vaxx-20230331
Q1 0001851657 --12-31 false 0.0001 50000000 0.0001 1000000000 0.0001 100000000 13874132 13874132 6902994 2023 NASDAQ Yes Yes false P1Y 0001851657 2023-01-01 2023-03-31 0001851657 2022-12-31 0001851657 2023-03-31 0001851657 us-gaap:AirTransportationEquipmentMember 2023-03-31 0001851657 vaxx:LaboratoryAndComputerEquipmentMember 2023-03-31 0001851657 us-gaap:CommonClassAMember 2023-03-31 0001851657 us-gaap:CommonClassBMember 2023-03-31 0001851657 2022-01-01 2022-03-31 0001851657 us-gaap:GeneralAndAdministrativeExpenseMember 2023-01-01 2023-03-31 0001851657 us-gaap:NotesPayableToBanksMember vaxx:Note2025Member 2022-12-31 0001851657 us-gaap:EmployeeStockOptionMember 2022-12-31 0001851657 us-gaap:CommonClassAMember 2022-12-31 0001851657 us-gaap:CommonClassBMember 2022-12-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassAMember 2023-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassBMember 2023-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassAMember 2022-12-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassBMember 2022-12-31 0001851657 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001851657 us-gaap:RetainedEarningsMember 2023-03-31 0001851657 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001851657 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001851657 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001851657 us-gaap:RetainedEarningsMember 2022-12-31 0001851657 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2023-03-31 0001851657 us-gaap:VehiclesMember 2023-03-31 0001851657 vaxx:NotesPayableAirplaneMember 2020-06-30 0001851657 vaxx:NotesPayableAirplaneMember 2023-01-01 2023-03-31 0001851657 vaxx:NotesPayableAirplaneMember 2023-03-31 0001851657 us-gaap:NotesPayableToBanksMember vaxx:Note2025Member 2023-03-31 0001851657 us-gaap:ForeignPlanMember vaxx:PersonalRetirementSavingsAccountMember 2023-01-01 2023-03-31 0001851657 us-gaap:AirTransportationEquipmentMember 2022-12-31 0001851657 vaxx:LaboratoryAndComputerEquipmentMember 2022-12-31 0001851657 us-gaap:VehiclesMember 2022-12-31 0001851657 us-gaap:CommonClassBMember 2023-05-05 0001851657 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001851657 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001851657 2022-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassAMember 2022-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassBMember 2022-03-31 0001851657 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001851657 us-gaap:RetainedEarningsMember 2022-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassAMember 2023-01-01 2023-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassAMember 2022-01-01 2022-03-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassAMember 2021-12-31 0001851657 us-gaap:CommonStockMember us-gaap:CommonClassBMember 2021-12-31 0001851657 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001851657 us-gaap:RetainedEarningsMember 2021-12-31 0001851657 us-gaap:FairValueInputsLevel1Member 2022-12-31 0001851657 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2023-03-31 0001851657 us-gaap:FairValueInputsLevel1Member 2023-03-31 0001851657 us-gaap:MoneyMarketFundsMember 2023-03-31 0001851657 us-gaap:FurnitureAndFixturesMember 2023-03-31 0001851657 us-gaap:FurnitureAndFixturesMember 2022-12-31 0001851657 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-03-31 0001851657 2021-01-01 2021-12-31 0001851657 us-gaap:RestrictedStockMember 2023-01-01 2023-03-31 0001851657 us-gaap:RestrictedStockMember 2023-03-31 0001851657 us-gaap:ResearchAndDevelopmentExpenseMember 2023-01-01 2023-03-31 0001851657 us-gaap:ResearchAndDevelopmentExpenseMember 2022-01-01 2022-03-31 0001851657 us-gaap:ForeignPlanMember vaxx:PersonalRetirementSavingsAccountMember 2022-01-01 2022-03-31 0001851657 2021-12-31 0001851657 us-gaap:ConstructionInProgressMember 2023-03-31 0001851657 us-gaap:ConstructionInProgressMember 2022-12-31 0001851657 us-gaap:CommonClassAMember 2021-11-30 0001851657 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-03-31 0001851657 us-gaap:WarrantMember 2022-01-01 2022-03-31 0001851657 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-03-31 0001851657 us-gaap:WarrantMember 2023-01-01 2023-03-31 0001851657 2022-04-30 0001851657 us-gaap:EmployeeStockOptionMember 2023-03-31 0001851657 us-gaap:CommonClassAMember 2023-05-05 0001851657 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2023-01-01 2023-03-31 0001851657 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2023-03-31 0001851657 us-gaap:USTreasurySecuritiesMember 2023-03-31 0001851657 us-gaap:USTreasurySecuritiesMember 2023-01-01 2023-03-31 0001851657 us-gaap:FairValueInputsLevel2Member 2023-03-31 0001851657 us-gaap:FairValueInputsLevel3Member 2023-03-31 0001851657 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2023-03-31 0001851657 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2023-03-31 0001851657 us-gaap:FairValueInputsLevel2Member 2022-12-31 0001851657 us-gaap:FairValueInputsLevel3Member 2022-12-31 0001851657 us-gaap:USTreasurySecuritiesMember 2022-12-31 0001851657 us-gaap:USTreasurySecuritiesMember 2022-01-01 2022-12-31 0001851657 2022-01-01 2022-12-31 0001851657 us-gaap:LeaseholdImprovementsMember 2023-03-31 0001851657 us-gaap:LeaseholdImprovementsMember 2022-12-31 0001851657 us-gaap:SoftwareAndSoftwareDevelopmentCostsMember 2022-12-31 0001851657 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2022-12-31 0001851657 us-gaap:NotesPayableToBanksMember vaxx:Promissory2022NoteMember 2022-12-31 0001851657 us-gaap:NotesPayableToBanksMember vaxx:Promissory2022NoteMember 2023-03-31 0001851657 vaxx:Note2025Member 2022-01-01 2022-03-31 0001851657 vaxx:Note2025Member 2023-01-01 2023-03-31 0001851657 vaxx:RelatedPartyMember vaxx:Promissory2022NoteMember 2022-10-31 0001851657 vaxx:RelatedPartyMember vaxx:Promissory2022NoteMember 2023-01-01 2023-03-31 0001851657 us-gaap:RestrictedStockMember 2022-12-31 0001851657 us-gaap:CommonClassAMember us-gaap:EmployeeStockOptionMember 2023-03-31 0001851657 us-gaap:CommonClassBMember us-gaap:EmployeeStockOptionMember 2023-03-31 0001851657 vaxx:ContractResearchOrganizationsMember 2023-03-31 0001851657 vaxx:ContractManufacturingOrganizationsMember 2023-03-31 0001851657 vaxx:UbiMember vaxx:UnitedbiomedicalincMember 2023-03-31 0001851657 us-gaap:InProcessResearchAndDevelopmentMember 2023-03-31 0001851657 vaxx:RelatedPartyMember 2022-12-31 0001851657 vaxx:RelatedPartyMember 2023-03-31 0001851657 vaxx:Promissory2022NoteMember 2022-10-31 0001851657 vaxx:Promissory2022NoteMember 2022-12-31 0001851657 vaxx:Promissory2022NoteMember 2023-03-31 0001851657 us-gaap:DomesticCountryMember 2023-03-31 0001851657 vaxx:Ub612Member 2022-01-01 2022-12-31 0001851657 2022-08-31 0001851657 vaxx:UbiIpMember vaxx:ServicesProvidedByRelatedPartiesMember 2023-01-01 2023-03-31 0001851657 vaxx:UbiIpMember vaxx:ServicesProvidedByRelatedPartiesMember 2022-01-01 2022-12-31 0001851657 vaxx:UbiIpMember vaxx:ServicesProvidedByRelatedPartiesMember 2022-12-31 0001851657 vaxx:UbiIpMember vaxx:ServicesProvidedByRelatedPartiesMember 2023-03-31 0001851657 srt:MaximumMember vaxx:StockOptionAndGrantPlan2021Member 2023-01-01 2023-01-01 0001851657 vaxx:Ub612Member 2021-08-01 2021-08-31 0001851657 us-gaap:MoneyMarketFundsMember 2022-12-31 0001851657 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2022-12-31 0001851657 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel2Member 2022-12-31 0001851657 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel3Member 2022-12-31 0001851657 vaxx:Ub612Member 2021-08-31 0001851657 us-gaap:RestrictedStockMember 2022-01-01 2022-03-31 0001851657 us-gaap:RestrictedStockMember 2023-01-01 2023-03-31 0001851657 srt:MaximumMember 2023-01-01 2023-03-31 0001851657 vaxx:Note2025Member 2023-01-01 2023-03-31 0001851657 vaxx:Promissory2022NoteMember 2023-01-01 2023-03-31 0001851657 vaxx:MichaelJFoxFoundationGrantMember 2023-03-31 0001851657 vaxx:MichaelJFoxFoundationGrantMember 2021-11-03 2021-11-03 0001851657 vaxx:CoalitionForEpidemicPreparednessInnovationsCepiGrantMember 2023-03-31 0001851657 vaxx:CoalitionForEpidemicPreparednessInnovationsCepiGrantMember 2023-01-01 2023-03-31 0001851657 vaxx:MichaelJFoxFoundationGrantMember 2023-01-01 2023-03-31 0001851657 vaxx:MichaelJFoxFoundationGrantMember 2022-01-01 2022-03-31 0001851657 vaxx:CoalitionForEpidemicPreparednessInnovationsCepiGrantMember 2022-04-01 2022-04-30 0001851657 us-gaap:ForeignPlanMember 2023-01-01 2023-03-31 0001851657 vaxx:UbiIpMember vaxx:ServicesProvidedByRelatedPartiesMember 2022-01-01 2022-03-31 0001851657 srt:MaximumMember vaxx:Note2025Member 2022-01-01 2022-12-31 0001851657 srt:MaximumMember vaxx:Note2025Member 2023-01-01 2023-03-31 utr:sqft iso4217:USD xbrli:pure xbrli:shares iso4217:USD xbrli:shares dummy:Segments
 
 
 
 
 
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
March 31, 2023
-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.)
505 Odyssey Way
Merritt Island
,
FL
32953
(Address of principal executive offices)
(Zip Code)
(
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).
Yes
No
As of
 
May 5, 2023, the registrant had
112,665,699
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.
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 materially from those reflected in
 
forward-looking statements include, among others, the
 
following:
 
the prospects
 
of our
 
product candidates,
 
including the
 
progress, number,
 
scope, cost,
 
results
 
and timing
 
of data
 
from
our development activities, preclinical trials
 
and clinical trials for our product
 
candidates or programs, such as the target
indication(s) for
 
development
 
or
 
approval,
 
the
 
size,
 
design,
 
population,
 
conduct,
 
cost,
 
objective
 
or
 
endpoints
 
of
 
any
clinical trial, or the timing for initiation
 
or completion of or availability of
 
results from any clinical trial, for submission,
review or approval of any regulatory filing, or for meeting with regulatory
 
authorities;
 
the potential benefits that may be derived from any of our product candidates;
 
the timing of and our ability to
 
obtain and maintain regulatory approval for our existing product
 
candidates, any product
candidates
 
that
 
we
 
may
 
develop,
 
and
 
any
 
related
 
restrictions,
 
limitations,
 
or
 
warnings
 
in
 
the
 
label
 
of
 
any
 
approved
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;
 
estimates of our addressable market and
 
market growth, and expectations about market
 
trends;
 
our future operations, financial position, revenue,
 
costs, expenses, uses of cash, capital requirements,
 
our needs for
additional
 
financing or
 
the period
 
for which
 
our existing
 
cash resources
 
will be
 
sufficient
 
to meet
 
our operating
requirements;
 
our
 
ability
 
to comply
 
with legal
 
and
 
regulatory
 
requirements
 
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;
 
our ability to access capital on acceptable terms in a rising interest rate and
 
tighter credit environment;
 
competitive companies and technologies
 
within 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 and obtain alternative sources of raw materials;
 
our ability
 
and the
 
potential to
 
successfully manufacture
 
our product
 
candidates for
 
pre-clinical use,
 
for clinical
 
trials
and, if approved, on a larger scale for commercial
 
use;
 
the
 
ability
 
and
 
willingness
 
of
 
our
 
third-party
 
collaborators,
 
including
 
UBI,
 
to
 
continue
 
research
 
and
 
development
activities
 
relating
 
to
 
our
 
product
 
candidates
 
and
 
our
 
ability
 
to
 
attract
 
additional
 
collaborators
 
with
 
development,
regulatory and commercialization expertise;
 
general economic, political,
 
demographic and business conditions
 
in the United States,
 
Taiwan
 
and other jurisdictions
where we conduct business or clinical trials;
 
the potential effects of government
 
regulation, including regulatory developments
 
in the United
States and other jurisdictions;
 
ability to obtain additional financing
 
in future offerings or otherwise;
 
the effects
 
of the Russia-Ukraine
 
conflict and
 
the COVID-19 pandemic
 
on business operations
 
and the initiation,
development and operation of our clinical trials, including patient enrollment
 
of our clinical trials; and
 
our strategies, prospects, plans, expectations, forecasts or objectives.
We discuss many
 
of these and other factors
 
in greater detail under Item 1A.
 
“Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2022 filed with
 
the Securities and Exchange Commission on March
 
27, 2023. These risk factors
are not
 
exhaustive. Other
 
sections of
 
this report
 
may include additional
 
factors which
 
could adversely
 
impact our
 
business and
financial performance.
 
New risk factors emerge
 
from time to time,
 
and it is not
 
possible to predict
 
all such risk factors,
 
nor can
we assess the impact of all
 
such risk factors on our
 
business or the extent to which
 
any factor or combination of factors
 
may cause
actual results
 
to differ
 
materially from
 
those contained
 
in any
 
forward-looking statements.
 
