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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 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
 
August 7, 2023, the registrant had
112,870,912
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;
 
expectations regarding our ability to continue as a going concern;
 
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)
June 30,
December 31,
2023
2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
37,058
$
33,475
Short-term investments
18,790
53,352
Restricted cash
205
1,095
Amounts due from related parties
407
414
Prepaid expenses and other current assets
3,245
5,551
Total current assets
59,705
93,887
Property and equipment, net
11,662
12,512
Total assets
$
71,367
$
106,399
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
1,893
$
5,295
Amounts due to related parties
12,788
12,772
Accrued expenses and other current liabilities
7,708
11,370
Note payable, net of debt issuance cost
398
391
Note payable to related party
994
1,113
Total current liabilities
23,780
30,941
Other liabilities:
Note payable, net of debt issuance cost, net of current
 
portion
9,732
9,933
Note payable to related party, net of current portion
2,607
3,112
Other long-term liabilities
236
236
Total liabilities
36,355
44,222
Commitments and contingencies (Note 14)
Preferred stock: $
0.0001
 
par value,
50,000,000
 
shares authorized at June 30, 2023 and December
 
31, 2022
Stockholders’ equity:
Class A common stock, $
0.0001
 
par value;
1,000,000,000
 
shares authorized,
112,823,913
 
and
112,182,750
 
shares issued and
outstanding at June 30, 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 June
30, 2023 and December 31, 2022
1
1
Additional paid-in capital
371,852
366,798
Accumulated other comprehensive loss
(18)
(197)
Accumulated deficit
(337,101)
(304,703)
Total stockholders’ equity
35,012
62,177
Total liabilities and stockholders’ equity
$
71,367
$
106,399
The accompanying notes are an integral part
 
of these unaudited condensed consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
VAXXINITY,
 
INC.
CONDENSED CONSOLIDATED
 
STATEMENTS
 
OF OPERATIONS AND
OTHER COMPREHENSIVE (INCOME) LOSS
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Operating expenses:
Research and development
$
8,345
$
10,664
$
19,769
$
22,142
General and administrative
6,082
6,560
13,422
13,246
Total operating expenses
14,427
17,224
33,191
35,388
Loss from operations
(14,427)
(17,224)
(33,191)
(35,388)
Other (income) expense:
Interest and other expense
146
105
338
210
Interest and other income
(578)
(75)
(1,145)
(80)
(Gain) loss on foreign currency transactions, net
(18)
(2)
14
(3)
Total other (income) expense,
 
net
(449)
28
(793)
127
Net loss
$
(13,977)
$
(17,252)
$
(32,398)
$
(35,515)
Net loss per share, basic and diluted
$
(0.11)
$
(0.14)
$
(0.26)
$
(0.28)
Weighted average common
 
shares outstanding, basic and
diluted
126,481,497
125,948,595
126,272,546
125,829,764
Other comprehensive income:
 
Unrealized gain on investments
(31)
(179)
 
Other comprehensive income
$
(31)
$
$
(179)
$
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
Issuance of common stock upon exercise of stock options
635,001
0
393
393
Stock-based compensation expense
2,433
2,433
Unrealized gain on investments
31
31
Net loss
(13,977)
(13,977)
Balance at June 30, 2023
112,823,912
$
278
13,874,132
$
1
$
371,852
$
(18)
$
(337,101)
$
35,012
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
Issuance of common stock upon exercise of stock options
162,613
112
112
Stock-based compensation expense
1,826
1,826
Net loss
(17,252)
(17,252)
Balance at June 30, 2022
112,129,705
$
278
13,874,132
$
1
$
362,058
$
$
(264,996)
$
97,341
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)
Six Months Ended June 30,
2023
2022
Cash flows from operating activities:
Net loss
$
(32,398)
$
(35,515)
Adjustments to reconcile net loss to net cash used in operating
 
