UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-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, 2017March 31, 2022
or
☐ | TRANSITION REPORT |
Commission File Number:001-32587For the transition period from to
Commission file number 001-32587
ALTIMMUNE, INC.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)
| | |
Delaware | 20-2726770 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| | |
910 Clopper RoadSuite 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 |
| ALT |
|
(240)654-1450
(Registrant’s telephone number, including area code)
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 and posted on its corporate Web site, if any, every Interactive Data fileFile required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒⌧ No ☐◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.
| | | | | |||||
Large accelerated filer | ◻ | | Accelerated | ◻ | |||||
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 Rule12b-2 of the Act). Yes ☐ No ☒⌧
Indicate the numberAs of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: The number ofMay 10, 2022 there were 43,219,358 shares of the registrant’s Common Stock,common stock, par value $0.0001 per share, outstanding asoutstanding.
ALTIMMUNE, INC.
TABLE OF CONTENTS
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| Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 | 1 | |||
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| Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited) | 5 | |||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||||
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i
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements.Statements
ALTIMMUNE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets: |
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Cash and cash equivalents | $ | 17,116,845 | $ | 2,876,113 | ||||
Restricted cash | 34,174 | — | ||||||
Accounts receivable | 2,902,503 | 383,046 | ||||||
Prepaid expenses and other current assets | 1,007,032 | 420,424 | ||||||
Tax refund receivable | 5,061,920 | 807,507 | ||||||
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Total current assets | 26,122,474 | 4,487,090 | ||||||
Property and equipment, net | 280,093 | 177,859 | ||||||
Intangible assets, net | 38,586,399 | 14,954,717 | ||||||
Other assets | 22,248 | 22,248 | ||||||
Goodwill | 9,334,904 | 18,758,421 | ||||||
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Total assets | $ | 74,346,118 | $ | 38,400,335 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable | $ | 49,702 | $ | 458,629 | ||||
Accounts payable | 495,064 | 2,005,208 | ||||||
Accrued expenses and other current liabilities | 3,597,313 | 2,972,745 | ||||||
Current portion of deferred revenue | 19,753 | 19,753 | ||||||
Current portion of deferred rent | 18,626 | 14,388 | ||||||
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Total current liabilities | 4,180,458 | 5,470,723 | ||||||
Unvested restricted stock liability | 343 | 1,001 | ||||||
Long-term debt | 590,185 | 525,950 | ||||||
Deferred revenue, long-term portion | 164,609 | 179,424 | ||||||
Deferred rent, long-term portion | 1,591 | 15,914 | ||||||
Deferred tax liability | 8,312,426 | — | ||||||
Other long-term liabilities | 4,027,962 | — | ||||||
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Total liabilities | 17,277,574 | 6,193,012 | ||||||
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Contingencies (Note 12) | ||||||||
Series B redeemable convertible preferred stock; $0.0001 par value; 16,000 shares designated; 15,656 and zero shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively; aggregate liquidation and redemption value of $8,238,300 at September 30, 2017 | 8,238,300 | — | ||||||
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Stockholders’ equity: | ||||||||
Series B convertible preferred stock; $0.01 par value; zero and 599,285 shares authorized, issued and outstanding at September 30, 2017 and December 31, 2016, respectively | — | 5,993 | ||||||
Common stock, $0.0001 par value; 100,000,000 shares authorized; 15,652,640 and 6,991,749 shares issued; 15,627,081 and 6,917,204 shares outstanding at September 30, 2017 and December 31, 2016, respectively | 1,563 | 692 | ||||||
Additionalpaid-in capital | 122,392,504 | 71,034,899 | ||||||
Accumulated deficit | (68,853,850 | ) | (31,259,449 | ) | ||||
Accumulated other comprehensive loss – foreign currency translation adjustments | (4,709,973 | ) | (7,574,812 | ) | ||||
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Total stockholders’ equity | 48,830,244 | 32,207,323 | ||||||
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Total liabilities, redeemable convertible preferred stock, and stockholders’ equity | $ | 74,346,118 | $ | 38,400,335 | ||||
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| March 31, | | December 31, | ||
| | 2022 | | 2021 | ||
| | (unaudited) | | | | |
ASSETS |
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Current assets: |
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Cash and cash equivalents | | $ | 179,947 | | $ | 190,301 |
Restricted cash | |
| 34 | |
| 34 |
Total cash, cash equivalents and restricted cash | |
| 179,981 | |
| 190,335 |
Accounts receivable | |
| 193 | |
| 429 |
Income tax and R&D incentive receivables | |
| 5,880 | |
| 5,410 |
Prepaid expenses and other current assets | |
| 5,039 | |
| 7,952 |
Total current assets | |
| 191,093 | |
| 204,126 |
Property and equipment, net | |
| 1,337 | |
| 1,448 |
Intangible assets, net | |
| 12,419 | |
| 12,419 |
Other assets | |
| 811 | |
| 872 |
Total assets | | $ | 205,660 | | $ | 218,865 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
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Current liabilities: | |
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Accounts payable | | $ | 2,205 | | $ | 2,034 |
Contingent consideration | | | 4,310 | | | 6,090 |
Accrued expenses and other current liabilities | |
| 12,609 | |
| 10,152 |
Total current liabilities | |
| 19,124 | |
| 18,276 |
Other long-term liabilities | |
| 1,668 | |
| 1,454 |
Total liabilities | |
| 20,792 | |
| 19,730 |
Commitments and contingencies (Note 16) | |
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Stockholders’ equity: | |
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Common stock, $0.0001 par value; 200,000,000 shares authorized; 43,219,896 and 40,993,768 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | | | 4 | | | 4 |
Additional paid-in capital | |
| 502,505 | |
| 497,342 |
Accumulated deficit | |
| (312,601) | |
| (293,171) |
Accumulated other comprehensive loss, net | |
| (5,040) | |
| (5,040) |
Total stockholders’ equity | |
| 184,868 | |
| 199,135 |
Total liabilities and stockholders’ equity | | $ | 205,660 | | $ | 218,865 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
ALTIMMUNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
License revenue | $ | 26,689 | $ | 4,938 | $ | 36,565 | $ | 168,341 | ||||||||
Research grants and contracts | 4,565,251 | 896,101 | 7,892,919 | 1,983,574 | ||||||||||||
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Total revenue and grants and contracts | 4,591,940 | 901,039 | 7,929,484 | 2,151,915 | ||||||||||||
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Operating expenses | ||||||||||||||||
Research and development | 5,905,552 | 2,400,914 | 13,946,403 | 4,845,045 | ||||||||||||
General and administrative | 3,038,756 | 3,289,647 | 6,863,782 | 5,301,444 | ||||||||||||
Goodwill impairment charges | 26,600,000 | — | 26,600,000 | — | ||||||||||||
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Total operating expenses | 35,544,308 | 5,690,561 | 47,410,185 | 10,146,489 | ||||||||||||
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Loss from operations | (30,952,368 | ) | (4,789,522 | ) | (39,480,701 | ) | (7,994,574 | ) | ||||||||
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Other income (expense): | ||||||||||||||||
Change in fair value of warrant liabilities | (508,316 | ) | — | (508,316 | ) | — | ||||||||||
Change in fair value of embedded derivative | (1,157 | ) | — | (1,157 | ) | — | ||||||||||
Interest expense | (2,344 | ) | (9,408 | ) | (160,103 | ) | (28,858 | ) | ||||||||
Interest income | 15,372 | — | 19,538 | 1,047 | ||||||||||||
Other income (expense) | 10,786 | 3,871 | 9,839 | (2,600 | ) | |||||||||||
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Total other income (expense), net | (485,659 | ) | (5,537 | ) | (640,199 | ) | (30,411 | ) | ||||||||
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Net loss before income tax benefit | (31,438,027 | ) | (4,795,059 | ) | (40,120,900 | ) | (8,024,985 | ) | ||||||||
Income tax benefit | 1,532,790 | — | 2,526,499 | — | ||||||||||||
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Net loss | (29,905,237 | ) | (4,795,059 | ) | (37,594,401 | ) | (8,024,985 | ) | ||||||||
Other comprehensive loss – foreign currency translation adjustments | (1,028,033 | ) | (1,316,787 | ) | (2,864,839 | ) | (5,121,081 | ) | ||||||||
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Total comprehensive loss | $ | (30,933,270 | ) | $ | (6,111,846 | ) | $ | (40,459,240 | ) | $ | (13,146,066 | ) | ||||
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Net loss | $ | (29,905,237 | ) | $ | (4,795,059 | ) | $ | (37,594,401 | ) | $ | (8,024,985 | ) | ||||
Preferred stock accretion and dividends | (1,962,072 | ) | (104,548 | ) | (2,125,141 | ) | (247,562 | ) | ||||||||
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Net loss attributed to common stockholders | $ | (31,867,309 | ) | $ | (4,899,607 | ) | $ | (39,719,542 | ) | $ | (8,272,547 | ) | ||||
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Weighted-average common shares outstanding, | 15,527,867 | 6,911,715 | 11,595,698 | 6,911,366 | ||||||||||||
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Net loss per share attributed to common stockholders, basic and diluted | $ | (2.05 | ) | $ | (0.71 | ) | $ | (3.43 | ) | $ | (1.20 | ) | ||||
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(in thousands, except share and per share data)
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| | For the Three Months Ended | ||||
| | March 31, | ||||
| | 2022 |
| 2021 | ||
Revenues | | $ | 32 | | $ | 838 |
Operating expenses: | |
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Research and development | |
| 15,104 | |
| 11,878 |
General and administrative | |
| 4,427 | |
| 3,821 |
Total operating expenses | |
| 19,531 | |
| 15,699 |
Loss from operations | |
| (19,499) | |
| (14,861) |
Other income (expense): | |
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Interest expense | |
| (62) | |
| (12) |
Interest income | |
| 21 | |
| 42 |
Other income (expense), net | |
| 110 | |
| (33) |
Total other income (expense), net | |
| 69 | |
| (3) |
Net loss | |
| (19,430) | |
| (14,864) |
Other comprehensive income — unrealized gain on short-term investments | |
| — | |
| 5 |
Comprehensive loss | | $ | (19,430) | | $ | (14,859) |
Net loss per share, basic and diluted | | $ | (0.44) | | $ | (0.38) |
Weighted-average common shares outstanding, basic and diluted | |
| 43,969,481 | |
| 38,914,990 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
ALTIMMUNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK ANDCHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
Series B Redeemable Convertible Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2017 | — | $ | — | 599,285 | $ | 5,993 | 6,917,204 | $ | 692 | $ | 71,034,899 | $ | (31,259,449 | ) | $ | (7,574,812 | ) | $ | 32,207,323 | |||||||||||||||||||||||||
Stock based compensation | 905,230 | 905,230 | ||||||||||||||||||||||||||||||||||||||||||
Vesting and accelerated vesting of restricted stock | 48,988 | 5 | 231,895 | 231,900 | ||||||||||||||||||||||||||||||||||||||||
Exercises of stock options | 200,657 | 20 | 16,435 | 16,455 | ||||||||||||||||||||||||||||||||||||||||
Warrant issuance, net of issuance costs | 548,956 | 548,956 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of Series B convertible preferred stock into common stock | (599,285 | ) | (5,993 | ) | 599,285 | 60 | 5,933 | — | ||||||||||||||||||||||||||||||||||||
Conversion of convertible notes and accrued interest into common stock | 316,734 | 32 | 3,645,392 | 3,645,424 | ||||||||||||||||||||||||||||||||||||||||
Warrant exercises | 660,715 | 66 | (66 | ) | — | |||||||||||||||||||||||||||||||||||||||
Issuance of common stock for the acquisition of subsidiaries | 6,883,498 | 688 | 44,742,049 | 44,742,737 | ||||||||||||||||||||||||||||||||||||||||
Issuance of Series B redeemable convertible preferred stock and warrants, net of issuance costs and discounts | 15,656 | 6,276,228 | 3,223,853 | 3,223,853 | ||||||||||||||||||||||||||||||||||||||||
Accretion of Series B redeemable convertible preferred stock | 1,962,072 | (1,962,072 | ) | (1,962,072 | ) | |||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 2,864,839 | 2,864,839 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | (37,594,401 | ) | (37,594,401 | ) | ||||||||||||||||||||||||||||||||||||||||
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Balance, September 30, 2017 | 15,656 | $ | 8,238,300 | — | $ | — | 15,627,081 | $ | 1,563 | $ | 122,392,504 | $ | (68,853,850 | ) | $ | (4,709,973 | ) | $ | 48,830,244 | |||||||||||||||||||||||||
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(in thousands, except share amounts)
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| | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | Additional | | | | | Other | | Total | |||
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| Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| Stockholders’ | |||||||
| | Shares | | Amount | | Capital | | Deficit | | Loss | | Equity | |||||
Balance at December 31, 2021 | | 40,993,768 | | $ | 4 | | $ | 497,342 | | $ | (293,171) | | $ | (5,040) | | $ | 199,135 |
Stock-based compensation |
| — |
| | — |
| | 2,033 |
| | — |
| | — |
| | 2,033 |
Exercise of stock options |
| 95,771 |
| | — |
| | 197 |
| | — |
| | — |
| | 197 |
Vesting of restricted stock awards including withholding, net | | 17,568 | | | — | | | (170) | | | — | | | — | | | (170) |
Issuance of common stock from Employee Stock Purchase Plan |
| 16,450 |
| | — |
| | 113 |
| | — |
| | — |
| | 113 |
Issuance of common stock in at-the-market offerings, net |
| 335,485 |
| | — |
| | 2,990 | | | — | | | — |
| | 2,990 |
Issuance of common stock upon exercise of warrants | | 1,760,854 | | | — | | | — | | | — | | | — | | | — |
Net loss | | — | | | — | | | — | | | (19,430) | | | — | | | (19,430) |
Balance at March 31, 2022 |
| 43,219,896 |
| $ | 4 |
| $ | 502,505 |
| $ | (312,601) |
| $ | (5,040) |
| $ | 184,868 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
ALTIMMUNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (37,594,401 | ) | $ | (8,024,985 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Goodwill impairment charges | 26,600,000 | — | ||||||
Stock-based compensation | 1,137,125 | 584,784 | ||||||
Depreciation | 61,191 | 47,276 | ||||||
Amortization | 40,409 | 60,552 | ||||||
Debt discount and deferred financing cost accretion | 98,060 | 1,950,159 | ||||||
Loss on disposal of property and equipment | 3,745 | — | ||||||
Change in fair value of warrant liabilities | 508,316 | — | ||||||
Change in fair value of embedded derivatives | 1,157 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,393,988 | ) | (103,308 | ) | ||||
Prepaid expenses and other current assets | (150,524 | ) | 67,465 | |||||
Accounts payable | (2,273,397 | ) | 925,664 | |||||
Accrued expenses and other current liabilities | (34,680 | ) | 80,668 | |||||
Deferred revenue | (14,815 | ) | (70,705 | ) | ||||
Deferred rent | (10,085 | ) | (5,971 | ) | ||||
Tax refund receivable | (2,142,987 | ) | (371,715 | ) | ||||
Deferred tax liability | (243,056 | ) | — | |||||
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Net cash used in operating activities | (15,407,930 | ) | (4,860,116 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (89,849 | ) | (113,040 | ) | ||||
Proceeds from sale of property and equipment | 7,531 | — | ||||||
Additions to intangible assets | (47,634 | ) | (66,307 | ) | ||||
Refund of cash held in escrow | 200,000 | — | ||||||
Cash assumed from acquiring subsidiaries | 13,684,535 | — | ||||||
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Net cash provided by (used in) investing activities | 13,754,583 | (179,347 | ) | |||||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayments of notes payable | (212,431 | ) | (99 | ) | ||||
Proceeds from issuance of convertible notes, net of issuance costs | 3,018,780 | 531 | ||||||
Proceeds from issuance of preferred stock and warrants, net of issuance costs | 13,018,570 | 5,673,680 | ||||||
Proceeds from exercise of stock options | 16,455 | 300 | ||||||
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Net cash provided by financing activities | 15,841,374 | 5,674,412 | ||||||
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EFFECT OF EXCHANGE RATES ON CASH | 86,879 | (170,048 | ) | |||||
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Net increase in cash and cash equivalents and restricted cash | 14,274,906 | 464,901 | ||||||
Cash and cash equivalents and restricted cash, beginning of period | 2,876,113 | 4,638,711 | ||||||
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Cash and cash equivalents and restricted cash, end of period | $ | 17,151,019 | $ | 5,103,612 | ||||
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SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 5,882 | $ | 2,424 | ||||
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SUPPLEMENTALNON-CASH FINANCING ACTIVITIES: | ||||||||
