The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Nature of Business and Basis of Presentation
Nature of Business
Altimmune, Inc., headquartered in Gaithersburg, Maryland, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware. The Company is focused on discovering and developing immunotherapies and vaccines to address significant unmet medical needs. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt, and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.
The accompanying unaudited condensed consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018 included in the annual report on Form 10-K which was filed with the SEC on April 1, 2019. In the opinion of management, the Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as the audited consolidated financial statements, and these condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2019 or any future years or periods.
Basis of presentation
The unaudited condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern.
On September 13, 2018, the Company filed Certificates of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to increase the number of authorized shares of the Company’s common stock, par value $0.0001 per share, from 100,000,000 to 200,000,000 shares and to effect a reverse stock split of the Company’s common stock at a ratio of 1-for-30 (the “Reverse Stock Split”). All references set forth in this quarterly report to number of shares or per share data have been presented retroactively on a post Reverse Stock Split basis.
2.
Summary of Significant Accounting Policies
During the three months ended March 31, 2019, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual report on Form 10-K for the year ended December 31, 2018 as filed with the SEC, except for recently adopted accounting standards.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are recorded as a current and long-term lease obligation, with a corresponding right of use lease assets.
The lease obligations represent the Company’s obligation to make lease payments arising from the lease. The right of use lease assets represent the Company’s right to use an underlying asset for the lease term. The lease obligations and the operating right of use lease assets are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.
5
Recently Issued Accounting Pronouncements
- Adopted
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires a lessee to separate the lease components from the non-lease components in a contract and recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. The standard requires a modified retrospective approach or an optional transition to apply the new guidance in the year of transition rather than at the beginning of the earliest period presented. The Company adopted ASU 2016-02 in the first quarter of 2019 under the optional transition method. The Company’s current operating leases will be accounted for as operating lease liabilities and right of use assets upon adoption. The Company has elected the package of practical expedients permitted. Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease, (b) whether classification of the operating leases would be different in accordance, or (c) whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs at lease commencement. In addition, the Company does not allocate the consideration between lease and non-lease components. On January 1, 2019, the Company recorded a lease liability and a corresponding right of use asset. The adjustment resulted in an increase of $756,347 to total assets and total liabilities on the consolidated balance sheet. The adoption will not have a material impact on the consolidated statement of operations or consolidated statement of cash flows.
In June 2018, FASB issued ASU No. 2018-07,
Compensation—Stock Compensation (Topic
718)—Improvements to Nonemployee Share-Based Payment Accounting
(“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted ASU 2018-07 in the first quarter of 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements - Pending Adoption
In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, was issued to modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted. The Company is still completing its assessment of the impacts and anticipated adoption date of this guidance.
3.
Net Loss Per Share
Because the Company has reported a net loss attributable to common stockholders for all periods presented, basic and diluted net loss per share attributable to common stockholders are the same for all periods presented. For periods presented, all preferred stock, unvested restricted stock, common stock warrants, and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.
Potential common shares issuable upon conversion, vesting or exercise of preferred stock, unvested restricted stock, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding are as follows:
|
|
For the Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Redeemable preferred stock
|
|
|
-
|
|
|
|
86,868
|
|
Common stock warrants
|
|
|
10,386,256
|
|
|
|
78,336
|
|
Common stock options
|
|
|
900,869
|
|
|
|
56,875
|
|
Restricted stock
|
|
|
323,333
|
|
|
|
710
|
|
4.
Goodwill and Intangible Assets
Goodwill
In May 2017, the Company closed on a business combination and recorded an initial purchase price allocation including goodwill. The measurement period ended on the one year anniversary of the business combination and during the three months ended March 31, 2018, the Company recorded adjustments to the purchase price allocation resulting in a net decrease in tax refunds receivable, with a corresponding net increase in goodwill, of $490,676. As goodwill related to this transaction had previously been determined to be fully impaired, the Company recognized an impairment charge of $490,676 as a result of these purchase price allocation adjustments. The purchase price allocation was considered final in May 2018, and no further adjustments were recorded.