activities:
Depreciation expense
1,112
725
Amortization of debt issuance costs
26
27
Amortization of discount on short-term investments
(872)
Stock-based compensation expense
4,658
4,004
Changes in operating assets and liabilities:
Amounts due from related parties
7
(7)
Prepaid expenses and other current assets
2,306
1,003
Long-term deposits
(2,076)
Accounts payable
(3,402)
(2,854)
Amounts due to related parties
16
(2,683)
Accrued expenses and other current liabilities
(3,662)
7,326
Other long-term liabilities
(1)
Net cash used in operating activities
(32,209)
(30,051)
Cash flows from investing activities:
Purchase of short-term investments
(18,588)
Proceeds from maturity of short-term investments
54,200
Purchases of property and equipment
(262)
(1,252)
Net cash provided by (used in) investing activities
35,350
(1,252)
Cash flows from financing activities:
Repayments of note payable
(220)
(213)
Repayments of note payable with related party
(625)
Proceeds from exercise of stock options
397
233
Net cash provided by (used in) financing activities
(448)
20
Change in cash, cash equivalents and restricted cash
2,693
(31,283)
Cash, cash equivalents and restricted cash at beginning of
 
period
34,570
145,057
Cash, cash equivalents and restricted cash at end of period
$
37,263
$
113,774
Reconciliation of cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash at end of period
$
37,263
$
113,774
Less restricted cash
(205)
(1,095)
Cash and cash equivalents end of period
$
37,058
$
112,679
Supplemental Disclosure
Cash paid for interest
$
192
$
185
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 Biomedical,
 
Inc. (“UBI”)
 
in two separate
 
transactions: a
 
spin-out
from UBI
 
in 2014 of
 
operations focused on
 
developing chronic disease
 
product candidates that
 
resulted in
 
United Neuroscience (“UNS”),
and a second spin-out
 
from UBI in 2020
 
of operations focused on
 
the development of a
 
COVID-19 vaccine that resulted
 
in C19 Corp.
(“COVAXX”).
 
On February 2, 2021,
 
Vaxxinity
 
was incorporated for
 
the purpose of reorganizing
 
and combining UNS
 
and COVAXX
and on March 2, 2021, did so by acquiring
 
all 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 and Going Concern Assessment
As of June 30, 2023, the Company had $
56.1
 
million of cash, cash equivalents and short term investments to fund operations, including
$
37.1
 
million of
 
cash and
 
cash equivalents,
 
$
18.8
 
million of
 
short-term investments,
 
and $
0.2
 
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 $
32.4
 
million for
the six months ended June 30, 2023. Net cash used in operating activities for the six months ended June 30,
 
2023 was $
32.2
 
million. In
addition, as
 
of June 30,
 
2023, the
 
Company has
 
an accumulated
 
deficit of
 
$
337.1
 
million. The
 
Company expects
 
to incur
 
substantial
operating losses and negative cash flows from operations for the foreseeable future.
 
In accordance with
 
ASU 2014-15, Presentation
 
of Financial Statements-
 
Going Concern (Subtopic 205-40)
 
– Disclosure of
 
Uncertainties
about
 
an Entity’s
 
Ability to
 
Continue
 
as a
 
Going
 
Concern,
 
our
 
management is
 
required
 
to
 
evaluate
 
whether there
 
are
 
conditions
 
or
events, considered
 
in the aggregate,
 
that raise
 
substantial doubt
 
about our
 
ability to continue
 
as a
 
going concern
 
within one
 
year after
the date that our financial statements are
 
issued. When our management identifies conditions or events,
 
considered in the aggregate, that
raise substantial
 
doubt about
 
our ability
 
to continue
 
as a
 
going concern,
 
our management
 
must consider
 
whether its
 
plans to
 
mitigate
those relevant conditions or events will alleviate the substantial doubt.
 
