UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20192020
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 000-52091
GEOVAX LABS, INC.
(Exact name of Registrant as specified in its charter)
Delaware |
| |
(State or other jurisdiction | (I.R.S. Employer Identification No.) | |
of incorporation or organization) | ||
1900 Lake Park Drive | ||
, Suite 380 | ||
Smyrna, Georgia | 30080 | |
(Address of principal executive offices) | (Zip Code) |
(678) 384-7220
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Emerging growth company | ☐ |
Smaller reporting company | ☒ |
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 ☒
Securities registered pursuant to Section 12(b) of the Act:
As of May 13, 2019, 610,0895, 2020, 13,819,101 shares of the Registrant’s common stock, $.001 par value, were issued and outstanding.
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION | ||
Item 1 | Condensed Consolidated Financial Statements: | |
| Condensed Consolidated Balance Sheets as of March 31, | 1 |
| Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2020 and 2019 | 2 |
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) for the three-month periods ended March 31, 2020 and 2019 | 3 | |
| Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2020 and 2019 | 4 |
| Notes to Condensed Consolidated Financial Statements (unaudited) | 5 |
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 |
Item 3 | Quantitative and | 14 |
Item 4 | Controls and Procedures | 14 |
PART II – OTHER INFORMATION | ||
Item 1 | Legal Proceedings | 15 |
Item 1A | Risk Factors | 15 |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
Item 3 | Defaults Upon Senior Securities | 15 |
Item 4 | Mine Safety Disclosures | 15 |
Item 5 | Other Information | 15 |
Item 6 | Exhibits | 16 |
SIGNATURES | 17 | |
|
Part I -- FINANCIAL INFORMATION
| Item 1 Financial Statements |
GEOVAX LABS, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
March 31, | December 31, | March 301 | December 31, | |||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 175,985 | $ | 259,701 | $ | 221,807 | $ | 283,341 | ||||||||
Grant funds and other receivables | 160,277 | 121,814 | 520,509 | 68,603 | ||||||||||||
Prepaid expenses and other current assets | 111,647 | 238,189 | 67,895 | 95,320 | ||||||||||||
Total current assets | 447,909 | 619,704 | 810,211 | 447,264 | ||||||||||||
Property and equipment, net (Note 5) | 13,725 | 11,350 | 9,612 | 10,606 | ||||||||||||
Deposits | 11,010 | 11,010 | 11,010 | 11,010 | ||||||||||||
Total assets | $ | 472,644 | $ | 642,064 | $ | 830,833 | $ | 468,880 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 253,166 | $ | 125,859 | $ | 740,829 | $ | 152,653 | ||||||||
Accrued expenses (Note 6) | 1,378,710 | 1,238,552 | 1,917,425 | 1,851,040 | ||||||||||||
Current portion of notes payable (Note 7) | 12,500 | 260,420 | 12,048 | 12,500 | ||||||||||||
Total current liabilities | 1,644,376 | 1,624,831 | 2,670,302 | 2,016,193 | ||||||||||||
Note payable, net of current portion (Note 7) | 35,417 | 39,580 | 24,781 | 27,243 | ||||||||||||
Total liabilities | 1,679,793 | 1,664,411 | 2,695,083 | 2,043,436 | ||||||||||||
Commitments (Note 8) | ||||||||||||||||
Stockholders’ equity (deficiency): | ||||||||||||||||
Preferred stock, $.01 par value: | ||||||||||||||||
Preferred Stock, $.01 par value (Note 9): | ||||||||||||||||
Authorized shares – 10,000,000 | ||||||||||||||||
Series B convertible preferred stock, $1,000 stated value; 100 shares issued and outstanding at March 31, 2019 and December 31, 2018 | 76,095 | 76,095 | ||||||||||||||
Series C convertible preferred stock, $1,000 stated value; -0- and 2,150 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | - | 705,238 | ||||||||||||||
Series E convertible preferred stock, $1,000 stated value; -0- and 1,200 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | - | 1,190,000 | ||||||||||||||
Series F convertible preferred stock, $1,000 stated value; 2,583 and -0- shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 1,591,763 | - | ||||||||||||||
Series G convertible preferred stock, $1,000 stated value; 500 and -0- shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 404,250 | - | ||||||||||||||
Issued and outstanding shares – 400 and 2,486 March 31, 2020 and December 31, 2019, respectively | 376,095 | 1,932,433 | ||||||||||||||
Common stock, $.001 par value: | ||||||||||||||||
Authorized shares – 600,000,000 | ||||||||||||||||
Issued and outstanding shares – 556,489 and 437,807 at March 31, 2019 and December 31, 2018, respectively | 556 | 438 | ||||||||||||||
Issued and outstanding shares – 13,791,601 and 299,835 at March 31, 2020 and December 31, 2019, respectively | 13,792 | 300 | ||||||||||||||
Additional paid-in capital | 37,898,525 | 37,482,766 | 41,189,070 | 39,340,224 | ||||||||||||
Accumulated deficit | (41,178,338 | ) | (40,476,884 | ) | (43,443,207 | ) | (42,847,513 | ) | ||||||||
Total stockholders’ equity (deficiency) | (1,207,149 | ) | (1,022,347 | ) | (1,864,250 | ) | (1,574,556 | ) | ||||||||
Total liabilities and stockholders’ equity (deficiency) | $ | 472,644 | $ | 642,064 | $ | 830,833 | $ | 468,880 |
See accompanying notes to condensed consolidated financial statements.
GEOVAX LABS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Grant and collaboration revenues | $ | 364,232 | $ | 221,299 | $ | 715,977 | $ | 364,232 | ||||||||
Operating expenses: | ||||||||||||||||
Research and development | 555,718 | 486,994 | 808,936 | 555,718 | ||||||||||||
General and administrative | 510,064 | 357,228 | 502,345 | 510,064 | ||||||||||||
Total operating expenses | 1,065,782 | 844,222 | 1,311,281 | 1,065,782 | ||||||||||||
Loss from operations | (701,550 | ) | (622,923 | ) | (595,304 | ) | (701,550 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income | 1,224 | 1,318 | 752 | 1,224 | ||||||||||||
Interest expense | (1,128 | ) | (208 | ) | (1,142 | ) | (1,128 | ) | ||||||||
Total other income (expense) | 96 | 1,110 | (390 | ) | 96 | |||||||||||
Net loss | $ | (701,454 | ) | $ | (621,813 | ) | $ | (595,694 | ) | $ | (701,454 | ) | ||||
Basic and diluted: | ||||||||||||||||
Net loss per common share | $ | (1.43 | ) | $ | (2.50 | ) | $ | (0.13 | ) | $ | (2,851.44 | ) | ||||
Weighted average shares outstanding | 491,707 | 248,340 | 4,687,893 | 246 |
See accompanying notes to condensed consolidated financial statements.