6
Intangibles
assets
The Company’s intangible assets consisted of the following:
|
|
March 31, 2019
|
|
|
|
Estimated
Useful
Lives
|
|
Gross
Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value
|
|
Internally developed patents
|
|
6-10 years
|
|
$
|
721,570
|
|
|
$
|
(405,969
|
)
|
|
$
|
315,601
|
|
Acquired licenses
|
|
16-20 years
|
|
$
|
285,000
|
|
|
|
(257,369
|
)
|
|
|
27,631
|
|
Total intangible assets subject to amortization
|
|
|
|
|
1,006,570
|
|
|
|
(663,338
|
)
|
|
|
343,232
|
|
IPR&D assets
|
|
Indefinite
|
|
|
13,418,967
|
|
|
|
—
|
|
|
|
13,418,967
|
|
Total
|
|
|
|
$
|
14,425,537
|
|
|
$
|
(663,338
|
)
|
|
$
|
13,762,199
|
|
|
|
December 31, 2018
|
|
|
|
Estimated
Useful
Lives
|
|
Gross
Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Impairment
|
|
|
Net Book
Value
|
|
Internally developed patents
|
|
6-10 years
|
|
$
|
718,559
|
|
|
$
|
(317,172
|
)
|
|
$
|
—
|
|
|
$
|
401,387
|
|
Acquired licenses
|
|
16-20 years
|
|
|
285,000
|
|
|
|
(253,430
|
)
|
|
|
—
|
|
|
|
31,570
|
|
Total intangible assets subject to amortization
|
|
|
|
$
|
1,003,559
|
|
|
$
|
(570,602
|
)
|
|
$
|
—
|
|
|
$
|
432,957
|
|
IPR&D assets
|
|
Indefinite
|
|
|
37,868,978
|
|
|
|
—
|
|
|
|
(24,450,011
|
)
|
|
|
13,418,967
|
|
Total
|
|
|
|
$
|
38,872,537
|
|
|
$
|
(570,602
|
)
|
|
$
|
(24,450,011
|
)
|
|
$
|
13,851,924
|
|
Amortization expense of intangible assets subject to amortization was $92,744 and $14,628 for the three months ended March 31, 2019 and 2018, respectively. Amortization expense was classified as research and development expenses in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.
As of March 31, 2019, future estimated amortization expense was as follows:
Years ending December 31,
|
|
|
|
|
The remainder of 2019
|
|
$
|
44,535
|
|
2020
|
|
|
45,933
|
|
2021
|
|
|
25,375
|
|
2022
|
|
|
25,371
|
|
2023
|
|
|
25,375
|
|
2024 and thereafter
|
|
|
176,643
|
|
Total
|
|
$
|
343,232
|
|
5.
Accrued Expenses
Accrued expenses and other current liabilities consist of the following:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
Accrued professional services
|
|
$
|
746,063
|
|
|
$
|
552,619
|
|
Accrued payroll and employee benefits
|
|
|
842,678
|
|
|
|
1,257,191
|
|
Accrued interest
|
|
|
1,932
|
|
|
|
1,192
|
|
Accrued research and development
|
|
|
1,562,203
|
|
|
|
2,076,704
|
|
Lease obligation, current portion
|
|
|
239,776
|
|
|
|
—
|
|
Deferred rent, current portion
|
|
|
—
|
|
|
|
175,490
|
|
Deferred revenue
|
|
|
41,867
|
|
|
|
19,753
|
|
Total accrued expenses
|
|
$
|
3,434,519
|
|
|
$
|
4,082,949
|
|
7
6.
Notes Payable and Other Long-Term Liabilities
The Company’s current portion of outstanding notes payable are summarized as follows:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
BPI France notes, short-term portion
|
|
$
|
227,117
|
|
|
$
|
71,596
|
|
Total notes payable
|
|
$
|
227,117
|
|
|
$
|
71,596
|
|
The Company’s long-term portion of outstanding notes payable as well as other long-term liabilities are summarized as follows:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
BPI France notes, long-term portion
|
|
$
|
334,460
|
|
|
$
|
501,174
|
|
Lease obligation, long-term portion (see Note 10)
|
|
|
1,682,247
|
|
|
|
—
|
|
Deferred rent, long-term portion
|
|
|
—
|
|
|
|
1,045,807
|
|
Common stock warrant liability (see Note 8)
|
|
|
65,000
|
|
|
|
65,000
|
|
Other
|
|
|
235,124
|
|
|
|
240,090
|
|
Total other long-term liabilities
|
|
$
|
2,316,831
|
|
|
$
|
1,852,071
|
|
Line of Credit
On July 27, 2018, the Company renewed its existing line of credit agreement for a six-month term with an increase to the borrowing capacity from $250,000 to $1,750,000, subject to a minimum liquidity requirement equal to the outstanding balance of the line. The line of credit expired in January 2019. There was no balance on this credit facility as of December 31, 2018 or for the period within 2019 prior to its expiration.
