UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2018.2019.

OR

For the transition period from                 to                 from___________ to___________

Commission File Number: 001-32188

ORAGENICS, INC.

(Exact name of registrant as specified in its charter)

4902 Eisenhower Blvd., Suite 125

Tampa, Florida 33634

(Address of principal executive offices)

813-286-7900

813-286-7900

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

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 and 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 ☒[X] No ☐[  ]

Indicate by check mark whether the registrant has submitted electronically if any, 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 ☒[X] No ☐[  ]

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of November 13, 2018,8, 2019, there were 29,433,13546,124,803 shares of Common Stock, $.001 par value, outstanding.

Note Regarding Reverse Stock Splits

Effective January 19, 2018, we filed an amendment to our Amended and Restated Articles of Incorporation with the Secretary of State of the State of Florida to effect a reverse split of our authorized and outstanding common stock at a ratio of one-for-ten. The applicable historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split.

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PART I – FINANCIALFINANCIAL INFORMATION

Oragenics, Inc.

Balance Sheets

Balance Sheets

See accompanying notes.

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Oragenics, Inc.

Statements of Operations

(Unaudited)

See accompanying notes.

Oragenics, Inc.

Statements of Operations

(Unaudited)

See accompanying notes.

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Oragenics, Inc.

Statements of Cash Flows

(Unaudited)

See accompanying notes.

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Oragenics, Inc.

Notes to Financial Statements

(Unaudited)

(Unaudited)

1. Organization

Oragenics, Inc. (formerly known as Oragen, Inc.) (the “Company” or “we”) was incorporated in November, 1996; however, operating activity did not commence until 1999.1996. We are focused on becoming a leader in developing novel antibiotics against infectious disease and on developing effective treatments for oral mucositis.

2. Basis of Presentation

The accompanying unaudited interim financial statements as of September 30, 20182019 and December 31, 20172018 (audited) and three and nine months ended September 30, 20182019 and 20172018 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial condition, results of operations and cash flows for the periods presented. The results of operations for the interim period ending September 30, 20182019 are not necessarily indicative of the results that may be expected for the year ending December 31, 20182019 or any future period.

These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017,2018, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2018.March 29, 2019. The Company has incurred recurring losses and negative cash flows from operations since inception. To date, the Company has not generated significant revenues from operations. The Company sold its consumer probiotics business in 2016 and, as a result, has generated $-0- revenues. The Company incurred a net loss of $7,158,521$11,968,726 and used cash of $6,101,876$9,076,328 in its operating activities during the nine months ended September 30, 2018.2019. As of September 30, 2018,2019, the Company had an accumulated deficit of $108,617,988.$123,755,548.

The Company expects to incur substantial expenditures to further develop each of its technologies. The Company believes the working capital at September 30, 2018, together with recent warrant exercises (See Note 10),2019 will be sufficient to meet the business objectives, as presently structured, through the fourth quarter of 2019.2020. As such, there is substantial doubt that we can continue as a going concern beyond that date.

The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, or other developments. Additional financing will be required to continue operations after the Company exhausts its current cash resources and to continue its long-term plans for clinical trials and new product development. There can be no assurance that any such financing can be realized by the Company, or if realized, what the terms thereof may be, or that any amount that the Company is able to raise will be adequate to support the Company’s working capital requirements until it achieves profitable operations.

The Company intends to seek additional funding through sublicensing arrangements, joint venturing or partnering, sales of rights to technology, government grants and public or private financings. The Company’s future success depends on its ability to raise capital and ultimately generate revenue and attain profitability. The Company cannot be certain that additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to it or, if available, will be on terms acceptable to the Company. If the Company issues additional securities to raise funds, these securities may have rights, preferences, or privileges senior to those of its common stock, and the Company’s current shareholders may experience dilution. If the Company is unable to obtain funds when needed, or on acceptable terms, the Company may be required to curtail its current development programs, cut operating costs, and forego future development and other opportunities.

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3. Significant Accounting Policies

Recently Issued Accounting Pronouncements

In July 2018, the Financial Accounting Standards Board issued Accounting Standards Updates 2018-10 Codification Improvements to Topic 842,, Leases and 2018-11 Leases (Topic 842).

Update 2018-10 Codification Improvements to Topic 842 represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Some of the amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies, providing needed clarifications, and improving the presentation of guidance in the Codification. The adoption of this guidance is not expected to have a material impact on the Company’s results of operation, financial position or disclosures.

Update 2018-11 Leases (Topic 842) provides entities with an additional (and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing a cumulative-effect adjustment totransition method, which applies the opening balanceprovisions of retained earnings in the period of adoption.standard at the effective date without adjusting comparative periods presented. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840). An entity electing this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840. We implemented this standard on January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The adoption ofCompany adopted the following practical expedients and elected the following accounting policies related to this guidance isstandard:

The standard did not expected to have a material impact on our balance sheets or on our statements of operations. The most significant impact was the Company’s resultsrecognition of operation,right of use (ROU) assets and lease liabilities for operating leases. We implemented internal controls to enable the preparation of financial positioninformation on adoption of the standard. Adoption of the lease standard had no impact to cash provided by or disclosures.used in operating, financing, or investing activities in the cash flow statements.

In June 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-07 Compensation—Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The requirements of Topic 718 should be applied to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of this guidance isdid not expected to have a material impact on the Company’s results of operation, financial position or disclosures.

In February 2016, the FASB issued guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Previous lease accounting was criticized for failing to meet the needs of users of financial statements because it did not always provide a faithful representation of leasing transactions. In particular, it did not require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. The guidance is effective for annual and interim periods beginning after December 15, 2018. The adoption of this guidance is not expected to have a material impact on the Company’s results of operation, financial position or disclosures.

There are no additional accounting pronouncements issued or effective during the three and nine months ended September 30, 20182019 that have had, or are expected to have, a material impact on our financial statements.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The principal areas of estimation reflected in the financial statements are anticipated milestone payments, stock based compensation, valuation of warrants, accounting for clinical trial costs, and income tax valuation allowance.

Stock-Based Payment Arrangements

Generally, all forms of stock-based payments, including stock option grants, warrants, and restricted stock grants are measured at their fair value on the awards’ grant date typically using a Black-Scholes pricing model. Stock-based compensation awards issued to non-employees for services rendered are recorded at the fair value of the stock-based payment. The expense resulting from stock-based payments are recorded in research and development expense or general and administrative expense in the statement of operations, depending on the nature of the services provided. Stock-based payment expense is recorded over the requisite service period in which the grantee provides services to us.the Company. To the extent the stock option grants, warrants, or restricted stock grants do not vest at the grant date they are subject to forfeiture.

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Stock-Based Compensation

US GAAP requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values as of the grant date. Stock-based compensation expense is recorded over the requisite service period in which the grantee provides services to us,the Company, to the extent the options do not vest at the grant date and are subject to forfeiture. For performance-based awards that do not include market-based conditions, we record share-based compensation expense only when the performance-based milestone is deemed probable of achievement. We utilize both quantitative and qualitative criteria to judge whether milestones are probable of achievement. For awards with market-based performance conditions, we recognize the grant-date fair value of the award over the derived service period regardless of whether the underlying performance condition is met. In connection with adopting ASU 2016-09, the Company made an accounting policy election to account for forfeitures in compensation expense as they occur.

Warrants

The Company used the Black Scholes Option Pricing Model in calculating the relative fair value of any warrants that have been issued.

Net Loss Per Share

During all periods presented, the Company had securities outstanding that could potentially dilute basic earnings per share in the future but were excluded from the computation of diluted net loss per share, as their effect would have been antidilutive because the Company reported a net loss for all periods presented. Basic and diluted net loss per share amounts are the same for the periods presented. Net loss per share is computed using the weighted average number of shares of common stock outstanding.

Revenue Recognition

The Company does not currently generate revenue from its business.Concentrations

Concentrations

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash accounts in commercial banks, which may, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. As of September 30, 2019 and December 31, 2018, the uninsured portion of this balance was $13,561,418. As of December 31, 2017, the uninsured portion of this balance was $5,916,143.$22,041,924 and $19,958,301, respectively.

4. Stock-based Compensation

The Company recognized stock-based compensation on all employee and non-employee awards as follows:

At the Company’s Annual Meeting of Shareholders, held on June 22, 2018,20, 2019, the shareholders approved an amendment to the Company’s 2012 Equity Incentive Plan (the “Plan”) solely to increase the common shares available for awards thereunder by an additional 6,000,000 shares and ratified an amendment approved by shareholders at the prior year’s annual meeting to increase the shares available for awards thereunderunder the Plan by 1,500,000 shares. The aggregate number of shares of the Company’s common stock currently authorized pursuant to its 2012 Equity Incentive Plan, as amended, is 2,250,0008,250,000 and the Company’s 2012 Equity Incentive Plan, as amended (the “Plan”) continues to provide that the maximum number of shares that may be subject to stock options and stock appreciation rights orgranted to any individual in a calendar year is 1,000,000 shares. The Plan also provides that the maximum number of shares that may be subject to awards (other than stock options and stock appreciation rights) intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code (other than stock options and stock appreciation rights)that may be granted to any individual in aone calendar year is 1,000,000 shares.shares (however, the exception for “performance-based compensation” under Code Section 162(m) was repealed in the Tax Cuts and Jobs Act of 2017, unless the awards intended to qualify for such exception were granted before November 2, 2017). As of September 30, 2018,2019, an aggregate of 1,813,6332,488,293 shares of common stock are covered by outstanding option awards and 195,6175,520,957 shares of common stock are available for future awards under the Plan.

