Vaxxinity 10Q 2023 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒

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

For the quarterly period ended

March 31, 2023

-OR-

☐

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

EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number

001-41058

Vaxxinity, Inc.

(Exact name of registrant as specified in its charter)

Delaware

86-2083865

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

505 Odyssey Way

Merritt Island

32953

(Address of principal executive offices)

(Zip Code)

(

254

)

244-5739

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

__________________

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Class A Common Stock, par value

$0.0001 per share

VAXX

The

Nasdaq

Global Market

Indicate by check mark whether the registrant (1) has filed

all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant

was required to file such reports), and (2) has been subject

to such filing requirements for the past 90

days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or

for such shorter period that the registrant was required

to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated

filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth

company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange

Act:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to

use the extended transition period for complying with any

new or revised

financial accounting standards provided pursuant to Section 13(a)

of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company

(as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

As of

May 5, 2023, the registrant had

112,665,699

shares of $0.0001 par value Class A common stock

outstanding and

13,874,132

shares of $0.0001 par value Class B

common stock outstanding.

SPECIAL NOTE REGARDING FORWARD

-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q contains forward-looking statements. Forward-looking statements are neither historical facts

nor

assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of

our

business,

future

plans

and

strategies

and

other

future

conditions.

some

cases,

you

can

identify

forward-looking

statements

because

they

contain

words

such

“anticipate,”

“believe,”

“estimate,”

“expect,”

“intend,”

“may,”

“predict,”

“project,”

“target,”

“potential,” “seek,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “plan,” other words and terms of similar meaning

and the negative of these words or similar terms.

Forward-looking statements

are subject to

known and unknown

risks and uncertainties,

many of which

may be beyond

our control.

caution you

that forward-looking

statements are not

guarantees of

future performance or

outcomes and that

actual performance

and outcomes may

differ materially

from those made

in or suggested

by the forward-looking

statements contained

in this Quarterly

Report. In addition, even if our results of

operations, financial condition and cash flows, and the development of the

markets in which

we operate, are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may

not be indicative of results or

developments in subsequent periods. New factors emerge from

time to time that may

cause our business

not to develop

as we expect,

and it is not

possible for us to

predict all of

them. Factors that could

cause actual results

and outcomes

to differ materially from those reflected in

forward-looking statements include, among others, the

following:

•

the prospects

of our

product candidates,

including the

progress, number,

scope, cost,

results

and timing

of data

from

our development activities, preclinical trials

and clinical trials for our product

candidates or programs, such as the target

indication(s) for

development

approval,

the

size,

design,

population,

conduct,

cost,

objective

endpoints

any

clinical trial, or the timing for initiation

or completion of or availability of

results from any clinical trial, for submission,

review or approval of any regulatory filing, or for meeting with regulatory

authorities;

•

the potential benefits that may be derived from any of our product candidates;

•

the timing of and our ability to

obtain and maintain regulatory approval for our existing product

candidates, any product

candidates

that

may

develop,

and

any

restrictions,

limitations,

warnings

the

label

any

approved

product candidates;

•

our ability to develop and commercialize

new products and product candidates;

•

our ability to leverage our Vaxxine

Platform;

•

the rate and degree of market acceptance of our

products and product candidates;

•

estimates of our addressable market and

market growth, and expectations about market

trends;

•

our future operations, financial position, revenue,

costs, expenses, uses of cash, capital requirements,

our needs for

additional

financing or

the period

for which

our existing

cash resources

will be

sufficient

to meet

our operating

requirements;

•

our

ability

to comply

with legal

and

regulatory

requirements

relating

to privacy,

tax, anti-corruption

and

other applicable laws;

•

our ability to hire and retain key personnel and to manage

our future growth effectively;

•

our ability to access capital on acceptable terms in a rising interest rate and

tighter credit environment;

•

competitive companies and technologies

within our industry and our ability to compete;

•

our and our

collaborators’, including

United Biomedical’s

(“UBI”), ability

and willingness to

obtain, maintain,

defend

and enforce our

intellectual property protection

for our proprietary

and collaborative product

candidates, and the

scope

of such protection;

•

the

performance

third-party

suppliers

and

manufacturers

and

our

ability

find

additional

suppliers

and

manufacturers and obtain alternative sources of raw materials;

•

our ability

and the

potential to

successfully manufacture

our product

candidates for

pre-clinical use,

for clinical

trials

and, if approved, on a larger scale for commercial

use;

•

the

ability

and

willingness

our

third-party

collaborators,

including

UBI,

continue

research

and

development

activities

relating

our

product

candidates

and

our

ability

attract

additional

collaborators

with

development,

regulatory and commercialization expertise;

•

general economic, political,

demographic and business conditions

in the United States,

Taiwan

and other jurisdictions

where we conduct business or clinical trials;

•

the potential effects of government

regulation, including regulatory developments

in the United

States and other jurisdictions;

•

ability to obtain additional financing

in future offerings or otherwise;

•

the effects

of the Russia-Ukraine

conflict and

the COVID-19 pandemic

on business operations

and the initiation,

development and operation of our clinical trials, including patient enrollment

of our clinical trials; and

•

our strategies, prospects, plans, expectations, forecasts or objectives.

We discuss many

of these and other factors

in greater detail under Item 1A.

“Risk Factors” in our Annual Report on Form 10-K

for the year ended December 31, 2022 filed with

the Securities and Exchange Commission on March

27, 2023. These risk factors

are not

exhaustive. Other

sections of

this report

may include additional

factors which

could adversely

impact our

business and

financial performance.

New risk factors emerge

from time to time,

and it is not

possible to predict

all such risk factors,

nor can

we assess the impact of all

such risk factors on our

business or the extent to which

any factor or combination of factors

may cause

actual results

to differ

materially from

those contained

in any

forward-looking statements.

Forward-looking statements

are not

guarantees of performance. Given these uncertainties, you

should not place undue reliance on these forward-looking

statements,

which speak only as of the date hereof

You

should read

this Quarterly

Report and

the documents

that we reference

in this Quarterly

Report and

have filed as

exhibits

completely and with the understanding that our

actual future results may be materially different from what

we expect. We qualify

all of

the forward

-looking

statements

in this

Quarterly

Report

by these

cautionary

statements.

Except

as required

by law,

undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events

or otherwise.

As used

in this

Quarterly Report

on Form

10-Q, unless

otherwise specified

or the

context otherwise

requires, the

terms “we,”

“our,” “us,” the

“Company” refer to

Vaxxinity,

Inc. and

its subsidiaries.

All brand names

or trademarks

appearing in this

Quarterly

Report are the property of their respective owners.

Table of

Contents

Page

PART I—Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Stockholders’ Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II—Other Information

Item 1A. Risk Factors

Item 6. Exhibits

Signature

PART

I – FINANCIAL INFORMATION

Item 1. Financial Statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

BALANCE SHEETS

(in thousands, except share and per share amounts)

March 31,

December 31,

2023

2022

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

22,585

33,475

Short-term investments

44,993

53,352

Restricted cash

100

1,095

Amounts due from related parties

518

414

Prepaid expenses and other current assets

5,237

5,551

Total current assets

73,433

93,887

Property and equipment, net

12,098

12,512

Total assets

85,531

106,399

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

3,029

5,295

Amounts due to related parties

12,706

12,772

Accrued expenses and other current liabilities

9,439

11,370

Note payable, net of debt issuance cost

394

391

Note payable to related party

898

1,113

Total current liabilities

26,467

30,941

Other liabilities

Note payable, net of debt issuance cost, net of current portion

9,832

9,933

Note payable to related party, net of current portion

2,862

3,112

Other long-term liabilities

236

Total liabilities

39,398

44,222

Commitments and contingencies (Note 14)

Preferred stock: $

0.0001

par value,

50,000,000

shares authorized at March 31, 2023 and December 31,

2022

—

Stockholders’ equity:

Class A common stock, $

0.0001

par value;

1,000,000,000

shares authorized,

112,118,911

and

112,182,750

shares issued and

outstanding at March 31, 2023 and December 31, 2022,

respectively

278

Class B common stock, $

0.0001

par value;

100,000,000

shares authorized,

13,874,132

shares issued and outstanding at

March 31, 2023 and December 31, 2022

Additional paid-in capital

369,026

366,798

Accumulated other comprehensive loss

(49)

(197)

Accumulated deficit

(323,124)

(304,703)

Total stockholders’ equity

46,133

62,177

Total liabilities and stockholders’ equity

85,531

106,399

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)

Three Months Ended March 31,

2023

2022

Operating expenses:

Research and development

11,424

11,478

General and administrative

7,384

6,686

Total operating expenses

18,808

18,164

Loss from operations

(18,808)

(18,164)

Other (income) expense:

Interest and other expense

192

105

Interest and other income

(567)

(5)

(Gain) loss on foreign currency transactions, net

(12)

(1)

Total other (income)

expense, net

(387)

Net loss

(18,421)

(18,263)

Net loss per share, basic and diluted

(0.15)

Weighted average

common shares outstanding, basic and diluted

126,061,273

125,709,613

Other comprehensive income:

Unrealized gain on investments

148

—

Other comprehensive income

148

—

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

Common Stock-Class A

Common Stock-Class B

Amount

Additional Paid-in

Capital

Accumulated

Other

Comprehensive

(Loss)

Accumulated

Deficit

Stockholders’

Equity

Balance at December 31, 2022

112,182,750

278

13,874,132

366,798

(197)

(304,703)

62,177

Issuance of common stock upon exercise of stock options

6,161

—

Stock-based compensation expense

—

2,225

—

2,225

Unrealized gain on investments

—

148

—

148

Net loss

—

(18,421)

Balance at March 31, 2023

112,188,911

278

13,874,132

369,026

(49)

(323,124)

46,133

Common Stock-Class A

Common Stock-Class B

Amount

Additional Paid-in

Capital

Accumulated

Other

Comprehensive

(Loss)

Accumulated

Deficit

Stockholders’

Equity

Balance at December 31, 2021

111,518,094

278

13,874,132

357,821

—

(229,481)

128,619

Issuance of common stock upon exercise of stock options

448,998

—

121

—

121

Stock-based compensation expense

—

2,178

—

2,178

Net loss

—

(18,263)

Balance at March 31, 2022

111,967,092

278

13,874,132

360,120

—

(247,744)

112,655

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF CASH FLOWS

(in thousands)

(Unaudited)

Three Months Ended March 31,

2023

2022

Cash flows from operating activities:

Net loss

(18,421)

(18,263)

Adjustments to reconcile net loss to net cash used in operating

activities:

Depreciation expense

586

333

Amortization of debt issuance costs

Amortization of discount on short-term investments

(406)

—

Stock-based compensation expense

2,225

2,178

Changes in operating assets and liabilities:

Amounts due from related parties

(104)

(6)

Prepaid expenses and other current assets

314

667

Long-term deposits

—

(1,351)

Accounts payable

(2,260)

(1,733)

Amounts due to related parties

(67)

(2,620)

