UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 .

  For fiscal year ended December 31, 2017

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No. 000-52091

GEOVAX LABS, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware 87-0455038
( State or other jurisdiction of ( IRS Employer

incorporation or organization )

Identification Number )

 

1900 Lake Park Drive, Suite 380  
Smyrna, GA 30080

(Address of principal executive offices)

(Zip Code)

 

(678) 384-7220

Registrant ’s telephone number, including area code:

 

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

None

 

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

Common Stock $.001 par value

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant ’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

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

 

Large accelerated filer         Accelerated filer                  Non-accelerated filer           Smaller reporting company ☑          Emerging growth company

 

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

 

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

 

The aggregate market value of Common S tock held by non-affiliates of the registrant on June 30, 2017, based on the closing price on that date was $2,456,108.

 

Number of shares of Common Stock outstanding as of March 22, 2018: 131,736,810

 

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant’s definitive Proxy Statement with respect to its 2018 Annual Meeting of Stockholders are incorporated by reference in Part III

 

 

 
 

 

Table of Contents

 

PART I
 
Item 1 Business 1
Item 1A Risk Factors 13
Ite m 1B Unresolved Staff Comments 20
Item 2 Properties 20
Item 3 Legal Proceedings 20
Item 4 Mine Safety Disclosures 20
     
PART II
 
Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

21
Item 6 Selected Financial Data 22
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
Item 7A Quantitative and Qualitative Disclosures about Market Risk 28
Item 8 Financial Statements and Supplementary Data 28
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 28
Item 9A Controls and Procedures 28
Item 9B Other Information 29
     
PART III
 
Item 10 Directors, Executive Officers and Corporate Governance 29
Item 11 Executive Compensation 29
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 29
Item 13 Certain Relationships and Related Party Transactions, and Director Independence 29
Item 14 Principal Accounting Fees and Services 30
     
PART IV
 
Item 15 Exhibits and Financial Statement Schedules 30
Item 16 Form 10-K Summary 30
     
Signatures 31
     
Exhibit Index 32

 

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PART I

 

ITEM 1.      BUSINESS

 

This Annual Report (including the following section regarding Management ’s Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Annual Report. Additionally, statements concerning future matters, including statements regarding our business, our financial position, the research and development of our products and other statements regarding matters that are not historical are forward-looking statements.

 

Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” below, as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

 

Overview

 

GeoVax Labs, Inc. (“GeoVax” or the “Company”) is a clinical-stage biotechnology company developing human vaccines against infectious diseases and cancer using a novel patented Modified Vaccinia Ankara-Virus Like Particle (MVA-VLP) vaccine platform. In this platform, MVA, a large virus capable of carrying several vaccine antigens, expresses proteins that assemble into highly effective VLP immunogens in the person being vaccinated. The MVA-VLP virus replicates to high titers in approved avian cells for manufacturing but cannot productively replicate in mammalian cells. Therefore, the MVA-VLP derived vaccines elicit durable immune responses in the host similar to a live attenuated virus, while providing the safety characteristics of a replication-defective vector.

 

Our current development programs are focused on preventive vaccines against Human Immunodeficiency Virus (HIV), Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, and Lassa), and malaria, as well as therapeutic vaccines for chronic Hepatitis B infections and cancers. Our most advanced vaccine program is focused on the clade B subtype of HIV prevalent in the larger commercial markets of the Americas, Western Europe, Japan and Australia; this program is currently undergoing human clinical trials.

 

Our corporate strategy is to advance and protect our vaccine platform and use its unique capabilities to design and develop an array of products. We aim to advance products through to human clinical testing, and to seek partnership or licensing arrangements for commercialization. We will also leverage third party resources through collaborations and partnerships for preclinical and clinical testing. Our collaborators and partners include the National Institute of Allergy and Infectious Diseases (NIAID) of the National Institutes of Health (NIH), the HIV Vaccines Trial Network (HVTN), Centers for Disease Control and Prevention (CDC), United States Army Research Institute of Infectious Disease (USAMRIID), U.S. Naval Research Laboratory (USNRL), Emory University, University of Pittsburgh, Georgia State University Research Foundation (GSURF), Peking University, University of Texas Medical Branch (UTMB), the Institute of Human Virology (IHV) at the University of Maryland, the Scripps Research Institute (TSRI), the Burnet Institute in Australia, American Gene Technologies International, Inc. (AGT), ViaMune, Inc., Vaxeal Holding SA, and CaroGen Corporation.

 

We are incorporated in Delaware, and our offices and laboratory facilities are in Smyrna, Georgia (metropolitan Atlanta).

 

Our Technology

 

Vaccines typically contain agents (antigens) that resemble disease-causing microorganisms. Traditional vaccines are often made from weakened or killed forms of the virus or from its surface proteins. Many newer vaccines use recombinant DNA (deoxyribonucleic acid) technology to generate vaccine antigens in bacteria or cultured cells from specific portions of the DNA sequence of the target pathogen. The generated antigens are then purified and formulated for use in a vaccine. The most successful of these purified antigens have been non-infectious virus-like particles (VLPs) as exemplified by vaccines for hepatitis B (Merck's Recombivax ® and GSK's Engerix ® ) and Papilloma viruses (GSK's Cervarix ® , and Merck's Gardasil ® ). Our approach uses recombinant DNA and/or recombinant MVA to produce VLPs in the person being vaccinated (in vivo) reducing complexity and costs of manufacturing. In human clinical trials of our HIV vaccines, we have demonstrated that our VLPs, expressed from the cells of the person being vaccinated, can be safe, yet elicit both strong and durable humoral and cellular immune response.

 

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VLPs can train the body's immune system to recognize and kill the authentic virus should it appear. VLPs can also train the immune system to recognize and kill virus-infected cells to control infection and reduce the length and severity of disease. One of the biggest challenges with VLP-based vaccines is to design the vaccines in such a way that the VLPs will be recognized by the immune system in the same way as the authentic virus would be. When VLPs for enveloped viruses like HIV, Ebola, Marburg or Lassa fever are produced in vivo (in the cells of the recipient), they include not only the protein antigens, but also an envelope consisting of membranes from the vaccinated individual's cells. In this way, they are highly similar to the virus generated in a person's body during a natural infection. VLPs produced in vitro (in a pharmaceutical plant), by contrast, have no envelope; or, envelopes from the cultured cells (typically hamster or insect cells) used to produce them. We believe our technology provides distinct advantages by producing VLPs that more closely resemble the authentic viruses. This feature of our immunogens allows the body's immune system to more readily recognize the virus. By producing VLPs in vivo , we also avoid potential purification issues associated with in vitro production of VLPs.

 

Examples of VLPs

 

Figure 1. Electron micrographs showing examples of VLPs produced by GeoVax vaccines in human cells. Note that the Ebola virus VLPs on the left self-assemble into the rod-like shape of the actual Ebola virus, while the HIV VLPs shown on the right take on the spherical shape of the actual HIV virus. While below the resolution of these micrographs, both types of VLPs display what we believe to be the native form of their respective viral envelope glycoproteins which we believe is key to generating an effective immune humoral response.

 

We selected MVA for use as the live viral component of our vaccines because of its well-established safety record and because of the ability of this vector to carry sufficient viral sequences to produce VLPs. MVA was originally developed as a safer smallpox vaccine for use in immune-compromised people. It was developed by attenuating the standard smallpox vaccine by making over 500 passages of the virus in chicken embryos or chicken embryo fibroblasts, which resulted in a virus with limited ability to replicate in human cells but did not compromise the ability of MVA to grow on avian cells, which are used for manufacturing the virus. The deletions also resulted in the loss of immune evasion genes which assist the spread of wild type smallpox infections, even in the presence of human immune responses.

 

Our MVA-VLP vaccine platform affords other unique advantages:

Safety: Our HIV vaccines have demonstrated outstanding safety in human clinical trials. Safety for MVA, generally, has been shown in more than 120,000 subjects in Europe, including immunocompromised individuals during the initial development of MVA and more recently with the development of MVA as a safer vaccine against smallpox.

Durability: Our technology raises highly durable (long-lasting) vaccine responses, the most durable in the field of vectored HIV vaccines. We hypothesize that elicitation of durable vaccine responses is conferred on responding B cells by the vaccinia parent of MVA, which raises highly durable responses for smallpox.

Limited pre-existing immunity to vector : Following the eradication of smallpox in 1980, smallpox vaccinations subsequently ended, leaving all but those born before 1980 and selected populations (such as vaccinated laboratory workers, first responders) unvaccinated and without pre-existing immunity.

No need for adjuvants: MVA stimulates strong innate immune responses and does not require the use of adjuvants.

Thermal stability: MVA is stable in both liquid and lyophilized formats (> 6 years of storage).

Genetic stability and manufacturability: If appropriately engineered, MVA is genetically stable and can reliably be manufactured in either the established Chick Embryo Fibroblast cell substrate, or novel continuous cell lines that support scalability as well as greater process consistency and efficiency.

 

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Our Product Development Pipelin e

 

The table below summarizes the status of our product development programs, which are discussed in greater detail in the following pages.

 

Program   Stage of Development   Collaborators / Funding Sponsor
HIV-Clade B Preventive Vaccine   Phase 2a completed   NIH/NIAID, HVTN, Emory University
HIV-Clade B Immunotherapy   Phase 1   AGT, Emory University
HIV-Clade C Preventive Vaccine     Preclinical   NIH/NIAID, Emory University
Hemorrhagic Fever Vaccines        
Ebola virus   Preclinical   NIH/NIAID, USAMRIID
Lassa fever   Preclinical   NIH/NIAID, UTMB, IHV, TSRI, USNRL
Sudan virus   Discovery    
Marburg virus   Discovery    
Zika Vaccine   Preclinical   NIH/NIAID, CDC
Malaria Vaccine   Preclinical   Burnet Institute
Cancer Immunotherapy   Preclinical    ViaMune, Vaxeal, University of Pittsburgh
Hepatitis B Immunotherapy   Preclinical   CaroGen, GSURF, Peking University

 

Our HIV/AIDS Vaccine Program

 

About HIV/AIDS. HIV/AIDS is considered by many in the scientific and medical community to be the most lethal infectious disease in the world. An estimated 37 million people are living with HIV worldwide, with approximately 2.5 million newly infected annually. Approximately 39 million people infected with HIV have died since the 1981 start of the HIV pandemic. The United States currently has an estimated 1.2 million HIV-infected individuals, with approximately 50,000 new infections per year, a number that has remained virtually the same for 20 years. Alarmingly the fastest growing demographic for acquiring an HIV infection in the US is the 13 – 24-year-old group which is expanding at roughly 10% per year and will soon become the group with the highest total number of infections. Moreover, 44% of new infections occur in African-Americans.

 

There are several AIDS-causing HIV virus subtypes, or clades, that are found in different regions of the world. These clades are identified as clade A, clade B and so on. The predominant clade found in Europe, North America, parts of South America, Japan and Australia is clade B, whereas the predominant clades in Africa are clades A and C. In India, the predominant clade is clade C. Genetic differences between the clades may mean that vaccines or treatments developed against HIV of one clade may only be partially effective or ineffective against HIV of other clades. Thus, there is often a geographical focus to designing and developing HIV vaccines.

 

At present, the standard approach to treating HIV infection is to inhibit viral replication through the use of combinations of drugs. Available drugs include reverse transcriptase inhibitors, protease inhibitors, integration inhibitors and inhibitors of cell entry. However, HIV is prone to genetic changes that can produce strains that are resistant to currently approved drugs. When HIV acquires resistance to one drug within a class, it can often become resistant to the entire class, meaning that it may be impossible to re-establish control of a genetically altered strain by substituting different drugs in the same class. Furthermore, these treatments continue to have significant limitations which include toxicity, patient non-adherence to the treatment regimens and cost. Thus, over time, viruses acquire drug-resistant mutations, and many patients develop intolerance to the medications or simply give up taking the medications due to cost, inconvenience or side effects.

 

Prevention of HIV infection remains a worldwide unmet medical need, even in the United States and other first world countries where effective antiretroviral therapies are available. There is no approved HIV vaccine. Current antiretroviral therapies (ART) do not eliminate HIV infection, requiring individuals to remain on such drugs for their entire lives. Uptake and successful long-term adherence to therapy is also limited. Only 30% of those infected with HIV in the US ultimately remain in HIV care with their viral load sufficiently suppressed to prevent spread of HIV. Furthermore, the financial burden to the U.S. taxpayer for HIV education, prevention, and treatment costs is borne through multiple federal agencies. The annual taxpayer cost of HIV in 2016 was $19 billion and is expected to grow to $26 billion by 2020, yet the overall infection rate has not changed in the last 20 years and not a single person has been cured of his/her HIV infection.

 

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According to the International AIDS Vaccine Initiative (IAVI), the cost and complexity of new treatment advances for HIV/AIDS puts them out of reach for most people in the countries where treatment is most needed. In industrialized nations, where drugs are more readily available, side effects and increased rates of viral resistance have raised concerns about their long-term use. Vaccines are seen by many as the most promising way to end the HIV/AIDS pandemic. It is expected that vaccines, once developed, will be used universally and administered worldwide by organizations that provide healthcare services, including hospitals, medical clinics, the military, prisons and schools.

 

Our Preventive HIV Vaccine Program

 

Clade B Preventive HIV Vaccine Program. Our most clinically advanced vaccine is GOVX-B11, designed to protect against the clade B subtype of the HIV virus prevalent in the Americas, Western Europe, Japan and Australia. GOVX-B11 consists of a recombinant DNA vaccine used to prime immune responses and a recombinant MVA vaccine used to boost the primed responses. Both the DNA and MVA vaccines produce non-infectious VLPs in the cells of the vaccinated person.

 

Phase 1 and phase 2a clinical trials of GOVX-B11 have been conducted by the HVTN. In these trials, totaling approximately 500 participants, GOVX-B11 was tested at various doses and regimens and was extremely well tolerated. The HVTN is the largest worldwide clinical trials network dedicated to the development and testing of HIV/AIDS vaccines. Support for the HVTN comes from the NIAID, part of the NIH. The HVTN’s HIV Vaccine Trial Units are located at leading research institutions in 27 cities on four continents.

 

In January 2017 HVTN began the next human clinical trial (HVTN 114) in the path toward human efficacy trials. HVTN 114 enrolled individuals who previously participated in the HVTN 205 Phase 2a trial of the GOVX-B11 vaccine, which concluded in 2012. HVTN 114 tests the ability of late boosts (additional vaccinations) to increase the antibody responses elicited by the GeoVax vaccine regimen. These “late boosts” consist of the GeoVax MVA62B vaccine with or without a gp120 protein vaccine. The gp120 protein, AIDSVAX ® B/E, is the same protein used to boost immune responses in the partially protective RV144 trial in Thailand and is being used in HVTN 114 to assess the effect of adding a protein vaccine to GOVX-B11. Participants in HVTN 114 receive either (a) another MVA62B boost, (b) a combined boost of MVA62B and AIDSVAX ® B/E, or (c) AIDSVAX ® B/E alone.

 

GeoVax, NIAID, HVTN, Duke University, Profectus BioSciences, and the University of Maryland ’s Institute for Human Virology (IHV) are actively planning a Phase 1 clinical trial that will test GOVX-B11 with two novel protein vaccines, the B.63521∆11mutC gp120 vaccine developed by Duke and the IHV01 gp120 vaccine developed by IHV and Profectus. This trial will extend on the results from HVTN 114 and further elucidate the immunogenicity of GOVX-B11 in combination with protein vaccines. We expect the clinical trial to begin in late 2018.

