What changed in this filing

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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-30 · 202 added, 201 removed, 866 unchanged (32% of the section changed)

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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, 2022, pursuant to and as required by Rule 13a-15(b) under the Exchange Act.

Based on that evaluation, our Chief Executive Officer and Chief

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.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2022, 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

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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.

The other information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference.

Equity Compensation Plan Information

The table below provides information about our common stock that, as of December 31, 2022, may be issued upon the exercise of options and the vesting of RSUs under the following equity compensation plans (which are all our equity compensation plans;

provided, however, that new equity awards may only be issued under the 2015 Omnibus Incentive Plan and the 2021 Inducement Plan):

2015 Omnibus Incentive Plan (the “2015 Plan”)

Stock Option Plan (the “2008 Plan”)

2021 Inducement Equity Incentive Plan (the "2021 Inducement Plan”)

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans

approved by security holders

Equity compensation plans

not approved by security holders

(1) The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price.

(2) Includes 6,434,068 shares issuable upon the exercise of outstanding options granted under the 2015 Plan, 1,542,250 shares issuable upon the vesting of RSUs granted under the 2015 Plan, and 196,616 shares issuable upon the exercise of outstanding options granted under the 2008 Plan.

(3) Includes 1,302,500 shares issuable upon the exercise of outstanding options granted under the 2021 Inducement Plan, and 400,000 shares issuable upon the vesting of RSUs granted under the 2021 Inducement Plan.

Certain Relationships and Related Transactions, and Director Independence.

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Exhibit Number

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.)

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.)

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.)

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.)

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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.)

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.)

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.)

Amended and Restated Loan and Security Agreement, dated April 21, 2022, between the Registrant and its subsidiary, Aravas Inc., as borrowers, and Silicon Valley Bank (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on May 11, 2022.)

Amended and Restated 2015 Omnibus Incentive Plan, as amended (Incorporated by reference to Appendix A of the Registrant’s Proxy Statement filed on April 19, 2022.)

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.)

Form of Incentive Stock Option Grant Agreement –

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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.)

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.)

Form of Grant of Restricted Stock Units under the 2015 Omnibus Incentive Plan.

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(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.)

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.)

2021 Inducement Equity Incentive Plan (Incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 filed on January 20 2023.)

Form of Non-Statutory Stock Option Agreement –

Under the 2021 Inducement Equity Incentive Plan

Under the 2021 Inducement Equity Incentive Plan (Incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-QK filed on March 30, 2020.)

Form of Restricted Stock Unit Agreement (Inducement Award) –

Under the 2021 Inducement Equity Incentive Plan

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.)

Under the 2021 Inducement Equity Incentive Plan (Incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-QK filed on March 30, 2020.)

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.)

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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.)

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.)

Amendment No.

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(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.)

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.)

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.)

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(Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q filed on August 8, 2019.)

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.)

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.)

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.)

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.)

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.)

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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.)

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.)

First Amendment to Lease Agreement, dated October 26, 2022, between the Registrant and Overlook at Rob Roy Owner, LLC.

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.)

Amended and Restated Executive Employment Agreement, dated December 13, 2022, 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 15, 2022.)

Amended and Restated Executive Employment Agreement, dated December 13, 2022, between Savara Inc.

and David Lowrance (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 15, 2022.)

Amendment No.

1 to the Manufacture and Supply Agreement, dated December 7, 2022 entered into by and between Savara ApS GEMABIOTECH SAU.

Executive Employment Agreement, dated November 10, 2022, between Savara Inc.

and Raymond D.

Executive Employment Agreement, dated February 13, 2023, between Savara Inc.

and Rob Lutz (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 13, 2023.)

List of Subsidiaries

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/s/ Dave Lowrance

Chief Financial Officer

Chief Financial and Administrative Officer

(Principal Financial and Accounting Officer)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2022 and 2021

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

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

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 United States 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.

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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.

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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

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During 2022, the Company incurred $28 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

payments made to vendors in excess of costs incurred.

