vaxx-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒

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

For the quarterly period ended

March 31, 2023

-OR-

☐

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

EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number

001-41058

Vaxxinity, Inc.

(Exact name of registrant as specified in its charter)

Delaware

86-2083865

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

505 Odyssey Way

Merritt Island

32953

(Address of principal executive offices)

(Zip Code)

(

254

)

244-5739

(Registrant’s telephone number, including area code)

Not Applicable

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

__________________

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Class A Common Stock, par value

$0.0001 per share

VAXX

The

Nasdaq

Global Market

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

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

Exchange Act of 1934 during the

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

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

to such filing requirements for the past 90

days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted

electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T

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

for such shorter period that the registrant was required

to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated

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

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

Act:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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

use the extended transition period for complying with any

new or revised

financial accounting standards provided pursuant to Section 13(a)

of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company

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

Yes

☐

☒

As of

May 5, 2023, the registrant had

112,665,699

shares of $0.0001 par value Class A common stock

outstanding and

13,874,132

shares of $0.0001 par value Class B

common stock outstanding.

SPECIAL NOTE REGARDING FORWARD

-LOOKING STATEMENTS

This Quarterly Report on Form

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

nor

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

our

business,

future

plans

and

strategies

and

other

future

conditions.

some

cases,

you

can

identify

forward-looking

statements

because

they

contain

words

such

“anticipate,”

“believe,”

“estimate,”

“expect,”

“intend,”

“may,”

“predict,”

“project,”

“target,”

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

and the negative of these words or similar terms.

Forward-looking statements

are subject to

known and unknown

risks and uncertainties,

many of which

may be beyond

our control.

caution you

that forward-looking

statements are not

guarantees of

future performance or

outcomes and that

actual performance

and outcomes may

differ materially

from those made

in or suggested

by the forward-looking

statements contained

in this Quarterly

Report. In addition, even if our results of

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

markets in which

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

not be indicative of results or

developments in subsequent periods. New factors emerge from

time to time that may

cause our business

not to develop

as we expect,

and it is not

possible for us to

predict all of

them. Factors that could

cause actual results

and outcomes

to differ materially from those reflected in

forward-looking statements include, among others, the

following:

•

the prospects

of our

product candidates,

including the

progress, number,

scope, cost,

results

and timing

of data

from

our development activities, preclinical trials

and clinical trials for our product

candidates or programs, such as the target

indication(s) for

development

approval,

the

size,

design,

population,

conduct,

cost,

objective

endpoints

any

clinical trial, or the timing for initiation

or completion of or availability of

results from any clinical trial, for submission,

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

authorities;

•

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

•

the timing of and our ability to

obtain and maintain regulatory approval for our existing product

candidates, any product

candidates

that

may

develop,

and

any

restrictions,

limitations,

warnings

the

label

any

approved

product candidates;

•

our ability to develop and commercialize

new products and product candidates;

•

our ability to leverage our Vaxxine

Platform;

•

the rate and degree of market acceptance of our

products and product candidates;

•

estimates of our addressable market and

market growth, and expectations about market

trends;

•

our future operations, financial position, revenue,

costs, expenses, uses of cash, capital requirements,

our needs for

additional

financing or

the period

for which

our existing

cash resources

will be

sufficient

to meet

our operating

requirements;

•

our

ability

to comply

with legal

and

regulatory

requirements

relating

to privacy,

tax, anti-corruption

and

other applicable laws;

•

our ability to hire and retain key personnel and to manage

our future growth effectively;

•

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

tighter credit environment;

•

competitive companies and technologies

within our industry and our ability to compete;

•

our and our

collaborators’, including

United Biomedical’s

(“UBI”), ability

and willingness to

obtain, maintain,

defend

and enforce our

intellectual property protection

for our proprietary

and collaborative product

candidates, and the

scope

of such protection;

•

the

performance

third-party

suppliers

and

manufacturers

and

our

ability

find

additional

suppliers

and

manufacturers and obtain alternative sources of raw materials;

•

our ability

and the

potential to

successfully manufacture

our product

candidates for

pre-clinical use,

for clinical

trials

and, if approved, on a larger scale for commercial

use;

•

the

ability

and

willingness

our

third-party

collaborators,

including

UBI,

continue

research

and

development

activities

relating

our

product

candidates

and

our

ability

attract

additional

collaborators

with

development,

regulatory and commercialization expertise;

•

general economic, political,

demographic and business conditions

in the United States,

Taiwan

and other jurisdictions

where we conduct business or clinical trials;

•

the potential effects of government

regulation, including regulatory developments

in the United

States and other jurisdictions;

•

ability to obtain additional financing

in future offerings or otherwise;

•

the effects

of the Russia-Ukraine

conflict and

the COVID-19 pandemic

on business operations

and the initiation,

development and operation of our clinical trials, including patient enrollment

of our clinical trials; and

•

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

We discuss many

of these and other factors

in greater detail under Item 1A.

