NOVAVAX 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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2020

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 No. 000-26770

NOVAVAX, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

22-2816046

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

21 Firstfield Road, Gaithersburg, MD

 

20878

(Address of principal executive offices)

 

(Zip code)

(240) 268-2000

(Registrant's telephone number, including area code)

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

Title of each class

    

Trading
Symbol(s)

    

Name of each exchange on which registered

Common Stock, Par Value $0.01 per share

 

NVAX

 

The Nasdaq Global Select 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 No

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 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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   No

The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, was 61,278,148 as of July 31, 2020.

NOVAVAX, INC.

TABLE OF CONTENTS

Page No.

PART I. FINANCIAL INFORMATION

2

Item 1.

Consolidated Financial Statements

2

Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019

2

Unaudited Consolidated Statements of Operations and Unaudited Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2020 and 2019

3

Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2020 and 2019

4

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

6

Notes to the Consolidated Financial Statements (unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33

Item 4.

Controls and Procedures

34

PART II. OTHER INFORMATION

34

Item 1A.

Risk Factors

34

Item 6.

Exhibits

38

SIGNATURES

40

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NOVAVAX, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)

    

June 30, 

    

December 31, 

2020

2019

(unaudited)

ASSETS

Current assets:

 

  

 

  

Cash and cash equivalents

$

424,395

$

78,823

Marketable securities

 

77,902

 

Restricted cash

 

106,768

 

2,947

Accounts receivable

7,500

Prepaid expenses and other current assets

 

27,316

 

7,977

Total current assets

 

636,381

 

97,247

Restricted cash

 

411

 

410

Property and equipment, net

 

115,375

 

11,445

Intangible assets, net

 

5,250

 

5,581

Goodwill

 

118,849

 

51,154

Other non-current assets

 

55,961

 

7,120

Total assets

$

932,227

$

172,957

 

 

  

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

 

 

  

Accounts payable

$

9,242

$

2,910

Accrued expenses

 

38,690

 

14,867

Accrued interest

 

5,078

 

5,078

Deferred revenue

 

158,851

 

1,678

Other current liabilities

 

1,470

 

1,262

Total current liabilities

 

213,331

 

25,795

Deferred revenue

 

2,500

 

2,500

Convertible notes payable

 

321,323

 

320,611

Other non-current liabilities

 

10,725

 

10,068

Total liabilities

 

547,879

 

358,974

 

 

  

Commitments and contingencies

 

 

  

Preferred stock, $0.01 par value, 2,000,000 shares authorized; 438,885 shares of redeemable Series A Convertible Preferred Stock issued and outstanding at June 30, 2020 and no shares issued and outstanding at December 31, 2019

199,822

 

 

  

Stockholders' equity (deficit):

 

 

  

Common stock, $0.01 par value, 600,000,000 shares authorized at June 30, 2020 and December 31, 2019; 61,262,632 shares issued and 61,211,223 shares outstanding at June 30, 2020 and 32,399,352 shares issued and 32,352,416 shares outstanding at December 31, 2019

 

612

 

324

Additional paid-in capital

 

1,699,072

 

1,260,551

Accumulated deficit

 

(1,499,325)

 

(1,431,801)

Treasury stock, 51,409 shares, cost basis at June 30, 2020 and 46,936 shares, cost basis at December 31, 2019

 

(2,638)

 

(2,583)

Accumulated other comprehensive loss

 

(13,195)

 

(12,508)

Total stockholders' equity (deficit)

 

184,526

 

(186,017)

Total liabilities, preferred stock and stockholders' equity (deficit)

$

932,227

$

172,957

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

2

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

(unaudited)

For the Three Months

For the Six Months

Ended June 30, 

Ended June 30, 

    

2020

    

2019

    

2020

    

2019

Revenue:

 

  

 

  

 

  

 

  

Grant and other

$

35,538

$

3,357

$

38,915

$

7,339

Total revenue

 

35,538

 

3,357

 

38,915

 

7,339

 

 

 

 

Expenses:

 

 

 

 

Research and development

 

34,846

 

30,417

 

51,741

 

65,890

General and administrative

 

17,719

 

9,606

 

27,098

 

18,338

Total expenses

 

52,565

 

40,023

 

78,839

 

84,228

Loss from operations

 

(17,027)

 

(36,666)

 

(39,924)

 

(76,889)

Other income (expense):

 

 

 

 

Investment income

 

297

 

474

 

732

 

894

Interest expense

 

(3,403)

 

(3,403)

 

(6,806)

 

(6,806)

Other income (expense)

 

2,612

 

(8)

 

2,613

 

(20)

Net loss

$

(17,521)

$

(39,603)

$

(43,385)

$

(82,821)

 

 

 

 

Basic and diluted net loss per share

$

(0.30)

$

(1.69)

$

(0.84)

$

(3.77)

 

Basic and diluted weighted average number of common shares outstanding

 

58,618

 

23,473

 

51,401

 

21,966

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

For the Three Months

For the Six Months

Ended June 30, 

Ended June 30, 

    

2020

    

2019

    

2020

    

2019

Net loss

$

(17,521)

$

(39,603)

$

(43,385)

$

(82,821)

Other comprehensive income (loss):

 

 

 

 

Net unrealized gains on marketable debt securities available-for-sale

 

176

 

 

44

 

5

Foreign currency translation gain (loss) adjustment

 

1,115

 

70

 

(731)

 