 

Clade C Preventive HIV Vaccine Program . We also are developing DNA/MVA vaccines designed for use against the clade C subtype of HIV that predominate in South Africa and India. NIAID has awarded us Small Business Innovative Research (SBIR) grants in support of this effort.

 

Our HIV Immunotherapy Program

 

Finding a cure for HIV/AIDS remains an elusive goal. Current ART, though highly effective at suppressing HIV viral load, are unable to eliminate latent forms of HIV that are invisible to the immune system and inaccessible to antiretroviral drugs. Long-term use of ART can lead to loss of drug effectiveness and can come with severe side effects. The lifetime medical costs of treating an HIV-infected patient in the U.S. are estimated to exceed $500,000. Therefore, any new treatment regimen that allows patients to reduce, modify, or discontinue their antiretroviral therapy can offer measurable quality of life benefits to the patient and tremendous value to the marketplace.

 

In March 2017, we entered into collaboration with AGT whereby AGT intends to conduct a Phase 1 human clinical trial with our combined technologies during the second half of 2018. The GeoVax vaccine will be used to stimulate virus-specific CD4 T cells in vivo , which will then be harvested from the patient, genetically modified ex vivo using AGT’s technology, and reinfused to the patient. The primary objectives of the trial will be to assess the safety and efficacy of the therapy, with secondary objectives to assess the immune responses as a measure of efficacy. The overall goal of the program will be to develop a functional cure for HIV infection. In a previous phase 1 clinical trial (GV-TH-01), we demonstrated that our vaccine can stimulate production of CD4 + T cells in HIV infected patients– the intended use of the MVA-VLP HIV vaccine in the proposed AGT study.

 

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Our Hemorrhagic Fever Vaccine Program s

 

About Ebola, Sudan, Marburg and Lassa fever viruses. Ebola (EBOV, formerly designated as Zaire ebolavirus), Sudan (SUDV), and Marburg viruses (MARV) are the current most virulent species of the Filoviridae family. They can cause up to a 90% fatality rate in humans and are epizootic in Central and West Africa with 28 outbreaks since 1976. The 2013-16 Ebola outbreak caused 28,616 cases and 11,310 deaths (40% fatal). Additional outbreaks are certain due to indigenous reservoirs of the virus (e.g. fruit bats).

 

Lassa fever virus (LASV), a member of the Arenaviridae family, also causes severe and often fatal hemorrhagic illnesses in an overlapping region with Ebola. In contrast to the unpredictable epidemics of filoviruses, LASV is endemic in West Africa with an annual incidence of >300,000 infections, resulting in 5,000-10,000 deaths. Data from a recent study suggest that the number of annual LASV cases may be much higher, reaching three million infections and 67,000 deaths, putting as many as 200 million persons at risk.

 

Although the timing of the next filovirus outbreak cannot be predicted, it is certain that one will occur due to multiple factors such as: the zoonotic nature of the virus, weak health systems, high population mobility, cultural beliefs and burial practices, and endemic infectious diseases such as malaria and Lassa fever that mimic early Ebola symptoms in those at natural risk; and for those not at natural risk, the risk of intentional release by a bioterrorist.

 

We believe an ideal vaccine against major filoviruses and LASV must activate both humoral and cellular arms of the immune system. It should include the induction of antibodies to slow the initial rate of infection and a cellular immune response to help clear the infection. Moreover, it should address strain variations by providing broad coverage against potential epizootic filovirus strains, and it should be safe not only in healthy individuals (e.g. travelers or health care workers), but also in immunocompromised persons (e.g., HIV infected) and those with other underlying health concerns.

 

Despite significant progress being made with some experimental vaccines in clinical trials, none have been fully tested for both safety and efficacy. The replication competent rVSV-ZEBOV showed safety concerns in Phase 1 trials and by virtue of being replication competent could pose threats to immunocompromised individuals, such as those infected with HIV living in West Africa where recent Ebola epidemics started. The less advanced adeno-vectored vaccine candidates may require relatively cumbersome heterologous prime/boost regimens, for example with MVA, to elicit durable protective immunity. The use of Ad5 vectors also has been associated with concerns over increased susceptibility to HIV infection in areas with high HIV incidence. Even with rVSV-ZEBOV showing promise in the 2013-2015 epidemic, the world would benefit by being prepared with a safer and effective vaccine, to prevent or alleviate the effects of the next epidemic.

 

Our Vaccines . To address the unmet need for a product that can respond to future filovirus epidemics and potentially end LASV infections in West Africa, we are developing innovative vaccines utilizing our MVA-VLP platform. We are addressing strain variations, and induction of broad humoral and cellular response through development of four monovalent vaccines, which we may also investigate blending together as a single tetravalent vaccine (TV) to provide broad coverage, potentially with a single dose. The MVA vector is considered safe, having originally been developed for use in immunocompromised individuals as a smallpox vaccine.

 

Our vaccines are expected to not only protect at-risk individuals against EBOV, SUDV, MARV, and LASV, but also potentially reduce or modify the severity of other re-emerging filovirus pathogens such as Bundibugyo, Ivory Coast, and Reston viruses, based on antigenic cross reactivity and the elicitation of T cells to the more conserved matrix proteins (e.g. VP40 or Z) in addition to standard GP proteins used by us and other manufacturers. Thus, the GeoVax MVA-VLP approach offers a unique combination of advantages to achieve breadth and safety of a pan-filo/LASV vaccine. In addition to protecting people in Africa, it is intended to prevent the spread of disease to the US, and for preparedness against terrorist release of any of bio-threat pathogens. The initial markets for our vaccines are both NGOs such as the GAVI vaccine alliance and the Bill & Melinda Gates Foundation, as well as US and foreign governments.

 

Our initial preclinical studies in rodents and nonhuman primates for our first vaccine candidate ( for EBOV) have shown 100% protection against a lethal dose of Ebola virus upon a single immunization. Preclinical studies in rodents for our second vaccine candidate (for LASV) showed similarly impressive results (100% single-dose protection).

 

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Our Zika Virus Vaccine Program

 

About Zika Virus . Zika disease is a rapidly spreading emerging infection caused by the Zika virus (ZIKV) and has been linked to an increase in microcephaly in infants and Guillain-Barre syndrome (a neurodegenerative disease) in adults. ZIKV is a member of the Flaviviridae family, which includes medically important pathogens such as dengue fever, yellow fever, Japanese encephalitis, tick-borne encephalitis, and West Nile viruses. ZIKV, which was first discovered in 1947 in the Zika forest of Uganda, was considered only a minor public health concern for 60 years. Recently, with its appearance and rapid spread in the Americas, it has emerged as a serious threat with pandemic potential. Symptoms of Zika infection have historically been mild. In the recent epidemic, however, an alarming association between ZIKV infection and fetal brain abnormalities including microcephaly has been observed. No approved preventive or therapeutic products are currently available to fight the Zika epidemic. Public health officials recommend avoiding exposure to ZIKV, delaying pregnancy, and following basic supportive care (fluids, rest, and acetaminophen) after infection. A vaccine is urgently needed to prevent a Zika pandemic.

 

Our Vaccine . To address the unmet need for a ZIKV vaccine, we are developing novel vaccine candidates constructed in our MVA live vector platform, which has already shown great promise in our HIV and Ebola vaccines. We believe that, unlike other vaccines in development, the GeoVax vaccine combines a highly potent, yet safe, replication deficient viral vector (MVA) to deliver novel antigens of ZIKV to develop a single-dose vaccine. MVA has an outstanding safety record, which is particularly important given the need to include women of child-bearing age and newborns among those being vaccinated. Our Zika vaccine does not appear to induce Antibody Dependent Enhancement (ADE) of infection. ADE is a serious side effect induced when a vaccinated individual is bitten a second time by a mosquito carrying a second flavivirus such as dengue, resulting in a more virulent reaction. We expect these features to yield a safe and highly effective vaccine that is well suited to provide potent and durable immunity against ZIKV infection.

 

We collaborated with the US Centers for Disease Control (CDC) to develop a lethal challenge model in mice to test our vaccine candidates. We have demonstrated 100% protection in mice against a lethal challenge after a single dose vaccination. ZIKV and reagents are supplied by UTMB.

 

Our Malaria Vaccine Program

 

About Malaria . Malaria is a mosquito-borne disease caused by Plasmodium parasites. Symptoms are fever, chills, sweating, vomiting and flu-like illness. If untreated, severe complications (severe anemia, cerebral malaria and organ failure) will lead to death. Over 3 billion people in 106 countries and territories live at risk of malaria infection. According to the latest estimates from the World Health Organization (WHO), 214 million new cases of malaria were recorded worldwide in 2015, resulting in 438,000 deaths. There are 1,500 cases in the US each year (travelers returning home). Children under five years of age are particularly susceptible to malaria illness, infection, and death. In 2015, malaria killed an estimated 306,000 children. Current treatments include bed net distributions, drug treatment and mosquito spraying. Malaria parasites develop resistance to drugs and insecticides. Even though vaccines have shown to be the most cost-effective ways to fight and eliminate infectious diseases (Smallpox, polio, etc.), and after many decades of research and development, there is no commercial malaria vaccine at the present time. Even a vaccine with efficacy of 30-50% will prevent hundreds of thousands of deaths annually. Current vaccine candidates generally consist of subunit proteins, are poorly immunogenic, based on limited number of antigens (generally 4-5 antigens), do not target multiple stages of parasite life cycle, and do not induce strong durable functional antibodies and T cell responses. Therefore, identification of appropriate antigens and vaccine technologies is critical for development of an effective malaria vaccine.

 

Our Vaccine Approach . An ideal malaria vaccine candidate should contain antigens from multiple stages of the malaria life cycle, and should induce both functional antibodies (predominantly IgG1 and IgG3 subtypes shown to be associated with protection) and strong cell mediated immunity (e.g. Th1 biased CD4+ ad CD8+) to reduce parasitemia by clearing infected cells (liver cells or erythrocytes). We have shown (in animal models and humans) that MVA-VLP vaccines can induce a Th1 biased response with both durable functional antibodies (IgG1 and IgG3) and CD4 + and CD8 + T cell responses both of which are hallmarks of an ideal malaria vaccine.

 

We have established a collaboration with the Burnet Institute, a leading infectious diseases research institute in Australia, for the development of a vaccine to prevent malaria infection. The project includes the design, construction, and characterization of multiple malaria vaccine candidates using GeoVax’s MVA-VLP vaccine platform combined with malaria Plasmodium falciparum and Plasmodium vivax sequences identified by the Burnet Institute. The vaccine design, construction, and characterization will be performed at GeoVax with further characterization and immunogenicity studies in animal models conducted at Burnet Institute using their unique functional assays that provide key information on vaccine efficacy.

 

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Our Hepatitis B Vaccine Program

 

About Hepatitis B Disease . Hepatitis B is a contagious liver disease caused by the Hepatitis B virus (HBV). It is transmitted person-to-person by blood, semen, or other bodily fluids. This can happen through sexual contact, needle sharing, or mother to infant transmission during birth. For some people, Hepatitis B is an acute (or short-term) illness; but for others, it can become a long-term, chronic infection that may lead to serious health issues like cirrhosis or liver cancer. The risk of chronic infection is related to age at infection. Approximately 90% of infected infants will develop chronic infections. As a child gets older, the risk decreases. Approximately 25%–50% of children infected between the ages of 1 and 5 years will develop chronic hepatitis. The risk drops to 6%–10% when a person is infected at over 5 years of age. Worldwide, most people with chronic Hepatitis B were infected at birth or during early childhood.

 

The CDC estimates that between 700,000 to 1.4 million people in the United States have chronic HBV infections, with an estimated 20,000 new infections every year. Many people are unaware that they are infected or may not show any symptoms. Therefore, they never seek the attention of medical or public health officials. Globally, chronic Hepatitis B affects more than 240 million people and contributes to nearly 686,000 deaths worldwide each year. Even though a preventive HBV vaccine is available, less than 5% of chronic HBV infections are cured through currently available therapies.

 

Our Hepatitis B Vaccine Approach . There is a clear medical need to treat chronic HBV infections, which affect hundreds of millions of people around the world, many of whom die due to complications of HBV including cirrhosis and cancer. Multiple vaccines exist to protect against HBV infection, but they cannot help patients already diagnosed with the disease. Although chronic HBV can be treated with drugs, the treatments do not cure 95% of patients; they cannot induce strong neutralizing antibodies and cellular responses needed to break tolerance to HBV antigens and clear infections, but only suppress the replication of the virus. Therefore, most people who start treatments must continue with them for life. Moreover, diagnosis and treatment options are very limited in resource/low income-constrained populations, which leads to many patients succumbing within months of diagnosis.

 

Our combination therapeutic vaccine strategy is comprised of multivalent vaccine antigens delivered by DNA and MVA-VLP in combination with the standard-of-care treatment to induce functional antibodies and CD4 + , CD8 + T cell responses to clear infection and break tolerance needed toward a functional cure. Our goal is to significantly increase the current cure rate of HBV infections while reducing the duration of drug therapy, overall treatment costs, side effects, and potential drug resistance.

 

Given the challenges and difficulties of developing an effective therapy for chronic HBV infections, our strategy is to engage with multiple collaborators for combination therapies to increase our chances of success. We initially began collaborating in 2017 with Georgia State University Research Foundation (GSU) on a project that includes the design, construction, characterization and animal testing of multiple vaccine candidates using our MVA-VLP vaccine platform. Vaccine antigens include both GeoVax and GSU’s proprietary designed sequences. In February 2018, we expanded our collaborative efforts to include CaroGen Corporation to evaluate our MVA-VLP-HBV vaccine candidates in combination with CaroGen’s HBV virus-like vesicles (VSV) vaccine candidate.

 

Our Cancer Immunotherapy Program

 

About Cancer Immunotherapy . Cancer is the second most common cause of death in the US, exceeded only by heart disease. Its global burden is expected to rise to 22 million new cases per year by 2030. Currently, there is only one FDA approved cancer vaccine, PROVENGE® (sipuleucel-T). PROVENGE® is a personalized therapy for prostate cancer patients, which prolongs survival times by about 4 months. However, the field of immuno-oncology has received new momentum with the discovery and initial launch of monoclonal antibodies (Mabs) called immune checkpoint inhibitors (ICIs). Tumors hijack the body’s natural immune checkpoints by over expressing immune checkpoint ligands (proteins that bind to and activate the inhibitory activity of immune checkpoints), as a mechanism of immune resistance, especially against the T cells that are specific for tumor antigens and can kill cancer cells. ICIs block the interaction of Immune checkpoints with their ligands on tumor cells, allowing poorly functional T cells to resume proliferation, cytokine production and killing of tumor cells.

 

Unlike conventional therapies (e.g. radiation, chemotherapy, antibody, etc.), cancer vaccines have the potential to induce responses that not only result in the control and even clearance of tumors but also establish immunological memory that can suppress and prevent tumor recurrence. Convenience, safety, and low toxicity of cancer vaccines could make them invaluable tools to be included in future immunotherapy approaches for treating tumors. Currently, there are only a few vectored cancer vaccines being tested in combination with ICIs, all of which are in early clinical stages.

 

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Our Immuno-Oncology Development Efforts. GeoVax has established a collaboration with Dr. Olivera Finn, a leading expert in cancer immunotherapy at the University of Pittsburgh. Dr. Finn was the first to show that many tumors express an abnormal form of cell surface-associated Mucin 1 (MUC1) protein that is recognized by the immune system as foreign. Given this, we are developing our MVA-VLP vaccine platform to deliver abnormal forms of MUC1 with the goal of raising protective anti-tumor antibodies and T cell responses in cancer patients.