Given that the Company has incurred
 
substantial operating losses and negative
 
cash flows from operations since
 
inception and expects
to continue
 
to incur
 
substantial operating
 
losses and
 
negative cash
 
flows from
 
operations for
 
the foreseeable
 
future, our
 
management
assessed that there were conditions or events,
 
considered in the aggregate, as of
 
the issue date of these
 
financial statements, which raised
substantial doubt about our ability to continue as a going concern.
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
10
Our management considered
 
whether its plans to
 
mitigate those relevant conditions
 
or events will alleviate
 
the substantial doubt
 
about
our ability to continue
 
as a going concern.
 
We
 
expect to finance our
 
operations by raising new
 
capital through public
 
or private equity
offerings, strategic collaborations and debt financing
 
and other capital sources or combinations thereof, and
 
as needed reduce our costs
through
 
overhead
 
reduction,
 
attrition,
 
organization
 
restructuring,
 
and
 
curtailment
 
of
 
certain
 
research
 
and
 
development
 
activities.
Management believes
 
that these
 
plans, which
 
have been
 
approved
 
by the
 
Company’s
 
Board
 
of Directors,
 
alleviate substantial
 
doubt
about our ability to
 
continue as a going
 
concern, as management believes that
 
it is probable that
 
its plans will be
 
effectively implemented
within one year after
 
the issue date
 
of the accompanying
 
financial statements and
 
that it is
 
probable that its
 
plans, when implemented,
will mitigate the relevant conditions or events that raise substantial doubt about our ability
 
to continue as a going concern.
 
Accordingly, the accompanying unaudited condensed consolidated financial statements have been prepared assuming
 
that the Company
will continue
 
as a
 
going concern,
 
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.
 
However, there
 
can be no
 
assurance that our
 
current operating plan
 
will be achieved
 
or that additional
funding will be available on terms acceptable to us, or at all.
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 and
 
six months ended June 30,
 
2023 and cash
flows for the six months ended June 30, 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 and six months ended June 30, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
11
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):
June 30, 2023
Level 1
Level 2
Level 3
Total
Assets:
Short-term investments
$
18,790
$
$
$
18,790
Money market accounts
7,050
7,050
Total assets
$
25,840
$
$
$
25,840
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
During the three and six months ended June 30, 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 June 30, 2023
Amortized Cost
Unrealized
Gains (Losses),
Net
Recorded Basis
U.S. Treasury Securities
$
18,807
$
(18)
$
18,790
Total
$
18,807
$
(18)
$
18,790
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):
June 30,
December 31,
2023
2022
Clinical prepayments
$
1,544
$
2,679
Prepaid insurance
758
1,870
Prepaid materials and supplies
248
Deposits
240
232
Other
702
522
$
3,245
$
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
 
$
1.3
 
million
 
on
 
deposit
 
as
 
of
 
June 30,
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
12
Prepaid
 
insurance
 
consists
 
primarily
 
of
 
$
0.7
 
million
 
and
 
$
1.6
 
million
 
for
 
the
 
unamortized
 
portion
 
of
 
the
 
Company’s
 
annual
 
D&O
insurance fee as of June 30, 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.
 
There were
no
 
amounts held
 
by related
 
parties at
 
June 30, 2023
 
and $
0.2
 
million at
December 31, 2022.
6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
June 30,
December 31,
2023
2022
Airplane
$
11,983
$
11,983
Laboratory and computer equipment
3,310
3,146
Software
426
415
Leasehold improvements
407
403
Facilities, furniture and fixtures
99
37
Vehicles
87
87
Construction in progress
86
65
Total property and equipment
16,398
16,136
Less: accumulated depreciation and amortization
(4,736)
(3,624)
Property and equipment, net
$
11,662
$
12,512
Depreciation expense
 
for the three
 
and six months
 
ended June 30,
 
2023 was $
0.5
 
million and $
1.1
 
million, respectively.
Depreciation
expense for the three and six months ended June 30, 2022 was $
0.4
 
million and $
0.7
 
million, respectively.
 
