UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20222023.
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________ to __________________
Commission File Number: 001-32188
ORAGENICS, INC.
(Exact name of registrant as specified in its charter)
| florida | 59-3410522 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
4902 Eisenhower Blvd., Suite 125
Tampa, Florida 33634
(Address of principal executive offices)
813-286-7900
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | OGEN | NYSE American |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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):
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
As of August 8, 2022,10, 2023, there were shares of Common Stock, $.001$0.001 par value, outstanding.
EXPLANATORY NOTE
Oragenics Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment No. 1”) to amend its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2022 (the “Original Form 10-Q”).
Background of Restatement
This Amendment No. 1 is being filed for the sole purpose of restating certain of the financial statements included in the Original Form 10-Q (the “Restatement”) due to the Company discovering that it made the following errors in the Original Form 10-Q: (i) not properly analyzing research and development contracts. The total adjustments made resulted in a decrease in net loss of approximately $1.9 million for the six-month period ended June 30, 2022. On April 10, 2023, the Company filed a Current Report on Form 8-K disclosing that the consolidated financial statements included in the Original Form 10-Q should not be relied upon.
Internal Control Considerations
In connection with the Restatement, management has concluded that the Company had a material weakness as of June 30, 2022, as the Company’s procedures relating to the review of research and development contracts was insufficient, resulting in material errors in the financial statements. For a discussion of management’s considerations of the Company’s research and development contract procedures, and material weakness identified, refer to Controls and Procedures in Part I, Item 4.
Items Amended in this Amendment No. 1
This Amendment No. 1 sets forth the Original Form 10-Q, as modified and superseded where necessary to reflect the Restatement and the related disclosure controls and procedures and internal control considerations. Accordingly, the following items included in the Original Form 10-Q have been amended:
●Part I, Item 1, Consolidated Financial Statements
●Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations
●Part I, Item 4, Controls and Procedures
●Part II, Item 1A, Risk Factors
Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment No. 1 currently dated certifications from its Chief Executive Officer and President, and Chief Financial Officer.
Except as described above and in 1A: Amendment To Previously Reported Quarterly Financial Statements, this Amendment No. 1 does not amend, update or change any other disclosures in the Original Form 10-Q. In addition, the information contained in this Amendment No. 1 does not reflect events occurring after the Original Form 10-Q and does not modify or update the disclosures therein, except to reflect the effects of the Restatement.
Oragenics, Inc.
Consolidated Balance Sheets
June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 17,867,483 | $ | 27,265,703 | ||||
| Other receivables | — | 6,987 | ||||||
| Prepaid expenses and other current assets | 1,990,049 | 434,699 | ||||||
| Total current assets | 19,857,532 | 27,707,389 | ||||||
| Property and equipment, net | 109,780 | 45,708 | ||||||
| Operating lease right-of-use assets | 385,361 | 477,882 | ||||||
| Total assets | $ | 20,352,673 | $ | 28,230,979 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 1,279,598 | $ | 947,574 | ||||
| Short-term notes payable | — | 303,416 | ||||||
| Operating lease liabilities | 180,824 | 194,270 | ||||||
| Total current liabilities | 1,460,422 | 1,445,260 | ||||||
| Long-term liabilities: | ||||||||
| Operating lease liabilities | 217,353 | 299,520 | ||||||
| Total long-term liabilities | 217,353 | 299,520 | ||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, no par value; shares authorized; Series A shares, Series B shares, issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 2,656,713 | 2,656,713 | ||||||
| Common stock, $ par value; and shares authorized at June 30, 2022 and December 31, 2021, respectively, shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 116,395 | 116,395 | ||||||
| Additional paid-in capital | 195,356,454 | 194,987,219 | ||||||
| Accumulated deficit | (179,454,664 | ) | (171,274,128 | ) | ||||
| Total shareholders’ equity | 18,674,898 | 26,486,199 | ||||||
| Total liabilities and shareholders’ equity | $ | 20,352,673 | $ | 28,230,979 | ||||
See accompanying notes.
Oragenics, Inc.Note Regarding Reverse Stock Splits
Consolidated StatementsWe filed an amendment to our Amended and Restated Articles of Operations
(Unaudited)Incorporation with the Secretary of the State of Florida to effect a reverse split of our authorized and outstanding common stock at a ratio of one for sixty (60) effective January 20, 2023. All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split.
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2022 As Restated | 2021 | 2022 As Restated | 2021 | |||||||||||||
| Grant revenue | $ | 30,391 | $ | — | $ | 45,474 | $ | — | ||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 2,590,032 | 2,467,575 | 5,883,693 | 5,728,479 | ||||||||||||
| General and administrative | 1,044,334 | 1,370,393 | 2,375,883 | 3,346,969 | ||||||||||||
| Total operating expenses | 3,634,366 | 3,837,968 | 8,259,576 | 9,075,448 | ||||||||||||
| Loss from operations | (3,603,975 | ) | (3,837,968 | ) | (8,214,102 | ) | (9,075,448 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 15,369 | 24,254 | 27,275 | 44,287 | ||||||||||||
| Interest expense | (816 | ) | (1,033 | ) | (4,062 | ) | (3,601 | ) | ||||||||
| Local business tax | (490 | ) | (600 | ) | (980 | ) | (1,200 | ) | ||||||||
| Miscellaneous income | 369 | — | 11,333 | 670 | ||||||||||||
| Total other income, net | 14,432 | 22,621 | 33,566 | 40,156 | ||||||||||||
| Loss before income taxes | (3,589,543 | ) | (3,815,347 | ) | (8,180,536 | ) | (9,035,292 | ) | ||||||||
| Income tax benefit | — | — | — | — | ||||||||||||
| Net loss | $ | (3,589,543 | ) | $ | (3,815,347 | ) | $ | (8,180,536 | ) | $ | (9,035,292 | ) | ||||
| Basic and diluted net loss per share | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.07 | ) | $ | (0.08 | ) | ||||
| Shares used to compute basic and diluted net loss per share | 116,394,806 | 115,864,162 | 116,394,806 | 109,357,191 | ||||||||||||
See accompanying notes.
Oragenics, Inc.Note Regarding Prior Period Restatements
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(Restated)
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid In | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances at December 31, 2021 | 116,394,806 | $ | 116,395 | 16,017,000.000 | $ | 2,656,713 | $ | 194,987,219 | $ | (171,274,128 | ) | $ | 26,486,199 | |||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 90,247 | — | 90,247 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (4,590,993 | ) | (4,590,993 | ) | |||||||||||||||||||
| Balances at March 31, 2022 | 116,394,806 | $ | 116,395 | 16,017,000.000 | $ | 2,656,713 | $ | 195,077,466 | $ | (175,865,121 | ) | $ | 21,985,453 | |||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 278,988 | — | 278,988 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (3,589,543 | ) | (3,589,543 | ) | |||||||||||||||||||
| Balances at June 30, 2022 | 116,394,806 | $ | 116,395 | 16,017,000.000 | $ | 2,656,713 | $ | 195,356,454 | $ | (179,454,664 | ) | $ | 18,674,898 | |||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid In | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances at December 31, 2020 | 91,766,928 | $ | 91,767 | 16,017,133.483 | $ | 7,174,854 | $ | 164,022,957 | $ | (154,444,983 | ) | $ | 16,844,595 | |||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 1,123,761 | — | 1,123,761 | |||||||||||||||||||||
| Series C dividend | — | — | 33.016 | 1,117,531 | — | (1,117,531 | ) | — | ||||||||||||||||||||
| Series C redemption | (166.499 | ) | (5,635,672 | ) | (5,635,672 | ) | ||||||||||||||||||||||
| ATM offering - net of expenses | 21,398,765 | 21,399 | — | — | 26,654,993 | — | 26,676,392 | |||||||||||||||||||||
| Issuance of common stock from warrant exercise | 2,472,573 | 2,472 | — | — | 2,258,864 | — | 2,261,336 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (5,219,945 | ) | (5,219,945 | ) | |||||||||||||||||||
| Balances at March 31, 2021 | 115,638,266 | 115,638 | 16,017,000 | 2,656,713 | 194,060,575 | (160,782,459 | ) | 36,050,467 | ||||||||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 231,140 | — | 231,140 | |||||||||||||||||||||
| Issuance of common stock from option exercise | 556,540 | 557 | — | — | 266,583 | — | 267,140 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (3,815,347 | ) | (3,815,347 | ) | |||||||||||||||||||
| Balances at June 30, 2021 | 116,194,806 | 116,195 | 16,017,000 | 2,656,713 | 194,558,298 | (164,597,806 | ) | 32,733,400 | ||||||||||||||||||||
See accompanying notes.
Oragenics, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| 2022 | 2021 | |||||||
For the Six Months Ended June 30, | ||||||||
2022 As Restated | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (8,180,536 | ) | $ | (9,035,292 | ) | ||
| Depreciation and amortization | 18,847 | 25,176 | ||||||
| Gain on sale of property and equipment | (10,964 | ) | — | |||||
| Stock-based compensation expense | 369,235 | 1,354,901 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | 6,987 | — | ||||||
| Prepaid expenses and other current assets | (1,555,350 | ) | 256,189 | |||||
| Accounts payable and accrued expenses | 332,024 | 993,251 | ||||||
| Net cash used in operating activities | (9,019,757 | ) | (6,405,775 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of property and equipment | 12,000 | — | ||||||
| Purchase of property and equipment | (87,047 | ) | — | |||||
| Net cash used in investing activities | (75,047 | ) | — | |||||
| Cash flows from financing activities: | ||||||||
| Payments on short-term notes payable | (303,416 | ) | (228,227 | ) | ||||
| Redemption of Series C Preferred stock | — | (5,635,672 | ) | |||||
| Proceeds from issuance of common stock for option exercise | — | 267,140 | ||||||
| Proceeds from issuance of common stock for warrant exercise | — | 2,261,336 | ||||||
| Net proceeds from issuance of common stock | — | 26,676,392 | ||||||
| Net cash provided by (used in) financing activities | (303,416 | ) | 23,340,969 | |||||
| Net increase (decrease) in cash and cash equivalents | (9,398,220 | ) | 16,935,194 | |||||
| Cash and cash equivalents at beginning of period | 27,265,703 | 17,639,575 | ||||||
| Cash and cash equivalents at end of period | $ | 17,867,483 | $ | 34,574,769 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | 4,062 | $ | 3,601 | ||||
| Non-cash investing and financing activities: | ||||||||
| Stock dividend on Series C Preferred stock | $ | — | $ | 1,117,531 | ||||
See accompanying notes.
Oragenics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization
Oragenics, Inc. (the “Company” or “we”) is focused onOn April 4, 2023, the developmentCompany’s management and Audit Committee of the NT-CoV2-1 intranasal vaccine candidate to combatCompany’s Board of Directors concluded that the novel Severe Acute Respiratory Syndrome coronavirus (“SARS-CoV-2”) and further development of effective treatments for novel antibiotics against infectious disease.
1A: Amendment To Previously Reported Quarterly Financial Statements
The Company’s previously issued unaudited consolidated financial statements for the three-three and six-month periods ended June 30, 2022 have beenshould be restated related to the Company’s accounting for certain research and development expense; certain upfront and prepayments made to vendors, and their classification on the Company’s unaudited consolidated financial statements.
should no longer be relied upon. Management reviewed the terms and conditions of the Company’s contracts and the payments and concluded that during the three-three and six-month period endedending June 30, 2022 amounts were paid as part of a prepayment arrangement. Management reviewed Accounting Standards Codification Topic 730 Research and Development guidance related to recording initial upfront payments to vendors and determined that the unaudited consolidated financial statements originally reported for the three-three and six- monthsix-month periods ended June 30, 2022 classified as research and development expense on the unaudited consolidated statement of operations that should behave been classified as prepaid expense on the Company’s unaudited consolidated balance sheet.
TheOn April 14, 2023 the Company has restated its accounting for these prepaid research and development expenses and recorded them as prepaid assets on its unaudited consolidated balance sheet with changesfiled an amendment to the amount of researchQuarterly Report (“Amendment 1”) on Form 10-Q filed with the Securities and development expense recordedExchange Commission (“SEC”) on its unaudited consolidated statement of operationsMay 13, 2022 (the “Original Form 10-Q”). Amendment 1 was filed for the three-and six- monthsole purpose of restating certain financial statements included in the Original Form 10-Q. When referencing prior period comparisons for the three and six-month periods ended June 30, 2022.2022 in this Form 10-Q for the three and six-month periods ended June 30, 2023 the financial information reflects the restated financials as reported in Amendment 1.
As a result of these adjustments, net loss for the three and six months ended June 30, 2022 was reduced by approximately $0.4 millionand $1.9 million respectively. The total assets reported for the six-month period ended June 30, 2022 increased by approximately $1.9 million. Total accumulated deficit for the six-month period ending June 30, 2022 was reduced by approximately $1.9 million. The Company has reported an amended net loss of $3.6million and $8.2million for the three and six months ended June 30, 2022 respectively; versus the previously reported net loss of approximately $4 million and $10 million. For the same six-month period ended June 30, 2022 the Company has also reported amended total assets of $20 million and accumulated deficit of $179 million versus $18 millionand $181 million respectively.
| 2 |
The following table summarizes the effect of the restatement on the Company’s unaudited consolidated financial statements for the three- and six- months ended June 30, 2022:PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
Schedule of Effect of Restatement on Financial Statements
Oragenics, Inc.
Consolidated Balance Sheets
June 30, 2022
| June 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,473,822 | $ | 11,426,785 | ||||
| Other receivables | 13,163 | - | ||||||
| Prepaid expenses and other current assets | 1,611,849 | 2,844,798 | ||||||
| Total current assets | 8,098,834 | 14,271,583 | ||||||
| Property and equipment, net | 98,456 | 121,062 | ||||||
| Operating lease right-of-use assets | 249,256 | 347,440 | ||||||
| Deposits | 17,940 | 17,940 | ||||||
| Total assets | $ | 8,464,486 | $ | 14,758,025 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 951,019 | $ | 1,124,197 | ||||
| Short-term notes payable | - | 267,640 | ||||||
| Operating lease liabilities - Current | 190,242 | 204,447 | ||||||
| Total current liabilities | 1,141,261 | 1,596,284 | ||||||
| Long-term liabilities: | ||||||||
| Operating lease liabilities - Long Term | 65,752 | 152,439 | ||||||
| Total long-term liabilities | 65,752 | 152,439 | ||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, no par value; shares authorized; and Series A shares, and Series B shares, -- and -- Series C shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 1,592,723 | 1,592,723 | ||||||
| Common stock, $ par value; shares authorized and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 2,025 | 2,025 | ||||||
| Additional paid-in capital | 197,120,665 | 196,977,071 | ||||||
| Accumulated deficit | (191,457,940 | ) | (185,562,517 | ) | ||||
| Total shareholders’ equity | 7,257,473 | 13,009,302 | ||||||
| Total liabilities and shareholders’ equity | $ | 8,464,486 | $ | 14,758,025 | ||||
See accompanying notes.
As Previously Reported | Adjustment | As Restated | ||||||||||
| (Unaudited) | ||||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 17,867,483 | $ | 17,867,483 | ||||||||
| Other receivables | - | - | ||||||||||
| Prepaid expenses and other current assets | 102,498 | 1,887,551 | 1,990,049 | |||||||||
| Total current assets | 17,969,981 | 19,857,532 | ||||||||||
| Property and equipment, net | 109,780 | 109,780 | ||||||||||
| Operating lease right-of-use assets | 385,361 | 385,361 | ||||||||||
| Total assets | $ | 18,465,122 | $ | 20,352,673 | ||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable and accrued expenses | $ | 1,279,598 | $ | 1,279,598 | ||||||||
| Short-term notes payable | - | - | ||||||||||
| Operating lease liabilities | 180,824 | 180,824 | ||||||||||
| Total current liabilities | 1,460,422 | 1,460,422 | ||||||||||
| Long-term liabilities: | ||||||||||||
| Operating lease liabilities | 217,353 | 217,353 | ||||||||||
| Total long-term liabilities | 217,353 | 217,353 | ||||||||||
| Shareholders’ equity: | ||||||||||||
| Preferred stock, no par value; shares authorized; Series A shares, Series B shares, issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 2,656,713 | 2,656,713 | ||||||||||
| Preferred stock, no par value; 50,000,000 shares authorized; 9,417,000 Series A shares, 6,600,000 Series B shares, issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 2,656,713 | 2,656,713 | ||||||||||
| Common stock, $ par value; and shares authorized at June 30, 2022 and December 31, 2021, respectively, shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 116,395 | 116,395 | ||||||||||
| Additional paid-in capital | 195,356,454 | 195,356,454 | ||||||||||
| Accumulated deficit | (181,342,215 | ) | 1,887,551 | (179,454,664 | ) | |||||||
| Total shareholders’ equity | 16,787,347 | 18,674,898 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 18,465,122 | $ | 20,352,673 | ||||||||
Oragenics, Inc.
