Filing
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
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Securities registered pursuant to Section 12(b) of the Act:
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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As of May 11, 2022, the registrant had
Table of Contents
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Page |
PART I. |
FINANCIAL INFORMATION |
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Item 1. |
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1 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
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3 |
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4 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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25 |
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i
PART I—FINANCIAL INFORMATION
Item I. Financial Information
Savara Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
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March 31, 2022 |
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December 31, 2021 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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In-process R&D |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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( |
) |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
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For the three months ended March 31, |
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2022 |
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2021 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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Other (expense) income |
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Interest expense, net |
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( |
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( |
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Foreign currency exchange loss |
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( |
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( |
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Tax credit income |
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Total other (expense) income, net |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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Net loss per share: |
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Basic and diluted |
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$ |
( |
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$ |
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Weighted-average common shares outstanding: |
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Basic and diluted |
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Other comprehensive loss: |
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Loss on foreign currency translation |
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( |
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( |
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Unrealized loss on short-term investments |
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( |
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( |
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Total comprehensive loss |
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$ |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Periods Ended March 31, 2022 and 2021
(In thousands, except share amounts)
(Unaudited)
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Stockholders’ Equity |
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Common Stock |
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Number of |
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Amount |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Balance on December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock for |
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— |
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— |
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— |
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— |
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— |
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Repurchase of shares for |
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( |
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— |
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( |
) |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign exchange translation |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Unrealized loss on short-term |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance on March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stockholders’ Equity |
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Common Stock |
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Number of |
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Amount |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Balance on December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock and |
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— |
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— |
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Repurchase of outstanding |
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— |
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— |
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( |
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— |
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— |
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( |
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Net issuance of common stock |
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— |
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— |
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Issuance of common stock for |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign exchange translation |
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— |
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— |
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— |
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— |
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( |
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( |
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Unrealized loss on short-term |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance on March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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For the three months ended March 31, |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of right-of-use assets |
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Foreign currency loss |
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Amortization of debt issuance costs |
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Amortization on premium to short-term investments |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Non-current assets |
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( |
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( |
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Accounts payable and accrued expenses and other current liabilities |
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( |
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( |
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Long-term liabilities |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Purchase of available-for-sale securities, net |
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( |
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( |
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Maturity of available-for-sale securities |
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Sale of available-for-sale securities, net |
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— |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Repurchase of outstanding pre-funded warrants |
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— |
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( |
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Issuance of common stock and pre-funded warrants in public offering, net of offering costs |
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— |
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Proceeds from exercise of stock options |
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— |
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Issuance of common stock upon exercise of warrants, net |
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— |
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Repurchase of shares for minimum tax withholdings |
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( |
) |
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— |
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Net cash (used in) provided by financing activities |
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( |
) |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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( |
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Increase in cash and cash equivalents |
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Cash and cash equivalents beginning of period |
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Cash and cash equivalents end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Savara Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Organization and Nature of Operations
Description of Business
Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. The Company’s lead program, molgramostim nebulizer solution (“molgramostim”), an inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). Previously, the Company's pipeline included vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus lung infection in people living with cystic fibrosis (“CF”) and inhaled liposomal ciprofloxacin (formerly referred to as Apulmiq) for non-CF bronchiectasis. The Company and its wholly-owned subsidiaries operate in one segment with its principal office in Austin, Texas.
Since inception, Savara has devoted its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital. Savara has incurred operating losses and negative cash flow from operations and has
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments that are necessary to fairly present the statements of financial position, operations and cash flows for the periods presented. The results of operations for interim periods shown in this report are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted from these condensed consolidated financial statements, as permitted by rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The Company believes the disclosures made in these condensed consolidated financial statements are adequate to make the information herein not misleading. The Company recommends that these condensed consolidated financial statements be read in conjunction with its audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements. There have been no changes to the Company's significant accounting policies since the date of those financial statements.
Principles of Consolidation
The interim condensed consolidated financial statements of the Company are stated in U.S. dollars and are prepared under U.S. GAAP. These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The financial statements of the Company’s wholly-owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated other comprehensive income in the condensed consolidated balance sheet. All intercompany transactions and accounts have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2021 has been derived from the Company's audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements.
Liquidity
As of March 31, 2022, the Company had an accumulated deficit of approximately $
The Company is currently focused on the development of molgramostim for the treatment of aPAP and believes such activities will result in the continued incurrence of significant research and development and other expenses related to this
5
program. If the clinical trial for the Company’s product candidate fails or produces unsuccessful results and the product candidate does not gain regulatory approval or, if approved, fails to achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. The Company intends to cover its future operating expenses through cash and cash equivalents on hand, short-term investments and, potentially, through a combination of equity offerings, debt financings, government or other third-party funding, and other collaborations and strategic alliances with partner companies. The Company cannot be sure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its stockholders.
The Company’s cash and cash equivalents of $
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management’s estimates include, but are not limited to, those related to the accrual of research and development expenses and general and administrative costs, certain financial instruments recorded at fair value, the valuation of stock-based compensation, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience, changes in circumstance and facts, and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.
Risks and Uncertainties
The product candidate being developed by the Company requires approval from the U.S. Food and Drug Administration (“FDA”) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s product candidate will receive the necessary approvals. If the Company is denied regulatory approval of its product candidate, or if approval is delayed, it may have a material adverse impact on the Company’s business, results of operations, and its financial position.
The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of drug candidates, raising additional capital, development of competing drugs and therapies, protection of proprietary technology, and market acceptance of the Company’s products. As a result of these and other factors and the related uncertainties, there can be no assurance of the Company’s future success.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents. The Company places its cash and cash equivalents with a limited number of high-quality financial institutions and at times may exceed the amount of insurance provided on such deposits.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company's chief operating decision maker is the chief executive officer. We have
Recent Accounting Pronouncements
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 condensed consolidated financial statements.
6
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
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March 31, 2022 |
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December 31, 2021 |
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Prepaid contracted research and development costs |
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$ |
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$ |
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R&D tax credit receivable |
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VAT receivable |
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Prepaid insurance |
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Deposits and other |
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Total prepaid expenses and other current assets |
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$ |
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$ |
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Prepaid Contracted Research and Development Costs
As of March 31, 2022, Prepaid contracted research and development costs are primarily comprised of contractual prepayments associated with the Company's clinical trial for molgramostim for the treatment of aPAP. This includes prepaid amounts paid under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers that provide services in connection with the Company's research and development activities.
R&D Tax Credit Receivable
The Company has recorded a Danish tax credit earned by its subsidiary, Savara ApS, as of March 31, 2022. Under Danish tax law, Denmark remits a research and development tax credit equal to
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of (in thousands):
|
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March 31, 2022 |
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December 31, 2021 |
|
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Accrued contracted research and development costs |
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$ |
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$ |
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Accrued compensation |
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Accrued general and administrative costs |
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Lease liability |
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Total accrued expenses and other current liabilities |
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$ |
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$ |
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Accrued Contracted Research and Development Costs
As of March 31, 2022, Accrued contracted research and development costs are primarily comprised of costs associated with molgramostim for the treatment of aPAP, including expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities.
Accrued Compensation
As of March 31, 2022, Accrued compensation includes amounts to be paid to employees for salary, vacation and non-equity performance-based compensation. At the end of any period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, timing of payments to employees and vacation usage.
7
5. Short-term Investments
The Company’s investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business.
As of March 31, 2022 |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Corporate securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2021 |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Asset backed securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total short-term investments |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
The Company has classified its investments as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive income in the condensed consolidated balance sheet. Classification as short-term or long-term is based upon whether the maturity of the debt securities is less than or greater than twelve months.
There were
6. Long-term Debt
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
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 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 contained an affirmative covenant that required us to deliver evidence by June 30, 2021 of the receipt of gross cash proceeds of at least $
The loan bears interest at the greater of (i) the prime rate reported in The Wall Street Journal, plus a spread of
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.
