ITEM
1. | FINANCIAL
STATEMENTS |
Oragenics,
Inc.
Consolidated
Balance Sheets
See
accompanying Report of Independent Registered Public Accounting Firm and notes to the consolidated financial statements.
Oragenics,
Inc.
Consolidated
Statements of Operations
(Unaudited)
See
accompanying notes.
Oragenics,
Inc.
Consolidated
Statements of Changes in Shareholders’ Equity
(Unaudited)
| |
Common Stock | | |
Preferred Stock | | |
Additional
Paid In | | |
Accumulated | | |
Total
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 | |
Beginning balance, value | |
| 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 As Restated | |
| 2,002,946 | | |
$ | 2,003 | | |
| 16,017,000 | | |
$ | 2,656,713 | | |
$ | 195,191,858 | | |
$ | (175,865,121 | ) | |
$ | 21,985,453 | |
Ending balance, value | |
| 2,002,946 | | |
$ | 2,003 | | |
| 16,017,000 | | |
$ | 2,656,713 | | |
$ | 195,191,858 | | |
$ | (175,865,121 | ) | |
$ | 21,985,453 | |
See
accompanying notes.
Oragenics,
Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
See
accompanying notes.
Oragenics,
Inc.
Notes
to Consolidated Financial Statements
(Unaudited)
1.
Organization
Oragenics,
Inc. (the “Company” or “we”) 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
The
accompanying unaudited interim consolidated financial statements as of March 31, 2023 and December 31, 2022 (audited) and three months
ended March 31, 2023 and 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 March 31, 2023, are not necessarily indicative of the results of operations
that may be expected for the year ended December 31, 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-month
period ended March 31, 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-month period ending March 31, 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-month period ended March 31, 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-month period ended March 31, 2022 in this Form 10-Q for the three-month period ended March 31,
2023 the financial information reflects the restated financials as reported in Amendment 1.
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, 2022, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on 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 $2,844,837 and used cash of $2,108,695 in its
operating activities during the three months ended March 31, 2023. As of March 31, 2023, the Company had an accumulated deficit of $188,407,354.
The
Company expects to incur substantial expenditures to further develop its technologies. The Company believes the working capital at March
31, 2023 will be sufficient to meet the business objectives as presently structured through the fourth quarter of 2023. As such, there
is substantial doubt that we can continue as a going concern beyond that date.
The
Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional
financing or achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those
now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical
advances, or other developments. Additional financing will be required to continue operations after the Company exhausts its current
cash resources and to continue its long-term plans for clinical trials and new product development. There can be no assurance that any
such financing can be realized by the Company, or if realized, what the terms thereof may be, or that any amount that the Company is
able to raise will be adequate to support the Company’s working capital requirements until it achieves profitable operations.
The
Company intends to seek additional funding through sublicensing arrangements, joint venturing or partnering, sales of rights to technology,
government grants and public or private financings. The Company’s future success depends on its ability to raise capital and ultimately
generate revenue and attain profitability. The Company cannot be certain that additional capital, whether through selling additional
debt or equity securities or obtaining a line of credit or other loan, will be available to it or, if available, will be on terms acceptable
to the Company. If the Company issues additional securities to raise funds, these securities may have rights, preferences, or privileges
senior to those of its common stock, and the Company’s current shareholders may experience dilution. If the Company is unable to
obtain funds when needed or on acceptable terms, the Company may be required to curtail its current development programs, cut operating
costs and forego future development and other opportunities.
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 months ended March 31, 2023, that have had, or are expected
to have, a material impact on our consolidated financial statements.
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 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 Statement of Cash Flows for the
three-month period ended March 31, 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 |
| ● | Changes
in Operating Lease Liabilities of ($47,327) was reclassified from Accounts Payable and Accrued
Expenses |
Stock-Based
Payment Arrangements
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 Option Pricing Model. Stock-based compensation awards issued to non-employees for services rendered
are recorded at the fair value of the stock-based payment. The expense resulting from stock-based payments are recorded in research and
development expense or general and administrative expense in the 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-Scholes Option Pricing Model in calculating the relative fair value of any warrants that have been issued.
Net
Loss Per Share
During
all periods presented, the Company had securities outstanding that could potentially dilute basic earnings per share in the future but
were excluded from the computation of diluted net loss per share, as their effect would have been antidilutive because the Company reported
a net loss for all periods presented. Basic and diluted net loss per share amounts are the same for the periods presented. Net loss per
share is computed using the weighted average number of shares of common stock outstanding.
Concentrations
Financial
instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents.
