[Front Matter](index=1&type=section&id=Front%20Matter) This section contains preliminary information for the quarterly report, including filing details and forward-looking statements [Form 10-Q Information](index=1&type=section&id=Form%2010-Q%20Information) This section provides the basic filing information for the Quarterly Report on Form 10-Q for NightHawk Biosciences, Inc. for the period ended September 30, 2023, including its status as a non-accelerated filer and smaller reporting company, and the number of common shares outstanding - NightHawk Biosciences, Inc. filed its Quarterly Report on Form 10-Q for the period ended September 30, 2023[2](index=2&type=chunk) Filer Status | Filer Status | Value | | :------------- | :---- | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☐ | - As of November 20, 2023, there were **26,081,890 shares of Common Stock**, $0.0002 par value per share, outstanding[4](index=4&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements within the report, emphasizing that actual results may differ materially due to various risks and uncertainties, including the ability to raise capital, develop products, reliance on third parties, and regulatory actions - The report contains forward-looking statements regarding strategy, future operations, financial position, revenues, costs, prospects, plans, and objectives[9](index=9&type=chunk) - Actual results could differ materially due to factors such as the ability to raise additional capital, develop commercial products, reliance on third parties, timing of manufacturing facility completion, competitive developments, and regulatory actions[10](index=10&type=chunk) - The Company undertakes no obligation to revise or update any forward-looking statements, except as required by law[11](index=11&type=chunk) [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for NightHawk Biosciences, Inc., including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows, providing a snapshot of the company's financial position and performance for the periods ended September 30, 2023, and December 31, 2022 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights | Metric | September 30, 2023 (unaudited) | December 31, 2022 | | :-------------------------------- | :----------------------------- | :------------------ | | Total Current Assets | $24,180,163 | $50,054,260 | | Total Assets | $69,915,144 | $104,396,912 | | Total Current Liabilities | $24,487,847 | $18,037,323 | | Total Liabilities | $36,468,500 | $31,960,244 | | Total Stockholders' Equity | $33,446,644 | $72,436,668 | - Total Current Assets decreased by approximately **$25.9 million** from December 31, 2022, to September 30, 2023, primarily due to a significant reduction in short-term investments[17](index=17&type=chunk) - Total Liabilities increased by approximately **$4.5 million**, while Total Stockholders' Equity decreased by approximately **$39 million** during the nine-month period[17](index=17&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Consolidated Statements of Operations and Comprehensive Loss Highlights | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $723,126 | $58,861 | $2,146,804 | $290,259 | | Total operating expenses | $11,782,921 | $10,599,434 | $37,743,715 | $26,790,980 | | Operating loss | $(11,059,795) | $(10,540,573) | $(35,596,911) | $(26,500,721) | | Net Loss | $(14,312,029) | $(13,347,771) | $(41,168,866) | $(28,475,479) | | Net loss attributable to NightHawk Biosciences, Inc. | $(13,132,470) | $(13,258,350) | $(39,809,132) | $(28,210,223) | | Net loss per common share (basic and diluted) | $(0.50) | $(0.52) | $(1.53) | $(1.10) | - Revenue significantly increased for both the three and nine months ended September 30, 2023, compared to the prior year, primarily driven by process development revenue[18](index=18&type=chunk) - Net loss attributable to NightHawk Biosciences, Inc. increased by approximately **$11.6 million** for the nine months ended September 30, 2023, compared to the same period in 2022[18](index=18&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity Highlights | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :----------------- | :------------------ | | Common Stock | $5,217 | $5,126 | | Additional Paid-In Capital (APIC) | $285,090,202 | $283,019,456 | | Accumulated Deficit | $(248,962,791) | $(209,153,659) | | Total Stockholders' Equity | $33,446,644 | $72,436,668 | - The accumulated deficit increased by approximately **$39.8 million** from December 31, 2022, to September 30, 2023, reflecting the net loss incurred during the period[21](index=21&type=chunk) - Total Stockholders' Equity decreased by approximately **$39 million**, primarily due to the net loss, partially offset by stock-based compensation and other comprehensive income[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (Nine Months Ended September 30) | Cash Flow Activity | 2023 | 2022 | | :------------------------------------ | :------------- | :------------- | | Net Cash (Used In) Provided by Operating Activities | $(30,454,924) | $2,141,977 | | Net Cash Provided By Investing Activities | $30,137,129 | $3,622,252 | | Net Cash Used In Financing Activities | $(2,751,037) | $(145,672) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(3,072,020) | $5,604,363 | | Cash and Cash Equivalents – End of the Period | $5,362,534 | $13,658,242 | - Net cash used in operating activities significantly increased to **$30.5 million** in 2023 from cash provided of **$2.1 million** in 2022, primarily due to an increased net loss and changes in working capital[27](index=27&type=chunk) - Net cash provided by investing activities increased to **$30.1 million** in 2023, largely due to the sale of short-term investments[27](index=27&type=chunk) [Notes to the Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section details the accounting policies, discontinued operations, acquisitions, fair value measurements, and other financial commitments impacting the consolidated financial statements [1. Basis of Presentation and Significant Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) - The consolidated financial statements are prepared in conformity with U.S. GAAP for interim financial reporting and include NightHawk Biosciences, Inc. and its subsidiaries, with significant intercompany accounts eliminated[29](index=29&type=chunk)[31](index=31&type=chunk) - The Company has an accumulated deficit of approximately **$249.0 million** as of September 30, 2023, and expects continued losses, raising substantial doubt about its ability to continue as a going concern within one year[34](index=34&type=chunk)[36](index=36&type=chunk) - Effective January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses, which did not have a material impact on its consolidated financial statements[79](index=79&type=chunk)[80](index=80&type=chunk) [2. Discontinued Operations](index=23&type=section&id=2.%20Discontinued%20Operations) - In September 2023, the Company commenced active marketing for the sale of Elusys Therapeutics, Inc., which has been classified as a discontinued operation for all periods presented[32](index=32&type=chunk)[83](index=83&type=chunk) - As a result of the planned divestiture, goodwill was fully impaired by **$3.9 million** and intangible assets were partially impaired by **$2.3 million**[84](index=84&type=chunk) Net Loss from Discontinued Operations (Elusys Therapeutics) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $6,699,200 | $5,980,994 | $6,699,200 | $6,012,993 | | Total operating expenses | $9,751,830 | $8,437,364 | $12,566,023 | $9,698,848 | | Net loss from discontinued operations | $(3,105,766) | $(2,700,946) | $(5,913,409) | $(3,931,784) | [3. Acquisitions](index=26&type=section&id=3.%20Acquisitions) - The Company acquired Elusys Therapeutics in April 2022 to expand its role in biodefense, with an initial expectation to leverage its Scorpius biomanufacturing facility for internal manufacturing[89](index=89&type=chunk)[93](index=93&type=chunk) - However, the Company has been unable to manufacture Elusys' therapies internally and has not generated sufficient revenue or capital to build the planned Kansas facility, leading to reliance on third-party manufacturers[93](index=93&type=chunk) Elusys Acquisition Purchase Consideration and Allocation | Metric | Amount | | :------------------------------------ | :------------- | | Total purchase consideration | $42,853,685 | | Net assets acquired and liabilities assumed | $38,980,605 | | Goodwill | $3,873,080 | [4. Fair Value of Financial Instruments](index=30&type=section&id=4.%20Fair%20Value%20of%20Financial%20Instruments) - The Company uses a three-tier fair value hierarchy (Level I, II, III) for financial instruments, with cash equivalents and short-term investments classified as Level I[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - Warrants issued in January 2020 are classified as Level 3 derivative liabilities, revalued quarterly using the Monte Carlo simulation model, with a fair value of **$0** as of September 30, 2023[105](index=105&type=chunk)[106](index=106&type=chunk) - The change in fair value of contingent consideration for Elusys was **$(0.3) million** for the three months and **$(0.2) million** for the nine months ended September 30, 2023, primarily due to changes in timing and amount of contract deferred consideration[108](index=108&type=chunk) [5. Short-Term Investments](index=36&type=section&id=5.%20Short-Term%20Investments) Short-Term Investments | Date | Fair Value | | :--------------- | :----------- | | September 30, 2023 | $4.2 million | | December 31, 2022 | $35.8 million | - Short-term investments, consisting of equity securities (mutual funds), decreased significantly from **$35.8 million** at December 31, 2022, to **$4.2 million** at September 30, 2023[110](index=110&type=chunk) [6. Prepaid Expenses and Other Current Assets](index=37&type=section&id=6.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid Expenses and Other Current Assets | Category | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :----------------- | :------------------ | | Prepaid manufacturing expense | $475,536 | $91,477 | | Contract assets | $363,918 | — | | Other prepaid expenses and current assets | $280,787 | $1,132,502 | | Prepaid insurance | $104,126 | $201,252 | | Prepaid preclinical and clinical expenses | $36,861 | $65,892 | | **Total** | **$1,261,228** | **$1,491,123** | - Prepaid manufacturing expenses increased substantially from **$91,477** to **$475,536**, while other prepaid expenses and current assets decreased[111](index=111&type=chunk) [7. Property and Equipment](index=37&type=section&id=7.%20Property%20and%20Equipment) Property and Equipment, Net | Category | September 30, 2023 | December 31, 2022 | | :---------------------- | :----------------- | :------------------ | | Lab equipment | $21,080,029 | $18,060,058 | | Leasehold improvements | $2,827,289 | $2,486,329 | | Construction-in-process | — | $2,053,335 | | Total, net | $18,683,898 | $20,438,521 | - Lab equipment increased by approximately **$3 million**, while construction-in-process was fully expensed or reclassified, leading to a net decrease in total property and equipment[113](index=113&type=chunk) - Depreciation expense for the nine months ended September 30, 2023, was **$3.4 million**, a significant increase from **$0.7 million** in the same period of 2022[113](index=113&type=chunk) [8. Goodwill and Other Intangible Assets](index=37&type=section&id=8.%20Goodwill%20and%20Other%20Intangible%20Assets) - Goodwill and intangible assets related to Elusys were fully impaired by **$3.9 million** and **$2.3 million**, respectively, due to the planned divestiture[118](index=118&type=chunk) Change in Carrying Amount of Goodwill and Intangible Assets (Nine Months Ended September 30, 2023) | Metric | Goodwill | Intangible Assets | | :-------------------------------- | :------- | :---------------- | | Balance at December 31, 2022 | $3,301,959 | $8,669,375 | | Impairment | $(3,873,079) | $(2,277,921) | | Reclassified to discontinued operations | — | $(5,300,204) | | Balance at September 30, 2023 | $— | $— | - The Company finalized the purchase price allocation for the Elusys acquisition in April 2023, resulting in a measurement period adjustment that increased goodwill by approximately **$0.6 million**[119](index=119&type=chunk) [9. Accrued Expenses and Other Liabilities](index=39&type=section&id=9.%20Accrued%20Expenses%20and%20Other%20Liabilities) Accrued Expenses and Other Liabilities | Category | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :----------------- | :------------------ | | Accrued marketing expenses | $749,998 | — | | Accrued preclinical and clinical trial expenses | $252,618 | $953,252 | | Compensation and related benefits | $373,211 | $491,191 | | Accrued manufacturing expenses | $345,646 | $6,133 | | **Total** | **$2,031,618** | **$1,916,601** | - Accrued marketing expenses significantly increased from zero to **$749,998**, and accrued manufacturing expenses also saw a substantial rise[120](index=120&type=chunk) [10. Stockholders' Equity](index=39&type=section&id=10.%20Stockholders'%20Equity) Common Stock Warrants Outstanding | Date | Warrants Outstanding | | :--------------- | :------------------- | | December 31, 2022 | 747,383 | | September 30, 2023 | 313,358 | - The number of outstanding common stock warrants decreased by **434,025** due to expirations during the nine months ended September 30, 2023[124](index=124&type=chunk) - Stock-based compensation expense for the nine months ended September 30, 2023, was **$2.1 million**, a decrease from **$2.4 million** in the same period of 2022[126](index=126&type=chunk) [11. Revenue](index=45&type=section&id=11.%20Revenue) - Elusys completed the manufacturing conversion of **23,732 vials of ANTHIM®** for **$6.7 million** in September 2023, included in discontinued operations[137](index=137&type=chunk) - No grant revenue was recognized during the three and nine months ended September 30, 2023, as the CPRIT grant concluded with all **$15.2 million** recognized and received[138](index=138&type=chunk)[140](index=140&type=chunk) - Process development revenue for the nine months ended September 30, 2023, was **$2.0 million**, primarily from two customers, recognized over time using an input method[143](index=143&type=chunk) [12. Net Loss Per Share](index=47&type=section&id=12.%20Net%20Loss%20Per%20Share) Net Loss Per Share Attributable to NightHawk Biosciences, Inc. | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss per common share, basic and diluted (continuing operations) | $(0.38) | $(0.41) | $(1.30) | $(0.95) | | Net loss per common share, basic and diluted (discontinued operations) | $(0.12) | $(0.11) | $(0.23) | $(0.15) | | Total Net loss per common share, basic and diluted | $(0.50) | $(0.52) | $(1.53) | $(1.10) | - All common stock options, unvested restricted stock units, and warrants were anti-dilutive and excluded from diluted EPS calculations for both periods[148](index=148&type=chunk) [13. Income Tax](index=49&type=section&id=13.%20Income%20Tax) - The Company estimates an annual effective tax rate of **0%** for 2023 due to a history of losses and a full valuation allowance against net deferred tax assets in the U.S., Australia, and Germany[150](index=150&type=chunk)[151](index=151&type=chunk) - Total tax expense for the three months ended September 30, 2023, was approximately **$0.1 million**, and a benefit of **$(0.5) million** for the nine months ended September 30, 2023[150](index=150&type=chunk) - The liability for unrecognized tax benefits was **$1.5 million** as of September 30, 2023, with **$1.0 million** affecting the effective tax rate and included in discontinued operations[154](index=154&type=chunk) [14. Leases](index=51&type=section&id=14.%20Leases) - The Company accounts for its leases under ASC 842, classifying them as operating or finance leases for office, laboratory, and manufacturing spaces[156](index=156&type=chunk)[157](index=157&type=chunk) - Total finance lease cost for the nine months ended September 30, 2023, was **$1.8 million**, comprising amortization of lease assets and interest on lease liabilities[163](index=163&type=chunk) Weighted Average Lease Terms and Borrowing Rates (September 30, 2023) | Metric | Operating Leases | Finance Leases | | :-------------------------------- | :--------------- | :--------------- | | Weighted average remaining lease term | 6.7 years | 11.3 years | | Weighted average incremental borrowing rate | 9.45 % | 10.12 % | [15. Commitments and Contingencies](index=54&type=section&id=15.%20Commitments%20and%20Contingencies) - Elusys has non-cancellable future commitments of approximately **$53.0 million** through 2025 with Lonza, a third-party manufacturer, for ANTHIM® bulk drug product[165](index=165&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the shift in focus to its CDMO business, the divestiture of Elusys, and the associated financial impacts and future outlook [Overview](index=54&type=section&id=Overview) - The Company's current focus is on its Contract Development and Manufacturing Organization (CDMO) business, Scorpius Biomanufacturing, Inc., which provides services from process development to cGMP clinical and commercial manufacturing of biologics[167](index=167&type=chunk) - Priorities shifted away from clinical-stage oncology assets (HS-110 and PTX-35) towards biodefense and biomanufacturing capabilities[168](index=168&type=chunk) - The Company approved a refocus and restructuring plan in September 2023, including a workforce reduction of approximately **13 employees (14% of workforce)** to save **$1.8 million annually** and direct resources to the CDMO business[172](index=172&type=chunk) [Critical Accounting Policies and Estimates](index=56&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management's discussion is based on consolidated financial statements prepared in accordance with U.S. GAAP, requiring significant judgments and estimates for reported amounts[174](index=174&type=chunk) - Process development revenue is recognized over time using an input method, tracking progress by measuring inputs relative to total estimated inputs to satisfy performance obligations[175](index=175&type=chunk) - Transaction prices for services reflect best estimates of consideration, with variable consideration included only to the extent that a significant revenue reversal is improbable[176](index=176&type=chunk)[178](index=178&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) Revenue Comparison (Three Months Ended September 30) | Revenue Type | 2023 | 2022 | | :-------------------- | :--------- | :------- | | Product sales (discontinued) | $6.7 million | $5.98 million | | Process development | $0.6 million | — | | Service revenue | $0.1 million | $0.06 million | Research and Development Expense Comparison (Nine Months Ended September 30) | Program | 2023 (millions) | 2022 (millions) | | :-------------------------------- | :-------------- | :-------------- | | HS-110 | $1.4 | $0.4 | | HS-130 | $0.0 | $0.7 | | PTX-35 | $1.3 | $1.8 | | Other programs | $1.1 | $0.5 | | Unallocated R&D expenses | $12.8 | $9.9 | | **Total R&D expense** | **$16.6** | **$13.3** | - Selling, general and administrative expenses increased to **$19.6 million** for the nine months ended September 30, 2023, from **$13.3 million** in 2022, driven by increases in personnel, marketing, professional, depreciation, amortization, and rent expenses[190](index=190&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, the Company had approximately **$9.5 million** in cash and cash equivalents and short-term investments, expected to fund operations into Q1 2024[192](index=192&type=chunk) - Management has determined there is substantial doubt about the Company's ability to continue as a going concern due to significant losses and insufficient revenue, necessitating additional capital or strategic alternatives[192](index=192&type=chunk) - Net cash used in operating activities increased to **$30.5 million** for the nine months ended September 30, 2023, from **$2.1 million** provided in the same period of 2022, primarily due to increased net loss and changes in working capital[199](index=199&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, NightHawk Biosciences, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide information on quantitative and qualitative disclosures about market risk[205](index=205&type=chunk) [Item 4. Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in internal control over financial reporting, including ineffective IT general controls, errors in deferred tax asset valuation allowance, and inadequate management review controls - As of September 30, 2023, disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[207](index=207&type=chunk) - Identified material weaknesses include ineffective information technology general controls (user access, segregation of duties), errors in deferred tax asset valuation allowance related to the Elusys acquisition, and ineffective design of certain management review controls[209](index=209&type=chunk) - The Company is implementing a remediation plan, including enhanced process controls for user access, improved documentation, and new controls for income tax accounting[211](index=211&type=chunk) [PART II—OTHER INFORMATION](index=68&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, and other disclosures pertinent to the company's operations and financial standing [Item 1. Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently a party to any legal proceedings that would have a material adverse effect on its business, operating results, financial condition, or cash flows - The Company is not currently involved in any legal proceedings that would materially adversely affect its business, operating results, financial condition, or cash flows[215](index=215&type=chunk) [Item 1A. Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) Investing in NightHawk Biosciences, Inc. securities involves a high degree of risk, with significant concerns about the Company's ability to continue as a going concern due to accumulated deficits, ongoing losses, and limited cash runway - The Company's accumulated deficit of **$249.0 million** as of September 30, 2023, and ongoing net losses raise substantial doubt about its ability to continue as a going concern[217](index=217&type=chunk)[218](index=218&type=chunk) - With approximately **$9.5 million** in cash and cash equivalents and short-term investments, the Company expects to fund operations only into Q1 2024, necessitating additional capital or strategic alternatives, including the divestiture of Elusys[220](index=220&type=chunk) - The business is now concentrated in the CDMO segment, which has not yet generated significant revenue, and dependence on a few customers poses concentration risks[227](index=227&type=chunk)[229](index=229&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the quarter ended September 30, 2023, that had not been previously disclosed - No unregistered sales of equity securities occurred during the quarter ended September 30, 2023, that were not previously disclosed[233](index=233&type=chunk) [Item 3. Defaults Upon Senior Securities](index=74&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - This item is not applicable[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - This item is not applicable[235](index=235&type=chunk) [Item 5. Other Information](index=74&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - No other information to report[236](index=236&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q, including various Certificates of Amendment to the Certificate of Incorporation, Bylaws, and certifications from executive officers - The report includes various exhibits, such as Certificates of Amendment to the Certificate of Incorporation and certifications from the Principal Executive Officer and Principal Financial Officer[239](index=239&type=chunk)[241](index=241&type=chunk) [SIGNATURES](index=77&type=section&id=SIGNATURES) The report is duly signed on behalf of NightHawk Biosciences, Inc. by Jeffrey A. Wolf, Chairman and Chief Executive Officer, and William Ostrander, Chief Financial Officer, on November 20, 2023 - The report was signed by Jeffrey A. Wolf, Chairman and Chief Executive Officer, and William Ostrander, Chief Financial Officer, on November 20, 2023[246](index=246&type=chunk)

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents NightHawk Biosciences, Inc.'s unaudited consolidated financial statements for the quarter ended June 30, 2023, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, acquisitions, fair value measurements, and other financial details [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets and stockholders' equity from December 31, 2022, to June 30, 2023 | Metric | June 30, 2023 (unaudited) | December 31, 2022 | | :-------------------------------- | :-------------------------- | :------------------ | | **Assets** | | | | Cash and cash equivalents | $5.8 million | $8.4 million | | Short-term investments | $12.7 million | $35.8 million | | Total Current Assets | $22.8 million | $50.1 million | | Total Assets | $80.2 million | $104.4 million | | **Liabilities & Equity** | | | | Total Current Liabilities | $15.3 million | $18.0 million | | Total Liabilities | $33.1 million | $32.0 million | | Total Stockholders' Equity | $47.1 million | $72.4 million | | Total Liabilities and Stockholders' Equity | $80.2 million | $104.4 million | - Total assets decreased by approximately **$24.2 million** from December 31, 2022, to June 30, 2023, primarily driven by a reduction in short-term investments and cash and cash equivalents[17](index=17&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenue significantly increased for both the three and six months ended June 30, 2023, compared to the prior year, primarily driven by process development revenue, but operating expenses also rose substantially, leading to a larger net loss | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $0.7 million | $0.05 million | $1.4 million | $0.3 million | | Cost of revenues | $0.4 million | — | $1.0 million | — | | Research and development | $5.7 million | $4.7 million | $12.7 million | $8.7 million | | Selling, general and administrative | $7.4 million | $4.9 million | $14.2 million | $8.7 million | | Loss from operations | $(14.3) million | $(9.7) million | $(27.4) million | $(17.2) million | | Net loss attributable to NightHawk Biosciences, Inc. | $(13.9) million | $(6.8) million | $(26.7) million | $(15.0) million | | Net loss per share, basic and diluted | $(0.53) | $(0.27) | $(1.03) | $(0.58) | - Revenue significantly increased for both the three and six months ended June 30, 2023, compared to the prior year, primarily driven by process development revenue, however, operating expenses also rose substantially, leading to a larger net loss[18](index=18&type=chunk) [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%20Equity) Total stockholders' equity decreased by approximately $25.4 million from December 31, 2022, to June 30, 2023, primarily due to the net loss incurred during the period | Metric | Balance at December 31, 2022 | Balance at June 30, 2023 | | :------------------------------------ | :--------------------------- | :----------------------- | | Common Stock | $5,126 | $5,210 | | Additional Paid-in Capital (APIC) | $283.0 million | $284.5 million | | Accumulated Deficit | $(209.2) million | $(235.8) million | | Accumulated Other Comprehensive Income | $51,924 | $104,962 | | Non-Controlling Interest | $(1.5) million | $(1.7) million | | Total Stockholders' Equity | $72.4 million | $47.1 million | - Total stockholders' equity decreased by approximately **$25.4 million** from December 31, 2022, to June 30, 2023, primarily due to the net loss incurred during the period[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a significant increase in cash used in operating activities in the first half of 2023, primarily due to increased net loss and changes in working capital, while investing activities provided substantial cash, largely from the sale of short-term investments | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Used In Operating Activities | $(22.0) million | $(1.4) million | | Net Cash Provided By Investing Activities | $22.3 million | $3.8 million | | Net Cash Used In Financing Activities | $(2.9) million | $(0.1) million | | Net (Decrease) Increase in Cash and Cash Equivalents | $(2.6) million | $2.2 million | | Cash and Cash Equivalents – End of the Period | $5.8 million | $10.2 million | - The company experienced a significant increase in cash used in operating activities in the first half of 2023, primarily due to increased net loss and changes in working capital, Investing activities provided substantial cash, largely from the sale of short-term investments[25](index=25&type=chunk) [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the consolidated financial statements, covering accounting policies, significant estimates, business combinations, fair value measurements, and specific financial line items, offering crucial context for the reported figures [Note 1. Basis of Presentation and Significant Accounting Policies](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the company's basis for financial statement preparation, including U.S. GAAP conformity, consolidation principles, and the unaudited nature of interim statements, highlighting a 'going concern' uncertainty due to accumulated deficits and expected future losses, necessitating additional funding, and detailing key accounting policies for cash, derivatives, investments, estimates, segments, business combinations, goodwill, intangible assets, contingent consideration, R&D, revenue recognition, and recently adopted standards - The company has an accumulated deficit of approximately **$235.8 million** as of June 30, 2023, and a net loss of approximately **$26.9 million** for the six months ended June 30, 2023, raising substantial doubt about its ability to continue as a going concern within one year[30](index=30&type=chunk)[32](index=32&type=chunk) - As of June 30, 2023, the company had approximately **$18.6 million** in cash and cash equivalents and short-term investments, which is believed to be sufficient to fund operations into Q4 2023[32](index=32&type=chunk) - The company adopted ASU 2016-13 (Credit Losses) as of January 1, 2023, with no material impact on its consolidated financial statements[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 2. Acquisitions](index=21&type=section&id=Note%202.%20Acquisitions) This note details the acquisitions of Pelican Therapeutics and Elusys Therapeutics, where the Pelican acquisition increased NightHawk's controlling interest to 85% but related goodwill and in-process R&D were fully impaired by December 31, 2022, due to the discontinuation of PTX-35, while the Elusys acquisition in April 2022, valued at approximately $42.9 million, expanded NightHawk's biodefense role with ANTHIM® and included significant contingent and deferred consideration liabilities - NightHawk Biosciences, Inc. increased its controlling ownership in Pelican Therapeutics from **80% to 85%** in October 2018[74](index=74&type=chunk) - Goodwill and in-process R&D from the Pelican acquisition were fully impaired as of December 31, 2022, following the termination of PTX-35 development[75](index=75&type=chunk) - The acquisition of Elusys Therapeutics on April 18, 2022, was valued at approximately **$42.9 million**, comprising cash, deferred cash, and contingent/deferred consideration liabilities[80](index=80&type=chunk)[83](index=83&type=chunk) - The Elusys acquisition added ANTHIM® (FDA-approved anthrax antitoxin) to NightHawk's portfolio, aiming to expand its biodefense role and leverage planned biomanufacturing facilities[79](index=79&type=chunk) [Note 3. Fair Value of Financial Instruments](index=26&type=section&id=Note%203.%20Fair%20Value%20of%20Financial%20Instruments) This note describes the company's fair value measurements, categorizing financial instruments into a three-tier hierarchy (Level I, II, III), where short-term investments are classified as Level I, and contingent consideration and warrant liabilities are classified as Level 3, requiring significant unobservable inputs for valuation, such as stock price volatility and expected payment timing | Description | Total (June 30, 2023) | Level 1 (June 30, 2023) | Level 3 (June 30, 2023) | | :---------------------- | :-------------------- | :---------------------- | :---------------------- | | Short-term investments | $12.7 million | $12.7 million | — | | Contingent consideration | $12.3 million | — | $12.3 million | | Warrant liability | — | — | — | | | | | | | Description | Total (Dec 31, 2022) | Level 1 (Dec 31, 2022) | Level 3 (Dec 31, 2022) | | :---------------------- | :------------------- | :--------------------- | :--------------------- | | Short-term investments | $35.8 million | $35.8 million | — | | Contingent consideration | $12.2 million | — | $12.2 million | | Warrant liability | — | — | — | - The fair value of warrant liability was **$0** as of June 30, 2023, and December 31, 2022, with 9,357 warrants outstanding subject to quarterly revaluation[93](index=93&type=chunk)[94](index=94&type=chunk) - The change in fair value of contingent consideration for the six months ended June 30, 2023, was **$0.1 million**, primarily due to changes in the timing and amount of contract deferred consideration[95](index=95&type=chunk) [Note 4. Short-Term Investments](index=31&type=section&id=Note%204.%20Short-Term%20Investments) Short-term investments, consisting of equity securities (mutual funds), are carried at fair value based on quoted market prices, and their value decreased from $35.8 million at December 31, 2022, to $12.7 million at June 30, 2023 | Metric | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Short-term investments | $12.7 million | $35.8 million | [Note 5. Prepaid Expenses and Other Current Assets](index=31&type=section&id=Note%205.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid expenses and other current assets primarily include prepaid manufacturing expenses, other prepaid expenses, contract assets, and prepaid insurance, with the total decreasing from $3.6 million at December 31, 2022, to $3.4 million at June 30, 2023 | Category | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Prepaid manufacturing expense | $2.1 million | $1.8 million | | Other prepaid expenses and current assets | $1.1 million | $1.4 million | | Contract assets | $0.2 million | — | | Prepaid insurance | $0.06 million | $0.2 million | | Prepaid preclinical and clinical expenses | $0.02 million | $0.07 million | | **Total** | **$3.4 million** | **$3.6 million** | [Note 6. Property and Equipment](index=31&type=section&id=Note%206.%20Property%20and%20Equipment) Property and equipment, net, decreased from $20.5 million at December 31, 2022, to $19.1 million at June 30, 2023, while depreciation expense significantly increased to $2.2 million for the six months ended June 30, 2023, compared to $0.3 million in the prior year | Category | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Lab equipment | $20.3 million | $18.1 million | | Leasehold improvements | $2.8 million | $2.5 million | | Construction-in-process | — | $2.1 million | | Total | $24.3 million | $23.4 million | | Accumulated depreciation | $(5.2) million | $(3.0) million | | **Property and equipment, net** | **$19.1 million** | **$20.5 million** | - Depreciation expense for the six months ended June 30, 2023, was **$2.2 million**, a substantial increase from **$0.3 million** for the same period in 2022[101](index=101&type=chunk) [Note 7. Goodwill and Other Intangible Assets](index=31&type=section&id=Note%207.%20Goodwill%20and%20Other%20Intangible%20Assets) This note details the goodwill and intangible assets from the Pelican and Elusys acquisitions, where Pelican's goodwill and in-process R&D were fully impaired by Q3 2022 due to the termination of PTX-35 development, while Elusys' goodwill ($3.9 million) and intangible asset ($9.7 million for ANTHIM® formulation) were tested for impairment, with no impairment charge recorded as of June 30, 2023, and goodwill increased by $0.6 million due to purchase price allocation finalization - Pelican's in-process R&D of **$3.5 million** was fully impaired in Q3 2022 due to the termination of PTX-35 development[104](index=104&type=chunk) - Elusys' goodwill was **$3.9 million** and its intangible asset (ANTHIM® formulation) was **$9.7 million** at acquisition, No impairment charges were recorded for Elusys' goodwill or intangible assets as of June 30, 2023[105](index=105&type=chunk) | Metric | Goodwill | Intangible Assets | | :-------------------------- | :--------- | :---------------- | | Balance at December 31, 2022 | $3.3 million | $8.7 million | | Acquisition fair value adjustments | $0.6 million | — | | Amortization | — | $(0.7) million | | **Balance at June 30, 2023** | **$3.9 million** | **$7.9 million** | [Note 8. Accrued Expenses and Other Liabilities](index=33&type=section&id=Note%208.%20Accrued%20Expenses%20and%20Other%20Liabilities) Accrued expenses and other liabilities decreased from $4.3 million at December 31, 2022, to $3.5 million at June 30, 2023, with key components including accrued preclinical and clinical trial expenses, amounts due to Elusys shareholders, and an ANTHIM® technology transfer fee | Category | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Accrued preclinical and clinical trial expenses | $0.8 million | $1.0 million | | Due to Elusys shareholders | $0.6 million | $0.6 million | | ANTHIM® technology transfer fee | $0.5 million | $0.5 million | | Accrued marketing expenses | $0.5 million | — | | Compensation and related benefits | $0.3 million | $0.6 million | | Income tax payable | $0.1 million | $1.1 million | | **Total** | **$3.5 million** | **$4.3 million** | [Note 9. Stockholders' Equity](index=34&type=section&id=Note%209.%20Stockholders%20Equity) This note details changes in stockholders' equity, including common stock warrants, stock options, restricted stock, and restricted stock units, where the number of outstanding warrants decreased due to expirations, stock-based compensation expense was $1.4 million for the six months ended June 30, 2023, and the company granted 360,000 RSUs during the period | Metric | December 31, 2022 | June 30, 2023 | | :-------------------------------- | :---------------- | :-------------- | | Outstanding common stock warrants | 747,383 | 313,358 | | Outstanding stock options | 7,036,874 | 6,858,093 | | Restricted stock at period end | 34,001 | — | | RSUs at period end | — | 310,000 | - Stock-based compensation expense was **$1.4 million** for the six months ended June 30, 2023, compared to **$1.7 million** for the same period in 2022[112](index=112&type=chunk) - During the six months ended June 30, 2023, **360,000** Restricted Stock Units (RSUs) were granted[123](index=123&type=chunk) [Note 10. Revenue](index=37&type=section&id=Note%2010.%20Revenue) This note details the company's revenue sources, where no product sales of ANTHIM® occurred in the first half of 2023 or 2022, grant revenue from CPRIT was fully recognized and received by June 30, 2023, license revenue included a $0.1 million milestone payment from Shattuck, and process development revenue significantly increased to $1.3 million for the six months ended June 30, 2023, from the San Antonio CDMO facility - No product sales of ANTHIM® were recognized during the three and six months ended June 30, 2023, or 2022[124](index=124&type=chunk) - All **$15.2 million** of the CPRIT grant funding has been recognized as revenue and received as of June 30, 2023[127](index=127&type=chunk) - The company received a **$0.1 million** milestone payment from Shattuck in March 2023 for the completion of a Phase 1A clinical trial[129](index=129&type=chunk) | Revenue Type | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :----------------------------- | | Process development revenue | $0.7 million | $1.3 million | | License revenue | — | $0.1 million | | Grant revenue | — | — | [Note 11. Net Loss Per Share](index=39&type=section&id=Note%2011.%20Net%20Loss%20Per%20Share) This note reconciles net loss to net loss attributable to NightHawk Biosciences, Inc. and presents basic and diluted net loss per share, where all potentially dilutive securities (stock options, restricted stock units, and warrants) were excluded from diluted EPS calculations for both periods due to their anti-dilutive effect | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to NightHawk Biosciences, Inc. | $(13.9) million | $(6.8) million | $(26.7) million | $(15.0) million | | Net loss per share, basic and diluted | $(0.53) | $(0.27) | $(1.03) | $(0.58) | - Potentially dilutive securities, including **6,858,093** outstanding stock options, **310,000** restricted stock units, and **313,358** outstanding common stock warrants, were excluded from diluted EPS calculations for the six months ended June 30, 2023, due to their anti-dilutive effect[136](index=136&type=chunk) [Note 12. Income Tax](index=41&type=section&id=Note%2012.%20Income%20Tax) The company recorded an income tax benefit of approximately $0.6 million for the six months ended June 30, 2023, resulting from an additional release of its valuation allowance due to the finalization of the Elusys acquisition's purchase price allocation, while a full valuation allowance is maintained against net deferred tax assets in the U.S., Australia, and Germany due to a history of losses - An income tax benefit of approximately **$0.6 million** was recognized for the six months ended June 30, 2023, due to an additional release of the valuation allowance from the finalization of the Elusys acquisition's purchase accounting[139](index=139&type=chunk) - The company estimates an annual effective tax rate of **0%** for the year ending December 31, 2023, and maintains a full valuation allowance on net deferred tax assets in certain jurisdictions due to historical losses[137](index=137&type=chunk)[140](index=140&type=chunk) - As of June 30, 2023, the liability for unrecognized tax benefits was **$1.5 million**, with **$1.0 million** potentially affecting the effective tax rate if recognized[142](index=142&type=chunk) [Note 13. Leases](index=41&type=section&id=Note%2013.%20Leases) The company accounts for operating and finance leases under ASC 842, with facilities in Morrisville, San Antonio, Parsippany, and North Brunswick, including a Morrisville operating lease ($5.6 million ROU asset), a San Antonio finance lease ($15.1 million ROU asset) for Scorpius, and another San Antonio finance lease ($7.8 million ROU asset) for additional space, with total cash paid for operating leases being $0.5 million for the six months ended June 30, 2023 - The company operates under various operating and finance leases for facilities in North Carolina, Texas, and New Jersey[144](index=144&type=chunk) - A finance lease for a San Antonio facility for Scorpius commenced in September 2022, resulting in a **$15.1 million** finance lease right-of-use asset[146](index=146&type=chunk) | Lease Type | Weighted Average Remaining Lease Term (June 30, 2023) | Weighted Average Incremental Borrowing Rate (June 30, 2023) | | :-------------------------- | :------------------------------------------ | :---------------------------------------------------- | | Operating leases | 7.0 years | 9.47 % | | Finance leases | 13.6 years | 9.81 % | - Total cash paid for operating leases was **$0.5 million** for the six months ended June 30, 2023[148](index=148&type=chunk) [Note 14. Commitments and Contingencies](index=45&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) The company has significant non-cancellable future commitments with Lonza, a third-party manufacturer, totaling approximately $53.0 million through 2025 for the production of ANTHIM® substance requirements - The company has remaining total non-cancellable future commitments of approximately **$53.0 million** through 2025 with Lonza for ANTHIM® substance requirements[151](index=151&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting its shift towards biodefense and biomanufacturing, discussing critical accounting policies, analyzing revenue and expense trends for the three and six months ended June 30, 2023, and addressing liquidity challenges, including the need for additional capital to sustain operations [OVERVIEW](index=47&type=section&id=OVERVIEW) NightHawk Biosciences is an integrated biopharmaceutical company focused on developing, manufacturing, and commercializing medical countermeasures for biothreats, with its ecosystem including Elusys (biodefense expertise, ANTHIM®), Scorpius (biomanufacturing), and Skunkworx (discovery), and has shifted priorities to biodefense and biomanufacturing, moving away from clinical-stage oncology assets - NightHawk Biosciences is a fully integrated biopharmaceutical company specializing in medical countermeasures for biothreats, leveraging its subsidiaries Elusys, Scorpius, and Skunkworx[153](index=153&type=chunk) - The company's monoclonal antibody ANTHIM® (obiltoxaximab) is FDA-approved for inhalational anthrax treatment and prophylaxis, and also approved in the EU, Canada, and the UK[154](index=154&type=chunk) - Scorpius's lead biomanufacturing facility in San Antonio, Texas, commenced operations in October 2022, aiming to reduce dependence on third-party CDMOs and offer fee-for-service capacity[155](index=155&type=chunk) - Priorities have shifted to biodefense and biomanufacturing, with resources refocused away from clinical-stage oncology assets like HS-110 and PTX-35[156](index=156&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=47&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section emphasizes the critical accounting policies that require significant management judgment and estimates, particularly regarding revenue recognition for process development services, where revenue is recognized over time using an input method, and variable consideration is estimated to the extent a significant reversal is improbable - Process development revenue is recognized over time using an input method, tracking progress by measuring inputs relative to total estimated inputs[159](index=159&type=chunk) - The company estimates variable consideration in transaction prices, including discounts and credits, only when it is probable that a significant revenue reversal will not occur[162](index=162&type=chunk) [RESULTS OF OPERATIONS](index=49&type=section&id=RESULTS%20OF%20OPERATIONS) The company experienced significant revenue growth in Q2 and H1 2023, primarily from process development, but also saw substantial increases in operating expenses, particularly R&D and SG&A, leading to increased operating and net losses compared to the prior year periods [Comparison of the Three Months Ended June 30, 2023 and 2022](index=49&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) For the three months ended June 30, 2023, revenue increased significantly to $0.7 million from $0.05 million in 2022, driven by process development, while operating expenses rose sharply, with R&D increasing by 21.3% to $5.7 million and SG&A increasing to $7.4 million from $4.9 million, resulting in a higher loss from operations | Metric | Q2 2023 | Q2 2022 | Change | | :------------------------------------ | :-------- | :-------- | :------- | | Revenue | $0.7 million | $0.05 million | +$0.65 million | | Cost of revenues | $0.4 million | — | +$0.4 million | | Research and development expense | $5.7 million | $4.7 million | +$1.0 million (21.3%) | | Selling, general and administrative expense | $7.4 million | $4.9 million | +$2.5 million | | Change in fair value of contingent consideration | $1.1 million | $(0.2) million | +$1.3 million | | Total non-operating loss | $0.2 million | $0.6 million | -$0.4 million | - R&D expense for HS-110 increased by **$0.3 million** due to site close-out fees, while PTX-35 expense decreased by **$0.4 million** due to discontinued clinical trials[166](index=166&type=chunk) - Unallocated research expenses increased by **$0.9 million**, primarily due to higher personnel costs, stock-based compensation, contractor expenses, and supplies for discovery projects[166](index=166&type=chunk)[167](index=167&type=chunk) [Comparison of the Six Months Ended June 30, 2023 and 2022](index=51&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) For the six months ended June 30, 2023, total revenue increased to $1.4 million, including $0.1 million from licensing and $1.3 million from process development, compared to $0.3 million in the prior year, while R&D expenses rose by 47.0% to $12.7 million, and SG&A expenses increased to $14.2 million from $8.7 million, contributing to a higher overall loss | Metric | H1 2023 | H1 2022 | Change | | :------------------------------------ | :-------- | :-------- | :------- | | Revenue | $1.4 million | $0.3 million | +$1.1 million | | Cost of revenues | $1.0 million | — | +$1.0 million | | Research and development expense | $12.7 million | $8.6 million | +$4.1 million (47.0%) | | Selling, general and administrative expense | $14.2 million | $8.7 million | +$5.5 million | | Change in fair value of contingent consideration | $0.1 million | $(0.02) million | +$0.12 million | | Total non-operating loss | $0.08 million | $1.3 million | -$1.22 million | - Grant revenue decreased to zero in H1 2023 as all **$15.2 million** of the CPRIT grant funding has been recognized and received[172](index=172&type=chunk) - Unallocated research expenses increased by **$3.6 million**, primarily due to higher personnel costs, stock-based compensation, contractor expenses, and supplies for discovery projects[176](index=176&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=53&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company faces significant liquidity challenges, with $18.6 million in cash and short-term investments expected to fund operations only into mid-Q4 2023, has incurred substantial losses and negative cash flows, necessitating additional funding through equity, debt, partnerships, or other strategic alternatives, and also has significant future commitments with Lonza for ANTHIM® manufacturing - As of June 30, 2023, the company had approximately **$18.6 million** in cash and cash equivalents and short-term investments, sufficient to fund operations into mid-Q4 2023[179](index=179&type=chunk) - Management has determined there is substantial doubt about the company's ability to continue as a going concern within one year[179](index=179&type=chunk) - Net cash used in operating activities increased significantly to **$22.0 million** for the six months ended June 30, 2023, compared to **$1.4 million** in the prior year[185](index=185&type=chunk) - The company has remaining non-cancellable future commitments of approximately **$53.0 million** through 2025 with Lonza for ANTHIM® substance requirements, including **$34 million** for drug substance and **$19 million** for raw materials from a March 2023 order[184](index=184&type=chunk)[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, NightHawk Biosciences, Inc. is not required to provide quantitative and qualitative disclosures about market risk - NightHawk Biosciences, Inc. is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2023, due to material weaknesses in internal control over financial reporting, including ineffective information technology general controls and inadequate design of certain management review controls, particularly concerning income tax accounting errors identified in prior periods - As of June 30, 2023, disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[193](index=193&type=chunk) - Material weaknesses include ineffective information technology general controls (user access, segregation of duties) and inadequate design of management review controls, especially concerning income tax accounting[194](index=194&type=chunk)[203](index=203&type=chunk) - The company is implementing a remediation plan, including enhanced process controls for user access and segregation of duties, expanded documentation, and improved controls over income tax accounting[197](index=197&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, operating results, financial condition, or cash flows - The company is not currently involved in any legal proceedings that would materially adversely affect its business, operating results, financial condition, or cash flows[201](index=201&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, emphasizing substantial doubt about the company's ability to continue as a going concern due to accumulated deficits and expected losses, highlighting the need for significant additional capital, the dilutive effect of potential equity financings, and the uncertainty of achieving profitability from product sales or manufacturing services - The company's accumulated deficit of **$235.8 million** as of June 30, 2023, and ongoing net losses raise substantial doubt about its ability to continue as a going concern[205](index=205&type=chunk) - With cash and short-term investments projected to fund operations only into mid-Q4 2023, the company is evaluating strategic alternatives and needs to raise significant additional capital[206](index=206&type=chunk) - Failure to obtain additional funding could force delays, reductions, or termination of operations, asset sales, or liquidation[206](index=206&type=chunk) - Future equity financings will likely dilute existing stockholders, and debt financings may involve restrictive covenants[205](index=205&type=chunk)[212](index=212&type=chunk)[215](index=215&type=chunk) - The company expects to incur substantial losses for the foreseeable future and may never achieve profitability, depending on regulatory approvals, market acceptance, and manufacturing success[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the quarter ended June 30, 2023, that were not previously disclosed - No unregistered sales of equity securities occurred during the quarter ended June 30, 2023, that were not previously disclosed[218](index=218&type=chunk) [Item 3. Defaults Upon Senior Securities](index=65&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - This item is not applicable[219](index=219&type=chunk) [Item 4. Mine Safety Disclosures](index=65&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[220](index=220&type=chunk) [Item 5. Other Information](index=65&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - No other information is reported under this item[221](index=221&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q, including various amendments to the Certificate of Incorporation, Bylaws, and certifications from executive officers - The Exhibit Index lists various corporate documents, including amendments to the Certificate of Incorporation and Bylaws, and certifications from the Principal Executive Officer and Principal Financial Officer[222](index=222&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) [SIGNATURES](index=68&type=section&id=SIGNATURES) The report is duly signed on behalf of NightHawk Biosciences, Inc. by Jeffrey A. Wolf, Chairman and Chief Executive Officer, and William Ostrander, Chief Financial Officer, on August 14, 2023 - The report is signed by Jeffrey A. Wolf, Chairman and Chief Executive Officer, and William Ostrander, Chief Financial Officer, on August 14, 2023[228](index=228&type=chunk)[229](index=229&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Delaware (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 001-35994 NightHawk Biosciences, Inc. (Exact name of registrant as speci ...

Business Focus and Strategy - The company specializes in the end-to-end development, manufacturing, and commercialization of innovative medical countermeasures, particularly focusing on biodefense and biomanufacturing capabilities[29]. - The company is focused on identifying novel assets to combat emerging biological threats as part of its biodefense strategy[41]. - The company formed a Biothreat Advisory Board in August 2021 to guide the development of biosecurity initiatives, including experts from defense and biodefense sectors[51]. - The company is focused on maximizing commercial opportunities for ANTHIM® and is actively seeking strategic partnerships to enhance its economic potential[66]. - The company is exploring partnerships for licensing and collaborative relationships to enhance its market position in innovative medical countermeasures[70]. - The company aims to streamline the commercialization of medical countermeasures by prioritizing American-made equipment and in-house biomanufacturing[62]. Product Development and Regulatory Compliance - ANTHIM® (obiltoxaximab) received FDA approval in 2016 and has generated $6.0 million in procurement contracts for the Canadian government since the acquisition of Elusys[30][41]. - ANTHIM® is the only licensed anthrax antitoxin treatment in the EU and Canada, approved for both treatment and prophylaxis of inhalational anthrax[30][45]. - The FDA review process for NDAs and BLAs typically takes 10 to 12 months for standard reviews and 6 to 8 months for priority reviews[95]. - The FDA may extend the review process for drug applications by up to three additional months for late-submitted information[98]. - An approval letter from the FDA allows for commercial marketing of a drug, but may require a risk evaluation and mitigation strategy (REMS) to ensure safety[100]. - Post-approval requirements include ongoing compliance with FDA regulations, which can affect product marketability and profitability[102]. - Manufacturers must maintain compliance with current good manufacturing practices (cGMP) to ensure product stability and safety[103]. - The FDA may require post-marketing Phase 4 testing to monitor the effects of approved products, which can lead to additional regulatory scrutiny[106]. - Changes to approved applications, such as new indications or manufacturing processes, require FDA approval and may involve significant clinical data[101]. - Noncompliance with regulatory requirements can result in severe consequences, including product recalls or withdrawal from the market[115]. - The company must comply with various local, state, national, and international regulations, which can affect manufacturing and distribution processes[112]. - The company requires FDA approval to commercialize its product candidates, including ANTHIM®, which is contingent on regulatory approvals for the new manufacturing facility[211]. Financial Performance and Challenges - As of December 31, 2022, the company reported an accumulated deficit of $209.2 million and a net loss of approximately $43.9 million for the year[159]. - The company has not generated significant revenue from product sales, with only $6.0 million generated from new sales of ANTHIM® since acquiring Elusys[162]. - The company anticipates incurring additional expenses associated with ANTHIM® before generating significant revenue from sales, which is not expected for several years[158]. - The company expects to continue experiencing negative cash flows and significant operating losses for the foreseeable future[168]. - The accumulated deficit increased to $209.2 million as of December 31, 2022, compared to $165.7 million as of December 31, 2021, reflecting ongoing financial challenges[169]. - The company expects to incur additional operating losses in the future, with cumulative losses anticipated to increase as it continues to develop its product candidates[169]. - The company has entered a new line of business providing contract development and manufacturing services, but it has not yet proven its ability to operate a CDMO facility successfully[162]. - For the year ended December 31, 2022, all revenue was derived from a single purchase order for ANTHIM® and one customer for CDMO services, highlighting a lack of revenue diversification[186]. - The company is considering multiple financing alternatives, including equity financings and debt financings, to meet its capital needs, which may lead to dilution for existing shareholders[170]. Operational and Market Risks - The company faces uncertainty regarding coverage and reimbursement for product candidates, which may affect sales and pricing strategies[134]. - The company anticipates ongoing legislative healthcare reforms may result in downward pressure on product pricing and reimbursement rates[142]. - The company is substantially dependent on the success of its product ANTHIM®, which is currently the only source of revenue following the termination of licenses for other product candidates[192]. - The ability to generate product revenues from ANTHIM® is heavily dependent on U.S. government spending, particularly in biodefense, which poses a risk to future revenue generation[188]. - The company does not have long-term contracts with CDMO customers, making its revenue stream vulnerable to market fluctuations and customer decisions[189]. - The company faces intense competition in the market, particularly for ANTHIM®, which competes against a larger manufacturer with more resources[223]. - There is uncertainty regarding market acceptance of ANTHIM® and other product candidates, which could adversely affect revenue if they fail to gain traction[222]. - The company may face challenges in competing for market share against established pharmaceutical companies and other CDMOs with greater financial resources[224]. Manufacturing and Development Capabilities - The company plans to develop a 500,000+ square foot biodefense-focused biomanufacturing facility in Manhattan, Kansas, with over $300 million in funding and incentives applied for[37]. - Scorpius Biomanufacturing, Inc. aims to reduce reliance on third-party manufacturers and has commenced operations in San Antonio, Texas, in September 2022[32][35]. - The company has enhanced in-house development capabilities and leased a 20,144 square foot facility in San Antonio, TX, which commenced operations in October 2022[77]. - The company operates a single manufacturing facility in San Antonio, Texas, increasing exposure to disruptions from unforeseen events[194]. - The company relies on third-party suppliers for raw materials, and any delays or non-compliance could adversely affect manufacturing and financial results[196][198]. Research and Development - Research and development expenses were $23.5 million and $16.5 million during the years ended December 31, 2022 and 2021, respectively[146]. - The company has formed several subsidiaries to focus on various aspects of its business, including biodefense and contract manufacturing[148]. - All product candidates are currently in the preclinical stage, necessitating extensive preclinical and clinical testing before any BLA submission can be made[215]. - Clinical trials are expected to take several years to complete, with significant costs and potential delays due to various factors such as safety issues and patient recruitment challenges[217]. - The success of clinical trials is uncertain, and failure at any stage could lead to abandonment of product candidates and delays in future development[216].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 001-35994 NightHawk Biosciences, Inc. (Exact Name of Registrant as Specified ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 001-35994 NightHawk Biosciences, Inc. (Exact Name of Registrant as Specified in It ...

Financial Performance - For the three months ended March 31, 2022, the company recognized $0.2 million in grant revenue, a decrease from $0.5 million in the same period in 2021, primarily due to the expected timing of contract deliveries [144]. - Research and development expenses increased approximately 15.5% to $3.9 million for the three months ended March 31, 2022, compared to $3.4 million for the same period in 2021 [145]. - General and administrative expenses decreased to $3.8 million for the three months ended March 31, 2022, down from $4.8 million in 2021, primarily due to a $2.0 million decrease in stock-based compensation [146]. - Total non-operating loss was ($0.7) million for the three months ended March 31, 2022, compared to a non-operating income of $18,108 for the same period in 2021 [148]. - Net cash used in operating activities was $10.2 million for the three months ended March 31, 2022, compared to $4.8 million in the same period in 2021 [160]. - Net cash provided by investing activities was $16.8 million during the three months ended March 31, 2022, compared to $0.6 million in 2021, driven by an increase in net sale of short-term investments [164]. - The company incurred an accumulated deficit of $173.8 million through March 31, 2022, and expects to continue incurring significant expenses and losses from operations [166]. - The company has approximately $84.1 million in cash and cash equivalents and short-term investments as of March 31, 2022 [172]. Mergers and Acquisitions - The company closed the merger with Elusys Therapeutics on April 18, 2022, paying an upfront cash amount of $3 million and agreeing to additional milestone payments and earn-out payments over 12 years [136]. - The merger with Elusys included an upfront cash payment of $3 million and additional milestone payments related to future revenues [154]. - The company expects to incur an additional $2 million payment related to the acquisition of Elusys, along with $1.6 million in additional expenses [170]. - The company anticipates increased costs associated with the manufacture of Anthim due to the acquisition of Elusys [170]. Clinical Development - The company completed the enrollment of its Phase 2 trial for HS-110 in combination with either nivolumab or pembrolizumab for advanced non-small cell lung cancer (NSCLC) patients [125]. - PTX-35 is being evaluated in a Phase 1 clinical trial for advanced solid tumors, showing potential to enhance CD8+ T-cell activation [128]. - The proprietary gp96 platform is designed to induce immune responses against cancer and infectious diseases, leveraging the body's natural immune activation mechanisms [124]. - The RapidVax platform is designed for accelerated responses to biological threats, utilizing a flexible antigen expression system for T-cell activation [130]. Future Plans and Investments - The company plans to launch Scorpion Biologics as a CDMO to support biotherapeutics and discovery pipeline, with a focus on expanding manufacturing capabilities [132]. - The company is developing a new biodefense-focused large molecule and biologics biomanufacturing facility in Manhattan, Kansas, with over $300 million in funding sought for its development [141]. - The company plans to invest approximately $30.5 million to build out a new facility in San Antonio, TX, with operations projected to commence by the third quarter of 2022 [153]. - The company plans to invest approximately $30.5 million in building out a new manufacturing facility in San Antonio, TX, to enhance in-house capabilities and reduce reliance on third-party vendors [168]. - As of May 13, 2022, the company has spent $20.6 million on laboratory-related manufacturing equipment for the San Antonio facility [168]. - The potential value of tax credits and incentives for the San Antonio facility is estimated to be up to $4.5 million [168]. - Operations at the new facility are projected to commence by the third quarter of 2022, with plans to transition outsourced manufacturing in-house [168]. - The company is considering multiple financing alternatives, including equity and debt financings, to meet future capital needs [173]. - The company does not expect to use significant corporate resources for advancing its COVID-19 program and is seeking grant funding for clinical development [172]. - The company has sufficient funds to complete current clinical trials and expects to fund operations into 2024, but will need substantial additional funding for future initiatives [172].

PART I [Business](index=8&type=section&id=Item%201.%20Business) A biopharmaceutical company developing immune therapies for cancer and infectious diseases via its proprietary gp96 and DR3/TNFRSF25 platforms - The company is a fully integrated biopharmaceutical firm specializing in therapies that arm the immune system against diseases like cancer and infectious disease[28](index=28&type=chunk) - The company's strategy includes becoming fully integrated, maximizing commercial opportunities, developing its CDMO subsidiary Scorpion, obtaining regulatory approvals, and expanding its patent portfolio[90](index=90&type=chunk)[93](index=93&type=chunk) Key Product Platforms and Clinical Assets | Platform | Key Asset | Indication | Development Stage | | :--- | :--- | :--- | :--- | | **gp96 Platform** | HS-110 (viagenpumatucel-L) | Non-Small Cell Lung Cancer (NSCLC) | Phase 2 (Enrollment Complete) | | | HS-130 (ComPACT®) | Advanced Solid Tumors | Phase 1 (Enrollment Complete) | | **RapidVax® Platform** | RapidVax® Base Cell | Infectious/Emerging Diseases | Preclinical | | **DR3/TNFRSF25 Platform** | PTX-35 | Advanced Solid Tumors | Phase 1 | - On December 20, 2021, the company entered into an agreement to acquire Elusys Therapeutics, Inc, which commercializes **ANTHIM®** (obiltoxaximab), an FDA-approved monoclonal antibody for the biodefense threat anthrax[35](index=35&type=chunk) - The company is establishing in-house manufacturing capabilities through its subsidiary Scorpion Biological Services, Inc, with a new **20,144 sq. ft. facility** in San Antonio, TX, expected to be operational in **Q2 2022**[77](index=77&type=chunk)[80](index=80&type=chunk) - The development of PTX-35 is supported by a **$15.2 million grant** from the Cancer Prevention and Research Institute of Texas (CPRIT), which requires **$7.6 million** in matching funds from the company's subsidiary, Pelican[100](index=100&type=chunk)[103](index=103&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial financial, clinical development, and operational risks, including a history of net losses and reliance on key product candidates Financial Performance and Position Risks | Risk Factor | 2021 Figure | 2020 Figure | | :--- | :--- | :--- | | **Net Loss** | $35.4 million | $26.4 million | | **Accumulated Deficit (at YE)** | $165.7 million | $130.6 million | | **Net Cash Used in Operations** | $38.1 million | $22.0 million | - The company has a limited operating history, has not generated any product revenue, and anticipates incurring **substantial losses** for the foreseeable future with uncertain profitability[210](index=210&type=chunk)[215](index=215&type=chunk) - The business is substantially dependent on the success of its product candidates, with only three currently in clinical trials, and **no guarantee any will be commercialized**[235](index=235&type=chunk) - Risks related to the pending Elusys merger include potential failure to complete the transaction, difficulties in integrating the business, and **substantial dependence on U.S. Government contracts** for Anthim revenue[334](index=334&type=chunk)[336](index=336&type=chunk)[339](index=339&type=chunk) - The company relies on third parties for manufacturing, conducting clinical trials (CROs), and supplying materials, which exposes it to risks of delays, quality issues, and lack of control[266](index=266&type=chunk)[273](index=273&type=chunk)[280](index=280&type=chunk) - The company's stock price has been volatile, with a closing price of **$3.04 per share** on December 31, 2021, compared to a high of **$17.00 per share** on February 9, 2021[236](index=236&type=chunk) - During 2021, the company recorded a non-cash goodwill impairment charge and an indefinite-lived intangible assets impairment charge totaling **$3.8 million** related to the Pelican acquisition[240](index=240&type=chunk) [Properties](index=122&type=section&id=Item%202.%20Properties) The company leases office and laboratory facilities in North Carolina, Texas, and New Jersey, including a new biomanufacturing site in San Antonio - The company's executive offices are located in Morrisville, NC, and it also leases office and lab space in San Antonio, TX, and North Brunswick, NJ[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk) - In October 2021, its subsidiary Scorpion entered into a lease for a **20,144 sq. ft.** office and lab space in San Antonio, TX, for biomanufacturing purposes, with monthly base rent starting at **$50,360**[391](index=391&type=chunk) [Legal Proceedings](index=124&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business or financial condition - The company is not presently a party to any material legal proceedings[393](index=393&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=124&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE American under 'HTBX', a reverse stock split was effected in 2020, and no dividends are anticipated - The company's common stock trades on the NYSE American under the symbol **'HTBX'**[396](index=396&type=chunk) - A **one-for-seven reverse stock split** of the common stock was effected on December 11, 2020[398](index=398&type=chunk) - The company has **never paid cash dividends** and does not plan to in the foreseeable future[399](index=399&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 2,909,972 | $7.55 | 358,897 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=126&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's net loss widened to $35.4 million in 2021 due to increased R&D expenses and impairment charges, while maintaining sufficient cash to fund operations into 2024 Financial Highlights (Years Ended December 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Grant Revenue | $2.1 million | $2.8 million | | Research & Development Expense | $18.8 million | $12.9 million | | General & Administrative Expense | $16.8 million | $14.9 million | | Goodwill Impairment Loss | $1.5 million | $0 | | In-process R&D Impairment Loss | $2.4 million | $0 | | **Net Loss** | **$35.4 million** | **$26.4 million** | | Net Loss Per Share | ($1.41) | ($1.63) | | Cash & Short-term Investments (at YE) | $96.4 million | $111.8 million | - The increase in R&D expense was primarily due to a **$2.4 million impairment loss** on in-process R&D, a **$1.3 million increase** in COVID-19 program costs, and a **$0.9 million increase** in PTX-35 expenses[451](index=451&type=chunk)[453](index=453&type=chunk) - The company recorded a full goodwill impairment loss of **$1.5 million** in 2021 due to a sustained decline in its stock price[454](index=454&type=chunk) - As of December 31, 2021, the company had **$96.4 million** in cash, cash equivalents, and short-term investments, which management believes is sufficient to fund operations into 2024[424](index=424&type=chunk)[483](index=483&type=chunk) - Net cash used in operating activities increased to **$38.1 million** in 2021 from **$22.0 million** in 2020, primarily due to a higher net loss and an increase in other assets related to equipment purchases for the new facility[484](index=484&type=chunk) [Financial Statements and Supplementary Data](index=149&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements, with the auditor's report highlighting critical audit matters related to valuation and impairment - The report includes the consolidated balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows for the years ended December 31, 2021 and 2020[615](index=615&type=chunk)[640](index=640&type=chunk) - The independent auditor's report identified two Critical Audit Matters: the **valuation of contingent consideration** from the Pelican acquisition and the **impairment of goodwill and in-process R&D**, both of which involved complex and subjective management judgments[645](index=645&type=chunk)[646](index=646&type=chunk)[651](index=651&type=chunk) [Controls and Procedures](index=149&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of year-end 2021 - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2021[494](index=494&type=chunk) - Management's assessment concluded that the company's internal controls over financial reporting were **effective** as of December 31, 2021, based on the COSO framework[495](index=495&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=152&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's leadership team, board composition, director independence, and committee structure - The executive officers are **Jeffrey Wolf** (Chairman, CEO, President) and **William L. Ostrander** (CFO, Secretary)[505](index=505&type=chunk) - The Board of Directors has determined that **three of its four members are independent**[520](index=520&type=chunk) - The Board maintains an Audit Committee, Compensation Committee, and Nominating and Governance Committee, each composed entirely of **independent directors**[516](index=516&type=chunk)[517](index=517&type=chunk) - The company has a combined Chairman and CEO role (held by Jeffrey Wolf) but has appointed an **independent Lead Director** (Dr. Prendergast) to preside over executive sessions and liaise between management and independent directors[534](index=534&type=chunk)[537](index=537&type=chunk) [Executive Compensation](index=163&type=section&id=Item%2011.%20Executive%20Compensation) CEO Jeffrey Wolf's total 2021 compensation was approximately $5.9 million, driven by significant equity awards, as part of a program designed to align pay with performance 2021 Summary Compensation Table | Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Other | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Jeffrey Wolf** (CEO) | 2021 | $539,623 | $270,000 | $2,633,525 | $1,964,424 | $500,000 | **$5,907,572** | | **William L. Ostrander** (CFO) | 2021 | $274,817 | $96,250 | $0 | $451,602 | $0 | **$822,669** | - The company's executive compensation philosophy is based on aligning with stockholders' interests, being competitive to attract and retain talent, and rewarding the achievement of goals[552](index=552&type=chunk) - In 2021, CEO Jeffrey Wolf's base salary was increased to **$540,000** and CFO William L. Ostrander's was increased to **$275,000**[569](index=569&type=chunk) - The Compensation Committee retained **Meridian Compensation Partners, LLC** as its independent compensation consultant in 2020 and 2021[556](index=556&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=181&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 2022, CEO Jeffrey Wolf held 6.6% beneficial ownership, with all executive officers and directors as a group holding 8.7% Security Ownership of Management (as of March 9, 2022) | Name of Beneficial Owner | Shares Beneficially Owned | Percentage Ownership | | :--- | :--- | :--- | | Jeffrey Wolf (CEO & Chairman) | 1,739,660 | 6.6% | | William L. Ostrander (CFO) | 59,440 | * | | John K. A. Prendergast, Ph.D. (Director) | 287,409 | 1.1% | | John Monahan, Ph.D. (Director) | 119,980 | * | | Edward B. Smith, III (Director) | 120,050 | * | | **All Executive Officers and Directors as a group (5 persons)** | **2,326,539** | **8.7%** | [Certain Relationships and Related Transactions, and Director Independence](index=183&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The pending merger with Elusys Therapeutics, founded by CEO Jeffrey Wolf, is the primary related party transaction, and all directors except the CEO are independent - The pending acquisition of Elusys Therapeutics is a related party transaction, as Elusys was founded by CEO Jeff Wolf, who owns approximately **1.2%** of Elusys's outstanding stock[607](index=607&type=chunk) - The Board of Directors has determined that all current directors are independent under NYSE American rules, with the exception of Mr. Wolf due to his role as President and CEO[611](index=611&type=chunk) [Principal Accountant Fees and Services](index=185&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) BDO USA, LLP served as the independent auditor, with total audit fees of $376,123 for fiscal year 2021 Accountant Fees (BDO USA, LLP) | Fee Category | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees and Expenses | $376,123 | $329,213 | - All audit and non-audit services provided by the independent registered public accounting firm were **pre-approved** by the Audit Committee[613](index=613&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=187&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and indexes all exhibits filed with the Form 10-K, including material contracts and governance documents - This item lists the financial statements, financial statement schedules, and exhibits filed with the Form 10-K[615](index=615&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 001-35994 Heat Biologics, Inc. (Exact Name of Registrant as Specified in Its ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 001-35994 Heat Biologics, Inc. (Exact Name of Registrant as Specified in Its Chart ...