 

We are also collaborating with ViaMune, Inc., which has developed a fully synthetic MUC1 vaccine candidate (MTI). The collaboration will assess each companies’ vaccine platform, separately, and in combination, with the goal of developing a tumor MUC1 vaccine that can produce a broad spectrum of anti-tumor antibody and T cell responses. The resulting MUC1 vaccine will be combined with ICIs as a novel vaccination strategy for cancer patients with advanced MUC1+ tumors. We have produced an MVA-VLP-MUC1 vaccine candidate, demonstrated VLP production by electron microscopy using MUC1 immunogold staining, and showed that the VLPs express a hypo-glycosylated form of MUC1 in human cell lines. Preclinical studies of the combined MTI and MVA-VLP-MUC1 vaccines conducted at the University of North Carolina at Charlotte have shown encouraging results and we are currently planning the next stage of preclinical testing .

 

In January 2018, we began an additional collaboration with Vaxeal Holding SA , in Switzerland to investigate a combination approach with another tumor-associated antigen (Cyclin B1). The collaboration between GeoVax and Vaxeal will include the design, construction, characterization and animal testing of vaccine candidates using our MVA-VLP vaccine platform in combination with Vaxeal’s proprietary designed antigen sequences.

 

Support from the United States Government

 

Grants and Contracts. We have been the recipient of multiple federal grants and contracts in support of our vaccine development programs. Our most recent awards are as follows:

 

SBIR Grant No. 1R43AI134200-01. In June 2017, NIAID awarded us a Small Business Innovation Research (SBIR) grant entitled “ Advanced Preclinical Testing of a Novel Recombinant Vaccine Against Zika Virus .” The initial grant award was $300,000 for the first year of a two-year project period beginning June 24, 2017, with a total project budget of $600,000.

 

Staged Vaccine Development Contract. In August 2016, NIAID awarded us a Staged Vaccine Development contract to produce our preventive HIV vaccine for use in future clinical trials. The award included a base contract of $199,442 for the initial period from August 1, 2016 to December 31, 2017 (the “base period”) to support process development, as well as $7.6 million in additional development options that can be exercised by NIAID. Prior to the end of the base period NIAID notified us that it did not plan to exercise the additional development option under the contract due to funds availability and NIAID’s programmatic needs. We do not expect this to have an impact on the human clinical trials of our preventive HIV vaccine currently being conducted by the HVTN, or future trials being planned.

 

SBIR Grant No. 2R44AI106422-03. In April 2016, NIAID awarded us a n SBIR grant entitled “ Enhancing Protective Antibody Responses for a DNA/MVA HIV Vaccine .” The initial grant award was $740,456 for the first year of a two-year project period beginning April 15, 2016, with a total project budget of $1,398,615. In March 2017, NIAID awarded us $658,159 for the second year of the project period to test the effects of adding two proteins to our vaccine regimen.

 

SBIR Grant No. 1R43AI120887-01/02. In June 2015, NIAID awarded us an SBIR grant entitled “ Directed Lineage Immunizations for Eliciting Broadly Neutralizing Antibody .” The initial grant award was $299,585 for the first year of a two-year project period beginning July 1, 2015. In June 2016, NIAID awarded us $294,038 for the second year of the project period to develop a clade C HIV vaccine. Clade C is the most prevalent subtype of HIV in eastern South American, sub-Saharan Africa and India

 

Clinical Trial Support . All our human clinical trials to date for our preventive HIV vaccines, including the recently initiated HVTN 114 trial, have been conducted by the HVTN and funded by NIAID. This financial support has been provided by NIAID directly to the HVTN, so has not been recognized in our financial statements, and we do not know the cost of these trials.

 

Other Federal Support . We have been the recipient of additional in-kind federal support through collaborative and intramural arrangements with CDC for our Zika vaccine program, the Rocky Mountain Laboratory facility of NIAID for our hemorrhagic fever virus vaccine program, and the United States Army Medical Research Institute of Infectious Diseases (USAMRIID) for our hemorrhagic fever virus vaccine program. This support generally has been for the conduct or support of preclinical animal studies on our behalf.

 

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Government Regulations

 

Regulation by governmental authorities in the United States and other countries is a significant factor in our ongoing research and development activities and in the manufacture of our products. Complying with these regulations involves considerable expertise, time and expense.

 

In the United States, drugs and biologics are subject to rigorous federal and state regulation. Our products are regulated under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, and the regulations promulgated under these statutes, and other federal and state statutes and regulations. These laws govern, among other things, the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of medications and medical devices. Product development and approval within this regulatory framework is difficult to predict, takes several years and involves great expense. The steps required before a human vaccine may be marketed in the United States include:

 

Preclinical laboratory tests, in vivo preclinical studies and formulation studies;

Manufacturing and testing of the product under strict compliance with current Good Manufacturing Practice (cGMP) regulations;

Submission to the FDA of an Investigational New Drug application for human clinical testing which must become effective before human clinical trials can commence;

Adequate and well-controlled human clinical trials to establish the safety and efficacy of the product;

T he submission of a Biologics License Application to the FDA, along with the required user fees; and

FDA approval of the BLA prior to any commercial sale or shipment of the product

 

Before marketing any drug or biologic for human use in the U nited States, the product sponsor must obtain FDA approval. In addition, each manufacturing establishment must be registered with the FDA and must pass a pre-approval inspection before introducing any new drug or biologic into commercial distribution.

 

Because GeoVax does not manufacture vaccines for human use within our own facilities, we must ensure compliance both in our own operations and in the outsourced manufacturing operations. All FDA-regulated manufacturing establishments (both domestic establishments and foreign establishments that export products to the United States) are subject to inspections by the FDA and must comply with the FDA’s cGMP regulations for products, drugs and devices.

 

FDA determines compliance with applicable statutes and regulations through documentation review, investigations, and inspections. Several enforcement mechanisms are available to FDA, ranging from a simple demand to correct a minor deficiency to mandatory recalls, closure of facilities, and even criminal charges for the most serious violations.

 

 

Even if FDA regulatory clearances are obtained, a marketed product is subject to continual review, and later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions .

 

Whether or not the FDA has approved the drug, approval of a product by regulatory authorities in foreign countries must be obtained prior to the commencement of commercial sales of the drug in such countries. The requirements governing the conduct of clinical trials and drug approvals vary widely from country to country, and the time required for approval may be longer or shorter than that required for FDA approval.

 

We also are subject to various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances used in connection with our research. The extent of government regulation that might result from any future legislation or administrative action cannot be accurately predicted.

 

Manufacturing

 

We do not have the facilities or expertise to manufacture any of the clinical or commercial supplies of any of our products. To be successful, our products must be manufactured in commercial quantities in compliance with regulatory requirements and at an acceptable cost. To date, we have not commercialized any products, nor have we demonstrated that we can manufacture commercial quantities of our product candidates in accordance with regulatory requirements. If we cannot manufacture products in suitable quantities and in accordance with regulatory standards, either on our own or through contracts with third parties, it may delay clinical trials, regulatory approvals and marketing efforts for such products. Such delays could adversely affect our competitive position and our chances of achieving profitability. We cannot be sure that we can manufacture, either on our own or through contracts with third parties, such products at a cost or in quantities that are commercially viable.

 

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We currently rely and intend to continue to rely on third-party contract manufacturers to produce vaccines needed for research and clinical trials. We have arrangements with third party manufacturers for the supply of our DNA and MVA vaccines for use in our planned clinical trials. These suppliers operate under the FDA’s Good Manufacturing Practices and (in the case of European manufacturers) similar regulations of the European Medicines Agency. We anticipate that these suppliers will be able to provide sufficient vaccine supplies to complete our currently planned clinical trials. Various contractors are generally available in the United States and Europe for manufacture of vaccines for clinical trial evaluation, however, it may be difficult to replace existing contractors for certain manufacturing and testing activities and costs for contracted services may increase substantially if we switch to other contractors.

 

Competition

 

The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be competitive with our products. There are several multinational pharmaceutical companies and large biotechnology companies currently marketing or pursuing the development of products or product candidates targeting the same indications as our product candidates. The number of companies seeking to develop products and therapies for the treatment of unmet needs in these indications is likely to increase. Some of these competitive products and therapies are based on scientific approaches that are similar to our approaches, and others are based on entirely different approaches.

 

Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Our competitors’ products may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. We expect any products that we develop and commercialize to compete based on, among other things, efficacy, safety, convenience of administration and delivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payers.

 

There are currently no FDA licensed and commercialized HIV vaccines, Zika vaccines, or hemorrhagic fever virus vaccines available in the world market. We are aware of several development-stage and established enterprises, including major pharmaceutical and biotechnology firms, which are actively engaged in vaccine research and development in these areas. For hemorrhagic fever viruses, these include NewLink Genetics and Merck, Johnson & Johnson, Novavax, Profectus Biosciences, Protein Sciences, Inovio and GlaxoSmithKline. For HIV, these include Sanofi, GlaxoSmithKline, and Johnson & Johnson. Other HIV vaccines are in varying stages of research, testing and clinical trials including those supported by the NIH Vaccine Research Center, the U.S. Military, IAVI, the European Vaccine Initiative, and the South African AIDS Vaccine Initiative. For Zika, these include NewLink Genetics, Inovio, Merck, Butantan Institute and NIH (NIAID).

 

There are numerous FDA-approved treatments for HIV, primarily antiretroviral therapies, marketed by large pharmaceutical companies. Currently, there are no approved therapies for the eradication of HIV. We expect that major pharmaceutical companies that currently market antiretroviral therapy products or other companies that are developing HIV product candidates may seek to develop products for the eradication of HIV.

 

There are currently no commercialized vaccines to treat chronic HBV infection. Multiple vaccines exist to protect against HBV infection, but they cannot help patients already diagnosed with the disease. Although chronic HBV can be treated with drugs, the treatments do not cure 95% of patients; they cannot induce strong neutralizing antibodies and cellular responses needed to break tolerance to HBV antigens and clear infections, but only suppress the replication of the virus.

 

There are currently no commercialized vaccines to prevent malaria infection . A first generation infection-blocking malaria vaccine, RTS,S, is under regulatory review. It requires 4 doses and has been recommended by the WHO for pilot implementation studies. Since this vaccine is based on a single antigen and has modest efficacy (30-40%, depending on the age of subjects), the WHO has defined a Road Map for developing and licensing of next generation malaria vaccines. These vaccines are expected to contain multiple antigens designed to block both infection and transmission of malaria with at least a 75% efficacy rate.

 

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A number of companies are developing various types of therapeutic vaccines or other immunotherapy approaches to treat cancer including Advaxis, Immune Design, Oncothyreon, Bavarian Nordic, Roche Pharmaceuticals, Merck  & Co, Bristol Myers Squibb, AstraZeneca plc, and Medimmune, LLC.

 

Our Intellectual Property

 

We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary rights are described by valid and enforceable patents or are effectively maintained as trade secrets. Accordingly, we are pursuing and will continue to pursue patent protection for our proprietary technologies obtained or developed through our collaborations or developed by us alone. Our patent portfolio includes applications directed to DNA and MVA based HIV vaccines, their genetic inserts expressing multiple HIV protein components, composition, structure, claim of immunization against multiple subtypes of HIV, routes of administration, safety and other related factors and methods of therapeutic and prophylactic use thereof including administration regimes. Also included are applications directed to preventive vaccines against hemorrhagic fever viruses (Ebola, Sudan, Marburg and Lassa), Zika virus and malaria, and use thereof; immuno-oncology vaccine compositions and methods of use thereof; and therapeutic vaccines against HBV and use thereof. We are the licensee of at least nine issued or allowed U.S. patents and at least twenty-three issued or allowed non-U.S. patents. We are actively pursuing two U.S. provisional applications, two non-U.S. and two international patent applications as the owner of record, in addition to at least two non-U.S. patent applications under license.

 

We are the exclusive, worldwide licensee of several patents and patent applications, which we refer to as the Emory Technology, owned, licensed or otherwise controlled by Emory University for HIV or smallpox vaccines pursuant to a license agreement originally entered into on August  23, 2002 and restated on June 23, 2004 (the “Emory License”). Through the Emory License we are also a non-exclusive licensee of four issued United States patents owned by the NIH related to the ability of our MVA vector vaccine to operate as a vehicle to deliver HIV virus antigens, and to induce an immune response in humans.

 

We are not a party to any litigation, opposition, interference, or other potentially adverse proceeding with regard to our patent positions. However, if we become involved in litigation, interference proceedings, oppositions or other intellectual property proceedings, for example as a result of an alleged infringement or a third-party alleging an earlier date of invention, we may have to spend significant amounts of money and time and, in the event of an adverse ruling, we could be subject to liability for damages, invalidation of our intellectual property and injunctive relief that could prevent us from using technologies or developing products, any of which could have a significant adverse effect on our business, financial conditions or results of operations. In addition, any claims relating to the infringement of third-party proprietary rights, or earlier date of invention, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert management’s attention and resources and require us to enter royalty or license agreements which are not advantageous if available at all.

 

In addition to patent protection, we also attempt to protect our proprietary products, processes and other information by relying on trade secrets and non-disclosure agreements with our employees, consultants and certain other persons who have access to such products, processes and information. Under these agreements, all inventions conceived by employees are our exclusive property. Nevertheless, there can be no assurance that these agreements will afford significant protection against misappropriation or unauthorized disclosure of our trade secrets and confidential information.

 

We cannot be certain that any of the current pending patent applications we have licensed, or any new patent applications we may file or license, will ever be issued in the United States or any other country. Even if issued, there can be no assurance that those patents will be sufficiently broad to prevent others from using our products or processes. Furthermore, our patents, as well as those we have licensed or may license in the future, may be held invalid or unenforceable by a court, or third parties could obtain patents that we would need to either license or to design around, which we may be unable to do. Current and future competitors may have licensed or filed patent applications or received patents and may acquire additional patents or proprietary rights relating to products or processes competitive to ours. In addition, any claims relating to the infringement of third-party proprietary rights, or earlier date of invention, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert management’s attention and resources and require us to enter royalty or license agreements which are not advantageous to us, if available at all.

 

Research and Development

 

Our expenditures for research and development activities were $2,017,350, $1,970,859, and $1,693,102 during the years ended December 31, 2017, 2016 and 2015, respectively. As our vaccines continue to go through the process to obtain regulatory approval, we expect our research and development costs to increase. We have not yet formulated any plans for marketing and sales of any vaccine candidate we may successfully develop. Compliance with environmental protection laws and regulations has not had a material effect on our capital expenditures, earnings or competitive position to date.

 

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Scientific Advisors

 

We seek advice from our Scientific Advisory Board, which consists of a number of leading scientists, on scientific and medical matters. The current members of our Scientific Advisory Board are:

 

Name   Position/Institutional Affiliation
Thomas P. Monath, MD   Managing Partner and Chief Scientific Officer at Crozet Biopharma
Stanley A. Plotkin, MD   Professor Emeritus, University of Pennsylvania Adjunct Professor, Johns Hopkins University
Barney S. Graham, MD, PhD   Senior Investigator, Vaccine Research Center, NIAID
Scott C. Weaver, PhD   Director, University of Texas Medical Branch Institute for Human Infections and Immunity Scientific Director, Galveston National Laboratory
Olivera J. Finn, PhD   Distinguished Professor of Immunology and Surgery, University of Pittsburgh

 

Properties and Employees

 

We lease approximately 8,400 square feet of office and laboratory space located at 1900 Lake Park Drive, Suite 380, Smyrna, Georgia under a lease agreement which expires on December 31, 2018. We believe this space is adequate for our current needs and we expect to renew the lease on a short-term basis. We may experience an adverse impact on our business if we are unable to access suitable facilities for our offices and laboratories. As of March 20, 2018, we had seven full-time and two part-time employees. None of our employees are covered by collective bargaining agreements and we believe that our employee relations are good.