The Company recorded an accrued liability of $1.3 million for expenses incurred but not yet invoiced, and a prepaid expense of $1.8 million for 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:

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(3) 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

(4) Performed a comparison of current quarterly and annual results compared to prior quarter and prior year to assess the historical accuracy of management’s analysis.

/s/ RSM US LLP

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Stockholders’

Common stock, $ 0.001 par value, 300,000,000 and 200,000,000 shares authorized as of

Common stock, $ 0.001 par value, 300,000,000 shares authorized as of

December 31, 2022 and 2021, respectively;

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Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Accumulated deficit

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Years ended December 31,

Milestone revenue

Operating expenses:

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Loss from operations

Other expense, net:

Other income (expense), net:

Interest expense, net

Foreign currency exchange (loss) gain

Foreign currency exchange loss

Tax credit income

Change in fair value of financial instruments

Total other expense, net

Total other income (expense), net

Net loss per share:

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Basic and diluted

Other comprehensive loss:

(Loss) gain on foreign currency translation

Unrealized loss on short-term investments

Other comprehensive income (loss):

Loss on foreign currency translation

Unrealized gain (loss) on short-term investments

Total comprehensive loss

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Balance on December 31, 2020

Issuance of common stock for licensing of assets

Issuance of common stock upon at the market offerings,

Issuance of common stock upon exercise of Milestone

Warrants, net

Issuance of common stock upon exercise

of stock options

Issuance of common stock for settlement

Closing costs for previous issuance of securities in

private placement

Incremental cost due to modification of detachable

warrants previously issued with debt instrument

Stock-based compensation

Foreign exchange translation adjustment

Unrealized loss on short-term investments

Balance on December 31, 2020

Issuance of common stock and pre-

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offering costs (1)

Repurchase of outstanding pre-funded

Repurchase of outstanding pre-funded warrants

Issuance of common stock upon

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of stock options

Issuance of common stock for settlement

Repurchase of shares for minimum tax

Issuance of common stock for settlement of RSUs

Repurchase of shares for minimum tax withholdings

Stock-based compensation

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Balance on December 31, 2021

Issuance of common stock upon exercise

of stock options

Issuance of common stock for settlement of RSUs

Repurchase of shares for minimum tax withholdings

Stock-based compensation

Foreign exchange translation adjustment

Unrealized gain on short-term investments

Balance on December 31, 2022

(1) As discussed in Note 9.

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Amortization of right-of-use assets

Acquired in-process research and development (Note 8)

Change in fair value of financial instruments

Non-cash interest (income) expense

Foreign currency loss (gain)

Non-cash interest income

Foreign currency loss

Amortization of debt issuance costs

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Prepaid expenses and other current assets

Non-current assets

Accounts payable and accrued expenses and other current liabilities

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Purchase of property and equipment

Purchase of in-process research and development (Note 8)

Purchase of available-for-sale securities, net

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Sale of available-for-sale securities, net

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Repayment of long-term debt (1)

Proceeds from long-term debt, net (1)

Issuance of common stock and pre-funded warrants in public offering, net of offering costs

Issuance of common stock upon at the market offerings, net

Issuance of common stock upon exercise of warrants, net

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Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Increase in cash and cash equivalents

Cash and cash equivalents beginning of period

Cash and cash equivalents end of period

Non-cash transactions:

Common stock issued for acquired in-process research and development, net

Supplemental disclosure of cash flow information:

Cash paid for interest

(1) As discussed in Note 7.

Debt Facility , the Amended Loan Agreement (as defined herein) was accounted for as a modification.

The Company used the proceeds from the Amended Loan Agreement to repay the outstanding amounts under the Loan Agreement from Silicon Valley Bank.

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

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“we,”

or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases.

"our" 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.

The Company and its wholly-owned subsidiaries operate in one segment with its principal office in Austin, Texas as of December 31, 2022, though a significant portion of our employees work remotely.

