GeoVax Labs, Inc. - Quarter Report: 2022 September (Form 10-Q)

See accompanying notes to condensed consolidated financial statements.

GEOVAX LABS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

GEOVAX LABS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

GEOVAX LABS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

See accompanying notes to consolidated financial statements.

Supplemental disclosure of non-cash financing activities:

During the nine months ended September 30, 2021, we issued 149,705 shares of common stock upon the cashless exercise of stock purchase warrants, and $172,056 of principal and accrued interest related to a note payable was extinguished upon the loan’s forgiveness.

GEOVAX LABS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(unaudited)

1.         Nature of Business

GeoVax Labs, Inc., headquartered in the Atlanta, Georgia metropolitan area, is a clinical-stage biotechnology company incorporated under the laws of the State of Delaware. GeoVax Labs, Inc. and its wholly owned subsidiary, GeoVax, Inc., a Georgia corporation, are collectively referred to as “GeoVax” or the “Company”.

The Company is focused on developing immunotherapies and vaccines against infectious diseases and cancers using novel vector vaccine platforms. GeoVax’s product pipeline includes ongoing human clinical trials for vaccines against COVID-19 and a therapy for advanced head and neck cancer. Additional research and development programs include preventive vaccines against hemorrhagic fever viruses (Ebola Zaire, Ebola Sudan, Marburg, and Lassa Fever) and malaria, as well as immunotherapies for solid tumors.

2.         Summary of Significant Accounting Policies

We disclosed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 those accounting policies that we consider significant in determining our results of operations and financial position. During the nine months ended September 30, 2022, there have been no material changes to, or in the application of, the accounting policies previously identified and described in the Form 10-K.

Basis of Presentation – The accompanying condensed consolidated financial statements include the accounts of GeoVax Labs, Inc. and GeoVax, Inc. All intercompany transactions have been eliminated in consolidation. The financial statements are unaudited, but include all adjustments, consisting of normal recurring entries, which we believe to be necessary for a fair presentation of interim periods presented. Interim results are not necessarily indicative of results for a full year. The financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. We expect our operating results to fluctuate for the foreseeable future; therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.

Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As of the date these financial statements are issued, the Company expects its existing cash and cash equivalents to be sufficient to fund its operations for at least the next twelve months. Since inception, the Company’s activities have consisted primarily of performing research and development to advance its technologies. The Company expects to continue to generate operating losses in the foreseeable future and will require additional funding to continue its research and development activities. The Company may seek funds through further equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

Recent Accounting Pronouncements – During the nine months ended September 30, 2022, there have been no new accounting pronouncements or changes in accounting pronouncements which we expect to have a material impact on our financial statements.

3.         Balance Sheet Components

Prepaid Expenses – Prepaid expenses consist of the following:

Property and Equipment – Property and equipment consist of the following:

Other Assets – Other assets consist of the following:

Accrued Expenses – Accrued expenses consist of the following:

Other Liabilities – Other liabilities were $2,000,000 at September 30, 2022 and December 31, 2021 and consist of the noncurrent portion of accrued technology license fees.

4.         Commitments

Operating Lease – We lease approximately 8,400 square feet of office and laboratory space pursuant to an operating lease which expires on December 31, 2022, but which we expect to extend. Rent expense for the three-month and nine-month periods ended September 30, 2022 was $44,089 and $132,267, respectively, as compared to $42,803 and $128,410, respectively, for the same periods of 2021. Future minimum lease payments total $44,089 in 2022.

License Agreements – We have entered into license agreements for various technologies and patent rights associated with our product development activities. These agreements may contain provisions for upfront payments, milestone fees due upon the achievement of selected development and regulatory events, minimum annual royalties or other fees, and royalties based on future net sales. Unrecorded future minimum payments under these agreements (excluding milestone and royalty payments due upon contingent future events) are approximately $409,000 in the aggregate.

