VXRT US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the other sections of this Annual Report on Form 10-K, including our consolidated financial statements and notes thereto included elsewhere. This discussion contains a number of forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in the Annual Report on Form 10-K, particularly in Item 1A – “Risk Factors.” The forward-looking statements made in this Annual Report on Form 10-K are made only as of the date hereof.

Company Overview

We are a clinical-stage biotechnology company primarily focused on the development of oral recombinant vaccines based on our Vector-Adjuvant-Antigen Standardized Technology (“VAAST”) proprietary oral vaccine platform. Our oral vaccines are designed to generate broad and durable immune responses that may protect against a wide range of infectious diseases and may be useful for the treatment of chronic viral infections and cancer. Our investigational vaccines are administered using a room temperature-stable tablet, rather than by injection.

We are developing prophylactic vaccine candidates that target a range of infectious diseases, including SARS-CoV-2 (the virus that causes coronavirus disease 2019 (“COVID-19”)), norovirus (a widespread cause of acute gastro-intestinal enteritis), seasonal influenza and respiratory syncytial virus (“RSV”) (a common cause of respiratory tract infections). We have completed a Phase 1 clinical trial for our first SARS CoV-2 vaccine candidate, that commenced in October 2020; the study met its primary and secondary endpoints. A Phase 2 study with our second-generation SARS CoV-2 vaccine candidate commenced dosing in October 2021 and is currently ongoing. Three Phase 1 human studies for our norovirus vaccine candidate have been completed, including a study with a bivalent norovirus vaccine which, as we disclosed in September 2019, met its primary and secondary endpoints. Additional Phase 1 studies with our norovirus vaccine are currently ongoing. Our monovalent H1 influenza vaccine protected participants against H1 influenza infection in a Phase 2 challenge study, as published in 2020 (Lancet ID). In addition, we are in early development of our first therapeutic vaccine targeting cervical cancer and dysplasia caused by human papillomavirus (“HPV”).

Having previously disclosed that we were no longer prioritizing internal manufacturing and planned to rely primarily on third party manufacturers for the current Good Manufacturing Practice (“cGMP”) manufacturing of our candidate vaccines, we are now also relying on internal manufacturing for production in pre-commercial quantities.

Vaxart Biosciences, Inc. was originally incorporated in California under the name West Coast Biologicals, Inc. in March 2004 and changed its name to Vaxart, Inc. (“Private Vaxart”) in July 2007, when it reincorporated in the state of Delaware. In February 2018, Private Vaxart completed a reverse merger (the “Merger”) with Aviragen Therapeutics, Inc. (“Aviragen”), pursuant to which Private Vaxart survived as a wholly owned subsidiary of Aviragen. Under the terms of the Merger, Aviragen changed its name to Vaxart, Inc. and Private Vaxart changed its name to Vaxart Biosciences, Inc.

Through the Merger, we acquired two royalty-earning products, Relenza and Inavir. We also acquired three Phase 2 clinical stage antiviral compounds, which we have discontinued independent clinical development of. However, for one of these, Vapendavir, we have entered into an exclusive worldwide license agreement with Altesa Biosciences, Inc. (“Altesa”) on July 6, 2021, permitting Altesa to develop and commercialize this capsid-binding broad spectrum antiviral.

Financial Operations Overview

Revenue

Revenue from Customer Service Contracts

We have been earning revenue from a fixed price service contract, as amended, for a total of $617,000, which we completed in the first three months of 2021.

Revenue from Government Contract

The government contract with the Department of Health and Human Services, Office of Biomedical Advanced Research and Development Authority (“HHS BARDA”), as modified, was a cost-plus-fixed-fee contract, under which we were reimbursed for allowable direct contract costs plus allowable indirect costs and a fixed-fee totaling $15.7 million from September 2015 through September 30, 2018. Activities were completed in 2018 and no future revenue is expected from this contract.

Royalty Revenue

We earn royalty revenue on sales of Inavir

and, until the patent expired, earned royalty revenue on sales of Relenza (both treatments for influenza) through our licensees Daiichi Sankyo Company, Limited and GlaxoSmithKline, plc, respectively, under royalty agreements with expiry dates in December 2029 and July 2019, respectively, based on fixed percentages of net sales of these drugs.

87

Table of Contents

Non-Cash Royalty Revenue Related to Sale of Future Royalties

In April 2016, Aviragen sold certain royalty rights related to Inavir in the Japanese market for $20.0 million to HealthCare Royalty Partners III, L.P. (“HCRP”). We pay HCRP the first $3 million plus 15% of the next $1 million of royalties earned in annual periods ending on March 31. At the time of the Merger, the estimated future benefit to HCRP was remeasured at fair value and was estimated to be $15.9 million, which we account for as a liability and amortize using the effective interest method over the remaining estimated life of the arrangement. The estimated future benefit was remeasured as of December 31, 2021, when the fair value was estimated to be $11.5 million, resulting in a revaluation gain of $3.8 million. Even though we do not retain the related royalties under the transaction, as the amounts are remitted to HCRP, we will continue to record revenue related to these royalties until the amount of the associated liability and related interest is fully amortized.

Research and Development Expenses

Research and development expenses represent costs incurred to conduct research, including the development of our tablet vaccine platform, and the manufacturing, preclinical and clinical development activities of our tablet vaccine candidates. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:

● facilities, depreciation and allocated overhead expenses.

We do not allocate our internal expenses to specific programs. Our employees and other internal resources are not directly tied to any one research program and are typically deployed across multiple projects. Internal research and development expenses are presented as one total.

We incur significant external costs for manufacturing our tablet vaccine candidates, and for CROs that conduct clinical trials on our behalf. We capture these expenses for each vaccine program. We do not allocate external costs incurred on preclinical research or process development to specific programs.

88

Table of Contents

The following table shows our period-over-period research and development expenses, identifying external costs that were incurred in each of our vaccine programs and, separately, on preclinical research and process development (in thousands):

Year Ended December 31,

External program costs:

All other programs — 7 84

We expect that research and development expenses will increase in 2022 and beyond as we advance our tablet vaccine candidates into and through clinical trials, pursue regulatory approval of our tablet vaccine candidates and prepare for a possible commercial launch, all of which will also require a significant investment in manufacturing and inventory related costs. To the extent that we enter into licensing, partnering or collaboration agreements, a significant portion of such costs may be borne by third parties.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for our tablet vaccine candidates. The probability of successful commercialization of our tablet vaccine candidates may be affected by numerous factors, including clinical data obtained in future trials, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our tablet vaccine candidates.

General and Administrative Expense

General and administrative expenses consist of personnel costs, allocated expenses and expenses for outside professional services, including legal, audit, accounting, public relations, market research and other consulting services. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of rent, depreciation and other facilities related expenses.

Results of Operations

The following table presents period-over-period changes in selected items in the consolidated statements of operations and comprehensive loss (in thousands, except percentages):

Year Ended December 31,

89

Table of Contents

Total Revenues

The following table summarizes the period-over-period changes in our revenues for years ended December 31 (in thousands, except percentages):

Revenue from customer service contracts $ 13 (93 )% $ 198 (51 )% $ 406

Revenue from government contract — N/A — (100 )% (20 )

Revenue from Customer Service Contracts

We earned revenue from customer service contracts of $13,000, $198,000 and $406,000 in the years ended December 31, 2021, 2020 and 2019, respectively. This revenue was recognized from a fixed price contract executed in July 2019, as amended, for a total of $617,000, which we have now completed.

Revenue from Government Contract

We reversed previously-recognized revenue of $20,000 during the year ended December 31, 2019. As of December 31, 2021, the cumulative revenue recorded from inception under the HHS BARDA contract represents $20,000 less than the maximum amount billable under the contract as presently modified. The active phase of the contract occurred in 2016 and 2017. In 2018 activities were wound down and completed and no future revenue is expected from this contract.

Royalty Revenue

For the year ended December 31, 2021, royalty revenue decreased by $3.0 million, or 100%, compared to the year ended December 31, 2020, which represented a decrease of $1.5 million, or 33%, compared to the year ended December 31, 2019.

Royalty revenue was earned on sales of Relenza and Inavir, both treatments for influenza, which were acquired in the Merger and is based on fixed percentages of net sales of these drugs in the period. Relenza revenue ceased in 2019 and all our 2020 Inavir royalty revenue was earned in the first quarter. We recognize royalty revenue from sales of Inavir only after the first $3 million net of 5% withholding tax in years ending on March 31 has been recognized as non-cash royalty revenue related to sale of future royalties. We recognized no royalty revenue in 2021 and do not expect our royalty revenue in the future, if any, will be significant.

Non-cash Royalty Revenue Related to Sale of Future Royalties

For the year ended December 31, 2021, non-cash royalty revenue related to sale of future royalties was $879,000, compared to $886,000 for the year ended December 31, 2020 and $5.0 million for the year ended December 31, 2019. Non-cash royalty revenue of up to $3.3 million may be earned in each year ending on March 31. In 2019, we recorded $1.7 million related to the year ended March 31, 2019, plus $3.3 million related to the year ended March 31, 2020. In the year ended December 31, 2020, we recognized the $34,000 not recognized in 2019 for the year ended March 31, 2020, and $852,000 related to the year ended March 31, 2021. In the year ended December 31, 2021, we recognized the $493,000 for the year ended March 31, 2021, and $386,000 related to the year ending March 31, 2022.

90

Table of Contents

Total Operating Expenses

The following table summarizes the period-over-period changes in our operating expenses for years ended December 31 (in thousands, except percentages):

Impairment of intangible assets 3,005 N/A — N/A —

Restructuring charges (reversals) — (100 )% (849 ) N/A 4,920

Research and Development

For 2021, research and development expenses increased by $28.9 million, or 145%, compared to 2020. The increase was principally due to preclinical, manufacturing and clinical expenses related to our COVID-19 and norovirus vaccine candidates and increased personnel costs, including stock-based compensation, and facilities allocation related to headcount increases.

For 2020, research and development expenses increased by $5.3 million, or 37%, compared to 2019. The increase was principally due to preclinical, manufacturing and clinical expenses related to our COVID-19 vaccine candidate, partially offset by lower costs of manufacturing and clinical trials for our norovirus vaccine candidate and lower depreciation and amortization expense.

