NOVAVAX INC 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within time periods specified in the rules and forms of the Securities and Exchange Commission. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the chief executive officer and the chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report (the “Evaluation Date”). Based on that evaluation, the Company’s chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, such controls and procedures were effective at the reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”). Such internal control includes those policies and procedures that: • pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and • provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 66 Table of C onten ts Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, our management has determined that, as of December 31, 2020, our internal controls over financial reporting are effective based on those criteria. On May 27, 2020, we completed our acquisition of Novavax CZ. We are in the process of evaluating the existing controls and procedures of Novavax CZ and integrating it into our internal control over financial reporting. In accordance with SEC Staff guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, we have excluded the business that we acquired in the Novavax CZ acquisition from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2020. The business that we acquired in the Novavax CZ acquisition represented 15% of the Company’s total assets as of December 31, 2020, none of the Company’s revenue and less than 3% of the Company’s net loss for the year ended December 31, 2020. Ernst & Young LLP has issued a report on our internal control over financial reporting. This report is included in the Reports of Independent Registered Public Accounting Firm in Item 15.(a)(1). Changes in Internal Control over Financial Reporting Our management, including our chief executive officer and chief financial officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarterly period ended December 31, 2020 and has concluded that there was no change that occurred during the quarterly period ended December 31, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management’s assessment of and conclusion on the effectiveness of disclosure controls and procedures and internal controls over financial reporting did not include the internal controls related to the operations acquired in the acquisition of Novavax CZ that are included in our December 31, 2020 consolidated financial statements. Our audit of internal control over financial reporting also did not include an evaluation of the internal control over financial reporting of Novavax CZ. Item 9B. OTHER INFORMATION None. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference from our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders scheduled to be held in June 2021 (the “2021 Proxy Statement”). We expect to file the 2021 Proxy Statement within 120 days after the close of the fiscal year ended December 31, 2020. Item 11. EXECUTIVE COMPENSATION We incorporate herein by reference the information required by this item concerning executive compensation to be contained in the 2021 Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS We incorporate herein by reference the information required by this item concerning security ownership of certain beneficial owners and management and related stockholder matters to be contained in the 2021 Proxy Statement. The following table provides our equity compensation plan information as of December 31, 2020. Under these plans, our common stock may be issued upon the exercise of stock options and purchases under our Employee Stock Purchase Plan (“ESPP”). See also the information regarding our stock options and ESPP in Note 13 to the consolidated financial statements included herewith. Equity Compensation Plan Information 67 Table of C onten ts Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) Equity compensation plans approved by security holders(1) 6,679,629 39.96 2,729,512 Equity compensation plans not approved by security holders N/A N/A N/A (1) Includes our 2015 Stock Incentive Plan, 2005 Stock Incentive Plan and ESPP. The weighted-average exercise price in column (b) excludes restricted stock units, which are not subject to an exercise price. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE We incorporate herein by reference the information required by this item concerning certain related party transactions set forth in Note 16 to our consolidated financial statements included herewith. We incorporate herein by reference other information required by this item concerning certain other relationships and related transactions and director independence to be contained in the 2021 Proxy Statement. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES We incorporate herein by reference the information required by this item concerning principal accountant fees and services to be contained in the 2021 Proxy Statement. PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of the Annual Report: (1) Index to Financial Statements Reports of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 20 20 and 20 19 F- 5 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 20 20 , 201 9 and 201 8 F- 6 Consolidated Statements of Stockholders’ Equity ( Deficit ) for the years ended December 31, 20 20 , 201 9 and 2 0 18 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 20 20 , 201 9 and 201 8 F- 8 Notes to Consolidated Financial Statements F- 9 (2) Financial Statement Schedules Financial statement schedules are omitted because they are not applicable, not required under the instructions or all the information required is set forth in the financial statements or notes thereto. (3) Exhibits Exhibits marked with a single asterisk (*) are filed herewith. Exhibits marked with a double plus sign (††) refer to management contracts, compensatory plans or arrangements. Confidential treatment has been granted for portions of exhibits marked with a double asterisk (**). Confidential information contained in exhibits marked with a caret (^) has been omitted because it (i) is not material and/or (ii) would be competitively harmful if publicly disclosed. 68 Table of C onten ts All other exhibits listed have previously been filed with the SEC and are incorporated herein by reference. Exhibit Number Description 3.1 Second Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 3.2 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 9, 2019 (File No. 000-26770)) 3.3 Amended and Restated By-Laws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013 (File No. 000-26770)) 3.4 Certificate of Designation of Series A Convertible Preferred Stock of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770)) 4.1 Specimen stock certificate for shares of common stock of the Registrant, par value $.01 per share (Incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3, filed on December 31, 2019 (File No. 333-235761)) 4.2 Indenture (including form of Notes) with respect to Novavax, Inc.’s 3.75% Convertible Senior Notes due 2023, dated as of January 29, 2016, between Novavax, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on January 29, 2016 (File No. 000-26770)) 4.3 Form of Series A Convertible Preferred Stock Certificate of the Registrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770)) 4.4* Description of Registrant’s Securities 10.1†† Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013 (File No. 000-26770)) 10.2†† Amendment to Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Appendix 1 of the Registrant’s Definitive Proxy Statement filed on April 30, 2014 in connection with the Annual Meeting held on June 12, 2014 (File No. 000-26770)) 10.3†† Form of Non-Statutory Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015 (File No. 000-26770)) 10.4†† Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2005 Stock Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 27, 2015 (File No. 000-26770)) 10.5†† A mended and Restated 2013 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2020, filed on May 11, 2020 (File No. 000-26770)) 10.6†† Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filed on May 13, 2020 in connection with the Annual Meeting held on June 25, 2020 (File No. 000-26770)) 69 Table of C onten ts 10.7†† Form of Non-Statutory Stock Option Award Agreement granted under the Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 10.8†† Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 10.9†† Form of Incentive Stock Option Award Agreement granted under the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017 (File No. 000-26770)) 10.10†† Form of Incentive Stock Option Agreement granted under the Amended and Restated Novavax, Inc. 2015 Stock Incentive Plan (Performance- and Time-Based Vesting) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on November 16, 2016 (File No. 000-26770)) 10.11†† Form of Restricted Stock Award Agreement granted under the Novavax, Inc. 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed on August 10, 2015 (File No. 000-26770)) 10.12†† Form of Restricted Stock Unit Agreement granted under the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 18, 2019 (File No. 000-26770)) 10.13†† Form of Stock Appreciation Right Award Agreement granted under the Novavax, Inc. Amended and Restated 2015 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on November 7, 2019 (File No. 000-26770)) 10.14†† Form of Director Deferred Fee Agreement (Incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770)) 10.15†† Employment Agreement between Novavax, Inc. and Stanley C. Erck, dated as of June 22, 2011 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011 (File No. 000-26770)) 10.16†† Employment Agreement between Novavax, Inc. and Gregory M. Glenn dated July 1, 2010 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on July 6, 2010 (File No. 000-26770)) 10.17††* Employment Agreement between Novavax, Inc. and Gregory F. Covino dated October 30, 2020 10.18††* Offer letter to Gregory F. Covino dated October 30, 2020 10.19†† Employment Agreement between Novavax, Inc. and John A. Herrmann dated April 1, 2012 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770)) 10.20†† Employment Agreement between Novavax, Inc. and John J. Trizzino dated March 3, 2014 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016 (File No. 000-26770)) 10.21†† Novavax, Inc. Amended and Restated Change in Control Severance Benefit Plan (Incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017 (File No. 000-26770)) 10.22†† Form of Indemnification Agreement entered into between the Registrant and its directors and officers (Incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, filed on March 16, 2010 (File No. 000-26770)) 10.23 Lease Agreement for space at 22 Firstfield Road between ARE-20/22/1300 Firstfield Quince Orchard, LLC and Novavax, Inc., dated as of November 18, 2011 (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011, filed on March 14, 2012 (File No. 000-26770)) 70 Table of C onten ts 10.24 Deed of Lease for space at 21 Firstfield Road between Firstfield Holdco, LLC and Novavax, Inc., dated as of February 4, 2015 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on August 21, 2015 (File No. 000-26770)) 10.25 First Amendment to Deed of Lease for space at 21 Firstfield Road between Firstfield Holdco, LLC and Novavax, Inc., dated as of August 17, 2015 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on August 21, 2015 (File No. 000-26770)) 10.26 Second Amendment to Deed of Lease for space at 21 Firstfield Road between BMR-Firstfield LLC (formerly Firstfield Holdco, LLC) and Novavax, Inc., dated as of March 31, 2017 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 8, 2017 (File No. 000-26770)) 10.27* Deed o f L ease for space at 700 Quince Orchard Road between ARE-MARYLAND NO. 51, LLC and Novavax, Inc., dated October 22, 2020 10.28** Second Amended and Restated Joint Venture Agreement between Novavax, Inc. and Cadila Pharmaceuticals Limited, dated as of July 17, 2018 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed on November 7, 2018 (File No. 000-26770)) 10.29** Second Amended and Restated Novavax Product License Agreement between Novavax, Inc. and CPL Biologicals Private Limited, dated as of July 17, 2018 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed on November 7, 2018 (File No. 000-26770)) 10.30^ Supply and License Agreement between Novavax, Inc. and Serum Institute of India Private Limited, dated as of July 30, 2020 (Incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.31^ Amendment to Supply and License Agreement between Novavax, Inc. and Serum Institute of India Private Limited, dated as of September 11, 2020 (Incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.32** Grant Agreement between Bill & Melinda Gates Foundation and Novavax, Inc., dated as of September 25, 2015 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed on November 9, 2015 (File No. 000-26770)) 10.33** Global Access Commitments Agreement between Bill & Melinda Gates Foundation and Novavax, Inc., dated as of September 25, 2015 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed on November 9, 2015 (File No. 000-26770)) 10.34^ Asset Purchase Agreement between Novavax, Inc. and Paragon Bioservices, Inc., dated June 26, 2019 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 7, 2019 (File No. 000-26770)) 10.35*^ SARS-CoV-2 Vaccine Supply Agreement, effective as of October 22, 2020, between Novavax, Inc. and The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the United Kingdom of Great Britain and Northern Ireland 10.36*^ Advance Purchase Agreement, effective as of December 31, 2020, between Novavax, Inc. and the Commonwealth of Australia as represented by the Department of Health 10.37*^ Advance Purchase Agreement, effective as of January 19, 2021, between Novavax, Inc. and Her Majesty the Queen in Right of Canada, as represented by the Minister of Public Works and Government Services 10.38^ Base Agreement between Novavax, Inc. and Advanced Technology International, dated June 25, 2020 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.39^ Undefinitized Project Agreement No. 1 between Novavax, Inc. and Advanced Technology International, dated July 6, 2020 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 71 Table of C onten ts 10.40^ Modification No. 01 to Undefinitized Project Agreement No. 1 between Novavax, Inc. and Advanced Technology International. dated July 9, 2020 (Incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 (File No. 000-26770)) 10.41*^ Modification No. 02 to Undefinitized Project Agreement No. 01, entered into September 10, 2020, between the Company and Advanced Technology International 10.42*^ Modification No. 03 to Undefinitized Project Agreement No. 01, entered into September 18, 2020, between the Company and Advanced Technology International 10.43*^ Modification No. 04 to Undefinitized Project Agreement No. 01, entered into December 23, 2020, between the Company and Advanced Technology International 10.44*^ Modification No. 05 to Undefinitized Project Agreement No. 01, dated January 12, 2021, between the Company and Advanced Technology International 10.45*^ Modification No. 06 to Undefinitized Project Agreement No. 01, entered into January 19, 2021, between the Company and Advanced Technology International 10.46 Letter Contract between Novavax, Inc. and the U.S. Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense, dated June 8, 2020 (Incorporated as reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (File No. 000-267770)) 10.47 Amendment of Solicitation/Modification of Contract between Novavax, Inc. and the U.S. Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense, dated September 16, 2020 (Incorporated as reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (File No. 000-267770)) 10.48*^ Amendment of Solicitation/Modification of Contract, Modification No. 2, entered into December 1, 2020, between the Company and the U.S. Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense 10.49*^ Amendment of Solicitation/Modification of Contract, Modification No. 3, entered into January 5, 2021, between the Company and the U.S. Department of Defense Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense 10.50 Base Call Option Transaction Confirmation, dated as of January 25, 2016, between Novavax and JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on January 29, 2016 (File No. 000-26770)) 10.51 Base Call Option Transaction Confirmation, dated as of January 25, 2016, between Novavax and Morgan S tanley & Co. LLC (Incorporated by reference to Exhibit 10. 2 to the Registrant’s Current Report on Form 8-K, filed on January 29, 2016 (File No. 000-26770)) 10.52 Additional Base Call Option Transaction Confirmation, dated as of February 2, 2016, between Novavax and JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770)) 10.53 Additional Base Call Option Transaction Confirmation, dated as of February 2, 2016, between Novavax and Morgan Stanley & Co. LLC (Incorporated by reference to Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 29, 2016 (File No. 000-26770)) 10.54 Series A Convertible Preferred Subscription Agreement, dated June 15, 2020, between Novavax, Inc. and RA Capital Healthcare Fund, L.P. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 19, 2020 (File No. 000-26770)) 10.55 Restated Funding Agreement, entered into on May 11, 2020, between Novavax, Inc. and the Coalition for Epidemic Preparedness Innovations (Incorporated as reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (File No. 000-267770)) 10.56*^ Amendment Number 1 to the iPDP and Budget of the Outbreak Response Funding Agreement (Step 2), entered into on November 2, 202 0 , between Novavax, Inc. and the Coalition for Epidemic Preparedness Innovations 72 Table of C onten ts 10.57 Share Purchase Agreement between Novavax, Inc. (solely as guarantor), Novavax AB, De Bilt Holdings B.V., Poonawalla Science Park B.V., Bilthoven Biologicals B.V. and Serum Institute International B.V. (solely as guarantor), dated May 27, 2020 (Incorporated as reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (File No. 000-267770)) 14 Code of Business Conduct and Ethics (Incorporated by reference to Exhibit 14 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed on August 9, 2011 (File No. 000-26770)) 21* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(e) of the Securities Exchange Act 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 2020 and 2019, (ii) the Consolidated Statements of Operations for the three years in the period ended December 31, 2020, (iii) the Consolidated Statements of Comprehensive Loss for the three years in the period ended December 31, 2020, (iv) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three years in the period ended December 31, 2020, (v) the Consolidated Statements of Cash Flows for the three years in the period ended December 31, 2020, and (vi) the Notes to Consolidated Financial Statements. Item 16. FORM 10-K SUMMARY Not applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. NOVAVAX, INC. By: /s/ Stanley C. Erck Stanley C. Erck President and Chief Executive Officer Date: March 1, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: 73 Table of C onten ts Name Title Date /s/ Stanley C. Erck President and Chief Executive Officer and Director (Principal Executive Officer) March 1, 2021 Stanley C. Erck /s/ Gregory F. Covino Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) March 1, 2021 Gregory F. Covino /s/ James F. Young Chairman of the Board of Directors March 1, 2021 James F. Young /s/ Gregg H. Alton Director March 1, 2021 Gregg H. Alton /s/ Richard H. Douglas Director March 1, 2021 Richard H. Douglas /s/ Gary C. Evans Director March 1, 2021 Gary C. Evans /s/ Rachel K. King Director March 1, 2021 Rachel K. King /s/ Margaret G. McGlynn Director March 1, 2021 Margaret G. McGlynn /s/ Michael A. McManus Director March 1, 2021 Michael A. McManus /s/ Rajiv I. Modi Director March 1, 2021 Rajiv I. Modi /s/ David M. Mott Director March 1, 2021 David M. Mott 74 Table of C onten ts INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2020, 2019 and 2018 Contents Reports of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of December 31, 20 20 and 2 019 F- 5 Consolidated Statements of Operations and Statements of Comprehensive Loss for the years ended December 31, 20 20 , 201 9 and 20 18 F- 6 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2020, 2019 and 2018 F- 7 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 F- 8 Notes to Consolidated Financial Statements F- 9 F- 1 Table of C onten ts Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Novavax, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Novavax, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2021 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the account or disclosures to which they relate. Revenue recognition related to the cost-based input method for U.S. government contracts Description of the Matter As described in Note 2 to the consolidated financial statements, the Company recorded $217.2 million of revenue from U.S. government contracts to advance the clinical development and manufacturing of NVX-CoV2373 on a reimbursable-cost or reimbursable-cost-plus fixed fee basis. The Company measures progress toward satisfaction of its performance obligations using a cost-based input method that requires an estimate of total allowable cost at completion. Estimating the total allowable costs at completion is highly subjective. Changes in the estimated total allowable cost at completion could materially impact the timing of revenue recognition. Allowable contract costs include direct costs incurred on the contract and indirect costs that are applied in the form of rates to the direct costs. Auditing revenue recognition based on the cost-based input method involved subjective auditor judgment. The estimates of costs at completion are based on management’s assessment of the costs necessary to fulfill its performance obligations under the contracts. Auditing allowable contract costs was complex due to the specialized knowledge needed to evaluate the costs included in the calculation of indirect rates and the contract terms. F- 2 Table of C onten ts How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over recognition of revenue under the cost-based input method. For example, we tested controls over the appropriateness of significant assumptions regarding the estimation of allowable costs to be incurred for the performance obligations and controls over the appropriateness of the indirect rate calculation. To test the recognition of revenue under the cost-based input method, our audit procedures included among others, reviewing management’s estimate of total allowable costs at completion for consistency with contract terms, obtaining an understanding of the stage of completion through review of project deliverables, evidencing of stage of completion including discussion with clinical research and manufacturing teams, and comparing actual results to prior management estimates. To test the recognition of revenue related to indirect rates, our audit procedures included among others, testing the allowability of the underlying costs used in the Company’s calculation of indirect rates. We utilized specialists to evaluate the treatment of significant indirect cost types. Identification of embedded leases related to manufacturing supply agreements Description of the Matter As described in Note 7 to the consolidated financial statements, the Company entered into multiple manufacturing supply agreements with contract manufacturing organizations and contract development and manufacturing organizations. The Company determined that certain of these arrangements contain embedded leases as it has the exclusive use of, and control over, a portion of the manufacturing facility or equipment of the contract manufacturing organization during the contractual term of the arrangements. As a result of identifying embedded leases in certain of these arrangements, the Company immediately expensed $245.9 million, which represented the right of use assets related to these arrangements that currently do not have alternative future use. Auditing embedded leases within manufacturing supply agreements was complex due to the judgment required to evaluate whether each arrangement included a lease and the related lease term. This significant auditor judgment involves the assessment of whether the Company has the right to obtain substantially all of the economic benefits from the use of identified assets and an assessment of the lease term, including whether the Company is reasonably certain not to exercise its termination provisions within the arrangements. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the identification of embedded leases in supply agreements. For example, we tested controls over management’s review of the supply agreements that evaluated whether management was entitled to substantially all of the economic benefits, as well as management’s assessment of the various termination provisions. To test the Company’s identification of embedded leases, our audit procedures included among others, reviewing the terms of manufacturing supply agreements with contract manufacturing organizations and contract development and manufacturing organizations, obtaining an understanding of the facilities and equipment subject to the arrangements through discussions with representatives of the counterparties, and evaluating the identification of embedded leases and determination of the lease term. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. Tysons, Virginia March 1, 2021 F- 3 Table of C onten ts Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Novavax, Inc. Opinion on Internal Control over Financial Reporting We have audited Novavax, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Novavax, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. As indicated in the accompanying Management's Report on Internal Control over Financial Reporting included in item 9A, management's assessment of and conclusion of the effectiveness of internal control over financial reporting did not include the internal controls of Novavax CZ (formerly Praha Vaccines a.s.), which is included in the 2020 consolidated financial statements of the Company and constituted 15% of total assets, as of December 31, 2020, and 0% and 3% of revenue and net loss, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Novavax CZ. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated March 1, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia March 1, 2021 F- 4 Table of C onten ts NOVAVAX, INC. CONSOLIDATED BALANCE SHEETS December 31, 2020 2019 (in thousands, except share and per share information) ASSETS Current assets: Cash and cash equivalents $ 553,398 $ 78,823 Marketable securities 157,649 — Restricted cash 93,880 2,947 Accounts receivable 262,012 7,500 Prepaid expenses and other current assets 181,264 7,977 Total current assets 1,248,203 97,247 Restricted cash 1,460 410 Property and equipment, net 179,954 11,445 Intangible assets, net 5,725 5,581 Goodwill 135,379 51,154 Other non-current assets 11,758 7,120 Total assets $ 1,582,479 $ 172,957 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable 54,332 $ 2,910 Accrued expenses 137,390 14,867 Accrued interest 5,078 5,078 Deferred revenue 273,228 1,678 Current portion of finance lease liabilities 105,862 — Other current liabilities 3,782 1,262 Total current liabilities 579,672 25,795 Convertible notes payable 322,035 320,611 Non-current finance lease liabilities 40,083 — Other non-current liabilities 13,480 12,568 Total liabilities 955,270 358,974 Commitments and contingencies Preferred stock, $ 0.01 par value, 2,000,000 shares authorized at December 31, 2020 and 2019; no shares issued and outstanding at December 31, 2020 and 2019 — — Stockholders’ Equity (Deficit): Common stock, $ 0.01 par value, 600,000,000 shares authorized at December 31, 2020 and 2019; and 71,350,365 shares issued and 70,953,739 shares outstanding at December 31, 2020 and 32,399,352 shares issued and 32,352,416 shares outstanding at December 31, 2019 714 324 Additional paid-in capital 2,535,476 1,260,551 Accumulated deficit ( 1,874,199 ) ( 1,431,801 ) Treasury stock, 396,626 shares, cost basis at December 31, 2020 and 46,936 shares, cost basis at December 31, 2019 ( 41,806 ) ( 2,583 ) Accumulated other comprehensive income (loss) 7,024 ( 12,508 ) Total stockholders’ equity (deficit) 627,209 ( 186,017 ) Total liabilities and stockholders’ equity (deficit) $ 1,582,479 $ 172,957 The accompanying notes are an integral part of these financial statements. F- 5 Table of C onten ts NOVAVAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2020 2019 2018 (in thousands, except per share information) Revenue: Government contracts $ 217,246 $ 7,500 $ — Grants and other 258,352 11,162 34,288 Total revenue 475,598 18,662 34,288 Expenses: Research and