Clinical Trial Commitments – We have entered into agreements with contract research organizations (“CROs”) and with testing sites to conduct clinical trials of our products under development. Contracts with CROs are generally cancellable with notice. We have also entered into arrangements with contract manufacturing organizations (“CMOs”) to produce materials for use in our clinical trials. These contracts generally provide for non-cancellable obligations or cancellation penalties depending on the time of cancellation. As of September 30, 2022, the total non-cancellable obligations under contracts with CMOs were approximately $1.2 million.

Other Commitments – In the normal course of business, we enter into various firm purchase commitments and other contractual obligations related to production and testing of our product candidates, conduct of clinical trials and preclinical research studies, and other activities. As of September 30, 2022, there are approximately $612,000 of unrecorded noncancelable purchase commitments to our vendors and subcontractors.

5.         Stockholders’ Equity

January 2022 Private Placement – On January 19, 2022, we closed a private placement of 707,484 shares of common stock, a pre-funded warrant to purchase 2,360,000 shares of common stock for a nominal exercise price per share (the “Jan 2022 Pre-Funded Warrant”), and a warrant to purchase up to 3,067,484 shares of common stock at an exercise price of $3.26 per share (the “Jan 2022 Common Warrant”). Net proceeds after deducting placement agent commissions and other offering expenses were approximately $9.2 million. During March 2022, the Jan 2022 Pre-Funded Warrant was exercised in full. The Jan 2022 Common Warrant is currently exercisable and will expire on February 10, 2027.

May 2022 Private Placement – On May 27, 2022, we closed a private placement of 1,050,000 shares of common stock, pre-funded warrants to purchase an aggregate of 11,071,214 shares of common stock for a nominal exercise price per share (the “May 2022 Pre-Funded Warrants”), and preferred investment options to purchase up to an aggregate of 12,121,214 shares of common stock at an exercise price of $1.65 per share (the “May 2022 Preferred Investment Options”). Net proceeds after deducting placement agent commissions and other offering expenses were approximately $18.5 million.

The May 2022 Pre-Funded Warrants were exercised as to 1,980,304 shares concurrent with the closing and during June and July the remaining 9,090,910 were fully exercised. During August, the May 2022 Preferred Investment Options were exercised as to 4,621,214 shares, resulting in net proceeds to us of approximately $7,626,000.

Other Common Stock Transactions – During May and July, we issued 68,500 and 75,000 shares, respectively, of our common stock pursuant to consulting agreements.

Stock Options – We have a stock-based incentive plan (the “2020 Plan”) pursuant to which our Board of Directors may grant stock options and other stock-based awards to our employees, directors and consultants. A total of 1,500,000 shares of our common stock are reserved for issuance pursuant to the 2020 Plan. During the nine months ended September 30, 2022, there were no stock option transactions related to the 2020 Plan. As of September 30, 2022, there are 962,300 stock options outstanding, with a weighted-average exercise price of $3.18 per share and a weighted-average remaining term of 8.6 years.

Stock Purchase Warrants – The table below presents summary information about our warrants outstanding as of September 30, 2022.

6.         Stock-Based Compensation Expense

Stock-based compensation expense related to stock options is recognized on a straight-line basis over the requisite service period for the award and is allocated to research and development expense or general and administrative expense based upon the classification of the individual to whom the award is granted. As of September 30, 2022, there is $849,571 of unrecognized compensation expense that we expect to recognize over a weighted-average period of 1.7 years.

We also have issued shares of restricted common stock to consultants and recognize the related expense over the terms of the related agreements. As of September 30, 2022, there is $72,375 recorded as a prepaid expense for these arrangements, which will be recognized as expense over the terms of the related agreements.

The following table summarizes our total stock-based compensation expense for employees, directors and consultants:

During September 2021, we recorded $209,825 of expense associated with the issuance of a stock purchase warrant in connection with our entering into a technology licensing agreement; such amount was recorded as research and development expense.