Accrued expenses and notes payable modified and replaced with convertible notes | $ | 1,077,540 | $ | — | ||||
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Conversion of convertible notes into common stock | $ | 3,645,424 | $ | — | ||||
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Common stock warrants issued in connection with convertible notes, net of issuance costs | $ | 548,956 | $ | — | ||||
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Preferred stock subscription reclassified as additionalpaid-in capital upon preferred stock issuance | $ | — | $ | 325,280 | ||||
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|
|
(in thousands, except share amounts)
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | 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 | | $ | 4 | | $ | 417,337 | | $ | (186,421) | | $ | (5,044) | | $ | 225,876 |
Stock-based compensation |
| — |
| | — |
| | 1,218 | | | — | | | — |
| | 1,218 |
Vesting of restricted stock awards including withholding, net |
| (6,349) |
| | — |
| | (92) | | | — | | | — |
| | (92) |
Issuance of common stock from Employee Stock Purchase Plan |
| 8,733 |
| | — |
| | 106 | | | — | | | — |
| | 106 |
Retirement of common stock in exchange for common stock warrant |
| (1,000,000) |
| | — |
| | (7,540) | | | (9,660) | | | — |
| | (17,200) |
Issuance of common stock warrant in exchange for retirement of common stock |
| — |
| | — |
| | 17,200 | | | — | | | — |
| | 17,200 |
Issuance of common stock in at-the-market offerings, net |
| 2,110,800 |
| | — |
| | 34,178 | | | — | | | — |
| | 34,178 |
Issuance of common stock upon cashless exercise of warrants | | 1,050 | | | — | | | 10 | | | — | | | — | | | 10 |
Unrealized gain on short-term investments | | — | | | — | | | — | | | — | | | 5 | | | 5 |
Net loss | | — | | | — | | | — | | | (14,864) | | | — | | | (14,864) |
Balance at March 31, 2021 |
| 38,257,180 |
| $ | 4 |
| $ | 462,417 |
| $ | (210,945) |
| $ | (5,039) |
| $ | 246,437 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
ALTIMMUNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| | | | | | |
|
| Three Months Ended March 31, | ||||
| | 2022 | | 2021 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
| |
|
| |
|
Net loss | | $ | (19,430) | | $ | (14,864) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
|
| |
| |
Change in fair value of contingent consideration liability | |
| (1,780) | |
| 880 |
Stock-based compensation expense | |
| 2,033 | |
| 1,218 |
Depreciation and amortization | |
| 119 | |
| 74 |
Unrealized (gains) losses on foreign currency exchange | |
| (110) | |
| 33 |
Changes in operating assets and liabilities: | |
| | |
| |
Accounts receivable | |
| 236 | |
| (191) |
Prepaid expenses and other current assets | |
| 3,046 | |
| (4,201) |
Accounts payable | |
| 171 | |
| (194) |
Accrued expenses and other liabilities | |
| 2,659 | |
| (2,189) |
Income tax and R&D incentive receivables | |
| (470) | |
| (135) |
Net cash used in operating activities | |
| (13,526) | |
| (19,569) |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
|
| |
|
|
Proceeds from sales and maturities of short-term investments | |
| — | |
| 30,912 |
Purchases of short-term investments | |
| — | |
| (7,476) |
Purchases of property and equipment, net | |
| (9) | |
| (4,209) |
Cash paid for internally developed patents | |
| — | |
| (62) |
Net cash (used in) provided by investing activities | |
| (9) | |
| 19,165 |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
|
| |
|
|
Payments of deferred offering costs | | | (119) | | | 135 |
Proceeds from issuance of common stock in at-the-market offerings, net | |
| 2,990 | |
| 34,178 |
Proceeds from issuance of common stock from Employee Stock Purchase Plan | |
| 113 | |
| 106 |
Proceeds from exercises of stock options | |
| 197 | |
| — |
Net cash provided by financing activities | |
| 3,181 | |
| 34,419 |
Net (decrease) increase in cash and cash equivalents and restricted cash | |
| (10,354) | |
| 34,015 |
Cash, cash equivalents and restricted cash at beginning of period | |
| 190,335 | |
| 115,952 |
Cash, cash equivalents and restricted cash at end of period | | $ | 179,981 | | $ | 149,967 |
| | | | | | |
SUPPLEMENTAL NON-CASH ACTIVITIES: | |
| | |
| |
Fair value of common stock retired in exchange for issuance of common stock warrant | | $ | — | | $ | 17,200 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
5
ALTIMMUNE, INC.
NOTES TO UNAUDITED CONDENSED 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 in 1997 under the laws of the State of Delaware. Altimmune
The Company is focused on discoveringdeveloping treatments for obesity and developing immunotherapiesliver diseases. The Company’s pipeline includes next generation peptide therapeutics for obesity and vaccines to address significant unmet medical needs.non-alcoholic steatohepatitis (“NASH”) (for both, pemvidutide [proposed INN], formerly known as ALT-801), and for chronic hepatitis B (HepTcell). Since its inception, Altimmunethe 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 convertible preferred stock, long-term debt and proceeds from research grants and government contracts. AltimmuneThe 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.
Pursuant to an Agreement and PlanBasis of Merger and Reorganization (the “Merger Agreement”) dated January 18, 2017, PharmAthene, Inc. (“PharmAthene”), its wholly owned acquisition subsidiaries Mustang Merger Sub Corp I Inc. (“Merger Sub Corp”) and Mustang Merger Sub II LLC (“Merger Sub LLC”) agreed to acquire 100% of the outstanding capital stock of Altimmune in a reverse triangular merger and reorganization pursuant to section 368(a) of the Internal Revenue Code (the “Mergers”) (Note 3).
As a condition for the Mergers, in January 2017, prior to the Mergers, Altimmune entered into a Convertible Promissory Note Purchase Agreement (the “Note Agreement”) for the private placement of $8.6 million of 6% convertible notes (the “Notes”) (See Note 7) to be issued in two separate closings. The initial closing dated March 9, 2017 resulted in $3,150,630 of gross proceeds. The initial closing also included $196,496 of certain existing outstanding notes payable and $881,044 of certain accrued expenses that were modified and became a component of the Notes on March 9, 2017. In connection with the Notes, Altimmune issued warrants to purchase 49,776 shares of Altimmune’s common stock to certain noteholders, with an exercise price of $0.01 per share. These warrants are classified as permanent equity (see Note 10). The second closing was included in the sale of Series B redeemable convertible preferred stock (“redeemable preferred stock”) that closed on August 16, 2017 (see Note 9).
On May 4, 2017, Altimmune and PharmAthene closed the Mergers in accordance with the terms of the Merger Agreement. Upon the closing of the Mergers, (i) Merger Sub Corp merged with and into Altimmune, with Altimmune remaining as the surviving corporation; (ii) Altimmune then merged with and into Merger Sub LLC, with Merger Sub LLC (renamed as “Altimmune LLC”) remaining as the surviving entity; and (iii) PharmAthene was renamed as “Altimmune, Inc.” Upon closing of the Mergers, all equity instruments of Altimmune were exchanged for corresponding equity instruments of PharmAthene (see Note 3). Altimmune and PharmAthene and its subsidiaries are hereinafter collectively referred to as the “Company” or “we”.Presentation
The accompanying unaudited condensed 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 Altimmune’sthe audited consolidated financial statements for the year ended December 31, 20162021 included in the Registration StatementAnnual Report on FormS-4/A 10-K which was filed with the SEC on March 31, 2017.15, 2022. In the opinion of management, we havethe Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as ourthe audited consolidated financial statements, and these condensed 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 20172022 or any future years or periods.
The accompanying unaudited condensedconsolidated 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. Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses in past years and incurred a net loss of $37,594,401 and used $15,407,930 in cash to fund operations during the nine months ended September 30, 2017, and had an accumulated deficit of $68,853,850 as of September 30, 2017. We expect to incur additional losses in the future in connection with our research and development activities. Since inception, we have financed our activities principally from the issuance of equity and debt securities and the receipt of proceeds from research grants and government contracts.
Our ability to continue as a going concern is dependent upon our ability to raise additional debt and equity capital. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.
As capital resources are consumed to fund our research and development activities, we may not have sufficient capital to fund our plan of operations. In order to address our capital needs, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing. Adequate financing opportunities might not be available to us, when and if needed, on acceptable terms, or at all. If we are unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, our operating results and prospects will be adversely affected.
As more fully described in Note 3, in January 2017, in connection with the Mergers, Altimmune entered into the Note Agreement for the private placement of the Notes. In addition, as more fully described in Note 9, in August 2017, we issued shares of redeemable preferred stock and the related common stock warrants for an aggregate net proceeds of $13.0 million. We expect that the combination of the net proceeds from the Notes, cash assumed from the Mergers, the anticipated receipt of tax refunds (Note 3), redeemable preferred financing, and revenue from our government sponsored contracts will be insufficient to fund our operations and research and development efforts for at least twelve months from the expected issuance date of our September 2017 financial statements.
3. Business Combination
On May 4, 2017, we closed the Mergers with PharmAthene. In accordance with the terms of the Merger Agreement, PharmAthene issued 0.749106 (the “share exchange ratio”) of a share of PharmaAthene common stock for each share of Altimmune’s $0.0001 par value common stock (“common stock”) outstanding as of the closing date. All historical share and per share information including common and preferred stock, common stock warrants, and stock options, has been retroactively adjusted to reflect the impact of the share exchange ratio. In addition, Altimmune’s stock options and warrants were also replaced with options and warrants to purchase PharmAthene’s common stock at the same share exchange ratio of 0.749106 share. Immediately prior to closing, 599,285 shares of Series B convertible preferred stock (“convertible preferred stock”) converted into Altimmune common stock on a1-for-1 basis. Due to the convertible preferred stock having unique terms and conditions, the convertible preferred stock outstanding in periods prior to the Mergers continues to be presented separately on our balance sheet for periods prior to conversion. In addition, outstanding principal and accrued interest on the Notes converted into 316,734 shares of Altimmune common stock. Further, 39,758 shares of Altimmune common stock were issued pursuant to the accelerated vesting of restricted stock, and 660,715 shares of Altimmune common stock were issued as a result of warrant exercises, both in accordance with their original terms. Upon the closing of the Mergers, Altimmune common stock totaling 6,883,498 shares were exchanged for 6,883,498 shares of PharmAthene common stock.
Although PharmAthene was the issuer of the shares and considered the legal acquirer in the Mergers, following the closing, shareholders of Altimmune held 58.2% of the equity interest of the combined entity and assumed control of the combined entity. As a result, the transaction has been accounted for as a reverse merger, with Altimmune considered the accounting acquirer, and the assets and liabilities of PharmAthene have been recorded at their estimated fair value. The unadjusted purchase price allocated to PharmAthene’s assets and liabilities was estimated to be $44,742,737 as of the closing date and consisted of the shares of the combined company retained by PharmAthene shareholders, and the estimated fair value of vested PharmAthene stock options and warrants which remained outstanding as of the closing date. Also at the closing, 7,569 outstanding unvested options of PharmAthene with an estimated fair value of $15,173 remained subject to vesting and service requirements. These unvested options will be recorded as operating expense in future periods as the services are delivered and the options vest.
Headquartered in Annapolis, Maryland, PharmAthene was incorporated in Delaware in April 2005. PharmAthene was a biodefense company engaged in Phase II clinical trials in developing a next generation anthrax vaccine. The next generation vaccine is intended to have more rapid time to protection, fewer doses for protection and less stringent requirements for temperature controlled storage and handling than the currently used vaccine. The Mergers enable the combined company to become a fully integrated, commercially-focused immunotherapeutics company with the ability to create more value than either company could achieve individually. As a publicly listed entity, the Mergers also provide us with additional capital financing alternatives to support the combined entity’s planned research and development activities.
In addition to the operating assets and liabilities of PharmAthene, Altimmune also acquired PharmAthene’s tax attributes, which primarily consisted of a tax refund receivable and approximately $1 million of net operating losses which were limited under Section 382 of the U.S. Internal Revenue Service and were fully reserved, which begin to expire in 2023. We recorded a deferred tax liability related to future tax benefits arising from anin-process research and development asset (“IPR&D”) acquired in the Mergers. Goodwill generated from the Mergers is not expected to be deductible for tax purposes.
For accounting purposes, the historical financial statements of Altimmune have not been adjusted to reflect the Mergers, other than adjustments to the capital structure of Altimmune to reflect the historical capital structure of PharmAthene. Altimmune incurred $1,673,695 of transaction costs, which have been expensed as incurred in the accompanying condensed consolidated financial statements.
The following table lists the various securities of PharmAthene which were outstanding as of May 4, 2017 and whose rights and obligations were assumed by Altimmune following the Mergers:
Outstanding PharmAthene common stock | 6,883,498 | |||
Outstanding PharmAthene stock options | 123,003 | |||
Outstanding PharmAthene stock warrants | 4,658 | |||
Per share fair value of PharmAthene common stock | $ | 6.50 | ||
Weighted average per share fair value of PharmAthene stock options | $ | 0.26 | ||
Per share fair value of PharmAthene stock warrants | $ | 0.01 | ||
Aggregate fair value of consideration | $ | 44,757,910 | ||
Less fair value of unvested common stock options | (15,173 | ) | ||
|
| |||
Total fair value of consideration | $ | 44,742,737 | ||
|
|
Since the acquisition date, we have recorded adjustments to the allocation of the purchase consideration that included a $44,700 adjustment to increase our tax refund receivable and a $4,535 adjustment to reduce our deferred tax liabilities, with a total adjustment of $49,235 resulting in an increase in goodwill. The adjustments were the result of a change in the tax rate being applied from 34% to 35%. These purchase price adjustments were reflected in the accompanying condensed consolidated balance sheet as of September 30, 2017. The adjusted allocation of the purchase consideration to the assets acquired and liabilities assumed of PharmAthene in these financial statements is still preliminary and subject to change as management gathers information regarding these items. The adjusted allocation of the purchase consideration was as follows:
Cash and cash equivalents | $ | 13,684,535 | ||
Accounts receivable | 1,124,462 | |||
Prepaid expenses and other current assets | 597,172 | |||
Tax refund receivable | 2,047,234 | |||
Property and equipment | 75,779 | |||
IPR&D | 22,389,000 | |||
Goodwill | 15,573,822 | |||
|
| |||
Total assets acquired | 55,492,004 | |||
|
| |||
Accounts payable and accrued expenses | (2,193,785 | ) | ||
Deferred tax liability | (8,555,482 | ) | ||
|
| |||
Total liabilities assumed | (10,749,267 | ) | ||
|
| |||
Net assets acquired | $ | 44,742,737 | ||
|
|
We relied on significant Level 3 unobservable inputs to estimate the fair value of acquired IPR&D assets using management’s estimate of future revenue and expected profitability of the products after taking into account an estimate of future expenses necessary to bring the products to completion. These projected cash flows were then discounted to their present values using a discount rate of 23%, which was considered commensurate with the risks and stages of development of the products.
The operating activities of PharmAthene have been included in the accompanying condensed consolidated financial statements from the date of the Mergers. For the period from May 4, 2017 to September 30, 2017, revenues and net loss of PharmAthene included in the accompanying condensed consolidated financial statements aggregated $1,052,007 and $343,509, respectively.