The Company maintains cash accounts in commercial banks, which may, at times, exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. As of
March 31, 2023, the uninsured portion of this balance was $8,908,340. As of December 31, 2022, the uninsured portion of this balance
was $11,176,785.
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.
4.
Property and Equipment, net
Property
and equipment, net consists of the following as of March 31, 2023 and December 31, 2022:
Summary
of Property and Equipment, Net
| |
March
31, 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 | |
| (1,374,542 | ) | |
| (1,363,239 | ) |
Property
and equipment, net | |
$ | 109,759 | | |
$ | 121,062 | |
Depreciation
and amortization expense for the three months ended March 31, 2023 and March 31, 2022 was $11,303 and $8,468 respectively.
5.
Accounts Payable and Accrued Expenses
Accounts
payable and accrued expenses consist of the following as of March 31, 2023 and December 31, 2022:
Summary
of Accounts Payable and Accrued Expenses
| |
March 31, 2023 | | |
December 31, 2022 | |
Accounts payable trade | |
$ | 939,013 | | |
$ | 246,690 | |
Accrued Expense | |
| 488,372 | | |
| 812,861 | |
Professional fees | |
| - | | |
| 31,101 | |
Vacation | |
| 43,120 | | |
| 33,545 | |
Total accounts payable and accrued expenses | |
$ | 1,470,505 | | |
$ | 1,124,197 | |
6.
Short-Term Notes Payable
The
Company had the following short-term notes payable as of March 31, 2023 and December 31, 2022:
Summary
of Short-Term Notes payable
| |
March 31, 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, 2023 and May 24, 2022, respectively | |
$ | 107,890 | | |
$ | 267,640 | |
Directors’
and officers’ liability | |
$ | 107,890 | | |
$ | 267,640 | |
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 March 31, 2023 and December 31, 2022:
Schedule
of Prepaid Expense and Other Current Assets
| |
March 31, 2023 | | |
December 31, 2022 | |
Prepaid Research and Development Expense | |
| 2,256,983 | | |
| 2,471,809 | |
Prepaid Insurance | |
| 212,730 | | |
| 372,989 | |
Prepaid Financing costs | |
| 75,000 | | |
| - | |
Total | |
| 2,544,713 | | |
| 2,844,798 | |
As
of March 31, 2023 and December 31, 2022, the Company had $2,544,713
and $2,844,798 in prepaid expenses, respectively. The
balance at March 31, 2023 reflects approximately $2.3
million of prepaid expense to third-party vendors for research and development to be completed, $0.08
million of prepaid financing costs related to the Company’s At-The-Market Program and approximately $0.2
million in prepaid insurance.
8.
Shareholders’ Equity
Common
Stock
Approval
of a 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 split 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-month period ended March 31, 2022, have been adjusted to
reflect the effect of the reverse split.
Shares
issued under At-The-Market (“ATM”) program
For
the three-month periods ended March 31, 2022 and 2023 the Company did not issue any shares of common stock under its ATM program.
During
the six- and nine- month periods ending June 30, 2022 and September 30, 2022 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 6,544
shares of common stock under its ATM Program which generated gross proceeds of approximately $72,000,
The Company intends to use the net proceeds of the offering primarily 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 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 three months ended March 31, 2023 did not,
consummate any further sale of its common stock through the AGP Sales Agreement.
On February 24, 2023 the Company entered into an ATM
with Ladenburg Thalmann & Co. Inc (“Ladenburg”) to sell 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.
Other
Share Issuances
During
the three-month periods ended March 31, 2022 and 2023 the Company issued no additional shares of common stock.
During the three-month period ended September
30, 2022 the 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 into an aggregate of approximately 15,000 shares
of commons stock.
During
the twelve-months ended December 31, 2022, the Company issued 13,019 shares of common stock in connection with the exercise of stock
options which generated gross proceeds of $363,139.
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 9,029 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 13,500
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.
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 shall rank (i) on par with the Common Stock and Series A Preferred Stock and junior to Series C Preferred Stock
as to dividend rights and (ii) junior to Series C Preferred Stock, on par with Series A Preferred Stock and senior to the Common Stock
as to distribution of assets upon liquidation, dissolution or winding-up by us, whether voluntary or involuntary.
Upon
any liquidation, dissolution or winding-up by us, whether voluntary or involuntary, the holders of Series B Preferred Stock shall be
entitled to receive out of the assets, after payment to the holders of Series C Preferred Stock but on par with the holders of Series
A Preferred Stock and in preference to the holders of the Common Stock, an amount of cash equal to the greater of (i) the product of
the number of shares of Series B Preferred Stock then held by such holder, multiplied by the Original Issue Price; and (ii) the amount
that would be payable to such holder in the Liquidation in respect of Common Stock issuable upon conversion of such shares of Series
B Preferred Stock if all outstanding shares of Series B Preferred Stock were converted into Common Stock immediately prior to the Liquidation.