8
Summary of Carrying Value
The following table summarizes the components of the long-term debt carrying value, which approximates the fair value (in thousands):
Future minimum payments due during the year ended December 31, |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
2022 |
|
$ |
|
|
$ |
|
||
2023 |
|
|
|
|
|
|
||
Total future minimum payments |
|
|
|
|
|
|
||
Unamortized end of term charge |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Debt discount related to warrants |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
Long-term debt |
|
$ |
|
|
$ |
|
||
7. Fair Value Measurements
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.
The three tiers are defined as follows:
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments annually or whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired in-process research and development (“IPR&D”) and other long-lived assets that are written down to fair value if they are impaired.
IPR&D is considered an indefinite-lived intangible asset and is assessed for impairment annually, or more frequently if impairment indicators exist. In accordance with ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), the Company utilizes a two-step method, which allows the Company to first assess qualitative factors before performing a quantitative assessment of the fair value of a reporting unit. If it is determined on the basis of qualitative factors that the fair value of the IPR&D is more likely than not less than the carrying value, a quantitative impairment test is required.
During the three months ended March 31, 2022 and 2021, the Company experienced a decrease of approximately $
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments.
Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.
9
The fair value of these instruments as of March 31, 2022 and December 31, 2021 was as follows (in thousands):
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
As of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Corporate securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Asset backed securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Corporate securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Commercial paper |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
8
Public Offering of Common Stock
On March 15, 2021, the Company sold (i) an aggregate of
The Company determined that the securities issued in the Public Offering were free-standing and that the 2021 Pre-Funded Warrants did not contain any settlement obligations that would result in liability classification under ASC 480, Distinguishing Liability from Equity and ASC 815-40, Contracts in Entity’s Own Equity. The shares encompassed in the 2021 Pre-Funded Warrants were sold at the same price as the underlying common stock, less $
The Public Offering resulted in net proceeds to the Company of approximately $
Financial instruments |
|
Proceeds |
|
|
Common stock |
|
$ |
|
|
2021 Pre-funded Warrants |
|
|
|
|
Total |
|
|
|
|
Offering expenses |
|
|
( |
) |
Net proceeds |
|
$ |
|
|
The Company intends to use the net proceeds from the Public Offering to fund the clinical development of molgramostim for the treatment of aPAP and other general corporate purposes.
Milestone Warrants
Immediately prior to the Public Offering, the Company entered into separate, privately-negotiated warrant repurchase agreements with certain holders of its outstanding milestone warrants, each dated as of December 24, 2019. The Company paid $
10
On August 13, 2021, thirty days following the achievement of a defined clinical milestone, the remaining
Termination of Wainwright Common Stock Sales Agreement
On April 28, 2017, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, which was amended by Amendment No. 1 to the Common Stock Sales Agreement on June 29, 2018 (the “Wainwright Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Wainwright, shares of Common Stock having an aggregate offering price of not more than $
On July 2, 2021, the Company delivered written notice to Wainwright that it was terminating the Wainwright Sales Agreement effective
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 “Evercore Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of Common Stock (the “Shares”), having an aggregate offering price of not more than $
During the three months ended March 31, 2022 and 2021, the Company did
Common Stock Reserved for Issuance
The Company’s shares of common stock reserved for issuance as of the periods indicated were as follows:
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
April 2017 Warrants |
|
|
|
|
|
|
||
June 2017 Warrants |
|
|
|
|
|
|
||
December 2018 Warrants |
|
|
|
|
|
|
||
2017 Pre-funded Warrants |
|
|
|
|
|
|
||
Pre-funded PIPE Warrants |
|
|
|
|
|
|
||
2021 Pre-funded Warrants |
|
|
|
|
|
|
||
Stock options outstanding |
|
|
|
|
|
|
||
Issued and nonvested RSUs |
|
|
|
|
|
|
||
Total shares reserved |
|
|
|
|
|
|
||
Warrants
The following table summarizes the outstanding warrants for the Company’s common stock as of March 31, 2022:
Expiration Date |
|
Shares Underlying |
|
|
Exercise Price |
|
||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
|
|
|
||
11
Accumulated Other Comprehensive Income (Loss) Information
The components of accumulated other comprehensive income (loss) as of the dates indicated and the change during the period were (in thousands):
|
|
Foreign Exchange Translation Adjustment |
|
|
Unrealized Gain (Loss) on ST Investments |
|
|
Total Accumulated Other Comprehensive Income (Loss) |
|
|||
Balance, December 31, 2020 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Change |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, December 31, 2021 |
|
|
|
|
$ |
( |
) |
|
|
|
||
Change |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, March 31, 2022 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
9
Manufacturing and Other
The Company is subject to various royalties and manufacturing and development payments related to its product candidate, molgramostim.
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. In addition to these milestones, the Company will owe a royalty of three-and one-half percent (
The following table summarizes manufacturing commitments and contingencies as of the period indicated (in thousands):
|
|
March 31, 2022 |
|
|
Molgramostim manufacturer: |
|
|
|
|
Achievement of certain milestones related to validation of API and regulatory approval of |
|
$ |
|
|
Molgramostim nebulizer manufacturer: |
|
|
|
|
Achievement of various development activities and regulatory approval of nebulizer utilized |
|
|
|
|
Total manufacturing and other commitments |
|
$ |
|
|
The milestone commitments disclosed above reflect the activities that have
On December 10, 2020, the Company announced that the Phase 3 trial of vancomycin in people living with cystic fibrosis who have MRSA lung infection did not meet the primary endpoint. On January 7, 2021 the Company issued a termination notice to GlaxoSmithKline Trading Services Limited (“GSK”), which manufactures the drug product from bulk vancomycin powder. On January 26, 2021, the Company and GSK entered a change order for termination costs associated with the closeout and wind down of vancomycin activities. During the three months ended March 31, 2021, the Company paid approximately $
Contract Research
On March 5, 2021, the Company entered into a Master Services Agreement (“MSA”) with Parexel International (IRL) Limited (“Parexel”) pursuant to which Parexel will provide contract research services related to clinical trials. Contemporaneously with entering the MSA, a work order was executed with Parexel, under which they will provide services related to the IMPALA-2 trial. Under that work order and subsequent change orders, the Company will pay Parexel service fees and pass-through expenses estimated to be approximately $
Risk Management
The Company maintains various forms of insurance that the Company's management believes are adequate to reduce the exposure to certain risks associated with operating the Company’s business to an acceptable level.
12
10. Stock-Based Compensation
Equity Incentive Plans
2008 Stock Option Plan
The Company adopted the Savara Inc. Stock Option Plan (the “2008 Plan”), pursuant to which the Company reserved shares for issuance to employees, directors, and consultants. The 2008 Plan includes (i) the option grant program providing for both incentive and non-qualified stock options, as defined by the Internal Revenue Code, and (ii) the stock issuance program providing for the issuance of awards that are valued based upon common stock, including restricted stock, dividend equivalents, stock appreciation rights, phantom stock, and performance units. The 2008 Plan also allows eligible persons to purchase shares of common stock at an amount determined by the plan administrator. Upon a participant’s termination, the Company retains the right to repurchase nonvested shares issued in conjunction with the stock issuance program at the fair market value per share as of the date of termination.
The Company previously issued incentive and non-qualified options and restricted stock to employees and non-employees under the 2008 Plan. The terms of the stock options, including the exercise price per share and vesting provisions, were determined by the board of directors. Stock options were granted at exercise prices not less than the estimated fair market value of the Company’s common stock at the date of grant based upon objective and subjective factors including: third-party valuations, preferred stock transactions with third parties, current operating and financial performance, management estimates and future expectations.