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

for the year ended December 31, 2022 filed with

the Securities and Exchange Commission on March

27, 2023. These risk factors

are not

exhaustive. Other

sections of

this report

may include additional

factors which

could adversely

impact our

business and

financial performance.

New risk factors emerge

from time to time,

and it is not

possible to predict

all such risk factors,

nor can

we assess the impact of all

such risk factors on our

business or the extent to which

any factor or combination of factors

may cause

actual results

to differ

materially from

those contained

in any

forward-looking statements.

Forward-looking statements

are not

guarantees of performance. Given these uncertainties, you

should not place undue reliance on these forward-looking

statements,

which speak only as of the date hereof

You

should read

this Quarterly

Report and

the documents

that we reference

in this Quarterly

Report and

have filed as

exhibits

completely and with the understanding that our

actual future results may be materially different from what

we expect. We qualify

all of

the forward

-looking

statements

in this

Quarterly

Report

by these

cautionary

statements.

Except

as required

by law,

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

or otherwise.

As used

in this

Quarterly Report

on Form

10-Q, unless

otherwise specified

or the

context otherwise

requires, the

terms “we,”

“our,” “us,” the

“Company” refer to

Vaxxinity,

Inc. and

its subsidiaries.

All brand names

or trademarks

appearing in this

Quarterly

Report are the property of their respective owners.

Table of

Contents

Page

PART I—Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Stockholders’ Equity

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II—Other Information

Item 1A. Risk Factors

Item 6. Exhibits

Signature

PART

I – FINANCIAL INFORMATION

Item 1. Financial Statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

BALANCE SHEETS

(in thousands, except share and per share amounts)

March 31,

December 31,

2023

2022

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

22,585

33,475

Short-term investments

44,993

53,352

Restricted cash

100

1,095

Amounts due from related parties

518

414

Prepaid expenses and other current assets

5,237

5,551

Total current assets

73,433

93,887

Property and equipment, net

12,098

12,512

Total assets

85,531

106,399

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

3,029

5,295

Amounts due to related parties

12,706

12,772

Accrued expenses and other current liabilities

9,439

11,370

Note payable, net of debt issuance cost

394

391

Note payable to related party

898

1,113

Total current liabilities

26,467

30,941

Other liabilities

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

9,832

9,933

Note payable to related party, net of current portion

2,862

3,112

Other long-term liabilities

236

Total liabilities

39,398

44,222

Commitments and contingencies (Note 14)

Preferred stock: $

0.0001

par value,

50,000,000

shares authorized at March 31, 2023 and December 31,

2022

—

Stockholders’ equity:

Class A common stock, $

0.0001

par value;

1,000,000,000

shares authorized,

112,118,911

and

112,182,750

shares issued and

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

respectively

278

Class B common stock, $

0.0001

par value;

100,000,000

shares authorized,

13,874,132

shares issued and outstanding at

March 31, 2023 and December 31, 2022

Additional paid-in capital

369,026

366,798

Accumulated other comprehensive loss

(49)

(197)

Accumulated deficit

(323,124)

(304,703)

Total stockholders’ equity

46,133

62,177

Total liabilities and stockholders’ equity

85,531

106,399

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF OPERATIONS

(in thousands, except share and per share amounts)

(Unaudited)

Three Months Ended March 31,

2023

2022

Operating expenses:

Research and development

11,424

11,478

General and administrative

7,384

6,686

Total operating expenses

18,808

18,164

Loss from operations

(18,808)

(18,164)

Other (income) expense:

Interest and other expense

192

105

Interest and other income

(567)

(5)

(Gain) loss on foreign currency transactions, net

(12)

(1)

Total other (income)

expense, net

(387)

Net loss

(18,421)

(18,263)

Net loss per share, basic and diluted

(0.15)

Weighted average

common shares outstanding, basic and diluted

126,061,273

125,709,613

Other comprehensive income:

Unrealized gain on investments

148

—

Other comprehensive income

148

—

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

Common Stock-Class A

Common Stock-Class B

Amount

Additional Paid-in

Capital

Accumulated

Other

Comprehensive

(Loss)

Accumulated

Deficit

Stockholders’

Equity

Balance at December 31, 2022

112,182,750

278

13,874,132

366,798

(197)

(304,703)

62,177

Issuance of common stock upon exercise of stock options

6,161

—

Stock-based compensation expense

—

2,225

—

2,225

Unrealized gain on investments

—

148

—

148

Net loss

—

(18,421)

Balance at March 31, 2023

112,188,911

278

13,874,132

369,026

(49)

(323,124)

46,133

Common Stock-Class A

Common Stock-Class B

Amount

Additional Paid-in

Capital

Accumulated

Other

Comprehensive

(Loss)

Accumulated

Deficit

Stockholders’

Equity

Balance at December 31, 2021

111,518,094

278

13,874,132

357,821

—

(229,481)

128,619

Issuance of common stock upon exercise of stock options

448,998

—

121

—

121

Stock-based compensation expense

—

2,178

—

2,178

Net loss

—

(18,263)

Balance at March 31, 2022

111,967,092

278

13,874,132

360,120

—

(247,744)

112,655

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED

STATEMENTS

OF CASH FLOWS

(in thousands)

(Unaudited)

Three Months Ended March 31,

2023

2022

Cash flows from operating activities:

Net loss

(18,421)

(18,263)

Adjustments to reconcile net loss to net cash used in operating

activities:

Depreciation expense

586

333

Amortization of debt issuance costs

Amortization of discount on short-term investments

(406)

—

Stock-based compensation expense

2,225

2,178

Changes in operating assets and liabilities:

Amounts due from related parties

(104)

(6)

Prepaid expenses and other current assets

314

667

Long-term deposits

—

(1,351)

Accounts payable

(2,260)

(1,733)

Amounts due to related parties

(67)

(2,620)

Accrued expenses and other current liabilities

(1,931)

1,268

Other long-term liabilities

—

(1)

Net cash used in operating activities

(20,051)

(19,514)

Cash flows from investing activities:

Purchase of short-term investments

(18,588)

—

Redemption of short-term investments

27,500

—

Purchases of property and equipment

(172)

(713)

Net cash provided by (used in) investing activities

8,740

(713)

Cash flows from financing activities:

Repayments of note payable

(111)

(107)

Repayments of note payable with related party

(466)

—

Proceeds from exercise of stock options

121

Net cash provided by (used in) financing activities

(574)

Change in cash, cash equivalents and restricted cash

(11,885)

(20,213)

Cash, cash equivalents and restricted cash at beginning of period

34,570

145,057

Cash, cash equivalents and restricted cash at end of period

22,685

124,844

Reconciliation of cash, cash equivalents and restricted cash:

Cash, cash equivalents and restricted cash at end of period

22,685

124,844

Less restricted cash

(100)

(78)

Cash and cash equivalents end of period

22,585

124,766

Supplemental Disclosure

Cash paid for interest

192

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

1. Nature of the Business

Vaxxinity,

Inc.,

Delaware

corporation

(“Vaxxinity

,”

and

together

with

its

subsidiaries,

the

“Company”),

was

formed

through

the

combination of

two separate businesses

that originated

from United Biomedica

l, Inc. (“UBI”)

in two separate

transactions: a

spin-out

from UBI in

2014 of

operations focused on

developing chronic disease

product candidates that

resulted in United

Neuroscience (“UNS”),

and a second spin-out

from UBI in 2020 of

operations focused on the

development of a COVID-19

vaccine that resulted in

C19 Corp.

(“COVAXX”).

On February 2, 2021,

Vaxxinity

was incorporated for the

purpose of reorganizing

and combining UNS and

COVAXX

and on March 2, 2021, did so by

acquiring all of the outstanding equity interests

of UNS and COVAXX

pursuant to a contribution and

exchange

agreement

(the

“Contribution

and

Exchange

Agreement”)

whereby

the

existing

equity

holders

UNS

and

COVAXX

contributed

their

equity

interests

each

UNS

and

COVAXX

exchange

for

equity

Vaxxinity

(the

“Reorganization”).

December 31, 2022, COVAXX

merged with and into Vaxxinity.

The Company is a

biotechnology company currently focused on

developing product candidates for human

use in the fields

of neurology,

pain, cardiovascular diseases

and coronaviruses utilizing

its “Vaxxine Platform”—a synthetic peptide

vaccine technology first

developed

UBI

and

subsequently

refined

over

the

last

two

decades.