development 747,027 113,842 173,797 Gain on sale of assets — ( 9,016 ) — General and administrative 145,290 34,417 34,409 Total expenses 892,317 139,243 208,206 Loss from operations ( 416,719 ) ( 120,581 ) ( 173,918 ) Other income (expense): Investment income 1,014 1,512 2,674 Interest expense ( 15,145 ) ( 13,612 ) ( 13,612 ) Other income (expense) 12,591 ( 13 ) 108 Net loss $ ( 418,259 ) $ ( 132,694 ) $ ( 184,748 ) Basic and diluted net loss per share $ ( 7.27 ) $ ( 5.51 ) $ ( 9.99 ) Basic and diluted weighted average number of common shares outstanding 57,554 24,100 18,488 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Year Ended December 31, 2020 2019 2018 (in thousands) Net loss $ ( 418,259 ) $ ( 132,694 ) $ ( 184,748 ) Other comprehensive income (loss): Net unrealized gains on marketable securities available-for-sale 9 5 12 Foreign currency translation adjustment 19,523 ( 1,322 ) ( 2,586 ) Other comprehensive income (loss) 19,532 ( 1,317 ) ( 2,574 ) Comprehensive loss $ ( 398,727 ) $ ( 134,011 ) $ ( 187,322 ) The accompanying notes are an integral part of these financial statements. F- 6 Table of C onten ts NOVAVAX, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) Year Ended December 31, 2020, 2019 and 2018 Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity (Deficit) Shares Amount (in thousands, except share information) Balance at December 31, 2017 16,184,241 $ 162 $ 1,023,532 $ ( 1,114,359 ) $ ( 2,450 ) $ ( 8,617 ) $ ( 101,732 ) Non-cash stock-based compensation — — 18,314 — — — 18,314 Stock issued under incentive programs 120,561 1 2,744 — — — 2,745 Restricted stock cancelled ( 938 ) — — — — — — Issuance of common stock, net of issuance costs of $ 4,265 2,941,438 29 100,031 — — — 100,060 Unrealized gain on marketable securities — — — — — 12 12 Foreign currency translation adjustment — — — — — ( 2,586 ) ( 2,586 ) Net loss — — — ( 184,748 ) — — ( 184,748 ) Balance at December 31, 2018 19,245,302 192 1,144,621 ( 1,299,107 ) ( 2,450 ) ( 11,191 ) ( 167,935 ) Non-cash stock-based compensation — — 17,048 — — — 17,048 Stock issued under incentive programs 173,873 2 1,122 — ( 132 ) — 992 Fractional shares purchased in stock split — — — — ( 1 ) — ( 1 ) Issuance of common stock, net of issuance costs of $ 1,655 12,980,177 130 97,760 — — — 97,890 Unrealized gain on marketable securities — — — — — 5 5 Foreign currency translation adjustment — — — — — ( 1,322 ) ( 1,322 ) Net loss — — — ( 132,694 ) — — ( 132,694 ) Balance at December 31, 2019 32,399,352 324 1,260,551 ( 1,431,801 ) ( 2,583 ) ( 12,508 ) ( 186,017 ) Preferred stock beneficial conversion feature — — 24,139 ( 24,139 ) — — — Conversion of preferred stock 4,388,850 44 199,778 — — — 199,822 Non-cash stock-based compensation — — 128,035 — — — 128,035 Stock issued under incentive programs 2,168,725 22 44,447 — ( 39,223 ) — 5,246 Issuance of common stock, net of issuance costs of $ 11,416 32,393,438 324 878,526 — — — 878,850 Unrealized gain on marketable securities — — — — — 9 9 Foreign currency translation adjustment — — — — — 19,523 19,523 Net loss — — — ( 418,259 ) — — ( 418,259 ) Balance at December 31, 2020 71,350,365 $ 714 $ 2,535,476 $ ( 1,874,199 ) $ ( 41,806 ) $ 7,024 $ 627,209 The accompanying notes are an integral part of these financial statements. F- 7 Table of C onten ts NOVAVAX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2020 2019 2018 (in thousands) Operating Activities: Net loss $ ( 418,259 ) $ ( 132,694 ) $ ( 184,748 ) Reconciliation of net loss to net cash used in operating activities: Depreciation and amortization 4,885 5,676 8,159 Gain on sale of assets — ( 9,016 ) — Non-cash impact of lease termination — — ( 4,381 ) Amortization of debt issuance costs 1,424 1,424 1,424 Right-of-use assets expensed 245,861 — — Non-cash stock-based compensation 128,035 17,048 18,314 Other ( 16,504 ) 4,957 ( 2,451 ) Changes in operating assets and liabilities: Accounts receivable, prepaid expenses and other assets ( 422,689 ) ( 4,202 ) 1,212 Accounts payable and accrued expenses 163,161 ( 11,485 ) ( 6,744 ) Deferred revenue 271,545 ( 8,331 ) ( 15,610 ) Net cash used in operating activities ( 42,541 ) ( 136,623 ) ( 184,825 ) Investing Activities: Capital expenditures ( 54,622 ) ( 1,857 ) ( 1,372 ) Acquisition of Novavax CZ, net of cash acquired ( 165,516 ) — — Proceeds from sale of assets — 18,333 — Purchases of marketable securities ( 363,202 ) ( 17,484 ) ( 120,150 ) Proceeds from maturities of marketable securities 205,562 39,500 150,118 Net cash (used in) provided by investing activities ( 377,778 ) 38,492 28,596 Financing Activities: Net proceeds from sale of preferred stock 199,822 — — Net proceeds from sales of common stock 875,623 97,392 100,060 Proceeds from the exercise of stock-based awards 44,469 992 2,745 Treasury stock related to tax withholding on stock-based awards ( 39,087 ) — — Finance lease payments ( 96,065 ) — — Net cash provided by financing activities 984,762 98,384 102,805 Effect of exchange rate on cash, cash equivalents and restricted cash 2,115 ( 32 ) ( 48 ) Net increase (decrease) in cash, cash equivalents and restricted cash 566,558 221 ( 53,472 ) Cash, cash equivalents and restricted cash at beginning of year 82,180 81,959 135,431 Cash, cash equivalents and restricted cash at end of year $ 648,738 $ 82,180 $ 81,959 Supplemental disclosure of non-cash activities: Sale of common stock under the Sales Agreement not settled at year-end $ 3,227 $ 497 $ — Capital expenditures included in accounts payable and accrued expenses $ 9,255 $ 49 $ 519 Right-of-use assets from new lease agreements $ 247,599 $ — $ — Supplemental disclosure of cash flow information: Cash interest payments, net of amounts capitalized $ 13,705 $ 12,188 $ 12,188 The accompanying notes are an integral part of these financial statements. F- 8 Table of C onten ts NOVAVAX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Note 1 – Organization Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, Novavax AB and Novavax CZ (formerly, Praha Vaccines a.s.), the “Company”) is a late-stage biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs. The Company’s vaccine candidates, including both its coronavirus vaccine candidate, NVX-CoV2373, and its lead influenza vaccine candidate, NanoFlu TM , are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries, Novavax AB and Novavax CZ. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents consist of the following at December 31 (in thousands): 2020 2019 Cash $ 122,312 $ 15,863 Money market funds  96,116 42,960 Government-backed securities 44,250 20,000 Treasury securities 44,052 — Corporate debt securities 246,668 — Cash and cash equivalents $ 553,398 $ 78,823 Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature. Marketable Securities Marketable securities consist of debt securities with maturities greater than three months from the date of purchase that have historically included commercial paper, government-backed securities, treasury securities, corporate notes and agency securities. Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company’s ability and intent to hold the investment to maturity. Interest and dividend income are recorded when earned and included in investment income in the consolidated statements of operations. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations. The specific identification method is used in computing realized gains and losses on the sale of the Company’s securities. The Company classifies its marketable securities with readily determinable fair values as “available-for-sale.” Investments in securities that are classified as available-for-sale are measured at fair market value in the consolidated balance F- 9 Table of C onten ts sheets, and unrealized gains and losses on marketable securities are reported as a separate component of stockholders’ equity (deficit) until realized. Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company’s ability to hold the securities, including whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer’s financial condition and business outlook to predict whether the loss in value is other-than-temporary. If a decline in value is determined to be other-than-temporary, the value of the security is reduced and the impairment is recorded as other income (expense) in the consolidated statements of operations. Concentration of Credit Risk Financial instruments expose the Company to concentration of credit risk and consist primarily of cash and cash equivalents and marketable securities. The Company’s investment policy limits investments to certain types of instruments, including asset-backed securities, high-grade corporate debt securities and money market funds, places restrictions on maturities and concentrations in certain industries and requires the Company to maintain a certain level of liquidity. At times, the Company maintains cash balances in financial institutions, which may exceed federally insured limits. The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk on its cash and cash equivalents. Fair Value Measurements The Company applies Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), for financial and non-financial assets and liabilities. ASC 820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. • Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. Restricted Cash The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements (see Note 8), payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreements (see Note 8), escrow funds paid in connection with the acquisition of Novavax CZ (see Note 6), escrow funds received in connection with a sale of assets transaction in 2019, and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases. The Company will utilize the CEPI and BMGF funds as it incurs expenses for services performed under these agreements. As of December 31, 2020, the restricted cash balances (both current and non-current) consisted of $ 1.5 million for payments received from BMGF, $ 92.4 million of payments under the CEPI funding agreements, and $ 1.5 million of security deposits. As of December 31, 2019, the restricted cash balances (both current and non-current) consisted of $ 1.4 million for payments received from BMGF, $ 1.5 million held in escrow received in connection with the sale of assets transaction and $ 0.4 million of security deposits. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows at December 31 (in thousands): F- 10 Table of C onten ts 2020 2019 Cash and cash equivalents $ 553,398 $ 78,823 Restricted cash current 93,880 2,947 Restricted cash non-current 1,460 410 Cash, cash equivalents and restricted cash $ 648,738 $ 82,180 Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, generally three to twenty-five years . Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of the improvements or the remaining term of the lease. Repairs and maintenance costs are expensed as incurred. Lease Accounting The Company determines at the inception or modification of a contract if an arrangement is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. In determining if a contract contains a lease, the Company evaluates whether the contract, either explicitly or implicitly, is for the use of an identified asset and the Company has the right to direct the use of, and obtain substantially all of the benefit from, the identified asset. Depending on the contract, the lease commencement date, defined as the date on which the lessor makes the underlying asset available for use by the lessee and is the date on which the Company is required to accrue lease expenses, may be different than the inception date of the contract. The Company evaluates changes to the terms and conditions of a lease contract to determine if they result in a new lease or a modification of an existing lease. For lease modifications, the Company remeasures and reallocates the remaining consideration in the contract and reassesses the lease classification at the effective date of the modification. Leases are classified as either operating or finance leases based on the economic substance of the agreement. The Company enters into non-cancelable lease agreements for facilities and certain equipment. Further, the Company enters into manufacturing supply agreements with contract manufacturing organizations and contract development and manufacturing organizations to manufacture its vaccine candidates. Certain of these manufacturing supply agreements include the use of identified manufacturing facilities and equipment that are controlled by the Company and, if the Company receives substantially all of the output of the underlying assets, qualify as an embedded lease. manufacturing supply agreements that contain a lease are treated as lease arrangements in their entirety. For leases that have a lease term of more than 12 months at the lease commencement date, the Company recognizes lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, and corresponding right-of-use (“ROU”) assets, which represent the right to use an underlying asset for the lease term, based on the present value of the fixed future payments over the lease term. The Company calculates the present value of future payments using the discount rate implicit in the lease, if available, or the Company’s incremental borrowing rate. For all leases that have a lease term of 12 months or less at the commencement date (referred to as “short-term” leases), the Company has elected to apply the practical expedient in ASC Topic 842, Leases (“ASC 842”), to not recognize a lease liability or ROU asset but instead, recognize lease payments as an expense on a straight-line basis over the lease term and variable lease payments that do not depend on an index or rate, as an expense in the period in which the variable lease costs are incurred based on performance or usage in accordance with contractual agreements. In determining the lease period, the Company evaluates facts and circumstances that could affect the period over which it is reasonably certain to use the underlying asset while taking into consideration the non-cancelable period over which it has the right to use the underlying asset and any option period to extend or terminate the lease if it is reasonably certain to exercise the option. The Company re-evaluates short-term leases that are modified and if they no longer meet the requirements to be treated as short-term leases, recognizes and measures the lease liability and ROU asset as if the date of the modification is the lease commencement date. For operating leases, the Company recognizes lease expense