The following unaudited pro forma information for the nine months ended September 30, 2017 and 2016 gives effect to the acquisition of PharmAthene as if the Mergers had occurred at the beginning of the respective full annual reporting period:
Pro forma revenue and grants and contracts Pro forma net (loss) income attributable to common stockholders Pro forma weighted average common shares outstanding, basic Pro forma net (loss) income per share, basic Pro forma weighted average common shares outstanding, diluted Pro forma net (loss) income per share, diluted Nine Months Ended September 30, 2017 2016 $ 9,035,435 $ 6,262,748 $ (39,277,568 ) $ 111,784,503 15,218,542 14,268,717 $ (2.58 ) $ 7.83 15,218,542 15,107,312 $ (2.58 ) $ 7.40
4.2. Summary of Significant Accounting Policies
Segment information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, our Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. We view our operations and manage our business in one operating segment, the research and development of immunotherapies and vaccines.
Business combination
We use our best estimates and assumptions to accurately assign fair value to the tangible andintangible assets acquired and liabilities assumed at the acquisition date. Our estimates are inherentlyuncertain and subject to refinement. During the measurement period, which may be up to one year from theacquisition date, we may record adjustments to the fair value of these tangible and intangible assetsacquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positionsandtax-related valuation allowances are initially established in connection with a business combination as of theacquisition date. Our management collects information and reevaluates these estimates and assumptionsquarterly and records any adjustments to our preliminary estimates to goodwill during the measurement period. Upon the conclusion of the measurement period or finaldetermination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequentadjustments are recorded to our consolidated statements of operations and comprehensive loss.
Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. We allocate the purchase price in excess of net tangible assets acquired to identifiable intangible assets, including purchased IPR&D assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management. We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill.
Our IPR&D assets represent the estimated fair value as of the acquisition date of substantivein-process projects thatthree months ended March 31, 2022, there have not reached technological feasibility. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval. The valuation of IPR&D assets is determined using the discounted cash flow method. In determining the value of IPR&D assets, management considers, among other factors, the stage of completion of the projects, the technological feasibility of the projects, whether the projects have an alternative future use and the estimated residual cash flows that could be generated from the various projects and technologies over their respective projected economic lives. The discount rate used is determined at the time of acquisition and includes a rate of return which accounts for the time value of money, as well as risk factors that reflect the economic risk that the cash flows projected may not be realized.
Impairment of long-lived assets and goodwill
We evaluate our long-lived tangible and intangible assets, including IPR&D assets and goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Impairment of long-lived assets other than goodwill and indefinite lived intangibles is assessed by comparing the undiscounted cash flows expected to be generated by the asset to its carrying value. Goodwill is tested for impairment by comparing the estimated fair value of our single reporting unit to its carrying value.
From the date of the Mergers through September 30, 2017, we experienced a decline in the trading price of our common stock. As of September 30, 2017, our one reporting unit had an estimated average market capitalization through September 30, 2017, before adjusting for an estimated control premium, of approximately $36,200,000 as compared to the unadjusted carrying value of the reporting unit of $75,430,244, which is an impairment indicator. As a result, we conducted an interim impairment review and test.
Our IPR&D assets are currentlynon-amortizing. Until such time as the projects are either completed or abandoned, we test those assets for impairment annually by comparing the fair value of such assets to their carrying value. On an interim basis, we consider qualitative factors which could be indicative of impairment; these factors include the current project status, forecasted changes in the timing or amounts required to complete the project, forecasted changes in the future cash flows to be generated by the completed products, and changes to other market based assumptions, such as discount rates. Upon completion or abandonment, the value of the IPR&D assets will be amortized to expense or the anticipated useful life of the developed products, if completed, or charged to expense when abandoned if no alternative future use exists. As of September 30, 2017, the projects continue to progress as originally anticipated, andbeen no significant changes to the estimated timingCompany’s summary of significant accounting policies contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC.
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 amountthe emergence of cash flowsnew variants, may directly or any other marketindirectly
6
impact the Company’s business, financial condition, and results of operations is highly uncertain and subject to change. The Company considered the potential impact of the COVID-19 pandemic on the Company’s estimates and assumptions have occurred. We performed an interim qualitative assessment of our long-lived assets, including IPR&D, as of September 30, 2017, and have determined that our long-lived assets, including IPR&D, arethere was not impaired at September 30, 2017.
We test goodwill for impairment during the fourth quarter of each year, or more frequently if impairment indicators arise. During the nine months ended September 30, 2017, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)No. 2017-04,Simplifying the Test for Goodwill Impairment (“ASU2017-04”), which provides for aone-step quantitative test. We early adopted ASU 2017-04 to simplify our goodwill impairment analysis. If the carrying value of a reporting unit exceeds its fair value, the amount of goodwill impairment is the excess of the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. We consider multiple methods including both market and income approaches to determine fair value of our one reporting unit, and primarily relied on fair value estimated based on our market capitalization (a Level 1 input) as of or near the testing date, adjusted for an estimated control premium. As noted, due to the decline in the market value of our common stock which indicated potential impairment, we performed an interim impairment test on our goodwill as of September 30, 2017, using a volume weighted average price (“VWAP”) of $2.31 per share at September 30, 2017 and a control premium of 35%.
Based on the result of our impairment test, the carrying value of our reporting unit exceeded its estimated fair value at September 30, 2017. As a result, we have concluded that our goodwill was impaired at September 30, 2017 and an impairment charge of $26,600,000 was recorded during the three and nine months ended September 30, 2017, and was classified as a component of operating expenses. We will continue to evaluate our goodwill for impairment based on factors including the overall movements of our market capitalization. Any sustained declines in our stock price from the September 30, 2017 level could result in a future impairment and the overall amount of impairment loss could be material.
Income Taxes
We account for income taxes using the asset and liability approach, which requires the recognition of future tax benefits or liabilities on the temporary differences between the financial reporting and tax bases of our assets and liabilities. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. We also recognize a tax benefit from uncertain tax positions only if it is “more likely than not” that the position is sustainable based on its technical merits.
Pursuant to federal and state tax regulations with respect to carryback periods of certain net operating losses (“NOLs”), in 2017, as a result of the Mergers, we anticipate that we will be able to carryback 2017 NOLs to 2016, which we expect will allow us to recover previously paid federal and state income taxes by PharmAthene and other tax credits of approximately $5.1 million. These anticipated refunds generated through September 30, 2017, are included as a component of tax refund receivable on the condensed consolidated balance sheet at September 30, 2017 and an income tax benefit during the three and nine months ended September 30, 2017.
Preferred Stock
Convertible preferred stock outstanding prior to the Mergers were classified as permanent equity, with the net issuance price in excess of par value recorded as additionalpaid-in capital. Redeemable preferred stock issued in August 2017 are classified as temporary equity and were initially recorded at their original issuance price, net of issuance costs and discounts. Discounts included common stock warrants issued as part of the financing which were required to be classified as a liability and recorded at fair value (Note 10), an embedded derivative related to certain redemption features which was classified as a liability and recorded at fair value (Note 9), and the intrinsic value of a beneficial conversion feature present in the instrument at issuance (Note 9). The carrying value of redeemable preferred stock will be accreted over the term of the redeemable preferred stock up to their redemption value, using the interest method with the amount of the accretion recorded as a reduction of additionalpaid-in capital.
Warrants
Common stock warrants issued in connection with the convertible preferred stock and the Notes were classified as a component of permanent equity because they were freestanding financial instruments that were legally detachable and separately exercisable from other debt and equity instruments, were contingently exercisable, did not embody an obligation for us to repurchase our own shares, and permitted the holders to receive a fixed number of common shares upon exercise. In addition, such warrants required physical settlement and do not provide any guarantee of value or return. These warrants were valued using the Black Scholes option pricing model (“Black-Scholes”).
Common stock warrants issued in connection with the redeemable preferred stock are classified as a liability because the warrants may be net share settled at the holders option. Such warrants contain terms which could, in certain circumstances, require the Company to settle the instruments for cash and such circumstances are outside the Company’s control. Common stock warrants classified as a liability are initially recorded at their issuance date fair value and are remeasured on each subsequent balance sheet date with changes in fair value recorded as a component of other income (expenses), net. These common stock warrants were valued using the Monte Carlo simulation valuation model.
Stock Compensation
We adopted FASB’s ASUNo. 2016-09,Compensation – Stock Compensation (“ASU2016-09”) on January 1, 2017. The adoption of ASU2016-09 did not have a material impact on ourto the Company’s unaudited consolidated financial statements. We elected to adopt the cash flow presentationstatements as of the excess tax benefits prospectively, commencing with our statement of cash flowsand for the three months ended March 31, 2017. We have elected2022. However, actual results could differ from those estimates and there may be changes to continuethe Company’s estimates in future periods.
3. Fair Value Measurements
The Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2022 consisted of the following (in thousands):
| | | | | | | | | | | | |
| | Fair Value Measurement at March 31, 2022 | ||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
Assets: | | | | | | | | | | | | |
Cash equivalents - money market funds | | $ | 65,641 | | $ | 65,641 | | $ | — | | $ | — |
Total | | | 65,641 | | | 65,641 | | | — | | | — |
Liabilities: | | | | | | | | | | | | |
Contingent consideration liability (see Note 8) | |
| 4,310 | |
| — | |
| — | |
| 4,310 |
Total | | $ | 4,310 | | $ | — | | $ | — | | $ | 4,310 |
The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2021 consisted of the following (in thousands):
| | | | | | | | | | | | |
| | Fair Value Measurement at December 31, 2021 | ||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
Assets: | | | | | | | | | | | | |
Cash equivalents - money market funds | | $ | 65,634 |
| $ | 65,634 |
| $ | — |
| $ | — |
Total | | | 65,634 | | | 65,634 | | | — | | | — |
Liabilities: | | | | | | | | | | | | |
Contingent consideration liability (see Note 8) | |
| 6,090 | |
| — | |
| — | |
| 6,090 |
Total | | $ | 6,090 | | $ | — | | $ | — | | $ | 6,090 |
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 March 31, 2022 include the following significant unobservable inputs:
| | | | |
Unobservable input | | Value or Range |
| Weighted-Average |
Expected volatility |
| 84.4% | | 84.4% |
Risk-free interest rate |
| 0.90% | | 0.90% |
Cost of capital |
| 30% | | 30% |
Discount for lack of marketability |
| 10%‑13% | | 12% |
Probability of payment |
| 94% | | 94% |
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 0 transfers into or out of Level 3 of the fair value hierarchy as of March 31, 2022 and December 31, 2021.
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 three months ended March 31, 2022, the Company had 0 significant assets or liabilities that were measured at fair value on a non-recurring
7
basis. During the year ended December 31, 2021, the Company recorded non-cash impairment charges to property and equipment, net on a non-recurring basis (see below).
Lonza Manufacturing Agreement
In March 2021, the Company expanded its manufacturing collaboration with Lonza Houston, Inc. (“Lonza”) for the manufacture of AdCOVID or other adenovirus-based vaccines. Under the expanded agreement, the Company had 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 was completed during the fourth quarter of 2021. The Company capitalized a total of $4.0 million as construction-in-progress (“CIP”) during the three months ended March 31, 2021 under this expanded agreement. The Company subsequently terminated the agreement and impaired the amount during the year ended December 31, 2021.
4. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
| | | | | | |
| | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||
Furniture, fixtures and equipment |
| $ | 163 |
| $ | 222 |
Laboratory equipment | |
| 243 | |
| 1,040 |
Computers and telecommunications | |
| 179 | |
| 291 |
Software | |
| 128 | |
| 148 |
Leasehold improvements | |
| 1,749 | |
| 1,794 |
Property and equipment, at cost | |
| 2,462 | |
| 3,495 |
Less: accumulated depreciation and amortization | |
| (1,125) | |
| (2,047) |
Property and equipment, net | | $ | 1,337 | | $ | 1,448 |
Depreciation expense related to property and equipment was approximately $0.1 million for both the three months ended March 31, 2022 and 2021.
5. Intangible Assets
The Company’s intangible assets consist of the following (in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2022 | ||||||||||||
| | | | Gross | | | | | | | | | | |
| | Estimated | | Carrying | | Accumulated | | | | | Net Book | |||
| | Useful Lives | | Value | | Amortization | | Impairment | | Value | ||||
IPR&D assets |
| Indefinite | | $ | 12,419 | | $ | — | | $ | — | | $ | 12,419 |
Total |
|
| | $ | 12,419 | | $ | — | | $ | — | | $ | 12,419 |
| | | | | | | | | | | | | | |
| | December 31, 2021 | ||||||||||||
| | | | Gross | | | | | | | | | | |
| | Estimated | | Carrying | | Accumulated | | | | | Net Book | |||
|
| Useful Lives |
| Value |
| Amortization |
| Impairment |
| Value | ||||
Internally developed patents |
| 6–20 years | | $ | 1,079 | | $ | (500) | | $ | (579) | | $ | — |
Acquired licenses |
| 16–20 years | |
| 285 | |
| (285) | |
| — | |
| — |
Total intangible assets subject to amortization |
|
| |
| 1,364 | |
| (785) | |
| (579) | |
| — |
IPR&D assets |
| Indefinite | |
| 12,419 | |
| — | |
| — | |
| 12,419 |
Total |
|
| | $ | 13,783 | | $ | (785) | | $ | (579) | | $ | 12,419 |
There was 0 amortization expense of intangible assets subject to amortization for the three months ended March 31, 2022. Amortization expense of intangible assets subject to amortization totalled $6,640 for the three months ended March 31, 2021. Amortization expense was classified as research and development expenses in the consolidated statements
8
of operations and comprehensive loss. There was 0 in-process research and development (“IPR&D”) impairment loss during the three months ended March 31, 2022 and the year ended December 31, 2021.
6. Operating Leases
The Company rents office and laboratory space in the United States. The Company also leases office equipment under non-cancellable equipment leases through June 2026. Rent expense during the three months ended March 31, 2022 and 2021 under all of the Company’s operating leases was $0.1 million and $0.1 million, respectively. Rent expense includes short-term leases and variable lease costs that are not included in the lease obligation.
Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.
The office space leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The office space lease also includes an option to renew the lease as of the end of the term. The Company has determined that the lease renewal option is not reasonably certain of being exercised.
The cash paid for operating lease liabilities for both the three months ended March 31, 2022 and 2021 was $0.1 million.
Supplemental other information related to the operating leases balance sheet information is as follows (in thousands, except lease term and discount rate):
| | | | | | | |
| | | | |
| ||
| | March 31, 2022 | | December 31, 2021 |
| ||
Operating lease obligations (see Note 7 and 9) |
| $ | 1,437 |
| $ | 1,535 | |
Operating lease right-of-use assets (included in "Other assets" in Balance Sheet) | | $ | 750 | | $ | 798 | |
Weighted-average remaining lease term (years) | |
| 3.1 | |
| 3.3 | |
Weighted-average discount rate | |
| 7.2 | % |
| 7.2 | % |
7. Accrued Expenses
Accrued expenses and other current liabilities consist of the following (in thousands):
| | | | | | |
| | | | | ||
| | March 31, 2022 | | December 31, 2021 | ||
Accrued professional services |
| $ | 642 |
| $ | 396 |
Accrued payroll and employee benefits | |
| 1,117 | |
| 2,313 |
Accrued research and development | |
| 10,382 | |
| 6,988 |
Lease obligation, current portion (see Note 6) | |
| 421 | |
| 411 |
Accrued interest and other | |
| 47 | |
| 44 |
Total accrued expenses and other current liabilities | | $ | 12,609 | | $ | 10,152 |
8. Contingent Consideration
The Company entered into an Agreement and Plan of Merger and Reorganization, dated July 8, 2019, by and among the Company, Springfield Merger Sub, Inc., Springfield Merger Sub, LLC, Spitfire Pharma, Inc. and David Collier, as the Stockholder Representative (the “Spitfire Merger Agreement”) to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”). Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis.
The transaction closed on July 12, 2019. The Company issued 1,887,250 unregistered shares of its common stock as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5.0 million less working capital and transaction expense adjustment amounts as defined in the agreement.
9
The acquisition of Spitfire was accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset was not considered a business. The Company expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses.