7.         Net Loss Per Share

Basic and diluted loss per common share are computed based on the weighted average number of common shares outstanding. The Company’s additional potentially dilutive securities, which include stock options and stock purchase warrants, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. The securities that could potentially dilute basic earnings per share in the future and that have been excluded from the computation of diluted net loss per share totaled 14,346,415 and 3,418,631 shares at September 30, 2022 and 2021, respectively.

8.         Income Taxes

No provision for income taxes was recorded in either of the nine-month periods ended September 30, 2022 and 2021. The Company remains in a cumulative loss position with a full valuation allowance recorded against its net deferred income tax assets as of September 30, 2022.

Item 2         Management’s Discussion and Analysis of Financial Condition And Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes thereto and other disclosures included in this Quarterly Report on Form 10-Q (this “Report”), and our audited financial statements and the accompanying notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission on March 9, 2022.

Forward-Looking Statements

Information included in this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. We generally use the words “believes,” “expects,” “intends,” “plans,” “anticipates,” “likely,” “will” and similar expressions to identify forward-looking statements. All statements in this Report, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, intentions, expectations and objectives could be forward-looking statements. Such forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and factors include, but are not limited to, those factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. We operate in a highly competitive, highly regulated and rapidly changing environment and our business is constantly evolving. Therefore, it is likely that new risks will emerge, and that the nature and elements of existing risks will change, over time. It is not possible for management to predict all such risk factors or changes therein, or to assess either the impact of all such risk factors on our business. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Report.

Overview

GeoVax is a clinical-stage biotechnology company developing immunotherapies and vaccines against infectious diseases and cancers using novel vector vaccine platforms. GeoVax’s product pipeline includes ongoing human clinical trials in COVID-19 and head and neck cancer. Additional research and development programs include preventive vaccines against Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, and Lassa) and malaria, as well as immunotherapies for solid tumors.

Our programs are in various stages of development, the most significant of which are summarized below:

Financial Overview

Revenues

We have not generated any revenues from product sales to date. Our product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that we advance to clinical testing will require regulatory approval prior to commercial use and will require significant costs for commercialization. Our grant revenues relate to grants and contracts from agencies of the U.S. government in support of our vaccine development activities. We record revenue associated with these grants as the related costs and expenses are incurred.

Research and development expenses

Since our inception, we have focused and we continue to focus significant resources on our research and development activities, including developing our vector platform and analytical testing methods, conducting preclinical studies, developing manufacturing processes, and conducting clinical trials. Research and development costs are expensed as incurred and consist primarily of the following:

We track our external research and development costs on a program-by-program basis. We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to shared costs deployed across multiple projects under development.

Our research and development expenses can fluctuate considerably on a period-to-period basis. We expect our research and development expenses to increase substantially in the future as we advance our existing and future product candidates into and through clinical trials and pursue regulatory approval. The process of conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming. Clinical trials generally become larger and more costly to conduct as they advance into later stages.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any product candidates that we develop from our programs. We are also unable to predict when, if ever, material net cash inflows will commence from sales of product candidates we develop, if at all. This is due to the numerous risks and uncertainties associated with developing product candidates.

General and administrative expenses

Our general and administrative expenses consist primarily of personnel costs in our executive, finance and investor relations, business development and administrative functions, including stock-based compensation. Other general and administrative expenses include consulting fees, professional service fees for accounting and legal services, lease expenses related to our offices, insurance premiums, intellectual property costs incurred in connection with filing and prosecuting patent applications, depreciation and other costs. We expect our general and administrative expenses to continue to increase in the future as we expand our operating activities and prepare for potential commercialization of our current and future product candidates, increase our headcount and investor relations activities and maintain compliance with requirements of Nasdaq and the Securities and Exchange Commission.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and adjusts the estimates as necessary. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

For a description of critical accounting policies that require significant judgments and estimates during the preparation of our financial statements, refer to Item 7 in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to our Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes to our critical accounting policies from those disclosed in our 2021 Annual Report.

