Altimmune, Inc. 10-Q

Item 1. Financial Statements ALTIMMUNE, INC. CONSOLIDATED BALANCE SHEETS March 31, 2021 December 31, 2020 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 149,932,387 $ 115,917,807 Restricted cash 34,174 34,174 Total cash, cash equivalents and restricted cash 149,966,561 115,951,981 Short-term investments 76,574,768 100,005,558 Accounts receivable 4,801,428 4,610,202 Tax refund receivable 7,898,067 7,762,793 Prepaid expenses and other current assets 5,950,999 1,926,675 Total current assets 245,191,823 230,257,209 Property and equipment, net 5,198,052 1,056,920 Right of use asset 866,336 903,825 Intangible assets, net 12,879,247 12,823,846 Other assets 115,300 73,413 Total assets $ 264,250,758 $ 245,115,213 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 418,243 $ 612,293 Accrued expenses and other current liabilities 9,405,649 11,408,154 Total current liabilities 9,823,892 12,020,447 Contingent consideration 6,270,000 5,390,000 Other long-term liabilities 1,719,438 1,828,443 Total liabilities 17,813,330 19,238,890 Commitments and contingencies (Note 16) Stockholders’ equity: Common stock, $0.0001 par value; 200,000,000 shares authorized; 38,257,180 and 37,142,946 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 3,810 3,697 Additional paid-in capital 462,417,706 417,337,742 Accumulated deficit (210,944,707 ) (186,420,599 ) Accumulated other comprehensive loss, net (5,039,381 ) (5,044,517 ) Total stockholders’ equity 246,437,428 225,876,323 Total liabilities and stockholders’ equity $ 264,250,758 $ 245,115,213 The accompanying notes are an integral part of the unaudited consolidated financial statements. 1 ALTIMMUNE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) For the Three Months Ended March 31, 2021 2020 Revenues $ 837,516 $ 2,212,694 Operating expenses: Research and development 11,877,900 7,187,531 General and administrative 3,821,420 2,331,917 Total operating expenses 15,699,320 9,519,448 Loss from operations (14,861,804 ) (7,306,754 ) Other income (expense): Interest expense (11,671 ) (1,885 ) Interest income 42,499 151,569 Other (expense) income, net (33,132 ) 25,542 Total other (expense) income, net (2,304 ) 175,226 Net loss before income tax benefit (14,864,108 ) (7,131,528 ) Income tax benefit — 3,245,879 Net loss (14,864,108 ) (3,885,649 ) Other comprehensive income (loss) – unrealized gain (loss) on investments 5,136 (32,435 ) Comprehensive loss $ (14,858,972 ) $ (3,918,084 ) Net loss per share, basic and diluted $ (0.38 ) $ (0.26 ) Weighted-average common shares outstanding, basic and diluted 38,914,990 15,110,585 The accompanying notes are an integral part of the unaudited consolidated financial statements. 2 ALTIMMUNE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited) Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Total Stockholders’ Shares Amount Capital Deficit Loss Equity Balance at December 31, 2020 37,142,946 $ 3,697 $ 417,337,742 $ (186,420,599 ) $ (5,044,517 ) $ 225,876,323 Stock-based compensation — — 1,218,351 — — 1,218,351 Vesting of restricted stock awards including withholding, net (6,349 ) 1 (92,507 ) — — (92,506 ) Issuance of common stock from Employee Stock Purchase Plan 8,733 1 106,000 — — 106,001 Retirement of common stock in exchange for common stock warrant (1,000,000 ) (100 ) (7,539,900 ) (9,660,000 ) — (17,200,000 ) Issuance of common stock warrant in exchange for retirement of common stock — — 17,200,000 — — 17,200,000 Issuance of common stock in at the market offering, net 2,110,800 211 34,178,020 — — 34,178,231 Issuance of common stock upon cashless exercise of warrants 1,050 — 10,000 — — 10,000 Unrealized income on short-term investments — — — — 5,136 5,136 Net loss — — — (14,864,108 ) — (14,864,108 ) Balance at March 31, 2021 38,257,180 $ 3,810 $ 462,417,706 $ (210,944,707 ) $ (5,039,381 ) $ 246,437,428 Common Stock Additional Paid-In Accumulated Accumulated Other Comprehensive Total Stockholders’ Shares Amount Capital Deficit Loss Equity Balance at December 31, 2019 15,312,167 $ 1,508 $ 187,914,916 $ (137,376,122 ) $ (5,020,156 ) $ 45,520,146 Stock-based compensation — — 214,921 — — 214,921 Vesting of restricted stock awards including withholding, net (5,974 ) 1 (17,080 ) — — (17,079 ) Issuance of common stock from Employee Stock Purchase Plan 38,809 3 56,736 — — 56,739 Issuance of common stock upon exercise of warrants 14,500 2 39,972 — — 39,974 Unrealized loss on short-term investments — — — — (32,435 ) (32,435 ) Net loss — — — (3,885,649 ) — (3,885,649 ) Balance at March 31, 2020 15,359,502 $ 1,514 $ 188,209,465 $ (141,261,771 ) $ (5,052,591 ) $ 41,896,617 The accompanying notes are an integral part of the unaudited consolidated financial statements. 