The Spitfire Merger Agreement also includes future contingent payments up to $88.0 million in cash and shares of the Company’s common stock as follows (each, a “Milestone Event”):
● | a one-time payment of $5.0 million (the “IND Milestone Consideration Amount”) within sixty days of the submission of an Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (the “FDA”) or other applicable governmental authority in a foreign jurisdiction, which IND has not been rejected or placed on clinical hold by the FDA or such applicable foreign governmental authority within time specified in the Merger Agreement; |
● | a one-time payment of $3.0 million (the “Phase 2 Milestone Consideration Amount” and together with the IND Milestone Consideration Amount, the “Regulatory Milestones”) within sixty days of the initiation (first patient, first dosing) of a Phase 2 clinical trial of a product candidate anywhere in the world; and |
● | payments of up to $80.0 million upon the achievement of specified worldwide net sales (the “Sales Milestones”) of all products developed using the technology acquired in the License Agreement within ten years following the approval of a new drug application filed with the FDA. |
The Regulatory Milestones will be payable in shares of the Company’s Common Stock, with the number of shares of the Company’s Common Stock to be issued in connection with each milestone amount, if any, are dependent on the share price at the time of achievement. The number of any shares issued in consideration for the IND Milestone Consideration Amount will be determined based on lower of (A) the average of the closing prices of our Common Stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to the IND Reference Date or (B) $2.95. The value of any shares issued in consideration for the Phase 2 Milestone Consideration Amount shall be determined based the lower of (A) on the average of the closing trading prices of our Common Stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days immediately preceding the date of the occurrence of the Phase 2 Milestone Event or (B) $3.54.
The future contingent payments related to the Regulatory Milestones are stock-based awards expectedpayments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity (“ASC 480”). Such stock-based payments are subject to vest, rather than electinga lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. The future contingent payments related to accountthe Sales Milestones are predominately cash-based payments accounted for forfeitures as they occur to determineunder FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, the Company will recognize the Sales Milestones when the contingency is probable and the amount is reasonably estimated.
On November 3, 2020, the Company received acknowledgement from the Australian Government Department of Health on the Company’s submitted clinical trial notification (“CTN”) which triggered the obligation to settle the IND Milestone payment to the former owners. As a result, on November 19, 2020, the Company issued 1,694,906 shares of its Common Stock valued at $9.57 per share for the amount value of $13.6 million to the former Spitfire stockholders. Pursuant to the Spitfire Merger Agreement, the Company issued the shares within sixty days of the submission of the CTN, which was October 29, 2020. From September 30, 2020 through November 19, 2020, the date of issuance, the Company recognized a decrease in the fair value of the IND Milestone payment of $5.4 million to research and development expense and reclassified the balance in the contingent consideration liability associated with the fair value of the IND Milestone payment to equity in the Company’s consolidated balance sheet. NaN Regulatory Milestones were achieved during the three months ended March 31, 2022. The Phase 2 Milestone was met on April 26, 2022. See Note 17 for further details.
The Company estimates the future contingent consideration for the Regulatory Milestones based upon a Monte Carlo simulation valuation model that is risk adjusted based on the probability of achieving the milestones and a discount for lack of marketability. The Company remeasures the fair value of the contingent consideration at each reporting period.
10
During the fourth quarter of 2020, the Company achieved the IND Milestone and paid the obligation in shares according to the calculation above. Below is a summary of the contingent consideration activity (in thousands):
| | | | | | |
| | Three Months Ended March 31, | ||||
| | 2022 | | 2021 | ||
Beginning balance |
| $ | 6,090 |
| $ | 5,390 |
Change in fair value | |
| (1,780) | |
| 880 |
Ending balance | | $ | 4,310 | | $ | 6,270 |
As of March 31, 2022, the decrease in fair value was primarily attributable to a decrease in the closing share price of the Company’s common stock, partially offset by an increase in the probability of milestone achievement. As of March 31, 2021, the increase in fair value was primarily attributable to an increase in the closing share price of the Company’s common stock and in the probability of milestone achievement. Any changes in fair value have been recorded within research and development expense during the respective periods presented.
9. Other Long-Term Liabilities
The Company’s other long-term liabilities are summarized as follows (in thousands):
| | | | | | |
| | | | | ||
| | March 31, 2022 | | December 31, 2021 | ||
Lease obligation, long-term portion (see Note 6) |
| $ | 1,016 |
| $ | 1,124 |
Conditional economic incentive grants | |
| 250 | |
| 250 |
Other | |
| 402 | |
| 80 |
Total other long-term liabilities | | $ | 1,668 | | $ | 1,454 |
10. Common Stock
Public Offering
On July 16, 2020, the Company offered and sold (i) 3,369,564 shares of common stock, at a price to the public of $23.00 per share, and (ii) pre-funded warrants of the Company to purchase 1,630,436 shares of common stock at an exercise price equal to $0.0001 per share (the “Pre-Funded Warrants”), at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of Common Stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of the Company’s common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to the Company. The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020. The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.
The Company has assessed the Pre-Funded Warrants for appropriate equity or liability classification and determined that the Pre-Funded Warrants are freestanding instruments that do not meet the definition of a liability pursuant to ASC 480 and do not meet the definition of a derivative pursuant to FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (“ASC 815”). The Pre-Funded Warrants are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the Pre-Funded Warrants are classified as equity and are accounted for as a component of additional paid-in capital at the time of issuance. As of March 31, 2022, 760,870 of the Pre-Funded Warrants were exercised, leaving 869,566 remaining Pre-Funded Warrants unexercised.
11
At-the-Market Offerings
On February 25, 2021, the Company entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C. and B. Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offerings program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million (the “Shares”) through the Sale Agents (the “2021 Offering”). Any Shares offered and sold in the 2021 Offering will be issued pursuant to the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on December 31, 2020, which was declared effective on January 11, 2021, the prospectus supplement relating to the 2021 Offering filed with the SEC on February 25, 2021 and any applicable additional prospectus supplements related to the 2021 Offering that form a part of the Registration Statement.
During the three months ended March 31, 2022, the Company sold 335,485 shares of Common Stock under the 2021 Agreement resulting in approximately $3.0 million in net proceeds. As of March 31, 2022, the Company has sold in aggregate 5,135,939 shares of Common Stock under the 2021 Agreement resulting in approximately $67.8 million in net proceeds, with $55.0 million remaining available to be sold under the 2021 Agreement. As of March 31, 2022, the Company recorded approximately $0.1 million of offering costs which offset the proceeds received from the shares sold through March 31, 2022. The Company capitalized approximately $0.1 million of deferred offering costs which will offset future proceeds received under the 2021 Agreement.
Exchange Agreement
On February 25, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with an Investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.0001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,000,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $0.0001 per share. The Exchange Warrants did not have an expiration date and were exercisable at any time except that the Exchange Warrants could not be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99% of the Company’s common stock, subject to certain exceptions. In accordance with FASB Accounting Standards Codification Topic 505, Equity, the Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and a corresponding debit to additional paid-in-capital and accumulated deficit at the fair value of the Exchange Warrants on the issuance date. The Exchange Warrants were classified as equity in accordance with ASC 480 and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in-capital and is not subject to remeasurement. The Company determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants. As of March 31, 2022, the Exchange Warrants to purchase 1,000,000 shares were net exercised, resulting in the issuance of 999,984 shares of common stock. All of the Exchange Warrants were exercised in full.
11. Warrants
A summary of warrant activity during the three months ended March 31, 2022 is as follows:
| | |
Warrants outstanding, December 31, 2021 | 2,776,191 | |
Exercises (see Note 10) | (1,760,870) | |
Warrants outstanding, March 31, 2022 | 1,015,321 |
12. Stock-Based Compensation
Stock Options
The Company’s stock option awards generally vest over four years and typically have a contractual life of ten years. At March 31, 2022, there was $14.0 million of unrecognized compensation cost related to stock options, which is
12
expected to be recognized in each period. There was no impactover a weighted-average period of 3.1 years. During the three months ended March 31, 2022, the Company granted 1,020,427 stock options with a weighted average exercise price of $6.91 and per share weighted average grant date fair value of $6.06.
Information related to our computationstock options outstanding at March 31, 2022 is as follows (in thousands, except share, exercise price and contractual term):
| | | | | | | | | | |
|
| |
| | |
| Weighted-Average |
| | |
| | | | Weighted- | | Remaining | | | | |
| | Number of | | Average | | Contractual Term | | Aggregate Intrinsic | ||
| | Stock Options | | Exercise Price | | (Years) | | Value | ||
Outstanding |
| 3,464,793 | | $ | 8.41 |
| 6.0 | | $ | 4,045 |
Exercisable |
| 1,271,282 | | $ | 7.45 |
| 5.8 | | $ | 2,759 |
Unvested |
| 2,193,511 | | $ | 8.96 |
| 6.0 | | $ | 1,286 |
Restricted Stock
At March 31, 2022, the Company had unvested restricted stock of dilutive EPS53,818 shares with total unrecognized compensation expense of $0.2 million, which the Company expects to recognize over a weighted average period of approximately 0.7 years. During the three months ended March 31, 2022, the Company released 20,182 shares of unrestricted common stock as all securities were considered anti-dilutive.a result of the vesting of restricted stock.
Recently issued accounting pronouncementsRestricted Stock Units
During the three months ended March 31, 2022, the Company granted 255,000 shares of restricted stock units which vest over four years. At March 31, 2022, the Company had unvested restricted stock units of 446,837 shares with total unrecognized compensation expense of $3.9 million, which the Company expects to recognize over a weighted average period of approximately 3.5 years. During the three months ended March 31, 2022, the Company released 40,091 shares of unrestricted common stock as a result of the vesting of restricted stock units.
2019 Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan, employees purchased 16,450 shares for $0.1 million during the three months ended March 31, 2022. During the three months ended March 31, 2022, the Company recognized compensation expense of $0.1 million.
Stock-based Compensation Expense
Stock-based compensation expense is classified in the unaudited consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021 as follows (in thousands):
| | | | | | |
|
| For the Three Months Ended | ||||
| | March 31, | ||||
| | 2022 |
| 2021 | ||
Research and development | | $ | 618 | | $ | 321 |
General and administrative | |
| 1,415 | |
| 897 |
Total | | $ | 2,033 | | $ | 1,218 |
13. U.S. Government Contracts and Grants
In May 2014, FASB issued ASUNo. 2014-09,RevenueJune 2020, the Company was awarded $4.7 million from Contractsthe U.S. Army Medical Research & Development Command (“USAMRDC”) to fund its Phase 1/2 clinical trial of T-COVID. The competitive award was granted by USAMRDC in collaboration with Customers(“ASU2014-09”the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology consortium working in partnership with the Department of Defense (“DoD”). Under the contract, MTEC paid the Company a firm fixed fee based upon the achievement of certain milestones for conduct and completion of a Phase
13
1/2 study and research and development work on the replication-deficient adenovirus 5 (“RD-Ad5”) vector vaccine platform. For the three months ended March 31, 2021, the Company recognized approximately $0.5 million of grant revenue under the contract, which completed the full recognition of this award. NaN revenue was recognized for this contract for the three months ended March 31, 2022.
In July 2016, the Company signed a five-year contract with Biomedical Advanced Research and Development Authority (“BARDA”). The contract, as amended, which amends the guidance for revenue recognition to replace numerous industry specificrequirements. ASU2014-09, as amended, implementshad a five-step process for customer contract revenue recognitionthat focuses on transfer of control, as opposed to transfer of risk and rewards. ASU2014-09, as amended, also requiresenhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows fromcontracts with customers. Other major provisions include ensuring the timetotal value of money is considered in thetransaction price, and allowing estimates of variable considerationup to $136.8 million to be used to fund clinical development of NasoShield. Under the contract, BARDA paid the Company a fixed fee and reimbursed certain costs for the research and development of an Ad5-vectored, protective antigen-based intranasal anthrax vaccine through cGMP manufacture and conduct of a Phase 1 clinical trial dose ranging assessment of safety and immunogenicity. The contract consisted of an initial base performance period providing approximately $30.9 million in funding for the period July 2016 through December 2021. BARDA had seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical studies. Each option, if exercised by BARDA, would have provided additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning in 2021. For the three months ended March 31, 2021, the Company recognized before contingencies areresolved in certain circumstances. ASU2014-09, as amended, is effective for reporting periods beginningafter December 15, 2017. Early adoption is permitted, but not before December 15, 2016. Entities can transitiontoapproximately $0.2 million of grant revenue under the standard either retrospectively or as a cumulative-effect adjustment asBARDA contract. For the three months ended March 31, 2022, the Company has recognized de minimis grant revenue related to the close-out of the dateBARDA contract. BARDA did not extend the contract beyond the end of adoption. We are currently inDecember 2021.
14. Income Taxes
Due to a full valuation allowance, the process of evaluatingCompany did not record an income tax benefit for both the effect the adoption of ASU2014-09, as amended, may have on our financial statements. As the majority of our revenues relate to research grantsthree months ended March 31, 2022 and government contracts, we do not expect the adoption of ASU2014-09, as amended, will have a material impact on our financial statements.2021.
In February 2016, FASB issued ASUNo. 2016-02,Leases (“ASU2016-02”). ASU2016-02 requires a lessee to separate the lease components from thenon-lease components in a contract and recognize in the statement of financial position a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying asset for the lease term. It also aligns lease accounting for lessors with the revenue recognition guidance in ASU2014-09. ASU2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied at the beginning of the earliest period presented using a modified retrospective approach. We do not expect the adoption of ASU2016-02 will have a material impact on our financial statements.
5.15. Net Loss Per Share
Because we havethe Company has reported a net loss attributable to common stockholders for all periods presented, basic and diluted net loss per share attributable to common stockholders are the same for all periods presented. For periods presented,
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average numbers of shares of common stock outstanding for the period. Basic shares outstanding includes the weighted average effect of the Company’s outstanding pre-funded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock.
Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period. As such, all preferred stock, unvested restricted stock, restricted stock units, common stock warrants, and stock options have been excluded from the computation of diluted weighted-averageweighted average shares outstanding because such securities would have an antidilutive impact.anti-dilutive impact for all periods presented.