Forward-looking statements
 
are not
guarantees of performance. Given these uncertainties, you
 
should not place undue reliance on these forward-looking
 
statements,
which speak only as of the date hereof
.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
PART
 
I – FINANCIAL INFORMATION
Item 1. Financial Statements.
VAXXINITY,
 
INC.
CONDENSED CONSOLIDATED
 
BALANCE SHEETS
(in thousands, except share and per share amounts)
March 31,
December 31,
2023
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
22,585
$
33,475
Short-term investments
44,993
53,352
Restricted cash
100
1,095
Amounts due from related parties
518
414
Prepaid expenses and other current assets
5,237
5,551
Total current assets
73,433
93,887
Property and equipment, net
12,098
12,512
Total assets
$
85,531
$
106,399
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
3,029
$
5,295
Amounts due to related parties
12,706
12,772
Accrued expenses and other current liabilities
9,439
11,370
Note payable, net of debt issuance cost
394
391
Note payable to related party
898
1,113
Total current liabilities
26,467
30,941
Other liabilities
Note payable, net of debt issuance cost, net of current portion
9,832
9,933
Note payable to related party, net of current portion
2,862
3,112
Other long-term liabilities
236
236
Total liabilities
39,398
44,222
Commitments and contingencies (Note 14)
Preferred stock: $
0.0001
 
par value,
50,000,000
 
shares authorized at March 31, 2023 and December 31,
 
2022
Stockholders’ equity:
Class A common stock, $
0.0001
 
par value;
1,000,000,000
 
shares authorized,
112,118,911
 
and
112,182,750
 
shares issued and
outstanding at March 31, 2023 and December 31, 2022,
 
respectively
278
278
Class B common stock, $
0.0001
 
par value;
100,000,000
 
shares authorized,
13,874,132
 
shares issued and outstanding at
March 31, 2023 and December 31, 2022
1
1
Additional paid-in capital
369,026
366,798
Accumulated other comprehensive loss
(49)
(197)
Accumulated deficit
(323,124)
(304,703)
Total stockholders’ equity
46,133
62,177
Total liabilities and stockholders’ equity
$
85,531
$
106,399
The accompanying notes are an integral part
 
of these unaudited condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
VAXXINITY,
 
INC.
CONDENSED CONSOLIDATED
 
STATEMENTS
 
OF OPERATIONS
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended March 31,
2023
2022
Operating expenses:
Research and development
$
11,424
$
11,478
General and administrative
7,384
6,686
Total operating expenses
18,808
18,164
Loss from operations
(18,808)
(18,164)
Other (income) expense:
Interest and other expense
192
105
Interest and other income
(567)
(5)
(Gain) loss on foreign currency transactions, net
(12)
(1)
Total other (income)
 
expense, net
(387)
99
Net loss
(18,421)
(18,263)
Net loss per share, basic and diluted
(0.15)
(0.15)
Weighted average
 
common shares outstanding, basic and diluted
126,061,273
125,709,613
Other comprehensive income:
 
Unrealized gain on investments
148
 
Other comprehensive income
$
148
$
The accompanying notes are an integral part
 
of these unaudited condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
VAXXINITY,
 
INC.
CONDENSED CONSOLIDATED
 
STATEMENTS
 
OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(Unaudited)
Common Stock-Class A
Common Stock-Class B
Shares
Amount
Shares
Amount
Additional Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss)
Accumulated
Deficit
Stockholders’
Equity
Balance at December 31, 2022
112,182,750
$
278
13,874,132
$
1
$
366,798
$
(197)
$
(304,703)
$
62,177
Issuance of common stock upon exercise of stock options
6,161
4
4
Stock-based compensation expense
2,225
2,225
Unrealized gain on investments
148
148
Net loss
(18,421)
(18,421)
Balance at March 31, 2023
112,188,911
$
278
13,874,132
$
1
$
369,026
$
(49)
$
(323,124)
$
46,133
Common Stock-Class A
Common Stock-Class B
Shares
Amount
Shares
Amount
Additional Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss)
Accumulated
Deficit
Stockholders’
Equity
Balance at December 31, 2021
111,518,094
$
278
13,874,132
$
1
$
357,821
$
$
(229,481)
$
128,619
Issuance of common stock upon exercise of stock options
448,998
121
121
Stock-based compensation expense
2,178
2,178
Net loss
(18,263)
(18,263)
Balance at March 31, 2022
111,967,092
$
278
13,874,132
$
1
$
360,120
$
$
(247,744)
$
112,655
The accompanying notes are an integral
 
part of these unaudited condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
VAXXINITY,
 
INC.
CONDENSED CONSOLIDATED
 
STATEMENTS
 
OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended March 31,
2023
2022
Cash flows from operating activities:
Net loss
$
(18,421)
$
(18,263)
Adjustments to reconcile net loss to net cash used in operating
 
activities:
Depreciation expense
586
333
Amortization of debt issuance costs
13
14
Amortization of discount on short-term investments
(406)
Stock-based compensation expense
2,225
2,178
Changes in operating assets and liabilities:
Amounts due from related parties
(104)
(6)
Prepaid expenses and other current assets
314
667
Long-term deposits
(1,351)
Accounts payable
(2,260)
(1,733)
Amounts due to related parties
(67)
(2,620)
Accrued expenses and other current liabilities
(1,931)
1,268
Other long-term liabilities
(1)
Net cash used in operating activities
(20,051)
(19,514)
Cash flows from investing activities:
Purchase of short-term investments
(18,588)
Redemption of short-term investments
27,500
Purchases of property and equipment
(172)
(713)
Net cash provided by (used in) investing activities
8,740
(713)
Cash flows from financing activities:
Repayments of note payable
(111)
(107)
Repayments of note payable with related party
(466)
Proceeds from exercise of stock options
4
121
Net cash provided by (used in) financing activities
(574)
14
Change in cash, cash equivalents and restricted cash
(11,885)
(20,213)
Cash, cash equivalents and restricted cash at beginning of period
34,570
145,057
Cash, cash equivalents and restricted cash at end of period
$
22,685
$
124,844
Reconciliation of cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at end of period
$
22,685
$
124,844
Less restricted cash
(100)
(78)
Cash and cash equivalents end of period
$
22,585
$
124,766
Supplemental Disclosure
Cash paid for interest
$
192
$
92
The accompanying notes are an integral part
 
of these unaudited condensed consolidated financial statements.
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
9
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 Biomedica
 
l, 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 of 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”).
 
On
December 31, 2022, COVAXX
 
merged with and into Vaxxinity.
The Company is a
 
biotechnology company currently focused on
 
developing product candidates for human
 
use in the fields
 
of neurology,
pain, cardiovascular diseases
 
and coronaviruses utilizing
 
its “Vaxxine Platform”—a synthetic peptide
 
vaccine technology first
 
developed
by
 
UBI
 
and
 
subsequently
 
refined
 
over
 
the
 
last
 
two
 
decades.
 
The
 
Company
 
is
 
engaged
 
in
 
the
 
development
 
of
 
rationally
 
designed
prophylactic and therapeutic vaccines to combat common chronic diseases with large global unmet
 
medical need. The Company is also
developing a heterologous booster vaccine for
 
SARS-Cov-2. UBI is a
 
significant shareholder of the Company and,
 
therefore, considered
a related party.
The Company
 
is subject
 
to risks and
 
uncertainties common
 
to early-stage
 
companies in
 
the biotechnology
 
industry including,
 
but not
limited
 
to,
 
uncertainty
 
of
 
product
 
development
 
and
 
commercialization,
 
lack
 
of
 
marketing
 
and
 
sales
 
history,
 
development
 
by
 
its
competitors of new
 
technological innovations, dependence on
 
key personnel, market
 
acceptance of products, product
 
liability, protection
of proprietary technology,
 
ability to raise additional
 
financing, and compliance
 
with government regulations. If
 
the Company does not
successfully
 
commercialize
 
or
 
out-license
 
any
 
of
 
its
 
product
 
candidates,
 
it
 
will
 
be
 
unable
 
to
 
generate
 
recurring
 
product
 
revenue
 
or
achieve profitability.
The
 
Company’s
 
product
 
candidates
 
are
 
in
 
development
 
and
 
will
 
require
 
significant
 
additional
 
research
 
and
 
development
 
efforts,
including extensive pre-clinical and clinical testing and regulatory approval
 
prior to commercialization. These efforts require significant
amounts of
 
additional capital, adequate
 
personnel and infrastructure
 
and extensive compliance
 
-reporting capabilities.
 
There can be
 
no
assurance that
 
the Company’s
 
research and
 
development will
 
be successfully
 
completed, that
 
adequate protection
 
for the
 
Company’s
intellectual property
 
will be
 
obtained, that
 
any products
 
developed will
 
obtain necessary
 
government regulatory
 
approval or
 
that any
approved products will be commercially viable.
 
Even if the Company’s product development efforts are
 
successful, it is uncertain when,
if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in
technology and is dependent upon the services of its employees and consultants.
Liquidity
As of March 31,
 
2023, the Company
 
had $
67.7
 
million of cash,
 
cash equivalents and
 
short term investments
 
to fund operations,
 
including
$
22.6
 
million of
 
cash and
 
cash equivalents,
 
$
45.0
 
million of
 
short-term investments,
 
and $
0.1
 
million of
 
restricted cash.
 
To
 
date, the
Company has
 
primarily financed
 
its operations
 
through the
 
sale of
 
convertible preferred
 
stock and
 
common stock,
 
borrowings under
promissory
 
notes
 
(including
 
Convertible
 
Notes),
 
a
 
portion
 
of
 
which
 
has
 
been
 
raised
 
from
 
related
 
party
 
entities,
 
and
 
grants
 
from
foundations
 
such
 
as
 
the
 
Coalition
 
for
 
Epidemic
 
Preparedness
 
Innovations
 
(CEPI)
 
and
 
the
 
Michael
 
J.
 
Fox
 
Foundation
 
(MJFF).
 
The
Company has experienced
 
significant negative cash flows
 
from operations since inception,
 
and incurred a net
 
loss of $
18.4
 
million for
the three
 
months ended
 
March 31, 2023.
 
Net cash
 
used in
 
operating activities
 
for the
 
three months
 
ended March 31,
 
2023 was
 
$
20.1
million. In addition,
 
as of March 31, 2023,
 
the Company has an
 
accumulated deficit of
 
$
323.1
 
million. The Company
 
expects to incur
substantial operating losses and
 
negative cash flows from
 
operations for the foreseeable
 
future. As of the
 
date these unaudited condensed
consolidated financial
 
statements were
 
available to
 
be issued,
 
the Company
 
expects its
 
existing cash
 
and cash
 
equivalents and
 
short-
term investments to be sufficient to fund its operating expenses and
 
capital expenditure requirements for at least the next 12 months.
In order
 
to continue
 
to fund
 
future research
 
and development
 
activities, the
 
Company
 
will need
 
to seek
 
additional capital.
 
This may
occur through strategic alliances, licensing
 
arrangements, grants or future public
 
or private debt or
 
equity financings. Additional funding
may not be available on
 
terms the Company finds acceptable
 
or at all. If the Company
 
is unable to obtain sufficient
 
capital to continue
to
 
advance
 
its
 
programs,
 
the
 
Company
 
would
 
be
 
forced
 
to
 
delay,
 
limit,
 
reduce
 
or
 
terminate
 
its
 
product
 
development
 
or
 
future
commercialization efforts
 
or grant rights
 
to third parties
 
to develop and
 
market product candidates
 
that the Company
 
would otherwise
prefer to develop and market itself.
The
 
accompanying
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
have
 
been
 
prepared
 
on
 
a
 
going
 
concern
 
basis,
 
which
contemplates
 
the
 
realization
 
of
 
assets
 
and
 
satisfaction
 
of
 
liabilities
 
in
 
the
 
ordinary
 
course
 
of
 
business.
 
The
 
unaudited
 
condensed
consolidated
 
financial
 
statements
 
do
 
not
 
include
 
any
 
adjustments
 
relating
 
to
 
the
 
recoverability
 
and
 
classification
 
of
 
recorded
 
asset
amounts or the amounts and classification of liabilities that might result from the outcome
 
of the uncertainties described above.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
10
2. Summary of Significant Accounting Policies
Basis of presentation
The
 
accompanying
 
interim
 
unaudited
 
condensed
 
consolidated
 
financial
 
statements
 
have
 
been
 
prepared
 
using
 
generally
 
accepted
accounting principles in the
 
United States of
 
America (“GAAP”) and pursuant to
 
the rules and regulations
 
of the United States
 
Securities
and Exchange Commission (“SEC”) for interim financial reporting.
 
These interim
 
condensed consolidated
 
financial statements
 
are unaudited
 
and, in
 
the opinion
 
of management,
 
include all
 
adjustments
necessary to fairly present the results of the interim periods. The condensed consolidated balance sheet at December 31, 2022, has been
derived from the audited financial statements
 
at that date. Operating results for
 
the three months ended March 31,
 
2023 and cash flows
for the
 
three months ended March 31,
 
2023 are not necessarily
 
indicative of the results
 
that may be expected
 
for the fiscal year ending
December 31, 2023
 
or any other future
 
period. Certain information
 
and footnote disclosures
 
normally included in
 
annual consolidated
financial
 
statements prepared
 
in accordance
 
with GAAP
 
have
 
been omitted
 
in accordance
 
with the
 
rules and
 
regulations
 
for
 
interim
reporting
 
of
 
the
 
SEC.
 
These
 
interim
 
unaudited
 
condensed
 
financial
 
statements
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
the
 
consolidated
financial statements
 
and notes
 
thereto included
 
in our Annual
 
Report on
 
Form 10-K
 
for the year
 
ended December 31,
 
2022 filed
 
with
the SEC on March 27, 2023 (the “Annual Report”).
Significant accounting policies
 
The significant accounting policies used in preparation of these unaudited
 
condensed consolidated financial statements are disclosed in
our annual consolidated financial statements for the year ended December 31, 2022 included in the Annual Report. There have been no
changes to the Company’s significant
 
accounting policies during the three months ended March 31, 2023.
Recently issued accounting pronouncements
 
From time to
 
time, new accounting
 
pronouncements are issued
 
by the Financial
 
Accounting Standards Board
 
(“FASB”) or other standard
setting bodies and are adopted by the Company as of the specified effective
 
date.
 