The

Company

engaged

the

development

rationally

designed

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

medical need. The Company is also

developing a heterologous booster vaccine for

SARS-Cov-2. UBI is a

significant shareholder of the Company and,

therefore, considered

a related party.

The Company

is subject

to risks and

uncertainties common

to early-stage

companies in

the biotechnology

industry including,

but not

limited

to,

uncertainty

product

development

and

commercialization,

lack

marketing

and

sales

history,

development

its

competitors of new

technological innovations, dependence on

key personnel, market

acceptance of products, product

liability, protection

of proprietary technology,

ability to raise additional

financing, and compliance

with government regulations. If

the Company does not

successfully

commercialize

out-license

any

its

product

candidates,

will

unable

generate

recurring

product

revenue

achieve profitability.

The

Company’s

product

candidates

are

development

and

will

require

significant

additional

research

and

development

efforts,

including extensive pre-clinical and clinical testing and regulatory approval

prior to commercialization. These efforts require significant

amounts of

additional capital, adequate

personnel and infrastructure

and extensive compliance

-reporting capabilities.

There can be

assurance that

the Company’s

research and

development will

be successfully

completed, that

adequate protection

for the

Company’s

intellectual property

will be

obtained, that

any products

developed will

obtain necessary

government regulatory

approval or

that any

approved products will be commercially viable.

Even if the Company’s product development efforts are

successful, it is uncertain when,

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

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

Liquidity

As of March 31,

2023, the Company

had $

67.7

million of cash,

cash equivalents and

short term investments

to fund operations,

including

22.6

million of

cash and

cash equivalents,

45.0

million of

short-term investments,

and $

0.1

million of

restricted cash.

date, the

Company has

primarily financed

its operations

through the

sale of

convertible preferred

stock and

common stock,

borrowings under

promissory

notes

(including

Convertible

Notes),

portion

which

has

been

raised

from

party

entities,

and

grants

from

foundations

such

the

Coalition

for

Epidemic

Preparedness

Innovations

(CEPI)

and

the

Michael

Fox

Foundation

(MJFF).

The

Company has experienced

significant negative cash flows

from operations since inception,

and incurred a net

loss of $

18.4

million for

the three

months ended

March 31, 2023.

Net cash

used in

operating activities

for the

three months

ended March 31,

2023 was

20.1

million. In addition,

as of March 31, 2023,

the Company has an

accumulated deficit of

323.1

million. The Company

expects to incur

substantial operating losses and

negative cash flows from

operations for the foreseeable

future. As of the

date these unaudited condensed

consolidated financial

statements were

available to

be issued,

the Company

expects its

existing cash

and cash

equivalents and

short-

term investments to be sufficient to fund its operating expenses and

capital expenditure requirements for at least the next 12 months.

In order

to continue

to fund

future research

and development

activities, the

Company

will need

to seek

additional capital.

This may

occur through strategic alliances, licensing

arrangements, grants or future public

or private debt or

equity financings. Additional funding

may not be available on

terms the Company finds acceptable

or at all. If the Company

is unable to obtain sufficient

capital to continue

advance

its

programs,

the

Company

would

forced

delay,

limit,

reduce

terminate

its

product

development

future

commercialization efforts

or grant rights

to third parties

to develop and

market product candidates

that the Company

would otherwise

prefer to develop and market itself.

The

accompanying

unaudited

condensed

consolidated

financial

statements

have

been

prepared

going

concern

basis,

which

contemplates

the

realization

assets

and

satisfaction

liabilities

the

ordinary

course

business.

The

unaudited

condensed

consolidated

financial

statements

not

include

any

adjustments

relating

the

recoverability

and

classification

recorded

asset

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

of the uncertainties described above.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies

Basis of presentation

The

accompanying

interim

unaudited

condensed

consolidated

financial

statements

have

been

prepared

using

generally

accepted

accounting principles in the

United States of

America (“GAAP”) and pursuant to

the rules and regulations

of the United States

Securities

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

These interim

condensed consolidated

financial statements

are unaudited

and, in

the opinion

of management,

include all

adjustments

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

derived from the audited financial statements

at that date. Operating results for

the three months ended March 31,

2023 and cash flows

for the

three months ended March 31,

2023 are not necessarily

indicative of the results

that may be expected

for the fiscal year ending

December 31, 2023

or any other future

period. Certain information

and footnote disclosures

normally included in

annual consolidated

financial

statements prepared

in accordance

with GAAP

have

been omitted

in accordance

with the

rules and

regulations

for

interim

reporting

the

SEC.