3 ALTIMMUNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (14,864,108 ) $ (3,885,649 ) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of contingent consideration liability 880,000 1,750,000 Stock-based compensation expense 1,218,351 214,921 Depreciation and amortization 74,298 73,356 Unrealized losses on foreign currency exchange 33,376 24,939 Changes in operating assets and liabilities: Accounts receivable (191,226 ) (973,557 ) Prepaid expenses and other current assets (4,200,624 ) (214,893 ) Accounts payable (194,050 ) 911,397 Accrued expenses and other liabilities (2,189,903 ) 1,112,718 Tax refund receivable (135,274 ) (3,360,633 ) Net cash used in operating activities (19,569,160 ) (4,347,401 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales and maturities of short-term investments 30,912,000 13,700,000 Purchases of short-term investments (7,476,074 ) (7,099,263 ) Purchases of property and equipment, net (4,208,790 ) (18,131 ) Cash paid for internally developed patents (62,041 ) (19,390 ) Net cash provided by investing activities 19,165,095 6,563,216 CASH FLOWS FROM FINANCING ACTIVITIES: Payments of deferred offering costs 134,413 — Proceeds from exercises of warrants — 39,974 Proceeds from issuance of common stock in at the market offering, net 34,178,231 — Proceeds from issuance of common stock from Employee Stock Purchase Plan 106,001 56,739 Net cash provided by financing activities 34,418,645 96,713 Net increase in cash and cash equivalents and restricted cash 34,014,580 2,312,528 Cash, cash equivalents and restricted cash at beginning of period 115,951,981 8,996,860 Cash, cash equivalents and restricted cash at end of period $ 149,966,561 $ 11,309,388 SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES: Fair value of common stock retired in exchange for issuance of common stock warrant $ 17,200,000 $ — The accompanying notes are an integral part of the unaudited consolidated financial statements. 4 ALTIMMUNE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Nature of Business and Basis of Presentation Nature of Business Altimmune, Inc., headquartered in Gaithersburg, Maryland, United States, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware. The Company is focused on developing intranasal vaccines, immune modulating therapies, and treatments for liver disease. The Company’s diverse pipeline includes proprietary intranasal vaccines for COVID-19 (AdCOVID), anthrax (NasoShield) and influenza (NasoVAX); an intranasal immune modulating therapeutic for COVID-19 (T-COVID); and next generation peptide therapeutics for NASH (ALT-801) and chronic hepatitis B (HepTcell). Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt, and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales. Basis of Presentation The accompanying unaudited consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 included in the Annual Report on Form 10-K which was filed with the SEC on February 25, 2021. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as the audited consolidated financial statements, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2021 or any future years or periods. The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern. 2. Summary of Significant Accounting Policies During the three months ended March 31, 2021, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC, except for the recently adopted accounting standard for income taxes. Use of Estimates The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s business, financial condition, and results of operations is highly uncertain and subject to change. The Company considered the potential impact of the COVID-19 pandemic on the Company’s estimates and assumptions and determined that there was not a material impact to the Company’s unaudited consolidated financial statements as of and for the three months ended March 31, 2021. However, actual results could differ from those estimates and there may be changes to the Company’s estimates in future periods. Recently Issued Accounting Pronouncements - Adopted In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). ASU 2019-12 amends the approaches and methodologies in accounting for income taxes during interim periods and makes changes to certain income tax classifications. The new standard allows exceptions to the use of the incremental approach for intra-period tax allocation, when there is a loss from continuing operations and income or a gain from other items, and to the general methodology for calculating income taxes in an interim period, when a year-to-date loss exceeds the anticipated loss for the year. The standard also requires franchise or similar taxes partially based on income to be reported as income tax and the effects of enacted changes in tax laws or rates to be included in the annual effective tax rate computation from the date of enactment. Lastly, in any future acquisition, the Company would be required to evaluate when the step-up in the tax basis of 5 goodwill is part of the business combination and when it should be considered a separate transaction. The Company a dopt ed the standard as of January 1, 2021 and has evaluated the effects of this standard and determined that the adoption did not have a material impact on the Company’s consolidated financial statement s . 