The following table sets forth the computation of basic and diluted net loss per share:
Numerator: Net loss Less: preferred stock accretion and dividends Net loss attributed to common stockholders Denominator: Weighted-average common shares outstanding, basic and diluted Net loss per share attributed to common stockholders, basic and diluted Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 $ (29,905,237 ) $ (4,795,059 ) $ (37,594,401 ) $ (8,024,985 ) (1,962,072 ) (104,548 ) (2,125,141 ) (247,562 ) $ (31,867,309 ) $ (4,899,607 ) $ (39,719,542 ) $ (8,272,547 ) 15,527,867 6,911,715 11,595,698 6,911,366 $ (2.05 ) $ (0.71 ) $ (3.43 ) $ (1.20 )
Potential common shares issuable upon conversion, vesting or exercise of convertible preferred stock, redeemable preferred stock, unvested restricted stock, restricted stock units, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding, as they are anti-dilutive, are as follows:
| | | | |
| | For the Three Months Ended | ||
| | March 31, | ||
| | 2022 | | 2021 |
Common stock warrants |
| 145,755 |
| 145,755 |
Common stock options |
| 3,479,992 |
| 2,307,264 |
Restricted stock units |
| 446,837 |
| 196,279 |
Restricted stock |
| 53,818 |
| 134,545 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Convertible preferred stock | — | 517,860 | — | 411,736 | ||||||||||||
Redeemable preferred stock | 5,863,564 | — | 5,863,564 | — | ||||||||||||
Common stock warrants | 2,350,085 | 538,003 | 2,350,085 | 442,910 | ||||||||||||
Common stock options | 1,720,004 | 831,248 | 1,720,004 | 838,595 | ||||||||||||
Restricted stock | 25,559 | — | 25,559 | — |
6. Goodwill
14
16. Commitments and Intangible AssetsContingencies
Changes in the carrying amounts of IPR&D assets and goodwill for the nine months ended September 30, 2017 were:
IPR&D | Goodwill | |||||||
Balance, beginning of period | $ | 14,477,019 | $ | 18,758,421 | ||||
Additions from the Mergers | 22,389,000 | 15,573,822 | ||||||
Foreign currency translation adjustments | 1,235,457 | 1,602,661 | ||||||
Impairment charges | — | (26,600,000 | ) | |||||
|
|
|
| |||||
Balance, end of period | $ | 38,101,476 | $ | 9,334,904 | ||||
|
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Our intangible assets consisted of the following:
December 31, 2016 | ||||||||||||||||
Estimated Lives | Gross Carrying Value | Accumulated Amortization | Net Book Value | |||||||||||||
Internally developed patents | 6-10 years | $ | 624,454 | $ | (211,956 | ) | $ | 412,498 | ||||||||
Acquired licenses | 16-20 years | 285,000 | (219,800 | ) | 65,200 | |||||||||||
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Total intangible assets subject to amortization | 909,454 | (431,756 | ) | 477,698 | ||||||||||||
IPR&D assets | Indefinite | 14,477,019 | — | 14,477,019 | ||||||||||||
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Total | $ | 15,386,473 | $ | (431,756 | ) | $ | 14,954,717 | |||||||||
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September 30, 2017 | ||||||||||||||||
Estimated Lives | Gross Value | Accumulated Amortization | Net Book Value | |||||||||||||
Internally developed patents | 6-10 years | $ | 672,088 | $ | (239,211 | ) | $ | 432,877 | ||||||||
Acquired licenses | 16-20 years | 285,000 | (232,954 | ) | 52,046 | |||||||||||
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Total intangible assets subject to amortization | 957,088 | (472,165 | ) | 484,923 | ||||||||||||
IPR&D assets | Indefinite | 38,101,476 | — | 38,101,476 | ||||||||||||
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Total | $ | 39,058,564 | $ | (472,165 | ) | $ | 38,586,399 | |||||||||
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Amortization expense of intangible assets subject to amortization totaled $14,257 and $11,764 for the three months ended September 30, 2017 and 2016, respectively, and $40,409 and $60,552 for the nine months ended September 30, 2017 and 2016, respectively. Amortization expense was classified as research and development expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.Spitfire Acquisition
As of September 30, 2017, future estimated amortization expense is as follows:
Years ending December 31, | ||||
The remainder of 2017 | $ | 14,257 | ||
2018 | 53,027 | |||
2019 | 48,227 | |||
2020 | 34,781 | |||
2021 | 14,222 | |||
2022 and thereafter | 320,409 | |||
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Total | $ | 484,923 | ||
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7. Notes Payable
As a condition for the Mergers as describeddisclosed in Note 3, Altimmune entered into8, the Note Agreement on January 18, 2017. The Notes bore interest at a rate of 6% per annum, compounded annually. On February 28, 2017, as part of the initial closing, $196,496 of the Notes were issued upon the conversion of outstanding principal of certain prior notes payable, and $881,044 of the Notes were issued upon the conversion of certain outstanding accrued expenses. The conversion of the prior notes payable into the Notes was accounted for as a modification with no resulting gains or losses being recognized. On March 9, 2017, the remainder of the initial closing of the Notes was issued for an aggregate of $3,150,630 in gross proceeds. In connection with the issuance of the Notes, we granted warrants for the purchaseCompany is obligated to make payments of up to 49,776 shares$80.0 million upon the achievement of our common stockspecified worldwide net sales of all products developed using the technology acquired from Spitfire Pharma Inc. within ten years following the approval of a new drug application filed with the FDA.
Litigation
In December 2019, a complaint was filed by Dr. De-Chu Christopher Tang (“Plaintiff”) against the Company, which was removed to certain noteholders.the United States District Court for the Eastern District of Texas. The allocated fair valuePlaintiff amended the complaint in February 2020 to include Vipin K. Garg and David J. Drutz as defendants, in addition to the Company (Dr. Garg, Dr. Drutz, and the Company are collectively referred to as “Defendants”). In March 2020 the Defendants filed a motion to dismiss the complaint. The Court denied the motion without prejudice and allowed Plaintiff an opportunity to file an amended complaint. Plaintiff’s second amended complaint was filed on April 17, 2020, and Defendants filed a motion to dismiss that complaint on May 1, 2020. A hearing on Defendants’ motion to dismiss was held on May 20, 2020. Plaintiff, who is representing himself, alleges five causes of action as follows: (1) Defendants’ alleged retention of Plaintiff’s lab notebooks after the termination of his employment in 2012; (2) alleged plagiarism based on publishing an article without naming Plaintiff as an author; (3) use of the warrantsAdhigh System, which Plaintiff alleges he developed; (4) allegations that Defendants manipulated our stock and caused a decrease in value; and (5) allegations that the Defendants “wast[ed] government grant money and poison[ed] science by leaving data to rot.” On September 30, 2020, Plaintiff filed a motion titled “Motion to Proscribe Defendants’ Allegedly Illegal Use of Plaintiff’s AdHigh System in Altimmune’s Human Clinical Trials,” to which Defendants filed an opposition on October 13, 2020. The court has not yet ruled on that motion, which also remains pending. On November 6, 2020, Defendants filed a motion for summary judgment on the issuance datebasis of $566,793 was accountedlack of personal jurisdiction, insufficient service of process, and failure to state a claim. The court ruled on that motion on March 25, 2021, which dismissed the case on the basis of lack of personal jurisdiction. On December 1, 2020, the magistrate judge assigned to the case issued a report and recommendation that Defendants’ motion to dismiss of May 1, 2020 be granted and that this action be dismissed for aslack of personal jurisdiction. Plaintiff filed objections to the report and recommendation on December 14, 2020, and the resolution of those objections by the district court remains pending.
In December 2021, the Plaintiff refiled the complaint in the United States District Court for the District of Maryland. On February 24, 2022, Defendants filed a debt issuance discount and was accreted over the termmemorandum containing a brief description of the Notes using the interest method.
All outstanding principalplanned motion and accrued interest on the Notes were converted into our common stock upon the closea concise summary of the Mergers.factual and legal support for it. On Maythe basis of that memorandum, the Court granted Defendants’ request to file a motion to dismiss and allowed Plaintiff an opportunity to file an amended complaint. Plaintiff’s amended complaint was filed on March 3, 2022, and Defendants filed a motion to dismiss that complaint on April 4, 2017, upon2022. The Company believes the close ofallegations in the Mergers, outstanding principalcomplaint are without merit and accrued interest, net of unamortized discount and deferred financing costs totaling $3,645,424 were converted into 316,734 shares of our common stock. Interest expense incurred onintends to vigorously defend the Notes prior to conversion totaled $83,207 and $136,629 for the three and nine months ended September 30, 2017, respectively.
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Accrued professional services | $ | 885,549 | $ | 689,135 | ||||
Accrued board of director compensation | 81,414 | 606,199 | ||||||
Accrued payroll and employee benefits | 1,070,006 | 957,719 | ||||||
Accrued interest | 536 | 169,790 | ||||||
Accrued research and development costs | 1,559,808 | 549,902 | ||||||
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Total | $ | 3,597,313 | $ | 2,972,745 | ||||
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9. Redeemable Convertible Preferred Stock
On August 16, 2017, we issued 15,656 shares of $0.0001 par value, redeemable preferred stock and warrants to purchase up to 2,345,427 shares of our common stock (see Note 10) for total gross proceeds of $14,716,370, and incurred issuance costs totaling
$1,697,800. The redeemable preferred stock matures on August 16, 2018. The maturity date may be extended at the option of the holders to ten trading days after the curing of a triggering event (as defined), or ten business days after the consummation of a change of control. In addition, the redeemable preferred stock agreements require that we reserve a sufficient number of common shares to cover at least 150% of the common shares expected to be issued upon the conversion of the redeemable preferred stock at the then current conversion price, and the exercises of common stock warrants issued in connection with the redeemable preferred stock.litigation.
The rights, preferences, and privileges of redeemable preferred stock are summarized below:
Voting – Holders of redeemable preferred stock have no voting rights, except as required by law.
Dividends – Holders of redeemable preferred stock are entitled to participate in dividends, when and if declared by our board of directors, on an as converted basis at the initial conversion price of $2.67 per share, not to exceed the maximum ownership percentages (as defined).
Optional conversion –Holders of redeemable preferred stock have the option to convert redeemable preferred stock into shares of common stock, rounded up to the nearest whole shares, at any time, not to exceed the maximum ownership percentages (as defined), at the conversion rate calculated as (1) whole shares of redeemable preferred shares to be converted at $1,000 per share, plus any accrued but unpaid dividends, and any accrued but unpaid late charges, divided by (2) the conversion price whichCompany is $2.67 per share initially, or as adjusted for any dilutive events and down rounds.
Mandatory conversion – If for any ten consecutive trading days after the redeemable preferred stock issuance date, the weighted average price of our common stock equals or exceeds 200% of the then current conversion price (initially $2.67 per share, subject to adjustment for stock dividends, stock splits, or a stock combination), we have the option to require all holders of redeemable preferred stock to convert all or a pro rata portion of their outstanding unconverted redeemable preferred stock (plus accrued and unpaid dividends and accrued and unpaid late charges) into common stock at the then current conversion rate (initially $2.67 per share), up to the maximum ownership percentage (as defined).
Triggering event conversion –Upon a triggering event, holders of redeemable preferred stock may elect to convert all, or a portion of, the outstanding conversion amount at the triggering event conversion price determined based on the lowest of (1) the conversion price then in effect (initially $2.67 per share), (2) 75% of the lowest VWAP during the20-day period prior to the triggering event conversion date, and (3) 75% of the VWAP on the triggering event conversion date, adjusted for any share dividend, share split, or share combination.
Installment –On each of the nine specified installment dates beginning in December 2017 through maturity, we are required to convert, redeem, or a combination,one-ninth of the originally issued number of redeemable preferred shares at their stated value of $1,000 per share, for an aggregate value of $1,739,524 at each installment. If we elect to convert the installment shares, the conversion price is determined based on the lowest of (i) the then applicable conversion price (initially $2.67 per share), (ii) 85% of the average of the three lowest weighted-average prices of the common stock during the ten trading days up to the installment date, and (iii) 85% of the weighted average price of common stock on the trading day immediately before the installment date. If we elect cash redemption, the redemption amount is $1,000 per share, plus any accrued but unpaid dividends and any accrued but unpaid late charges.
Liquidation preference –In the event of a voluntary or involuntary liquidation, dissolution, or winding up of business involving substantially all of our assets, holders of redeemable preferred stock are entitled to receive cash payments in priority to holders of common stock in the amount that equals the sum of any outstanding shares at $1,000 per share, plus any accrued and unpaid dividends, and any accrued and unpaid late charges. If assets available for distribution are insufficient to satisfy the liquidation payment in full, funds available for distribution shall be allocated pari passu among holders of redeemable preferred stock, and other equity classes equal in preference, based on their relative shareholdings. When the holders of redeemable preferred stock are satisfied in full, any excess assets available for distribution will be allocated ratably among holders of common stock and holders of redeemable preferred stock based on the number of common shares held by each holders of redeemable preferred stock on anas-converted basis.
Mandatory redemption –Upon maturity, we are required redeem any remaining outstanding redeemable preferred stock in cash at $1,000 per share, plus any accrued and unpaid dividends, and any accrued and unpaid late charges.
Change of control redemption or triggering event redemption –In the event of a change of control or upon a triggering event, holders of redeemable preferred stock may redeem for cash all or a portion of their outstanding redeemable preferred stock at the greater of (i) 125% of the amount to be redeemed, or (ii) the amount to be redeemed multiplied by the quotient of the highest closing sale price during the period from the earlier of consummation or public announcement of the change of control to the date of the redemption notice, divided by the lowest conversion price in effect during such period. If we are unable to redeem all redeemable preferred stock submitted for redemption, we may be required to pay a penalty until the redemption amount is paid in full.
Stock purchasing rights –Holders of redeemable preferred stock are entitled to the same stock purchasing rights granted to holders of common stock.
Late charges –We may be required to pay a late charge for any amounts due to the holders of redeemable preferred stock that are not paid timely, at 12% per annum on the unpaid amount, until it is paid in full.
Because the securities contain contingencies which could require the Company to redeem the shares for cash, and such contingencies are outside the control of the Company, the redeemable convertible preferred stock must be classified outside of permanent equity. Because a substantive conversion feature is present at issuance, the redeemable convertible preferred stock is only contingently redeemable and therefore is classified as temporary equity and carried on the balance sheet in between liabilities and equity at its accreted redemption value.
In addition, certain features present in the redeemable convertible preferred stock require separate recognition. For purposes of this evaluation, we have determined that the redeemable preferred instrument is more akin to a debt host because the installment conversion feature, as the primary settlement mechanism, settles in variable shares. Because the potential contingent redemption price contains a significant premium over the issuance price, the redemption feature is not clearly and closely related to the debt-like host instrument. All redemption features (including the change of control redemption, triggering event redemption, mandatory redemption, and installment redemption) have been determined to be a single, compound embedded derivative financial instrument to be bifurcated and separately accounted for as a liability. The embedded derivative financial instrument was initially recorded at its fair value on the redeemable preferred stock issuance date, and is being remeasured on each subsequent balance date with changes in fair value classified as a component of other income (expenses), net. The embedded derivative is classified as a component of other long-term liabilities.
The redeemable convertible preferred stock also contains a beneficial conversion element at issuance. The conversion feature was“in-the-money” as of the commitment date as the fair value of the underlying common share was greater than the effective conversion price. The beneficial conversion feature, measured as the intrinsic value of the feature, totaled $3,223,853 and is classified as a component of additionalpaid-in capital. This amount was allocated from the net proceeds of the financing. The beneficial conversion feature will not be remeasured in subsequent periods.
The net proceeds from the financing were allocated as follows:
Common stock warrant liability | $ | 3,498,632 | ||
Embedded derivative, redemption features | 19,857 | |||
Beneficial conversion feature | 3,223,853 | |||
Initial carrying value of redeemable preferred stock | 6,276,228 | |||
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Net proceeds from redeemable preferred stock issuance | $ | 13,018,570 | ||
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The periodic changes in the fair value of the embedded redemption derivative financial instrument measured using Level 3 inputs, is as follows:
Balance, beginning of period | $ | — | ||
Issuance | 19,857 | |||
Change in fair value | 1,157 | |||
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Balance, end of period | $ | 21,014 | ||
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The fair value used to determine the initial carrying value of the embedded redemption derivative financial instrument was measured using Level 3 inputs and was estimated using the Monte Carlo simulation valuation model. The assumptions used to estimate the fair value of the embedded redemption derivative financial instrument as September 30, 2017 and as of the redeemable preferred stock issuance date were as follows:
Expected volatility Incremental borrowing rate Risk-free interest rate September 30,
2017 August 16,
2017 52.00 % 56.00 % 12.00 % 12.00 % 1.28 % 1.24 %
10. Warrants
As of December 31, 2016, there were 616,770 warrants outstanding. In March 2017, we issued warrants to purchase up to 49,776 shares of common stock in connection with the Notes (see Note 1). The warrants were classified as permanent equity, and were recorded at the issuance date using a relative fair value allocation method, and were not subsequently remeasured. In connection with the Mergers, 660,715 shares of common stock were issued as a result of cashless exercises of such warrants.
In August 2017, in connection with the redeemable preferred stock issuance (Note 9), we granted warrants to holders of redeemable preferred stock to purchase up to 2,345,427 shares of our common stock. Warrants issued with the redeemable preferred stock are classified as a liability and are initially recorded at their grant date fair value, to be remeasured on each subsequent balance sheet date. The warrant liability is classified as component of other long-term liabilities.
A summary of warrant activity during the three and nine months ended September 30, 2017 and 2016 is as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Warrants outstanding, beginning of period | 4,658 | 477,613 | 616,770 | 208.614 | ||||||||||||
Issuances | 2,345,427 | 134,499 | 2,395,203 | 403,498 | ||||||||||||
Exercises and conversions | — | — | (661,888 | ) | — | |||||||||||
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Warrants outstanding, end of period | 2,350,085 | 612,112 | 2,350,085 | 612,112 | ||||||||||||
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Warrants outstanding at September 30, 2017 have an aggregate grant date fair value of $3,498,720 with a weighted average exercise price of $2.70.