Accrued expenses and other current liabilities

(1,931)

1,268

Other long-term liabilities

—

(1)

Net cash used in operating activities

(20,051)

(19,514)

Cash flows from investing activities:

Purchase of short-term investments

(18,588)

—

Redemption of short-term investments

27,500

—

Purchases of property and equipment

(172)

(713)

Net cash provided by (used in) investing activities

8,740

(713)

Cash flows from financing activities:

Repayments of note payable

(111)

(107)

Repayments of note payable with related party

(466)

—

Proceeds from exercise of stock options

121

Net cash provided by (used in) financing activities

(574)

Change in cash, cash equivalents and restricted cash

(11,885)

(20,213)

Cash, cash equivalents and restricted cash at beginning of period

34,570

145,057

Cash, cash equivalents and restricted cash at end of period

22,685

124,844

Reconciliation of cash, cash equivalents and restricted cash:

Cash, cash equivalents and restricted cash at end of period

22,685

124,844

Less restricted cash

(100)

(78)

Cash and cash equivalents end of period

22,585

124,766

Supplemental Disclosure

Cash paid for interest

192

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Nature of the Business

Vaxxinity,

Inc.,

Delaware

corporation

(“Vaxxinity

,”

and

together

with

its

subsidiaries,

the

“Company”),

was

formed

through

the

combination of

two separate businesses

that originated

from United Biomedica

l, Inc. (“UBI”)

in two separate

transactions: a

spin-out

from UBI in

2014 of

operations focused on

developing chronic disease

product candidates that

resulted in United

Neuroscience (“UNS”),

and a second spin-out

from UBI in 2020 of

operations focused on the

development of a COVID-19

vaccine that resulted in

C19 Corp.

(“COVAXX”).

On February 2, 2021,

Vaxxinity

was incorporated for the

purpose of reorganizing

and combining UNS and

COVAXX

and on March 2, 2021, did so by

acquiring all of the outstanding equity interests

of UNS and COVAXX

pursuant to a contribution and

exchange

agreement

(the

“Contribution

and

Exchange

Agreement”)

whereby

the

existing

equity

holders

UNS

and

COVAXX

contributed

their

equity

interests

each

UNS

and

COVAXX

exchange

for

equity

Vaxxinity

(the

“Reorganization”).

December 31, 2022, COVAXX

merged with and into Vaxxinity.

The Company is a

biotechnology company currently focused on

developing product candidates for human

use in the fields

of neurology,

pain, cardiovascular diseases

and coronaviruses utilizing

its “Vaxxine Platform”—a synthetic peptide

vaccine technology first

developed

UBI

and

subsequently

refined

over

the

last

two

decades.

The

Company

engaged

the

development

rationally

designed

prophylactic and therapeutic vaccines to combat common chronic diseases with large global unmet

medical need. The Company is also

developing a heterologous booster vaccine for

SARS-Cov-2. UBI is a

significant shareholder of the Company and,

therefore, considered

a related party.

The Company

is subject

to risks and

uncertainties common

to early-stage

companies in

the biotechnology

industry including,

but not

limited

to,

uncertainty

product

development

and

commercialization,

lack

marketing

and

sales

history,

development

its

competitors of new

technological innovations, dependence on

key personnel, market

acceptance of products, product

liability, protection

of proprietary technology,

ability to raise additional

financing, and compliance

with government regulations. If

the Company does not

successfully

commercialize

out-license

any

its

product

candidates,

will

unable

generate

recurring

product

revenue

achieve profitability.

The

Company’s

product

candidates

are

development

and

will

require

significant

additional

research

and

development

efforts,

including extensive pre-clinical and clinical testing and regulatory approval

prior to commercialization. These efforts require significant

amounts of

additional capital, adequate

personnel and infrastructure

and extensive compliance

-reporting capabilities.

There can be

assurance that

the Company’s

research and

development will

be successfully

completed, that

adequate protection

for the

Company’s

intellectual property

will be

obtained, that

any products

developed will

obtain necessary

government regulatory

approval or

that any

approved products will be commercially viable.

Even if the Company’s product development efforts are

successful, it is uncertain when,

if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in

technology and is dependent upon the services of its employees and consultants.

Liquidity

As of March 31,

2023, the Company

had $

67.7

million of cash,

cash equivalents and

short term investments

to fund operations,

including

22.6

million of

cash and

cash equivalents,

45.0

million of

short-term investments,

and $

0.1

million of

restricted cash.

date, the

Company has

primarily financed

its operations

through the

sale of

convertible preferred

stock and

common stock,

borrowings under

promissory

notes

(including

Convertible

Notes),

portion

which

has

been

raised

from

party

entities,

and

grants

from

foundations

such

the

Coalition

for

Epidemic

Preparedness

Innovations

(CEPI)

and

the

Michael

Fox

Foundation

(MJFF).

The

Company has experienced

significant negative cash flows

from operations since inception,

and incurred a net

loss of $

18.4

million for

the three

months ended

March 31, 2023.

Net cash

used in

operating activities

for the

three months

ended March 31,

2023 was

20.1

million. In addition,

as of March 31, 2023,

the Company has an

accumulated deficit of

323.1

million. The Company

expects to incur

substantial operating losses and

negative cash flows from

operations for the foreseeable

future. As of the

date these unaudited condensed

consolidated financial

statements were

available to

be issued,

the Company

expects its

existing cash

and cash

equivalents and

short-

term investments to be sufficient to fund its operating expenses and

capital expenditure requirements for at least the next 12 months.

In order

to continue

to fund

future research

and development

activities, the

Company

will need

to seek

additional capital.

This may

occur through strategic alliances, licensing

arrangements, grants or future public

or private debt or

equity financings. Additional funding

may not be available on

terms the Company finds acceptable

or at all. If the Company

is unable to obtain sufficient

capital to continue

advance

its

programs,

the

Company

would

forced

delay,

limit,

reduce

terminate

its

product

development

future

commercialization efforts

or grant rights

to third parties

to develop and

market product candidates

that the Company

would otherwise

prefer to develop and market itself.

The

accompanying

unaudited

condensed

consolidated

financial

statements

have

been

prepared

going

concern

basis,

which

contemplates

the

realization

assets

and

satisfaction

liabilities

the

ordinary

course

business.

The

unaudited

condensed

consolidated

financial

statements

not

include

any

adjustments

relating

the

recoverability

and

classification

recorded

asset

amounts or the amounts and classification of liabilities that might result from the outcome

of the uncertainties described above.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies

Basis of presentation

The

accompanying

interim

unaudited

condensed

consolidated

financial

statements

have

been

prepared

using

generally

accepted

accounting principles in the

United States of

America (“GAAP”) and pursuant to

the rules and regulations

of the United States

Securities

and Exchange Commission (“SEC”) for interim financial reporting.

These interim

condensed consolidated

financial statements

are unaudited

and, in

the opinion

of management,

include all

adjustments

necessary to fairly present the results of the interim periods. The condensed consolidated balance sheet at December 31, 2022, has been

derived from the audited financial statements

at that date. Operating results for

the three months ended March 31,

2023 and cash flows

for the

three months ended March 31,

2023 are not necessarily

indicative of the results

that may be expected

for the fiscal year ending

December 31, 2023

or any other future

period. Certain information

and footnote disclosures

normally included in

annual consolidated

financial

statements prepared

in accordance

with GAAP

have

been omitted

in accordance

with the

rules and

regulations

for

interim

reporting

the

SEC.

These

interim

unaudited

condensed

financial

statements

should

read

conjunction

with

the

consolidated

financial statements

and notes

thereto included

in our Annual

Report on

Form 10-K

for the year

ended December 31,

2022 filed

with

the SEC on March 27, 2023 (the “Annual Report”).

Significant accounting policies

The significant accounting policies used in preparation of these unaudited

condensed consolidated financial statements are disclosed in

our annual consolidated financial statements for the year ended December 31, 2022 included in the Annual Report. There have been no

changes to the Company’s significant

accounting policies during the three months ended March 31, 2023.

Recently issued accounting pronouncements

From time to

time, new accounting

pronouncements are issued

by the Financial

Accounting Standards Board

(“FASB”) or other standard

setting bodies and are adopted by the Company as of the specified effective

date.

In June 2016,

the Financial Accounting

Standards Board (“FASB”)

issued Accounting Standards

Update (“ASU”) 2016-13,

Financial

Instruments

Credit

Losses (Topic

326):

Measurement

of Credit

Losses on

Financial

Instruments

(“ASU

2016-13”).

ASU 2016

-13

significantly

changes

the

impairment

model

for

most

financial

assets

and

certain

other

instruments

will

require

immediate

recognition of estimated credit

losses expected to occur

over the remaining life

of many financial assets, which

will generally result in

earlier recognition of allowances for

credit losses on loans and other financial

instruments.

On January 1, 2023, the Company

adopted

ASU 2016-13. The adoption of this standard did not have a material impact

on the Company's consolidated financial statements.

3. Fair Value

Measurements

The Company's money

market accounts and

short-term investments are

shown at fair

value based on

unadjusted quoted market

prices

in active markets for identical assets.

The following

table presents

information about

the Company’s

financial instruments

measured at

fair value

on a

recurring basis

and

indicate the level of the fair value hierarchy used to determine such fair values (in

thousands):

March 31, 2023

Level 1

Level 2

Level 3

Total

Assets:

Short-term investments

44,993

—

44,993

Money market accounts

8,976

—

8,976

Total assets

53,969

—

53,969

December 31, 2022

Level 1

Level 2

Level 3

Total

Assets:

Short-term investments

53,352

—

53,352

Money market account

27,724

—

27,724

Total assets

81,076

—

81,076

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

During the three months ended March 31, 2023 and the year ended December 31, 2022, there were

transfers between Level 1, Level

2 and Level 3.

4. Short-Term

Investments

The Company’s short-term investments

consist of the following (in thousands):

As of March 31, 2023

Amortized Cost

Unrealized

Gains (Losses),

Net

Recorded Basis

U.S. Treasury Securities

45,042

(49)

44,993

Total

45,042

(49)

44,993

As of December 31, 2022

Amortized Cost

Unrealized

Gains (Losses),

Net

Recorded Basis

U.S. Treasury Securities

53,549

(197)

53,352

Total

53,549

(197)

53,352

These securities mature in less than 1 year.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

March 31,

December 31,

2023

2022

Clinical prepayments

2,878

2,679

Prepaid insurance

1,257

1,870

Prepaid materials and supplies

237

248

Deposits

240

232

Other

625

522

5,237

5,551

Clinical prepayments consist of amounts paid in

advance to clinical research organizations (“CROs”) for

expenses related to our clinical

trials, primarily

UB-612, and

included

1.9

million on

deposit as

of March

31, 2023

that will

be credited

against final

UB-612

trial

expenses. The remaining clinical prepayment amounts are amortized

to expense as earned by the CRO and clinical trial sites.