(1,104)

Other comprehensive gain (loss)

 

1,291

 

70

 

(687)

 

(1,099)

Comprehensive loss

$

(16,230)

$

(39,533)

$

(44,072)

$

(83,920)

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

3

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Three Months Ended June 30, 2020 and 2019

(unaudited)

Additional

Other

Stockholders'

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Equity

    

Shares

    

Amount

    

Capital

    

Deficit

    

Stock

    

Income (Loss)

    

(Deficit)

 

(in thousands, except share information)

Balance at March 31, 2020

 

53,906,322

$

539

$

1,450,279

$

(1,457,665)

$

(2,638)

$

(14,486)

$

(23,971)

Preferred stock beneficial conversion feature

24,139

(24,139)

Non-cash compensation cost for stock options, RSUs, SARs and ESPP

 

 

 

7,932

 

 

 

 

7,932

Exercise of stock options/Vesting of RSUs/Purchases under ESPP

 

316,815

 

3

 

8,947

 

 

 

 

8,950

Issuance of common stock, net of issuance costs of $2,647

 

7,039,495

 

70

 

207,775

 

 

 

 

207,845

Unrealized gain on marketable securities

 

 

 

 

 

 

176

 

176

Foreign currency translation adjustment

 

 

 

 

 

 

1,115

 

1,115

Net loss

 

 

 

 

(17,521)

 

 

 

(17,521)

Balance at June 30, 2020

 

61,262,632

$

612

$

1,699,072

$

(1,499,325)

$

(2,638)

$

(13,195)

$

184,526

Balance at March 31, 2019

 

23,495,466

$

235

$

1,206,317

$

(1,342,325)

$

(2,450)

$

(12,360)

$

(150,583)

Non-cash compensation cost for stock options, RSUs and ESPP

 

 

 

4,621

 

 

 

 

4,621

Fractional shares purchased in stock split

(1)

(1)

Issuance of common stock, net of issuance costs of ($3)

 

 

 

3

 

 

 

 

3

Foreign currency translation adjustment

 

 

 

 

 

 

70

 

70

Net loss

 

 

 

 

(39,603)

 

 

 

(39,603)

Balance at June 30, 2019

 

23,495,466

$

235

$

1,210,941

$

(1,381,928)

$

(2,451)

$

(12,290)

$

(185,493)

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

4

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Six Months Ended June 30, 2020 and 2019

(unaudited)

Additional

Other

Stockholders'

Common Stock

Paid-in

Accumulated

Treasury

Comprehensive

Equity

    

Shares

    

Amount

    

Capital

    

Deficit

    

Stock

    

Income (Loss)

    

(Deficit)

 

(in thousands, except share information)

Balance at December 31, 2019

 

32,399,352

$

324

$

1,260,551

$

(1,431,801)

$

(2,583)

$

(12,508)

$

(186,017)

Preferred stock beneficial conversion feature

24,139

(24,139)

Non-cash compensation cost for stock options, RSUs, SARs and ESPP

 

 

 

11,897

 

 

 

 

11,897

Exercise of stock options/Vesting of RSUs/Purchases under ESPP

 

350,054

 

3

 

9,007

 

 

(55)

 

 

8,955

Issuance of common stock, net of issuance costs of $5,145

28,513,226

285

393,478

393,763

Unrealized gain on marketable securities

 

 

 

 

 

 

44

 

44

Foreign currency translation adjustment

 

 

 

 

 

 

(731)

 

(731)

Net loss

 

 

 

 

(43,385)

 

 

 

(43,385)

Balance at June 30, 2020

 

61,262,632

$

612

$

1,699,072

$

(1,499,325)

$

(2,638)

$

(13,195)

$

184,526

Balance at December 31, 2018

 

19,245,302

$

192

$

1,144,621

$

(1,299,107)

$

(2,450)

$

(11,191)

$

(167,935)

Non-cash compensation cost for stock options, RSUs and ESPP

 

 

 

10,179

 

 

 

 

10,179

Exercise of stock options/Purchases under ESPP

 

51,388

 

1

 

941

 

 

 

 

942

Fractional shares purchased in stock split

 

 

 

 

 

(1)

 

 

(1)

Issuance of common stock, net of issuance costs of $1,112

 

4,198,776

 

42

 

55,200

 

 

 

 

55,242

Unrealized gain on marketable securities

 

 

 

 

 

 

5

 

5

Foreign currency translation adjustment

 

 

 

 

 

 

(1,104)

 

(1,104)

Net loss

 

 

 

 

(82,821)

 

 

 

(82,821)

Balance at June 30, 2019

 

23,495,466

$

235

$

1,210,941

$

(1,381,928)

$

(2,451)

$

(12,290)

$

(185,493)

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

5

NOVAVAX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Six Months Ended

June 30, 

    

2020

    

2019

Operating Activities:

 

  

 

  

Net loss

$

(43,385)

$

(82,821)

Reconciliation of net loss to net cash provided by (used in) operating activities:

 

 

Depreciation and amortization

 

1,905

 

3,864

Loss on disposal of property and equipment

 

 

88

Amortization of debt issuance costs

 

712

 

712

Non-cash stock-based compensation

 

11,897

 

10,179

Other

 

(1,793)

 

1,269

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other assets

 

(61,079)

 

2,617

Accounts payable and accrued expenses

 

27,094

 

(10,952)

Deferred revenue

 

157,173

 

