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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, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-37471
PIERIS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Nevada 30-0784346
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
255 State Street9th Floor 
Boston,MA
United States02109
(Address of principal executive offices) (Zip Code)
857-246-8998
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, $0.001 par value per sharePIRSThe Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company
1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No 

As of August 3, 2020, the registrant had 52,398,600 shares of common stock outstanding.
2


TABLE OF CONTENTS
 Page


i


Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties, principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding future events, our future financial performance, expectations for growth and revenues, anticipated timing and amounts of milestone and other payments under collaboration agreements, business strategy and plans, objectives of management for future operations, timing and outcome of legal and other proceedings, and our ability to finance our operations are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “look forward,” “ongoing,” “could,” “estimates,” “expects,” “intends,” “may,” “appears,” “suggests,” “future,” “likely,” “plans,” “potential,” “possibly,” “projects,” “predicts,” “seek,” “should,” “target,” “would” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in our most recent Annual Report on Form 10-K, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements to differ materially.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. Actual results could differ materially from our forward-looking statements due to a number of factors, including, without limitation, risks related to: the results of our research and development activities, including uncertainties relating to the discovery of potential drug candidates and the preclinical and ongoing or planned clinical testing of our drug candidates; the early stage of our drug candidates presently under development; our ability to obtain and, if obtained, maintain regulatory approval of our current drug candidates and any of our other future drug candidates; our need for substantial additional funds in order to continue our operations and the uncertainty of whether we will be able to obtain the funding we need; our future financial performance; our ability to retain or hire key scientific or management personnel; our ability to protect our intellectual property rights that are valuable to our business, including patent and other intellectual property rights; our dependence on third-party manufacturers, suppliers, research organizations, testing laboratories and other potential collaborators; the success of our collaborations with third parties; our ability to meet milestones; our ability to successfully market and sell our drug candidates in the future as needed; the size and growth of the potential markets for any of our approved drug candidates, and the rate and degree of market acceptance of any of our approved drug candidates; competition in our industry; regulatory developments in the United States and foreign countries, including the timing for, and outcome of, the additional in-use and compatibility study for PRS-343 as requested by the FDA in July 2020, and the resolution of the partial clinical hold relating to that drug candidate; the expected impact of new accounting standards; and the length and severity of the pandemic relating to SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, which could have an impact on our research, development, supply chain, and clinical trials.

You should not place undue reliance on any forward-looking statement(s), each of which applies only as of the date of this Quarterly Report on Form 10-Q. Before you invest in our securities, you should be aware that the occurrence of the events described in Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the Securities and Exchange Commission, or SEC, on March 13, 2020, as well as those in Part II, Item 1A (Risk Factors) of our Quarterly Report on Form 10-Q, for the fiscal quarter ended March 31, 2020, filed with the SEC on May 11, 2020, could negatively affect our business, operating results, financial condition and stock price. All forward-looking statements included in this document are based on information available to us on the date hereof, and except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our statements to actual results or changed expectations.
Currency Presentation and Currency Translation
Unless otherwise indicated, all references to “dollars,” “$,” “U.S. $” or “U.S. dollars” are to the lawful currency of the United States. All references in this Quarterly Report on Form 10-Q to “euro” or “€” are to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended. We prepare our financial statements in U.S. dollars.
The functional currency for our operations is primarily the euro. With respect to our financial statements, the translation from the euro to U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for
revenue and expense accounts using a weighted average exchange rate during the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income/loss.
Where in this Quarterly Report on Form 10-Q we refer to amounts in euros, we have for your convenience also, in certain cases, provided a conversion of those amounts to U.S. dollars in parentheses. Where the numbers refer to a specific balance sheet account date or financial statement account period, we have used the exchange rate that was used to perform the conversions in connection with the applicable financial statement. In all other instances, unless otherwise indicated, the conversions have been made using the noon buying rate of €1.00 to U.S. $1.1202 based on information provided by Thomson Reuters as of June 30, 2020.
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PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.
PIERIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands)
 June 30,December 31,
 20202019
Assets
Current assets:
Cash and cash equivalents$44,302  $62,260  
Short term investments32,912  41,894  
Accounts receivable10,712  6,787  
Prepaid expenses and other current assets4,102  4,072  
Total current assets92,028  115,013  
Property and equipment, net20,506  19,502  
Operating lease right-of-use assets3,274  3,436  
Other non-current assets1,975  3,146  
Total assets$117,783  $141,097  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$4,406  $5,803  
Accrued expenses and other current liabilities5,942  9,944  
Deferred revenues, current portion7,912  11,256  
Total current liabilities18,260  27,003  
Deferred revenue, net of current portion37,845  47,258  
Operating lease liabilities15,006  15,484  
Total liabilities71,111  89,745  
Stockholders’ equity:
Preferred stock    
Common stock52  55  
Additional paid-in capital230,407  227,468  
Accumulated other comprehensive loss(1,064) (1,995) 
Accumulated deficit(182,723) (174,176) 
Total stockholders’ equity46,672  51,352  
Total liabilities and stockholders’ equity$117,783  $141,097  
The accompanying notes are an integral part of these condensed consolidated financial statements.