Prepaid

insurance

consists

primarily

1.1

million

and

1.6

million

for

the

unamortized

portion

the

Company’s

annual

D&O

insurance fee as of March 31, 2023 and December 31, 2022, respectively.

Prepaid materials and supplies

consist of amounts paid

in advance related to

the procurement and/or production

of materials for use in

the Company’s clinical trials,

primarily UB-612. Amounts held

by related parties

totaled $

0.2

million at March 31,

2023 and

0.2

million

at December 31, 2022.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

6. Property and Equipment, Net

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

March 31,

December 31,

2023

2022

Airplane

11,983

Laboratory and computer equipment

3,267

3,146

Leasehold improvements

403

Software

426

415

Facilities, furniture and fixtures

Vehicles

Construction in progress

Total property

and equipment

16,307

16,136

Less: accumulated depreciation and amortization

(4,209)

(3,624)

Property and equipment, net

12,098

12,512

Depreciation expense for the three months ended March 31, 2023

and 2022 was $

0.6

million and $

0.3

million, respectively.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following

(in thousands):

March 31,

December 31,

2023

2022

Accrued external research and development

6,491

6,904

Accrued bonuses

1,527

2,568

Accrued professional fees and other

1,420

1,722

Accrued interest

176

9,439

11,370

8. Other Long-Term

Liabilities

Other long-term liabilities consisted of the following (in thousands):

March 31,

December 31,

2023

2022

Accrued taxes

236

As of

March 31, 2023 and

December 31, 2022, approximately

0.2

million of

accrued taxes related

to penalties and

interest the Company

may be subject to paying for late filing fees related to a foreign

subsidiary. The

Company expects these amounts to be forgiven but has

accrued for them until the statute of limitations expires and it is appropriate to write them off.

9. Notes Payable

Note Payable—Airplane

In connection with

the acquisition of

an airplane, the Company

entered into a note

payable agreement (the

“2025 Note”) in

June 2020

for $

11.5

million, with an annual interest rate of

3.4

% and a maturity date of

June 9, 2025

. Principal and interest payments are

payable

monthly in the amount of $

0.1

million with a final payment of $

9.4

million at maturity. The 2025 Note is guaranteed by the co-founders

of the Company. In addition, the Company

incurred debt issuance costs of $

0.3

million, which are being amortized over the term of the

loan. There are no financial covenants associated with the 2025 Note.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The carrying value of the 2025 Note is as follows (in thousands):

March 31,

December 31,

2023

2022

Principal

10,344

10,455

Unamortized debt issuance cost

(118)

(131)

Carrying amount

10,226

10,324

Less: current portion

(394)

(391)

Note payable, net of current portion and debt issuance cost

9,832

9,933

As of March 31, 2023, the remaining principal payments for the 2025

Note are as follows (in thousands):

Amount

2023 (remaining 9 months)

333

2024

458

2025

9,553

10,344

Interest

expense

associated

with

the

2025

Note

was

0.1

million

and

0.1

million

for

the

three

months

ended

March 31,

2023

and

March 31, 2022, respectively.

Accrued interest of

less than $

0.1

million was included

in accrued expenses

and other current

liabilities

in the accompanying condensed consolidated balance sheets as of March

31, 2023 and December 31, 2022.

Promissory Note with Related Party

In October 2022, the Company entered into a related party unsecured promissory note (the “2022 Promissory Note”) with UBI for $

4.2

million. The

2022 Promissory

Note accrues

interest at

7.0

% per

annum and

is due

October 1, 2026

. The

2022 Promissory

Note was

issued to satisfy accounts payable to UBI

totaling $

4.2

million. As of March 31, 2023 and

December 31, 2022, the outstanding principal

amount

under the

2022 Promissory

Note was

3.8

million

and $

4.2

million, respectively.

During the

three months

ended March

31,

2023, the Company incurred $

0.1

million in interest expense and $

0.1

million of interest was paid related to the Promissory Note.

The carrying value of the 2022 Promissory Note is as follows (in thousands):

March 31,

December 31,

2023

2022

Principal

3,759

4,225

Less: current portion

(898)

(1,113)

Note payable with related party,

net of current portion

2,862

3,112

As of March 31, 2023, the remaining principal payments for the 2022

Promissory Note are as follows (in thousands):

Amount

2023 (remaining 9 months)

647

2024

1,029

2025

1,103

2026

980

3,759

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

10. Common Stock

The Company has reserved shares of Class A common stock for issuance for the following

purposes:

March 31,

December 31,

2023

2022

Options and RSUs issued and outstanding

22,914,609

20,716,760

Options available for future grants

6,902,994

6,064,003

Warrants issued and

outstanding

1,928,020

31,745,623

28,708,783

11. Stock-Based Compensation

2021 Omnibus Incentive Compensation Plan

November

2021,

the

Company

established

the

2021 Omnibus

Incentive

Compensation

Plan

(the

“Plan”),

which

provides

for

the

Company

grant

nonqualified

stock

options,

incentive

(qualified)

stock

options,

stock

appreciation

rights,

restricted

awards,

restricted stock units, performance awards, cash incentive awards and other

equity-based awards (including fully vested shares).

At inception

in November

2021, the

maximum number

of shares

of Class

A common

stock that

could be

issued under

the Plan

was

8,700,000

shares of

Class A common

stock. This

number increases

automatically on

January 1

of each

year,

commencing January

2023, by the number of shares

equal to the lesser of (i)

% of the outstanding shares of

our Class A common stock on

the immediately

preceding

December 31,

(ii) the

number of

shares determined

by the

compensation committee

of the

board of

directors,

if any

such

determination

is made,

and

(iii) the

number

of shares

underlying

any

awards granted

during

the

preceding

calendar

year,

net of

the

underlying

awards

canceled

forfeited

under

the

Plan.

January

2023,

accordance

with

the

automatic

“evergreen”

provision of the Plan, the maximum number of shares that can be issued

under the plan was increased to

11,886,306

Stock Options

As of March 31, 2023, there

were options to purchase

16,252,154

shares of Class

A stock outstanding and options

to purchase

6,362,455

shares of Class B stock outstanding, of which options to purchase

10,449,895

shares of Class A common stock and options to purchase

4,992,111

shares of Class

B common stock were

exercisable, respectively. As of March 31, 2023,

the maximum number

of stock options

awards available for future issuance under the Company’s

plans is

6,902,994

The following table summarizes stock option activity during the three

months ended March 31, 2023:

Number of Stock

Options

Outstanding

Weighted

Exercise Price

Per Share

Weighted

Contractual

Term

(years)

Aggregate

Intrinsic Value

(in thousands)

Balance at December 31, 2022

20,416,760

5.07

6.8

7,166

Granted

2,622,284

2.30

Exercised

(6,161)

(0.57)

Forfeited

(418,274)

(5.95)

Balance at March 31, 2023

22,614,609

4.74

6.0

14,368

Options vested and exercisable at March 31, 2023

15,442,006

4.59

5.3

—

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the

common stock for those options that had exercise prices lower than the fair

value of the common stock as of March 31, 2023.

The intrinsic value of options exercised during the three months ended

March 31, 2023 was immaterial.

The weighted-average grant-date fair value per share of options granted

during the three months ended March 31, 2023 was $

1.90

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Restricted Stock Units

The following table summarizes the Company’s

restricted stock unit activity for the three months ended March 31, 2023:

Number of

Weighted

Average

Grant Date

Fair Value

Per Share

Unvested at December 31, 2022

300,000

3.76

Issued

—

Unvested at March 31, 2023

300,000

3.76

Stock-based compensation expense recognized on restricted stock was $

0.1

million for the three months ended March 31, 2023.

Stock-Based Compensation Expense

The

Company

recorded

stock-based

compensation

expense

the

following

expense

categories

the

accompanying

unaudited

condensed consolidated statements of operations (in thousands):

Three Months Ended March 31,

2023

2022

General and administrative

1,403

1,371

Research and development

822

807

Total stock-based

compensation expense

2,225

2,178

As of

March 31, 2023,

total unrecognized

compensation cost

related to

the unvested

stock-based awards

was $

17.3

million, which

expected to be recognized over a weighted average period of

3.0

years.

12. Income Taxes

The

Company

computes

its expected

annual effective

income

tax

rate in

accordance

with FAB

Accounting

Standards

Codification

(“ASC”)

740

“Income

Taxes”

and

makes

changes

quarterly

basis,

as necessary,

based on

certain

factors

such

as changes

forecasted annual pre-tax income; changes to

actual or forecasted permanent

book to tax differences; impacts

from tax audits with

state,

federal or foreign tax authorities; impacts from tax

law changes; or change in judgment

as to the realizability of

deferred tax assets. The

Company identifies items

which are unusual

and non-recurring in

nature and treats

these as discrete events.

The tax effect

of discrete

items is recorded in the quarter in which the discrete events occur.

The

Company’s

effective

tax

rate

for

the

three

months

ended

March 31,

2023

and

March 31,

2022

was

due

primarily

its

uncertainty of realizing a benefit from net operating losses incurred during

the period.

In assessing

the realizability

of deferred

tax assets,

management considers

whether it

is more-likely-than-not

that some

or all

of the

recorded deferred

tax assets

will be

realized. The

ultimate realization

of deferred

tax assets

is dependent

on the

generation of

future

taxable income in the periods in which

those temporary differences become

deductible. Management considers the scheduled

reversal

of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these items

and the consecutive years of pretax losses (resulting from impairment), management determined that enough uncertainty

exists relative

the

realization

the

deferred

income

tax

asset

balances

warrant

the

application

full

valuation

allowance

for

all

taxing

jurisdictions.

The Company files

income

tax returns in

the U.S. federal

and various state

and local jurisdictions. The

Company also files

returns in

numerous foreign jurisdictions

that have varied

years remaining open

for examination, but generally

the statute of

limitations is three

to four years from when the return is filed. As of March 31, 2023,

the Company has no ongoing audits.

The

Company

has

net

operating

loss

(“NOL”)

carryforwards

for

federal

and

state

income

tax

purposes.

Use

the

NOL

carryforwards is

limited under

Section 382

of the

Internal Revenue

Code, as

the Company

had a

change in

ownership of

more than

% of its capital stock over a

three-year period as measured under Section 382 of

the Internal Revenue Code of 1986, as

amended (the

“Code”).

These complex changes of ownership rules generally focus

on ownership changes involving stockholders owning

directly or

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

indirectly

our

stock,

including

certain

public

“groups”

stockholders

as set

forth

under

Section

382

the

Code,

including those arising from

new stock issuances and

other equity transactions.

Some of these NOL carryforwards

will expire if they

are not used within

certain periods. At this

time, the Company considers

it more likely than

not that it will not

have sufficient taxable

income in the future that will allow us to realize these NOL carryforwards.

13. Net Loss Per Share

The Company’s potentially dilutive securities,

which include options

and restricted stock

units have been

excluded from the

computation

of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common

shares outstanding used to calculate both

basic and diluted net loss

per share is the same.

