SEC Filing - ARS Pharmaceuticals

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39756

ARS Pharmaceuticals, Inc.

(Exact name of Registrant as specified in its Charter)



Delaware	81-1489190
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

11682 El Camino Real, Suite 120 San Diego, California	92130
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (858) 771-9307

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SPRY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 6, 2023 there were 95,997,252 shares of registrant’s common stock, $0.0001 par value per share, outstanding.

Table of Contents



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	6
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations and Comprehensive Loss	7
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 5.	Other Information	93
Item 6.	Exhibits	94

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:


	•		any statements regarding future economic conditions or performance;


	•		research and development plans, including planned clinical trials, for neffy, including for additional indications;


	•		the expected timing for reporting data;


	•		the design and potential benefits of neffy;


	•		our plans to complete a pharmacokinetic/pharmacodynamic study assessing repeat doses of neffy compared to repeat doses of epinephrine injection product under allergen-induced rhinitis conditions to support approval of our New Drug Application (“NDA”) resubmission for neffy with the U.S. Food and Drug Administration (“FDA”) for the treatment of allergic reactions (Type 1), including anaphylaxis for adults and children ≥30 kg;


	•		the timing for the FDA’s review of, and the potential outcome from, our Formal Dispute Resolution Request, if any, to appeal the FDA’s Complete Response Letter (“CRL”) regarding our initial NDA for neffy;


	•		our expectations regarding the timing for resubmitting an NDA for neffy with the FDA for the treatment of allergic reactions (Type 1), including anaphylaxis for adults and children ≥30 kg, the FDA’s review of our NDA for neffy, including the classification of our NDA submission as Class 2 and the anticipated Prescription Drug User Fee Act (“PDUFA”) target action date;


	•		our belief that additional testing for nitrosamine impurities based on new draft guidance issued after our NDA submission will not be a rate-limiting step for the resubmission to the FDA;


	•		Our plans to submit a supplemental NDA to the FDA and a post approval variation to the European Medicines Agency (“EMA”) for 1.0 mg neffy and the timing thereof;


	•		our plans to submit regulatory filings for neffy in Japan and China in collaboration with our partners and the timing thereof;


	•		the expected timing for regulatory review decisions for neffy;


	•		the timing of the commercial launch of neffy, if approved;


	•		the commercial potential of and commercialization strategy for neffy;


	•		the size of the markets for neffy and any other product candidates, the projected growth thereof, and our ability to capture and grow those markets;


	•		the rate and degree of market acceptance of neffy and any other product candidates;


	•		our expected competitive position;


	•		our expectations regarding our ability to achieve gross profit margins similar to small molecule drugs;


	•		our potential to become the standard in treatment and transform the treatment of allergic reactions;


	•		the likelihood of neffy attaining favorable coverage;


	•		the expected intellectual property protection for neffy;


	•		legislative and regulatory developments in the United States and foreign countries;


	•		estimates regarding anticipated operating losses, capital requirements and needs for additional funds;


	•		our ability to obtain, maintain and successfully enforce adequate patent and other intellectual property protection for neffy or any future product candidate;


	•		our expected use of the remaining net proceeds of our initial public offering; and


	•		statements of belief and any statement of assumptions underlying any of the foregoing.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A, “Risk Factors” of this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Unless the context otherwise indicates, references in this Quarterly Report to the terms “ARS”, “the Company”, “we”, “our” and “us” refer to ARS Pharmaceuticals, Inc. and its consolidated subsidiaries, and references to our “common stock” refers to our voting common stock.

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

An investment in shares of our common stock involves a high degree of risk. Below is a list of the more significant risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report. Some of the material risks associated with our business include the following:


	•		We are a clinical-stage biopharmaceutical company and have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future. We have never generated revenue from product sales and may never be profitable.


	•		We have a limited operating history and only one current product candidate, neffy, which is in the clinical stage of development and has no commercial sales, which may make it difficult to evaluate the prospects for our future viability. We may need additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development activities or commercialization efforts. Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidate.