The Company granted -0- and 676,160 stock options under its Plan, with a weighted-average grant date fair value of $-0- and $0.49 per share, during the three and nine months ended September 30, 2019, respectively. The Company granted 1,425,000 and 1,553,0001,533,000 stock options under its Plan, with a weighted-average grant date fair value of $0.72 and $0.79 per share, during the three and nine months ended September 30, 2018, respectively. The Company granted -0- and 105,600 stock options, with a weighted-average grant date fair value of $-0- and $3.60 per share, during the three and nine months ended September 30, 2017, respectively.

During the nine months ended September 30, 2018, 1,028,8522019, 609,406 stock options previously granted under the Plan have vested, and 1,500no stock options were forfeited, and no stock options were exercised.

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On September 27, 2018, the Board of Directors approved discretionary stock option awards under the Plan providing the right to acquire 125,000 shares of common stock, to each of the Company’s non-employee directors: Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Plan at an exercise price of $0.73 per share, the closing price on September 27, 2018, the date of grant. The options vest immediately. The stock option awards are subject to the standard terms and conditions of the Company’s form of stock option agreement.

Also, on September 27, 2018, the Board of Directors approved discretionary stock option awards under the Plan, as recommended and approved by the Compensation Committee, for the Company’s executive officers and certain currently employees. Dr. Alan Joslyn, the Company’s Chief Executive Officer, Mr. Michael Sullivan, the Company’s Chief Financial Officer, and Dr. Handfield, the Company’s Senior Vice President of Discovery Research, were granted options to purchase 400,000, 250,000 and 220,000 shares of Company common stock, respectively, under the Plan at an exercise price of $0.73 per share, the closing price on September 27, 2018, the date of grant. The stock option awards are subject to the standard terms and conditions of the Company’s form of stock option agreement which includes earlier vesting upon a change in control of the Company.

Also, on June 22, 2018, and in connection with, and in furtherance of, the non-employee director compensation program, the Board approved the award of 4,000 restricted shares of the Company’s common stock to each of the Company’s non-employee directors, Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Plan. Pursuant to the terms of the award, the restricted shares were immediately vested.

On June 22, 2018, in connection with, and in furtherance of, the non-employee director compensation program, the Board approved stock option awards in the amount of 14,000 to each of the Company’s non-employee directors, Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Plan at an exercise price of $1.52 per share, the closing price on June 22, 2018, the date of the grant.

In addition, on June 22, 2018, in connection with, and in furtherance of, the equity based award program, the Board approved stock option awards in the amount of 62,000 to management and 10,000 to staff under the Plan at an exercise price of $1.52 per share, the closing price on June 22, 2018, the date of the grant.

On June 22, 2017, in connection with, and in furtherance of, the non-employee director compensation program, the Board approved stock option awards in the amount of 14,000 to each of the Company’s non-employee directors, Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Plan at an exercise price of $3.70 per share, the closing price on June 22, 2017, the date of the grant.

In addition, on June 22, 2017, in connection with, and in furtherance of, the new equity based award program, the Board approved stock option awards in the amount of 45,500 to management and 4,100 to staff under the Plan at an exercise price of $3.70 per share, the closing price on June 22, 2017, the date of the grant.

On February 9, 2017, in connection with, and in furtherance of, the non-employee director compensation program, the Board approved the award of 4,000 restricted shares of the Company’s common stock to each of the Company’s non-employee directors, Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Plan, of which, 1,000 restricted shares vested at the end of each calendar quarter in 2017.

Each executive officer and non-employee director receiving equity-based awards is subject to a minimum dollar value stock ownership holding requirement with respect to the awards received as well as all prior equity awards under the Plan which requirements are intended to align the ability to sell shares with the performance of the Company’s stock price. The executive officer recipients each have a minimum dollar value stock ownership holding requirement threshold equal to two times (2x) their then base salaries below which dollar threshold they would be precluded from selling any shares of Company stock obtained from the Company under its Plan. Also, the non-employee directors are each subject to a minimum dollar value stock ownership holding requirement threshold equal to six times the annual Board retainer ($270,000) below which dollar threshold they would be precluded from selling shares of Company stock acquired from the Company under its Plan.

5. Warrants

On July 17, 2018,March 25, 2019, the Companyannounced the closing of an underwritten public offering (the “Public Offering”)for gross proceeds of Class A Units, pricedapproximately $12.5 million, which included the partial exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting underwriting discounts and commissions and offering expenses payable by the Company.

The offering was comprised of 16,666,668 shares of common stock, together with short-term warrants to purchase up to 8,333,334 shares of common stock, and long-term warrants to purchase up to 8,333,334 shares of common stock, at a price to the public of $0.75. The Company granted the underwriter a 30-day option to purchase up to 2,500,000 additional shares of common stock and/or short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,250,000 shares of common stock of the Company at the public offering price, less underwriting discounts and commissions. The underwriter exercised its option to purchase the short-term warrants to purchase 1,250,000 shares of $1.00common stock and long-term warrants to purchase 1,250,000 shares of common stock effective as of the closing.

Each short-term warrant has an exercise price of $0.75 per unit, with each unit consisting of one share of common stock, is immediately exercisable, and a seven-yearwill expire on the earlier of (1) the eighteen-month anniversary of the date of issuance and (2) twenty-one trading days following the Company’s release of top-line data related to its Phase 2 double blind, placebo controlled clinical trial of AG013. Each long-term warrant to purchase onehas an exercise price of $0.90 per share of common stock, with an exercise price of $1.00 per share, and Class B Units, priced at a public offering price of $1.00 per unit, with each unit comprised of one share of series D preferred stock (the “Series D Preferred Stock”), which is convertible into one share of common stock, and a seven-year warrant to purchase one share of common stock with an exercise price of $1.00 per share. The exercise price of the warrants are fixed and do not contain any variable pricing features or any price based anti-dilutive features.

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The exercise price of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, dilutive issuances, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

A total of 13,800,000 warrants to purchase 13,800,000 shares of common stock were issued in the Public Offering.

On April 6, 2018 (the “Closing Date”), the Company entered into a securities purchase agreement with certain institutional investors for the purchase and sale of 900,000 shares of the Company’s common stock in a registered direct offering at a purchase price of $2.00 per share. The Company also issued unregistered warrants to the investors in a concurrent private placement to purchase up to an equivalent number of shares of the Company’s common stock with an exercise price of $2.00 per share. The warrants areimmediately exercisable six months following the Closing Date and will expire five years fromfollowing the date of issuance.

A summary of warrant activity for the year ended December 31, 20172018 and the nine months ended September 30, 20182019 is as follows:

The warrants outstanding as of September 30, 20182019 are as follows:

On July 17, 2018,March 25, 2019, the Company announced the closing of an underwritten public offering (the “Public Offering”)for gross proceeds of Class A Units, priced at a public offering priceapproximately $12.5 million, which included the partial exercise of $1.00 per unit, with each unit consisting of one share of common stock and a seven-year warrantthe underwriter’s over-allotment option to purchase one share of common stock with an exercise price of $1.00 per share,additional shares and Class B Units, priced at a publicwarrants, prior to deducting underwriting discounts and commissions and offering price of $1.00 per unit, with each unitexpenses payable by the Company.

The offering was comprised of one share of series D preferred stock (the “Series D Preferred Stock”), which is convertible into one share of common stock, and a warrant. The conversion price of the Series D Preferred Stock issued in the transaction as well as the exercise price of the Warrants are fixed and do not contain any variable pricing 3features or any price based anti-dilutive features. The securities comprising the units were immediately separable and have been issued separately.

The Conversion Price of the Series D Preferred Stock and exercise price of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, dilutive issuances, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

A total of 4,436,00016,666,668 shares of common stock, 9,364,000 shares of Series D Preferred Stock convertible into 9,364,000together with short-term warrants to purchase up to 8,333,334 shares of common stock, and totallong-term warrants to purchase 13,800,000up to 8,333,334 shares of common stock, were issued inat a price to the Public Offering inclusivepublic of $0.75. The Company granted the underwriters exercise of their over-allotmentunderwriter a 30-day option to purchase 1,800,000up to 2,500,000 additional shares of common stock and/or short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,800,0001,250,000 shares of common stock of the Company at the Public Offeringpublic offering price, per share less the underwriting discounts and commissions.The underwriter did not exercise its option to purchase additional shares of common stock, however the underwriterexercised its option to purchase the short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,250,000 shares of common stock effective as of the closing.

Each short-term warrant has an exercise price of $0.75 per share of common stock, is immediately exercisable, and will expire on the earlier of (1) the eighteen-month anniversary of the date of issuance and (2) twenty-one trading days following the Company’s release of top-line data related to its Phase 2 double blind, placebo controlled clinical trial of AG013. Each long-term warrant has an exercise price of $0.90 per share of common stock, is immediately exercisable and will expire five years following the date of issuance.

The net proceedsCompany intends to the Company from the Public Offering, after deducting Underwriter fees and expenses and the Company’s Public Offering expenses, was approximately $12.4 million. The Company anticipates usinguse the net proceeds from this Public Offeringof the offering to continue funding development offund its AG013 our ongoing Phase 2research, clinical trial for the treatment of Oral Mucositis, ourtrials, pre-clinical development of ourthe lantibiotics program, and for working capital and general corporate purposes, including research and development activities, capital expenditures and working capital.purposes.

The proceeds received in the Public Offering were allocated to each instrument on a relative fair value basis. Total proceeds of $13.8 million were allocated to warrants issued, $6.5 million, common stock, $2.3 million and Series D Preferred Stock, $5.0 million. The allocation resulted in an effective conversion price for the Series D Preferred Stock that was below the quoted market price of the Company’s common stock on the closing date. As such, the Company recognized a beneficial conversion

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feature equal to the intrinsic value of the conversion feature on the closing date, resulting in a deemed dividend for the Series D Preferred Stock of approximately $1.4 million recognized on the closing date.

