vxrt20230930_10q.htm
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Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2023

 

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: 001-35285

 

  

Vaxart, Inc.

  

  

(Exact Name of Registrant as Specified in its Charter)

  

 

  

Delaware

  

59-1212264

  

  

(State or other jurisdiction of incorporation or organization)

  

(IRS Employer Identification No.)

  

 

  

170 Harbor Way, Suite 300South San Francisco, CA 94080

  

(650) 550-3500

  

  

(Address of principal executive offices, including zip code)

  

(Registrant’s telephone number, including area code)

  

 

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

 

  

Title of each class

 

Trading symbol

  

Name of each exchange on which registered 

  

Common Stock, $0.0001 par value

 

VXRT

  

The Nasdaq Capital 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 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, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “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 ☑

 

The Registrant had 152,038,840 shares of common stock, $0.0001 par value, outstanding as of November 1, 2023.

 



 

 

 

 

FORM 10-Q

FOR THE QUARTER ENDED September 30, 2023

TABLE OF CONTENTS

 

 

   

Page

Part I

FINANCIAL INFORMATION

1
         
   

Item 1.

Financial Statements (Unaudited)

1
         
     

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

1
         
     

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022

2
         
     

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022

3
         
     

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

5
         
     

Notes to the Condensed Consolidated Financial Statements

6
         
   

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15
         
   

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24
         
   

Item 4.

Controls and Procedures

25
         
         

Part II

OTHER INFORMATION

26
         
   

Item 1.

Legal Proceedings

26
         
   

Item 1A.

Risk Factors

26
         
   

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities

27
         
   

Item 3.

Defaults Upon Senior Securities

27
         
   

Item 4.

Mine Safety Disclosures

27
         
   

Item 5.

Other Information

27
         
   

Item 6.

Exhibits

28
         

SIGNATURES

  29

 

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (this “Quarterly Report”) for the quarterly period ended September 30, 2023, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections, concerning our business, operations, and financial performance and condition as well as our plans, objectives, and expectations for business operations and financial performance and condition. Any statements contained herein that are not of historical facts may be deemed to be forward-looking statements. You can identify these statements by words such as “anticipate,” “assume,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “should,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements are based on current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report may turn out to be inaccurate. Factors that could materially affect our business operations and financial performance and condition include, but are not limited to, those risks and uncertainties described herein under “Item 1A. Risk Factors.” and those described in our Annual Report on Form 10-K for the year ended December 31, 2022, under “Item 1A. Risk Factors.” You are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements are based on information available to us as of the filing date of this Quarterly Report. Unless required by law, we do not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the risk factors we describe in the reports we will file from time to time with the Securities and Exchange Commission (the “SEC”) after the date of this Quarterly Report.

 

This Quarterly Report also contains market data related to our business and industry. These market data include projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results may differ from the projections based on these assumptions. As a result, our markets may not grow at the rates projected by these data, or at all. The failure of these markets to grow at these projected rates may harm our business, results of operations, financial condition and the market price of our common stock.

 

 

 

PART I FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

VAXART, INC.

 

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

  

September 30, 2023

  

December 31, 2022

 

Assets

        

Current assets:

        

Cash, cash equivalents and restricted cash

 $

33,238

  $46,013 

Short-term investments

  19,799   49,704 

Accounts receivable

  424   20 

Prepaid expenses and other current assets

  3,639   3,714 
         

Total current assets

  57,100   99,451 
         

Property and equipment, net

  12,926   15,585 

Right-of-use assets, net

  25,753   25,715 

Intangible assets, net

  4,472   5,020 

Goodwill

  4,508   4,508 

Other long-term assets

  883   3,568 
         

Total assets

 $105,642  $153,847 
         

Liabilities and Stockholders’ Equity

        

Current liabilities:

        

Accounts payable

 $1,339  $5,514 

Deferred grant revenue

  79   2,000 

Other accrued current liabilities

  5,991   8,084 

Current portion of operating lease liability

  2.517   2,228 

Current portion of liability related to sale of future royalties

  1,342   95 
         

Total current liabilities

  11,268   17,921 
         

Operating lease liability, net of current portion

  17,942   19,477 

Liability related to sale of future royalties, net of current portion

  4,633   5,621 

Other long-term liabilities

  278   231 
         

Total liabilities

  34,121   43,250 
         

Commitments and contingencies (Note 8)

          
         

Stockholders’ equity:

        

Preferred stock: $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022

      

Common stock: $0.0001 par value; 250,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 152,081,196 shares issued and 152,037,358 shares outstanding as of September 30, 2023 and 134,199,429 shares issued and outstanding as of December 31, 2022

  15   13 

Additional paid-in capital

  463,755   437,992 

Treasury stock at cost, 43,838 shares as of September 30, 2023 and none as of December 31, 2022, respectively

  (39)   

Accumulated deficit

  (392,199)  (327,109)

Accumulated other comprehensive loss

  (11)  (299)
         

Total stockholders’ equity

  71,521   110,597 
         

Total liabilities and stockholders’ equity

 $105,642  $153,847 

 

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

 

 

 

 

VAXART, INC.

