Vaxart Inc

VAXART****, INC.**

NOTE1. Organization and Nature of Business

General

Vaxart Biosciences, Inc. was originally incorporated in California in* March2004,* under the name West Coast Biologicals, Inc. The Company changed its name to Vaxart, Inc. (“Private Vaxart”) in* July2007,* and reincorporated in the state of Delaware. In* February 2018,*Private Vaxart completed a business combination with Aviragen Therapeutics, Inc. (“Aviragen”), pursuant to which Aviragen merged with Private Vaxart, with Private Vaxart surviving as a wholly-owned subsidiary of Aviragen (the “Merger”). Pursuant to the terms of the Merger, Aviragen changed its name to Vaxart, Inc. (together with its subsidiaries, the “Company” or “Vaxart”) and Private Vaxart changed its name to Vaxart Biosciences, Inc.

In* June**2024,* the Company entered into an underwriting agreement with Oppenheimer & Co. Inc., relating to the issuance and sale by the Company in an underwritten registered direct offering of 50,000,000 shares of the Company’s common stock, at a price of $0.80 per share. The gross proceeds to the Company from such offering were $40.0 million, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, the net proceeds were $37.5 million.

In* January**2024,* the Company entered into a securities purchase agreement (the*“2024* Securities Purchase Agreement”) with RA Capital Healthcare Fund, L.P. pursuant to which 15,384,615 shares of the Company's common stock were sold to RA Capital Healthcare Fund, L.P. at an offering price of $0.65 per share pursuant to the Company’s shelf registration statement on Form S-3 (FileNo. 333-270671) (the*“2023* Shelf Registration”). The gross proceeds from the2024 Securities Purchase Agreement were $10.0 million and, after deducting offering expenses, the net proceeds were $9.9 million.

In* September2021,* the Company entered into a Controlled Equity Offering Sales Agreement (the* “September 2021ATM”), pursuant to which it mayoffer and sell, from time to time through Cantor Fitzgerald & Co. and B. Riley Securities, Inc. (together, the “sales agents”), shares of its common stock having an aggregate offering price of up to $100 million. The Company filed a prospectus supplement with the SEC on September 16, 2021,a subsequent prospectus supplement with the SEC on May 9, 2023and paid sales commissions of up to 3.0% of gross proceeds from the sale of shares. In thenine* months ended* September30,* 2024, 7,719,641 shares were issued and sold under the* September 2021ATM for gross proceeds of $9.1 million, which, after deducting sales commissions and expenses incurred to date, resulted in net proceeds of $8.8 million. Since September*30,* 2024,* the Company hasnot raised any additional capital under the* September 2021ATM. Effective October 18, 2024,the September 2021ATM was terminated as further detailed in Note12*.

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

NOTE2. Summary of Significant Accounting Policies

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

The Company is a clinical-stage biotechnology company withno product sales. Its primary source of capital is from the sale and issuance of common stock and common stock warrants as well as funding from the Biomedical Advanced Research and Development Authority (“HHS BARDA”), a division of the Administration for Strategic Preparedness and Response (“ASPR”) within the United States (“U.S.”) Department of Health and Human Services. As of* September**30,* 2024, the Company had cash, cash equivalents and short-term investments of $58.7 million.

Based on management’s current plan, the Company expects to have cash runway into2026. The Company will be dependent upon raising additional capital through placement of its common stock, notes or other securities, borrowings, or entering into a partnership with a strategic party in order to implement its business plan. There can beno assurance that the Company will be successful raising additional capital in order to continue as a going concern.

The condensed consolidated balance sheet as of* December 31, 2023,included in this document, was derived from audited financial statements, but doesnot* include all disclosures required by U.S. GAAP. Certain information and footnote disclosures normally included in consolidated financial statements have been condensed or omitted pursuant to these rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes related thereto for the year ended* December**31,* 2023, included in the Company’s Annual Report on Form10-K filed with the SEC on* March 14, 2024 (the “Annual Report”). Unless noted below, there have beenno* material changes to the Company’s significant accounting policies described in Note2 to the consolidated financial statements included in the Annual Report. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position and the results of its operations and cash flows. The results of operations for such interim periods arenot necessarily indicative of the results to be expected for the full year or any future periods.