3. Fair Value Measurements The Company’s assets and liabilities measured at fair value on a recurring basis at March 31, 2021 consisted of the following: Fair Value Measurement at March 31, 2021 Total Level 1 Level 2 Level 3 Assets: Cash equivalents - money market funds $ 13,962,902 $ 13,962,902 $ — $ — Short-term investments 76,574,768 — 76,574,768 — Total 90,537,670 13,962,902 76,574,768 — Liabilities: Contingent consideration liability (see Note 8) 6,270,000 — — 6,270,000 Total $ 6,270,000 $ — $ — $ 6,270,000 The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2020 consisted of the following: Fair Value Measurement at December 31, 2020 Total Level 1 Level 2 Level 3 Assets: Cash equivalents - money market funds $ 90,389,473 $ 90,389,473 $ — $ — Short-term investments 100,005,558 — 100,005,558 — Total 190,395,031 90,389,473 100,005,558 — Liabilities: Contingent consideration liability (see Note 8) 5,390,000 — — 5,390,000 Warrant liability 10,000 — — 10,000 Total $ 5,400,000 $ — $ — $ 5,400,000 The warrant liability is included in Other long-term liabilities in the consolidated balance sheet at December 31, 2020. The warrant liability was valued using the Monte Carlo simulation valuation model with Level 3 inputs. Short-term investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data (Level 2). The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. Short-term investments had quoted prices at March 31, 2021 as shown below: March 31, 2021 Amortized Cost Unrealized Gain (Loss) Market Value United States treasury securities $ 16,029,965 $ 2,995 $ 16,032,960 Commercial paper and corporate debt securities 33,412,043 (1,935 ) 33,410,108 Asset backed securities 2,111,239 (278 ) 2,110,961 Certificate of deposit 25,020,739 — 25,020,739 Total $ 76,573,986 $ 782 $ 76,574,768 Short-term investments had quoted prices at December 31, 2020 as shown below: December 31, 2020 Amortized Cost Unrealized Gain (Loss) Market Value United States treasury securities $ 20,052,757 $ 1,843 $ 20,054,600 Commercial paper and corporate debt securities 47,521,344 (5,440 ) 47,515,904 Asset backed securities 7,414,619 (757 ) 7,413,862 Certificate of deposit 25,021,192 — 25,021,192 Total $ 100,009,912 $ (4,354 ) $ 100,005,558 6 The fair value of contingent payments classified as a liability is based on the regulatory milestones described in Note 8 and estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The assumptions used to estimate the fair value of contingent payments that are classified as a liability at March 31, 2021 include the following significant unobservable inputs: Unobservable input Value or Range Weighted Average Expected volatility 117.4% 117.4% Risk-free interest rate 0.09% 0.09% Cost of capital 30% 30% Discount for lack of marketability 16%-19% 18% Probability of payment 63% 63% Projected year of payment 2022 2022 If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers into and out of any of the levels of the fair value hierarchy as of March 31, 2021 and December 31, 2020. Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. Assets recorded at fair value on a non-recurring basis, such as property and equipment and intangible assets are recognized at fair value when they are impaired. As of March 31, 2021 and December 31, 2020, the Company had no significant assets or liabilities that were measured at fair value on a non-recurring basis. 4. Property and Equipment, Net March 31, 2021 December 31, 2020 Furniture, fixtures and equipment $ 185,878 $ 125,538 Laboratory equipment 1,041,752 959,585 Computers and telecommunications 250,516 220,316 Software 64,409 64,409 Leasehold improvements 1,415,608 1,285,883 Construction-in-progress 4,000,000 — Property and equipment, at cost 6,958,163 2,655,731 Less: accumulated depreciation and amortization (1,760,111 ) (1,598,811 ) Property and equipment, net $ 5,198,052 $ 1,056,920 As of March 31, 2021, construction-in-progress primarily includes costs related to the procurement of long-lead equipment and build out of the suite associated with the Company's manufacturing collaboration with Lonza Houston, Inc. (“Lonza”) described in Note 16. Depreciation expense related to property and equipment was approximately $67,658 and $59,505, for the three months ended March 31, 2021 and 2020, respectively. 