BPI France Notes
Altimmune France has two non-interest-bearing research and development funding arrangements with BPI France that were entered into in December 2013 to provide Altimmune France up to €750,000 in research funding in the first arrangement and up to €250,000 in the second arrangement. Altimmune France was permitted to draw 50% of the funds upon the signing of the arrangements, an additional 30% contingent upon a financial audit and technical progress report, and the remaining amounts at the completion of the research and development project being funded by the arrangements. In October 2016, the Company and BPI France agreed to extend the term on the arrangement by two years. Each of the two obligations is repayable in sixteen quarterly installments from June 2019 through March 2023. The total amount advanced under the arrangements was €500,000 as of March 31, 2019 ($561,577 as of March 31, 2019). In April 2019, the Company was notified that €102,951 ($115,630 as of March 31, 2019) exceeded the allowable funding in accordance with the arrangement and demanded payment of this amount which is classified as short term. The remaining balance of €397,049 ($445,947 as of March 31, 2019) may still be repayable in sixteen quarterly instalments from June 2019 through March 2023. As of March 31, 2019, $227,117 on this note is classified as short term, and $334,460 as long term. The BPI France notes are recorded at their repayment value which approximates fair value.
7.
Common Stock
On March 12, 2019, the Company issued a combined total of 1,500,000 common units and 2,861,370 pre-funded units to two institutional investors in a registered direct offering (the “Registered Direct Offering”). Each common unit in the Registered Direct Offering was sold at a price of $3.21 and consisted of one share of common stock and 0.70 of a warrant to purchase one share of common stock at an exercise price of $3.21. Each warrant sold in the Registered Direct Offering was exercisable immediately and expired five years from the date of issuance. Each pre-funded unit in the Registered Direct Offering was sold at a public offering price of $3.20 and consisted of a pre-funded warrant to purchase one share of common stock at an exercise price of $0.01 per share and 0.70 of a warrant to purchase one share of common stock at an exercise price of $3.21. The pre-funded warrants were immediately exercisable and were able to be exercised at any time until all of the pre-funded warrants are exercised in full. All of the pre-funded warrants were exercised prior to March 31, 2019. The net proceeds of the Registered Direct Offering were approximately $12,668,784, after deducting the underwriting discount and offering expenses payable by the Company.
The warrants issued in the Registered Direct Offering were concluded to be equity classified freestanding financial instruments. The Registered Direct Offering triggered a down round adjustment to the exercise price of warrants previously issued in an October 2018 public offering from $4.1798 to $2.7568. The Company treated the value of the effect of the reduction in exercise price as a deemed dividend of $452,925 during the quarter ended March 31, 2019, which reduced income available to common shareholders.
8
8.
Warrants
A summary of warrant activity during the three months ended March 31, 2019 is as follows:
|
|
|
|
|
|
|
|
|
Warrants outstanding, beginning of period
|
|
|
7,344,297
|
|
|
Issuances
|
|
|
3,052,959
|
|
|
Exercises and conversions
|
|
|
(11,000
|
)
|
|
Warrants outstanding, end of period
|
|
|
10,386,256
|
|
|
For warrants classified as a liability, the following is a summary of the periodic changes in their fair value during the three months ended March 31, 2019:
Balance, January 1, 2019
|
|
$
|
65,000
|
|
Changes in fair value (Monte Carlo simulation valuation)
|
|
|
-
|
|
Balance, March 31, 2019
|
|
$
|
65,000
|
|
The fair value of common warrants classified as a liability was estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The following assumptions were used to estimate the fair value of warrants that were classified as a liability at March 31, 2019.
|
|
|
|
Expected volatility
|
|
96.1
|
%
|
Expected term (years)
|
|
3.40
|
|
Risk-free interest rate
|
|
2.2
|
%
|
Expected dividend yield
|
|
0.0
|
%
|
9.