Consolidated Statements of Operations
(Unaudited)
As Previously Reported | Adjustment | As Restated | ||||||||||
For the Three Months Ended June 30, 2022 | ||||||||||||
As Previously Reported | Adjustment | As Restated | ||||||||||
| Grant revenue | $ | 30,391 | $ | 30,391 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development | 3,033,182 | (443,150 | ) | 2,590,032 | ||||||||
| General and administrative | 1,044,334 | 1,044,334 | ||||||||||
| Total operating expenses | 4,077,516 | 3,634,366 | ||||||||||
| Loss from operations | (4,047,125 | ) | (3,603,975 | ) | ||||||||
| Other income (expense): | ||||||||||||
| Interest income | 15,369 | 15,369 | ||||||||||
| Interest expense | (816 | ) | (816 | ) | ||||||||
| Local business tax | (490 | ) | (490 | ) | ||||||||
| Miscellaneous income | 369 | 369 | ||||||||||
| Total other income, net | 14,432 | 14,432 | ||||||||||
| Loss before income taxes | (4,032,693 | ) | (3,589,543 | ) | ||||||||
| Income tax benefit | - | - | ||||||||||
| Net loss | $ | (4,032,693 | ) | $ | (3,589,543 | ) | ||||||
| Basic and diluted net loss per share | $ | (0.03 | ) | $ | (0.03 | ) | ||||||
| Shares used to compute basic and diluted net loss per share | 116,394,806 | 116,394,806 | ||||||||||
Oragenics, Inc.
Consolidated Statements of Operations
(Unaudited)
| As Previously Reported |
Adjustment | As Restated | ||||||||||
For the Six Months Ended June 30, 2022 | ||||||||||||
As Previously Reported | Adjustment | As Restated | ||||||||||
| Grant revenue | $ | 45,474 | $ | 45,474 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development | 7,771,244 | (1,887,551 | ) | 5,883,693 | ||||||||
| General and administrative | 2,375,883 | 2,375,883 | ||||||||||
| Total operating expenses | 10,147,127 | 8,259,576 | ||||||||||
| Loss from operations | (10,101,653 | ) | (8,214,102 | ) | ||||||||
| Other income (expense): | ||||||||||||
| Interest income | 27,275 | 27,275 | ||||||||||
| Interest expense | (4,062 | ) | (4,062 | ) | ||||||||
| Local business tax | (980 | ) | (980 | ) | ||||||||
| Miscellaneous income | 11,333 | 11,333 | ||||||||||
| Total other income, net | 33,566 | 33,566 | ||||||||||
| Loss before income taxes | (10,068,087 | ) | (8,180,536 | ) | ||||||||
| Income tax benefit | - | - | ||||||||||
| Net loss | $ | (10,068,087 | ) | $ | (8,180,536 | ) | ||||||
| Basic and diluted net loss per share | $ | (0.09 | ) | $ | (0.07 | ) | ||||||
| Shares used to compute basic and diluted net loss per share | 116,394,806 | 116,394,806 | ||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Grant revenue | $ | 13,163 | $ | 30,391 | $ | 30,187 | $ | 45,474 | ||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 2,006,696 | 2,590,032 | 3,679,272 | 5,883,693 | ||||||||||||
| General and administrative | 1,115,785 | 1,044,334 | 2,365,048 | 2,375,883 | ||||||||||||
| Local business tax | - | 490 | - | 980 | ||||||||||||
| Total operating expenses | 3,122,481 | 3,634,856 | 6,044,320 | 8,260,556 | ||||||||||||
| Loss from operations | (3,109,318 | ) | (3,604,465 | ) | (6,014,133 | ) | (8,215,082 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 58,954 | 15,369 | 121,155 | 27,275 | ||||||||||||
| Interest expense | (843 | ) | (816 | ) | (4,190 | ) | (4,062 | ) | ||||||||
| Miscellaneous income | 621 | 369 | 1,745 | 11,333 | ||||||||||||
| Total other income, net | 58,732 | 14,922 | 118,710 | 34,546 | ||||||||||||
| Loss before income taxes | (3,050,586 | ) | (3,589,543 | ) | (5,895,423 | ) | (8,180,536 | ) | ||||||||
| Income tax benefit | — | — | — | — | ||||||||||||
| Net loss | $ | (3,050,586 | ) | $ | (3,589,543 | ) | $ | (5,895,423 | ) | $ | (8,180,536 | ) | ||||
| Basic and diluted net loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Shares used to compute basic and diluted net loss per share | ||||||||||||||||
See accompanying notes.
| 4 |
Oragenics, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid In | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances at December 31, 2022 | 2,024,657 | $ | 2,025 | 9,467,000 | $ | 1,592,723 | $ | 196,977,071 | $ | (185,562,517 | ) | $ | 13,009,302 | |||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 79,966 | — | 79,966 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (2,844,837 | ) | (2,844,837 | ) | |||||||||||||||||||
| Balances at March 31, 2023 | 2,024,657 | 2,025 | 9,467,000 | 1,592,723 | 197,057,037 | (188,407,354 | ) | 10,244,431 | ||||||||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 63,628 | — | 63,628 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (3,050,586 | ) | (3,050,586 | ) | |||||||||||||||||||
| Balances at June 30, 2023 | 2,024,657 | $ | 2,025 | 9,467,000 | $ | 1,592,723 | $ | 197,120,665 | $ | (191,457,940 | ) | $ | 7,257,473 | |||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid In | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances at December 31, 2021 | 2,002,946 | $ | 2,003 | 16,017,000 | $ | 2,656,713 | $ | 195,101,611 | $ | (171,274,128 | ) | $ | 26,486,199 | |||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 90,247 | — | 90,247 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (4,590,993 | ) | (4,590,993 | ) | |||||||||||||||||||
| Balances at March 31, 2022 | 2,002,946 | $ | 2,003 | 16,017,000 | $ | 2,656,713 | $ | 195,191,858 | $ | (175,865,121 | ) | $ | 21,985,453 | |||||||||||||||
| Balance | 2,002,946 | $ | 2,003 | 16,017,000 | $ | 2,656,713 | $ | 195,191,858 | $ | (175,865,121 | ) | $ | 21,985,453 | |||||||||||||||
| Compensation expense relating to option issuances | — | — | — | — | 278,988 | — | 278,988 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (3,589,543 | ) | (3,589,543 | ) | |||||||||||||||||||
| Balances at June 30, 2022 | 2,002,946 | $ | 2,003 | 16,017,000 | $ | 2,656,713 | $ | 195,470,846 | $ | (179,454,664 | ) | $ | 18,674,898 | |||||||||||||||
| Balance | 2,002,946 | $ | 2,003 | 16,017,000 | $ | 2,656,713 | $ | 195,470,846 | $ | (179,454,664 | ) | $ | 18,674,898 | |||||||||||||||
See accompanying notes.
| 5 |
Oragenics, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
| 2023 | 2022 | |||||||||||||||||||
As Previously Reported | Adjustment | As Restated | For the Six Months Ended June 30, | |||||||||||||||||
For the Six Months Ended June 30, 2022 | 2023 | 2022 | ||||||||||||||||||
As Previously Reported |
Adjustment | As Restated | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net loss | $ | (10,068,087 | ) | 1,887,551 | $ | (8,180,536 | ) | $ | (5,895,423 | ) | $ | (8,180,536 | ) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
| Depreciation and amortization | 18,847 | 18,847 | 22,606 | 18,847 | ||||||||||||||||
| Gain on sale of property and equipment | (10,964 | ) | (10,964 | ) | - | (10,964 | ) | |||||||||||||
| Stock-based compensation expense | 369,235 | 369,235 | 143,594 | 369,235 | ||||||||||||||||
| Changes in operating assets and liabilities: | - | |||||||||||||||||||
| Other receivables | 6,987 | 6,987 | (13,163 | ) | 6,987 | |||||||||||||||
| Operating Lease Right of Use Assets | 98,184 | - | ||||||||||||||||||
| Prepaid expenses and other current assets | 332,201 | (1,887,551 | ) | (1,555,350 | ) | 1,232,949 | (1,555,350 | ) | ||||||||||||
| Deposits | - | - | ||||||||||||||||||
| Accounts payable and accrued expenses | 332,024 | 332,024 | (274,070 | ) | 332,024 | |||||||||||||||
| Net cash used in operating activities | (9,019,757 | ) | (9,019,757 | ) | (4,685,323 | ) | (9,019,757 | ) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Proceeds from sale of property and equipment | 12,000 | 12,000 | - | 12,000 | ||||||||||||||||
| Purchase of property and equipment | (87,047 | ) | (87,047 | ) | - | (87,047 | ) | |||||||||||||
| Net cash used in investing activities | (75,047 | ) | (75,047 | ) | - | (75,047 | ) | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Payments on short-term notes payable | (303,416 | ) | (303,416 | ) | (267,640 | ) | (303,416 | ) | ||||||||||||
| Redemption of Series C Preferred stock | - | - | ||||||||||||||||||
| Proceeds from issuance of common stock for option exercise | - | - | ||||||||||||||||||
| Proceeds from issuance of common stock for warrant exercise | - | - | ||||||||||||||||||
| Net proceeds from issuance of common stock | - | - | ||||||||||||||||||
| Net cash provided by (used in) financing activities | (303,416 | ) | (303,416 | ) | ||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (9,398,220 | ) | (9,398,220 | ) | ||||||||||||||||
| Net cash used in financing activities | (267,640 | ) | (303,416 | ) | ||||||||||||||||
| Net decrease in cash and cash equivalents | (4,952,963 | ) | (9,398,220 | ) | ||||||||||||||||
| Cash and cash equivalents at beginning of period | 27,265,703 | - | 27,265,703 | 11,426,785 | 27,265,703 | |||||||||||||||
| Cash and cash equivalents at end of period | $ | 17,867,483 | $ | 17,867,483 | $ | 6,473,822 | $ | 17,867,483 | ||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||||||||
| Interest paid | $ | 4,062 | $ | 4,062 | $ | 3,347 | $ | 4,062 | ||||||||||||
| Non-cash investing and financing activities: | - | - | ||||||||||||||||||
| Stock dividend on Series C Preferred stock | $ | - | $ | - | ||||||||||||||||
See accompanying notes.
| 6 |
Oragenics, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization
Oragenics, Inc. (the “Company” or “we”, or “our”) is focused on the development of the NT-CoV2-1 intranasal vaccine candidate to combat the novel Severe Acute Respiratory Syndrome coronavirus (“SARS-CoV-2”) and further development of effective treatments for novel antibiotics against infectious disease.
2. Basis of Presentation As Restated
The accompanying unaudited interim consolidated financial statements as of June 30, 2023, the December 31, 2022, and December 31, 2021 (audited) andthe three and six monthssix-months ended June 30, 20222023 and 2021,2022, have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim consolidated 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 consolidated financial statements. In the opinion of management, the accompanying consolidated 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 ended June 30, 2022,2023, are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2022,2023, or any future period.
Prior Period Restatements
On April 4, 2023 the Company’s management and Audit Committee of the Company’s Board of Directors concluded that the unaudited consolidated financial statements for the three and six-month periods ended June 30, 2022 should be restated and should no longer be relied upon. Management reviewed the terms and conditions of the Company’s contracts and the payments and concluded that during the three and six-month periods ending June 30, 2022 amounts were paid as part of a prepayment arrangement. Management reviewed Accounting Standards Codification Topic 730 Research and Development guidance related to recording initial upfront payments to vendors; and determined that the unaudited consolidated financial statements originally reported for the three and six-month periods ended June 30, 2022 classified as research and development expense on the unaudited consolidated statement of operations that should be classified as prepaid expense on the Company’s unaudited consolidated balance sheet.
On April 14, 2023 the Company filed Amendment 1 on Form 10-Q/A with the SEC. Amendment 1 was filed for the sole purpose of restating certain financial statements included in the Original Form 10-Q. When referencing prior period comparisons for the three and six-month periods ended June 30, 2022 in this Form 10-Q the financial information reflects the restated financials as reported in Amendment 1.
| 7 |
Going Concern Consideration
These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2021,2022, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 24, 2022.April 17, 2023. 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 incurred a net loss of $8,180,5365,895,423 and used cash of $9,019,7574,685,323 in its operating activities during the six months ended June 30, 2022.2023. As of June 30, 2022,2023, the Company had an accumulated deficit of $179,454,664191,457,940.
The Company expects to incur substantial expenditures to further develop its technologies. The Company believes the working capital at June 30, 20222023 will be sufficient to meet the business objectives as presently structured only through the fourth quarter of 2022.2023. As such, there is substantial doubt that we can continue as a going concern beyond that date. As a result, the Company has implemented certain cost-saving initiatives, including reducing our efforts and staff focused on our lantibiotics program, which are expected to negatively impact the development of our lantibiotics program. See, “Risk Factors.”
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.
3. Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements include the accounts of Oragenics, Inc. and our wholly-owned subsidiary Noachis Terra, Inc.(“NTI”). All intercompany balances and transactions have been eliminated.
New Accounting Standards
There are no additional accounting pronouncements issued or effective during the three and six months ended June 30, 2022,2023, that have had, or are expected to have, a material impact on our consolidated financial statements.
| 8 |
Use of Estimates
The preparation of consolidated 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 consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The principal area of estimation reflected in the consolidated financial statements is stock-based compensation.are estimates for research and development expenses and related prepaid and accrued expenses, which are based on the percentage of completion of the Company’s contracts with Contract Research Organizations.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Adjustments to the Consolidated Balance Sheet and Consolidated Statement of Cash Flows for the six-month period ended June 30, 2022 were as follows:
| ● | Deposits of $17,940 were reclassified from Prepaid Expenses and other current assets to Other Assets. | |
| ● | Changes in Operating Lease Right of Use Assets of $45,921 was reclassified from Accounts Payable and Accrued Expenses into its own account. | |
| ● | Changes in Operating Lease Liabilities of ($47,327) was reclassified from Accounts Payable and Accrued Expenses into its own account. |
Generally, all forms of stock-based payments, including stock option grants, and warrants are measured at their fair value on the awards’ grant date using a Black-Scholes pricing model.Option Pricing Model. Stock-based compensation awards issued to all employees and 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 consolidated 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. To the extent the stock option grants, or warrants do not vest at the grant date they are subject to forfeiture.
Stock-Based Compensation
US GAAP requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the consolidated 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, 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 ScholesBlack-Scholes Option Pricing Model in calculating the relative fair value of any warrants that have been issued.
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 sameAll references to common stock for the comparative three and six-month periods presented.ended June 30, 2022, have been adjusted to reflect the effect of the reverse split. Net loss per share is computed using the weighted average number of shares of common stock outstanding.
| 9 |
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 itthere is not exposed to any significanta minimal credit risk on cash and cash equivalents. AsCash and cash equivalents could be adversely impacted, including the loss of June 30, 2022,uninsured deposits and other uninsured financial assets, if one or more of the uninsured portion of this balance was $17,617,483. As of December 31, 2021,financial institutions in which the uninsured portion of this balance was $27,015,703.Company holds its cash or cash equivalents fails or is subject to other adverse conditions in the financial or credit markets.
Grant Revenue
Grant revenues are derived from a small business innovation research grant in the amount of $250,000 (“Computer-aided Design for Improved Lantibiotics” R41GM136034. The Company recognizes grant revenue as reimbursable grant costs are incurred up to the pre-approved award limits within the budget period. The costs associated with these reimbursements are reflected as a component of research and development expenses in the accompanying consolidated statement of operations. The remainder of the grant will be recognized in July of 2023.