(5,577)

Net cash provided by (used in) operating activities

 

92,524

 

(80,621)

 

 

Investing Activities:

 

 

Capital expenditures

 

(3,884)

 

(1,281)

Acquisition of Praha Vaccines a.s., net of cash acquired

(164,204)

Proceeds from maturities of marketable securities

 

29,750

 

24,500

Purchases of marketable securities

 

(107,608)

 

(2,484)

Net cash provided by (used in) investing activities

 

(245,946)

 

20,735

 

 

Financing Activities:

 

 

Net proceeds from sale of preferred stock

199,822

Net proceeds from sales of common stock

 

393,763

 

55,242

Proceeds from the exercise of stock options and employee stock purchases

 

8,955

 

942

Net cash provided by financing activities

 

602,540

 

56,184

Effect of exchange rate on cash, cash equivalents and restricted cash

 

276

 

(22)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

449,394

 

(3,724)

Cash, cash equivalents and restricted cash at beginning of period

 

82,180

 

81,959

Cash, cash equivalents and restricted cash at end of period

$

531,574

$

78,235

 

 

Supplemental disclosure of non-cash activities:

 

 

Property and equipment purchases included in accounts payable and accrued expenses

$

2,753

$

146

Supplemental disclosure of cash flow information:

 

 

Cash payments of interest

$

6,094

$

6,094

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

6

NOVAVAX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

Note 1 – Organization

Novavax, Inc. (“Novavax,” and together with its wholly owned subsidiaries, Novavax AB and Praha Vaccines a.s., the “Company”) is a late-stage biotechnology company that promotes improved global health through the discovery, development and commercialization of innovative vaccines to prevent serious infectious diseases and address urgent, global health needs. The Company’s vaccine candidates, including both its recently announced coronavirus vaccine candidate, NVX-CoV2373, as well as its other lead candidate, NanoFluTM, are genetically engineered, three-dimensional nanostructures of recombinant proteins critical to disease pathogenesis and may elicit differentiated immune responses, which may be more efficacious than naturally occurring immunity or traditional vaccines. The Company’s technology targets a variety of infectious diseases. The Company is also developing proprietary immune stimulating saponin-based adjuvants at Novavax AB, its wholly owned Swedish subsidiary. The Company’s lead adjuvant, Matrix-M™, has been shown to enhance immune responses and has been well-tolerated in multiple clinical trials.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated balance sheet as of June 30, 2020, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three and six months ended June 30, 2020 and 2019, the consolidated statements of changes in stockholders’ equity (deficit) for the three and six months ended June 30, 2020 and 2019 and the consolidated statements of cash flows for the six months ended June 30, 2020 and 2019 are unaudited, but include all adjustments (consisting of normal recurring adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results, comprehensive loss, changes in stockholders’  equity (deficit) and cash flows, respectively, for the periods presented. Although the Company believes that the disclosures in these unaudited consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

The unaudited consolidated financial statements include the accounts of Novavax, Inc. and its wholly owned subsidiaries, Novavax AB and Praha Vaccines a.s. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements are presented in U.S. dollars. The functional currency of Novavax AB, which is located in Sweden, is the local currency (Swedish Krona), and the functional currency of Praha Vaccines a.s., which is located in the Czech Republic, is the local currency (Czech Koruna). The translation of assets and liabilities of these subsidiaries to U.S. dollars is made at the exchange rate in effect at the consolidated balance sheet date, while equity accounts are translated at historical rates. The translation of the statement of operations data is made at the average exchange rate in effect for the period. The translation of operating cash flow data is made at the average exchange rate in effect for the period, and investing and financing cash flow data is translated at the exchange rate in effect at the date of the underlying transaction. Translation gains and losses are recognized as a component of accumulated other comprehensive loss in the accompanying unaudited consolidated balance sheets. The foreign currency translation adjustment balance included in accumulated other comprehensive loss was $13.2 million and $12.5 million at June  30, 2020 and December 31, 2019, respectively.

The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Results for this or any interim period are not necessarily indicative of results for any future interim period or for the entire year. The Company operates in one business segment.

7

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents consist of the following at (in thousands):

    

June 30, 

    

December 31, 

2020

2019

Cash

$

124,783

$

15,863

Money market funds

 

225,373

 

42,960

Asset-backed securities

 

24,250

 

20,000

Treasury bills

 

49,989

 

Cash and cash equivalents

$

424,395

$

78,823

Cash equivalents are recorded at cost, which approximate fair value due to their short-term nature.

Marketable Securities

Marketable securities consist of debt securities with maturities greater than three months from the date of purchase that include commercial paper, asset-backed securities, treasury bills and corporate notes. Classification of marketable securities between current and non-current is dependent upon the maturity date at the balance sheet date taking into consideration the Company's ability and intent to hold the investment to maturity.

Interest and dividend income are recorded when earned and included in investment income in the consolidated statements of operations. Premiums and discounts, if any, on marketable securities are amortized or accreted to maturity and included in investment income in the consolidated statements of operations. The specific identification method is used in computing realized gains and losses on the sale of the Company's securities.