Non-Employee DirectorOther Share Issuance

On February 9, 2017, in connection with1, 2019, and in furtherance of the new equity based award program (See Note 4), the Board approved the award of 4,000 restricted shares of the Company’s common stock to each of the Company’s non-employee directors, Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Company’s 2012 Equity Incentive Plan of which a total of 1,000 restricted shares vested at the end of each of the four quarters in 2017. The awards are considered issued and outstanding as of the date of the grant and are eligible to be voted by the recipient.

On June 22, 2018, and in connection with, and in furtherance of, the non-employee director compensation program, the Board approved the award of 4,000 restricted shares of the Company’s common stock to each of the Company’s non-employee directors, Frederick Telling, Charles Pope, Alan Dunton, and Robert Koski under the Company’s 2012 Equity Incentive Plan. Pursuant to the terms of the award, the restricted shares were immediately vested.

Other Share Issuances.  

On AugustMay 1, 2018,2019, respectively, the Company issued 12,500 shares of its common stock as partial consideration for the acquisition of certain services.

As of September 30, 2018, 7,868,000 shares of Series D

Preferred Stock have been converted into shares of Common Stock.

On March 9, 2018, a holder of 2,583,000 shares of the Company’s Series A Convertible Preferred Stock, converted the Series A Convertible Preferred Stock into 258,300 shares of the Company’s common stock.

Preferred Stock

The Series A Non-Voting, Convertible Preferred Stock Financing

On May 10, 2017 we entered into a securities purchase agreement with three accredited investors, to purchase up to $3,000,000 of Series A Convertible Preferred Stock (the “Series A Preferred Stock Financing”). The sale of the Preferred Stock took place in two separate closings and at the first closing which occurred on May 10, 2017, we received gross proceeds of approximately $1,302,000. The second closing occurred on July 25, 2017 and we received gross proceeds of approximately $1,698,000, which was the balance of the Preferred Stock Financing. The full $3,000,000 of Preferred Stock, and after giving effect to the reverse stock split and the conversion of 2,583,000 shares of the Series A Preferred Stock into 258,300 shares of the Company’s common stock, is convertible into 1,200,001nine hundred and forty one thousand seven hundred and one shares of our Common Stock, based on a fixed conversion price of $2.50 per share on an as-converted basis. In addition, we issued warrants to purchase an aggregate of 462,106 shares of Common Stock at the first closing and we issued an aggregate of 602,414 shares of Common Stock at the second closing (the “Series A Warrants”). The Series A Warrants have a term of seven years from the date of issuance are non-exercisable until 6 months after issuance, and after giving effect to the reverse stock split, have an exercise price of $3.10 per share. Proceeds from the Series A Preferred Stock Financing (including the exercise of any warrants for cash) will be used for general corporate purposes, including working capital.basis..

On July 27, 2017, we entered into an agreement to amend the warrants issued in connection with the Series A Preferred Stock Financing to provide notification and objection requirements with respect to the change of control provisions. The change of control provisions in the warrants had previously caused the warrants to be treated as a derivative liability as opposed to being treated as equity on our balance sheet. The warrants have been replaced by amended and restated warrants containing such notification and objection requirements (the “Amended and Restated Common Stock Purchase Warrants”) so that the Amended and Restated Common Stock Purchase Warrants are now treated as equity on our balance sheet. All other terms of the original warrants remain unchanged by the Amended and Restated Common Stock Purchase Warrants.

In connection with the Series A Preferred Financing, we filed a Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock with the Secretary of State of the State of Florida, to be effective May 10, 2017. The number of shares of Preferred Stock designated as Series A Preferred Stock, par value of $0.001 per share, was 12,000,000.

In connection with the issuance and sale of the Series A Preferred Stock and Series A Warrants, we granted certain demand registration rights and piggyback registration rights with respect to the shares of our Common Stock issuable upon conversion of the Preferred Stock and exercise of the Warrants, pursuant to a Registration Rights Agreement.

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Except as otherwise required by law, the Series A Preferred Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Preferred Stock, (c) increase the number of authorized shares of Series A Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing. Initially upon issuance, in connection withUpon any liquidation, dissolution or winding-up by us, whether voluntary or involuntary that is not a Fundamental Transaction (as defined in the Certificate of Designation), the holders of Series A Preferred Stock shall be entitled to receive out of the assets, the greater of (i) the product of the number of shares of Series A Preferred Stock then held by such holder, multiplied by the Original Issue Price; and (ii) the amount that would be payable to such holder in the Liquidation in respect of Common Stock issuable upon conversion of such shares of Series A Preferred Stock if all outstanding shares of Series A Preferred Stock were converted into Common Stock immediately prior to the Liquidation. The Series A Preferred Stock is classified as permanent equity. Following our Series B Non-Voting Convertible Preferred Financing, the Series A Preferred liquidation preference was revised to be behind our Series C Preferred and pari passu with our Series B Preferred.

On March 9, 2018, a holder of 2,583,000 shares of the Company’s Series A Convertible Preferred Stock, converted the Series A Convertible Preferred Stock, in accordance with the terms for conversion, into 258,300 shares of the Company’s common stock.

The Series B Non-Voting, Convertible Preferred Stock Financing

On November 8, 2017, we completed a private placement of $3,300,000 of Series B Non-Voting, Convertible Preferred Stock (the “Series B Convertible Preferred Stock”) pursuant to a Securities Purchase Agreement with four existing shareholders who are accredited investors including an entity affiliated with a director of the Company (the “Series B Preferred Stock Financing”).

The full $3,300,000 of Series B Convertible Preferred Stock is convertible, after giving effect to the reverse stock split into 1,320,002one million three hundred and twenty thousand shares of our Common Stock, based on a conversion of one share of Series B Preferred Stock into two shares of Common Stock. The purchase price per share of the Series B Preferred Stock is represented by $2.50 per share of the Common Stock on an as converted basis. In addition, we issued to the investors in the private placement accompanying common stock purchase warrants to purchase an aggregate of 1,064,518 shares of Common Stock (the “Series B Warrants”). The Series B Warrants have a term of seven years from the date of issuance and are non-exercisable until six (6) months after issuance, and after giving effect to the reverse stock split, have an exercise price of $3.10 per share.

In connection with the Series B Preferred Financing, we filed a Certificate of Designation and Rights of Series B Convertible Preferred Stock with the Secretary of State of the State of Florida, to be effective November 8, 2017. The number of shares of Preferred Stock designated as Series B Preferred Stock, $0.001 per share, is 6,600,000.

Except as otherwise required by law, the Series B Preferred Stock shall have no voting rights. However, as long as any shares of Series B Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock or alter or amend the Certificate of Designation, (b) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Preferred Stock, (c) increase the number of authorized shares of Series B Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

The Series B Preferred Stock shall rank (i) on par with the Common Stock and Series A Preferred Stock and junior to Series C Preferred Stock as to dividend rights and (ii) junior to Series C Preferred Stock, on par with Series A Preferred Stock and senior to the Common Stock as to distribution of assets upon liquidation, dissolution or winding-up by us, whether voluntary or involuntary.

Upon any liquidation, dissolution or winding-up by us, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be entitled to receive out of the assets, after payment to the holders of Series C Preferred Stock but on par with the holders of Series A Preferred Stock and in preference to the holders of the Common Stock, an amount of cash equal to the greater of (i) the product of the number of shares of Series B Preferred Stock then held by such holder, multiplied by the Original Issue Price; and (ii) the amount that would be payable to such holder in the Liquidation in respect of Common Stock issuable upon conversion of such shares of Series B Preferred Stock if all outstanding shares of Series B Preferred Stock were converted into Common Stock immediately prior to the Liquidation. The Series B Preferred Stock is classified as permanent equity.

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Series C Non-Voting, Non- Convertible Preferred Stock Financing Intrexon Debt Conversion

Concurrently with the Series B Preferred Stock Financing, we also entered into a Debt Conversion Agreement (the “Intrexon Debt Conversion Agreement”) with Intrexon Corporation (“Intrexon”) pursuant to which Intrexon exchanged the $2,400,000 unsecured non-convertible promissory note previously issued by us to Intrexon (the “Intrexon Note”), the accrued interest on the Intrexon Note and trade payables owed by us (collectively the “Debt”) in the aggregate amount of approximately $3,400,000 for equity in the form of 100 shares of Series C, Non-Voting, Non-Convertible Preferred Stock (the “Series C Preferred Stock”) issued by us to Intrexon pursuant to the Debt Conversion Agreement which 100 shares have a stated value equal to the amount of the Debt.

In connection with the Intrexon Debt Conversion Agreement, we filed a Certificate of Designation and Rights of Series C Non-Convertible Preferred Stock with the Secretary of State of the State of Florida, to be effective November 8, 2017. The number of shares of Preferred Stock designated as Series C Preferred Stock is 1,000 and have a par value of $0.001 per share.

Each issued and outstanding share of Series C Preferred Stock entitlesentitled the holder of record, Intrexon, to receive dividends at the annual rate of twelve percent (12%) (the “Initial Rate”) of its Stated Value, payable by issuing additional shares of Series C Preferred Stock within thirty days after the end of each calendar year pro-rata for partial years. The Initial Rate shall be subject to increasewas automatically increased to twenty percent (20%) automatically after May 10, 2019. OnIn January 25, 2018of 2019 we paid a dividend on ourissued 12.208 shares of the Company’s Series C Preferred Stock as a dividend to Intrexon, of 1.733 shares foras the portionholder of the 2017 fiscal year the Series C Preferred Stock was outstanding.Stock.