GEOVAX LABS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
(Unaudited)
Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Series E Convertible Preferred Stock | Three-Months Ended March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 100 | $ | 76,095 | 2,570 | $ | 842,990 | 1,000 | $ | 980,000 | - | $ | - | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock (Note 9) | Common Stock | Additional | Accumulated | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Paid-in Capital | Deficit | (Deficiency) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 2,486 | $ | 1,932,433 | 299,835 | $ | 300 | $ | 39,340,224 | $ | (42,847,513 | ) | $ | (1,574,556 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Sale of convertible preferred stock for cash | - | - | - | - | - | - | 600 | 590,000 | 300 | 300,000 | - | - | - | - | 300,000 | |||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred stock to common stock | - | - | - | - | (450 | ) | (441,000 | ) | - | - | (2,386 | ) | (1,856,338 | ) | 13,481,349 | 13,481 | 1,842,857 | - | - | |||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018 | 100 | $ | 76,095 | 2,570 | $ | 842,990 | 550 | $ | 539,000 | 600 | $ | 590,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for services | - | - | 10,417 | 11 | 5,989 | - | 6,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2020 | - | - | - | - | - | (595,694 | ) | (595,694 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 400 | $ | 376,095 | 13,791,601 | $ | 13,792 | $ | 41,189,070 | $ | (43,443,207 | ) | $ | (1,864,250 | ) |
Total | ||||||||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Stockholders’ Equity | |||||||||||||||||
Shares | Amount | Capital | Deficit | (Deficiency) | ||||||||||||||||
Balance at December 31, 2017 | 213,474 | $ | 213 | $ | 35,696,435 | $ | (37,916,790 | ) | $ | (321,057 | ) | |||||||||
Sale of convertible preferred stock for cash | - | - | - | - | 590,000 | |||||||||||||||
Issuance of common stock for services | 10,000 | 10 | 199,990 | - | 200,000 | |||||||||||||||
Conversion of preferred stock to common stock | 60,000 | 60 | 440,940 | - | - | |||||||||||||||
Stock-based compensation expense | - | - | 23,978 | - | 23,978 | |||||||||||||||
Net loss for the three months ended March 31, 2018 | - | - | - | (621,813 | ) | (621,813 | ) | |||||||||||||
Balance at March 31, 2018 | 283,474 | $ | 283 | $ | 36,361,343 | $ | (36,538,603 | ) | $ | (128,892 | ) |
Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series E Convertible Preferred Stock | Series F Convertible Preferred Stock | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance at December 31, 2018 | 100 | $ | 76,095 | 2,150 | $ | 705,238 | 1,200 | $ | 1,190,000 | - | $ | - | ||||||||||||||||||||
Conversion of preferred stock to common stock | - | - | (587 | ) | (192,557 | ) | - | - | (180 | ) | (110,918 | ) | ||||||||||||||||||||
Exchange of preferred stock | - | - | (1,563 | ) | (512,681 | ) | (1,200 | ) | (1,190,000 | ) | 2,763 | 1,702,681 | ||||||||||||||||||||
Balance at March 31, 2019 | 100 | $ | 76,095 | - | $ | - | - | $ | - | 2,583 | $ | 1,591,763 |
Three-Months Ended March 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series G Convertible Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | Preferred Stock (Note 9) | Common Stock | Additional | Accumulated | Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficiency) | Shares | Amount | Shares | Amount | Paid-in Capital | Deficit | (Deficiency) | |||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | - | $ | - | 437,807 | $ | 438 | $ | 37,482,766 | $ | (40,476,884 | ) | $ | (1,022,347 | ) | 3,450 | $ | 1,971,333 | 219 | $ | - | $ | 37,483,204 | $ | (40,476,884 | ) | $ | (1,022,347 | ) | ||||||||||||||||||||||||||||
Sale of convertible preferred stock for cash and cancellation of note payable | 500 | 404,250 | - | - | 85,750 | - | 490,000 | 500 | 404,250 | - | - | 85,750 | - | 490,000 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred stock to common stock | - | - | 118,280 | 118 | 303,357 | - | - | (767 | ) | (303,475 | ) | 59 | - | 303,475 | - | - | ||||||||||||||||||||||||||||||||||||||||
Fractional shares issuable upon reverse stock split | - | - | 402 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | - | - | - | - | 26,652 | - | 26,652 | - | - | - | - | 26,652 | - | 26,652 | ||||||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2019 | - | - | - | - | - | (701,454 | ) | (701,454 | ) | - | - | - | - | - | (701,454 | ) | (701,454 | ) | ||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | 500 | $ | 404,250 | 556,489 | $ | 556 | $ | 37,898,525 | $ | (41,178,338 | ) | $ | (1,207,149 | ) | 3,183 | $ | 2,072,108 | 278 | $ | - | $ | 37,899,081 | $ | (41,178,338 | ) | $ | (1,207,149 | ) |
See accompanying notes to consolidated financial statements.
GEOVAX LABS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (701,454 | ) | $ | (621,813 | ) | $ | (595,694 | ) | $ | (701,454 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization | 1,897 | 4,980 | 994 | 1,897 | ||||||||||||
Stock-based compensation expense | 153,224 | 52,549 | 6,000 | 153,224 | ||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Grant funds and other receivables | (38,463 | ) | 54,758 | (451,906 | ) | (38,463 | ) | |||||||||
Prepaid expenses and other current assets | (30 | ) | 20,848 | 27,425 | (30 | ) | ||||||||||
Accounts payable and accrued expenses | 267,465 | 107,105 | 654,561 | 267,465 | ||||||||||||
Total adjustments | 384,093 | 240,240 | 237,074 | 384,093 | ||||||||||||
Net cash used in operating activities | (317,361 | ) | (381,573 | ) | (358,620 | ) | (317,361 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchase of property and equipment | (4,272 | ) | - | - | (4,272 | ) | ||||||||||
Net cash used in investing activities | (4,272 | ) | - | - | (4,272 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||
Net proceeds from sale of preferred stock | 240,000 | 590,000 | 300,000 | 240,000 | ||||||||||||
Proceeds from issuance of note payable | - | 50,000 | ||||||||||||||
Principal repayment of note payable | (2,083 | ) | - | (2,914 | ) | (2,083 | ) | |||||||||
Net cash provided by financing activities | 237,917 | 640,000 | 297,086 | 237,917 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (83,716 | ) | 258,427 | (61,534 | ) | (83,716 | ) | |||||||||
Cash and cash equivalents at beginning of period | 259,701 | 312,727 | 283,341 | 259,701 | ||||||||||||
Cash and cash equivalents at end of period | $ | 175,985 | $ | 571,154 | $ | 221,807 | $ | 175,985 |
Supplemental disclosure of non-cash financing activities:
During the three months ended March 31, 2020, 1,686 shares of Series H Convertible Preferred Stock were converted into 9,393,937 shares of common stock and 700 shares of Series I Convertible Preferred Stock were converted into 4,087,412 shares of common stock.
During the three months ended March 31, 2019, 1,563 shares of Series C Convertible Preferred Stock and 1,200 shares of Series E Convertible Preferred Stock were exchanged for 2,763 shares of Series F Convertible Preferred Stock, 250 shares of Series G Convertible Preferred Stock were issued in exchange for cancellation of $250,000 of term notes payable, 587 shares of Series C Convertible Preferred Stock were converted into 78,28039 shares of common stock, and 180 shares of Series F Convertible Preferred Stock were converted into 40,00020 shares of common stock. During the three months ended March 31, 2018, 450 shares of Series D Convertible Preferred Stock were converted into 60,000 shares of common stock.