The Company classifies its marketable securities with readily determinable fair values as “available-for-sale.” Investments in securities that are classified as available-for-sale are measured at fair market value in the consolidated balance sheets, and unrealized gains and losses on marketable securities are reported as a separate component of stockholders' deficit until realized. Marketable securities are evaluated periodically to determine whether a decline in value is “other-than-temporary.” The term “other-than-temporary” is not intended to indicate a permanent decline in value. Rather, it means that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the security. Management reviews criteria, such as the magnitude and duration of the decline, as well as the Company's ability to hold the securities, including whether the Company will be required to sell a security prior to recovery of its amortized cost basis, the investment issuer's financial condition and business outlook to predict whether the loss in value is other-than-temporary. If a decline in value is determined to be other-than-temporary, the value of the security is reduced and the impairment is recorded as other income (expense) in the consolidated statements of operations.

Restricted Cash

The Company’s current and non-current restricted cash includes payments received under the Coalition for Epidemic Preparedness Innovations (“CEPI”) funding agreements (see Note 11), payments received under the Bill & Melinda Gates Foundation (“BMGF”) grant agreement (see Note 11), escrow funds paid in connection with the acquisition of Praha Vaccines a.s. (see Note 5) and funds received in connection with a transaction in 2019 with Catalent Maryland, Inc. (formerly Paragon Bioservices, Inc.), a unit of Catalent Biologics (“Catalent”), pursuant to which the Company agreed to sell to Catalent certain assets related to its biomanufacturing and development activities and cash collateral accounts under letters of credit that serve as security deposits for certain facility leases. The Company will utilize the CEPI and BMGF funds as it incurs expenses for services performed under these agreements.

8

At both June 30, 2020 and December 31, 2019, the restricted cash balances (both current and non-current) consisted of $1.4 million of payments received from BMGF, $1.5 million held in escrow received in connection with the Catalent transaction and $0.4 million of security deposits. At June 30, 2020, the restricted cash balance also included $92.6 million of payments under the CEPI funding agreements and $11.2 million held in escrow that was paid by the Company in connection with the Praha Vaccines a.s. acquisition.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows (in thousands):

    

June 30, 

    

December 31, 

2020

2019

Cash and cash equivalents

$

424,395

$

78,823

Restricted cash current

 

106,768

 

2,947

Restricted cash non-current

 

411

 

410

Cash, cash equivalents and restricted cash

$

531,574

$

82,180

Acquisitions

The Company applies the acquisition method of accounting to business combinations in accordance with ASC 805, Business Combinations. The Company’s consolidated financial statements include the operating results of an acquired entity from the date on which it obtains control of the business acquired. The Company recognizes and measures the identifiable assets acquired and liabilities assumed, as of the acquisition date, based on their estimated fair value with the excess purchase consideration, if any, recognized as goodwill. In determining fair value, the Company uses various recognized valuation methods, including the cost and market approaches. The Company initially performs these valuations based on preliminary estimates and assumptions by management or independent valuation specialists under Company supervision, where appropriate, and makes revisions as estimates and assumptions are finalized. The final determination of fair values must be completed no later than the first anniversary of the date of acquisition. The Company expenses acquisition related costs as incurred. See Note 5 for further discussion around the Company’s recent acquisition of Praha Vaccines a.s.

Revenue Recognition

The Company performs research and development under grant, license and clinical development agreements. Payments received in advance of work performed are recorded as deferred revenue.

The Company entered into funding agreements with CEPI that provide total funding of up to $388.4 million (see Note 11). The funding includes approximately $245.9 million in the form of a grant (“CEPI Grant Funding”) and up to $142.5 million in the form of one or more forgivable no interest term loans (“CEPI Forgivable Loan Funding”). Under the CEPI Grant Funding, the Company is entitled to reimbursement for costs that support development activities of NVX-CoV2373. The CEPI Forgivable Loan Funding is designated for the prepayment of certain manufacturing activities. The funding from CEPI is critical to enable ongoing development of NVX-CoV2373, and to enable the Company to obtain product licensing to produce the vaccine for use in clinical trials and commercial distribution, if approved.

The CEPI funding agreements do not provide a direct economic benefit to CEPI. Rather, the Company entered into an agreement with CEPI to attempt to develop a COVID-19 vaccine under which CEPI only benefits to the extent the arrangement furthers its public health mission. Based on these circumstances, the Company does not consider CEPI to be a customer and concluded the funding agreements are outside the scope of ASC 606, Revenue from Contracts with Customers. Payments received under the CEPI Grant Funding are considered conditional contributions under the scope of ASC 958-605, Not-for-Profit Entities – Revenue Recognition, and are recorded as deferred revenue until the period in which such research and development activities are performed and revenue can be recognized.

The CEPI Forgivable Loan Funding provides the Company access to up to $142.5 million in funds to be used in connection with the potential commercial manufacture of NVX-CoV2373. As of June 30, 2020, the Company received $76.0 million of such funding. Under the funding agreements, the Company is only required to repay the CEPI Forgivable Loan Funding if the proceeds of sales to one or more third parties of NVX-CoV2373 cover the Company’s costs of manufacturing such vaccine, not including manufacturing costs funded by CEPI.  

9

As the financial risk remains with CEPI, the Company has determined that the use of the CEPI Forgivable Loan Funding is outside the scope of ASC 470, Debt. The research and development risk is considered substantive, such that it is not yet probable the development will be successful. Therefore, the Company has concluded that ASC 730, Research and Development is considered applicable and most appropriate. Given the financial risk associated with the research and development activities lies with CEPI because repayment of any funds provided by CEPI depends solely on the results of the research and development activities having future economic benefit, the Company will account for its obligation under the CEPI Forgivable Loan Funding as a contract to perform research and development for others. The Company will record contract revenue as it performs the contractual research and development services.