4. Stock-based CompensationProperty and Equipment, net
Property and equipment, net consists of the following as of June 30, 2023 and December 31, 2022:
Summary of Property and Equipment, Net
| June 30, 2023 | December 31, 2022 | |||||||
| Furniture and fixtures | $ | 20,742 | $ | 20,742 | ||||
| Laboratory equipment | 676,744 | 676,744 | ||||||
| Leasehold improvements | 487,871 | 487,871 | ||||||
| Office and computer equipment | 298,944 | 298,944 | ||||||
| Property and equipment, gross | 1,484,301 | 1,484,301 | ||||||
| Accumulated depreciation and amortization | (1,385,845 | ) | (1,363,239 | ) | ||||
| Property and equipment, net | $ | 98,456 | $ | 121,062 | ||||
Depreciation and amortization expense for the three months ended June 30, 2023 and 2022 was $11,303 and $10,379 respectively. Depreciation and amortization expense for the six months ended June 30, 2023 and 2022 was $22,606 and $18,847 respectively.
5. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following as of June 30, 2023, and December 31, 2022:
Summary of Accounts Payable and Accrued Expenses
| June 30, 2023 | December 31, 2022 | |||||||
| Accounts payable trade | $ | 590,576 | $ | 246,690 | ||||
| Accrued Expense | 334,441 | 812,861 | ||||||
| Professional fees | - | 31,101 | ||||||
| Vacation | 26,002 | 33,545 | ||||||
| Total accounts payable and accrued expenses | $ | 951,019 | $ | 1,124,197 | ||||
6. Short-Term Notes Payable
The Company recognized stock-based compensation on all employeehad the following short-term notes payable as of June 30, 2023 and non-employee awards as follows:December 31, 2022:
ScheduleSummary of Stock Based Compensation Expenses RecognizedShort-Term Notes Payable
| For the Three Months Ended June 30, 2022 | For the Three Months Ended June 30, 2021 | For the Six Months Ended June 30, 2022 | For the Six Months Ended June 30, 2021 | |||||||||||||
| Research and development | $ | 26,399 | $ | 48,761 | $ | 65,854 | $ | 79,688 | ||||||||
| General and administrative | 252,589 | 182,379 | 303,381 | 1,275,213 | ||||||||||||
| Total Stock-based compensation | $ | 278,988 | $ | 231,140 | $ | 369,235 | $ | 1,354,901 | ||||||||
| June 30, 2023 | December 31, 2022 | |||||||
| Directors’ and officers’ liability insurance financing of $528,429 and $600,169 due in monthly installments of $54,366 and $61,496 including principal and interest at 6.24% and 5.34% through May 24, 2024 and May 24, 2023, respectively | $ | - | $ | 267,640 | ||||
| Directors’ and officers’ liability | - | 267,640 | ||||||
| 10 |
The following table summarizesCompany’s policy renewals will be completed in subsequent periods and the Company will evaluate if premium financing is necessary at that time. The Company also maintains a product liability insurance policy which has been renewed in subsequent periods without premium financing.
7. Prepaid Expense and Other Current Assets
Schedule of Prepaid Expense and Other Current Assets at June 30, 2023 and December 31, 2022:
Schedule of Prepaid Expense and Other Current Assets
| June 30, 2023 | December 31, 2022 | |||||||
| Prepaid research and expense | $ | 1,455,456 | $ | 2,471,809 | ||||
| Prepaid insurance | 56,393 | 372,989 | ||||||
| Prepaid financing costs | 75,000 | - | ||||||
| Other prepaid costs | 25,000 | - | ||||||
| Total accounts payable and accrued expenses | $ | 1,611,849 | $ | 2,844,798 | ||||
As of June 30, 2023 and December 31, 2022, the Company had approximately $1.6 million and $2.8 million in prepaid expenses, respectively. The balance at June 30, 2023 reflects approximately $1.5 million of prepaid expense to third-party vendors for research and development to be completed.
8. Shareholders’ Equity
Common Stock
Reverse Stock Split
On December 22, 2022, the Board of Directors approved an amendment to our Amended and Restated Articles of Incorporation to effect a reverse stock option activitysplit of our common stock by a ratio of one for sixty. The Company’s common stock began trading on a split-adjusted basis on January 23, 2023. All references to common stock for the comparative three and six-month periods ended June 30, 2022, have been adjusted to reflect the effect of the reverse split. The stock split was also reflected in the December 31, 2022 stock amounts. As a result of the reverse stock split, the Company’s common stock began trading on a split-adjusted basis on January 23, 2023.
Shares issued under At-The-Market (“ATM”) program
For the three and six-month periods ended June 30, 2022 and 2023 the Company did not issue any shares of common stock under its ATM program.
During the three-month period ended December 31, 2022, the Company issued shares of common stock under its ATM Program which generated gross proceeds of approximately $72,000, The net proceeds of the offering were for use in connection with the Company’s pre-clinical development of its SARS-CoV-2 vaccine candidates, Terra CoV-2 and NT-CoV2-1, and its lantibiotics program and for general corporate purposes, including research and development activities, capital expenditures and working capital.
On December 19, 2022, the Company sent written notice of termination to A.G.P./Alliance Global Partners (“AGP”), pursuant to the terms of the Company’s Sales Agreement with AGP in connection with the Company’s ATM Program. The termination took effect on December 29, 2022. As a result of the termination, the Company will not, and during the six months ended June 30, 2022:2023 did not, consummate any further sale of its common stock through the AGP Sales Agreement.
Summary of Stock Option Activity
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (In Years) | Aggregate Intrinsic Value(1) | |||||||||||||
| Outstanding at December 31, 2021 | 6,724,402 | $ | 0.95 | $ | 2,773 | |||||||||||
| Granted | 1,382,500 | 0.32 | — | $ | — | |||||||||||
| Exercised | — | — | — | $ | — | |||||||||||
| Expired | (4,500 | ) | 12.00 | |||||||||||||
| Forfeited | (726,998 | ) | 0.94 | — | $ | — | ||||||||||
| Outstanding at June 30, 2022 | 7,375,404 | $ | 0.83 | $ | 72,050 | |||||||||||
| Exercisable at June 30, 2022 | 5,952,900 | $ | 0.89 | $ | 36,300 | |||||||||||
Total unrecognized compensation cost relatedOn February 24, 2023 the Company entered into an ATM with Ladenburg Thalmann & Co. Inc (“Ladenburg”) to unvestedsell shares of its common stock. The Company intends to use the proceeds from the ATM to continue funding its pre-clinical development of its SARS-CoV-2 vaccine candidates, Terra CoV-2 and NT-CoV2-1 and its lantibiotics program and for the general corporate purposes, including capital expenditures, working capital, and research and development activities.
| 11 |
Other Share Issuances
During the three and six-month periods ended June 30, 2022 and 2023 the Company issued additional shares of common stock.
During the three-month period ended September 30, 2022 and prior to the reverse stock split, the holders of shares of the Company’s Series A Convertible Preferred Stock, and shares of the Company’s Series B Convertible Preferred Stock converted the Series A Convertible Preferred Stock into an aggregate of approximately shares of common stock.
During the twelve-months ended December 31, 2022, the Company issued shares of common stock in connection with the exercise of stock options waswhich generated gross proceeds of $436,162363,139.
Preferred Stock
Issuance of Series A Convertible Preferred Stock Financing
In May of 2017 we entered into a securities purchase agreement to sell up to $3 million of Series A Convertible Preferred Stock. The full $3 million of Preferred Stock, after giving effect to the reverse stock splits and previous conversions, is convertible into shares of our common stock based on a fixed conversion price of $150.00 per share on an as-converted basis. In addition, and after giving effect to the reverse stock split, we issued warrants to purchase an aggregate of approximately 17,742 shares of common stock. The warrants have a term of seven years from the date of issuance and have an exercise price of $186.00 per share. Proceeds from the Series A Preferred Stock and any cash proceeds from the exercise of any warrants will be used for general corporate purposes, including working capital.
The Series A Preferred Stock also includes certain demand registration rights, piggyback registration rights and liquidation preference rights. On May 10, 2017, we filed a Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Florida. Except as otherwise required by law, 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 Series A Preferred Stock is classified as permanent equity.
The Series B Non-Voting, Convertible Preferred Stock Financing
On November 8, 2017, we completed a private placement of $3.3 million of Series B Non-Voting, Convertible Preferred Stock (the “Series B Convertible Preferred Stock”).
The full $3.3 million of Series B Convertible Preferred Stock, and after giving effect to the reverse stock splits and the previous conversions, is convertible into 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 $150.00 per share of the Common Stock on an as converted basis. In addition, and after giving effect to the reverse stock split, we issued to the investors in the private placement accompanying common stock purchase warrants to purchase an aggregate of approximately 17,742 shares of Common Stock. The warrants have a term of seven years from the date of issuance, and after giving effect to the reverse stock split, have an exercise price of $186.00 per share.
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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.
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 ranks (i) on par with the Common Stock and Series A Preferred Stock as to dividend rights and (ii) 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, 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.
9. Warrants
The Company’s outstanding and exercisable warrants as of June 30, 20222023 are presented below:
Schedule of Warrants Outstanding and is expected to be recognized over a weighted-average period of less than Exercisable
| Exercise Price | Total Warrants Outstanding | Exercisable Warrants Outstanding | Expiration Date | |||||||||
| $ | 54.00 | 32,033 | 32,033 | 3/25/2024 | ||||||||
| $ | 186.00 | 5,135 | 5,135 | 5/10/2024 | ||||||||
| $ | 186.00 | 6,694 | 6,694 | 7/25/2024 | ||||||||
| $ | 186.00 | 10,888 | 10,888 | 11/8/2024 | ||||||||
| $ | 75.00 | 153,334 | 153,334 | 5/1/2025 | ||||||||
| $ | 60.00 | 52,911 | 52,911 | 7/17/2025 | ||||||||
| $ | 260,995 | 260,995 | ||||||||||
two years.
All outstanding warrants are classified as equity on the Company’s Consolidated Balance Sheets.
10. Stock Compensation Plan
On February 25, 2022, the Company held its reconvened 2020 Annual Meeting. At the reconvened 2020Annual2020 Annual Meeting, the shareholders of the Company approved and ratified the Company’s 2021 Equity Incentive Plan (the “2021 Incentive Plan”), which is a successor to the Company’s 2012 Equity Incentive Plan (the “2012 Plan”).ThePlan. The 2021 Incentive Plan provides the aggregate number of shares of Common Stock that may be issued under the 2021 Plan will not exceed the sum of (i) new shares, (ii) the number of shares remaining available for the grant of new awards under the 2012 Incentive Plan as of immediately prior to the effective date of the 2021 Incentive Plan, and (iii) certain shares subject to outstanding awards granted under the 2012 Incentive Plan that may become available for issuance under the 2021 Incentive Plan, as such shares become available from time to time. As of June 30,December 31, 2022, an aggregate of shares of common stock are covered by outstanding option awards and shares of common stock are available for future awards under the 2021 Plan.
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 itsIncentive Plan.
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5.Options are granted at the fair market value of the Company’s stock on the date of grant which determines the exercise price after the completion of the vesting period. Options can vest either immediately or over a period of up to from their respective grant dates and expire years from the date of grant. As of June 30, 2023 and December 31, 2022, the Company did not award any stock appreciation rights under the 2021 Incentive Plan.
Total compensation cost related to stock options was approximately $ and $ for the three months ended June 30, 2023 and 2022, respectively. Total compensation cost related to stock options was approximately $ and $ for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, there was approximately $ of unrecognized compensation costs related to stock options, which is expected to be recognized over a weighted average period of less than one year.
During the three monthssix-months ended March 31, 2021,June 30, 2023, the Company issuedgranted stock options to the Chief Financial Officer as an additional onboarding award. The exercise price, determined by the stock price close on March 7, 2023, was $ sharesper share. The fair value of this award was $ per share of common stock as a resultwhich is used to expense the option over the vesting period. This fair value was determined using the Black Scholes Option Pricing model, which values options based on the stock price at the grant date, the expected life of the exerciseoption, the estimated volatility of certain outstanding warrantsthe stock, the expected dividend payments, and the risk-free interest rate over the life of the option. The assumptions used in the Black-Scholes Option Pricing model were as follows: (i) warrants to acquire 360,000 shares of Common Stock at an exercise price of $1.00 per share were exercised and (ii) warrants to acquire 2,112,573 shares of Common Stock at an exercise price of $0.90 per share were exercised. The warrant exercises provided aggregate gross proceeds tofollows for stock options granted in the Company of $2,261,336.six-month period ended June 30, 2023:
A summary of warrant activity for the year ended December 31, 2021 and the six months ended June 30, 2022 is as follows:
ScheduleSummary of Warrants ActivityAssumptions Used to Estimate the Fair Value of Stock Options Granted
| Warrants | Weighted Average Price | |||||||
| Balance - December 31, 2020 | 20,513,145 | $ | 1.36 | |||||
| Granted | — | — | ||||||
| Exercised | (2,472,573 | ) | 0.91 | |||||
| Expired | — | — | ||||||
| Balance - December 31, 2021 | 18,040,572 | 1.42 | ||||||
| Granted | — | — | ||||||
| Exercised | — | — | ||||||
| Expired | — | — | ||||||
| Balance - June 30, 2022 | 18,040,572 | $ | 1.42 | |||||
Six-months ended June 30, 2023 | ||||
| Risk free interest rate | % | |||
| Expected volatility of common stock | % | |||
| Dividend yield | 0.0 | % | ||
| Expected life of options | years | |||
The warrants outstanding as of June 30, 2022 are as follows:
Schedule of Warrants Outstanding
| Exercise Price | Warrants Outstanding | Expiration Date | ||||||
| $ | 3.10 | 48,387 | 9/19/2022 | |||||
| $ | 2.00 | 900,000 | 4/10/2023 | |||||
| $ | 3.10 | 462,106 | 5/10/2024 | |||||
| $ | 3.10 | 602,414 | 7/25/2024 | |||||
| $ | 3.10 | 1,064,518 | 11/8/2024 | |||||
| $ | 1.00 | 3,174,500 | 7/17/2025 | |||||
| $ | 0.90 | 2,588,647 | 3/25/2024 | |||||
| $ | 1.25 | 9,200,000 | 5/1/2025 | |||||
| 18,040,572 | ||||||||
All outstanding warrants are classified as equity on the Company’s Consolidated Balance Sheets.
6.11. Prepaids, As Restated
As of June 30, 2022 and December 31, 2021, the Company had $1,990,049 and $434,699, respectively, in prepaid expense and other current assets. The balance on June 30, 2022 consists of approximately $1.9 million paid to third-party vendors for research and development to be completed, $0.08 million for prepaid insurance expense, and deposits of approximately $0.02 million.
Schedule of Prepaids
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid Expense | 1,972,109 | 416,759 | ||||||
| Deposits | 17,940 | 17,940 | ||||||
| Total | 1,990,049 | 434,699 | ||||||
7. Short-Term Notes PayableLicense Agreements
As of June 30, 2022 and December 31, 2021, the Company had $— and $303,416, respectively, in short-term notes payable for the financing of various insurance policies.
Products Liability Insurance
The product liability insurance policy has been renewed in subsequent periods without premium financing.
Directors’ and Officers’ InsuranceInspirevax License
On July 24, 2021,February 23, 2023, the Company entered into a short-term note payable for $600,169 bearing interest at 5.34%Commercial License Agreement (the “License Agreement”) with Inspirevax Inc. (“Inspirevax”) pursuant 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, 2021 and are made evenly based on a straight-line amortization over a 10-month period with the final payment being made on May 16, 2022.
On July 24, 2020,which Inspirevax granted the Company entered into a short-term note payablean exclusive worldwide license to use Inspirevax’s inventions, patents, trade secrets, know-how, copyright, biological material, designs, and/or technical information created by or on behalf of Inspirevax (the “Inspirevax Technologies”) relating to its novel lipid-protein based intranasal adjuvants, to make, research, and develop an intra-nasal vaccine in combination with an antigen (“Combination Product”) to be used in an intranasal vaccine for $413,784 bearing interest at 5.39%use against diseases caused by coronaviruses and any genetic variants thereof 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, 2020 and were made evenly based on a straight-line amortization over an 11-month period with the final payment being made on June 28, 2021.
