Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Vice-President, Strategy and Finance (principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, as of December 31, 2021. Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Vice-President, Strategy and Finance concluded that, as of such date, our disclosure controls and procedures were not effective at a reasonable assurance level because of the material weaknesses in internal control over financial reporting set forth below; provided, however, that we have made improvements with respect to addressing such material weaknesses and will continue to execute on an existing plan to remedy them.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d (f) under the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by a company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
In preparing the financial statements as of and for the year ended December 31, 2020, our management identified material weaknesses in its internal control over financial reporting. The material weaknesses identified were as follows:
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(i) There was a material weakness in our internal control environment over financial reporting as a result of insufficient resources with appropriate knowledge and expertise to design, implement, document and operate effective internal controls over financial reporting.
(ii) There was a material weakness in our internal control activities due to a failure in design and implementation of controls to review clinical trial expenses, including the evaluation of the terms of clinical trial contracts. Specifically, Tempest failed to properly review and evaluate progress of expense incurred in clinical trial contracts which resulted in the inaccurate actual of its clinical trial expenses.
Remediation of Material Weaknesses in Internal Control over Financial Reporting
Our management, under the supervision of its Chief Executive Officer, has undertaken a plan to remediate the material weaknesses identified above, including adjustment to the methodology used to reflect clinical trial expenses in our financial statements and leveraging additional accounting resources. The additional efforts summarized below, which are in the process of being implemented, are intended to finalize the remediation, which our management expects to complete in the first half of 2022.
(i) We will seek to recruit and hire additional accounting personnel with appropriate experience, certification, education and training to help design, implement, document and operate effective internal controls over financial reporting; and
(ii) We will finalize our internal control design, and implement management review controls to review clinical trial expenses and the completeness of our reserves based on the status of clinical development and the progress of expense incurred.
Our management cannot assure you that the material weaknesses identified will be remediated on the timelines currently anticipated by us, or at all, or that there will not be additional material weaknesses or significant deficiencies in the future.
Notwithstanding the existence of the material weaknesses as described above, we believe that the Consolidated Financial Statements in this Annual Report fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates, and for the periods, presented, in conformity with GAAP.
Attestation Report of the Registered Public Accounting Firm.
We are a smaller reporting company, and therefore our independent registered public accounting firm has not issued a report on the effectiveness of internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to our Proxy Statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
We have filed the following documents as part of this Annual Report:
(a)(1) Financial Statements
The financial statements are included in Item 8. “Financial Statements and Supplementary Data.”
(a)(2) Financial Statement Schedules
All schedules are omitted as information required is inapplicable or the information is presented in the financial statements and the related notes.
(a)(3) Exhibits
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Incorporation by Reference
Exhibit Number Description of Exhibit Form File Number Exhibit Filing Date Filed or Furnished Herewith
2.1 Agreement and Plan of Merger, dated as of March 29, 2021, by and among Tempest Therapeutics, Inc., Mars Merger Corp. and Tempest Therapeutics, Inc.