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PIERIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except per share data)
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Revenue
Customer revenue$10,930  $4,723  $19,815  $11,949  
Collaboration revenue316  609  4,692  1,928  
Total revenue11,246  5,332  24,507  13,877  
Operating expenses
Research and development11,333  13,373  24,091  27,669  
General and administrative4,568  4,189  8,927  9,121  
Total operating expenses15,901  17,562  33,018  36,790  
Loss from operations(4,655) (12,230) (8,511) (22,913) 
Other (expense) income
Interest income129  449  448  955  
Other (expense) income, net(424) 23  (484) (148) 
Net loss$(4,950) $(11,758) $(8,547) $(22,106) 
Other comprehensive income:
Foreign currency translation178  (414) 830  272  
Unrealized gain (loss) on available-for-sale securities(15) (237) 101  3  
Comprehensive loss$(4,787) $(12,409) $(7,616) $(21,831) 
Net loss per share
Basic and diluted$(0.09) $(0.24) $(0.16) $(0.44) 
Weighted average number of common shares outstanding
Basic and diluted52,371  49,204  53,792  50,034  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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PIERIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
For the Three Months Ended June 30, 2019 and 2020
 Preferred sharesCommon sharesAdditional
paid-in
capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total Stockholders' equity
 No. of
shares
Share
capital
No. of
shares
Share
capital
Balance as of March 31, 20198  $  49,151  $49  $191,224  $(2,056) $(159,055) $30,162  
Change in Retained Earnings from adoption of ASC 606
—  —  —  —  —  —  —  —  
Net loss—  —  —  —  —  —  (11,758) (11,758) 
Foreign currency translation adjustment—  —  —  —  —  (414) —  (414) 
Unrealized gains/(losses) on investments—  —  —  —  —  (237) —  (237) 
Stock based compensation expense—  —  —  —  1,452  —  —  1,452  
Issuance of common stock resulting from exercise of stock options—  —  50  —  97  —  —  97  
Issuance of common stock resulting from purchase of employee stock purchase plan shares—  —  58  —  178  —  —  178  
Issuance of common stock resulting from exercise of warrants—  —  3  —  5  —  —  5  
Balance as of June 30, 20198  $  49,262  $49  $192,956  $(2,707) $(170,813) $19,485  
Balance as of March 31, 202011  $  55,212  $55  $228,751  $(1,227) $(177,773) $49,806  
Net loss—  —  —  —  —  —  (4,950) (4,950) 
Foreign currency translation adjustment—  —  —  —  —  178  —  178  
Unrealized gains/(losses) on investments—  —  —  —  —  (15) —  (15) 
Stock based compensation expense—  —  —  —  1,237  —  —  1,237  
Issuance of common stock resulting from exercise of stock options—  —  139  —  271  —  —  271  
Issuance of common stock resulting from purchase of employee stock purchase plan shares—  —  47  —  145  —  —  145  
Preferred stock conversion (Series D)3  —  (3,000) (3) 3  —  —  —  
Balance as of June 30, 202014  $  52,399  $52  $230,407  $(1,064) $(182,723) $46,672  
The accompanying notes are an integral part of these condensed consolidated financial statements.