We expect that research and development expenses will increase in 2022 as we will incur significant expenses for manufacturing and clinical trials related to our COVID-19 and norovirus vaccine candidates.

General and Administrative

For 2021, general and administrative expenses increased by $6.7 million, or 44%, compared to 2020. The principal reasons for the increase in 2021 are increased personnel costs, including the non-cash expense for modifying the terms of outstanding options awarded to our former Chairman of the Board, additional directors and officers liability insurance costs and higher legal fees and other professional costs.

For 2020, general and administrative expenses increased by $9.0 million, or 146%, compared to 2019. The increase was principally due to increased legal fees, higher stock-based compensation costs, additional directors and officers liability insurance costs, severance expenses for our former Chief Executive Officer and increased costs incurred in upgrading our accounting systems in line with our corporate growth.

Impairment of Intangible Assets

Impairment of intangible assets of $3.0 million represents the partial impairment as of December 31, 2021, of developed technology related to royalty revenue receivable, for which we have lowered our projections, principally due to increased social distancing and mask wearing due to the COVID-19 pandemic.

91

Table of Contents

Restructuring Charges (Reversals)

In 2019, in connection with our December restructuring, we accrued costs of $3.2 million representing the amount we were invoiced by Lonza Houston, Inc. (“Lonza”) after the suspension of our norovirus manufacturing work order, representing the maximum amount potentially payable to Lonza. We also accrued $425,000 for severance and legal expenses and impaired $1.3 million of property and equipment and right-of-use assets, mainly related to manufacturing assets. In 2020, we incurred further costs, principally legal fees, of $122,000 and we paid $2.3 million in full settlement with Lonza, enabling us to reverse $971,000 of the 2019 accrual. In 2021 there were no charges or reversals related to this restructuring and we do not expect any further adjustments in the future.

Other Income (Expense)

The following table summarizes the period-over-period changes in our non-operating income and expenses for years ended December 31 (in thousands, except percentages):

Interest expense — N/A — (100 )% (315 )

Gain on sale of equipment — N/A — (100 )% 1

Gain on remeasurement of future royalty liability 3,789 N/A — N/A —

Loss on debt extinguishment — N/A — (100 )% (100 )

Foreign exchange loss, net (1 ) (92 )% (13 ) (59 )% (32 )

Net non-operating income (expense) $ 2,389 N/A $ (1,812 ) (24 )% $ (2,370 )

For 2021 we recorded net non-operating income of $2.4 million, compared to net non-operating expenses of $1.8 million in 2020 and $2.4 million in 2019.

The gain on revaluation of future royalty liability in 2021 arose due to the lowered projections of amounts payable to HCRP, as royalties have declined since the start of the COVID-19 pandemic.

Non-cash interest expense related to sale of future royalties, which relates to accounting for sums that will become payable to HCRP for royalty revenue earned from Inavir as debt, was $1.5 million in 2021, down from the $1.9 million and $2.4 million in 2020 and 2019, respectively, as the outstanding balance due to HCRP has been paid down. We project a further reduction in 2022 following the revaluation of our liability to HCRP.

Provision for Income Taxes

The following table summarizes the period-over-period changes in our provision for income taxes for years ended December 31 (in thousands, except percentages):

Foreign withholding tax on royalty revenue $ 44 (76 )% $ 183 (58 )% $ 435

Foreign taxes payable on intercompany interest 62 19 % 52 (2 )% 53

State income taxes 1 (67 )% 3 50 % 2

A significant portion of the provision for income taxes in the years ended December 31, 2021, 2020 and 2019, respectively, represents withholding tax on royalty revenue earned on sales of Inavir in Japan, which is potentially recoverable as a foreign tax credit but expensed because we record a 100% valuation allowance against our deferred tax assets. The amount of income tax expense recorded is directly proportional to Inavir royalties, including the portion that we pass through to HCRP, and has declined in line with reductions in royalty revenue. In addition, we incurred charges relating to interest on an intercompany loan from a foreign subsidiary and for state income taxes in the United States.

92

Table of Contents

Liquidity and Capital Resources

Our primary source of financing is from the sale and issuance of common stock and common stock warrants in public offerings, along with proceeds from the exercise of warrants. In the past, we have also obtained funds from the issuance of secured debt and preferred stock and from collaboration agreements. In October 2020 we entered into an Open Market Sale Agreement (the “October 2020 ATM”), under which we could sell shares of our common stock having an aggregate offering price of up to $250 million. Having sold shares under the October 2020 ATM for aggregate gross proceeds of $133.4 million, we terminated the October 2020 ATM in September 2021 and entered into a Controlled Equity Offering Sales Agreement (the “September 2021 ATM”), under which we may offer and sell, from time to time through sales agents, shares of our common stock having an aggregate offering price of up to $100 million. We will incur direct expenses and pay sales commissions of up to 3.0% of gross proceeds from the sale of shares under the September 2021 ATM.

As of December 31, 2021, we had $182.7 million of cash, cash equivalents and marketable securities. Since then, we have received net proceeds of $1.0 million from the sale of common stock under the September 2021 ATM. There is approximately $95 million in net proceeds still available to us under the September 2021 ATM.

We believe our existing funds (including funds already received in 2022) are sufficient to fund us for at least one year from the date of issuance of this Annual Report. To continue operations thereafter, we expect that we will need to raise further capital, through the sale of additional securities or otherwise. Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, most notably our ability to successfully commercialize our products and services.

We may fund a significant portion of our ongoing operations through partnering and collaboration agreements which, while reducing our risks and extending our cash runway, will also reduce our share of eventual revenues, if any, from our vaccine product candidates. We may be able to fund certain activities with assistance from government programs. The sale of additional equity would result in additional dilution to our stockholders. We may also fund our operations through debt financing, which would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market vaccine candidates that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects.

Our future funding requirements will depend on many factors, including the following:

● the timing and costs of our planned clinical trials of our product candidates;

● the amount and timing of royalties received on sales of Inavir;

● the number and characteristics of product candidates that we pursue;

● the outcome, timing and costs of seeking regulatory approvals;

● the extent to which we in-license or acquire other products and technologies.

93

Table of Contents

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Year Ended December 31,

Net cash used in investing activities (49,097 ) (1,220 ) (850 )

Net Cash Used in Operating Activities

We experienced negative cash flow from operating activities in 2021, 2020 and 2019 in the amounts of $59.8 million, $23.8 million and $13.1 million, respectively. The cash used in operating activities in 2021 was due to cash used to fund a net loss of $70.5 million and an increase in working capital of $2.1 million, partially offset by adjustments for net non-cash income related to depreciation and amortization, stock-based compensation, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling $12.8 million. The cash used in operating activities in 2020 was due to cash used to fund a net loss of $32.2 million, partially offset by adjustments for net non-cash income related to depreciation and amortization, accretion of premium on investments, impairment of intangible assets, stock-based compensation, gain on remeasurement of future royalty liability, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling $5.6 million and a decrease in working capital of $2.8 million. The cash used in operating activities in 2019 was due to cash used to fund a net loss of $18.6 million, partially offset by net non-cash expenses related to depreciation and amortization, gain on sale of equipment, impairment charges, stock-based compensation, non-cash interest expense, loss on debt extinguishment, non-cash interest expense related to sale of future royalties and non-cash revenue related to sale of future royalties totaling $4.2 million and a decrease in working capital of $1.3 million.

Net Cash Used in Investing Activities

In 2021, we used $4.8 million for a business acquisition and $39.1 million to purchase marketable securities, net of maturities. We used $5.2 million, $1.2 million and $850,000 in the years ended December 31, 2021, 2020 and 2019, respectively, to purchase property and equipment. In 2020, we received cash of $3,000 for the sale of equipment.

Net Cash Provided by Financing Activities

In 2021, we received $122.2 million from the sale of common stock under the October 2020 ATM, $1.9 million from the exercise of common stock warrants and $1.7 million from the exercise of stock options. In 2020, we received $9.2 million from the sale of common stock and common stock warrants in a registered direct offering in March, $97.0 million from the sale of common stock under an at-the-market facility in July, $4.9 million from the sale of common stock under the October 2020 ATM, $26.0 million from the exercise of common stock warrants, $602,000 from the exercise of stock options and net proceeds of $652,000 from the disgorgement of related party short-swing profits. In 2019, we received $2.5 million from the sale of common stock in a registered direct offering in March, $8.1 million from the sale of common stock, pre-funded warrants and common stock warrants in an underwritten public offering in April, $7.8 million from the sale of common stock, pre-funded warrants and common stock warrants in an underwritten public offering in September, $1.2 million from the exercise of pre-funded warrants and $180,000 from the exercise of common stock warrants, partially offset by repayment of principal of $3.8 million on the secured promissory note payable to Oxford Finance.

94

Table of Contents

Contractual Obligations and Commercial Commitments

We have the following contractual obligations and commercial commitments as of December 31, 2021 (in thousands):

Contractual Obligation Total < 1 Year 1 - 3 Years 3 - 5 Years > 5 Years

Long Term Debt, HCRP. Under an agreement executed in 2016, we are obligated to pay HCRP the first $3 million plus 15% of the next $1 million of royalty revenues that we earn for sales of Inavir in each year ending on March 31. See Note 7 to the Consolidated Financial Statements in Part II, Item 8 for further details.

Operating leases. Operating lease amounts include future minimum lease payments under all our non-cancellable operating leases with an initial term in excess of one year, including a total of $14.9 million for one lease that has been executed but has not yet commenced. See Note 8 to the Consolidated Financial Statements in Part II, Item 8 for further details.

Purchase obligations. These amounts include an estimate of all open purchase orders and contractual obligations in the ordinary course of business, including commitments with contract manufacturers and suppliers for which we have not received the goods or services. We consider all open purchase orders, which are generally enforceable and legally binding, to be commitments, although the terms may afford us the option to cancel based on our business needs prior to the delivery of goods or performance of services.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Accrued Research and Development Expenses

We record accrued expenses for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided and include the costs incurred but not yet invoiced within other accrued liabilities in the consolidated balance sheets and within research and development expense in the consolidated statements of operations and comprehensive loss. These costs can be a significant component of our research and development expenses.