In June 2016,
 
the Financial Accounting
 
Standards Board (“FASB”)
 
issued Accounting Standards
 
Update (“ASU”) 2016-13,
 
Financial
Instruments
 
-
 
Credit
 
Losses (Topic
 
326):
 
Measurement
 
of Credit
 
Losses on
 
Financial
 
Instruments
 
(“ASU
 
2016-13”).
 
ASU 2016
 
-13
significantly
 
changes
 
the
 
impairment
 
model
 
for
 
most
 
financial
 
assets
 
and
 
certain
 
other
 
instruments
 
as
 
it
 
will
 
require
 
immediate
recognition of estimated credit
 
losses expected to occur
 
over the remaining life
 
of many financial assets, which
 
will generally result in
earlier recognition of allowances for
 
credit losses on loans and other financial
 
instruments.
 
On January 1, 2023, the Company
 
adopted
ASU 2016-13. The adoption of this standard did not have a material impact
 
on the Company's consolidated financial statements.
3. Fair Value
 
Measurements
The Company's money
 
market accounts and
 
short-term investments are
 
shown at fair
 
value based on
 
unadjusted quoted market
 
prices
in active markets for identical assets.
The following
 
table presents
 
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 (in
 
thousands):
March 31, 2023
Level 1
Level 2
Level 3
Total
Assets:
Short-term investments
$
44,993
$
$
$
44,993
Money market accounts
8,976
8,976
Total assets
$
53,969
$
$
$
53,969
December 31, 2022
Level 1
Level 2
Level 3
Total
Assets:
Short-term investments
$
53,352
$
$
$
53,352
Money market account
27,724
27,724
Total assets
$
81,076
$
$
$
81,076
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
11
During the three months ended March 31, 2023 and the year ended December 31, 2022, there were
no
 
transfers between Level 1, Level
2 and Level 3.
4. Short-Term
 
Investments
The Company’s short-term investments
 
consist of the following (in thousands):
As of March 31, 2023
Amortized Cost
Unrealized
Gains (Losses),
Net
Recorded Basis
U.S. Treasury Securities
$
45,042
$
(49)
$
44,993
Total
$
45,042
$
(49)
$
44,993
As of December 31, 2022
Amortized Cost
Unrealized
Gains (Losses),
Net
Recorded Basis
U.S. Treasury Securities
$
53,549
$
(197)
$
53,352
Total
$
53,549
$
(197)
$
53,352
These securities mature in less than 1 year.
5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
March 31,
December 31,
2023
2022
Clinical prepayments
$
2,878
$
2,679
Prepaid insurance
1,257
1,870
Prepaid materials and supplies
237
248
Deposits
240
232
Other
625
522
$
5,237
$
5,551
Clinical prepayments consist of amounts paid in
 
advance to clinical research organizations (“CROs”) for
 
expenses related to our clinical
trials, primarily
 
UB-612, and
 
included
 
$
1.9
 
million on
 
deposit as
 
of March
 
31, 2023
 
that will
 
be credited
 
against final
 
UB-612
 
trial
expenses. The remaining clinical prepayment amounts are amortized
 
to expense as earned by the CRO and clinical trial sites.
 
Prepaid
 
insurance
 
consists
 
primarily
 
of
 
$
1.1
 
million
 
and
 
$
1.6
 
million
 
for
 
the
 
unamortized
 
portion
 
of
 
the
 
Company’s
 
annual
 
D&O
insurance fee as of March 31, 2023 and December 31, 2022, respectively.
 
Prepaid materials and supplies
 
consist of amounts paid
 
in advance related to
 
the procurement and/or production
 
of materials for use in
the Company’s clinical trials,
 
primarily UB-612. Amounts held
 
by related parties
 
totaled $
0.2
 
million at March 31,
 
2023 and
 
$
0.2
 
million
at December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
12
6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
March 31,
December 31,
2023
2022
Airplane
$
11,983
$
11,983
Laboratory and computer equipment
3,267
3,146
Leasehold improvements
403
403
Software
426
415
Facilities, furniture and fixtures
55
37
Vehicles
87
87
Construction in progress
87
65
Total property
 
and equipment
16,307
16,136
Less: accumulated depreciation and amortization
(4,209)
(3,624)
Property and equipment, net
$
12,098
$
12,512
Depreciation expense for the three months ended March 31, 2023
 
and 2022 was $
0.6
 
million and $
0.3
 
million, respectively.
 
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following
 
(in thousands):
March 31,
December 31,
2023
2022
Accrued external research and development
$
6,491
$
6,904
Accrued bonuses
1,527
2,568
Accrued professional fees and other
1,420
1,722
Accrued interest
1
176
$
9,439
$
11,370
8. Other Long-Term
 
Liabilities
Other long-term liabilities consisted of the following (in thousands):
March 31,
December 31,
2023
2022
Accrued taxes
236
236
$
236
$
236
As of
 
March 31, 2023 and
 
December 31, 2022, approximately
 
$
0.2
 
million of
 
accrued taxes related
 
to penalties and
 
interest the Company
may be subject to paying for late filing fees related to a foreign
 
subsidiary. The
 
Company expects these amounts to be forgiven but has
accrued for them until the statute of limitations expires and it is appropriate to write them off.
9. Notes Payable
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 $
0.1
 
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 THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
13
The carrying value of the 2025 Note is as follows (in thousands):
 
March 31,
December 31,
2023
2022
Principal
$
10,344
$
 
10,455
Unamortized debt issuance cost
(118)
(131)
Carrying amount
10,226
10,324
Less: current portion
(394)
(391)
Note payable, net of current portion and debt issuance cost
$
9,832
$
9,933
As of March 31, 2023, the remaining principal payments for the 2025
 
Note are as follows (in thousands):
 
Amount
2023 (remaining 9 months)
$
333
2024
458
2025
9,553
$
10,344
Interest
 
expense
 
associated
 
with
 
the
 
2025
 
Note
 
was
 
$
0.1
 
million
 
and
 
$
0.1
 
million
 
for
 
the
 
three
 
months
 
ended
 
March 31,
 
2023
 
and
March 31, 2022, respectively.
 
Accrued interest of
 
less than $
0.1
 
million was included
 
in accrued expenses
 
and other current
 
liabilities
in the accompanying condensed consolidated balance sheets as of March
 
31, 2023 and December 31, 2022.
Promissory Note with Related Party
In October 2022, the Company entered into a related party unsecured promissory note (the “2022 Promissory Note”) with UBI for $
4.2
million. The
 
2022 Promissory
 
Note accrues
 
interest at
7.0
% per
 
annum and
 
is due
October 1, 2026
. The
 
2022 Promissory
 
Note was
issued to satisfy accounts payable to UBI
 
totaling $
4.2
 
million. As of March 31, 2023 and
 
December 31, 2022, the outstanding principal
amount
 
under the
 
2022 Promissory
 
Note was
 
$
3.8
 
million
 
and $
4.2
 
million, respectively.
 
During the
 
three months
 
ended March
 
31,
2023, the Company incurred $
0.1
 
million in interest expense and $
0.1
 
million of interest was paid related to the Promissory Note.
The carrying value of the 2022 Promissory Note is as follows (in thousands):
March 31,
December 31,
2023
2022
Principal
$
3,759
$
 
4,225
Less: current portion
(898)
(1,113)
Note payable with related party,
 
net of current portion
$
2,862
$
3,112
As of March 31, 2023, the remaining principal payments for the 2022
 
Promissory Note are as follows (in thousands):
 
Amount
2023 (remaining 9 months)
$
647
2024
1,029
2025
1,103
2026
980
$
3,759
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
14
10. Common Stock
The Company has reserved shares of Class A common stock for issuance for the following
 
purposes:
 
March 31,
December 31,
2023
2022
Options and RSUs issued and outstanding
22,914,609
20,716,760
Options available for future grants
6,902,994
6,064,003
Warrants issued and
 
outstanding
1,928,020
1,928,020
31,745,623
28,708,783
11. Stock-Based Compensation
2021 Omnibus Incentive Compensation Plan
In
 
November
 
2021,
 
the
 
Company
 
established
 
the
 
2021 Omnibus
 
Incentive
 
Compensation
 
Plan
 
(the
 
“Plan”),
 
which
 
provides
 
for
 
the
Company
 
to
 
grant
 
nonqualified
 
stock
 
options,
 
incentive
 
(qualified)
 
stock
 
options,
 
stock
 
appreciation
 
rights,
 
restricted
 
share
 
awards,
restricted stock units, performance awards, cash incentive awards and other
 
equity-based awards (including fully vested shares).
 
At inception
 
in November
 
2021, the
 
maximum number
 
of shares
 
of Class
 
A common
 
stock that
 
could be
 
issued under
 
the Plan
 
was
8,700,000
 
shares of
 
Class A common
 
stock. This
 
number increases
 
automatically on
 
January 1
 
of each
 
year,
 
commencing January
 
1,
2023, by the number of shares
 
equal to the lesser of (i)
4
% of the outstanding shares of
 
our Class A common stock on
 
the immediately
preceding
 
December 31,
 
(ii) the
 
number of
 
shares determined
 
by the
 
compensation committee
 
of the
 
board of
 
directors,
 
if any
 
such
determination
 
is made,
 
and
 
(iii) the
 
number
 
of shares
 
underlying
 
any
 
awards granted
 
during
 
the
 
preceding
 
calendar
 
year,
 
net of
 
the
shares
 
underlying
 
awards
 
canceled
 
or
 
forfeited
 
under
 
the
 
Plan.
 
On
 
January
 
1,
 
2023,
 
in
 
accordance
 
with
 
the
 
automatic
 
“evergreen”
provision of the Plan, the maximum number of shares that can be issued
 
under the plan was increased to
11,886,306
.
Stock Options
As of March 31, 2023, there
 
were options to purchase
16,252,154
 
shares of Class
 
A stock outstanding and options
 
to purchase
6,362,455
shares of Class B stock outstanding, of which options to purchase
10,449,895
 
shares of Class A common stock and options to purchase
4,992,111
 
shares of Class
 
B common stock were
 
exercisable, respectively. As of March 31, 2023,
 
the maximum number
 
of stock options
awards available for future issuance under the Company’s
 
plans is
6,902,994
.
The following table summarizes stock option activity during the three
 
months ended March 31, 2023:
 
Number of Stock
Options
Outstanding
Weighted
Exercise Price
Per Share
Weighted
Contractual
Term
 
(years)
Aggregate
Intrinsic Value
(in thousands)
Balance at December 31, 2022
20,416,760
$
5.07
6.8
$
7,166
Granted
2,622,284
2.30
Exercised
(6,161)
(0.57)
Forfeited
(418,274)
(5.95)
Balance at March 31, 2023
22,614,609
$
4.74
6.0
$
14,368
Options vested and exercisable at March 31, 2023
15,442,006
$
4.59
5.3
$
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the
common stock for those options that had exercise prices lower than the fair
 
value of the common stock as of March 31, 2023.
The intrinsic value of options exercised during the three months ended
 
March 31, 2023 was immaterial.
The weighted-average grant-date fair value per share of options granted
 
during the three months ended March 31, 2023 was $
1.90
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
15
Restricted Stock Units
The following table summarizes the Company’s
 
restricted stock unit activity for the three months ended March 31, 2023:
 
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Per Share
Unvested at December 31, 2022
300,000
$
3.76
Issued
Unvested at March 31, 2023
300,000
$
3.76
Stock-based compensation expense recognized on restricted stock was $
0.1
 
million for the three months ended March 31, 2023.
Stock-Based Compensation Expense
The
 
Company
 
recorded
 
stock-based
 
compensation
 
expense
 
in
 
the
 
following
 
expense
 
categories
 
in
 
the
 
accompanying
 
unaudited
condensed consolidated statements of operations (in thousands):
Three Months Ended March 31,
2023
2022
General and administrative
$
1,403
$
1,371
Research and development
822
807
Total stock-based
 
compensation expense
$
2,225
$
2,178
As of
 
March 31, 2023,
 
total unrecognized
 
compensation cost
 
related to
 
the unvested
 
stock-based awards
 
was $
17.3
 
million, which
 
is
expected to be recognized over a weighted average period of
3.0
 
years.
12. Income Taxes
The
 
Company
 
computes
 
its expected
 
annual effective
 
income
 
tax
 
rate in
 
accordance
 
with FAB
 
Accounting
 
Standards
 
Codification
(“ASC”)
 
740
 
,
 
“Income
 
Taxes”
 
and
 
makes
 
changes
 
on
 
a
 
quarterly
 
basis,
 
as necessary,
 
based on
 
certain
 
factors
 
such
 
as changes
 
in
forecasted annual pre-tax income; changes to
 
actual or forecasted permanent
 
book to tax differences; impacts
 
from tax audits with
 
state,
federal or foreign tax authorities; impacts from tax
 
law changes; or change in judgment
 
as to the realizability of
 
deferred tax assets. The
Company identifies items
 
which are unusual
 
and non-recurring in
 
nature and treats
 
these as discrete events.
 
The tax effect
 
of discrete
items is recorded in the quarter in which the discrete events occur.
 