The Series B Preferred Stock is classified as permanent equity.
9.
Warrants
The
Company’s outstanding and exercisable warrants as of March 31, 2023 are presented below:
Schedule
of Warrants Outstanding and Exercisable
Exercise Price | | |
Total Warrants Outstanding | | |
Exercisable Warrants Outstanding | | |
Expiration Date |
$ | 120.00 | | |
| 15,000 | | |
| 15,000 | | |
4/10/2023 |
$ | 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 |
| | | |
| 275,995 | | |
| 275,995 | | |
|
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 2020 Annual Meeting. At the 2020 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 2012 Incentive
Plan. 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) 166,667
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 December 31, 2022, an aggregate of 139,091
shares of common stock are covered by outstanding
option awards and 148,455
shares of common stock are available for future
awards under the 2021 Incentive Plan.
Options are granted at the fair market value
of the Company’s stock on the date of grant. Options can vest either immediately or over a period of up to three
years from their respective grant dates and expire 10
years from the date of grant. As of March 31, 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 $79,966 and $90,247 for the three months ended March 31, 2023 and 2022,
respectively. As of March 31, 2023, there was approximately $182,475 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-months ended March 31, 2023, the Company granted 7,000
stock options to the Chief Financial Officer as an onboarding award. The fair value of this award was $3.92 per share of common stock.
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 option, the estimated volatility of the 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
for stock options granted in the three-month period ended March 31, 2023:
Summary
of Assumptions Used to Estimate the Fair Value of Stock Options Granted
| |
Three-months ended March 31, 2023 | |
Risk free interest rate | |
| 4.0 | % |
Expected volatility of common stock | |
| 143.0 | % |
Dividend yield | |
| 0.0 | % |
Expected life of options | |
| 10 years | |
11.
License Agreements
Inspirevax
License
On
February 23, 2023, the Company entered into a Commercial License Agreement (the “License Agreement”) with Inspirevax Inc.
(“Inspirevax”) pursuant to which Inspirevax granted the Company an 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 use against diseases caused by coronaviruses and any genetic variants thereof to be sold by us. The Company agreed to pay in consideration for the License Agreement an upfront signing fee and to certain milestone
payment obligations.
NIH
License
Through
NTI, the Company is a party to a Patent License and Biological Materials License Agreement (the “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 License Agreement, the 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.
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 to include the Delta and Omicron variants. In addition, the
Company subsequently amended the License Agreement to broaden the non-exclusive field of use to include all diseases caused by coronaviruses
and any genetic variants thereof. Additional amendments to the License Agreement removed certain protocols and reagents from the License Agreement,
and 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.
During
the three months ended March 31, 2021, 41,210 warrants were exercised as follows: (i) 6,000 shares at an
exercise price of $60.00 per share and (ii) 35,210 at an exercise price of $54.00 per share.
As of the three-month period ended March 31, 2023, there are 32,033 warrants
outstanding carrying an exercise price of $54.00 that expire on March 25, 2024.
Inspirevax
License
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 consolidated financial statements as they are incurred.
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.
NIH
License
Under
the terms of the NIH License Agreement, 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
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
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 (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 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 certain
countries, additional countries may be requested by us at our expense. In addition, the Company is required to provide certain indemnifications
to the NRC and its employees.
Unless
terminated earlier, the License Agreement will terminate twenty (20) years from the effective date of the License Agreement. Either party
may terminate the License Agreement, by giving written notice to the other party, if the other party defaults or is in breach of the
License Agreement, provided that if the defaulting party cures the breach within 60 days after the notice is given, the License Agreement
shall continue in full force and effect. The NRC may terminate the 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 License Agreement contains customary
confidentiality obligations.
13.
Leases
Lab
Facility-Alachua. The Company 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 three-months ended March 31, 2023 was approximately $41,426. The lease may be terminated
prior to its stated expiration date upon the payment of nine-months rent.
Corporate 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 was thirty-six months commencing on March
1, 2017. In November of 2019, the Company entered into an amendment for the Tampa facility for a term of three years beginning in March
of 2020. In August of 2022, the Company entered into an amendment for the leased office space for twelve months commencing on March 1,
2023. Lease payments are $4,944 per month inclusive of insurance, taxes and utilities. The lease expires on February 29, 2024. Total
rent expense under this lease was approximately $16,700 for the three-months ended March 31, 2023.
