CASSAVA SCIENCES INC
For the period ended Dec 31, 2023. Filed Feb 28, 2024.
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FY2023 · Filed Feb 28, 2024
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Cassava Sciences, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cassava Sciences, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Description of the Matter | Prepaid and Accrued Development Expenses Related to CRO Pass Through Costs for Clinical Trials As explained in Note 2 to the consolidated financial statements, the Company contracts with a contract research organization (CRO) to assist the Company in conducting clinical trials, the costs for which are recorded as research and development expenses as incurred. A portion of these costs are pass through costs, which are costs incurred by third parties contracted by the CRO to perform certain services for clinical trials. These costs are passed through to the Company by the CRO. Depending on the timing of CRO payments, the Company records these costs as either prepaid or accrued development expenses. These prepaid or accrued development expenses are based on management’s determination of pass through costs incurred by the third parties based on the status of the clinical trials. At December 31, 2023, based on timing of invoicing and costs incurred, prepaid and accrued development expenses for CRO pass through costs were $317 thousand and $182 thousand, respectively. Auditing the Company’s prepaid and accrued development expenses related to CRO pass through costs for clinical trials was challenging because the recorded amounts involved management’s validation of the completeness and accuracy of costs incurred for services provided but not yet billed by third parties to the CRO. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process of accounting for prepaid and accrued development expenses related to CRO pass through costs for clinical trials, including management’s review of the progress of clinical trial activity in comparison to budgets and invoices received from the CRO. To evaluate the adequacy of the Company’s prepaid and accrued development expenses related to CRO pass through costs for clinical trials, our audit procedures included, among others, testing the completeness and accuracy of the underlying data used by management to determine the prepaid and accrued development expenses. To evaluate completeness and accuracy of the data, on a sample basis, we: (i) obtained confirmation directly from the CRO of key clinical trial contract terms and conditions and any amendments thereto, as well as pass through costs incurred to date, (ii) agreed data used in the calculation to the contracts with the CRO, and any amendments thereto, and/or the data obtained from the CRO, (iii) corroborated the progress of clinical trials through inquiry of Company personnel who oversee clinical trials, and (iv) obtained and reviewed subsequent invoices received from the CRO to corroborate the prepaid and accrued development expenses at the end of the reporting period. |
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| Description of the Matter | Loss Contingencies The Company is subject to lawsuits, claims, allegations, and investigations regarding simufilam and SavaDx. As described in Note 12 to the consolidated financial statements, such allegations and claims could result in adverse consequences. At December 31, 2023, the Company was unable to determine the likelihood of a loss, if any, associated with these lawsuits and investigations and therefore was unable to reasonably estimate a loss or range of loss. Auditing management’s accounting for, and disclosure of, loss contingencies related to the lawsuits and investigations was challenging because management’s evaluation of the likelihood of loss required judgment. |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process of evaluation of the accounting for and disclosure of these matters. This included controls over management’s assessment of the likelihood of incurrence of a loss and whether the loss or range of loss was reasonably estimable, and the development of related disclosures. Our audit procedures included gaining an understanding of the status of ongoing lawsuits and investigations, reading the meeting minutes of the board of directors and of the committees of the board of directors, reading summaries of the proceedings and related correspondence, requesting letters from internal and external legal counsel, meeting with internal and external legal counsel to discuss developments related to the lawsuits and investigations together with our forensic professionals, and obtaining written representations from the Company on these matters. We also evaluated the Company’s disclosures in relation to these matters. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2002.
Austin, Texas
February 28, 2024
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