related to fixed payments on a straight-line basis over the lease term and lease expense related to variable payments as incurred based on performance or usage in accordance with the contractual agreements. For finance leases, the Company recognizes the amortization of the ROU asset over the shorter of the lease term or useful life of the underlying asset. The Company expenses ROU assets acquired for research and development activities under ASC Topic 730, Research and Development , if they do not have an alternative future use, in research and development projects or otherwise. F- 11 Table of C onten ts The Company uses significant assumptions and judgment in evaluating its lease contracts and other agreements under ASC 842, including the determination of whether an agreement is or contains a lease, whether a change in the terms and conditions of a lease contract represent a new or modified lease, whether a lease represents an operating or finance lease, the discount rate used to determine the present value of lease obligations and the term of a lease embedded in its manufacturing supply agreements. Revenue The Company performs research and development under government funding, grant, license and clinical development agreements. The revenue primarily consists of funding under U.S. government contracts and other arrangements to advance the clinical development and manufacturing of NVX-CoV2373. The Company’s U.S. government contracts are with the U.S. Department of Defense (the “DoD”) and its participation in formerly known as Operation Warp Speed (“OWS”) (see Note 8). Other funding arrangements primarily include a grant and forgivable loan funding from CEPI (see Note 8). At contract inception, the Company analyzes the revenue arrangement to determine the appropriate accounting under U.S. GAAP. Currently, the Company’s revenue arrangements represent customer contracts within the scope of ASC Topic 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) or are subject to the contribution guidance in ASC Topic 958-605, Not-for-Profit Entities – Revenue Recognition (“ASC 958-605”), which applies to business entities that receive contributions within the scope of ASC 958-605. The Company recognizes revenue from arrangements within the scope of ASC 606 following the five-step model: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) it satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to its customer. The Company recognizes contribution revenue within the scope of ASC 958-605 when the funder-imposed conditions have been substantially met. Contributions are recorded as deferred revenue until the period in which research and development activities are performed that satisfy the funder-imposed conditions. Under the U.S. government contracts, the Company is entitled to receive funding of up to $ 1.8 billion, on a reimbursable-cost or reimbursable-cost-plus-fixed-fee basis, to support certain activities related to the development, manufacture and delivery of NVX-CoV2373 to the U.S. government. The Company analyzed these contracts and determined that they are within the scope of ASC 606. The obligations under each of the contracts are not distinct in the context of the contract as they are highly interdependent or interrelated and, as such, they are accounted for as a single performance obligation. The transaction price under these arrangements is the consideration the Company is expecting to receive and consists of the funded contract amount and the unfunded variable amount to the extent that it is probable that a significant reversal of revenue will not occur. The Company recognizes revenue for these contracts over time as the Company transfers control over the goods and services and satisfies the performance obligation. The Company measures progress toward satisfaction of the performance obligation using an Estimate-at-Completion (“EAC”) process, which is a cost-based input method that reviews and monitors the progress towards the completion of the Company’s performance obligation. Under this process, management considers the costs that have been incurred to-date, as well as projections to completion using various inputs and assumptions, including, but not limited to, progress towards completion, labor costs and level of effort, material and subcontractor costs, indirect administrative costs and other identified risks. Estimating the total allowable cost at completion of the performance obligation under a contract is subjective and requires the Company to make assumptions about future activity and cost drivers. Changes in these estimates can occur for a variety of reasons and, if significant, may impact the timing of revenue and fee recognition on the Company’s contracts. Allowable contract costs include direct costs incurred on the contract and indirect costs that are applied in the form of rates to the direct costs. Progress billings under the contracts are initially based on provisional indirect billing rates, agreed upon between the Company and the U.S. government. These indirect rates are subject to audit on an annual basis. The Company records the impact of changes in the indirect billing rates in the period when such changes are identified. These changes reflect the difference between actual indirect costs incurred compared to the estimated amounts used to determine the provisional indirect billing rates agreed upon with the U.S. government. The Company recognizes revenue on the U.S government contracts based on reimbursable allowable contract costs incurred in the period up to the transaction price. For reimbursable-cost-plus-fixed-fee contracts, the Company recognizes the fixed-fee based on the proportion of reimbursable contract costs incurred to total estimated allowable contract costs expected to be incurred on completion of the underlying performance obligation as determined under the EAC process. The Company recognizes changes in estimates related to the EAC process in the period when such changes are made on a cumulative catch-up basis. The Company includes the transaction price comprising both funded and unfunded portions of customer contracts, in this estimate. The Company’s other funding agreements currently include funding from CEPI of $ 399.5 million in the form of a grant of $ 257.0 million (“CEPI Grant Funding”) and one or more forgivable no interest term loans of $ 142.5 million (“CEPI Forgivable Loan Funding”). Under the Company’s grant funding arrangements, including the CEPI Grant Funding, the Company is primarily entitled to reimbursement for costs that support development related activities of NVX-CoV2373. The F- 12 Table of C onten ts CEPI Forgivable Loan Funding is designated for the prepayment of certain manufacturing activities. The Company analyzed these other funding arrangements and determined that they are not within the scope of ASC 606 as they do not provide a direct economic benefit to the grantor. Payments received under the grant funding arrangements are considered conditional contributions under the scope of ASC 958-605 and are recorded as deferred revenue until the period in which such research and development activities are actually performed that satisfy the funder-imposed conditions. Payments received under the CEPI Forgivable Loan Funding agreements are only repayable if the proceeds of sales to one or more third parties of NVX-CoV2373 cover the Company’s costs of manufacturing such vaccine candidate, not including manufacturing costs funded by CEPI. As the financial risk remains with CEPI, the Company determined that the use of the CEPI Forgivable Loan Funding is outside the scope of ASC Topic 470, Debt. The research and development risk is considered substantive, such that it is not yet probable that the development will be successful. Therefore, the Company has concluded that ASC 730 is considered applicable and most appropriate. Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, the Company has accounted for the obligation under the CEPI Forgivable Loan Funding as a contract to perform research and development for others. The Company has determined that payments received under these agreements should be recorded as revenue under ASC 958-605 rather than a reduction to research and development expenses. This is consistent with the Company’s policy of presenting such amounts as revenue. In reaching this determination, the Company considered a number of factors, including whether it is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s core operations. The Company will record revenue as it performs the contractual research and development services. The Company has manufacturing and supply arrangements that include a license to use the Company's intellectual property. The licensing arrangements include sales-based royalties, as well as certain development and commercial milestone payments, and the license is deemed to be the predominant item to which the milestone payments and sales-based royalties relate. The fulfillment of the Company's obligation for the license is subject to a constraint, the achievement of the development and commercial milestone or the royalty-related sales under the arrangement. For milestone payments, the constraint is overcome and the Company recognizes revenue, when the development and commercial milestone is achieved. For the year ended December 31, 2020, the Company recognized $ 20.0 million related to a development and commercial milestone payment. The Company did not recognized any revenue in 2020 related to sales-based royalties. The opening and closing balances of receivables and contracts liabilities were $ 262.0 million and $ 7.5 million, and $ 273.2 million and $ 1.7 million, respectively, from the Company's revenue contracts with customers. The aggregate amount of the transaction price allocated to the performance obligations that were unsatisfied (or partially unsatisfied) was $ 1.8 billion at the end of reporting period, of which $ 1.5 billion relates to OWS. Other Intangible Assets The Company’s intangible assets include proprietary adjuvant technology and collaboration agreements, which were measured at the estimated fair values as of their acquisition dates. Amortization expense for intangible assets is recorded on a straight-line basis over the expected useful lives of the assets, ranging for 7 years to 20 years. Impairment of Long-Lived Assets Long-lived assets, including property and equipment and finite-lived intangible and right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on the criteria for accounting for the impairment or disposal of long-lived assets under ASC Topic 360, Property, Plant and Equipment. The Company calculates the estimated fair value of a long-lived asset (group) using the income approach. Impairment losses are recognized when the sum of expected future cash flows is less than the assets’ (group’s) carrying value. Goodwill Goodwill is subject to impairment tests annually or more frequently should indicators of impairment arise. The Company has determined that, because its only business is the development of recombinant vaccines, it operates as a single operating segment and has one reporting unit. The Company primarily utilizes the market approach and, if considered necessary, the income approach to determine if it has an impairment of its goodwill. The market approach is based on market value of invested capital. To ensure that the Company’s capital stock is the appropriate measurement of fair value, the Company considers factors such as its trading volume, diversity of investors and analyst coverage. If considered necessary, the income approach is used to corroborate the results of the market approach. Goodwill impairment may exist if the carrying value of the reporting unit exceeds its estimated fair value. If the carrying value of the reporting unit exceeds its fair value, step two of the F- 13 Table of C onten ts impairment analysis is performed. In step two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair value, should such a circumstance arise. During 2020, the Company changed its annual goodwill impairment testing date from December 31 to October 1. Management has determined that the change in the testing date does not represent a material change to a method of applying an accounting principle as it does not have a material effect on the Company’s consolidated financial statements in light of the Company’s internal controls and requirements under ASC Topic 350, Intangibles—Goodwill and Other , to assess goodwill impairment upon certain triggering events. At October 1, 2020 and December 31, 2019, the Company used the market approach to determine if the Company had an impairment of its goodwill. The fair value of the Company’s single reporting unit was substantially higher than its carrying value, resulting in no impairment to goodwill as of October 1, 2020 and December 31, 2019. Stock-Based Compensation The Company accounts for stock-based compensation related to grants of stock options, stock appreciation rights, restricted stock awards and purchases under the Company’s Employee Stock Purchase Plan, as amended and restated (the “ESPP”) at fair value. The Company recognizes compensation expense related to such awards on a straight-line basis over the requisite service period (generally the vesting period) of the equity awards, which typically occurs ratably over periods ranging from one year to four years . The expected term of stock options and stock appreciation rights granted is based on the Company’s historical option exercise experience and post-vesting forfeiture experience using the historical expected term from the vesting date, whereas the expected term for purchases under the ESPP is based on the purchase periods included in the offering. The expected volatility is determined using historical volatilities based on stock prices over a look-back period corresponding to the expected term. The risk-free interest rate is determined using the yield available for zero-coupon U.S. Government issues with a remaining term equal to the expected term. The Company has never paid a dividend, and as such, the dividend yield is zero, and the Company does not intend to pay dividends in the foreseeable future. Restricted stock awards are recorded as compensation expense over the expected vesting period based on the fair value at the award date using the straight-line method of amortization. See Note 13 for a further discussion on stock-based compensation. Research and Development Expenses Research and development expenses include salaries, stock-based compensation, laboratory supplies, consultants and subcontractors, including external contract research organizations (“CROs”), contract management organizations ("CMOs") and contract management and development organizations ("CDMOs") and other expenses associated with the Company’s process development, manufacturing, clinical, regulatory and quality assurance activities for its clinical development programs. In addition, related indirect costs such as fringe benefits and overhead expenses are also included in research and development expenses. The Company estimates its research and development expense related to services performed under its contracts with external service providers based on an estimate of the level of service performed in the period. Research and development activities are expensed as incurred. Accrued Research and Development Expenses The Company accrues research and development expenses, including clinical trial-related expenses, as the services are performed, which may include estimates of those expenses incurred, but not invoiced. The Company uses information provided by third-party service providers and CROs, CMO's and CDMO's invoices and internal estimates to determine the progress of work performed on the Company’s behalf. Assumptions based on clinical trial protocols, contracts and participant enrollment data are also developed to determine and analyze these estimates and accruals. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes . Under the liability method, deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. F- 14 Table of C onten ts Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized in income in the period such changes are enacted. A valuation allowance is established when necessary to reduce net deferred tax assets to the amount expected to be realized. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are reversed in the period in which the more likely than not recognition threshold is no longer satisfied. Interest and penalties related to income tax matters are recorded as income tax expense. At December 31, 2020 and 2019, the Company had no accruals for interest or penalties related to income tax matters. Net Loss per Share Net loss per share is computed using the weighted average number of shares of common stock outstanding. At December 31, 2020, 2019 and 2018, the Company had outstanding stock options and unvested restricted stock awards totaling 6,679,629 , 4,992,792 and 2,975,481 underlying shares of the Company’s common stock, respectively. At December 31, 2020 and 2019, the Company’s Notes (as defined in Note 11) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $ 136.20 or higher. These and any other shares due to the Company upon settlement of its capped call transactions are excluded from the computation, as their effect is antidilutive. Foreign Currency The accompanying consolidated financial statements are presented in U.S. dollars. The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona) and the functional currency of Novavax CZ, which is located in the Czech Republic, is the local currency (Czech Koruna). The translation of assets and liabilities of Novavax AB and Novavax CZ to U.S. dollars are made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of the statement of operations data is made at the average exchange rate in effect for the period. The translation of operating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction. Translation gains and losses are recognized as a component of accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets. The foreign currency translation adjustment balance included in accumulated other comprehensive income (loss) was $ 7.0 million and $( 12.5 ) million at December 31, 2020 and 2019, respectively. Segment Information The Company manages its business as one operating segment: the development of recombinant vaccines. The Company does not operate separate lines of business with respect to its vaccine candidates. Accordingly, the Company does not have separately reportable segments as defined by ASC Topic 280, Segment Reporting . Recent Accounting Pronouncements Recently Adopted In January 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017‑04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017‑04”), which will simplify the goodwill impairment calculation by eliminating Step 2 from the current goodwill impairment test. The new standard does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative goodwill impairment test by comparing the fair value of its reporting unit to its carrying amount, but if the Company is required to recognize a goodwill impairment charge, under the new standard, the amount of the charge will be calculated by subtracting the reporting unit's fair value from its carrying amount. Under the current standard, if the Company is required to recognize a goodwill impairment charge, Step 2 requires it to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge is calculated by subtracting the reporting unit's implied fair value of goodwill from the goodwill carrying amount. The standard was effective January 1, 2020 for the Company and will be applied prospectively from the date of adoption. The adoption of ASU 2017-04 did not have a material impact on the Company’s historical financial statements. F- 15 Table of C onten ts Not Yet Adopted In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which will simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts on an entity’s own equity. Specifically, the new standard will remove the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features. It will also remove certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and will simplify the diluted earnings per share calculation for convertible instruments. ASU 2020-06 will be effective January 1, 2022 for the Company and may be applied using a full or modified retrospective approach. Early adoption is permitted, but no earlier than January 1, 2021 for the Company. Management has evaluated the impact of adopting ASU 2020-06 and has determined such adoption will not have a material impact on the overall stockholders' equity (deficit) in the Company’s consolidated financial statements. Note 3 – Fair Value Measurements The following table represents the estimated fair value of the Company’s financial assets and liabilities (in thousands): Fair Value at December 31, 2020 Fair Value at December 31, 2019 Assets Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Money market funds(1) $ 96,116 $ — $ — $ 42,960 $ — $ — Government-backed securities(2) — $ 44,250 — — 20,000 — Treasury securities(3) — $ 54,088 — — — — Corporate debt securities(4) — $ 373,681 — — — — Agency securities — $ 20,600 — — — — Total cash equivalents and marketable securities $ 96,116 $ 492,619 $ — $ 42,960 $ 20,000 $ — Liabilities Convertible notes payable $ — $ 407,238 $ — $ — $ 125,811 $ — (1) Classified as cash and cash equivalents as of December 31, 2020 and 2019, respectively (see Note 2). (2) Includes $ 44,250 and $ 20,000 classified as cash and cash equivalents as of December 31, 2020 and 2019, respectively, on the consolidated balance sheets. (3) Includes $ 44,052 classified as cash and cash equivalents as of December 31, 2020 on the consolidated balance sheets. (4) Includes $ 246,668 classified as cash and cash equivalents as of December 31, 2020 on the consolidated balance sheets. Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor’s valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Pricing of the Company’s Notes (as defined in Note 11) has been estimated using other observable inputs, including the price of the Company’s common stock, implied volatility, interest rates and credit spreads among others. During the years ended December 31, 2020 and 2019, the Company did not have any transfers between Levels. The amount in the Company’s consolidated balance sheets for accounts payable and accrued expenses approximates its fair value due to its short-term nature. Note 4 – Marketable Securities Marketable securities classified as available-for-sale as of December 31, 2020 and 2019 were comprised of (in thousands): F- 16 Table of C onten ts December 31, 2020 December 31, 2019 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Treasury securities $ 10,038 $ — $ ( 2 ) $ 10,036 $ — $ — $ — Corporate debt securities 127,003 13 ( 3 ) 127,013 — — — — Agency securities 20,599 1 — 20,600 — — — — Total $ 157,640 $ 14 $ ( 5 ) $ 157,649 $ — $ — $ — $ — As of December 31 2020, investments in marketable securities, including corporate debt securities, were due to mature within one year. Note 5 – Goodwill and Other Intangible Assets Goodwill The changes in the carrying amounts of goodwill for the years ended December 31, 2020 and 2019 were as follows (in thousands): Year Ended December 31, 2020 2019 Beginning balance $ 51,154 $ 51,967 Goodwill resulting from the acquisition of Novavax CZ 70,662 — Currency translation adjustments 13,563 ( 813 ) Ending balance $ 135,379 $ 51,154 Identifiable Intangible Assets Purchased intangible assets consisted of the following as of December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Finite-lived intangible assets: Proprietary adjuvant technology $ 9,099 $ ( 3,374 ) $ 5,725 $ 7,985 $ ( 2,562 ) $ 5,423 Collaboration agreements 4,109 ( 4,109 ) — 3,606 ( 3,448 ) 158 Total identifiable intangible assets $ 13,208 $ ( 7,483 ) $ 5,725 $ 11,591 $ ( 6,010 ) $ 5,581 Amortization expense for the years ended December 2020, 2019 and 2018 was $ 0.6 million, $ 0.7 million and $ 0.7 million, respectively. Estimated amortization expense for existing intangible assets for each of the five succeeding years ending December 31, is as follows (in thousands): Year Amount 2021 $ 455 2022 455 2023 455 2024 455 2025 455 Note 6 - Acquisition of Novavax CZ On May 27, 2020 (the “Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Deed”) by and among Novavax AB, the Company’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V. (collectively, the “Sellers”) and, solely as guarantors, each of F- 17 Table of C onten ts Serum International B.V. and the Company. Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Novavax CZ (formerly, Praha Vaccines a.s.), a vaccine manufacturing company (the “Acquisition”). The assets of Novavax CZ acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity. Allocation of Purchase Price to Assets Acquired and Liabilities Assumed The Company has accounted for the Acquisition as a business combination using the acquisition method of accounting, with the Company as the acquirer. The acquisition method requires the Company to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of net assets acquired is recorded as goodwill. The Company completed the appraisal process necessary to assess the fair values of the assets acquired and liabilities assumed to determine the amount of goodwill to be recognized as of the Acquisition Date. The final determination of the fair value of all assets and liabilities is presented in the table below. The table below summarizes the final allocation of the Purchase Price based upon the fair values of assets acquired and liabilities assumed (in thousands): Prepaid expense and other current assets $ 326 Property and equipment 96,739 Goodwill 70,662 Accounts payable ( 1,193 ) Accrued expenses ( 205 ) Other non-current liabilities ( 813 ) Purchase Price, net of cash acquired $ 165,516 The fair value of the assets acquired and liabilities assumed were determined using market and cost valuation methodologies. The fair value measurements were based on significant unobservable inputs that were developed by the Company using publicly available information, market participant assumptions, and cost and development assumptions. Because of the use of significant unobservable inputs, the fair value measurements represent a Level 3 measurement as defined in ASC 820. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets or liabilities. The cost approach estimates value by determining the current cost of replacing an asset with another of equivalent utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The cost approach was the primary approach used to value fixed assets, including the real property. Fixed assets are depreciated on a straight-line basis over their expected remaining useful lives, ranging from four years to 25 years. The Company recorded $ 70.7 million in goodwill related to the Acquisition representing the Purchase Price that was in excess of the fair value of the assets acquired and liabilities assumed. The goodwill generated from the Acquisition is not expected to be deductible for U.S. federal income tax purposes. The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition, such as the assembled workforce of Novavax CZ. Current assets and current liabilities were recorded at their contractual or historical acquisition amounts, which approximate their fair value. Impact to Financial Results for the Year Ended December 31, 2020 The results of operations from Novavax CZ have been included in the consolidated financial statements since the Acquisition Date. As a result, the consolidated financial results for the year ended December 31, 2020 does not reflect a full twelve months of Novavax CZ results. From the Acquisition Date through December 31, 2020, Novavax CZ has not recognized any revenue and has recorded a net loss from operations of $ 11.3 million. The Company incurred approximately $ 2.7 million of costs related to the Acquisition in the year ended December 31, 2020, which are included within general and administrative expenses in the consolidated statements of operations. Supplemental Pro Forma Financial Information (Unaudited) F- 18 Table of C onten ts The unaudited pro forma financial information for the periods set forth below gives effect to the Acquisition as if it had occurred as of January 1, 2019. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the Acquisition been consummated as of that time. The unaudited pro forma financial information combines the historical results of operations of the Company and Novavax CZ for the periods presented below and reflects the application of certain pro forma adjustments (in thousands, except per share amounts): Year Ended December 31, 2020 2019 (in thousands, except per share information) Revenue $ 475,598 $ 18,662 Net loss ( 419,896 ) ( 142,210 ) Basic and diluted net loss per share $ ( 7.04 ) $ ( 3.22 ) Pro forma adjustments include the recognition of depreciation expense based on the Acquisition Date fair value and remaining useful lives of Novavax CZ fixed assets (net of historical depreciation expense) and the elimination of costs related to the Acquisition, which are non-recurring in nature. Note 7 – Leases As of December 31, 2020, the Company had operating leases for its research and development and manufacturing facilities, corporate headquarters and offices and certain equipment, as well as embedded leases related to multiple manufacturing supply agreements with CMOs and CDMOs to manufacture the Company’s COVID-19 vaccine candidate, NVX-CoV2373. The CMO and CDMO manufacturing supply agreements were entered into during 2020 and include the use of identified manufacturing facilities, contain fixed or minimum commitments and include variable costs related to production and material costs in excess of the fixed or minimum commitment specified in the agreements. The Company evaluated the agreements at inception and determined that certain of these arrangements contain an embedded lease under ASC 842 as it has the exclusive use of, and control over, a portion of the manufacturing facility and equipment of the supplier during the contractual term of the arrangement. The Company classified the CMO and CDMO arrangements as operating and finance leases based on the terms of the agreement. The Company recognized lease expense related to fixed payments for its short-term operating leases on a straight-line basis over the lease term and lease expense related to variable payments as incurred based on performance or usage in accordance with the contractual agreements. The Company recognized lease liabilities and ROU assets of $ 245.9 million for its finance leases and long-term operating leases. The Company’s weighted average Incremental Borrowing Rate for its lease obligations was 6.4 %. The Company expensed the ROU assets since they relate to research and development activities for the development of NVX-CoV2373 for which the Company does not have an alternative future use. The Company used significant judgment and estimates, including the estimated value of the underlying leased asset and financial profile of comparable companies to analyze the credit spread as on the date of the lease inception. During 2020, the Company entered into various facility lease agreements, including a lease for the premises located at 700 Quince Orchard Road, Gaithersburg, Maryland ("700QO") that is expected to commence in 2021. The lease is for approximately 170,000 square feet of space that the Company intends to use for manufacturing, research and development and offices. The term of the lease is approximately 15 years with options to extend the lease. The lease provides for an annual base rent of $ 5.8 million that is subject to future rent increases, and obligates the Company to pay building operating costs. The Company anticipates that it will incur substantial tenant improvement costs, net of a landlord contribution of $ 30.6 million, in 2021 to bring the building to the condition, necessary for its intended use. The Company is planning to occupy the premises in phases expected to start in the second half of 2021. Since the commencement date isn’t until 2021, the lease amounts were not included as an ROU asset and lease liability as of December 31, 2020. At December 31, 2020, the facility leases, excluding the 700QO lease, have expirations that range from approximately three to six years , some of which include options to extend the leases or terminate the leases early. Options to extend the leases or terminate the leases early are only included in the lease term when it is reasonably certain that the option will be exercised. The facility leases contain provisions for future rent increases, and obligate the Company to pay building operating costs. The Company records operating lease expense for each of its operating leases on a straight-line basis from lease commencement date through the end of the lease term. F- 19 Table of C onten ts Supplemental balance sheet information related to leases as of December 31, 2020 was as follows (in thousands, except weighted-average remaining lease term and discount rate): Lease Assets and Liabilities Classification Amount Assets: ROU assets, operating, net Other non-current assets $ 7,794 Liabilities: Current portion of operating lease liabilities Other current liabilities $ 3,782 Current portion of finance lease liabilities Current portion of finance lease liabilities 105,862 Total current lease liabilities $ 109,644 Non-current portion of operating lease liabilities Other non-current liabilities $ 10,122 Non-current portion of finance lease liabilities Non-current finance lease liabilities 40,083 Total non-current lease liabilities $ 50,205 Weighted-average remaining lease term (years): Operating leases 4.5 Finance leases 4.7 Weighted-average discount rate: Operating leases 13.8 % Finance leases 6.4 % Lease expense for the operating and short-term leases for the year ended December 31 was as follows (in thousands): 2020 Operating lease expense $ 2,462 Short-term lease expense 66,805 Finance lease expense: ROU assets expensed 242,009 Interest expense 3,097 Total finance lease expense $ 245,106 Supplemental cash flow information related to leases for the year ended December 31, 2020 was as follows (in thousands): Amount Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in operating leases $ 63,634 Operating cash flows used in finance leases 3,097 Financing cash flows used in finance leases 96,065 ROU assets obtained in exchange for operating lease obligations $ 5,590 ROU assets obtained in exchange for finance lease obligations 242,009 As of December 31, 2020, maturities of lease liabilities were as follows (in thousands): F- 20 Table of C onten ts Year Amount 2021 $ 118,017 2022 44,692 2023 3,385 2024 2,393 2025 2,369 Thereafter 2,079 Total minimum lease payments 172,935 Less: imputed interest ( 13,086 ) Total lease liabilities $ 159,849 Note 8 – U.S. Government Contracts, Grants and Other Revenue Arrangements U.S. Government Contracts Operation Warp Speed In July 2020, the Company entered into a Project Agreement (the “Project Agreement”) with Advanced Technology International, Inc. (“ATI”), the Consortium Management Firm acting on behalf of the Medical CBRN Defense Consortium in connection with OWS. OWS is a partnership among components of the U.S. Department of Health and Human Services and the U.S. Department of Defense working to accelerate the development, manufacturing and distribution of COVID-19 vaccines, therapeutics and diagnostics. The Project Agreement, which was last amended in December 2020, relates to the Base Agreement the Company entered into with ATI in June 2020 (the “Base Agreement,” together with the Project Agreement, the “OWS Agreement”). Under the OWS Agreement, the Company is entitled to receive funding of up to $ 1.7 billion to support certain activities related to the development of NVX-CoV2373 and the manufacture and delivery of the vaccine candidate to the U.S. Government. Pursuant to the OWS Agreement, the Company is authorized to make expenditures or incur obligations of up to $ 1.6 billion. The OWS Agreement requires the Company to conduct certain clinical, regulatory and other activities, including a pivotal Phase 3 clinical trial to determine the safety and efficacy of NVX-CoV2373, and to manufacture and deliver to the U.S. Government 100 million doses of the vaccine candidate. Funding under the OWS Agreement is payable to the Company for various development, clinical trial, manufacturing, regulatory and other activities. The OWS Agreement contains terms and conditions that are customary for U.S. Government agreements of this nature, including provisions giving the U.S. Government the right to terminate the Base Agreement and/or the Project Agreement based on a reasonable determination that the funded project will not produce beneficial results commensurate with the expenditure of resources and that termination would be in the U.S. Government’s interest. If the Project Agreement is terminated prior to completion, the Company is entitled to be paid for work performed and costs or obligations incurred prior to termination and consistent with the terms of the OWS Agreement. The performance period under the Project Agreement extends from July 2020 through December 2021, subject to early termination by the U.S. Government or extension by mutual agreement of the parties. In 2020, the Company recognized revenue under the OWS Agreement of $ 204.7 million. U.S. Department of Defense In June 2020, the Company entered into a letter contract that was last amended in January 2021 (the “DoD Contract”) with the DoD Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CRBND-EB”), under which JPEO-CRBND-EB agreed to provide funding of up to $ 45.7 million to the Company to support the manufacture of NVX-CoV2373. Under the DoD Contract, the Company is authorized to make expenditures or incur obligations up to the full amount of the funding. Under the DoD Contract, the Company is expected to deliver 10 million doses of NVX-CoV2373 to the DoD. The 10 million doses of NVX-CoV2373 may be used in Phase 2/3 clinical trials or under an EUA, if approved by the U.S. Food and Drug Administration (“FDA”). Pursuant to the DoD Contract, if NVX-CoV2373 is approved by the FDA, the DoD is entitled to most-favored customer status for a period of five years from the award of the DoD Contract, meaning that the Company cannot give any comparable commercial client in the United States more favorable pricing than the DoD under similar transactional circumstances. In 2020, the Company recognized revenue from the DoD Contract of $ 12.5 million. F- 21 Table of C onten ts Grants and Other Revenue Arrangements Coalition for Epidemic Preparedness Innovations In May 2020, the Company entered into a restated funding agreement which was amended in November 2020 (the “CEPI Funding Agreement”) with CEPI, under which CEPI agreed to provide funding of up to $ 399.5 million to the Company to support the development of NVX-CoV2373. The CEPI Funding Agreement provides up to $ 257.0 million in Grant Funding and up to $ 142.5 million in Forgivable Loan Funding, which loans are in the form of one or more forgivable no interest term loans in order to prepay certain manufacturing activities and are not subject to restrictive or financial covenants. The Company is only required to repay any CEPI Forgivable Loan Funding under certain circumstances to the extent it sells doses of NVX-CoV2373, produced with the funds provided and included in such loan(s), to a third party. Under the terms of the CEPI Funding Agreement, among other things, the Company and CEPI agreed on the importance of global equitable access to any vaccines produced pursuant to the CEPI Funding Agreement. Any such vaccines, if approved, are expected to be procured and allocated through global mechanisms under discussion as part of the Access to COVID-19 Tools (ACT) Accelerator, an international initiative launched by the World Health Organization (“WHO”), Gavi the Vaccine Alliance, CEPI and other global non-governmental organizations and governmental leaders in 2020. The scope and continuation of the CEPI Funding Agreement may be amended depending on ongoing developments of the COVID-19 outbreak and the success of NVX-CoV2373 relative to other third-party COVID-19 vaccine candidates or treatments. If the WHO, CEPI or a regulatory authority having jurisdiction over a clinical trial of NVX-CoV2373 determines that a third-party product candidate has substantially greater potential than a Company vaccine product, the Company must cease its clinical trial in the relevant region, and will be reimbursed for any costs incurred as a result thereof. In addition, CEPI has the right to unilaterally terminate the CEPI Funding Agreement if CEPI reasonably determines that (i) there are material safety, regulatory or ethical issues with the development of NVX-CoV2373, (ii) NVX-CoV2373 development should be limited in scope or terminated, (iii) the Company becomes unable to discharge its obligations under the agreement, (iv) the Company fails to meet certain milestones, or (v) the Company commits fraud or a financial irregularity. Payments received in advance that are related to future performance are deferred and recognized as revenue when the research and development activities are performed. Cash payments received under the CEPI Funding Agreement are restricted as to their use until expenditures contemplated in the funding agreements are incurred. In 2020, the Company recognized revenue of $ 222.8 million under the CEPI Funding Agreement. Bill & Melinda Gates Foundatio n In support of the Company's development of ResVax TM , in September 2015, the Company entered into the grant agreement with BMGF (the “BMGF Grant Agreement”), under which it was awarded a grant totaling up to $ 89.1 million (the “Grant”). The Grant supports ResVax development activities, including the Company's global Phase 3 clinical trial in pregnant women in their third trimester and other regulatory efforts. Unless terminated earlier by BMGF, the BMGF Grant Agreement will continue in effect until the end of 2021. The Company concurrently entered into a Global Access Commitments Agreement (“GACA”) with BMGF as a part of the BMGF Grant Agreement. Under the terms of the GACA, among other things, the Company agreed to make a certain amount of ResVax available and accessible at affordable pricing to people in certain low- and middle-income countries. Unless terminated earlier by BMGF, the GACA will continue in effect until the later of 15 years from its effective date, or 10 years after the first sale of a product under defined circumstances. The term of the GACA may be extended in certain circumstances, by a period of up to five additional years. In July 2020, the Company entered into a grant agreement with BMGF (the “BMGF SA Grant Agreement”) under which it was awarded a grant of $ 15.0 million to support a Phase 2b clinical trial in the Republic of South Africa to evaluate the safety, immunogenicity, and potential efficacy of NVX-CoV2373. Payments received in advance that are related to future performance are deferred and recognized as revenue when the research and development activities are performed. Cash payments received under the BMGF Grant Agreement and the BMGF SA Grant Agreement are restricted as to their use until expenditures contemplated in the agreements are incurred. In 2020, the Company recognized