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PIERIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
For the Six Months Ended June 30, 2019 and 2020
Preferred sharesCommon sharesAdditional paid-in capitalAccumulated other comprehensive lossAccumulated deficitTotal Stockholders' equity
No. of sharesShare capitalNo. of sharesShare capital
Balance as of December 31, 20183  $  54,151  $54  $189,929  $(2,982) $(147,066) $39,935  
Change in Retained Earnings from adoption of ASC 606
—  —  —  —  —  —  (1,641) (1,641) 
Net loss—  —  —  —  —  —  (22,106) (22,106) 
Foreign currency translation adjustment—  —  —  —  —  272  —  272  
Unrealized loss on investments—  —  —  —  —  3  —  3  
Stock based compensation expense—  —  —  —  2,742  —  —  2,742  
Issuance of common stock resulting from exercise of stock options—  —  50  —  97  —  —  97  
Issuance of common stock resulting from purchase of employee stock purchase plan shares—  —  58  —  178  —  —  178  
Issuance of common stock resulting from exercise of warrants—  —  3  —  5  —  —  5  
Preferred stock conversion5  —  (5,000) (5) 5  —  —  —  
Balance as of June 30, 20198  $  49,262  $49  $192,956  $(2,707) $(170,813) $19,485  
Balance as of December 31, 201911  $  55,212  $55  $227,468  $(1,995) $(174,176) $51,352  
Net loss—  —  —  —  —  —  (8,547) (8,547) 
Foreign currency translation adjustment—  —  —  —  —  830  —  830  
Unrealized gain on investments—  —  —  —  —  101  —  101  
Stock based compensation expense—  —  —  —  2,520  —  —  2,520  
Issuance of common stock resulting from exercise of stock options—  —  139  —  271  —  —  271  
Issuance of common stock resulting from purchase of employee stock purchase plan shares—  —  47  —  145  —  —  145  
Preferred stock conversion (Series D)3  —  (3,000) (3) 3  —  —  —  
Balance as of June 30, 202014  $  52,399  $52  $230,407  $(1,064) $(182,723) $46,672  
The accompanying notes are an integral part of these condensed consolidated financial statements.
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PIERIS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 Six Months Ended June 30,
 2020
2019 (1)
Operating activities:
Net loss$(8,547) $(22,106) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation869  208  
Right-of-use asset amortization156  215  
Stock-based compensation2,520  2,742  
Other non-cash transactions343  (151) 
Changes in operating assets and liabilities(20,250) (6,749) 
Net cash used in operating activities(24,909) (25,841) 
Investing activities:
Purchases of property and equipment(2,988) (1,054) 
Proceeds from maturity of investments47,523  35,647  
Purchases of investments(38,525) (26,997) 
Net cash provided by investing activities6,010  7,596  
Financing activities:
Proceeds from exercise of stock options271  97  
Proceeds from exercise of warrants  5  
Proceeds from employee stock purchase plan145  178  
Net cash provided by financing activities416  280  
Effect of exchange rate change on cash and cash equivalents525  (2,001) 
Net decrease in cash and cash equivalents(17,958) (19,966) 
Cash and cash equivalents at beginning of period62,260  74,867  
Cash and cash equivalents at end of period$44,302  $54,901  
Supplemental cash flow disclosures:
Net unrealized gain on investments$31  $93  
Property and equipment included in accounts payable$329  $31  
(1) Restated to conform to ASC 842. See accompanying Note 2.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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PIERIS PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
1.  Corporate Information
Pieris Pharmaceuticals, Inc. was founded in May 2013, and acquired 100% interest in Pieris Pharmaceuticals GmbH (formerly Pieris AG, a German company that was founded in 2001) in December 2014. Pieris Pharmaceuticals, Inc. and its wholly-owned subsidiaries, hereinafter collectively Pieris, or the Company, is a clinical-stage biopharmaceutical company that discovers and develops Anticalin-based drugs to target validated disease pathways in unique and transformative ways. Pieris’ corporate headquarters is located in Boston, Massachusetts and its research facility is located in Hallbergmoos, Germany.
Pieris’ clinical pipeline includes an inhaled IL-4Rα antagonist Anticalin protein to treat uncontrolled asthma and an immuno-oncology, or IO, bispecific targeting HER2 and 4-1BB.
The Company’s core Anticalin technology and platform was developed in Germany, and the Company has partnership arrangements with several major multi-national pharmaceutical companies.
As of June 30, 2020, the Company had cash, cash equivalents and investments of $77.2 million. The Company expects that its existing cash, cash equivalents and investments are sufficient to support operating expense and capital expenditure requirements for at least 12 months from the date of this filing.