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2023

   

2022

   

2023

   

2022

 

Revenue:

                               

Non-cash royalty revenue related to sale of future royalties

  $ 446     $     $ 754     $ 85  

Grant revenue

    1,655             3,380        
                                 

Total revenue

    2,101             4,134       85  
                                 

Operating expenses:

                               

Research and development

    15,002       22,466       53,437       60,595  

General and administrative

    4,921       6,960       17,144       22,939  
                                 

Total operating expenses

    19,923       29,426       70,581       83,534  
                                 

Operating loss

    (17,822 )     (29,426 )     (66,447 )     (83,449 )
                                 

Other income (expense):

                               

Interest income

    723       458       2,076       650  

Non-cash interest expense related to sale of future royalties

    (207 )     (325 )     (573 )     (988 )

Other expense, net

    (55 )           (59 )     (2 )
                                 

Loss before income taxes

    (17,361 )     (29,293 )     (65,003 )     (83,789 )
                                 

Provision for income taxes

    39       16       87       51  
                                 

Net loss

  $ (17,400 )   $ (29,309 )   $ (65,090 )   $ (83,840 )
                                 

Net loss per share - basic and diluted

  $ (0.11 )   $ (0.23 )   $ (0.45 )   $ (0.66 )
                                 

Shares used to compute net loss per share - basic and diluted

    152,026,112       126,889,718       145,810,175       126,374,424  
                                 

Comprehensive loss:

                               

Net loss

  $ (17,400 )   $ (29,309 )   $ (65,090 )   $ (83,840 )

Unrealized gain (loss) on available-for-sale investments, net of tax

    13       (109 )     288       (444 )

Comprehensive loss

  $ (17,387 )   $ (29,418 )   $ (64,802 )   $ (84,284 )

 

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

 

 

 

VAXART, INC.

 

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023

(In thousands, except share amounts)

(Unaudited)

 

                          

Accumulated

     
                  

Additional

      

Other

  

Total

 
  

Common Stock

  

Treasury Stock

  

Paid-in

  

Accumulated

  

Comprehensive

  

Stockholders’

 

Three Months Ended September 30, 2023

  Shares   Amount   Shares   Amount  Capital   Deficit   (Loss) Gain   Equity 
                                 

Balances as of June 30, 2023

  152,016,238  $15   (33,246) $(31) $459,912  $(374,799) $(24) $85,073 
                                 
Release of common stock for vested restricted stock units  64,958                      
                                 

Repurchase of common stock to satisfy tax withholding

        (10,592)  (8)           (8)
                                 

Stock-based compensation

              3,843         3,843 
                                 

Unrealized gains on available-for-sale investments

                    13   13 
                                 

Net loss

                 (17,400)     (17,400)
                                 

Balances as of September 30, 2023

  152,081,196  $15   (43,838) $(39) $463,755  $(392,199) $(11) $71,521 
                                 

Nine Months Ended September 30, 2023

                                
                                 

Balances as of December 31, 2022

  134,199,429  $13     $  $437,992  $(327,109) $(299) $110,597 
                                 

Issuance of common stock under September 2021 ATM, net of offering costs of $103

  1,362,220   1         1,429         1,430 
                                 

Issuance of common stock under 2023 Shelf Registration, net of offering costs of $284

  16,000,000   1         13,602         13,603 
                                 

Issuance of common stock upon exercise of stock options

  54,720            17         17 
                                 

Issuance of common stock under ESPP

  301,061            298         298 
                                 

Release of common stock for vested restricted stock units

  163,766                      
                                 

Repurchase of common stock to satisfy tax withholding

        (43,838)  (39)           (39)
                                 

Stock-based compensation

              10,417         10,417 
                                 

Unrealized gains on available-for-sale investments

                    288   288 
                                 

Net loss

                 (65,090)     (65,090)
                                 

Balances as of September 30, 2023

  152,081,196  $15   (43,838) $(39) $463,755  $(392,199) $(11) $71,521 

 

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

 

 

VAXART, INC.