The Company
2015 Omnibus Incentive Option Plan
The Company operates the 2015 Omnibus Incentive Plan (the “2015 Plan”), as amended with approval by the Company's stockholders. 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 (“RSUs”), performance units, shares and other stock-based awards. Share-based awards are subject to terms and conditions established by board of directors or the compensation committee of board of directors. As of March 31, 2022, the number of shares of common stock available for grant under the 2015 Plan was
Under both the 2008 Plan and 2015 Plan, stock options typically vest
2021 Inducement Equity Incentive Plan
The Company adopted the 2021 Inducement Equity Incentive Plan (the “Inducement Plan”) 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). As of March 31, 2022, the number of shares of common stock available for grant under the 2021 Plan was
Under the Inducement Plan, stock options typically vest
Stock-Based Awards Activity
The following table provides a summary of stock-based awards activity for the three months ended March 31, 2022:
Stock Options:
Outstanding at December 31, 2021 |
|
|
|
|
Granted |
|
|
|
|
Exercised |
|
|
|
|
Expired/cancelled/forfeited |
|
|
( |
) |
Outstanding at March 31, 2022 |
|
|
|
13
The total compensation cost related to non-vested stock options not yet recognized as of March 31, 2022 was $
RSUs:
Outstanding at December 31, 2021 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Forfeited |
|
|
|
|
Outstanding at March 31, 2022 |
|
|
|
The total compensation cost related to unvested RSUs not yet recognized as of March 31, 2022 was $
D. 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 three months ended March 31, 2022 and 2021 (in thousands):
|
|
Three months ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
Total stock-based compensation |
|
$ |
|
|
$ |
|
||
11. Net Loss per Share
Basic and diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common stock and pre-funded warrants outstanding during the period without consideration of common stock equivalents. For periods in which the Company generated a net loss, the Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive.
The following equity instruments were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
|
|
Three months ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Awards under equity incentive plan |
|
|
|
|
|
|
||
Non-vested restricted shares and restricted stock units |
|
|
|
|
|
|
||
Warrants to purchase common stock |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
The following table calculates basic earnings per share of common stock and diluted earnings per share of common stock for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share amounts):
|
|
Three months ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common stockholders |
|
|
( |
) |
|
|
( |
) |
Undistributed earnings and net loss attributable to |
|
|
( |
) |
|
|
( |
) |
Weighted-average common shares outstanding, basic |
|
|
|
|
|
|
||
Basic and diluted EPS |
|
$ |
( |
) |
|
$ |
( |
) |
12. Subsequent Events
The Company has evaluated subsequent events through the date these condensed consolidated financial statements were issued. The Company determined there were no events, other than as described below, that required disclosure or recognition in these condensed consolidated financial statements.
Amended and Restated Loan Agreement
On
14
lender (the “Lender”), which amended and restated in its entirety the Loan Agreement. The Amended Loan Agreement provides for a $
The loan bears interest at a floating rate equal to the greater of (i)
Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if the Company’s balance of cash and cash equivalents falls below $
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements contained herein that involve risks and uncertainties, such as Savara’s plans, objectives, expectations, intentions, and beliefs should be considered forward-looking statements. Savara’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those identified below, the ability to project future cash utilization and reserves needed for contingent future liabilities and business operations, the risks associated with the process of conducting clinical trials and developing, obtaining regulatory approval for and commercializing drug candidates that are safe and effective for use as human therapeutics, the timing and ability to raise additional capital as needed to fund continued operations, natural disasters, pandemics, geopolitical events, and those discussed in the section entitled “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on March 30, 2022, all of which are difficult to predict.
Statements made herein are as of the date of the filing of this Quarterly Report with the SEC and should not be relied upon as of any subsequent date. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2021.
Overview
Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our lead program, molgramostim nebulizer solution (“molgramostim”), an inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). Previously, our pipeline included vancomycin hydrochloride inhalation powder (“vancomycin”) for persistent methicillin-resistant Staphylococcus aureus lung infection in people living with cystic fibrosis (“CF”) and inhaled liposomal ciprofloxacin (formerly referred to as Apulmiq) for non-CF bronchiectasis. Savara, together with its wholly-owned subsidiaries, operate in one segment with its principal office in Austin, Texas.
Since inception, we have devoted our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to March 31, 2022, we have raised net cash proceeds of approximately $392.9 million, primarily from public offerings of our common stock, private placements of convertible preferred stock, and debt financings.
We have never been profitable and have incurred operating losses every year since inception. Our net losses for the three months ended March 31, 2022 and 2021 were $8.3 million and $10.2 million, respectively, and the net loss for the year ended December 31, 2021 was $43.0 million. As of March 31, 2022, we had an accumulated deficit of $308.8 million. Our operating losses primarily resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.
We have chosen to operate by outsourcing our manufacturing and most of our clinical operations. We expect to incur significant additional expenses and continue to incur operating losses for at least the next several years as we initiate and continue the clinical development of, and seek regulatory approval for, our primary product candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to the timing of clinical development programs and efforts to achieve regulatory approval.
As of March 31, 2022, we had cash and cash equivalents of $79.2 million and short-term investments of $72.6 million. We will continue to require additional capital to continue our clinical development and potential commercialization activities. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.
16
COVID-19 Update
The continuing COVID-19 global pandemic poses risks to our business. As we continue enrollment of our Phase 3 trial for the use of molgramostim for the treatment of aPAP, there remains a general uncertainty regarding the impact of COVID-19 on the aPAP patient population, health care providers, and clinical trial staff and personnel. Patients suffering from aPAP lung disease are prone to underlying lung conditions and are often treated by infectious disease specialists and pulmonologists. Some aPAP patients may be hesitant to enroll in the study due to the study requiring multiple clinical site visits, which may lead to COVID-19 exposure. Further, if an aPAP patient enrolled in the study contracted COVID-19, they may experience an interruption in treatment or need to discontinue their participation. There could also be delays in treatment associated with quarantine requirements if a staff member at an enrollment site contracts COVID-19 or treating physicians may need to refocus their attention on COVID-19 as new variants emerge.
We are unable to quantify the impact this situation will have on our future financial performance, but the public health actions being undertaken to reduce the spread of the virus have created, and may continue to create, challenges and disruptions to our operations. Management, on an on-going basis, is evaluating our liquidity position, communicating with and monitoring the actions of our service providers, manufacturers, and suppliers and reviewing our near-term financial performance as we manage Savara through the uncertainty related to COVID-19.
As of the date of this report:
The COVID-19 pandemic remains extremely fluid and we are continuing to re-assess the impact on our operations by monitoring the spread of COVID-19, emerging COVID-19 variants, and the actions implemented to combat the virus in various regions throughout the world. Where possible and appropriate, we are making necessary operational and strategic decisions in an attempt to mitigate the negative impact of the virus on our operations.
Recent Events
Amended and Restated Loan Agreement
On April 21, 2022, we entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”) between Savara and our subsidiary, Aravas Inc. ("Aravas"), as borrowers, and Silicon Valley Bank, as lender (the “Lender”), which amended and restated in its entirety the Loan and Security Agreement between Savara and Aravas, as borrowers, and the Lender dated April 28, 2017, as subsequently amended on October 31, 2017, December 4, 2018, January 31, 2020, and March 30, 2021 (the “Loan Agreement”). The Amended Loan Agreement provides for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.
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, we may elect to extend the Interest-Only Period until the Maturity Date if we maintain 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.
Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if our balance of cash and cash equivalents falls below $40 million, we are required to maintain cash and cash equivalents equal to at least (i) six
17
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).
International Conflict
In February 2022, Russia commenced a military invasion of Ukraine. The political and physical conditions in Ukraine and Russia, as well as in neighboring countries, may disrupt our supply chain and increase our costs, which may adversely affect our ability to conduct ongoing clinical trials and impact patients’ ability to partake in our clinical trials. While we do not believe this conflict will have a material impact on our current operations, given the rapidly evolving situation and the potential to expand beyond Ukraine and Russia, the full impact of the conflict remains uncertain.