revenue from the BMGF Grant Agreement of $ 0.4 million and has recognized approximately $ 82 million in revenue since the inception of the agreement. In 2020, the Company recognized revenue from the BMGF SA Grant Agreement of $12.4 million. Serum Institute of India Private Limited F- 22 Table of C onten ts In July 2020, the Company entered into a supply and license agreement with Serum Institute of India Private Limited (“SIIPL”), as amended by the parties in September 2020, under which the Company granted exclusive and non-exclusive licenses to SIIPL for the development, co-formulation, filling and finishing, registration and commercialization by SIIPL of NVX-CoV2373. SIIPL has agreed to purchase Matrix-M adjuvant from the Company and the Company has granted SIIPL a non-exclusive license to manufacture the antigen drug substance component of NVX-CoV2373 in SIIPL’s licensed territory solely for use in the manufacture of NVX-CoV2373 under the terms of the agreement. The parties will equally split the revenue from sale of NVX-CoV2373 by SIIPL in its licensed territory, net of agreed costs. The Company granted to SIIPL (i) an exclusive license in India during the agreement, and (ii) a non-exclusive license (a) during the “Pandemic Period” (as declared by the World Health Organization), in all countries other than specified countries designated by the World Bank as upper-middle or high-income countries, with respect to which the Company retains rights, and (b) after the Pandemic Period, in only those countries designated as low or middle-income by the World Bank. Following the Pandemic Period, the Company may notify SIIPL of any bona fide opportunities for the Company to license NVX-CoV2373 to a third party in such low and middle-income countries and SIIPL would have an opportunity to match or improve such third party terms, failing which, the Company would have the discretion to remove one or more non-exclusive countries from SIIPL’s license. Takeda Pharmaceutical Company Limited In August 2020, the Company announced a collaboration agreement with Takeda Pharmaceutical Company Limited (“Takeda”) for the exclusive development, manufacturing and commercialization of NVX-CoV2373 in Japan. Takeda will receive funding from the Government of Japan’s Ministry of Health, Labour and Welfare to support the technology transfer, establishment of infrastructure and scale-up of manufacturing. The collaboration agreement was finalized in February 2021. The Company will be entitled to receive payments based on the achievement of certain development and commercial milestones, as well as a portion of net profits from the sale of the vaccine. In 2020, the Company recognized other revenue as a result of achieving a development milestone from the Takeda arrangement of $ 20.0 million. Vaccine Supply Advance Purchase Agreements In October 2020, the Company entered into a SARS-CoV-2 vaccine supply agreement with The Secretary of State for Business, Energy and Industrial Strategy, acting on behalf of the government of the UK, the purchase of up to 60 million doses of NVX-CoV2373, plus such additional orders as the Authority may make from time to time. The Company agreed to continue to conduct a UK-based Phase 3 clinical trial of NVX-CoV2373 to assess the efficacy of NVX-CoV2373 in the UK population, establish a dedicated supply chain for NVX-CoV2373 in the UK and seek regulatory approval for NVX‑CoV2373 in the UK. In December 2020, the Company finalized the advance purchase agreement with the Australian Federal Government to supply 51 million doses of NVX-CoV2373. We will work with Australia’s regulatory agency, the Therapeutics Goods Administration ("TGA"), to obtain product approvals upon demonstrating efficacy in clinical studies. As part of the agreement, Australia will have the option to purchase up to an additional 10 million doses. Further, in December 2020, the Company finalized an advance purchase agreement with the government of New Zealand for the purchase of 10.7 million doses of NVX-CoV2373. Under the terms of the Company's advance purchase agreements, government counterparties make upfront payments and have certain termination rights, or rights to reduce or cancel orders, if regulatory approval for the vaccine is not received or if supply is materially interrupted, delayed or deferred. The Company expects to record such upfront payments as deferred revenue and anticipates recognizing revenue when the vaccine is delivered to its customers. Note 9 – Preferred Stock In June 2020, the Company entered into a redeemable Series A Convertible Preferred Stock Subscription Agreement, pursuant to which the Company agreed to issue and sell in a private placement 438,885 shares of its newly designated redeemable Series A Convertible Preferred Stock, par value $ 0.01 per share (“Preferred Stock”), at a purchase price of $ 455.70 per share, for total gross proceeds of $ 200.0 million. During the fourth quarter of 2020, all outstanding shares of Preferred Stock were converted and the Company issued 4,388,850 shares of common stock, par value $ 0.01 per share and reclassified $ 199.8 million from Preferred stock to additional paid in capital. The Company recognized a beneficial conversion feature of approximately $ 24.1 million at the time of issuance of the Preferred Stock that was recorded in additional paid-in capital and accumulated deficit as the Preferred Stock issuance was contingently redeemable and convertible at any time at the option of the holder. F- 23 Table of C onten ts Note 10 – Other Financial Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following at December 31 (in thousands): 2020 2019 Prepaid expenses $ 171,602 $ 3,601 Other current assets 9,662 4,376 Prepaid expenses and other current assets $ 181,264 $ 7,977 Property and Equipment, net Property and equipment is comprised of the following at December 31 (in thousands): 2020 2019 Land and buildings $ 79,096 $ — Machinery and equipment 31,609 9,946 Leasehold improvements 9,684 9,088 Computer hardware 6,126 4,987 Construction in progress 71,232 448 197,747 24,469 Less ― accumulated depreciation ( 17,793 ) ( 13,024 ) Property and equipment, net $ 179,954 $ 11,445 Depreciation expense was approximately $ 4.3 million, $ 5.1 million and $ 7.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Accrued Expenses Accrued expenses consist of the following at December 31 (in thousands): 2020 2019 Employee benefits and compensation $ 20,752 $ 7,504 Research and development accruals 99,994 6,175 Other accrued expenses 16,644 1,188 Accrued expenses $ 137,390 $ 14,867 Purchase Commitments During 2020, the Company entered into agreements in the normal course of business with CMOs and CDMOs supplying the Company with production capabilities, and with vendors for preclinical studies, clinical trials and other goods or services. A number of these arrangements are within the scope of lease accounting (see Note 7). Certain agreements provide for termination rights subject to termination fees. Under such agreements, the Company is contractually obligated to make payments to vendors, mainly to reimburse them for their estimated unrecoverable expenses. The exact amount of such obligations are dependent on the timing of termination, and the terms of the relevant agreement, and cannot be reasonably estimated. As of December 31, 2020, these agreements are active ongoing arrangements and the Company expects to receive value from these arrangements in the future. As of December 31, 2020, the Company had approximately $ 117 million of such non-cancelable purchase commitments with a remaining term of more than one year. Note 11– Long-Term Debt Convertible Notes F- 24 Table of C onten ts In 2016, the Company issued $ 325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”). The Notes are senior unsecured debt obligations and were issued at par. The Notes were issued pursuant to an indenture dated January 29, 2016 (the “Indenture”), between the Company and the trustee. The Company received $ 315.0 million in net proceeds from the offering after deducting underwriting fees and offering expenses. The Notes bear cash interest at a rate of 3.75 %, payable on February 1 and August 1 of each year, beginning on August 1, 2016. The Notes are not redeemable prior to maturity and are convertible into shares of the Company’s common stock. As a result of the Company’s one-for-twenty reverse stock split (see Note 13) and pursuant to Section 14.04(a) of the Indenture, the Notes are initially convertible into approximately 2,385,800 shares of the Company’s common stock based on the initial conversion rate of 7.3411 shares of the Company’s common stock per $1,000 principal amount of the Notes. This represents an initial conversion price of approximately $ 136.20 per share of the Company’s common stock, representing an approximate 22.5 % conversion premium based on the last reported sale price of the Company’s common stock of $ 111.20 per share on January 25, 2016. In addition, the holders of the Notes may require the Company to repurchase the Notes at par value plus accrued and unpaid interest following the occurrence of a Fundamental Change (as described in the Indenture). If a holder of the Notes converts upon a Make-Whole Adjustment Event (as described in the Indenture), they may be eligible to receive a make-whole premium through an increase to the conversion rate up to a maximum of 8.9928 shares per $1,000 principal amount of Notes (subject to other adjustments as described in the Indenture). The Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity classification guidance. Based upon the Company’s analysis, it was determined the Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope exception from derivative accounting, and also since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the proceeds received from the issuance of the convertible debt were recorded as a liability on the consolidated balance sheets. In connection with the issuance of the Notes, the Company also paid $ 38.5 million, including expenses, to enter into privately negotiated capped call transactions with certain financial institutions (the “capped call transactions”). The capped call transactions are generally expected to reduce the potential dilution upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the Notes. The cap price of the capped call transactions will initially be $ 194.60 per share, which represented a premium of approximately 75 % based on the last reported sale price of the Company’s common stock of $ 111.20 per share on January 25, 2016, and is subject to certain adjustments under the terms of the capped call transactions. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price, there would nevertheless be dilution upon conversion of the Notes to the extent that such market price exceeds the cap price. The Company evaluated the capped call transactions under ASC 815-10, Derivatives and Hedging – Overall and determined that it should be accounted for as a separate transaction and that the capped call transactions will be classified as an equity instrument. The Company incurred approximately $ 10.0 million of debt issuance costs in 2016 relating to the issuance of the Notes, which were recorded as a reduction to the Notes on the consolidated balance sheet. The $ 10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven -year contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method. The Company also incurred $ 0.9 million of expenses related to the capped call transactions, which were recorded as a reduction to additional paid-in-capital. Total convertible notes payable consisted of the following at (in thousands): December 31, 2020 December 31, 2019 Principal amount of Notes $ 325,000 $ 325,000 Unamortized debt issuance costs ( 2,965 ) ( 4,389 ) Total convertible notes payable $ 322,035 $ 320,611 Interest expense incurred in connection with the Notes consisted of the following for the years ended December 31 (in thousands): F- 25 Table of C onten ts 2020 2019 2018 Coupon interest at 3.75% $ 12,188 $ 12,188 $ 12,188 Amortization of debt issuance costs 1,424 1,424 1,424 Total interest expense on Notes $ 13,612 $ 13,612 $ 13,612 Note 12 – Stockholders’ Equity In 2020, the Company entered into various At Market Issuance Sales Agreements, which allows it to issue and sell up to $ 1.0 billion in gross proceeds of its common stock. During 2020, the Company sold 25.2 million shares of common stock under these Sales Agreements resulting in $ 835.6 million in net proceeds (this amount excludes $ 3.2 million received in the first quarter of 2021 for shares traded in late December 2020) and 7.2 million shares of common stock resulting in $ 38.5 million in net proceeds from the remaining portion of its At Market Issuance Sales Agreement entered into prior to 2020. From January 1, 2021 through January 20, 2021, the Company sold 0.9 million shares of common stock from its At Market Issuance Sales Agreement entered into in November 2020 ("November 2020 Sales Agreement") resulting in $ 113.0 million in net proceeds, leaving $ 27.2 million remaining under the agreement. The Company terminated the November 2020 Sales Agreement by mutual agreement upon entering into the January 2021 Sales Agreement. In 2019, the Company sold 13.0 million shares of common stock resulting in $ 97.4 million in net proceeds (this amount excludes $ 0.5 million received in the first quarter of 2020 for shares traded in late December 2019) under its various At Market Issuance Sales Agreement. On May 8, 2019, the Company’s stockholders of record as of March 25, 2019 approved a one-for-twenty reverse stock split of the Company’s outstanding common stock, which was effected on May 10, 2019. The number of authorized shares of common stock and preferred stock of the Company was not affected and remains at 600,000,000 and 2,000,000 , respectively, but the number of shares of common stock outstanding as of May 10, 2019 was reduced from 469,453,883 to 23,472,574 . The aggregate par value of the issued common stock was reduced by reclassifying a portion of the par value amount of the outstanding common shares from Common stock to Additional paid-in-capital for all periods presented. In addition, all per share and share amounts, including stock options and restricted stock awards, have been retroactively restated in the accompanying consolidated financial statements and notes thereto for all periods presented to reflect the reverse stock split. In 2018, the Company sold 1.2 million shares