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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, 2021
-OR-
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
 
001-41058
Vaxxinity, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
86-2083865
(State or other jurisdiction of
 
incorporation or organization)
(I.R.S. Employer
Identification No.)
1717 Main St,
Ste 3388
Dallas
,
TX
75201
(
254
)
244-5739
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
__________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Class A Common Stock, par value
$0.0001 per share
VAXX
The Nasdaq Global Market
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
(§232.405 of this chapter) 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, smaller reporting company, or an emerging growth
company. See 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).
As of December 17, 2021, the registrant had
111,519,983
 
shares of $0.0001 par value Class A common stock outstanding
 
and
13,874,132
 
shares of $0.0001 par value
Class B common stock outstanding.
1
SPECIAL NOTE REGARDING FORWARD
 
-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
 
statements. Forward-looking statements are neither
historical facts nor assurances of future performance.
 
Instead, they are based on our current beliefs,
 
expectations and assumptions
regarding the future of our business, future plans and
 
strategies and other future conditions. In some
 
cases, you can identify forward-
looking statements because they contain
 
words such as “anticipate,” “believe,” “estimate,”
 
“expect,” “intend,” “may,”
 
“predict,”
“project,” “target,” “potential,”
 
“seek,” “will,” “would,” “could,” “should,” “continue,”
 
“contemplate,” “plan,” other words and
terms of similar meaning and the negative
 
of these words or similar terms.
Forward-looking statements are subject to known
 
and unknown risks and uncertainties, many of which may
 
be beyond our
control. We
 
caution you that forward-looking statements are
 
not guarantees of future performance or outcomes and
 
that actual
performance and outcomes may differ
 
materially from those made in or suggested by
 
the forward-looking statements contained in
this Quarterly Report. In addition, even if our results
 
of operations, financial condition and cash flows, and the
 
development of the
markets in which we operate, are consistent with
 
the forward-looking statements contained
 
in this Quarterly Report, those results or
developments may not be indicative of results
 
or developments in subsequent periods. New factors
 
emerge from time to time that
may cause our business not to develop as we expect,
 
and it is not possible for us to predict all of them. Factors that could
 
cause
actual results and outcomes to differ
 
from those reflected in forward-looking statements
 
include, among others, the following:
 
the prospects of UB-612 and other product candidates,
 
including the timing of data from our clinical
 
trials for UB-612
and other product candidates and our ability
 
to obtain and maintain regulatory approval for our
 
product candidates;
 
our ability to develop and commercialize
 
new products and product candidates;
 
our ability to leverage our Vaxxine
 
Platform;
 
the rate and degree of market acceptance of our
 
products and product candidates;
 
our status as a clinical-stage company and estimates
 
of our addressable market, market growth, future
 
revenue,
expenses, capital requirements and our
 
needs for additional financing;
 
our ability to comply with multiple legal and regulatory
 
systems relating to privacy,
 
tax, anti-corruption
and other applicable laws;
 
our ability to hire and retain key personnel and to manage
 
our future growth effectively;
 
competitive companies and technologies
 
and our industry and our ability to compete;
 
our and our collaborators’, including United Biomedical’s
 
(“UBI”), ability and willingness to obtain, maintain,
 
defend
and enforce our intellectual property protection
 
for our proprietary and collaborative product candidates,
 
and the scope
of such protection;
 
the performance of third party suppliers and
 
manufacturers and our ability to find additional suppliers
 
and
manufacturers;
 
our ability and the potential to successfully
 
manufacture our product candidates for pre
 
-clinical use, for clinical trials
and on a larger scale for commercial
 
use, if approved;
 
the ability and willingness of our third-party
 
collaborators, including UBI, to continue research
 
and development
activities relating to our product candidates;
 
general economic, political, demographic
 
and business conditions in the United States, Taiwan
 
and other
jurisdictions;
 
the potential effects of government
 
regulation, including regulatory developments
 
in the United
States and other jurisdictions;
 
ability to obtain additional financing
 
in future offerings;
 
expectations about market trends;
 
and
2
 
the effects of the COVID-19 pandemic on business
 
operations, the initiation, development
 
and operation of our
clinical trials and patient enrollment
 
of our clinical trials.
We discuss many
 
of these factors in greater detail under Part II,
 
Item 1A. “Risk Factors.” These risk factors are not
exhaustive and other sections of this report may include additional factors which
 
could adversely impact our business and
financial performance. Given these uncertainties, you
 
should not place undue reliance on these forward-looking
 
statements.
You
 
should read this Quarterly Report and the documents
 
that we reference in this Quarterly Report and have filed
 
as
exhibits completely and with the understanding
 
that our actual future results may be materially different
 
from what we expect.
We qualify
 
all of the forward- looking statements in this Quarterly
 
Report by these cautionary statements. Except
 
as required
by law, we undertake
 
no obligation to publicly update any forward-looking statements,
 
whether as a result of new information,
future events or otherwise.
As used in this Quarterly Report on Form 10-Q, unless otherwise specified or
 
the context otherwise requires, the terms
“we,” “our,” “us,” the “Company” refer
 
to Vaxxinity,
 
Inc. and its subsidiaries. All brand names or trademarks appearing in this
Quarterly Report are the property of their respective owners.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
PART
 
I.
 
Financial Information
Item1.
 
Financial Statements
VAXXINITY,
 
INC.
CONDENSED COMBINED CONSOLIDATED
 
BALANCE SHEETS
 
(in thousands, except share and per share amounts)
(unaudited)
December 31,
September 30,
2020
2021
Assets
Current assets:
Cash and cash equivalents
$
31,143
$
89,375
Accounts receivable
26
Amounts due from related parties
361
380
Prepaid expenses and other current assets
4,144
14,299
Total current assets
35,674
104,054
Deferred offering costs
2,254
6,189
Property and equipment, net
12,158
11,382
Licensed intellectual property, net
13,217
Restricted cash
55
74
Total assets
$
50,141
$
134,916
Liabilities, convertible preferred stock, and stockholders’ deficit
Current liabilities:
Accounts payable
$
1,017
$
3,905
Amounts due to related parties
8,004
21,216
Accrued expenses and other current liabilities
610
5,134
Notes payable
619
425
Notes payable with related parties
2,294
Convertible notes payable
10,356
Convertible notes with related parties, net of discount
14,324
Total current liabilities
37,224
30,680
Other liabilities
Simple agreement for future equity
24,335
Notes payable
10,699
10,366
Warrant liability
400
Other long-term liabilities
2,383
240
Total liabilities
75,041
41,286
Commitments and contingencies (Note 14)
nil
nil
Convertible preferred stock:
Series seed stock
10,383
Series seed-1 stock
20,903
Series seed-2 stock
11,315
Series A-1 stock
4,640
Series A-2 stock
15,234
Series A stock
128,206
Series B stock
122,791
Total convertible preferred stock
62,475
250,997
Stockholders’ deficit:
Class A common stock
272
255
Treasury stock
(23)
Additional paid-in capital
4,682
23,668
Accumulated deficit
(92,306)
(181,290)
Total stockholders' deficit
(87,375)
(157,367)
Total liabilities, convertible preferred
 