The Company has determined that payments received under these agreements should be recorded as revenue rather than a reduction to research and development expenses. In reaching this determination that such payments should be recorded as revenue, management considered a number of factors, including whether the Company is principal under the arrangement, and whether the arrangement is significant to, and part of, the Company’s core operations. Further, management has consistently applied its policy of presenting such amounts as revenue.

Net Loss per Share

Net loss per share is computed using the weighted average number of shares of common stock outstanding. At June 30, 2020 and 2019, the Company had outstanding stock options, stock appreciation rights (“SARs”) and unvested restricted stock units (“RSUs”) totaling 7,797,651 and 2,935,847, respectively. In addition, at June 30, 2020, the Company had 438,885 shares outstanding of its newly designated Series A Convertible Preferred Stock , which are convertible into 4,388,850 shares of the Company’s common stock.

At June 30, 2020, the Company’s Notes (see Note 7) would have been convertible into approximately 2,385,800 shares of the Company’s common stock assuming a common stock price of $136.20 or higher. These and any shares due to the Company upon settlement of its capped call transactions are excluded from the computation, as their effect is antidilutive.

Recent Accounting Pronouncements

Recently Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) (“ASU 2017-04”), which will simplify the goodwill impairment calculation by eliminating Step 2 from the current goodwill impairment test. The new standard does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative goodwill impairment test by comparing the fair value of its reporting unit to its carrying amount, but if the Company is required to recognize a goodwill impairment charge, under the new standard, the amount of the charge will be calculated by subtracting the reporting unit's fair value from its carrying amount. Under the current standard, if the Company is required to recognize a goodwill impairment charge, Step 2 requires it to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge is calculated by subtracting the reporting unit's implied fair value of goodwill from the goodwill carrying amount. The standard was effective January 1, 2020 for the Company and will be applied prospectively from the date of adoption. The adoption of ASU 2017-04 did not have a material impact on the Company’s historical financial statements.

10

Note 3 – Fair Value Measurements

The following table represents the Company's fair value hierarchy for its financial assets and liabilities measured at fair value (in thousands):

Fair Value at June 30, 2020

Fair Value at December 31, 2019

    

Level 1

    

Level 2

    

Level 3

    

Level 1

    

Level 2

    

Level 3

Assets

 

  

 

  

 

  

 

  

 

  

 

  

Money market funds(1)

$

225,373

$

$

$

42,960

$

$

Asset-backed securities(2)

 

 

24,250

 

 

 

20,000

 

Treasury bills(3)

99,972

Corporate debt securities

 

 

27,919

 

 

 

 

Total assets

$

225,373

$

152,141

$

$

42,960

$

20,000

$

Liabilities

 

 

 

  

 

  

 

  

 

  

Convertible notes payable

$

$

309,166

$

$

$

125,811

$

(1)

Classified as cash and cash equivalents as of June 30, 2020 and December 31, 2019, respectively, on the consolidated balance sheets.

(2)

Includes $24,250 and $20,000 classified as cash and cash equivalents as of June 30, 2020 and December 31, 2019, respectively, on the consolidated balance sheets.

(3)

Includes $49,989 classified as cash and cash equivalents as of June 30, 2020 on the consolidated balance sheets.

Fixed-income investments categorized as Level 2 are valued at the custodian bank by a third-party pricing vendor's valuation models that use verifiable observable market data, e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Pricing of the Company's Notes (see Note 7) has been estimated using other observable inputs, including the price of the Company's common stock, implied volatility, interest rates and credit spreads among others.

During the six months ended June 30, 2020 and 2019, the Company did not have any transfers between levels.

The amount recorded in the Company's unaudited consolidated balance sheets for accounts payable and accrued expenses approximates its fair value due to its short-term nature.

Note 4 – Marketable Securities

Marketable securities classified as available-for-sale as of June 30, 2020 and December 31, 2019 were comprised of (in thousands):

June 30, 2020

December 31, 2019

    

    

Gross

    

Gross

    

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Amortized

Unrealized

Unrealized

Cost

Gains

Losses

Fair Value

Cost

Gains

Losses

Fair Value

Treasury bills

$

49,981

$

2

$

$

49,983

$

$

$

$

Corporate debt securities

$

27,877

$

42

$

$

27,919

$

$

$

$

Total

$

77,858

$

44

$

$

77,902

$

$

$

$

The primary objective of the Company's investment policy is the preservation of capital; thus, the Company's investment policy limits investments to certain types of instruments with high-grade credit ratings, places restrictions on maturities and concentrations in certain industries and requires the Company to maintain a certain level of liquidity.

11

Note 5 – Acquisition of Praha Vaccines a.s.

On May 27, 2020 (the “Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Deed”) by and among Novavax AB, the Company’s wholly-owned Swedish subsidiary (the “Buyer”), and De Bilt Holdings B.V., Poonawalla Science Park B.V., and Bilthoven Biologicals B.V. (collectively, the “Sellers”) and, solely as guarantors, each of Serum International B.V. and the Company. Pursuant to the terms and conditions of the Deed, the Buyer acquired all the issued and outstanding shares of Praha Vaccines a.s., a vaccine manufacturing company, organized and existing under the laws of the Czech Republic (“Praha Vaccines”), from the Sellers for approximately €151.7 million (approximately $167.3 million) in cash (the “Purchase Price”), subject to customary working capital adjustments (collectively, the “Acquisition”), which have not been finalized. The assets of Praha Vaccines acquired as part of the Acquisition include a biologics manufacturing facility and associated assets in Bohumil, Czech Republic and will be used by the Company to expand its manufacturing capacity.