8. Commitments and Contingencies
Additional Consideration-NTI Acquisition
In connection with the Company’s acquisition of NTI in May of 2020, thebe sold by us. The Company is obligatedagreed to pay in consideration for the former sole shareholder of NTI contingent consideration based upon the exercise ofLicense Agreement an upfront signing fee and to certain of the Company’s outstanding warrants as follows: (i) twenty percent (20%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $0.75 and $0.90 and (ii) forty-five percent (45%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $1.00, in each case, for so long as the warrants remain outstanding.The Company’s previously issued warrants carrying an exercise price of $0.75 have expired by their terms. As a result, no additional consideration will be due to the former sole shareholder of NTI relating to these warrants.
During the three months ended March 31, 2021, warrants were exercised as follows: (i) shares at an exercise price of $1.00 per share and (ii) at an exercise price of $0.90 per share. See Note 9. Shareholders’ Equity.
As a result of the warrant exercises in 2021, the Company paid $542,263 of additional consideration to the sole former shareholder of NTI. The additional considerationmilestone payment is included in research and development expenses.
During the three months ended June 30, 2022, no warrants were exercised that resulted in the payment of additional consideration to the sole former shareholder of NTI.obligations.
NIH License
Through NTI, the Company is a party to a Patent License and Biological Materials License Agreement (the “NIH License“License Agreement” or “NIH License”), dated March 23, 2020, with the United States Department of Health and Human Services (the “HHS”), as represented by the National Institute of Allergy and Infectious Diseases (“NIAID”), an Institute within the National Institutes of Health (“NIH”). Under the terms of the NIH License Agreement, we holdthe Company holds a nonexclusive, worldwide license to certain specified patent rights (including patent applications, provisional patent applications and Patent Cooperation Treaty (“PCT”) patent applications) and biological materials relating to the use of pre-fusion coronavirus spike proteins to exploit products (“Licensed Products”) and practice processes (“Licensed Processes”) that are covered by the licensed patent rights and biological materials for the purpose of developing and commercializing a vaccine product candidate for SARS-CoV-2.
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NRC License
On July 26, 2021, the Company entered into a non-exclusive Technology License Agreement (the “License Agreement”) with the National Research Council of Canada (“NRC”) pursuant to which the NRC grants to the Company a license to use NRC’s inventions, patents, trade secrets, know-how, copyright, biological material, designs, and/or technical information created by or on behalf of the NRC (the “NRC Technologies”) relating to the derivatives of CHO 2353 TM Cell Line listed in the License Agreement (the “Stable Cells”) to: (i) make, research, and develop SARS-CoV-2 spike protein manufactured by a Stable Cell (the “Drug Substance”) within Canada, Australia, the United Kingdom, the European Union and the United States (U.S.) (collectively the “Territory”); (ii) file regulatory approval, export and sell the final formulation of the Drug Substance (“Products”) and (iii) engage contractors to use the Stable Cells to make Drug Substance or Products on behalf of the Company to be used and sold, worldwide, by the Company. The License Agreement was subsequently amended in September and December of 2021, again in February and July of 2022, and most recently in April of 2023. Consolidated the amendments included the following changes to the License Agreement i) to include the Delta and Omicron variants, ii) provided terms to broaden the non-exclusive field of use to include all diseases caused by coronaviruses and any genetic variants thereof, additionally iii) removed certain protocols and reagents from the License Agreement, and iv) included amendments to remove any license fees owed by the Company to the NRC related to the returned protocols and reagents.
12. Commitments and Contingencies
Additional Consideration−Noachis Terra Inc.(“NTI”) Acquisition.
In connection with the Company’s acquisition of NTI, the Company is obligated to pay the former sole shareholder of NTI contingent consideration based upon the exercise of certain of the Company’s outstanding warrants as follows: (i) twenty percent (20%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $45.00 and $54.00 and (ii) forty-five percent (45%) of the cash proceeds received by the Company upon exercise of the Company’s warrants carrying an exercise price of $60.00, in each case, for so long as the warrants remain outstanding.
The Company’s previously issued warrants carrying an exercise price of $45.00 have expired by their terms. As a result, no additional consideration will be due to the former sole shareholder of NTI relating to these warrants.
At December 31, 2021, warrants had been exercised as follows: (i) shares at an exercise price of $60.00 per share and (ii) at an exercise price of $54.00 per share.
As of the six-month period ended June 30, 2023, there are 32,033 warrants outstanding carrying an exercise price of $54.00 that expire on March 25, 2024 and 52,911 warrants outstanding carrying an exercise price of $60.00 that expire on July 17, 2025.
Inspirevax
As consideration for the License Agreement with Inspirevax the Company will be subject to certain milestone payments related to various events including but not limited to: (a) the Company’s decision for an appropriate nasal spray device, (b) phase 2a and 2b/3 clinical trials and patient participation, (c) certain license applications submitted to the FDA; (d) certain filing events for marketing authorizations out of the United States; and (e) certain metrics for sales within the United States, Europe and other countries or regions. Additionally, the Company is required to pay to Inspirevax certain royalties based upon net sales and subject to revenue limitations at which time the royalty amount will decrease. The amount of the milestone obligations could range from $0.1 million to $7.25 million; the Company evaluates the likelihood of triggering any milestone obligations and records the liabilities on the consolidated financial statements as they are incurred.
On May 25, 2023 the Company and Inspirevax agreed to amend certain payment terms of the License Agreement related to the purchase of biological materials. The amended payment terms provide the Company with longer periods to make payment and are based on the earlier of certain vaccine development milestones or June 30, 2024.
Unless terminated earlier, the License Agreement will terminate the later of (i) twenty (20) years from the first commercial sale of a product, (ii) the last date a product is covered by a valid patent claim, or (iii) the expiration of regulatory exclusivity. The Company may terminate the License Agreement by giving thirty (30) days written notice to Inspirevax. Either party may terminate, if the other party defaults or is in breach of the License Agreement, provided that if the defaulting party cures the breach within sixty (60) days after the notice is given, the License Agreement shall continue in full force and effect. The License Agreement contains customary confidentiality obligations.
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NIH License
Under the terms of the NIH License Agreement, the NIAID is entitled to receive a non-creditable, nonrefundable upfront license issue royalty of $30,000 and reimbursement of $11,739 for our pro rata share of the NIAID’s past and future patent prosecution-related expenses (which amounts have already been paid). Additionally, the NIAID is entitled to receive lump sum nonrefundable minimum annual royalties, which increase in the year after the first commercial sale of any Licensed Products or the practice of any Licensed Processes, as well as lump sum benchmark royalties following our completion of certain commercial development and sales-related benchmarks. The NIH is entitled to receive earned royalties on the annual net sales of Licensed Products and the practice of any Licensed Processes (subject to certain reductions), at certain low- to mid-single digit royalty rates, which rates vary based on the total amount of annual net sales and the geographic market in which those sales occur. We must provide regular written reports to the NIAID on the development status of and royalty payments relating to the Licensed Products and the Licensed Processes.
The NIH License Agreement will expire upon (a) twenty (20) years from the first commercial sale where no licensed patent rights exist or have ceased to exist or (b) the expiration of the last patent contained in the licensed patent rights, unless terminated earlier. None of the applications included in the NIH licensed patent rights have issued yet. The NIH may terminate or modify the license in the event of a material breach, including if the Company does not meet certain milestones by certain dates, or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such breach or insolvency event. The Company may terminate the license, or any portion thereof, at its sole discretion at any time upon 60 days written notice to the NIH.
NRC License
On July 26, 2021, the Company entered into a non-exclusive Technology License Agreement (the “NRC License Agreement”) with the National Research Council of Canada (“NRC”) pursuant to which the NRC grants to the Company a license to use NRC’s inventions, patents, trade secrets, know-how, copyright, biological material, designs, and/or technical information created by or on behalf of the NRC (the “NRC Technologies”) relating to the derivatives of CHO 2353 TM Cell Line listed in the NRC License Agreement (the “Stable Cells”) to: (i) make, research, and develop SARS-CoV-2 spike protein manufactured by a Stable Cell (the “Drug Substance”) within Canada, Australia, the United Kingdom, the European Union and the United States (U.S.) (collectively the “Territory”); (ii) file regulatory approval, export and sell the final formulation of the Drug Substance (“Products”) and (iii) engage contractors to use the Stable Cells to make Drug Substance or Products on behalf of the Company to be used and sold, worldwide, by the Company. The NRC License Agreement was subsequently amended to include the Delta and Omicron variants. In addition, the Company subsequently amended the NRC License Agreement to broaden the non-exclusive field of use to include all diseases caused by coronaviruses and any genetic variants thereof.
As consideration for the grant of the NRC license, the Company will pay to the NRC an annual (low five digits) license fee, with the initial portion of the fee covering the first three years of the license.license (already paid). Additionally, we will pay certain milestone payments (a) upon transfer of each Stable Cell listed in the Agreement and (b) with regard to each of the first three Products, (i) upon submission of the Investigational New Drug application (IND) related thereto, (ii) upon dosing the first patient in a Phase 1 or Phase 2 clinical trial, (iii) upon dosing the first patient in a Phase 3 clinical trial and (iv) upon first regulatory approval. Milestone payments range from the low five digits to high six digits. In addition, Oragenics will pay a low single-digit royalty to the NRC for the sale of Products, based on sales revenue, commencing after the first commercial sale.
Pursuant to the NRC License Agreement, the NRC is required to bear the responsibility and pay the costs to obtain and maintain patents related to the NRC Technologies in the U.S., Canada, Brazil, European Union, Japan, South Korea, Singapore, Australia, China, and India, and the NRC shall use reasonable efforts to obtain and maintain those patents. Additionalcertain countries, additional countries may be requested by us in which event, the NRC will file and maintain such patents, at our expense.
Pursuant to In addition, the NRC License Agreement, we areCompany is required to indemnify and holdprovide certain indemnifications to the NRC and its employees and agents harmless from and against all liability and damages in connection with or arising out of all claims, demands, losses, damages, costs including solicitor and client costs, actions, suits or proceedings brought by any third party that are in any manner based upon, arising out of, related to, occasioned by, or attributable to the manufacturing, distribution, shipment, offering for sale, sale, or use of Products, services based on the NRC Technologies and product liability and infringement of intellectual property rights other than copyright, if any, licensed under the NRC License Agreement.employees.
Unless terminated earlier, the NRC License Agreement will terminate twenty (20)(20) years from the effective date of the NRC License Agreement. Either party may terminate the NRC License Agreement, by giving written notice to the other party, if the other party defaults or is in breach of the NRC License Agreement, provided that if the defaulting party cures the breach within 60 days after the notice is given, the NRC License Agreement shall continue in full force and effect. The NRC may terminate the NRC License Agreement if the Company becomes bankrupt, or insolvent, or has a receiver appointed to continue its operations, or passes a resolution for winding up. The NRC License Agreement contains customary confidentiality obligations.
Three-Way Collaborative Agreement
In addition, in connection withMay of 2023 the initiative to develop its vaccine, we also previouslyCompany entered into a material transfer agreementCollaborative Research Agreement (the “Collaboration”) with Inspirevax, and the NRC (the “Collaborators”). The Collaboration received non-dilutive funding from Consortium Québécois Sur La Découverte Du Médicament (the “CQDM”) a not-for-profit corporation governed by Canada created to promote, stimulate, and support drug research, development and discovery. The CQDM also provides funding for drug research and discovery projects. The project is budgeted to cost approximately $1.7 million Canadian dollars over 27 months. Each collaborator is responsible for funding a portion of the project with payments made upon certain milestones, the CQDM grant award will fund approximately 40% of the budgeted project costs with the NRC for SARS-CoV-2 trimeric spike protein Wuhan variant and SARS-CoV-2 trimeric spike protein South African variant to move forward with pre-clinical testing.Collaborators.
13. Leases
Leases
Lab Facility-Alachua.Facility-Alachua. The Company’s Alachua facility is being leasedCompany began leasing this office location from a real estate developer for a term of five years beginning in December 2014. In June of 2019, the Company entered into an amendment for the Alachua facility for a term of five years beginning in December of 2019. Under the amended lease agreement, the rental payments range from $12,870 per month to $13,338 per month. Total rental expense for the Alachua facility during the six-months ended June 30, 2023 was approximately $85,230. The lease may be terminated prior to its stated expiration date upon the payment of nine-months rent.
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Corporate Office – Tampa.Office-Tampa. In November of 2016, the Company entered into an amendment for the leased office space for corporate personnel located in Tampa, FL. The amended lease is for approximately 2,207 square feet. The lease period for the office space is for was thirty-six months commencing on March 1, 2017. The Company entered into amendments extending the term of the lease in November 2019 and August 2022. The lease expires on February 29, 2024. Lease payments range fromare $4,138 per month to $4,3924,944 per month inclusive of insurance, taxes, and utilities. The lease expired on February 29, 2020. In November of 2019, the Company entered into an amendmentTotal rent expense for the Tampa facility for a term of three years beginning in March of 2020.and six-months ended June 30, 2023 was $16,878 Under the amended lease agreement, the rental payments range fromand $4,52433,578 per month to $4,800 per month., respectively.
Supplemental balance sheet information related to leases is as follows:
Schedule of Supplemental Balance SheetOther Information Related to Leases
| June 30, 2022 | December 31, 2021 | |||||||
| Weighted Average Remaining Lease Term In Years | ||||||||
| Operating leases | 1.95 | 2.45 | ||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | 5.69 | % | 5.70 | % | ||||
| For the Six Months Ended June 30, 2023 | For the Twelve Months Ended December 31, 2022 | |||||||
| Weighted Average Remaining Lease Term In Years | ||||||||
| Operating leases | 1.21 | 1.72 | ||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | 5.77 | % | 5.78 | % | ||||
Maturities of operating lease liabilities are as follows:
Schedule of Maturities of Operating Lease Liabilities
| Year ended December 31: | ||||||||
| 2022 | $ | 108,829 | ||||||
| 2023 | 169,656 | 109,690 | ||||||
| 2024 | 146,718 | 156,605 | ||||||
| 2025 | - | |||||||
| Total | $ | 425,203 | $ | 266,295 | ||||
| Less: Imputed interest | (27,026 | ) | ||||||
| Less: effect of discounting | (10,301 | ) | ||||||
| Present value of lease liabilities | $ | 398,177 | $ | 255,994 | ||||
The cost component of operating leases is as follows:
Schedule of Cost Component of Operating Leases
For the Six Months Ended June 30, 2022 | For the Six Months Ended June 30, 2021 | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | |||||||||||||
| Operating lease cost | $ | 114,259 | $ | 114,002 | $ | 116,098 | $ | 114,259 | ||||||||
| Short-term lease cost | 1,965 | 782 | - | 1,965 | ||||||||||||
| Total lease cost | $ | 116,224 | $ | 114,784 | $ | 116,098 | $ | 116,224 | ||||||||
Supplemental cash flow information related to operating leases is as follows:
Schedule of Supplemental Cash Flow Information Related to Operating Leases
For the Six Months Ended June 30, 2022 | For the Six Months Ended June 30, 2021 | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
| Operating cash flows from operating leases | $ | 117,350 | $ | 113,454 | $ | 118,807 | $ | 117,350 | ||||||||
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9.14. Shareholders’ EquitySubsequent Events
Common Stock
The Company’s Board of Directors and the Company’s shareholders, at its reconvened 2020 Annual Meeting on February 25, 2022, approved an amendment to our Amended and Restated Articles of Incorporation to (i) increase the number of authorized shares of common stock from shares to shares.Securities Purchase Agreement
During the three and six months ended June 30, 2022,On August 4, 2023 the Company issued noentered into a Securities Purchase Agreement (the “Purchase Agreement”) with two healthcare-focused investors, pursuant to which the Company agreed to issue in a private placement (the “Offering”), an aggregate of (i) shares of the Company’s common stock, $ par value (the “Common Stock”), and (ii) shares of Series E Mirroring Preferred Stock (the “Series E Preferred Stock”). For each share of Common Stock purchased by an investor, the investor will receive one share of Series E Preferred Stock.