stock, and stockholders' deficit
$
50,141
$
134,916
Note: Derived from audited Financial Statements as of December 31, 2020.
The accompanying notes are an integral part of the condensed combined
 
consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
VAXXINITY,
 
INC.
CONDENSED COMBINED CONSOLIDATED
 
STATEMENTS
 
OF OPERATIONS
 
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended
September 30,
Nine months ended September 30,
2020
2021
2020
2021
Revenue
$
117
$
50
$
557
$
67
Cost of revenue
(178)
9
52
1,937
Gross profit/loss
295
41
505
(1,870)
Operating expenses:
Research and development
7,867
23,616
12,109
54,221
General and administrative
5,122
6,700
9,453
21,130
Total operating expenses
12,989
30,316
21,562
75,351
Loss from operations
(12,694)
(30,275)
(21,057)
(77,221)
Other expense:
Interest expense, net
331
109
737
493
Change in fair value of convertible notes
2,786
4,781
2,667
Change in fair value of warrant liability
214
Change in fair value of simple agreements for future
equity
615
615
8,365
Foreign currency loss, net
39
5
48
24
Other expense, net
3,771
114
6,181
11,763
Net loss
$
(16,465)
$
(30,389)
$
(27,238)
$
(88,984)
Net loss per share, basic and diluted
(0.24)
(0.44)
(0.47)
(1.30)
Weighted average
 
common shares outstanding, basic
and diluted
68,138,651
68,728,509
58,154,956
68,667,682
The accompanying notes are an integral part of the condensed combined
 
consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
VAXXINITY,
 
INC.
 
CONDENSED COMBINED CONSOLIDATED
 
STATEMENTS
 
OF CONVERTIBLE PREFERRED STOCK
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
 
(in thousands, except share amounts)
 
(unaudited)
 
Convertible Preferred Stock
Series Seed
Series Seed-1
Series Seed-2
Series A-1
Series A-2
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Total
Balance at June 30,
 
2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
$
$
$
42,601
Issuance of Series A-1 preferred stock, net of issuance costs of
$
585
1,566,153
3,987
3,987
Conversion of Simple Agreement for Future Equity to Series A-2 preferred
stock, net of issuance costs of $
41
6,307,690
15,275
15,275
Balance at September 30, 2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
1,566,153
$
3,987
6,307,690
$
15,275
$
61,863
Convertible Preferred Stock
Series Seed
Series Seed-1
Series Seed-2
Series A-1
Series A-2
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Total
Balance at December 31, 2019
7,831,528
$
10,383
8,017,771
$
16,436
$
$
$
$
26,819
Issuance of Series Seed-1 convertible preferred stock, net of issuance costs of $
18
14,858,686
4,467
4,467
Issuance of Series Seed-2 preferred stock, net of issuance costs of $
45
14,152,237
10,955
10,955
Conversion of Simple Agreement for Future Equity to Series Seed-2 preferred Stock
 
463,162
360
360
Issuance of Series A-1 preferred stock, net of issuance costs of
$
373
1,566,153
3,987
3,987
Conversion of Simple Agreement for Future Equity to Series A-2 preferred stock, net of
issuance costs of $
41
6,307,690
15,275
15,275
Balance at September 30, 2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
1,566,153
$
3,987
6,307,690
$
15,275
$
61,863
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
VAXXINITY,
 
INC.
 
CONDENSED COMBINED CONSOLIDATED
 
STATEMENTS
 
OF STOCKHOLDERS’ DEFICIT
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 202
 
0
 
(in thousands, except share amounts)
 
(unaudited)
 
Stockholders’ Deficit
Common Stock
Common Stock
(Class A)
Common Stock
(Class B)
Treasury Stock
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Paid-in
Capital
Accumulated
Deficit
Stockholders’
Deficit
Balance at June 30,
 
2020
71,289,721
$
271
$
$
(3,169,093)
$
(23)
$
4,055
$
(63,121)
$
(58,818)
Issuance of common stock upon exercise of stock options
68,069
19
19
Stock-based compensation expense
291
291
Reclassification of common stock to Class A common stock
(60,290,572)
(271)
60,290,572
271
Reclassification of common stock to Class B common stock
(10,999,149)
10,999,149
Net loss
(16,465)
(16,465)
Balance at September 30, 2020
$
60,358,641
$
271
10,999,149
$
(3,169,093)
$
(23)
$
4,365
$
(79,586)
$
(74,973)
Stockholders’ Deficit
Common Stock
Common Stock
(Class A)
Common Stock
(Class B)
Treasury Stock
Additional
Paid-in
 
Capital
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Accumulated
Deficit
Stockholders’
Deficit
Balance at December 31, 2019
37,953,692
$
270
$
$
(3,169,093)
$
(23)
$
3,591
$
(52,348)
$
(48,510)
Issuance of common stock upon exercise of stock options
213,271
68,069
79
79
Vesting of restricted stock
121,282
1
1
Issuance of common stock for C19 Shareholders
33,001,476
Stock-based compensation expense
695
695
Reclassification of common stock to Class A common stock
(60,290,572)
(271)
60,290,572
271
Reclassification of common stock to Class B common stock
(10,999,149)
10,999,149
Net loss
(27,238)
(27,238)
Balance at September 30, 2020
$
60,358,641
$
271
10,999,149
$
(3,169,093)
$
(23)
$
4,365
$
(79,586)
$
(74,973)
The accompanying notes are an integral part of the condensed combined
 
consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
VAXXINITY,
 
INC.
 