Since inception, Savara has devoted substantially all of its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital.

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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 .

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 (loss) .

All intercompany transactions and accounts have been eliminated in consolidation.

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The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In addition, on March 10, 2023, the FDIC took control of Silicon Valley Bank and created the National Bank of Santa Clara to hold the deposits of Silicon Valley Bank after Silicon Valley Bank was unable to continue its operations.

Silicon Valley Bank’s deposits are insured by the FDIC, in amount up to $ 250 thousand for any depositor;

any deposit in excess of this insured amount could be lost.

Department of the Treasury, Federal Reserve Board, and FDIC stated that all depositors of Silicon Valley Bank would have access to all deposits after one business day following the date of closure;

we and other depositors with Silicon Valley Bank received such access on March 13, 2023.

Additionally, Treasury Secretary Janet L.

Yellen, Federal Reserve Chair Jerome H.

Powell and FDIC Chairman Martin J.

Gruenberg have announced that all bank depositors, including deposits in excess of the FDIC Limit, with SVB will be fully protected.

In order to mitigate risks associated with our banking deposits, the Company maintains a significant portion of its liquidity in U.S.

Treasury money market funds and other short-term investments with custodial services provided by U.S.

Bank, N.A., refer to Note 5.

Short-term Investments and Note 8.

Fair Value Measurements .

The Company continues to monitor the circumstances surrounding Silicon Valley Bank and does not anticipate a material impact on its financial condition or operations based upon the FDIC’s management of Silicon Valley Bank’s assets and operations;

however, it continues to monitor the situation.

Use of Estimates

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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’

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.

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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.

We are subject to credit risk from our portfolio of cash equivalents and marketable securities.

These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we

may consider for investment.

The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk.

We maintain our cash and cash equivalents and marketable securities with a limited number of financial institutions.

Deposits held with the financial institutions exceed the amount of insurance provided on such deposits.

We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the consolidated balance sheets.

Accrued Research and Development Costs

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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

balance in each reporting period.

The Company makes significant judgments and estimates in determining the accrual 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.

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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.

From time to time the Company enters 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 may be 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.

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 unde rlying 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.

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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

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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

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.

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Refer to Note 8.

Fair Value Measurements—Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis for additional discussion.

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.

Fair Value Measurements –

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis for additional discussion.

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 in accordance with ASU 2016-02, Leases (Topic 842), as codified in ASC 842, Leases .

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.

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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;

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 and corresponding liability in accordance with ASC 842, Leases ;

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 10.

Commitments—Operating Leases for additional discussion.

Commitments –

Operating Leases for additional discussion.

Segment Reporting

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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

not improve or extend the useful life of the respective asset are charged to expense as incurred.

Repairs and maintenance that do not improve or extend the useful life of the respective asset are charged to expense as incurred.

Refer to Note 6.

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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.

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.

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.

Net Loss per Share

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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.

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.

There are no recent accounting pronouncements issued by the FASB, the AICPA, or the SEC that are believed by the Company's management to have a material effect, if any, on the Company’s consolidated financial statements.

Prepaid Expenses and Other Current Asset s

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During the year ended December 31, 2022 , the Company generated a Danish tax credit of $ 0.8 million which is expected to be received in the fourth quarter of 2023.

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.

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.

Accrued Expenses and Other Current Liabilities

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Total short-term investments (*)

* Designated custodial institution, U.S.

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 (loss) 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.

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Property and equipment, net

Depreciation expense for the years ended December 31, 2021 and 2020 was $ 0.1 million and $ 0.3 million, respectively.

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

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’

On April 28, 2017, the Company and its subsidiary, Aravas Inc.

(“Aravas”), 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 , the Third Amendment on January 31, 2020 , and the Fourth Amendment on March 30, 2021 (the “Loan Agreement”), pursuant to which Silicon Valley Bank provided a term loan to us in the principal amount of $ 25.0 million.