See accompanying notes to condensed consolidated financial statements.
GEOVAX LABS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 201920
(unaudited)
1. Description of Business
GeoVax Labs, Inc. (“GeoVax” or the “Company”), is a clinical-stage biotechnology company developing human vaccines and immunotherapies against infectious diseases and cancers using a novel patented Modified Vaccinia Ankara (MVA) Virus-Like Particle (MVA-VLP)(VLP) vaccine platform.platform (GV-MVA-VLPTM). In this platform, MVA, a large virus capable of carrying several vaccine antigens, expresses proteins that assemble into highly effective VLP immunogens in the person being vaccinated. The MVA-VLP virus replicates to high titers in approved avian cells for manufacturing but cannot productively replicate in mammalian cells. Therefore, the GeoVax MVA-VLP derived vaccines elicit durable immune responses in the host similar to a live attenuated virus, while providing the safety characteristics of a replication-defective vector.
Our current development programs are focused on preventive vaccines against novel coronavirus (COVID-19), Human Immunodeficiency Virus (HIV), Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, Lassa), and malaria, as well as therapeutic vaccines for chronic Hepatitis B infections and cancers. We believe our technology and vaccine development expertise are well-suited for a variety of human infectious diseases and we intend to pursue further expansion of our product pipeline.
Our corporate strategy is to improve the health toof patients worldwide by advancing our vaccine platform, using its unique capabilities to design and develop an array of products addressing unmet medical needs in the areas of infectious diseases and oncology. We aimintend to advance products through to human clinical testing, and to seek partnership or licensing arrangements for achieving regulatory approval and commercialization. We also leverage third party resources through government, academic and corporate research collaborations and partnerships for preclinical and clinical testing with multiple government, academic and corporate entities.testing.
Certain of our vaccine development activities have been, and continue to be, financially supported by the U.S. government. This support has been both in the form of research grants and contracts awarded directly to us, as well as indirect support for the conduct of preclinical animal studies and human clinical trials.
We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products require approval from, and are subject to, ongoing oversight by the Food and Drug Administration (FDA) in the United States, by the European Medicines Agency (EMA) in the European Union, and by comparable agencies in other countries. Obtaining approval for a new pharmaceutical product is never certain, may take many years and often involves expenditure of substantial resources. Our goal is to build a profitable company by generating income from products we develop and commercialize, either alone or with one or more potential strategic partners.
GeoVax is incorporated under the laws of the State of Delaware and our principal offices are located in the metropolitan Atlanta, Georgia area.
2. Basis of Presentation
The accompanying condensed consolidated financial statements at March 31, 20192020 and for the three-month periods ended March 31, 20192020 and 20182019 are unaudited, but include all adjustments, consisting of normal recurring entries, which we believe to be necessary for a fair presentation of the dates and periods presented. Interim results are not necessarily indicative of results for a full year. The financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. We expect our operating results to fluctuate for the foreseeable future; therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.
As described in Note 12,9, effective April 30, 2019, we enacted a one-for-five hundred reverse stock split of our common stock.stock, and effective January 21, 2020, we further enacted a one-for-two thousand reverse split. The accompanying financial statements, and all share and per share information contained herein, have been retroactively restated to reflect the reverse stock split.splits.
Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of the financial statements. We are devoting substantially all of our present efforts to research and development of our vaccine candidates. We have funded our activities to date from government grants and clinical trial assistance, and from sales of our equity securities. We will continue to require substantial funds to continue these activities.
We believe that our existing cash resources together with our government and collaborative funding commitments, and equity funding commitments discussed in Note 9 will be sufficient to continue our planned operations into the third quarter of 2019.2020. Due to our history of operating losses and our continuing need for capital to conduct our research and development activities, there is substantial doubt concerning our ability to operate as a going concern beyond that date. We are currently exploring sources of capital through additional government grants and corporate collaborations. We also intend to secure additional funds through sales of our equity securities or by other means. Management believes that we will be successful in securing the additional capital required to continue the Company’s planned operations, but that our plans do not fully alleviate the substantial doubt about the Company’s ability to operate as a going concern. Additional funding may not be available on favorable terms or at all. If we fail to obtain additional capital when needed, we will be required to delay, scale back, or eliminate some or all of our research and development programs as well as reduce our general and administrative expenses.
3. Significant Accounting Policies and Recent Accounting Pronouncements
We disclosed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20182019 those accounting policies that we consider significant in determining our results of operations and financial position. Other than as described below, there have been no material changes to, or in the application of, the accounting policies previously identified and described in the Form 10-K.
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02, Leases (ASU 2016-02). ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to classify leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to prior guidance for operating leases. We adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on our financial statements, given that the noncancelable term of our current lease is less than 12 months (see Note 8).
There have been no other recent accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2019,2020, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, which we expect to have a material impact on our financial statements.
4. Basic and Diluted Loss Per Common Share
Basic netand diluted loss per common share isare computed usingbased on the weighted-averageweighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares and potentially dilutive common share equivalents outstanding during the period. Potentially dilutive commonoutstanding. Common share equivalents consist of common shares issuable upon conversion of convertible preferred stock, and upon exercise of stock options and stock purchase warrants. CommonAll common share equivalents which potentially could dilute basic earningsare excluded from the computation of diluted loss per share insince the future, andeffect would be anti-dilutive. The weighted average number of common share equivalents which were excluded from the computation of diluted loss per share, as the effect would be anti-dilutive, totaled approximately 589,000970,571 and 446,000295 shares at March 31, 2020 and 2019, and 2018, respectively. See Note 9 for more information concerning our outstanding common share equivalents at March 31, 2020 that could potentially dilute earnings per share in the future.
5. Property and Equipment
Property and equipment as shown on the accompanying Condensed Consolidated Balance Sheets is composed of the following as of March 31, 20192020 and December 31, 2018:2019:
March 31, 2019 | December 31, 2018 | March 31, 2020 | December 31, 2019 | |||||||||||||
Laboratory equipment | $ | 534,578 | $ | 530,306 | $ | 534,577 | $ | 534,577 | ||||||||
Leasehold improvements | 115,605 | 115,605 | 115,605 | 115,605 | ||||||||||||
Other furniture, fixtures & equipment | 28,685 | 28,685 | 11,736 | 11,736 | ||||||||||||
Total property and equipment | 678,868 | 674,596 | 661,918 | 661,918 | ||||||||||||
Accumulated depreciation and amortization | (665,143 | ) | (663,246 | ) | (652,306 | ) | (651,312 | ) | ||||||||
Property and equipment, net | $ | 13,725 | $ | 11,350 | $ | 9,612 | $ | 10,606 |
6. Accrued Expenses
Accrued expenses as shown on the accompanying Condensed Consolidated Balance Sheets is composed of the following as of March 31, 20192020 and December 31, 2018:2019:
March 31, 2019 | December 31, 2018 | March 31, 2020 | December 31, 2019 | |||||||||||||
Accrued management salaries | $ | 1,026,467 | $ | 924,509 | $ | 1,418,797 | $ | 1,323,483 | ||||||||
Accrued directors’ fees | 333,870 | 295,670 | 436,920 | 409,219 | ||||||||||||
Other accrued expenses | 18,373 | 18,373 | 61,708 | 118,338 | ||||||||||||
Total accrued expenses | $ | 1,378,710 | $ | 1,238,552 | $ | 1,917,425 | $ | 1,851,040 |
7. Notes Payable
On February 28, 2018, we entered into a Senior Note Purchase Agreement with Georgia Research Alliance, Inc. (GRA) pursuant to which we issued a five-year Senior Promissory Note (the “GRA Note”) to GRA in exchange for $50,000. The GRA Note bears an annual interest rate of 5%, payable monthly, withmonthly. Future principal repayments beginning in the second year. Principal repayments are expected to be $8,333$8,964 for the remainder of 2019, $12,5002020 $12,487 in 2020, 2021, and$13,126 in 2022, and $2,083$2,252 in 2023. In connection with the GRA Note, we also issued to GRA a five-year warrant to purchase 358 shares of our common stock. Interest expense related to the GRA Note for the three-month periods ended March 31, 2020 and 2019 was $485 and 2018 was $621, and $208, respectively.