The gross proceeds from the offering are approximately $850,000. The Company intends to use the net proceeds from the offering for general corporate purposes.
The Common Stock and Series E Preferred Stock sold in the Offering were issued in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”), and Regulation D promulgated thereunder and, have not been registered under the Act, or applicable state securities laws. Accordingly, the Common Stock and Series E Preferred Stock may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Act and such applicable state securities laws.
During the three months ended March 31, 2021,The Purchase Agreement contains customary representations, warranties and agreements by the Company, issued an aggregate of shares of common stock comprised of (i) shares of common stock issued in connection with sales under its At-The-Market Program which generated gross proceeds of approximately $27.8 million and (ii) 2,472,573 shares of common stock issued as the resultcustomary conditions to closing, indemnification obligations of the exercise of certain outstanding warrants which generated gross proceeds of approximately $2.3 million as a resultCompany, other obligations of the exercise of certain outstanding.parties and termination provisions.
Series E Preferred Stock
Series C Non-Voting, Non-Convertible, Preferred Stock Dividend and Redemption
DuringIn connection with the three months ended March 31, 2021,Securities Purchase Agreement referenced above, the Company providedfiled a noticeCertificate of redemption,Designation with the Secretary of State for the State of Florida (the “Series E Certificate of Designation”) designating shares out of the authorized but unissued shares of its preferred stock as Series E Preferred Stock.
The descriptions of the Certificate of Designation and Purchase Agreement are qualified by reference to the holderfull text of such documents, which were attached to the Form 8-K as Exhibits 3.1 and 10.1 respectively, filed with the Securities and Exchange Commission on August 7, 2023.
Restricted Stock Award
On August 8 2023, the Compensation Committee and Board of Directors approved restricted stock awards to certain of our executive officers under the Company’s 2021 Equity Incentive Plan, consisting of 25,000 shares to our Chief Executive Officer, Ms. Kimberly Murphy, with 20,000 shares to vest immediately and 5,000 shares to vest within six (6) months from date of the award and 15,000 shares to our Chief Financial Officer, Ms. Janet Huffman, with 10,000 shares to vest immediately and 5,000 shares to vest within six (6) months from date of the award. The restricted stock awards are subject to the terms and conditions of the Company’s Series C Preferred Stockform of restricted stock award agreement which includes, earlier vesting upon a change in control of the Company. An additional 100,000 shares of common stock were awarded to redeem all outstanding Series C Preferred Stock (which includeddirectors of the dividend of Company with 80,000 shares paid on January 28, 2021to vest immediately and any accrued dividends due through the redemption20,000 shares to vest within six (6) months from date of March 13, 2021). The Series C Preferred Stock redemption amount of approximately $the award.
5.6 million was paid on March 15, 2021 and all outstanding shares of Series C Preferred Stock were cancelled.
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following information should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, included elsewhere in this Form 10-Q as well as our Annual Report on Form 10-K for the year ended December 31, 20212022 filed on March 24, 2022.April 17, 2023.
As used in this quarterly report the terms “we”, “us”, “our”, “Oragenics” and the “Company” mean Oragenics, Inc. and its wholly owned subsidiary Noachis Terra Inc., unless the context otherwise requires.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “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. These forward-looking statements are not historical facts, but are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. These forward-looking statements include statements about our strategies, objectives and our future achievement. To the extent statements in this Quarterly Report involve, without limitation, our expectations for growth, estimates of future revenue, our sources and uses of cash, our liquidity needs, our current or planned clinical trials or research and development activities, product development timelines, our future products, regulatory matters, expense, profits, cash flow balance sheet items or any other guidance on future periods, these statements are forward-looking statements. These statements are often, but not always, made through the use of word or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and “would. “These forward-looking statements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements. Actual events or results may differ materially from those discussed in this Quarterly Report on Form 10-Q. Except as may be required by applicable law, we undertake no obligation to update any forward-looking statements or to reflect events or circumstances arising after the date of this Report. Important factors that could cause actual results to differ materially from those in these forward-looking statements are in the section entitled “Risk Factors” in the most recent Annual Report on Form 10- K filed with the Securities and Exchange Commission, and the other risks and uncertainties described elsewhere in this report as well as other risks identified from time to time in our filings with the Securities and Exchange Commission, press releases and other communications. In addition, the statements contained throughout this Quarterly Report concerning future events or developments or our future activities, including concerning, among other matters, current or planned clinical trials, anticipated research and development activities, anticipated dates for commencement of clinical trials, anticipated completion dates of clinical trials, anticipated meetings with the FDA or other regulatory authorities concerning our product candidates, anticipated dates for submissions to obtain required regulatory marketing approvals, anticipated dates for commercial introduction of products, and other statements concerning our future operations and activities, are forward-looking statements that in each instance assume that we are able to obtain sufficient funding in the near term and thereafter to support such activities and continue our operations and planned activities in a timely manner. There can be no assurance that this will be the case. Also, such statements assume that there are no significant unexpected developments or events that delay or prevent such activities from occurring. Failure to timely obtain sufficient funding, or unexpected developments or events, could delay the occurrence of such events or prevent the events described in any such statements from occurring.
Overview
We are a development-stage company dedicated to fighting infectious diseases including coronaviruses and multidrug-resistant organisms. Our lead product (NT-CoV2-1) is an intranasal vaccine candidate to prevent coronavirus disease 2019 (“COVID-19”) from the SARS-CoV-2 virus and variants thereof. The NT-CoV2-1 program leverages coronavirus spike protein research licensed from the National Institute of Health and the National Research Council of Canada with a focus on reducing viral transmission and offering a more patient-friendly intranasal administration. Our lantibiotics program features a novel class of antibiotics against bacteria that have developed resistance to commercial antibiotics.
Our SARS-CoV-2 Vaccine Product Candidate - NT-CoV2-1
Following our May 2020 acquisition of one hundred percent (100%) of the total issued and outstanding common stock of Noachis Terra, Inc. (“Noachis Terra”)NTI we are focused on the development and commercialization of a vaccine product candidate to provide long-lasting immunity from SARS-CoV-2, which causes COVID-19. Noachis TerraNTI is a party to a worldwide, nonexclusive intellectual property and biological materials license agreement with the National Institute of Allergy and Infectious Diseases (“NIAID”), an institute within the National Institutes of Health (“NIH”), relating to certain research, patent applications and biological materials involving pre-fusion stabilized coronavirus spike proteins and their use in the development and commercialization of a vaccine to provide specific, long lasting immunity from SARS-CoV-2. Since the acquisition we have conducted testing in animal models, including SARS-CoV-2 challenge studies in hamsters, using specific formulations for intramuscular administration (our Terra CoV-2 vaccine candidate) and intranasal administration (our NT-CoV2-1 vaccine candidate), both based on the NIAID pre-fusion stabilized spike protein antigens. Following consideration of a number of factors, including but not limited to the competitive landscape, we determined to bring the intranasal vaccine candidate NT-CoV2-1, into further development due to the greater differentiation versus current COVID-19 vaccines and the potential benefits of intranasal over intramuscular administration. We believe these benefits could include a higher reduction of transmission of SARS-CoV-2 and would offer a needle-free delivery option. We therefore are currently focusing our development efforts on our more highly differentiated NT-CoV2-1 vaccine candidate.
On July 26, 2021, we entered into a licensing agreement with the National Research Council (“NRC”) that enables us to pursue the development of next-generation vaccines against the SARS-CoV-2 virus and its variants. The license was subsequently amended toto: include the Omicron variant, to broadenedbroaden the non-exclusive field of use to include all diseases caused by coronaviruses, and any genetic variants thereof, and to add a research protocol developed by the NRC, and to add reagents as part of the NRC Technology licensed by us. The NRC technologies, in combination with the licensed technologies from the U.S. NIH used in our NT-CoV2-1 vaccine candidate, provide us with a platform that can generate cell lines for high-yield production of spike protein antigens for existing and emerging variants of concern. This platform should allow production of cell lines within six to eight weeks of spike gene sequence availability, compared with six to nine months for traditional production of such cell lines. The NRC technologies, developed with support from the NRC’s Pandemic Response Challenge Program, are expected to enable expedited evaluation of SARS-CoV-2 antigen candidates in pre-clinical and clinical studies.
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Coronaviruses are a family of viruses that can lead to upper-respiratory infections in humans. Recent clinical reports also suggest that the SARS-CoV-2 virus can affect other body-systems, including the nervous, cardiovascular, gastrointestinal and renal systems. Among the recent iterations of coronaviruses to move from animal to human carriers is SARS-CoV-2, which, beginning in Wuhan, China, in late 2019, caused a global pandemic due to its rapid spread and the relatively high mortality rate (as compared to the seasonal influenza). In late JulyAs of 2022,August 8, 2023, the World Health Organization’s estimates indicate the number of worldwide COVID-19 infections have exceeded 566769 million and the number of deaths directly attributed to COVID-19 have exceeded 6.46.9 million. Pfizer/BioNTech received FDA approval for their COVID-19 vaccines in August of 2021 and the Moderna vaccine in January 2022. The Janssen vaccine is currently available in the United States under Emergency Use Authorizations (“EUA”) by the FDA. In July of 2022, the FDA granted EUA for the Novavax COVID-19 vaccine. FDA granted EUA for Janssen’s COVID-19 vaccine as well. The overall disease burden from COVID-19 has continuedin February of 2021 and revoked the EUA on June 1, 2023. On April 18, 2023, FDA amended the EUA of both Moderna and Pfizer/BioNTech Bivalent (Original and Omicron BA.4/BA.5 strains) to increase in the U.S. despite 92%be used for all doses administered to individuals six months of those age 65 or older being fully vaccinated and 72% of those age 5 or older. CurrentAvailable vaccines have reduced the rates of hospitalization and death due to COVID-19 in vaccinated individuals, but the transmission levels even in vaccinated individuals has allowed SARS-CoV-2 variants to continue to circulate. We believe given the size of the worldwide pandemicspread of COVID-19 that even with additional vaccines available, in the months ahead, there will be demand for the highly differentiated NT-CoV2-1 vaccine, once development is successfully completed. We intend to combine the research, patent applications and biological materials covered by our NIAID license and with our NRC license and our existing clinical research and manufacturing capabilities to respond rapidly to this ongoing, global, public health issue. We believe our NT-CoV2-1 vaccine holds the possibility of playing an important role in addressing this issue.
Coronaviruses, such as SARS-CoV-2, possess signature protein spikes on their outer capsule. Our NIAID license covers patents and data on a vaccine candidate that were created based on a stabilized pre-fusion spike trimeric protein. By stabilizing the spike protein in the pre-fusion state, the number of immunogenic centers is increased thereby allowing for a greater likelihood of successful antibody binding, resulting in an improved immunogenic response. Spike protein antigens stabilized in the pre-fusion state have been used successfully in the leading COVID-19 vaccines from Pfizer/BioNTech and Moderna, which we believe reduces the risk of using the same approach in our NT-CoV2-1 vaccine candidate. The Companygenetic code, acquired from the NIH, for the stabilized pre-fusion spike protein was provided to Aragen Bioscience, Inc. (“Aragen”) for the purpose of insertion of the spike protein gene sequence into a Chinese Hamster Ovary (“CHO”) cell line. Aragen is a leading contract research organization focused on accelerating pre-clinical biologics product development, has extensive experience building CHO cell lines for recombinant proteins, such as monoclonal antibodies. Aragen successfully inserted the NIH pre-fusion spike protein gene sequence into a CHO cell line and Oragenics is currently producing Phase 1 clinical materialsmaterial based on the pre-fusion protein stabilization technology licensed from the NIH as well as additional antigen design technologies licensed from the NRC.upon this cell line.
We entered into both a material transfer agreement and a non-exclusive research license agreement with Inspirevax for the use of intranasal mucosal adjuvants in our NT-CoV2-1 vaccine candidates. Regarding the intranasal mucosal adjuvants of interest, BDX300 and BDX301 are proteosome-based adjuvants comprised of proteins and lipopolysaccharides with improved attributes including enhanced immune response, manufacturing efficiency and the benefits of intranasal vaccine administration. The non-exclusive license agreement allows for the collaboration and research regarding the intranasal delivery of vaccine during clinical development with the opportunity to enter into a commercial agreement upon regulatory approval of the intranasal vaccine. The NT-CoV2-1 vaccine containing Inspirevax’s intranasal mucosal adjuvant BDX301 has been studied in pre-clinical animal studies, including hamster viral challenge studies and mouse immunogenicity studies. A rabbit toxicology study has been initiated and is required for regulatory approval prior to the Phase 1 clinical study.
A Non-Exclusive Research License Agreement with Inspirevax was executed in February 2022. This agreement granted the Company non-exclusive rights to conduct non-clinical and clinical research and trials in relation to vaccines comprising the BDX300 or BDX301 adjuvants to prevent or treat diseases caused by coronaviruses and genetic variants thereof.
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We began pre-clinical studies in June of 2021 through our collaboration and material transfer agreement with the NRC. We initiated an immunogenicity study in mice to evaluate several adjuvant candidates. On August 30, 2021, we announced the successful completion of these mouse immunogenicity studies that supported further development using either the intramuscular or intranasal routes of administration. A hamster challenge study was initiated in September of 2021 to assess inhibition of viral replication using adjuvants specific for intramuscular and intranasal administration. In December of 2021, we announced that both formulations generated robust immune responses and reduced the SARS-CoV-2 viral loads to undetectable levels in the nasal passages and lungs five days following a viral challenge. By contrast, hamsters in the control groups that had received saline or adjuvants alone had no detectable immune response and substantial viral loads. The vaccines delivered by intranasal and intramuscular routes generated immune responses as measured by multiple assays. On June 14, 2022, we announced that the results of these studies were published in Nature Scientific Reports.
In March of 2022, following a positive assessment of a rabbit-based pilot study, we initiated a Good Laboratory Practice toxicology study to evaluate the safety profile and immunogenicity of NT-CoV2-1 in rabbits. This important preclinical study is designed to provide data required to advance our intranasal vaccine candidate into human clinical studies. While the study has concluded, we are completing the full set of toxicology data which will be needed to support the filing of an IND application for NT-CoV2-1. Based on our previous preclinical results,the findings of the final toxicology report, including a full histopathology evaluation, we are encouragedwere able to confirm a safety and immunogenicity profile that this study may further support our intranasal development path.plan to submit regulatory filings required to progress to a Phase 1 clinical study.
While we previously had a Type B Pre-IND Meeting with the FDA on our intramuscular vaccine product candidate, we again met with the FDA in a Type B Pre-IND Meeting request to discuss our intranasal vaccine product candidate. As a result of this meeting, the FDA indicated that the Company could file an IND application for NT-CoV2-1 following the availability of the final GLP toxicology report for inclusion in the IND.
On February 23, 2023, we entered into a Commercial License Agreement with Inspirevax, Inc. for its novel intranasal mucosal adjuvant, BDX301, for the development of NT-CoV2-1, our lead intranasal COVID-19 vaccine candidate. Under the exclusive licensing agreement, we are required to use our best efforts to develop NT-CoV2-1 with Inspirevax’s novel BDX301 intranasal mucosal adjuvant. We have also formed a Joint Development Committee (JDC) with Inspirevax comprising representatives of both companies to oversee the development efforts. We will be subject to clinical, regulatory and commercial milestone payments, as well as tiered royalty payments. Additionally, the agreement provides a certain period of time for the companies to expand their focus to pursue the development of additional intranasal vaccine candidates using Inspirevax’s adjuvants.
