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iso4217:USD xbrli:shares dummy:Item

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

September 30, 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 November 6, 2023, the registrant had

112,871,792

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

our business,

future

plans

and strategies

and other

future conditions.

In 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 of

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,

revenues, 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;

•

expectations regarding our ability to continue as a going concern;

•

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

global

conflicts,

including

Russia-Ukraine

and

Israel-Hamas,

and

the

COVID-19

pandemic

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

(Unaudited)

Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(Income) (Unaudited)

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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)

(Unaudited)

September 30,

December 31,

2023

2022

Assets

Current assets:

Cash and cash equivalents

17,395

33,475

Short-term investments

25,124

53,352

Restricted cash

206

1,095

Amounts due from related parties

407

414

Prepaid expenses and other current assets

3,224

5,551

Total current assets

46,356

93,887

Property and equipment, net

11,123

12,512

Total assets

57,479

106,399

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

2,974

5,295

Amounts due to related parties

12,512

12,772

Accrued expenses and other current liabilities

4,744

11,370

Note payable, net of debt issuance cost

402

391

Note payable to related party

929

1,113

Total current liabilities

21,561

30,941

Other liabilities:

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

9,630

9,933

Note payable to related party, net of current portion

2,347

3,112

Other long-term liabilities

236

Total liabilities

33,774

44,222

Commitments and contingencies (Note 14)

(nil)

Stockholders’ equity:

Class A common stock, $

0.0001

par value;

1,000,000,000

shares authorized,

112,871,792

and

112,182,750

shares issued and

outstanding at September 30, 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

September 30, 2023 and December 31, 2022

Additional paid-in capital

373,678

366,798

Accumulated other comprehensive loss

(7)

(197)

Accumulated deficit

(350,245)

(304,703)

Total stockholders’ equity

23,705

62,177

Total liabilities and stockholders’ equity

57,479

106,399

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

VAXXINITY,

INC.

CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS AND

OTHER COMPREHENSIVE LOSS (INCOME)

(in thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2023

2022

2023

2022

Operating expenses:

Research and development

7,910

12,468

27,679

34,609

General and administrative

5,535

7,300

18,956

20,546

Total operating expenses

13,445

19,768

46,635

55,155

Loss from operations

(13,445)

(19,768)

(46,635)

(55,155)

Other (income) expense:

Interest and other expense

176

514

264

Interest and other income

(512)

(545)

(1,657)

(625)

(Gain) loss on foreign currency transactions, net

(25)

(28)

Total other (income), net

(300)

(516)

(1,093)

(389)

Net loss

(13,145)

(19,252)

(45,542)

(54,766)

Net loss per share, basic and diluted

(0.10)

(0.15)

(0.36)

(0.43)

Weighted average common shares outstanding, basic and

diluted

126,736,784

126,036,865

126,272,546

125,899,557

Other comprehensive (income) loss:

Unrealized (gain) loss on investments

(11)

215

(190)

215

Other comprehensive (income) loss

(11)

215

(190)

215

Comprehensive loss

(13,134)

(19,467)

(45,352)

(54,981)

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

Issuance of common stock upon exercise of stock options

635,001

—

393

—

393

Stock-based compensation expense

—

2,433

—

2,433

Unrealized gain on investments

—

Net loss

—

(13,977)

Balance at June 30, 2023

112,823,912

278

13,874,132

371,852

(18)

(337,101)

35,012

Issuance of common stock upon exercise of stock options

47,880

—

Stock-based compensation expense

—

1,769

—

1,769

Unrealized loss on investments

—

Net loss

—

(13,145)

Balance at September 30, 2023

112,871,792

278

13,874,132

373,678

(7)

(350,245)

23,705

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

Issuance of common stock upon exercise of stock options

162,613

—

112

—

112

Stock-based compensation expense

—

1,826

—

1,826

Net loss

—

(17,252)

Balance at June 30, 2022

112,129,705

278

13,874,132

362,058

—

(264,996)

97,341

Issuance of common stock upon exercise of stock options

52,165

Stock-based compensation expense

2,357

Net loss

(215)

(19,251)

(19,466)

Balance at September 30, 2022

112,181,870

278

13,874,132

364,444

(215)

(284,247)

80,261

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)

Nine Months Ended September 30,

2023

2022

Cash flows from operating activities:

Net loss

(45,542)

(54,766)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

1,778

1,144

Amortization of debt issuance costs

Amortization of discount on short-term investments

(1,222)

(422)

Stock-based compensation expense

6,427

6,361

Changes in operating assets and liabilities:

Amounts due from related parties

(7)

Prepaid expenses and other current assets

2,327

3,349

Long-term deposits

—

(2,076)

Accounts payable

(2,321)

127

Amounts due to related parties

(260)

(2,731)

Accrued expenses and other current liabilities

(6,626)

7,530

Net cash used in operating activities

(45,393)

(41,451)

Cash flows from investing activities:

Purchase of short-term investments

(43,587)

(107,526)

Proceeds from maturity of short-term investments

73,227

27,500

Purchases of property and equipment

(389)

(1,574)