The
 
Company’s
 
effective
 
tax
 
rate
 
for
 
the
 
three
 
months
 
ended
 
March 31,
 
2023
 
and
 
March 31,
 
2022
 
was
0
%,
 
due
 
primarily
 
to
 
its
uncertainty of realizing a benefit from net operating losses incurred during
 
the period.
In assessing
 
the realizability
 
of deferred
 
tax assets,
 
management considers
 
whether it
 
is more-likely-than-not
 
that some
 
or all
 
of the
recorded deferred
 
tax assets
 
will be
 
realized. The
 
ultimate realization
 
of deferred
 
tax assets
 
is dependent
 
on the
 
generation of
 
future
taxable income in the periods in which
 
those temporary differences become
 
deductible. Management considers the scheduled
 
reversal
of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these items
and the consecutive years of pretax losses (resulting from impairment), management determined that enough uncertainty
 
exists relative
to
 
the
 
realization
 
of
 
the
 
deferred
 
income
 
tax
 
asset
 
balances
 
to
 
warrant
 
the
 
application
 
of
 
a
 
full
 
valuation
 
allowance
 
for
 
all
 
taxing
jurisdictions.
The Company files
 
income
 
tax returns in
 
the U.S. federal
 
and various state
 
and local jurisdictions. The
 
Company also files
 
returns in
numerous foreign jurisdictions
 
that have varied
 
years remaining open
 
for examination, but generally
 
the statute of
 
limitations is three
to four years from when the return is filed. As of March 31, 2023,
 
the Company has no ongoing audits.
The
 
Company
 
has
 
US
 
net
 
operating
 
loss
 
(“NOL”)
 
carryforwards
 
for
 
federal
 
and
 
state
 
income
 
tax
 
purposes.
 
Use
 
of
 
the
 
NOL
carryforwards is
 
limited under
 
Section 382
 
of the
 
Internal Revenue
 
Code, as
 
the Company
 
had a
 
change in
 
ownership of
 
more than
50
% of its capital stock over a
 
three-year period as measured under Section 382 of
 
the Internal Revenue Code of 1986, as
 
amended (the
“Code”).
 
These complex changes of ownership rules generally focus
 
on ownership changes involving stockholders owning
 
directly or
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
16
indirectly
5
%
 
or
 
more
 
of
 
our
 
stock,
 
including
 
certain
 
public
 
“groups”
 
of
 
stockholders
 
as set
 
forth
 
under
 
Section
 
382
 
of
 
the
 
Code,
including those arising from
 
new stock issuances and
 
other equity transactions.
 
Some of these NOL carryforwards
 
will expire if they
are not used within
 
certain periods. At this
 
time, the Company considers
 
it more likely than
 
not that it will not
 
have sufficient taxable
income in the future that will allow us to realize these NOL carryforwards.
13. Net Loss Per Share
The Company’s potentially dilutive securities,
 
which include options
 
and restricted stock
 
units 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 for
 
the
three months ended March 31, 2023 and 2022 because including them would
 
have had an anti-dilutive effect:
 
March 31,
2023
2022
Restricted stock units issued and outstanding
300,000
300,000
Options issued and outstanding
22,614,609
20,274,077
Warrants issued and
 
outstanding
1,928,020
1,928,020
24,842,629
22,502,097
14. Commitments and Contingencies
Contractual Obligations
 
The Company
 
enters into agreements
 
with CROs to
 
conduct clinical
 
trials and preclinical
 
studies and CMOs
 
to produce
 
vaccines and
other potential product candidates. Contracts with CROs and CMOs are generally
 
cancellable, with notice, at the Company’s
 
option.
 
As of March 31, 2023, the Company had remaining prepayments to CROs of $
2.7
 
million and remaining prepayments to CMOs of $
0.2
million for activities
 
associated with the conduct
 
of its clinical
 
trials and for
 
the production of
 
the Company’s anticipated vaccine product
candidate.
 
Michael J. Fox Foundation Grant
 
On November 3,
 
2021, the Company
 
was awarded a
 
grant from the
 
Michael J. Fox
 
Foundation for Parkinson’s
 
Research (“MJFF”) in
the amount of $
0.8
 
million to be used
 
in a project for
 
the exploration of markers
 
for target engagement
 
in individuals immunized
 
with
UB-312, an
 
active
a
-Synuclein (“aSyn”)
 
immunotherapy.
 
The Company
 
will oversee
 
sample management,
 
sample preparation
 
(IgG
fractions) and distribution, as
 
well as characterize
 
the binding properties
 
of the antibodies
 
against pathological forms
 
of aSyn. As
 
funding
is expected to be received
 
in tranches over a
 
two-year period, and the
 
amounts received in each
 
tranche are expected to be
 
utilized within
12 months,
 
the funds
 
received are
 
recognized
 
as a
 
short-term
 
accrued liability.
 
The Company
 
recognizes
 
payments from
 
MJFF as
 
a
reduction of research and development expenses, in the same period as the
 
expenses that the grant is intended to reimburse are incurred.
As of March 31, 2023,
 
there was
no
 
balance remaining in the
 
accrued liability related to
 
this grant. For
 
the three months
 
ended March 31,
2023 and 2022,
 
the Company did
no
t recognize any reduction
 
of research and
 
development expenses for
 
amounts reimbursed through
the grant.
Coalition for Epidemic Preparedness Innovations (“CEPI”)
 
Grant
In April
 
2022, the
 
Company entered
 
into an
 
agreement with
 
the Coalition
 
for Epidemic
 
Preparedness Innovations
 
(“CEPI”) whereby
CEPI agreed
 
to provide
 
funding
 
of up
 
to $
9.3
 
million
 
to co-fund
 
a Phase
 
3 clinical
 
trial of
 
the Company’s
 
next
 
generation
 
UB-612
COVID-19 vaccine candidate
 
as a heterologous
 
– or ‘mix-and-match’
 
– booster dose. The
 
Phase 3 trial, which
 
began in early
 
2022, is
evaluating the
 
ability of
 
UB-612 to
 
boost COVID-19
 
immunity against
 
the original
 
strain and
 
multiple variants
 
of concern
 
including
Omicron - in people aged 16 years or older, who
 
have been previously immunized with an authorized COVID-19 vaccine.
The Company will also be performing further manufacturing scale-up
 
work to enable readiness for potential commercialization.
 
Under
the terms of the
 
agreement with CEPI, if
 
successful, a portion of
 
the released doses of
 
the commercial product
 
will be delivered to
 
the
COVID-19 Vaccines
 
Global Access (“COVAX”)
 
consortium for distribution to developing countries at low cost.
Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in
the funding agreement
 
are incurred. As
 
funding is expected
 
to be
 
received in tranches
 
over an 18-month
 
period, and the
 
amounts received
in each tranche are
 
expected to the
 
utilized within 12 months,
 
the funds received are
 
reflected within restricted cash
 
with a corresponding
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
17
short-term accrued liability.
 
As of March 31,
 
2023, the Company
 
had
no
 
remaining restricted cash
 
or accrued liability
 
related to CEPI
funding. The Company recognizes payments from CEPI as a reduction of research and development expenses, in
 
the same period as the
expenses that
 
the grant is
 
intended to reimburse
 
are incurred. For
 
the three months
 
ended March 31, 2023,
 
the Company recognized
 
a
reduction of $
1.0
 
million of research and development expenses.
Lease Agreements
 
The Company has
two
 
operating lease agreements for
 
office and laboratory space.
 
The Company is
 
also required to
 
pay certain operating
costs under its leases.
In August 2022, the Company entered into a lease for
9,839
 
square feet of lab and office space with Space Florida in
 
Exploration Park,
Florida commencing August 12, 2022. The lease
 
has an initial
one-year
 
term with an annual lease
 
obligation of $
0.5
 
million, after lessee
credits. Additionally,
 
the lease requires the Company to provide a security deposit in the amount of less than $
0.1
 
million.
 
In April 2022, the
 
Company entered into a
 
facility lease agreement for
4,419
 
square feet of office
 
space in New York,
 
New York.
 
The
lease commenced in
 
April 2022 and
 
will expire in
 
March 2029 with
 
no option to
 
renew.
 
This lease and
 
its terms were
 
reviewed using
the guidance
 
found in
 
ASC 842,
 
“Leases”.
 
Since the
 
lease has
 
a non-cancellable
 
period of
one year
, and
 
after the
 
first year
 
both the
Company and the landlord have the option to early terminate the
 
lease for any or no reason, the Company has elected to
 
apply the short-
term expedient, which does not subject the New York
 
lease to capitalization.
 
Rent expense for the three months ended March 31, 2023 and 2022 was $
0.1
 
million and $
0.1
 
million, respectively.
License Agreements
In August 2021, the Company
 
entered into a license
 
agreement (the “Platform License Agreement”) with
 
UBI and certain of
 
its affiliates
that
 
expanded
 
intellectual
 
property
 
rights
 
held
 
under
 
previously
 
issued
 
license
 
agreements
 
with
 
UBI.
 
As
 
part
 
of
 
the
 
agreement,
 
the
Company obtained a worldwide, sublicensable
 
(subject to certain conditions), perpetual,
 
fully paid-up, royalty-free license to
 
research,
develop, make, have made, utilize, import, export,
 
market, distribute, offer for sale, sell, have sold,
 
commercialize or otherwise exploit
peptide-based
 
vaccines
 
in
 
the
 
field
 
of
 
all
 
human
 
prophylactic
 
and
 
therapeutic
 
uses,
 
except
 
for
 
such
 
vaccines
 
related
 
to
 
human
immunodeficiency virus (HIV), herpes simplex virus (HSE) and Immunoglobulin
 
E (IgE). The patents and patent applications licensed
under the
 
Platform License
 
Agreement include
 
claims directed
 
to a
 
CpG delivery
 
system, artificial
 
T helper
 
cell epitopes
 
and certain
designer peptides and proteins utilized
 
in UB-612. In consideration for
 
the Platform License Agreement, the
 
Company issued to UBI a
warrant to purchase Class A common stock (the “UBI Warrant”)
 
.
 
The Company considered ASC 805, “Business Combinations” (“ASC 805”) and ASC 730,
 
“Research and Development” (“ASC 730”)
in determining
 
how to account
 
for the issuance
 
of the
 
UBI Warrant.
 
The UBI Warrant
 
was issued to
 
a related party
 
in exchange for
 
a
license agreement.
 
The majority
 
of the
 
voting interests
 
in the
 
related
 
party and
 
in the
 
Company
 
were held
 
by a
 
group of
 
immediate
family members, at the time of the transaction, and as such the transaction constitutes a common control transaction, which requires the
license to be accounted
 
for at the carrying value
 
in the books of the
 
transferor.
 
As the related party did
 
not have any basis in the
 
assets
licensed, there was no accounting impact for the Company.
Indemnification Agreements
 
In the
 
ordinary course
 
of business,
 
the Company
 
may provide
 
indemnification of
 
varying scope
 
and terms
 
to employees,
 
consultants,
vendors, lessors,
 
business partners
 
and other
 
parties with
 
respect to
 
certain matters
 
including, but
 
not limited
 
to, losses
 
arising out
 
of
breach of such agreements
 
or from intellectual property
 
infringement claims made by
 
third parties. In addition,
 
the Company has entered
into indemnification agreements with members of its board of directors and executive officers that will require the Company
 
to, among
other things,
 
indemnify them
 
against certain
 
liabilities that
 
may arise
 
by reason
 
of their
 
status or
 
service as
 
directors or
 
officers.
 
The
maximum potential amount
 
of future payments the
 
Company could be
 
required to make under
 
these indemnification agreements
 
is, in
many cases, unlimited.
 
To
 
date, the Company
 
has not incurred
 
any material
 
costs as a
 
result of
 
such indemnification
 
obligations. The
Company
 
is
 
not
 
aware
 
of
 
any
 
indemnification
 
arrangements
 
that
 
could
 
have
 
a
 
material
 
effect
 
on
 
its
 
financial
 
position,
 
results
 
of
operations, or cash flows, and it has
 
not accrued any liabilities related to such obligations as
 
of March 31, 2023 and December 31, 2022.
 
Legal Proceedings
 
From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. As of March 31,
2023 and December 31, 2022, the Company was not a party to any material legal matters
 
or claims.
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
18
Loss Contingency
In April
 
2021, the
 
Company engaged
 
United Biopharma,
 
Inc. (“UBP”)
 
to begin
 
acquiring raw
 
materials for
 
use in
 
the production
 
of
GMP grade recombinant protein for UB-612, the Company’s COVID-19 vaccine candidate under an Authorization to Proceed (“ATP”)
agreement. Through August 2021, $
7.2
 
million of materials were ordered, $
3.0
 
million of materials were received by UBP and paid for
with an
 
advance
 
payment from
 
the Company,
 
and the
 
Company
 
expensed $
1.2
 
million as
 
these raw
 
materials were
 
used to
 
produce
proteins.
 
During 2022, the Company
 
recognized an additional
 
$
1.8
 
million in expense related
 
to the materials
 
UBP had taken possession
of but had not yet used in production.
 
When the Company
 
asked to pause
 
further manufacture
 
of protein upon
 
rejection of the
 
Emergency Use
 
Authorization application
 
by
Taiwan in August 2021,
 
UBP requested that
 
its suppliers
 
cancel the
 
remaining $
4.2
 
million in
 
orders for which
 
it had
 
not taken possession
of the
 
materials. In
 
the fourth
 
quarter of
 
2022, the
 
Company learned
 
that most
 
of the
 
suppliers refused
 
to cancel
 
the orders,
 
although
some agreed to seek other buyers for the materials. For these orders, management has not yet concluded that a loss for the Company for
this entire
 
amount is
 
probable, since
 
they were
 
not originally
 
authorized by
 
the ATP,
 
and UBP’s
 
suppliers may
 
be able
 
to dispose
 
of
some amount to other buyers. Hence, an expense has not been recognized
 
for them.
 
15. Benefit Plans
In
 
March
 
2018,
 
the
 
Company
 
established
 
a
 
defined
 
contribution
 
savings
 
plan
 
under
 
Section
 
401(k)
 
of
 
the
 
Code.
 