CONDENSED COMBINED CONSOLIDATED
 
STATEMENTS
 
OF CONVERTIBLE PREFERRED STOCK
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
 
(in thousands, except share amounts)
 
(unaudited)
 
Convertible Preferred Stock
Series A
Series B
Shares
Amount
Shares
Amount
Total
Balance at June 30,
 
2021
62,223,095
$
128,206
15,365,574
$
122,843
$
251,049
Additional issuance costs of Series B convertible preferred stock
(52)
(52)
Balance at September 30, 2021
62,223,095
$
128,206
15,365,574
$
122,791
$
250,997
Convertible Preferred Stock
Series Seed
Series Seed-1
Series Seed-2
Series A-1
Series A-2
Series A
Series B
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Total
Balance at December 31, 2020
7,831,528
$
10,383
22,876,457
$
20,903
14,615,399
$
11,315
1,871,511
$
4,640
6,307,690
$
15,234
$
$
$
62,475
Exchange of Series Seed, Series
 
seed-1, Series seed-2,
 
Series A-1 and Series A-2
 
for Series A
(7,831,528)
(10,383)
(22,876,457)
(20,903)
(14,615,399)
(11,315)
(1,871,511)
(4,640)
(6,307,690)
(15,234)
53,502,585
62,475
Conversion of convertible notes to
 
Series A preferred
3,624,114
27,379
27,379
Conversion of notes payable with
 
related party to Series A convertible
preferred
423,230
2,138
2,138
Conversion of SAFEs to Series A
 
convertible preferred
4,539,060
35,600
35,600
Conversion of Warrants to Series A
 
convertible preferred
134,106
614
614
Issuance of Series B convertible preferred
stock, net of issuance costs of $
133
15,365,574
122,791
122,791
Balance at September 30, 2021
$
$
$
$
$
62,223,095
$
128,206
15,365,574
$
122,791
$
250,997
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
VAXXINITY,
 
INC.
 
CONDENSED COMBINED CONSOLIDATED
 
STATEMENTS
 
OF STOCKHOLDERS’ DEFICIT
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
 
(in thousands, except share amounts)
 
(unaudited)
 
Stockholders’ Deficit
Common Stock
(Class A)
Common Stock
(Class B)
Additional
Paid-in
Capital
Accumulated
Deficit
Stockholders’
Deficit
Shares
Amount
Shares
Amount
Balance at June 30,
 
2021
54,845,535
$
255
13,874,132
$
$
8,825
$
(150,901)
$
(141,821)
Issuance of common stock upon exercise of
 
stock options
54,841
59
59
Stock-based compensation expense
1,464
1,464
Common Stock Warrants
 
(See Note 4)
13,320
13,320
Net loss
(30,389)
(30,389)
Balance at September 30, 2021
54,900,376
$
255
13,874,132
$
$
23,668
$
(181,290)
$
(157,367)
Stockholders’ Deficit
Common Stock
(Class A)
Common Stock
(Class B)
Treasury Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Stockholders’
Deficit
Shares
Amount
Shares
Amount
Shares
Amount
Balance at December 31, 2020
60,360,523
$
272
10,999,149
$
(3,169,093)
$
(23)
$
4,682
$
(92,306)
$
(87,375)
Issuance of common stock upon exercise of stock options
82,696
6
64
70
Vesting of restricted stock
15,405
Reclassification of common stock to Class B common stock
(2,874,985)
2,874,983
Issuance of common stock upon stock grant
485,830
Retirement of treasury stock upon merger
(3,169,093)
(23)
3,169,093
23
Stock-based compensation expense
5,602
5,602
Common Stock Warrants (See Note 4)
13,320
13,320
Net loss
(88,984)
(88,984)
Balance at September 30, 2021
54,900,376
$
255
13,874,132
$
$
$
23,668
$
(181,290)
$
(157,367)
The accompanying notes are an integral part of the condensed combined
 
consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
VAXXINITY,
 
INC.
 
CONDENSED COMBINED CONSOLIDATED
 
STATEMENTS
 
OF CASH FLOWS
 
(in thousands)
 
(unaudited)
 
Nine months ended
September 30,
2020
2021
Cash flows from operating activities:
Net loss
$
(27,238)
$
(88,984)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
363
928
Stock-based compensation expense
695
5,602
Non-cash interest expense
405
268
Change in fair value of convertible notes
4,781
2,667
Change in fair value of warrant liability
214
Change in fair value of simple agreement for future equity
615
8,365
Accounts receivable
(26)
26
Prepaid expenses and other current assets
(5,296)
(10,155)
Amounts due from related parties
(34)
(18)
Deferred offering costs
(541)
(3,935)
Accounts payable
821
2,888
Amounts due to related parties
2,177
13,212
Accrued expenses and other current liabilities
487
4,521
Other liabilities
122
(2,625)
Net cash used in operating activities
(22,669)
(67,026)
Cash flows from investing activities:
Purchase of property and equipment
(1,026)
(50)
Net cash used in investing activities
(1,026)
(50)
Cash flows from financing activities:
Proceeds from issuance of convertible notes payable
12,040
2,000
Payment of debt issuance costs for related party convertible
 
 
notes
(300)
 
Repayment of convertible notes
(5,500)
(2,096)
 
Proceeds from issuance of simple agreement for future equity
15,020
2,900
 
Proceeds from issuance of Series Seed-1 convertible preferred stock, net
 
of issuance costs
4,467
 
Proceeds from issuance of Series Seed-2 convertible preferred stock, net
 
of issuance costs
10,955
 
Proceeds from issuance of Series A-1 convertible preferred stock, net of issuance
 
costs
 
4,360
 
Repayment of note payable with related party
(100)
 
Proceeds from issuance of Series B convertible preferred stock, net of issuance costs
122,791
 
Proceeds and repayments Paycheck Protection Program
257
(257)
 
Proceeds from exercise of stock options
79
70
Net cash provided by financing activities
41,378
125,308
Increase in cash, cash equivalents, and restricted cash
17,683
58,232
Cash and cash equivalents at beginning of period
476
31,143
Restricted Cash
79
74
Cash, cash equivalents and restricted cash at end of period
$
18,238
$
89,449
Supplemental disclosures of non-cash investing, financing and cash
 
flow information:
Non-cash interest expense
425
268
Conversion of simple agreement for future equity into Series Seed 2 preferred
 
stock
360
Fair value of restricted stock vesting during the period
1
Conversion of simple agreement for future equity into Series A-2
 
preferred stock
15,275
Acquisition of airplane through isuance of note payable
11,500
Fair value of warrants issued in connection with preferred stock issuance
373
Issue of Warrant
 
for Licensed Intellectual Property
13,320
The accompanying notes are an integral part of the condensed combined
 
consolidated financial statements.
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
11
1. Nature of the Business
Vaxxinity,
 
Inc., a Delaware corporation (“Vaxxinity”,
 
and together with its subsidiaries, the “Company”), was formed
through the combination of two separate businesses that originated from United
 
Biomedical, Inc. (“UBI”) in two separate transactions:
a spin-out from UBI in 2014 of operations focused on developing
 
chronic disease product candidates that resulted in United
Neuroscience (“UNS”), and a second spin-out from UBI in 2020 of operations
 
focused on the development of a COVID-19 vaccine
that resulted in C19 Corp. (“COVAXX”).
 