5. Intangible Assets The Company’s intangible assets consisted of the following: March 31, 2021 Estimated Useful Lives Gross Carrying Value Accumulated Amortization Net Book Value Internally developed patents 6-20 years $ 946,828 $ (486,548 ) $ 460,280 Acquired licenses 16-20 years 285,000 (285,000 ) — Total intangible assets subject to amortization 1,231,828 (771,548 ) 460,280 IPR&D assets Indefinite 12,418,967 — 12,418,967 Total $ 13,650,795 $ (771,548 ) $ 12,879,247 7 December 31, 2020 Estimated Useful Lives Gross Carrying Value Accumulated Amortization Net Book Value Internally developed patents 6-10 years $ 884,787 $ (479,908 ) $ 404,879 Acquired licenses 16-20 years 285,000 (285,000 ) — Total intangible assets subject to amortization 1,169,787 (764,908 ) 404,879 IPR&D assets Indefinite 12,418,967 — 12,418,967 Total $ 13,588,754 $ (764,908 ) $ 12,823,846 Amortization expense of intangible assets was $6,640 and $13,851 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the weighted average amortization period remaining for intangible assets was 12.3 years. Amortization expense was classified as research and development expenses in the accompanying unaudited consolidated statements of operations and comprehensive loss. 6. Operating Leases The Company rents office and laboratory space in the United States. The Company also leases office equipment under a non-cancellable equipment lease through December 2022. Rent expense during the three months ended March 31, 2021 and 2020 under all of the Company’s operating leases was $130,138 and $87,599, respectively. Rent expense includes short-term leases and variable lease costs that are not included in the lease obligation. Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases. The office space leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The office space lease also includes an option to renew the lease as of the end of the term. The Company has determined that the lease renewal option is not reasonably certain of being exercised. The cash paid for operating lease liabilities for the three months ended March 31, 2021 and 2020 was $117,354 and $95,714, respectively. Supplemental other information related to the operating leases balance sheet information was as follows: March 31, 2021 December 31, 2020 Operating lease obligations (see Note 7 and 9) $ 1,739,559 $ 1,824,840 Operating lease right-of-use assets $ 866,336 $ 903,825 Weighted-average remaining lease term (years) 4.1 4.3 Weighted-average discount rate 7.3 % 7.3 % 7. Accrued Expenses Accrued expenses and other current liabilities consist of the following: March 31, 2021 December 31, 2020 Accrued professional services $ 612,212 $ 1,350,194 Accrued payroll and employee benefits 1,182,658 2,351,599 Accrued interest 13,744 13,016 Accrued research and development 7,211,778 7,316,876 Lease obligation, current portion (see Note 6) 365,504 356,716 Deferred revenue 19,753 19,753 Total accrued expenses $ 9,405,649 $ 11,408,154 8. Contingent Consideration The Company entered into an Agreement and Plan of Merger and Reorganization, dated July 8, 2019, by and among the Company, Springfield Merger Sub, Inc., Springfield Merger Sub, LLC, Spitfire Pharma, Inc. and David Collier, as the Stockholder Representative (the “Spitfire Merger Agreement”) to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”). Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis. The transaction closed on July 12, 2019. The Company issued 1,887,250 unregistered shares of its common stock (the “shares”) as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5.0 million less working capital and transaction expense adjustment amounts as defined in the agreement. 8 The acquisition of Spitfire was accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset was not considered a business. The Company expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses. The Spitfire Merger Agreement also includes future contingent payments up to $88.0 million in cash and shares of the Company’s common stock as follows (each, a “Milestone Event”): • a one-time payment of $5.0 million (the “IND Milestone Consideration Amount”) within sixty days of the submission of an Investigational New Drug Application (“IND”) to the United States Food and Drug Administration (the “FDA”) or other applicable governmental authority in a foreign jurisdiction, which IND has not been rejected or placed on clinical hold by the FDA or such applicable foreign governmental authority within time specified in the Merger Agreement; • a one-time payment of $3.0 million (the “Phase 2 Milestone Consideration Amount” and together with the IND Milestone Consideration Amount, the “Regulatory Milestones”) within sixty days of the initiation of a Phase 2 clinical trial of a product candidate anywhere in the world; and • payments of up to $80.0 million upon the achievement of specified worldwide net sales (the “Sales Milestones”) of all products developed using the technology acquired in the License Agreement within ten years following the approval of a new drug application filed with the FDA. The Regulatory Milestones will be payable in shares