The Purchase Price includes €10.0 million (approximately $11.1 million), which has been placed in an escrow account until September 30, 2020, less any amounts to settle claims made by the Buyer against the Sellers under the Deed or other ancillary agreements. The Deed and ancillary agreements contain customary warranties and post-completion covenants, as well as indemnities by each of the parties thereto.

Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

The Company has accounted for the Acquisition as a business combination using the acquisition method of accounting, with the Company as the acquirer. The acquisition method requires the Company to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of net assets acquired is recorded as goodwill. The Company has commenced the appraisal process necessary to assess the fair values of the assets acquired and liabilities assumed to determine the amount of goodwill to be recognized as of the Acquisition Date. These appraisals are not yet complete and therefore, the amounts recorded for certain assets and liabilities are preliminary and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the Acquisition Date. The final determination of the fair value of certain assets and liabilities will be completed within the measurement period of up to one year from the Acquisition Date. The final values may also result in changes to depreciation and amortization expense related to certain assets such as buildings and equipment. Any potential adjustments made could be material in relation to the preliminary values presented in the table below.

The table below summarizes the preliminary allocation of the Purchase Price based upon the fair values of assets acquired and liabilities assumed at the Acquisition Date. The preliminary allocation is based upon information that was available to management at the time the consolidated financial statements were prepared and is subject to change prior to completion of the measurement period (in thousands):

Prepaid expense and other current assets

    

$

326

Property and equipment

 

96,739

Goodwill

 

70,468

Accounts payable

 

(1,193)

Accrued expenses

 

(205)

Other non-current liabilities

 

(813)

Purchase Price, net of cash acquired

$

165,322

The fair value of the assets acquired and liabilities assumed were preliminarily determined using market and cost valuation methodologies. The fair value measurements are based on significant unobservable inputs that were developed by the Company using publicly available information, market participant assumptions, and cost and development assumptions. Because of the use of significant unobservable inputs, the fair value measurements represent a Level 3 measurement as defined in ASC 820, Fair Value Measurement and Disclosures. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets or liabilities. The cost approach estimates value by determining the current cost of replacing an asset with another of equivalent utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.

The cost approach was the primary approach used to value fixed assets, including the real property. Fixed assets are depreciated on a straight-line basis over their expected remaining useful lives, ranging from 4 to 25 years. The carrying value and expected lives of the fixed assets may change upon finalizing the purchase price allocation as valuation and engineering reports are finalized.

12

The Company recorded $70.5 million in goodwill related to the Acquisition representing the Purchase Price that was in excess of the fair value of the assets acquired and liabilities assumed. The goodwill generated from the Acquisition is not expected to be deductible for U.S. federal income tax purposes. The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition, such as the assembled workforce of Praha Vaccines.

Current assets and current liabilities were recorded at their contractual or historical acquisition amounts, which approximate their fair value.

Determining the fair value of assets acquired and liabilities assumed requires the exercise of significant professional judgment. Use of different estimates and judgments could yield different results.

Impact to Financial Results for the Three and Six Months Ended June 30, 2020

The results of operations from Praha Vaccines have been included in the consolidated financial statements since the Acquisition Date. As a result, the consolidated financial results for the three and six months ended June 30, 2020 do not reflect a full three months and six months of Praha Vaccines results, respectively. From the Acquisition Date through June 30, 2020, Praha Vaccines has not recognized any revenue and recorded a net income of $1.8 million from Praha Vaccines’ operations.

The Company incurred approximately $1.9 million of costs related to the Acquisition in the three months ended June 30, 2020, which are included within general and administrative expenses in the consolidated statements of operations.

Supplemental Pro Forma Financial Information (Unaudited)

The unaudited pro forma financial information for the periods set forth below gives effect to the Acquisition as if it had occurred as of January 1, 2019.  The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the Acquisition been consummated as of that time. The unaudited pro forma financial information combines the historical results of operations of the Company and Praha Vaccines for the periods presented below and reflects the application of certain pro forma adjustments (in thousands, except per share amounts):

Three Months Ended

Six Months Ended

June 30,

June 30,

    

2020

    

2019

    

2020

2019

Revenue

$

35,538

$

3,357

$

38,915

$

7,339

Net loss

 

(18,196)

 

(42,119)

 

(45,821)

 

(87,367)

Basic and diluted net loss per share

 

(0.31)

 

(0.97)

 

(0.83)

 

(2.08)

Pro forma adjustments include the recognition of depreciation expense based on the Acquisition Date fair value and remaining useful lives of Praha Vaccines’ fixed assets (net of historical depreciation expense) and the elimination of costs related to the Acquisition, which are non-recurring in nature.