On February 2, 2021, Vaxxinity
 
was incorporated for the purpose of reorganizing and
 
combining UNS and COVAXX
and on March 2, 2021, did so by acquiring all the outstanding equity
 
interests of UNS and COVAXX
 
pursuant to a contribution and
exchange agreement (the “Contribution and Exchange Agreement”)
 
whereby the existing equity holders of UNS and COVAXX
contributed their equity interests in each of UNS and COVAXX
 
in exchange for equity in Vaxxinity
 
(the “Reorganization”).
 
The Company is a biotechnology company currently focused on developing
 
product candidates for human use in the
fields of neurology and coronaviruses utilizing its “Vaxxine
 
Platform” — a peptide vaccine technology first developed by UBI and
subsequently refined over the last two decades. The Company is engaged
 
in the development and commercialization of rationally
designed prophylactic and therapeutic vaccines to combat chronic disorders
 
and infectious diseases with large patient populations and
unmet medical need. UBI is a significant shareholder of the Company and,
 
therefore, considered a related party.
 
Impact of COVID-19 Pandemic
In March 2020, the World
 
Health Organization declared the outbreak of a COVID-19
 
pandemic. The COVID-19 pandemic is
evolving, and to date, has led to the implementation of various responses,
 
including government-imposed quarantines, travel
restrictions and other public health safety measures.
The Company is closely monitoring the impact of the COVID-19 pandemic
 
on all aspects of its business, including how it
will impact its operations and the operations of its customers, suppliers, vendors
 
and business partners. The Company does not yet
know the full extent of potential delays or impacts on its business, its clinical trials, its research
 
programs, healthcare systems or the
global economy and it cannot presently predict the scope and severity of any potential
 
business shutdowns or disruptions. The extent
to which COVID-19 impacts its business, results of operation and financial
 
condition will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, such as the duration
 
of the outbreak, new information that may emerge
concerning the severity of COVID-19 or the effectiveness of actions to
 
contain COVID-19 or treat its impact, among others. If the
Company or any of the third parties with whom the Company engages, however,
 
were to experience shutdowns or other business
disruptions, its ability to conduct its business in the manner and on the timelines
 
presently planned could be materially and negatively
affected, which could have a material adverse impact on its business,
 
results of operation and financial condition.
The Company has not incurred impairment losses in the carrying values
 
of its assets as a result of the COVID-19 pandemic
and it is not aware of any specific related event or circumstance that would require
 
it to revise its estimates reflected in these
condensed combined consolidated financial statements.
2. Summary of Significant Accounting Policies
 
Basis of Presentation
The accompanying unaudited interim condensed combined
 
consolidated financial statements have been prepared pursuant to
the rules and regulations of the United States Securities and Exchange Commission
 
(“SEC”) for interim financial reporting. The
condensed consolidated financial statements for the periods presented
 
include the accounts of UNS and COVAXX
 
that were parties to
the Contribution and Exchange Agreement. All share and per share amounts,
 
as originally recorded by each entity,
 
have been
converted to a number of shares and per share amounts using the conversion ratios
 
determined under the Contribution and Exchange
Agreement.
 
These interim condensed combined consolidated financial statements are unaudited
 
and, in the opinion of management,
include all adjustments (consisting of normal recurring adjustments and
 
accruals) necessary to fairly present the results of the interim
periods. The condensed combined balance sheet at December 31, 2020, has
 
been derived from the audited financial statements at that
date. Operating results for the three and nine months ended September
 
30, 2021 and cash flows for the nine months ended September
30, 2021 are not necessarily indicative of the results that may be expected for
 
the fiscal year ended December 31, 2021 or any other
future period. Certain information and footnote disclosures normally
 
included in annual financial statements prepared in accordance
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
12
with accounting principles generally accepted in the United States (“U.S. GAAP”)
 
have been omitted in accordance with the rules and
regulations for interim reporting of the SEC. These interim condensed
 
financial statements should be read in conjunction with the
financial statements and notes thereto included in our report for the year
 
ended December 31, 2020.
 
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed
 
financial statements are disclosed in our
annual financial statements for the year ended December 31, 2020. There
 
have been no changes to the Company’s
 
significant
accounting policies during the three and nine months ended September
 
30, 2021.
 
Emerging Growth Company Status
The Company is an “emerging growth company” (“EGC”),
 
as defined in the Jumpstart Our Business Startups Act (“JOBS
Act”) and is permitted to and plans to take advantage of certain exemptions
 
from various reporting requirements that are applicable to
other public companies that are not EGCs. The Company may take advantage of
 
these exemptions until it is no longer an EGC under
Section 107 of the JOBS Act, which provides that an EGC can take advantage of
 
the extended transition period afforded by the JOBS
Act for the implementation of new or revised accounting standards. The Company
 
has elected to avail itself of the extended transition
period and, therefore, while the Company is an EGC it will not be subject to new or revised accounting
 
standards at the same time that
they become applicable to other public companies that are not EGCs.
 
Recently Adopted Accounting Pronouncements
In November 2018, the Financial Accounting Standards Board (“FASB”)
 
issued ASU 2018-18, Collaborative
Arrangements (Topic
 
808):
 
Clarifying the Interaction between Topic
 
808 and Topic
 
606
, (“ASU 2018-18”). The amendments in this
update clarify that certain transactions between collaborative arrangement
 
participants should be accounted for as revenue when the
collaborative arrangement participant is a customer in the context of a unit
 
of account and precludes recognizing as revenue
consideration received from a collaborative arrangement
 
participant if the participant is not a customer.
 
ASU 2018-18 is effective for
the Company’s annual reporting
 
periods after December 15, 2020. The Company adopted ASU 2018-18 at January 1, 2021.
 
The
adoption of this pronouncement did not have a material impact on the
 
Company’s combined consolidated financial
 
statements or its
results of operations.
 
In December 2019, the FASB
 
issued ASU 2019-12,
 
Income Taxes (Topic
 
740): Simplifying the Accounting for Income
Taxes
 
(“ASU 2019-12”), which is intended to simplify the accounting for income
 
taxes. ASU 2019-12 removes certain exceptions to
the general principles in Topic
 
740 and also clarifies and amends existing guidance to improve consistent application.
 
The new
standard will be effective for the Company beginning
 
January 1, 2021. The Company adopted ASU 2019-12 at January 1, 2021. The
adoption of this pronouncement did not have a material impact on the
 
Company’s combined consolidated financial
 
statements or its
results of operations.
 