2. Summary of Significant Accounting Policies
The Company´s significant accounting policies are described in Note 2 - Summary of Significant Accounting Policies, within the Company´s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. There has been no material change to the significant accounting policies during the six months ended June 30, 2020, other than the Adoption of Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, or ASU 2018-18, described in more detail below.
Unaudited Interim Financial Information
The accompanying unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, and disclosures considered necessary for a fair presentation of interim period results have been included. Interim results for the three and six months ended June 30, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which was filed with the SEC on March 13, 2020.
Basis of Presentation and Use of Estimates
The accompanying condensed consolidated financial statements of Pieris Pharmaceuticals, Inc. and its wholly-owned subsidiaries were prepared in accordance with U.S. GAAP. The condensed consolidated financial statements include the accounts of all subsidiaries. All intercompany balances and transactions have been eliminated.
The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures at the date of the financial statements and during the reporting period. Significant estimates are used for, but are not limited to, revenue recognition; deferred tax assets, deferred tax liabilities and valuation allowances; determination of the incremental borrowing rate to calculate right-of-use assets and lease liabilities; beneficial conversion features; fair value of stock options, preferred stock, and warrants; and various accruals. Management evaluates its estimates on an ongoing basis. Actual results and outcomes could differ materially from management’s estimates, judgments and assumptions.
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Cash, Cash Equivalents and Investments
The Company determines the appropriate classification of its investments at the time of purchase. All liquid investments with original maturities of 90 days or less from the purchase date and for which there is an active market are considered to be cash equivalents. The Company’s investments are comprised of money market, asset backed securities, government treasuries and corporate bonds that are classified as available-for-sale in accordance with FASB Accounting Standards Codification, or ASC, 320, Investments—Debt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its balance sheets.

Available-for-sale investments are recorded at fair value, with unrealized gains or losses included in accumulated other comprehensive loss on the Company’s balance sheets. Realized gains and losses are determined using the specific identification method and are included as a component of other income.

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than temporary, the Company considers its intent to sell or whether it is more likely than not that the Company will be required to sell the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, the severity and the duration of the impairment and changes in value subsequent to period end.
Concentration of Credit Risk and Off-Balance Sheet Risk
The Company has no financial instruments with off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. Financial instruments that subject Pieris to concentrations of credit risk include cash and cash equivalents, investments, and accounts receivable. The Company’s cash, cash equivalents, and investments are held in accounts with financial institutions that management believes are creditworthy. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentration of credit risk. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. Accounts receivable primarily consist of amounts due under strategic partnership and other license agreements with major multi-national pharmaceutical companies for which the Company does not obtain collateral.
Fair Value Measurement
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. FASB ASC Topic 820, Fair Value Measurement and Disclosures, or ASC 820, established a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the financial instrument based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the financial instrument and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported or disclosed fair value of the financial instruments and is not a measure of the investment credit quality. Fair value measurements are classified and disclosed in one of the following three categories:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency.
Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Financial instruments measured at fair value on a recurring basis include cash equivalents and investments (Note 4).

