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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, 2021

or

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

For the transition period from                  to                 

Commission file number 001-32587

Graphic

ALTIMMUNE, INC.

(Exact Name of Registrant as Specified in its Charter)

    

Delaware

    

20-2726770

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

910 Clopper Road Suite 201S, Gaithersburg, Maryland

    

20878

(Address of Principal Executive Offices)

 

(Zip Code)

(240) 654-1450

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

ALT

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 the 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 Act).   Yes      No  

As of November 5, 2021 there were 39,738,625 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

ALTIMMUNE, INC.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

1

Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020

1

Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (unaudited)

2

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)

3

Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)

5

Notes to Consolidated Financial Statements (unaudited)

6

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

Item 4.

Controls and Procedures

24

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

27

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ALTIMMUNE, INC.

CONSOLIDATED BALANCE SHEETS

    

September 30, 

December 31, 

2021

2020

(unaudited)

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

174,863,565

$

115,917,807

Restricted cash

 

34,174

 

34,174

Total cash, cash equivalents and restricted cash

 

174,897,739

 

115,951,981

Short-term investments

 

25,020,738

 

100,005,558

Accounts receivable

 

1,573,760

 

4,610,202

Income tax receivable

 

9,476,435

 

7,762,793

Prepaid expenses and other current assets

 

7,294,360

 

1,926,675

Total current assets

 

218,263,032

 

230,257,209

Property and equipment, net

 

4,718,146

 

1,056,920

Intangible assets, net

 

12,993,575

 

12,823,846

Other assets

 

931,904

 

977,238

Total assets

$

236,906,657

$

245,115,213

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

6,083

$

612,293

Accrued expenses and other current liabilities

 

19,120,902

 

11,408,154

Total current liabilities

 

19,126,985

 

12,020,447

Contingent consideration

 

6,950,000

 

5,390,000

Other long-term liabilities

 

1,565,611

 

1,828,443

Total liabilities

 

27,642,596

 

19,238,890

Commitments and contingencies (Note 16)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Common stock, $0.0001 par value; 200,000,000 shares authorized; 39,702,768 and 37,142,946 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

3,959

3,697

Additional paid-in capital

 

483,582,367

 

417,337,742

Accumulated deficit

 

(269,282,102)

 

(186,420,599)

Accumulated other comprehensive loss, net

 

(5,040,163)

 

(5,044,517)

Total stockholders’ equity

 

209,264,061

 

225,876,323

Total liabilities and stockholders’ equity

$

236,906,657

$

245,115,213

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

1

Table of Contents

ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

    

For the Three Months Ended

    

For the Nine Months Ended

September 30, 

September 30, 

2021

    

2020

2021

    

2020

Revenues

$

157,559

$

2,937,991

$

1,132,698

$

5,872,321

Operating expenses:

 

  

 

  

 

  

 

  

Research and development

 

29,205,739

 

17,041,975

 

54,356,051

 

40,823,756

General and administrative

 

4,155,928

 

4,220,238

 

11,636,001

 

9,097,511

Impairment loss on construction-in-progress

 

 

 

8,070,000

 

Total operating expenses

 

33,361,667

 

21,262,213

 

74,062,052

 

49,921,267

Loss from operations

 

(33,204,108)

 

(18,324,222)

 

(72,929,354)

 

(44,048,946)

Other income (expense):

 

  

 

  

 

  

 

  

Interest expense

 

(32,866)

 

(2,275)

 

(66,763)

 

(7,468)

Interest income

 

12,485

 

45,127

 

87,847

 

278,154

Other (expense) income, net

 

(286,199)

 

29,218

 

(293,233)

 

48,882

Total other (expense) income, net

 

(306,580)

 

72,070

 

(272,149)

 

319,568

Net loss before income tax benefit

 

(33,510,688)

 

(18,252,152)

 

(73,201,503)

 

(43,729,378)

Income tax benefit

 

 

482,017

 

 

5,306,678

Net loss

 

(33,510,688)

 

(17,770,135)

 

(73,201,503)

 

(38,422,700)

Other comprehensive (loss) income — unrealized (loss) gain on short-term investments

 

(1,923)

 

(10,569)

 

4,354

 

(22,116)

Comprehensive loss

$

(33,512,611)

$

(17,780,704)

$

(73,197,149)

$

(38,444,816)

Net loss per share, basic and diluted

$

(0.81)