On December 27, 2018, we issued short-term non-interest-bearing Term Promissory Notes (the “Term Notes”) to two current investors in exchange for an aggregate of $250,000. In connection with the Term Notes, we also issued to the investors three-year warrants to purchase an aggregate of 20,000 shares of our common stock. In February 2019, the Term Notes were cancelled in exchange for shares of our convertible preferred stock (see Note 9).
8. Commitments
Lease Agreement
We lease approximately 8,400 square feet of office and laboratory space pursuant to an operating lease which expires on December 31, 2019, with annual extension options through December 31, 2022. Rent expense for the for the three-month periods ended March 31, 2020 and 2019 was $41,539 and 2018 was $40,316, and $39,136, respectively. Future minimum lease payments total $120,949 for the remainder of 2019. Our current intention is to exercise our option to extend$124,616 in 2020, $171,213 in 2021 and $176,356 in 2022, although the lease may be terminated at least for the subsequent one-year renewal period, subject to our landlord’s right to cancel the extension period 90any time by either party with ninety days prior to its commencement.written notice.
Other Commitments
In the normal course of business, we enter into various firm purchase commitments related to production and testing of our vaccine, conduct of research studies, and other activities. As of March 31, 2019,2020, there are approximately $487,000$539,000 of unrecorded outstanding purchase commitments to our vendors and subcontractors, all of which we expect will be due in 2019.2020. We expect this entire amount to be reimbursable to us pursuant to existing government grants.
9. Stockholders’ Equity
Series B Preferred Stock
AsSummary -- We are authorized to issue up to 10,000,000 shares of our Preferred Stock, $.01 par value, which may be issued in one or more series. The table below presents our issued and outstanding series of preferred stock as of March 31, 2019, there2020 and December 31, 2019. Each series of our outstanding preferred stock has a stated value of $1,000 per share. Further details concerning each series of preferred stock, and the changes in each series during the three months ended March 31, 2020 are 100 shares of ourdiscussed in the sections that follow the table.
March 31, 2020 | December 31, 2019 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Shares | Value | Shares | Value | |||||||||||||
Series B Convertible Preferred Stock | 100 | $ | 76,095 | 100 | $ | 76,095 | ||||||||||
Series H Convertible Preferred Stock | - | - | 1,686 | 1,156,338 | ||||||||||||
Series I Convertible Preferred Stock | - | - | 700 | 700,000 | ||||||||||||
Series J Convertible Preferred Stock | 300 | 300,000 | - | - | ||||||||||||
Total | 400 | $ | 376,095 | 2,486 | $ | 1,932,433 |
Series B Preferred Stock -- Our Series B Convertible Preferred Stock (“Series B Preferred Stock”) outstanding., has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series B Preferred Stock may be convertedhas no voting rights and is not entitled to a dividend. As of March 31, 2020, there were 100 shares of Series B Preferred Stock outstanding, convertible at any time at the option of the holder into shares of our common stock at a fixed conversion price of $175$350,000 per common share. There were no transactions involving our Series B Preferred Stock during the three months ended March 31, 2020.
Series H Preferred Stock –Our Series H Convertible Preferred Stock (“Series H Preferred Stock”) has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series H Preferred Stock has no voting rights and is not entitled to a dividend. During the three months ended March 31, 2019,2020, 1,686 shares of Series H Preferred Stock were converted into 9,393,937 shares of our common stock. As of March 31, 2020, there wereare no conversions or other transactions involving ourshares of Series BH Preferred Stock.Stock outstanding.
Series FI Preferred Stock –
On February 18, 2019, we entered into Exchange Agreements (the “Exchange Agreements”) with holders of ourOur Series C and Series E Convertible Preferred Stock, pursuant to which the holders exchanged all shares of Series C and Series E Preferred Stock held by them for an aggregate of 2,763 shares of Series FI Convertible Preferred Stock (“Series FI Preferred Stock”). Each share has rights and privileges as set forth in the pertinent Certificate of Series F Preferred Stock is entitled toDesignation of Preferences, Rights and Limitations, including a liquidation preference equal to its $1,000the stated value per share. The Series I Preferred Stock has no voting rights and is not entitled to a dividend. During the three months ended March 31, 2020, 700 shares of Series H Preferred Stock were converted into 4,087,412 shares of our common stock. As of March 31, 2020, there are no shares of Series I Preferred Stock outstanding
Series J Preferred Stock – On January 24, 2020, we entered into a Securities Purchase Agreement with the purchasers identified therein providing for the issuance and sale to the Purchasers of an aggregate of 300 shares of our Series J Convertible Preferred Stock (“Series G Preferred Stock”) for gross proceeds of $300,000. Our Series J Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series J Preferred Stock has no voting rights and is not entitled to a dividend. The Series FJ Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i) $7.50$2.00 per share and (ii) 90%80% of the volume weighted average price of the common stock during the ten trading days immediately preceding the delivery of a notice of conversion. The Series FJ Preferred Stock contains price adjustment provisions, which may, under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series FJ Preferred Stock. During the three months ended March 31, 2020, there were no conversions of Series J Preferred Stock and 300 shares are outstanding as of March 31, 2020.
Common Stock
During
Reverse Stock Split – Following approval by our shareholders at a meeting held on January and February 2019 (prior to the exchange discussed above), the holders converted 587 shares of Series C Preferred Stock into 78,280 shares3, 2020, on January 21, 2020, we effected a one-for-two thousand reverse split of our common stock. During March 2019 (subsequentstock by the filing of an amendment to our certificate of incorporation with the exchange),State of Delaware.
As discussed under “Preferred Stock” above, during the holders converted 180 shares of Series F Preferred Stock into 40,000 shares of our common stock. As ofthree months ended March 31, 2019, there are no shares of our Series C or Series E Preferred Stock outstanding, and 2,583 shares of our Series F Preferred Stock outstanding.