	•		We currently depend on the success of neffy, which is our only current product candidate. If we are unable to obtain regulatory approval for, and successfully commercialize, neffy, or experience significant delays in doing so, our business will be materially harmed.


	•		If the FDA does not conclude that neffy or any future product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidates under Section 505(b)(2) are not as we expect, the approval pathway for those product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.


	•		If we fail to develop and commercialize neffy for additional indications or fail to discover, develop and commercialize other product candidates, we may be unable to grow our business and our ability to achieve our strategic objectives would be impaired.


	•		Competitive products may reduce or eliminate the commercial opportunity for neffy for its current or future indications. If our competitors develop technologies or product candidates more rapidly than us, or their technologies or product candidates are more effective or safer than ours, our ability to develop and successfully commercialize neffy may be adversely affected.


	•		We are dependent on international third-party licensees and assignees for the development and commercialization of neffy in several countries outside the United States. The failure of these third parties to meet their contractual, regulatory or other obligations could adversely affect our business.


	•		We may seek to enter into additional collaborations, licenses and other similar arrangements for neffy or any future product candidate and may not be successful in doing so, and even if we are, we may relinquish valuable rights and may not realize the benefits of such relationships.


	•		We currently have limited marketing, sales or distribution infrastructure. If we are unable to fully develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we may not be successful in commercializing our product candidates.


	•		The market for neffy and any future product candidates we may develop may be smaller than we expect.


	•		Any of our current and future product candidates for which we, or any current or future licensing and collaboration partners, obtain regulatory approval in the future will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. If approved, neffy and any future product candidates could be subject to post-marketing restrictions or withdrawal from the market and we, or any current or future licensing and collaboration partners, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our products following approval.


	•		Even if neffy or any future product candidate of ours receives regulatory approval, it may fail to achieve the degree of market acceptance by allergists, pediatricians and other physicians, patients, caregivers, third-party payors and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable.


	•		Our commercial success depends on our ability to obtain and maintain sufficient intellectual property protection for our product candidates and other proprietary technologies.


	•		Our success is highly dependent on our ability to attract and retain highly skilled executive officers and employees.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ARS Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and par value data)


	September 30, 2023			December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	60,532		$	210,518
Short-term investments		181,370			63,863
Prepaid expenses and other current assets		2,564			3,319
Total current assets		244,466			277,700
Right-of-use asset		300			445
Fixed assets, net		617			329
Other assets		3,173			2,961
Total assets	$	248,556		$	281,435
Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities (including related party amounts of $208 and $16, respectively)	$	10,945		$	4,931
Lease liability, current		235			230
Contract liability, current		—			283
Total current liabilities		11,180			5,444
Lease liability, net of current portion		92			251
Contract liability, net of current portion		—			2,854
Total liabilities		11,272			8,549
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value per share; 10,000,000 shares authorized at September 30, 2023 and December 31, 2022; no shares issued and outstanding at September 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value per share; 200,000,000 shares authorized at September 30, 2023 and December 31, 2022; 95,796,254 and 93,943,316 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		9			9
Additional paid-in capital		361,571			349,408
Accumulated other comprehensive (loss) gain, net		(161	)		407
Accumulated deficit		(124,135	)		(76,938	)
Total stockholders’ equity		237,284			272,886
Total liabilities, convertible preferred stock and stockholders’ equity	$	248,556		$	281,435

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

ARS Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue under collaboration agreements	$	—		$	189		$	30		$	1,316