Financial Operations Overview
Research and Development Expenses
The largest component of our operating expenses has historically been our investment in research and development activities. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
The following table shows our research and development expenses for the periods indicated:
|
|
Three months ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Product candidates: |
|
|
|
|
|
|
||
Molgramostim |
|
$ |
5,684 |
|
|
$ |
5,091 |
|
Vancomycin |
|
|
— |
|
|
|
2,498 |
|
Total research and development expenses |
|
$ |
5,684 |
|
|
$ |
7,589 |
|
We expect research and development expenses will remain significant in the future as we advance our molgramostim product candidate into and through clinical trials and pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing activities, including investing in the development of a second source manufacturer and clinical supplies.
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of molgramostim.
General and Administrative Expenses
General and administrative expenses primarily consist of salaries, benefits, and related costs for personnel in executive, finance and accounting, legal and investor relations, and professional and consulting fees for accounting, legal, investor relations, business development, commercial strategy and research, human resources, and information technology services. Other general and administrative expenses include facility lease and insurance costs.
18
Critical Accounting Policies and Estimates
There have not been any material changes during the three months ended March 31, 2022 to the methodology applied by management for critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Please read Part II, Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2021 for further description of our critical accounting policies.
Results of Operations — Comparison of Three Months Ended March 31, 2022 and 2021
|
|
For the Three Months Ended March 31, |
|
|
Dollar |
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
5,684 |
|
|
$ |
7,589 |
|
|
$ |
(1,905 |
) |
General and administrative |
|
|
2,354 |
|
|
|
2,778 |
|
|
|
(424 |
) |
Depreciation and amortization |
|
|
8 |
|
|
|
47 |
|
|
|
(39 |
) |
Total operating expenses |
|
|
8,046 |
|
|
|
10,414 |
|
|
|
(2,368 |
) |
Loss from operations |
|
|
(8,046 |
) |
|
|
(10,414 |
) |
|
|
2,368 |
|
Other (expense) income, net |
|
|
(254 |
) |
|
|
197 |
|
|
|
(451 |
) |
Net loss |
|
$ |
(8,300 |
) |
|
$ |
(10,217 |
) |
|
$ |
1,917 |
|
Research and Development
Research and development expenses decreased by $1.9 million, or 25.1%, to $5.7 million for the three months ended March 31, 2022 from $7.6 million for the three months ended March 31, 2021. The decrease is primarily attributable to an approximately $2.5 million decrease in costs associated with the close-out and wind-down of vancomycin activities. This decrease is partially offset by an approximately $0.6 million increase in costs associated with molgramostim for the treatment of aPAP related to continued screening and enrollment of patients and chemistry, manufacturing, and controls (“CMC”) associated with the IMPALA-2 trial.
General and Administrative
General and administrative expenses decreased by $0.4 million, or 15.3%, to $2.4 million for the three months ended March 31, 2022 from $2.8 million for the three months ended March 31, 2021. The decrease is primarily attributable to decreased administrative and compensation costs associated with streamlining certain operational activities, which were initiated during the third quarter of 2021.
Other (Expense) Income, Net
Other (expense) income, net decreased by $0.5 million, or 83.0%, to a loss of $0.3 million for the three months ended March 31, 2022 from income of $0.2 million for the three months ended March 31, 2021. The change is primarily related to a $0.5 million decrease in Tax credit income during the three months ended March 31, 2022, which is a result of decreased spend in our Danish subsidiary during the quarter.
Liquidity and Capital Resources
As of March 31, 2022, we had $79.2 million of cash and cash equivalents, $72.6 million in short-term investments and an accumulated deficit of $308.8 million. As discussed in Note 6. Long-term Debt in the notes to the condensed consolidated financial statements included in this Quarterly Report, we entered into a Loan and Security Agreement with Silicon Valley Bank during the year ended December 31, 2017, which was amended a fourth time in March 2021, under which we have drawn a total of $25 million.
As discussed in Note 12. Subsequent Events in the notes to the consolidated financial statements included in this Quarterly Report, we entered into the Amended Loan Agreement during April 2022 that provided for a $26.5 million term loan facility, the proceeds of which were used to refinance all outstanding obligations under the Loan Agreement.
On March 11, 2021, we completed a public issuance of our common stock and pre-funded warrants for gross proceeds of approximately $130 million and net proceeds, after deducting underwriting discounts, commissions and offering expenses, of approximately $122.2 million as discussed in Note 8. Stockholders’ Equity in the notes to the condensed consolidated financial statements included in this Quarterly Report. Since 2017, we have completed four public offerings with combined net proceeds, after deducting the underwriting discounts and commissions and offering expenses, of approximately $257.6 million.
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We have used and intend to use the net proceeds from these offerings for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 trial and given the uncertainty created by the COVID-19 global pandemic, we will continue to monitor our liquidity and capital requirements.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
|
|
(in thousands) |
|
|||||
Cash used in operating activities |
|
$ |
(8,425 |
) |
|
$ |
(9,597 |
) |
Cash provided by (used in) investing activities |
|
|
53,665 |
|
|
|
(77,739 |
) |
Cash (used in) provided by financing activities |
|
|
(1 |
) |
|
|
120,466 |
|
Effect of exchange rate changes |
|
|
(24 |
) |
|
|
(28 |
) |
Net change in cash |
|
$ |
45,215 |
|
|
$ |
33,102 |
|
Cash flows from operating activities
Cash used in operating activities for the three months ended March 31, 2022 was $8.4 million, consisting of a net loss of $8.3 million, a $2.5 million decrease in Accounts payable and Accrued expenses and other current liabilities mostly relating to the wind down or completion of our non-aPAP trials. This was partially offset by a $1.6 million decrease in Prepaid and other current assets associated with a reduction in prepaid research and development costs for our IMPALA-2 trial and approximately $1.0 million of noncash charges (comprised of depreciation and amortization including right-of-use assets, accretion on discount to short-term investments, amortization of debt issuance costs and stock-based compensation).
Cash flows from investing activities
Cash used in investing activities of $53.7 million for the three months ended March 31, 2022 was primarily associated with cash used for purchases of short-term investments in excess of proceeds from the net sales and maturities of short-term investments.
Cash flows from financing activities
Cash provided by financing activities was minimal for the three months ended March 31, 2022. The change from the three months ended March 31, 2021 is primarily related to $121.8 million in net proceeds from the public issuance of common stock and pre-funded warrants and $2.5 million in net proceeds from the exercise of warrants. This was partially offset by the payment of $3.9 million to repurchase outstanding warrants, as discussed in Note 8. Stockholders’ Equity in the notes to the condensed consolidated financial statements included in this Quarterly Report.
Future Funding Requirements
We have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize our product candidate. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture, and clinical trials of, and seeking regulatory approval for, our product candidate. In addition, subject to obtaining regulatory approval of our product candidate, we anticipate we may need additional funding in connection with our continuing operations.
As of March 31, 2022, we had cash, cash equivalents, and short-term investments of approximately $151.8 million. Although we have sufficient capital to fund our planned activities, including those discussed in Note 9. Commitments - Manufacturing and Other, of the condensed consolidated financial statements in this Quarterly Report, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.
20
Although we are well capitalized, until we can generate a sufficient amount of product revenue to finance our cash requirements, we may finance our future cash needs primarily through the issuance of additional equity securities and potentially through borrowings, grants, and strategic alliances with partner companies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts or grant rights to develop and market product candidate to third parties that we would otherwise prefer to develop and market ourselves.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies – Recent Accounting Pronouncements, of the condensed consolidated financial statements in this Quarterly Report for a discussion of recent accounting pronouncements and their effect, if any, on us.