The Company excluded the following potential

common shares, presented based

on amounts outstanding at each

period end, from the computation of

diluted net loss per share for

the

three months ended March 31, 2023 and 2022 because including them would

have had an anti-dilutive effect:

March 31,

2023

2022

Restricted stock units issued and outstanding

300,000

Options issued and outstanding

22,614,609

20,274,077

Warrants issued and

outstanding

1,928,020

24,842,629

22,502,097

14. Commitments and Contingencies

Contractual Obligations

The Company

enters into agreements

with CROs to

conduct clinical

trials and preclinical

studies and CMOs

to produce

vaccines and

other potential product candidates. Contracts with CROs and CMOs are generally

cancellable, with notice, at the Company’s

option.

As of March 31, 2023, the Company had remaining prepayments to CROs of $

2.7

million and remaining prepayments to CMOs of $

0.2

million for activities

associated with the conduct

of its clinical

trials and for

the production of

the Company’s anticipated vaccine product

candidate.

Michael J. Fox Foundation Grant

On November 3,

2021, the Company

was awarded a

grant from the

Michael J. Fox

Foundation for Parkinson’s

Research (“MJFF”) in

the amount of $

0.8

million to be used

in a project for

the exploration of markers

for target engagement

in individuals immunized

with

UB-312, an

active

-Synuclein (“aSyn”)

immunotherapy.

The Company

will oversee

sample management,

sample preparation

(IgG

fractions) and distribution, as

well as characterize

the binding properties

of the antibodies

against pathological forms

of aSyn. As

funding

is expected to be received

in tranches over a

two-year period, and the

amounts received in each

tranche are expected to be

utilized within

12 months,

the funds

received are

recognized

as a

short-term

accrued liability.

The Company

recognizes

payments from

MJFF as

reduction of research and development expenses, in the same period as the

expenses that the grant is intended to reimburse are incurred.

As of March 31, 2023,

there was

balance remaining in the

accrued liability related to

this grant. For

the three months

ended March 31,

2023 and 2022,

the Company did

t recognize any reduction

of research and

development expenses for

amounts reimbursed through

the grant.

Coalition for Epidemic Preparedness Innovations (“CEPI”)

Grant

In April

2022, the

Company entered

into an

agreement with

the Coalition

for Epidemic

Preparedness Innovations

(“CEPI”) whereby

CEPI agreed

to provide

funding

of up

to $

9.3

million

to co-fund

a Phase

3 clinical

trial of

the Company’s

generation

UB-612

COVID-19 vaccine candidate

as a heterologous

– or ‘mix-and-match’

– booster dose. The

Phase 3 trial, which

began in early

2022, is

evaluating the

ability of

UB-612 to

boost COVID-19

immunity against

the original

strain and

multiple variants

of concern

including

Omicron - in people aged 16 years or older, who

have been previously immunized with an authorized COVID-19 vaccine.

The Company will also be performing further manufacturing scale-up

work to enable readiness for potential commercialization.

Under

the terms of the

agreement with CEPI, if

successful, a portion of

the released doses of

the commercial product

will be delivered to

the

COVID-19 Vaccines

Global Access (“COVAX”)

consortium for distribution to developing countries at low cost.

Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in

the funding agreement

are incurred. As

funding is expected

to be

received in tranches

over an 18-month

period, and the

amounts received

in each tranche are

expected to the

utilized within 12 months,

the funds received are

reflected within restricted cash

with a corresponding

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

short-term accrued liability.

As of March 31,

2023, the Company

had

remaining restricted cash

or accrued liability

related to CEPI

funding. The Company recognizes payments from CEPI as a reduction of research and development expenses, in

the same period as the

expenses that

the grant is

intended to reimburse

are incurred. For

the three months

ended March 31, 2023,

the Company recognized

reduction of $

1.0

million of research and development expenses.

Lease Agreements

The Company has

two

operating lease agreements for

office and laboratory space.

The Company is

also required to

pay certain operating

costs under its leases.

In August 2022, the Company entered into a lease for

9,839

square feet of lab and office space with Space Florida in

Exploration Park,

Florida commencing August 12, 2022. The lease

has an initial

one-year

term with an annual lease

obligation of $

0.5

million, after lessee

credits. Additionally,

the lease requires the Company to provide a security deposit in the amount of less than $

0.1

million.

In April 2022, the

Company entered into a

facility lease agreement for

4,419

square feet of office

space in New York,

New York.

The

lease commenced in

April 2022 and

will expire in

March 2029 with

no option to

renew.

This lease and

its terms were

reviewed using

the guidance

found in

ASC 842,

“Leases”.

Since the

lease has

a non-cancellable

period of

one year

, and

after the

first year

both the

Company and the landlord have the option to early terminate the

lease for any or no reason, the Company has elected to

apply the short-

term expedient, which does not subject the New York

lease to capitalization.

Rent expense for the three months ended March 31, 2023 and 2022 was $

0.1

million and $

0.1

million, respectively.

License Agreements

In August 2021, the Company

entered into a license

agreement (the “Platform License Agreement”) with

UBI and certain of

its affiliates

that

expanded

intellectual

property

rights

held

under

previously

issued

license

agreements

with

UBI.

part

the

agreement,

the

Company obtained a worldwide, sublicensable

(subject to certain conditions), perpetual,

fully paid-up, royalty-free license to

research,

develop, make, have made, utilize, import, export,

market, distribute, offer for sale, sell, have sold,

commercialize or otherwise exploit

peptide-based

vaccines

the

field

all

human

prophylactic

and

therapeutic

uses,

except

for

such

vaccines

human

immunodeficiency virus (HIV), herpes simplex virus (HSE) and Immunoglobulin

E (IgE). The patents and patent applications licensed

under the

Platform License

Agreement include

claims directed

to a

CpG delivery

system, artificial

T helper

cell epitopes

and certain

designer peptides and proteins utilized

in UB-612. In consideration for

the Platform License Agreement, the

Company issued to UBI a

warrant to purchase Class A common stock (the “UBI Warrant”)

The Company considered ASC 805, “Business Combinations” (“ASC 805”) and ASC 730,

“Research and Development” (“ASC 730”)

in determining

how to account

for the issuance

of the

UBI Warrant.

The UBI Warrant

was issued to

a related party

in exchange for

license agreement.

The majority

of the

voting interests

in the

party and

in the

Company

were held

by a

group of

immediate

family members, at the time of the transaction, and as such the transaction constitutes a common control transaction, which requires the

license to be accounted

for at the carrying value

in the books of the

transferor.

As the related party did

not have any basis in the

assets

licensed, there was no accounting impact for the Company.

Indemnification Agreements

In the

ordinary course

of business,

the Company

may provide

indemnification of

varying scope

and terms

to employees,

consultants,

vendors, lessors,

business partners

and other

parties with

respect to

certain matters

including, but

not limited

to, losses

arising out

breach of such agreements

or from intellectual property

infringement claims made by

third parties. In addition,

the Company has entered

into indemnification agreements with members of its board of directors and executive officers that will require the Company

to, among

other things,

indemnify them

against certain

liabilities that

may arise

by reason

of their

status or

service as

directors or

officers.

The

maximum potential amount

of future payments the

Company could be

required to make under

these indemnification agreements

is, in

many cases, unlimited.

date, the Company

has not incurred

any material

costs as a

result of

such indemnification

obligations. The

Company

not

aware

any

indemnification

arrangements

that

could

have

material

effect

its

financial

position,

results

operations, or cash flows, and it has

not accrued any liabilities related to such obligations as

of March 31, 2023 and December 31, 2022.

Legal Proceedings

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. As of March 31,

2023 and December 31, 2022, the Company was not a party to any material legal matters

or claims.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Loss Contingency

In April

2021, the

Company engaged

United Biopharma,

Inc. (“UBP”)

to begin

acquiring raw

materials for

use in

the production

GMP grade recombinant protein for UB-612, the Company’s COVID-19 vaccine candidate under an Authorization to Proceed (“ATP”)

agreement. Through August 2021, $

7.2

million of materials were ordered, $

3.0

million of materials were received by UBP and paid for

with an

advance

payment from

the Company,

and the

Company

expensed $

1.2

million as

these raw

materials were

used to

produce

proteins.

During 2022, the Company

recognized an additional

1.8

million in expense related

to the materials

UBP had taken possession

of but had not yet used in production.

When the Company

asked to pause

further manufacture

of protein upon

rejection of the

Emergency Use

Authorization application

Taiwan in August 2021,

UBP requested that

its suppliers

cancel the

remaining $

4.2

million in

orders for which

it had

not taken possession

of the

materials. In

the fourth

quarter of

2022, the

Company learned

that most

of the

suppliers refused

to cancel

the orders,

although

some agreed to seek other buyers for the materials. For these orders, management has not yet concluded that a loss for the Company for

this entire

amount is

probable, since

they were

not originally

authorized by

the ATP,

and UBP’s

suppliers may

be able

to dispose

some amount to other buyers. Hence, an expense has not been recognized

for them.

15. Benefit Plans

March

2018,

the

Company

established

defined

contribution

savings

plan

under

Section

401(k)

the

Code.

This

plan

covers

substantially all

U.S. employees

who meet

minimum age

and service

requirements and

allows participants

to defer

a portion

of their

annual compensation on a pre-tax basis. The Company matches

employee contributions to the Plan at

100

% up to

% of the employee’s

base salary.

The Company offers

its Ireland-based employees

a Personal Retirement Savings

Account (“PRSA”) that allows

participants to defer a

portion of their annual

compensation. The Company provides

contributions equal to

% of each

participant’s annual salary. During three

months ended March 31, 2023 and 2022, the Company contributed less than $

0.1

million to PRSA accounts.

16. Related Party Transactions

The Company has related party arrangements with UBI

and a number of its

affiliated companies listed namely, United Biomedical, Inc.,

Asia (“UBIA”), UBI Pharma, Inc. (“UBI-P”), United BioPharma, Inc (“UBP”)

and UBI IP Holding (“UBI-IP”).

As of

March 31, 2023,

UBI owned

% of

the Company’s

stock. The

majority of

the voting

interests in

both UBI

and the

Company

were held by a group of immediate family members,

and as such the entities are under common control.

These related parties are governed by various Master Services Agreements

(“MSA”) detailed below.

UBI MSA - UBI provides research, development and clinical functions to the Company.

There is also a purchase arrangement

with UBI for the production and shipment of the Company’s

diagnostic test kits.

UBIA MSA - UBI-Asia for manufacturing, quality control, testing, validation,

and supply services.

UBP MSA - UBP provides

the Company with manufacturing, testing and validation services.

COVID MSA (“COVID

MSA”) - COVID

MSA provides that UBI

acts as COVAXX’s

agent with respect

to matters relating

the

Company’s

COVID-19

program

and

provides

research,

development,

manufacturing

and

back

office

administrative

services to the Company.

COVID-19

Relief

MSA

four-company

MSA

with

UBI,

UBI-Asia

and

UBP.