8-K 001-35890 2.1 3/29/2021
3.1 Restated Certificate of Incorporation of the Registrant, as amended
10-Q 001-35890 3.1 5/15/2019
3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on June 24, 2021
8-K 001-35890 3.1 6/28/2021
3.3 Certificate of Amendment to the Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on June 25, 2021
8-K 001-35890 3.2 6/28/2021
3.4 Amended and Restated Bylaws of the Registrant
8-K 001-35890 3.1 9/24/2021
4.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
4.2† Form of Tempest Therapeutics, Inc. Warrant to Purchase Stock
S-4/A 333-255198 4.2 5/4/2021
10.1+ 2 011 Equity Incentive Plan
S-8 333-257727 10.2 7/7/2021
10.2+ 2017 Equity Incentive Plan
S-8 333-257727 10.1 7/7/2021
10.3+ Form of Stock Option Agreement under the 2017 Equity Incentive Plan
X
10.13 +
2019 Equity Incentive Plan
8-K 001-35890 10.1 6/13/2019
10.14 +
Form of Option Grant Package under 2019 Equity Incentive Plan
10-Q 001-35890 10.7 8/12/2019
10.15 +
Form of RSU Grant Package under 2019 Equity Incentive Plan
10-Q 001-35890 10.8 8/12/2019
10.16 +
Form of Stock Option Agreement under the Sub Plan for French Residents under 2019 Equity Incentive Plan
10-K 001-35890 10.16 3/11/2020
10.17 +
Form of Inducement Nonqualified Stock Option Agreement subject to the terms of the 2019 Equity Incentive Plan
10-K 001-35890 10.17 3/11/2020
10.18 +
2019 Employee Stock Purchase Plan
8-K 001-35890 10.2 6/13/2019
10.19 Loan and Security Agreement, dated January 15, 2021, by and among Oxford Finance LLC, the Lenders party thereto, and Tempest
S-4/A 333-255198 10.3 5/4/2021
10.20 +
Form of Indemnification Agreement
8-K 001-35890 10.1 7/07/2021
10.21 +
Employment Agreement, dated July 7, 2021, by and between the Company and Stephen Brady
8-K 001-35890 10.2 7/07/2021
10.22 +
Employment Agreement, dated July 7, 2021, by and between the Company and Thomas Dubensky, Ph.D.
8-K 001-35890 10.3 7/07/2021
10.23 +
Employment Agreement, dated July 7, 2021, by and between the Company and Samuel Whiting, M.D., Ph.D.
8-K 001-35890 10.4 7/07/2021
10.24† Lease Agreement, dated February 22, 2019, by and between ARE-San Francisco No. 17, LLC and Tempest Therapeutics, Inc.
S-4/A 333-255198 10.1 5/4/2021
10.25† First Amendment to Lease, dated June 28, 2019, by and between ARE-San Francisco No. 17, LLC and Tempest Therapeutics, Inc.
S-4/A 333-255198 10.2 5/4/2021
21.1 Subsidiaries of the Registrant X
23.1 Consent of Ernst & Young LLP, independent registered public accounting firm
X
23.2 Consent of Deloitte & Touche LLP, independent registered public accounting firm
X
24.1 Power of Attorney (included on signature page) X
31.1 Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2 Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
X
32.1 ^
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) and 15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to section 906 of The Sarbanes-Oxley Act of 2002
X
101.INS Inline XBRL Instance Document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
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_______________________________________
+ Indicates management contract or compensatory plan.
† Filed previously.
^ These certifications are being furnished solely to accompany this Annual Report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, 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 language in such filing.
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ITEM 16. FORM 10-K SUMMARY
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEMPEST THERAPEUTICS, INC.
By: /s/ Stephen Brady
Stephen Brady
Chief Executive Officer (Principal Executive Officer)
By: /s/ Nicholas Maestas
Nicholas Maestas
Vice-President, Strategy and Finance (Principal
Financial Officer)
Date: March 29, 2022
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen Brady and Nicolas Maestas , jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of Tempest Therapeutics, Inc., and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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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 and in the capacities and on the dates indicated.
Signature Title Date
/s/ Stephen Brady President, Chief Executive Officer and Director (Principal Executive Officer)
March 29, 2022
Stephen Brady
/s/ Nicholas Maestas Vice President, Strategy and Finance
(Principal Financial Officer)
March 29, 2022
Nicholas Maestas
/s/ Pierre Lorenzo Corporate Controller, Treasurer and Secretary
(Principal Accounting Officer)
March 29, 2022
Pierre Lorenzo
/s/ Michael Rabb Chairman of the Board of Directors March 29, 2022
Michael Rabb
/s/ Thomas Dubensky President and Director March 29, 2022
Thomas Dubensky, Ph.D.
/s/ Geoff Nichol Director March 29, 2022
Geoff Nichol, M.B., Ch.B., M.B.A.
/s/ Christine Pellizzari Director March 29, 2022
Christine Pellizzari
/s/ Ronit Simantov Director March 29, 2022
Ronit Simantov, M.D.
/s/ Thomas Woiwode Director March 29, 2022
Thomas Woiwode, Ph.D.
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