 

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2022

(In thousands, except share amounts)

(Unaudited)

 

                  

Accumulated

     
          

Additional

      

Other

  

Total

 
  

Common Stock

  

Paid-in

  

Accumulated

  

Comprehensive

  

Stockholders’

 

Three Months Ended September 30, 2022

  Shares   Amount  Capital   Deficit   Loss   Equity 
                         

Balances as of June 30, 2022

  126,446,036  $13  $417,372  $(273,882) $(409) $143,094 
                         

Issuance of common stock under September 2021 ATM, net of offering costs of $161

  1,789,022      4,853         4,853 
                         

Issuance of common stock upon exercise of stock options

  96,350      135         135 
                         

Stock-based compensation

        3,643         3,643 
                         

Unrealized losses on available-for-sale investments

              (109)  (109)
                         

Net loss

           (29,309)     (29,309)
                         

Balances as of September 30, 2022

  128,331,408  $13  $426,003  $(303,191) $(518) $122,307 
                         

Nine Months Ended September 30, 2022

                        
                         

Balances as of December 31, 2021

  125,594,393  $13  $406,943  $(219,351) $(74) $187,531 
                         

Issuance of common stock under September 2021 ATM, net of offering costs of $583

  2,565,022      8,650         8,650 
                         

Issuance of common stock upon exercise of warrants

  5,000      2         2 
                         

Issuance of common stock upon exercise of stock options

  166,993      214         214 
                         

Stock-based compensation

        10,194         10,194 
                         

Unrealized losses on available-for-sale investments

              (444)  (444)
                         

Net loss

           (83,840)     (83,840)
                         

Balances as of September 30, 2022

  128,331,408  $13  $426,003  $(303,191) $(518) $122,307 

 

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

 

 

 

VAXART, INC.

 

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

   

Nine Months Ended September 30,

 
   

2023

   

2022

 
                 

Cash flows from operating activities:

               

Net loss

  $ (65,090 )   $ (83,840 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation and amortization

    6,293       3,915  
Loss on disposal of equipment     55        

Amortization of discount on investments, net

   

(510

)     (13 )

Stock-based compensation

    10,417       10,194  

Non-cash interest expense related to sale of future royalties

    573       988  

Non-cash revenue related to sale of future royalties

    (314 )     (152 )

Change in operating assets and liabilities:

               

Accounts receivable

    (404 )     71  

Prepaid expenses and other assets

    2,760       (4,037 )

Accounts payable

    (2,699 )     2,528  

Deferred grant revenue

    (1,921 )      

Other accrued liabilities

    (6,092 )     4,719  
                 

Net cash used in operating activities

    (56,932 )     (65,627 )
                 

Cash flows from investing activities:

               

Purchases of property and equipment

    (1,975 )     (5,700 )

Proceeds from sale of property and equipment

    120        

Cash paid for right-of-use assets

          (5,038 )

Purchases of investments

    (27,497 )     (48,178 )

Proceeds from maturities of investments

    58,200       22,700  
                 

Net cash provided by (used in) investing activities

    28,848       (36,216 )
                 

Cash flows from financing activities:

               

Net proceeds from issuance of common stock in registered direct offering

    13,603        

Net proceeds from issuance of common stock through at-the-market facility

    1,430       8,650  

Proceeds from issuance of common stock upon exercise of warrants

          2  

Shares acquired to settle employee tax withholding liabilities

    (39 )      

Proceeds from issuance of common stock upon exercise of stock options

    17       214  

Proceeds from issuance of common stock under the employee stock purchase plan

    298        
                 

Net cash provided by financing activities

    15,309       8,866  
                 

Net decrease in cash, cash equivalents and restricted cash

    (12,775 )     (92,977 )
                 

Cash, cash equivalents and restricted cash at beginning of the period

    46,013       143,745  
                 

Cash, cash equivalents and restricted cash at end of the period

  $ 33,238     $ 50,768  

 

                 

Supplemental disclosure of non-cash investing and financing activity:

               

Operating lease liabilities arising from obtaining right-of-use assets

  $ 296     $ 9,997  

Acquisition of property and equipment included in accounts payable and accrued expenses

  $ 14     $ 1,738  

 

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

 

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 1.  Organization and Nature of Business

 

General 

 

Vaxart Biosciences, Inc. was originally incorporated in California in March 2004, under the name West Coast Biologicals, Inc. The Company changed its name to Vaxart, Inc. (“Private Vaxart”) in July 2007, and reincorporated in the state of Delaware. In February 2018, Private Vaxart completed a business combination with Aviragen Therapeutics, Inc. (“Aviragen”), pursuant to which Aviragen merged with Private Vaxart, with Private Vaxart surviving as a wholly-owned subsidiary of Aviragen (the “Merger”). Pursuant to the terms of the Merger, Aviragen changed its name to Vaxart, Inc. (together with its subsidiaries, the “Company” or “Vaxart”) and Private Vaxart changed its name to Vaxart Biosciences, Inc.