The

Company

is an

exclusive

licensee

technologies related to diagnostics, vaccines, and therapies for

COVID-19. The MSA established the terms under which UBI-

Asia

provides

research,

development,

testing

and

manufacturing

services

the

Company

and

UBP

provides

contract

development and manufacturing services to the Company.

Total amounts

due to related parties were

12.7

million and $

12.8

million as of March 31, 2023

and December 31, 2022, respectively.

Total amounts

due from related parties were $

0.5

million and $

0.4

million as of March 31, 2023 and

December 31, 2022, respectively.

Total expenses incurred, including interest expense,

were $

1.2

million and $

0.8

million for the three months ended March 31, 2023 and

2022,

respectively.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Total related party operating

activity, including the activity described

above, are as follows (in thousands):

March 31,

December 31,

2023

2022

Consolidated balance sheet

Assets

Prepaid expenses and other current assets

237

Amounts due from related parties

518

414

Liabilities

Amounts due to related parties

12,706

12,772

Current portion of note payable

898

1,113

Note payable

2,862

3,112

Accrued interest payable

—

Three Months Ended March 31,

2023

2022

Operating expenses

Research and development

Services provided by related parties

381

784

General and administrative

Services provided by related parties

754

—

Other income/expense

Related party interest expense

—

Item 2. Management’s Discussion and Analysis of Financial

Condition and Results of Operations.

The following discussion and analysis of our financial condition

and results of operations should be read

together with our unaudited

condensed consolidated financial statements and related

notes and other financial information appearing elsewhere

in this Quarterly

Report on Form 10-Q. We

intend for this discussion to provide you with information that will assist you

in understanding our

unaudited condensed consolidated financial statements, the changes

in key items in those unaudited condensed consolidated financial

statements from period to period and the primary factors that

accounted for those changes.

Some of the information contained in this

discussion and analysis or set forth elsewhere in this Quarterly

Report, including information with respect to

our plans and strategy

for our business and related financing, includes forward

-looking statements that involve risks, uncertainties and assumptions.

See the

section of this Quarterly Report titled “Special Note Regarding

Forward-Looking Statements” for a discussion of forward

-looking

statements. As a result of many factors, including

those factors set forth under

“Risk Factors” in Item 1A of Part I of our Annual

Report on Form 10-K for the year ended December 31, 2022, in Item 1A of Part

II of this Quarterly Report on Form 10-Q, or in other

filings that we make with the SEC

, our actual results could differ materially from

management’s

expectations and the results

described in or implied by the forward-looking statements

contained in the following discussion and analysis. Investors and others

should note that we routinely use the Investors section

of our website to announce material information to investors and the

marketplace. While not all of the information that we post on the Investors section

of our website is of a material nature, some

information could be deemed to be material. Accordingly,

we encourage investors, the media, and others interested in us

to review the

information that we share on the Investors

section of our website, https://vaxxinity.com/.

Overview

are

engaged

the

development

rationally

designed

prophylactic

and

therapeutic

vaccines

combat

chronic

disorders

and

infectious diseases

with large

patient populations

and unmet

medical

needs. While

vaccines have

traditionally been

unable to

combat

such disorders effectively

and safely, we

believe our platform could overcome

the traditional hurdles facing vaccines

in this area.

Our

Vaxxine

Platform relies

on a synthetic

peptide vaccine

technology first

developed by

UBI and

subsequently refined

over the

last two

decades. We

believe our

vaccines have

the potential

to combat

conditions that

have not

yet been

successfully treated,

or which

have

primarily been addressed with

monoclonal antibodies (“mAbs”) which,

while generally effective, are

extremely costly and cumbersome,

and

thus

have

limited

accessibility.

Our

pipeline

primarily

consists

five

programs

focused

chronic

disease,

spanning

neurodegenerative disorders in

addition to other

neurology and cardiovascular

indications. Given the global

COVID-19 pandemic and

our Vaxxine

Platform’s

applicability to

infectious disease,

we are also

opportunistically advancing

a product candidate

that addresses

SARS-CoV-2.

Our current pipeline consists of six programs from early to

late-stage development, including five programs focused on chronic disease:

UB-311,

our

leading

neurology

product

candidate,

which

targets

Alzheimer’s

disease

(“AD”);

UB-312,

which

targets

Parkinson’s

disease

(“PD”)

and

other

synucleinopathies;

VXX-301,

anti-tau

product

candidate

which

has

the

potential

address

multiple

neurodegenerative conditions, including AD; UB-313,

which targets Calcitonin Gene-Related Peptide (“CGRP”) to

prevent migraines;

and

VXX-401,

which

targets

proprotein

convertase

subtilisin/kexin

type

serine

protease

(“PCSK9”)

reduce

low-density

lipoprotein (“LDL”)

cholesterol, a risk

factor for

atherosclerotic heart

disease. Through

our Vaxxine

Platform, we

believe we may

able to address a wide range of other chronic diseases, including diseases that are or could potentially

be successfully treated by mAbs,

which increasingly dominate the treatment paradigm but remain

accessible only to a small proportion of patients who could potentially

benefit from them.

In addition

to our

chronic disease

pipeline, given

our Vaxxine

Platform’s

applicability to

infectious disease

and the

ongoing need

for

booster vaccines to address SARS-CoV-2, we are advancing an infectious disease product candidate, UB-612, as

a heterologous booster

against

COVID-19.

have

reported

topline

results

pivotal

Phase

trial

UB-612,

and

completed

rolling

submissions

for

conditional/provisional authorization with regulatory authorities in the

United Kingdom and Australia in March 2023.

Our ability to generate revenue

sufficient to achieve profitability will

depend on the eventual regulatory

approval and commercialization

of one or

more of our product

candidates. We

have not yet obtained

any regulatory approvals

for our product

candidates or conducted

sales and marketing activities for our product candidates.

have

principally

funded

our operations

through financing

transactions.

Through

March 31, 2023,

we received

gross proceeds

$306.4 million

in connection

with various

financing

transactions,

including

the sale

of preferred

and common

stock, the

issuance of

promissory notes (including convertible promissory notes

(“Convertible Notes”)), and the entry

into simple agreements for future

equity

(“SAFEs”).

Costs associated with research and development are the most significant component of our expenses. These costs can vary greatly from

period to period depending on the timing

of various trials for our

product candidates. We expect our allocated research and development

costs and

general

and

administrative

expenses

could

increase

over

time if

we expand

the number

of product

candidates that

are

advancing,

advance any

of the

current pipeline

candidates to

later stage

clinical trials

which typically

have more

subjects and

higher

costs, or incur increased

costs as a result

of operating as a

public company. Further, we anticipate incurring greater selling and

marketing

expenses

commercialize

any

our

product

candidates

the

future

and

prepare

for

such

commercialization.

Our

product

candidates

are

clinical

stage

pre-clinical

stage

development.

have

generated

limited

revenue

date

and

have

incurred

significant operating losses since inception. Net losses were

$18.4 million and $18.3 million for the

three months ended March 31, 2023

and 2022,

respectively.

As of March

31, 2023,

we had

an accumulated

deficit of

$323.1 million.

expec

t our

expenses and

capital

requirements may increase over time in connection with our planned operations,

which include:

•

continuing pre-clinical studies, existing clinical trials, or initiating new

clinical trials for product candidates UB-312, UB-313,

VXX-401, UB-612, and other product candidates;

•

hiring additional

clinical, quality

control, medical,

scientific and

other technical

personnel to

support additional

clinical and

research and development programs;

•

expanding operational, financial and management systems

and infrastructure, expanding our facilities and

increasing personnel

to support operations;

•

undertaking actions to meet the requirements and demands of being

a public company;

•

maintaining, expanding and protecting our intellectual property portfolio;

•

seeking regulatory approvals for any product candidates that successfully complete

clinical trials; and

•

undertaking pre-commercialization and commercialization

activities to establish sales, marketing and distribution capabilities

for any product candidates for which we may receive regulatory approval in regions

where we elect to commercialize

products on our own or jointly with third parties.

As of the date of this report, we expect our existing cash and cash

equivalents and our short-term investments will be sufficient

to fund

our operating expenses and capital expenditure requirements for at least the next

12 months and into mid-2024. Thereafter, our viability

will depend

on our

ability

to raise

additional

capital

to finance

operations,

to successfully

commercialize

our

product candidates,

approved, or to enter into collaborations with third

parties for the development of our product candidates. If we

are unable to do any of

the foregoing, we would

be forced to delay,

limit, reduce or terminate

our product candidate development

or future commercialization

efforts.

Our estimates

are based

on a

variety of

assumptions that

may prove

to be

wrong, and

we could

exhaust our

available capital

resources sooner than expected. See “— Liquidity and Capital Resources.”

Business Update Regarding COVID-19 Pandemic

In March

2020, the

World

Health Organization

declared the

COVID-19

outbreak

a pandemic.

The onset

of the

pandemic led

to our

institutional

prioritization

COVID-19

vaccine

development

efforts,

which

correlated

with

relative

decline

research

and

development expenditures for our chronic disease product candidates. To date, our operations have not been negatively impacted by the

COVID-19 pandemic in

a material manner. While

the pandemic has

subsided around the

world since 2020,

we cannot

predict the

specific

extent, duration

or full

impact that

future outbreaks

associated with

new variants

of the

COVID-19

virus may

have on

our financial

condition

and

operations.

Potential impacts

could

include delays

of the

development

of clinical

supply

materials, and

enrollment

patients in our

studies may be delayed

or suspended, as hospitals

and clinics in

areas where we are

conducting trials may need

to shift

resources to

cope with

COVID-19 and

may limit

access or

close clinical

facilities. Additionally,

if our

trial participants

are unable

travel to our clinical study sites

as a result of quarantines or other restrictions

resulting from COVID-19 outbreaks,

we may experience

higher drop-out rates or delays in our clinical studies. The

impact of the COVID-19 pandemic on our financial performance will depend

on future developments, including the duration and spread of future outbreaks and

related governmental advisories and restrictions. The

impact of

future outbreaks

on the financial

markets and

the overall

economy are

also highly

uncertain and

cannot be

predicted. If

the

financial markets and/or the overall economy are impacted for an

extended period, our results may be materially adversely

affected. See

“Risk

Factors—Risks

Our

Business

and

Industry—The

coronavirus

pandemic

has

caused

interruptions

delays

our

business plan and

could continue

to adversely

affect our

business” in our

Annual Report

on Form

10-K for the

year ended

December

31, 2022.

Components of Our Unaudited Condensed Consolidated Results of Operations

Revenue

recorded no

revenue for the three

months ended March 31,

2023 and 2022.

do not expect

to generate any

meaningful revenue

unless and until we obtain regulatory approval of and

commercialize or out-license at least one of our

product candidates, and we do not

know when, or if, this will

occur. If our development

efforts for our product candidates

are successful and result in commercialization,

may

generate

additional

revenue

the

future

from

combination

product

sales

payments

from

collaboration

license

agreements that we

have entered into

or may enter into

with third parties. We

have incurred significant

losses since our inception.

expect to incur losses for the foreseeable future and may never achieve or maintain

profitability.