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We have market risk exposure related to our cash, cash equivalents, and short-term investment securities. Such interest-earning instruments carry a degree of interest rate risk; however, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 1% change in interest rates during any of the periods presented would not have a material impact on our condensed consolidated financial statements. Additionally, our investment securities are fixed income instruments denominated and payable in U.S. dollars and have short-term maturities, typically less than twelve months, and typically carry credit ratings of “A” at a minimum by two of three Nationally Recognized Statistical Rating Organizations, specifically Moody’s, Standard & Poor’s, or Fitch. As such, we do not believe that our cash, cash equivalents and short-term investment securities have significant risk of default or illiquidity.
We also have interest rate exposure related to our long-term debt. As of March 31, 2022, the Loan Agreement bore interest at the greater of (i) prime rate reported in The Wall Street Journal, plus a spread of 3.0% or (ii) 7.75%. Changes in the prime rate would have impacted our interest expense associated with our secured term loan. If a 10% change in interest rates from the interest rates on March 31, 2022 were to have occurred, this change would not have had a material effect on our interest expense with respect to outstanding borrowed amounts.
We have ongoing operations in Denmark and pay those vendors in local currency (Danish Krone) or Euros. At times, we seek to limit the impact of foreign currency fluctuations through the use of derivative instruments, and short-term foreign currency forward exchange contracts not designated as hedging instruments. We did not recognize any significant exchange rate losses during the three months ended March 31, 2022 and 2021. A 10% change in the Krone-to-dollar or Euro-to-dollar exchange rate on March 31, 2022 would not have had a material effect on our results of operations or financial condition.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our results of operations during the periods presented.
Although we do not believe that we are currently exposed to material changes in the risks related to our cash, cash equivalents, and short-term investment securities, interest rates of our long-term debt, or foreign currency exchange rates, we are cautiously and actively monitoring potential risks associated with these instruments.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 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 March 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
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that assessment, management concluded that our internal control over financial reporting was effective as of March 31, 2022 based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
22
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. We are not currently a party to any material pending litigation or other material legal proceeding.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2021, and the risk factors and other cautionary statements contained in our other filings with the SEC, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2021 or our other SEC filings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
An Exhibit Index has been attached as part of this report and is incorporated by reference.
23
Exhibit Index
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
3.2 |
|
|
10.1 |
|
|
31.1 |
|
|
31.2 |
|
|
32.1 |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
24
SIGNATURES
Pursuant to the requirements 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.
|
Savara Inc. |
|
|
|
|
Date: May 11, 2022 |
By: |
/s/ Matthew Pauls |
|
|
Matthew Pauls |
|
|
Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) |
Date: May 11, 2022 |
By: |
/s/ David Lowrance |
|
|
David Lowrance |
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
25
Exhibit 10.1
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated as of the Effective Date between SILICON VALLEY BANK, a California corporation (“Bank”), and the borrower listed on Schedule I hereto (“Borrower”), and provides the terms on which Bank shall lend to Borrower, and Borrower shall repay Bank. This Agreement amends and restates in its entirety that certain Loan and Security Agreement, dated as of April 28, 2017, by and among Bank and Borrower, as previously amended, restated, amended and restated, supplemented, or otherwise modified from time to time (the “Original Agreement”). The parties agree as follows:
1
Exhibit 10.1
Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder. Bank may deduct amounts owing by Borrower under the clauses of this Section 1.3 pursuant to the terms of Section 1.4(c). Bank shall provide Borrower written notice of deductions made pursuant to the terms of the clauses of this Section 1.3.
2
Exhibit 10.1
3
Exhibit 10.1
4
Exhibit 10.1
5
Exhibit 10.1
Borrower represents and warrants as follows:
6
Exhibit 10.1
7
Exhibit 10.1
8
Exhibit 10.1
Borrower shall do all of the following:
9
Exhibit 10.1
Any submission by Borrower of a Compliance Statement, or any other financial statement submitted to the Financial Statement Repository pursuant to this Section 5.3 or otherwise submitted to Bank shall be deemed to be a representation by Borrower that (i) as of the date of such Compliance Statement, or other financial statement, the information and calculations set forth therein are true and correct, (ii) as of the end of the compliance period set forth in such submission, Borrower is in complete compliance with all required covenants except as noted in such Compliance Statement, or other financial statement, as applicable, (iii) as of the date of such submission, no Events of Default have occurred or are continuing, (iv) all representations and warranties other than any representations or warranties that are made as of a specific date in Section 4 remain true and correct in all material respects as of the date of such submission except as noted in such Compliance Statement, or other financial statement, as applicable, (v) as of the date of such submission, Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 4.9, and (vi) as of the date of such submission, no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
10
Exhibit 10.1
11
Exhibit 10.1
For clarity, Bank shall waive testing of the financial covenant set forth in this Section 5.10 for any day where Borrower’s balance of unrestricted cash and Cash Equivalents held at Bank or Bank Affiliates (subject to a Control Agreement) was, at all times, greater than or equal to Forty Million Dollars ($40,000,000).
12
Exhibit 10.1
13
Exhibit 10.1
Borrower shall not do any of the following without Bank’s prior written consent:
14
Exhibit 10.1
15
Exhibit 10.1
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
16
Exhibit 10.1
17
Exhibit 10.1
18
Exhibit 10.1
19
Exhibit 10.1
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or email address indicated below; provided that, for clause (b), if such notice, consent, request, approval, demand or other communication is not sent during the normal business hours of the recipient, it shall be deemed to have been sent at the opening of business on the next Business Day of the recipient. Bank or Borrower may change its mailing or electronic mail address by giving the other party written notice thereof in accordance with the terms of this Section 9.
If to Borrower: SAVARA INC., on behalf of Borrower
6836 Bee Cave Road, Building 3, Suite 201
Austin, TX 78746
Attn: Dave Lowrance, CFO
Email: dave.lowrance@savarapharma.com
with a copy to (which shall not constitute notice):
Holland & Knight LLP
2929 Arch Street, Suite 800
Philadelphia, PA 19104
Attn: David Surbeck
Email: David.Surbeck@hklaw.com
If to Bank:
SILICON VALLEY BANK
20
Exhibit 10.1
4370 La Jolla Village Drive, Suite 1050
San Diego, CA 92122
Attn: Kristine Rohmer, Director
Email: Krohmer@svb.com
with a copy to (which shall not constitute notice):
DLA Piper LLP (US)
401 B Street, Suite 1700
San Diego, California 92101
Attn: Parker Zangoei
Email: Parker.Zangoei@us.dlapiper.com
Except as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles of conflicts of law that would require the application of the laws of another jurisdiction. Borrower and Bank each irrevocably and unconditionally submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction with respect to the Loan Documents or to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly, irrevocably and unconditionally submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby irrevocably and unconditionally consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 9 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT. EACH PARTY HERETO HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to
21
Exhibit 10.1
judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
This Section 10 shall survive the termination of this Agreement and the repayment of all Obligations.
22
Exhibit 10.1
This Section 11.3 shall survive the termination of this Agreement and the repayment of all Obligations until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.
23
Exhibit 10.1
24
Exhibit 10.1
“Account” is, as to any Person, any “account” of such Person as “account” is defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to such Person.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“Affiliate” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Anti-Terrorism Law” means any law relating to terrorism or money-laundering, including Executive Order No. 13224 and the USA Patriot Act.
“Applicable Law” means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators.
“Authorized Signer” means any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of Borrower.
“Bank” is defined in the preamble hereof.
“Bank Entities” is defined in Section 11.8.
“Bank Expenses” are all audit fees, costs and reasonable expenses (including reasonable, out-of-pocket and documented attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
“Bank Services” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).
“Bank Services Agreement” is defined in the definition of Bank Services.
25
Exhibit 10.1
“Board” is Parent’s board of directors or equivalent governing body.