 

In June 2023, Vaxart completed an underwritten public offering (the “June 2023 Offering”) in which 16,000,000 shares of its common stock were sold at an offering price of $0.8680 per share pursuant to the Company’s effective shelf registration statement on Form S-3 (the “2023 Shelf Registration”). The net proceeds from the June 2023 Offering were $13.6 million after deducting underwriting discounts and commission and estimated offering expenses payable by Vaxart.

 

On  September 15, 2021, the Company entered into a Controlled Equity Offering Sales Agreement (the “September 2021 ATM”), pursuant to which it may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $100 million. The Company filed a prospectus supplement with the U.S. Securities and Exchange Commission (the “SEC”) on September 16, 2021, and a subsequent prospectus supplement with the SEC on May 9, 2023, and will pay sales commissions of up to 3.0% of gross proceeds from the sale of shares.

 

During the nine months ended  September 30, 2023, 1,362,220 shares were issued and sold under the September 2021 ATM for gross proceeds of $1.5 million, which, after deducting sales commissions and expenses incurred to date, resulted in net proceeds of $1.4 million. Since  September 30, 2023, the Company has not raised any additional capital under the September 2021 ATM.

 

The Company’s principal operations are based in South San Francisco, California, and it operates in one reportable segment, which is the discovery and development of oral recombinant protein vaccines, based on its proprietary oral vaccine platform. 

 

NOTE 2.  Summary of Significant Accounting Policies

 

Basis of Presentation, Liquidity and Going Concern – The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC assuming the Company will continue as a going concern. 

 

The Company is a clinical-stage biotechnology company with no product sales. Its primary source of capital is from the sale and issuance of common stock and common stock warrants. As of September 30, 2023, the Company had cash, cash equivalents, restricted cash, and investments of $53.0 million. The Company’s cash, cash equivalents, restricted cash and investments are not sufficient to fund the Company’s planned operations for a period of 12 months from the date the financial statements are issued.

 

The Company will be dependent upon raising additional capital through placement of its common stock, notes or other securities, borrowings, or entering into a partnership with a strategic party in order to implement its business plan. The Company is currently not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market and has been provided an initial compliance period until January 17, 2024, to regain compliance. The Company may be eligible for an additional 180 calendar days compliance period under certain circumstances. If the Company does not regain compliance during the compliance period, the Company’s common stock will be delisted from Nasdaq. The delisting of the Company's common stock from Nasdaq may make it more difficult for the Company to raise capital on favorable terms in the future, or at all. There can be no assurance that the Company will be successful raising additional capital. 

 

Based on management's current plan, the Company expects to have enough cash runway into the third quarter of 2024. If the Company is unable to raise additional capital in sufficient amounts or on acceptable terms, management’s plans include further reducing or delaying operating expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The condensed consolidated balance sheet as of December 31, 2022, included in this filing, was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in consolidated financial statements have been condensed or omitted pursuant to these rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes related thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2023 (the “Annual Report”). Unless noted below, there have been no material changes to the Company’s significant accounting policies described in Note 2 to the consolidated financial statements included in the Annual Report. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of its operations and cash flows. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year or any future periods.

 

Basis of Consolidation – The condensed consolidated financial statements include the financial statements of Vaxart, Inc. and its subsidiaries. All significant transactions and balances between Vaxart, Inc. and its subsidiaries have been eliminated in consolidation.

 

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results and outcomes could differ from these estimates and assumptions.

 

6

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Concentration of Credit Risk – Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, restricted cash and available-for-sale investments. The Company places its cash, cash equivalents, restricted cash and available-for-sale investments at financial institutions that management believes are of high credit quality. The Company is exposed to credit risk in the event of default by the financial institutions holding the cash, cash equivalents and restricted cash to the extent such amounts are in excess of the federally insured limits. Losses incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

 

The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer or sector and establishing a minimum allowable credit rating.

 

Recent Accounting Pronouncements

 

The Company has reviewed all newly-issued accounting pronouncements that are not yet effective and concluded that they are either not applicable to its operations or their adoption is not expected to have a material impact on its financial position or results of operations.

 

NOTE 3.  Fair Value of Financial Instruments

 

Fair value accounting is applied for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Financial instruments include cash and cash equivalents, marketable securities, accounts receivable and accounts payable that approximate fair value due to their relatively short maturities.

 

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

 

The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

 

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

 

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

 

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

 

The following table sets forth the fair value of the Company’s financial assets that are measured on a recurring basis as of September 30, 2023 and  December 31, 2022 (in thousands):

 

  

Level 1

  

Level 2

  

Level 3

  

Total

 

September 30, 2023

                

Financial assets:

                

Money market funds

 $27,975  $  $  $27,975 

U.S. Treasury securities

     19,799      19,799 

Total

 $27,975  $19,799  $  $47,774 

 

  

Level 1

  

Level 2

  

Level 3

  

Total

 

December 31, 2022

                

Financial assets:

                

Money market funds

 $30,834  $  $  $30,834 

U.S. Treasury securities

     41,542      41,542 

Commercial paper

     5,674      5,674 

Corporate debt securities

     2,488      2,488 

Total

 $30,834  $49,704  $  $80,538 

 

The Company held no recurring financial liabilities as of  September 30, 2023, or December 31, 2022.