 

Corporate Background

 

Our primary business is conducted by our wholly-owned subsidiary, GeoVax, Inc., which was incorporated under the laws of Georgia in June 2001. The predecessor of our parent company, GeoVax Labs, Inc. (the reporting entity) was originally incorporated in June 1988 under the laws of Illinois as Dauphin Technology, Inc. (“Dauphin”). In September 2006, Dauphin completed a merger with GeoVax, Inc. As a result of the merger, GeoVax, Inc. became a wholly-owned subsidiary of Dauphin, and Dauphin changed its name to GeoVax Labs, Inc. In June 2008, the Company was reincorporated under the laws of Delaware. We currently do not conduct any business other than GeoVax, Inc.’s business of developing new products for the treatment or prevention of human diseases. Our principal offices are in Smyrna, Georgia (metropolitan Atlanta). 

 

Available Information

 

Our website address is www.geovax.com. We make available on this website under “Investors – SEC Reports,” free of charge, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. We also make available our Code of Ethics on this website under the heading “Investors – Corporate Governance”. Information contained on our website is not incorporated into this Annual Report.  

 

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ITEM 1A.      RISK FACTORS

 

Investing in our securities involves a high degree of risk. You should carefully review and consider the risks, uncertainties and other factors described below before you decide whether to purchase our securities. Any of these factors could materially and adversely affect our business, financial condition, operating results and prospects and could negatively impact the market price of our common stock, and you may lose some or all of your investment. The risks and uncertainties described below are not the only ones facing our Company. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, may also impair our business operations. You should also refer to the information contained in this Form 10-K , including our financial statem ents and the related notes.

 

Risks Related to Our Business

 

We have a history of operating losses, and we expect losses to continue for the foreseeable future.

 

We have had no product revenue to date and there can be no assurance that we will ever generate any product revenue. We have experienced operating losses since we began operations in 2001. As of December 31, 2017, we had an accumulated deficit of approximately $37.9 million. We expect to incur additional operating losses and expect cumulative losses to increase as our research and development, pre-clinical, clinical, manufacturing and marketing efforts expand. Our ability to generate revenue and achieve profitability depends on our ability to successfully complete the development of our product candidates, conduct pre-clinical tests and clinical trials, obtain the necessary regulatory approvals, and manufacture and market the resulting products. Unless we are able to successfully meet these challenges, we will not be profitable and may not remain in business.

 

We have received a going concern opinion fro m our auditors.

 

We have received a "going concern" opinion from our independent registered public accounting firm, reflecting substantial doubt about our ability to continue as a going concern. Our consolidated financial statements contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and implement our business plan. If we are unable to achieve or sustain profitability or to secure additional financing on acceptable terms, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our stockholders losing their entire investment. There is no guarantee that we will become profitable or secure additional financing on acceptable terms.

 

Our business will require continued funding. If we do not receive adequate funding, we will not be able to continue our operations.

 

To date, we have financed our operations principally through the sale of our equity securities and through NIAID grants and clinical trial support. We will require substantial additional financing at various intervals for our operations, including clinical trials, operating expenses, intellectual property protection and enforcement, for pursuit of regulatory approvals, and for establishing or contracting out manufacturing, marketing and sales functions. There is no assurance that such additional funding will be available on terms acceptable to us or at all. If we are not able to secure the significant funding that is required to maintain and continue our operations at current levels, or at levels that may be required in the future, we may be required to delay clinical studies or clinical trials, curtail operations, or obtain funds through collaborative arrangements that may require us to relinquish rights to some of our products or potential markets.

 

The costs of conducting all of our human clinical trials to date for our preventive HIV vaccine have been borne by the HIV Vaccine Trials Network (HVTN), with funding by NIAID, and we expect NIAID support for additional clinical trials. GeoVax incurs costs associated with manufacturing the clinical vaccine supplies and other study support. We cannot predict the level of support we will receive from the HVTN or NIAID for any additional clinical trials of our HIV vaccines.

 

Our operations are also partially supported by the NIAID grants awarded to us to support our HIV and Zika vaccine programs. As of December 31, 2017, there was $481,695 of unused grant funds remaining and available for use during 2018. We are pursuing additional support from the federal government for our vaccine programs. However, as we progress to the later stages of our vaccine development activities, government financial support may be more difficult to obtain, or may not be available at all. Furthermore, there is some risk that actual funding for grants could be delayed, cut back, or eliminated due to government budget constraints. Therefore, it will be necessary for us to look to other sources of funding to finance our development activities.

 

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We expect that our current working capital, combined with proceeds from the grants awarded to us from NIAID will be sufficient to support our planned level of operations into the third quarter of 2018. We will need to raise additional funds to significantly advance our vaccine development programs and to continue our operations. In order to meet our operating cash flow needs we plan to seek sources of non-dilutive capital through government grant programs and clinical trial support. We may also plan additional offerings of our equity securities, debt, or convertible debt instruments. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could have a material adverse effect on our business, operating results, financial condition and prospects.

 

Risks Related to Development and Commercialization of Product Candidates and Dependence on Third Parties

 

Our products are still being developed and are unproven. These products may not be successful.

 

To become profitable, we must generate revenue through sales of our products. However, our products are in varying stages of development and testing. Our products have not been proven in human clinical trials and have not been approved by any government agency for sale. If we cannot successfully develop and prove our products and processes, or if we do not develop other sources of revenue, we will not become profitable and at some point we would discontinue operations.

 

Whether we are successful will be dependent, in part, upon the leadership provided by our management. If we were to lose the services of any of these individuals, our business and operations may be adversely affected.

 

Whether our business will be successful will be dependent, in part, upon the leadership provided by our officers, particularly our President and Chief Executive Officer and our Chief Scientific Officer. The loss of the services of these individuals may have an adverse effect on our operations. Further, our employees, including our executive officers and directors, are not subject to any covenants not to compete against the Company, and our business could be adversely affected if any of our employees or directors engaged in an enterprise competitive with the Company.

 

Regulatory and legal uncertainties could result in significant costs or otherwise harm our business.

 

To manufacture and sell our products, we must comply with extensive domesti c and international regulation. In order to sell our products in the United States, approval from the FDA is required. Satisfaction of regulatory requirements, including FDA requirements, typically takes many years, and if approval is obtained at all, it is dependent upon the type, complexity and novelty of the product, and requires the expenditure of substantial resources. We cannot predict whether our products will be approved by the FDA. Even if they are approved, we cannot predict the time frame for approval. Foreign regulatory requirements differ from jurisdiction to jurisdiction and may, in some cases, be more stringent or difficult to meet than FDA requirements. As with the FDA, we cannot predict if or when we may obtain these regulatory approvals. If we cannot demonstrate that our products can be used safely and successfully in a broad segment of the patient population on a long-term basis, our products would likely be denied approval by the FDA and the regulatory agencies of foreign governments.

 

We face intense competition and rapid technological change that could result in products that are superior to the products we will be commercializing or developing.

 

The market for vaccines that protect against or treat human infectious diseases is intensely competitive and is subject to rapid and significant technological change. We have numerous competitors in the United States and abroad, including, among others, large companies with substantially greater resources than us. If any of our competitors develop products with efficacy or safety profiles significantly better than our products, we may not be able to commercialize our products, and sales of any of our commercialized products could be harmed. Some of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Competitors may develop products earlier, obtain FDA approvals for products more rapidly, or develop products that are more effective than those under development by us. We will seek to expand our technological capabilities to remain competitive; however, research and development by others may render our technologies or products obsolete or noncompetitive, or result in treatments or cures superior to ours.

 

Our product candidates are based on new medical technology and, consequently, are inherently risky. Concerns about the safety and efficacy of our products could limit our future success.

 

We are subject to the risks of failure inherent in the development of product candidates based on new medical technologies. These risks include the possibility that the products we create will not be effective, that our product candidates will be unsafe or otherwise fail to receive the necessary regulatory approvals, and that our product candidates will be hard to manufacture on a large scale or will be uneconomical to market.

 

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Many pharmaceutical products cause multiple potential complications and side effects, not all of which can be predicted with accuracy and many of which may vary from patient to patient. Long term follow-up data may reveal previously unidentified complications associated with our products. The responses of potential physicians and others to information about complications could materially affect the market acceptance of our products, which in turn would materially harm our business.

 

We may experience delays in our clinical trials that could adversely affect our financial results and our commercial prospects.

 

We do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule, if at all. Product development costs will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than planned. Significant delays may adversely affect our financial results and the commercial prospects for our products and delay our ability to become profitable.

 

We rely heavily on the HVTN, independent clinical investigators, vaccine manufacturers, and other third-party service providers for successful execution of our clinical trials, but do not control many aspects of their activities. We are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates. There is also a risk of changes in clinical trial strategy and timelines due to the HVTN and NIAID altering their trial strategy.

 

Failure to obtain timely regulatory approvals required to exploit the commercial potential of our products could increase our future development costs or impair our future sales.

 

None of our vaccines are approved by the FDA for sale in the United States or by other regulatory authorities for sale in foreign countries. To exploit the commercial potential of our technologies, we are conducting and planning to conduct additional pre-clinical studies and clinical trials. This process is expensive and can require a significant amount of time. Failure can occur at any stage of testing, even if the results are favorable. Failure to adequately demonstrate safety and efficacy in clinical trials could delay or preclude regulatory approval and restrict our ability to commercialize our technology or products. Any such failure may severely harm our business. In addition, any approvals we obtain may not cover all of the clinical indications for which approval is sought or may contain significant limitations in the form of narrow indications, warnings, precautions or contraindications with respect to conditions of use, or in the form of onerous risk management plans, restrictions on distribution, or post-approval study requirements.

 

State pharmaceutical marketing compliance and reporting requirements may expose us to regulatory and legal action by state governments or other government authorities.

 

Several states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs and file periodic reports on sales, marketing, pricing and other activities. Similar legislation is being considered in other states. Many of these requirements are new and uncertain, and available guidance is limited. Unless we are in full compliance with these laws, we could face enforcement action, fines, and other penalties and could receive adverse publicity, all of which could harm our business.

 

Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot currently predict, and may have a significant adverse effect on our business and results of operations.

 

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. Among policy makers and payors in the United States and elsewhere, including in the European Union, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

 

15

 

 

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the Affordable Care Act, substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act, includes a number of provisions that are intended to lower healthcare costs, including prescription drug prices and government spending on medical products.

 

Since its enactment, there have also been judicial and Congressional challenges to certain aspects of the Affordable Care Act, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the statute. We continue to evaluate the effect that the Affordable Care Act and subsequent changes to the statute has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.

 

T here has also been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products. There have been several Congressional inquiries and proposed bills, as well as state efforts, designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. In June 2017, FDA issued a Drug Competition Action plan intended to lower prescription drug prices by encouraging competition from generic versions of existing products. The Agency announced that it will issue a similar plan intended to promote competition to prescription biologics from biosimilars later this year.

 

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. For example, in September 2017, the California State Assembly approved SB17, which requires pharmaceutical companies to notify health insurers and government health plans at least 60 days before any scheduled increases in the prices of their products if they exceed 16% over a two-year period, and further requiring pharmaceutical companies to explain the reasons for such increase. Effective in 2016, Vermont passed a law requiring certain manufacturer identified by the state to justify their price increases.

 

We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs, once marketing approval is obtained.

 

We may not be successful in establishing collaborations for product candidates we seek to commercialize, which could adversely affect our ability to discover, develop, and commercialize products.

 

We expect to seek collaborations for the development and commercialization of product candidates in the future. The timing and terms of any collaboration will depend on the evaluation by prospective collaborators of the clinical trial results and other aspects of our vaccine’s safety and efficacy profile. If we are unable to reach agreements with suitable collaborators for any product candidate, we will be forced to fund the entire development and commercialization of such product candidates, ourselves, and we may not have the resources to do so. If resource constraints require us to enter into a collaboration agreement early in the development of a product candidate, we may be forced to accept a more limited share of any revenues this product may eventually generate. We face significant competition in seeking appropriate collaborators. Moreover, these collaboration arrangements are complex and time-consuming to negotiate and document. We may not be successful in our efforts to establish collaborations or other alternative arrangements for any product candidate. Even if we are successful in establishing collaborations, we may not be able to ensure fulfillment by collaborators of their obligations or our expectations.

 

We do not have manufacturing, sales or marketing experience.

 

We do not have experience in manufacturing, selling, or marketing vaccines. To obtain the expertise necessary to successfully manufacture, market, and sell our vaccines, we will require the development of our own commercial infrastructure and/or collaborative commercial arrangements and partnerships. Our ability to execute our current operating plan is dependent on numerous factors, including, the performance of third party collaborators with whom we may contract.

 

16

 

 

Our vaccines under development may not gain market acceptance.

 

Our vaccines may not gain market acceptance among physicians, patients, healthcare payers and the medical community. Significant factors in determining whether we will be able to compete successfully include:

the efficacy and safety of our vaccines ;

the time and scope of regulatory approval ;

reimbursement coverage from insurance companies and others ;

the price and cost -effectiveness of our products; and

the ability to maintain patent protection.

 

We may be required to defend lawsuits or pay damages for product liability claims.

 

Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We may face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. We carry product liability insurance and we expect to continue such policies. However, product liability claims, regardless of their merits, could exceed policy limits, divert management’s attention, and adversely affect our reputation and the demand for our products.

 

Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If there is not sufficient reimbursement for our vaccines, it is less likely that they will be widely used.

 

Market acceptance of vaccines we develop, if approved, will depend on reimbursement policies and may be affected by, among other things, future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will cover and establish payment levels. We cannot be certain that reimbursement will be available for or any vaccines that we may develop. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for our vaccines. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize vaccines that we develop.

 

Risks Related to Our Intellectual Property

 

We could lose our license rights to our important intellectual property if we do not fulfill our contractual obligations to our licensors.

 

Our rights to significant parts of the technology we use in our vaccines are licensed from third parties and are subject to termination if we do not fulfill our contractual obligations to our licensors. Termination of intellectual property rights under any of our license agreements could adversely impact our ability to produce or protect our vaccines. Our obligations under our license agreements include requirements that we make milestone payments to our licensors upon the achievement of clinical development and regulatory approval milestones, royalties as we sell commercial products, and reimbursement of patent filing and maintenance expenses. Should we become bankrupt or otherwise unable to fulfill our contractual obligations, our licensors could terminate our rights to critical technology that we rely upon.

 

Other parties may claim that we infringe their intellectual property or proprietary rights, which could cause us to incur significant expenses or prevent us from selling products.

 

Our success will depend in part on our ability to operate without infringing the patents and proprietary rights of third parties. The manufacture, use and sale of new products have been subject to substantial patent rights litigation in the pharmaceutical industry. These lawsuits generally relate to the validity and infringement of patents or proprietary rights of third parties. Infringement litigation is prevalent with respect to generic versions of products for which the patent covering the brand name product is expiring, particularly since many companies that market generic products focus their development efforts on products with expiring patents. Pharmaceutical companies, biotechnology companies, universities, research institutions or other third parties may have filed patent applications or may have been granted patents that cover aspects of our products or our licensors’ products, product candidates or other technologies.