“Borrower” is set forth on Schedule I hereto.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and, if required under the terms of such Person’s Operating Documents, stockholders) and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
“Business Day” is a day other than a Saturday, Sunday or other day on which commercial banks in the State of California are authorized or required by law to close, except that if any determination of a “Business Day” shall relate to an FX Contract, the term “Business Day” shall be a FX Business Day.
“Cash Burn” means, as of any date, (i) so long as Net Income is a negative number, the amount, measured on as the monthly average for a trailing three (3) month period as of such date, the absolute value of the sum of (a) Net Income, plus (b) to the extent deducted in the calculation of such Net Income, depreciation expense and amortization expense, plus (c) non-cash stock based compensation, and (ii) if Net Income is a positive number, one Dollar ($1).
“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; (d) money market funds at least ninety-five percent (95.0%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition; (f) U.S. dollars, British pounds, euros or the national currency of any member state in the European Union, or any other currencies held from time to time in the ordinary course of business; (g) Investment grade corporate bonds; (h) Asset-backed securities, and (i) Investment grade municipal obligations.
“Change in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)‑5 under the Exchange Act), directly or indirectly, of thirty-five percent (35%) or more of the ordinary voting power for the election of directors, partners, managers and members, as applicable, of Parent (determined on a fully diluted basis) other than by the sale of Parent’s equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b) during any period of twelve (12) consecutive months, a majority of the members of the Board of Parent cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first (1st) day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) at any time, Parent shall cease to own and control, of record
26
Exhibit 10.1
and beneficially, directly or indirectly, one hundred percent (100%) (except for director’s qualifying shares as required by the laws of such foreign jurisdiction) of each class of outstanding stock, partnership, membership, or other ownership interest or other equity securities of each Subsidiary of Parent free and clear of all Liens (except Permitted Liens).
“Change in Law” means the occurrence, after the Effective Date, of: (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in Applicable Law or in the administration, interpretation, implementation or application thereof by any Governmental Authority; or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Claims” is defined in Section 11.3.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” consists of all of Borrower’s right, title and interest in and to the following personal property:
27
Exhibit 10.1
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.
“Compliance Statement” is that certain statement in the form attached hereto as Exhibit A.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Contingent Obligation” is, for any Person, any direct or indirect liability of that Person for (a) any direct or indirect guaranty by such Person of any Indebtedness, capital lease, dividend, letter of credit, credit card or other obligation of another Person, (b) any other obligation endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (c) any obligations for undrawn letters of credit for the account of that Person; and (d) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices (each a “Swap Agreement”); but “Contingent Obligation” does not include endorsements, warranties or indemnities in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Letter of Credit, FX Contract, amount utilized for cash management services, the Term Loan Advance, or any other extension of credit by Bank for Borrower’s benefit.
“Currency” is coined money and such other banknotes or other paper money as are authorized by law and circulate as a medium of exchange.
“Default” means any event which with notice or passage of time or both, would constitute an Event of Default.
“Default Rate” is defined in Section 1.2(c).
“Denmark Share Pledge Documents” means the following documents all duly executed on or prior to the Effective Date: (i) a share pledge agreement regarding the shares in Savara Denmark along with a letter of notification (in the form set out in the share pledge agreement), including the Addendum No. 1 to share pledge agreement; (ii) a letter of confirmation (in the form set out in the share pledge agreement); (iii) a copy of the shareholders’ register of Savara Denmark showing the recording of the pledge in a form satisfactory to the Bank; (iv) a legal opinion by LETT Law Firm P/S as to the enforceability of these documents.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
28
Exhibit 10.1
“Designated Deposit Account” is the deposit account established by Borrower with Bank for purposes of receiving Credit Extensions.
“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, Section 17-220 of the Delaware Revised Uniform Limited Partnership Act for limited partnerships formed under Delaware law, or any analogous action taken pursuant to any other Applicable Law with respect to any corporation, limited liability company, partnership or other entity.
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.
“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia, but excluding any FSHCO and any subsidiary of a Foreign Subsidiary.
“Effective Date” is set forth on Schedule I hereto.
“Environmental Laws” means any Applicable Law (including any permits, concessions, grants, franchises, licenses, agreements or governmental restrictions) relating to pollution or the protection of health, safety or the environment or the release of any materials into the environment (including those related to hazardous materials, air emissions, discharges to waste or public systems and health and safety matters).
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.
“Event of Default” is defined in Section 7.
“Exchange Act” is the Securities Exchange Act of 1934, as amended.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to Bank or required to be withheld or deducted from a payment to Bank, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of Bank being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of Bank with respect to an applicable interest in a Credit Extension pursuant to a law in effect on the date on which (i) Bank acquires such interest in the Credit Extensions or (ii) Bank changes its lending office, except in each case to the extent that, pursuant to Section 1.6, amounts with respect to such Taxes were payable either to Bank’s assignor immediately before Bank became a party hereto or to Bank immediately before it changed its lending office, (c) Taxes attributable to Bank’s failure to comply with Section 1.6(e), and (d) any withholding Taxes imposed under FATCA.
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted
29
Exhibit 10.1
pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Internal Revenue Code.
“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Term Loan Maturity Date, (b) the repayment of the Term Loan Advance in full, (c) as required pursuant to Sections 1.1(c) or 1.1(d), or (d) the termination of this Agreement, in an amount equal to the original aggregate principal amount of the Term Loan Advance multiplied by two and three quarters percent (2.75%).
“Financial Statement Repository” is Bank’s e-mail address specified in Section 9 or such other means of collecting information approved and designated by Bank after providing notice thereof to Borrower from time to time.
“Foreign Currency” is the lawful money of a country other than the United States.
“Foreign Subsidiary” means any Subsidiary organized under the laws of any jurisdiction other than the laws of the United States or any state or territory thereof or the District of Columbia.
“FSHCO” means any Domestic Subsidiary if substantially all of its assets (whether held directly or through other Subsidiaries) consist of the Equity Interests or Indebtedness of one or more Foreign Subsidiaries.
“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to Bank from the entity from which Bank shall buy or sell such Foreign Currency.
“FX Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency at a set price or on a specified date.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any Person providing a Guaranty in favor of Bank.
30
Exhibit 10.1
“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“Immaterial Subsidiary” means any direct or indirect Subsidiary of Parent which (a) is not actively engaged in any business activities, and (b) maintains assets of not more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate at any time.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, (d) Contingent Obligations and (e) other short- and long-term obligations under debt agreements, lines of credit and extensions of credit.
“Indemnified Person” is defined in Section 11.3.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Borrower under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.
“Information” is defined in Section 11.8.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, receivership or other relief.
“Intellectual Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following owned by such Person:
“Interest-Only Extension Option” means Borrower’s delivery to Bank on or prior to [____], written notification, in form and substance satisfactory to Bank in its sole discretion, of its desire to extend the Interest-Only Period by an additional twelve (12) months, thereby updating the terms of the financial covenant set forth in Section 5.10 in accordance with the terms thereof.
“Interest-Only Period” is set forth on Schedule I hereto.
“Internal Revenue Code” means the U.S. Internal Revenue Code of 1986, and the rules and regulations promulgated thereunder, each as amended or modified from time to time.
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing
31
Exhibit 10.1
and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership, membership, or other ownership interest or other equity securities), and any loan, advance or capital contribution to any Person.
“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Matt Pauls as of the Effective Date, and (b) Chief Financial Officer, who is Dave Lowrance as of the Effective Date.
“Letter of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement.
“Lien” is a claim, mortgage, deed of trust, levy, attachment charge, pledge, hypothecation, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Liquidity Ratio” means a ratio of (a) the sum of Borrower’s unrestricted cash and Cash Equivalents held at Bank and Bank Affiliates (subject to a Control Agreement), divided by (b) the outstanding principal balance of the Term Loan Advance.