 

7

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 4.  Balance Sheet Components

 

 

(a)

Cash, Cash Equivalents, Restricted Cash and Investments

 

Cash, cash equivalents, restricted cash and investments consisted of the following (in thousands):

 

  

Amortized

  

Gross Unrealized

  

Estimated

  

Cash and Cash Equivalents

  

Short-Term

 
  

Cost

  

Gains

  

Losses

  

Fair Value

  

and Restricted Cash

  

Investments

 

September 30, 2023

                        

Cash at banks

 $5,263  $  $  $5,263  $5,263  $ 

Money market funds

  27,975         27,975   27,975    

U.S. Treasury securities

  19,810      (11)  19,799      19,799 

Total

 $53,048  $  $(11) $53,037  $33,238  $19,799 

  

  

Amortized

  

Gross Unrealized

  

Estimated

  

Cash and Cash Equivalents

  

Short-Term

 
  

Cost

  

Gains

  

Losses

  

Fair Value

  

and Restricted Cash

  

Investments

 

December 31, 2022

                        

Cash at banks

 $15,179  $  $  $15,179  $15,179  $ 

Money market funds

  30,834         30,834   30,834    

U.S. Treasury securities

  41,812      (270)  41,542      41,542 

Commercial paper

  2,488         2,488      2,488 

Corporate debt securities

  5,703      (29)  5,674      5,674 

Total

 $96,016  $  $(299) $95,717  $46,013  $49,704 

  

Cash and cash equivalents and restricted cash of $33.2 million as of September 30, 2023 and $46.0 million as of December 31, 2022, includes restricted cash of $79,000 and $2.0 million, respectively.

 

 

(b)

Property and Equipment, Net

 

Property and equipment, net consists of the following (in thousands):

 

  

September 30, 2023

  

December 31, 2022

 
         

Laboratory equipment

 $13,638  $12,035 

Office and computer equipment

  1,105   1,078 

Leasehold improvements

  4,098   1,760 

Construction in progress

  27   3,984 

Total property and equipment

  18,868   18,857 

Less: accumulated depreciation

  (5,942)  (3,272)

Property and equipment, net

 $12,926  $15,585 

 

Depreciation expense was $1.0 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, and $2.8 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively. There were no material impairments of the Company’s property and equipment recorded in the nine months ended September 30, 2023, or 2022, respectively.

 

 

(c)

Right-of-Use Assets, Net

 

Right-of-use assets, net comprises facilities of $25.8 million and $25.7 million as of September 30, 2023 and December 31, 2022, respectively. 

 

 

(d)

Intangible Assets, Net

 

Intangible assets comprise developed technology and intellectual property. Intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over useful life of 11.75 years for developed technology and 20 years for intellectual property. As of September 30, 2023, developed technology and intellectual property had remaining lives of 6.1 and 4.25 years, respectively. As of September 30, 2023, there have been no indicators of impairment. Intangible assets consist of the following (in thousands):

 

  

September 30, 2023

  

December 31, 2022

 
         

Developed technology

 $5,000  $5,000 

Intellectual property

  80   80 

Total cost

  5,080   5,080 

Less: accumulated amortization

  (608)  (60)

Intangible assets, net

 $4,472  $5,020 

  

8

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Intangible asset amortization expense for the three months ended September 30, 2023 and 2022, was $0.2 million and $0.3 million, respectively, and for the nine months ended September 30, 2023 and 2022, $0.5 million and $1.0 million respectively.

 

As of September 30, 2023, the estimated future amortization expense by year is as follows (in thousands):

 

Year Ending December 31,

 

Amount

 

2023 (three months remaining)

 $183 

2024

  731 

2025

  731 

2026

  731 

2027

  731 

Thereafter

  1,365 

Total

 $4,472 

 

 

(e)

Goodwill

 

Goodwill, which represents the excess of the purchase price over the fair value of assets acquired, comprises $4.5 million as of September 30, 2023 and December 31, 2022. As of September 30, 2023, there have been no indicators of impairment.