Series D Non-Voting, Convertible Preferred Stock Financing

On July 17, 2018, weChanges In Shareholders’ Equity announced the closing of an underwritten public offering (the “Public Offering”) of units for gross proceeds of approximately $13.8 million, which included the full exercise

A summary of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting underwriting discounts and commissions and offering expenses.

The Public Offering was comprised of Class A Units, priced at a public offering price of $1.00 per unit, with each unit consisting of one share of common stock and a seven-year warrant to purchase one share of common stock with an exercise price of $1.00 per share, and Class B Units, priced at a public offering price of $1.00 per unit, with each unit comprised of one share of series D preferred stock, with a par value of $0.001 per share, (the “Series D Preferred Stock”), which is convertible into one share of common stock, and a warrant. The conversion price of the Series D Preferred Stock issuedchanges in the transaction as well as the exercise price of the warrants are fixed and do not contain any variable pricing features or any price based anti-dilutive features. The Series D Preferred Stock issued in this transaction included a beneficial ownership blocker but has no dividend rights (except to the extent that dividends are also paid on the common stock), liquidation preference or other preferences over common stock, and, with certain exceptions, has no voting rights. The securities comprising the units were immediately separable and were issued separately.

The Conversion Price of the Series D Preferred Stock and exercise price of the warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, dilutive issuances, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

A total of 4,436,000 shares of common stock, 9,364,000 shares of Series D Preferred Stock convertible into 9,364,000 shares of common stock, and total warrants to purchase 13,800,000 shares of common stock were issued in the Public Offering inclusive of the underwriters exercise of their over-allotment option to purchase 1,800,000 shares of common stock and warrants to purchase 1,800,000 shares of common stock at the Public Offering price per share less the underwriting discounts and commissions.

 The net proceeds to the Company from the Public Offering, after deducting Underwriter fees and expenses and the Company’s estimated Public Offering expenses was approximately $12.4 million. The Company anticipates using the net proceeds from this Public Offering to continue funding development of AG013, our ongoing Phase 2 clinical trialshareholders’ equity for the treatment of Oral Mucositis, our pre-clinical development of our lantibiotics programthree and for general corporate purposes, including research and development activities, capital expenditures and working capital.

In connection with the Public Offering, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series D Preferred Stock on July 13, 2018, with the Secretary of State of the State of Florida which became effective upon filing. The Certificate of Designation provides for the issuance of the shares of Series D Preferred Stock. With certain exceptions, the shares of Series D Preferred Stock rank on par with the shares of the Common Stock, in each case, as to dividend rights and distributions of assets upon liquidation, dissolution or winding up of the Company.

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With certain exceptions, as described in the Certificate of Designation, the shares of Series D Preferred Stock have no voting rights. However, as long as any shares of Series D Preferred Stock remain outstanding, the Certificate of Designation provides that the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series D Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (c) increase the number of authorized shares of Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

Each share of Series D Preferred Stock is convertible at any time at the holder’s option into a number of shares of Common Stock equal to one share divided by the Conversion Price. The “Conversion Price” is initially $1.00, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions as specified in the Certificate of Designation. Notwithstanding the foregoing, the Certificate of Designation further provides that the Company shall not effect any conversion of the shares of Series D Preferred Stock, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series D Preferred (together with such holder’s affiliates and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% of the shares of Common Stock then outstanding (or, upon election by a Holder prior to the issuance of the Warrants, 9.99%). At the holder’s option, upon notice to the Company, the holder may increase or decrease this beneficial ownership limitation not to exceed 9.99% of the shares of Common Stock then outstanding, with any such increase becoming effective upon 61 days’ prior notice to the Company.

Additionally, subject to certain exceptions and limitations, at any time prior to the three year anniversary of the issuance of the Series D Preferred Stock, the Company will have the right to cause each holder of the Series D Preferred Stock to convert all or part of such holder’s Series D Preferred Stock in the event that (i) the volume weighted average price of our common stock for each of 30 consecutive trading days exceeds $3.00 (subject to adjustment for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such measurement period exceeds $175,000 per trading day and (iii) the holder is not in possession of any information that constitutes or might constitute, material non-public information which was provided by the Company. The description of the Series D Preferred Stock is qualified by reference to the Certificate of Designation filed with our Form 8-K on July 17, 2018.

As ofnine months ended September 30, 2019 and 2018 7,868,000 shares of Series D Preferred Stock had converted into shares of Common Stock in accordance with the terms for conversion.is as follows:

10. Subsequent Events

Following the end of the quarter and through the date of this report (i) the remaining 1,496,000 shares of Series D Preferred Stock (See Note 9) were converted by the holder thereof into 1,496,000 shares of Common Stock, (ii) 9,505,500 warrants issued in connection with the Series D Preferred Stock (See Note 9) were exercised for cash generating approximately $9.5 millionin proceeds to the Company.

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The following information should be read in conjunction with the Financial Statements, including the notes thereto, included elsewhere in this Form 10-Q.

Forward-Looking Statements

This 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. Such forward-looking statements include statements regarding, among other things, (a) our need for and availability of working capital, (b) our financing plans, (c) our strategies, (d) our projected sales and profitability, (e) anticipated trends in our industry. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as in this 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” in our Form 10-K and in this 10-Q. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

Overview

We are focused on becoming a leader in developing novel antibiotics against infectious disease and on developing effective treatments for oral mucositis.

Our Oral Mucositis Product Candidate-Clinical

In June of 2015, we entered into a worldwide Exclusive Channel Collaboration Agreement (“Oral Mucositis ECC”) with Intrexon Corporation (“Intrexon”) and Intrexon Actobiotics NV, a wholly-owned subsidiary of Intrexon, pursuant to which we obtained certain exclusive rights to AG013 as a potential treatment of oral mucositis, or OM for cancer patients, which we intend to continue to develop. AG013, is an oral rinsing solution system designed to deliver human Trefoil Factor 1 (hTFF1) to protect and regenerate damaged mucosal lining of the oral cavity.

OM results in a painful inflammation and mucosal ulceration in the lining of the oral cavity, throat and esophagus and is one of the most commonly reported adverse events associated with cancer chemotherapy. Approximately 770,000 patients annually in the US are at an increased risk of developing OM according to cancer statistics provided by the Center for Disease Control (CDC) in 2017. OM has a negative effect on patient well-being and if severe, negatively affects adherence to a patient’s cancer treatment regimen. At present, we are not aware of any drug that is approved to prevent the condition broadly and current therapies are primarily palliative in nature, only addressing symptom relief but not treating the underlying causes of the condition.

In a Phase 1b clinical trial in 25 cancer patients with OM, AG013 was safe and well tolerated. Data published in the journalCancershowed a 35% reduction of the duration of ulcerative OM in the AG013-treated patients versus the placebo-treated patients. Furthermore, close to 30% of the patients treated with AG013 were full responders while all placebo-treated patients developed ulcerative OM. Additionally, in a Phase 1 pharmacokinetic (PK) study in 10 healthy volunteers, AG013 bacteria adhered to the buccal mucosa and actively secrete protein locally, resulting in homogeneous exposure of the entire mucosal surface up to 24 hours after administration of the rinse. During the first quarter of 2016, we also conducted a confirmatory animal study on AG013.

AG013 has been granted Orphan Drug status in the European Union. In November of 2016, the United States Food and Drug Administration (the “FDA”) granted Fast Track designation for AG013, and we believe it may be eligible for Biologic License Application (“BLA”) exclusivity as well. The FDA’s fast track therapy designation program is intended to facilitate the development and expedite the review of drug candidates intended for the treatment of serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs for those conditions. Under this program, FDA can, for example, review portions of a New Drug Application or BLA for a drug candidate before the entire application is complete, thus potentially beginning the review process at an earlier time.

We have developed a Phase 2 protocol for AG013 with the FDA under the fast track designation. The study is a double blind, placebo controlled, evaluation of daily AG013, administered three times a day, oral rinse for the duration of the cancer treatment. The study is expected to enroll between 160-180 evaluable patients receiving chemoradiation for treatment of head and neck cancer for 7 to 9 weeks. The primary endpoint is a reduction, compared to the placebo, in the number of days of severe oral mucositis. In addition, a number of secondary endpoints are being evaluated. In August of 2016, we received feedback from the FDA in response to our Type C meeting and the pursuit of a Phase 2 trial on AG013 for the treatment of oral mucositis in head and neck cancer patients. We filed an Investigational New Drug (“IND”) update in March 2017 and we initiated the Phase 2 study with AG013 in the United States in 2017 with the expectation that we willwould expand the trial into Europe in 2018

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upon sufficient financing being available to us.2018. The Phase 2 trial is a double-blind, placebo-controlled, 2-arm, multi-center trial in which approximately 200 patients will be randomized in a 1:1 ratio to receive either a placebo or AG013.AG013 following meals, beginning on the first day of chemoradiation therapy and continuing through the course of cancer treatment. The study is expected to enroll between 160-180 evaluable patients receiving chemoradiation for treatment of head and neck cancer for 7 to 9 weeks. The clinical trial will beis being conducted at between 50 - 75 clinical sites across the United States and Europe. The purpose of the Phase 2 study (NCT03234465) is to evaluate the efficacy (preventing the occurrence and shortening the duration of severe oral mucositis (“SOM”), safety and tolerability of topically administered rinse AG013 compared to placebo for reducing the incidence and severity of OM in patients undergoing traditional chemoradiation for the treatment of head and neck cancer. Key efficacy measures include collection of data regarding the duration, time to development, and overall incidence of OM (World Health Organization scale used) during the active treatment phase, beginning from the start of chemoradiation therapy until 2 weeks following its completion.