of the Company’s Common Stock, with the number of shares of the Company’s Common Stock to be issued in connection with each milestone amount, if any, are dependent on the share price at the time of achievement. The number of any shares issued in consideration for the IND Milestone Consideration Amount will be determined based on lower of (A) the average of the closing prices of our Common Stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to the IND Reference Date or (B) $2.95. The value of any shares issued in consideration for the Phase 2 Milestone Consideration Amount shall be determined based the lower of (A) on the average of the closing trading prices of our Common Stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days immediately preceding the date of the occurrence of the Phase 2 Milestone Event or (B) $3.54. The future contingent payments related to the Regulatory Milestones are stock-based payments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity (“ASC 480”). Such stock-based payments are subject to a lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. The future contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies . Accordingly, the Company will recognize the Sales Milestones when the contingency is resolved and the amount is paid or payable. The Company estimates the future contingent consideration for the Regulatory Milestones based upon a Monte Carlo simulation valuation model that is risk adjusted based on the probability of achieving the milestones and a discount for lack of marketability. The Company remeasures the fair value of the contingent consideration at each reporting period. During the fourth quarter of 2020, the Company achieved the IND Milestone and paid the obligation in shares according to the calculation above. Below is a summary of the contingent consideration activity: Three Months Ended March 31, 2021 2020 Beginning balance $ 5,390,000 $ 2,750,000 Change in fair value 880,000 1,750,000 Ending balance $ 6,270,000 $ 4,500,000 As of March 31, 2021, the increase in fair value was primarily attributable to an increase in the closing share price of the Company’s common stock and in the probability of milestone achievement. As of March 31, 2020, the increase in fair value was primarily due to an increase in the probability of milestone achievement. Any changes in fair value have been recorded within research and development expense during the respective periods presented. 9. Other Long-Term Liabilities The Company’s other long-term liabilities are summarized as follows: March 31, 2021 December 31, 2020 Lease obligation, long-term portion (see Note 6) $ 1,374,055 $ 1,468,124 Conditional economic incentive grants 250,000 250,000 Other 95,383 110,319 Total other long-term liabilities $ 1,719,438 $ 1,828,443 9 10. Common Stock Public Offering On July 16, 2020, the Company offered and sold (i) 3,369,564 shares of common stock, at a price to the public of $23.00 per share, and (ii) pre-funded warrants of the Company to purchase 1,630,436 shares of common stock at an exercise price equal to $0.0001 per share (the “Pre-Funded Warrants”), at a price to the public of $22.9999 per share of common stock underlying the Pre-Funded Warrants (equal to the public offering price per share of Common Stock, minus the exercise price of each Pre-Funded Warrant). The Pre-Funded Warrants are exercisable at any time, provided that each Pre-Funded Warrant holder will be prohibited from exercising such Pre-Funded Warrants into shares of the Company’s common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock then issued and outstanding, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to the Company. The gross proceeds of this offering were approximately $132.2 million, which includes the exercise in full of the underwriters’ option to purchase an additional 750,000 shares of common stock, before deducting underwriting discounts and commissions and offering expenses during the third quarter of 2020. The net proceeds of this offering were approximately $124.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Company has assessed the Pre-Funded Warrants for appropriate equity or liability classification and determined that the Pre-Funded Warrants are freestanding instruments that do not meet the definition of a liability pursuant to ASC 480 and do not meet the definition of a derivative pursuant to FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (“ASC 815”). The Pre-Funded Warrants are indexed to the Company’s common stock and meet all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the Pre-Funded Warrants are classified as equity and are accounted for as a component of additional paid-in capital at the time of issuance. As of March 31, 2021, no Pre-Funded Warrants were exercised. At-the-Market Offerings On February 25, 2021, the Company entered into an