 

 

(f)

Other Accrued Liabilities

 

Other accrued liabilities consist of the following (in thousands):

 

  

September 30, 2023

  

December 31, 2022

 
         

Accrued compensation

 $4,573  $3,112 

Accrued clinical and manufacturing expenses

  535   2,413 

Accrued professional and consulting services

  306   691 

Other liabilities, current portion

  577   1,868 

Total

 $5,991  $8,084 
 

NOTE 5.  Revenue

 

Royalty Agreement

 

The Company generates royalty revenue from the sale of Inavir in Japan, pursuant to a collaboration and license agreement that Aviragen entered into with Daiichi Sankyo Company, Limited (“Daiichi Sankyo”) in 2009. In September 2010, laninamivir octanoate was approved for sale by the Japanese Ministry of Health and Welfare for the treatment of influenza in adults and children, which Daiichi Sankyo markets as Inavir. Under the agreement, the Company currently receives a 4% royalty on net sales of Inavir in Japan. The last patent related to Inavir is set to expire in December 2029, at which time royalty revenue will cease. The Company’s royalty revenue is seasonal, in line with the flu season, so the majority of the Company’s royalty revenue and non-cash royalty revenue related to the sale of future royalties are earned in the first and fourth fiscal quarters. The royalty revenue related to Inavir recognized in the nine months ended September 30, 2023 and 2022, was nil. In addition, the Company recognized non-cash royalty revenue related to sale of future royalties (see Note 6) of $0.4 million and nil in the three months ended September 30, 2023 and 2022, respectively, and $0.8 million and $85,000 in the nine months ended September 30, 2023 and 2022, respectively. Both royalty revenue and the non-cash royalty revenue related to sale of future royalties are subject to a 5% withholding tax in Japan, for which $23,000 and nil was included in income tax expense in the three months ended September 30, 2023 and 2022, respectively, and $38,000 and $4,000 in the nine months ended September 30, 2023 and 2022, respectively.

 

Grant Revenue

 

In November 2022, the Company accepted a grant (the “BMGF Grant”) to perform research and development work for the Bill & Melinda Gates Foundation (“BMGF”) and received $2.0 million in advance that was recorded as restricted cash and deferred revenue. The Company received an additional $1.5 million in July 2023 upon completion of certain milestones. The Company recognizes revenue under research contracts only when a contract has been executed and the contract price is fixed or determinable. Revenue from the BMGF Grant is recognized in the period during which the related costs are incurred and the related services are rendered, provided that the applicable conditions under the contract have been met. Costs of contract revenue are recorded as a component of operating expenses in the consolidated statements of operations and comprehensive loss. The Company recognized revenue from the BMGF Grant of $1.7 million and $3.4 million in the three and nine months ended September 30, 2023, respectively. As of September 30, 2023 and December 31, 2022, restricted cash and deferred revenue were $79,000 and $2.0 million, respectively.

 

 

NOTE 6.  Liabilities Related to Sale of Future Royalties

 

In April 2016, Aviragen entered into a Royalty Interest Acquisition Agreement (the “RIAA”) with HealthCare Royalty Partners III, L.P. (“HCRP”). Under the RIAA, HCRP made a $20.0 million cash payment to Aviragen in consideration for acquiring certain royalty rights (“Royalty Rights”) related to the approved product Inavir in the Japanese market. The Royalty Rights were obtained pursuant to the collaboration and license agreements (the “License Agreement”) and a commercialization agreement that the Company entered into with Daiichi Sankyo. Per the terms of the RIAA, HCRP is entitled to the first $3.0 million plus 15% of the next $1.0 million in royalties earned in each year commencing on April 1, with any excess revenue being retained by the Company.

 

9

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Under the relevant accounting guidance, due to a limit on the amount of royalties that HCRP can earn under the RIAA, this transaction was accounted for as a liability that is being amortized using the effective interest method over the life of the arrangement. The Company has no obligation to pay any amounts to HCRP other than to pass through to HCRP its share of royalties as they are received from Daiichi Sankyo. To record the amortization of the liability, the Company is required to estimate the total amount of future royalty payments to be received under the License Agreement and the payments that will be passed through to HCRP over the life of this agreement. Consequently, the Company imputes interest on the unamortized portion of the liability and records non-cash interest expense using an estimated effective interest rate. The royalties earned in each period that will be passed through to HCRP are recorded as non-cash royalty revenue related to sale of future royalties, with any excess not subject to pass-through being recorded as royalty revenue. When the pass-through royalties are paid to HCRP in the following quarter, the imputed liability related to sale of future royalties is commensurately reduced. The Company periodically assesses the expected royalty payments, and to the extent such payments are greater or less than the initial estimate, the Company adjusts the amortization of the liability and interest rate. As a result of this accounting, even though the Company does not retain HCRP’s share of the royalties, it will continue to record non-cash revenue related to those royalties until the amount of the associated liability, including the related interest, is fully amortized.