 
Recently Issued Accounting Pronouncements
In February 2016, the FASB
 
issued ASU 2016-12, “Leases (Topic
 
842), and associated ASUs related to Topic
 
842, which
requires organizations that lease assets to recognize on the balance
 
sheet the assets and liabilities for the rights and obligations created
by those leases. The new guidance requires that a lessee recognize assets and
 
liabilities for leases, and recognition, presentation and
measure in the financial statements will depend on its classification as a finance
 
or operating lease. In addition, the new guidance
requires disclosures to help investors and other financial statement users better
 
understand the amount, timing and uncertainty of cash
flows arising from leases. The estimated impact on our existing lease agreements
 
is approximately $
250,000
.
 
The Company has elected to apply the transition requirements as of January
 
1, 2022. This approach allows for a
cumulative effect adjustment in the period of adoption, and prior
 
periods continue to be reported in accordance with historic
accounting under ASC 840 “Leases.” Additionally,
 
as an accounting policy election, the Company has chosen to not apply the
standard to any existing short-term leases (term of 12 months or less) as this is optional under
 
U.S. GAAP.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
13
3. Fair Value
 
Measurements
 
The value for the Convertible Notes, SAFE and warrant liability balances as of
 
December 31, 2020 are based on significant inputs not
observable in the market, which represents a Level 3 measurement within
 
the fair value hierarchy. In
 
accordance with the Contribution
and Exchange Agreement, on March 2, 2021 the Convertible Notes, SAFEs and
 
warrants were all converted into Series A preferred
stock.
 
The following tables present information about the Company’s
 
financial instruments measured at fair value on a recurring basis and
indicate the level of the fair value hierarchy used to determine such fair values:
December 31, 2020
Level 1
Level 2
Level 3
Total
Liabilities
Convertible notes payable
$
$
$
24,040
$
24,040
SAFEs
24,335
24,335
Warrant liability
400
400
$
$
$
48,775
$
48,775
September 30, 2021
Level 1
Level 2
Level 3
Total
Assets
Money market funds
$
84,000
$
$
$
84,000
$
84,000
$
$
$
84,000
During the nine months ended September 30, 2020 and 2021, there were
no
 
transfers between Level 1, Level 2 and Level 3.
 
Convertible Notes
 
During the years ended December 31, 2019 and 2020, and the nine months
 
ended September 30, 2021, the Company issued
Convertible Notes. In accordance with ASC 480, a portion of the Convertible
 
Notes were required to be measured and accounted for
at fair value at each reporting date. The Company determined the Convertible
 
Notes requiring a measurement to fair value represent a
recurring measurement that is classified within Level 3 of the fair value
 
hierarchy wherein fair value is estimated using significant
unobservable inputs.
 
Convertible Notes requiring a measurement to fair value are as follows (in thousands):
 
September 30,
2021
Beginning balance, December 31, 2020
 
$
24,680
Level 3 fair value of the principal amount of
convertible notes
 
$
24,040
Change in fair value
2,667
Conversion to Series A preferred stock
 
(26,707)
Ending balance September 30, 2021
$
The fair value of the Convertible Notes was estimated using a straight debt and
 
conversion feature valuation model consisting
of probability assumptions on multiple conversion scenarios, discount
 
rates and interest rates.
 
In accordance with the Contribution and Exchange Agreement, on March
 
2, 2021, the Convertible Notes were converted into
Series A preferred stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
14
Simple Agreement for Future Equity
 
During the year ended December 31, 2020, the Company executed
 
SAFE arrangements. The fair value of the SAFEs on the
date of issuance was determined to equal the proceeds received by the Company.
 
The value of the SAFEs on the dates of conversion
into preferred stock was determined to be equal to the fair value of the preferred
 
stock issued, or $
15.6
 
million.
 
The following table sets forth a summary of the activities of the SAFE arrangements,
 
which represents a recurring
measurement that is classified within Level 3 of the fair value hierarchy wherein
 
fair value is estimated using significant unobservable
inputs (in thousands):
 
SAFE
Liability
Balance at December 31, 2020
$
24,335
Change in fair value
8,365
Issuance of SAFEs
2,900
Conversion to Series A preferred stock
(35,600)
Balance at September 30, 2021
$
In accordance with the Contribution and Exchange Agreement, on March
 
2, 2021, the SAFEs were converted into Series A
preferred stock.
Warrants to Purchase Series
 
A-1 Convertible Preferred Stock & Common Stock
 
In connection with the 2020 Series A-1 convertible preferred stock (“Series A-1
 
preferred”) financing transactions, the
Company issued fully vested warrants to purchase
205,970
 
shares of Series A-1 preferred. The warrants were issued to advisors as
consideration for assistance with the sale and issuance of the Series A-1 preferred.
 
The warrants were determined to represent issuance
costs and were recorded as a reduction in the proceeds received from the
 
sale.
 
The warrants were issued to advisors of the company and represented non-variable
 
contingently redeemable instruments.
 
As
such, the warrants were accounted for as liabilities and adjusted to fair value
 
at each reporting period.
 
The warrants are exercisable on the date of issuance and have an exercise price
 
of $
0.003
 
per share and a contractual term of
ten years
. In December 2020,
71,862
 
warrants were exercised at $
0.003
 
per share, resulting in cash proceeds of less than $
1,000
. As of
December 31, 2020,
134,106
 
warrants to purchase Series A-1 preferred were outstanding. The Company
 
continued to re-measure the
fair value of the liability associated with the warrant to purchase shares of Series A-1
 
preferred at the end of each reporting period
until the Reorganization, when the warrant converted into Series A
 
preferred stock and subsequently,
 
in connection with the IPO,
converted into Class A common stock.
The following table sets forth a summary of the activity of the warrant
 
liability which represented a recurring measurement
that is classified within Level 3 of the fair value hierarchy wherein fair value
 
is estimated using significant unobservable inputs (in
thousands):
 
Warrants
Liability
Balance at December 31, 2020
$
400
Change in fair value
214
Exchange of warrants for shares of Series A preferred stock
(614)
Balance at September 30, 2021
$
On August 5, 2021, as partial consideration for the rights and licenses the company
 
received pursuant to the Platform License
Agreement, the company issued a warrant to United Biomedical, Inc., for
 
the purchase of
1,928,020
 
shares of Class A common stock
at an exercise price of $
12.45
 
per share. The fair value of this warrant as of September 30, 2021 was $
13.3
 
million. Due to its
underlying characteristics, the warrant was classified as additional paid
 
in capital with a corresponding recognition as an ‘intangible
asset - licensed intellectual property’ to be amortized over its estimated useful
 
life of
twenty years
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
15
4. Property,
 
Equipment and Licensed Intellectual Property
Property and equipment, net consisted of the following (in thousands):
 
December 31,
September 30,
2020
2021
Airplane
$
11,983
$
11,983
Laboratory and computer equipment
969
1,019
Furniture and fixtures
84
84
Total property
 
and equipment
$
13,036
$
13,086
Less accumulated depreciation
(878)
(1,704)
Property and equipment, net
$
12,158
$
11,382
Depreciation and amortization expense for the three and nine months
 
ended September 30, 2020 was less than $
0.1
 
million and less
than $
0.1
 
million respectively. Depreciation
 
and amortization expense for the three and nine months ended September 30, 2021
 
was
$
0.4
 
million and $
0.9
 
million, respectively.
 