Cost of Revenue

recorded

no cost

of revenue

for

the three

months ended

March 31,

2023 and

2022. If

our

development

efforts

in respect

of our

current pipeline

of product

candidates are

successful and

result in

regulatory approval,

we expect our

cost of

revenue will increase

relative proportion to the level of our revenue as we

commercialize the applicable product candidate. We expect that the cost of revenue

will increase in absolute dollars as and if our revenue grows and will vary from period

to period as a percentage of revenue.

Research and Development Expenses

The design, initiation and execution of candidate discovery and development programs of our potential future product candidates is key

to our

success and

involves significant

expenses. Prior

to initiating

these programs,

project teams

incorporating individuals

from the

essential disciplines within the Company scope out the activities, timing, requirements, inclusion and exclusion criteria and the primary

and

secondary

endpoints.

Once

have

decided

proceed,

our

Vaxxine

Platform

enables

the

iteration

drug

candidates

the

discovery

phase

through

rapid,

rational

design

and

formulation.

After

have

identified

drug

candidates,

the

costs

scaling

the

formulation from

research grade

to clinical

grade, then

to commercial

grade, typically

consumes significant

resources. In

addition, to

internal

research

and development,

we utilize

service providers,

including

related parties,

to complete

activities we

lack the

internal

resources to handle.

Research and development expenses consist primarily of costs incurred

for research activities, including drug discovery

efforts and the

development of our product candidates. We

expense research and development costs as incurred, which include:

•

expenses incurred to conduct the necessary preclinical studies and clinical

trials required to obtain regulatory approval;

•

expenses incurred under agreements with CROs that are primarily engaged in

the oversight and conduct of our clinical trials,

preclinical studies and drug discovery efforts and contract

manufacturers that are primarily engaged to provide preclinical

and clinical drug substance and product for our research and development programs;

•

other costs related to acquiring and manufacturing materials in connection

with our drug discovery efforts and preclinical

studies and clinical trial materials, including manufacturing validation

batches;

•

costs related to investigative sites and consultants that conduct our clinical

trials, preclinical studies and other scientific

development services;

•

employee-related expenses, including salaries and benefits, travel and

stock-based compensation expense for employees

engaged in research and development functions;

•

costs related to compliance with regulatory requirements; and

•

facilities-related costs, depreciation and other expenses, which include

rent and utilities.

recognize

external

development

costs

based

evaluation

the

progress

completion

specific

tasks

using

information

provided to us by

service providers. This process

involves reviewing open contracts and

purchase orders, communicating with

personnel

to identify services that

have been performed on

our behalf and

estimating the level

of service performed and

the associated cost

incurred

for the service when we have not yet been invoiced or otherwise notified of actual costs. Any nonrefundable advance payments that we

make for goods or services to be received in the future for use in research and development

activities are recorded as prepaid expenses.

Such amounts are expensed as the related goods are delivered or the related services are performed, or until it is no longer expected that

the goods will be delivered, or the services rendered, at which point the net remainder

is expensed.

We continue to work with related parties for the advancement

of our research and development programs, including for manufacturing,

quality control,

testing, validation,

and supply

services. While

this related

party work

has significantly

diminished over

the last

year,

and we expect this trend to continue, we are still reliant on UBIA to provide certain manufacturing-related

and prior-conducted clinical

data that

will be

needed for

inclusion in

our regulatory

applications for

UB-612. During

the three

months ended

March 31, 2023

and

2022,

related party expenses were approximately 3.3% and 6.8% of our

research and development expenses, respectively.

Where appropriate,

we allocate

our third-party

research

and development

expenses on

a program-by-program

basis. These

expenses

primarily

relate

outside

consultants,

CROs,

contract

manufacturers

and

research

laboratories

connection

with

pre-clinical

development, process

development, manufacturing

and clinical

development activities.

do not

allocate our

internal costs,

such as

employee costs,

costs associated

with our discovery

efforts, laboratory

supplies and

facilities, including

depreciation or

other indirect

costs, to

specific programs because

these costs often

relate to platform

development, to multiple

programs simultaneously or

to discovery

of new

programs, and

any such

allocation would

necessarily involve

significant estimates

and judgments

and, accordingly,

would be

imprecise. When we

refer to the

research and development

expenses associated with

a specific program,

these refer exclusively

to the

allocated

third-party

expenses

associated

with

that

product

candidate.

All

other

research

and

development

costs

are

referred

unallocated costs.

Product candidates in later

stages of clinical development

generally have higher development costs

than those in earlier

stages of clinical

development,

primarily

due

the

increased

size

and

duration

later-stage

clinical

trials.

Additionally,

greater

research

and

development overhead is required to support

broader and more rapid

development of our Vaxxine Platform and new product candidates.

As a result, we expect that our research and development expenses could increase if we continue our existing and planned clinical trials

and conduct

increased pre-clinical

and clinical

development activities,

including submitting

regulatory filings

for product

candidates,

and focus more generally on the development of our chronic disease product

candidates.

At this

time, we

cannot reasonably

estimate or know

the nature,

timing and

costs of

the efforts

that will be

necessary to

complete the

pre-clinical and clinical development of any of our

product candidates or when, if ever,

material net cash inflows may commence from

any of our product candidates.

General and Administrative Expenses

General

and

administrative

expenses

consist

primarily

salaries

and

benefits,

travel

and

stock-based

compensation

expense

for

personnel

executive,

business

development,

finance,

human

resources,

legal,

information

technology,

public

relations,

communications and

administrative functions.

General and administrative

expenses also include

insurance costs and

professional fees

for

legal,

patent,

consulting,

investor

and

public

relations,

accounting

and

audit

services

and

other

general

operating

expenses

not

otherwise classified as research and development expenses. We

expense general and administrative costs as incurred.

In the event UB-612 obtains regulatory approval and we subsequently commence commercialization of this product, we expect general

and administrative

expenses will

increase. We

will continue

to incur

public company-related

expenses, including

services associated

with maintaining compliance with Nasdaq listing and SEC requirements, director and officer liability insurance and investor and public

relations costs.

Other Expense (Income)

Interest Expense

Interest expense consists of

interest incurred on (i)

the note entered into

during June 2020 for

the acquisition of an

airplane (the “2025

Note”) and (ii) the related party promissory note (the “2022 Promissory

Note”) entered into during 2022.

Interest Income

Interest income consists of income earned on our cash and cash equivalents, money

market holdings, and short-term investments.

(Gain) Loss on Foreign Currency

Translation, Net

Our foreign subsidiaries, which are

wholly-owned by the Company, use the

U.S. dollar as their

functional currency and maintain records

the

local

currency.

Nonmonetary

assets

and

liabilities

are

remeasured

historical

rates

and

monetary

assets

and

liabilities

are

remeasured at exchange rates in

effect at the end

of the reporting period. Income

statement accounts are remeasured at

average exchange

rates for the reporting

period. The resulting gains or

losses are included in

foreign currency losses (gains)

in the consolidated financial

statements.

Provision for Income Taxes

We have not recorded any significant amounts related to income tax but have reserved $0.7 million of unrecognized tax

benefits against

NOLs. We have not

recorded any income tax benefits for the majority of our net losses we incurred to date.

account for

income taxes

using the

asset and

liability method,

which requires

the recognition of

deferred tax

assets and

liabilities

for the expected future tax consequences of events that have been included

in the consolidated financial statements or our tax returns.

Deferred tax assets and liabilities are

determined based on the difference between the

financial statement carrying amounts and tax basis

of existing assets and liabilities and for loss and credit carryforwards, which are measured using the enacted tax rates and laws in effect

in the years in which the differences are expected to reverse. The realization of our deferred tax assets is dependent upon the generation

of future taxable income, the amount and timing of which are uncertain. Valuation allowances are provided if, based upon the weight of

available evidence, it

is more likely

than not that

some or all

of the deferred

tax assets will not

be realized. As

of March 31,

2023, we

continue to maintain

a full valuation allowance

against all of our

deferred tax assets based

on evaluation of

all available evidence.

file income tax returns in the U.S.

federal and state jurisdictions and may become subject to

income tax audit and adjustments by related

tax authorities. Our

tax return periods (for

entities then in existence)

for U.S. federal

income taxes for the

tax years since 2017

remain

open

to examination

under the

statute of

limitations by

the

Internal

Revenue

Service

and state

jurisdictions.

record

reserves

for

potential tax payments to various tax authorities related to

uncertain tax positions, if any. The nature of uncertain tax positions

is subject

to significant judgment

by management and

subject to change, which

may be substantial. These

reserves are based

on a determination

of whether

and how

much a

tax benefit

taken by

us in our

tax filings

or positions

is more

likely than

not to

be realized

following the

resolution

any

potential

contingencies

the

tax

benefit.

develop

our

assessment

uncertain

tax

positions,

and

the

associated cumulative probabilities, using internal expertise and assistance from third-party experts. As additional information becomes

available, estimates

are revised

and refined.

Differences between

estimates and

final settlement

may occur

resulting in

additional tax

expense. Potential interest

and penalties associated

with such uncertain

tax positions are

recorded as a

component of our provision

for

income taxes.

Condensed Consolidated Results of Operations

The following is a summary of our unaudited condensed consolidated results

of operations:

Three Months Ended March 31,

(In thousands)

2023

2022

Change $

Change %

Operating expenses:

Research and development

11,424

11,478

(54)

(0)

General and administrative

7,384

6,686

698

Total operating expenses

18,808

18,164

644

Loss from operations

(18,808)

(18,164)

(644)

Other (income) expense:

Interest expense

192

105

Interest income

(567)

(5)

(562)

11,240

(Gain) loss on foreign currency translation, net

(12)

(1)

(11)

1,081

Total other (income)

expense, net

(387)

(486)

(491)

Net loss

(18,421)

(18,263)

(158)

Comparison of the Three Months Ended March 31, 2023 and 2022

Research and Development Expenses

Research

and

development

expenses

were

$11.4

million

and

$11.5

million

for

the

three

months

ended

March 31,

2023

and

2022,

respectively.

The $0.1

million decrease

was comprised

of a

$0.1 million

increase

in allocated

costs (i.e.,

costs that

can be

directly

attributed to

specific clinical program)

and a $0.2 million decrease

in unallocated costs. The increase

in allocated cost was due

to increases in costs

for our VXX-401 hypercholesteremia program,

platform development and activities supporting

multiple programs totaling $1.2 million,

partially

offset

decreases

costs

our

UB-612

COVID-19

vaccine

program,

UB-312

program

and

UB-313

CGRP

program totaling $1.1 million.

The $0.2 million decrease

in unallocated costs was driven

by a decrease in salaries

and personnel costs,

and consulting and external contractor services supporting research and development activities across the

pipeline,

partially offset by an

increase in travel expenses.

General and Administrative Expenses

General

and

administrative

expenses

were

$7.4

million

and

$6.7

million

for

the

three

months

ended

March 31,

2023

and

2022,

respectively.