 

The following table shows the activity within the liability account during the nine months ended September 30, 2023 (in thousands):

 

Total liability related to sale of future royalties, start of period

 $5,716 

Non-cash royalty revenue paid to HCRP

  (314)

Non-cash interest expense recognized

  573 

Total liability related to sale of future royalties, end of period

  5,975 

Current portion

  (1,342)

Long-term portion

 $4,633 

  

 

NOTE 7.  Leases

 

The Company has obtained the right of use for office and manufacturing facilities under seven operating lease agreements with initial terms exceeding one year and has one operating lease agreement for facilities and one for manufacturing equipment with initial terms of one year or less. The lease term at the commencement date is determined by considering whether renewal options and termination options are reasonably assured of exercise.

 

In  September 2021, the Company executed a lease for a facility in South San Francisco, California, with an initial term expiring on  March 31, 2029. This lease has two separate components, one commenced in the third quarter of 2022 and the other in the first quarter of 2023 resulting in an additional right of use asset $15.0 million and $3.1 million, respectively.

 

As of September 30, 2023, the weighted average discount rate for operating leases with initial terms of more than one year was 9.8% and the weighted average remaining term of these leases was 5.4 years. Discount rates were determined using the Company’s marginal rate of borrowing at the time each lease was executed or extended.

 

The following table summarizes the Company’s undiscounted cash payment obligations for its operating lease liabilities with initial terms of more than twelve months as of  September 30, 2023 (in thousands):

 

Year Ending December 31,

    

2023 (three months remaining)

 $1,043 

2024

  4,275 

2025

  4,421 

2026

  4,975 

2027

  5,205 
2028  

5,387

 

Thereafter

  1,410 

Undiscounted total

  26,716 

Less: imputed interest

  (6,257)

Present value of future minimum payments

  20,459 

Current portion of operating lease liability

  (2,517)

Operating lease liability, net of current portion

 $17,942 

 

The Company has a future payment obligation of up to $0.2 million that is not reflected in the table above relating to a lease agreement that has not yet commenced but was executed as of September 30, 2023. The Company presently has no finance leases and no future obligations under operating leases with initial terms of one year or less.

 

10

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

The Company is also required to pay for operating expenses related to the leased space. The operating expenses are incurred separately and were not included in the present value of lease payments. Operating lease expenses for the three and nine months ended September 30, 2023, and 2022 are summarized as follows (in thousands):

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Lease cost

                

Operating lease cost

 $1,554  $1,202  $4,617  $2,652 

Short-term lease cost

  10   117   41   335 

Variable lease cost

  459   397   1,401   926 

Total lease cost

 $2,023  $1,716  $6,059  $3,913 

 

 

NOTE 8.  Commitments and Contingencies

 

 

(a)

Purchase Commitments

 

As of September 30, 2023, the Company had approximately $4.8 million of non-cancelable purchase commitments, principally for contract manufacturing and clinical services which are expected to be paid within the next year. 

 

 

(b)

Indemnifications

 

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has also entered into indemnification agreements with certain officers and directors which provide, among other things, that the Company will indemnify and advance expenses incurred in connection with certain actions, suits or proceedings to such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Delaware law and the Company’s Bylaws. The Company currently has directors’ and officers’ insurance.

 

 

(c)

Litigation

 

From time to time the Company may be involved in legal proceedings arising in connection with its business. Based on information currently available, the Company believes that the amount, or range, of reasonably possible losses in connection with any pending actions against it in excess of established reserves, in the aggregate, is indeterminable to its consolidated financial condition or cash flows. However, any current or future dispute resolution or legal proceeding, regardless of the merits of any such proceeding, could result in substantial costs and a diversion of management’s attention and resources that are needed to run the Company successfully, and could have a material adverse impact on its business, financial condition and results of operations.

 

On October 23, 2020, a complaint was filed in the U.S. District Court for the Southern District of New York, entitled Roth v. Armistice Capital LLC, et al. The complaint names Armistice and certain Armistice-related parties as defendants, asserting a violation of Exchange Act Section 16(b) and seeking the disgorgement of short-swing profits. The complaint purports to bring the lawsuit on behalf of and for the benefit of the Company and names the Company as a “nominal defendant” for whose benefit damages are sought.

 

On January 8, 2021, a purported shareholder, Phillip Chan, commenced a pro se lawsuit in the U.S. District Court for the Northern District of California titled Chan v. Vaxart, Inc. et al. (the “Opt-Out Action”), opting out of the consolidated Himmelberg v. Vaxart, Inc. et al. and Hovhannisyan v. Vaxart, Inc. et al. class actions, (together, the “Putative Class Action”). Because this complaint is nearly identical to an earlier version of a complaint filed in the Putative Class Action, the Opt-Out Action has been stayed while the Putative Class Action is pending.

 

 

NOTE 9.  Stockholders’ Equity

 

 

(a)

Preferred Stock

 

The Company is authorized to issue 5,000,000 shares of preferred stock, $0.0001 par value per share. The Company’s board of directors may, without further action by the stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 5,000,000 shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deterring or preventing a change of control or other corporate action. No shares of preferred stock are currently outstanding, and the Company has no present plan to issue any shares of preferred stock.