Equity Distribution Agreement (the “2021 Agreement”) with Piper Sandler & Co., Evercore Group L.L.C., and B. Riley Securities, Inc., serving as sales agents (the “Sales Agents”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $125.0 million (the “Shares”) through the Sale Agents (the “2021 Offering”). Any Shares offered and sold in the 2021 Offering will be issued pursuant to the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on December 31, 2020, which was declared effective on January 11, 2021, the prospectus supplement relating to the 2021 Offering filed with the SEC on February 25, 2021 and any applicable additional prospectus supplements related to the 2021 Offering that form a part of the Registration Statement. As of March 31, 2021, the Company has sold 2,110,800 shares of Common Stock under the 2021 Agreement resulting in approximately $34.2 million in net proceeds, with $89.7 million remaining available to be sold under the 2021 Agreement. As of March 31, 2021, the Company recorded approximately $0.1 million of offering costs which offset the proceeds received from the shares sold through March 31, 2021 and recognized approximately $0.1 million of deferred offering costs which will offset future proceeds received under the 2021 Agreement. O n March 27, 2020, the Company entered into an Equity Distribution Agreement (the “2020 Agreement”) with JMP Securities LLC, serving as placement agent (the “Placement Agent”) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $50.0 million (the “Shares”) through the Placement Agent (the “2020 Offering”). Any Shares offered and sold in the 2020 Offering were issued pursuant to the Company’s Registration Statement on Form S-3 filed with the SEC on April 4, 2019, which was declared effective on April 12, 2019, the prospectus supplement relating to the 2020 Offering filed with the SEC on March 27, 2020 and any applicable additional prospectus supplements related to the 2020 Offering that form a part of the Registration Statement. The aggregate market value of Shares eligible for sale in the 2020 Offering and under the 2020 Agreement were subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The Company offered Shares having an aggregate offering price of $18.9 million pursuant to the prospectus supplement filed with the SEC on March 27, 2020. On June 1, 2020, the Company filed an amendment to the 2020 Agreement which amended the prospectus supplement dated March 27, 2020 to increase the aggregate offering price to $50.0 million. No Shares were sold under the 2020 Agreement during the three months ended March 31, 2020. As of March 31, 2021, the 2020 Agreement was fully utilized and no Shares were sold under the 2020 Agreement during the three months ended March 31, 2021. Exchange Agreement On February 25, 2021, the Company entered into an exchange agreement (the “Exchange Agreement”) with an Investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.0001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,000,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $0.0001 per share. The Exchange Warrants do not expire and are exercisable at any time except that the Exchange Warrants cannot be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99% of the Company’s common stock, subject to certain exceptions. In accordance with FASB Accounting Standards Codification Topic 505, Equity , the 10 Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and a corresponding debit to additional paid-in-capital and accumulated deficit at the fair value of the Exchange Warrants on the issuance date. The Exchange Warrants are classified as equity in accordance with ASC 480 and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in-capital is not subject to remeasurement. The Company determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants. As of March 31, 2021, no ne of the Exchange Warrants have been exercised. 11. Warrants A summary of warrant activity during the three months ended March 31, 2021 is as follows: Warrants outstanding, December 31, 2020 1,777,611 Exchanges (see Note 10) 1,000,000 Exercises (1,420 ) Warrants outstanding, March 31, 2021 2,776,191 As of March 31, 2021, all of the common stock warrants that were previously classified as a liability were exercised in full. 12. Stock-Based Compensation Stock Options The Company’s stock option awards generally vest over four years and typically have a contractual life of ten years. At March 31, 2021, there was $10.1 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.9 years. During the three months ended March 31, 2021, the Company granted 669,000 stock options with a weighted average exercise price of $16.73 and per share weighted average grant date fair value of $13.76. Information related to stock options outstanding at March 31, 2021 is as follows: Number of Stock Options Weighted- average