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
June 30,
December 31,
2023
2022
Accrued external research and development
$
4,506
$
6,904
Accrued bonuses
2,614
2,568
Accrued professional fees and other
588
1,722
Accrued interest
176
$
7,708
$
11,370
 
8. Other Long-Term
 
Liabilities
Other long-term liabilities consisted of the following (in thousands):
June 30,
December 31,
2023
2022
Accrued taxes
236
236
$
236
$
236
As of June 30, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
13
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.
 
The carrying value of the 2025 Note is as follows (in thousands):
 
June 30,
December 31,
2023
2022
Principal
$
10,234
$
 
10,455
Unamortized debt issuance cost
(104)
(131)
Carrying amount
10,130
10,324
Less: current portion
(398)
(391)
Note payable, net of current portion and debt issuance cost
$
9,732
$
9,933
As of June 30, 2023, the remaining principal payments for the 2025 Note are
 
as follows (in thousands):
 
Amount
2023 (remaining 6 months)
$
223
2024
458
2025
9,553
$
10,234
Interest expense
 
associated with
 
the 2025
 
Note was
 
$
0.1
 
million and
 
$
0.2
 
million for
 
the three
 
and six
 
months ended
 
June 30, 2023,
respectively.
 
Interest
 
expense
 
associated
 
with the
 
2025
 
Note
 
was $
0.1
 
million and
 
$
0.2
 
million
 
for
 
the
 
three
 
and
 
six
 
months
 
ended
June 30, 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 June 30, 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.
The carrying value of the 2022 Promissory Note is as follows (in thousands):
June 30,
December 31,
2023
2022
Principal
$
3,600
$
 
4,225
Less: current portion
(994)
(1,113)
Note payable with related party,
 
net of current portion
$
2,607
$
3,112
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
14
As of June 30, 2023, the remaining principal payments for the 2022 Promissory Note are
 
as follows (in thousands):
 
Amount
2023 (remaining 6 months)
$
488
2024
1,029
2025
1,103
2026
980
$
3,600
Interest expense associated with
 
the 2022 Promissory
 
Note was $
0.1
 
million and $
0.1
 
million for the
 
three and six
 
months ended June 30,
2023, respectively.
 
10. Common Stock
The Company has reserved shares of Class A common stock for issuance for the following
 
purposes:
 
June 30,
December 31,
2023
2022
Options and RSUs issued and outstanding
22,684,626
20,716,760
Options available for future grants
6,079,959
6,064,003
Warrants issued and outstanding
1,928,020
1,928,020
30,692,605
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 June 30, 2023, there were options to purchase
16,022,171
 
shares of Class A stock outstanding and options to purchase
6,362,455
shares of Class B stock outstanding, of which options to purchase
11,143,381
 
shares of Class A common stock and options to purchase
5,015,785
 
shares of Class B common stock were exercisable, respectively.
 
As of June 30, 2023, the maximum number of stock options
awards available for future issuance under the Company’s
 
plan is
6,079,959
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
15
The following table summarizes stock option activity during the six
 
months ended June 30, 2023:
 
Number of Stock
Options
Outstanding
Weighted
Average
Exercise Price
Per Share
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
(in thousands)
Balance at December 31, 2022
20,416,760
$
5.07
6.8
$
7,166
Granted
3,553,348
2.27
Exercised
(641,162)
0.62
Forfeited
(944,320)
7.33
Balance at June 30, 2023
22,384,626
$
4.66
6.0
$
16,242
Options vested and exercisable at June 30, 2023
16,159,166
$
4.56
5.2
$
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 June 30, 2023.
The intrinsic value of options exercised during the six months ended June 30,
 
2023 was $
0.8
 
million.
The weighted-average grant-date fair value per share of options granted during the
 
six months ended June 30, 2023 was $
1.88
.
Restricted Stock Units
The following table summarizes the Company’s
 
restricted stock unit activity for the six months ended June 30, 2023:
 
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Per Share
Unvested at December 31, 2022
300,000
$
3.76
Issued
Unvested at June 30, 2023
300,000
$
3.76
Stock-based compensation expense recognized on restricted stock
 
was $
0.1
 
million for the six months ended June 30, 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 and other comprehensive (income) loss
 