 

11

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

(b)

Common Stock

 

As of September 30, 2023, the Company was authorized to issue 250,000,000 shares of common stock, $0.0001 par value per share, which includes an increase of 100,000,000 on August 4, 2022, when the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock from 150,000,000 shares. Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of the Company’s directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders. Holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s board of directors at its discretion out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically. As of September 30, 2023, no dividends had been declared by the board of directors.

 

In the event of the Company’s voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the common stock will be entitled to receive an equal amount per share of all the Company’s assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied. There are no sinking fund provisions applicable to the common stock.

 

The Company had shares of common stock reserved for issuance as follows:

 

  

September 30, 2023

  

December 31, 2022

 
         

Options issued and outstanding

  18,073,909   14,725,261 

RSUs issued and outstanding

  3,594,698   808,310 

Available for future grants of equity awards

  5,527,341   12,074,692 

Common stock warrants

  227,434   227,434 

2022 Employee Stock Purchase Plan

  1,498,939   1,800,000 

Total

  28,922,321   29,635,697 

 

In June 2023, Vaxart completed an underwritten public offering in which 16,000,000 shares of its common stock were sold at an offering price of $0.8680 per share pursuant to the Company’s effective 2023 Shelf Registration. The net proceeds from the June 2023 Offering were $13.6 million after deducting underwriting discounts and commission and estimated offering expenses payable by Vaxart. The June 2023 Offering included a 30-day option to purchase up to an additional 2,400,000 common shares at the offering price of $0.8680 per share which expired in July 2023.

 

 

(c)

Warrants

 

The following warrants were outstanding as of September 30, 2023, all of which contain standard anti-dilution protections in the event of subsequent rights offerings, stock splits, stock dividends or other extraordinary dividends, or other similar changes in the Company’s common stock or capital structure, and none of which have any participating rights for any losses:

 

Securities into which warrants are convertible

 

Warrants Outstanding

  

Exercise Price

 

Expiration Date

          

Common Stock

  44,148  $1.10 

April 2024

Common Stock

  26,515  $1.375 

April 2024

Common Stock

  29,150  $2.50 

March 2025

Common Stock

  100,532  $3.125 

February 2025

Common Stock

  16,175  $3.125 

March 2024

Common Stock

  10,914  $22.99 

December 2026

Total

  227,434      

 

In the event of a Fundamental Transaction (a transfer of ownership of the Company as defined in the warrant) within the Company’s control, the holders of the unexercised common stock warrants exercisable for $1.10 and $2.50 and those exercisable for $3.125 expiring in February 2025 shall be entitled to receive cash consideration equal to a Black-Scholes valuation, as defined in the warrant. If such Fundamental Transaction is not within the Company’s control, the warrant holders would only be entitled to receive the same form of consideration (and in the same proportion) as the holders of the Company’s common stock, hence these warrants are classified as a component of permanent equity.

 

 

VAXART, INC.

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 10.  Equity Incentive Plans

 

On April 23, 2019, the Company’s stockholders approved the adoption of the 2019 Equity Incentive Plan (the “2019 Plan”), under which the Company is authorized to issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), other stock awards and performance awards that may be settled in cash, stock, or other property. The 2019 Plan is designed to secure and retain the services of employees, directors and consultants, provide incentives for the Company’s employees, directors and consultants to exert maximum efforts for the success of the Company and its affiliates, and provide a means by which employees, directors and consultants may be given an opportunity to benefit from increases in the value of the Company’s common stock. Following adoption of the 2019 Plan, all previous plans were frozen, and on forfeiture, cancellation and expiration, awards under those plans are not assumed by the 2019 Plan.

 

The aggregate number of shares of common stock authorized for issuance under the 2019 Plan was initially 1,600,000 shares, which was increased through an amendment to the 2019 Plan adopted by the Company’s stockholders (a “Plan Amendment”) on June 8, 2020, to 8,000,000, by a Plan Amendment on June 16, 2021, to 16,900,000, and by a Plan Amendment on August 4, 2022, to 28,900,000. Further amendments to the 2019 Plan to increase the share reserve would require stockholder approval. Awards that are forfeited or canceled generally become available for issuance again under the 2019 Plan. Awards have a maximum term of ten years from the grant date and may vest over varying periods, as specified by the Company’s board of directors for each grant.

 

A summary of stock option and RSU transactions in the nine months ended September 30, 2023, is as follows:

 

          

Weighted

      

Weighted

 
  

Shares

  

Number of

  

Option Average

  

Unvested

  

RSU Average

 
  

Available

  

Options

  

Exercise

  

RSU Shares