This
 
plan
 
covers
substantially all
 
U.S. employees
 
who meet
 
minimum age
 
and service
 
requirements and
 
allows participants
 
to defer
 
a portion
 
of their
annual compensation on a pre-tax basis. The Company matches
 
employee contributions to the Plan at
100
% up to
4
% of the employee’s
base salary.
The Company offers
 
its Ireland-based employees
 
a Personal Retirement Savings
 
Account (“PRSA”) that allows
 
participants to defer a
portion of their annual
 
compensation. The Company provides
 
contributions equal to
5
% of each
 
participant’s annual salary. During three
months ended March 31, 2023 and 2022, the Company contributed less than $
0.1
 
million to PRSA accounts.
16. Related Party Transactions
The Company has related party arrangements with UBI
 
and a number of its
 
affiliated companies listed namely, United Biomedical, Inc.,
Asia (“UBIA”), UBI Pharma, Inc. (“UBI-P”), United BioPharma, Inc (“UBP”)
 
and UBI IP Holding (“UBI-IP”).
As of
 
March 31, 2023,
 
UBI owned
44
% of
 
the Company’s
 
stock. The
 
majority of
 
the voting
 
interests in
 
both UBI
 
and the
 
Company
were held by a group of immediate family members,
 
and as such the entities are under common control.
These related parties are governed by various Master Services Agreements
 
(“MSA”) detailed below.
 
UBI MSA - UBI provides research, development and clinical functions to the Company.
 
There is also a purchase arrangement
with UBI for the production and shipment of the Company’s
 
diagnostic test kits.
UBIA MSA - UBI-Asia for manufacturing, quality control, testing, validation,
 
and supply services.
UBP MSA - UBP provides
 
the Company with manufacturing, testing and validation services.
COVID MSA (“COVID
 
MSA”) - COVID
 
MSA provides that UBI
 
acts as COVAXX’s
 
agent with respect
 
to matters relating
the
 
Company’s
 
COVID-19
 
program
 
and
 
provides
 
research,
 
development,
 
manufacturing
 
and
 
back
 
office
 
administrative
services to the Company.
COVID-19
 
Relief
 
MSA
 
-
A
four-company
 
MSA
 
with
 
UBI,
 
UBI-Asia
 
and
 
UBP.
 
The
 
Company
 
is an
 
exclusive
 
licensee
 
of
technologies related to diagnostics, vaccines, and therapies for
 
COVID-19. The MSA established the terms under which UBI-
Asia
 
provides
 
research,
 
development,
 
testing
 
and
 
manufacturing
 
services
 
to
 
the
 
Company
 
and
 
UBP
 
provides
 
contract
development and manufacturing services to the Company.
Total amounts
 
due to related parties were
 
$
12.7
 
million and $
12.8
 
million as of March 31, 2023
 
and December 31, 2022, respectively.
Total amounts
 
due from related parties were $
0.5
 
million and $
0.4
 
million as of March 31, 2023 and
 
December 31, 2022, respectively.
Total expenses incurred, including interest expense,
 
were $
1.2
 
million and $
0.8
 
million for the three months ended March 31, 2023 and
2022,
 
respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
19
Total related party operating
 
activity, including the activity described
 
above, are as follows (in thousands):
March 31,
December 31,
2023
2022
Consolidated balance sheet
Assets
Prepaid expenses and other current assets
$
237
$
237
Amounts due from related parties
518
414
Liabilities
Amounts due to related parties
12,706
12,772
Current portion of note payable
898
1,113
Note payable
2,862
3,112
Accrued interest payable
73
Three Months Ended March 31,
2023
2022
Operating expenses
Research and development
Services provided by related parties
 
$
381
 
$
784
General and administrative
Services provided by related parties
 
$
754
 
$
Other income/expense
Related party interest expense
 
$
69
 
$
 
 
20
Item 2. Management’s Discussion and Analysis of Financial
 
Condition and Results of Operations.
 
The following discussion and analysis of our financial condition
 
and results of operations should be read
 
together with our unaudited
condensed consolidated financial statements and related
 
notes and other financial information appearing elsewhere
 
in this Quarterly
Report on Form 10-Q. We
 
intend for this discussion to provide you with information that will assist you
 
in understanding our
unaudited condensed consolidated financial statements, the changes
 
in key items in those unaudited condensed consolidated financial
statements from period to period and the primary factors that
 
accounted for those changes.
Some of the information contained in this
discussion and analysis or set forth elsewhere in this Quarterly
 
Report, including information with respect to
 
our plans and strategy
for our business and related financing, includes forward
 
-looking statements that involve risks, uncertainties and assumptions.
 
See the
section of this Quarterly Report titled “Special Note Regarding
 
Forward-Looking Statements” for a discussion of forward
 
-looking
statements. As a result of many factors, including
 
those factors set forth under
“Risk Factors” in Item 1A of Part I of our Annual
Report on Form 10-K for the year ended December 31, 2022, in Item 1A of Part
 
II of this Quarterly Report on Form 10-Q, or in other
filings that we make with the SEC
, our actual results could differ materially from
 
management’s
 
expectations and the results
described in or implied by the forward-looking statements
 
contained in the following discussion and analysis. Investors and others
should note that we routinely use the Investors section
 
of our website to announce material information to investors and the
marketplace. While not all of the information that we post on the Investors section
 
of our website is of a material nature, some
information could be deemed to be material. Accordingly,
 
we encourage investors, the media, and others interested in us
 
to review the
information that we share on the Investors
 
section of our website, https://vaxxinity.com/.
Overview
We
 
are
 
engaged
 
in
 
the
 
development
 
of
 
rationally
 
designed
 
prophylactic
 
and
 
therapeutic
 
vaccines
 
to
 
combat
 
chronic
 
disorders
 
and
infectious diseases
 
with large
 
patient populations
 
and unmet
 
medical
 
needs. While
 
vaccines have
 
traditionally been
 
unable to
 
combat
such disorders effectively
 
and safely, we
 
believe our platform could overcome
 
the traditional hurdles facing vaccines
 
in this area.
 
Our
Vaxxine
 
Platform relies
 
on a synthetic
 
peptide vaccine
 
technology first
 
developed by
 
UBI and
 
subsequently refined
 
over the
 
last two
decades. We
 
believe our
 
vaccines have
 
the potential
 
to combat
 
conditions that
 
have not
 
yet been
 
successfully treated,
 
or which
 
have
primarily been addressed with
 
monoclonal antibodies (“mAbs”) which,
 
while generally effective, are
 
extremely costly and cumbersome,
and
 
thus
 
have
 
limited
 
accessibility.
 
Our
 
pipeline
 
primarily
 
consists
 
of
 
five
 
programs
 
focused
 
on
 
chronic
 
disease,
 
spanning
neurodegenerative disorders in
 
addition to other
 
neurology and cardiovascular
 
indications. Given the global
 
COVID-19 pandemic and
our Vaxxine
 
Platform’s
 
applicability to
 
infectious disease,
 
we are also
 
opportunistically advancing
 
a product candidate
 
that addresses
SARS-CoV-2.
Our current pipeline consists of six programs from early to
 
late-stage development, including five programs focused on chronic disease:
UB-311,
 
our
 
leading
 
neurology
 
product
 
candidate,
 
which
 
targets
 
Alzheimer’s
 
disease
 
(“AD”);
 
UB-312,
 
which
 
targets
 
Parkinson’s
disease
 
(“PD”)
 
and
 
other
 
synucleinopathies;
 
VXX-301,
 
an
 
anti-tau
 
product
 
candidate
 
which
 
has
 
the
 
potential
 
to
 
address
 
multiple
neurodegenerative conditions, including AD; UB-313,
 
which targets Calcitonin Gene-Related Peptide (“CGRP”) to
 
prevent migraines;
and
 
VXX-401,
 
which
 
targets
 
proprotein
 
convertase
 
subtilisin/kexin
 
type
 
9
 
serine
 
protease
 
(“PCSK9”)
 
to
 
reduce
 
reduce
 
low-density
lipoprotein (“LDL”)
 
cholesterol, a risk
 
factor for
 
atherosclerotic heart
 
disease. Through
 
our Vaxxine
 
Platform, we
 
believe we may
 
be
able to address a wide range of other chronic diseases, including diseases that are or could potentially
 
be successfully treated by mAbs,
which increasingly dominate the treatment paradigm but remain
 
accessible only to a small proportion of patients who could potentially
benefit from them.
In addition
 
to our
 
chronic disease
 
pipeline, given
 
our Vaxxine
 
Platform’s
 
applicability to
 
infectious disease
 
and the
 
ongoing need
 
for
booster vaccines to address SARS-CoV-2, we are advancing an infectious disease product candidate, UB-612, as
 
a heterologous booster
against
 
COVID-19.
 
We
 
have
 
reported
 
topline
 
results
 
of
 
a
 
pivotal
 
Phase
 
3
 
trial
 
of
 
UB-612,
 
and
 
completed
 
rolling
 
submissions
 
for
conditional/provisional authorization with regulatory authorities in the
 
United Kingdom and Australia in March 2023.
 
Our ability to generate revenue
 
sufficient to achieve profitability will
 
depend on the eventual regulatory
 
approval and commercialization
of one or
 
more of our product
 
candidates. We
 
have not yet obtained
 
any regulatory approvals
 
for our product
 
candidates or conducted
sales and marketing activities for our product candidates.
We
 
have
 
principally
 
funded
 
our operations
 
through financing
 
transactions.
 
Through
 
March 31, 2023,
 
we received
 
gross proceeds
 
of
$306.4 million
 
in connection
 
with various
 
financing
 
transactions,
 
including
 
the sale
 
of preferred
 
and common
 
stock, the
 
issuance of
promissory notes (including convertible promissory notes
 
(“Convertible Notes”)), and the entry
 
into simple agreements for future
 
equity
(“SAFEs”).
Costs associated with research and development are the most significant component of our expenses. These costs can vary greatly from
period to period depending on the timing
 
of various trials for our
 
product candidates. We expect our allocated research and development
costs and
 
general
 
and
 
administrative
 
expenses
 
could
 
increase
 
over
 
time if
 
we expand
 
the number
 
of product
 
candidates that
 
we
 
are
advancing,
 
advance any
 
of the
 
current pipeline
 
candidates to
 
later stage
 
clinical trials
 
which typically
 
have more
 
subjects and
 
higher
 
21
costs, or incur increased
 
costs as a result
 
of operating as a
 
public company. Further, we anticipate incurring greater selling and
 
marketing
expenses
 
if
 
we
 
commercialize
 
any
 
of
 
our
 
product
 
candidates
 
in
 
the
 
future
 
and
 
prepare
 
for
 
such
 
commercialization.
 
Our
 
product
candidates
 
are
 
in
 
clinical
 
stage
 
or
 
pre-clinical
 
stage
 
development.
 
We
 
have
 
generated
 
limited
 
revenue
 
to
 
date
 
and
 
have
 
incurred
significant operating losses since inception. Net losses were
 
$18.4 million and $18.3 million for the
 
three months ended March 31, 2023
and 2022,
 
respectively.
 
As of March
 
31, 2023,
 
we had
 
an accumulated
 
deficit of
 
$323.1 million.
 
We
 
expec
t our
 
expenses and
 
capital
requirements may increase over time in connection with our planned operations,
 
which include:
continuing pre-clinical studies, existing clinical trials, or initiating new
 
clinical trials for product candidates UB-312, UB-313,
VXX-401, UB-612, and other product candidates;
hiring additional
 
clinical, quality
 
control, medical,
 
scientific and
 
other technical
 
personnel to
 
support additional
 
clinical and
research and development programs;
expanding operational, financial and management systems
 
and infrastructure, expanding our facilities and
 
increasing personnel
to support operations;
undertaking actions to meet the requirements and demands of being
 
a public company;
maintaining, expanding and protecting our intellectual property portfolio;
seeking regulatory approvals for any product candidates that successfully complete
 
clinical trials; and
undertaking pre-commercialization and commercialization
 
activities to establish sales, marketing and distribution capabilities
for any product candidates for which we may receive regulatory approval in regions
 
where we elect to commercialize
products on our own or jointly with third parties.
As of the date of this report, we expect our existing cash and cash
 
equivalents and our short-term investments will be sufficient
 
to fund
our operating expenses and capital expenditure requirements for at least the next
 
12 months and into mid-2024. Thereafter, our viability
will depend
 
on our
 
ability
 
to raise
 
additional
 
capital
 
to finance
 
operations,
 
to successfully
 
commercialize
 
our
 
product candidates,
 
if
approved, or to enter into collaborations with third
 
parties for the development of our product candidates. If we
 
are unable to do any of
the foregoing, we would
 
be forced to delay,
 
limit, reduce or terminate
 
our product candidate development
 
or future commercialization
efforts.
 
Our estimates
 
are based
 
on a
 
variety of
 
assumptions that
 
may prove
 
to be
 
wrong, and
 
we could
 
exhaust our
 
available capital
resources sooner than expected. See “— Liquidity and Capital Resources.”
 
Business Update Regarding COVID-19 Pandemic
In March
 
2020, the
 
World
 
Health Organization
 
declared the
 
COVID-19
 
outbreak
 
a pandemic.
 
The onset
 
of the
 
pandemic led
 
to our
institutional
 
prioritization
 
of
 
COVID-19
 
vaccine
 
development
 
efforts,
 
which
 
correlated
 
with
 
a
 
relative
 
decline
 
in
 
research
 
and
development expenditures for our chronic disease product candidates. To date, our operations have not been negatively impacted by the
COVID-19 pandemic in
 
a material manner. While
 
the pandemic has
 
subsided around the
 
world since 2020,
 
we cannot
 
predict the
 
specific
extent, duration
 
or full
 
impact that
 
future outbreaks
 
associated with
 
new variants
 
of the
 
COVID-19
 
virus may
 
have on
 
our financial
condition
 
and
 
operations.
 