Information regarding recent accounting pronouncements is contained in Note 2 to the condensed consolidated financial statements, included in this Quarterly Report.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are likely or reasonably likely to have a material effect on our financial condition or results of operations, other than the operating lease for our office and laboratory space.

Results of Operations

The following tables summarize our results of operations for the three-month and nine-month periods ended September 30, 2022 and 2021:

Grant Revenues

The following table summarizes our grant revenues for the three-month and nine-month periods ended September 30, 2022 and 2021:

Total grant revenues decreased by $81,526 (100%) for the three-month period ended September 30, 2022 and by $139,013 (63%) for the nine-month period ended September 30, 2022, versus the comparable 2021 periods, attributable to the differing mix of active grants as shown in the table above, as well as the timing of expenditures related to such grants. As of September 30, 2022, all grant funds approved for direct use by GeoVax have been utilized.

Research and Development Expenses

For the three-month and nine-month periods ended September 30, 2022, research and development expenses increased by $1,496,834 (122%) and $2,698,937 (101%), respectively, versus the comparable 2021 periods. The overall increase during the 2022 periods relates primarily to higher personnel costs (including the use of external consultants), costs of conducting clinical trials for GEO-CM04S1 and Gedeptin, costs of manufacturing materials for use in our clinical trials, and a generally higher level of activity. Research and development expense for the three-month and nine-month periods of 2022 included stock-based compensation expense of $54,293 and $162,878, respectively; as compared to $21,468 and $64,404, respectively, for the comparable 2021 periods.

General and Administrative Expenses

For the three-month and nine-month periods ended September 30, 2022, general and administrative expenses increased by $491,905 (65%) and $801,031 (31%), respectively, versus the comparable 2021 periods. The overall increase during the 2022 periods relates primarily to higher personnel costs (including the use of external consultants), patent costs, investor relations consulting costs, and travel expenses. General and administrative expense for the three-month and nine-month periods of 2022 included stock-based compensation expense of $184,273 and $488,017, respectively; as compared to $64,282 and $184,899, respectively, for the comparable periods of 2021.

Other Income (Expense)

Interest income for the three-month and nine-month periods ended September 30, 2022 was $2,431 and $877, respectively, as compared to $3,747 and $3,998, respectively, for comparable periods of 2021. The variances between periods are primarily attributable to cash available for investment and interest rate fluctuations.

No interest expense was recorded during the three-month and nine-month periods ended September 30, 2022. Interest expense for the three-month and nine-month periods ended September 30, 2021 was $-0- and $1,286, respectively.

During the nine-month period ended September 30, 2021, we recorded a $172,056 one-time gain on debt extinguishment associated with the forgiveness of the principal and accrued interest related to our Paycheck Protection Program (PPP) loan.

Liquidity, Capital Resources and Cash Flows

The following tables summarize our liquidity and capital resources as of September 30, 2022 and December 31, 2021, and our cash flows for the nine-month periods ended September 30, 2022 and 2021:

Operating Activities – Net cash used in operating activities of $11,965,972 for the nine months ended September 30, 2022, was primarily due to our net loss of $8,637,316, as adjusted by non-cash items such as depreciation expense and stock-based compensation expense, and by changes in our working capital accounts. Net cash used in operating activities of $4,513,271 for the nine months ended September 30, 2021, was primarily due to our net loss of $4,827,314, also adjusted by non-cash charges such as depreciation and stock-based compensation expense, and by changes in our working capital accounts.

Investing Activities – Net cash used in investing activities was $134,258 and $47,718 for the nine-month periods ended September 30, 2022 and 2021, respectively, and relates primarily to purchases of laboratory equipment.