Net cash provided by (used in) investing activities

29,251

(81,600)

Cash flows from financing activities:

Repayments of note payable

(331)

(320)

Repayments of note payable with related party

(949)

—

Proceeds from exercise of stock options

453

262

Net cash used in financing activities

(827)

(58)

Change in cash, cash equivalents and restricted cash

(16,969)

(123,109)

Cash, cash equivalents and restricted cash at beginning of period

34,570

145,057

Cash, cash equivalents and restricted cash at end of period

17,601

21,948

Reconciliation of cash, cash equivalents and restricted cash:

Cash, cash equivalents and restricted cash at end of period

17,601

21,948

Less restricted cash

(206)

(3,073)

Cash and cash equivalents end of period

17,395

18,875

Supplemental Disclosure

Cash paid for interest

592

277

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

Biomedical, 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

global government

regulations. If

the Company

does not successfully commercialize

or out-license any of its

product candidates, it will be

unable to generate recurring product

revenue

or 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 and Going Concern Assessment

As of September 30, 2023, the Company had $

17.4

million of cash and cash equivalents and

25.1

million of short-term investments to

fund operations. To 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), a

portion of which has been raised from related

party entities,

and grants from

foundations such as

the Coalition for

Epidemic Preparedness Innovations

(CEPI) and the

Michael J. Fox

Foundation

(MJFF). The Company has

experienced significant negative

cash flows from operations

since inception, and incurred

a net loss of

45.5

million for the nine months

ended September 30, 2023. Net cash used

in operating activities for the nine

months ended September 30,

2023 was

45.4

million. In

addition, as

of September 30,

2023, the

Company has

an accumulated

deficit of

350.2

million. The

Company

expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future.

In accordance

with ASC

205-40, Presentation

of Financial

Statements-Going Concern,

management is

required to

evaluate whether

there are

conditions or

events, considered

in the

aggregate, that

raise substantial

doubt about

the Company's

ability to

continue as

going concern within one year after the date that the financial statements are issued. When management

identifies conditions or events,

considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern, management must

consider whether its plans to mitigate those relevant conditions or events will alleviate the substantial doubt.

Given that the Company has incurred substantial operating losses and negative cash flows from operations since inception and expects

to continue

to incur

substantial operating

losses and

negative cash

flows from

operations for

the foreseeable

future, management

assessed

that there are conditions or events, considered

in the aggregate, as of the issue

date of these financial statements, which

raise substantial

doubt about the Company's ability to continue as a going concern.

Management considered whether its plans

to mitigate those relevant conditions

or events will alleviate

the substantial doubt about

the

Company's ability to

continue as a

going concern. These

plans include raising

new capital through

public or private

equity offerings,

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

strategic collaborations, debt

financing and other

capital sources or

combinations thereof, and

as needed cost

reduction through attrition,

organization restructuring, and curtailment of certain research and development activities.

However, there are significant risks and uncertainties as to whether these plans will be achieved or additional funding will be available

on terms acceptable to the Company, or at all.

Due to

the risks

and uncertainties,

management cannot

conclude that

substantial doubt

about the

Company's ability

to continue

as a

going concern has

been alleviated.

As such, there

is substantial doubt

about the entity's

ability to continue

as a going

concern within

one year after the

date that the

financial statements are

issued.

However, since liquidation is

not imminent, the accompanying

unaudited

condensed consolidated financial statements

have been prepared

assuming that the

Company will continue as

a going concern,

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.

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

normal and

recurring

adjustments

necessary

fairly

present

the

results

the

interim

periods.

The

condensed

consolidated

balance

sheet

December 31, 2022, has been derived from the audited financial statements

at that date. Operating results for the three and nine months

ended September 30, 2023

and cash flows

for the nine

months ended September 30,

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 note 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

of the

SEC. These

interim unaudited condensed

financial statements should

be 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 and nine months ended September 30, 2023.

Recently adopted 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

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.

Recently issued accounting pronouncements not yet adopted

In August 2020,

the FASB

issued ASU 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, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity,

including convertible instruments and contracts on an entity's own equity. The guidance allows for either full

retrospective adoption or

modified retrospective adoption. The guidance is effective for the Company in the first quarter of fiscal

year 2024 and early adoption is

permitted. The Company is in the process of evaluating the effect the amendment will have on the consolidated financial statements.

VAXXINITY,

INC.

NOTES TO THE CONDENSED 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):

September 30, 2023

Level 1

Level 2

Level 3

Total

Assets:

Short-term investments

25,124

—

25,124

Money market accounts

10,925

—

10,925

Total assets

36,049

—

36,049

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

During the three and

nine months ended September 30, 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 September 30, 2023

Amortized Cost

Unrealized

Gains (Losses),

Net

Recorded Basis

U.S. Treasury Securities

25,130

(6)

25,124

Total

25,130

(6)

25,124

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.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Prepaid Expenses and Other Current Assets

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

September 30,

December 31,

2023

2022

Clinical prepayments

1,762

2,679

Prepaid insurance

280

1,870

Prepaid materials and supplies

—

248

Deposits

240

232

Other

942

522

3,224

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 $

1.5

million on deposit as of September 30, 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

0.3

million

and

1.6

million

for

the

unamortized

portion

the

Company’s

annual

D&O

insurance fee as of September 30, 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. There

were

amounts held by related parties

at September 30, 2023 and $

0.2

million

at December 31, 2022.