We believe the benefits of our NT-CoV2-1 vaccine product candidate through its intranasal delivery mechanism to be:
| ● | Targeted Mucosal Immunity – Conventional injectable vaccines are poor inducers of mucosal immunity, whereas intranasal immunization can induce strong mucosal immunity by enhancing the immune response at the entry sites of mucosal pathogens. When the SARS-CoV-2 virus enters the nasal cavity, the respiratory epithelial layer is the first barrier against viral infection. The intranasal route of vaccination provides two additional layers of protection over intramuscular shots because (i) it produces immunoglobulin A and resident memory B and T cells in the respiratory mucosa that are an effective barrier to infection at those sites, and (ii) cross-reactive resident memory B and T cells can respond earlier than other immune cells should a viral variant start an infection. | |
| ● | Needle-Free Administration – As an obvious benefit, intranasal administration means needle-free delivery, resulting in meaningful differentiation for children and needle-phobic populations, improved compliance and the potential for self-administration. | |
| ● | Storage & Transport – The currently available mRNA-based vaccines have been delivered globally via stringent storage and transport requirements that strain distribution logistics under the best of circumstances. A key benefit of our NT-CoV2-1 vaccine candidate is a significantly reduced handling burden, allowing transport at a more manageable refrigeration temperature (5°C) that improves access globally including remote and under-vaccinated geographies. | |
| ● | Durability – Broad initial success with mRNA vaccines has significantly diminished COVID-19’s impact and death, but the trade-off has been fleeting efficacy. By benefitting from the immunological properties of the hybrid NIH/NRC construct, NT-CoV2-1 is potentially much more durable and long-lasting than currently available mRNA-based therapies. |
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Through assessment of a variety of factors including our pre-clinical testing to date, the expected benefits noted above, evolving variants and available vaccines in use, we determined to focus our development efforts on the intranasal delivery of our vaccine product candidate, NT-CoV2-1, which we believe is more highly differentiated than the currently available and late-stage COVID-19 vaccines. We expectare currently evaluating formulation options and considering regulatory pathways to advance the program. In connection therewith, we are strategically assessing multiple opportunities inclusive of further regulatory guidance and requirements, and the potential implications thereof. As a result, we now anticipate being in a position to file an IND application within the FDA upon completion of our pending toxicology studyUnited States and/or a Clinical Trial Application in Canada and to thereafter commence a Phase 1 clinical study with NT-CoV2-1 in the protocol for which is currently under development.
back half of 2023.
We expect to use our currently available cash resources to continue to advance the development of NT-CoV2-1 through IND-enabling studies and commencement of a Phase 1 clinical trial with further clinical development being contingent upon the receipt of additional funding, including non-dilutive government grant funding which we continue to pursue, or partnering or out-licensing opportunities.
On June 5, 2023, we announced the award of a grant from CQDM, a Canadian bioresearch consortium, for the collaborative development of a variant-agnostic COVID-19 protein subunit vaccine candidate. The project, which aims to build upon Oragenics’ current lead intranasal vaccine candidate NT-CoV2-1, is a collaboration with the National Research Council of Canada (NRC) and Inspirevax. The new source of non-dilutive funding is expected to help address the evolving SARS-CoV-2 virus by working to develop broadly protective antigens designed to protect against current and future variants. We believe our pan-coronavirus vaccine candidate presents a potential universal solution to the evolving nature of SARS-CoV-2 and potentially future coronaviruses.
The grant awarded by CQDM is expected to help Oragenics fund the development of two to four well-characterized stable CHO pools expressing new, cross-protective vaccine antigens with well-established preclinical efficacy using intranasal immunization. These antigens are expected to be rapidly deployable in next-generation vaccine formulations by leveraging the NRC’s advanced manufacturing platform currently utilized by Oragenics and previously developed for the reference strain SARS-CoV-2 spike antigen.
Our Antibiotic Product Candidate - Oragenics Derived Compound (ODC-x)
Members of our scientific team discovered that a certain bacterial strain of Streptococcus mutans, produces Mutacin 1140 (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-positive bacterial species. Over 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-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 antibiotic-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.
The timing of the filing of an IND regarding any future lantibiotic candidate is subject to our having sufficient available human, material and financing capital, which includes research subjects, both animal and human, given all of our anticipated needs and expected requirements in connection with our ongoing research and development initiatives. We expect to continue to advance our lantibiotics program to an IND filing based on the availability of both human and financial capital. Based upon the current funding we expect to continue toreduce our focus on the identification of new potential product lantibiotic candidates, efficient and cost-effective improvements in the manufacturing processes and pre-clinical studies required to support a first in human Phase 1 clinical study.study until such time as we raise additional capital.
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In October 2021, we were awarded a small business innovation research grant in the amount of $250,000 (“Computer-aided Design for Improved Lantibiotics”, R41GM136034) for the Company’s continued research and development of lantibiotics, including its collaborative program with the Biomolecular Sciences Institute at Florida International University (FIU). The grant provides the Company with funding to develop novel lantibiotics for the treatment of ESKAPE pathogens (defined as Enterococcus faecium, Staphylococcus aureus, Klebsiella pneumoniae, Acinetobacter baumannii, Pseudomonas aeruginosa, and Enterobacter spp.).
On March 14, 2023, we announced favorable findings from third party laboratory testing of several compounds in our lantibiotics platform to combat multiple pathogens despite the resistance of those pathogens to standard-of-care antibiotics. Lantibiotics are a novel class of antibiotics with the potential to treat serious, life-threatening infections. Through its platform, Oragenics has created more than 700 potential lantibiotic structures. Our lantibiotics platform is focused on the development of new antibiotics effective against certain pathogens including Enterococcus faecium (VRE) and Staphylococcus aureus (MRSA). This preclinical testing was conducted through our collaboration with Linnaeus Bioscience Inc. Testing by Linnaeus Bioscience demonstrated that the MRSA and VRE pathogen strains and clinical isolates remained sensitive to several of our lantibiotic structures analyzed despite their resistance to so-called drugs of last resort such as oxacillin, methicillin, vancomycin and/or daptomycin. More than 2.8 million antibiotic-resistant infections occur in the U.S. each year, and more than 35,000 people die as a result. The results of our work with Linnaeus Bioscience advance our long-term mission to become a provider of treatments for infectious diseases. We remain committed to fighting infectious diseases through the development of our lantibiotics pipeline against MRSA and VRE pathogens.
Product Candidates.Candidates
Through our wholly-owned subsidiary, Noachis Terra,NTI, we began the research and development stage for our new Terra CoV-2 and NT-CoV2-1 vaccine product candidates. We hold a nonexclusive, worldwide intellectual property license agreement for certain research, patent applications and biological materials relating to the use of pre-fusion coronavirus spike proteins for the development and commercialization of a vaccine against SARS-CoV-2. We also hold a non-exclusive license with the NRC that enables us to pursue the rapid development of next-generation vaccines against the SARS-CoV-2 (the “NIH License”) virus and its variants (the “NRC License” and together with the NIH License the License Agreements.“License Agreements”).
Additionally, we are developing semi-synthetic lantibiotic analogs that may be effective against systemic Gram-positive multidrug infections, and analogs that may be effective in treating Gram-negative infections. We seek to protect our product candidates through patents and patent applications pursuant to the terms of our license agreements.License Agreements.
| Product/Candidate | Description | Application | Status | |||
| NT-CoV2-1 | Intranasal vaccine candidate (recombinant protein + adjuvant) to provide long lasting immunity against SARS-CoV-2 | Broad, community-based vaccine immunity against SARS-CoV-2 | Pre-clinical | |||
| Antibiotics | Semi-synthetic analogs of MU1140: Member of lantibiotic class of antibiotics | Healthcare-associated infections | Pre-clinical |
Our Business Development Strategy
Success in the biopharmaceutical and product development industry relies on the continuous development of novel product candidates. Most product candidates do not make it past the clinical development stage, which forces companies to look externally for innovation. Accordingly, we expect from time to time, to seek strategic opportunities through various forms of business development, which can include strategic alliances, licensing deals, joint ventures, collaborations, equity-or debt-based investments, dispositions, mergers and acquisitions. We view these business development activities as a necessary component of our strategies, and we seek to enhance shareholder value by evaluating business development opportunities both within and complementary to our current business as well as opportunities that may be new and separate from the development of our existing product candidates. Our business strategy requires significant capital. See, Risk Factors.
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Financial Overview
Impact of the Novel Coronavirus.
The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, development partners, communities and business operations, as the U.S. and global economies and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information or trends that may emerge concerning COVID-19, the actions taken to contain it or treat its impact, the emergence of any new variant strains of COVID-19, and the impact on local, regional, national and international markets.
To date, we and our development partners, have been able to conduct ordinary operations at or near normal levels and do not currently anticipate any interruptions for the foreseeable future. However, there could be additional repercussions for our operations, particularly for the initial development of our NT-CoV2-1 product candidate, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational study sites. The continuation of the pandemic could adversely affect our planned clinical trial operations, including our ability to conduct the trials on the expected timelines and recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if their geography is impacted by the pandemic. Further, the COVID-19 pandemic could result in delays in our clinical trials due to prioritization of hospital resources toward the pandemic, the broad emergency use authorization of vaccines, restrictions in travel, potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services. In addition, we rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the pandemic may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us.
Research and Development Expenses As Restated
Research and development consist 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 License Agreements with third parties 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, up-front payment and prepayments related to research and development activities and in-licensed products and technology are recorded as prepaid expenses on the balance sheet and recorded as expenses on the Company’s consolidated statement of operations as work is performed or the expense is 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 all of which are largely provided by third parties. Nonclinical research and development costs consist of our research activities, research activities provided by third parties, our own nonclinical studies, nonclinical studies provided by third parties, the acquisition of in process research and development, 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 the development of our product candidates. 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,partnerships, 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.
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Our research and development expenses were $5,883,693$3,679,262 and $5,728,479$5,883,693 for the six monthssix-months ended June 30, 2023 and 2022, respectively. Our research and 2021, respectively.development costs are tracked by our COVID vaccine program and our lantibiotics program. Due to limited resources, while we continue our development efforts, we have focused on reducing our research and development expenses until we can raise additional capital.
Our current product development strategy contemplates an expected increase in ourcontinued research and development expenses in the future as we continuefurther the advancement of our product development programs for our vaccine and lantibiotic product candidates, with greater near-term emphasis on our vaccine product candidate. Continued research and development expense is subject to available capital and our ability to raise the additional required capital. The lengthy process of completing pre-clinical studies, 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 pre-clinical studies, 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 or the regulatory authority in other jurisdictions where we may seek approval.
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 program and the License Agreements as to the planning and timing of our 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 tocould increase as a result of our vaccine product candidate and to remain relatively constant with respect to our lantibiotic program.candidate. 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.
Recent Financing
On August 4, 2023, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with two healthcare-focused investors, pursuant to which the Company agreed to issue in a private placement (the “Offering”), an aggregate of (i) 404,728 shares of the Company’s common stock, $0.001 par value (the “Common Stock”), and (ii) 404,728 shares of Series E Mirroring Preferred Stock (the “Series E Preferred Stock”), the rights and preferences of which are set forth in the Certificate of Designation filed with the Secretary of State for the State of Florida. The closing of the offering occurred on August 4, 2023. The gross proceeds from the offering were approximately $850,000. The Company intends to use the net proceeds from the offering for general corporate purposes.
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 anticipateare aware that ourcertain general and administrative expenses tocould increase for, among others, the following reasons:
| ● | the efforts we undertake from, time to time, to raise additional capital; and | |
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Other Income (Expense)
Other income (expense) includes miscellaneous income, local business taxes, gain on sale of property and equipment, 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
At December 31, 2021,2022, the Company has federal and state tax net operating loss carryforwards of $145,260,353.$150,083,903. Federal and state tax net operating loss carryforwards generated prior to December 31, 2017 will expire through 2037 and are not subject to taxable income limitations. Federal tax net operating loss carryforwards generated subsequent to December 31, 2017, do not expire but are subject to taxable income limitation pursuant to the Tax Cuts and Jobs Act that was enacted on December 22, 2017. State of Pennsylvania tax net operating loss carryforwards will expire through 2036. The Company also has federal research and development tax credit carryforwards of $4,027,180.$4,834,847. The federal tax credit carryforward will expire beginning in 2021 and continuing through 20412042 unless previously utilized.
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Utilization of net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or, could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“IRC Section 382”) and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change, as defined by IRC Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has completed several financings since its inception, as well as the recent acquisition of Noachis Terra,NTI, which may result in a change in ownership as defined by IRC Section 382, or could result in a change in control in the future. 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 June 30,2023 and 2022 and 2021, As Restated
Grant revenue. Grant revenue was $13,163 for the three months ended June 30, 2023 compared to $30,391 for the three months ended June 30, 2022, compareda decrease of $17,228 or 57%. This decrease was attributable to $-0-awards received for a small business innovation research grant that expired in the period subsequent to June 30, 2023.
Research and Development. Research and development expenses were $2,006,696 for the three months ended June 30, 2021; an increase of $30,391, or 100.0%. This increase was attributable2023 compared to the award of a small business innovation research grant.
Research and Development, As Restated. Research and development expenses were $2,590,032 for the three months ended June 30, 2022, compared to $2,467,575 for the three months ended June 30, 2021, an increasea decrease of $122,457.$583,336 or 23%.
| For the Three | For the Three | |||||||
| Months Ended | Months Ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Lantibiotics Expense | ||||||||
| Clinical Research | $ | - | $ | - | ||||
| Non-clinical research and development activities | 214,214 | 297,520 | ||||||
| COVID Vaccine Development Expense | ||||||||
| Clinical Research | 513,056 | 864,367 | ||||||
| Non-clinical research and development activities | 1,279,426 | 1,428,145 | ||||||
| Total Research and development activities | $ | 2,006,696 | $ | 2,590,032 | ||||
The table below provides a breakdown
This decrease was mainly driven by approximately $0.5 million of decreased costs associated with the development of our COVID vaccine and primarily associated with costs for outside consultants. Additionally, there were decreases in research and development expense for our lantibiotic product of approximately $0.07 million. Decreases in expense related to the periods for our current development programs:
| For the Three Months Ended June 30, 2022 | For the Three Months Ended June 30, 2021 | |||||||
| Lantibiotics Expense | ||||||||
| Clinical Research | $ | - | $ | - | ||||
| Non-clinical research and development activities | 297,520 | 304,311 | ||||||
| Vaccine Development Expense | ||||||||
| Clinical Research | 864,367 | - | ||||||
| Non-clinical research and development activities | 1,428,145 | 2,163,264 | ||||||
| Total Research and Development expense | $ | 2,590,032 | $ | 2,467,575 | ||||
This increaselantibiotic product were largely related to purchases of equipment in the comparable period in 2022 and decreased research and development expense reflected onactivities in the statementcomparable period of operations was primarily due to increases in costs associated with research and development and materials related to the development of the NT-CoV2-1 vaccine program.2023.
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General and Administrative. General and administrative expenses were $1,044,334$1,115,785 for the three months ended June 30, 20222023 compared to $1,370,393$1,044,334 for three months ended June 30, 2021,2022, a decrease of $326,059approximately $71,451 or 23.8%.7% This decrease was primarily due to decreases in salaries, filing fees and registration costs, and board costs of $252,448, $134,054, and $33,687. decreased expenses related to:
| ● | Public company related expenses of approximately $0.03 million, | |
| ● | Board of Director compensation related expense of $0.05 million, and | |
| ● | Legal expenses of approximately $0.06 million, and | |
| ● | Non-employee stock option and Insurance expense of approximately $0.08 million |
These expense decreases were offset by increases in non-employee stock-based compensation, and insurance costs of $54,704 and $37,431, respectively.in:
| ● | Consultant expense for third party accounting support of approximately $0.07 million, | |
| ● | Accounting expenses related to our 2022 financial restatements of approximately $0.2 million, and | |
| ● | Rent expense of approximately $0.06 million. |
Other Income.Income (Expense). Other income, net was $58,732 for the three months ended June 30, 2023 compared to $14,432 for the three months ended June 30, 2022, compared to $22,621 for the three months ended June 30, 2021, resulting in a net changean increase of $8,189.$44,300 or 307%. The net change was primarily attributable to a decreasean increase in interest income of $8,885.$43,585 or 284% for the three-month period ended June 30, 2023 compared to 2022.
Results of Operations for the Six Months Ended June 30,2023 and 2022 and 2021, As Restated
Grant revenue. Grant revenue was $30,187 for the six months ended June 30, 2023 compared to $45,474 for the six months ended June 30, 2022, compareda decrease of $15,287 or 34%. This decrease was attributable to $-0-awards received for a small business innovation research grant that expired in the period subsequent to June 30, 2023.