Operating expenses:
Research and development (including related party amounts of $307, $776, $1,382 and $1,888, respectively)		3,002			3,893			16,862			13,666
General and administrative (including related party amounts of $322, $73, $840 and $344, respectively)		14,976			2,926			40,462			7,723
Total operating expenses		17,978			6,819			57,324			21,389
Loss from operations		(17,978	)		(6,630	)		(57,294	)		(20,073	)
Other income (expense), net		3,112			47			10,097			(180	)
Net loss	$	(14,866	)	$	(6,583	)	$	(47,197	)	$	(20,253	)
Change in unrealized gains and losses on available-for-sale securities		19			—			(568	)		—
Comprehensive loss	$	(14,847	)	$	(6,583	)	$	(47,765	)	$	(20,253	)
Net loss per share, basic and diluted	$	(0.16	)	$	(0.21	)	$	(0.50	)	$	(0.66	)
Weighted-average shares outstanding used in computing net loss per share, basic and diluted		95,576,627			30,755,123			94,910,012			30,578,516

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

ARS Pharmaceuticals, Inc.

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

(in thousands, except share data)

(unaudited)


	Common Stock
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Gain, Net			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2022		93,943,316	$	9	$	349,408	$	407		$	(76,938	)	$	272,886
Exercise of common stock options		502,687		—		1,319		—			—			1,319
Restricted stock units released		2,025		—		—		—			—			—
Stock-based compensation		—		—		2,250		—			—			2,250
Net loss and comprehensive loss		—		—		—		(339	)		(14,961	)		(15,300	)
Balance at March 31, 2023		94,448,028	$	9	$	352,977	$	68		$	(91,899	)	$	261,155
Exercise of common stock options		851,001		—		2,739		—			—			2,739
Restricted stock units released		2,025		—		—		—			—			—
Shares issued under the employee stock purchase plan		21,899		—		115		—			—			115
Stock-based compensation		—		—		2,161		—			—			2,161
Net loss and comprehensive loss		—		—		—		(248	)		(17,370	)		(17,618	)
Balance at June 30, 2023		95,322,953	$	9	$	357,992	$	(180	)	$	(109,269	)	$	248,552
Exercise of common stock options		473,301		—		922		—			—			922
Stock-based compensation		—		—		2,657		—			—			2,657
Net loss and comprehensive loss		—		—		—		19			(14,866	)		(14,847	)
Balance at September 30, 2023		95,796,254	$	9	$	361,571	$	(161	)	$	(124,135	)	$	237,284


	Series A Convertible Preferred Stock				Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Series D Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
Balance at December 31, 2021		4,764,000	$	365		606,060	$	1,000		7,692,309	$	19,868		9,337,066	$	54,806		30,369,413	$	3	$	10,984	$	(42,256	)	$	(31,269	)
Stock-based compensation		—		—		—		—		—		—		—		—		—		—		264		—			264
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		—		—		—		(7,250	)		(7,250	)
Balance at March 31, 2022		4,764,000	$	365		606,060	$	1,000		7,692,309	$	19,868		9,337,066	$	54,806		30,369,413	$	3	$	11,248	$	(49,506	)	$	(38,255	)
Exercise of stock options		—		—		—		—		—		—		—		—		385,710		—		287		—			287
Stock-based compensation		—		—		—		—		—		—		—		—		—		—		356		—			356
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		—		—		—		(6,420	)		(6,420	)
Balance at June 30, 2022		4,764,000	$	365		606,060	$	1,000		7,692,309	$	19,868		9,337,066	$	54,806		30,755,123	$	3	$	11,891	$	(55,926	)	$	(44,032	)
Stock-based compensation		—		—		—		—		—		—		—		—		—		—		460		—			460
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		—		—		—		(6,583	)		(6,583	)
Balance at September 30, 2022		4,764,000	$	365		606,060	$	1,000		7,692,309	$	19,868		9,337,066	$	54,806		30,755,123	$	3	$	12,351	$	(62,509	)	$	(50,155	)