Potential impacts
 
could
 
include delays
 
of the
 
development
 
of clinical
 
supply
 
materials, and
 
enrollment
 
of
patients in our
 
studies may be delayed
 
or suspended, as hospitals
 
and clinics in
 
areas where we are
 
conducting trials may need
 
to shift
resources to
 
cope with
 
COVID-19 and
 
may limit
 
access or
 
close clinical
 
facilities. Additionally,
 
if our
 
trial participants
 
are unable
 
to
travel to our clinical study sites
 
as a result of quarantines or other restrictions
 
resulting from COVID-19 outbreaks,
 
we may experience
higher drop-out rates or delays in our clinical studies. The
 
impact of the COVID-19 pandemic on our financial performance will depend
on future developments, including the duration and spread of future outbreaks and
 
related governmental advisories and restrictions. The
impact of
 
future outbreaks
 
on the financial
 
markets and
 
the overall
 
economy are
 
also highly
 
uncertain and
 
cannot be
 
predicted. If
 
the
financial markets and/or the overall economy are impacted for an
 
extended period, our results may be materially adversely
 
affected. See
“Risk
 
Factors—Risks
 
Related
 
to
 
Our
 
Business
 
and
 
Industry—The
 
coronavirus
 
pandemic
 
has
 
caused
 
interruptions
 
or
 
delays
 
of
 
our
business plan and
 
could continue
 
to adversely
 
affect our
 
business” in our
 
Annual Report
 
on Form
 
10-K for the
 
year ended
 
December
31, 2022.
Components of Our Unaudited Condensed Consolidated Results of Operations
Revenue
 
We
 
recorded no
 
revenue for the three
 
months ended March 31,
 
2023 and 2022.
 
We
 
do not expect
 
to generate any
 
meaningful revenue
unless and until we obtain regulatory approval of and
 
commercialize or out-license at least one of our
 
product candidates, and we do not
know when, or if, this will
 
occur. If our development
 
efforts for our product candidates
 
are successful and result in commercialization,
we
 
may
 
generate
 
additional
 
revenue
 
in
 
the
 
future
 
from
 
a
 
combination
 
of
 
product
 
sales
 
or
 
payments
 
from
 
collaboration
 
or
 
license
 
22
agreements that we
 
have entered into
 
or may enter into
 
with third parties. We
 
have incurred significant
 
losses since our inception.
 
We
expect to incur losses for the foreseeable future and may never achieve or maintain
 
profitability.
Cost of Revenue
 
We
 
recorded
 
no cost
 
of revenue
 
for
 
the three
 
months ended
 
March 31,
 
2023 and
 
2022. If
 
our
 
development
 
efforts
 
in respect
 
of our
current pipeline
 
of product
 
candidates are
 
successful and
 
result in
 
regulatory approval,
 
we expect our
 
cost of
 
revenue will increase
 
in
relative proportion to the level of our revenue as we
 
commercialize the applicable product candidate. We expect that the cost of revenue
will increase in absolute dollars as and if our revenue grows and will vary from period
 
to period as a percentage of revenue.
 
Research and Development Expenses
 
The design, initiation and execution of candidate discovery and development programs of our potential future product candidates is key
to our
 
success and
 
involves significant
 
expenses. Prior
 
to initiating
 
these programs,
 
project teams
 
incorporating individuals
 
from the
essential disciplines within the Company scope out the activities, timing, requirements, inclusion and exclusion criteria and the primary
and
 
secondary
 
endpoints.
 
Once
 
we
 
have
 
decided
 
to
 
proceed,
 
our
 
Vaxxine
 
Platform
 
enables
 
the
 
iteration
 
of
 
drug
 
candidates
 
in
 
the
discovery
 
phase
 
through
 
rapid,
 
rational
 
design
 
and
 
formulation.
 
After
 
we
 
have
 
identified
 
drug
 
candidates,
 
the
 
costs
 
of
 
scaling
 
the
formulation from
 
research grade
 
to clinical
 
grade, then
 
to commercial
 
grade, typically
 
consumes significant
 
resources. In
 
addition, to
internal
 
research
 
and development,
 
we utilize
 
service providers,
 
including
 
related parties,
 
to complete
 
activities we
 
lack the
 
internal
resources to handle.
Research and development expenses consist primarily of costs incurred
 
for research activities, including drug discovery
 
efforts and the
development of our product candidates. We
 
expense research and development costs as incurred, which include:
expenses incurred to conduct the necessary preclinical studies and clinical
 
trials required to obtain regulatory approval;
expenses incurred under agreements with CROs that are primarily engaged in
 
the oversight and conduct of our clinical trials,
preclinical studies and drug discovery efforts and contract
 
manufacturers that are primarily engaged to provide preclinical
and clinical drug substance and product for our research and development programs;
other costs related to acquiring and manufacturing materials in connection
 
with our drug discovery efforts and preclinical
studies and clinical trial materials, including manufacturing validation
 
batches;
 
costs related to investigative sites and consultants that conduct our clinical
 
trials, preclinical studies and other scientific
development services;
employee-related expenses, including salaries and benefits, travel and
 
stock-based compensation expense for employees
engaged in research and development functions;
costs related to compliance with regulatory requirements; and
facilities-related costs, depreciation and other expenses, which include
 
rent and utilities.
We
 
recognize
 
external
 
development
 
costs
 
based
 
on
 
an
 
evaluation
 
of
 
the
 
progress
 
to
 
completion
 
of
 
specific
 
tasks
 
using
 
information
provided to us by
 
service providers. This process
 
involves reviewing open contracts and
 
purchase orders, communicating with
 
personnel
to identify services that
 
have been performed on
 
our behalf and
 
estimating the level
 
of service performed and
 
the associated cost
 
incurred
for the service when we have not yet been invoiced or otherwise notified of actual costs. Any nonrefundable advance payments that we
make for goods or services to be received in the future for use in research and development
 
activities are recorded as prepaid expenses.
Such amounts are expensed as the related goods are delivered or the related services are performed, or until it is no longer expected that
the goods will be delivered, or the services rendered, at which point the net remainder
 
is expensed.
We continue to work with related parties for the advancement
 
of our research and development programs, including for manufacturing,
quality control,
 
testing, validation,
 
and supply
 
services. While
 
this related
 
party work
 
has significantly
 
diminished over
 
the last
 
year,
and we expect this trend to continue, we are still reliant on UBIA to provide certain manufacturing-related
 
and prior-conducted clinical
data that
 
will be
 
needed for
 
inclusion in
 
our regulatory
 
applications for
 
UB-612. During
 
the three
 
months ended
 
March 31, 2023
 
and
2022,
 
related party expenses were approximately 3.3% and 6.8% of our
 
research and development expenses, respectively.
 
Where appropriate,
 
we allocate
 
our third-party
 
research
 
and development
 
expenses on
 
a program-by-program
 
basis. These
 
expenses
primarily
 
relate
 
to
 
outside
 
consultants,
 
CROs,
 
contract
 
manufacturers
 
and
 
research
 
laboratories
 
in
 
connection
 
with
 
pre-clinical
development, process
 
development, manufacturing
 
and clinical
 
development activities.
 
We
 
do not
 
allocate our
 
internal costs,
 
such as
employee costs,
 
costs associated
 
with our discovery
 
efforts, laboratory
 
supplies and
 
facilities, including
 
depreciation or
 
other indirect
costs, to
 
specific programs because
 
these costs often
 
relate to platform
 
development, to multiple
 
programs simultaneously or
 
to discovery
 
23
of new
 
programs, and
 
any such
 
allocation would
 
necessarily involve
 
significant estimates
 
and judgments
 
and, accordingly,
 
would be
imprecise. When we
 
refer to the
 
research and development
 
expenses associated with
 
a specific program,
 
these refer exclusively
 
to the
allocated
 
third-party
 
expenses
 
associated
 
with
 
that
 
product
 
candidate.
 
All
 
other
 
research
 
and
 
development
 
costs
 
are
 
referred
 
to
 
as
unallocated costs.
Product candidates in later
 
stages of clinical development
 
generally have higher development costs
 
than those in earlier
 
stages of clinical
development,
 
primarily
 
due
 
to
 
the
 
increased
 
size
 
and
 
duration
 
of
 
later-stage
 
clinical
 
trials.
 
Additionally,
 
greater
 
research
 
and
development overhead is required to support
 
broader and more rapid
 
development of our Vaxxine Platform and new product candidates.
As a result, we expect that our research and development expenses could increase if we continue our existing and planned clinical trials
and conduct
 
increased pre-clinical
 
and clinical
 
development activities,
 
including submitting
 
regulatory filings
 
for product
 
candidates,
and focus more generally on the development of our chronic disease product
 
candidates.
At this
 
time, we
 
cannot reasonably
 
estimate or know
 
the nature,
 
timing and
 
costs of
 
the efforts
 
that will be
 
necessary to
 
complete the
pre-clinical and clinical development of any of our
 
product candidates or when, if ever,
 
material net cash inflows may commence from
any of our product candidates.
General and Administrative Expenses
 
General
 
and
 
administrative
 
expenses
 
consist
 
primarily
 
of
 
salaries
 
and
 
benefits,
 
travel
 
and
 
stock-based
 
compensation
 
expense
 
for
personnel
 
in
 
executive,
 
business
 
development,
 
finance,
 
human
 
resources,
 
legal,
 
information
 
technology,
 
public
 
relations,
communications and
 
administrative functions.
 
General and administrative
 
expenses also include
 
insurance costs and
 
professional fees
for
 
legal,
 
patent,
 
consulting,
 
investor
 
and
 
public
 
relations,
 
accounting
 
and
 
audit
 
services
 
and
 
other
 
general
 
operating
 
expenses
 
not
otherwise classified as research and development expenses. We
 
expense general and administrative costs as incurred.
In the event UB-612 obtains regulatory approval and we subsequently commence commercialization of this product, we expect general
and administrative
 
expenses will
 
increase. We
 
will continue
 
to incur
 
public company-related
 
expenses, including
 
services associated
with maintaining compliance with Nasdaq listing and SEC requirements, director and officer liability insurance and investor and public
relations costs.
Other Expense (Income)
 
Interest Expense
 
Interest expense consists of
 
interest incurred on (i)
 
the note entered into
 
during June 2020 for
 
the acquisition of an
 
airplane (the “2025
Note”) and (ii) the related party promissory note (the “2022 Promissory
 
Note”) entered into during 2022.
 
Interest Income
Interest income consists of income earned on our cash and cash equivalents, money
 
market holdings, and short-term investments.
 
(Gain) Loss on Foreign Currency
 
Translation, Net
 
Our foreign subsidiaries, which are
 
wholly-owned by the Company, use the
 
U.S. dollar as their
 
functional currency and maintain records
in
 
the
 
local
 
currency.
 
Nonmonetary
 
assets
 
and
 
liabilities
 
are
 
remeasured
 
at
 
historical
 
rates
 
and
 
monetary
 
assets
 
and
 
liabilities
 
are
remeasured at exchange rates in
 
effect at the end
 
of the reporting period. Income
 
statement accounts are remeasured at
 
average exchange
rates for the reporting
 
period. The resulting gains or
 
losses are included in
 
foreign currency losses (gains)
 
in the consolidated financial
statements.
Provision for Income Taxes
 
We have not recorded any significant amounts related to income tax but have reserved $0.7 million of unrecognized tax
 
benefits against
NOLs. We have not
 
recorded any income tax benefits for the majority of our net losses we incurred to date.
 
We
 
account for
 
income taxes
 
using the
 
asset and
 
liability method,
 
which requires
 
the recognition of
 
deferred tax
 
assets and
 
liabilities
for the expected future tax consequences of events that have been included
 
in the consolidated financial statements or our tax returns.
 
Deferred tax assets and liabilities are
 
determined based on the difference between the
 
financial statement carrying amounts and tax basis
of existing assets and liabilities and for loss and credit carryforwards, which are measured using the enacted tax rates and laws in effect
in the years in which the differences are expected to reverse. The realization of our deferred tax assets is dependent upon the generation
of future taxable income, the amount and timing of which are uncertain. Valuation allowances are provided if, based upon the weight of
available evidence, it
 
is more likely
 
than not that
 
some or all
 
of the deferred
 
tax assets will not
 
be realized. As
 
of March 31,
 
2023, we
continue to maintain
 
a full valuation allowance
 
against all of our
 
deferred tax assets based
 
on evaluation of
 
all available evidence.
 
We
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
file income tax returns in the U.S.
 
federal and state jurisdictions and may become subject to
 
income tax audit and adjustments by related
tax authorities. Our
 
tax return periods (for
 
entities then in existence)
 
for U.S. federal
 
income taxes for the
 
tax years since 2017
 
remain
open
 
to examination
 
under the
 
statute of
 
limitations by
 
the
 
Internal
 
Revenue
 
Service
 
and state
 
jurisdictions.
 
We
 
record
 
reserves
 
for
potential tax payments to various tax authorities related to
 
uncertain tax positions, if any. The nature of uncertain tax positions
 
is subject
to significant judgment
 
by management and
 
subject to change, which
 
may be substantial. These
 
reserves are based
 
on a determination
of whether
 
and how
 
much a
 
tax benefit
 
taken by
 
us in our
 
tax filings
 
or positions
 
is more
 
likely than
 
not to
 
be realized
 
following the
resolution
 
of
 
any
 
potential
 
contingencies
 
related
 
to
 
the
 
tax
 
benefit.
 
We
 
develop
 
our
 
assessment
 
of
 
uncertain
 
tax
 
positions,
 
and
 
the
associated cumulative probabilities, using internal expertise and assistance from third-party experts. As additional information becomes
available, estimates
 
are revised
 
and refined.
 
Differences between
 
estimates and
 
final settlement
 
may occur
 
resulting in
 
additional tax
expense. Potential interest
 
and penalties associated
 
with such uncertain
 
tax positions are
 
recorded as a
 
component of our provision
 
for
income taxes.
 