Research and Development. Research and development expenses were $3,679,272 for the six months ended June 30, 2021; an increase of $45,474, or 100.0%. This increase was attributable2023 compared to the award of a small business innovation research grant.
Research and Development, as Restated. Research and development expenses were $5,883,693 for the six months ended June 30, 2022, compared to 5,728,479 for the six months ended June 30, 2021, an increasea decrease of $155,214$2.2 million or 3%37%.
The table below provides a breakdown of our research and development expense for the periods for our current development programs:
| For the Six | For the Six | |||||||||||||||
| Months Ended | Months Ended | |||||||||||||||
| For the Six Months Ended June 30, 2022 | For the Six Months Ended June 30, 2021 | June 30, 2023 | June 30, 2022 | |||||||||||||
| Lantibiotics Expense | ||||||||||||||||
| Clinical Research | $ | - | $ | - | $ | - | $ | - | ||||||||
| Non-clinical research and development activities | 688,557 | 595,383 | 491,506 | 688,557 | ||||||||||||
| Vaccine Development Expense | ||||||||||||||||
| COVID Vaccine Development Expense | ||||||||||||||||
| Clinical Research | 1,955,117 | - | 653,224 | 1,955,117 | ||||||||||||
| Non-clinical research and development activities | 3,240,019 | 5,133,096 | 2,534,542 | 3,240,019 | ||||||||||||
| Total Research and Development expense | $ | 5,883,693 | $ | 5,728,479 | ||||||||||||
| Total Research and development activities | $ | 3,679,272 | $ | 5,883,693 | ||||||||||||
This increasedecrease was primarily due to increases inapproximately $2.0 million of decreased costs associated with the NT-CoV2-1COVID vaccine development program. Additionally, decreases in research and development for the development of our lantibiotic product were reflected in salaries, wages and benefits, and other overhead expenses of approximately; $60,000, $25,000, and $100,000 respectively. The decrease in research and development expenses attributable to the vaccine development program supplies and equipment costs, bonus costs, costsreflect our actions toward the requisite steps to manage the timing of expenses associated with our lantibiotic ECC, patent costs, and rent and utilities costs, of $611,926, $44,490, $39,060, $27,966, $26,745, and $18,891, respectively. These increases were partially offset by decreases in costs associated with consideration relating to the acquisition of Noachis Terra, Inc., and salaries of $542,261, and $71,603, respectively.preclinical efforts. The increase in research and development expenses attributable to the vaccine development program related to our taking the requisite preclinical stepsactivities necessary to be in a position to submit an Initial New Drug Application to the FDA or other regulatory agency, including conducting toxicology studies in mice, hamsters, and rabbits, enablement of COVID 19 variants, securing an adjuvant, assay testing, stability and release testing and preparing the elements necessary for manufacturing of our vaccine product candidate in order to be in a position to move forward with a Phase 1 and Phase 2 clinical studies.
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General and Administrative. General and administrative expenses were $2,375,883$2,365,048 for the six months ended June 30, 20222023 compared to $3,346,969$2,375,883 for six months ended June 30, 2021,2022, a decrease of $971,086approximately $11,000 or 29.0%.0.5% This decrease was primarily due to decreases in non-employee stock-based compensation, salaries, employee benefits, stock-based compensation costs, and payroll taxes of $945,141, $336,103, $27,233, $26,692, and $21,091. decreased expenses related to:
| ● | Public company related expenses of approximately $0.3 million, | |
| ● | Employee and non-employee related options expense of $0.2 million, and | |
| ● | Other overhead related expenses for director compensation, travel, insurance, and supplies of approximately $0.1 million |
These expense decreases were offset by increases in costs associated with filing fees and registration costs, insurance, bonus, and legal costs of $216,742, $75,572, and $52,254, respectively.in:
| ● | Consultant expense for third party accounting support of approximately $0.2 million, | |
| ● | Accounting expenses related to our 2022 financial restatements of approximately $0.2 million, and | |
| ● | Other overhead related expenses for salaries and wages, legal, and rent expenses of approximately $0.2 million |
Other Income.Income (Expense) Other income, net was $118,710 for the six months ended June 30, 2023 compared to $33,566 for the six months ended June 30, 2022, compared to $40,156 for the six months ended June 30, 2021, resulting in a net changean increase of $6,590.$85,144 or 254%. The net change was primarily attributable to a decreasean increase in interest income of $16,273. and an increase in$93,880, for the gain on sale of property and equipment of $10,964.six-month period ended June 30, 2023 compared to 2022.
Liquidity and Capital Resources As Restated
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 six months ended June 30, 20222023 and June 30, 20212022 our operating activities used cash of $9,019,757,$4,685,323, and $6,405,775,$9,019,757, respectively. The use of cash in all periodsdecrease primarily resulted from our decrease in net losses adjusted for non-cash items and changes in operating assets and liabilities, which is primarily driven by an increase in prepaid expenses of approximately $1.6 million.liabilities. We had a working capital surplus of $18,397,106$6,957,573 and $26,262,129$12,675,299 at June 30, 20222023 and December 31, 2021,2022, respectively.
During the six months ended June 30, 2022 and June 30, 2021, our investing activities used cash of $(75,047) and $-0- respectively. The cash used by investing activities during the six months ended June 30, 2022, was primarily due to the purchase of property and equipment net of the proceeds from the sale of property and equipment.
During the six months ended June 30, 2023 and 2022, our investing activities used cash of $0 and $75,047 respectively.
During the six months ended June 30, 2021,2023 and 2022, our financing activities used and provided cash of $(303,416)$267,640 and $23,340,969$303,416 respectively. The cash used by and provided in financing activities during the six months ended June 30, 2022 and June 30, 2021,2023, was primarily due to payments on short term notes payable the sales of common stock, the exercise of warrants, and the redemption of the Series C Preferred stock.related to financed insurance premiums.
Financing
Additional details of our financing activities for the periods reflected in this report are provided below as well as certain information on our outstanding shares of preferred stock:
November 2020 Public Offering.
On November 24, 2020, we closed an underwritten public offering for gross proceeds of approximately $6.0 million, which included the full exercise of the underwriter’s over-allotment option to purchase additional shares, prior to deducting underwriting discounts and commissions and offering expenses. The offering was comprised of 14,189,189 shares of common stock at a price to the public of $0.37 per share. We granted the underwriter a 45-day option to purchase up to 2,128,378 additional shares of our common stock at the public offering price, less underwriting discounts and commissions. The underwriter exercised its option in full to purchase 2,128,378 additional shares of common stock, which the indicated gross proceeds reflect. We intend to use the net proceeds of the offering primarily to continue funding our pre-clinical development of our SARS-CoV-2 vaccine, NT-CoV2-1 and our lantibiotics program and for general corporate purposes, including research and development activities, capital expenditures and working capital. Dr. Frederick Telling who is a Director of the Company, participated in the offering through the purchase of 100,000 shares of the Company’s common stock. Dr. Telling’s participation was approved by the Company’s Audit Committee.
December 2020 Registered Direct Offering.
On December 29, 2020, we closed a registered direct offering for gross proceeds of approximately $6.5 million, prior to deducting underwriting discounts and commissions and offering expenses. The offering was comprised of 14,444,444 shares of common stock at a price to the public of $0.45 per share. We intend to use the net proceeds of the offering primarily to continue funding our pre-clinical development of our SARS-CoV-2 vaccine, NT-CoV2-1 and our lantibiotics program and for general corporate purposes, including research and development activities, capital expenditures and working capital.
At-the- MarketAt-the-Market (“ATM Program”)
On February 1, 2021, we entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners, as sales agent (the “Sales Agent”), pursuant to which we may offer and sell through or to the Sales Agent shares of our Common Stock (the “ATM Program”). During the three months ended March 31, 2021, we issued an aggregate of 21,398,765356,650 shares of Common Stock and received gross proceeds of an aggregate of approximately $27.8 million under our ATM Program. Any Shares offered and sold in the ATM Program were issued pursuant to our universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”) of which $9,671,869 remains available under our Shelf Registration Statement. The ATM Program will terminatecould be terminated upon (a) the election of the Agent upon the occurrence of certain adverse events, (b) 10 days’ advance notice from one party to the other, or (c) the sale of the balance available under our Shelf Registration Statement. Under the terms of the Sales Agreement, the Sales Agent is entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of shares under the Sales Agreement.
On December 19, 2022, we sent written notice of termination to A.G.P./Alliance Global Partners (“AGP”), pursuant to the terms of our Sales Agreement with AGP in connection with the Company’s ATM Program. The termination took effect on December 29, 2022.
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On February 24, 2023 we entered into an ATM with Ladenburg Thalmann & Co. Inc (“Ladenburg”) to sell shares of our common stock. The Company intends to use the proceeds from the ATM to continue funding its COVID Vaccine program and its lantibiotics program and for the general corporate purposes, including capital expenditures, working capital, and research and development activities. During the six-month period ended June 30, 2023 we did not issue any shares of common stock under our ATM program.
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
The product liability insurance policy has been renewed in subsequent periods without premium financing.
Directors’ and Officers’ Insurance
On August 5, 2022, we entered into a short-term note payable for $528,429 bearing interest at 6.24% 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, 2022 and are made evenly based on a straight-line amortization over a 10-month period with the final payment being due on May 24, 2023.
On July 24, 2021, we entered into a short-term note payable for $600,169 bearing interest at 5.34% 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, 2021 and arewere made evenly based on a straight-line amortization over a 10-month period with the final payment being made onpaid in May 16,of 2022.
Recent Developments
On July 24, 2020,August 4, 2023, we entered into a short-term note payable for $413,784 bearing interest at 5.39%Securities Purchase Agreement (the “Purchase Agreement”) with two healthcare-focused investors, pursuant to financewhich the Company agreed to issue in a portionprivate placement (the “Offering”), an aggregate of (i) 404,728 shares of the directors’Company’s common stock, $0.001 par value (the “Common Stock”), and officers’ liability insurance(ii) 404,728 shares of Series E Mirroring Preferred Stock (the “Series E Preferred Stock”), the rights and employment practices liability insurance premiums. Principal and interest payments on this note began August 24, 2020 and were made evenly based on a straight-line amortization over an 11-month periodpreferences of which are set forth in the Certificate of Designation filed with the final payment being madeSecretary of State for the State of Florida. The closing of the offering occurred on June 28, 2021.August 4, 2023. The gross proceeds from the offering were approximately $850,000. The Company intends to use the net proceeds from the offering for general corporate purposes.
Our Outstanding Preferred Stock
During 2017, we issued shares of Series A and Series B Preferred Stock in financing transactions (the “Preferred Stock Financings”). In connection with the Preferred Stock Financings, we filed Certificate of Designations of Preferences, Rights and Limitations of Series A and Series B Preferred Stock with the Secretary of State of the State of Florida, effective May 10, 2017 and November 8, 2017, respectively. Our currentlyOn August 26, 2022, holders of 4,000,000 shares of the Company’s Series A Convertible Preferred Stock, and 2,550,000 shares of the Company’s Series B Convertible Preferred Stock converted the Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock into an aggregate of 15,167 shares of common stock. As of June 30, 2023 our outstanding Series A and Series B Preferred Stock and the amount of common stock that may be issued upon conversion is set forth below:
| Preferred Stock Series | Outstanding Shares | Common Stock Equivalents | Outstanding Shares | Common Stock Equivalents | ||||||||
| Series A Preferred | 9,417,000 | 941,701 | 5,417,000 | 9,028 | ||||||||
| Series B Preferred | 6,600,000 | 1,320,002 | 4,050,000 | 13,500 | ||||||||
In addition, we issued warrants to purchase an aggregate of (i) 1,064,520 shares of Common Stock to the Series A holders, and (ii) 1,064,518 shares of Common Stock to the Series B holders in connection with the Preferred Stock Financings.Financing. As of June 30, 2023, there are 11,828 and 11,720 shares of common stock able to be acquired upon exercise of the warrants held by our Series A and Series B holders respectively.
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Except as otherwise required by law, the Series A and Series B Preferred Stock have no voting rights. However, as long as any shares of Series A and 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 A and Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A or 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 A and Series B Preferred Stock, (c) increase the number of authorized shares of Series A and Series B 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 Designations), the holders of Series A and Series B 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 and 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 (as defined in the Certificate of Designations) in respect of Common Stock issuable upon conversion of such shares of Series A and Series B Preferred Stock if all outstanding shares of Series A and Series B Preferred Stock were converted into Common Stock immediately prior to the Liquidation. The Series A and Series B Preferred Stock is classified as permanent equity. Each of the Series A and Series B Preferred Stock have redemption rights to the extent we have funds legally available therefor,therefore, at any time after the fifth anniversary of the original issue date of the applicable Series A and Series B Preferred Stock. We have the right to redeem all or any portion of the outstanding shares of Series A and Series B Preferred Stock at the original issue price by providing at least seventy fiveseventy-five (75) days written notice of such redemption to all holders of the then outstanding shares of Series A and Series B Convertible Preferred Stock.
Future Capital Requirements
Our capital requirements for 2022the remainder of 2023 and the first half of 2024 will depend on numerous factors, including the success of our commercialization efforts and of our research and development, the resources we devote to develop and support our technologiesproduct candidate 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 research, nonclinical testing and clinical trials, 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.
Our current available cash and cash equivalents, provide us with limited liquidity. We believe our existing cash and cash will allow us to fund our operating plan through the fourth quarter of 2022.2023. As a result, we have implemented certain cost-saving initiatives, including reducing our efforts and staff focused on our lantibiotics program, which are expected to negatively impact the development of our lantibiotics program. See, “Risk Factors.” We expect to manage the timing of our development expenditures and 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 and commercialization 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 seek to move forward with the development of NT-CoV2-1 vaccine candidate and our other product candidates, we will require additional capital. In addition, we continue to pursue other COVID-19 research and development funding opportunities through governmental and nongovernmental sources, as well as potential research collaboration arrangements with academic institutions and other commercial partners. Our ability to advance the development of our NT-CoV2-1 vaccine candidate at our currently anticipated pace, in accordance with our License agreements, is dependent upon our ability to secure additional capital resources through these funding opportunities or an alternative capital raise, such as an equity or debt financing or other strategic business collaboration. Moreover, the global impact of COVID-19 could further impact our need for additional capital if we experience delays in our anticipated timelines or achievement milestones.
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Because of the numerous risks and uncertainties associated with research, development and clinical testing of our product candidates, we are unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
| ● | conducting preclinical research for our NT-CoV2-1vaccine product candidate, filing an IND with the FDA and, if approved, engage in Phase 1 clinical trials; | |
| ● | our ability to partner or collaborate with third parties; | |
| ● | identifying and securing clinical sites for the conduct of human trials for our product candidates; | |
| ● | the number and characteristics of the product candidates we pursue; | |
| ● | the scope, progress, results and costs of researching and developing our product candidates, and conducting nonclinical and clinical trials; | |
| ● | the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; | |
| ● | our ability to maintain current research and development licensing agreements and to establish new strategic partnerships, licensing or other arrangements and the financial terms of such agreements; | |
| ● | our ability to advance our lantibiotic development or achieve milestones under our License Agreements and the payment obligations we may have; | |
| ● | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and | |
| ● | the timing, receipt and amounts of sales of, or royalties on, our products and future products, if any. |
We have based our estimates on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, grants, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.
Critical Accounting Estimates and Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of consolidated financial statements in accordance with US GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made; and changes in the estimate or different estimates that could have been made could have a material impact on our results of operations or financial condition. The principal area of estimation reflected in the consolidated financial statements is stock-based compensation.are estimates for research and development expenses and related prepaid and accrued expenses, which are based on the percentage of completion of the Company’s contracts with Contract Research Organizations.
In April of 2023 management reviewed the terms and conditions of the Company’s research and development contracts and the payments; and concluded that during the three-month period ended March 31, 2022, three- and six-month periods ended June 30, 2022, and the three- and nine- month periods ended September 30, 2022 amounts were paid as part of a prepayment arrangement. Management reviewed Accounting Standards Codification Topic 730 Research and Development guidance related to recording initial upfront payments to vendors and determined that the unaudited consolidated financial statements originally reported for the stated periods classified research and development expense on the unaudited consolidated statement of operations that should be classified as prepaid expense on the Company’s unaudited consolidated balance sheet.