Stock-Based Compensation
Stock Options
The Company’s stock option awards generally vest over four years and typically have a contractual life of ten years. At March 31, 2019, there was $1,995,347 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 3.63 years. During the three months ended March 31, 2019, the Company granted 548,000 stock options with a weighted average price of $2.81 and per share weighted average grant date fair value of $2.13.
Information related to stock options outstanding at March 31, 2019 is as follows:
|
|
Number
of Stock
Options
|
|
|
Weighted-
average
Exercise
Price
|
|
|
Weighted-
average
Remaining
Contractual
Term
(Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
|
|
|
900,869
|
|
|
$
|
5.96
|
|
|
|
5.93
|
|
|
$
|
66,732
|
|
Exercisable
|
|
|
82,693
|
|
|
$
|
23.37
|
|
|
|
5.24
|
|
|
$
|
20,232
|
|
Unvested
|
|
|
818,247
|
|
|
$
|
4.21
|
|
|
|
6.00
|
|
|
$
|
46,500
|
|
Restricted Stock
At March 31, 2019, the Company had unvested restricted stock of 323,333 shares with total unrecognized compensation expense of $1,062,672, which the Company expects to recognize over a weighted average period of approximately 3.67 years. During the three months ended March 31, 2019, the Company released 71 shares of common stock from restriction as a result of the vesting of restricted stock.
Stock-based compensation expense
Stock-based compensation expense is classified in the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2019 and 2018 as follows:
|
For the Three Months Ended
March 31,
|
|
|
2019
|
|
|
2018
|
|
Research and development
|
$
|
76,624
|
|
|
$
|
89,036
|
|
General and administrative
|
|
331,090
|
|
|
|
267,673
|
|
Total
|
$
|
407,714
|
|
|
$
|
356,709
|
|
9
2019 Employee Stock Purchase Plan
On March 29, 2019, the board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). A total of 403,500 shares of the Company’s common stock have been reserved for issuance under the 2019 ESPP. Subject to any plan limitations, the 2019 ESPP allows eligible employees to contribute through payroll deductions up to 10% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The offering periods begin in February and August of each year, with the initial offering period commencing on August 1, 2019. The common shares issuable under the 2019 ESPP were registered pursuant to a registration statement on Form S-8 on April 4, 2019.
Unless otherwise determined by the administrator, the Company’s common stock will be purchased for the accounts of employees participating in the 2019 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period.
10.
Operating Leases
The Company rents office and laboratory space in the United States. The Company also leases office equipment under a non-cancellable equipment lease through December 2022. Rent expense during the three months ended March 31, 2019 under all of the Company’s operating leases was $90,176, which includes short-term leases and variable lease costs not included in the lease obligation.
Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.
The office space lease provides for increases in future minimum annual rental payments as defined in the lease agreements. The Company has determined the lease renewal option is not reasonably certain.
The operating cash flows from operating leases for the three months ended March 31, 2019 was $44,202.
Supplemental other information related to the operating leases balance sheet information is as follows:
|
|
March 31, 2019
|
|
Operating lease obligations
|
|
$
|
1,922,023
|
|
Operating lease right-of-use assets
|
|
$
|
744,929
|
|
Weighted-average remaining lease term
|
|
|
6.08
|
|
Weighted-average discount rate
|
|
|
8.0
|
%
|
Maturities of lease liabilities is as follows:
Year ending December 31,
|
|
|
|
|
The remainder of 2019
|
|
$
|
286,629
|
|
2020
|
|
|
387,079
|
|
2021
|
|
|
393,542
|
|
2022
|
|
|
400,198
|
|
2023
|
|
|
407,054
|
|
2024 and thereafter
|
|
|
552,946
|
|
Total lease payments
|
|
|
2,427,448
|
|
Less imputed interest
|
|
|
(505,425
|
)
|
Total
|
|
$
|
1,922,023
|
|
11.
Commitments and Contingencies
The Company is a party in various other contractual disputes, litigation, and potential claims arising in the ordinary course of business. The Company does not believe that the resolution of these matters will have a material adverse effect on its financial position or results of operations.
12.
Subsequent Events
None
10