Series G Preferred Stock
On February 25, 2019,2020, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of up to 1,000 shares of our Series G Convertible Preferred Stock (“Series G Preferred Stock”) and related warrants for gross proceeds of up to $1.0 million, to be funded at up to three different closings. Each share of Series G Preferred Stock is entitled to a liquidation preference equal to its $1,000 stated value, has no voting rights, and is not entitled to a dividend. The Series G Preferred Stock is convertible at any time at the option of the holders intoissued 13,481,349 shares of our common stock at a conversion price equalpursuant to the lesser of (i) $7.50 per shareconversions our Series H and (ii) 90% of the volume weighted average price of the common stock immediately preceding the delivery of a notice of conversion. The Series G Preferred Stock contains price adjustment provisions, which may, under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series GI Preferred Stock.
AtDuring the first closing, which occurred on February 26, 2019,three months ended March 31, 2020, we issued 500 shares of Series G Preferred Stock in exchange for the payment by the Purchasers of $250,000 in the aggregate, plus the cancellation of Term Notes held by the Purchasers (see Note 7) in the amount of $250,000. At the first closing we also issued the Purchasers Series I Warrants to purchase an aggregate of 33,33410,417 shares of our common stock. stock pursuant to a consulting agreement for which we recognized $6,000 of stock-based compensation expense.
Stock Options
During the three months ended March 31, 2020, there were no transactions involving our stock option plan. As a result of the reverse stock splits enacted in April 2019 and in January 2020, we have made adjustments and retroactive restatements to all of our outstanding stock options such that the balances as of March 31, 2020 are negligible. Therefore, there was no stock-based compensation expense related to our stock option plan recognized in the consolidated statement of operations for the three months ended March 31, 2020.
Stock Purchase Warrants
The following table summarizes our stock purchase warrants have an exercise priceoutstanding as of $7.50 per share, are exercisable six months fromMarch 31, 2020:
Expiration Date | Exercise Price | Number of Warrants | |||||||
Series G | September 2021 | $ | 25,440 | 48 | |||||
Series H | December 2021 | 1.15 | 217,392 | ||||||
Series I | Aug-Dec 2024 | 15,000 | 48 |
All of the issuance date, and have a term of exercise equal to five years from the date they first become exercisable. Theoutstanding warrants contain anti-dilution and price adjustment provisions, which may, under certain circumstances reduce the exercise price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then exercise price of the warrants; inwarrants. Such provisions as to the eventSeries G and Series H Warrants apply to the exercise price only, with no effect on the number of such adjustment,shares subject to the warrants. Such provisions as to the Series I Warrants apply to both the exercise price and the number of shares subject to the warrants, so that the number of warrants will also increase sobe increased such that the aggregate exercise price, remainsafter taking into account the same for each warrant.
Within 50decrease in the exercise price, will be equal to 60 days after the first closing, we mayaggregate exercise price prior to the rightadjustment. The Series H Warrants have an additional price adjustment provision requiring a similar adjustment to sell the Purchasers an aggregateexercise price and number of up to $250,000 of Series G Preferred Stock and related warrants at the second closing. Within 110 to120 days after the first closing, we may exercise the right to sell the Purchasers an aggregate of up to $250,000 of Series G Preferred Stock and related warrants at the third closing. At the second and third closings, assuming the sale of all of the Series G Preferred Stock that may be sold at those times, the Purchasers will receive aggregate additional Series I Warrants to purchase up to 66,668 sharesfollowing a reverse stock split of our common stock.
Duringstock; such adjustments occurred in connection with our April 30, 2019 reverse stock split and our January 21, 2020 reverse stock split, which is reflected in the three months ended March 31, 2019, there were no conversions or other transactions involving our Series G Preferred Stock.
Common Stock Transactions
As discussed above, during the three months ended March 31, 2019, we issued 118,280 shares of our common stock pursuant to conversions our Series C and Series F Preferred Stock.
Stock Options
During the three months ended March 31, 2019, there were no transactions involving our stock option plans. As of March 31, 2019, there are 29,441 stock options outstanding ($53.19/share weighted-average exercise price), 13,585 of which are exercisable ($93.92/share weighted-average exercise price).table above.
Stock Purchase Warrants
During the three months ended March 31, 2019, we issued 33,334 stock purchase warrants in connection with the sale of our Series G Preferred Stock as discussed above. As of March 31, 2019, there are 148,032 stock purchase warrants outstanding ($11.54/share weighted-average exercise price), 94,698 of which are exercisable ($12.75/share weighted-average exercise price).
Stock-Based Compensation Expense
Stock-based compensation expense related to our stock option plans was $26,652$-0- and $23,978$26,652 during the three-month periods ended March 31, 20192020 and 2018,2019, respectively. Stock-based compensation expense related to stock options is recognized on a straight-line basis over the requisite service period for the award and is allocated to research and development expense or general and administrative expense based upon the related employee classification. As of March 31, 2019,2020, there was $183,731 ofno unrecognized compensation expense related to stock options, which we expect to recognize over a weighted average period of 2.0 years.options.
Additionally, during the three-month periods ended March 31, 20192020 and 20182019 we recorded stock-based compensation expense of $126,572$6,000 and $28,571,$126,572, respectively, associated with common stock issued for consulting and financial advisory services. As of March 31, 2019, there was $72,509 of unrecognized stock-based compensation expense associated with these arrangements, which we expect to recognize during the second quarter of 2019.
10. Income Taxes
Because of our historically significant net operating losses, we have not paid income taxes since inception. We maintain deferred tax assets that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These deferred tax assets are comprised primarily of net operating loss carryforwards and also include amounts relating to nonqualified stock options and research and development credits. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of our future profitability and our ability to utilize the deferred tax assets. Utilization of operating losses and credits will be subject to substantial annual limitations due to ownership change provisions of Section 382 of the Internal Revenue Code. The annual limitation will result in the expiration of net operating losses and credits before utilization.
11. Grants and Collaboration Revenue
We receive payments from government entities under our grants from the National Institute of Allergy and Infectious Diseases (NIAID) and from the U.S. Department of Defense in support of our vaccine research and development efforts. We record revenue associated with government grants as the reimbursable costs are incurred. During the three-month periods ended March 31, 20192020 and 2018,2019, we recorded $354,319$654,021 and $216,299,$354,319, respectively, of revenues associated with these grants. As of March 31, 2019,2020, there is an aggregate of $2,525,419$606,944 in approved grant funds available for use during 2019 and 2020.
During the three-month periods ended March 31, 20192020 and 2018,2019, we recorded $9,913$61,956 and $5,000,$9,913, respectively, of revenues associated with research collaboration agreements with several third parties.
12. Subsequent Events
Preferred Stock TransactionsCARES Act Paycheck Protection Program Loan
On April 26, 2019,17, 2020, we received $250,000 from the sale of 250 shares of our Series G Preferred Stock (see Note 9) and we issued additional Series I Warrants to purchase 33,334 shares of our common stock. During May 2019, holders of our preferred stock converted 94 shares of our Series F Preferred Stock into 53,600 shares of our common stock.