$

(0.54)

$

(1.79)

$

(1.74)

Weighted-average common shares outstanding, basic and diluted

 

41,370,768

 

33,056,971

 

40,843,905

 

22,058,424

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

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ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

Accumulated

Additional

Other

Total

    

Common Stock

    

Paid-In

    

Accumulated

    

Comprehensive

    

Stockholders’

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at December 31, 2020

37,142,946

$

3,697

$

417,337,742

$

(186,420,599)

$

(5,044,517)

$

225,876,323

Stock-based compensation

 

 

 

1,218,351

 

 

 

1,218,351

Vesting of restricted stock awards including withholding, net

 

(6,349)

 

1

 

(92,507)

 

 

 

(92,506)

Issuance of common stock from Employee Stock Purchase Plan

8,733

1

106,000

106,001

Retirement of common stock in exchange for common stock warrant

 

(1,000,000)

 

(100)

 

(7,539,900)

 

(9,660,000)

 

 

(17,200,000)

Issuance of common stock warrant in exchange for retirement of common stock

 

 

 

17,200,000

 

 

 

17,200,000

Issuance of common stock in at-the-market offerings, net

2,110,800

211

34,178,020

34,178,231

Issuance of common stock upon cashless exercise of warrants

 

1,050

 

 

10,000

 

 

 

10,000

Unrealized gain on short-term investments

 

 

 

 

 

5,136

 

5,136

Net loss

 

 

 

 

(14,864,108)

 

 

(14,864,108)

Balance at March 31, 2021

 

38,257,180

 

3,810

 

462,417,706

 

(210,944,707)

 

(5,039,381)

 

246,437,428

Stock-based compensation

 

 

 

1,484,829

 

 

 

1,484,829

Exercise of stock options

38,217

 

4

 

94,425

 

 

 

94,429

Vesting of restricted stock awards including withholding, net

 

(7,583)

 

1

 

(91,122)

 

 

 

(91,121)

Issuance of common stock in at-the-market offerings, net

1,405,710

141

18,177,832

18,177,973

Unrealized gain on short-term investments

 

 

 

 

 

1,141

 

1,141

Net loss

 

 

 

 

(24,826,707)

 

 

(24,826,707)

Balance at June 30, 2021

 

39,693,524

 

3,956

 

482,083,670

 

(235,771,414)

 

(5,038,240)

 

241,277,972

Stock-based compensation

 

 

 

1,496,884

 

 

 

1,496,884

Exercise of stock options

398

 

 

5,970

 

 

 

5,970

Vesting of restricted stock awards including withholding, net

 

(6,521)

 

1

 

(122,626)

 

 

 

(122,625)

Issuance of common stock from Employee Stock Purchase Plan

15,367

2

118,469

118,471

Unrealized loss on short-term investments

 

 

 

 

 

(1,923)

 

(1,923)

Net loss

 

 

 

 

(33,510,688)

 

 

(33,510,688)

Balance at September 30, 2021

 

39,702,768

 

$

3,959

 

$

483,582,367

 

$

(269,282,102)

 

$

(5,040,163)

 

$

209,264,061

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

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ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

Accumulated

Additional

Other

Total

    

Common Stock

    

Paid-In

    

Accumulated

    

Comprehensive

    

Stockholders’

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at December 31, 2019

15,312,167

$

1,508

$

187,914,916

$

(137,376,122)

$

(5,020,156)

$

45,520,146

Stock-based compensation

 

 

 

214,921

 

 

 

214,921

Vesting of restricted stock awards including withholding, net

 

(5,974)

 

1

 

(17,080)

 

 

 

(17,079)

Issuance of common stock from Employee Stock Purchase Plan

 

38,809

 

3

 

56,736

 

 

 

56,739

Issuance of common stock upon exercise of warrants

 

14,500

 

2

 

39,972

 

 

 

39,974

Unrealized loss on short-term investments

 

 

 

 

 

(32,435)

 

(32,435)

Net loss

 

 

 

 

(3,885,649)

 

 

(3,885,649)

Balance at March 31, 2020

 

15,359,502

 

1,514

 

188,209,465

 

(141,261,771)

 

(5,052,591)

 

41,896,617

Stock-based compensation

 

 

 

330,510

 

 

 

330,510

Exercise of stock options

13,935

1

36,174

36,175

Vesting of restricted stock awards including withholding, net

 

(5,974)