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

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

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

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

Revenue Recognition

Under firm fixed-price milestone contracts, the Company recognizes the firm fixed-price revenue as the milestones are substantially complete and the firm fixed-price for the milestone is earned (“firm fixed-price milestone”). Under cost reimbursable contracts, the Company recognizes revenue as allowable costs are incurred and the fixed fee is earned (“cost-plus-fixed-fee”). Reimbursable costs under the contract primarily include direct labor, subcontract costs, materials, equipment, travel, and approved overhead and indirect costs. Fixed fees under cost reimbursable contracts are earned in proportion to the allowable costs incurred in performance of the work relative to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed, as detailed in Note5.

Payments to the Company under cost reimbursable contracts are provisional payments subject to adjustment upon annual audit by the government. Management believes that revenue for periodsnot yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billings* may*be adjusted accordingly in the period that the adjustment is known.

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Recent Accounting Pronouncements

The Company has reviewed all significant newly-issued accounting pronouncements that arenot yet effective and concluded that they are eithernot applicable to its operations or their adoption isnot expected to have a material impact on its financial position or results of operations.

NOTE3**.Fair Value of Financial Instruments **

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

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

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

Level1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that arenot active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little orno market data.

The following table sets forth the fair value of the Company’s financial assets that are measured on a recurring basis as of* September 30, 2024* and* December 31, 2023* (in thousands):

The Company heldno financial liabilities measured on a recurring basis as of* September 30, 2024* or* December 31, 2023*.

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NOTE4**.**Balance Sheet Components

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

As of* September**30,* 2024 and* December 31, 2023,all investments were available-for-sale debt securities with remaining maturities of12* months or less.

Accounts receivable consists of $0.55 million of government contract receivables from HHS BARDA, and $40,000 royalty receivable totaling $0.59 million as of* September**30,* 2024 and a total of $3.0 million of accounts receivable for royalties as of* December 31, 2023.For further information on HHS BARDA receivables, see Note5*.

An allowance for expected credit losses over the life of the receivables is reserved for based on a combination of historical experience, aging analysis, current economic trends and information on specific accounts, with related amounts recorded as a reserve against revenue recognized. The reserve is re-evaluated on a regular basis and adjusted as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. The Company has providedno allowance for credit losses as of* September**30,* 2024 and* December 31, 2023.*

Unbilled receivable, which was earned andnot yet billed, consists of government contracts from HHS BARDA of $3.1 million andzero as of* September**30,* 2024 and* December 31, 2023,respectively, as detailed in Note5*.

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

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

Depreciation expense was $1.0 million for each of thethree months ended* September 30,* 2024 and2023, and $2.8 million for each of thenine months ended* September**30,* 2024 and2023. There wereno impairments of the Company’s property and equipment recorded in thethree andnine months ended* September 30,* 2024 or2023.

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Prepaid clinical services, long-term were $60.1 million andzero as of* September 30, 2024and December 31, 2023,respectively. The long-term prepaid clinical services represent amounts the Company has paid to clinical research organizations that will be utilized in overone* year.

Right-of-use assets, net are comprised of facilities of $21.5 million and $24.8 million as of* September 30, 2024* and* December 31, 2023*, respectively. The right-of-use of additional leased premises in California commenced in2023, resulting in an additional $3.1 million right-of-use assets recorded in the year ended* December 31, 2023.*

Intangible assets are comprised of developed technology and intellectual property. Intangible assets are carried at cost less accumulated amortization. As of* September 30, 2024*, developed technology and intellectual property had remaining lives of 5.1 years and 3.3 years, respectively. As of* September**30,* 2024, there have beenno indicators of impairment. Intangible assets consist of the following (in thousands):

Intangible asset amortization expense was $0.1 million and $0.2 million for thethree months ended* September30,* 2024 and2023, respectively, and $0.5 million for each of thenine months ended* September30,* 2024 and2023.

As of* September 30, 2024*, the estimated future amortization expense by year is as follows (in thousands):

Goodwill, which represents the excess of the purchase price over the fair value of assets acquired, was$4.5 million as of both* September 30, 2024* and* December 31, 2023*. As of* September 30, 2024*, there have beenno indicators of impairment.

Deferred government revenue represents amounts received from HHS BARDA contracts where the earnings process isnot yet complete. The Company will recognize deferred government revenue once the earnings process is complete. Deferred government revenue was $65.4 million andzero as of* September 30, 2024and December 31 2023,*respectively.

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

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