These

interim

unaudited

condensed

financial

statements

should

read

conjunction

with

the

consolidated

financial statements

and notes

thereto included

in our Annual

Report on

Form 10-K

for the year

ended December 31,

2022 filed

with

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

Significant accounting policies

The significant accounting policies used in preparation of these unaudited

condensed consolidated financial statements are disclosed in

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

changes to the Company’s significant

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

Recently issued accounting pronouncements

From time to

time, new accounting

pronouncements are issued

by the Financial

Accounting Standards Board

(“FASB”) or other standard

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

date.

In June 2016,

the Financial Accounting

Standards Board (“FASB”)

issued Accounting Standards

Update (“ASU”) 2016-13,

Financial

Instruments

Credit

Losses (Topic

326):

Measurement

of Credit

Losses on

Financial

Instruments

(“ASU

2016-13”).

ASU 2016

-13

significantly

changes

the

impairment

model

for

most

financial

assets

and

certain

other

instruments

will

require

immediate

recognition of estimated credit

losses expected to occur

over the remaining life

of many financial assets, which

will generally result in

earlier recognition of allowances for

credit losses on loans and other financial

instruments.

On January 1, 2023, the Company

adopted

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

on the Company's consolidated financial statements.

3. Fair Value

Measurements

The Company's money

market accounts and

short-term investments are

shown at fair

value based on

unadjusted quoted market

prices

in active markets for identical assets.

The following

table presents

information about

the Company’s

financial instruments

measured at

fair value

on a

recurring basis

and

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

thousands):

March 31, 2023

Level 1

Level 2

Level 3

Total

Assets:

Short-term investments

44,993

—

44,993

Money market accounts

8,976

—

8,976

Total assets

53,969

—

53,969

December 31, 2022

Level 1

Level 2

Level 3

Total

Assets:

Short-term investments

53,352

—

53,352

Money market account

27,724

—

27,724

Total assets

81,076

—

81,076

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

transfers between Level 1, Level

2 and Level 3.

4. Short-Term

Investments

The Company’s short-term investments

consist of the following (in thousands):

As of March 31, 2023

Amortized Cost

Unrealized

Gains (Losses),

Net

Recorded Basis

U.S. Treasury Securities

45,042

(49)

44,993

Total

45,042

(49)

44,993

As of December 31, 2022

Amortized Cost

Unrealized

Gains (Losses),

Net

Recorded Basis

U.S. Treasury Securities

53,549

(197)

53,352

Total

53,549

(197)

53,352

These securities mature in less than 1 year.

5. Prepaid Expenses and Other Current Assets

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

March 31,

December 31,

2023

2022

Clinical prepayments

2,878

2,679

Prepaid insurance

1,257

1,870

Prepaid materials and supplies

237

248

Deposits

240

232

Other

625

522

5,237

5,551

Clinical prepayments consist of amounts paid in

advance to clinical research organizations (“CROs”) for

expenses related to our clinical

trials, primarily

UB-612, and

included

1.9

million on

deposit as

of March

31, 2023

that will

be credited

against final

UB-612

trial

expenses. The remaining clinical prepayment amounts are amortized

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

Prepaid

insurance

consists

primarily

1.1

million

and

1.6

million

for

the

unamortized

portion

the

Company’s

annual

D&O

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

Prepaid materials and supplies

consist of amounts paid

in advance related to

the procurement and/or production

of materials for use in

the Company’s clinical trials,

primarily UB-612. Amounts held

by related parties

totaled $

0.2

million at March 31,

2023 and

0.2

million

at December 31, 2022.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

6. Property and Equipment, Net

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

March 31,

December 31,

2023

2022

Airplane

11,983

Laboratory and computer equipment

3,267

3,146

Leasehold improvements

403

Software

426

415

Facilities, furniture and fixtures

Vehicles

Construction in progress

Total property

and equipment

16,307

16,136

Less: accumulated depreciation and amortization

(4,209)

(3,624)

Property and equipment, net

12,098

12,512

Depreciation expense for the three months ended March 31, 2023

and 2022 was $

0.6

million and $

0.3

million, respectively.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following

(in thousands):