of common stock resulting in $ 46.2 million in net proceeds under its various At Market Issuance Sales Agreements and completed a public offering of 1.7 million shares of its common stock, including 0.2 million shares of common stock that were issued upon the exercise in full of the option to purchase additional shares granted to the underwriters, at a price of $ 33.00 per share resulting in net proceeds, net of offering costs of $ 3.6 million, of approximately $ 54 million. Note 13 – Stock-Based Compensation Stock Options The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company’s annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary. The 2015 Plan authorizes the issuance of up to 10,900,000 shares of common stock under equity awards granted under the 2015 Plan, which includes an increase of 7,100,000 shares approved for issuance under the 2015 Plan at the Company’s 2020 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025. The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms. The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100 % of the fair market value of the Company’s common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years . F- 26 Table of C onten ts Stock Options and Stock Appreciation Rights The following is a summary of stock options and stock appreciation rights activity under the 2015 Plan and the 2005 Plan for the year ended December 31, 2020: 2015 Plan 2005 Plan Stock Options Weighted- Average Exercise Price Stock Options Weighted- Average Exercise Price Outstanding at January 1, 2020 3,388,750 $ 35.64 501,780 $ 64.19 Granted 3,363,766 $ 38.01 — $ — Exercised ( 1,025,025 ) $ 31.39 ( 264,265 ) $ 45.89 Canceled ( 307,028 ) $ 33.51 ( 23,329 ) $ 51.92 Outstanding at December 31, 2020 5,420,463 $ 38.05 214,186 $ 88.11 Shares exercisable at December 31, 2020 878,488 $ 71.27 214,186 $ 88.11 Shares available for grant at December 31, 2020 2,473,916 In 2019, the Company granted 192,400 stock appreciation rights, with a weighted-average exercise price of $ 5.95 , under the 2015 Plan. Additionally, in 2019, due to limitations on the equity awards available under the 2015 Plan, the Company granted to certain employees 1,014,240 stock options, with a weighted-average exercise price of $ 5.95 , under the 2015 Plan that were subject to approval of an increase in the number of shares under the 2015 Plan at the Company's 2020 annual meeting of stockholders. Furthermore, in April 2020, due to limitations on the equity awards available under the 2015 Plan, the Company granted to all of its employees collectively 2,501,600 stock options, with a weighted-average exercise price of $ 19.08 , and 326,050 restricted stock units under the 2015 Plan that include a performance requirement related to its NVX-CoV2373 program that were also subject to approval of an increase in the number of shares under the 2015 Plan at the Company's 2020 annual meeting of stockholders. Since the proposal to increase the number of shares under the 2015 Plan was approved at the Company’s 2020 annual meeting of stockholders, as discussed in the “ Stock Options ” section above, the Company began to record stock-based compensation expense for these awards at that time. The fair value of stock options granted under the 2015 Plan was estimated at the date of grant or the date upon which the 2015 Plan was approved by the Company’s stockholders for stock options discussed above using the Black-Scholes option-pricing model with the following assumptions: 2020 2019 2018 Weighted average Black-Scholes fair value of stock options and SARs granted $ 80.48 $ 4.98 $ 34.80 Risk-free interest rate 0.2 %- 1.5 % 1.5 %- 2.6 % 2.3 %- 3.1 % Dividend yield — % — % — % Volatility 116.0 %- 152.2 % 105.4 %- 134.1 % 93.3 %- 115.6 % Expected term (in years) 3.9 - 7.6 3.9 - 7.5 4.1 - 7.5 The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights outstanding under the 2015 Plan and 2005 Plan as of December 31, 2020 was $ 427.8 million and 8.5 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights exercisable under the 2015 Plan and 2005 Plan as of December 31, 2020 was $ 55.9 million and 5.8 years, respectively. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and stock appreciation rights) that would have been received by the holders had all stock option and stock appreciation rights holders exercised their stock options and stock appreciation rights on December 31, 2020. This amount is subject to change based on changes to the closing price of the Company’s common stock. The aggregate intrinsic value of stock options exercised and vesting of restricted stock awards for 2020, 2019 and 2018 was $ 187.3 million, $ 0.5 million and $ 0.4 million, respectively. F- 27 Table of C onten ts Employee Stock Purchase Plan The Employee Stock Purchase Plan, as amended (the “ESPP”), was approved at the Company’s annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 600,000 shares of common stock to be purchased. The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15 % of their compensation, at 85 % of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate). At December 31, 2020, there were 255,596 shares available for issuance under the ESPP. The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2020 2019 2018 Range of Black-Scholes fair values of ESPP shares granted $ 2.57 -$ 92.67 $ 2.57 -$ 35.00 $ 7.20 -$ 70.64 Risk-free interest rate 0.2 %- 2.6 % 1.2 %- 2.6 % 0.7 %- 2.2 % Dividend yield — % — % — % Volatility 66.6 %- 189.7 % 52.2 %- 171.6 % 52.2 %- 203.8 % Expected term (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Restricted Stock Units The following is a summary of restricted stock units activity for the year ended December 31, 2020: Number of Shares Per Share Weighted- Average Fair Value Outstanding and Unvested at January 1, 2020 1,102,311 $ 5.95 Restricted stock units granted 837,896 94.74 Restricted stock units vested ( 840,812 ) 9.37 Restricted stock units forfeited ( 54,415 ) 40.37 Outstanding and Unvested at December 31, 2020 1,044,980 $ 72.59 The Company recorded stock-based compensation expense for awards issued under the above mentioned plans in the consolidated statements of operations as follows (in thousands): Year Ended December 31, 2020 2019 2018 Research and development $ 55,955 $ 8,436 $ 10,575 General and administrative 72,080 8,612 7,739 Total stock-based compensation expense $ 128,035 $ 17,048 $ 18,314 As of December 31, 2020, there was approximately $ 312 million of total unrecognized compensation expense related to unvested stock options, stock appreciation rights, restricted stock units and the ESPP. This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of 1.3 years, and will be allocated between research and development and general and administrative expenses accordingly. This estimate does not include the impact of other possible stock-based awards that may be made during future periods and awards that require approval by the stockholders. Note 14 – Employee Benefits The Company maintains a defined contribution 401(k) retirement plan, pursuant to which employees may elect to contribute up to 100 % of their compensation on a tax deferred basis up to the maximum amount permitted by the Internal Revenue Code of 1986, as amended. F- 28 Table of C onten ts The Company matches 100 % of the first 3 % of the participants’ deferral, and 50 % on the next 2 % of the participants’ deferral, up to a potential 4 % Company match. The Company’s matching contributions to the 401(k) plan vest immediately. Under its 401(k) plan, the Company has recorded expense of $ 0.9 million, $ 1.0 million and $ 1.2 million in 2020, 2019 and 2018, respectively. The Company’s foreign subsidiaries have pension plans under local tax and labor laws and are obligated to make contributions to the plan. Contributions and other expenses related to this plan were $ 1.0 million, $ 0.7 million and $ 0.8 million in 2020, 2019 and 2018, respectively. Note 15 – Income Taxes The Company’s loss from operations before income tax expense by jurisdiction for the years ended December 31 are as follows (in thousands): 2020 2019 2018 Domestic $ ( 455,253 ) $ ( 124,189 ) $ ( 176,290 ) Foreign 36,994 ( 8,505 ) ( 8,458 ) Total net loss $ ( 418,259 ) $ ( 132,694 ) $ ( 184,748 ) As a result of current and historical losses, there is no income tax provision for the years ended December 31, 2020, 2019 and 2018. A reconciliation of the provision for income tax to the amount computed by applying the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows: 2020 2019 2018 Statutory federal tax rate ( 21 ) % ( 21 ) % ( 21 ) % State income taxes, net of federal benefit ( 3 ) % ( 2 ) % ( 3 ) % Research and development and other tax credits — % ( 3 ) % ( 3 ) % Non-deductible expenses 4 % — % — % Non-cash stock-based compensation ( 7 ) % — % — % Other 1 % 1 % 1 % Change in tax rate ( 5 ) % 3 % 5 % Change in valuation allowance 31 % 22 % 21 % Income tax provision — % — % — % As of December 31, 2020, the Company has available federal, state, and foreign net operating losses of $ 1.3 billion, $ 756.0 million and $ 42.7 million, respectively, that may be applied against future taxable income. A significant portion of the federal net operating losses will begin to expire in 2037. A portion of the foreign net operating losses will begin to expire in 2023. The Company also has research tax credits of $ 35.1 million that begin to expire in 2020. Utilization of the net operating loss carryforwards and credits may be subject to an annual limitation due to ownership changes of the Company. As of December 31, 2020, the Company does not expect such limitation, if any, to impact the use of the net operating losses and business tax credits. The Company files income tax returns in the U.S. federal jurisdiction and in various states, as well as in Sweden and the Czech Republic. The Company has U.S. tax net operating losses and credit carryforwards that are subject to examination from 2000 through 2020. The returns in Sweden are subject to examination from 2014 through 2020 and the returns for the Czech Republic are subject to examination from 2017 through 2020. F- 29 Table of C onten ts The significant components of the Company’s deferred tax assets and liabilities as of December 31 were as follows (in thousands): 2020 2019 Deferred tax assets: Federal and State net operating loss carryforward $ 325,655 $ 293,736 Foreign net operating loss carryforward 8,620 13,520 Research tax credits 35,065 37,066 Lease liability 39,548 2,164 Deferred revenue 60,657 973 Non-cash stock-based compensation 22,577 13,679 Original discount interest 3,177 4,326 Other 12,019 2,820 Total deferred tax assets 507,318 368,284 Valuation allowance ( 504,788 ) ( 365,772 ) Net deferred tax assets $ 2,530 $ 2,512 Deferred tax liabilities: ROU assets ( 1,253 ) ( 1,033 ) Intangibles ( 1,198 ) ( 1,279 ) Other ( 79 ) ( 200 ) Total deferred tax liabilities $ ( 2,530 ) $ ( 2,512 ) Net deferred tax assets $ — $ — The valuation allowance increased by $ 139.0 million and $ 28.3 million for the years ended December 31, 2020 and 2019, respectively, due to increases in deferred tax assets. Realization of net deferred tax assets is dependent on the Company’s ability to generate future taxable income, which is uncertain. Accordingly, a full valuation allowance was recorded against these assets as of December 31, 2020 and 2019 as management believes it is more likely than not that the assets will not be realizable. The Company recognizes the effect of a tax position when it is more likely than not, based on the technical merits, that the tax position will be sustained upon examination. A reconciliation of the beginning and ending amounts of unrecognized tax benefits in the year ended December 31, 2020, 2019 and 2018 is as follows (in thousands): 2020 2019 2018 Unrecognized tax benefits balance at January 1, $ — $ — $ — Additions for tax positions of current year 1,413 — — Additions for tax positions of prior years 7,353 — — Reductions for tax positions of prior year — — — Settlements of tax positions of prior years — — — Unrecognized tax benefits balance at December 31, $ 8,766 $ — $ — The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2020 and 2019, the Company had no accruals for interest or penalties related to income tax matters. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $ 8.8 million. Note 16 – Related Party Transaction In June 2020, in advance of David M. Mott joining the Company’s Board of Directors, the Company agreed to sell 32,916 shares of common stock to him at a purchase price of $ 45.57 per share, reflecting the closing price of the Company’s common stock on the trading date prior to the date the parties’ agreement regarding the sale, for total gross proceeds of $ 1.5 million. Mr. Mott joined the Company’s Board of Directors later in the same month. F- 30 Table of C onten ts Note 17 – Subsequent Events In January 2021, the Company entered into an At Market Issuance Sales Agreement ("January 2021 Sales Agreement"), which allows it to issue and sell up to $ 500 million in gross proceeds of its common stock. From January 22 through February 24, 2021, the Company sold 1.7 million shares of common stock under the January 2021 Sales Agreement resulting in $ 452.0 million in net proceeds, leaving $ 42.2 million remaining. In January and February 2021, the Company finalized multiple advance purchase agreements and one binding Heads of Terms to supply. in total, approximately 75 million doses of NVX-CoV2373 to various government customers. The Company will work with the relevant regulatory agencies to obtain necessary approvals, as necessary. In February 2021, the Company finalized an expanded collaboration and license agreement with SK bioscience to manufacture and commercialize NVX-CoV2373 for sale to the Korean government. Concurrently, SK bioscience finalized an advance purchase agreement with the Korean government to supply 40 million doses of NVX-CoV2373 to the Republic of Korea beginning in 2021. The agreement is in addition to the Company's existing manufacturing arrangement with SK bioscience. In February 2021, the Company entered into a Memorandum of Understanding with Gavi, the Vaccine Alliance ("Gavi"), to provide 1.1 billion cumulative doses of NVX-CoV2373 for the COVAX Facility. The Company will work with Gavi to finalize an advance purchase agreement for vaccine supply and global distribution via the COVAX Facility and its partners. The vaccine doses will be manufactured and distributed globally by the Company and SIIPL. F- 31