We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates.

Intangible Assets

Intangible assets acquired in the Merger were initially recorded at their estimated fair values of $20.3 million for developed technology related to Inavir which was, until it was revalued, being amortized on a straight-line basis over the estimated period of future royalties of 11.75 years and $1.8 million for the developed technology related to Relenza which was fully amortized over the remaining royalty period of 1.3 years. The developed technology related to Inavir was revalued at $10.6 million as of December 31, 2021, resulting in an impairment loss of $3.0 million being recorded. These valuations were prepared by an independent third party based on discounted cash flows of estimated future revenue streams, which are highly subjective. The fair value, as reassessed as of December 31, 2021, is being amortized on a straight-line basis over the remaining period of future royalties of 7.9 years.

Stock-Based Compensation

We measure the fair value of all stock option awards to employees, non-executive directors and consultants on the grant date, and record the fair value of these awards, net of estimated forfeitures, as compensation expense over the service period. The fair value of options is estimated using the Black-Scholes valuation model and the expense recorded is affected by subjective assumptions regarding a number of variables, as follows:

Expected term – This represents the period that our stock-based awards granted are expected to be outstanding and is determined using the simplified method (the arithmetic average of its original contractual term and its average vesting term). We have very limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for our stock-based awards. Based on the weighted average applied to options awarded in 2021, a notional 10% decrease in expected term would have reduced the fair value and the related compensation expense by approximately 2.3%.

95

Table of Contents

Expected volatility – This is a measure of the amount by which our common stock price has fluctuated or is expected to fluctuate. Since the beginning of 2020 we have measured volatility based on the historical volatility of our own stock over the retrospective period corresponding to the expected term of the options on the measurement date. Prior to 2020 we applied 51% weighting to our own historic volatility and 7% to the historical volatility of each of seven comparable publicly traded biopharmaceutical companies, selected based on their similar size and stage of life cycle. Based on the weighted average applied to options awarded in 2021, a notional 10% decrease in expected volatility (from 125% to 113%) would have reduced the fair value and the related compensation expense by approximately 4.7%.

Risk-Free Interest Rate – This is based on the U.S. Treasury yield curve on the measurement date corresponding with the expected term of the stock-based awards.

Expected Dividend – We have not made any dividend payments and do not plan to pay dividends in the foreseeable future. Therefore, we use an expected dividend yield of zero.

Forfeiture Rate – This is a measure of the amount of awards that are expected to not vest and is reassessed quarterly. An increase in the estimated forfeiture rate will cause a small decrease the related compensation expense early in the service period, but since the final expense recorded for each award is the number of options vested times their grant date fair value, it has no impact on the total expense recorded.

Recently Issued Accounting Pronouncements

See the “Recent Accounting Pronouncements” in Note 2 to the Consolidated Financial Statements in Part II, Item 8 for information related to the issuance of new accounting standards in 2021, none of which have had, or are expected to have, a material impact on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

The primary objective of our investment activities is to preserve principal while at the same time maximize the income we receive from our investments without significantly increasing risk. All our cash is denominated in U.S. dollars and held either in bank accounts or money market funds that presently earn very little interest. Interest rates are sufficiently low that we believe a 1% increase in the borrowing base rate would result in a negligible increase, if any, in the interest we could earn on our cash deposits.

Exchange Rate Sensitivity

Our royalty revenue, which is calculated in U.S. dollars, is based on sales in Japanese yen, so a 1% increase in the strength of the U.S. dollar against the yen would lead to a 1% reduction in royalty revenue. All our other revenue and substantially all of our expenses, assets and liabilities are denominated in U.S. dollars and, as a result, we have not experienced significant foreign exchange gains recently and do not anticipate that foreign exchange gains or losses will be significant in the near future.

96

Table of Contents

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements Page

Report of OUM & Co., LLP - Independent Registered Public Accounting Firm 101

Consolidated Balance Sheets 102

Consolidated Statements of Operations and Comprehensive Loss 103

Consolidated Statements of Stockholders’ Equity 104

Consolidated Statements of Cash Flows 106

Notes to the Consolidated Financial Statements 108

97

Table of Contents

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Vaxart, Inc.

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheet of Vaxart, Inc. (the “Company”) as of December 31, 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the COSO.

The consolidated financial statements of the Company as of and for each of the two years in the period ended December 31, 2020 were audited by OUM & Co. LLP, who joined WithumSmith+Brown, PC on July 15, 2021, and rendered their opinion on such statements on February 25, 2021.

Basis for Opinion

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

98

Table of Contents

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrued Clinical and Manufacturing Expenses - Refer to Note 2 to the consolidated financial statements

Critical Audit Matter Description

The Company recognizes costs it incurs for preclinical studies, clinical trials, and manufacturing activities as research and development expenses based on its evaluation of its third-party service providers’ progress toward completion of specific tasks. Payment timing may differ significantly from the period in which the costs are recognized as expense. Costs for services incurred that have not yet been paid are recognized as accrued expenses.

In estimating the vendors’ progress toward completion of specific tasks, the Company uses data such as patient enrollment, clinical site activations or vendor information of actual costs incurred. This data is obtained through reports from or discussions with Company personnel and third-party service providers as to the progress or state of completion of trials, or the completion of services.

Given the number of ongoing preclinical study and clinical trial activities and the subjectivity involved in estimating clinical trial and manufacturing expenses, auditing the accrued clinical and manufacturing expenses involved especially subjective judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accrued preclinical studies, clinical trials and manufacturing expenses included the following, among others:

o Evaluated management’s judgments compared to the evidence obtained.

99

Table of Contents

Impairment of Intangible Asset and Revaluation of Liability Related to Sale of Future Royalties – Refer to Notes 2, 5 and 7 to the consolidated financial statements

Critical Audit Matter Description

Management utilizes expected future cash flow models as significant inputs into their assessment over the impairment of finite-lived intangible assets and in the determination of the liability related to the sale of future royalties pursuant to a Royalty Interest Acquisition Agreement with HCRP (the “HCRP Agreement”). These models are dependent upon management’s estimates of future cash flows and other factors, including future economic conditions. The Company’s consolidated balance for finite-lived intangible assets and liability related to sale of future royalties were $10.6 million and $11.5 million as of December 31, 2021, respectively. During the year ended December 31, 2021, the Company evaluated the finite-lived intangible assets and recognized impairment charges of $3 million. Additionally, the Company recorded a gain of $3.8 million on a revaluation of the liability related to the sale of future royalties. The impairment and revaluation were based on revised royalty projections and discount rate assumptions that were used in the impairment assessment of the intangible asset underlying the liability.

We identified the impairment assessment of the intangible asset and the revaluation of the liability related to the sale of future royalties as a critical audit matter. The principal considerations for our determination that this is a critical audit matter are the significant judgments made by management in the impairment assessment of the intangible asset and the revaluation of the related liability. A high degree of auditor judgment, effort, and subjectivity was required to perform procedures and evaluate management’s assumptions related to its current estimates of future royalties expected to be paid over the life of the HCRP Agreement.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of intangible assets and the development of assumptions used to estimate fair value. These procedures also included, among others, testing management’s process for developing the estimate, which included evaluating the appropriateness of the method related to cash flow projections for intangible assets and future royalties; testing the completeness and accuracy of underlying data used in the estimates; and evaluating the reasonableness of significant assumptions including future sales, long-term growth rates, and future economic conditions. Evaluating these assumptions involved evaluating whether the assumptions used were reasonable considering (i) historical performance, (ii) industry and economic forecasts and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditor since 2019.

San Francisco, California

February 24, 2022

PCAOB ID Number 100

100

Table of Contents

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Vaxart, Inc.

South San Francisco, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Vaxart, Inc. (the “Company”) as of December 31, 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ OUM & Co. LLP

We have served as the Company’s auditor since 2019.

San Francisco, California

February 25, 2021

PCAOB ID Number 252

101

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

Assets

Current assets:

Short-term investments 22,742 —

Accounts receivable 71 334

Prepaid expenses and other current assets 2,609 1,327

Long-term investments 16,210 —

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of operating lease liability 1,011 2,052

Current portion of liability related to sale of future royalties 836 2,779

Other accrued current liabilities 5,064 4,799

Operating lease liability, net of current portion 11,997 5,156

Other long-term liabilities 171 109

Commitments and contingencies (Note 10)

Stockholders’ equity:

Accumulated other comprehensive loss (74 ) —

Total liabilities and stockholders’ equity $ 221,168 $ 152,582

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

102

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

Year Ended December 31,

Revenue:

Revenue from customer service contracts $ 13 $ 198 $ 406

Revenue from government contract — — (20 )

Non-cash royalty revenue related to sale of future royalties 879 886 5,030

Operating expenses:

Impairment of intangible assets 3,005 — —

Restructuring charges (reversals) — (849 ) 4,920

Other income (expense):

Interest expense — — (315 )

Gain on sale of equipment — — 1

Gain on remeasurement of future royalty liability 3,789 — —

Loss on debt extinguishment — — (100 )

Foreign exchange loss, net (1 ) (13 ) (32 )

Net loss per share – basic and diluted $ (0.58 ) $ (0.36 ) $ (0.86 )

Comprehensive loss:

Unrealized loss on available-for-sale investments, net of tax (74 ) — —

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

103

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

(In thousands, except share amounts)

Additional Total

Common Stock Paid-in Accumulated Stockholders’

Shares Amount Capital Deficit Equity

Stock-based compensation — — 627 — 627

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

104

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (continued)

(In thousands, except share amounts)

Accumulated

Additional Other Total

Common Stock Paid-in Accumulated Comprehensive Stockholders’

Shares Amount Capital Deficit Loss Equity

Issuance of common stock upon exercise of options 414,676 — 602 — — 602

Disgorgement of short-swing profits, net of costs — — 652 — — 652

Stock-based compensation — — 4,358 — — 4,358

Issuance of common stock upon exercise of options 1,070,921 — 1,745 — — 1,745

Stock-based compensation — — 8,867 — — 8,867

Unrealized losses on available-for-sale investments — — — — (74 ) (74 )