An interim safety analysis was requested by the FDA on patients from our Phase 2 clinical trial of AG013 for the treatment of OM. We completed enrollment of the interim safety analysis cohort, which included 24 randomized patients in our Phase 2 clinical trial of AG013 for the treatment OM. Nineteen of those patients were included in the unblinded safety evaluation, of which 10 received AG013. We recently announced positive results from our interim safety analysis which was requested by the FDA on patients from our Phase 2 clinical trial of AG013 for the treatment of OM.in May, 2018. The study provided information that, we believe, likely indicates that the overall incidence of severe OM is less than would be anticipated in the general head and neck cancer population.

Safety was evaluated on the basis of treatment-emergent adverse events, vital signs, weight, physical examinations, clinical laboratory assessments and the presence of AG013 in whole blood. Tolerability measures (taste, consistency and smell) were collected from the patient diaries. In addition, the reasons for study treatment discontinuation were also summarized. Following review of the data by an independent Data Safety Monitoring Board (DSMB), it was concluded that the clinical trial can proceed with no changes to the study. The data analysis indicated that the distribution of adverse events werewas similar between AG013 and placebo. The serious adverse events reported were consistent with those commonly reported in a head and neck cancer population receiving traditional chemoradiation therapy treatments and included fevers, neutropenia, anemia, nausea and vomiting, infections and oral (mouth and throat) pain. Therepain and there were no reports of AG013 related bacteremia or sepsis. Of patients that discontinued participation in the clinical study, 4 patients experienced adverse events, including 3 patients who developed nausea and vomiting, 2 patients that were non-compliant with the study procedures and 3 patients developed severe OM.

Following the clearance in May 2018, by the DSMB, we are proceedingproceeded with patient enrollment for our AGO13AG013 clinical trial. We recently determinedtrial in the United States and we actively worked to expand the number of clinical sites, we would conduct our trials in an attemptboth the United States and Europe, in order to accelerate enrollment. The expansionthe pace of the number of clinical sites at which we would conduct our clinical trials is expected to add to our clinical trial costs.patient enrollment. On October 15, 2018, we received clearance from the Belgian Health Authority to activate the patient enrollment process in Belgium.Belgium followed by Health Authority approvals in the United Kingdom and Germany in November 2018. As a result, we incurred additional clinical trial costs, but we have significantly improved the pace of our patient enrollment. We expect to report top-line resultscompleted our site activation activities where we have 59 clinical sites in 4 countries actively screening patients for inclusion in the clinical trial. We currently have approximately 182 patients enrolled in the trial of the contemplated 200 patients. We continue to anticipate completing the enrollment portion of the trial in the fourth quarter of 2019 with the top line results from the trial being released in early 2020.

In addition, the DSMB met in September 2019 and reviewed safety data to date on the first 100 patients who have completed the trial and determined that the clinical trial may continue with no adjustments or further review.

On September 30, 2019, we made a poster presentation at the European Society for Medical Oncology Congress where we announced initial blinded blended data from our ongoing Phase 2, placebo-controlled, clinical trial of AG013 in late 2019.oral mucositis. The presentation described the methods and initial blinded results from the ongoing Phase 2 clinical trial for our lead oral mucositis product candidate, AG013. The initial blinded data, submitted in the abstract, reflected the results for 42 of the 71 enrolled and randomized patients across 48 study sites who had completed their treatment course and demonstrated that in the blinded, combined placebo and active treatment groups, there was sufficient evidence of efficacy and safety to continue the study. Additional data accumulated since poster submission, indicated the blinded efficacy evaluation, which included any patient with SOM after week one of treatment and those receiving a cumulative dose of 55 Gy (week 6 of treatment), demonstrated an overall SOM incidence of 47%, which we believe is lower than would be expected based on historical data in the head and neck cancer population receiving this chemoradiation regimen. The overall rate of SOM was reported in only 13.1 % (110 of 842) of evaluable visits. The overall safety profile continues to be consistent with those adverse events that normally occur in cancer patients receiving chemoradiation therapy. The study, however, remains blinded and individual treatment responses remain to be identified.

Our Antibiotic Product Candidate-Preclinical

Members of our scientific team discovered that a certain bacterial strain produces MU1140, a molecule belonging to the novel class of antibiotics known as lantibiotics. Lantibiotics, such as MU1140, are highly modified peptide antibiotics made by a small group of Gram positiveGram-positive bacterial species. Approximately 60 lantibiotics have been discovered, to date. We believe lantibiotics are generally recognized by the scientific community to be potent antibiotic agents.

In nonclinical testing, MU1140 has shown activity against all Gram positiveGram-positive bacteria against which it has been tested, including those responsible for a number of healthcare associated infections, or HAIs. A high percentage of hospital-acquired infections are caused by highly resistant bacteria such as methicillin-resistant Staphylococcus aureus (MRSA) or multidrug-resistant Gram-negative bacteria. We believe the need for novel antibiotics is increasing as a result of the growing resistance of target pathogens to existing FDA approved antibiotics on the market.

Lantibiotics have been difficult to investigate for their clinical usefulness as therapeutic agents in the treatment of infectious diseases due to a general inability to produce or synthesize sufficient quantities of pure amounts of these molecules. Traditional fermentation methods can only produce minute amounts of the lantibiotic.

In June 2012, we entered into the Lantibiotic Exclusive Channel Collaboration agreement (“Lantibiotic ECC”) with Intrexon for the development and commercialization of the native strain of MU1140 and related homologs using Intrexon’s advanced transgene and cell engineering platforms. Through our work with Intrexon, we have been able to produce a significant increase in the fermentation titer of MU1140 compared to standard fermentation methods and have discovered a new purification process for MU1140. Our work with Intrexon generated a substantial number of homologs of MU1140, and we are continuing our research and development and collaboration efforts with Intrexon to develop potential derivatives of the MU1140 molecule using genetically modified bacteria.

In our pre-clinical studies to support a potential IND filing with the FDA, we tested a total of six homologs of MU1140 for certain compound characteristics, including but not limited to: drug activity (based on minimum inhibitory concentration or “MIC”) equal or better than “standard of care” drugs against certain drug-resistant bacteria, safety, toxicity, stability, and manufacturability. An animal study specifically evaluated homolog efficacy in relation to survival, measurable amounts ofClostridium difficile (“C. diff”) colony forming units, and toxin levels. Three homologs demonstrated promising results with one homolog, OG253 achieving a 100% survival rate throughout the entire study in contrast to an approximately 30% survival rate for the vancomycin positive control.

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Based on these early results, we selected a lead candidate, OG253, for which we had a pre INDpre-IND meeting with the FDA in November of 2015 regarding the pursuit of an IND for OG253. Following additional research and development on second generation lantibiotics, in August of 2016, we opted to select a second generation lantibiotic, OG716, for treatment ofC. diff as our new lead candidate. OG716 is a new, orally-active homolog, that has exhibited positive results in an animal model for potential treatment ofC. diff. Generated from our MU1140 platform, this new lantibiotic showed promising efficacy in reducing clinically relevantC. diff infections as measured by increased animal survival and decreased relapse as well as reduced production of toxins A & B andC. diff spores when compared to a vancomycin positive control.

The timing of the filing of an IND regarding OG716 is subject to our having sufficient available capital given all of our anticipated needs and expected requirements in connection with our ongoing research and development initiatives. We currently expect the IND for a first-in-human clinical study of OG716 to be filed with the FDA based onfollowing our ability to completecompletion of the requisite studies, contingent on sufficient funding. Based upon the funding available from our recent public offerings and the exercisewhich we commenced in October of warrants we expect to conduct certain of the requisite studies.2019.

Other Product Candidates and Technologies.

In addition to our lantibiotics and oral mucositis product candidates, we also have other candidates and technologies in the oral care and weight loss areas. We do not intend to continue to develop these potential product candidates and technologies without partnering with a third party. We out-licensed the continued research and development of our weight loss product candidate in December 2013 to, LPThera LLC, and LPThera LLC continues to work to develop a product for commercial use. Our oral care product candidate SMaRT Replacement Therapy is positioned for out-licensing opportunities.

Recent Developments

Clearance For Patient Enrollment In Belgium. On October 17, 2018, we announced we had received clearance to enroll patients residing in Belgium from the Belgian Health Authority, The Federal Agency for Medicines and Health Product into our Phase 2 clinical trial of AG013. We continue to pursue Health Authority approval to initiate patient enrollment in both GermanyBrexit and the United Kingdom.

Full Conversion of Series D Preferred. 1,496,000 shares of Series D Preferred Stock was issuedRegulatory Framework in the Company’s July 2018 public offeringUnited Kingdom

In June 2016, the United Kingdom (the “Public Offering”“UK”), were outstanding at September 30, 2018. As of October 3, 2018, all remaining shares of electorate voted in a referendum to leave the Company’s Series D Preferred stock have been voluntarily converted by the holders to the Company’s common stock and no shares of Series D Preferred stock remain outstanding. The Company received no additional proceeds from the conversions of Series D Preferred by the holders thereof.

Warrant Exercises. In the Company’s Public Offering, the Company issued 13,800,000 warrants to acquire the Company’s common stock at an exercise price of $1.00 per shareEuropean Union (the “Public Offering Warrants”). As of November 13, 2018, 9,505,500 shares of Company common stock have been issued as a result of the voluntary exercise of such Public Offering Warrants by the holders thereof. The warrant exercises resulted in gross proceeds to the Company of $9,505,500.