“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Perfection Certificate, the Warrant, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, landlord waivers and consents, bailee waivers and consents, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Bank in connection with this Agreement or Bank Services, all as amended, restated, or otherwise modified in accordance with the terms thereof.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 5 during the next succeeding financial reporting period.
“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.
“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents (other than the Warrant), or otherwise, including, without limitation, all obligations relating to Bank Services and interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents (other than the Warrant).
“OFAC” is the Office of Foreign Assets Control of the United States Department of the Treasury and any successor thereto.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership or limited partnership, its partnership agreement or limited partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
32
Exhibit 10.1
“Original Agreement” is defined in the preamble hereof.
“Other Connection Taxes” means, with respect to Bank, Taxes imposed as a result of a present or former connection between Bank and the jurisdiction imposing such Tax (other than connections arising from Bank having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Credit Extension or Loan Document).
“Other Taxes” means all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.
“Parent” means SAVARA INC., a Delaware corporation.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment/Advance Form” is that certain form in the form attached hereto as Exhibit B.
“Payment Date” is set forth on Schedule I hereto.
“Perfection Certificate” is the Perfection Certificate delivered by Borrower in connection with this Agreement.
“Permitted Foreign Accounts” is defined in Section 5.9(a).
“Permitted Distributions” means:
33
Exhibit 10.1
provided that the total amount of distributions comprised of (a), (c) and (h) above do not exceed One Hundred Thousand Dollars ($100,000) in an aggregate amount in a fiscal year.
“Permitted Indebtedness” is:
“Permitted Investments” are:
34
Exhibit 10.1
“Permitted Liens” are:
35
Exhibit 10.1
36
Exhibit 10.1
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Prepayment Fee” is a fee due upon prepayment (whether voluntary or otherwise) of the Term Loan Advance equal to (i) four and one quarter percent (4.25%) of the aggregate outstanding principal balance of the Term Loan Advance at the time of prepayment if such prepayment occurs on or prior to the first (1st) anniversary of the Effective Date, (ii) one percent (1.00%) of the aggregate outstanding principal balance of the Term Loan Advance at the time of prepayment if such prepayment occurs after the first (1st) anniversary of the Effective Date but on or prior to the second (2nd) anniversary of the Effective Date, and (iii) zero percent (0.00%) of the aggregate outstanding principal balance of the Term Loan Advance at the time of prepayment if such prepayment occurs at any time after the second (2nd) anniversary of the Effective Date but prior to the Term Loan Maturity Date.
“Prime Rate” is set forth on Schedule I hereto.
“Prime Rate Margin” is set forth on Schedule I hereto.
“Quarterly Financial Statements” is defined in Section 5.3(a).
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“Remaining Months Liquidity” as of any date, is an amount equal to (a) the sum of Borrower’s unrestricted cash and Cash Equivalents held at Bank and Bank Affiliates (subject to a Control Agreement) on such date, divided by (b) Cash Burn as of such date.
“Representatives” is defined in Section 11.8.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
“Restricted License” is any material license or other material agreement with respect to which Borrower is the licensee other than any commercial off-the-shelf licenses or similar agreements that are commercially available to the public) (a) that validly prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any property subject to such license or agreement, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral.
“Sanctioned Person” means a Person that: (a) is listed on any Sanctions list maintained by OFAC or any similar Sanctions list maintained by any other Governmental Authority having jurisdiction over Borrower; (b) is located, organized, or resident in any country, territory, or region that is the subject or target of Sanctions; or (c) is fifty percent (50%) or more owned or controlled by one (1) or more Persons described in clauses (a) and (b) hereof.
“Sanctions” means the economic sanctions laws, regulations, embargoes or restrictive measures administered, enacted or enforced by the United States government and any of its agencies, including, without limitation, OFAC and the U.S. State Department, or any other Governmental Authority having jurisdiction over Borrower.
“Savara Denmark” is SAVARA APS, an entity organized under the laws of Denmark.
“SEC” is the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.
37
Exhibit 10.1
“Subordinated Debt” is indebtedness incurred by Borrower or any of its Subsidiaries subordinated to all of Borrower’s or any of its Subsidiaries’ now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock, partnership, membership, or other ownership interest or other equity securities having ordinary voting power (other than stock, partnership, membership, or other ownership interest or other equity securities having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.
“Swap Agreement” is defined within the definition of Contingent Obligation.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Loan Advance” is defined in Section 1.1(a) of this Agreement.
“Term Loan Amortization Date” is set forth on Schedule I hereto.
“Term Loan Availability Amount” is set forth on Schedule I hereto.
“Term Loan Maturity Date” is set forth on Schedule I hereto.
“Trademarks” means, with respect to any Person, any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of such Person connected with and symbolized by such trademarks.
“Transfer” is defined in Section 6.1.
“USA Patriot Act” means the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (Public Law 107-56, signed into law on October 26, 2001), as amended from time to time.
“Warrant” are those certain Warrants to Purchase Common Stock issued by Parent in favor of Bank and Life Science Loans, LLC in connection with the Original Agreement and (i) dated as of April 28, 2017 (as amended by that certain Amendment to Warrant to Purchase Common Stock dated as of June 26, 2017, and that certain Second Amendment to Warrant to Purchase Common Stock dated as of January 31, 2020), (ii) dated as of June 26, 2017 (as amended by that certain First Amendment to Warrant to Purchase Common Stock dated as of January 31, 2020), and (iii) dated as of December 4, 2018 (as amended by that certain First Amendment to Warrant to Purchase Common Stock dated as of January 31, 2020), or any date theretofore or thereafter.
[Signature page follows]
38
Exhibit 10.1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWER:
SAVARA INC.
By: _______________________________________
Name: _____________________________________
Title: ______________________________________
ARAVAS INC.