Note 6 – Goodwill and Other Intangible Assets

Goodwill

The change in the carrying amounts of goodwill for the six months ended June 30, 2020 was as follows (in thousands):

    

Amount

Balance at December 31, 2019

$

51,154

Goodwill resulting from the acquisition of Praha Vaccines

70,468

Currency translation adjustments

 

(2,773)

Balance at June 30, 2020

$

118,849

13

Identifiable Intangible Assets

Purchased intangible assets consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020

December 31, 2019

    

Gross

    

    

    

Gross

    

    

Carrying

Accumulated

Intangible

Carrying

Accumulated

Intangible

Amount

Amortization

Assets, Net

Amount

Amortization

Assets, Net

Finite-lived intangible assets:

 

  

 

  

 

  

 

  

 

  

 

  

Proprietary adjuvant technology

$

7,991

$

(2,764)

$

5,227

$

7,985

$

(2,562)

$

5,423

Collaboration agreements

 

3,608

 

(3,585)

 

23

 

3,606

 

(3,448)

 

158

Total identifiable intangible assets

$

11,599

$

(6,349)

$

5,250

$

11,591

$

(6,010)

$

5,581

Amortization expense for the six months ended June 30, 2020 and 2019 was $0.3 million.

Estimated amortization expense for existing intangible assets for the remainder of 2020 and for each of the five succeeding years ending December 31 will be as follows (in thousands):

Year

    

Amount

2020 (remainder)

$

222

2021

 

400

2022

 

400

2023

 

400

2024

 

400

2025

 

400

Note 7 – Long-Term Debt

Convertible Notes

The Company incurred approximately $10.0 million of debt issuance costs during the first quarter of 2016 relating to the issuance of $325 million aggregate principal amount of convertible senior unsecured notes that will mature on February 1, 2023 (the “Notes”), which were recorded as a reduction to the Notes on the consolidated balance sheet. The $10.0 million of debt issuance costs is being amortized and recognized as additional interest expense over the seven-year contractual term of the Notes on a straight-line basis, which approximates the effective interest rate method.

Total convertible notes payable consisted of the following at (in thousands):

    

June 30, 

    

December 31, 

2020

2019

Principal amount of the Notes

$

325,000

$

325,000

Unamortized debt issuance costs

 

(3,677)

 

(4,389)

Total convertible notes payable

$

321,323

$

320,611

Interest expense incurred in connection with the Notes consisted of the following (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Coupon interest at 3.75%

$

3,047

$

3,047

$

6,094

$

6,094

Amortization of debt issuance costs

 

356

 

356

 

712

 

712

Total interest expense on the Notes

$

3,403

$

3,403

$

6,806

$

6,806

14

Note 8 – Preferred Stock

In June 2020, the Company entered into a redeemable Series A Convertible Preferred Stock Subscription Agreement (“Subscription Agreement”), pursuant to which the Company agreed to issue and sell in a private placement 438,885 shares of its newly designated redeemable Series A Convertible Preferred Stock, par value $0.01 per share (“Preferred Stock”), at a purchase price of $455.70 per share, for total gross proceeds of $200.0 million (the “Preferred Private Placement”). Under the terms of the Preferred Stock, any holder thereof has the right to redeem shares of the Preferred Stock at the original purchase price if the Company fails to meet certain SEC filing requirements and file and maintain for at least one year a registration statement for the resale of the shares of common stock underlying the Preferred Stock. Because certain of these features are outside of the Company's control, the Company has classified the Preferred Stock outside of permanent equity.

Each share of Preferred Stock is convertible into ten shares of common stock. The conversion price is equal to $45.57 and is subject to adjustment based on standard anti-dilution provisions. Holders of Preferred Stock are not entitled to cumulative dividends, are not entitled to vote on matters submitted to common stockholders and have a liquidation preference over common stockholders equal to the greater of the original purchase price, plus declared and unpaid Preferred Stock dividends, and the amount that would be payable in respect of common stock assuming the Preferred Stock converted immediately prior to the liquidation. The Company recognized a beneficial conversion feature of approximately $24.1 million that was recorded within additional paid-in capital and accumulated deficit as the Preferred Stock issuance is only contingently redeemable and convertible at any time at the option of the holder.

Note 9 – Stockholders' Equity (Deficit)

In June 2020, in advance of David M. Mott joining the Company’s Board of Directors, the Company agreed to sell 32,916 shares of common stock to him at a purchase price of $45.57 per share, reflecting the closing price of the Company’s common stock on the trading date prior to the date the parties’ agreement regarding the sale, for total gross proceeds of $1.5 million. Mr. Mott joined the Company’s Board of Directors later in the same month.

In May 2020, the Company entered into an At Market Issuance Sales Agreement ("May 2020 Sales Agreement"), which allows it to issue and sell up to $250 million in gross proceeds of its common stock. During the six months ended June 30, 2020, the Company sold 2.2 million shares of common stock under the May 2020 Sales Agreement resulting in $107.0 million in net proceeds, leaving $141.6 million remaining under the May 2020 Sales Agreement.

In March 2020, the Company entered into an At Market Issuance Sales Agreement (“March 2020 Sales Agreement”), which allowed it to issue and sell up to $150 million in gross proceeds of its common stock. During the six months ended June 30, 2020, the Company sold 8.6 million shares of common stock under the March 2020 Sales Agreement resulting in $148.1 million in net proceeds. The March 2020 Sales Agreement was fully utilized at that time.

In January 2020, the Company entered into an At Market Issuance Sales Agreement ("January 2020 Sales Agreement"), which allowed it to issue and sell up to $100 million in gross proceeds of its common stock. During the first quarter of 2020, the Company sold 10.5 million shares of common stock under the January 2020 Sales Agreement resulting in $98.7 million in net proceeds. The January 2020 Sales Agreement was fully utilized at that time.