The periodic changes in the fair value of the warrant liability, measured using Level 3 inputs, is as follows:
Balance, beginning of period | $ | — | ||
Issuance | 3,498,632 | |||
Change in fair value | 508,316 | |||
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Balance, end of period | $ | 4,006,948 | ||
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The fair value used to determine the initial carrying value of warrants classified as permanent equity was measured using Level 3 inputs and was estimated using the Black-Scholes option pricing model. The fair value of common warrants classified as a liability was estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The following assumptions were used to estimate the fair value of warrants during the three and nine months ended September 30, 2017 and 2016:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Expected volatility | 87.00 | % | 71.00 | % | 87.00 | % | 75.00 | % | ||||||||
Expected term (years) | 5.00 | 4.22 | 5.00 | 4.54 | ||||||||||||
Risk-free interest rate | 1.76 | % | 1.08 | % | 1.76 | % | 1.29 | % | ||||||||
Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % |
11. Stock-Based Compensation
Stock Options
Our stock option awards generally vest over four years and typically have a contractual life of ten years. At September 30, 2017, there was $2,227,080 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.45 years. During the three and nine months ended September 30, 2017, we issued 200,060 and 200,657 shares, respectively, of common stock as a result of option exercises.
Information related to stock options outstanding at September 30, 2017 is as follows:
Number of Stock | Weighted- average Exercise Price | Weighted- (Years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding | 1,720,004 | $ | 4.73 | 4.93 | $ | 883,740 | ||||||||||
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Exercisable | 971,221 | $ | 4.44 | 4.41 | $ | 857,749 | ||||||||||
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Expected to vest | 748,783 | $ | 5.11 | 5.61 | $ | 25,991 | ||||||||||
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Restricted Stock
At September 30, 2017, we had unvested restricted stock of 25,559 shares with total unrecognized compensation expense of $33,618, which we expect to recognize over a weighted average period of approximately 1.86 years. During the three and nine months ended September 30, 2017, we released 2,130 and 48,987 shares of common stock, respectively, from restriction as a result of the vesting and accelerated vesting of restricted stock.
Stock-based compensation expense
Stock-based compensation expense is classified in the accompanying condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016 as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Research and development | $ | 93,821 | $ | 62,871 | $ | 250,061 | $ | 215,596 | ||||||||
General and administrative | 359,216 | 132,185 | 887,064 | 369,189 | ||||||||||||
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Total | $ | 453,037 | $ | 195,056 | $ | 1,137,125 | $ | 584,784 | ||||||||
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12. Contingencies
We are a party in various other contractualcontracts and subject to disputes, litigation, and potential claims arising in the ordinary course of business. We do not believe thatbusiness, none of which are currently reasonably possible or probable of material loss.
17. Subsequent Events
Contingent Consideration
On April 26, 2022, the resolutionCompany dosed the first patient in the Phase 2 MOMENTUM trial of these matters will have a material adverse effect on our financial position or resultspemvidutide in obesity, which triggered the obligation to pay the Phase 2 Milestone Consideration Amount to the Spitfire Equityholders.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form10-Q and our consolidated financial statements and related notes for the year ended December 31, 20162021 included in the Registration Statementour Annual Report on FormS-4/A, 10-K, which was filed with the Securities and Exchange Commission on March 31, 2017 (“FormS-4/A”). Unless the context indicates otherwise, references to “we,” “us,” “our,” “Altimmune” or the “Company” refer, for periods prior to the completion of the Mergers (as defined below), to Altimmune, Inc. and its subsidiaries.15, 2022.
This Quarterly Report on Form10-Q contains forward-looking statements that involve substantial risks and uncertainties. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “expect,“may,” “will,” “should,” “could,” “target,” “strategy,” “intend,” “may,” “plan,” “predict,” “project,” “would” and“guidance,” “likely,” “usually,” “potential,” or the negative of these words or variations of such words, similar expressions, or comparable terminology are intended to identify such forward-looking statements, although not all forward-looking statements contain these identifying words. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those
indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included importantA further list and description of risks, uncertainties and other factors in the cautionary statements included in this Quarterly Report on Form10-Q, particularly in the section entitled “Risk Factors” in Part II, Item 1A that could cause actual results or events to differ materially from the forward-looking statements that we make.make is included in the cautionary statements herein and in our other filings with the Securities and Exchange Commission, including those set forth under Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
We have based the forward-looking statements included in this Quarterly Report on Form10-Q on information available to us on the date of this Quarterly Report,quarterly report, and we assume no obligation to update any such forward-looking statements, other than as required by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including Annual Reports on Form10-K, Quarterly Reports on Form10-Q and Current Reports on Form8-K.
Overview
We areAltimmune, Inc. is a clinical stage immunotherapeuticsbiopharmaceutical company focused on the development of products to stimulate robustdeveloping treatments for obesity and durable immune responsesliver diseases. Our lead product candidate, pemvidutide (proposed INN, formerly known as ALT-801), is a dual GLP-1/glucagon receptor agonist that is being developed for the prevention and treatment of diseases. obesity and non-alcoholic steatohepatitis (“NASH”). In addition, we are developing HepTcell, an immunotherapeutic agent designed to achieve a functional cure for chronic hepatitis B.
Impact of COVID-19
We have two proprietary platform technologies, RespirVec and Densigen, eachare closely monitoring how the spread of which has been shown, inCOVID-19, including any resurgences or the emergence of new variants, is affecting our employees, business, preclinical studies and early clinical trials,trials. We have reopened our executive office to activateallow employees to return to the immune systemoffice based on an approach that is intended to comply with federal and state guidelines, with a focus on employee safety and optimal work environment. We are continuing our regular interactions with the FDA and other regulatory agencies and, based on current information, we do not anticipate COVID-19 to materially affect our regulatory timelines for our ongoing clinical trials. Furthermore, as a government contractor, we are subject to the federal government vaccination mandate, which requires federal contractor employees, except in distinctly different ways than traditional vaccine methods. Using these technologies, we have generated clinical product candidates which potentially represent an entirely new approachcertain limited circumstances, to harnessingbe vaccinated against COVID-19 by December 8, 2021. While the immune system. Our most advanced product candidate, NasoVAX, an intranasally administered recombinant influenza vaccine, uses an adenovectorvaccination mandate remains subject to achieve expressionthe interpretation of various government agencies and other entities, and questions remain regarding the specific application of the influenza antigenvaccination mandate, we are continuing to develop and implement health, safety, employment and operational protocols in the target cell, thereby potentially stimulating a broader and more rapid immune response than traditional influenza vaccines. Our planned Phase 2 program for NasoVAX started in September 2017, with initial data anticipated approximately six months following the start of enrollment. Our second most advanced product candidate, HepTcell, is being tested as an immunotherapy for patients chronically infectedorder to timely comply with the hepatitis B virus (‘‘HBV’’),vaccination mandate. As of and for the three months ended March 31, 2022, the vaccination mandate has not had a material impact on our employees or operations.
Although operations have not been materially affected by the potentialCOVID-19 pandemic as of and for the three months ended March 31, 2022, at this time, however, there is uncertainty relating to providethe trajectory of the pandemic and the impact
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of related responses, and disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing trials and the incurrence of unforeseen costs as a functional cure, something that is not achievableresult of disruptions in clinical supply or preclinical study or clinical trial delays. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with current treatments. HepTcell is currently in a Phase 1 trialconfidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United KingdomStates and South Koreaother countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in patientsthe United States and other countries to contain and treat the disease. In addition, a recurrence of COVID-19 cases, or variants thereof, could cause other widespread or more severe impacts depending on where infection rates are highest. We continue to monitor developments as we deal with chronic HBV. Preliminary results fromthe disruptions and uncertainties relating to the COVID-19 pandemic. See “Risk Factors” in Part II, Item 1A of this trial are expected byQuarterly Report on Form 10-Q and “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the end of 2017. With the supportyear ended December 31, 2021.
Recent Global Events
Russia and Ukraine Conflict
The military conflict in Russia and Ukraine that began in February 2022 continues as of the date of this quarterly report. As the conflict continues to evolve, we are closely monitoring the impact on our business. The conflict, and the sanctions and counter-sanctions imposed in response to it, have created increased economic uncertainty and operational complexity globally. While we have no direct exposure to Russia and Ukraine, and do not at the moment believe the situation will have a material impact on our operating results, we are monitoring any broader economic impact from the situation. Should the conflict continue or escalate, it could have a significant negative effect on the global economy or on our operations, including continued inflationary pressures on raw materials, supply chain and logistics disruptions, volatility in foreign exchange rates and interest rates and heightened cybersecurity threats.
U.S. Government Contracts and Grants
In June 2020, we were awarded $4.7 million from the U.S. Army Medical Research & Development Command (“USAMRDC”) to fund our Phase 1/2 clinical trial of T-COVID. The competitive award was granted by USAMRDC in collaboration with the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology consortium working in partnership with the Department of Defense (“DoD”). Under the contract, MTEC paid us a firm fixed fee based upon the achievement of certain milestones for conduct and completion of a Phase 1/2 study and research and development work on the replication-deficient adenovirus 5 (“RD-Ad5”) vector vaccine platform. For the three months ended March 31, 2021, we recognized approximately $0.5 million of grant revenue under the contract, which completed the full recognition of this award. No revenue was recognized for this contract for the three months ended March 31, 2022.
In July 2016, we signed a five-year contract with Biomedical Advanced Research and Development Authority (‘‘BARDA’’(“BARDA”), we are developing. The contract, as amended, had a third product candidate, NasoShield,total value of up to $136.8 million to be used to fund clinical development of NasoShield. Under the contract, BARDA paid us a fixed fee and reimbursed certain costs for the research and development of an Ad5-vectored, protective antigen-based intranasal anthrax vaccine designed to provide rapid, stable protection after one intranasal administration. Subject tocontinued financialthrough cGMP manufacture and other support from BARDA, we anticipate launchingconduct of a Phase 1 clinical trial dose ranging assessment of safety and immunogenicity. The contract consisted of an initial base performance period providing approximately $30.9 million in funding for NasoShieldthe period July 2016 through December 2021. BARDA had seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical trials. Each option, if exercised by BARDA, would have provided additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning in 2021. For the first quarterthree months ended March 31, 2021, we recognized approximately $0.2 million of 2018. Withgrant revenue under the supportBARDA contract. For the three months ended March 31, 2022, we have recognized de minimis grant revenue related to the close-out of the National InstituteBARDA contract. BARDA did not extend the contract beyond the end of Allergy and Infectious Disease (“NIAID”), we are developing a fourth product candidate,SparVax-L, a recombinant protein based anthrax vaccine designed to require fewer doses and have a longer shelf-life than the only currently licensed anthrax vaccine.December 2021.
Pursuant to the Agreement and Plan17
As a condition for the Mergers, in January 2017, Altimmune entered into a Convertible Promissory Note Purchase Agreement (the “Note Agreement”) for the private placement of $8.6 million of 6% convertible notes (the “Notes”) to be issued in two separate closings. The initial closing dated March 9, 2017 resulted in $3,150,630 of gross proceeds. The initial closing also included $196,496 of certain existing outstanding notes payable and $881,044 of certain accrued expenses that were modified and became a component of the Notes on February 28, 2017. The second closing contemplated by the Note Agreement occurred in connection with the offering of Series B redeemable convertible preferred stock (“redeemable preferred stock”). In connection with the Notes, Altimmune issued warrants to purchase 49,776 shares of Altimmune’s common stock to certain noteholders, with an exercise price of $0.01 per share.
In accordance with the terms of the Merger Agreement, PharmAthene issued 0.749106 (the “share exchange ratio”) of a share of PharmaAthene common stock for each share of Altimmune common stock outstanding as of the closing date. All historical share and per share information has been retroactively adjusted to reflect the impact of the share exchange ratio. In addition, Altimmune stock options and warrants were also replaced with options and warrants to purchase PharmAthene’s common stock at the same exchange ratio of 0.749106 share. Immediately prior to closing, 599,285 shares of our Series B convertible preferred (“convertible preferred”) stock were converted into Altimmune common stock on a1-for-1 basis. In addition, outstanding principal and accrued interest on the Notes were converted into 316,734 shares of Altimmune common stock. Further, 39,758 shares of Altimmune common stock were issued pursuant to the accelerated vesting of restricted stock, and 660,715 shares of Altimmune common stock were issued as a result of warrant exercises, both in accordance with their original terms. Upon the closing of the Mergers, all outstanding shares of Altimmune common stock were exchanged for 6,883,498 shares of PharmAthene common stock.
Following the closing, shareholders of Altimmune held 58.2% of the equity interest of the combined entity and assumed control of the combined entity. As a result, the transaction has been accounted for as a reverse merger, and the assets and liabilities of PharmAthene will be recorded at their estimated fair value. The unadjusted purchase price to be allocated to PharmAthene’s assets and liabilities was estimated to be $44,742,737 as of the closing date and consisted of the shares of the combined company retained by PharmAthene shareholders, and the estimated fair value of vested PharmAthene stock options and warrants which remained outstanding as of the closing date. Also at the closing, 7,569 shares of PharmAthene outstanding stock options with an estimated fair value of $15,173 remained subject to vesting and service requirements. These unvested options will be recorded as operating expense in future periods as the services are delivered and the options vest.
We have incurred accumulated losses since inception. Our ability to continue as a going concern is dependent upon our ability to raise additional debt and equity capital. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.
As capital resources are consumed to fund our research and development activities, we may not have sufficient capital to fund our plan of operations. In order to address its capital needs, including our planned clinical trials, in addition to the Note Agreement and the private placement, we must continue to actively pursue additional equity or debt financing.
Adequate financing opportunities might not be available to us, when and if needed, on acceptable terms, or at all. If we are unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, our operating results and prospects will be adversely affected. As of September 30, 2017, the combination of the net proceeds from the Notes, cash assumed from the Mergers, the anticipated receipt of tax refunds, the August 2017 redeemable preferred stock financing, and revenue from our government sponsored contracts will be insufficient to fund our operations and research and development efforts for at least twelve months from the expected issuance date of our September 2017 financial statements.
Critical Accounting Policies and Significant Judgment and Estimates
Other than described below, there wereManagement’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. and the rules and regulations of the SEC for interim financial reporting. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent liabilities in our consolidated financial statements. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future given available information.
There have been no material changes in our critical accounting policies and significant judgment and estimates as disclosed in our Annual Report on Form 10-K for the first nine months of 2017year ended December 31, 2021. For more information regarding our critical accounting policies, we encourage you to read the information provideddiscussion contained in Item 7 under the heading “Critical Accounting Policies and Significant JudgmentJudgments and Estimates” orand Note 2 “Summary of Significant Accounting Policies” included in the significant accounting policiesnotes to the consolidated financial statements contained in our consolidated financial statementsAnnual Report on Form 10-K for the year ended December 31, 2016 included in FormS-4/A.
Business combination
We use our best estimates and assumptions to accurately assign fair value to the tangible andintangible assets acquired and liabilities assumed at the acquisition date. Our estimates are inherentlyuncertain and subject to refinement. During the measurement period, which may be up to one year from theacquisition date, we may record adjustments to the fair value of these tangible and intangible assetsacquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positionsandtax-related valuation allowances are initially established in connection with a business combination as of theacquisition date. Our management collects information and reevaluates these estimates and assumptionsquarterly and records any adjustments to our preliminary estimates to goodwill during the measurement period. Upon the conclusion of the measurement period or finaldetermination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequentadjustments are recorded to our consolidated statements of operations and comprehensive loss.
Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. We allocate the purchase price in excess of net tangible assets acquired to identifiable intangible assets, including purchased IPR&D assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management. We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill.
Our IPR&D assets represent the estimated fair value as of the acquisition date of substantivein-process projects that have not reached technological feasibility. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval.
The valuation of IPR&D assets is determined using the discounted cash flow method. In determining the value of IPR&D assets, management considers, among other factors, the stage of completion of the projects, the technological feasibility of the projects,
whether the projects have an alternative future use and the estimated residual cash flows that could be generated from the various projects and technologies over their respective projected economic lives. The discount rate used is determined at the time of acquisition and includes a rate of return which accounts for the time value of money, as well as risk factors that reflect the economic risk that the cash flows projected may not be realized.