Completed Underwritten Public Offering. On July 17, 2018, we announced the closing of an underwritten public offering of units for gross proceeds of approximately $13.8 million, which includes the full exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting underwriting discounts and commissions and offering expenses payable by us. The offering was comprised of Class A Units, priced at a public offering price of $1.00 per unit, with each unit consisting of one share of common stock and a seven-year warrant to purchase one share of common stock with an exercise price of $1.00 per share (each, a “Warrant” and collectively, the “Warrants”), and Class B Units, priced at a public offering price of $1.00 per unit, with each unit comprised of one share of series D preferred stock (the “Series D Preferred Stock”“EU”), which is convertible into one sharecommonly referred to as “Brexit”. In March 2017, the UK government formally notified the European Council of common stock, and a Warrant. The conversion priceits intention to leave the EU after it triggered Article 50 of the Series D Preferred Stock issuedLisbon Treaty to begin the two-year negotiation process establishing the terms of the exit and outlining the future relationship between the UK and the EU. Formal negotiations officially started in June 2017. After multiple votes in the transaction as well asBritish Parliament in January, March, and October 2019 failing to approve the exercise pricedraft Brexit withdrawal agreement with the EU, the UK government negotiated a delay to the UK’s withdrawal until January 31, 2020. The new date of Brexit is still uncertain. The outcome after Brexit also continues to be uncertain, which may pose certain implications to our research, commercial and general business operations in the UK and the EU, including the approval and supply of our products. At present, it is still unclear whether and to what extent the UK will remain within or aligned to the EU system of medicines regulation, depending on the ultimate outcome of the Warrants are fixednegotiations. However, both the UK and do not contain any variable pricing features or any price based anti-dilutive features. The Series D Preferred Stockthe EU have issued detailed guidance for the industry on how medicines, medical devices and clinical trials will be separately regulated in this transaction includes a beneficial ownership blocker but has no dividend rights (except to the extent that dividends are also paid on the common stock), liquidation preference or other preferences over common stock, and, with certain exceptions, has no voting rights. The securities comprising the units were immediately separable and have been issued separately. A total of 4,436,000 shares of common stock, 9,364,000 shares of Series D Preferred Stock convertible into 9,364,000 shares of common stock, and total warrants to purchase 13,800,000 shares of common stock were issuedtheir respective territories in the public offering inclusiveevent of a ‘hard Brexit’, meaning an outcome where no negotiated settlement is reached.

Our preparation for Brexit, including for a potential ‘hard Brexit’, includes the underwriters exercise of their over-allotment optionchanges necessary to purchase 1,800,000 shares of common stock and warrants to purchase 1,800,000 shares of common stock atmeet the public offering price per share lessrelevant requirements in the underwriting discounts and commissions. The net proceeds to the Company from the public offering, after deducting Underwriter fees and expensesEU and the Company’s public offering expenses was approximately $12.4 million.UK after Brexit, especially in the regulatory, research, manufacturing and supply chain areas. The principal aim is to ensure the continuity of supply to patients in Europe (EU and the UK) participating in our AG013 clinical trial.

About Us

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About Us

We were incorporated in November 1996 and commenced operations in 1999. We consummated our initial public offering in June 2003. We have devoted substantially all of our available resources to our discovery efforts comprising research and development, clinical trials for our product candidates, protection of our intellectual property and the general and administrative support of these operations. We have generated limited revenues from grants and from our former consumer ProBiora3 product business through June 30, 2016 and have principally funded our operations through the sale of debt and equity securities, including the exercise of warrants issued in connection with financing transactions. In June of 2016, we completed the sale of our consumer probiotics business to ProBiora Health, LLC and as a result, we will no longer generate revenue from sales of consumer probiotic products.

As of September 30, 2018,2019, we had an accumulated deficit of $108,617,988$123,755,548 and we have yet to achieve profitability. We incurred net losses of $7,158,521and $5,270,792 for$11,968,726 and $7,158,521for the nine months ended September 30, 20182019 and September 30, 2017,2018, respectively, and $6,731,525$11,326,182 and $7,013,304$6,731,525 for the years ended December 31, 20172018 and 2016,2017, respectively. We expect to incur significant and increasing operating losses for the foreseeable future as we seek to advance our product candidates through preclinical testing and clinical trials to ultimately obtain regulatory approval and eventual commercialization. We will need to raise additional capital. Adequate additional funding may not be available to us on acceptable terms, or at all. We expect that research and development expenses will increase along with general and administrative costs, as we seek to grow and continue to operate our business. Our net revenues were $0 and $0 for the three and nine months ended September 30, 20182019 and 2017,2018, respectively, and $0 and $464,048,$0, for the years ended December 31, 20172018 and 2016,2017, respectively.

Financial Overview

Research and Development Expenses

Research and development consistsconsist of expenses incurred in connection with the discovery and development of our product candidates. These expenses consist primarily of employee-related expenses, which include salaries and benefits and attending science conferences; expenses incurred under our ECC agreements with Intrexon and under other agreements with contract research organizations, investigative sites and consultants that conduct our clinical trials and a substantial portion of our nonclinical studies; the cost of acquiring and manufacturing clinical trial materials; facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities and equipment, and depreciation of fixed assets; license fees, for and milestone payments related to, in-licensed products and technology; stock-based compensation expense; and costs associated with nonclinical activities and regulatory approvals. We expense research and development costs as incurred.

Our research and development expenses can be divided into (i) clinical research, and (ii) nonclinical research and development activities. Clinical research costs consist of clinical trials, manufacturing services, regulatory activities and related personnel costs, and other costs such as rent, utilities, depreciation and stock-based compensation. Nonclinical research and development costs consist of our research activities, nonclinical studies, related personnel costs and laboratory supplies, and other costs such as rent, utilities, depreciation and stock-based compensation and research expenses we incur associated with our ECC agreements with Intrexon. While we are currently focused on advancing our product development programs, our future research and development expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of each product candidate’s commercial potential. In addition, we cannot forecast with any degree of certainty which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans, research expenses and capital requirements.

Our research and development expenses were $$4,178,294$9,360,520 and $$2,724,349$4,178,294 for the nine months ended September 30, 20182019 and 2017,2018, respectively.

Our current product development strategy contemplates an expected increase in our research and development expenses in the future as we continue the advancement of our clinical trial for our oral mucositis candidate and nonclinical product development programs for our lantibiotic product candidate. The lengthy process of completing clinical trials; seeking regulatory approval for our product candidates; and expanding the potential claims we are able to make, requires expenditure of substantial resources. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenues and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Our current product candidates are not expected to be commercially available until we are able to obtain regulatory approval from the FDA.FDA or European Medicines Agency.

Our plan is to budget and manage expenditures in research and development such that they are undertaken in a cost-effective manner yet still advance the research and development efforts. While we have some control under our Lantibiotic ECC and Oral Mucositis ECC as to the planning and timing of the research and development and therefore the timing of when expenditures may be incurred for various phases of agreed upon projects, actual expenditures can vary from period to period. Subject to available capital, we expect overall research and development expenses to increase as a result of our Phase 2b clinical trial on our oral mucositis product candidate as our financial resources permit. Our research and development projects are currently expected to be taken to the point where they can be licensed or partnered with larger pharmaceutical companies.

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General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance, and administrative functions. Other general and administrative expenses include facility costs not otherwise included in research and development expenses, patent filing, and professional fees for legal, consulting, auditing and tax services.

We anticipate that our general and administrative expenses to increase for, among others, the following reasons:

Other Income (Expense)

Other income (expense) includes local business taxes, as well as interest income and expense. Interest income consists of interest earned on our cash and cash equivalents, and interest earned on the stock subscription receivable.equivalents. The primary objective of our investment policy is capital preservation. Interest expense consists primarily of interest and costs associated with our indebtedness.

Income Taxes

As of December 31, 2017,2018, we have federal and state tax net operating loss carryforwards of approximately $93,966,000 to offset future federal$102,984,000. Federal and state income taxes.tax net operating loss carryforwards generated prior to December 31, 2017 will expire through 2037. Federal tax net operating loss carryforwards generated subsequent to December 31, 2017, do not expire but are subject to a limitation of 80% of federal taxable income. The state tax loss carryforwards generated subsequent to December 31, 2017, will expire through 2038, unless previously utilized. We also have federal research and development tax credit carryforwards of approximately $2,016,000 as of December 31, 2017 to offset future$2,250,000. The federal and state income taxes. Our net operating loss and research and development tax credit carryforwards will expire if not used by 2037through 2028, unless previously utilized.

Pursuant to Internal Revenue Service Code Sections 382 and 2027, respectively. Our ability to utilize383, use of our net operating losslosses and tax credit carryforwards may beare limited in the eventdue to a cumulative change in ownership as definedof more than 50% that occurred in Section 3822009 and in 2013. As a result of these 50% changes in ownership, the Internal Revenue Codeannual amount of 1986, as amended, orpre-change net operating losses that may be used in periods subsequent to the Code, has occurred or may occurchange in the future. The private placement transaction with the KFLP inownership is approximately $417,000 for losses incurred through June 2009, (the “June 2009 Private Placement”) constituted such an event and $3,540,000 for losses incurred through December 2013. The impact of this limitation is factored into management’s valuation allowance placed against our historical loss carryforwards up to such point in time were limited. Furthermore, our transactions with Intrexon during 2013 constituted a second such event, and our historical loss carryforwards up to December 2013 were further limited. See “Tax Loss Carryforwards.”deferred tax assets. In each period since our inception, we have recorded a 100% valuation allowance for the full amount of our deferred tax asset, as the realization of the deferred tax asset is uncertain. As a result, we have not recorded any federal tax benefit in our statements of operations.