Condensed Consolidated Results of Operations
The following is a summary of our unaudited condensed consolidated results
 
of operations:
 
Three Months Ended March 31,
(In thousands)
2023
2022
Change $
Change %
Operating expenses:
Research and development
11,424
11,478
(54)
(0)
%
General and administrative
7,384
6,686
698
10
%
Total operating expenses
18,808
18,164
644
4
%
Loss from operations
(18,808)
(18,164)
(644)
4
%
Other (income) expense:
Interest expense
192
105
87
83
%
Interest income
(567)
(5)
(562)
11,240
%
(Gain) loss on foreign currency translation, net
(12)
(1)
(11)
1,081
%
Total other (income)
 
expense, net
(387)
99
(486)
(491)
%
Net loss
$
(18,421)
$
(18,263)
$
(158)
$
1
%
Comparison of the Three Months Ended March 31, 2023 and 2022
Research and Development Expenses
 
Research
 
and
 
development
 
expenses
 
were
 
$11.4
 
million
 
and
 
$11.5
 
million
 
for
 
the
 
three
 
months
 
ended
 
March 31,
 
2023
 
and
 
2022,
respectively.
 
The $0.1
 
million decrease
 
was comprised
 
of a
 
$0.1 million
 
increase
 
in allocated
 
costs (i.e.,
 
costs that
 
can be
 
directly
 
attributed to
 
a
specific clinical program)
 
and a $0.2 million decrease
 
in unallocated costs. The increase
 
in allocated cost was due
 
to increases in costs
for our VXX-401 hypercholesteremia program,
 
platform development and activities supporting
 
multiple programs totaling $1.2 million,
partially
 
offset
 
by
 
decreases
 
in
 
costs
 
related
 
to
 
our
 
UB-612
 
COVID-19
 
vaccine
 
program,
 
UB-312
 
PD
 
program
 
and
 
UB-313
 
CGRP
program totaling $1.1 million.
 
The $0.2 million decrease
 
in unallocated costs was driven
 
by a decrease in salaries
 
and personnel costs,
and consulting and external contractor services supporting research and development activities across the
 
pipeline,
 
partially offset by an
increase in travel expenses.
General and Administrative Expenses
 
General
 
and
 
administrative
 
expenses
 
were
 
$7.4
 
million
 
and
 
$6.7
 
million
 
for
 
the
 
three
 
months
 
ended
 
March 31,
 
2023
 
and
 
2022,
respectively.
 
The $0.7 million increase was primarily due to increases in professional and consulting services,
 
travel expenses, salaries and personnel
costs, and depreciation related
 
to assets placed in
 
service primarily at our
 
Florida lab, partially offset by
 
a decrease in director
 
and officer
insurance expense of $0.4 million.
 
Interest Expense
Interest expense was $0.2 million and $0.1 million for the three months ended
 
March 31, 2023 and 2022, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
Interest Income
Interest income on
 
cash and short-term
 
investments was $0.6
 
million and less
 
than $0.1 million
 
for the three
 
months ended March 31,
2023 and 2022, respectively.
(Gain) Loss on Foreign Currency Translation, Net
 
The net (gain) loss on foreign currency translation reflects de minimis fluctuations
 
in the foreign exchange rate.
Liquidity and Capital Resources
Sources of Liquidity
 
We have not yet obtained regulatory
 
approval for or commercialized any of our product candidates, which are in various phases of pre-
clinical and clinical development. We
 
have financed operations primarily through
 
the issuance of common stock, convertible preferred
stock, borrowings under promissory notes (including the Convertible Notes) and the execution of SAFEs. Through March 31, 2023, we
received gross proceeds of $306.4
 
million in connection with
 
various financing transactions, including the
 
sale of preferred and
 
common
stock, the issuance of
 
promissory notes (including Convertible
 
Notes), and the execution
 
of SAFEs. As
 
of March 31, 2023, we
 
had $67.7
million
 
of cash,
 
cash equivalents
 
and
 
short-term securities
 
to fund
 
operations,
 
including $22.6
 
million of
 
cash and
 
cash equivalents,
$45.0 million of short-term investments, and
 
a $0.1 million restricted
 
cash balance, compared to $87.9 million
 
as of December 31, 2022.
The decrease in cash, cash equivalents and short-term securities for the
 
periods reported are primarily due to the factors described under
“Cash Flows” below.
Cash Flows
The following table provides information regarding our cash flows
 
for the three months ended March 31, 2023 and 2022
 
(in thousands):
 
March 31,
December 31,
2023
2022
Balance Sheet Data:
Cash and cash equivalents
$
22,585
$
33,475
Short-term investments, net
44,993
53,352
Restricted cash
100
1,095
Total assets
85,531
106,399
Total liabilities
39,398
44,222
Total stockholders' equity
$
46,133
$
62,177
Three Months Ended March 31,
2023
2022
Statement of Cash Flow Data:
Net cash (used in) provided by operating activities
$
(20,051)
$
(19,514)
Net cash (used in) provided by investing activities
8,740
(713)
Net cash (used in) provided by financing activities
(574)
14
Net (decrease) in cash, cash equivalents and restricted cash
$
(11,885)
$
(20,213)
Operating Activities
Net cash used
 
in operating activities
 
for the three
 
months ended March
 
31, 2023 was
 
$20.1 million, primarily
 
resulting from an
 
$18.4
million
 
net loss,
 
an unfavorable
 
$4.0 million
 
change in
 
operating
 
assets and
 
liabilities and
 
total non-cash
 
items of
 
$2.4 million.
 
The
changes in
 
net operating
 
assets and liabilities
 
were primarily
 
due to a
 
decrease of $0.1
 
million in amounts
 
due to related
 
party,
 
a $1.9
million
 
decrease
 
in
 
accrued
 
expenses
 
and
 
other
 
current
 
liabilities,
 
and
 
a
 
$0.3
 
million
 
decrease
 
in
 
prepaid
 
expenses.
 
The
 
non-cash
adjustments
 
to net loss primarily consisted of $2.2 million of stock-based compensation
 
and $0.6 million in depreciation.
 
Net
 
cash used
 
in operating
 
activities for
 
the three
 
months ended
 
March
 
31, 2022
 
was $19.5
 
million, primarily
 
resulting
 
from
 
a $18.3
million net
 
loss, an
 
unfavorable $3.8
 
million change
 
in operating assets
 
and liabilities
 
and total
 
non-cash items
 
of $2.5
 
million. The
changes in net
 
operating assets and
 
liabilities were primarily
 
due to
 
a decrease of
 
$2.6 million in
 
amounts due
 
to related party,
 
a $1.3
million increase in accrued expenses and other
 
current liabilities, a $1.7 million decrease
 
in accounts payable and other liabilities, a
 
$0.7
million decrease in
 
prepaid expenses, and
 
a $1.4 million
 
decrease in long-term deposits.
 
The primary non-cash
 
adjustments to net loss
consisted of $2.2 million of stock-based compensation and $0.3
 
million in depreciation.
 
26
Investing Activities
Net cash provided
 
by investing activities
 
totaled $8.7 million
 
for the three
 
months ended March 31,
 
2023. The cash
 
provided by investing
activities consisted primarily
 
of the acquisition
 
and redemption
 
of short-term investments,
 
and the
 
acquisition of laboratory
 
and computer
equipment.
Net cash used
 
in investing activities
 
totaled $0.7 million for
 
the three months
 
ended March 31,
 
2022. The cash
 
used in investing
 
activities
consisted primarily of the acquisition of equipment.
Financing Activities
Net cash used by financing activities was less than $0.6 million for the three months
 
ended March 31, 2023.
 
Net cash used by financing activities was less than $0.1 million for the three
 
months ended March 31, 2022.
Funding Requirements
We
 
have incurred
 
net losses
 
in each
 
reporting period
 
since inception.
 
We
 
do not
 
expect to
 
generate any
 
revenue unless
 
and until
 
we
obtain regulatory approval of and commercialize our product candidates, or enter into collaboration or licensing arrangements with one
or more third-party
 
strategic partners. We
 
do not know when,
 
or if, this will
 
occur. We
 
will continue to incur
 
significant losses for the
foreseeable future even
 
if we ultimately receive
 
regulatory approval for
 
one or more of
 
our product candidates
 
and commercialize any
approved
 
products,
 
and
 
we expect
 
the losses
 
to
 
increase
 
as we
 
continue
 
the development
 
of,
 
and
 
seek regulatory
 
approvals
 
for,
 
our
product candidates and begin to commercialize any approved products.
As of the
 
date of this
 
Quarterly
 
Report, we expect
 
our existing cash,
 
cash equivalents and
 
short-term investments
 
will be sufficient
 
to
fund our operating expenses for at least the next 12 months and into mid-2024. As of March 31, 2023, other than our 2025 Note and the
2022 Promissory Note, we have no material debt obligations.
We have
 
based our projections of operating capital
 
requirements on assumptions that may
 
prove to be incorrect, and we may
 
use all of
our available capital resources sooner than we expect. Our future capital
 
requirements will depend on many factors, which include:
the scope, number, progress, initiation,
 
duration, cost, results and timing of clinical trials, pre-clinical programs
 
and
nonclinical studies of our current or future product candidates;
the outcomes and timing of regulatory reviews, approvals or other
 
actions;
the timing and manner in which we manufacture our pre-clinical and clinical
 
drug material, the terms on which we can have
such manufacturing completed, and the extent to which we undertake commercialization
 
of any drug products, if approved;
the extent to which we establish sales, marketing, medical affairs
 
and distribution infrastructure to commercialize any product
candidates;
the timing and extent to which we expand our operational, financial and management
 
systems and infrastructure, and
facilities;
 
the timing and extent to which we increase our personnel to support operations,
 
including necessary increases in headcount to
conduct and expand our clinical trials, commercialize any approved products and support
 
our operations as a public
company;
the number of patent applications we must file and claims we must defend in order
 
to maintain, expand and protect our
intellectual property portfolio, and the costs of preparing, filing and prosecuting
 
patent applications, maintaining and
protecting our intellectual property rights;
our ability to obtain marketing approval for our product candidates;
 
our ability to establish and maintain additional licensing, collaboration or
 
similar arrangements on favorable terms and
whether and to what extent we retain development or commercialization responsibilities
 
under any new licensing,
collaboration or similar arrangement;
the success of any other business, product or technology that we acquire or in
 
which we invest;
 
 
our ability to maintain, expand and defend the scope of our intellectual property
 
portfolio;
 
27
the current and potential impacts of the Russia-Ukraine conflict, the COVID-19
 
pandemic, inflation and rising interest rates
on our business;
 
the costs of acquiring, licensing or investing in businesses, product
 
candidates and technologies;
 
 
market acceptance of our product candidates, to the extent any are approved for
 
commercial sale; and
 
the effect of competing technological and market developments.
Until such time, if ever, as we
 
can generate positive cash flows from operations,
 
we expect to finance our cash needs through public or
private equity offerings, strategic collaborations and debt financing. To the extent that we raise additional capital through the sale
 
of our
Class A common
 
stock, convertible securities or
 
other equity securities,
 
stockholders’ ownership interest
 
will be diluted and
 
the terms
of these securities
 
could include liquidation
 
or other preferences
 
and anti-dilution protections.
 
In addition, debt
 
financing, if available,
may
 
result in
 
fixed
 
payment
 
obligations
 
and
 
may
 
involve agreements
 
that include
 
restrictive
 
covenants
 
that limit
 
our
 
ability to
 
take
specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring dividends.
If we raise additional
 
funds through strategic collaborations
 
or marketing, distribution
 
or licensing arrangements
 
with third parties, we
may have to relinquish valuable rights to our technologies,
 
future revenue streams or product candidates or grant licenses on
 
terms that
may
 
not
 
be
 
favorable
 
to
 
us.
 
If
 
we
 
are
 
unable
 
to
 
raise
 
additional
 
funds
 
when
 
needed,
 
we
 
may
 
be
 
required
 
to
 
delay,
 
limit,
 
reduce
 
or
terminate our product
 
candidate development or
 
future commercialization efforts
 
or grant rights
 
to third parties to
 
develop and market
product candidates that we would otherwise prefer to develop and market
 
ourselves.
 
Contract Research and Manufacturing Organizations
We
 
recorded accrued
 
expenses of $4.8
 
million in our
 
balance sheet for
 
expenditures incurred
 
by CROs and
 
contract manufacturers
 
as
of March 31, 2023 and $4.3 million as of December 31, 2022.
Tax
 
-Related Obligations
We have reserved $0.7 million of unrecognized tax benefits against NOLs. Additionally, as of March 31, 2023, we accrued $0.2 million
in interest and penalties related to prior year tax filings.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and do not
 
currently have, any off-balance sheet arrangements, as defined in
 
the rules and
regulations of the SEC.
 
Critical Accounting Policies and Estimates
The preparation of financial statements
 
in accordance with GAAP requires
 
management to make estimates and
 
assumptions that affect
the amounts
 
reported
 
in our
 
unaudited
 
condensed
 
consolidated financial
 
statements and
 
accompanying
 
notes. Management
 
bases its
estimates on
 
historical experience,
 
market and
 
other conditions,
 
and various
 
other assumptions
 
it believes
 
to be
 
reasonable. Although
these estimates are based
 
on management’s best knowledge of current events and actions
 
that may impact us
 
in the future, the
 
estimation
process
 
is,
 
by
 
its
 
nature,
 
uncertain
 
given
 
that
 
estimates
 
depend
 
on
 
events
 
over
 
which
 
we
 
may
 
not
 
have
 
control.
 
In
 
addition,
 
if
 
our
assumptions change,
 
we may
 
need to
 
revise our
 
estimates, or
 
take other
 
corrective actions,
 
either of
 
which may
 
also have
 
a material
effect on our unaudited condensed consolidated financial statements. Significant estimates contained within
 
these unaudited condensed
consolidated
 
financial
 
statements
 
include,
 
but
 
are
 
not
 
limited
 
to,
 
the
 
estimated
 
fair
 
value
 
of
 
our
 
common
 
stock,
 
stock-based
compensation,
 
income
 
tax
 
valuation
 
allowance
 
and
 
the
 
accruals
 
of
 
research
 
and
 
development
 
expenses.
 