Financing Activities – Net cash provided by financing activities was $35,353,328 for the nine-month period ended September 30, 2022, consisting of (i) net proceeds of $27,727,194 from sales of our common stock and warrants, and (ii) net proceeds of $7,626,134 from the exercise of warrants, as described in Note 5 to the condensed consolidated financial statements included in this Quarterly Report. Net cash provided by financing activities was $12,784,212 for the nine-month period ended September 30, 2021, consisting of (i) net proceeds of $9,408,920 from a public offering of our common stock, (ii) $3,404,156 of net proceeds from the exercise of warrants, and (iii) $28,864 in principal repayments of a note payable and repurchase of preferred stock.

Funding Requirements

We have no products approved for commercial sale. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize our product candidates. We do not know when, or if, this will occur. As of September 30, 2022, we have an accumulated deficit of approximately $73 million and we expect to incur operating losses and generate negative cash flows from operations for the foreseeable future. We have funded our operations to date primarily from sales of our equity securities and from government grants and clinical trial assistance.

Our primary uses of capital are for personnel costs, costs of conducting clinical trials, manufacturing costs for materials used in clinical trials, third-party research services, laboratory and related supplies, technology license fees, legal and other regulatory expenses, and general overhead costs. We expect these costs will continue to be the primary operating capital requirements for the near future.

Our future expenditures are likely to be highly volatile in future periods depending on the outcomes of our clinical trials and preclinical studies. We expect our research and development costs to increase as we continue development of our various programs and as we move toward later stages of development, especially with regard to the ongoing clinical trials for Gedeptin and GEO-CM04S1. We expect our general and administrative expenses to increase commensurately in support of expanded research and development efforts.

As of the date of this Quarterly Report, we expect our existing cash and cash equivalents will be sufficient to fund our operations over at least the next twelve months.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect, and we may use our available capital resources sooner than we expect. Our future capital requirements will depend on many factors, which include but are not limited to:

We will need to continue to raise additional capital to support our future operating activities, including progression of our development programs, preparation for commercialization, and other operating costs. Financing strategies we may pursue include, but are not limited to, the public or private sale of equity, debt financings or funds from other capital sources, such as government funding, collaborations, strategic alliances or licensing arrangements with third parties. There can be no assurances additional capital will be available to secure additional financing, or if available, that it will be sufficient to meet our needs on favorable terms. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates.

Item 3         Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4         Controls and Procedures

Evaluation of disclosure controls and procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to management, including the Chief Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Our management has carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and our Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 or 15d-15 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in internal control over financial reporting

There were no significant changes in our internal control over financial reporting that occurred during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

PART II -- OTHER INFORMATION

Item 1         Legal Proceedings

None.

Item 1A      Risk Factors

For information regarding factors that could affect our results of operations, financial condition or liquidity, see the risk factors discussed under “Risk Factors” in Item 1A of our most recent Annual Report on Form 10-K. See also “Forward-Looking Statements,” included in Part I - Item 2 of this Quarterly Report on Form 10-Q. As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A concerning any material changes from the risk factors previously disclosed in our most recent Annual Report on Form 10-K.

Item 2         Unregistered Sales of Equity Securities and Use of Proceeds

During July 2022, we issued 75,000 shares of our common stock to a consultant in exchange for services. The shares were valued at $60,750 as of the date of issuance and were granted as a restricted stock award under our 2020 Stock Incentive Plan. We relied on an exemption from the registration requirements of the Securities Act afforded by Section 4(a) (2) thereof and Rule 506 of Regulation D.

There were no other sales of unregistered securities during the period covered by this report that have not previously been reported on Form 8-K.

Item 3         Defaults Upon Senior Securities

None.

Item 4         Mine Safety Disclosures

Not applicable.

Item 5         Other Information

During the period covered by this report, there was no information required to be disclosed by us in a Current Report on Form 8-K that was not so reported, nor were there any material changes to the procedures by which our security holders may recommend nominees to our board of directors.

Item 6         Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.