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

105

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

Cash flows from operating activities:

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

Gain on sale of equipment — — (1 )

Accretion of premium on investments 85 — —

Impairment of property and equipment and right-of-use assets — — 1,272

Impairment of intangible assets 3,005 — —

Non-cash interest expense — — 88

Gain on remeasurement of future royalty liability (3,789 ) — —

Loss on debt extinguishment — — 100

Non-cash interest expense related to sale of future royalties 1,480 1,874 2,073

Non-cash revenue related to sale of future royalties (1,098 ) (3,277 ) (3,482 )

Change in operating assets and liabilities:

Cash flows from investing activities:

Purchase of property and equipment (5,157 ) (1,223 ) (850 )

Proceeds from sale of equipment — 3 —

Acquisition of business (4,829 ) — —

Purchases of investments (44,811 ) — —

Proceeds from maturities of investments 5,700 — —

Net cash used in investing activities (49,097 ) (1,220 ) (850 )

Cash flows from financing activities:

Disgorgement of short-swing profits, net of costs — 652 —

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

106

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (continued)

(In thousands)

Year Ended December 31,

Supplemental disclosure of cash flow information:

Interest paid $ — $ — $ 227

Supplemental disclosure of non-cash investing and financing activity:

Issuance of warrants to placement agents’ designees $ — $ 453 $ 100

Issuance of warrants to underwriters’ designees $ — $ — $ 830

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

107

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 1. Organization and Basis of Presentation

General

Vaxart Biosciences, Inc. was originally incorporated in California in March 2004, under the name West Coast Biologicals, Inc. The Company changed its name to Vaxart, Inc. (“Private Vaxart”) in July 2007, and reincorporated in the state of Delaware. In February 2018, Private Vaxart completed a business combination with Aviragen Therapeutics, Inc. (“Aviragen”), pursuant to which Aviragen merged with Private Vaxart, with Private Vaxart surviving as a wholly-owned subsidiary of Aviragen (the “Merger”). Pursuant to the terms of the Merger, Aviragen changed its name to Vaxart, Inc. (together with its subsidiaries, the “Company” or “Vaxart”) and Private Vaxart changed its name to Vaxart Biosciences, Inc.

On March 20,2019, the Company completed a registered direct offering (the “March 2019 Offering”) of 1,200,000 shares of the Company’s common stock. The total gross proceeds from the offering to the Company were $3.0 million. After deducting placement agent fees and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled $2.5 million. Pursuant to the terms of the engagement letter with the placement agents, the Company paid the placement agents aggregate fees and reimbursable costs of $320,000. In addition, the Company issued the placement agents’ designees 84,000 common stock warrants at the closing of the March 2019 Offering, each warrant entitling the holder to purchase one share of common stock for $3.125 at any time within five years of the effective date of the March 2019 Offering. The aggregate fair value of these warrants at issuance was estimated to be $100,000 (see Note 11), which was recorded in offering costs. As of December 31, 2021, the Company had received $0.2 million from the exercise of 67,825 common stock warrants issued to placement agents’ designees in the March 2019 Offering.

On April 11, 2019, the Company completed a public underwritten offering (the “April 2019 Offering”) of 925,455 shares of common stock, 8,165,455 pre-funded warrants, and warrants to purchase 10,454,546 shares of common stock (including 1,363,636 common stock warrants issued upon the exercise by the underwriters of their option to purchase such warrants). Each share of common stock with an accompanying common stock warrant was sold for $1.10, and each pre-funded warrant with an accompanying common stock warrant was sold for $1.00, with the amount paid for each accompanying common stock warrant being $0.10. Each pre-funded warrant entitled the holder to purchase one share of common stock for $0.10, was immediately exercisable, subject to certain ownership limitations, and was exercisable at any time until all the pre-funded warrants were exercised in full. Each common stock warrant entitles the holder to purchase one share of common stock for $1.10, is exercisable immediately, subject to certain ownership limitations, and will expire five years from the date of issuance.

Pursuant to the terms of an underwriting agreement, the Company paid the underwriters aggregate commissions and reimbursable costs of $750,000. In addition, the Company issued the underwriters’ designees 636,364 common stock warrants at the closing of the April 2019 Offering, each warrant entitling the holder to purchase one share of common stock for $1.375 at any time within five years of their issuance date. The aggregate fair value of these warrants at issuance was estimated to be $333,000 (see Note 11), which was recorded in offering costs.

The total gross proceeds from the April 2019 Offering to the Company were $9.3 million. After deducting underwriting discounts, commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company were $8.1 million. In addition, as of December 31, 2021, the Company had received a further $0.8 million from the exercise of all 8,165,455 pre-funded warrants, $11.5 million from the exercise of 10,410,398 common stock warrants issued to investors and $0.8 million from the exercise of 609,849 common stock warrants issued to underwriters’ designees issued in the April 2019 Offering.

On September 30, 2019, the Company completed a public underwritten offering (the “September 2019 Offering”) of 26,124,828 shares of common stock (including 3,558,161 shares of common stock issued upon the partial exercise by the underwriters of their option to purchase 4,000,000 shares), 4,100,000 pre-funded warrants, and warrants to purchase 30,666,667 shares of common stock (including 4,000,000 common stock warrants issued upon the exercise by the underwriters of their option to purchase such warrants). Each share of common stock with an accompanying common stock warrant was sold for $0.30, and each pre-funded warrant with an accompanying common stock warrant was sold for $0.20, with the amount paid for each accompanying common stock warrant being $0.10. Each pre-funded warrant entitled the holder to purchase one share of common stock for $0.10, was immediately exercisable, subject to certain ownership imitations, and was exercisable at any time until all the pre-funded warrants were exercised in full. Each common stock warrant entitles the holder to purchase one share of common stock for $0.30, is exercisable immediately, subject to certain ownership limitations, and will expire five years from the date of issuance.

Pursuant to the terms of an underwriting agreement, the Company paid the underwriters aggregate commissions and reimbursable costs of $713,000. In addition, the Company issued the underwriters’ designees 2,115,738 common stock warrants at the closing of the September 2019 Offering, each warrant entitling the holder to purchase one share of common stock for $0.375 at any time within five years of their issuance date. The aggregate fair value of these warrants at issuance was estimated to be $497,000 (see Note 11), which was recorded in offering costs.

The total gross proceeds from the September 2019 Offering to the Company were $8.7 million. After deducting underwriting discounts, commissions and offering expenses payable by the Company, the aggregate net proceeds received by the Company were $7.7 million. In addition, as of December 31, 2021, the Company had received $0.4 million from the exercise of all 4,100,000 pre-funded warrants, $9.2 million from the exercise of 30,661,667 common stock warrants issued to investors and $0.8 million from the exercise of all 2,115,738 common stock warrants issued to underwriters’ designees in the September 2019 Offering.

108

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

On March 2,2020, the Company completed a registered direct offering (the “March 2020 Offering”) of 4,000,000 shares of the Company’s common stock and warrants to purchase 2,000,000 shares of common stock. Each common stock warrant entitles the holder to purchase one share of common stock for $2.50, is exercisable immediately, subject to certain ownership limitations, and will expire five years from the date of issuance. Pursuant to the terms of the engagement letter with the placement agents, the Company paid the placement agents aggregate fees and reimbursable costs of $775,000. In addition, the Company issued the placement agents’ designees 280,000 common stock warrants at the closing of the March 2020 Offering, each warrant entitling the holder to purchase one share of common stock for $3.125 at any time within five years of the effective date of the March 2020 Offering. The aggregate fair value of these warrants at issuance was estimated to be $453,000 (see Note 11), which was recorded in offering costs.

The total gross proceeds from the March 2020 Offering to the Company were $10.0 million. After deducting placement agent fees and offering expenses payable by the Company, the aggregate net proceeds received by the Company totaled $9.2 million. In addition, as of December 31, 2021, the Company had received $4.9 million from the exercise of 1,970,850 common stock warrants issued to investors and $0.6 million from the exercise of 179,468 common stock warrants issued to placement agents’ designees in the March 2020 Offering.

On June 8, 2020, the Company’s shareholders approved an amendment to the Company’s certificate of incorporation to change the par value of its common and preferred stock from $0.10 per share to $0.0001 per share and to increase the number of authorized shares of common stock from 100,000,000 to 150,000,000. Except as otherwise noted in these consolidated financial statements, all share, equity security and per share amounts are presented to give retroactive effect to these changes.

On July 13, 2020, the Company completed the sale of 12,503,806 shares for gross proceeds of $100.0 million from an at-the-market facility (the “ATM Program”) under a sales prospectus agreement dated July 8, 2020. After deducting sales commissions and expenses, aggregate net cash proceeds under the ATM Program totaled $97.0 million.

On October 13, 2020, the Company entered into the Open Market Sale Agreement, (the “October 2020 ATM”) pursuant to which it could offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $250 million. The Company incurred direct expenses of approximately $0.3 million in connection with filing a prospectus supplement, dated October 13, 2020, with the U.S. Securities and Exchange Commission (the “SEC”), and paid sales commissions of up to 4.5% of gross proceeds from the sale of shares. As of December 31, 2020, the Company had sold 692,651 shares for gross proceeds of $5.5 million which, after deducting sales commissions and expenses, resulted in net proceeds under the October 2020 ATM of $4.9 million in 2020.

In the year ended December 31, 2021, the Company sold an additional 13,239,839 shares under the October 2020 ATM for gross proceeds of $127.9 million which, after deducting sales commissions and expenses, resulted in net proceeds under the October 2020 ATM of $122.2 million. As of December 31, 2021, a total of 13,932,490 shares had been issued and sold under the October 2020 ATM since its inception for gross proceeds of $133.4 million which, after deducting sales commissions and expenses, resulted in net proceeds of $127.1 million.

On September 13, 2021, the October 2020 ATM was terminated and on September 15, 2021, the Company entered into a Controlled Equity Offering Sales Agreement (the “September 2021 ATM”), pursuant to which it may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $100 million. The Company incurred direct expenses of approximately $0.2 million in connection with filing a prospectus supplement with the SEC on September 16, 2021, and will pay sales commissions of up to 3.0% of gross proceeds from the sale of shares. As of December 31, 2021, no shares had been issued under the September 2021 ATM.