 

1

 

(46,390)

 

 

 

(46,389)

Issuance of common stock in at-the-market offerings, net

 

2,965,144

 

297

 

22,780,432

 

 

 

22,780,729

Issuance of common stock upon exercise of warrants

 

8,221,279

 

822

 

31,269,341

 

 

 

31,270,163

Unrealized gain on short-term investments

 

 

 

 

 

20,888

 

20,888

Net loss

 

 

 

 

(16,766,916)

 

 

(16,766,916)

Balance at June 30, 2020

 

26,553,886

 

2,635

 

242,579,532

 

(158,028,687)

 

(5,031,703)

 

79,521,777

Stock-based compensation

 

 

 

1,320,089

 

 

 

1,320,089

Issuance of common stock from exercise of stock options

32,189

3

90,267

90,270

Vesting of restricted stock awards including withholding, net

 

103,551

 

13

 

(114,585)

 

 

 

(114,572)

Issuance of common stock from Employee Stock Purchase Plan

 

53,852

 

5

 

78,727

 

 

 

78,732

Issuance of common stock and pre-funded warrants in public offering, net

 

4,119,564

 

412

 

124,027,403

 

 

 

124,027,815

Issuance of common stock in at-the-market offerings, net

247,865

25

2,834,082

2,834,107

Issuance of common stock upon exercise of warrants

 

1,962,128

 

196

 

9,728,125

 

 

 

9,728,321

Unrealized loss on short-term investments

 

 

 

 

 

(10,569)

 

(10,569)

Net loss

 

 

 

 

(17,770,135)

 

 

(17,770,135)

Balance at September 30, 2020

 

33,073,035

 

$

3,289

 

$

380,543,640

 

$

(175,798,822)

 

$

(5,042,272)

 

$

199,705,835

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

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ALTIMMUNE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

    

Nine Months Ended September 30, 

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net loss

$

(73,201,503)

$

(38,422,700)

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

 

  

 

  

Change in fair value of contingent consideration liability

 

1,560,000

 

22,320,000

Impairment loss on construction-in-progress

 

8,070,000

 

Stock-based compensation expense

 

4,200,064

 

1,865,520

Depreciation and amortization

 

434,009

 

218,932

Unrealized losses (gains) on foreign currency exchange

 

297,135

 

(44,323)

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

3,036,442

 

(2,815,343)

Prepaid expenses and other current assets

 

(5,263,432)

 

(636,943)

Accounts payable

 

(606,210)

 

856,653

Accrued expenses and other liabilities

 

6,916,132

 

1,199,708

Income tax receivable

 

(1,713,642)

 

(5,564,759)

Net cash used in operating activities

 

(56,271,005)

 

(21,023,255)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Proceeds from sales and maturities of short-term investments

 

82,406,000

 

39,385,689

Purchases of short-term investments

 

(7,591,962)

 

(74,413,135)

Purchases of property and equipment, net

 

(11,970,179)

 

(100,329)

Cash paid for internally developed patents

 

(189,649)

 

(98,893)

Net cash provided by (used in) investing activities

 

62,654,210

 

(35,226,668)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Payments of deferred offering costs

(118,522)

(160,522)

Proceeds from exercises of warrants

 

 

41,038,458

Proceeds from issuance of common stock in at-the-market offerings, net

 

52,356,204

 

25,614,836

Proceeds from issuance of common stock and pre-funded warrants in public offering, net

 

 

124,027,815

Proceeds from issuance of notes payable

 

 

632,000

Payments of notes payable

 

 

(632,000)

Proceeds from issuance of common stock from Employee Stock Purchase Plan

 

224,472

 

135,471

Proceeds from exercises of stock options

 

100,399

 

126,445

Net cash provided by financing activities

 

52,562,553

 

190,782,503

Net increase in cash and cash equivalents and restricted cash

 

58,945,758

 

134,532,580

Cash, cash equivalents and restricted cash at beginning of period

 

115,951,981

 

8,996,860

Cash, cash equivalents and restricted cash at end of period

$

174,897,739

$

143,529,440

SUPPLEMENTAL CASH FLOW INFORMATION:

 

  

 

  

Cash paid for interest

$

$

1,791

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:

 

  

 

  

Operating lease liability and right of use asset addition

$

72,047

$

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

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ALTIMMUNE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Altimmune, Inc., headquartered in Gaithersburg, Maryland, United States, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware.