Exercise Price Weighted- average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding 2,293,367 $ 8.11 6.0 $ 16,651,695 Exercisable 773,781 $ 5.35 5.8 $ 7,855,753 Unvested 1,519,586 $ 9.51 6.0 $ 8,795,942 Restricted Stock At March 31, 2021, the Company had unvested restricted stock of 134,545 shares with total unrecognized compensation expense of $0.5 million, which the Company expects to recognize over a weighted average period of approximately 1.7 years. During the three months ended March 31, 2021, the Company released 20,181 shares of common stock from restriction as a result of the vesting of restricted stock. In February 2021, the Company granted 181,279 shares of restricted stock units which vest over four years. At March 31, 2021, the Company had unvested restricted stock units of 196,279 shares with total unrecognized compensation expense of $2.8 million, which the Company expects to recognize over a weighted average period of approximately 3.8 years. 2019 Employee Stock Purchase Plan Under the Employee Stock Purchase Plan, employees purchased 8,733 shares for $0.1 million during the three months ended March 31, 2021. During the three months ended March 31, 2021, the Company recognized compensation expense of $0.1 million. 11 Stock-based Compensation Expense Stock-based compensation expense is classified in the unaudited consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020 as follows: For the Three Months Ended March 31, 2021 2020 Research and development $ 321,338 $ 29,000 General and administrative 897,013 185,921 Total $ 1,218,351 $ 214,921 13. U.S. Government Contracts and Grants In June 2020, the Company was awarded $4.7 million from the U.S. Army Medical Research & Development Command (“USAMRDC”) to fund our Phase 1/2 clinical trial of T-COVID. The competitive award was granted by USAMRDC in collaboration with the Medical Technology Enterprise Consortium (“MTEC”), a 501(c)(3) biomedical technology consortium working in partnership with the Department of Defense (“DoD”). Under the contract, MTEC will pay the Company a firm fixed fee based upon the achievement of certain milestones for conduct and completion of a Phase 1/2 study and research and development work on the replication-deficient adenovirus 5 (“RD-Ad5”) vector vaccine platform. For the three months ended March 31, 2021, the Company has recognized approximately $0.5 million of grant revenue under the contract. In July 2016, the Company signed a five-year contract with BARDA. The contract, as amended, has a total value of up to $133.7 million and is used to fund clinical development of NasoShield. Under the contract, BARDA pays the Company a fixed fee and reimburses certain costs for the research and development of an Ad5-vectored, protective antigen-based intranasal anthrax vaccine through cGMP manufacture and conduct of a Phase 1 clinical trial dose ranging assessment of safety and immunogenicity. The contract consists of an initial base performance period providing approximately $27.8 million in funding for the period July 2016 through June 2021. BARDA has seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical studies. Each option, if exercised by BARDA, would provide additional funding ranging from approximately $1.1 million to $34.4 million for a three-year period beginning in 2021. For the three months ended March 31, 2021 and 2020, the Company has recognized approximately $0.2 million and $1.6 million, respectively, of grant revenue under the current BARDA contract. 14. Income Taxes Due to a full valuation allowance, the Company did not record an income tax benefit for the three months ended March 31, 2021. With respect to the prior year, on March 27, 2020, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act provided both stimulus measures and a number of tax provisions, including: temporary changes regarding the utilization and carry back of net operating losses, temporary changes to the prior and future limitations on interest deductions, technical corrections from prior tax legislation for tax depreciation of qualified improvement property, and certain refundable employee retention credits. As of March 31, 2020, the Company recognized a tax benefit of $3.2 million related to the carry back of losses back to obtain a refund of its 2016 tax liability. 15. Net Loss Per Share Because the Company has reported a net loss attributable to common stockholders for all periods presented, basic and diluted net loss per share attributable to common stockholders are the same for all periods presented. Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average numbers of shares of common stock outstanding for the period. Basic shares outstanding includes the weighted average effect of the Company’s outstanding pre-funded warrants, the exercise of which requires little or no consideration for the delivery of shares of common stock. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period. As such, all unvested restricted stock, common stock warrants, and stock options have been excluded from the computation of diluted weighted average shares outstanding because such securities would have an anti-dilutive impact for all periods presented. 12 Potential common shares issuable upon conversion, vesting or exercise of unvested restricted stock, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding, as they are anti-dilutive, are as follows: For the Three Months Ended March 31, 2021 2020 Common stock warrants 145,755 10,370,206 Common stock options 2,307,264 1,423,612 Restricted stock 330,824 215,413 16. Commitments and Contingencies Spitfire Acquisition As disclosed in Note 8, the Company is obligated to make payments of up to $80.0 million upon the achievement of specified worldwide net sales of all products developed using the technology acquired from Spitfire Pharma Inc. within ten years following the approval of a new drug application filed with the FDA. PER.C6 License Agreement Expansion On April 2, 2020, the Company entered into Amendment No. 3 to the Second Restated License Agreement (the “Amendment”), by and between the Company and Janssen Vaccines & Prevention B.V. (formerly known as Crucell Holland B.V.) (as amended by Amendment No. 1 to Second Restated License Agreement and Amendment No. 2 to Second Restated License Agreement, together with the Amendment, the “License Agreement”). Pursuant to the Amendment, the field of licenses granted to the Company for the use of the PER.C6 cell line under the License Agreement is expanded to cover COVID-19 caused by SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), in addition to the existing licenses related to Bacillus anthracis and influenza virus. All capitalized terms not defined herein shall have the meanings assigned to them in the Amendment or the License Agreement, as applicable. Pursuant to the Amendment, the Company agreed to pay certain additional development-based milestone payments through approval of licensed products by the FDA for the treatment or prevention of COVID-19, up to an aggregate amount of $1.2 million. The Company also agreed to pay royalty payments as a percentage of net sales of products to a royalty stacking reduction and minimum annual royalty payments, until the expiration of the term of the License Agreement, as amended. As of March 31, 2021, no payments were made under the License Agreement. Lonza Manufacturing Agreement In March 2021, the Company expanded its manufacturing collaboration with Lonza in connection with the Manufacturing Agreement entered into in November 2020 for the manufacture of AdCOVID. Under the expanded agreement, the Company has committed approximately $23.0 million to Lonza to procure long-lead equipment and construct a dedicated manufacturing suite for clinical and commercial production of AdCOVID. This work is expected to be completed during the fourth quarter of 2021. As of March 31, 2021, the Company capitalized approximately $4.0 million to construction-in-progress related to the equipment purchase and build out of the suite under the expanded agreement. Summit Biosciences Development and Manufacturing Agreement In March 2021, the Company entered into a development and manufacturing agreement with Summit Biosciences, Inc. (“Summit”) to manufacture a metered nasal spray presentation of AdCOVID. Under the agreement, the Company has committed approximately $6.7 million to Summit for the clinical manufacturing of AdCOVID multidose nasal spray. This work is expected to be completed by the end of 2021. As of March 31, 2021, the Company recorded approximately $1.4 million to prepaid expenses under the agreement. Litigation In December 2019, a complaint was filed by Dr. De-Chu Christopher Tang (“Plaintiff”) against the Company, which the Company removed to the United States District Court for the Eastern District of Texas. The Plaintiff amended the complaint in February 2020 to include Vipin K. Garg and David J. Drutz as defendants, in addition to the Company (Dr. Garg, Dr. Drutz, and the Company are collectively referred to as “Defendants”). On November 6, 2020, Defendants filed a motion for summary judgment on the basis of lack of personal jurisdiction, insufficient service of process, and failure to state a claim. The court ruled on that motion on March 25, 2021, which dismissed the case on the basis of lack of personal jurisdiction. As the outcome of this legal proceeding is certain at this time, the Company has not accrued any liability associated with this action. The Company is a party in various other contractual disputes, litigation, and potential claims arising in the ordinary course of business none of which are currently reasonably possible or probable of material loss. 13