Reverse Stock Split
On April 30, 2019, we effected a one-for-five hundred reverse split of our common stock$170,200 bank loan backed by the filingUnited States Small Business Administration pursuant to the Paycheck Protection Program (PPP) provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan bears an amendmentannual interest rate of one percent and is due April 17, 2022. No payments of principal or interest will be due until 180 days after the disbursement date. Commencing November 17, 2020, monthly payments of $9,578.16 will be due. Amounts due may be prepaid without penalty. We may apply to our certificate of incorporation with the State of Delaware. All share and per sharelender to have the principal amount reduced upon providing qualifying information in our condensed consolidated financial statements and notes that relateregarding eligible expenses to our common stock has been retroactively restated to reflect the reverse stock split.lender.
| Item 2 Management’s Discussion and Analysis of Financial Condition And Results of Operations |
FORWARD LOOKING STATEMENTS
In addition to historical information, the information included in this Form 10-Q contains forward-looking statements. Forward-looking statements involve numerous risks and uncertainties, including but not limited to the risk factors set forth under the heading “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2018,2019, and should not be relied upon as predictions of future events. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as ‘‘believes,’’ ‘‘expects,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘approximately,” ‘‘intends,’’ ‘‘plans,’’ ‘‘pro forma,’’ ‘‘estimates,’’ or ‘‘anticipates’’ or other variations thereof or comparable terminology, or by discussions of strategy, plans, or intentions. Such forward-looking statements are necessarily dependent on assumptions, data, or methods that may be incorrect or imprecise and may be incapable of being realized. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
● | whether we can raise additional capital as and when we need it; |
● | whether we are successful in developing our products; |
● | whether we are able to obtain regulatory approvals in the United States and other countries for sale of our products; |
● | whether we can compete successfully with others in our market; and |
● | whether we are adversely affected in our efforts to raise cash by the volatility and disruption of local and national economic, credit and capital markets and the economy in general. |
Readers are cautioned not to place undue reliance on forward-looking statements, which reflect our management’s analysis only. We assume no obligation to update forward-looking statements.
Overview
GeoVax is a clinical-stage biotechnology company developing human vaccines against infectious diseases and cancer using a novel patented Modified Vaccinia Ankara-VirusAnkara (MVA) Virus Like Particle (MVA-VLP)(VLP) vaccine platform.platform (GV-MVA-VLPTM). In this platform, MVA, a large virus capable of carrying several vaccine antigens, expresses proteins that assemble into VLP immunogens in the person being vaccinated. The GeoVax MVA-VLP derived vaccines elicit durable immune responses in the host similar to a live-attenuated virus, while providing the safety characteristics of a replication-defective vector.
Our current development programs are focused on preventive vaccines against HIV,novel coronavirus (COVID-19), Human Immunodeficiency Virus (HIV), Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, and Lassa), and malaria, as well as therapeutic vaccines for chronic Hepatitis B infections and cancers. Our most advancedWe believe our technology and vaccine program is focused on the clade B subtypedevelopment expertise are well-suited for a variety of HIV prevalent in the larger commercial marketshuman infectious diseases and we intend to pursue further expansion of the Americas, Western Europe, Japan and Australia; this program is currently undergoing human clinical trials.our product pipeline.
Our corporate strategy is to improve the health of patients worldwide by advancing our patented vaccine platform, using its unique capabilities to design and develop an array of products addressing unmet medical needs in the areas of infectious diseases and oncology. We intend to advance products through to human clinical testing, and to seek partnership or licensing arrangements for commercialization. We also leverage third party resources through government, academic and corporate research collaborations and partnerships for preclinical and clinical testing.
We have not generated any revenues from the sale of any such products, and we do not expect to generate any such revenues for at least the next several years. Our product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that we advance to clinical testing will require regulatory approval prior to commercial use and will require significant costs for commercialization. We may not be successful in our research and development efforts, and we may never generate sufficient product revenue to be profitable.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and adjusts the estimates as necessary. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our financial statements, refer to Item 7 in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to our Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. There have been no significant changes to our critical accounting policies from those disclosed in our 20182019 Annual Report.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is contained in Note 3 to the condensed consolidated financial statements, included in this Quarterly Report.
Liquidity and Capital Resources
Our principal uses of cash are to finance our research and development activities. Since inception, we have funded these activities primarily from government grants and clinical trial assistance, and from sales of our equity securities. At March 31, 2019,2020, we had cash and cash equivalents of $175,985$221,807 and total assets of $472,644,$830,833, as compared to $259,701$283,341 and $642,064,$468,880, respectively, at December 31, 2018.2019. At March 31, 2019,2020, we had a working capital deficit of $1,196,467,$1,860,081, compared to $1,005,127$1,568,929 at December 31, 2018.2019. Our current liabilities at March 31, 2019 and December 31, 20182020 include $1,360,337 and $1,220,179, respectively$1,855,717 of accrued management salaries and director fees, payment of which is still being deferred as discussed further below.
Net cash used in operating activities was $317,361$358,620 and $381,573$317,361 for the three-month periods ended March 31, 20192020 and 2018,2019, respectively. Generally, the variances between periods are due to fluctuations in our net losses, offset by non-cash charges such as depreciation and stock-based and deferred compensation expense, and by net changes in our assets and liabilities. Our net losses generally fluctuate based on expenditures for our research activities, partially offset by government grant revenues. As of March 31, 2019,2020, there is $2,525,419$606,944 in approved grant funds available for use during 20192020 and 2020.approximately $307,000 of upcoming billable fees pursuant to collaborative arrangements. Of this amount,these amounts, we expect that approximately $1,247,273$538,668 will be used by us to reimburse third parties who will provide services covered by theseour grants. See “Results of Operations – Grant and Collaboration Revenues” below for additional details concerning our government grants.
Members of our executive management team and our board of directors have deferredare deferring receipt of portions of their salaries and members of our board of directors are deferring receipt of all of their fees in order to help conserve the Company’s cash resources. As of March 31, 2019,2020, the accumulated deferrals totaled $1,360,337.$1,855,717. We expect the ongoing deferrals of approximately $34,000$31,800 per month for the management salaries and approximately $38,000 per quarter for the board of director fees to continue until such time as a significant financing event (as determined by the board of directors) is consummated. The method selected for addressing these accumulated deferrals could have an adverse effect on our liquidity.
The National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health (NIH),NIAID has funded the costs of conducting all of our human clinical trials (Phase 1 and Phase 2a) to date for our preventive HIV vaccines, with GeoVax incurring certain costs associated with manufacturing the clinical vaccine supplies and other study support. We expect that NIAID will also fund the cost of athe planned Phase 1 trial (HVTN 132) to further evaluate the safety and immunogenicity of adding “protein boost” components to our vaccine, GOVX-B11. We expect HVTN 132 to commence patient enrollment in mid-2019.late 2020. Additionally, we are party to a collaboration with American Gene Technologies International, Inc. (AGT) whereby AGT intends to conduct a Phase 1 human clinical trial with our combined technologies, with the ultimate goal of developing a functional cure for HIV infection; weinfection. We expect that AGT will begin the phase 1 trial during 2020. A similar effort is underway with a consortium led by researchers at the second halfUniversity of 2019. We are also currently in discussions with two other consortiums for the use ofCalifornia, San Francisco (UCSF), using our vaccine as part of a combinational therapy to induce remission in similar efforts toward developing a cure for HIV infection; weHIV-positive individuals. We also expect one or boththis program to enter clinical trials during 2020. However, each of these studies to begin in late 2019 or early 2020.programs could be delayed as a result of the ongoing COVID-19 pandemic.