Licensed intellectual property,
 
net consisted of the following (in thousands):
Licensed intellectual property is amortized over the estimated lifetime
 
of the intangible asset (
20
 
years).
 
As of September 30, 2021, the annual amortization schedule is as follows (in thousands):
 
September 30,
2021
Licensed intellectual property
$
13,320
Less accumulated amortization
(103)
Licensed intellectual property,
 
net
$
13,217
Amount
2021 (Q4 2021)
$
167
2022
666
2023
666
2024
668
2025 and thereafter
11,050
$
13,217
5. Accrued Expenses and Other Current Liabilities
 
Accrued expenses and other current liabilities consisted of the following (in
 
thousands):
 
December 31,
September 30,
2020
2021
Accrued professional fees and other
228
2,240
Accrued payroll and benefits
53
2,138
Accrued interest
33
31
Accrued external research and development
296
725
$
610
5,134
6. Convertible Notes Payable
 
Beginning in April 2018, the Company issued several Convertible Notes, some
 
of which were issued to related parties. The
Convertible Notes bear simple interest at annual rates ranging from
4.8
% to
6
%. All unpaid principal, together with the accrued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
16
interest thereon, are payable upon an event of default or upon maturity,
 
which ranges from
one
 
to
three years
. The Convertible Notes
contain a number of provisions addressing automatic and optional conversion,
 
events of default, and prepayment provisions.
 
The Company accounts for the Convertible Notes at fair value, in accordance
 
with ASC 480, with any changes in fair value
being recognized through the condensed combined consolidated statements of
 
operations.
In accordance with the Contribution and Exchange Agreement, on
 
March 2, 2021 each Reorg. Convertible Note (as defined
below) that was outstanding was exchanged for shares of Series A preferred
 
stock, as set forth in the applicable Convertible Note
agreements and the Contribution and Exchange Agreement.
 
 
During the three and nine months ended September 30, 2021, the Company
 
recognized interest expense of $
0.1
 
and $
0.2
million, respectively,
 
related to the Convertible Notes. In addition, during the nine months ended September
 
30, 2021, the Company
recognized a change in fair value of $
2.7
 
million in the accompanying condensed combined consolidated statements
 
of operations
related to the Convertible Notes.
 
The following table shows the activity of the Convertible Notes (in thousands):
Convertible Notes
Principal Amount Payable
Change in Fair Value
Accrued Interest
Issuance
Conversion to
Standard
Related Party
Standard
Related Party
Standard
Related Party
Costs
Series A
Preferred
Balance
December 31, 2019
$
11,170
$
510
$
33
$
26
$
378
$
4
$
$
$
12,121
Additions
2,040
10,000
1,661
3,119
203
48
(300)
16,771
Settlements
(5,500)
(5,500)
September 30, 2020
$
7,710
$
10,510
$
1,694
$
3,145
$
581
$
52
$
(300)
$
$
23,392
Convertible Notes
Principal Amount Payable
Change in Fair Value
Accrued Interest
Issuance
Conversion to
Standard
Related Party
Standard
Related Party
Standard
Related Party
Costs
Series A
Preferred
Balance
December 31, 2020
$
7,710
$
10,510
$
1,972
$
3,848
$
674
$
183
$
(217)
$
$
24,680
Additions
2,000
812
1,855
48
121
4,836
Settlements
(2,000)
(187)
(2,187)
Amortization
50
50
Conversion of Convertible
 
Notes
 
to Series A
 
preferred stock
167
(27,546)
(27,379)
September 30, 2021
$
5,710
12,510
$
2,784
$
5,703
$
535
$
304
$
$
(27,546)
$
7. Notes Payable
 
Notes Payable with Related Parties
In December 2018, the Company entered into related party convertible notes
 
payable (the “2018 Related Notes” and together
with the Convertible Notes, the “Reorg. Convertible Notes”)
 
for $
2.0
 
million in aggregate proceeds, received in three tranches. The
2018 Related Notes bore simple interest at an annual rate of
5
% and contain a number of provisions addressing automatic and optional
conversion, events of default and prepayment. In accordance with the Contribution
 
and Exchange Agreement, on March 2, 2021, the
2018 Related Notes were converted into Series A preferred stock.
 
In November 2019, the Company borrowed $
0.1
 
million from its Chief Executive Officer (the “2019 Executive
 
Note”). No
formal loan agreement was executed. However,
 
the Company has elected to accrue interest at an annual rate of
5
%, consistent with the
terms and conditions of the Convertible Notes and 2018 Related Notes, which was the
 
closest benchmark the Company could
evaluate. The 2019 Executive Note was repaid in August 2021.
 
Note Payable—Airplane
In connection with the acquisition of an airplane, the Company entered into
 
a note payable agreement (the “2025 Note”) in
June 2020 for $
11.5
 
million, with an annual interest rate of
3.4
% and a maturity date of
June 9, 2025
. Principal and interest payments
are payable monthly in the amount of $
0.06
 
million with a final payment of $
9.4
 
million at maturity. The 2025
 
Note is guaranteed by
the co-founders of the Company.
 
In addition, the Company incurred debt issuance costs of $
0.3
 
million, which are being amortized
over the term of the loan. There are no financial covenants associated with the 2025
 
Note.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
17
The carrying value of the 2025 Note is as follows (in thousands):
 
September 30,
2021
Principal
$
10,989
Unamortized debt issuance cost
(198)
Carrying amount
10,791
Less: current portion
(425)
Note payable, net of current portion and debt issuance cost
$
10,366
As of September 30, 2021, the remaining principal payments for the 2025
 
Note, are as follows (in thousands):
 
Amount
2021
$
105
2022
429
2023
444
2024
458
2025 and thereafter
9,553
$
10,989
Interest expense associated with the 2025 Note was less than $
0.1
 
million for each of the three and nine months ended
September 30, 2020. Interest expense associated with the 2025 Note
 
was $
0.1
 
million and $
0.3
 
million for the three and nine months
ended September 30, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
18
Note Payable—Paycheck Protection Program
 
The Company applied for and received a loan, which is in the form of a note
 
dated May 5, 2020, from HSBC Bank USA,
National Association (“HSBC”) in the aggregate amount of approximately
 
$
0.3
 
million (the “PPP Loan”), pursuant to the Paycheck
Protection Program (“PPP”). The PPP,
 
established as part of the Coronavirus Aid, Relief and Economic
 
Security Act (“CARES Act”),
provides for loans to qualifying businesses for amounts up to 2.5 times of the average
 
monthly payroll expenses of the qualifying
business. As of December 31, 2020, there were no events of default under
 
the PPP Loan. The Company paid off the PPP Loan in full,
including all accrued but unpaid interest to the repayment date, in August 2021.
 