 

Future or existing patents issued to third parties may contain patent claims that conflict with our products. We expect to be subject to infringement claims from time to time in the ordinary course of business, and third parties could assert infringement claims against us in the future with respect to our current products or with respect to products that we may develop or license. Litigation or interference proceedings could force us to:

stop or delay selling, manufacturing or using products that incorporate, or are made using the challenged intellectual property ;

pay damages; or

enter into licensing or royalty agreements that may not be available on acceptable terms, if at all.

 

17

 

 

Any litigation or interference proceedings, regardless of their outcome, would likely delay the regulatory approval process, be costly and require significant time and attention of our key management and technical personnel.

 

Any inability to protect intellectual property rights in the United States and foreign countries could limit our ability to manufacture or sell products.

 

We will rely on trade secrets, unpatented proprietary know-how, continuing technological innovation and, in some cases, patent protection to preserve our competitive position. Our patents and licensed patent rights may be challenged, invalidated, infringed or circumvented, and the rights granted in those patents may not provide proprietary protection or competitive advantages to us. We and our licensors may not be able to develop patentable products. Even if patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect the technology owned by or licensed to us. If patents containing competitive or conflicting claims are issued to third parties, we may be prevented from commercializing the products covered by such patents, or may be required to obtain or develop alternate technology. In addition, other parties may duplicate, design around or independently develop similar or alternative technologies.

 

We may not be able to prevent third parties from infringing or using our intellectual property, and the parties from whom we may license intellectual property may not be able to prevent third parties from infringing or using the licensed intellectual property. We generally will attempt to control and limit access to, and the distribution of, our product documentation and other proprietary information. Despite efforts to protect this proprietary information, unauthorized parties may obtain and use information that we may regard as proprietary. Other parties may independently develop similar know-how or may even obtain access to these technologies.

 

The laws of some foreign countries do not protect proprietary information to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries.

 

Neither the U.S.  Patent and Trademark Office nor the courts have established a consistent policy regarding the breadth of claims allowed in pharmaceutical patents. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the value of our proprietary rights.

 

Risks Related To Our Common Stock

 

The market price of our common stock is highly volatile.

 

The market price of our common stock has been, and is expected to continue to be, highly volatile. Certain factors, including announcements of new developments by us or other companies, regulatory matters, new or existing medicines or procedures, concerns about our financial position, operating results, litigation, government regulation, developments or disputes relating to agreements, patents or proprietary rights, may have a significant impact on the market price of our stock. In addition, potential dilutive effects of future sales of shares of common stock by us, and subsequent sales of common stock by the holders of warrants and options could have an adverse effect on the market price of our shares.

 

Our common stock does not have a vigorous trading market and investors may not be able to sell their securities when desired.

 

We have a limited active public market for our common shares. A more active public market, allowing investors to buy and sell large quantities of our common stock, may never develop. Consequently, investors may not be able to liquidate their investments in the event of an emergency or for any other reason.

 

We have never paid dividends and have no plans to do so.

 

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any potential return investors may have in our common stock will be in the form of appreciation, if any, in the market value of their shares of common stock.

 

18

 

 

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

 

We are subject to reporting obligations under the United States securities laws. The Secur ities and Exchange Commission (SEC) as required by the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting in its annual report. Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our stock.

 

If we fail to remain current in our reporting requirements, our securities could be removed from the OTC Market, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

United States companies trading on the OTC Market must be reporting issuers under Section  12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act. If we fail to remain current on our reporting requirements, we could be removed from the OTC Market. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

We need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.

 

In order to meet our operating cash flow needs we plan additional offerings of our equity securities, debt, or convertible debt instruments. The sale of additional equity securities could result in additional dilution to our stockholders. Certain equity securities, such as convertible preferred stock or warrants, may contain anti-dilution provisions which could result in the issuance of additional shares at lower prices if we sell other shares below specified prices. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure investors that financing will be available in amounts or on terms acceptable to us, if at all.

 

The exercise of options or warrants or conversion of our Series B, Series C , Series D or Series E Preferred Stock may depress our stock price and may result in significant dilution to our common stockholders.

 

There are a significant number of outstanding options and warrants to purchase our common stock and w e have issued Series B, Series C, Series D and Series E Convertible Preferred Stock that is convertible into our common stock. If the market price of our common stock exceeds the conversion prices of the preferred shares, holders of those securities may be likely to convert their preferred shares and sell the common stock acquired upon conversion of such securities in the open market. Sales of a substantial number of shares of our common stock in the public market by holders of preferred shares may depress the prevailing market price for our common stock and could impair our ability to raise capital through the future sale of our equity securities. Additionally, if the holders of outstanding preferred shares convert those preferred shares, our common stockholders will incur dilution in their relative percentage ownership. The prospect of this possible dilution may also impact the price of our common stock.

 

Our common stock is and likely will remain subject to the SEC ’s “penny stock” rules, which make it more difficult to sell.

 

Our common stock is currently and may remain classified as a “penny stock.” The SEC rules regarding penny stocks may have the effect of reducing trading activity in our shares, making it more difficult for investors to sell. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:

make a special written suitability determination for the purchaser;

receive the purchaser’s written agreement to a transaction prior to sale;

provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies;

obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has received the required risk disclosure document before a transaction in a “penny stock” can be completed; and

give bid and offer quotations and broker and salesperson compensation information to the customer orally or in writing before or with the confirmation.

 

19

 

 

These rules make it more difficult for broker-dealers to effectuate customer transactions and trading activity in our securities and may result in a lower trading volume of our common stock and lower trading prices.

 

Certain provisions of our certificate of incorporation which authorize the issuance of additional shares of preferred stock may make it more difficult for a third party to effect a change in control.

 

Our certificate of incorporation authorizes our Board of Directors to issue up to 10, 000,000 shares of preferred stock. We have issued, and there are outstanding, 100 shares of Series B Convertible Preferred Stock, 2,570 shares of our Series C Convertible Preferred Stock, 700 shares of our Series D Convertible Preferred Stock, and 600 shares of our Series E Convertible Preferred Stock. We believe the terms of these preferred shares would not have a substantial impact on the ability of a third party to effect a change in control. The remaining shares of preferred stock may be issued in one or more series, the terms of which may be determine at the time of issuance by our Board of Directors without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our Board of Directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it costlier to acquire or effect a change-in-control, which in turn could prevent the stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

None

 

ITEM 2.

PROPERTIES

 

We lease approximately 8,400 square feet of office and laboratory space located at 1900 Lake Park Drive, Suite 380, Smyrna, Georgia under a lease agreement which expires on December 31, 2018. We believe this space is adequate for our current needs.

 

ITEM 3.

LEGAL PROCEEDINGS

 

We are not currently a party to any material legal proceedings. We may from time to time become involved in various legal proceedings arising in the ordinary course of business.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable .

  

20

 

 

PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

Our common stock is currently traded on the OTC QB Market under the symbol “GOVX”. The following table sets forth the high and low bid prices for our common stock for the periods indicated. The prices represent quotations between dealers and do not include retail mark-up, markdown, or commission, and do not necessarily represent actual transactions. On March 20, 2018, the last reported sale price for our common stock as reported in the OTCQB Market was $0.04 per share.

 

   

High

   

Low

 

201 8

               

First Quarter (th rough March 20, 2018)

  $ 0.06     $ 0.04  

201 7

               

Fourth Quarter

  $ 0.10     $ 0.03  

Third Quarter

  $ 0.04     $ 0.03  

Second Quarter

  $ 0.07     $ 0.03  

First Quarter

  $ 0.07     $ 0.04  

201 6

               

Fourth Quarter

  $ 0.08     $ 0.05  

Third Quarter

  $ 0.11     $ 0.07  

Second Quarter

  $ 0.09     $ 0.06  

First Quarter

  $ 0.14     $ 0.05  

 

Holders

 

On March 20, 2018, there were approximately 540 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

 

Dividends

 

We have not paid any dividends since our inception and do not contemplate paying dividends in the foreseeable future. The certificates of designation for our outstanding preferred stock would prohibit the payment of dividends on our common stock if there were any dividends due but unpaid on our preferred stock. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board of Directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board of Directors may deem relevant.

 

Recent Sales of Unregistered Securities

 

There were no sales of unregistered securities during the period covered by this report that have not previously been reported on Form 10-Q or Form 8-K.

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities d uring the fourth quarter of 2017.

 

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Securities Authorized for Issuance U nder Equity Co mpensation Plans

 

The following table sets forth certain inf ormation as of December 31, 2017 with respect to compensation plans under which our equity securities are authorized for issuance.

 

Plan Category

 

Number of securities to be

issued upon exercise of

outstanding options,

warrants and rights
(a)

   

Weighted-average exercise

price of outstanding options,

warrants and

rights
(b)

   

Number of securities

remaining available for

future issuance under

equity compensation plans

(excluding securities

reflected in column (a))

(c)

 

Equity compensation pla ns approved by stockholders

    3,720,000       $0.48       -0-  

Equity compensation plans n ot approved by stockholders

    3,304,275       $0.07       526,025  

 

A description of our equity compensation plans can be found in footnotes 2 and 9 to our 2017 consolidated financial statements.

 

 

ITEM 6.      SELECTED FINANCIAL DATA

 

The following selected financial data as of and for each of the five years ended December 31, 2017 are derived from our audited consolidated financial statements. The historical results presented below are not necessarily indicative of the results to be expected for any future period. The information set forth below should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our consolidated financial statements and the related notes, beginning on page F-1.

 

   

Years Ended December 31,

 
   

201 7

   

201 6

   

201 5

   

201 4

   

201 3

 

Statement of Operations Data:

                                       

Total revenues

  $ 1,075,270     $ 828,918     $ 428,081     $ 882,956     $ 2,417,550  

Net loss

    (2,170,162 )     (3,271,701 )     (2,689,287 )     (2,733,555 )     (2,284,943 )

Basic and diluted net loss per common share

    (0.03 )     (0.08 )     (0.08 )     (0.10 )     (0.11 )

 

   

As of December 31,

 
   

201 7

   

201 6

   

201 5

   

201 4

   

201 3

 

Balance Sheet Data:

                                       

Total assets

    490,235       610,217       1,331,593       1,333,198       2,839,576  

Total stockholders ’ equity (deficiency)

    (321,057 )     240,370       1,204,603       1,146,175       2,527,227  

 

 

ITEM 7.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read together with “Selected Financial Data” and our consolidated financial statements and the related notes beginning on page F-1. This discussion contains forward-looking statements that involve risks and uncertainties because they are based on current expectations and relate to future events and our future financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements because of many important factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report.

 

Overvie w

 

GeoVax is a clinical-stage biotechnology company developing human vaccines against infectious diseases and cancer using a novel patented Modified Vaccinia Ankara-Virus Like Particle (MVA-VLP) vaccine platform. In this platform, MVA, a large virus capable of carrying several vaccine antigens, expresses proteins that assemble into highly effective VLP immunogens in the person being vaccinated. The MVA-VLP derived vaccines elicit durable immune responses in the host similar to a live-attenuated virus, while providing the safety characteristics of a replication-defective vector.

 

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Our current development programs are focused on preventive vaccines against Human Immunodeficiency Virus (HIV), Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, and Lassa), and malaria, as well as therapeutic vaccines for chronic Hepatitis B infections and cancers. Our most advanced vaccine program is focused on the clade B subtype of HIV prevalent in the larger commercial markets of the Americas, Western Europe, Japan and Australia; this program is currently undergoing human clinical trials.

 

Our corporate strategy is to advance and protect our vaccine platform and use its unique capabilities to design and develop an array of products. We aim to advance products through to human clinical testing, and to seek partnership or licensing arrangements for commercialization. We will also leverage third party resources through collaborations and partnerships for preclinical and clinical testing. Our collaborators and partners include the National Institute of Allergy and Infectious Diseases (NIAID) of the National Institutes of Health (NIH), the HIV Vaccines Trial Network (HVTN), Centers for Disease Control and Prevention (CDC), United States Army Research Institute of Infectious Disease (USAMRIID), U.S. Naval Research Laboratory (USNRL), Emory University, University of Pittsburgh, Georgia State University Research Foundation, Peking University, University of Texas Medical Branch (UTMB), the Institute of Human Virology (IHV) at the University of Maryland, the Scripps Research Institute (TSRI), Burnet Institute in Australia, American Gene Technologies, Inc. (AGT), ViaMune, Inc., Vaxeal Holding SA, and CaroGen Corporation.

 

We have not generated any revenues from the sale of any such products, and we do not expect to generate any such revenues for at least the next several years. Our product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that we advance to clinical testing will require regulatory approval prior to commercial use and will require significant costs for commercialization. We may not be successful in our research and development efforts, and we may never generate sufficient product revenue to be profitable.

 

Critical Accounting Policies and Estimates

 

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

 

Our significant accounting policies are summarized in Note  2 to our consolidated financial statements for the year ended December 31, 2017. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

 

Revenue Recognition

 

During the years ended December 31, 2017, 2016 and 2015, w e recognized revenue in accordance with U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, as amended by Staff Accounting Bulletin No. 104, Revenue Recognition, (SAB 104). SAB 104 provides guidance in applying GAAP to revenue recognition issues, and specifically addresses revenue recognition for upfront, nonrefundable fees received in connection with research collaboration agreements. During 2017, 2016 and 2015, our revenue consisted primarily of grant and contract funding received from the NIH. Revenue from these arrangements is approximately equal to the costs incurred and is recorded as income as the related costs are incurred.

 

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for the Company beginning January 1, 2018. We do not believe the adoption of ASU 2014-09 will have a material impact on our financial statements.

 

23

 

 

Stock-Based Compensation

 

We account for stock-based transactions in which the Company receives services from employees, directors or others in exchange for equity instruments based on the fair value of the aw ard at the grant date. Compensation cost for awards of common stock is estimated based on the price of the underlying common stock on the date of issuance. Compensation cost for stock options or warrants is estimated at the grant date based on each instrument’s fair value as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period for the award.

 

In March 2016, the FASB issued Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which amends Accounting Standards Codification Topic 718, Compensation – Stock Compensation. ASU 2016-09 is an attempt to simplify several aspects of the accounting for stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted ASU 2016-09 effective January 1, 2017; such adoption had no material impact on our financial statements.

 

In May 2017, the FASB issued Accounting Standards Update 2017-09, Scope of Modification Accounting (“ASU 2017-09”), which amends Accounting Standards Codification Topic 718, Compensation – Stock Compensation. ASU 2017-09 is an attempt to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award. ASU 2017-09 is effective for the Company beginning January 1, 2018. We do not believe the adoption of ASU 2017-09 will have a material impact on our financial statements.

 

Liquidity and Capital Resources

 

O ur principal uses of cash are to finance our research and development activities. Since inception, we have funded these activities primarily from government grants and clinical trial assistance, and from sales of our equity securities. At December 31, 2017, we had cash and cash equivalents of $312,727 and total assets of $490,235, as compared to $454,030 and $610,217, respectively, at December 31, 2016. At December 31, 2017, we had a working capital deficit of $363,218, compared to positive working capital of $174,532 at December 31, 2016. Our current liabilities at December 31, 2017 and 2016 include $715,235 and $279,240, respectively, of accrued management salaries and director fees, payment of which will continue to be deferred as discussed further below.

 

Net cash used in operating activities was $1,688,464, $1,946,119, and $2,705,263 for the years ended December 31, 2017, 2016 and 2015, respectively. Generally, the variances between periods are due to fluctuations in our net losses, offset by non-cash charges such as depreciation and stock-based compensation expense, and by net changes in our assets and liabilities. Our net losses generally fluctuate based on expenditures for our research activities, partially offset by government grant revenues. As of December 31, 2017, there is $481,695 in remaining grant funds available for use during 2018. See the table with further details under “Results of Operations – Grant and Collaboration Revenues” below.

