — Total Current — — Deferred: Federal — — State — — Foreign — — Total Deferred — — Total income tax expense (benefit) $ — $ — F- 25 A reconciliation of the expected income tax results computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2021 and 2020 (in thousands): December 31, 2021 2020 Income tax benefit computed at federal statutory tax rate $ ( 9,033 ) $ ( 10,419 ) Change in valuation allowance ( 12,253 ) 13,355 Orphan drug & research credits generated ( 1,966 ) ( 1,904 ) Orphan drug & research credit expense disallowance — 68 Impact of foreign operations ( 177 ) ( 205 ) Sec. 382 Limitation 25,249 — Foreign deferred tax asset - true up ( 3,833 ) — Imputed interest 1,253 — Permanent differences 738 ( 760 ) Other 22 ( 135 ) Total $ — $ — Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has established a valuation allowance due to uncertainties regarding the realization of deferred tax assets based upon the Company’s lack of earnings history. During the years ended December 31, 2021 and 2020, the valuation allowance decreased by $ 10.9 million and increased by $ 14.3 million, respectively. During 2021, the valuation allowance decreased by $ 25.2 million due to Internal Revenue Code of 1986 Section 382 ("Section 382") limited net operating loss ("NOL") and credits being removed from financial statements; this decrease was offset by increases of approximately $ 13.2 million due to continuing operations and $ 1.1 million due to foreign translation adjustments, which are recorded in OCI. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2021 2020 Deferred tax liabilities: Prepaid assets $ — $ — Intangible assets — — Other 574 524 Total deferred tax liabilities 574 524 Deferred tax assets: Net operating loss carryforwards 36,298 38,256 Intangible assets 5,380 230 Amortization 1,212 1,332 Credit carryforwards 4,351 17,620 Accrued liabilities & other 1,107 1,806 Total deferred tax assets 48,348 59,244 Subtotal 47,774 58,720 Valuation allowance ( 47,774 ) ( 58,720 ) Net deferred taxes $ — $ — During 2021, the Company completed a Section 382 analysis to determine the amount of losses that are currently available for potential offset against future taxable income. Based on the analysis, it was determined that the utilization of the Company's NOLs and tax credit carryforwards generated in tax periods up to and including December 2019 are substantially limited and may result in the expiration of such carryforwards prior to utilization. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5 % shareholders in the stock of a corporation by more than 50 percentage points in the aggregate over a three-year period. Since the Company's formation, it has raised capital through public or private issuance of common stock on several occasions which have ultimately resulted in multiple changes in ownership, as defined by Section 382. As a result of these ownership changes, $ 47.4 million of NOLs and $ 15.3 million of research and orphan drug credits have been fully restricted from use and were removed from the ending deferred tax assets and 2021 carryforwards mentioned above. As of December 31, 2021, the Company still has $ 50.6 million of federal Section 382 NOLs, which are included in the federal NOL carryforwards below, that are severely limited in future years. F- 26 As of December 31, 2021 and 2020 , the Company had foreign NOL carryforwards of approximately $ 71.8 million and $ 54.8 million, respectively, which have an indefinite carryforward period. After taking the Section 382 limitations discussed into account, as of December 31, 2021 and 2020 , the Company had NOLs for federal income tax purposes of approximately $ 96.0 million and $ 123.9 million, respectively. The federal NOL carryforwards begin to expire in 2037 , with $ 90.7 million not having an expiration date . As of December 31, 2021 and 2020, the Company had state NOL carryforwards of approximately $ 3.6 million and $ 2.9 million, respectively. The state NOL carryforwards begin to expire in 2038 . As of December 31, 2021 and 2020 , the Company also had available research and orphan drug tax credit carryforwards for federal income tax purposes of approximately $ 3.9 million and $ 17.2 million, respectively. If not utilized, these carryforwards expire at various dates beginning in 2039 . As of December 31, 2021 and 2020 , the Company had state research and development tax credit carryforwards of approximately $ 0.6 million and $ 0.5 million, respectively, which will begin to expire in 2034 if not utilized. The Company applies the accounting guidance in ASC 740 Income Taxes related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. As of December 31, 2021 and 2020 , the Company had no unrecognized tax benefits. During the years ended December 31, 2021 and 2020 , the Company had no interest and penalties related to income taxes. The Company files income tax returns in the U.S. federal, state, and foreign jurisdictions. As of December 31, 2021 , the statute of limitations for assessment by the Internal Revenue Service (“IRS”) is open for the 2018 and subsequent tax years, although carryforward attributes that were generated for tax years prior to then may still be adjusted upon examination by the IRS if they either have been, or will be, used in a future period. The 2017 and subsequent tax years remain open and subject to examination by the state taxing authorities. The 2018 and subsequent tax years remain open and subject to examination by the foreign taxing authorities. There are currently no federal, state, or foreign income tax audits in progress. 15. Net Loss per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding. Diluted net loss per share is computed similarly to basic net loss per share except the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted net loss per share is the same as basic net loss per common share since the effects of potentially dilutive securities are antidilutive. As of December 31, 2021 and 2020, potentially dilutive securities include: Year ended December 31, 2021 2020 Awards under equity incentive plan 6,218,841 6,240,342 Non-vested restricted shares and restricted stock units 1,272,375 509,397 Warrants to purchase common stock 77,793 31,828,710 Total 7,569,009 38,578,449 The following table calculates basic earnings per share of common stock and diluted earnings per share of common stock for the years ended December 31, 2021 and 2020 (in thousands, except share and per share amounts): Year ended December 31, 2021 2020 Net loss $ ( 43,014 ) $ ( 49,615 ) Net loss attributable to common stockholders $ ( 43,014 ) $ ( 49,615 ) Undistributed earnings and net loss attributable to common stockholders, basic and diluted $ ( 43,014 ) $ ( 49,615 ) Weighted-average common shares outstanding, basic and diluted 133,919,145 59,309,090 Basic and diluted EPS $ ( 0.32 ) $ ( 0.84 ) F- 27 16. Subsequent Events The Company has evaluated subsequent events through the date these financial statements were issued. The Company determined there were no events that required disclosure or recognition in these financial statements. F- 28