Net cash used in investing activities was $4,272$-0- and $-0-$4,272 for the three-month periods ended March 31, 20192020 and 2018,2019, respectively. Our investing activities have consisted predominantly of capital expenditures.
Net cash provided by financing activities was $237,917$297,086 and $640,000$237,917 for the three-month periods ended March 31, 20192020 and 2018,2019, respectively. Net cash provided by financing activities during the 20182020 period relates to the sale by us of shares of our Series EJ convertible preferred stock ($590,000)for net proceeds of $300,000 and our issuance of$2,914 in principal repayments toward a five-year Senior Promissory Note (the “GRA Note”) to the Georgia Research Alliance, Inc. for $50,000. The GRA Note bears an annual interest rate of 5%, payable monthly, with principal repayments beginning in the second year. Net cash provided by financing activities during the 2019 period relates to the sale by us of shares of our Series G convertible preferred stock for net proceeds of $240,000 (see discussion below) and $2,083 in principal repayments toward the GRA Note.
On February 25, 2019,April 17, 2020, we entered intoreceived a Securities Purchase Agreement (the “Securities Purchase Agreement”) with$170,200 bank loan backed by the purchasers identified therein (the “Purchasers”) providing for saleUnited States Small Business Administration pursuant to the Purchasers of an aggregate of up to 1,000 shares of our Series G Convertible Preferred Stock (“Series G Preferred Stock”) and related warrants for gross proceeds of up to $1.0 million, to be funded at up to three different closings. At the first closing, which occurred on February 26, 2019, we issued 500 shares of Series G Preferred Stock in exchange for the payment by the Purchasers of $250,000 in the aggregate ($240,000 after deducting certain expensesPaycheck Protection Program (PPP) provisions of the Purchasers), plus the cancellationCARES Act. The loan bears an annual interest rate of Term Notes held by the Purchasers in the amountone percent and is due April 17, 2022. No payments of $250,000. At the first closing we also issued the Purchasers Series I Warrants to purchase an aggregate of 33,334 shares of our common stock. At the second closing, which occurred on April 26, 2019, we issued an additional 250 shares of Series G Preferred Stock in exchange for the payment by the Purchasers of $250,000 in the aggregate. At the second closing we also issued the Purchasers additional Series I Warrants to purchase an aggregate of 33,334 shares of our common stock. Within 110 to120principal or interest will be due until 180 days after the first closing, we may exercise the right to sell the Purchasers an aggregatedisbursement date. Commencing November 17, 2020, monthly payments of up to $250,000 of Series G Preferred Stock and related warrants at the third closing. At the third closing, assuming the sale of all of the Series G Preferred Stock that$9,578.16 will be due. Amounts due may be sold at that time,prepaid without penalty. We may apply to the Purchasers will receive aggregate additional Series I Warrantslender to purchase uphave the principal amount reduced upon providing qualifying information regarding eligible expenses to 33,334 shares of our common stock.the lender.
As of March 31, 2019,2020, we had an accumulated deficit of approximately $41.2 million, and$43.4 million. We expect for the foreseeable future we expect thewill continue to operate at a loss. The amount of the accumulated deficit will continue to increase, as it will be expensive to continue our research and development efforts. We will continue to require substantial funds to continue our activities and cannot predict the outcome of our efforts. We have received a “going concern” opinion from our independent registered public accountants reflecting substantial doubt about our ability to continue as a going concern. We believe that our existing cash resources, combined with funding from existing government grants and clinical trial support, and committed sources of equity capitalcollaborative arrangements, will be sufficient to fund our planned operations into the third quarter of 2019.2020. We will require additional funds to continue our planned operations beyond that date. We are currently seeking sources of capital through additional government grant programs and clinical trial support, and we plan to conduct at least one additional offeringsoffering of our equity securities. Additional funding may not be available on favorable terms or at all and if we fail to obtain additional capital when needed, we may be required to delay, scale back, or eliminate some or all of our research and development programs as well as reduce our general and administrative expenses.
On April 15, 2019, our stockholders approved, and on April 30, 2019 we implemented, a one-for-five hundred reverse split of our common stock, which is intended to not only improve the marketability of our stock, but also to provide additional shares of authorized common stock available to meet our equity financing needs. The reverse stock split is also intended to help us meet the minimum price requirements for listing our common stock on the Nasdaq Capital Market, should that be a condition to completing any of the financing options we may contemplate. The reverse stock split ratio was chosen in part to support a higher stock price per share than the lower ratios in the range approved by our stockholders. There can be no assurance the necessary minimum price requirements will be met.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that are likely or reasonably likely to have a material effect on our financial condition or results of operations.
Contractual Obligations
The table below summarizes our contractual obligations as of March 31, 2019, aggregated by type (in thousands). Our contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent liabilities for which we cannot reasonably predict future payment. Additionally, the expected timing of payment of the obligations presented below is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations.
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations |
Total | Less than 1 Year | 1-3 Years | 4-5 Years | More than 5 years | |||||||||||||||
Operating Lease Obligations (1) | $ | 121 | $ | 121 | $ | -- | $ | -- | $ | -- | ||||||||||
Purchase Obligations (2) | 487 | 487 | -- | -- | -- | |||||||||||||||
Total | $ | 608 | $ | 608 | $ | -- | $ | -- | $ | -- |
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As of March 31, 2019, except as disclosed in the table above, we had no other material firm purchase obligations or commitments for capital expenditures and no committed lines of credit or other committed funding or long-term debt, with the exception of the note payable to GRA ($47,917 remaining principal balance at March 31, 2019). We have employment agreements with our executive officers, each of which may be terminated with no more than 90 days’ advance written notice. Pursuant to existing technology license agreements, we may be required to make potential future milestone and royalty payments which are contingent upon the occurrence of future events. Such events include development milestones, regulatory approvals and product sales. Because the achievement of these milestones is currently neither probable nor reasonably estimable, the contingent payments have not been included in the table above or recorded in our financial statements.
Results of Operations
Net Loss
We recorded a net loss of $595,694 for the three-month period ended March 31, 2020, as compared to $701,454 for the three-month period ended March 31, 2019, as compared to $621,813 for the three-month period ended March 31, 2018.2019. Our net losses typically fluctuate due to the timing of activities and related costs associated with our vaccine research and development activities and our general and administrative costs, as described below.
Grant and Collaboration Revenues
During the three-month period ended March 31, 2019,2020, we recorded grant and collaboration revenues of $364,232,$715,977, as compared to $221,299$364,232 during the comparable period of 2018.2019.
Grant Revenues – Our grant revenues relate to grants and contracts from agencies of the U.S. government in support of our vaccine development activities. We record revenue associated with these grants as the related costs and expenses are incurred. The difference in our grant revenues from period to period is dependent upon our expenditures for activities supported by the grants and fluctuates based on the timing of the expenditures. Additional detail concerning our grant revenues and the remaining funds available for use as of March 31, 20192020 is presented in the table below.