 

During 2016 and 2017 members of our executive management team and our board of directors agreed to defer portions of their salaries and fees in order to help conserve the Company ’s cash resources. As of December 31, 2017 and 2016, the accumulated deferrals totaled $715,235 and $279,240, respectively. The ongoing deferrals of approximately $30,200 per month for the management salaries and approximately $28,000 per quarter for the board of director fees will continue until such time as a significant financing event (as determined by the board of directors) is consummated.

 

NIAID has funded the costs of conducting all of our human clinical trials (Phase 1 and Phase 2a) to date for our preventive HIV vaccines, with GeoVax incurring certain costs associated with manufacturing the clinical vaccine supplies and other study support. NIAID is also currently funding the cost of an ongoing Phase 1 trial (HVTN 114), which is investigating the effect of adding a “protein boost” component to our vaccine. Concurrently, a preclinical study in non-human primates (funded by a NIAID grant) is evaluating two additional proteins specifically chosen as boosting agents for GOVX-B11, and planning is underway for a Phase 1 trial to evaluate the safety and immunogenicity of these proteins in humans , which we expect to begin in the second half of 2018. Based on the results from these studies, we expect NIAID may then be ready to support a large phase 2b efficacy trial.

 

Net cash used in investing activities was $4,350, $ -0-, and $15,850 for the years ended December 31, 2017, 2016 and 2015, respectively. Our investing activities have consisted predominantly of capital expenditures.

 

Net cash provided by financing activities was $1,551,511, $1,339,801, and $2,679,810 for the years ended December 31, 2017, 2016 and 2015, respectively. During 2015, we sold 3,000 shares of Series C convertible preferred stock for net proceeds of $2,679,810; as part of this transaction, we also issued several series of stock purchase warrants. During 2016, warrants to purchase 21,884,420 shares of common stock were exercised for total net proceeds to the Company of $1,339,801. In May 2017, we sold shares of our Series D convertible preferred stock for net proceeds of $980,000. During 2017 , warrants to purchase an aggregate of 31,639,577 shares of common stock were exercised for total net proceeds of $571,511.

 

24

 

 

On February 28, 2018, we entered into a Senior Note Purchase Agreement with Georgia Research Alliance, Inc. (GRA) pursuant to which we issued a five-year Senior Promissory Note (the “Note”) in exchange for $50,000. The Note bears an annual interest rate of 5%, payable monthly, with principal repayments beginning in the second year. In connection with the Note, we also issued to the GRA a five-year warrant to purchase 178,571 shares of our common stock at a purchase price of $0.042 per share.

 

On March 5, 2018, we sold shares of our Series E convertible preferred stock to certain institutional investors for an aggregate purchase price of $600,000. The preferred stock is convertible at any time into shares of our common stock at $0.08 per share (7,500,000 shares in the aggregate), subject to possible adjustment as provided in the certificate of designation.

 

As of December 31, 2017, we had an accumulated deficit of $37.9 million. We expect for the foreseeable future we will continue to operate at a loss. The amount of the accumulated deficit will continue to increase, as it will be expensive to continue our research and development efforts. We will continue to require substantial funds to continue our activities and cannot predict the outcome of our efforts. We believe that our existing cash resources, combined with funding from existing NIH grants and clinical trial support will be sufficient to fund our planned operations into the third quarter of 2018. We will require additional funds to continue our planned operations beyond that date. We are currently seeking sources of capital through additional government grant programs and clinical trial support, and we may also conduct additional offerings of our equity securities. However, additional funding may not be available on favorable terms or at all and if we fail to obtain additional capital when needed, we may be required to delay, scale back, or eliminate some or all of our research and development programs as well as reduce our general and administrative expenses.

 

Contractual Obligations

 

Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent liabilities for which we cannot reasonably predict future payment. Additionally, the expected timing of payment of the obligations presented below is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations.

 

The following table represents our contractual obl igations as of December 31, 2017, aggregated by type (in thousands):

 

   

Payments Due by Period

 

Contractual

Obligations

 

 

Total

   

Less than

1 Year

   

1-3

Years

   

4-5

Years

   

More than

5 years

 

Operating Lease Obligations (1)

  $ 156     $ 156     $ --     $ --     $ --  

Firm Purchase Commitments (2)

    79       79       --       --       --  

Emory University – License Agreement (3)

    --       --       --       --       --  

Total

  $ 235     $ 235     $ --     $ --     $ --  

 

 

(1)

Our operating lease obligations relate to the facility lease for our 8,430 square foot facility in Smyrna, Georgia, which houses our laboratory operations and our administrative offices. The current term of our lease expires on December 31, 2018.

 

(2)

Firm purchase commitments relate to contracts for research activities related to NIH grants.

 

(3)

Pursuant to the Emory License, we have committed to make potential future milestone and royalty payments which are contingent upon the occurrence of future events. Such events include development milestones, regulatory approvals and product sales. Because the achievement of these milestones is currently neither probable nor reasonably estimable, the contingent payments have not been included in the table above or recorded on our Consolidate d Balance Sheets. The aggregate total of all potential milestone payments included in the Emory License (excluding royalties on net sales) is approximately $3.5 million.

 

As of December 31, 2017 , except as disclosed in the table above, we had no other material firm purchase obligations or commitments for capital expenditures and no committed lines of credit or other committed funding or long-term debt. We have employment agreements with our executive officers, each of which may be terminated with no more than 90 days’ advance written notice.

 

25

 

 

Net Operating Loss Carryforwards

 

At December 31, 2017 , we had consolidated net operating loss carryforwards for income tax purposes of $70.9 million, which will expire in 2019 through 2037 if not utilized. We also have research and development tax credits of approximately $949,000 available to reduce income taxes, if any, which will expire in 2022 through 2037 if not utilized. The amount of net operating loss carryforwards and research tax credits available to reduce income taxes in any year may be limited in certain circumstances.

 

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 operating leases.

 

Results of Operations

 

We recorded net losses of $2,170,162, $3,271,701, and $2,689,287 for the years ended December 31, 2017, 2016 and 2015, respectively. Our operating results typically fluctuate due to the timing of activities and related costs associated with our research and development activities and our general and administrative costs, as described below.

 

Grant and Collaboration Revenue s

 

We recorded grant and collaboration revenues of $1,075,270, $828,918, and $428,081 for the years ended December 31, 2017, 2016 and 2015, respectively. Our grant revenues relate to grants and contracts from NIAID in support of our vaccine development activities. We record revenue associated with these grants as the related costs and expenses are incurred. The difference in our grant revenues from period to period is dependent upon our expenditures for activities supported by the grants and fluctuates based on the timing of the expenditures. Additional detail concerning our grant revenues and the remaining funds available for use as of December 31, 2017 is presented in the table below.

   

 

 

Grant Revenue Recorded During

Year Ended December 31,

   

Remaining Funds Available at December 31,

 

Grant/Contract No.

 

201 7

   

201 6

   

201 5

   

201 7

 

Staged Vaccine Development Contract

  $ 142,240     $ 55,521     $ -     $ -  

SBIR Grant No. R43AI120887

    158,972       235,535       199,116       -  

SBIR Grant No. R44AI106422

    604,703       537,862       -       256,050  

SBIR Grant No. R43AI106422

    -       -       153,501       -  

SBIR Grant No. R43AI134200

    74,355       -       -       225,645  

IPCAVD Grant

    -       -       75,464       -  

Total

  $ 980,270     $ 828,918     $ 428,081     $ 481,695  

 

In March 2017, we entered into a collaboration with American Gene Technologies International, Inc. (AGT) whereby AGT intends to conduct a Phase 1 human clinical trial with our combined technologies, with the goal of developing a functional cure for HIV infection. The cost of the clinical trial will be borne by AGT. The primary objectives of the trial will be to assess the safety and efficacy of the therapy, with secondary objectives to assess the immune responses as a measure of efficacy. In exchange for use of our vaccine product in the clinical trial, AGT paid us a fee of $95,000 which we recorded as revenue during 2017. No commercial rights or licenses have yet been granted to AGT.

 

Research and Development Expenses

 

Our research and development expenses were $2,017,350, $1,970,859, and $1,693,102 for the years ended December 31, 2017, 2016 and 2015, respectively. Research and development expense for these periods includes stock-based compensation expense of $25,953, $23,614, and $22,083 for 2017, 2016 and 2015, respectively (see discussion under “Stock-Based Compensation Expense” below).

 

26

 

 

Our research and development expenses can fluctuate considerably on a period-to-period basis, depending on our need for vaccine manufacturing by third parties, the timing of expenditures related to our grants from NIAID, the timing of costs associated with any clinical trials being funding directly by us, and other factors. The overall increase in research and development expense from 2015 to 2017 is primarily attributable to increasing expenditures related to the activities supported by our grants from NIAID. Our research and development costs do not include costs incurred by the HVTN in conducting clinical trials of our preventive HIV vaccines; those costs are funded directly to the HVTN by NIAID.

 

We do not disclose our research and development expenses by project, since our employees’ time is spread across multiple programs and our laboratory facility is used for multiple vaccine candidates. We track the direct cost of research and development expenses related to government grant revenue by the percentage of assigned employees’ time spent on each grant and other direct costs associated with each grant. Indirect costs associated with grants are not tracked separately but are applied based on a contracted overhead rate negotiated with the NIH. Therefore, the recorded revenues associated with government grants approximates the costs incurred.

 

We do not provide forward-looking estimates of costs and time to complete our research programs due to the many uncertainties associated with vaccine development. Due to these uncertainties, our future expenditures are likely to be highly volatile in future periods depending on the outcomes of the trials and studies. As we obtain data from pre-clinical studies and clinical trials, we may elect to discontinue or delay vaccine development programs to focus our resources on more promising vaccine candidates. Completion of preclinical studies and human clinical trials may take several years or more, but the length of time can vary substantially depending upon several factors. The duration and the cost of future clinical trials may vary significantly over the life of the project because of differences arising during development of the human clinical trial protocols, including the number of patients that ultimately participate in the clinical trial; the duration of patient follow-up that seems appropriate in view of the results; the number of clinical sites included in the clinical trials; and the length of time required to enroll suitable patient subjects.

 

General and Administrative Expense s

 

Our general and administrative expenses were $1,232,368, $2,131,426, and $1,429,731 for the years ended December 31, 2017, 2016 and 2015, respectively. General and administrative costs include officers’ salaries, legal and accounting costs, patent costs, and other general corporate expenses. General and administrative expense includes stock-based compensation expense of $31,271, $944,053, and $45,822 for 2017, 2016 and 2015, respectively (see discussion under “Stock-Based Compensation Expense” below). Excluding stock-based compensation expense, general and administrative expenses were $1,201,097, $1,187,373, and $1,383,909 for 2017, 2016 and 2015, respectively. The decrease in general and administrative expense from 2015 to 2016 is primarily attributable to general reductions in general and administrative costs as part of overall cost containment measures which continued into 2017 . We expect that our general and administrative costs may increase in the future in support of expanded research and development activities and other general corporate activities.

 

Stock-Based Compensation Expense

 

For the thr ee years ended December 31, 2017, the components of stock-based compensation expense were as follows:

 

   

201 7

   

201 6

   

201 5

 

Stock option expense

  $ 57,224     $ 54,805     $ 67,905  

Warrant modification expense

    -       912,862       -  

Total stock -based compensation expense

  $ 57,224     $ 967,667     $ 67,905  

 

In general, stock-based compensation expense is allocated to research and development expense or general and administrative expense according to the classification of cash compensation paid to the employee, consultant or director to whom the stock compensation was granted. For the three years ended December 31, 2017, stock-based compensation expense was allocated as follows:

 

   

201 7

   

201 6

   

201 5

 

General and administrative expense

  $ 31,271     $ 944,053     $ 45,822  

Research and development expense

    25,953       23,614       22,083  

Total stock -based compensation expense

  $ 57,224     $ 967,667     $ 67,905  

 

27

 

 

Interest Income

 

Interest income was $4,286, $1,666, and $5,465 for the years ended December 31, 2017, 2016 and 2015, respectively. The variances between years are primarily attributable to the cash available for investment and to interest rate fluctuations.

 

Impact of Inflation

 

For the three-year period ended December 31, 2017, we do not believe that inflation and changing prices had a material impact on our operations or on our financial results.

 

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our exposure to market risk is limited primarily to interest income sensitivity, which is affected by changes in the general level of United States interest rates, particularly because a significant portion of our investments are in institutional money market funds. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income received without significantly increasing risk. Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We do not have any derivative financial instruments or foreign currency instruments.

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our consolidated financial statements and supplemental schedule and notes thereto as of December 31, 2017 and 2016 and for each of the three years ended December 31, 2017, 2016 and 2015 together with the independent registered public accounting firm’s report thereon, are set forth on pages F-1 to F-16 of this Annual Report on Form 10-K.

 

ITEM 9.

Changes in and Disagreements with Accountants on Accounting AND Financial Disclosure

 

There were no disagreements with our accountants on matters of accounting or financial disclosure, or other reportable events requiring disclosure under this Item 9.

 

ITEM 9A.

Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that financial information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the required time periods, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure.

 

An evaluation was performed by our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 20 17. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2017 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

 

Management ’s Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act . Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2017 based on criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of this assessment, management concluded that, as of December 31, 2017, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

28

 

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter 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 an d 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.

 

ITEM 9B.

Other Information

 

None.

 

PART III

 

ITEM 10.

Directors, Executive Officers and Corporate Governance

 

Information required by this Item is included in our definit ive proxy statement for our 2018 meeting of shareholders to be filed with the SEC under the captions “Directors and Executive Officers” and “Corporate Governance” and is incorporated herein by this reference.

 

Code of Ethics

 

We have adopted a Code of Ethics in compliance with the applicable rules of the SEC that applies to our principal executive officer, our principal financial officer and our principal accounting officer, or persons performing similar functions . A copy of this policy is available on our website at www.geovax.com under the heading “Investors – Corporate Governance” and is also available free of charge upon written request to the attention of our Corporate Secretary by regular mail, e-mail to mreynolds@geovax.com, or facsimile at (678) 384-7281. We intend to disclose any amendment to, or a waiver from, a provision of our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics enumerated in applicable rules of the SEC. Such disclosures will be made on our website at www.geovax.com .

 

ITEM 11.

Executive Compensation

 

The i nformation required by this Item is included in our definitive proxy statement for our 2018 meeting of shareholders to be filed with the SEC under the captions “Corporate Governance” and “Compensation Discussion and Analysis” and is incorporated herein by this reference.

 

ITEM 12.

Security Ownership of Certain B eneficial Owners and Management and Related Stockholder Matters

 

The information required by this Item is included in our definit ive proxy statement for our 2018 meeting of shareholders to be filed with the SEC under the captions “Security Ownership of Principal Stockholders, Directors and Executive Officers” and “Securities Authorized for Issuance under Equity Compensation Plans” and is incorporated herein by this reference.

 

ITEM 13.

Certain Relationships and Related Party Transactions, and Director Independence

 

The information required by this Item is included in our definitive proxy statement for our 2018 meeting of shareholders to be filed with the SEC under the captions “Corporate Governance” and “Certain Relationships and Related Party Transactions” and is incorporated herein by this reference.

 

29

 

 

Item 14.       Principal AccountING  Fees and Services

 

The information required by this Item is included in our definit ive proxy statement for our 2018 meeting of stockholders to be filed with the SEC under the caption “Ratification of Appointment of the Independent Registered Public Accounting Firm” and is incorporated herein by this reference.