8. Convertible Preferred Stock
 
As explained in Note 1, in accordance with the Contribution and Exchange
 
Agreement, on March 2, 2021 each share of
preferred stock of UNS and COVAXX,
 
as well as each Reorg. Convertible Note, that was outstanding
 
was exchanged for Vaxxinity’s
preferred stock as set forth in the Contribution and Exchange Agreement. Each
 
UNS convertible preferred share was exchanged for
0.2191
 
shares of Vaxxinity
 
preferred stock and each share of COVAXX
 
convertible preferred stock was exchanged for
3.4233
 
shares
of Vaxxinity
 
preferred stock.
As of September 30, 2021,
Vaxxinity’s
 
Amended and Restated Certificate of Incorporation (authorized
87,223,095
shares of convertible preferred stock with a
 
par value of $
0.0001
 
per share, of which
62,223,095
 
shares have been designated
as Series A preferred stock and
25,000,000
 
shares have been designated as Series B preferred stock.
The holders of Vaxxinity’s
 
preferred stock have liquidation rights in the event of a deemed liquidation that,
 
in certain
situations, are not solely within the control of Vaxxinity.
 
Therefore, the preferred stock is classified outside of stockholders’ deficit.
 
Preferred stock consisted of the following as of September 30, 2021:
As of September 30, 2021
Issuance Dates
Shares
issued and
outstanding
Common
Stock Issuable
Upon
Conversion
Series A preferred stock
March 2021
62,223,095
39,989,083
Series B preferred stock
March 2021
5,441,863
3,497,337
Series B preferred stock
June 2021
9,923,711
6,377,700
77,588,669
49,864,120
The common stock issuable upon conversion reflects the application
 
of the stock split described in Note 1. All shares of
preferred stock were automatically converted into shares of Vaxxinity’s
 
Class A common stock concurrently with the closing of the
Company’s IPO in November 2021.
9. Simple Agreement for Future Equity
 
During the year ended December 31, 2020, the Company executed
 
SAFE arrangements. The SAFEs were not
mandatorily redeemable, nor did they require
 
the Company to repurchase a fixed number of shares. The
 
Company determined that
the SAFEs contained a liquidity event provision that
 
embodied an obligation indexed to the fair value of
 
the Company’s equity
shares and could require the Company to settle
 
the SAFE obligation by transferring assets or cash.
 
For this reason, the Company
recorded the SAFEs as a liability under ASC 480 and
re-measured the fair value at the end of each
 
reporting period, with changes
in fair value reported in earnings.
In March 2020, the Company issued a SAFE (“SAFE 1”) for $
0.4
 
million, which converted into
463,162
 
shares of
Series Seed-2 convertible preferred stock
 
at $
0.7773
 
per share in April 2020. In June, July,
 
and
August 2020, the Company
issued a series of SAFEs (“SAFE 2”) for $
14.7
 
million, which converted into
6,307,690
 
shares of Series A-2 convertible
preferred stock (“Series A-2 preferred”)
 
at $
2.3241
 
per share in
August 2020.
The Company determined the fair value of SAFE 2
 
investment on the date of conversion and recognized the
 
difference
between the fair value on the date of conversion
 
and the initial fair value of SAFE 2 investment in
 
the consolidated statement of
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
19
operations. A loss of $0.6 million was recorded
 
in the consolidated statement of operations for
 
the nine months ended September
30, 2020.
In December 2020, the Company issued a series of SAFEs (collectively,
 
“SAFE 3”) for $
24.3
 
million. In January 2021,
the Company issued additional SAFEs for $
2.9
 
million.
As explained in Note 1, in accordance with the Contribution
 
and Exchange Agreement, on March 2, 2021, the
shareholders of both UNS and COVAXX
 
contributed their capital stock in
 
exchange for Vaxxinity’s
 
capital stock. Prior to the
Reorganization, all the holders of outstanding
 
COVAXX
 
SAFEs agreed to convert such SAFEs into shares of Series A-3 preferred
stock of COVAXX,
 
which shares were then exchanged for shares of the
 
Company’s Series A preferred
 
stock.
10. Common Stock
 
As explained in Note 1, in accordance with the Contribution and Exchange
 
Agreement, on March 2, 2021, all outstanding
shares of common stock of UNS and COVAXX
 
were contributed to Vaxxinity
 
and exchanged for an aggregate of
57,702,458
 
shares
of Vaxxinity’s
 
Class A common stock,
10,999,149
 
shares of Vaxxinity’s
 
Class B common stock and
37,388,014
 
shares of our Series
A preferred was exchanged for Vaxxinity’s
 
common stock. Each UNS share of common stock was exchanged for
0.2191
 
shares of
Vaxxinity
 
common stock and each share of COVAXX
 
common stock was exchanged for
3.4233
 
like shares of Vaxxinity
 
common
stock.
 
In September 2021, the Company converted
2,874,984
 
shares of Class A common stock held by the Company’s
 
Chief
Executive Officer and Executive Chairman on a
one
-to-one basis for shares of Class B common stock.
 
As of September 30, 2021, Vaxxinity’s
 
Amended and Restated Certificate of Incorporation authorized
170,650,960
 
shares of
common stock with a par value of $
0.0001
 
per share, of which
146,477,113
 
shares have been designated as Class A common stock
and
24,173,847
 
shares have been designated as Class B common stock.
 
Holders of Class A common stock and Class B common stock have identical rights,
 
except with respect to voting and
conversion. Except as otherwise expressly provided in Vaxxinity’s
 
Amended and Restated Certificate of Incorporation or Bylaws, or
required by applicable law,
 
holders of Class A common stock will be entitled to one vote per share on all matters submitted to
 
a vote
of stockholders and holders of our Class B common stock will be entitled to ten votes
 
per share on all matters submitted to a vote of
stockholders.
 