On April 21, 2022 , the Company and Aravas entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”), as co-borrowers, and Silicon Valley Bank, as lender (the “Lender”), which amended and restated the Loan Agreement in its entirety.

The Amended Loan Agreement provides for a $ 26.5 million term loan facility.

The Company used the proceeds from the Amended Loan Agreement to repay outstanding amounts under the Loan Agreement, including principal of $ 25.0 million, a prepayment fee of $ 0.1 million, and an end of term charge of $ 1.4 million.

Pursuant to the Amended Loan Agreement, the loan has an interest-only monthly payment through April 21, 2026 (the “Interest-Only Period”) and thereafter equal monthly installments of principal plus interest over 12 months until April 21, 2027 (the “Maturity Date”).

However, the Company may elect to extend the Interest-Only Period until the Maturity Date if it maintains cash and cash equivalents equal to at least 1.75 times the outstanding principal amount of the loan during the fifth year.

If the Interest-Only Period is extended, all principal and unpaid interest is due and payable on the Maturity Date.

The loan bears interest at a floating rate equal to the greater of (i) 3 % and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5 %.

Savara is obligated to pay customary closing fees and a final payment of 2.75 % of the principal amount advanced under the facility.

The Company may prepay the loan in whole or in part at any time, subject to a prepayment fee of 4.25 % if prepaid within the first anniversary of the closing date and 1.0 % if prepaid between the first and second anniversaries of the closing date.

Following the second anniversary, there is no prepayment fee.

Silicon Valley Bank was granted a perfected first priority lien in all of the Company's assets with a negative pledge on intellectual property.

The Amended Loan Agreement contained customary affirmative and negative covenants, including among others, covenants that limit the Company's 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’

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.

Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if the Company’s balance of cash and cash equivalents falls below $ 40.0 million, the Company is required to maintain cash and cash equivalents equal to at least (i) six months of operating expenses and (ii) 1.2 times the outstanding principal amount of the loan (or 1.75 in the final year of the loan if the Interest-Only Period is extended).

In accordance with FASB ASC Topic 470-50, Debt –

Modifications and Extinguishments , the Company evaluated the Amended Loan Agreement to determine whether it should be accounted for as a modification or extinguishment.

As a result of this analysis, the Amended Loan Agreement was accounted for as a modification.

Accordingly, no gain or loss is recognized.

Approximately $ 0.1 million of fees paid to the lender were capitalized and will be amortized over the term of

the Amended Loan Agreement.

Expenses paid to third parties associated with the Amended Loan Agreement were immediately expensed and recorded in the Interest expense line item in our consolidated statement of operations.

On March 10, 2023, the FDIC took control and was appointed receiver of Silicon Valley Bank.

As such, the Company is monitoring the impact on the Amended Loan Agreement.

Summary of Carrying Value

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Long-term debt

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

$ 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.

Fair Value Measurements

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Commercial paper

* Designated custodial institution, U.S.

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, 2022 and 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and Li abilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis.

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At December 31, 2022, 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.

Stockholders’

For the years ended December 31, 2022 and 2021, the Company experienced a decrease of approximately $ 0.6 million and a decrease of approximately $ 0.9 million, respectively, in the carrying value of IPR&D, which was due to foreign currency translation.

Stockh olders’

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 Milestone Warrants were 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.

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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.

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 (the “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.

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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.

During the year ended December 31, 2022, the Company did no t sell any shares of common stock under the Evercore Sales Agreement.

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.

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The Company’s shares of common stock reserved for issuance as of December 31, 2022 and 2021 were as follows:

Warrants acquired in April 2017 merger

Warrants converted in connection with April 2017 merger

April 2017 Warrants

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Pre-funded PIPE Warrants

Milestone Warrants

2021 Pre-funded Warrants

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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.

The exercise of lease renewal and termination options are at the Company’s sole discretion with the exception of the Austin Texas lease, as amended, noted below.

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.

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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.

On June 3, 2021 , the Company entered into a lease agreement (the “Antecedent TX Lease”) with the same landlord for a different office suite located in the same building and relocated its headquarters to this location.