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

ARS Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(47,197	)	$	(20,253	)
Non-cash adjustments to reconcile net loss to net cash provided by (used) in operating activities:
Stock-based compensation expense		6,957			1,080
Non-cash interest expense		—			125
Depreciation		61			20
Amortization and accretion of short-term investments, net		(5,121	)		—
Change in fair value of warrant liability		—			(3	)
Changes in operating assets and liabilities:
Other receivables		—			(328	)
Prepaid and other assets		481			6
Accounts payable and accrued liabilities (including related party amounts of $192 and $220, respectively)		6,104			1,138
Operating right-of-use assets and lease liabilities, net		(9	)		(50	)
Contract liability		(3,137	)		(1,316	)
Net cash used in operating activities		(41,861	)		(19,581	)
Cash flows from investing activities:
Purchases of short-term investments, available-for-sale		(237,953	)		—
Maturities of short-term investments, available-for-sale		125,000			—
Purchase of property and equipment		(266	)		(73	)
Net cash used in investing activities		(113,219	)		(73	)
Cash flows from financing activities:
Proceeds from exercise of common stock options and employee stock purchase plan		5,094			287
Cash paid for transaction costs		—			(647	)
Repayment of bank note payable		—			(2,727	)
Net cash provided by (used in) financing activities		5,094			(3,087	)
Net change in cash and cash equivalents		(149,986	)		(22,741	)
Cash and cash equivalents at beginning of period		210,518			60,063
Cash and cash equivalents at end of period	$	60,532		$	37,322
Supplemental cash flow information:
Purchases of property and equipment included in accounts payable	$	91		$	—
Purchases of property and equipment reclassed from prepaid expenses and other current assets	$	174		$	—
Unpaid transaction costs included in accounts payable and accrued expenses	$	—		$	137

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

ARS Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of Business

Description of Business

ARS Pharmaceuticals, Inc. (“ARS” or the “Company”) is focused on the development of ARS-1 (brand name neffy®), a proprietary product candidate for the needle-free intranasal delivery of epinephrine for the emergency treatment of Type I allergic reactions including anaphylaxis. The Company incorporated in Delaware in January 2016 and is located in San Diego, California. The Company has a wholly owned subsidiary, ARS Pharmaceuticals Operations, Inc., incorporated in Delaware in August 2015, through which it conducts substantially all its operations. ARS Pharmaceuticals Operations, Inc. has a wholly owned subsidiary in Ireland, ARS Pharmaceuticals IRL, Limited, to facilitate the filing of regulatory approval for neffy in European countries.

Merger Transaction

On November 8, 2022 (the “Closing Date”), Silverback Therapeutics, Inc., a Delaware corporation (“Silverback”), now known as ARS Pharmaceuticals, Inc., completed its reverse merger (the “Merger”) with privately-held ARS Pharmaceuticals, Inc. (“ARS Pharma”), in accordance with the terms of the agreement and plan of merger and reorganization, dated July 21, 2022, as amended on August 11, 2022 and October 25, 2022 (the “Merger Agreement”), whereby Sabre Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of Silverback, merged into ARS Pharma, with ARS Pharma surviving as Silverback’s wholly-owned subsidiary. ARS Pharma was renamed ARS Subsidiary, Inc., and then subsequently renamed ARS Pharmaceuticals Operations, Inc.

At the effective time of the Merger (the “Effective Time”), each share of ARS Pharma common stock outstanding immediately prior to the Effective Time, after giving effect to the automatic conversion of all shares of preferred stock of ARS Pharma into shares of ARS Pharma common stock immediately prior to the Effective Time (excluding shares held as treasury stock by ARS Pharma or held or owned by Silverback, Merger Sub or any subsidiary of Silverback or ARS Pharma and dissenting shares), was automatically converted into the right to receive shares of Silverback common stock equal to the exchange ratio of 1.1819. At the completion of the Merger, the prior ARS Pharma equityholders owned 62% and the prior Silverback equityholders owned 38% of the combined company, in each case on a fully diluted basis using the treasury stock method and excluding out-of-money options of Silverback.

The Merger was accounted for as a reverse recapitalization, with ARS Pharma being treated as the acquirer for accounting purposes. Pursuant to the Merger Agreement, Silverback changed its name to ARS Pharmaceuticals, Inc., and changed its corporate ticker symbol on the Nasdaq Global Market to “SPRY”. See discussions of the transactions in connection with the Merger at Note 3 - Merger and Related Transactions.