The $0.7 million increase was primarily due to increases in professional and consulting services,

travel expenses, salaries and personnel

costs, and depreciation related

to assets placed in

service primarily at our

Florida lab, partially offset by

a decrease in director

and officer

insurance expense of $0.4 million.

Interest Expense

Interest expense was $0.2 million and $0.1 million for the three months ended

March 31, 2023 and 2022, respectively.

Interest Income

Interest income on

cash and short-term

investments was $0.6

million and less

than $0.1 million

for the three

months ended March 31,

2023 and 2022, respectively.

(Gain) Loss on Foreign Currency Translation, Net

The net (gain) loss on foreign currency translation reflects de minimis fluctuations

in the foreign exchange rate.

Liquidity and Capital Resources

Sources of Liquidity

We have not yet obtained regulatory

approval for or commercialized any of our product candidates, which are in various phases of pre-

clinical and clinical development. We

have financed operations primarily through

the issuance of common stock, convertible preferred

stock, borrowings under promissory notes (including the Convertible Notes) and the execution of SAFEs. Through March 31, 2023, we

received gross proceeds of $306.4

million in connection with

various financing transactions, including the

sale of preferred and

common

stock, the issuance of

promissory notes (including Convertible

Notes), and the execution

of SAFEs. As

of March 31, 2023, we

had $67.7

million

of cash,

cash equivalents

and

short-term securities

to fund

operations,

including $22.6

million of

cash and

cash equivalents,

$45.0 million of short-term investments, and

a $0.1 million restricted

cash balance, compared to $87.9 million

as of December 31, 2022.

The decrease in cash, cash equivalents and short-term securities for the

periods reported are primarily due to the factors described under

“Cash Flows” below.

Cash Flows

The following table provides information regarding our cash flows

for the three months ended March 31, 2023 and 2022

(in thousands):

March 31,

December 31,

2023

2022

Balance Sheet Data:

Cash and cash equivalents

22,585

33,475

Short-term investments, net

44,993

53,352

Restricted cash

100

1,095

Total assets

85,531

106,399

Total liabilities

39,398

44,222

Total stockholders' equity

46,133

62,177

Three Months Ended March 31,

2023

2022

Statement of Cash Flow Data:

Net cash (used in) provided by operating activities

(20,051)

(19,514)

Net cash (used in) provided by investing activities

8,740

(713)

Net cash (used in) provided by financing activities

(574)

Net (decrease) in cash, cash equivalents and restricted cash

(11,885)

(20,213)

Operating Activities

Net cash used

in operating activities

for the three

months ended March

31, 2023 was

$20.1 million, primarily

resulting from an

$18.4

million

net loss,

an unfavorable

$4.0 million

change in

operating

assets and

liabilities and

total non-cash

items of

$2.4 million.

The

changes in

net operating

assets and liabilities

were primarily

due to a

decrease of $0.1

million in amounts

due to related

party,

a $1.9

million

decrease

accrued

expenses

and

other

current

liabilities,

and

$0.3

million

decrease

prepaid

expenses.

The

non-cash

adjustments

to net loss primarily consisted of $2.2 million of stock-based compensation

and $0.6 million in depreciation.

Net

cash used

in operating

activities for

the three

months ended

March

31, 2022

was $19.5

million, primarily

resulting

from

a $18.3

million net

loss, an

unfavorable $3.8

million change

in operating assets

and liabilities

and total

non-cash items

of $2.5

million. The

changes in net

operating assets and

liabilities were primarily

due to

a decrease of

$2.6 million in

amounts due

to related party,

a $1.3

million increase in accrued expenses and other

current liabilities, a $1.7 million decrease

in accounts payable and other liabilities, a

$0.7

million decrease in

prepaid expenses, and

a $1.4 million

decrease in long-term deposits.

The primary non-cash

adjustments to net loss

consisted of $2.2 million of stock-based compensation and $0.3

million in depreciation.

Investing Activities

Net cash provided

by investing activities

totaled $8.7 million

for the three

months ended March 31,

2023. The cash

provided by investing

activities consisted primarily

of the acquisition

and redemption

of short-term investments,

and the

acquisition of laboratory

and computer

equipment.

Net cash used

in investing activities

totaled $0.7 million for

the three months

ended March 31,

2022. The cash

used in investing

activities

consisted primarily of the acquisition of equipment.

Financing Activities

Net cash used by financing activities was less than $0.6 million for the three months

ended March 31, 2023.

Net cash used by financing activities was less than $0.1 million for the three

months ended March 31, 2022.

Funding Requirements

have incurred

net losses

in each

reporting period

since inception.

do not

expect to

generate any

revenue unless

and until

obtain regulatory approval of and commercialize our product candidates, or enter into collaboration or licensing arrangements with one

or more third-party

strategic partners. We

do not know when,

or if, this will

occur. We

will continue to incur

significant losses for the

foreseeable future even

if we ultimately receive

regulatory approval for

one or more of

our product candidates

and commercialize any

approved

products,

and

we expect

the losses

increase

as we

continue

the development

of,

and

seek regulatory

approvals

for,

our

product candidates and begin to commercialize any approved products.

As of the

date of this

Quarterly

Report, we expect

our existing cash,

cash equivalents and

short-term investments

will be sufficient

fund our operating expenses for at least the next 12 months and into mid-2024. As of March 31, 2023, other than our 2025 Note and the

2022 Promissory Note, we have no material debt obligations.

We have

based our projections of operating capital

requirements on assumptions that may

prove to be incorrect, and we may

use all of

our available capital resources sooner than we expect. Our future capital

requirements will depend on many factors, which include:

•

the scope, number, progress, initiation,

duration, cost, results and timing of clinical trials, pre-clinical programs

and

nonclinical studies of our current or future product candidates;

•

the outcomes and timing of regulatory reviews, approvals or other

actions;

•

the timing and manner in which we manufacture our pre-clinical and clinical

drug material, the terms on which we can have

such manufacturing completed, and the extent to which we undertake commercialization

of any drug products, if approved;

•

the extent to which we establish sales, marketing, medical affairs

and distribution infrastructure to commercialize any product

candidates;

•

the timing and extent to which we expand our operational, financial and management

systems and infrastructure, and

facilities;

•

the timing and extent to which we increase our personnel to support operations,

including necessary increases in headcount to

conduct and expand our clinical trials, commercialize any approved products and support

our operations as a public

company;

•

the number of patent applications we must file and claims we must defend in order

to maintain, expand and protect our

intellectual property portfolio, and the costs of preparing, filing and prosecuting

patent applications, maintaining and

protecting our intellectual property rights;

•

our ability to obtain marketing approval for our product candidates;

•

our ability to establish and maintain additional licensing, collaboration or

similar arrangements on favorable terms and

whether and to what extent we retain development or commercialization responsibilities

under any new licensing,

collaboration or similar arrangement;

•

the success of any other business, product or technology that we acquire or in

which we invest;

•

our ability to maintain, expand and defend the scope of our intellectual property

portfolio;

•

the current and potential impacts of the Russia-Ukraine conflict, the COVID-19

pandemic, inflation and rising interest rates

on our business;

•

the costs of acquiring, licensing or investing in businesses, product

candidates and technologies;

•

market acceptance of our product candidates, to the extent any are approved for

commercial sale; and

•

the effect of competing technological and market developments.

Until such time, if ever, as we

can generate positive cash flows from operations,

we expect to finance our cash needs through public or

private equity offerings, strategic collaborations and debt financing. To the extent that we raise additional capital through the sale

of our

Class A common

stock, convertible securities or

other equity securities,

stockholders’ ownership interest

will be diluted and

the terms

of these securities

could include liquidation

or other preferences

and anti-dilution protections.

In addition, debt

financing, if available,

may

result in

fixed

payment

obligations

and

may

involve agreements

that include

restrictive

covenants

that limit

our

ability to

take

specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring dividends.

If we raise additional

funds through strategic collaborations

or marketing, distribution

or licensing arrangements

with third parties, we

may have to relinquish valuable rights to our technologies,

future revenue streams or product candidates or grant licenses on

terms that

may

not

favorable

us.

are

unable

raise

additional

funds

when

needed,

may

required

delay,

limit,

reduce

terminate our product

candidate development or

future commercialization efforts

or grant rights

to third parties to

develop and market

product candidates that we would otherwise prefer to develop and market

ourselves.

Contract Research and Manufacturing Organizations

recorded accrued

expenses of $4.8

million in our

balance sheet for

expenditures incurred

by CROs and

contract manufacturers

of March 31, 2023 and $4.3 million as of December 31, 2022.

Tax

-Related Obligations

We have reserved $0.7 million of unrecognized tax benefits against NOLs. Additionally, as of March 31, 2023, we accrued $0.2 million

in interest and penalties related to prior year tax filings.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and do not

currently have, any off-balance sheet arrangements, as defined in

the rules and

regulations of the SEC.

Critical Accounting Policies and Estimates

The preparation of financial statements

in accordance with GAAP requires

management to make estimates and

assumptions that affect

the amounts

reported

in our

unaudited

condensed

consolidated financial

statements and

accompanying

notes. Management

bases its

estimates on

historical experience,

market and

other conditions,

and various

other assumptions

it believes

to be

reasonable. Although

these estimates are based

on management’s best knowledge of current events and actions

that may impact us

in the future, the

estimation

process

is,

its

nature,

uncertain

given

that

estimates

depend

events

over

which

may

not

have

control.

addition,

our

assumptions change,

we may

need to

revise our

estimates, or

take other

corrective actions,

either of

which may

also have

a material

effect on our unaudited condensed consolidated financial statements. Significant estimates contained within

these unaudited condensed

consolidated

financial

statements

include,

but

are

not

limited

to,

the

estimated

fair

value

our

common

stock,

stock-based

compensation,

income

tax

valuation

allowance

and

the

accruals

research

and

development

expenses.

base

our

estimates

historical

experience,

known

trends

and

other

market-specific

other

relevant

factors

that

believe

reasonable

under

the

circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in facts and circumstances. If market and

other conditions

change from

those that

we anticipate,

our unaudited

condensed consolidated

financial statements

may be

materially

affected.

While

our

significant

accounting

policies

are

described

detail

our

annual

consolidated

financial

statements

for

the

year

ended

December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2022, we believe

that the following

critical accounting policies and estimates have a higher degree of inherent uncertainty

and require our most significant judgments.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we

are required to estimate accrued research and development

expenses.

As we

advance

our

programs,

anticipate

complex

clinical

studies

resulting

greater

research

and development

expenses, which will

place even greater emphasis

on the accrual. This

process involves reviewing

open contracts and purchase

orders,

communicating with

our applicable

personnel to

identify services

that have

been performed

on our

behalf and

estimating the

level of

service performed

and the associated

cost incurred for

the service when

we have not

yet been invoiced

or otherwise notified

of actual

costs. In the past years, UBI and its affiliated companies performed and administered a significant amount of research and development

work on our

behalf.