Impairment of long-lived assets and goodwill
We evaluate our long-lived tangible and intangible assets, including IPR&D assets and goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Impairment of long-lived assets is assessed by comparing the undiscounted cash flows expected to be generated by the asset to its carrying value. From the date of the Mergers through September 30, 2017, we experienced a decline in the trading price of our common stock. As of September 30, 2017, our one reporting unit had an estimated average market capitalization through September 30, 2017, defined as the number of common shares outstanding multiplied by the traded market price of our common stock on September 30, 2017, before adjusting for an estimated control premium, of approximately $36.2 million as compared to the unadjusted,pre-tax carrying value of the reporting unit of $75.4 million, which is an impairment indicator.
Our IPR&D assets are currentlynon-amortizing. Until such time as the projects are either completed or abandoned, we test those assets for impairment annually by comparing the fair value of such assets to their carrying value. On an interim basis, we consider qualitative factors which could be indicative of impairment; these factors include the current project status, forecasted changes in the timing or amounts required to complete the project, forecasted changes in the future cash flows to be generated by the completed products, and changes to other market based assumptions, such as discount rates. Upon completion or abandonment, the value of the IPR&D asset will be amortized to expense or the anticipated useful life of the developed product, if completed, or charged to expense when abandoned if no alternative future use exists. As of September 30, 2017, the projects continue to progress as originally anticipated, and no significant changes to the timing or amount of cash flows or any other market assumptions appears to have occurred. We performed an interim qualitative assessment of our long-lived assets, including IPR&D, as of September 30, 2017, and have determined that our long-lived assets, including IPR&D, are not impaired at September 30, 2017.
We test goodwill for impairment during the fourth quarter of each year, or more frequently if impairment indicators arise. If the carrying value of a reporting unit exceeds its fair value, the amount of goodwill impairment is the excess of the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. We consider multiple methods including both market and income approaches to determine fair value of our one reporting unit including fair value estimated based on our market capitalization as of or near the testing date, adjusted for an estimated control premium. We performed an interim impairment test on our goodwill as of September 30, 2017. Based on the result of the goodwill impairment test, the carrying value of our reporting unit exceeded its estimated fair value at September 30, 2017. We have concluded that our goodwill was impaired at September 30, 2017 and an impairment adjustment charge of $26.6 million was recorded during the three and nine months ended September 30, 2017, and was classified as a component of operating expenses. We will continue to evaluate our goodwill for impairment based on factors including the overall movements of our market capitalization. Any sustained declines in our stock price from the September 30, 2017 level could result in a future impairment and the overall amount of impairment loss could be material.
Income Taxes
We account for income taxes using the asset and liability approach, which requires the recognition of future tax benefits or liabilities on the temporary differences between the financial reporting and tax bases of our assets and liabilities. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. We also recognize a tax benefit from uncertain tax positions only if it is “more likely than not” that the position is sustainable based on its technical merits.
Pursuant to federal and state tax regulations with respect to carryback periods of net operating losses (“NOLs”), in 2017, as a result of the Mergers, we anticipate that we will be able to carryback 2017 NOLs to 2016, which we expect will allow us to recover previously paid federal and state income taxes. These anticipated refunds generated through September 30, 2017, are included as a component of tax refund receivable on the unaudited condensed consolidated balance sheet at September 30, 2017 and an income tax benefit during the three and nine months ended September 30, 2017.
Recently issued accounting pronouncements
In May 2014, FASB issued ASUNo. 2014-09,Revenue from Contracts with Customers(“ASU2014-09”), as amended, which amends the guidance for revenue recognition to replace numerous industry specificrequirements. ASU2014-09, as amended, implements a five-step process for customer contract revenue recognitionthat focuses on transfer of control, as opposed to transfer of risk and rewards. ASU2014-09, as amended, also requiresenhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows fromcontracts with customers. Other major provisions include ensuring the time value of money is considered in thetransaction price, and allowing estimates of variable consideration to be recognized before contingencies areresolved in certain circumstances. ASU2014-09, as amended, is effective for reporting periods beginningafter December 15, 2017.
Early adoption is permitted, but not before December 15, 2016. Entities can transitionto the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently in the process of evaluating the effect the adoption of ASU2014-09, as amended, may have on our financial statements. We do not expect the adoption of ASU2014-09, as amended, will have a material impact on our financial statements.
In February 2016, FASB issued ASUNo.2016-02,Leases (“ASU2016-02”). ASU2016-02 requires a lessee to separate the lease components from thenon-lease components in a contract and recognize in the statement of financial position a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying asset for the lease term. It also aligns lease accounting for lessors with the revenue recognition guidance in ASU2014-09. ASU2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied at the beginning of the earliest period presented using a modified retrospective approach. We do not expect the adoption of ASU2016-02 will have a material impact on our financial statements.2021.
Results of Operations
Comparison of the three months ended September 30, 2017March 31, 2022 and 2016:2021:
| | | | | | | | | | | | |
| | For the Three Months Ended | | |||||||||
| | March 31, | | |||||||||
(in thousands, except percentages) |
| 2022 |
| 2021 |
| Increase (Decrease) |
| |||||
Revenue | | $ | 32 | | $ | 838 | | $ | (806) |
| (96) | % |
Operating expenses: | |
|
| |
|
| |
|
|
| | |
Research and development | |
| 15,104 | |
| 11,878 | |
| 3,226 |
| 27 | % |
General and administrative | |
| 4,427 | |
| 3,821 | |
| 606 |
| 16 | % |
Total operating expenses | |
| 19,531 | |
| 15,699 | |
| 3,832 |
| 24 | % |
Loss from operations | |
| (19,499) | |
| (14,861) | |
| (4,638) |
| (31) | % |
Other income (expense): | |
|
| |
|
| |
| |
|
| |
Interest expense | |
| (62) | |
| (12) | |
| (50) |
| (417) | % |
Interest income | |
| 21 | |
| 42 | |
| (21) |
| (50) | % |
Other income (expense), net | |
| 110 | |
| (33) | |
| 143 |
| 433 | % |
Total other income (expense), net | |
| 69 | |
| (3) | |
| 72 |
| 2,400 | % |
Net loss | | $ | (19,430) | | $ | (14,864) | | $ | (4,566) |
| (31) | % |
Three Months Ended September 30, | ||||||||||||||||
2017 | 2016 | Increase (Decrease) | ||||||||||||||
License revenue | $ | 26,689 | $ | 4,938 | $ | 21,751 | 440 | % | ||||||||
Research grants and contracts | 4,565,251 | 896,101 | 3,669,150 | 409 | ||||||||||||
|
|
|
| |||||||||||||
Total revenue and grants and contracts | 4,591,940 | 901,039 | 3,690,901 | 410 | ||||||||||||
|
|
|
| |||||||||||||
Operating expenses | ||||||||||||||||
Research and development | 5,905,552 | 2,400,914 | 3,504,638 | 146 | ||||||||||||
General and administrative | 3,038,756 | 3,289,647 | (250,891 | ) | (8 | ) | ||||||||||
Goodwill impairment charges | 26,600,000 | — | 26,600,000 | — | ||||||||||||
|
|
|
| |||||||||||||
Total operating expenses | 35,544,308 | 5,690,561 | 29,853,747 | 525 | ||||||||||||
|
|
|
| |||||||||||||
Loss from operations | (30,952,368 | ) | (4,789,522 | ) | 26,162,846 | 546 | ||||||||||
|
|
|
| |||||||||||||
Other income (expenses): | ||||||||||||||||
Change in fair value of warrant liabilities | (508,316 | ) | — | 508,316 | — | |||||||||||
Change in fair value of embedded derivative | (1,157 | ) | — | 1,157 | — | |||||||||||
Interest expense | (2,344 | ) | (9,408 | ) | (7,064 | ) | (75 | ) | ||||||||
Interest income | 15,372 | — | 15,372 | — | ||||||||||||
Other income | 10,786 | 3,871 | 6,915 | 179 | ||||||||||||
|
|
|
| |||||||||||||
Total other expenses, net | (485,659 | ) | (5,537 | ) | 480,122 | 8,671 | ||||||||||
|
|
|
| |||||||||||||
Net loss before income tax benefit | (31,438,027 | ) | (4,795,059 | ) | 26,642,968 | 556 | ||||||||||
Income tax benefit | 1,532,790 | — | 1,532,790 | — | ||||||||||||
|
|
|
| |||||||||||||
Net loss | $ | (29,905,237 | ) | $ | (4,795,059 | ) | $ | 25,110,178 | 524 | % | ||||||
|
|
|
|
Comparison of the nine months ended September 30, 2017 and 2016:
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | Increase (Decrease) | ||||||||||||||||||
License revenue | $ | 36,565 | $ | 168,341 | $ | (131,776 | ) | (78 | )% | |||||||||||
Research grants and contracts | 7,892,919 | 1,983,574 | 5,909,345 | 298 | ||||||||||||||||
|
|
|
| |||||||||||||||||
Total revenue and grants and contracts | 7,929,484 | 2,151,915 | 5,777,569 | 268 | ||||||||||||||||
|
|
|
| |||||||||||||||||
Operating expenses | ||||||||||||||||||||
Research and development | 13,946,403 | 4,845,045 | 9,101,358 | 188 | ||||||||||||||||
General and administrative | 6,863,782 | 5,301,444 | 1,562,338 | 29 | ||||||||||||||||
Goodwill impairment charges | 26,600,000 | — | 26,600,000 | — | ||||||||||||||||
|
|
|
| |||||||||||||||||
Total operating expenses | 47,410,185 | 10,146,489 | 37,263,696 | 367 | ||||||||||||||||
|
|
|
| |||||||||||||||||
Loss from operations | (39,480,701 | ) | (7,994,574 | ) | 31,486,127 | 394 | ||||||||||||||
|
|
|
| |||||||||||||||||
Other income (expenses): | ||||||||||||||||||||
Change in fair value of warrant liabilities | (508,316 | ) | — | 508,316 | — | |||||||||||||||
Change in fair value of embedded derivative | (1,157 | ) | — | (1,157 | ) | — | ||||||||||||||
Interest expense | (160,103 | ) | (28,858 | ) | 131,245 | 455 | ||||||||||||||
Interest income | 19,538 | 1,047 | 18,491 | 1,766 | ||||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | Increase (Decrease) | ||||||||||||||||||
Other expenses | 9,839 | (2,600 | ) | 12,439 | 478 | |||||||||||||||
|
|
|
| |||||||||||||||||
Total other expenses, net | (640,199 | ) | (30,411 | ) | 609,788 | 2,005 | ||||||||||||||
|
|
|
| |||||||||||||||||
Net loss before income tax benefit | (40,120,900 | ) | (8,024,985 | ) | 32,095,915 | 400 | ||||||||||||||
Income tax benefit | 2,526,499 | — | 2,526,499 | — | ||||||||||||||||
|
|
|
| |||||||||||||||||
Net loss | $ | (37,594,401 | ) | $ | (8,024,985 | ) | $ | 29,569,416 | 368 | % | ||||||||||
|
|
|
|
The results of our operations during the three and nine months ended September 30, 2017 include the consolidated financial results of Altimmune and PharmAthene and its subsidiaries from the closing of the Mergers in May 2017. The operating results for the three and nine months ended September 30, 2016 included only Altimmune.
Revenue and grants and contracts
Revenue and grants and contracts for the three and nine months ended September 30, 2016 consistedconsists primarily of research grants from BARDA and NIAID in the United States from MTEC for our anthraxT-COVID product candidate and BARDA for our NasoShield vaccine product candidates. During July 2016, we signedcandidate. These grants consist of firm fixed fee contracts based on milestones and cost reimbursement contracts, with a new contract with BARDA resulting in an increase in research grantsfixed fee based on either costs incurred or milestones met. Our T-COVID and contractsNasoShield programs were discontinued as of the end of 2021.
Revenue decreased by $3.0$0.8 million, and $4.9 million duringor 96%, for the three and nine months ended September 30, 2017, respectively,March 31, 2022, as compared to the same period in 2016. Research grants and contracts for the three and nine months ended September 30, 2017 also included $624,000March 31, 2021. The decrease was primarily the result of a decrease of $0.5 million in MTEC revenue attributable to the timing of clinical trial and $1.0 million, respectively,the discontinuation of research grant revenue from a contract with NIAID that was acquired indevelopment work on the Mergers with PharmAthene.T-COVID program.
18
Research and development expenses
Research and development operating expensesexpense increased by $3.5$3.2 million, or 146%, and $9.1 million, or 188%27%, for the three and nine months ended September 30, 2017, respectively,March 31, 2022, as compared to the same periods in 2016.three months ended March 31, 2021. The increase in research and development expenses was primarily the combination of (i) the addition of $449,000 and $779,000 research and development costs for theSparVax-L asset acquired in the Mergers with PharmAthene, for the three and nine months ended September 30, 2017, respectively; (ii) an increase of $2.5 million and $4.0 million in spending on the development of the NasoShield product on behalf of BARDA during the three and nine months ended September 30, 2017, respectively; (iii) an increase of $10,000 and $1.3 million in HepTCell development and Phase 1 trial costs incurred during the three and nine months ended September 30, 2017, respectively; and (iv) an increase of $843,000 and $3.6 million in manufacturing and other costs in preparation for NasoVAX Phase 2 trial during the three and nine months ended September 30, 2017, respectively, offset by decreases in spending on other R&D efforts of $337,000 and $507,000 during the three and nine months ended September 30, 2017, respectively.result of:
● | an increase of $9.2 million due to the development activities for pemvidutide primarily due to the ongoing NAFLD trials and initiation of the MOMENTUM Phase 2 trial in obesity; |
● | an increase of $1.9 million due to development activities for HepTcell; |
● | a net increase of $0.4 million due to development activities related to our other programs, along with costs associated with our pre-clinical projects and non-project specific research and development costs including employee compensation and facility costs; |
● | a decrease of $5.6 million due primarily to development activities for our COVID-19 programs, which included AdCOVID and T-COVID (which were discontinued in 2021); and |
● | a decrease of $2.7 million primarily due to a decrease in the fair value of contingent consideration liability with respect to the acquisition of pemvidutide. |
General and administrative expenses
General and administrative expenses decreasedexpense increased by $251,000,$0.6 million, or 8%16%, for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021. The increase is due primarily to an increase in stock compensation expense.
Total other income (expense), net
Total other income (expense), net increased by $0.1 million during the three months ended September 30, 2017, and increased by $1.6 million, or 29%, during the nine months ended September 30, 2017,March 31, 2022, as compared to the same periods in 2016. The changes were the combined result of (i) the addition of $208,000 and $232,000 in general and administrative expenses from the Mergers with PharmAthene during the three and nine months ended September 30, 2017, respectively, and (ii) anMarch 31, 2021. The net increase in legal and professional costs,is primarily as a result of the Mergers by $1.3 million and $2.9 million during the three and nine months ended September 30, 2017, respectively, (iii) an increase in stock compensation expense of $238,000 and $528,000 during the three and nine months ended September 30, 2017, respectively, and (iv) an increase of $388,000 and $218,000 during the three and nine months ended September 30, 2017, respectively, offset by (v) a decrease due to a write down of deferred offering costschanges in September 2016 of $2.3 million.
Goodwill impairment charges
As more fully described in Note 4 to the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2017, we had determined that our goodwill was impaired at September 30, 2017 and an impairment charge of $26.6 million was recorded during the three and nine months ended September 30, 2017, and was classified as a component of operating expenses.
Other income (expenses), net
The increase in other expenses, net, by $480,000 and $610,000 during the three and nine months ended September 30, 2017, respectively, was primarily the result of (i) an increase in interest expense of $131,000 during the nine months ended September 30, 2017 from the issuance of the Notes during the periods presented, and (ii) a change in the fair value of warrant liabilities for $508,000 during the three and nine months ended September 30, 2017.
Income tax benefit
We recorded an income tax benefit of $1.5 million and $2.5 million during the three and nine months ended September 30, 2017, respectively, which reflected estimated tax refunds we expect to receive from carrying back the 2017 NOLs to offset the 2016 federal and state income taxes paid by PharmAthene.foreign currency conversion.