The Company is focused on developing treatments for obesity and liver diseases. The Company’s pipeline includes proprietary intranasal vaccines and next generation peptide therapeutics for obesity, NASH (pemvidutide, proposed INN, formerly known as ALT-801) and chronic hepatitis B (HepTcell). Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt, and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.

Basis of Presentation

The accompanying unaudited consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 included in the Annual Report on Form 10-K which was filed with the SEC on February 25, 2021. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as the audited consolidated financial statements, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2021 or any future years or periods.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern.

2. Summary of Significant Accounting Policies

During the nine months ended September 30, 2021, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC, except for the recently adopted accounting standard for income taxes.

Use of Estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic, including any resurgences or the emergence of new variants, may directly or indirectly impact the Company’s business, financial condition, and results of operations is highly uncertain and subject to change.

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The Company considered the potential impact of the COVID-19 pandemic on the Company’s estimates and assumptions and determined that there was not a material impact to the Company’s unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2021. However, actual results could differ from those estimates and there may be changes to the Company’s estimates in future periods.

Recently Issued Accounting Pronouncements - Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU 2019-12 amends the approaches and methodologies in accounting for income taxes during interim periods and makes changes to certain income tax classifications. The new standard eliminates the legacy exceptions to the general guidance for intra-period tax allocation, when there is a loss from continuing operations and income or a gain from other items, and to the general methodology for calculating income taxes in an interim period, when a year-to-date loss exceeds the anticipated loss for the year. The standard also requires franchise or similar taxes partially based on income to be reported as income tax and the effects of enacted changes in tax laws or rates to be included in the annual effective tax rate computation from the date of enactment. Lastly, in any future acquisition, the Company would be required to evaluate when the step-up in the tax basis of goodwill is part of the business combination and when it should be considered a separate transaction. The Company adopted the standard as of January 1, 2021 and has evaluated the effects of this standard and determined that the adoption did not have a material impact on the Company’s consolidated financial statements.

3. Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2021 consisted of the following:

Fair Value Measurement at September 30, 2021

    

Total

    

Level 1

    

Level 2

    

Level 3

Assets:

Cash equivalents - money market funds

$

65,632,943

$

65,632,943

$

$

Short-term investments

 

25,020,738

 

 

25,020,738

 

Total

90,653,681

65,632,943

25,020,738

Liabilities:

Contingent consideration liability (see Note 8)

 

6,950,000

 

 

 

6,950,000

Total

$

6,950,000

$

$

$

6,950,000

The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2020 consisted of the following:

Fair Value Measurement at December 31, 2020

    

Total

    

Level 1

    

Level 2

    

Level 3

Assets:

Cash equivalents - money market funds

$

90,389,473

    

$

90,389,473

    

$

    

$

Short-term investments

 

100,005,558

 

 

100,005,558

 

Total

190,395,031

90,389,473

100,005,558

Liabilities:

Contingent consideration liability (see Note 8)

 

5,390,000

 

 

 

5,390,000

Warrant liability

 

10,000

 

 

 

10,000

Total

$

5,400,000

$

$

$

5,400,000

The warrant liability is included in Other long-term liabilities in the consolidated balance sheet at December 31, 2020. The warrant liability was valued using the Monte Carlo simulation valuation model with Level 3 inputs.

Short-term investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data (Level 2). The pricing services

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utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value.

Short-term investments had quoted prices at September 30, 2021 as shown below:

September 30, 2021

Unrealized Gain

Amortized Cost

(Loss)

Market Value

Certificate of deposit

$

25,020,738

$

$

25,020,738

Total

$

25,020,738

$

$

25,020,738

Short-term investments had quoted prices at December 31, 2020 as shown below:

December 31, 2020

Unrealized Gain

Amortized Cost

(Loss)

Market Value

United States treasury securities

    

$

20,052,757

    

$

1,843

    

$

20,054,600

Commercial paper and corporate debt securities

47,521,344

(5,440)

47,515,904

Asset backed securities

 

7,414,619

 

(757)

 

7,413,862

Certificate of deposit

25,021,192

25,021,192

Total

$

100,009,912

$

(4,354)

$

100,005,558

The fair value of contingent payments classified as a liability is based on the regulatory milestones described in Note 8 and estimated using the Monte Carlo simulation valuation model with Level 3 inputs.