Grant Revenues Recorded During Three-Month Periods Ended March 31, | Approved Funds Available at | Grant Revenues Recorded During Three-Month Periods Ended March 31, | Approved Funds Available at | |||||||||||||||||||||
Grant/Contract No. | 2019 | 2018 | March 31, 2019 | 2020 | 2019 | March 31, 2020 | ||||||||||||||||||
Lassa Fever – U.S. Army Grant | $ | 142,685 | $ | - | $ | 2,427,550 | $ | 654,021 | $ | 142,685 | $ | 606,944 | ||||||||||||
Lassa Fever – NIH SBIR Grant | 63,667 | - | 83,375 | - | 63,667 | - | ||||||||||||||||||
HIV – NIH SBIR Grant | - | 187,511 | - | - | - | - | ||||||||||||||||||
Zika – NIH SBIR Grant | 147,967 | 28,788 | 14,494 | - | 147,967 | - | ||||||||||||||||||
Total | $ | 354,319 | $ | 216,299 | $ | 2,525,419 | $ | 654,021 | $ | 354,319 | $ | 606,944 |
Collaboration Revenues – In addition to the grant revenues above, during the three-months ended March 31, 20192020 and 2018,2019, we recorded $9,913$61,956 and $5,000$9,913 of revenue associated with several research collaborations with third parties. These amounts primarily represent amounts paid to us by the other parties for materials and other costs associated with joint studies. As of March 31, 2020 there is approximately $307,000 of upcoming billable fees pursuant to collaborative arrangements.
Research and Development Expenses
Our research and development expenses were $555,718$808,936 and $486,994$555,718 for the three-month periods ended March 31, 20192020 and 2018,2019, respectively. Research and development expense for these periods includes stock-based compensation expense of $-0- and $11,319, and $10,951, respectively (see discussion under “Stock-Based Compensation Expense” below).respectively.
Our research and development expenses can fluctuate considerably on a period-to-period basis, depending on our need for vaccine manufacturing by third parties, the timing of expenditures related to our government grants the timing of costs associated with any clinical trials being funding directly by us,and other research projects, and other factors. Research and development expenses increased by $68,724,$253,218, or 14%46%, from the 20182019 period to 20192020 primarily due to the timing of expenditures related to our government grants. Our research and development costs do not include costs incurred by the HIV Vaccine Trials Network (HVTN) in conducting clinical trials of our preventive HIV vaccines; those costs are funded directly to the HVTN by NIAID.
We do not disclose our research and development expenses by project, since our employees’ time is spread across multiple programs and our laboratory facility is used for multiple vaccine candidates. We track the direct cost of research and development expenses related to government grant revenue by the percentage of assigned employees’ time spent on each grant and other direct costs associated with each grant. Indirect costs associated with grants are not tracked separately but are applied based on a contracted overhead rate negotiated with the NIH. Therefore, the recorded revenues associated with government grants approximates the costs incurred.
We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertainties associated with vaccine development. Due to these uncertainties, our future expenditures are likely to be highly volatile in future periods depending on the outcomes of the trials and studies. As we obtain data from pre-clinical studies and clinical trials, we may elect to discontinue or delay vaccine development programs to focus our resources on more promising vaccine candidates. Completion of preclinical studies and human clinical trials may take several years or more, but the length of time can vary substantially depending upon several factors. The duration and the cost of future clinical trials may vary significantly over the life of the project because of differences arising during development of the human clinical trial protocols, including the number of patients that ultimately participate in the clinical trial; the duration of patient follow-up that seems appropriate in view of the results; the number of clinical sites included in the clinical trials; and the length of time required to enroll suitable patient subjects.
General and Administrative Expenses
Our general and administrative expenses were $510,064$502,345 and $357,228$510,064 for the three-month periods ended March 31, 20192020 and 2018,2019, respectively. General and administrative costs include officers’ salaries, legal and accounting costs, patent costs, and other general corporate expenses. General and administrative expense includes stock-based compensation expense of $141,905$6,000 and $41,598$141,905 for the 2020 and 2019 and 2018 periods, respectively (see discussion under “Stock-Based Compensation Expense” below).respectively. Excluding stock-based compensation expense, general and administrative expenses were $368,159$496,345 and $315,630$368,159 for the three-month periods ended March 31, 2020 and 2019, respectively, representing an increase of $128,186 (35%). This increase is primarily due to higher legal fees and 2018, respectively. The overall increase in general and administrative expense from 2018 to 2019 is attributable to costs associated with investment banking arrangements, investor relations activities, and travel.patent costs. We expect that our general and administrative costs may increase in the future in support of expanded research and development activities and other general corporate activities.
Stock-Based Compensation Expense
ForThe table below shows the components of stock-based compensation expense for the three-month periods ended March 31, 20192020 and 2018, the components of stock-based compensation expense were as follows:
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Stock option expense | $ | 26,652 | $ | 23,978 | ||||
Stock issued for services | 126,572 | 28,571 | ||||||
Total stock-based compensation expense | $ | 153,224 | $ | 52,549 |
2019. In general, stock-based compensation expense is allocated to research and development expense or general and administrative expense according to the classification of cash compensation paid to the employee, consultant or director to whom the stock compensation was granted. For the three-month periods ended March 31, 2019 and 2018, stock-based compensation expense was allocated as follows:
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
General and administrative expense | $ | 141,905 | $ | 41,598 | ||||
Research and development expense | 11,319 | 10,951 | ||||||
Total stock-based compensation expense | $ | 153,224 | $ | 52,549 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Stock option expense | $ | - | $ | 26,652 | ||||
Stock issued for services | 6,000 | 126,572 | ||||||
Total stock-based compensation expense | $ | 6,000 | $ | 153,224 |
Other Income (Expense)
Interest income for the three-month periods ended March 31, 2020 and 2019 was $752 and 2018 was $1,224, and $1,318, respectively. The variances between periods are primarily attributable to cash available for investment and interest rate fluctuations. Interest expense for the three-month periods ended March 31, 2020 and 2019 was $1,142 and 2018 was $1,128, and $208, respectively, related to the GRA Note and financing costs associated with insurance premiums.
| Item 3 Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
| Item 4 Controls and Procedures |
Evaluation of disclosure controls and procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to management, including the Chief Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
Our management has carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and our Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Changes in internal control over financial reporting
There was no change in our internal control over financial reporting that occurred during the three months ended March 31, 20192020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
PART II -- OTHER INFORMATION
| Item 1 Legal Proceedings |
None.
| Item 1A Risk Factors |
For information regarding factors that could affect our results of operations, financial condition or liquidity, see the risk factors discussed under “Risk Factors” in Item 1A of our most recent Annual Report on Form 10-K. See also “Forward-Looking Statements,” included in Item 2 of this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors previously disclosed in our most recent Annual Report on Form 10-K.
| Item 2 Unregistered Sales of Equity Securities and Use of Proceeds |
None not previously disclosed on Form 8-K.
| Item 3 Defaults Upon Senior Securities |
None.
| Item 4 Mine Safety Disclosures |
Not applicable
| Item 5 Other Information |
During the period covered by this report, there was no information required to be disclosed by us in a Current Report on Form 8-K that was not so reported, nor were there any material changes to the procedures by which our security holders may recommend nominees to our board of directors.
| Item 6 Exhibits Exhibit NumberDescription
* Filed herewith
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
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