(in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
General and administrative
$
1,607
$
1,008
$
3,009
$
2,379
Research and development
827
818
1,649
1,625
Total stock-based compensation
 
expense
$
2,433
$
1,826
$
4,658
$
4,004
As of
 
June 30,
 
2023,
 
total
 
unrecognized
 
compensation
 
cost
 
related
 
to
 
the unvested
 
stock-based
 
awards
 
was $
16.0
 
million,
 
which is
expected to be recognized over a weighted average period of
2.2
 
years.
12. Income Taxes
The
 
Company computes
 
its expected
 
annual effecti
 
ve 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,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
16
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 June 30, 2023 and June 30, 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 June 30, 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
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 consider
 
s
 
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
 
warrants, 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 June 30, 2023 and 2022 because including
 
them would have had an anti-dilutive effect:
 
June 30,
2023
2022
Restricted stock units issued and outstanding
300,000
300,000
Options issued and outstanding
22,384,626
20,339,861
Warrants issued and outstanding
1,928,020
1,928,020
24,612,646
22,567,881
 
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 June 30,
 
2023, the
 
Company had remaining
 
prepayments to
 
CROs of
 
$
1.3
 
million and
no
 
remaining prepayments
 
to CMOs
 
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
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
17
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
 
June 30, 2023,
 
there was
no
 
balance remaining
 
in the
 
accrued liability
 
related to
 
this grant.
 
For the
 
six months
 
ended June 30,
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
short-term accrued
 
liability.
 
As of
 
June 30, 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
 
six
 
months
 
ended
 
June 30,
 
2023,
 
the
 
Company
 
recognized
 
a
reduction of $
1.8
 
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
 
and six
 
months ended June 30,
 
2023 was $
0.2
 
million and $
0.3
 
million, respectively.
 
Rent expense
 
for the
three and six months ended June 30, 2022 was $
0.1
 
million and $
0.2
 
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
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
18
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
no
t accrued any liabilities related to such obligations as of June 30, 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 June 30,
2023 and December 31, 2022, the Company was not a party to any material legal
 
matters or claims.
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 for
 
$
3
 
million of
 
materials. 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 authorized under the ATP
 
that 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 is
probable, or
 
that one amount
 
of loss is
 
a better
 
estimate than any
 
other amount,
 
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
no
t been recognized for them.
As of August 9, 2023,
 
there is no claim against the Company by UBP related to these orders, no settlement or other agreement has been
reached between the
 
Company and UBP
 
or, to
 
the Company’s
 
knowledge, between UBP
 
and its suppliers. Therefore,
 
the range of the
potential loss is still $
0
 
to $
4.2
 
million.
 
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 the
three and six months ended June 30, 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 June 30, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
19
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.
The Company
 
also considers Destination
 
Systems, its
 
aircraft management firm,
 
a related party
 
since its
 
Chief Executive Officer, Landon
Ogilvie, is on the Company’s board
 
of directors.
Total related party operating activity
 
is as follows (in thousands):
June 30,
December 31,
2023
2022
Consolidated balance sheet
Assets
Prepaid expenses and other current assets
$
$
237
Amounts due from related parties
407
414
Liabilities
Amounts due to related parties
12,778
12,772
Current portion of note payable
994
1,113
Note payable
2,607
3,112
Accrued interest payable
73
Three Months Ended June 30,
Six Months Ended June 30,
2023
2022
2023
2022
Operating expenses
Research and development
Services provided by related parties
 
$
(25)
 
$
407
 
$
357
 
$
1,191
General and administrative
Services provided by related parties
 
$
303
 
$
 
$
1,057
 
$
Other income/expense
Related party interest expense
 
$
64
 
$
 
$
133
 
$
 
17. Subsequent Events
Changes in Registrant’s Certifying
 
Accountant
On
 
July
 
21,
 
2023,
 
Vaxxinity,
 
Inc.
 