The assumptions used to estimate the fair value of contingent payments that are classified as a liability at September 30, 2021 include the following significant unobservable inputs:

Unobservable input

Value or Range

    

Weighted Average

Expected volatility

    

78.0%

78.0%

Risk-free interest rate

 

0.06%

0.06%

Cost of capital

 

30%

30%

Discount for lack of marketability

 

10%‑12%

11%

Probability of payment

 

81%

81%

Projected year of payment

 

2022

 

2022

If applicable, the Company will recognize transfers into and out of Level 3 within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers into or out of Level 3 of the fair value hierarchy as of September 30, 2021 and December 31, 2020.

Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. Assets recorded at fair value on a non-recurring basis, such as property and equipment and intangible assets are recognized at fair value when they are impaired. During the nine months ended September 30, 2021, the Company recorded a non-cash impairment charge to property and equipment, net on a non-recurring basis (see below). As of December 31, 2020, the Company had no significant assets or liabilities that were measured at fair value on a non-recurring basis.

Property and Equipment, Net

During the nine months ended September 30, 2021, the Company recorded a non-cash impairment charge of $8.1 million to property and equipment, net. The fair value of the impaired assets was $3.3 million at September 30, 2021. At September 30, 2021, the fair value of the construction-in-progress related assets was primarily determined utilizing the cost approach, which reflects the current replacement cost of the asset being appraised, adjusted for contractual restrictions

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on the assets, the probability of satisfying the contractual restrictions, physical deterioration, functional obsolescence, and economic obsolescence. The fair value measurement is considered a Level 3 measurement within the valuation hierarchy.

4. Property and Equipment, Net

Property and equipment, net consists of the following:

September 30, 2021

December 31, 2020

Furniture, fixtures and equipment

    

$

202,100

    

$

125,538

Laboratory equipment

 

1,039,805

 

959,585

Computers and telecommunications

 

279,026

 

220,316

Software

 

94,409

 

64,409

Leasehold improvements

 

1,731,934

 

1,285,883

Construction-in-progress

3,300,000

Property and equipment, at cost

 

6,647,274

 

2,655,731

Less: accumulated depreciation and amortization

 

(1,929,128)

 

(1,598,811)

Property and equipment, net

$

4,718,146

$

1,056,920

As of September 30, 2021, construction-in-progress primarily includes costs related to the procurement of long-lead equipment associated with the Company’s manufacturing collaboration with Lonza Houston, Inc. (“Lonza”) for the manufacture of AdCOVID or other adenovirus-based vaccines. Under the agreement, the Company has committed approximately $23.0 million to Lonza to procure long-lead equipment and construct a dedicated manufacturing suite for clinical and commercial production of adenovirus-based vaccines. This work is expected to be completed during the fourth quarter of 2021.

In June 2021, the Company announced the discontinuation of further development of AdCOVID following the Company’s review of findings from the Phase 1 clinical trial. Construction continues at Lonza, and the Company is currently assessing its strategic options with respect to the suite. The Company’s current expectation is that, more likely than not, the suite will be disposed of significantly before the end of its previously estimated useful life. As of September 30, 2021, the Company recorded $8.1 million of impairment loss on construction-in-progress in the accompanying unaudited consolidated statements of operations and comprehensive loss, with $3.3 million remaining capitalized in the unaudited consolidated balance sheet, as it represents expected recoveries available to the Company under the construction contract. Following the discontinuation of AdCOVID, incremental cost incurred under the construction contract has been recorded to research and development expenses in the accompanying unaudited consolidated statements of operations and comprehensive loss. Research and development expenses related to property and equipment was approximately $9.6 million and $17.7 million for the three and nine months ended September 30, 2021, respectively.

Depreciation expense related to property and equipment was approximately $0.1 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

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5. Intangible Assets

The Company’s intangible assets consist of the following:

September 30, 2021

Gross

Estimated

Carrying

Accumulated

Net Book

Useful Lives

Value

Amortization

Value

Internally developed patents

    

620 years

    

$

1,074,436

    

$

(499,828)

    

$

574,608

Acquired licenses

 

1620 years

 

285,000

 

(285,000)

 

Total intangible assets subject to amortization

 

  

 

1,359,436

 

(784,828)

 

574,608

IPR&D assets

 

Indefinite

 

12,418,967

 

 

12,418,967

Total

 

  

$

13,778,403

$

(784,828)

$