7


An entity may elect to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in net loss. The Company did not elect to measure any additional financial instruments or other items at fair value.
Property and Equipment

Property and equipment are recorded at acquisition cost, less accumulated depreciation and impairment. Depreciation on property and equipment is calculated using the straight-line method over the remaining estimated useful lives of the assets. Maintenance and repairs to these assets are charged to expenses as occurred. For the six months ended June 30, 2020, the Company added material assets related to the February 2020 move to a new research and development facility in Hallbergmoos, Germany. Because of this, the Company expanded its presentation of property and equipment to be more descriptive and updated the useful life for one asset category on a prospective basis only. The disclosures for property and equipment, net as of December 31, 2019 have been reclassified to confirm with the current period presentation. The estimated useful life of the different groups of property and equipment is as follows:

Asset ClassificationEstimated useful life (in years)
Leasehold improvementsshorter of useful life or remaining life of the lease
Laboratory furniture and equipment
8-14
Office furniture and equipment
5-13
Computer and equipment
3-7
Revenue Recognition

The Company has entered into several licensing agreements with collaboration partners for the development of Anticalin therapeutics against a variety of targets. The terms of these agreements provide for the transfer of multiple goods or services which may include: (i) licenses, or options to obtain licenses, to the Company’s Anticalin technology and/or specific programs and (ii) research and development activities to be performed on behalf of or with a collaborative partner. Payments to Pieris under these agreements may include upfront fees (which include license and option fees), payments for research and development activities, payments based upon the achievement of certain milestones and royalties on product sales. There are no performance, cancellation, termination or refund provisions in any of the arrangements that could result in material financial consequences to Pieris.

Collaborative Arrangements

The Company considers the nature and contractual terms of an arrangement and assess whether the arrangement involves a joint operating activity pursuant to which it is an active participant and exposed to significant risks and rewards with respect to the arrangement. If the Company is an active participant and exposed to the significant risks and rewards with respect to the arrangement, it accounts for these arrangements pursuant to ASC 808, Collaborative Arrangements, or ASC 808, and applies a systematic and rational approach to recognize revenue. The Company classifies payments received as revenue and payments made as a reduction of revenue in the period in which they are earned.

In November 2018, the FASB issued Accounting Standards Update, or ASU, 2018-18, which makes targeted improvements to generally accepted accounting principles for collaborative arrangements, including: clarification that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers, or ASC 606, when the collaborative arrangement participant is a customer in the context of a unit of account, adding unit-of-account guidance in ASC 808 to align with the guidance in ASC 606, and a requirement that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under ASC 606 is precluded if the collaborative arrangement participant is not a customer. The guidance per ASU 2018-18 was adopted retrospectively to the date of initial application of ASC 606. The Company adopted ASU 2018-18 in the first quarter of 2020. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements; however, revenue recognized under a collaborative arrangement involving a participant that is not a customer (Collaboration Revenue) is now presented separately from Customer Revenue. This change has been reflected in the condensed consolidated statement of operations and the 2019 amounts were adjusted to conform to ASC 808 as follows:
8


 Three Months Ended June 30, 2019Six Months Ended June 30, 2019
As reported pre-adoptionASC 808 Adoption AdjustmentAs reported post-adoptionAs reported pre-adoptionASC 808 Adoption AdjustmentAs reported post-adoption
Customer revenue $4,934  $(211) $4,723  $12,468  $(519) $11,949  
Collaboration revenue398  211  609  1,409  519  1,928  
Total Revenue$5,332  $  $5,332  $13,877  $  $