(the
 
“Company”)
 
was
 
informed
 
by
 
Armanino
 
LLP
 
(“Armanino”)
 
that
 
it
 
intends
 
to
 
resign
 
as
 
the
Company’s independent registered public accounting firm, effective upon the earlier of (i) filing of the Company’s Quarterly
 
Report on
Form
 
10-Q
 
for
 
the quarter
 
ending
 
September
 
30,
 
2023
 
and
 
(ii)
 
the Company’s
 
appointment
 
of a
 
new independent
 
registered
 
public
accounting firm. The audit committee of the Company’s
 
board of directors accepted but did not request or recommend Armanino’s
resignation.
Armanino advised the Company that its decision was due to Armanino’s
 
transition away from providing financial statement audit
services to public companies.
VAXXINITY,
 
INC.
NOTES TO THE CONDENSED CONSOLIDATED
 
FINANCIAL STATEMENTS
 
20
Armanino’s audit reports
 
on the Company’s consolidated
 
financial statements for the years ended
 
December 31, 2022 and 2021 do
 
not
contain any adverse
 
opinion or
 
disclaimer of opinion
 
and were
 
not qualified
 
or modified
 
as to
 
uncertainty,
 
audit scope,
 
or accounting
principles. During the
 
two most recent
 
fiscal years and
 
the subsequent interim
 
period, there
 
were no (i) disagreements
 
with Armanino
on any matter of
 
accounting principles or practices, financial statement
 
disclosure, or auditing scope or procedure, which
 
disagreements,
if not
 
resolved to
 
the satisfaction
 
of Armanino,
 
would have
 
caused it
 
to make
 
reference to
 
the subject
 
matter of
 
the disagreements
 
in
connection with its report or (ii) “reportable events” as such term is defined in Item 304(a)(1)(v)
 
of Regulation S-K.
The Company has begun
 
a search process
 
to identify a
 
new independent registered
 
public accounting firm.
 
There can be
 
no assurance
that we will be
 
able to appoint a new
 
independent registered public accounting firm on
 
a timely basis, which would
 
result in our inability
to file required Exchange Act reports, limit our ability to raise capital, and result in a loss of investor
 
confidence.
Appointment of Global Scientific Director
On July
 
27, 2023, the
 
Company announced that
 
Peter Powchik will
 
join its
 
leadership team
 
as Executive
 
Vice President, Global Scientific
Director,
 
effective
 
October
 
1,
 
2023.
 
He
 
will
 
remain
 
as
 
a
 
member
 
of
 
the
 
Company’s
 
board
 
of
 
directors.
 
In
 
addition,
 
the
 
Company
announced that Ulo Palm will transition from the Company’s
 
Chief Medical Officer to senior advisor,
 
effective October
 
1, 2023.
 
 
 
 
 
21
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 ongoing need for booster vaccines
to address COVID-19 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,
 
which fall into
 
3 major areas:
 
Neurodegeneration,
Next Wave Chronic, and
 
Infectious Disease.
 
Our
 
Neurodegeneration
 
pipeline
 
consists
 
of
 
UB-311,
 
our
 
leading
 
neurology
 
product
 
candidate,
 
which
 
targets
 
Alzheimer’s
 
disease
(“AD”); UB-312,
 
which targets Parkinson’s
 
disease (“PD”) and
 
other synucleinopathies;
 
and VXX-301, an
 
anti-tau product candidate
which has the
 
potential to address
 
multiple neurodegenerative
 
conditions, including
 
AD.
 
Our Next Wave
 
Chronic pipeline consists
 
of
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 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
 
Neurodegeneration and Next Wave Chronic disease pipelines,
 
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 June 30, 2023,
 
we received
 
gross proceeds of
 
$306.8
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
 
research and
 
development costs
 
22
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 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 $14.0 million
 
and $17.3 million for the
 
three months ended June 30, 2023
 
and 2022, respectively.
Net losses were
 
$32.4 million
 
and $35.5 million
 
for the six
 
months ended June
 
30, 2023
 
and 2022, respectively.
 