The Antecedent TX Lease commencement date was August 1, 2021 and continued through December 31, 2022 .

On commencement of the Antecedent TX Lease, the Company recorded an operating lease liability and corresponding right-of-use asset of approximately $ 0.1 million.

In December 2022, contemporaneously with the expiration of the Antecedent TX Lease, the Company entered into another lease (the "Current TX Lease") with the same landlord for a different office suite located in the same commercial complex and relocated its headquarters to this location.

The term for the Current TX Lease is initially six months or June 30, 2023, at which point it converts to a month-to-month arrangement thereafter with termination rights upon thirty days written notice.

Due to the duration of the Current Texas Lease term, no right-of-use

asset or corresponding liability has been recorded in accordance with the Company's election under ASC 842 further described in Note 2.

Summary of Significant Accounting Policies .

On July 7, 2021, the Company entered into a lease agreement (the “PA Lease”) for an office space in Langhorne, Pennsylvania.

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Weighted-average discount rate - operating leases

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 .

As of December 31, 2022, the carrying value of the right-of-use ass ets for the operating leases was $ 0.1 million, which is reflected in Other non-current assets , and the carrying value of the lease liabilities for operating leases was $ 0.1 million, of which approximately $ 0.06 million related to the current portion of the lease liabilities is recorded in Accrued expenses and other current liabilities , and $ 0.05 million related to the non-curr ent portion of the lease liabilities is recorded in Other long-term liabilities .

Manufacturing and Other Commitments and Contingencies

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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.

The change in the amount of the milestone payments from December 31, 2021 to December 31, 2022 was related to foreign currency translation fluctuations.

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.

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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.

Contemporaneously with entering the MSA, a wor k 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 $ 33.6 million over the course of the IMPALA-2 clinical trial.

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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.

On December 8, 2020, the Company entered into an employment agreement with the CEO, as amended and restated on December 13, 2022, whereby the CEO is entitled to payments and benefits upon certain events.

Upon (i) termination without cause, (ii) termination due to the CEO’s death or disability, or (iii) the CEO’s resignation for good reason, the CEO is entitled to receive (i) a lump sum payment equal to 18 months of base salary, (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 18 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 18 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.

Upon a termination other than for cause, death or disability or resignation for good reason within three months prior to or 12 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.

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 (i) terminated without cause, (ii) terminated due to the CFO or CMO's death or disability, or (iii) resigns for good reason, which includes (i) a lump sum payment equal to 12 months of base salary and a pro-rated portion of their unpaid bonus, (ii) reimbursement for continued coverage under medical benefit plans for 12 months or until covered under a separate plan from another employer, and (iii) accelerated vesting of outstanding non-vested Company equity awards equal to 12 months.

Upon a termination other than for cause, death or disability or resignation for good reason within three months prior to or 12 months following a change in control, the CFO or CMO is entitled to receive (i) a lump sum payment of an amount equal to 18 months of base salary, plus 100% of their target bonus, plus a pro-rated portion of their unpaid target bonus, (ii) a lump sum payment equal to the amount required to continue coverage under medical benefit plans for 18 months, and (iii) the immediate and full vesting of outstanding non-vested options at the time of such termination.

Related Parties

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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 Company operates the 2015 Omnibus Incentive Plan (the “2015 Plan”), as amended and restated with approval by our stockholders in June 2018 and amended with approval by our stockholders in May 2020 and June 2022.

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.

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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

Rule 5635(c)(4).

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 Rule 5635(c)(4).

As of December 31, 2022 , the number of shares of common stock available for grant under the 2021 Plan was 1,197,500 shares.

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2.11 % - 3.94 %

0.77 % - 1.27 %

Expected term (years)

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The total compensation cost related to non-vested stock options not yet recognized as of December 31, 2022 was $ 4.7 million, which will be recognized over a weighted-average period of approximately 3.2 years.