In December 2018, the Company entered into an At Market Issuance Sales Agreement (“December 2018 Sales Agreement”), which allowed it to issue and sell up to $100 million in gross proceeds of its common stock. During the six months ended June 30, 2019, the Company sold 1.7 million shares of common stock under the December 2018 Sales Agreement, of which all were sold in the first quarter of 2019, resulting in $17.4 million in net proceeds. During the six months ended June 30, 2020, the Company sold 7.2 million shares of common stock under the December 2018 Sales Agreement, of which all were sold in the first quarter of 2020, resulting in $38.5 million in net proceeds. The December 2018 Sales Agreement was fully utilized at that time.

In December 2017, the Company entered into an At Market Issuance Sales Agreement (“December 2017 Sales Agreement”), which allowed it to issue and sell up to $75 million in gross proceeds of its common stock. During the six months ended June 30, 2019, the Company sold 2.5 million shares of common stock under the December 2017 Sales Agreement, of which all were sold in the first quarter of 2019, resulting in $37.9 million in net proceeds. The December 2017 Sales Agreement was fully utilized at that time.

15

Note 10 – Stock-Based Compensation

Stock Options

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company's annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary.

The 2015 Plan authorizes the issuance of up to 10,900,000 shares of common stock under equity awards granted under the 2015 Plan, which includes an increase of 7,100,000 shares approved for issuance under the 2015 Plan at the Company's 2020 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.

The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.

The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company's common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years.

Stock Options and Stock Appreciation Rights

The following is a summary of stock options and stock appreciation rights activity under the 2015 Plan and 2005 Plan for the six months ended June 30, 2020:

2015 Plan

2005 Plan

    

    

Weighted-

    

    

Weighted-

Average

Average

Stock Options

Exercise Price

Stock Options

Exercise Price

Outstanding at January 1, 2020

 

3,388,701

$

35.64

 

501,780

$

64.19

Granted

 

2,820,041

$

22.28

 

$

Exercised

 

(209,959)

$

30.35

 

(76,856)

$

33.56

Canceled

 

(32,254)

$

41.18

 

(22,329)

$

52.26

Outstanding at June 30, 2020

 

5,966,529

$

29.50

 

402,595

$

70.71

Shares exercisable at June 30, 2020

 

953,073

$

85.48

 

402,595

$

70.71

Shares available for grant at June 30, 2020

 

3,098,569

 

  

 

  

 

  

In 2019, the Company granted 192,400 stock appreciation rights, with a weighted-average exercise price of $5.95, under the 2015 Plan.

Additionally, in 2019, due to limitations on the equity awards available under the 2015 Plan, the Company granted to certain employees 1,014,200 stock options, with a weighted-average exercise price of $5.95, under the 2015 Plan that were subject to approval of an increase in the number of shares under the 2015 Plan at the Company's 2020 annual meeting of stockholders. Furthermore, in April 2020, due to limitations on the equity awards available under the 2015 Plan, the Company granted to all of its employees collectively 2,501,600 stock options, with a weighted-average exercise price of $19.08, and 326,050 restricted stock units under the 2015 Plan that include a performance requirement related to its NVX-CoV2373 program that were also subject to approval of an increase in the number of shares under the 2015 Plan at the Company's 2020 annual meeting of stockholders. Since the proposal to increase the number of shares under the 2015 Plan was approved at the Company’s 2020 annual meeting of stockholders, as discussed in the “Stock Options” section above, the Company began to record stock-based compensation expense for these awards at that time.

16

The fair value of stock options granted under the 2015 Plan was estimated at the date of grant or the date upon which the 2015 Plan was approved by the Company’s stockholders for stock options discussed above using the Black-Scholes option-pricing model with the following assumptions:

Three Months Ended

Six Months Ended

 

June 30, 

June 30, 

 

    

2020

    

2019

    

2020

    

2019

 

Weighted-average Black-Scholes fair value of stock options granted

 

$77.41

$8.50

 

$76.99

$23.43

Risk-free interest rate

 

0.3%-0.6%

1.8%-2.3%

0.3%-1.5%

1.8%-2.6%

Dividend yield

 

0%

0%

0%

0%

Volatility

 

116.0%-151.5%

127.3%-128.5%

116.0%-151.5%

111.6%-128.5%

Expected term (in years)

 

3.9-7.6

4.0

 

3.9-7.6

4.0-4.5

Expected forfeiture rate

 

0%

0%

0%

0%

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights outstanding under the 2015 Plan and 2005 Plan as of June 30, 2020 was $357.5 million and 8.5 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options and stock appreciation rights exercisable under the 2015 Plan and 2005 Plan as of June 30, 2020 was $34.1 million and 5.3 years, respectively. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money stock options and stock appreciation rights) that would have been received by the holders had all stock option  and stock appreciation rights holders exercised their stock options and stock appreciation rights on June 30, 2020. This amount is subject to change based on changes to the closing price of the Company's common stock. The aggregate intrinsic value of stock options and vesting of restricted stock awards for the six months ended June 30, 2020 and 2019 was $7.8 million and $0.1 million, respectively.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan, as amended (the “ESPP”), was approved at the Company's annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 600,000 shares of common stock to be purchased. The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15% of their compensation, at 85% of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate). At June 30, 2020, there were 278,543 shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Three Months Ended

Six Months Ended

June 30, 

June 30,