Schedule
of Other Information Related to Leases
| |
For the Three Months Ended March 31, 2023 | | |
For the Twelve Months Ended December 31, 2022 | |
Weighted Average Remaining Lease Term In Years | |
| | | |
| | |
Operating leases | |
| 1.46 | | |
| 1.72 | |
| |
| | | |
| | |
Weighted Average Discount Rate | |
| | | |
| | |
Operating leases | |
| 5.70 | % | |
| 5.78 | % |
Maturities
of operating lease liabilities are as follows:
Schedule
of Maturities of Operating Lease Liabilities
Year ended December 31: | |
| | |
2023 | |
| 164,535 | |
2024 | |
| 156,605 | |
2025 | |
| - | |
Total | |
$ | 321,140 | |
Less: effect of discounting | |
| (14,491 | ) |
Present value of lease liabilities | |
$ | 306,649 | |
The
cost component of operating leases is as follows:
Schedule
of Cost Component of Operating Leases
| |
For the Three Months Ended March 31, 2023 | | |
For the Three Months Ended March 31, 2022 | |
Operating lease cost | |
$ | 57,755 | | |
$ | 57,129 | |
Short-term lease cost | |
| - | | |
| 1,634 | |
Total lease cost | |
$ | 57,755 | | |
$ | 58,763 | |
Supplemental
cash flow information related to operating leases is as follows:
Schedule
of Supplemental Cash Flow Information Related to Operating Leases
| |
For the Three Months Ended March 31, 2023 | | |
For the Three Months Ended March 31, 2022 | |
Cash paid for amounts included in the measurement of lease liabilities: | |
| | | |
| | |
Operating cash flows from operating leases | |
$ | (59,274 | ) | |
$ | (58,535 | ) |
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, 2022 filed on 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 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. NTI 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 to: include
the Omicron variant, broaden the non-exclusive field of use to include all diseases caused by coronaviruses, and any genetic variants
thereof, 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.
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 April of 2023,
the World Health Organization’s estimates indicate the number of worldwide COVID-19 infections have exceeded 763 million and the
number of deaths directly attributed to COVID-19 have exceeded 6.9 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 2022, the FDA granted EUA for the Novavax COVID-19 vaccine as well.
Available 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
spread of COVID-19 that even with additional vaccines available, 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 genetic 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 material based
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.
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. Based on the findings of the final toxicology report,
including a full histopathology evaluation, we were able to confirm a safety and immunogenicity profile that further support our 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. |
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 are 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 in the United States and/or a Clinical Trial Application in
Canada and to thereafter commence a Phase 1 clinical study with NT-CoV2-1 in the 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.
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. Based upon the current funding we expect to reduce
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 until such time as we raise additional
capital.
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.
Through
our wholly-owned subsidiary, 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”).
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.
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.
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
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.
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 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.
Our
research and development expenses were $1,672,576 and $3,293,661 for the three months ended March 31, 2023 and March 31, 2022,
respectively. Our research and development costs are tracked by our COVID
vaccine program and our lantibiotics program.
Our
current product development strategy contemplates continued research and development expenses in the future as we further 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, overall research and
development expenses could increase as a result of our vaccine product 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.
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
are aware that certain general and administrative expenses could increase for, among others, the following reasons:
| ● | the
efforts we undertake from, time to time, to raise additional capital; and |
| | |
| ● | consulting,
legal, accounting and investor relations costs associated with being a public company. |
Other
Income (Expense)
Other
income (expense) includes 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. 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, 2022, the Company has federal and state tax net operating loss carryforwards of $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 $4,834,847.
The federal tax credit carryforward will expire beginning in 2021 and continuing through 2042 unless previously utilized.
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 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 March 31, 2023 and 2022
Grant
revenue. Grant revenue was $17,024 for the three
months ended March 31, 2023 compared to $15,083 for the three months ended March 31, 2022, an increase of $1,941, or 13%. This increase
was attributable to awards received for a small business innovation research grant.