Stock options to purchase 285,576 shares and 67,476 shares were exercised during the years ended December 31, 2021 and 2020, respectively.

The total compensation cost related to unvested RSUs not yet recognized as of December 31, 2022 was $ 1.9 million, which will be recognized over a weighted-average period of 1.7 years.

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The Company recorded a minimal amount of stock-based compensation expense for options issued to non-employees for the years ended December 31, 2022 and 2021, 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.

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

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, 2022 and 2021 (in thousands):

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Total stock-based compensation

Inc ome Taxes

The components of loss before income taxes for the years ended December 31, 2022 and 2021 are as follows (in thousands):

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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 the years ended December 31, 2022 and 2021 , the valuation allowance increased by $ 3.1 million and decreased by $ 10.9 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;

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Prepaid assets

Intangible assets

Total deferred tax liabilities

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Credit carryforwards

Section 174 research and development expenses

Accrued liabilities & other

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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.

As of December 31, 2022 and 2021, the Company still has $ 52.4 million and $ 50.6 million of federal Section 382 NOLs, respectively, which are included in the federal NOL carryforwards below, that are severely limited in future years.

As of December 31, 2022 and 2021 , the Company had foreign NOL carryforwards of approximately $ 81.8 million and $ 71.8 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.

After taking the Section 382 limitations discussed into account, as of December 31, 2022 and 2021, the Company had NOLs for federal income tax purposes of approximatel y $ 98.6 million and $ 96.0 million, respectively.

Federal NOL carryforwards of $ 5.2 million begin to expire in 2037 , with $ 93.4 million not having an expiration date.

As of December 31, 2022 and 2021 , the Company had state NOL carryforwards of approximately $ 3.5 million, respectively.

The state NOL carryforwards begin to expire in 2038 .

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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.

As of December 31, 2022 and 2021 , the Company had state research and development tax credit carryforwards of approximately $ 0.5 m illion and $ 0.6 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.

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There are currently no federal, state, or foreign income tax audits in progress.

Net Loss per Share

Net L oss per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding.

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Basic and diluted EPS

Subsequent Events

Sub sequent Events

Langhorne, PA Lease Amendment

On February 28, 2023, the Company entered into its first amendment to the PA Lease ("Amended PA Lease") for an expansion of approximately 3,970 additional square feet for a total of approximately 6,435 square feet of office space in Langhorne, Pennsylvania.

The Amended PA Lease commencement date is July 1, 2023 and extends the lease period through June 30, 2026.

On the Amended PA Lease commencement date, the Company will reevaluate and record an adjusted operating lease liability and corresponding right-of-use asset.

Silicon Valley Bank Receivership

On March 10, 2023, the FDIC took control of Silicon Valley Bank and created the National Bank of Santa Clara to hold the deposits of Silicon Valley Bank after Silicon Valley Bank was unable to continue their operations.

Silicon Valley Bank’s deposits are insured by the FDIC Limit, in amount up to $ 250 thousand for any depositor and any deposit in excess of this insured amount could be lost.

Department of the Treasury, Federal Reserve Board, and FDIC stated that all depositors of Silicon Valley Bank would have access to all of their money after one business day following the date of closure;

we and other depositors with Silicon Valley Bank received such access on March 13, 2023.

In order to mitigate risks associated with our banking deposits, the Company maintains a significant portion of its liquidity in U.S.

Treasury money market funds and other short-term investments with custodial services provided by U.S.

Bank, N.A., refer to Note 5.

Short-term Investments and Note 8.

Fair Value Measurements .

The Company is also monitoring the impact to its Amended Loan Agreement and continues to monitor the circumstances surrounding Silicon Valley Bank.

The Company does not anticipate a material impact on its financial condition or operations based upon the FDIC’s management of Silicon Valley Bank’s assets and operations;

however, it continues to monitor the situation.

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.

The Company determined there were no further events that required disclosure or recognition in these financial statements.

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

What changed 10-K

Item 9A. Controls and Procedures