March 31,

December 31,

2023

2022

Accrued external research and development

6,491

6,904

Accrued bonuses

1,527

2,568

Accrued professional fees and other

1,420

1,722

Accrued interest

176

9,439

11,370

8. Other Long-Term

Liabilities

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

March 31,

December 31,

2023

2022

Accrued taxes

236

As of

March 31, 2023 and

December 31, 2022, approximately

0.2

million of

accrued taxes related

to penalties and

interest the Company

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

subsidiary. The

Company expects these amounts to be forgiven but has

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

9. Notes Payable

Note Payable—Airplane

In connection with

the acquisition of

an airplane, the Company

entered into a note

payable agreement (the

“2025 Note”) in

June 2020

for $

11.5

million, with an annual interest rate of

3.4

% and a maturity date of

June 9, 2025

. Principal and interest payments are

payable

monthly in the amount of $

0.1

million with a final payment of $

9.4

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

of the Company. In addition, the Company

incurred debt issuance costs of $

0.3

million, which are being amortized over the term of the

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

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

March 31,

December 31,

2023

2022

Principal

10,344

10,455

Unamortized debt issuance cost

(118)

(131)

Carrying amount

10,226

10,324

Less: current portion

(394)

(391)

Note payable, net of current portion and debt issuance cost

9,832

9,933

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

Note are as follows (in thousands):

Amount

2023 (remaining 9 months)

333

2024

458

2025

9,553

10,344

Interest

expense

associated

with

the

2025

Note

was

0.1

million

and

0.1

million

for

the

three

months

ended

March 31,

2023

and

March 31, 2022, respectively.

Accrued interest of

less than $

0.1

million was included

in accrued expenses

and other current

liabilities

in the accompanying condensed consolidated balance sheets as of March

31, 2023 and December 31, 2022.

Promissory Note with Related Party

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

4.2

million. The

2022 Promissory

Note accrues

interest at

7.0

% per

annum and

is due

October 1, 2026

. The

2022 Promissory

Note was

issued to satisfy accounts payable to UBI

totaling $

4.2

million. As of March 31, 2023 and

December 31, 2022, the outstanding principal

amount

under the

2022 Promissory

Note was

3.8

million

and $

4.2

million, respectively.

During the

three months

ended March

31,

2023, the Company incurred $

0.1

million in interest expense and $

0.1

million of interest was paid related to the Promissory Note.

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

March 31,

December 31,

2023

2022

Principal

3,759

4,225

Less: current portion

(898)

(1,113)

Note payable with related party,

net of current portion

2,862

3,112

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

Promissory Note are as follows (in thousands):

Amount

2023 (remaining 9 months)

647

2024

1,029

2025

1,103

2026

980

3,759

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

10. Common Stock

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

purposes:

March 31,

December 31,

2023

2022

Options and RSUs issued and outstanding

22,914,609

20,716,760

Options available for future grants

6,902,994

6,064,003

Warrants issued and

outstanding

1,928,020

31,745,623

28,708,783

11. Stock-Based Compensation

2021 Omnibus Incentive Compensation Plan

November

2021,

the

Company

established

the

2021 Omnibus

Incentive

Compensation

Plan

(the

“Plan”),

which

provides

for

the

Company

grant

nonqualified

stock

options,

incentive

(qualified)

stock

options,

stock

appreciation

rights,

restricted

awards,

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

equity-based awards (including fully vested shares).

At inception

in November

2021, the

maximum number

of shares

of Class

A common

stock that

could be

issued under

the Plan

was

8,700,000

shares of

Class A common

stock. This

number increases

automatically on

January 1

of each

year,

commencing January

2023, by the number of shares

equal to the lesser of (i)

% of the outstanding shares of

our Class A common stock on

the immediately

preceding

December 31,

(ii) the

number of

shares determined

by the

compensation committee

of the

board of

directors,

if any

such

determination

is made,

and

(iii) the

number

of shares

underlying

any

awards granted

during

the

preceding

calendar

year,

net of

the

underlying

awards

canceled

forfeited

under

the

Plan.

January

2023,

accordance

with

the

automatic

“evergreen”

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

under the plan was increased to

11,886,306

Stock Options

As of March 31, 2023, there

were options to purchase

16,252,154

shares of Class

A stock outstanding and options

to purchase

6,362,455

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

10,449,895

shares of Class A common stock and options to purchase

4,992,111

shares of Class

B common stock were

exercisable, respectively. As of March 31, 2023,

the maximum number

of stock options

awards available for future issuance under the Company’s

plans is

6,902,994

SEC Form 10-Q filed by Vaxxinity Inc.