Having UBI and

its affiliated

company act as

intermediaries added

to the complexity

of determining appropriate

accruals,

and

we have

largely moved

away from

this model.

Certain accruals

and

amounts owed

to the

UBI entities

are still

under

review, and these amounts may

change as a result of this review.

The

majority

our

service

providers

invoice

arrears

for

services

performed,

pre-determined

schedule

when

contractual

milestones are met; however, some require advance payments. We

make estimates of accrued expenses as of each balance sheet date in

the consolidated financial statements

based on facts and circumstances

known to us at that

time. We

periodically confirm the accuracy

of the estimates with

the service providers and

make adjustments if necessary. Examples of estimated

accrued research and development

expenses include fees paid to:

•

vendors, including research laboratories, in connection with pre-clinical

development activities;

•

CROs and investigative sites in connection with pre-clinical studies and

clinical trials; and

•

contract manufacturers in connection with drug substance and drug product

formulation of pre-clinical studies and clinical

trial materials.

base our

expenses related

to pre-clinical

studies and

clinical trials

on our

estimates of

the services

received and

efforts expended

pursuant to quotes and contracts with multiple research institutions and CROs that supply,

conduct and manage pre-clinical studies and

clinical trials on our behalf.

The financial terms of these

agreements are subject to

negotiation, vary from contract

to contract and may

result

uneven

payment

flows.

There

may

instances

which

payments

made

our

vendors

will

exceed

the

level

services

provided and result

in a prepayment

of the expense.

Payments under some

of these contracts

depend on factors

such as the

successful

enrollment of patients

and the completion of

clinical trial milestones. In

accruing service fees, we

estimate the time period

over which

services will be performed

and the level of

effort to be

expended in each

period. If the actual

timing of the

performance of services

the level

of effort

varies from

the estimate,

it adjusts

the accrual

or the

prepaid expense

accordingly.

Although we

do not

expect our

estimates to

be materially

different from

amounts actually

incurred, our

understanding of

the status

and timing

of services performed

relative to the actual status and timing of services performed may vary and may result in reporting amounts

that are too high or too low

in any particular period. To

date, our estimated accruals have not differed materially from actual costs incurred.

Stock-Based Compensation

We measure all stock-based awards granted to employees, directors and non-employees based on their fair

value on the date of the

grant

and recognize the corresponding compensation expense of those awards over the requisite service period, which is

generally the vesting

period of the respective award. Forfeitures are accounted for as they occur. We

grant stock options and restricted stock unit awards that

are subject to service vesting conditions.

classify stock-based

compensation expense

in our

consolidated statements

of operations

in the

same manner

in which

the award

recipient’s payroll costs are classified

or in which the award recipient’s

service payments are classified.

We estimate the fair value of each stock

option grant using the Black-Scholes

option-pricing model, which requires the use

of subjective

assumptions

that

could

materially

impact

the

estimation

fair

value

and

compensation

expense

recognized.

These

assumptions include (i) the expected volatility of our stock

price, (ii) the periods of time over

which recipients are expected to hold their

options prior to exercise (expected lives), (iii) expected dividend yield on our common stock, and (iv) risk-free interest rates, which

are

based

quoted

U.S.

Treasury

rates

for

securities

with

maturities

approximating

the

options’

expected

lives.

Developing

these

assumptions

requires

the

use

judgment.

Both

prior

and

after

our

initial

public

offering

(“IPO”),

lacked

company-specific

historical and implied volatility

information. Therefore, we estimate

our expected stock volatility

based on the historical

volatility of a

publicly

traded

set of

peer

companies.

The

expected

term of

the

Company’s

options

has been

determined

utilizing

the “simplified”

method

for

awards

that

qualify

“plain-vanilla”

options.

The

expected

term

options

granted

non-employees

equal

the

contractual term of the

option award. The

expected dividend yield is

zero as we

have never paid dividends

and do not

currently anticipate

paying any in the foreseeable future.

Coalition for Epidemic Preparedness

(“CEPI”) Grant

In April 2022, we entered into an agreement with the Coalition for Epidemic

Preparedness Innovations (“CEPI”) whereby CEPI

agreed to provide funding of up to $9.3 million to co-fund a Phase 3 clinical trial of

our UB-612 COVID-19 vaccine candidate as a

heterologous – or ‘mix-and-match’ – booster dose. The Phase 3 trial, which

began in early 2022, is evaluating the ability of UB-612 to

boost COVID-19 immunity against the original strain and multiple variants

of concern, including Omicron, in people aged 16 years or

older who have been previously immunized with an authorized COVID-19

vaccine.

We will also be performing

further manufacturing scale-up work to enable readiness for potential commercialization.

Under the terms

of the agreement with CEPI, if successful, a portion of the released doses of the commercial

product will be allocated for delivery to

the COVID-19 Vaccines

Global Access (“COVAX”)

consortium for distribution to developing countries at low cost.

Cash payments received in advance under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in

the funding agreement are incurred. As funds are received, they are included within restricted cash offset by a corresponding short-term

accrued liability.

recognize payments

from CEPI

as a

reduction of

research and

development expenses,

in the

same period

as the

expenses that the grant is intended to reimburse are incurred.

Item 3. Quantitative and Qualitative Disclosures About

Market Risk.

are exposed

to market risk

in the ordinary

course of our

business. These

risks primarily

relate to

foreign currency

and changes

interest rates.

Foreign Currency Exchange

Risk

have

limited

exposure

foreign

currency

exchange

risk

most

our

operating

activities

are

primarily

denominated

U.S.

dollars. We believe actual foreign

exchange gains and

losses did not

have a significant

impact on our

results of operations

for any periods

presented herein.

The results

of the

analysis based

on our

financial position

as of

March 31, 2023,

indicated that

a hypothetical

10%

increase or decrease in applicable foreign currency exchange rates would not

have a material effect on our financial results.

Interest Rate Risk

We are

exposed to market risk related

to changes in interest rates. As of

March 31, 2023 and December 31,

2022, our cash equivalents

consisted

interest-bearing

checking

accounts

and

money

market

accounts.

The

2025

Note

entered

into

for

the

year

ended

December 31, 2020

bears a

fixed annual

interest rate

of 3.4%

and matures

in June

2025. Additionally,

the 2022

Promissory Note

entered into for

the year ended December

31, 2022 bears a fixed

annual interest rate of

7.0% and matures in

October 2026. Given

that

the 2025 Note

and the 2022

Promissory Note bear

fixed rates of

interest, we believe

there is no

material exposure to

interest rate risk.

The results of

the analysis based

on our financial

position as of

March 31, 2023, indicated

that a hypothetical

100 basis point

increase

or decrease in risk-free rates would not have a material effect

on our financial results.

Our measurement of

interest rate risk involves

assumptions that are

inherently uncertain and,

as a result,

we cannot precisely

estimate

the impact of

changes in interest

rates on net

interest revenues.

Actual results may

differ from

simulated results due

to changes in

the

amount of our

cash equivalents

and the timing,

magnitude, and

frequency of interest

rate changes, as

well as

changes in market

conditions

and management strategies, including changes in asset and liability mix.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal

financial officer, evaluated, as of the end of the

period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures

(as defined in Rules

13a-15(e)

and 15d-15(e)

under the

Exchange Act).

In designing

and evaluating

our disclosure

controls and

procedures, management

recognizes

that

any

controls

and

procedures,

matter

how

well

designed

and

operated,

can

provide

only

reasonable

assurance

achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are

resource constraints, and that management

is required to apply judgment

in evaluating the benefits of possible

controls and procedures

relative to their costs. Based on management’s evaluation, our principal executive officer and principal financial officer

concluded that,

as of March 31, 2023, our disclosure controls and procedures were effective

at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange

Act) during

the quarter

ended March 31,

2023 that

have materially

affected, or

are reasonably

likely to

materially affect,

our internal

control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management,

including the principal

executive officer and

principal financial officer,

does not expect

that our disclosure

controls

our

internal

control over

financial

reporting

will prevent

or detect

all error

and

all fraud.

A control

system,

no matter

how

well

designed and operated, can provide only reasonable,

not absolute, assurance that the control

system's objectives will be met.

The design

of a control

system must reflect

the fact that

there are resource

constraints, and

the benefits of

controls must

be considered

relative to

their costs.

Further, because of the inherent limitations

in all control systems, no evaluation of controls can provide

absolute assurance

that misstatements due to error

or fraud will not occur

or that all control issues and

instances of fraud, if any,

have been detected.

The

design

any

system

controls is

based

part

certain

assumptions

about

the

likelihood

of future

events,

and

there

can

assurance that any design

will succeed in achieving its stated

goals under all potential

future conditions.

Projections of any evaluation

of the effectiveness of controls to future periods are subject to risks.

Over time, controls may become inadequate because of changes in

conditions or deterioration in the degree of compliance with policies or

procedures.

PART

II – OTHER INFORMATION

Item 1A. Risk Factors.

There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31,

2021, filed with the Securities and Exchange Commission on March 27, 2023.

Item 6. Exhibits.

The following exhibits

required by Item 601

of Regulation S-K

are filed herewith

or have been

filed previously with

the SEC as

indicated

below:

Exhibit

No.

Index to Exhibits

3.1

Amended and Restated Certificate of Incorporation of Vaxxinity, Inc. (incorporated by reference to Exhibit 3.1 of our

Current Report on Form 8-K (File No. 001-41058) filed on November 17, 2021).

3.2

Amended and Restated Bylaws of Vaxxinity , Inc. (incorporated by reference to Exhibit 3.2 of our Current Report on

Form 8-K (File No. 001-41058) filed on November 17, 2021).

4.1

Warrant to Purchase Shares of Class A Common Stock of Vaxxinity, Inc. (incorporated by reference to Exhibit 4.1 of

our Registration Statement on Form S-1/A (File No. 333-260163) filed on November 5, 2021).

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1

Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-

Oxley Act of 2002**

101.INS

Inline XBRL Instance Document*

101.SCH

Inline XBRL Taxonomy

Extension Schema Document*

101.CAL

Inline XBRL Taxonomy

Extension Calculation Linkbase Document*

101.DEF

Inline XBRL Taxonomy

Extension Definition Linkbase Document*

101.LAB

Inline XBRL Taxonomy

Extension Label Linkbase Document*

101.PRE

Inline XBRL Taxonomy

Extension Presentation Linkbase Document*

104

Cover Page Interactive Data File (the cover page XBRL tags are embedded

within the Inline XBRL document).*

__________________________

Filed herewith.

Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf

by the undersigned, thereunto duly authorized on May 9, 2023.

VAXXINITY,

INC.

By:

/s/ Mei Mei Hu

Mei Mei Hu,

President and Chief Executive Officer

(Principal executive officer)

By:

/s/ Jason Pesile

Jason Pesile

Senior Vice President, Finance &

Accounting

(Principal

financial

officer

and

principal

accounting

officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	6th grade Good

Vaxxinity (VAXX) 10-Q2023 Q1 Quarterly report

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