The Company’s principal operations are based in South San Francisco, California, and it operates in one reportable segment, which is the discovery and development of oral recombinant protein vaccines, based on its proprietary oral vaccine platform.

109

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation – The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Basis of Consolidation – The consolidated financial statements include the financial statements of Vaxart, Inc. and its subsidiaries. All significant transactions and balances between Vaxart, Inc. and its subsidiaries have been eliminated in consolidation.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results and outcomes could differ from these estimates and assumptions.

Foreign Currencies – Foreign exchange gains and losses for assets and liabilities of the Company’s non-U.S. subsidiaries for which the functional currency is the U.S. dollar are recorded in foreign exchange gain or loss, net within other income and (expenses) in the Company’s consolidated statements of operations and comprehensive loss. The Company has no subsidiaries for which the local currency is the functional currency.

Cash and Cash Equivalents – The Company considers all highly liquid debt investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents, which may consist of amounts invested in money market funds, corporate bonds and commercial paper, are stated at fair value.

Investments – Excess cash balances may be invested in marketable debt securities. All investments that are readily convertible to known amounts of cash with stated maturities greater than three months when purchased are classified as investments.

The Company determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. Marketable debt securities are classified and accounted for as available-for-sale. After consideration of the Company’s objectives to preserve capital, as well as its liquidity requirements, it may sell these debt securities prior to their stated maturities. These securities are carried at fair value and unrealized gains and losses, net of taxes, are reported as a component of stockholders’ equity, except for unrealized losses determined to be other-than-temporary, which are recorded within other income (expense). Any realized gains or losses on the sale of marketable debt securities are determined on a specific identification method, and such gains and losses are recorded as a component of other income (expense). Available-for-sale investments are classified as either current or non-current assets based on each instrument’s underlying effective maturity date and whether the Company has the intent and ability to hold the investment for a period of greater than 12 months. Marketable securities with remaining maturities of 12 months or less are classified as current and are reported as short-term investments in the consolidated balance sheets. Marketable securities with remaining maturities of more than 12 months for which the Company has the intent and ability to hold the investment for more than 12 months are classified as non-current and are included in long-term investments in the consolidated balance sheets.

Securities are evaluated for impairment at the end of each reporting period. Impairment is evaluated considering numerous factors, including whether a decline in fair value below the amortized cost basis is due to credit-related factors or non-credit-related factors, the financial condition and near-term prospects of the issuer, and intent and ability to hold the investment to allow for an anticipated recovery in fair value. A credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. Any impairment that is not credit-related is recognized in other comprehensive loss, net of applicable taxes.

Concentration of Credit Risk – Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents and available-for-sale investments. The Company places its cash, cash equivalents and available-for-sale investments at financial institutions that management believes are of high credit quality. The Company is exposed to credit risk in the event of default by the financial institutions holding the cash and cash equivalents to the extent such amounts are in excess of the federally insured limits. The Company has not experienced any losses on its deposits since inception.

The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer or sector and establishing a minimum allowable credit rating.

Accounts Receivable – Accounts receivable arise from the Company’s royalty revenue receivable for sales, net of estimated returns, of Inavir and, until the patent expired in 2019, Relenza, and from its contracts with customers and with the Department of Health and Human Services, Office of Biomedical Advanced Research and Development Authority (“HHS BARDA”) (see Note 6) and are reported at amounts expected to be collected in future periods. An allowance for uncollectible accounts will be recorded based on a combination of historical experience, aging analysis and information on specific accounts, with related amounts recorded as a reserve against revenue recognized. Account balances will be written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has provided no allowance for uncollectible accounts as of December 31, 2021 and 2020.

110

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Property and Equipment – Property and equipment is carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to operations as incurred. Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in other income and (expenses) in the period realized.

The useful lives of the property and equipment are as follows:

Laboratory equipment (in years) 5

Office and computer equipment (in years) 3

Leasehold improvements Shorter of remaining lease term or estimated useful life

Goodwill and Other Intangible Assets – Goodwill, which represents the excess of the purchase price over the fair value of assets acquired, is not amortized. Intangible assets comprise developed technology and intellectual property. Intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over useful lives ranging from 1.3 to 11.75 years for developed technology and 20 years for intellectual property.

Impairment of Long-Lived Assets – The Company reviews its long-lived assets, including property and equipment, goodwill and intangible assets with finite lives, for impairment in the fourth quarter of each year, and more frequently whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. When indications of impairment are present and the estimated undiscounted future cash flows from the use of these assets is less than the assets’ carrying value, the related assets will be written down to fair value. The Company assessed its manufacturing equipment and its right-of-use asset and leasehold improvements at its manufacturing premises as impaired in the year ended December 31, 2019 (see Note 14) and its developed technology as impaired in the year ended December 31, 2021 (see Note 5).

Accrued Clinical and Manufacturing Expenses – The Company accrues for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided and includes the costs incurred but not yet invoiced within other accrued liabilities in the balance sheets and within research and development expense in the consolidated statements of operations and comprehensive loss. These costs can be a significant component of the Company’s research and development expenses.

The Company estimates the amount of services provided through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. The Company makes significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, it adjusts its accrued estimates. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed, the number of subjects enrolled, and the rate of enrollment may vary from its estimates and could result in the Company reporting amounts that are too high or too low in any particular period. The Company’s accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from contract research organizations and other third-party service providers. To date, the Company has not experienced any material differences between accrued costs and actual costs incurred.

Leases – The Company records operating leases as right-of-use assets and operating lease liabilities in its consolidated balance sheets for all operating leases with terms exceeding one year. Right-of-use assets represent the right to use an underlying asset for the lease term, including extension options considered reasonably certain to be exercised, and operating lease liabilities to make lease payments. Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term. To the extent that lease agreements do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments. The expense for operating lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses in the Company’s consolidated statement of operations and comprehensive loss. The Company has elected to not separate lease and non-lease components of facilities leases, whereas non-lease components of equipment leases are accounted for separately from lease components.

111

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Revenue Recognition – The Company recognizes revenue when it transfers control of promised goods or services to its customers, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the following five steps:

(i) identification of the promised goods or services in the contract;

Revenue from royalties earned as a percentage of sales, including milestone payments based on achieving a specified level of sales, where a license is deemed to be the predominant item to which the royalties relate, is recognized as revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied), as required under the sales- and usage-based royalty exception.

Revenue from contracts with customers is recognized ratably, based on costs incurred, as the Company provides promised services to its customers in amounts that reflect the consideration that the Company expects to receive for those services.

The Company performed research and development work under its cost-plus-fixed-fee contract with HHS BARDA. The Company recognizes revenue under research contracts only when a contract has been executed and the contract price is fixed or determinable. Revenue from the HHS BARDA contract is recognized in the period during which the related costs are incurred and the related services are rendered, provided that the applicable conditions under the contract have been met. Costs of contract revenue are recorded as a component of operating expenses in the consolidated statements of operations and comprehensive loss.

Under cost reimbursable contracts, the Company recognizes revenue as allowable costs are incurred and the fixed fee is earned. Reimbursable costs under the contract primarily include direct labor, subcontract costs, materials, equipment, travel, and approved overhead and indirect costs. Fixed fees under cost reimbursable contracts are earned in proportion to the allowable costs incurred in performance of the work relative to total estimated contract costs, with such costs incurred representing a reasonable measurement of the proportional performance of the work completed.

Payments to the Company under cost reimbursable contracts, such as this contract, are provisional payments subject to adjustment upon annual audit by the government. Management believes that revenue for periods not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period that the adjustment is known.

Research and Development Costs – Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and benefits, stock-based compensation, consultant fees, third-party costs for conducting clinical trials and the manufacture of clinical trial materials, certain facility costs and other costs associated with clinical trials. Payments made to other entities are under agreements that are generally cancelable by the Company. Advance payments for research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related services are performed.

Stock-Based Compensation – The Company measures the fair value of all stock-based awards, including stock options, on the grant date and records the fair value of these awards, net of estimated forfeitures, to compensation expense over the service period. The fair value of options is estimated using the Black-Scholes valuation model. The expected term of each option is estimated by taking the arithmetic average of its original contractual term and its average vesting term.

112

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Net Income (Loss) Per Share – Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period, without consideration of potential common shares.

Diluted net income (loss) per common share is computed giving effect to all potential dilutive common shares, comprising common stock issuable upon exercise of stock options and warrants. The Company uses the treasury-stock method to compute diluted income (loss) per share with respect to its stock options and warrants. For purposes of this calculation, options and warrants to purchase common stock are considered to be potential common shares and are only included in the calculation of diluted net income per share when their effect is dilutive. In the event of a net loss, the effects of all potentially dilutive shares are excluded from the diluted net loss per share calculation as their inclusion would be antidilutive.

Reclassification

Prior year data is subject to reclassification to conform to current year presentation.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (ASU) 2020-06,Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40). In addition to simplifying the accounting for certain debt and equity instruments, none of which the Company presently has outstanding, this standard update provides guidance on how certain instruments should be treated in the computation of earnings per share. The Company adopted the new guidance effective January 1, 2021. Its adoption had an immaterial impact on the number of shares used in the computation of year-to-date basic and diluted earnings per share.

Recent Accounting Pronouncements

The Company has reviewed all significant newly-issued accounting pronouncements that are not yet effective and concluded that they are either not applicable to its operations or their adoption will not have a material impact on its financial position or results of operations.

113

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 3. Business Combination

On November 30, 2021, the Company closed its acquisition of Kindred BioSciences, Inc.’s GMP manufacturing line in Burlingame, California in exchange for $4.8 million in cash. The transaction was accounted for as a business combination and the Company incurred transaction related expenses totaling $82,000, which were recorded within general and administrative expenses in the consolidated statement of operations.

The fair value of the assets acquired in connection with the acquisition are as follows (in thousands):

Property and equipment $ 321

Total purchase price $ 4,829

In addition, the Company paid $671,000 in prepaid rent in connection with the modification of the pre-existing embedded lease at the Burlingame facility (see Note 8).