Reduction in Force

On September 19, 2023, the FDA issued a CRL regarding our NDA for neffy. On September 29, 2023, we initiated a 20% reduction in force (“RIF”) in order to conserve our cash resources and manage operating expenses until the anticipated PDUFA target action date in the second half of 2024. We provided severance payments, continuation of group health insurance coverage, and other benefits for a specified period to the affected employees. We will incur costs of $0.6 million for termination benefits resulting from the RIF.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net operating losses since its inception and had an accumulated deficit of $124.1 million as of September 30, 2023. The Company had cash, cash equivalents, and short-term investments of $241.9 million as of September 30, 2023 and has not generated positive cash flows from operations. To date, the Company has funded its operations primarily with proceeds from the Merger, the issuance of convertible preferred stock, payments earned under collaboration agreements and bank debt. The Company’s currently available cash, cash equivalents, and short-term investments as of September 30, 2023 are sufficient to meet its anticipated cash requirements for at least the 12 months following the date these financial statements are issued.

From August 5, 2015 (inception) through September 30, 2023, the Company has devoted substantially all of its efforts to developing intellectual property, conducting product development and clinical trials, raising capital, and building infrastructure. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. If the Company does not successfully commercialize any product candidates for which it receives regulatory approval, it will be unable to generate recurring product revenue or achieve profitability. Management expects operating expenses to increase for the foreseeable future and there can be no assurance that the Company will ever achieve profitability, or if achieved, that it will be sustained on a continuing basis.

The Company’s ability to raise additional capital may be adversely impacted should the global economic conditions worsen or as a result of further disruptions to, and volatility in, the credit and financial markets in the United States, including bank failures, future health epidemics or pandemics, geopolitical actions or other macroeconomic factors. If such further disruption occurs, the Company could experience an inability to access additional capital. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations, and future prospects.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”). The Company’s financial statements are presented on a condensed consolidated basis, which include the accounts of ARS Pharmaceuticals, Inc., ARS Pharmaceuticals Operations, Inc. and ARS Pharmaceuticals IRL, Limited. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s functional and reporting currency is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars at foreign currency exchange rates in effect at the balance sheet date except for nonmonetary assets, which are remeasured at historical foreign currency exchange rates in effect at the date of transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. All adjustments considered necessary for a fair presentation have been included.

Since ARS Pharma was determined to be the accounting acquirer in connection with the Merger, for periods prior to the Merger the condensed consolidated financial statements were prepared on a stand-alone basis for ARS Pharma and did not include the combined entities activity or financial position. For periods subsequent to the Merger, the condensed consolidated financial statements include Silverback’s activity and Silverback’s assets and liabilities at their acquisition date fair value. Historical share and per share figures of ARS Pharma have been retroactively restated based on the exchange ratio in the Merger of 1.1819.

Unaudited Interim Condensed Consolidated Financial Statements

The accompanying condensed consolidated balance sheet as of September 30, 2023, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022, the condensed consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the nine months ended September 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, are unaudited. The balance sheet as of December 31, 2022 was derived from the audited financial statements as of and for the year ended December 31, 2022. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2022, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2023, the condensed consolidated results of its operations for the three and nine months ended September 30, 2023 and 2022, and its cash flows for the nine months ended September 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2023 and 2022 are also unaudited. The condensed consolidated results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any other period.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed consolidated financial statements and accompanying notes. The most significant estimates in the Company’s condensed consolidated financial statements relate to revenue recognized for its collaboration agreements, accruals for research and development expenses and valuation of equity awards. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Cash and Cash Equivalents

Cash and cash equivalents include cash readily available in checking and money market mutual funds. The Company considers all highly liquid investments with remaining maturities when purchased of 90 days or less to be cash equivalents.

Investments

The Company invests excess cash in investment grade fixed income securities. These investments are included in short-term investments on the balance sheets, classified as available