Results of Operations for the Three Months Ended September 30, 20182019 and 20172018

Research and Development. Research and development expenses were $$1,580,511$3,067,612 for the three months ended September 30, 2019 compared to $1,580,511 for the three months ended September 30, 2018, compared to $$996,477 for the three months ended September 30, 2017, an increase of $584,034$1,487,101 or 58.6%94.1%. This increase was primarily due to increases in costs associated with work under our ECC’s, including our current clinical trial for our oral mucositis product candidate, salary, insurance, and consulting of $1,478,273, $52,745, $9,208, and $5,042, respectively. This increase was partially offset by a decrease in stock-based compensation costs of $494,595 and $89,056, respectively.$53,047.

General and Administrative. General and administrative expenses were $852,841 for the three months ended September 30, 2019 compared to $1,183,830 for the three months ended September 30, 2018, compareda decrease of $330,989 or 28.0%. This decrease was primarily due to $925,043decreases in costs associated stock-based compensation and filing and registration fees of $363,080 and $47,720, respectively. This decrease was partially offset by increases in costs associated with travel and entertainment, legal, insurance, employee benefits, salary, and vacation costs of $21,749, $12,583, $12,058, $12,023, $9,919, and $7,680, respectively.

Other Income. Other income, net was $83,904 for the three months ended September 30, 2017, an increase of $258,787 or 28.0%. This increase was primarily due2019 compared to an increase in stock based compensation costs of $431,808. This increase was partially offset by decreases in consulting costs and filing fees and registration costs of $158,692 and $30,616, respectively.

Other Income. Other income, net was $6,506 for the three months ended September 30, 2018, compared to $(145,710) for the three months ended September 30, 2017, resulting in an increase of $152,216.$77,398. The net change was primarily attributable to the elimination of a recorded derivative liability in the prior period associated with some of our outstanding warrants of $42,918 which was partially offset by a decreasean increase in interest expenseincome of $103,752.$77,639.

Results of Operations for the For the Nine Months Ended September 30,201830, 2019 and 20172018

Research and Development. Research and development expenses were $$4,178,294$9,360,520 for the nine months ended September 30, 2019 compared to $4,178,294 for the nine months ended September 30, 2018, compared to $$2,724,349 for the nine months ended September 30, 2017, an increase of $1,453,945$5,182,226 or 53.4%124.0%. This increase was primarily due to increases in costs associated with work under our ECC’s, including our current clinical trial for our oral mucositis product candidate, salary, consulting, and stock-based compensation costsrent and utilities of $1,640,546$5,083,173, $94,902, $44,625, and $94,847,$14,728, respectively. This increase was partially offset by a decrease in, salarypatents and salary relatedbonus costs of $258,627.$33,921 and $25,000, respectively.

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GeneralandAdministrative. General and administrative expenses were $2,858,997 for the nine months ended September 30, 2019 compared to $2,991,300 for the nine months ended September 30, 2018, compareda decrease of $132,303 or 4.4%. This decrease was primarily due to $2,581,586decreases in costs associated with stock-based compensation and bonus costs of $331,332 and $163,655, respectively. This decrease was partially offset by increases in costs associated with consulting, insurance, travel and entertainment, salaries, and depreciation of $157,340, $77,309, $54,337, $49,211 and $19,587, respectively.

Other Income. Other income, net was $250,791 for the nine months ended September 30, 2017, an increase of $409,714 or 15.9%. This increase was primarily due2019 compared to increases in stock based compensation costs, salary and salary related costs, legal, accounting costs, and transfer agent costs, of $355,880, $160,300, $35,120, $22,019, and $22,416, respectively. These increases were partially offset by a decrease in consulting costs of $180,404.

Other Income. Other income, net was $11,073 for the nine months ended September 30, 2018, compared to $35,143 for the nine months ended September 30, 2017, resulting in a net changean increase of $24,070.$239,718. The net change was primarily attributable to the elimination of a recorded derivative liability in the prior period associated with some of our outstanding warrants of $188,726 which was partially offset by a decreasean increase in interest expenseincome of $160,917.$240,428.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through the sale of equity securities in our initial public offering, the sale of equity securities and warrants in private placements, debt financing, warrant exercises, public offerings, and grants. During the nine months ended September 30, 20182019 and September 30, 2017,2018, our operating activities used cash of $6,101,876$9,076,328 and $5,005,050,$6,101,876, respectively. The use of cash in all periods primarily resulted from our net losses adjusted for non-cash items and changes in operating assets and liabilities. We had a working capital surplus of $13,915,167$20,600,120 and $6,294,650$20,765,707 at September 30, 20182019 and December 31, 2017,2018, respectively.

During the nine months ended September 30, 20182019 and September 30, 2017,2018, our investing activities used cash of $11,354 and $60,242, and $-0-, respectively.

During the nine months ended September 30, 20182019 and September 30, 2017,2018, our financing activities provided cash of $13,807,393$11,171,305 and $3,847,886,$13,807,393, respectively. The cash provided by financing activities during the nine months ended September 30, 20182019 and September 30, 20172018 was primarily due to the recent consummationproceeds from the sale of a public offeringcommon stock, convertible preferred stock, and warrants and reductions in short term notes payable offset by the settlement of the stock subscription receivable and the receipt of proceeds under a note payable to shareholder.payable.

Financing

Additional details of our financing activities for the periods reflected in this report are provided below:

The May 2017 Series A Preferred Stock Financing

On May 10, 2017 we entered into a securities purchase agreement with three accredited investors, to purchase up to $3,000,000 of Series A Convertible Preferred Stock (the “Series A Preferred Stock Financing”). The sale of 1,200,000 shares of Series A Preferred Stock took place in two separate closings and at the first closing which occurred on May 10, 2017, we received gross proceeds of approximately $1,302,000. The second closing occurred on July 25, 2017 and we received gross proceeds of approximately $1,698,000, which was the balance of the Preferred Stock Financing. The Series A Preferred Stock is convertible into 1,200,000 shares of our Common Stock. The purchase price per share of the Series A Preferred Stock is represented by $2.50 per share of the Common Stock on an as converted basis. In addition, we issued to the investors in the private placement accompanying common stock purchase warrants to purchase an aggregate of 1,064,520 shares of Common Stock (the “Series A Warrants”). The Series A Warrants have a term of seven years from the date of issuance and are non-exercisable until six (6) months after issuance and have an exercise price of $3.10 per share. Proceeds from the Preferred Stock Financing (including the exercise of any warrants for cash) will be used for general corporate purposes, including working capital.

In connection with the issuance and sale of the Series A Preferred Stock and Warrants, we granted certain demand registration rights and piggyback registration rights with respect to the shares of our Common Stock issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, pursuant to a Registration Rights Agreement.

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Except as otherwise required by law, the Series A Preferred Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Preferred Stock, (c) increase the number of authorized shares of Series A Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing. Upon any liquidation, dissolution or winding-up by us, whether voluntary or involuntary that is not a Fundamental Transaction (as defined in the Certificate of Designation), the holders of Series A Preferred Stock shall be entitled to receive out of the assets, the greater of (i) the product of the number of shares of Series A Preferred Stock then held by such holder, multiplied by the Original Issue Price; and (ii) the amount that would be payable to such holder in the Liquidation in respect of Common Stock issuable upon conversion of such shares of Series A Preferred Stock if all outstanding shares of Series A Preferred Stock were converted into Common Stock immediately prior to the Liquidation.

The May 2017 Intrexon Debt Financing and ECC Amendment

On May 10, 2017, concurrently with the above referenced Series A Preferred Stock Financing, we entered into Note Purchase Agreement with Intrexon pursuant to which the Company issued a $2,400,000 unsecured non-convertible promissory note to Intrexon (the “Intrexon Note”) and amended the first milestone in our Oral Mucositis exclusive channel collaboration agreement (the “May Oral Mucositis ECC Amendment”) with Intrexon. The Intrexon Note matured in two (2) years and has a simple interest rate of 12% per annum. Proceeds from the Intrexon Note will be used to fund our AG013 research and clinical trials. In addition to, and as part of the Intrexon Note, we amended the first milestone payment on the Oral Mucositis ECC from a $2,000,000 payment upon first dosing of a patient to a $3,000,000 payment upon the earlier of (a) dosing of the last patient, in a Phase 2 clinical trial, and (b) the twenty four (24) month anniversary of the dosing of the first patient in the Phase 2 clinical trial. Simultaneously with the amendment to the Oral Mucositis ECC a similar amendment was put in place with respect to our Stock Issuance Agreement with Intrexon reflecting the milestone amendment. The Intrexon Note, including accrued and unpaid interest, was subsequently repaid in November 2017 through the issuance of Series C Preferred Stock (see below).

The November 2017 Series B Preferred Stock Financing

On November 8, 2017, we completed a private placement of $3,300,000 of Series B, Non-Voting, Convertible Preferred Stock (the “Series B Preferred Stock”) pursuant to a Securities Purchase Agreement with four existing shareholders who are accredited investors including, the Koski Family Limited Partnership, an entity affiliated with a director of the Company, (the “Series B Preferred Stock Financing”).

The full $3,300,000 of Series B Preferred Stock is convertible into 1,320,000 shares of our Common Stock. The purchase price per share of the Series B Preferred Stock is represented by $2.50 per share of the Common Stock on an as converted basis. In addition, we issued to the investors in the private placement accompanying common stock purchase warrants to purchase an aggregate of 1,064,518 shares of Common Stock (the “Series B Warrants”). The Series B Warrants have a term of seven years from the date of issuance and are non-exercisable until six (6) months after issuance and have an exercise price of $3.10 per share.