Holders of Class A common stock and Class B common stock vote together as a single
 
class on all matters submitted to a
vote of stockholders, except (i) amendments to Vaxxinity’s
 
Amended and Restated
 
Certificate of Incorporation to increase or decrease the par value of a class of
 
capital stock, in which case the applicable class
would be required to vote separately to approve the proposed amendment
 
and (ii) amendments to Vaxxinity’s
 
Amended and Restated
Certificate of Incorporation that alter or change the powers, preferences or
 
special rights of a class of capital stock in a manner that
affects its holders adversely,
 
in which case the applicable class would be required to vote separately to approve
 
the proposed
amendment.
 
Holders of common stock are entitled to receive, ratably,
 
dividends as may be declared by Vaxxinity’s
 
board of directors out
of funds legally available therefor if the board of directors, in its discretion,
 
determines to issue dividends.
 
The voting, dividend, and liquidation rights of the holders of common stock are
 
subject to and qualified by the rights, powers,
and preferences of the holders of Vaxxinity’s
 
preferred stock.
 
The Company has reserved shares of common stock for issuance for the following
 
purposes at September 30, 2021:
 
Series A preferred stock
39,989,083
Series B preferred stock
9,875,037
Options issued and outstanding
20,714,308
Options available for future grants
7,169,027
Warrants issued and
 
outstanding to purchase shares of common
2,056,722
79,804,177
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
20
11.
 
Equity Incentive Plan
 
Stock Options
 
In February 2021, the Company replaced the 2017 and 2020 Stock
 
Option and Grant Plans with the newly-adopted 2021
Stock Option and Grant Plan (the “Plan”), which provides for the Company
 
to grant qualified incentive options, nonqualified options,
restricted stock awards, unrestricted stock awards, and restricted stock units
 
to employees and non-employees to purchase the
Company’s common
 
stock.
 
The maximum number of shares of common stock that can be issued under
 
the Plan is
21,593,830
 
shares of Class A and
6,362,45
6 Class B shares. As of September 30, 2021,
7,169,027
 
shares were available for Class A common stock future grant. Shares
that are forfeited, canceled, reacquired by the Company prior to vesting,
 
satisfied without the issuance of stock, withheld to cover the
exercise price or tax withholdings, or otherwise terminated, other
 
than by exercise, shall be added back to the Shares available for
issuance under the Plan.
The exercise price for grants made pursuant to the terms of the Plan is determined
 
in the applicable grant by the board of
directors. Any incentive options granted to persons possessing less than
10
% of the total combined voting power of all classes of stock
may not have an exercise price of less than
100
% of the fair market value of the common stock on the grant date. Any incentive
options granted to persons possessing more than
10
% of the total combined voting power of all classes of stock may not have an
exercise price of less than
110
% of the fair market value of the common stock on the grant date.
 
The option term for incentive awards may not be greater than
ten years
 
from the date of the grant. Incentive options granted
to persons possessing more than
10
% of the total combined voting power of all classes of stock may not have an option term of
 
greater
than
five years
 
from the date of the grant. The vesting period for equity-based awards is determined
 
at the discretion of the board of
directors.
 
In August 2021, we canceled existing options to purchase, in aggregate,
6,342,456
 
shares of our Class A common stock held
by Mei Mei Hu and Louis Reese in exchange for an equal number of options to purchase
 
shares of our Class B common stock.
 
The
new options to purchase shares of our Class B common stock were issued with exercise
 
prices equal to the fair value of our Class B
common stock on the new grant date.
 
The company concluded, due to an increased exercise price in the exchanged options, there
 
will
be no associated incremental value reflected in our stock compensation
 
expense.
As of September 30, 2021 there were
14,351,853
 
options for Class A shares outstanding and
6,362,456
 
options for Class B
shares outstanding, of which
7,092,282
 
Class A shares were exercisable.
 
Total stock-based
 
compensation expense for stock options is as follows (in thousands):
Three Months Ended September 30,
Nine months ended September 30,
2020
2021
2020
2021
Research and development
$
83
$
364
$
206
$
738
General and administrative
208
1,100
489
4,864
Total stock-based
 
compensation expense
$
291
$
1,464
$
695
$
5,602
Restricted Stock
 
The following table summarizes the Company’s
 
restricted stock activity for the nine months ended September 30, 2021:
Number of
Shares
Weighted
average grant
date fair value
per share
Unvested at December 31, 2020
15,405
$
0.32
Vested
(15,405)
$
0.32
Unvested at September 30, 2021
-
$
-
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(unaudited)
 
21
Stock-based compensation expense recognized on vested
 
restricted stock was immaterial for the three and nine months ended
September 30, 2020 and 2021, respectively.
12. Income Taxes
 
During the three and nine months ended September 30, 2020 and
 
2021, respectively,
 
the Company recorded
no
 
income
tax benefit for the net operating losses incurred
 
in each year, due its uncertainty
 
of realizing a benefit
from those items. The
Company’s tax provision
 
and the resulting effective tax rate
 
for interim periods is determined based upon
 
its estimated annual
effective tax rate, adjusted for the
 
effect of discrete items arising
 
during the interim quarterly period. The
 
impact of such inclusions
could result in a higher or lower effective
 
tax rate during a particular quarterly period, based upon
 
the mix and timing of actual
earnings or losses versus annual projections. In each
 
quarterly period, the Company updates its estimate of the
 
annual effective tax
rate, and if the estimated annual tax rate changes,
 
a cumulative adjustment is made in that quarter.
The Company has evaluated the positive and negative
 
evidence bearing upon its ability to realize its deferred
 
tax assets,
which primarily consist of net operating
 
loss carryforwards. The Company has considered its history of
 
cumulative net losses,
estimated future taxable income and prudent
 
and feasible tax planning strategies and has concluded that it is more
 
likely than not
that the company will not realize the benefits
 
of its deferred tax
13. Net Loss Per Share
 
The Company’s unvested restricted
 
common shares have been excluded from the computation of basic net loss per
 
share.
 
The Company’s potentially dilutive
 
securities, which include options, unvested restricted stock, convertible notes
 
payable
and convertible preferred stock, have been excluded from the computation of diluted
 
net loss per share as the effect would be to
reduce the net loss per share. Therefore, the weighted average number
 
of common shares outstanding used to calculate both basic and
diluted net loss per share is the same. The Company excluded the following potential
 
common shares, presented based on amounts
outstanding at each period end, from the computation of diluted net loss per
 
share as of September 30, 2021 because including them
would have had an anti-dilutive effect:
 
Series A preferred stock
39,989,083
Series B preferred stock
9,875,037
Options to purchase common stock
20,714,308
Warrants issued and
 
outstanding to purchase shares of common stock
2,056,722
72