alt-10q_20190930.htm

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of November 12, 2019 there were 15,338,072 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

	September 30, 2019			December 31, 2018
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,972,482		$	33,718,713
Restricted cash		34,174			634,416
Total cash, cash equivalents and restricted cash		11,006,656			34,353,129
Short-term investments		28,226,026			—
Accounts receivable		1,012,491			3,461,938
Tax refund receivable		968,597			1,008,973
Prepaid expenses and other current assets		410,148			548,094
Total current assets		41,623,918			39,372,134
Property and equipment, net		1,162,715			1,342,802
Right of use asset		717,303			—
Intangible assets, net		12,741,656			13,851,924
Other assets		142,331			183,682
Total assets	$	56,387,923		$	54,750,542
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	49,884		$	372,860
Accrued expenses and other current liabilities		2,311,824			4,082,949
Notes payable		105,062			71,596
Total current liabilities		2,466,770			4,527,405
Deferred income taxes		—			58,500
Contingent consideration		2,750,000			—
Other long-term liabilities		1,787,203			1,852,071
Total liabilities		7,003,973			6,437,976
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.0001 par value; 200,000,000 shares authorized; 15,338,356 and 9,078,735 shares issued; 15,338,072 and 9,078,238 shares outstanding at September 30, 2019 and December 31, 2018, respectively		1,502			876
Additional paid-in capital		187,683,155			170,207,844
Accumulated deficit		(133,279,497	)		(116,855,991	)
Accumulated other comprehensive loss		(5,021,210	)		(5,040,163	)
Total stockholders’ equity		49,383,950			48,312,566
Total liabilities and stockholders’ equity	$	56,387,923		$	54,750,542

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018

Revenue	$	643,978		$	2,634,393		$	5,225,600		$	7,742,514
Operating expenses:
Research and development		8,729,697			4,728,726			14,892,464			15,394,616
General and administrative		2,187,661			1,963,733			6,485,960			7,345,651
Impairment charges		1,000,000			—			1,000,000			490,676
Total operating expenses		11,917,358			6,692,459			22,378,424			23,230,943
Loss from operations		(11,273,380	)		(4,058,066	)		(17,152,824	)		(15,488,429	)
Other income (expense):
Changes in fair value of warrant liability		76,000			806,224			30,000			(2,874,484	)
Changes in fair value of embedded derivatives		—			185,768			—			183,638
Interest expense		(756	)		(166,946	)		(2,244	)		(169,737	)
Interest income		224,058			21,100			649,268			78,306
Other income (expense)		(23,734	)		31,378			(6,206	)		289,053
Total other income (expense)		275,568			877,524			670,818			(2,493,224	)
Net loss before income tax benefit		(10,997,812	)		(3,180,542	)		(16,482,006	)		(17,981,653	)
Income tax benefit		58,500			829,393			58,500			3,318,124
Net loss		(10,939,312	)		(2,351,149	)		(16,423,506	)		(14,663,529	)
Other comprehensive income (loss) – foreign currency translation adjustments		—			—			—			(463,177	)
Other comprehensive income (loss) – unrealized gains on investments		18,953			—			18,953			—
Comprehensive loss	$	(10,920,359	)	$	(2,351,149	)	$	(16,404,553	)	$	(15,126,706	)
Net loss	$	(10,939,312	)	$	(2,351,149	)	$	(16,423,506	)	$	(14,663,529	)
Preferred stock accretion and other deemed dividends		—			64,139			(452,925	)		(2,527,275	)
Net loss attributed to common stockholders	$	(10,939,312	)	$	(2,287,010	)	$	(16,876,431	)	$	(17,190,804	)
Weighted-average common shares outstanding, basic and diluted		14,768,931			1,321,289			12,481,494			983,651
Net loss per share attributed to common stockholders, basic and diluted	$	(0.74	)	$	(1.73	)	$	(1.35	)	$	(17.48	)

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

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Equity
Balance, January 1, 2019		9,078,238	$	876	$	170,207,844	$	(116,855,991	)	$	(5,040,163	)	$	48,312,566
Stock based compensation and vesting of restricted stock		71				407,742								407,742
Issuance of common stock in registered direct offering, net of offering costs		4,361,370		436		12,668,348								12,668,784
Issuance of common stock upon exercise of warrants		11,000		1		30,323								30,324
Net loss								(2,097,306	)					(2,097,306	)
Balance, March 31, 2019		13,450,679		1,313		183,314,257		(118,953,297	)		(5,040,163	)		59,322,110
Stock based compensation and vesting of restricted stock		71				289,800								289,800
Net loss								(3,386,888	)					(3,386,888	)
Balance, June 30, 2019		13,450,750		1,313		183,604,057		(122,340,185	)		(5,040,163	)		56,225,022
Stock based compensation and vesting of restricted stock		72				287,802								287,802
Issuance of common stock for acquired in-process research and development		1,887,250		189		3,791,296								3,791,485
Unrealized gain on short-term investments											18,953			18,953
Net loss								(10,939,312	)					(10,939,312	)
Balance, September 30, 2019		15,338,072	$	1,502	$	187,683,155	$	(133,279,497	)	$	(5,021,210	)	$	49,383,950

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

	Series B Redeemable Convertible Preferred Stock						Common Stock				Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares			Amount			Shares		Amount		Capital			Deficit			Loss			Equity
Balance, January 1, 2018		12,177		$	9,281,767			608,499	$	61	$	121,657,587		$	(77,684,839	)	$	(4,576,986	)	$	39,395,823
Stock based compensation and vesting of restricted stock								71		—		356,737									356,737
Exercises of stock options								7,703		1		18,487									18,488
Conversion of Series B redeemable convertible preferred stock into common stock		(5,219	)		(5,218,572	)		130,447		13		5,218,559									5,218,572
Accretion of Series B Redeemable convertible preferred stock					1,891,321							(1,891,321	)								(1,891,321	)
Foreign currency translation adjustments																		615,471			615,471
Net loss															(3,173,538	)					(3,173,538	)
Balance, March 31, 2018		6,958			5,954,516			746,720		75		125,360,049			(80,858,377	)		(3,961,515	)		40,540,232
Stock based compensation and vesting of restricted stock								71		—		252,156									252,156
Exercises of stock options								1,837		—		4,410									4,410
Accretion of Series B redeemable convertible preferred stock					956,150							(956,150	)								(956,150	)
Conversion of Series B redeemable convertible preferred stock into common stock		(4,036	)		(4,036,539	)		334,180		33		4,036,506									4,036,539
Redemption of Series B redeemable convertible preferred stock for cash and release of embedded derivative		(2,364	)		(2,364,044	)						23,292									23,292
Issuance of common stock for the exchange of warrants								167,700		17		2,126,983									2,127,000
Foreign currency translation adjustments																		(1,078,648	)		(1,078,648	)
Net loss															(9,138,842	)					(9,138,842	)
Balance, June 30, 2018		558			510,083			1,250,508		125		130,847,246			(89,997,219	)		(5,040,163	)		35,809,989
Stock based compensation and vesting of restricted stock								71		—		95,649									95,649
Accretion of Series B redeemble convertible preferred stock					47,414							(47,414	)								(47,414	)
Conversion of Series B redeemable convertible preferred stock into common stock		(558	)		(557,497	)		37,451		4		535,253									535,257
Issuance of common stock for the exchange of warrants								150,968		15		1,306,026									1,306,041
Issuance of common stock and units in registered direct offerings, net of offering costs								286,633		29		4,334,786									4,334,815
Net loss															(2,351,149	)					(2,351,149	)
Balance, September 30, 2018		—		$	—			1,725,630	$	173	$	137,071,546		$	(92,348,368	)	$	(5,040,163	)	$	39,683,188

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

	For the Nine Months Ended September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(16,423,506	)	$	(14,663,529	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash consideration for acquired in-process research and development		6,541,485			—
Impairment charge		1,000,000			490,676
Stock-based compensation		985,260			704,425
Depreciation		181,314			146,299
Amortization		135,664			45,426
Unrealized gains on foreign currency exchange		(3,310	)		31,357
Debt discount and deferred financing cost accretion		—			120,024
Gain on disposal of property and equipment		—			(3,806	)
Changes in fair value of warrant liability		(30,000	)		2,874,484
Changes in fair value of embedded derivatives		—			(183,638	)
Changes in operating assets and liabilities:
Accounts receivable		2,449,447			1,258,837
Prepaid expenses and other current assets		179,298			589,773
Accounts payable		(322,976	)		20,940
Accrued expenses and other current liabilities		(2,125,851	)		1,695,296
Deferred revenue		(14,833	)		(14,833	)
Deferred rent		—			861,741
Lease obligation		(133,813	)		—
Tax refund receivable		40,376			4,839,775
Deferred taxes		(58,500	)		(3,046,768	)
Net cash used in operating activities		(7,599,945	)		(4,233,521	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for short-term investments		(28,207,073	)		—
Purchase of property and equipment		(1,227	)		(968,354	)
Proceeds from sale of property and equipment		—			14,492
Additions to intangible assets		(25,396	)		(39,145	)
Net cash used in investing activities		(28,233,696	)		(993,007	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of preferred stock		—			(2,386,284	)
Cash paid in conjunction with warrant exchange		(25,000	)		(1,100,000	)
Proceeds from conditional economic incentive		—			100,000
Proceeds from issuance of common units, net of issuance costs		12,668,784			4,334,816
Payments of notes payable		(186,940	)		—
Proceeds from exercises of warrants and stock options		30,324			22,898
Net cash provided by financing activities		12,487,168			971,430
EFFECT OF EXCHANGE RATES ON CASH		—			(50,365	)
Net decrease in cash and cash equivalents and restricted cash		(23,346,473	)		(4,305,463	)
Cash, cash equivalents and restricted cash, beginning of period		34,353,129			12,303,639
Cash, cash equivalents and restricted cash, end of period	$	11,006,656		$	7,998,176
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	—		$	49,712
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Conversion of Series B redeemable convertible preferred stock into common stock	$	—		$	9,790,368
Common stock issued for acquired in-process research and development	$	3,791,485		$	—
Accretion of Series B redeemable convertible preferred stock	$	—		$	2,894,885
Notes payable issued in conjunction with the exchange of warrants	$	—		$	1,500,000
Settlement of warrant liability for common stock	$	—		$	3,345,030

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

Altimmune, Inc., headquartered in Gaithersburg, Maryland, together with its subsidiaries (collectively, the “Company” or “Altimmune”) is a clinical stage biopharmaceutical company incorporated under the laws of the State of Delaware. The Company is focused on discovering and developing immunotherapies and vaccines to address significant unmet medical needs. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of common and preferred stock, long-term debt, and proceeds from research grants and government contracts. The Company has not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales.

The accompanying unaudited consolidated financial statements are prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2018 included in the annual report on Form 10-K which was filed with the SEC on April 1, 2019. In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on the same basis as the audited consolidated financial statements, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2019 or any future years or periods.

The unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary should we be unable to continue as a going concern.

During the nine months ended September 30, 2019, there have been no significant changes to the Company’s summary of significant accounting policies contained in the Company’s Annual report on Form 10-K for the year ended December 31, 2018 as filed with the SEC, except for contingent consideration, investments, and the recently adopted accounting standard for leases.

The Company’s short-term investments are comprised of debt securities that have original maturities less than or equal to one year and are classified as available-for-sale securities. Such securities are carried at estimated fair value, with any unrealized holding gains or losses reported as accumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. Realized gains and losses, and declines in value judged to be other-than-temporary, if any, are included in other income in the consolidated results of operations. The Company monitors its investment portfolio for impairment quarterly or more frequently if circumstances warrant. In determining whether a decline in the value of an investment is other-than-temporary, the Company evaluate currently available factors that may include, among others: (1) general market conditions; (2) the duration and extent to which fair value has been less than the carrying value; (3) the investment issuer's financial condition and business outlook; and (4) its assessment as to whether it is more likely than not that the Company will be required to sell a security prior to recovery of its amortized cost basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in fair value charged to earnings in that period, and a new cost basis for the security is established. Dividend and interest income are recognized in other income when earned. The cost of securities sold is calculated using the specific identification method. The Company places all investments with government agencies, or corporate institutions whose debt is rated as investment grade. Investments are classified as either current or non-current assets on our consolidated balance sheets based on their contractual maturity dates.

The Company determines if an arrangement is a lease at inception. Operating leases are recorded as a current and long-term lease obligation, with a corresponding right of use lease assets.

The lease obligations represent the Company’s obligation to make lease payments arising from the lease. The right of use lease assets represent the Company’s right to use an underlying asset for the lease term. The lease obligations and the operating right of use lease assets are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the

present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.

The Company records contingent consideration associated with development and regulatory milestones that meets the definition of a liability under ASC 480 at fair value. The fair value model used to calculate this obligation is based on the income approach (a discounted cash flow model) or a Monte Carlo simulation, if more appropriate, that has been risk adjusted based on the probability of achievement of the milestones. The inputs the Company uses for determining the fair value of the contingent consideration associated with development and regulatory milestones are Level 3 fair value measurements. The Company re-evaluates the fair value on a quarterly basis. Changes in the fair value can result from adjustments to the discount rates and updates in the assumed timing of milestone achievement. Any future increase in the fair value of the contingent consideration associated with development and regulatory milestones are based on an increased likelihood that the underlying milestones will be achieved.

The associated payment or payments which will become due and payable for development and regulatory milestones will result in a charge to research and development expense in the period in which the increase is determined. Similarly, any future decrease in the fair value for development and regulatory milestones will result in a reduction in research and development expense.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 requires a lessee to separate the lease components from the non-lease components in a contract and recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. The standard requires a modified retrospective approach or an optional transition to apply the new guidance in the year of transition rather than at the beginning of the earliest period presented. The Company adopted ASU 2016-02 in the first quarter of 2019 under the optional transition method. The Company’s current operating leases will be accounted for as operating lease liabilities and right of use assets upon adoption. The Company has elected the package of practical expedients permitted. Accordingly, the Company accounted for its existing operating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease, (b) whether classification of the operating leases would be different in accordance, or (c) whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs at lease commencement. In addition, the Company does not allocate the consideration between lease and non-lease components. On January 1, 2019, the Company recorded a lease liability and a corresponding right of use asset. The adjustment resulted in an increase of $756,347 to total assets and total liabilities on the January 1, 2019 consolidated balance sheet. The adoption will not have a material impact on the consolidated statement of operations or consolidated statement of cash flows.

In June 2018, FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718)—Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted ASU 2018-07 in the first quarter of 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, was issued to modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted. The Company is still completing its assessment of the impacts and anticipated adoption date of this guidance.

The Company entered into a definitive agreement to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”) on July 8, 2019. Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis.

The transaction closed on July 12, 2019. The Company issued 1,887,250 unregistered shares of its common stock (the “shares”) as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5,000,000 less working capital and transaction expense adjustment amounts as defined in the agreement (the “closing consideration”). The number of shares issued as payment of the Closing Consideration was determined based on the average of the closing prices of the Company’s common stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to and including July 8, 2019, the date on which the parties entered into the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). The Spitfire Equityholders

agreed to a lock-up on the upfront consideration pursuant to which 33.3% of the shares will be released at 6 months; 33.3% will be released at 12 months; and 33.3% will be released at 18 months.

The Merger Agreement also includes future contingent payments up to $88,000,000 in cash and shares of the Company’s common stock as follows (each, a “Milestone Event”):

The Company determined that the acquisition of Spitfire should be accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset is not considered a business. The Company expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses. During the three and nine months ended September 30, 2019, the Company recorded an in-process research and development expense of $4,337,574 for the up-front consideration, which included the fair value of the common stock transferred and net liabilities assumed. The fair value of the common shares transferred was based on the Company’s stock price of $2.45 on July 12, 2019, offset by an estimated discount of $832,277 for lack of marketability.

The future contingent payments related to the Regulatory Milestones are stock-based payments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity. The stock-based payments are subject to a lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. The Company has estimated contingent consideration of $2,750,000 based upon a Monte Carlo simulation that has been risk adjusted based on the probability of achieving the milestone and a discount for lack of marketability, which was expensed to in-process research and development expenses during the three and nine months ended September 30. 2019.

The future contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, the Company will recognize the Sales Milestones when the contingency is resolved and the amount is paid or payable.

Finally, transaction costs associated with the Spitfire acquisition of $61,673 and $680,090 are recorded within research and development expense during the three and nine months ended September 30, 2019, respectively.

Because the Company has reported a net loss attributable to common stockholders for all periods presented, basic and diluted net loss per share attributable to common stockholders are the same for all periods presented. For periods presented, all preferred stock, unvested restricted stock, common stock warrants, and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such securities would have an antidilutive impact.

Potential common shares issuable upon conversion, vesting or exercise of preferred stock, unvested restricted stock, common stock warrants, and stock options that are excluded from the computation of diluted weighted-average shares outstanding are as follows:

In May 2017, the Company closed on a business combination and recorded an initial purchase price allocation including goodwill. During the nine months ended September 30, 2018 and prior to the end of the measurement period for accounting for the business combination, the Company recorded adjustments to the purchase price allocation resulting in a net decrease in tax refunds receivable, with a corresponding net increase in goodwill, of $490,676. As goodwill related to this transaction had previously been determined to be fully impaired, the Company recognized an

impairment charge of $490,676 as a result of these purchase price allocation adjustments during the nine months ended September 30, 2018. The purchase price allocation was considered final in May 2018, and no further adjustments were recorded.

Amortization expense of intangible assets subject to amortization was $28,084 and $15,972 for the three months ended September 30, 2019 and 2018, and $135,664 and $45,426 for the nine months ended September 30, 2019 and 2018, respectively. Amortization expense was classified as research and development expenses in the accompanying unaudited consolidated statements of operations and comprehensive loss.

The development activities under the SparVax-L NIAID contract were completed during the third quarter of 2019, with no future funding identified. As a result of the contract completion and the US government’s funding prioritization of only single dose anthrax vaccine candidates, the Company abandoned the project and concluded that the full remaining net book value of the SparVax-L IPR&D asset was impaired during the three months ended September 30, 2019. An impairment charge of $1,000,000 was expensed for the three and nine months ended September 30, 2019.

The Company’s current portion of outstanding notes payable are summarized as follows:

The Company’s long-term portion of outstanding notes payable as well as other long-term liabilities are summarized as follows:

On July 27, 2018, the Company renewed its existing line of credit agreement for a six-month term with an increase to the borrowing capacity from $250,000 to $1,750,000, subject to a minimum liquidity requirement equal to the outstanding balance of the line. The line of credit was not renewed and expired in January 2019. There was no balance on this credit facility as of December 31, 2018 or for the period within 2019 prior to its expiration.

Altimmune France has two non-interest-bearing research and development funding arrangements with BPI France that were entered into in December 2013 to provide Altimmune France up to €750,000 in research funding in the first arrangement and up to €250,000 in the second arrangement. Altimmune France was permitted to draw 50% of the funds upon the signing of the arrangements, an additional 30% contingent upon a financial audit and technical progress report, and the remaining amounts at the completion of the research and development project being funded by the arrangements. In October 2016, the Company and BPI France agreed to extend the term on the arrangement by two years. The total amount advanced under the arrangements was €500,000. In April 2019, the Company was notified that €102,951 exceeded the allowable funding in accordance with the arrangement and made payment of this amount on June 5, 2019. In September 2019, the Company was notified that €238,229 ($265,540) was converted into a grant and recognized as grant revenue for the three and nine months ended September 30, 2019. In addition to the €102,951 amount paid in excess of the allowable funding, the Company paid €62,500 (total repayments of $186,940) during the nine months ended September 30, 2019. In October 2019, the Company paid the remaining balance on the BPI France notes. The BPI France notes are recorded at their repayment value which approximates fair value.

On July 12, 2019, as discussed in Note 3, the Company issued 1,887,250 unregistered shares of its common stock as upfront consideration to certain former Spitfire Equityholders representing the closing consideration.

On March 12, 2019, the Company issued a combined total of 1,500,000 common units and 2,861,370 pre-funded units to two institutional investors in a registered direct offering (the “Registered Direct Offering”). Each common unit in the Registered Direct Offering was sold at a price

of $3.21 and consisted of one share of common stock and 0.70 of a warrant to purchase one share of common stock at an exercise price of $3.21. Each warrant sold in the Registered Direct Offering was exercisable immediately and expired five years from the date of issuance. Each pre-funded unit in the Registered Direct Offering was sold at a public offering price of $3.20 and consisted of a pre-funded warrant to purchase one share of common stock at an exercise price of $0.01 per share and 0.70 of a warrant to purchase one share of common stock at an exercise price of $3.21. The pre-funded warrants were immediately exercisable and were able to be exercised at any time until all of the pre-funded warrants were exercised in full. All of the pre-funded warrants were exercised prior to March 31, 2019. The net proceeds of the Registered Direct Offering were approximately $12,668,784, after deducting the underwriting discount and offering expenses payable by the Company.

The warrants issued in the Registered Direct Offering were concluded to be equity classified freestanding financial instruments. The Registered Direct Offering triggered a down round adjustment to the exercise price of warrants previously issued in an October 2018 public offering from $4.1798 to $2.7568. The Company treated the value of the effect of the reduction in exercise price as a deemed dividend of $452,925 during the nine months ended September 30, 2019, which reduced income available to common shareholders.

A summary of warrant activity during the nine months ended September 30, 2019 is as follows:

For warrants classified as a liability, the following is a summary of the periodic changes in their fair value during the nine months ended September 30, 2019:

The Company’s stock option awards generally vest over four years and typically have a contractual life of ten years. At September 30, 2019, there was $1,536,208 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 3.41 years. During the nine months ended September 30, 2019, the Company granted 725,000 stock options with a weighted average exercise price of $2.67 and per share weighted average grant date fair value of $2.02.

Information related to stock options outstanding at September 30, 2019 is as follows:

At September 30, 2019, the Company had unvested restricted stock of 323,191 shares with total unrecognized compensation expense of $917,158, which the Company expects to recognize over a weighted average period of approximately 3.17 years. During the nine months ended September 30, 2019, the Company released 214 shares of common stock from restriction as a result of the vesting of restricted stock.

On March 29, 2019, the board of directors adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). A total of 403,500 shares of the Company’s common stock have been reserved for issuance under the 2019 ESPP. Subject to any plan limitations, the 2019 ESPP allows eligible employees to contribute through payroll deductions up to 10% of their earnings for the purchase of the Company’s common stock at a discounted

price per share. The offering periods begin in February and August of each year, with the initial offering period starting on August 1, 2019. The common shares issuable under the 2019 ESPP were registered pursuant to a registration statement on Form S-8 on April 4, 2019

Unless otherwise determined by the administrator, the Company’s common stock will be purchased for the accounts of employees participating in the 2019 ESPP at a price per share that is the lesser of 85% of the fair market value of the Company’s common stock on the first trading day of the offering period or 85% of the fair market value of the Company’s common stock on the last trading day of the offering period. The ESPP estimated shares to be purchased fair value is included in the stock-based compensation expense.

Employees have the ability to purchase shares of the Company’s common stock at the lower of the first or last trading day of the offering period, which represents an option and, therefore, the ESPP is a compensatory plan under ASC 718-50, Employee Stock Purchase Plans. Accordingly, stock-based compensation expense is determined based on the option’s grant-date fair value and is recognized over the requisite service period of the option. The Company used the Black-Scholes valuation model and recognized stock-based compensation expense of $8,596 for the three and nine months ended September 30, 2019, respectively.

Stock-based compensation expense is classified in the unaudited consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2019 and 2018 as follows:

The Company rents office and laboratory space in the United States. The Company also leases office equipment under a non-cancellable equipment lease through December 2022. Rent expense during the three and nine months ended September 30, 2019 under all of the Company’s operating leases was $84,745 and $258,824, respectively, which includes short-term leases and variable lease costs not included in the lease obligation.

The office space lease provides for increases in future minimum annual rental payments as defined in the lease agreements. The Company has determined the lease renewal option is not reasonably certain.

The operating cash outflows related to operating lease obligation and the operating cash inflows related to non cash lease expense for the nine months ended September 30, 2019 were $172,857 and $39,044, respectively.

Supplemental other information related to the operating leases balance sheet information is as follows:

As disclosed in Note 3, the Company is obligated to make payments of up to $80.0 million upon the achievement of specified worldwide net sales of all products developed using the technology acquired from Spitfire Pharma Inc. within ten (10) years following the approval of a new drug application filed with the FDA.

The Company is a party in various other contractual disputes, litigation, and potential claims arising in the ordinary course of business. The Company does not believe that the resolution of these matters will have a material adverse effect on its financial position or results of operations.

Cash equivalents and short-term investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. Short-term investments had quoted prices at September 30, 2019 as shown below:

The fair value of contingent payments classified as a liability was estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The assumptions used to estimate the fair value of contingent payments that were classified as a liability at September 30, 2019 were as follows:

The Company’s warrant liability is valued using the Monte Carlo simulation valuation model. If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs.

There were no transfers into and out of any of the levels of the fair value hierarchy during 2019 or 2018.

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2019 consisted of the following:

The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2018 consisted of the following:

Assets recorded at fair value on a nonrecurring basis, such as property and equipment, intangible assets, and goodwill are recognized at fair value when they are impaired. During the three and nine months ended September 30, 2019, the Company recognized an intangible asset impairment (Note 5) measured at fair value on a nonrecurring basis.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this quarterly report on Form 10-Q and our consolidated financial statements and related notes for the year ended December 31, 2018 included in our annual report on Form 10-K, which was filed with the Securities and Exchange Commission on April 1, 2019.

This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “may,” “will,” “should,” “could,” “target,” “strategy,” “intend,” “project,” “guidance,” “likely,” “usually,” “potential,” or the negative of these words or variations of such words, similar expressions, or comparable terminology are intended to identify such forward-looking statements, although not all forward-looking statements contain these identifying words. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this quarterly report on Form 10-Q, particularly in the section entitled “Risk Factors” in Part II, Item 1A, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements, other than as required by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Altimmune, Inc. is a clinical stage biopharmaceutical company focused on developing liver disease and immune modulating therapies. Our diverse pipeline includes next generation peptide therapeutics for NASH (ALT-801) and chronic Hepatitis B (HepTcell^TM), conjugated immunostimulants for the treatment of cancer (ALT-702) and intranasal vaccines (NasoVAX^TM and NasoShield^TM).

We entered into a definitive agreement to acquire all of the equity interests of Spitfire Pharma, Inc. (“Spitfire”) on July 8, 2019. Spitfire was a privately held, preclinical pharmaceutical company developing a novel dual GLP-1/glucagon receptor agonist for the treatment of non-alcoholic steatohepatitis.

The transaction closed on July 12, 2019. We issued 1,887,250 unregistered shares of our common stock (the “shares”) as upfront consideration to certain former securityholders of Spitfire (collectively, the “Spitfire Equityholders”), representing an amount equal to $5.0 million less working capital and transaction expense adjustment amounts as defined in the agreement (the “closing consideration”). The number of shares issued as payment of the closing consideration was determined based on the average of the closing prices of our common stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to and including July 8, 2019, the date on which the parties entered into the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). The Spitfire Equityholders agreed to a lock-up on the upfront consideration pursuant to which 33.3% of the shares will be released at 6 months; 33.3% will be released at 12 months; and 33.3% will be released at 18 months.

The Merger Agreement also includes future contingent payments up to $88.0 million in cash and shares of our common stock as follows (each, a “Milestone Event”):

We determined that the acquisition of Spitfire should be accounted for as an asset acquisition instead of a business combination because substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, and therefore, the asset is not considered a business. We expensed the acquired intellectual property as of the acquisition date as in-process research and development with no alternative future uses. During the three and nine months ended September 30, 2019, we recorded an in-process research and development expense of $4.3 million for the up-front consideration, which included the fair value of the stock transferred

and net liabilities assumed. The fair value of the common shares transferred was based on our stock price of $2.45 as of July 12, 2019, offset by an estimated discount of $0.8 million for lack of marketability discount. The net liabilities assumed of $0.5 million approximated fair value.

The future contingent payments related to the Regulatory Milestones are stock-based payments accounted for under FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities From Equity. The stock-based payments are subject to a lock-up whereby 50% of the shares are released at 3 months and 50% are released at 6 months. We estimated contingent consideration of $2.8 million based upon a Monte Carlo simulation that has been risk adjusted based on the probability of achieving the milestone and included a discount for lack of marketability, which was expensed to in-process research and development expenses during the three and nine months ended September 30. 2019.

The future contingent payments related to the Sales Milestones are predominately cash-based payments accounted for under FASB Accounting Standards Codification Topic 450, Contingencies. Accordingly, we will recognize the Sales Milestones when the contingency is resolved and the amount is paid or payable.

Finally, transaction costs associated with the Spitfire acquisition of $0.1 million and $0.7 million are recorded within research and development expense during the three and nine months ended September 30, 2019, respectively.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. and the rules and regulations of the SEC for interim financial reporting. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future given available information.

There have been no changes in our critical accounting policies and significant judgment and estimates as disclosed in our annual report on Form 10-K for the year ended December 31, 2018 except for recently adopted accounting standards (See Note 2 to the consolidated financial statements appearing in Item 1 of this report). For more information regarding our critical accounting policies, we encourage you to read the discussion contained in Item 7 under the heading “Critical Accounting Policies and Significant Judgments and Estimates” and Note 2 “Summary of Significant Accounting Policies” included in the notes to the consolidated financial statements contained in our annual report on Form 10-K for the year ended December 31, 2018.

	For the Three Months Ended September 30,
	2019			2018			Increase (Decrease)

Revenue	$	643,978		$	2,634,393		$	(1,990,415	)	(75.6	)	%
Operating expenses
Research and development		8,729,697			4,728,726			4,000,971		84.6
General and administrative		2,187,661			1,963,733			223,928		11.4
Impairment charges		1,000,000			-			1,000,000		—
Total operating expenses		11,917,358			6,692,459			5,224,899		78.1
Loss from operations		(11,273,380	)		(4,058,066	)		7,215,314		177.8
Other income (expense):
Changes in fair value of warrant liability		76,000			806,224			(730,224	)	(90.6	)
Changes in fair value of embedded derivative		—			185,768			(185,768	)	—
Interest expense		(756	)		(166,946	)		(166,190	)	(99.5	)
Interest income		224,058			21,100			202,958		961.9
Other income (expenses)		(23,734	)		31,378			(55,112	)	(175.6	)
Total other income (expense)		275,568			877,524			(601,956	)	(68.6	)
Net loss before income tax benefit		(10,997,812	)		(3,180,542	)		7,817,270		245.8
Income tax benefit		58,500			829,393			(770,893	)	(92.9	)
Net loss	$	(10,939,312	)	$	(2,351,149	)	$	8,588,163		365.3		%

	For the Nine Months Ended September 30,
	2019			2018			Increase (Decrease)
Revenue	$	5,225,600		$	7,742,514		$	(2,516,914	)	(32.5	)	%
Operating expenses
Research and development		14,892,464			15,394,616			(502,152	)	(3.3	)
General and administrative		6,485,960			7,345,651			(859,691	)	(11.7	)
Impairment charges		1,000,000			490,676			509,324		103.8
Total operating expenses		22,378,424			23,230,943			(852,519	)	(3.7	)
Loss from operations		(17,152,824	)		(15,488,429	)		1,664,395		10.7
Other income (expense):
Changes in fair value of warrant liability, including loss on exchange		30,000			(2,874,484	)		(2,904,484	)	(101.0	)
Changes in fair value of embedded derivative		—			183,638			(183,638	)	—
Interest expense		(2,244	)		(169,737	)		(167,493	)	(98.7	)
Interest income		649,268			78,306			570,962		729.1
Other income (expenses)		(6,206	)		289,053			(295,259	)	(102.1	)
Total other income (expense)		670,818			(2,493,224	)		(3,164,042	)	(126.9	)
Net loss before income tax benefit		(16,482,006	)		(17,981,653	)		(1,499,647	)	(8.3	)
Income tax benefit		58,500			3,318,124			(3,259,624	)	(98.2	)
Net loss	$	(16,423,506	)	$	(14,663,529	)	$	(1,759,977	)	12.0		%

Revenue consists primarily of research grants from Biomedical Advanced Research and Development Authority, or BARDA, and the National Institute of Allergy and Infectious Diseases, or NIAID, in the United States for our anthrax vaccine product candidates. These grants consist of cost reimbursement contracts, with a fixed fee based on either costs or milestones.

Revenue decreased by $1.99 million, or 75.6%, for the three months ended September 30, 2019 as compared to the same period in 2018. The decrease was primarily the result of:

Revenue decreased by $2.52 million, or 32.5%, for the nine months ended September 30, 2019, as compared to the same period in 2018. The decrease was primarily the result of:

Research and development operating expense increased by $4.00 million, or 84.6%, for the three months ended September 30, 2019 as compared to the same period in 2018. The increase was primarily the result of:

Research and development operating expense decreased by $0.50 million, or 3.3%, for the nine months ended September 30, 2019, as compared to the same period in 2018. The decrease was primarily the result of:

General and administrative expense increased by $0.2 million, or 11.4%, for the three months ended September 30, 2019 as compared to the same period in 2018 due primarily to increased insurance and stock compensation costs. General and administrative expense decreased by $0.9 million, or 11.7% for the nine months ended September 30, 2019, as compared to the same periods in 2018 primarily due to decreases in professional service costs, including legal costs.

Impairment charges of $1.0 million reported during the three and nine months ended September 30, 2019 resulted from the completion of SparVax-L NIAID contract with no future funding identified. As a result of the contract completion and the US government’s funding prioritization of only single dose anthrax vaccine candidates, we abandoned the project and impaired the remaining net book value of the SparVax-L IPR&D asset.

Goodwill impairment charges reported during the nine months ended September 30, 2018 represented an adjustment recorded during the measurement period to reduce the tax refund receivable acquired in connection with a 2017 business combination. We recorded adjustments to the purchase price allocation resulting in a net decrease in tax refunds receivable, with a corresponding net increase in goodwill, of $0.49 million. As goodwill related to this transaction had previously been determined to be fully impaired, we recognized an impairment charge of $0.49 million. The purchase price allocation was considered final in May 2018, and no further adjustments were recorded.

Other income (expense) decreased by $0.6 million and $3.2 million during the three and nine months ended September 30, 2019, respectively, as compared to the same periods in 2018. The decreases are primarily due to changes in the fair value of warrant liability and embedded derivatives as these instruments were settled primarily in 2018 offset by an increase of interest income due to higher cash and investment balances versus the prior year.

We recorded a $0.06 million discrete tax benefit for the three and nine months ended September 30, 2019, as compared to an income tax benefit of $0.8 million and $3.3 million for the same respective periods in 2018. We have a valuation allowance against our deferred tax assets. During the three and nine months ended September 30, 2019, our tax loss was applied to the valuation allowance. The $0.06 million discrete tax benefit was a result of the release of deferred tax liabilities associated with the SparVax-L impairment of the remaining net book value of the IPR&D asset. During the nine months ended September 30, 2018, our income tax benefit included $2.1 million for our projected 2018 unlimited lived Federal net operating loss determined to be realizable, $1.0 million due to Maryland state net operating losses, and discrete tax benefits of $0.2 million related to a change in estimate.

Our primary sources of cash during the nine months ended September 30, 2019 was the cash on-hand as of January 1, 2019 and the receipt of $12.7 million in proceeds from the Registered Direct Offering (as discussed below). Our cash, cash equivalents, and short-term investments were $39.2 million at September 30, 2019. We believe, based on the operating cash requirements and capital expenditures expected for 2019, our cash on hand at September 30, 2019, short-term investments, and revenue from our government sponsored contracts, are sufficient to fund operations for at least a twelve-month period from the issuance date of our September 30, 2019 financial statements.

We have not generated any revenues from the sale of any products to date, and there is no assurance of any future revenues from product sales. Our sources of revenue have consisted of revenues under our contract with BARDA and NIAID for the development of NasoShield and SparVax-L, respectively, and to a lesser degree from other licensing arrangements. We have incurred significant losses since we commenced operations. As of September 30, 2019, we had accumulated losses of $133.3 million since our inception. In addition, we have not generated positive cash flows from operations. We have had to rely on a variety of financing sources, including the issuance of debt and equity securities. As capital resources are consumed to fund our research and development activities, we may not have sufficient capital to fund our plan of operations.

In order to address our capital needs, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.

In July 2016, we signed a five-year contract with BARDA. The contract, as amended, has a total value of up to $133.7 million and is used to fund clinical development of NasoShield. Under the contract, BARDA pays us a fixed fee and reimburses certain costs for the research and development of an Ad5-vectored, protective antigen-based intranasal anthrax vaccine through cGMP manufacture and conduct of a Phase 1 clinical trial dose ranging assessment of safety and immunogenicity. The contract consists of an initial base performance period providing approximately $27.8 million in funding for the period July 2016 through December 2020, inclusive of a $3.7 million award during the third quarter of 2019 for continued Phase 1 clinical development. BARDA has seven options to extend the contract to fund certain continued development and manufacturing activities for the anthrax vaccine, including Phase 2 clinical trials. Each option, if exercised by BARDA, would provide additional funding ranging from approximately $1.1 million to $34.4 million for a three year period beginning January 2021. Through September 30, 2019, we have received an aggregate of approximately $21.3 million under the current BARDA contract.

We had a $15.3 million NIAID contract that was incrementally funded for the development of SparVax-L. Activities under this contract were completed during the quarter ended September 30, 2019 and no further funding is expected for this program. As a result of the contract completion and the US government’s funding prioritization of only single dose anthrax vaccine candidates, we abandoned the project and impaired the $1 million remaining net book value of the SparVax-L IPR&D asset.

The following table provides information regarding our cash flows for the three months ended September 30, 2019 and 2018:

Net cash used in operating activities was $7.6 million for the nine months ended September 30, 2019 compared to $4.2 million during the nine months ended September 30, 2018. Our sources of cash provided by operations during the three months ended September 30, 2019 were primarily cash receipts of revenue generated by our BARDA and NIAID contracts. The primary uses of cash from our operating activities include payments for labor and labor-related costs, professional fees, research and development costs associated with our clinical trials, and other general corporate expenditures. The increase in cash used in operations of $3.4 million year over year is due to a decrease in net loss as adjusted for noncash items of $2.8 million offset by changes in working capital accounts of $6.2 million.

Net cash used in investing activities was $28.2 million for the nine months ended September 30, 2019 compared to $1.0 million during the nine months ended September 30, 2018. The net cash used in investing activities during 2019 was primarily due to purchases of short-term investments. The net cash used in investing activities in 2018 was primarily due to purchases of property and equipment related to the buildout of the Company’s new office and laboratory facilities which was completed in 2018.

Net cash provided by financing activities during the nine months ended September 30, 2019 was $12.5 million compared to net cash used in financing activities of $1.0 million for the same period in 2018. The net cash provided by financing activities during the nine months ended September 30, 2019 was primarily the result of the receipt of $12.7 million in proceeds from the Registered Direct Offering (as discussed below). The net cash provided by financing activities during the nine months ended September 30, 2018 was primarily the result of a $2.4 million cash redemption by certain holders of our Series B Redeemable Preferred stock (the “Stockholders”) and a $1.1 million cash payment to extinguish warrants to purchase our common stock held by the Stockholders, being offset by the receipt of $4.3 million in proceeds from the sale of our common stock.

On March 12, 2019, we issued a combined total of 1,500,000 common units and 2,861,370 pre-funded units to certain institutional investors in a registered direct offering or the “Registered Direct Offering”. Each common unit in the Registered Direct Offering was sold at a price of $3.21 and consisted of one share of our common stock and 0.70 of a warrant to purchase one share of our common stock at an exercise price of $3.21. Each warrant sold in the Registered Direct Offering was exercisable immediately and expires five years from the date of issuance. Each pre-funded unit in the Registered Direct Offering was sold at a public offering price of $3.20 and consisted of a pre-funded warrant to purchase one share of our common stock at an exercise price of $0.01 per share and 0.70 of a warrant to purchase one share of our common stock

at an exercise price of $3.21. The pre-funded warrants were immediately exercisable and were able to be exercised at any time until all of the pre-funded warrants are exercised in full. All of the pre-funded warrants were exercised prior to March 31, 2019. The net proceeds of the Registered Direct Offering were approximately $12.7 million, after deducting the underwriting discount and offering expenses payable by us. The Registered Direct Offering triggered an adjustment to the exercise price of the warrants issued with the offering of common units and pre-funded units on October 2, 2018 from $4.1798 to $2.7568.

On July 15, 2019, we issued 1,887,250 unregistered shares of our common stock as upfront consideration to the Spitfire Equityholders, representing the closing consideration. The number of shares issued as payment of the closing consideration was determined based on the average of the closing prices of our common stock as reported on the Nasdaq Global Market for the twenty (20) consecutive trading days prior to and including July 8, 2019, the date on which the parties entered into the Merger Agreement. The price of the shares transferred on July 12, 2019 was $2.45.

We have financed our operations to date principally through proceeds from issuances of our preferred stock, common stock, and warrants. At September 30, 2019, we had $11.0 million of cash, cash equivalents and restricted cash and $28.2 million of short-term investments. Accordingly, management believes that the Company has sufficient capital to fund its plan of operations for at least a twelve-month period from the issuance date of our September 30, 2019 financial statements. However, in order to address our capital needs in the long-term, including our planned clinical trials, we must continue to actively pursue additional equity or debt financing, government funding, and monetization of our existing programs through partnership arrangements or sales to third parties.

As of September 30, 2019, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as “special purpose” entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (“the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2019 identified in connection with the evaluation thereof by our management, including the Chief Executive Officer and Chief Financial Officer, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, subsection “Risk Factors” in our 2018 Annual Report on Form 10-K filed with the SEC on April 1, 2019, as they could materially affect our business, financial condition or future results of operations. The risks described in our 2018 Annual Report on Form 10-K filed with the SEC on April 1, 2019 are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and future results of operations. The following information updates, and should be read in conjunction with, the risk factors previously disclosed in Item 1A, subsection “Risk Factors” to Part I of our 2018 Annual Report on Form 10-K filed with the SEC on April 1, 2019. Except as set forth below, there have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in our 2018 Annual Report on Form 10-K.

We recently completed the acquisition of Spitfire Pharma, Inc. and the failure to successfully integrate its operations could adversely affect our future results.

Our success will depend, in significant part, on our ability to realize the anticipated benefits from combining our operations with the operations of Spitfire Pharma, Inc. (“Spitfire”). The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in our failure to achieve some or all of the anticipated benefits of the merger. Potential difficulties that may be encountered in the integration process include the following:

If the acquired business is not successfully integrated into our company, our business, financial condition and results of operations could be materially adversely affected, as well as our professional reputation. Furthermore, if we are unable to successfully integrate the acquired business and operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. Successful integration of the acquired business will depend on our ability to manage these operations, to realize opportunities for revenue growth presented by our products and eliminate certain excess costs of the acquired business.

Please refer to Item 3.02 contained in our Current Report on Form 8-K filed on July 9, 2019 and our Current Report on Form 8-K filed on July 15, 2019 for the information required by Item 701 of Regulation S-K as to all equity securities that we issued during the period covered by this Quarterly Report on Form 10-Q that were not registered under the Securities Act.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

Delaware		20-2726770
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

910 Clopper Road Suite 201S, Gaithersburg, Maryland		20878
Address of Principal Executive Offices		Zip Code

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	ALT	The NASDAQ Global Market

		Page

PART I — FINANCIAL INFORMATION

	Item 1. Consolidated Financial Statements

	Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018	1
	Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 (unaudited)	2
	Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (unaudited)	3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	19

	Item 4. Controls and Procedures	19

PART II — OTHER INFORMATION		20

	Item 1. Legal Proceedings	20

	Item 1A. Risk Factors	20

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20

	Item 3. Defaults Upon Senior Securities	20

	Item 4. Mine Safety Disclosures	20

	Item 5. Other Information	20

	Item 6. Exhibits	21

	The three and nine months ended		The three and nine months ended
	September 30, 2019		September 30, 2018
Common stock warrants		10,384,706		1,767
Common stock options		976,861		45,517
Restricted stock		323,191		568

	September 30, 2019
	Estimated Useful Lives	Gross Carrying Value		Accumulated Amortization			Impairment			Net Book Value
Internally developed patents	6-10 years	$	743,956	$	(440,994	)	$	—		$	302,962
Acquired licenses	16-20 years		285,000		(265,273	)		—			19,727
Total intangible assets subject to amortization			1,028,956		(706,267	)		—			322,689
IPR&D assets	Indefinite		13,418,967		—			(1,000,000	)		12,418,967
Total		$	14,447,923	$	(706,267	)	$	(1,000,000	)	$	12,741,656

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

Years ending December 31,
The remainder of 2019	$	11,570
2020		41,589
2021		25,375
2022		25,375
2023		25,375
2024 and thereafter		193,405
Total	$	322,689

	September 30, 2019		December 31, 2018
Accrued professional services	$	398,754	$	552,619
Accrued payroll and employee benefits		954,658		1,257,191
Accrued interest		3,441		1,192
Accrued research and development		682,463		2,076,704
Lease obligation, current portion		252,755		—
Deferred rent, current portion		—		175,490
Deferred revenue		19,753		19,753
Total accrued expenses	$	2,311,824	$	4,082,949

	September 30, 2019		December 31, 2018
BPI France notes, long-term portion	$	—	$	501,174
Lease obligation, long-term portion (see Note 11)		1,552,031		—
Deferred rent, long-term portion		—		1,045,807
Common stock warrant liability (see Note 9)		10,000		65,000
Other		225,172		240,090
Total other long-term liabilities	$	1,787,203	$	1,852,071



Warrants outstanding, January 1, 2019	7,344,297
Issuances (Note 8)	3,052,959
Exchanges	(1,550	)
Exercises and conversions	(11,000	)
Warrants outstanding, September 30, 2019	10,384,706

Balance, January 1, 2019	$	65,000
Changes in fair value (Monte Carlo simulation valuation)		(30,000	)
Warrant repurchases		(25,000	)
Balance, September 30, 2019	$	10,000

	Number of Stock Options		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding		976,861	$	5.16		5.91	$	—
Exercisable		188,928	$	11.88		5.19	$	—
Unvested		787,933	$	3.55		6.08	$	—

	September 30, 2019
Operating lease obligations	$	1,804,786
Operating lease right-of-use assets	$	717,303
Weighted-average remaining lease term		5.58
Weighted-average discount rate		8.0	%

Year ending December 31,
The remainder of 2019	$	95,714
2020		387,079
2021		393,542
2022		400,198
2023		407,054
2024 and thereafter		552,948
Total lease payments		2,236,535
Less imputed interest		(431,749	)
Total	$	1,804,786

	September 30, 2019
	Amortized Cost		Unrealized Gain		Market Value

United States treasury securities	$	3,388,492	$	2,872	$	3,391,364
Financial and corporate debt securities		24,818,581		16,081		24,834,662
Total	$	28,207,073	$	18,953	$	28,226,026

Expected volatility	95.3	%
Risk-free interest rate	1.6	%
Cost of capital	30.0	%

	Fair Value Measurement at September 30, 2019
	Total		Level 1		Level 2		Level 3
Recurring fair value measurements
Cash equivalents - money market funds	$	10,620,192	$	10,620,192	$	—	$	—
Short-term investments		28,226,026		3,391,364		24,834,662		—
Contingent consideration		2,750,000		—		—		2,750,000
Warrant liability		10,000		—		—		10,000

	Fair Value Measurement at December 31, 2018
	Total		Level 1		Level 2		Level 3
Recurring fair value measurements
Cash equivalents - money market funds	$	29,375,509	$	29,375,509	$	—	$	—
Warrant liability		65,000		—		—		65,000

No.		Description


2.1		Agreement and Plan of Merger and Reorganization, dated July 8, 2019, by and among the Company, Springfield Merger Sub, Inc., Springfield Merger Sub, LLC, Spitfire Pharma, Inc. and David Collier, as the Stockholder Representative (incorporated by reference to Exhibit 2.1 to Registrant’s Form 8-K filed on July 9, 2019)

10.1		Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on July 9, 2019)

10.2 ^^		Amended and Restated License Agreement, dated July 12, 2019, by and between Mederis Diabetes, LLC and Spitfire Pharma, Inc.
10.3 ^^		Amendment No. 5 to Contract Award issued by Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 20, 2019
10.4		Employment Agreement, dated September 3, 2019, by and between the Company and M. Scott Harris, M.D.
31.1 †		Certification of Principal Executive Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)

31.2 †		Certification of Principal Financial Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)

32.1 †		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code

32.2 †		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code

101.INS		Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	ALTIMMUNE, INC.

Dated: November 13, 2019	By:	/s/ Vipin K. Garg
	Name:	Vipin K. Garg
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Dated: November 13, 2019	By:	/s/ Will Brown
	Name:	Will Brown
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)