The Series C Preferred Stock Issuance and Intrexon Debt Conversion

Concurrently with the Series B Preferred Stock Financing, we entered into a Debt Conversion Agreement (the “Intrexon Debt Conversion Agreement”) with Intrexon pursuant to which Intrexon exchanged amounts owed by us to Intrexon under the Intrexon Note, and trade payables in the aggregate amount of approximately $3,400,000 for equity in the form of 100 shares of Series C, Non-Voting, Non-Convertible, Redeemable Preferred Stock (the “Series C Preferred Stock”) issued by us to Intrexon pursuant to the Debt Conversion Agreement.

Each issued and outstanding share of Series C Preferred Stock entitles the holder of record to receive dividends at the annual rate of twelve percent (12%) (the “Initial Rate”) of its Stated Value, payable by issuing additional shares of Series C Preferred Stock within thirty days after the end of each calendar year pro-rata for partial years. ThePursuant to the terms of the Series C Preferred Stock, the Initial Rate shall be subject to increaseincreased to twenty percent (20%) automatically, afteron May 10, 2019 if the Series C Preferred Stockand such rate is not earlier redeemed by us.applicable to periods after that date. On January 25, 2018 we paid a dividend on our Series C Preferred Stock to Intrexon of 1.733 additional shares of additional Series C Preferred Stock for the portion of the 2017 fiscal year the Series C Preferred Stock was outstanding. On January 31, 2019 we paid a dividend on our Series C Preferred Stock to Intrexon of 12.208 additional shares of Series C Preferred Stock for the 2018 fiscal year the Series C Preferred Stock was outstanding.

The April 6, 2018 Registered Direct Offering and Private Placement.

On April 6, 2018, we entered into a securities purchase agreement with certain investors pursuant to which issued an aggregate of 900,000 shares of our common stock, par value $0.001 per share, at $2.00 per share. In a concurrent private placement, we issued to the investors who participated in the registered offering, warrants exercisable for one share of common stock for each share purchased in the registered offering for an aggregate of warrants to acquire 900,000 shares of common stock at an exercise price of $2.00 per share. Each warrant is exercisable beginning on the six-month anniversary of the date of its issuance and expires five years from the date of issuance.

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The July 17, 2018 Underwritten Public Offering

On July 17, 2018, we closed an underwritten public offering of units for gross proceeds of approximately $13.8 million, which includes the full exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting underwriting discounts and commissions and offering expenses payable by us.

The offering was comprised of Class A Units, priced at a public offering price of $1.00 per unit, with each unit consisting of one share of common stock and a seven-year warrant to purchase one share of common stock with an exercise price of $1.00 per share (each, a “Warrant” and collectively, the “Warrants”), and Class B Units, priced at a public offering price of $1.00 per unit, with each unit comprised of one share of series D preferred stock (the “Series D Preferred Stock”), which is convertible into one share of common stock, and a Warrant. The conversion price of the Series D Preferred Stock issued in the transaction as well as the exercise price of the Warrants are fixed and do not contain any variable pricing features or any price based anti-dilutive features. The Series D Preferred Stock issued in this transaction included a beneficial ownership blocker but has no dividend rights (except to the extent that dividends are also paid on the common stock), liquidation preference or other preferences over common stock, and, with certain exceptions, has no voting rights. The securities comprising the units were immediately separable and have been issued separately.

At the closing of ourthis underwritten public offering, a total of 4,436,000 shares of common stock, 9,364,000 shares of Series D Preferred Stock convertible into 9,364,000 shares of common stock, and warrants to acquire 13,800,000 shares of common stock were issued inclusive of the underwritersunderwriter’s exercise of their over-allotment option to purchase 1,800,000 shares of common stock and warrants to acquire 1,800,000 shares of common stock at $1.00 per share.

Since the closing of ourthis underwritten public offering all of the shares of Series D Preferred Stock that were issued have been converted into shares of our common stock in accordance with the terms for conversion and 9,505,500 warrants were exercised for cash generating approximately $9.5 million in proceeds to us.

The March 25, 2019 Underwritten Public Offering.

On March 25, 2019, we announced the closing of an underwritten public offering for gross proceeds of approximately $12.5 million, which included the partial exercise of the underwriter’s over-allotment option to purchase additional shares and warrants, prior to deducting underwriting discounts and commissions and offering expenses. The offering is comprised of 16,666,668 shares of common stock, short-term warrants to purchase up to 8,333,334 shares of common stock, and long-term warrants to purchase up to 8,333,334 shares of common stock, at a price to the public of $0.75 per share and accompanying warrants.

We granted the underwriter a 30-day option to purchase up to 2,500,000 additional shares of common stock and/or short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,250,000 shares of common stock the public offering price, less underwriting discounts and commissions.

The underwriter did not exercise its option to purchase additional shares of common stock, however the underwriter did exercise its option to purchase the short-term warrants to purchase 1,250,000 shares of common stock and long-term warrants to purchase 1,250,000 shares of common stock effective as of the closing. Each short-term warrant has an exercise price of $0.75 per share of common stock, is immediately exercisable, and will expire on the earlier of (1) the eighteen-month anniversary of the date of issuance and (2) twenty-one trading days following our release of top-line data related to its Phase 2 double blind, placebo controlled clinical trial of AG013. Each long-term warrant has an exercise price of $0.90 per share of common stock, is immediately exercisable and will expire five years following the date of issuance.

Other Financings

We enter into short term financing arrangements for the payment of our annual insurance premiums for our products liability insurance and directors and officers and employment practices insurance.

Products Liability Insurance

On March 10, 2019, we entered into a short-term note payable for $17,688 bearing interest at 5.69% to finance the product liability insurance. Principal and interest payments on this note began April 10, 2019 and are made evenly based on a straight-line amortization over an 11-month period with the final payment being due on February 10, 2020.

On March 10, 2018, we entered into a short-term note payable for $28,915 bearing interest at 5.09% to finance the product liability insurance. Principal and interest payments on this note began April 10, 2018 and are made evenly based on a straight-line amortization over an 11-month period with the final payment being made on February 12, 2019.

Directors’ and Officers’ Insurance

On August 7, 2019 we entered into a short-term note payable for $254,889 bearing interest at 5.74% to finance a portion of the directors’ and officers’ liability insurance and employment practices liability insurance premiums. Principal and interest payments on this note began August 24, 2019 and are made evenly based on a straight-line amortization over an 11-month period with the final payment being due on June 24, 2020.

On July 24, 2018, the Companywe entered into a short-term note payable for $215,575 bearing interest at 5.24% to finance a portion of the directors’ and officers’ liability insurance and employment practices liability insurance premiums. Principal and interest payments on this note began August 24, 2018 and are made evenly based on a straight linestraight-line amortization over an 11-month period with the final payment being made on June 25,27, 2019.

On March 10, 2018, we entered into a short-term note payable for $28,915 bearing interest at 5.09% per annum to finance the product liability insurance. Principal and interest payments on this note began April 10, 2018 and are made evenly based on a straight line amortization over a 11-month period with the final payment being due on February 10, 2019.

On March 10, 2017, we entered into a short-term note payable for $31,985 bearing interest at 6.18% per annum to finance the product liability insurance. Principal and interest payments on this note began April 10, 2017 and such payments are to be made evenly based on a straight line amortization over a 10-month period with the final payment being made on January 2, 2018.

On July 24, 2017, we entered into a short-term note payable for $140,062 bearing interest at 5.09% to finance a portion of the directors’ and officers’ liability insurance and employment practices liability insurance premiums. Principal and interest payments on this note began August 24, 2017 and such payments are to be made evenly based on a straight line amortization over an 11-month period with the final payment being made on June 25, 2018.

On July 24, 2016, we entered into a short-term note payable for $111,730 bearing interest at 4.89% per annum to finance a portion of the directors’ and officers’ liability insurance and employment practices liability insurance premiums. Principal and interest payments on this note begin August 24, 2016 and are made evenly based on a straight line amortization over an 11-month period with the final payment being made on June 21, 2017.

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Future Capital Requirements

Our capital requirements for the remainder of 20182019 and for 20192020 will depend on numerous factors, including the progress of our research and development, the resources we devote to develop and support our technologies and our success in pursuing strategic licensing and funded product development relationships with external partners. Subject to our ability to raise additional capital including through possible joint ventures and/or partnerships, we expect to incur substantial expenditures to further commercialize or develop our technologies including continued increases in costs related to our pending clinical trials research, nonclinical testing and clinical studies, as well as costs associated with our capital raising efforts and being a public company. We will require substantial funds to conduct research and development and nonclinical and Phase 1 and Phase 2 clinical testing of our licensed, patented technologies and to develop sublicensing relationships for the Phase 2 and 3 clinical testing and manufacture and marketing of any products that are approved for commercial sale. Our plans include seeking both equity and debt financing, alliances or other partnership agreements with entities interested in our technologies, or other business transactions that would generate sufficient resources to ensure continuation of our operations and research and development programs.

We believe our current available cash and cash equivalents, including the net proceeds from our recently completed public offering and warrant exercises, will allow us to fund our operating plan through the fourth quarter of 2019.2020. We expect to continue to seek additional funding for our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned clinical testing, research and development activities, which could harm our business. The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We also will require additional capital beyond our currently forecasted amounts. For example, as we continue to work with Intrexon under the Lantibiotic ECC for the development of MU1140 homologs and in our Oral Mucositis ECC including the currently pending clinical trial, we will require additional capital.