Liquidity and Capital Resources
Overview
Our primary sources of cash during the three and nine months ended September 30, 2017March 31, 2022 were $3.0 million in net proceeds received from the issuanceequity transactions and cash receipts of the Notes, $13.7 million in cash assumedaccounts receivable from the Mergers, and $13.0 million in net proceeds from the issuance of the redeemable preferred stock and warrants. Our primary source of cash during the comparable period in 2016 was $5.7 million net proceeds received from the issuance of our convertible preferred stock.research grants. Our cash, and cash equivalents and restricted cash were $17.1$180.0 million at September 30, 2017.March 31, 2022. We believe, based on the operating cash requirements and capital expenditures expected for 2017,2022 and 2023, our cash on hand at September 30, 2017,March 31, 2022, together with expected cash receipts from our income tax refunds and revenue from our government sponsored contracts,R&D incentives, are adequatesufficient to fund operations through September 2018. Our ability to continue asfor at least a going concern is dependent upontwelve-month period from the issuance date of our ability to raise additional debt and equity capital. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us. These factors raise substantial doubt about our ability to continue as a going concern. Our condensedMarch 31, 2022 consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should we be unable to continue as a going concern.statements.
We have not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales. Our sources of revenue consisthave consisted of grant revenues under our contractarrangements with BARDA and NIAID for the development of NasalShieldNasoShield, MTEC for a clinical trial andSparVax-L, respectively, development work on T-COVID, and to a lesser degree from other licensing arrangements. We have incurred significant losses since we commenced operations. As of September 30, 2017,March 31, 2022, we had an accumulated lossesdeficit of $68.9 million since our inception.$312.6 million. In addition, we have not generated positive cash flows from operations. We have had to rely on a variety of financing sources, including the issuance of debt and equity securities. As capital resources are consumed to fund our research and development activities, we may not have sufficientrequire additional capital to fundbeyond our plan of operations.currently anticipated amounts. In order to address our capital needs, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing.financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.
In June 2020, we were awarded $4.7 million from the U.S. Army Medical Research & Development Command (“USAMRDC”) to fund our Phase 1/2 clinical trial of T-COVID. The competitive award was granted by USAMRDC in collaboration with the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology
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consortium working in partnership with the Department of Defense (“DoD”). Under the contract, MTEC paid us a firm fixed fee based upon the achievement of certain milestones for conduct and completion of a Phase 1/2 study and research and development work on the replication-deficient adenovirus 5 (“RD-Ad5”) vector vaccine platform. Through March 31, 2022, we have collected approximately $4.7 million in cash under the contract, which completed the full recognition of this award.
In July 2016, we signed a five-year contract with BARDA which was amended in March 2017.BARDA. The contract, hasas amended, had a total value of up to $127.5$136.8 million and isto be used to fund clinical development of NasoShield. Under the contract, BARDA payspaid us a fixed fee and reimbursesreimbursed certain costs for the research and development of anAd5-vectored, protective antigen-based intranasal anthrax vaccine through GMPcGMP manufacture and conduct of a Phase 21 clinical trial dose ranging assessment of safety and immunogenicity. The contract consistsconsisted of an initial base performance period providing approximately $21.6$30.9 million in funding for the period July 2016 through July 2018.December 2021. BARDA hashad seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical studies.trials. Each option, if exercised by BARDA, would providehave provided additional funding ranging from approximately $1.1 million to $34.4 million for thea three-year period July 2018 through Julybeginning in 2021. Through September 30, 2017,March 31, 2022, we have received an aggregate ofcollected approximately $5.5$29.5 million in cash under the current BARDA contract.
As part of the Mergers, we assumed a PharmAthene contract with NIAID. The NIAID contract is incrementally funded. Over the base period of BARDA did not extend the contract PharmAthene was awarded initial fundingbeyond the end of approximately $5.2 million, which includes a cost reimbursement component and a fixed fee component payable upon achievement of certain milestones. NIAID exercised four options under this agreement to provide additional funding of approximately $8.8 million and an extension of the period of performance through December 31, 2017. In April 2017, PharmAthene was notified by NIAID that it will exercise only one of the additional remaining options under the contract to provide funding for a rabbit challenge study. Work under all exercised options will bring total committed and final funding under the NIAID contract to $15.1 million.2021.
Cash Flows
The following table provides information regarding our cash flows for the ninethree months ended September 30, 2017March 31, 2022 and 2016:2021:
| | | | | | |
| | Three Months Ended March 31, | ||||
(in thousands) |
| 2022 |
| 2021 | ||
Net cash (used in) provided by: |
| |
|
| |
|
Operating activities | | $ | (13,526) | | $ | (19,569) |
Investing activities | |
| (9) | |
| 19,165 |
Financing activities | |
| 3,181 | |
| 34,419 |
Net (decrease) increase in cash and cash equivalents and restricted cash | | $ | (10,354) | | $ | 34,015 |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Net cash (used in) provided by: | ||||||||
Operating activities | $ | (15,407,930 | ) | $ | (4,860,116 | ) | ||
Investing activities | $ | 13,754,583 | $ | (179,347 | ) | |||
Financing activities | $ | 15,841,374 | $ | 5,674,412 |
Operating Activities
Net cash used in operating activities was $15.4$13.5 million for the ninethree months ended September 30, 2017March 31, 2022 compared to $4.9$19.6 million during the ninethree months ended September 30, 2016.March 31, 2021. The primary uses of cash from our operating activities include payments for labor and labor-related costs, professional fees, research and development costs associated with our clinical trials, and other general corporate expenditures. The decrease in cash used in operations of $6.0 million year over year is due to an increase in net loss as adjusted for non-cash items of $6.5 million and changes in working capital accounts of $12.6 million.
Investing Activities
Net cash used in operating(used in) provided by investing activities duringwas minimal for the ninethree months ended September 30, 2017 included our net loss of $37.6 million, adjusted for $26.6 million in goodwill impairment charges, $1.1 million in stock-based compensation expense, $98,000 from the accretion of debt discount and deferred financing costs, a $508,000 change in the fair value of warrant liabilities, a $1.4 million increase in accounts receivable, a $2.3 million decrease in accounts payable, a $151,000 increase in prepaid expenses and other current assets, a $2.1 million increase in tax refund receivable, a $243,000 decrease in deferred tax liability and $88,000 from net changes in other balances.
In comparison, net cash used in operating activities of $4.9March 31, 2022 compared to $19.2 million during the ninethree months ended September 30, 2016 included our net loss of $8.0 million, adjusted for $585,000 of stock-based compensation expense; $2.0 million from the accretion of debt discount and deferred financing costs; a $103,000 increase in accounts receivable; a $926,000 increase in accounts payable; an $81,000 increase in accrued expenses and other current liabilities; a $372,000 increase in tax refund receivable, and $17,000 from net changes in other balances.
Investing Activities
During the nine months ended September 30, 2017,March 31, 2021. The net cash provided by investing activities of $13.8 millionduring the three months ended March 31, 2021 was primarily due net proceeds from short-term investment activity, partially offset by purchases of property and equipment primarily associated with the result of $13.7 million cash assumed from the Mergers with PharmAthene that closed in May 2017.COVID-19 vaccine programs.
Financing Activities
Net cash provided by financing activities during the ninethree months ended September 30, 2017March 31, 2022 was primarily$3.2 million compared to $34.4 million for the result of $3.0 millionthree months ended March 31, 2021. The net proceeds received from the Notes that closed in May 2017 and $13.0 million net proceeds from the redeemable preferred financing, offset by the repayment of notes payable for $212,000.
Net cash provided by financing activities during the ninethree months ended September 30, 2016March 31, 2022 was primarily the result of $5.7the receipt of $3.0 million netin proceeds received from the issuance of convertiblecommon stock from our at-the-market offerings program. The net cash provided by financing activities during the three months ended March 31, 2021 was primarily the result of the receipt of $34.2 million in proceeds from the issuance of common stock from our at-the-market offerings program.
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Financing
Public Offering
On July 16, 2020, we offered and sold (i) 3,369,564 shares of our common stock, at a price to the public of $23.00 per share, and (ii) pre-funded warrants to purchase 1,630,436 shares of our common stock at an exercise price equal to $0.0001 per share (the “Pre-Funded Warrants”), at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of Common Stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to us. The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020. The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. As of March 31, 2022, 760,870 of the Pre-Funded Warrants were exercised, leaving 869,566 remaining Pre-Funded Warrants unexercised.
At-the-Market Offerings
On February 25, 2021, we entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C. and B. Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offerings program under which we may offer and sell, from time to time at its sole discretion, shares of our common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million through the Sale Agents.
During the three months ended March 31, 2022, we sold 335,485 shares of Common Stock under the 2021 Agreement resulting in approximately $3.0 million in net proceeds. As of March 31, 2022, we sold 5,135,939 shares of Common Stock under the 2021 Agreement resulting in approximately $67.8 million in net proceeds, with $55.0 million remaining available to be sold under the 2021 Agreement.
Current Resources
We have financed our operations to date principally through our equity offerings and proceeds from issuances of our preferred stock, common stock, and warrants. At March 31, 2022, we had $180.0 million of cash, cash equivalents and restricted cash. Accordingly, management believes that the Company has sufficient capital to fund its plan of operations for at least a twelve-month period from the issuance date of our March 31, 2022 financial statements. However, in April 2016.order to address our capital needs in the long-term, including potential future clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, anyoff-balance sheet arrangements.arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.Risk
The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As a “smaller reporting company” as defined by Item 10 of September 30, 2017, we had cash and cash equivalents of $17.1 million. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Because most of our cash is held in bank deposit accounts without restriction, an immediate 100 basis point change in interest rates would not have a material effect on our financial position or the results of our operations. We are subject to interest rate risk from our outstanding notes and borrowings under our credit facility. Borrowings under our credit facility bear interest at an annual rate equal to the bank’s prime rate (4.75% at September 30, 2017) plus 2%.
In addition,Regulation S-K, we are subjectnot required to currency risk for cash held in British pounds and Euros in our UK and French subsidiaries. Fluctuations inprovide the exchange rates for the British pound since January 2016 have been about 22% comparing the high and low during the period. Transactionsinformation required by this Item.
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We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein.
Item 4. Controls and Procedures.Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule13a-15 under the Securities Exchange Act of 1934, as amended (“the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form10-Q.
Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2017,March 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
Our management, including our principal executive and principal financial officer, has evaluated anyThere were no changes in our internal control over financial reporting that occurred(as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the threequarter ended March 31, 2022 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and nine months ended September 30, 2017, and has concludedChief Financial Officer, that there was no change that occurred during the three and nine months ended September 30, 2017 that has materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting, except as follows:reporting.
On May 4, 2017, we completed the Mergers with PharmAthene as described in Items 1 and 2 above.
PART II —II. OTHER INFORMATION
None.From time to time, we may be involved in various legal proceedings arising from the normal course of business activities. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
In December 2019, a complaint was filed by Dr. De-Chu Christopher Tang (“Plaintiff”) against us, which we removed to the United States District Court for the Eastern District of Texas. The Plaintiff amended the complaint in February 2020 to include Vipin K. Garg and David J. Drutz as defendants, in addition to the Company (Dr. Garg, Dr. Drutz, and the Company are collectively referred to as “Defendants”). In December 2021, the Plaintiff refiled the complaint in the United States District Court for the District of Maryland. See Note 16 to the consolidated financial statements appearing in Item 1 of this report for further details.
We encourage you to carefully consider the risk factors identified in the “Risk Factors” section of our FormS-4/A filed with the Security and Exchange Commission on March 31, 2017, our Form10-K for the year ended December 31, 2016, and our Form8-K filed August 17, 2017. These risk factors could materially affect our business, financial condition, and future results and could cause our actual business and financial results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form10-Q or elsewhere by management from time to time. Except for the information presented below, which updates, and should be read in conjunction with, the risk factors and information disclosed in our FormS-4/A, Form10-K, and Form8-K, thereThere have been no material changes during the nine months ended September 30, 2017 tofrom the risk factors disclosed in our Annual Report on Form S/A10-K filed with the Security and Exchange CommissionSEC on March 31, 2017, and our Annual Report on Form10-K for the year ended December 31, 2016, and our Form8-K filed on August 17, 2017.15, 2022.
Future conditions might require us to make substantial write-downs in our assets, which would adversely affect our balance sheet and results of operations.
We review our long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We also test our goodwill and indefinite-lived intangible assets for impairment at least annually in the fourth quarter, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value. As of September 30, 2017, as a result of our declining share price, we tested our goodwill and indefinite-lived intangible assets for impairment. Based on the result of the test, we have determined that our indefinite-lived intangible assets were not impaired at September 30, 2017; however, we recorded $26.6 million in goodwill impairment charges as of September 30, 2017. If our stock price continues to remain low or decline, we may determine that certain of our assets, including goodwill, may be further impaired, and we may be required to write-down the carrying value for such assets or record additional write-down for goodwill. Any such significant write-downs could adversely affect our financial position and results of operations.
Conversion of the Series B redeemable convertible preferred stock or exercise of the related warrants may have an adverse effect on the market price of our common stock.
In August 2017, we issued and sold 15,656 shares of our Series B redeemable convertible preferred stock, initially convertible into 5,863,564 shares of our common stock (without regard to any limitations on conversion governing the Series B
redeemable convertible preferred stock). In connection with the issuance of the Series B redeemable convertible preferred stock, we also issued warrants initially exercisable to purchase 2,345,427 shares of our common stock (without regard to any limitations on exercise set forth in the warrants). We cannot predict if and when the holders of Series B redeemable convertible preferred stock and warrants may sell such shares of converted or exercised common stock. The conversion of shares of Series B redeemable convertible preferred stock into shares of common stock or the exercise of warrants for shares of our common stock will result in substantial dilution to holders of our common stock. Further, the sale of a significant amount of these shares of common stock in the open market or the perception that these sales may occur could adversely affect prevailing market prices of our common stock, including causing the market price of our common stock to decline or become highly volatile.
Holders of our Series B redeemable convertible preferred stock will have rights that may restrict the ability of the Company to operate our business or be adverse to holders of our common stock.
The Certificate of Designations governing the Series B redeemable convertible preferred stock, as filed with the Secretary of State of the State of Delaware on August 21, 2017, contains a covenant that until the Series B redeemable convertible preferred stock is no longer outstanding, the Company shall maintain an unrestricted cash balance equal to the lower of $3,500,000 or the amount of preferred outstanding at any given time. Further, additional provisions contained in the Certificate of Designations may limit the Company’s ability to: (i) issue stock senior to or on parity with the Series B redeemable convertible preferred stock, (ii) incur indebtedness that would cause us to exceed a specified leverage ratio, (iii) amend, modify, alter or supplement our articles of incorporation or the Certificate of Designations in a manner that would adversely affect the rights, preferences or privileges of the Series B redeemable convertible preferred stock, and (iv) pay distributions on, purchase or redeem our common stock or other capital stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.Not applicable.
Item 3. Default upon Senior Securities
Not applicable.None.
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Item 4. Mine Safety Disclosures
Not applicable.
We have refiled the incentive stock option award agreements with Mr. Enright and Ms. Czerepak dated September 22, 2017 and initially filed with our Current Report on Form8-K on September 28, 2017 as Exhibit 10.3 and Exhibit 10.4 to this Quarterly Report on Form10-Q. We are filing these agreements solely to include certain information that was inadvertently omitted from the copiesNone.
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| | |
| | Exhibit Index |
| | |
Exhibit No. | Description | |
| | |
31.1 † | ||
Certification of Principal Executive Officer Pursuant to SEC Rule13a-14(a)/15d-14(a) | ||
| | |
31.2 † | Certification of Principal Financial Officer Pursuant to SEC Rule13a-14(a)/15d-14(a) | |
| | |
32.1 † | ||
| | |
32.2 † | ||
| | |
101.INS | Inline XBRL Instance Document (the instance document does not appear in the | |
| | |
101.SCH | ||
Inline XBRL Taxonomy Extension Schema Document | ||
| | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
† | This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by |
§ | Certain portions of this exhibit have been omitted pursuant to a |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | |||
| ALTIMMUNE, INC. | ||||
| | | |||
Dated: | By: | /s/ | |||
| Name: | Vipin K. Garg | |||
| Title: | President and Chief Executive Officer | |||
| | | |||
Dated: | By: | /s/ | |||
| Name: | Richard Eisenstadt | |||
| Title: | Chief Financial Officer (Principal Financial and |
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