Goodwill, which represents the excess of the purchase price over the fair value of assets acquired, is attributable primarily to the expected cost savings of manufacturing internally, as opposed to outsourcing, and the assembled workforce. All of the goodwill is expected to be deductible for income tax purposes.

NOTE 4.Fair Value of Financial Instruments

Fair value accounting is applied for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Financial instruments include cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities that approximate fair value due to their relatively short maturities.

Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

114

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table sets forth the fair value of the Company’s financial assets that are measured on a recurring basis as of December 31, 2021 and 2020 (in thousands):

Level 1 Level 2 Level 3 Total

Recurring financial assets:

Corporate debt securities — 6,464 — 6,464

Level 1 Level 2 Level 3 Total

Recurring financial assets:

The Company held no financial liabilities measured on a recurring basis as of December 31, 2021 or 2020, or in the years ended December 31, 2021, 2020 or 2019.

NOTE 5. Balance Sheet Components

(a)Cash, Cash Equivalents and Investments

Cash, cash equivalents and investments consisted of the following (in thousands):

Amortized Gross Unrealized Estimated Cash and Cash Short-Term Long-Term

Cost Gains Losses Fair Value Equivalents Investments Investments

Amortized Gross Unrealized Estimated Cash and Cash Short-Term Long-Term

Cost Gains Losses Fair Value Equivalents Investments Investments

115

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(b)Accounts Receivable

Accounts receivable comprises royalties receivable of $71,000 and $334,000 as of December 30, 2021 and 2020, respectively.

(c)Property and Equipment, Net

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

Office and computer equipment 481 294

Leasehold improvements 1,063 —

Construction in progress 1,305 —

Less: accumulated depreciation (1,305 ) (573 )

Property and equipment, net $ 6,601 $ 1,480

Depreciation expense was $732,000, $114,000 and $504,000 for the years ended December 31, 2021, 2020 and 2019, respectively. Property and equipment and leasehold improvements at one of the Company’s leased premises in California that were used in the Company’s manufacturing operations (see Note 14) were assessed as impaired as of December 31, 2019, and accordingly an impairment charge of $1,152,000 was recorded as a component of restructuring costs within operating expenses.

(d) Right-of-Use Assets, Net

Right-of-use assets consist of the following (in thousands):

Office equipment — 2

The right of use of one of the Company’s leased premises in California used in the Company’s manufacturing operations (see Note 14) was assessed as impaired as of December 31, 2019, and accordingly an impairment charge of $120,000 was recorded as a component of restructuring costs within operating expenses.

(e)Intangible Assets, Net

Intangible assets comprise developed technology, intellectual property and, until it was considered fully impaired, in-process research and development. Intangible assets are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over useful lives ranging from 1.3 to 11.75 years for developed technology and 20 years for intellectual property. As of December 31, 2021, developed technology and intellectual property had remaining lives of 7.9 and 6.0 years, respectively. Intangible assets consist of the following (in thousands):

Intellectual property 80 80

Less: accumulated amortization (56 ) (5,019 )

Intangible asset amortization expense was $1.7 million, $1.7 million and $2.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Due to a decline in royalties earned since the outbreak of COVID-19 (see Note 7), developed technology was assessed as partially impaired as of December 31, 2021, and accordingly an impairment charge of $3.0 million was recorded within operating expenses.

116

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2021, the estimated future amortization expense by year is as follows (in thousands):

Year Ending December 31, Amount

(f)Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

Accrued clinical and manufacturing expenses 986 1,772

Accrued professional and consulting services 556 777

Other liabilities, current portion 736 632

NOTE 6. Revenue

Service Contracts with Customers

Contract Balances.No amounts related to service contracts with customers were receivable as of December 31, 2021 or 2020. Contract assets, representing unbilled receivables where revenue has been recognized in advance of customer billings, as of December 31, 2021 and 2020, were nil and $219,000, respectively, which were included in prepaid expenses and other current assets.

Remaining Performance Obligations. Remaining Performance Obligations (“RPO”) comprise deferred revenue plus unbilled contract revenue. As of December 31, 2021 and 2020, there was no deferred revenue and the aggregate amount of RPO was nil and $13,000, respectively, all of which was unbilled contract revenue which is not recorded on the balance sheet. Unbilled contract revenue represents non-cancelable contracts under which the Company has an obligation to perform, for which revenue has not yet been recognized in the financial statements and the fixed amounts billable have not yet been invoiced.

U.S. Government HHS BARDA Contract

In September 2015, HHS BARDA awarded the Company a contract to support the advanced development of a more effective and universal influenza vaccine to improve seasonal and pandemic influenza preparedness. On each of May 25 and July 18, 2017, and June 28, 2018, the Company entered into a Modification of Contract with HHS BARDA, the combined effect being to increase the value of the original $14 million contract by $1.7 million and to extend it through September 30, 2018. The modified contract is a cost-plus-fixed-fee contract, which reimburses the Company for allowable direct contract costs plus allowable indirect costs and a fixed-fee, totaling $15.7 million. As of December 31, 2021, the cumulative revenue recorded from inception under the HHS BARDA contract represents $20,000 less than the maximum amount billable under the contract as presently modified, with no further change orders envisaged.

Billings under the contract are based on approved provisional indirect billing rates, which permit recovery of fringe benefits, overhead and general and administrative expenses. Indirect rates as well as allowable costs are subject to audit by HHS BARDA on an annual basis. Management believes that revenues recognized to date have been recorded in amounts that are expected to be realized upon final audit and settlement. When the final determination of the allowable costs for any year has been made, revenue and billings may be adjusted accordingly in the period that the adjustments are known and collection is probable. Costs relating to contract acquisition are expensed as incurred. In the three months ended December 31, 2019, the Company reversed $20,000 in revenue that was invoiced late in 2018 to correct prior undercharges but which may never be received, and does not consider any of the revenue recorded as of December 31, 2021, to be at risk of reversal.

117

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Royalty agreements

Aviragen entered into a royalty-bearing research and license agreement with GlaxoSmithKline, plc (“GSK”) in 1990 for the development and commercialization of zanamivir, a neuraminidase inhibitor marketed by GSK as Relenza,to treat influenza. All the Company’s Relenza patents have expired, the last remaining intellectual property related to the Relenza patent portfolio, which is solely owned by the Company and exclusively licensed to GSK, having expired in July 2019 in Japan, at which time royalty revenue ceased, although it remained subject to minor adjustments for sales returns and exchange rate differences. Royalty revenue related to Relenza in 2021,2020 and 2019, was nil, $193,000 and $778,000, respectively.

The Company also generates royalty revenue from the sale of Inavir in Japan, pursuant to a collaboration and license agreement that Aviragen entered into with Daiichi Sankyo Company, Limited (“Daiichi Sankyo”), in 2009. In September 2010, laninamivir octanoate was approved for sale by the Japanese Ministry of Health and Welfare for the treatment of influenza in adults and children, which Daiichi Sankyo markets as Inavir. Under the agreement, the Company currently receives a 4% royalty on net sales of Inavir in Japan. The last patent related to Inavir is set to expire in December 2029 in Japan, at which time royalty revenue will cease. The royalty revenue related to Inavir recognized in 2021,2020 and 2019, was nil, $2,769,000 and $3,668,000, respectively. In addition, the Company recognized non-cash royalty revenue related to sale of future royalties (see Note 7) of $879,000, $886,000 and $5,030,000 in 2021,2020 and 2019, respectively. Both the royalty revenue and the non-cash royalty revenue related to sale of future royalties have been subjected to a 5% withholding tax in Japan, for which $44,000, $183,000 and $435,000 was included in income tax expense in the years ended December 31, 2021, 2020 and 2019, respectively.

NOTE 7.Liabilities Related to Sale of Future Royalties

In April 2016, Aviragen entered into a Royalty Interest Acquisition Agreement (the “RIAA”) with HCRP. Under the RIAA, HCRP made a $20.0 million cash payment to Aviragen in consideration for acquiring certain royalty rights (“Royalty Rights”) related to the approved product Inavir in the Japanese market. The Royalty Rights were obtained pursuant to the collaboration and license agreements (the “License Agreement”) and a commercialization agreement that the Company entered into with Daiichi Sankyo. Per the terms of the RIAA, HCRP is entitled to the first $3.0 million plus 15% of the next $1.0 million in royalties earned in each year commencing on April 1, with any excess revenue being retained by the Company.

Under the relevant accounting guidance, due to a limit on the amount of royalties that HCRP can earn under the RIAA, this transaction was accounted for as a liability that is being amortized using the effective interest method over the life of the arrangement. The Company has no obligation to pay any amounts to HCRP other than to pass through to HCRP its share of royalties as they are received from Daiichi Sankyo. To record the amortization of the liability, the Company is required to estimate the total amount of future royalty payments to be received under the License Agreement and the payments that will be passed through to HCRP over the life of this agreement. Consequently, the Company imputes interest on the unamortized portion of the liability and records non-cash interest expense using an estimated effective interest rate. The royalties earned in each period that will be passed through to HCRP are recorded as non-cash royalty revenue related to sale of future royalties, with any excess not subject to pass-through being recorded as royalty revenue. When the pass-through royalties are paid to HCRP in the following quarter, the imputed liability related to sale of future royalties is commensurately reduced. The Company periodically assesses the expected royalty payments, and to the extent such payments are greater or less than the initial estimate, the Company adjusts the amortization of the liability and interest rate. As a result of this accounting, even though the Company does not retain HCRP’s share of the royalties, it will continue to record non-cash revenue related to those royalties until the amount of the associated liability, including the related interest, is fully amortized.

The following table shows the activity within the liability account during the year ended December 31, 2021 (in thousands):

Total liability related to sale of future royalties, start of year $ 14,929

Non-cash royalty revenue paid to HCRP (1,098 )

Non-cash interest expense recognized 1,480

Revaluation gain recognized (3,789 )

Total liability related to sale of future royalties, end of year 11,522

Current portion (836 )

Long-term portion $ 10,686

Due to a decline in royalties earned since the outbreak of COVID-19, the amount expected to be payable to HCRP was revalued as of December 31, 2021, and the resulting gain on revaluation of debt of $3.8 million was recorded within other income and expenses.