We
 
base
 
our
 
estimates
 
on
historical
 
experience,
 
known
 
trends
 
and
 
other
 
market-specific
 
or
 
other
 
relevant
 
factors
 
that
 
we
 
believe
 
to
 
be
 
reasonable
 
under
 
the
circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in facts and circumstances. If market and
other conditions
 
change from
 
those that
 
we anticipate,
 
our unaudited
 
condensed consolidated
 
financial statements
 
may be
 
materially
affected.
While
 
our
 
significant
 
accounting
 
policies
 
are
 
described
 
in
 
detail
 
in
 
our
 
annual
 
consolidated
 
financial
 
statements
 
for
 
the
 
year
 
ended
December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2022, we believe
 
that the following
critical accounting policies and estimates have a higher degree of inherent uncertainty
 
and require our most significant judgments.
 
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we
 
are required to estimate accrued research and development
expenses.
 
As we
 
advance
 
our
 
programs,
 
we
 
anticipate
 
more
 
complex
 
clinical
 
studies
 
resulting
 
in
 
greater
 
research
 
and development
 
28
expenses, which will
 
place even greater emphasis
 
on the accrual. This
 
process involves reviewing
 
open contracts and purchase
 
orders,
communicating with
 
our applicable
 
personnel to
 
identify services
 
that have
 
been performed
 
on our
 
behalf and
 
estimating the
 
level of
service performed
 
and the associated
 
cost incurred for
 
the service when
 
we have not
 
yet been invoiced
 
or otherwise notified
 
of actual
costs. In the past years, UBI and its affiliated companies performed and administered a significant amount of research and development
work on our
 
behalf.
 
Having UBI and
 
its affiliated
 
company act as
 
intermediaries added
 
to the complexity
 
of determining appropriate
accruals,
 
and
 
we have
 
largely moved
 
away from
 
this model.
 
Certain accruals
 
and
 
amounts owed
 
to the
 
UBI entities
 
are still
 
under
review, and these amounts may
 
change as a result of this review.
The
 
majority
 
of
 
our
 
service
 
providers
 
invoice
 
in
 
arrears
 
for
 
services
 
performed,
 
on
 
a
 
pre-determined
 
schedule
 
or
 
when
 
contractual
milestones are met; however, some require advance payments. We
 
make estimates of accrued expenses as of each balance sheet date in
the consolidated financial statements
 
based on facts and circumstances
 
known to us at that
 
time. We
 
periodically confirm the accuracy
of the estimates with
 
the service providers and
 
make adjustments if necessary. Examples of estimated
 
accrued research and development
expenses include fees paid to:
vendors, including research laboratories, in connection with pre-clinical
 
development activities;
CROs and investigative sites in connection with pre-clinical studies and
 
clinical trials; and
contract manufacturers in connection with drug substance and drug product
 
formulation of pre-clinical studies and clinical
trial materials.
We
 
base our
 
expenses related
 
to pre-clinical
 
studies and
 
clinical trials
 
on our
 
estimates of
 
the services
 
received and
 
efforts expended
pursuant to quotes and contracts with multiple research institutions and CROs that supply,
 
conduct and manage pre-clinical studies and
clinical trials on our behalf.
 
The financial terms of these
 
agreements are subject to
 
negotiation, vary from contract
 
to contract and may
result
 
in
 
uneven
 
payment
 
flows.
 
There
 
may
 
be
 
instances
 
in
 
which
 
payments
 
made
 
to
 
our
 
vendors
 
will
 
exceed
 
the
 
level
 
of
 
services
provided and result
 
in a prepayment
 
of the expense.
 
Payments under some
 
of these contracts
 
depend on factors
 
such as the
 
successful
enrollment of patients
 
and the completion of
 
clinical trial milestones. In
 
accruing service fees, we
 
estimate the time period
 
over which
services will be performed
 
and the level of
 
effort to be
 
expended in each
 
period. If the actual
 
timing of the
 
performance of services
 
or
the level
 
of effort
 
varies from
 
the estimate,
 
it adjusts
 
the accrual
 
or the
 
prepaid expense
 
accordingly.
 
Although we
 
do not
 
expect our
estimates to
 
be materially
 
different from
 
amounts actually
 
incurred, our
 
understanding of
 
the status
 
and timing
 
of services performed
relative to the actual status and timing of services performed may vary and may result in reporting amounts
 
that are too high or too low
in any particular period. To
 
date, our estimated accruals have not differed materially from actual costs incurred.
Stock-Based Compensation
We measure all stock-based awards granted to employees, directors and non-employees based on their fair
 
value on the date of the
 
grant
and recognize the corresponding compensation expense of those awards over the requisite service period, which is
 
generally the vesting
period of the respective award. Forfeitures are accounted for as they occur. We
 
grant stock options and restricted stock unit awards that
are subject to service vesting conditions.
We
 
classify stock-based
 
compensation expense
 
in our
 
consolidated statements
 
of operations
 
in the
 
same manner
 
in which
 
the award
recipient’s payroll costs are classified
 
or in which the award recipient’s
 
service payments are classified.
We estimate the fair value of each stock
 
option grant using the Black-Scholes
 
option-pricing model, which requires the use
 
of subjective
assumptions
 
that
 
could
 
materially
 
impact
 
the
 
estimation
 
of
 
fair
 
value
 
and
 
related
 
compensation
 
expense
 
to
 
be
 
recognized.
 
These
assumptions include (i) the expected volatility of our stock
 
price, (ii) the periods of time over
 
which recipients are expected to hold their
options prior to exercise (expected lives), (iii) expected dividend yield on our common stock, and (iv) risk-free interest rates, which
 
are
based
 
on
 
quoted
 
U.S.
 
Treasury
 
rates
 
for
 
securities
 
with
 
maturities
 
approximating
 
the
 
options’
 
expected
 
lives.
 
Developing
 
these
assumptions
 
requires
 
the
 
use
 
of
 
judgment.
 
Both
 
prior
 
to
 
and
 
after
 
our
 
initial
 
public
 
offering
 
(“IPO”),
 
we
 
lacked
 
company-specific
historical and implied volatility
 
information. Therefore, we estimate
 
our expected stock volatility
 
based on the historical
 
volatility of a
publicly
 
traded
 
set of
 
peer
 
companies.
 
The
 
expected
 
term of
 
the
 
Company’s
 
options
 
has been
 
determined
 
utilizing
 
the “simplified”
method
 
for
 
awards
 
that
 
qualify
 
as
 
“plain-vanilla”
 
options.
 
The
 
expected
 
term
 
of
 
options
 
granted
 
to
 
non-employees
 
is
 
equal
 
to
 
the
contractual term of the
 
option award. The
 
expected dividend yield is
 
zero as we
 
have never paid dividends
 
and do not
 
currently anticipate
paying any in the foreseeable future.
Coalition for Epidemic Preparedness
 
(“CEPI”) Grant
In April 2022, we entered into an agreement with the Coalition for Epidemic
 
Preparedness Innovations (“CEPI”) whereby CEPI
agreed to provide funding of up to $9.3 million to co-fund a Phase 3 clinical trial of
 
our UB-612 COVID-19 vaccine candidate as a
heterologous – or ‘mix-and-match’ – booster dose. The Phase 3 trial, which
 
began in early 2022, is evaluating the ability of UB-612 to
boost COVID-19 immunity against the original strain and multiple variants
 
of concern, including Omicron, in people aged 16 years or
older who have been previously immunized with an authorized COVID-19
 
vaccine.
 
 
 
29
We will also be performing
 
further manufacturing scale-up work to enable readiness for potential commercialization.
 
Under the terms
of the agreement with CEPI, if successful, a portion of the released doses of the commercial
 
product will be allocated for delivery to
the COVID-19 Vaccines
 
Global Access (“COVAX”)
 
consortium for distribution to developing countries at low cost.
Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in
the funding agreement are incurred. As funds are received, they are included within restricted cash offset by a corresponding short-term
accrued liability.
 
We
 
recognize payments
 
from CEPI
 
as a
 
reduction of
 
research and
 
development expenses,
 
in the
 
same period
 
as the
expenses that the grant is intended to reimburse are incurred.
Item 3. Quantitative and Qualitative Disclosures About
 
Market Risk.
 
We
 
are exposed
 
to market risk
 
in the ordinary
 
course of our
 
business. These
 
risks primarily
 
relate to
 
foreign currency
 
and changes
 
in
interest rates.
 
Foreign Currency Exchange
 
Risk
 
We
 
have
 
limited
 
exposure
 
to
 
foreign
 
currency
 
exchange
 
risk
 
as
 
most
 
of
 
our
 
operating
 
activities
 
are
 
primarily
 
denominated
 
in
 
U.S.
dollars. We believe actual foreign
 
exchange gains and
 
losses did not
 
have a significant
 
impact on our
 
results of operations
 
for any periods
presented herein.
 
The results
 
of the
 
analysis based
 
on our
 
financial position
 
as of
 
March 31, 2023,
 
indicated that
 
a hypothetical
 
10%
increase or decrease in applicable foreign currency exchange rates would not
 
have a material effect on our financial results.
Interest Rate Risk
 
We are
 
exposed to market risk related
 
to changes in interest rates. As of
 
March 31, 2023 and December 31,
 
2022, our cash equivalents
consisted
 
of
 
interest-bearing
 
checking
 
accounts
 
and
 
money
 
market
 
accounts.
 
The
 
2025
 
Note
 
we
 
entered
 
into
 
for
 
the
 
year
 
ended
December 31, 2020
 
bears a
 
fixed annual
 
interest rate
 
of 3.4%
 
and matures
 
in June
 
2025. Additionally,
 
the 2022
 
Promissory Note
 
we
entered into for
 
the year ended December
 
31, 2022 bears a fixed
 
annual interest rate of
 
7.0% and matures in
 
October 2026. Given
 
that
the 2025 Note
 
and the 2022
 
Promissory Note bear
 
fixed rates of
 
interest, we believe
 
there is no
 
material exposure to
 
interest rate risk.
The results of
 
the analysis based
 
on our financial
 
position as of
 
March 31, 2023, indicated
 
that a hypothetical
 
100 basis point
 
increase
or decrease in risk-free rates would not have a material effect
 
on our financial results.
Our measurement of
 
interest rate risk involves
 
assumptions that are
 
inherently uncertain and,
 
as a result,
 
we cannot precisely
 
estimate
the impact of
 
changes in interest
 
rates on net
 
interest revenues.
 
Actual results may
 
differ from
 
simulated results due
 
to changes in
 
the
amount of our
 
cash equivalents
 
and the timing,
 
magnitude, and
 
frequency of interest
 
rate changes, as
 
well as
 
changes in market
 
conditions
and management strategies, including changes in asset and liability mix.
 
Item 4. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal
 
financial officer, evaluated, as of the end of the
period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures
 
(as defined in Rules
13a-15(e)
 
and 15d-15(e)
 
under the
 
Exchange Act).
 
In designing
 
and evaluating
 
our disclosure
 
controls and
 
procedures, management
recognizes
 
that
 
any
 
controls
 
and
 
procedures,
 
no
 
matter
 
how
 
well
 
designed
 
and
 
operated,
 
can
 
provide
 
only
 
reasonable
 
assurance
 
of
achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are
resource constraints, and that management
 
is required to apply judgment
 
in evaluating the benefits of possible
 
controls and procedures
relative to their costs. Based on management’s evaluation, our principal executive officer and principal financial officer
 
concluded that,
as of March 31, 2023, our disclosure controls and procedures were effective
 
at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) during
 
the quarter
 
ended March 31,
 
2023 that
 
have materially
 
affected, or
 
are reasonably
 
likely to
 
materially affect,
 
our internal
control over financial reporting.
 
Inherent Limitations on Effectiveness of Controls
Our management,
 
including the principal
 
executive officer and
 
principal financial officer,
 
does not expect
 
that our disclosure
 
controls
or
 
our
 
internal
 
control over
 
financial
 
reporting
 
will prevent
 
or detect
 
all error
 
and
 
all fraud.
 
A control
 
system,
 
no matter
 
how
 
well
designed and operated, can provide only reasonable,
 
not absolute, assurance that the control
 
system's objectives will be met.
 
The design
of a control
 
system must reflect
 
the fact that
 
there are resource
 
constraints, and
 
the benefits of
 
controls must
 
be considered
 
relative to
 
30
their costs.
 
Further, because of the inherent limitations
 
in all control systems, no evaluation of controls can provide
 
absolute assurance
that misstatements due to error
 
or fraud will not occur
 
or that all control issues and
 
instances of fraud, if any,
 
have been detected.
 
The
design
 
of
 
any
 
system
 
of
 
controls is
 
based
 
in
 
part
 
on
 
certain
 
assumptions
 
about
 
the
 
likelihood
 
of future
 
events,
 
and
 
there
 
can
 
be
 
no
assurance that any design
 
will succeed in achieving its stated
 
goals under all potential
 
future conditions.
 
Projections of any evaluation
of the effectiveness of controls to future periods are subject to risks.
 
Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with policies or
 
procedures.
 
 
 
 
 
 
 
 
31
PART
 
II – OTHER INFORMATION
 
Item 1A. Risk Factors.
 
There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31,
2021, filed with the Securities and Exchange Commission on March 27, 2023.
Item 6. Exhibits.
 
The following exhibits
 
required by Item 601
 
of Regulation S-K
 
are filed herewith
 
or have been
 
filed previously with
 
the SEC as
 
indicated
below:
Exhibit
No.
 
Index to Exhibits
3.1
 
3.2
 
4.1
31.1
31.2
32.1
101.INS
Inline XBRL Instance Document*
101.SCH
Inline XBRL Taxonomy
 
Extension Schema Document*
101.CAL
Inline XBRL Taxonomy
 
Extension Calculation Linkbase Document*
101.DEF
Inline XBRL Taxonomy
 
Extension Definition Linkbase Document*
101.LAB
Inline XBRL Taxonomy
 
Extension Label Linkbase Document*
101.PRE
Inline XBRL Taxonomy
 
Extension Presentation Linkbase Document*
104
Cover Page Interactive Data File (the cover page XBRL tags are embedded
 
within the Inline XBRL document).*
__________________________
*
 
Filed herewith.
**
 
Furnished herewith.