As of June 30,
 
2023,
we had an
 
accumulated deficit of $337.1
 
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, together
 
with the plans
described above, will be sufficient
 
to fund our operating expenses
 
and capital expenditure requirements
 
for at least the next 12
 
months
and into mid-2024. See Note 1 to the consolidated financial statements.
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.”
 
Recent Developments
On June 22, 2023, we announced positive results from Part B of the Phase 1 clinical trial
 
of UB-312, which showed that UB-312 was
well-tolerated and induced anti-alpha-synuclein (“aSyn”) antibody responses in participants
 
with early PD, meeting the primary
objectives of the trial.
 
92% of patients (12 out of 13) who completed dosing with UB-312 developed
 
anti-aSyn antibodies.
 
UB-312
had an overall adverse event profile similar to placebo.
 
Two patients experienced
 
serious adverse events (“SAEs”).
 
Only one SAE,
deep vein thrombosis, was deemed possibly related to the trial by the investigator,
 
and all SAEs were resolved. Anti-aSyn antibodies
were also detectable in the cerebrospinal fluid (“CSF”) of patients.
On July 17,
 
2023, we announced
 
additional data
 
from the Phase
 
1 clinical
 
trial of
 
UB-312 showing
 
that antibodies
 
derived from UB-
312 slow seeding of
 
aSyn in the
 
CSF of patients
 
with PD, as demonstrated
 
using multiple target
 
engagement assays.
 
UB-312-derived
antibodies showed preferential
 
binding to aggregated
 
aSyn isolated
 
from patients with
 
PD and Multiple
 
System Atrophy (“MSA”),
 
as
observed by dot blot. Preclinical data published in Alzheimer’s Research & Therapy in 2020 showed similar characteristics of UB-312-
derived
 
antibodies.
 
UB-312-derived
 
antibodies
 
also
 
successfully
 
demonstrated
 
inhibition
 
of
 
aSyn
 
aggregation
 
in
 
both
 
a
 
seed
amplification assay
 
(“SAA”) and
 
a protein
 
misfolding cyclic
 
amplification assay
 
(“PMCA”).
 
Finally,
 
aSyn aggregation
 
was slowed
down in CSF samples from PD patients who received UB-312, as compared
 
to those who received placebo, in the Phase 1 trial.
Interim results from the ongoing Phase 1 trial
 
of UB-313, our anti-CGRP candidate for migraine, show
 
that UB-313 was generally well-
tolerated and immunogenic in healthy volunteers.
 
The primary objectives of the trial are safety and tolerability,
 
as assessed by adverse
events, and
 
immunogenicity, as assessed by
 
serum anti-CGRP antibody
 
titers.
 
The secondary
 
objective is inhibition
 
of capsaicin-induced
dermal blood flow.
 
All subjects who received three doses of UB-313 (31 out of 31) developed anti-CGRP antibodies.
 
Despite a 100%
responder rate, the subjects did not
 
produce a level of serum
 
antibody titers we had expected based
 
on preclinical studies or as compared
to clinical results from
 
our other clinical programs.
 
For instance, the
 
titers induced by
 
UB-313 were on
 
average over 100
 
times lower
 
23
than those observed with UB-312 in healthy
 
volunteers.
 
After investigation, we believe this was
 
the result of suboptimal investigational
drug product
 
manufactured at
 
a new
 
contract manufacturer
 
compared with
 
prior lots
 
of the
 
product candidate.
 
Based on
 
the interim
results, we believe that UB-313
 
is on track to meet the
 
primary endpoints of the trial;
 
however, due to the
 
lower immunogenicity from
suboptimal drug product, UB-313
 
will not meet the secondary objective.
 