118

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 8. Leases

The Company has obtained the right of use for office and manufacturing facilities under five operating lease agreements with initial terms exceeding one year and has three operating lease agreements for facilities and one for manufacturing equipment with initial terms of one year or less.

The Company obtained the right of use of real estate located in South San Francisco, California, in November 2020 under a lease that was scheduled to terminate on September 30, 2025, which has been extended until March 31, 2029, with no extension option. The Company also obtained the right of use of real estate located in South San Francisco, California, in June 2015 that was scheduled to terminate on April 30, 2020, with a five-year extension option that the Company exercised in July 2019, extending the lease until April 30, 2025, which has been extended until March 31, 2029, with an option to extend for an additional eight years. The right of use of these premises was assessed as partially impaired as of December 31, 2019 (see Note 14). In addition, the Company has the right of use of a facility located in South San Francisco, California, under a lease that, following a one-year extension, now terminates on July 31, 2022, with no extension option. Further, the Company has the right of use of a facility located in South San Francisco, California, under a lease that terminates on March 30, 2029, with a five-year renewal option. Further, the Company had identified an embedded lease for the rental of facilities in Burlingame, California, within a Statement of Work for the manufacture of bulk vaccine product that was expected to be completed early in September 2022. This lease was partially extended until May 31, 2025, with two30-month extension options, in connection with the business combination (see Note 3) and partially terminated, for which a gain of $116,000 was recorded within research and development expense. Further, the Company obtained, via the Merger in February 2018, the right of use of facilities located in Alpharetta, Georgia, that terminated on February 28, 2021, with no extension option. These facilities were subleased for the remainder of the lease term effective November 30, 2018. The Company has also identified a short-term lease for the rental of facilities in Burlingame, California, and short-term embedded leases for the rental of facilities in South San Francisco, California and Lodi, Wisconsin.

As of December 31, 2021, the weighted average discount rate for operating leases with initial terms of more than one year was 9.27% and the weighted average remaining term of these leases was 6.93 years. Discount rates were determined using the Company’s marginal rate of borrowing at the time each lease was executed or extended.

The following table summarizes the Company’s undiscounted cash payment obligations for its operating lease liabilities with initial terms of more than twelve months as of December 31, 2021 (in thousands):

Year Ending December 31, Amount

Less: imputed interest (5,300 )

Present value of future minimum payments 13,008

Current portion of operating lease liability (1,011 )

Operating lease liability, net of current portion $ 11,997

The Company presently has no finance leases and future obligations of $14,000 for facilities and $8,000 for equipment under operating leases with initial terms of one year or less.

Certain operating lease agreements for facilities include non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Operating lease expenses for the years ended December 31, 2021, 2020 and 2019, are summarized as follows (in thousands):

Year Ended December 31,

Lease cost

Net cash outflows associated with operating leases totaled $4.4 million, $1.1 million and $983,000 in the years ended December 31, 2021, 2020 and 2019, respectively.

119

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 9. Secured Promissory Note Payable to Oxford Finance

On December 22,2016, the Company entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance, under which the Company borrowed $5.0 million. The $5.0 million loan, which bore interest at the 30-day U.S. LIBOR rate plus 6.17%, was evidenced by a secured promissory note and was repayable over four years, with interest only payable over the first12 months and the balance fully amortized over the subsequent 36 months. The loan was secured by substantially all the Company’s assets, except for intellectual property.

In conjunction with the execution of the Loan Agreement, all the holders of convertible promissory notes signed subordination agreements, under which they agreed to subordinate in favor of Oxford Finance all amounts due under their promissory notes and any security interest in the Company’s property. In addition, the holders of the notes agreed that they would not demand or receive any payment until all amounts owed to Oxford Finance under the Loan Agreement had been fully paid in cash. Upon repayment, an additional final payment equal to $325,000 would be due, which was accreted as interest expense over the term of the loan using the effective-interest method.

In connection with the Loan Agreement, the Company issued a warrant to Oxford Finance to purchase 7,563 shares of its Series C convertible preferred stock at an exercise price of $33.11 per share (the “Warrant”). The fair value of the Warrant at the date of issuance was approximately $134,000 which, along with other initial costs, was recorded as debt discount and was amortized as interest expense over the term of the loan using the effective-interest method. Due to the antidilution protection, following the Merger, the Warrant was amended to allow the holder to purchase 10,914 shares of common stock at an exercise price of $22.99 per share.

The annual effective interest rate of the note, including the accretion of the final payment and the amortization of the debt discount, was approximately 10.5%. The Company recorded interest expense related to the Loan Agreement of $311,000 during the year ended December 31, 2019, of which $223,000 was paid. The note was repaid in full on November 4, 2019. At that date, the unamortized deferred financing costs of $98,000 plus $2,000 reimbursed to Oxford Finance for legal fees were expensed as loss on debt extinguishment within other income and (expenses).

120

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 10. Commitments and Contingencies

(a)Purchase Commitments

As of December 31, 2021, the Company had approximately $11.0 million of non-cancelable purchase commitments, principally for contract manufacturing and clinical services which are expected to be paid within the next eighteen months. In addition, the Company has operating lease commitments as detailed in Note 8 and a further commitment for an operating lease with rental payments totaling $14.9 million payable by March 31, 2029, which has been executed but has not yet commenced.

(b)Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend indemnified parties for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has also entered into indemnification agreements with its directors and officers that require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance.

(c)Litigation

From time to time the Company may be involved in legal proceedings arising in connection with its business. Based on information currently available, the Company believes that the amount, or range, of reasonably possible losses in connection with any pending actions against it in excess of established reserves, in the aggregate, is not material to its consolidated financial condition or cash flows. However, any current or future dispute resolution or legal proceeding, regardless of the merits of any such proceeding, could result in substantial costs and a diversion of management’s attention and resources that are needed to run the Company successfully, and could have a material adverse impact on its business, financial condition and results of operations.

On August 4, 2020, a purported shareholder derivative complaint was filed in the Superior Court of California, San Mateo County, entitled Godfrey v. Latour, et al. An amended complaint was filed on September 4, 2020 and the case was re-named Ennis v. Latour, et al. A second amended complaint was filed on November 25, 2020. On March 15, 2021, the court sustained demurrers to the second amended complaint, without prejudice to file a further amended complaint. A third amended complaint was filed on June 11, 2021. The third amended complaint names certain current and former Vaxart directors as defendants, asserting claims against them for breach of fiduciary duty, unjust enrichment, and waste and seeking, among other things, an award of unspecified damages, certain equitable relief, and attorneys’ fees and costs. The complaint also asserts claims for breach of fiduciary duty and aiding and abetting breach of fiduciary duty against Armistice Capital, LLC (“Armistice”). The third amended complaint challenges certain stock options granted to certain of the Company’s officers and directors in June 2020; certain alleged statements and omissions made in the Company’s April 24, 2020, proxy statement; and certain amendments to two warrants held by Armistice, as disclosed on June 8, 2020. The third amended complaint purports to bring the lawsuit derivatively on behalf of and for the benefit of the Company and names the Company as a “nominal defendant” against which no damages are sought. On August 31, 2021, the Company, as well as all other defendants, filed demurrers to the third amended complaint. The demurrers have not yet been decided.

On September 8, 2020, a purported shareholder derivative complaint was filed in the Court of Chancery of the State of Delaware, entitled Galjour v. Floroiu, et al. On October 20, 2020, a purported shareholder derivative and class action complaint, entitled Jaquith v. Vaxart, Inc., was filed in the Court of Chancery of the State of Delaware. On November 12, 2020, the two actions were consolidated under the caption In re Vaxart, Inc. Stockholder Litigation and the complaint filed in the Jaquith action was deemed the operative pleading. The operative complaint names certain current and former Vaxart directors as defendants, asserting claims against them for breach of fiduciary duty and unjust enrichment and seeking, among other things, an award of unspecified damages, certain equitable relief, and attorneys’ fees and costs. The complaint also asserts claims for unjust enrichment and breach of fiduciary duty or alternatively aiding and abetting breach of fiduciary duty against Armistice. The complaint challenges certain stock options granted to certain of the Company’s officers and directors between March 24, 2020 and June 15, 2020; certain alleged statements and omissions made in the Company’s April 24, 2020, proxy statement; and certain amendments to two warrants held by Armistice, as disclosed on June 8, 2020. The complaint purports to bring all but one of the claims derivatively on behalf of and for the benefit of the Company. It also purports to bring one claim, for breach of fiduciary duty based on alleged statements and omissions in the Company’s April 24, 2020, proxy statement, directly on behalf of a class of Vaxart stockholders. The complaint names the Company as a “nominal defendant” against which no damages are sought. On January 4, 2021, all defendants filed motions to dismiss. In a decision dated November 30, 2021 and corrected on December 1, 2021, the court dismissed the claims relating to the warrant amendments. The motions to dismiss the remaining claims have not yet been decided.

121

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

In August and September 2020, two substantially similar securities class actions were filed in the U.S. District Court for the Northern District of California. The first action, titled Himmelberg v. Vaxart, Inc. et al. was filed on August 24, 2020. The second action, titled Hovhannisyan v. Vaxart, Inc. et al. was filed on September 1, 2020 (together, the “Putative Class Action”). By Order dated September 17, 2020, the two actions were deemed related. On December 9, 2020, the court appointed lead plaintiffs and lead plaintiffs’ counsel. On January 29, 2021, lead plaintiffs filed their consolidated amended complaint. On July 8, 2021, all defendants moved to dismiss the consolidated amended complaint. On May 14, 2021, the court granted lead plaintiffs’ request to amend the consolidated amended complaint and denied defendants’ motions to dismiss as moot. On June 10, 2021, lead plaintiffs filed an amended consolidated complaint. On August 9, 2021, lead plaintiffs filed a corrected amended consolidated complaint. The amended consolidated complaint names certain of Vaxart’s current and former executive officers and directors, as well as Armistice, as defendants. It claims three violations of federal civil securities laws; violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5, as against the Company and all individual defendants; violation of Section 20(a) of the Exchange Act, as against Armistice and all individual defendants; and violation of Section 20A of the Exchange Act against Armistice. The amended consolidated complaint alleges that the defendants violated securities laws by misstating and/or omitting information regarding the Company’s development of a norovirus vaccine, the vaccine manufacturing capabilities of a business counterparty, and the Company’s involvement with Operation Warp Speed (“OWS”); and by engaging in a scheme to inflate Vaxart’s stock price. The first amended consolidated complaint seeks to be certified as a class action for similarly situated shareholders and seeks, among other things, an unspecified amount of damages and attorneys’ fees and costs. On July 8, 2021, all defendants moved to dismiss the first amended consolidated complaint. On December 22, 2021, the court granted in part and denied in part the motions to dismiss. The parties appeared at an initial case management conference on February 2, 2022, to set a schedule for the rest of the action. On February 8, 2022, the court entered a Case Management Plan, setting forth certain case deadlines.