6. Property and Equipment, Net

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

September 30,

December 31,

2023

2022

Airplane

11,983

Laboratory and computer equipment

3,310

3,146

Software

426

415

Leasehold improvements

534

403

Facilities, furniture and fixtures

Vehicles

Construction in progress

Total property and equipment

16,524

16,136

Less: accumulated depreciation and amortization

(5,401)

(3,624)

Property and equipment, net

11,123

12,512

Depreciation

expense

for

the

three

and

nine

months

ended

September 30,

2023

was

0.7

million

and

1.8

million,

respectively.

Depreciation expense for the three and nine months ended September 30, 2022 was $

0.4

million and $

1.1

million, respectively.

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

September 30,

December 31,

2023

2022

Accrued external research and development

1,720

6,904

Accrued compensation

2,689

2,568

Accrued professional fees and other

334

1,722

Accrued interest

—

176

4,744

11,370

8. Other Long-Term Liabilities

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

September 30,

December 31,

2023

2022

Accrued taxes

236

As of

September 30, 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.

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

September 30,

December 31,

2023

2022

Principal

10,124

10,455

Unamortized debt issuance cost

(92)

(131)

Carrying amount

10,032

10,324

Less: current portion

(402)

(391)

Note payable, net of current portion and debt issuance cost

9,630

9,933

As of September 30, 2023, the remaining principal payments for the 2025 Note are as follows (in thousands):

Amount

2023 (remaining 3 months)

113

2024

458

2025

9,553

10,124

Interest expense associated

with the 2025

Note was $

0.1

million and $

0.3

million for the

three and nine

months ended September 30,

2023, respectively.

Interest expense

associated with

the 2025

Note was

0.1

million and

0.3

million for

the three

and nine

months

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ended September 30, 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 September 30, 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.

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

September 30,

December 31,

2023

2022

Principal

3,276

4,225

Less: current portion

(929)

(1,113)

Note payable with related party, net of current portion

2,347

3,112

As of September 30, 2023, the remaining principal payments for the 2022 Promissory Note are as follows (in thousands):

Amount

2023 (remaining 3 months)

165

2024

1,029

2025

1,103

2026

979

3,276

Interest expense

associated with

the 2022

Promissory Note

was $

0.1

million and

0.2

million for

the three

and nine

months ended

September 30, 2023, respectively.

10. Common Stock

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

September 30,

December 31,

2023

2022

Options and RSUs issued and outstanding

22,000,273

20,716,760

Options available for future grants

6,648,567

6,064,003

Warrants issued and outstanding

1,928,020

30,576,860

28,708,783

11. Stock-Based Compensation

2021 Omnibus Incentive Compensation Plan

In November

2021, the

Company established

the 2021

Omnibus Incentive

Compensation Plan

(the “Plan”),

which provides

for the

Company to

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 1,

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

VAXXINITY,

INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

As of

September 30, 2023,

there were

options to

purchase

15,437,818

shares of

Class A

stock outstanding

and options

to purchase

6,362,455

shares of Class B stock

outstanding, of which options to

purchase

10,948,474

shares of Class A common

stock and options

to purchase

5,039,459

shares of Class

B common stock

were exercisable, respectively. As

of September 30, 2023,

the maximum number

of stock options awards available for future issuance under the Company’s plan is

6,648,567

The following table summarizes stock option activity during the nine months ended September 30, 2023:

Number of Stock

Options

Outstanding

Weighted

Average

Exercise Price

Per Share

Weighted

Average

Remaining

Contractual

Term (years)

Aggregate

Intrinsic Value

(in thousands)

Balance at December 31, 2022

20,416,760

5.07

6.8

7,166

Granted

3,466,782

2.28

Exercised

(689,042)

0.66

Forfeited

(1,394,227)

7.44

Balance at September 30, 2023

21,800,273

4.62

6.2

6,421

Options vested and exercisable at September 30, 2023

15,987,933

4.50

5.9

6,338

The aggregate intrinsic value of options

is calculated as the difference between

the exercise price of the

options and the fair value of

the

common stock for those options that had exercise prices lower than the fair value of the common stock as of September 30, 2023.

The intrinsic value of options exercised during the nine months ended September 30, 2023 was $

0.5

million.

The weighted-average grant-date fair value per share of options granted during the nine months ended September 30, 2023 was $

1.88

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity for the nine months ended September 30, 2023:

Number of

Weighted

Average

Grant Date

Fair Value

Per Share

Unvested at December 31, 2022

300,000

3.76

Forfeited

(100,000)

3.76

Unvested at September 30, 2023

200,000

3.76

Stock-Based Compensation Expense

The

Company

recorded

stock-based

compensation

expense

the

following

expense

Vaxxinity, Inc. 10-Q