We believe
 
we have identified the necessary steps
 
to address
the manufacturing
 
issues and
 
to manufacture
 
a more
 
immunogenic product
 
consistent with
 
the known
 
immunogenic potential
 
of our
platform candidates.
Components of Our Unaudited Condensed Consolidated Results of Operations
Revenue
 
We recorded
 
no revenue for the three months ended June 30,
 
2023 and 2022 and the six months ended June 30,
 
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
 
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 June 30, 2023
 
and 2022 and the six months ended June 30, 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
 
24
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 six months ended June 30, 2023
 
and 2022,
related party expenses were approximately 1.8% and 5.4% of our research
 
and development expenses, respectively.
 
Where appropriate,
 
we allocate
 
certain external
 
research and
 
development expenses
 
on a
 
program-by-program
 
basis. These
 
expenses
primarily
 
relate
 
to
 
third-party
 
clinical development
 
services
 
(such
 
as
 
those provided
 
by
 
clinical
 
research
 
organizations
 
and
 
research
laboratories), manufacturing expenses, and consulting and other
 
professional services expenses. The Company's major
 
programs are in
the
 
areas
 
of
 
Neurodegenerative
 
Disease,
 
Chronic
 
Disease
 
and
 
Infectious
 
Disease.
 
Other
 
programs
 
include
 
Platform
 
development
activities and preclinical research. We do not allocate our internal research and development expenses and certain external research and
development expenses, such
 
as personnel expenses,
 
facility costs, laboratory
 
materials and equipment
 
costs, and travel
 
and entertainment
expenses
 
related
 
to
 
research
 
and
 
development
 
activities,
 
to
 
specific
 
programs
 
because,
 
for
 
example,
 
our
 
research
 
and
 
development
personnel work across programs,
 
and programs share
 
common facilities, laboratory
 
materials, and equipment,
 
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.
 
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 have incurred and expect to
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
(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 June 30,
 
2023, we
continue to maintain a
 
full valuation allowance against
 
all of our deferred
 
tax assets based on
 
evaluation of all available
 
evidence. We
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 June 30,
Six Months Ended June 30,
(In thousands)
2023
2022
Change $
2023
2022
Change $
Operating expenses:
Research and development
$
8,345
$
10,664
 
$
 
(2,319)
$
19,769
$
22,142
$
(2,373)
General and administrative
6,082
6,560
(478)
13,422
13,246
176
Total operating expenses
14,427
17,224
(2,797)
33,191
35,388
(2,197)
Loss from operations
(14,427)
(17,224)
2,797
(33,191)
(35,388)
2,197
Other (income) expense:
Interest expense
146
105
41
338
210
128
Interest income
(578)
(75)
(503)
(1,145)
(80)
(1,065)
(Gain) loss on foreign currency translation, net
(18)
(2)
(16)
14
(3)
17
Total other (income) expense,
 
net
(449)
28
(477)
(793)
127
(920)
Net loss
$
(13,977)
$
(17,252)
$
3,275
$
(32,398)
$
(35,515)
$
3,117
Research and Development Expenses
 
Comparison of the Three Months Ended June
 
30, 2023 and 2022
Allocated external research and development expenses decreased from $4.5
 
million for the three months ended June 30, 2022 to $3.1
million for the three months ended June 30, 2023.
 
26
Neurodegenerative Disease Program expenses decreased from $1.1 million for the
 
three months ended June 30, 2022 to $0.4 million for
the three months ended June 30, 2023. This decrease primarily resulted
 
from a $0.4 million decrease in expenses for UB-312
 
primarily
attributable
 
to
 
our
 
Phase
 
1
 
trial
 
entering
 
the
 
monitoring
 
phase,
 
and
 
a
 
$0.2
 
million
 
decrease
 
in
 
expenses
 
for
 
VXX-301
 
primarily
attributable to reduced pre-clinical activity.
 
Next Wave
 
Chronic Disease
 
Program expenses increased
 
from $1.7
 
million for the
 
three months ended
 
June 30, 2022
 
to $2.0
 
million
for
 
the
 
three
 
months
 
ended
 
June 30,
 
2023.
 
This
 
increase
 
primarily
 
resulted
 
from
 
a
 
$0.3