Research
and Development. Research and development expenses were $1,672,576 for the three months ended March 31, 2023 compared to $3,293,661
for the three months ended March 31, 2022, a decrease of $1.6 million or 49%.
| |
For the Three | | |
For the Three | |
| |
Months Ended | | |
Months Ended | |
| |
March 31, 2023 | | |
March 31, 2022 | |
Lantibiotics Expense | |
| | | |
| | |
| |
| | | |
| | |
Clinical Research | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Non-clinical research and development activities | |
| 277,286 | | |
| 391,088 | |
| |
| | | |
| | |
COVID Vaccine Development Expense | |
| | | |
| | |
| |
| | | |
| | |
Clinical Research | |
| 442,549 | | |
| 414,949 | |
| |
| | | |
| | |
Non-clinical research and development activities | |
| 952,741 | | |
| 2,487,624 | |
| |
| | | |
| | |
Total Research and development activities | |
$ | 1,672,576 | | |
$ | 3,293,661 | |
This
decrease was primarily due to approximately $1.5 million of decreased costs associated with the COVID vaccine development program. Additionally,
decreases in research and development for the development of our lantibiotic product were reflected in salaries, wages and benefits,
patent costs, and other administrative overhead expenses of approximately; $63,00, $35,000, and $50,000 respectively. These decreases
were partially offset by increases in supplies, repairs, rent and utilities, and depreciation expense of approximately; $7,000, $5,000,
$34,000, and $2,000 respectively. The decrease in research and development expenses attributable to the vaccine development program reflect
our actions toward the requisite steps to manage the timing of expenses associated with the preclinical efforts. The research and development
expenses attributable to the vaccine development program related to activities 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.
General
and Administrative. General and administrative expenses were $1,249,263 for the three months ended March 31, 2023 compared to
$1,331,549 for three months ended March 31, 2022, a decrease of $0.08 million or 6% This decrease was primarily due to decreased expenses related to:
| ● | Public
company related expenses of approximately $0.3 million, |
| ● | Employee
and non-employee related options expense of $0.1 million, and |
| ● | Other
overhead related expenses for salaries and wages, travel, insurance, and supplies of approximately
$0.08 million |
These
expense decreases were offset by increases in:
| ● | Consultant
expense for third party accounting support as a new Chief Financial Officer was identified
of approximately $0.1 million, |
| ● | Legal
expenses related to our ATM and Reverse Stock Split in the three-month period ended March
31, 2023 of approximately $0.2 million, and |
| ● | Increased
rent expense of approximately $0.05 million |
Other
Income. Other income, net was $59,978 for the three months ended March 31, 2023 compared to $19,134 for the three months
ended March 31, 2022, resulting in an increase of $40,844. The net change was primarily attributable to an increase in interest
income of $50,295, for the three-month period ended March 31, 2023 compared to 2022.
Liquidity
and Capital Resources
Since
our inception, we have funded our operations primarily through the sale of equity securities in our initial public offering, the sale
of equity securities and warrants in private placements, debt financing, warrant exercises, public offerings, and grants. During the
three months ended March 31, 2023 and March 31, 2022 our operating activities used cash of $2,108,695, and $5,636,952, respectively.
The decrease primarily resulted from our decrease in net losses adjusted for non-cash items and changes in operating assets and liabilities.
We had a working capital surplus of $9,922,471 and $12,675,299 at March 31, 2023 and December 31, 2022, respectively.
During
the three months ended March 31, 2023 and March 31, 2022, our investing activities used cash of $-0- and $(75,047) respectively.
During
the three months ended March 31, 2023 and March 31, 2022, our financing activities used cash of $(159,750) and $(181,241) respectively.
The cash used by financing activities during the three months ended March 31, 2023, was primarily due to payments on short term notes
payable 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:
At-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 356,650 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 remained available under our Shelf Registration Statement at September 30, 2022. The ATM Program
will terminate 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, 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.
On February 24, 2023 the Company entered into an ATM
with Ladenburg Thalmann & Co. Inc (“Ladenburg”) to sell shares of its 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 three-month period ended March 31, 2023 the
Company did not issue any shares of common stock under its 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 were made evenly based on a straight-line amortization over a 10-month period with the final payment paid
in May of 2022.
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.
On 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 September 30, 2022 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 |
Series
A Preferred |
|
5,417,000 |
|
9,028 |
Series
B Preferred |
|
4,050,000 |
|
13,500 |
In addition, we issued warrants to purchase shares of Common Stock to the
Series A holders, and (ii) shares of Common Stock to the Series B holders in connection with the Preferred Stock Financing. As of March
31, 2023, there are 11,828 and 11,720 shares of common stock held by our Series A and Series B holders respectively.
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 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-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 the 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 product 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 will allow us to fund our
operating plan through the fourth quarter of 2023. 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.
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 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.
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 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, 2022.
Recently
Issued Accounting Pronouncements
There
are no accounting pronouncements issued or effective during the three months ended March 31, 2023 that have had or are expected to have
an impact on our consolidated financial statements.