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As a result, management, the Audit Committee and the Board of Directors concluded that the following financial statements should be restated and could no longer be relied upon.
| i. | The Company’s unaudited consolidated financial statements for the three-months ended March 31, 2022 included in the Company’s Quarterly Report of Form 10-Q, filed with the SEC on May 13, 2022 (the “Q1 2022 10-Q”); and | |
| ii. | The Company’s unaudited consolidated financial statements for the three and six-months ended June 30, 2022 included in the Company’s unaudited consolidated Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2022 (the “Q2 2022 10-Q”); and | |
| iii. | The Company’s unaudited consolidated financial statements for the three and nine-months ended September 30, 2022, included in the Company’s unaudited consolidated Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022 (the “Q3 2022 10-Q”). |
The Company determined that the reporting effects of the above errors had a material impact to the Company’s unaudited consolidated financial statements of the Company for the Q1 2022 10-Q, Q2 2022 10-Q, and Q3 2022 10-Q. As a result, the Company determined that the unaudited consolidated financial statements should be restated, and the Company should file an amendment to the Q1 2022 10-Q, Q2 2022 10-Q, and Q3 2022 10-Q with the SEC. All such amendments were filed with the SEC on April 14, 2023.
As a result there have been changes to our critical accounting estimates related to research and development expense and initial upfront payments. For a detailed discussion of our critical accounting estimates, see our Annual Report on Form 10-K for the year ended December 31, 2021 There have been no material changes to our critical accounting estimates during the three and six months ended June 30, 2022.
Recently Issued Accounting Pronouncements
There are no accounting pronouncements issued or effective during the three and six months ended June 30, 20222023 that have had or are expected to have an impact on our consolidated financial statements.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Oragenics, Inc. is a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934 and is not required to provide the information required under this item.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Management’s evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act was performed under the supervision and participation of our senior management, including our ChiefPrincipal Executive Officer and President and Chief Financial Officer. The purpose of disclosure controls and procedures is to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our ChiefPrincipal Executive Officer and President and Chief Financial Officer, to allow timely decisions regarding required disclosures.
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On April 4, 2023, the Principal Executive Officer and President, Chief Financial Officer, Audit Committee, and the Company’s Board of Directors in connection with the Restatement, concluded that the following financial statements should be restated and could no longer be relied upon.
| i. | The Company’s unaudited consolidated financial statements for the three months ended March 31, 2022 included in the Company’s Quarterly Report of Form 10-Q, filed with the SEC on May 13, 2022 (the “Q1 2022 10-Q”); and | |
| ii. | The Company’s unaudited consolidated financial statements for the three and six-months ended June 30, 2022 included in the Company’s unaudited consolidated Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2022 (the “Q2 2022 10-Q”); and | |
| iii. | The Company’s unaudited consolidated financial statements for the three and nine-months ended September 30, 2022, included in the Company’s unaudited consolidated Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022 (the “Q3 2022 10-Q”). |
The following errors impacted such filings: (i) not properly analyzing research and development contracts.
Management reviewed the terms and conditions of the research and development contracts and the payments and concluded that during the three-month period ended March 31, 2022, three- and six-month periods ended June 30, 2022, and the three- and nine- month periods ended September 30, 2022 amounts were paid as part of a prepayment arrangement. Management reviewed Accounting Standards Codification Topic 730 Research and Development guidance related to recording initial upfront payments to vendors and determined that the unaudited consolidated financial statements originally reported for the stated periods classified research and development expense on the unaudited consolidated statement of operations that should be classified as prepaid expense on the Company’s unaudited consolidated balance sheet.
The Company determined that the reporting effects of the above errors had a material impact to the Company’s unaudited consolidated financial statements of the Company for the Q1 2022 10-Q, Q2 2022 10-Q, and Q3 2022 10-Q. As a result, the Company determined that the unaudited consolidated financial statements should be restated, and the Company should file an amendment to the Q1 2022 10-Q, Q2 2022 10-Q, and Q3 2022 10-Q with the SEC. All such amendments were filed with the SEC on April 14, 2023.
As a result, we have concluded that there is a material weakness relatingrelated to the review of research and development contracts as of June 30, 2022. Furthermore, the Company’sand determined that our disclosure controls and procedures and internal control over reviewfinancial reporting were not effective. Under Public Company Accounting Oversight Board standards, a material weakness is a deficiency, or combination of researchdeficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a misstatement of our consolidated annual or interim financial statements will not be prevented or detected on a timely basis. The existence of this issue could adversely affect us, our reputation or investor perceptions of us. We will take measures to remediate the underlying cause of the material weakness noted above. As we continue to evaluate and development contracts didwork to remediate the material weakness, we may determine to take additional measures to address the control deficiencies.
Although we plan to complete this remediation process as quickly as possible, we cannot provide any assurance as to when the remediation process will be complete, and our measures may not operate effectively, resultingprove to be successful in remediating the material errorsweakness. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements. For additional detail regardingstatements may contain misstatements and we could be required to restate our financial results. In addition, if we are unable to successfully remediate the errorsmaterial weakness or if we are unable to produce accurate consolidated financial statements in the financial statements referfuture, our stock price, liquidity and access to the Explanatory Notecapital markets may be adversely affected and we may be unable to this Amendment No. 1maintain compliance with applicable stock exchange listing requirements. Further, because of its inherent limitations, even our remediated and Note 1A: Amendment To Previously Reported Quarterly Financial Statements.effective internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in our conditions, or that the degree of compliance with our policies or procedures may deteriorate.
Changes in Internal Controls over Financial Reporting
Our management, with the participation of our Chief Executive Officer, and President, and Chief Financial Officer, has concluded there waswere no other significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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As a result of the three-COVID-19 pandemic, certain employees began working remotely in March 2020. Notwithstanding these changes to the working environment, we have not identified any material changes in our internal control over financial reporting. We will continue to monitor and six- months ended June 30, 2022.assess the COVID-19 situation to determine any potential impact on the design and operating effectiveness of our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and President, and Chief Financial Officer, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
We are not a party to any pending legal proceeding that is not in the ordinary course of business or otherwise material to our financial condition or business.
| ITEM 1A. | RISK FACTORS |
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, subsection “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 which could materially affect our business, financial condition or future results of operations. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and future results of operations. The following information updates, and should be read in conjunction with, the risk factors previously disclosed in Item 1A, subsection “Risk Factors” to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 filed on March 24, 2022.April 17, 2023. Except as set forth below, there have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K.
Except as set forth below, there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 24, 2022, as the same may be updated from time to time.
The following risk factors are in addition to the risk factors disclosed in the Company’s Quarterly Report on Form 10-Q for the three- and six- month periods ended June 30, 2022, filed with the SEC August 9, 2022:
The restatement of certain of our financial statements may subject us to risks and uncertainties, including the increased possibility of legal proceedings.
On April 4, 2023, the management and the Audit Committee of the Company’s Board of Directors concluded that the following financial statements should be restated and should no longer be relied upon:
The following errors impacted the Filings: (i) not properly analyzing research and development contracts.
The Company determined that the reporting effects of the above errors had a material impact to the Company’s unaudited consolidated financial statements of the Company for the three- and six- months ended June 30, 2022, as reported in the Q2 2022 10-Q. As a result, the Company determined that the unaudited consolidated financial statements for the three- and six- months ended June 30, 2022 should be restated, and the Company should file an amendment to the Q2 2022 10-Q with the SEC.
As a result of the restatement, we may become subject to additional risks and uncertainties, including, among others, the increased possibility of legal proceedings or a review by the SEC and other regulatory bodies. The costs of defending against such legal proceedings or administrative actions could be significant. In addition, we could face monetary judgments, penalties or other sanctions that could have a material adverse effect on our business, financial condition and operating results. In addition, the restatements:
The occurrence or continued occurrence of any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.
We have identified a material weakness in our internal control over financial reporting which could, if not remediated, adversely impact the reliability of our financial statements, result in material misstatements in our financial statements and cause current and potential stockholders to lose confidence in our financial reporting, which in turn could adversely affect the trading price of our common stock.
As discussed in the Explanatory Note to this Amendment No. 1 and Note 1A: Amendment To Previously Reported Quarterly Financial Statements, included in the interim financial statements, the Company has restated certain information contained in its previously issued unaudited interim consolidated financial statements for the three- and six- month periods ended June 30, 2022.
We have concluded that there is a material weakness related to the review of research and development contracts. The material weakness resulted in the restatement of certain of our financial statements and related disclosures, as discussed in the Explanatory Note to this Amendment No. 1 and Note 1A: Amendment To Previously Reported Quarterly Financial Statements. Thus, management has determined that our disclosure controls and procedures and internal control over financial reporting were not effective as of June 30, 2022. Under Public Company Accounting Oversight Board standards, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a misstatement of our consolidated annual or interim financial statements will not be prevented or detected on a timely basis. The existence of this issue could adversely affect us, our reputation or investor perceptions of us. We will take measures to remediate the underlying cause of the material weakness noted above. As we continue to evaluate and work to remediate the material weakness, we may determine to take additional measures to address the control deficiencies.
Although we plan to complete this remediation process as quickly as possible, we cannot provide any assurance as to when the remediation process will be complete, and our measures may not prove to be successful in remediating the material weakness. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain misstatements and we could be required to restate our financial results. In addition, if we are unable to successfully remediate the material weakness or if we are unable to produce accurate consolidated financial statements in the future, our stock price, liquidity and access to the capital markets may be adversely affected and we may be unable to maintain compliance with applicable stock exchange listing requirements. Further, because of its inherent limitations, even our remediated and effective internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in our conditions, or that the degree of compliance with our policies or procedures may deteriorate.
Risks Related to Our Business As Restated
We have incurred significant losses since our inception and expect to continue to experience losses for the foreseeable future.
We have incurred significant net losses and negative cash flow in each year since our inception, including net losses of approximately and $8.2$5.9 million and $9.0$8.2 million for the six months ended June 30, 20222023 and June 30, 2021,2022, respectively, and approximately $15.7 million and $26.4$14.3 million for the yearsyear ended December 31, 2021, and 2020, respectively.2022. As of June 30, 2022,2023, our accumulated deficit was approximately $179$191.5 million. We have devoted a significant amount of our financial resources to research and development, including our nonclinical development activities and clinical trials. We expect that the costs associated with our plans to begin preclinical research, contract manufacturing and file an IND for our NT-CoV2-1 vaccine product candidate and the research and development of our product candidates in the area of lantibiotics (“Lantibiotics Program”) will continue and, to have successful results, likely will require an increase in the level of our overall expenses significantly going forward. Additionally, our License Agreements also requires the payment of certain recurring and performance-based royalties that may negatively impact our financial capabilities. As a result, we expect to continue to incur substantial net losses and negative cash flow for the foreseeable future. These losses and negative cash flows have had, and will continue to have, an adverse effect on our shareholders’ equity and working capital. Our current cash, cash equivalents ad short-term investments are not sufficient to fully implement our business strategy and sustain our operations. As a result of our limited resources, we have undertaken cost-saving initiatives, including reducing our efforts and staff focused on our lantibiotics program. Our actual costs may ultimately vary from our current expectation, which could materially impact our use of capital and our forecast of the period of time through which our financial resources will be adequate to support our operations. Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of substantial expenses or when, or if, we will be able to generate the revenue necessary to achieve or maintain profitability.
We will need Due to raise additional capital in the future to complete the development and commercialization of our product candidatesaccumulated losses and operate our business.
Developingsubstantial doubt that we can continue as a going concern beyond December 2023, the Company is evaluating various opportunities for its Lantibiotics Program and commercializing biopharmaceutical products, including conducting nonclinical studies and clinical trials and establishing manufacturing capabilities, and the progress of our efforts to develop and commercialize our product candidates, including our acquisition of aits N-CoV2-1 vaccine product candidate, is expensive,as well as alternative assets that could be acquired or developed. These opportunities could include a wide range of options including, among other things, a potential sale, spin-off, fund raising, combination or other strategic transaction, which may also include the winding down of research and can cause usdevelopment activities. The result of this process may result in the liquidation of assets for significantly less than amounts that have been invested in them, the write-off of prior expenses incurred in connection with the development of such assets and may have a material adverse effect on our results of operations and liquidity. Notwithstanding the above, the Company will seek to use our limited, available capital resources faster than we currently anticipate. We anticipate that our cash resources asmaximize the value of June 30, 2022, will be sufficientsuch assets to fund our operations as presently structured through the fourth quarter of 2022. Our actual costs may ultimately vary from our current expectations, which could materially impact our use of capital and our forecast of the period of time through which our financial resources will be adequate to support our operations. Our current cash, cash equivalents and short-term investments are not sufficient to fully implement our business strategy and sustain our operations. Accordingly, we will need to seek additional sources of financing and such additional financing may not be available on favorable terms, if at all.extent possible. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate or government collaboration and licensing arrangements. If we do not succeed in raising additional funds on acceptable terms, we may be unable to complete existing nonclinical and planned clinical trials or obtain approval of our product candidates from the FDA and other regulatory authorities. We expect capital outlays andbelieve our existing cash will allow us to fund our operating expenditures to increase overplan only through the next several years as we expand our infrastructure, and research and development activities. Specifically, we need to raise additional capital to, among other things:fourth quarter of 2023.
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Our present and future funding requirements will depend on many factors, including:
Additional capital, if needed, may not be available on satisfactory terms, or at all. Furthermore, if we raise additional funds by issuing equity securities, dilution to our existing stockholders could result. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise additional funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock, and the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or our products under development or grant licenses on terms that are not favorable to us, which could lower the economic value of those programs to us. If adequate funds are not available, we may have to scale back our operations or limit our research and development activities, which may cause us to grow at a slower pace, or not at all, and our business could be adversely affected.
In addition, we could be forced to discontinue product development and commercialization of one or more of our product candidates, curtail or forego sales and marketing efforts, and/or forego licensing attractive business opportunities.
| ITEM 2. | UNREGISTERED SALE OF EQUITY SECURITIES, |
None.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not Applicable.
| ITEM 5. | OTHER INFORMATION |
None.
| ITEM 6. | EXHIBITS |
Incorporated by reference to Exhibits filed after signature page.
EXHIBIT INDEX
Incorporated by Reference | ||||||||||||
Exhibit number | Exhibit description | Form | File no. | Exhibit | Filing date | Filed herewith | ||||||
| 3.1 | Amended and Restated Articles of Incorporation as amended prior to December 29, 2017 (including certificates of designation of Series A, B and C Preferred Stock) | 8-K | 001-32188 | 3.1 | 12/29/17 | |||||||
| 3.2 | Articles of Amendment to Amended and Restated Articles of Incorporation dated effective December 29, 2017 | 8-K | 001-32188 | 3.2 | 12/29/17 | |||||||
| 3.3 | Articles of Amendment to Amended and Restated Articles of Incorporation effective January 19, 2018 | 8-K | 001-32188 | 3.1 | 1/19/18 | |||||||
| 3.4 | Articles of Amendment to Amended and Restated Articles of Incorporation | 8-K | 001-32188 | 3.4 | 6/26/18 | |||||||
| 3.5 | Articles of Amendment to Amended and Restated Articles of Incorporation | 8-K | 001-32188 | 3.5 | 2/28//22 | |||||||
| 3.6 | Bylaws | SB-2 | 333-100568 | 3.2 | 10/16/02 | |||||||
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| 101.INS | Inline XBRL Instance Document | |||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | X | ||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | X | ||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | X | ||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | X | ||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | X | ||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document |
*Portions of the exhibits have been omitted pursuant to Item 601(b)(10)(iv).
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th11th day of April,August 2023.
| ORAGENICS, INC. | ||
| BY: | /s/ Kimberly Murphy | |
| Kimberly Murphy, President and Chief Executive Officer and Principal Executive Officer | ||
| BY: | /s/ Janet Huffman | |
| Janet Huffman, Chief Financial Officer and Principal Accounting Officer | ||
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