On October 23, 2020, a complaint was filed in the U.S. District Court for the Southern District of New York, entitled Roth v. Armistice Capital LLC, et al. The complaint names Armistice and certain Armistice-related parties as defendants, asserting a violation of Exchange Act Section 16(b) and seeking the disgorgement of short-swing profits. The complaint purports to bring the lawsuit on behalf of and for the benefit of the Company and names the Company as a “nominal defendant” for whose benefit damages are sought.

On January 8, 2021, a purported shareholder, Phillip Chan, commenced a pro se lawsuit in the U.S. District Court for the Northern District of California titled Chan v. Vaxart, Inc. et al. (the “Opt-Out Action”). Because this complaint is nearly identical to an earlier version of a complaint filed in the Putative Class Action, the Opt-Out Action has been stayed pending resolution of the Putative Class Action.

On March 5, 2021, a purported shareholder, Kathleen Sanetel, served a demand letter on the Company’s board of directors demanding that it investigate and commence appropriate legal action against certain members of the board of directors, certain executive officers, and Armistice to remedy purportedly wrongful conduct. On or about June 2, 2021, another purported shareholder, Jerry Besa, served a substantially identical demand letter. The specific allegations and alleged wrongful conduct set forth in the demand letter are, in all material respects, substantially similar to the allegations and claims made in the amended consolidated complaint in the Putative Class Action. After receipt of the Sanetel demand letter, the Board appointed a committee of the Board (the “Demand Committee”) and delegated to the Demand Committee the authority to investigate the matters referenced in the demand letter and determine action(s), if any, to be taken by the Company in response to the demand. On February 10, 2022, a purported shareholder, Kevin Meehan, served a similar demand letter on the Company’s current board of directors, premised on the same allegations and claims made in the amended consolidated complaint in the Putative Class Action and demanding the Company take legal action against the defendants in the Putative Class Action. The Demand Committee will investigate and consider the Meehan demand letter.

No amounts have been accrued because the Company’s management does not presently believe that any loss is probable and it is not possible to reasonably estimate the loss, or range of losses, if any, that may result from any of the ongoing litigation. The Company’s legal costs incurred in its defense against these claims are expensed as incurred.

NOTE 11. Stockholders’ Equity

(a)Convertible Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, $0.0001 par value per share. The Company’s board of directors may, without further action by the stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 5,000,000 shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our common stock. The issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deterring or preventing a change of control or other corporate action. No shares of preferred stock are currently outstanding, and the Company has no present plan to issue any shares of preferred stock.

122

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(b)Common Stock

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of common stock possess all voting power for the election of the Company’s directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders. Holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s board of directors in its discretion out of funds legally available therefor. In no event will any stock dividends or stock splits or combinations of stock be declared or made on common stock unless the shares of common stock at the time outstanding are treated equally and identically. As of December 31, 2021, no dividends had been declared by the board of directors.

In the event of the Company’s voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of the common stock will be entitled to receive an equal amount per share of all the Company’s assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied. There are no sinking fund provisions applicable to the common stock.

The Company had shares of common stock reserved for issuance as follows:

(c)Warrants

The Company has the following warrants outstanding as of December 31, 2021, all of which contain standard anti-dilution protections in the event of subsequent rights offerings, stock splits, stock dividends or other extraordinary dividends, or other similar changes in the Company’s common stock or capital structure, and none of which have any participating rights for any losses:

The aggregate fair value at issuance of the warrants issued to the placement agents’ designees at the closing of the March 2019 Offering and the March 2020 Offering and to the underwriters’ designees at the closing of the April 2019 Offering and the September 2019 Offering (see Note 1) were estimated to be $100,000, $453,000, $333,000 and $497,000, respectively, using the Black-Scholes valuation model and using parameters and assumptions tabulated as follows:

Dividend yield — % — % — % — %

In the event of a Fundamental Transaction (a transfer of ownership of the Company as defined in the warrant) within the Company’s control, the holders of the unexercised common stock warrants exercisable for $0.30, $1.10 and $2.50 and those exercisable for $3.125 expiring in February 2025 shall be entitled to receive cash consideration equal to a Black-Scholes valuation, as defined in the warrant. If such Fundamental Transaction is not within the Company’s control, the warrantholders would only be entitled to receive the same form of consideration (and in the same proportion) as the holders of the Company’s common stock, hence these warrants are classified as a component of permanent equity.

123

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

NOTE 12. Equity Incentive Plans

On April 23, 2019, the Company’s stockholders approved the adoption of the 2019 Equity Incentive Plan (the “2019 Plan”), under which the Company is authorized to issue incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock awards and performance awards that may be settled in cash, stock, or other property. The 2019 Plan is designed to secure and retain the services of employees, directors and consultants, provide incentives for the Company’s employees, directors and consultants to exert maximum efforts for the success of the Company and its affiliates, and provide a means by which employees, directors and consultants may be given an opportunity to benefit from increases in the value of the Company’s common stock. Following adoption of the 2019 Plan, all previous plans were frozen, and on forfeiture, cancellation and expiration, awards under those plans are not assumed by the 2019 Plan.

The aggregate number of shares of common stock authorized for issuance under the 2019 Plan was initially 1,600,000 shares, which was increased through an amendment to the 2019 Plan adopted by the Company’s stockholders (a “Plan Amendment”) on June 8, 2020, to 8,000,000, and by a Plan Amendment on June 16, 2021, to 16,900,000, subject to standard adjustments in the event of a stock split, stock dividend or other extraordinary dividend, or other similar change in the Company’s common stock or capital structure. Further amendments to the 2019 Plan to increase the share reserve would require stockholder approval. Awards that expire or are canceled generally become available for issuance again under the 2019 Plan. Awards have a maximum term of ten years from the grant date and may vest over varying periods, as specified by the Company’s board of directors for each grant.

A summary of stock option transactions in each of the three years ended December 31, 2021, is as follows:

Weighted

Shares Number of Average

Available Options Exercise

For Grant Outstanding Price

As of December 31, 2021, there were 10,216,106 options outstanding with a weighted average exercise price of $4.96, a weighted average remaining term of 8.67 years and an aggregate intrinsic value of $18.7 million. Of these options, 9,577,757 were expected to vest, with a weighted average exercise price of $4.85, a weighted average remaining term of 8.62 years and an aggregate intrinsic value of $18.4 million. Of these, 3,743,237 were vested, with a weighted average exercise price of $2.71, a weighted average remaining term of 7.62 years and an aggregate intrinsic value of $14.2 million.

The aggregate intrinsic value represents the total pre-tax value (i.e., the difference between the Company’s stock price and the exercise price) of stock options outstanding as of December 31, 2021, based on the Company’s common stock closing price of $6.27, which would have been received by the option holders had all their in-the-money options been exercised as of that date.

124

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The Company received $1.7 million for the 1,070,921 options exercised during the year ended December 31, 2021, which had an intrinsic value of $6.2 million, and received $602,000 for the 414,676 options exercised during the year ended December 31, 2020, which had an intrinsic value of $2.2 million. There were no options exercised in the year ended December 31,2019.

On June 15, 2020, the Company awarded 900,000 performance-based options with an exercise price of $2.46 per share to its new Chief Executive Officer. Vesting of these options would occur if the Company achieved a specified closing price during any ten consecutive trading days by November 30, 2020, with one-third based on a closing price of $5.00, one-third based on a closing price of $7.50 and one-third based on a closing price of $10.00, subject to continuing employment. Utilizing a Monte Carlo Simulation and assumptions of the fair value of Common Stock of $2.46, estimated volatility of 105%, a risk-free interest rate of 0.35%, a zero dividend rate and an expected term of 5.23 years, the Company determined the weighted average fair value of these options on the issuance date to be $0.31 per share, or $279,000, which was initially being expensed over the estimated vesting term, assuming vesting occurs by November 30, 2020, for each tranche. The tranches based on closing prices of $5.00, $7.50 and $10.00 vested on July 9, 2020, July 20, 2020 and July 24, 2020, respectively, so the unamortized balance as of June 30, 2020, was expensed in the three months ended September 30, 2020.

Excluding these performance-based options, the weighted average grant date fair value of options awarded in the years ended December 31, 2021, 2020 and 2019, was $6.49, $2.49 and $0.48, respectively. Fair values were estimated using the following assumptions:

Year Ended December 31,

Dividend yield — % — % — %

The Company measures the fair value of all stock-based awards on the grant date and records the fair value of these awards, net of estimated forfeitures, to compensation expense over the service period. Total stock-based compensation recognized for options was as follows (in thousands):

Year Ended December 31,

Effective June 16, 2021, the Company modified the terms of outstanding options awarded to its former Chairman of the Board, Wouter W. Latour, such that the vesting of 100,000 options that would otherwise have been forfeited was accelerated. Further, the post-termination exercise period for all his vested and outstanding options as of the termination date was extended from three months to the earlier of the expiry of their ten-year term and June 16, 2023. The Company recorded a charge for the incremental increase in fair value of $1.3 million, which was included in stock-based compensation expense within general and administrative expenses in the three months ended June 30, 2021.

As of December 31, 2021, the unrecognized stock-based compensation cost related to outstanding stock options that are expected to vest was $28.6 million, which the Company expects to recognize over an estimated weighted average period of 3.07 years.

125

Table of Contents

VAXART, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements