Exhibit 99.1
EVAXION BIOTECH A/S
INDEX TO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
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Notes to Unaudited Condensed Consolidated Interim Financial Statements | 6 |
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EVAXION BIOTECH A/S
Unaudited Condensed Consolidated Interim Statements of Comprehensive Loss
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
(USD in thousands, except per share amounts) | ||||||
Operating expenses: | ||||||
Research and development | $ | | $ | | ||
General and administrative | | | ||||
Total operating expenses | | | ||||
Operating loss | ( | ( | ||||
Finance income | | | ||||
Finance expenses | ( | ( | ||||
Net loss before tax | ( | ( | ||||
Income tax benefit | | | ||||
Net loss for the period | $ | ( | $ | ( | ||
Net loss attributable to shareholders of Evaxion Biotech A/S | $ | ( | $ | ( | ||
Other comprehensive income that may be reclassified to profit or loss in subsequent periods: | ||||||
Exchange differences on translation of foreign operations | | | ||||
Tax on other comprehensive income | — | ( | ||||
Other comprehensive income that will not be reclassified to profit or loss in subsequent periods: | ||||||
Exchange differences on currency translation to presentation currency | ( | ( | ||||
Other comprehensive loss for the period, net of tax | $ | ( | $ | ( | ||
Total comprehensive loss | $ | ( | $ | ( | ||
Total comprehensive loss attributable to shareholders of Evaxion Biotech A/S | $ | ( | $ | ( | ||
Loss per share – basic and diluted | ( | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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EVAXION BIOTECH A/S
Unaudited Condensed Consolidated Interim Statements of Financial Position
March 31, | December 31, | |||||||
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| 2022 |
| 2021 | ||||
Note | (USD in thousands) | |||||||
ASSETS | ||||||||
Non-current assets |
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Intangible assets | $ | | $ | | ||||
Property and equipment |
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Government grants receivables, non-current |
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| — | ||||
Tax receivables, non-current |
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| — | ||||
Leasehold deposits, non-current |
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Total non-current assets |
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Current assets |
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Prepayments and other receivables |
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Deferred offering costs |
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| — | ||||
Government grants receivables, current |
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Tax receivables, current |
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Cash and cash equivalents |
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Total current assets |
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TOTAL ASSETS | $ | | $ | | ||||
EQUITY AND LIABILITIES |
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Share capital | 8 | $ | | $ | | |||
Other reserves |
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Accumulated deficit |
| ( |
| ( | ||||
Total equity |
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Non-current liabilities |
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Lease liabilities, non-current |
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Borrowings, non-current | 5 | | | |||||
Provisions |
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Total non-current liabilities |
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Current liabilities |
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Lease liabilities, current |
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Warrant liability | 6 | | — | |||||
Borrowings, current | 5 | | | |||||
Trade payables |
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Other payables |
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Total current liabilities |
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Total liabilities |
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TOTAL EQUITY AND LIABILITIES | $ | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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EVAXION BIOTECH A/S
Unaudited Condensed Consolidated Interim Statements of Changes in Equity
Other reserves | |||||||||||||||||
Foreign | |||||||||||||||||
currency | |||||||||||||||||
Share | Share | translation | Accumulated | Total | |||||||||||||
| Note |
| capital |
| premium |
| Reserve |
| deficit |
| equity | ||||||
(USD in thousands) | |||||||||||||||||
Equity at December 31, 2021 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Net loss for the period |
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| — |
| — |
| — |
| ( |
| ( | ||||||
Other comprehensive income |
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| — |
| — |
| ( |
| — |
| ( | ||||||
Share-based compensation | 7 |
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Equity at March 31, 2022 |
| $ | | $ | | $ | ( | $ | ( | $ | |
Other reserves | |||||||||||||||||
Foreign | |||||||||||||||||
currency | |||||||||||||||||
Share | Share | translation | Accumulated | Total | |||||||||||||
| Note |
| capital |
| premium |
| reserve |
| deficit |
| equity | ||||||
| (USD in thousands) | ||||||||||||||||
Equity at December 31, 2020 |
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| $ | | $ | | $ | | $ | ( | $ | | |||||
Net loss for the period |
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| — |
| — |
| — |
| ( |
| ( | |||||
Other comprehensive income |
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| — |
| — |
| ( |
| — |
| ( | |||||
Tax effect on OCI | — | — | ( | — | ( | ||||||||||||
Issuance of shares for cash | | | — | — | | ||||||||||||
Transaction costs | — | ( | — | — | ( | ||||||||||||
Share-based compensation |
| 7 |
| — |
| — |
| — |
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Equity at March 31, 2021 |
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| $ | | $ | | $ | ( | $ | ( | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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EVAXION BIOTECH A/S
Unaudited Condensed Consolidated Interim Statements of Cash Flows
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
(USD in thousands) | ||||||
Operating activities: |
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Net loss for the period | $ | ( | $ | ( | ||
Adjustments for non-cash items |
| ( |
| ( | ||
Interest paid |
| ( |
| ( | ||
Cash flow from operating activities before changes in working capital |
| ( |
| ( | ||
Cash flow from changes in working capital: |
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Changes in net working capital |
| ( |
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Net cash used in operating activities |
| ( |
| ( | ||
Investing activities: |
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Investment in intangible assets |
| — |
| ( | ||
Purchase of property, plant and equipment |
| ( |
| ( | ||
Receipt (payment) of non-current financial assets – leasehold deposits |
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Net cash used in investing activities |
| ( |
| ( | ||
Financing activities: |
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Proceeds from issuance of shares |
| — |
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Transaction costs related to issuance of shares |
| — |
| ( | ||
Proceeds from borrowings | | — | ||||
Repayment of borrowings | ( | — | ||||
Leasing installments |
| ( |
| ( | ||
Net cash provided by / (used in) financing activities |
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Net increase/ (decrease) in cash and cash equivalents |
| ( |
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Cash and cash equivalents at January 1 |
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Exchange rate adjustments on cash and cash equivalents |
| ( |
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Cash and cash equivalents at March 31 | $ | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
Note 1. General Company Information
Evaxion Biotech A/S (the “Company” or “Evaxion”) is an artificial intelligence (“AI”)-immunology platform company that uses its proprietary AI technology, engineering expertise and drug development know-how to simulate the human immune system and generate predictive models to identify and develop efficacious immunotherapies for patients in the global market. Unless the context otherwise requires, references to the “Company,” “we,” “us,” and “our”, refer to Evaxion Biotech A/S and its subsidiaries.
Evaxion is a public limited liability company incorporated and domiciled in Denmark with its registered office located at Dr. Neergaards Vej 5f, DK-2970 Hørsholm, Denmark.
The unaudited condensed consolidated interim financial statements of Evaxion Biotech and its subsidiary (collectively, the “Group”) for the three months ended March 31, 2022 and 2021, were approved, and authorized for issuance, by the Audit Committee of the board of directors on May 10, 2022.
Liquidity
We anticipate incurring additional losses until such time, if ever, we can complete our research and development (“R&D”) activities and obtain an out-licensing partnership for our product candidates and generate revenues from such product candidates. Substantial additional financing will be needed by us to fund our operations and to continue development of our product candidates.
We expect to finance cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements.
We may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of current shareholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of the current shareholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable and/or may reduce the value of our ordinary shares. Failure to raise capital or enter into such other arrangements when needed could have a negative impact on financial conditions and our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate our product candidate development or grant rights to develop and market our product candidates.
Note 2. Summary of Significant Accounting Policies
Basis of preparation
The unaudited condensed consolidated interim financial statements of the Company are prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting.” Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) have been condensed or omitted. Accordingly, these unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2021 and accompanying notes, which have been prepared in accordance with IFRS as issued by the International Accounting Standards Board.
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
The accounting policies applied are consistent with the accounting policies as outlined in the basis of presentation section included in Note 2 of the audited financial statements as of and for the year ended December 31, 2021. As of January 1, 2022, the following accounting policy in respect to the Company’s loan and warrants with European Investment Bank (“EIB”) are in effect:
EIB Loan
All loans and borrowings are classified as financial liabilities and are initially recorded at fair value less the value attributable to any separately accounted for embedded derivative. Further, considerations from the lender for other elements in the transaction are accounted for separately. After initial recognition, any such loans and borrowings are measured at amortized cost using the effective interest method, with the amortization recognized in finance costs.
In August 2020, the Company executed a loan agreement, or the EIB Loan, for a principal amount of €
EIB Warrants
On February 17, 2022, warrants were issued to EIB as part of the draw down of the first tranche of the EIB Loan. The warrants are part of the overall return to EIB on the financing arrangement and are thus accounted for in accordance with the Financial Instruments Standards (IAS) 32 and IFRS 9. EIB is entitled to elect net in cash settlement at any time, and consequently a financial liability for the redemption amount is recognized.
The liability is measured initially at its fair value and is subsequently remeasured at the redemption amount. The redemption amount is an amount equal to the volume weighted average price per ordinary share, or VWAP, for a period of
Basis of preparation - continued
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the unaudited condensed consolidated interim financial statements are disclosed in Note 3.
Reclassifications of prior period presentation
Certain items in prior year condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.
Standards issued but not yet effective
There were a number of standards and interpretations which were issued but were not yet effective at March 31, 2022 and have not been adopted for these financial statements, including:
● | Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (January 1, 2023) |
● | Amendment to IAS 1 Presentation of Financial Statements: Disclosure of Accounting Policies (January 1, 2023) |
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
● | Amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (January 1, 2023) |
The Company expects to adopt these standards, updates and interpretations when they become mandatory. These standards are not expected to have a significant impact on disclosures or amounts reported in the Company’s financial statements in the period of initial application and future reporting periods.
Note 3. Significant Accounting Judgements, Estimates, and Assumptions
In the application of our accounting policies, the Company is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
The unaudited condensed consolidated interim financial statements do not include all disclosures for critical accounting judgments and estimation uncertainties that are required in the annual consolidated financial statements, and therefore, should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021.
Significant accounting estimates made in the process of applying our accounting policies and that have the most significant effect on the amounts recognized in our unaudited condensed consolidated interim financial statements relate to share-based compensation. See Note 7 below for additional information regarding share-based compensation.
There have been no other changes to the application of critical accounting judgments, or estimation uncertainties regarding accounting estimates.
Note 4. Significant Events in the Reporting Period
Impact from COVID-19
The Company is closely monitoring the potential impact of COVID-19 on the 2022 financial results and cash flows and beyond. The Company’s top priority remains the health and safety of its staff and the patients in the studies. The Company maintains compliance with government and health authorities. Additionally, we have adapted the way in which we work to ensure we are doing our part in reducing transmission of COVID-19.
The Company has worked closely with laboratories and investigators to ensure safe continuation and working requirements of our ongoing research activities and human clinical trials. The Company has not experienced a materially negative impact from COVID-19. As of March 31, 2022, the impact of the COVID-19 pandemic continues to unfold. As events continue to evolve and additional information becomes available, our estimates may change materially in the future.
While business travel has been limited, the Company has remained active and effective in the process of raising capital with institutional investors by conducting key meetings on a virtual basis.
Russia’s Invasion of Ukraine
On February 24, 2022, Russia invaded Ukraine creating a global conflict. The resulting conflict and retaliatory measures by the global community have created global security concerns, including the possibility of expanded regional or global conflict, which have had, and are likely to continue to have, short-term and more likely longer-term adverse impacts on Ukraine and Europe and around the globe. Potential ramifications include disruption of the supply chain including research
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
activities and complications with the conduct of ongoing and future clinical trials of our product candidates, including patient enrollment. The Company relies on global networks of contract research organizations and clinical trial sites to enroll patients. Delays in research activities or in the conduct of our clinical trials could increase associated costs and, depending upon the duration of any delays, require us to find alternative suppliers at additional expense. In addition, the conflict between Russia and the Ukraine has had significant ramifications on global financial markets, which may adversely impact our ability to raise capital on favorable terms or at all.
Stock Split
On January 4, 2021, the Company effected the Stock Split resulting in a reduction of the nominal value of the Company’s ordinary shares from DKK
Note 5. Borrowings
Loan from Lessor
In October 2020, the Company entered into a lease for approximately
As a result of the finance structure this amount is not included as Purchase of property, plant and equipment within the condensed consolidated interim statements of cash flows. The leasehold improvements recognized will be subject for adjustment when the actual costs incurred are made available from DTU.
EIB Loan
In August 2020, the Company executed the EIB Loan with EIB, for a principal amount of €
During the year ended December 31, 2021, the Company initiated the draw of the first tranche of the EIB Loan Agreement. The Company received the proceeds from the draw of the first tranche of €
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
Borrowings are summarized as follows (in thousands):
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Loan from lessor | $ | | $ | | ||
EIB Loan |
| |
| — | ||
Total Borrowings |
| |
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Less: Borrowings, current portion |
| ( |
| ( | ||
Total Borrowings, net of current portion | $ | | $ | |
Note 6. Warrant Liability
The Company received the proceeds from the draw of the first tranche of the EIB Loan on February 17, 2022. In connection therewith, EIB received
As the warrant liability is a non-cash financing cost the amount related to the initial recognition of the warrant liability is not included within the condensed consolidated interim statements of cash flows.
The following table sets forth the changes to the warrant liability:
| Warrant Liability | ||
(USD in thousands) | |||
Carrying amount at January 1, 2022 | $ | | |
Initial recognition of warrant liability |
| | |
Remeasurement |
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Carrying amount at March 31, 2022 | $ | |
Note 7. Share-Based Payments
Warrant Program and Amendments
The Company’s Articles of Association allow for the granting of equity compensation, in the form of equity settled warrants, to employees, consultants and Scientific Advisory Board members who provide services similar to employees, members of executive management, and the board of directors. The warrants granted in 2018 or prior become exercisable upon an exit event, which triggers an immediate vesting, or at any time as determined by the board of directors in accordance with the terms of the plan. The warrants granted in 2021 vest either gradually over
On January 4, 2021, the Company effected its Stock Split which also resulted in a reduction of the nominal value of the Company’s ordinary shares from DKK
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
The following schedule specifies the granted warrants:
Weighted Average | ||||
Exercise | ||||
Number of | Price/Share | |||
| warrants |
| (DKK) | |
Warrants granted as at December 31, 2021 |
| |
| DKK |
Warrants granted |
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| USD |
Warrants forfeited |
| ( |
| USD |
Warrants cancelled |
| — |
| – |
Warrants granted as at March 31, 2022 (3) |
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| DKK |
Warrants exercisable as at March 31, 2022 |
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| DKK |
Weighted Average | ||||
Exercise | ||||
Number of | Price/Share | |||
| warrants |
| (DKK) | |
Warrants granted as at December 31, 2020 |
| |
| DKK |
Warrants granted |
| — |
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Warrants forfeited |
| ( |
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Warrants cancelled |
| ( |
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Warrants granted as at March 31, 2021 |
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| DKK |
Warrants exercisable as at March 31, 2021 |
| — |
| — |
(1)December 31, 2021 USD-end rate used.
(2)March 31, 2022 USD-end rate used.
(3)Number of warrants exclude EIB Warrants referred to in Note 6.
During the three months ended March 31, 2022, the company granted
Subsequent to the Company’s IPO, determining the initial fair value and subsequent accounting for equity awards require significant judgment regarding expected life and volatility of an equity award; however, as a public listed company there is objective evidence of the fair value of an ordinary share on the date an equity award is granted. On the other hand, due to the fact that as of 2021, warrants will be granted at the share price on the date of grant, fair value comprises a time value which is significantly affected by the expected life and expected volatility. The expected life of a warrant is based on the assumption that the holder will not exercise until after the equity award is fully vested. Actual exercise patterns may differ from the assumption used herein. The expected volatility is based on peer group data and reflects the assumption that the historical volatility over a period similar to the life of the warrant is indicative of future trends, which may not necessarily be the actual outcome. The peer group consists of listed companies that management believes are similar to the Company in respect to industry and stage of development. Even with objective evidence of the fair value of an ordinary share, small changes in any other individual assumption or in combination with other assumptions could have resulted in significantly different valuations.
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Notes to the Unaudited Condensed Consolidated Interim Financial Statements
Note 8. Capital Structure and Financial Matters
Share Capital – Ordinary Shares
There are
Number of | Share Capital | |||
Ordinary Shares | (DKK in thousands) | |||
Share capital, December 31, 2021 |
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Share capital, March 31, 2022 |
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Note 9. Events After the Reporting Period
Change of Chief Business Officer and Interim Chief Financial Officer; Appointment of New Interim Chief Financial Officer
Effective April 1, 2022, the Company’s Chief Business Officer and Interim Chief Financial Officer resigned from these positions with the Company. The Company’s Chief Operating Officer has been appointed as Interim Chief Financial Officer effective April 1, 2022.
Legal Proceeding
On April 28, 2022, the Company received formal notice that on April 21, 2022, Statens Serum Institut (“SSI”), had initiated a legal proceeding against the Company in The Danish Maritime and Commercial High Court (Sø og Handelsretten), claiming sole ownership of a patent application (PCT/EP2020/050058 and subsequently national filings, EP3906045), the Companywe filed related to a method for treating malignant neoplasm by administering a composition comprising a high dose of neopeptides, a solvent and SSI’s liposomal adjuvant, CAF®09b, for which the Company have a non-exclusive, royalty-bearing sub-licensable license to use from SSI (the “Invention”).
The patent application for the Invention relates solely to the use of the adjuvant CAF®09b in conjunction with a high dose of neopeptides in our EVX-01 product candidate. SSI’s claim to the patent application does not relate to any other aspect of the Company’s patent portfolio covering EVX-01 or the PIONEER platform technology. The patent application stems from work the Company we performed under a collaboration agreement the Company entered into with SSI, DTU, Center for Cancer Immune Therapy (Herlev Hospital) and the Center for Genomic Medicine (Rigshospitalet). The patent application names the Company and certain of the Company’s employees as the sole invertors of the Invention.
In its filing, SSI’s primary claim is that the Invention disclosed in the patent application was not made by the Company and its and our employees, but rather, that SSI and members of its staff made the Invention and, therefore, SSI and certain of its staff members should be listed as the sole inventors of the Invention. In the alternative, SSI claims that it should have co-ownership with the Company of the patent application and the Invention.
While it is too early to fully assess how the court will resolve this matter, it is the Company’s position that the Company and its employees are the sole inventors of the Invention. The Company’s believes that it has strong defenses against SSI’s claim and that SSI’s claim is without merit. The Company intends to vigorously defend the action. In any event, even if SSI’s claim were to be upheld by the court, while no assurance can be given, the Company does not expect that it would have a material impact on its rights to use the Invention in the development and commercialization of EVX-01, as the Company believes that such rights are covered by its current license agreement with SSI and SSI would be excluded from enforcing its rights in the Invention to prevent the Company from developing and commercializing its EVX-01 product candidate.
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