By: _______________________________________
Name: _____________________________________
Title: ______________________________________
[Signature Page to Amended and Restated Loan and Security Agreement]
Exhibit 10.1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BANK:
SILICON VALLEY BANK
By: _______________________________________
Name: Annie Kadota
Title: Vice President
[Signature Page to Amended and Restated Loan and Security Agreement]
Exhibit 10.1
SCHEDULE I
LSA PROVISIONS
LSA Section |
LSA Provision |
1.1(a) – Term Loan – Availability |
The Term Loan Advance shall be in an amount equal to Twenty-Six Million Five Hundred Thousand Dollars ($26,500,000). After repayment, the Term Loan Advance (or any portion thereof) may not be reborrowed. |
1.1(b) – Term Loan – Repayment |
The Term Loan Advance shall be “interest-only” through the Interest-Only Period, with interest due and payable in accordance with Section 1.2(a). Commencing on the Term Loan Amortization Date and continuing on each Payment Date thereafter, Borrower shall repay the Term Loan Advance in (i) twelve (12) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 1.2(b)(ii); provided, however, upon Borrower’s election of the Interest-Only Extension Option, no monthly installments of principal shall be due and Borrower shall instead repay the Term Loan Advance in full on the Term Loan Maturity Date. |
1.2(a) – Interest Payments – Term Loan Advance |
Interest on the principal amount of the Term Loan Advance is payable in arrears monthly (A) on each Payment Date commencing on the first Payment Date following the Funding Date of the Term Loan Advance, (B) on the date of any prepayment and (C) on the Term Loan Maturity Date. |
1.2(b)(i) – Interest Rate – Term Loan Advance |
The outstanding principal amount of the Term Loan Advance shall accrue interest at a floating rate per annum equal to the greater of (A) three percent (3.00%) and (B) the Prime Rate minus the Prime Rate Margin, which interest shall be payable in accordance with Section 1.2(a). |
1.2(e) – Interest Computation |
Interest shall be computed on the basis of the actual number of days elapsed and a 360-day year for any Credit Extension outstanding. |
12.2 – “Borrower” |
“Borrower” individually and collectively, jointly and severally, each of SAVARA INC., a Delaware corporation, and ARAVAS INC., a Delaware corporation. |
12.2 – “Effective Date” |
“Effective Date” is [], 2022. |
12.2 – “Interest-Only Period” |
“Interest-Only Period” is the period of time from the Effective Date through [___, 2026]; provided, however, if Borrower elects the Interest-Only Extension Option, the Interest-Only Period shall automatically, with no further action by the parties hereto, be extended to [___, 2027]. |
12.2 – “Payment Date” |
“Payment Date” is the first (1st) calendar day of each month. |
I-1
Exhibit 10.1
12.2 – “Prime Rate” |
“Prime Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero percent (0.0%) per annum, such rate shall be deemed to be zero percent (0.0%) per annum for purposes of this Agreement. |
12.2 – “Prime Rate Margin” |
“Prime Rate Margin” is one half of one percent (0.50%). |
12.2 – “Term Loan Amortization Date” |
“Term Loan Amortization Date” is the first (1st) day of the month immediately following the end of the Interest-Only Period. |
12.2 – “Term Loan Availability Amount” |
“Term Loan Availability Amount” is an aggregate original principal amount equal to Twenty-Six Million Five Hundred Thousand Dollars ($26,500,000). |
12.2 – “Term Loan Maturity Date” |
“Term Loan Maturity Date” is [____ 1, 2027]. |
I-2
Exhibit 10.1
EXHIBIT A
COMPLIANCE STATEMENT
TO: SILICON VALLEY BANK Date:
FROM: SAVARA INC., on behalf of Borrower
Under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (as amended, modified, supplemented and/or restated from time to time, the “Agreement”), Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below. Attached are the required documents evidencing such compliance, setting forth calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Subject to any exceptions set forth at the end of this certificate, any submission by Borrower of a Compliance Statement, or any other financial statement submitted to the Financial Statement Repository pursuant to Section 5.3 or otherwise submitted to Bank shall be deemed to be a representation by Borrower that (i) as of the date of such Compliance Statement, or other financial statement, the information and calculations set forth therein are true and correct, (ii) as of the end of the compliance period set forth in such submission, Borrower is in complete compliance with all required covenants except as noted in such Compliance Statement, or other financial statement, as applicable, (iii) as of the date of such submission, no Events of Default have occurred or are continuing, (iv) all representations and warranties other than any representations or warranties that are made as of a specific date in Section 4 remain true and correct in all material respects as of the date of such submission except as noted in such Compliance Statement, or other financial statement, as applicable, (v) as of the date of such submission, Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 4.9, and (vi) as of the date of such submission, no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
Please indicate compliance status by circling Yes/No under “Complies” column. |
||
Reporting Covenants |
Required |
Complies |
Quarterly Financial Statements |
(i) Quarterly within 45 days for Q1-Q3 (ii) Quarterly within 90 days for Q4 |
Yes No |
Compliance Statement |
with Quarterly Financial Statements (and monthly within 30 days if applicable) |
Yes No |
Annual Financial Statements (CPA Audited) |
FYE within 180 days
|
Yes No |
10-Q, 10-K and 8-K |
Within 5 days after filing with SEC |
Yes No N/A |
Board approved projections |
FYE within 30 days and as amended/updated |
Yes No |
Financial Covenant* |
Required |
Actual |
Complies |
Maintain as indicated: |
|
|
|
Minimum unrestricted cash and Cash Equivalents held at Bank and Bank Affiliates (subject to a Control Agreement) |
See Schedule 1 |
See Schedule 1 |
Yes No |
*Bank shall waive testing of the financial covenant set forth in Section 5.10 for any month where Borrower’s balance of unrestricted cash held at Bank (inclusive of any short-term investments) was, at all times during the previous month, greater than or equal to $40,000,000. |
|||
A-1
Exhibit 10.1
Other Matters
Have there been any material amendments of or other changes to the Operating Documents of Borrower since the date of the last Compliance Statement? If yes, provide copies of any such amendments or changes with this Compliance Statement. |
Yes |
No |
The following financial covenant analysis and information set forth in Schedule 1 attached hereto are true and correct as of the date of this Compliance Statement.
The following are the exceptions with respect to the statements above: (If no exceptions exist, state “No exceptions to note.”)
A-2
Exhibit 10.1
Schedule 1 to Compliance Statement
Financial Covenant of Borrower
In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.
Dated: ____________________
Required: Maintain:
Remaining Months Liquidity
Required: 6
Actual:
A. |
Aggregate value of Borrower’s unrestricted cash and Cash Equivalents held at Bank and Bank Affiliates (subject to a Control Agreement)
|
$
|
B. |
Cash Burn |
$
|
C. |
Remaining Months Liquidity (Line A divided by Line B) |
|
Is line C greater than or equal to 6?
No Yes
Liquidity Ratio
Required: 1.20 to 1.00; provided, however, upon Borrower’s election of the Interest-Only Extension Option, the foregoing Liquidity Ratio requirement shall automatically, with no further action required by the parties hereto, be updated to require 1.75 to 1.00.
Actual:
A. |
Aggregate value of Borrower’s unrestricted cash and Cash Equivalents held at Bank and Bank Affiliates (subject to a Control Agreement)
|
$
|
B. |
The outstanding principal balance of the Term Loan Advance |
$
|
C. |
Liquidity Ratio (Line A divided by Line B) |
|
Is line C greater than or equal to 1.20:1:00, or 1.75:1.00, as applicable?
A-1
Exhibit 10.1
No Yes
Actual: Did Borrower maintain both: (i) a Remaining Months Liquidity of 6; and (ii) a Liquidity Ratio of 1.20 to 1.00 (or 1.75 to 1.00 if Borrower elected the Interest-Only Extension Option) for the most recent month ending?
No, not in compliance Yes, in compliance
A-2
Exhibit 10.1
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
Deadline for same day processing is Noon Pacific Time
fax to: Date: _____________________
Loan Payment: SAVARA INC., on behalf of Borrower From Account #________________________________ To Account ________________________________ (Deposit Account #) (Loan Account #) Principal $____________________________________ and/or Interest $_____________________________ Authorized Signature: Phone Number: Print Name/Title: |
Loan Advance: Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire. From Account # __________________________ To Account #__________________________________________ (Loan Account #) (Deposit Account #) Amount of Term Loan Advance $26,500,000 All Borrower’s representations and warranties in the Amended and Restated Loan and Security Agreement are true and correct in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true and correct in all material respects as of such date: Authorized Signature: Phone Number: Print Name/Title: |
outgoing wire request: Complete only if all or a portion of funds from the loan advance above is to be wired. Deadline for same day processing is noon, Pacific Time Beneficiary Name: ____________________________ Amount of Wire: $ Beneficiary Bank: _____________________________ Account Number: City and State: Beneficiary Bank Transit (ABA) #: Beneficiary Bank Code (Swift, Sort, Chip, etc.): (For International Wire Only) Intermediary Bank: Transit (ABA) #: For Further Credit to: Special Instruction: By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us). Authorized Signature: 2nd Signature (if required): Print Name/Title: Print Name/Title: Telephone #: Telephone #:
|
A-1
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Pauls, certify that:
1. I have reviewed this Form 10-Q of Savara Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: May 11, 2022 |
|
/s/ Matthew Pauls |
|
|
Matthew Pauls |
|
|
Chief Executive Officer and Chair of the Board of Directors |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Lowrance, certify that:
1. I have reviewed this Form 10-Q of Savara Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: May 11, 2022 |
|
/s/ David Lowrance |
|
|
David Lowrance |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Savara Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew Pauls, principal executive officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 11, 2022
/s/ Matthew Pauls |
Matthew Pauls |
Chief Executive Officer and Chair of the Board of Directors |
(Principal Executive Officer) |
In connection with the Quarterly Report of Savara Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Lowrance, principal financial officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 11, 2022
/s/ David Lowrance |
David Lowrance |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
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