 

 

PART IV

 

Item 15.      Exhibits and Financial Statement Schedules

 

(a) Documents filed as part of this report:

 

(1) Financial Statements Page
  Report of Independent Registered Public Accounting Firm F-2
 

Consolidated Balance Sheets as of December 31, 2017 and 2016  

F-3
  Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015   F-4
  Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015 F-5
  Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015   F-6
  Notes to Consolidated Financial Statements F-7

 

(2)

Financial Statement Schedules

  The following financial statement schedule is set forth on page F-16 of this Annual Report on Form 10-K:
  Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2017, 2016 and 2015

 

 

  All other financial statement schedules have been omitted because they are not applicable or not required or because the information is included elsewhere in the Consolidated Financial Statements or the Notes thereto.

 

(3)

Exhibits Required by Item 601 of Regulation S-K

  The exhibits filed with this report are set forth on the exhibit index following the signature page and are incorporated by reference in their entirety into this item.

 

ITEM 16.      FORM 10-K SUMMARY

 

None.

 

[Signatures on Following Page]

 

30

 

 

S ignatures

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

GEOVAX LABS, INC.

 

BY: /s/ Robert T. McNally          

Robert T. McNally

President and Chief Executive Officer

(Principal Executive Officer)

 

Date: March 23, 2018

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature / Name   Title   Date
         
/s/ Robert T. McNally         Director   March 23, 2018
Robert T. McNally   President and Chief Executive Officer    
    (Principal Executive Officer)    
         
         
/s/ Mark W. Reynolds         Chief Financial Officer     March 23, 2018
Mark W. Reynolds   (Principal Financial and Accounting Officer)    
         
         
/s/ Randal D. Chase   Director   March 23, 2018
Randal D. Chase        
         
         
/s/ David A. Dodd   Director   March 23, 2018
David A. Dodd        
         
         
/s/ Dean G. Kollintzas   Director   March 23, 2018
Dean G. Kollintzas        
         
         
/s/ Robert T. McNally   Director   March 23, 2018
Robert T. McNally        
         
         
/s/ Harriet L. Robinson   Director   March 23, 2018
Harriet L. Robinson        
         
         
/s/ John N. Spencer, Jr.   Director   March 23, 2018
John N. Spencer, Jr.        

 

31

 

 

EXHIBIT INDEX

 

Exhibit

Number  

Description

3.1

Certificate of Incorporation (4)

3.1.1

Certificate of Amendment to the Certificate of Incorporation of GeoVax Labs, Inc. filed April 13, 2010 (8)

3.1.2

Certificate of Amendment to the Certificate of Incorporation of GeoVax Labs, Inc. filed April 27, 2010 (9)

3.1.3

Certificate of Amendment to the Certificate of Incorporation of GeoVax Labs, Inc. filed August 2, 2013 (10)

3.1.4

Certificate of Amendment to the Certificate of Incorporation of GeoVax Labs, Inc. filed May 13, 2015 (15)

3.1.5

Certificate of Amendment to the Certificate of Incorporation of GeoVax Labs, Inc. filed June 14, 2016 (17)

3.1.6

Certificate of Amendment to the Certificate of Incorporation of GeoVax Labs, Inc. filed August 4, 2017 (22)

3.2

Bylaws (4)

4.1 .1

Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock filed December 13, 2013 (12)

4.1 .2

Form of Stock Certificate for the Series B Convertible Preferred Stock (12)

4.2 .1

Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock filed February 27, 2015 (13)

4.2 .2

Form of Stock Certificate for the Series C Convertible Preferred Stock (13)

4.3.1

Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock filed May 9, 2017 (21)

4.3.2

Form of Stock Certificate for the Series D Convertible Preferred Stock (21)

4.4.1

Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock filed May 9, 2017 (23)

4.4.2

Form of Stock Certificate for the Series E Convertible Preferred Stock (23)

10.1 * *

Employment Agreement between GeoVax Labs, Inc. and Robert T. McNally effective as of April 1, 2008 (5)

10.1.1 **

Amendment No. 1 to Employment Agreement between GeoVax Labs, Inc. and Robert T. McNally dated  October 22, 2013 (11)

10.1.2 * ,**

Salary Deferral Agreement between GeoVax, Inc. and Robert T. McNally

10.1.3 * ,**

Amendment to Salary Deferral Agreement between GeoVax, Inc. and Robert T. McNally

10.2 * *

Employment Agreement between GeoVax, Inc. and Mark W. Reynolds Amended and Restated effective as of January 1, 2010 (7)

10.2.1 **

Amendment No. 1 to Employment Agreement between GeoVax Labs, Inc. and Mark W. Reynolds dated  October 22, 2 013 (11)

10.2.2 * ,**

Salary Deferral Agreement between GeoVax, Inc. and Mark W. Reynolds

10.2.3 * ,**

Amendment to Salary Deferral Agreement between GeoVax, Inc. and Mark W. Reynolds

10.3 * *

Employment Agreement between GeoVax, Inc. and Harriet Robinson effective as of November 19, 2007 (7)

10.3.1 **

Amendment No. 1 to Employment Agreement between GeoVax Labs, Inc. and Harriet Robinson dated  October 22, 2013 (11 )

10.3.2 * ,**

Salary Deferral Agreement between GeoVax, Inc. and Harriet Robinson

10.3.3 * ,**

Amendment to Salary Deferral Agreement between GeoVax, Inc. and Harriet Robinson

10.4 **

Employment Agreement between GeoVax, Inc. and Farshad Guirakhoo dated October 19, 2015 (16)

10.4.1 **

Amendment No. 1 to Employment Agreement between GeoVax Labs, Inc. and Farshad Guirakhoo dated  December 15, 2015 (18)

10.4.2 * ,**

Salary Deferral Agreement between GeoVax, Inc. and Farshad Guirakhoo

10. 5 **

GeoVax Labs, Inc. 2006 Equity Incentive Plan (2)

10.5.1 **

GeoVax Labs, Inc. 2016 Stock Incentive Plan (19)

10.5.2 **

Form of Employee Stock Option Agreement (20)

10.5.3 **

Form of Non-Qualified Stock Option Agreement (20)

10. 6

License Agreement (as amended and restated) between GeoVax, Inc. and Emory University, dated  August 23, 2002 ( 1)

10. 7

Office and Laboratory Lease between UCB, Inc. and GeoVax, Inc. (6)

10. 7.1

Amendment to Lease Agreement between UCB, Inc. and GeoVax, Inc. (14)

10.7.2 *

Second Amendment to Lease Agreement between UCB, Inc. and GeoVax, Inc.

10. 8

Summary of the GeoVax Labs, Inc. Director Compensation Plan (7)

10. 9

Form of Securities Purchase Agreement dated December 11, 2013 (12)

10.10

Form of Registration Rights Agreement dated December 11, 2013 (12)

10.11

Form of Securities Purchase Agreement dated February 25, 2015 (13)

10.12

Form of Registration Rights Agreement dated February 25, 2015 (13)

10. 13

Form of Securities Purchase Agreement dated May 8, 2017 (21)

 

32

 

 

10. 14

Form of Registration Rights Agreement dated May 8, 2017 (21)

10.15

Form of Securities Purchase Agreement dated March 5, 2018 (23)

10.1 6 *

Senior Note Purchase Agreement between Georgia Research Alliance, Inc. and GeoVax Labs, Inc., dated February 28, 2018

10.1 7 *

Common Stock Purchase Warrant dated February 28, 2018

10.18 *

Agreement with Maxim Group LLC dated February 14, 2018

14.1

Code of Ethics (3)

21.1

Subsidiaries of the Registrant (3)

31.1 *

Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

31.2 *

Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

32.1 *

Certification pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

32.2 *

Certification pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

101 *,***

The following financial information from GeoVax Labs, Inc. Annual Report on Form 10-K for the year ended December 31, 2017, formatted in Extensible Business Reporting Langue (XBRL): (i) Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii) Consolidated Statements of Stockholders' Equity for the years ended December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015, and (v) Notes to Condensed Consolidated Financial Statements.

___________________

* Filed herewith.
** Indicates a management contract or compensatory plan or arrangement.

***

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended and otherwise are not subject to liability under those sections.

 

( 1)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed October 4, 2006.

( 2)

Incorporated by reference from the registrant’s definitive Information Statement (Schedule 14C) filed August 18, 2006.

( 3)

Incorporated by reference from the registrant’s Annual Report on Form 10-K filed March 28, 2007.

( 4)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed June 23, 2008.

( 5)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed March 24, 2008.

( 6)

Incorporated by reference from the registrant’s Quarterly Report on Form 10-Q filed November 6, 2009.

( 7)

Incorporated by reference from the registrant’s Annual Report on Form 10-K filed March 8, 2010.

( 8)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed April 14, 2010.

( 9)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed April 28, 2010.

(1 0)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed August 2, 2013.

(1 1)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed October 23, 2013.

(1 2)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed December 17, 2013.

( 13)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed March 2, 2015.

(14 )

Incorporated by reference from the registrant’s Annual Report on Form 10-K filed March 20, 2015.

(15 )

Incorporated by reference from the registrant’s Current Report on Form 8-K filed May 14, 2015.

(16 )

Incorporated by reference from the registrant’s Quarterly Report on Form 10-Q filed November 12, 2015.

(17 )

Incorporated by reference from the registrant’s Current Report on Form 8-K filed June 16, 2016.

(18 )

Incorporated by reference from the registrant’s Annual Report on Form 10-K filed March 16, 2016.

( 19)

Incorporated by reference from the registrant’s definitive Proxy Statement filed April 29, 2016.

(20 )

Incorporated by reference from the registrant’s Quarterly Report on Form 10-Q filed August 5, 2016.

(2 1)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed May 9, 2017.

(2 2)

Incorporated by reference from the registrant’s Current Report on Form 8-K filed August 4, 2017.

(23 )

Incorporated by reference from the registrant’s Current Report on Form 8-K filed March 6, 2018.

 

33

 

 

GEOVAX LABS, INC.

INDEX TO 2017 CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

Report of Independent Registered Public Accounting Firm

F-2

 

 

Consolidated Balance Sheets as of December 31, 2017 and 2016

F-3

 

 

Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015

F-4

 

 

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015

F-5

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015

F-6

 

 

Notes to Consolidated Financial Statements

F-7

 

 

Financial Statement Schedule:

 

Schedule II – Valuation and Qualifying Accounts for the years ended

 

December 31, 2017, 2016 and 2015

F-16

 

F-1

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and the Board of Directors of GeoVax Labs, Inc.

 

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of GeoVax Labs, Inc. and subsidiary (the “Company”) as of December 31, 201 7 and 2016, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes to the consolidated financial statements and schedule (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated fin ancial statements, the Company has suffered recurring losses from operations and its total liabilities exceed its total assets. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness on the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company ’s auditor since 2005.

 

Atlanta, Georgia

March 23, 2018

 

 

235 Peachtree Street NE | Suite 1800 | Atlanta, Georgia 30303 | Phone 404.588.4200 | Fax 404.588.4222

A member of Allinial Global

 

F-2

 

 

 

GEOVAX LABS, INC.

CONSOLIDATED BALANCE SHEETS

 

   

December 31,

 
   

201 7

   

201 6

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 312,727     $ 454,030  

Grant funds receivable

    59,758       28,074  

Prepaid expenses and other current assets

    75,589       62,275  
                 

Total current assets

    448,074       544,379  
                 

Property and equipment, net

    31,151       54,828  
                 

Deposits

    11,010       11,010  
                 

Total assets

  $ 490,235     $ 610,217  
                 
                 

LIABILITIES AND STOCKHOLDERS ’ EQUITY

               

Current liabilities:

               

Accounts payable

  $ 77,581     $ 75,607  

Accrued expenses (Note 4)

    733,711       294,240  
                 

Total current liabilities

    811,292       369,847  
                 

Commitments (Note 6 )

               
                 

Stockholders ’ equity (deficiency):

               

Preferred stock, $.01 par value :

               

Authorized shares – 10,000,000

               

Series B convertible preferred stock, $1,000 stated value; 100 shares issued and outstanding at December 31, 2017 and 201 6, respectively

    76,095       76,095  

Series C convertible preferred stock, $1,000 stated value; 2,570 and 2,868 shares issued and outstanding at December 31, 2017 and 2016, respectively

    842,990       940,705  

Series D convertible preferred stock, $1,000 stated value; 1,000 and -0- shares issued and outstanding at December 31, 2017 and 2016 , respectively

    980,000       -  

Common stock, $.001 par value :

               
Autho rized shares – 600,000,000 and 300,000,000 at December 31, 2017 and 2016 , respectively                

Issued and outstanding shares – 106,736,810 and 55,235,233 at December 31, 2017 and 2016 , respectively

    106,737       55,235  

Additional paid-in capital

    35,589,911       34,914,963  

Accumulated d eficit

    (37,916,790 )     (35,746,628 )
                 

Total stockholders ’ equity (deficiency)

    (321,057 )     240,370  
                 

Total liabilities and stockholders ’ equity

  $ 490,235     $ 610,217  

 

See accompanying notes to consolidated financial statements.

 

F-3

 
 

 

GEOVAX LABS. INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   

Years Ended December 31,

 
   

201 7

   

201 6

   

20 15

 

Grant and collaboration revenue

  $ 1,075,270     $ 828,918     $ 428,081  
                         

Operating expenses:

                       

Research and development

    2,017,350       1,970,859       1,693,102  

General and administrative

    1,232,368       2,131,426       1,429,731  

Total operating expenses

    3,249,718       4,102,285       3,122,833  
                         

Loss from operations

    (2,174,448 )     (3,273,367 )     (2,694,752 )
                         

Other income :

                       

Interest income

    4,286       1,666       5,465  

Total other income

    4,286       1,666       5,465  
                         

Net loss

  $ (2,170,162 )   $ (3,271,701 )   $ (2,689,287 )
                         

Basic and diluted:

                       

Loss per common share

  $ (0.03 )   $ (0.08 )   $ (0.08 )

Weighted average shares outstanding

    68,605,817       41,516,514       31,950,813  

 

See accompanying notes to consolidated financial statements .

 

F-4

 
 

 

GEOVAX LABS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

 

   

Series B Convertible

Preferred Stock

   

Series C Convertible

Preferred Stock

   

Series D Convertible

Preferred Stock

   

 

Common Stock

   

 

Additional

   

 

 

   

Total

 
   

Shares

   

Amount

   

Shares

   

Amount

   

Shares

   

Amount

   

Shares

   

Amount

   

Paid-in

Capital

   

Accumulated

Deficit

   

Stockholders

Equity

 

Balance at December 31, 2014

    100     $ 76,095       -     $ -       -     $ -       31,950,813     $ 31,951     $ 30,823,769     $ (29,785,640 )   $ 1,146,175  

Sale of convertible preferred stock for cash

    -       -       3,000       983,941       -       -       -       -       1,695,869       -       2,679,810  

Stock-based compensation expense

    -       -       -       -       -       -       -       -       67,905       -       67,905  

Net loss for the year ended December 31, 2015

    -       -       -       -       -       -       -       -       -       (2,689,287 )     (2,689,287 )

Balance at December 31, 2015

    100       76,095       3,000       983,941       -       -       31,950,813       31,951       32,587,543       (32,474,927 )     1,204,603  

Conversion of preferred stock to common stock

    -       -       (132 )     (43,236 )     -       -       1,400,000       1,400       41,836       -       -  

Sale of common stock for cash upon warrant exercise

    -       -       -       -       -       -       21,884,420       21,884       1,317,917       -       1,339,801  

Stock-based compensation expense

    -       -       -       -       -       -       -       -       967,667       -       967,667  

Net loss for the year ended December 31, 2016

    -       -       -       -       -       -       -       -       -       (3,271,701 )     (3,271,701 )

Balance at December 31, 2016

    100       76,095       2,868       940,705       -       -       55,235,233       55,235       34,914,963       (35,746,628 )     240,370  

Sale of convertible preferred stock for cash

    -       -       -       -       1,000       980,000       -       -       -       -       980,000  

Conversion of preferred stock to common stock

    -       -       (298 )     (97,715 )     -       -       19,862,000       19,862       77,853       -       -  

Sale of common stock for cash upon warrant exercise

    -       -       -       -       -       -       31,639,577       31,640       539,871       -       571,511  

Stock-based compensation expense

    -       -       -       -       -       -       -       -       57,224       -       57,224  

Net loss for the year ended December 31, 2017

    -       -       -       -       -       -       -       -       -       (2,170,162 )     (2,170,162 )

Balance at December 31, 2017

    100     $ 76,095       2,570     $ 842,990       1,000     $ 980,000       106,736,810     $ 106,737     $ 35,589,911     $ (37,916,790 )   $ (321,057 )

 

F-5

 
 

 

GEOVAX LABS. INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   

Years Ended December 31,

 
   

201 7

   

201 6

   

20 15

 

Cash flows from operating activities:

                       

Net loss

  $ (2,170,162 )   $ (3,271,701 )   $ (2,689,287 )

Adjustments to reconcile net loss to net cash used in operating activities :

                       

Depreciation and amortization

    28,027       28,780       28,935  

Stock-based compensation expense

    57,224       967,667       67,905  

Changes in assets and liabilities :

                       

Grant funds receivable

    (31,684 )     91,904       (40,637 )

Prepaid expenses and other current assets

    (13,314 )     (5,626 )     (12,146 )

Accounts payable and accrued expenses

    441,445       242,857       (60,033 )

Total adjustments

    481,698       1,325,582       (15,976 )

Net cash used in operating activities

    (1,688,464 )     (1,946,119 )     (2,705,263 )
                         

Cash flows from investing activities:

                       

Purchase of property and equipment

    (4,350 )     -       (15,850 )

Net cash used in investing activities

    (4,350 )     -       (15,850 )
                         

Cash flows from financing activities:

                       

Net p roceeds from sale of preferred stock

    980,000       -       2,679,810  

Net p roceeds from sale of common stock

    571,511       1,339,801       -  

Net cash provided in financing activities

    1,551,511       1,339,801       2,679,810  
                         

Net decrease in cash and cash equivalents

    (141,303 )     (606,318 )     (41,303 )

Cash and cash equivalents at beginning of period

    454,030       1,060,348       1,101,651  
                         

Cash and cash equivalents at end of period

  $ 312,727     $ 454,030     $ 1,060,348  

 

Supplemental disclosure of non-cash financing activities:

As discussed in Note 7, during the year ended December 31, 2017, 298 shares of Series C Convertible Preferred Stock were converted into 19,862,000 shares of common stock and during the year ended December 31, 2016, 132 shares of Series C Convertible Preferred Stock were converted into 1,400,000 shares of common stock.

 

See accompanying notes to consolidated financial statements .

 

F-6

 

 

GEOVAX LABS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Years Ended December 31, 2017, 2016 and 2015

 

 

 

1.

Description of Business

 

GeoVax Labs, Inc. (“GeoVax” or the “Company”), is a clinical-stage biotechnology company developing human vaccines using our novel vaccine platform. Our current development programs are focused on preventive vaccines against Human Immunodeficiency Virus (HIV), Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, Lassa), and malaria, as well as therapeutic vaccines for chronic Hepatitis B infections and cancers. We believe our technology and vaccine development expertise are well-suited for a variety of human infectious diseases and we intend to pursue further expansion of our product pipeline.

 

Certain of our vaccine development activities have been, and continue to be, financially supported by the U.S. government. This support has been both in the form of research grants and contracts awarded directly to us, as well as indirect support for the conduct of preclinical animal studies and human clinical trials.

 

We operate in a highly regulated and competitive environment. The manufacturing and marketing of pharmaceutical products require approval from, and are subject to, ongoing oversight by the Food and Drug Administration (FDA) in the United States, by the European Medicines Agency (EMA) in the European Union, and by comparable agencies in other countries. Obtaining approval for a new pharmaceutical product is never certain, may take many years and often involves expenditure of substantial resources. Our goal is to build a profitable company by generating income from products we develop and commercialize, either alone or with one or more potential strategic partners.

 

GeoVax is incorporated under the laws of the State of Delaware and our principal offices are located in Smyrna, Georgia (metropolitan Atlanta area).  

 

 

2.

Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of GeoVax Labs, Inc. together with those of our wholly-owned subsidiary, GeoVax, Inc. All intercompany transactions have been eliminated in consolidation.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve -month period following the date of these consolidated financial statements. We are devoting substantially all of our present efforts to research and development. We have funded our activities to date from government grants and clinical trial assistance, and from sales of our equity securities. We will continue to require substantial funds to continue our research and development activities.

 

We believe that our existing cash resources and government funding commitments will be sufficient to continue our planned operations into the third quarter of 2018. Due to our history of operating losses and our continuing need for capital to conduct our research and development activities, there is substantial doubt concerning our ability to operate as a going concern beyond that date. We are currently exploring sources of capital through additional government grants and contracts. We also intend to secure additional funds through sales of our equity securities or by other means. Management believes that we will be successful in securing the additional capital required to continue the Company’s planned operations, but that our plans do not fully alleviate the substantial doubt about the Company’s ability to operate as a going concern. Additional funding may not be available on favorable terms or at all. If we fail to obtain additional capital when needed, we will be required to delay, scale back, or eliminate some or all of our research and development programs as well as reduce our general and administrative expenses.

 

F-7

 

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense s during the reporting period. Actual results may differ from those estimates.

 

Cash and Cash Equivalents

 

We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our cash and cash equivalents consist primarily of bank depos its and money market accounts. The recorded values approximate fair market values due to the short maturities.

 

Fair Value of Financial Instruments and Concentration of Credit Risk

 

Financial instruments that subject us to concentration of credit risk consist primarily of cash and cash equivalents, which are maintained by a high credit quality financial institution. The carrying values reported in the balance sheets for cash and cash equivalents approximate fair values.

 

Property and Equipment

 

Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to operations as incurred, while additions and improvements are capitalized. We calculate depreciation using the straight-line method over the estimated useful lives of the assets which range from three to five years. We amortize leasehold improvements using the straight-line method over the term of the related lease.

 

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016 - 02, Leases (ASU 2016 - 02 ). ASU 2016 - 02 requires lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. It will also require disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted. We do not currently know the impact ASU 2016 - 02 will have on our financial statements, which will be dependent upon the nature of any lease obligations we may have at the time of our adoption of ASU 2016 - 02.

 

Impairment of Long-Lived Assets

 

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected t o be generated by such assets. If we consider such assets to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the expected future net cash flows from the assets.

 

Accrued Expenses

 

As part of the process of preparing our financial statements, we estimate expenses that we believe we have incurred, but have not yet been billed by our third -party vendors. This process involves identifying services and activities that have been performed by such vendors on our behalf and estimating the level to which they have been performed and the associated cost incurred for such service as of each balance sheet date.

 

Net Loss Per Share

 

Basic and diluted loss per common share are computed based on the weighted average numbe r of common shares outstanding. Common share equivalents consist of common shares issuable upon conversion of convertible preferred stock, and upon exercise of stock options and stock purchase warrants. All common share equivalents are excluded from the computation of diluted loss per share since the effect would be anti-dilutive. Common share equivalents which could potentially dilute basic earnings per share in the future, and which were excluded from the computation of diluted loss per share, totaled approximately 245.3 million, 93.9 million, and 90.3 million at December 31, 2017, 2016 and 2015, respectively.

 

F-8

 

 

Revenue Recognition

 

During the years ended December 31, 2017, 2016 and 2015, w e recognized revenue in accordance with U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, as amended by Staff Accounting Bulletin No. 104, Revenue Recognition, (SAB 104 ). SAB 104 provides guidance in applying GAAP to revenue recognition issues, and specifically addresses revenue recognition for upfront, nonrefundable fees received in connection with research collaboration agreements. During 2017, 2016 and 2015, our revenue consisted primarily of grant and contract funding received from the NIH (see Note 5 ). Revenue from these arrangements is approximately equal to the costs incurred and is recorded as income as the related costs are incurred.

 

In May 2014, the FASB issued Accounting Standards Update 2014 - 09, Revenue from Contracts with Customers (ASU 2014 - 09 ), which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five -step model to determine when and how revenue is recognized. The core principle is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014 - 09 is effective for the Company beginning January 1, 2018. We do not believe the adoption of ASU 2014 - 09 will have a material impact on our financial statements.

 

Research and Development Expense

 

Research and development expense primarily consists of costs incurred in the discovery, development, testing and manufacturing of our product candidates. These expenses consist primarily of (i) salaries, benefits, and stock-based compensation for personnel, (ii) laboratory supplies and facility-related expenses to conduct development, (iii) fees paid to third -party service providers to perform, monitor and accumulate data related to our preclinical studies and clinical trials, (iv) costs related to sponsored research agreements, and (v) the costs to procure and manufacture materials used in clinical trials. These costs are charged to expense as incurred.

 

Patent Costs

 

Our expenditures relating to obtaining and protecting patents are charged to expense when incurred and are included in general and administrative expense.  

 

Period to Period Comparisons

 

Our operating results are expected to fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results for future periods.  

 

Income Taxes

 

We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities a nd their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance unless, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

 

Stock-Based Compensation

 

We account for stock-based transactions in which the Company receives services from employees, directors or others in exchange for equity instruments based on the fair value of the aw ard at the grant date. Compensation cost for awards of common stock is estimated based on the price of the underlying common stock on the date of issuance. Compensation cost for stock options or warrants is estimated at the grant date based on each instrument’s fair value as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period for the award. See Note 9 for additional stock-based compensation information.

 

F-9

 

 

In March 2016, the FASB issued Accounting Standards Update 2016 - 09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016 - 09” ), which amends Accounting Standards Codification Topic 718, Compensation – Stock Compensation. ASU 2016 - 09 is an attempt to simplify several aspects of the accounting for stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. We adopted ASU 2016 - 09 effective January 1, 2017; such adoption had no material impact on our financial statements.

 

In May 2017, the FASB issued Accounting Standards Update 2017 - 09, Scope of Modification Accounting (“ASU 2017 - 09” ), which amends Accounting Standards Codification Topic 718, Compensation – Stock Compensation. ASU 2017 - 09 is an attempt to provide clarity and reduce both ( 1 ) diversity in practice and ( 2 ) cost and complexity when applying the guidance in Topic 718 Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award. ASU 2017 - 09 is effective for the Company beginning January  1, 2018. We do not believe the adoption of ASU 2017 - 09 will have a material impact on our financial statements.

 

Other Recent Accounting Pronouncements

 

In July 2017, the FASB issued Accounting Standards Update 2017 - 11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017 - 11” ), which amends Accounting Standards Codification Topic 260, Earnings Per Share, Topic 480, Distinguishing Liabilities from Equity, and Topic 815, Derivatives and Hedging. ASU 2017 - 11 changes the classification of certain equity-linked financial instruments (or embedded features) with down round features and clarifies existing disclosure requirements for equity-classified instruments. ASU 2017 - 11 is effective for the Company beginning January  1, 2019. We are currently evaluating the impact of the adoption of ASU 2017 - 11 on our financial statements.

 

Except as discussed above, t here have been no recent accounting pronouncements or changes in accounting pronouncements which we expect to have a material impact on our financial statements, nor do we believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on our financial statements.

 

 

3.

Property and Equipment

 

Property and equipment as shown on the accompanying Consolidated Balance Sheets is composed of the following as of December 31, 2017 and 2016:

 

   

201 7

   

201 6

 

Laboratory equipment

  $ 530,306     $ 525,956  

Leasehold improvements

    115,605       115,605  

Other furniture, fixtures & equipment

    28,685       28,685  

Total property and equipment

    674,596       670,246  

Accumulated depreciation and amortization

    (643,445 )     (615,418 )

Property and equipment, net

  $ 31,151     $ 54,828  

 

Depreciation and leasehold amortization expense was $28,027, $28,780, and $28,935 during the years ended December 31, 2017, 2016 and 2015, respectively.

 

 

4.

Accrued Expenses

 

Accrued expenses as shown on the accompanying Consolidated Balance Sheets is composed of the following as of December 31, 2017 and 2016:

 

   

2017

   

2016

 

Accrued management salaries

  $ 532,615     $ 201,170  

Accrued directors ’ fees

    182,620       78,070  

Other accrued expenses

    18,476       15,000  

Total accrued expenses

  $ 733,711     $ 294,240  

 

F-10

 

 

 

5 .

Grants and Collaboration Revenue

 

Government Grants and Contracts

 

We receive payments from government entities under our grants and contracts with the National Institute of Allergy and Infectious Diseases in support of certain of our vaccine research and development efforts. We record revenue associated with government grants and contracts as the reimbursable costs are incurred. During 2017, 2016, and 2015, we recorded $980,270, $828,918, and $428,081, respectively, of revenue associated with these grants and contracts. As of December 31, 2017, there is an aggregate of $481,695 in remaining grant funds available for use during 2018.

 

Collaboration Revenue

 

In March 2017, we entered into a clinical trial collaboration agreement with American Gene Technologies International, Inc. (“AGT”) whereby AGT intends to conduct a phase 1 human clinical trial investigating our combined technologies as a functional cure for HIV infection. In connection with the agreement, AGT paid to us a non-refundable fee of $95,000, which we recorded as collaboration revenue during 2017.

 

 

6 .

Commitments

 

Lease Agreement

 

We lease approximately 8 ,400 square feet of office and laboratory space pursuant to an operating lease which expires on December 31, 2018. Rent expense for the years ended December 31, 2017, 2016 and 2015 was $151,748, $149,288, and $146,092, respectively. Future minimum lease payments total $156,545 in 2018.

 

Other Commitments

 

In the normal course of business, we may enter into various firm purchase commitments related to production and testing of our vaccine material, conduct of clinical trials, and other research-related act ivities. As of December 31, 2017, we had approximately $79,000 of unrecorded outstanding purchase commitments to our vendors and subcontractors, all of which we expect will be due in 2018. We expect this entire amount to be reimbursable to us pursuant to currently outstanding government grants.

 

 

7 .

Preferred Stock

 

Series B Convertible Preferred Stock

 

Our Series B Convertible Preferred Stock, $1,000 stated value (“Series B Preferred Stock”), has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series B Preferred Stock has no voting rights and is not entitled to a dividend. As of December 31, 2017, there were 100 shares of Series B Preferred Stock outstanding, convertible at any time at the option of the holder into 285,714 shares of common stock.

 

Series C Convertible Preferred Stock

 

In February 2015, we issued 3,000 shares of our Series C Convertible Preferred Stock, $1,000 stated value (“ Series C Preferred Stock”) and warrants to purchase up to an aggregate of 51,333,331 shares of our common stock for total net proceeds of $2,679,810. We allocated $1,695,869 of the purchase price to the fair value of the warrants issued in the transaction (recorded to Additional Paid-in Capital) and recorded the net amount of $983,941 as the initial carrying value of the Series C Preferred Stock.

 

The Series C Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series C Preferred Stock has no voting rights and is not entitled to a dividend. The Series C Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, and contains price adjustment provisions which may, under certain circumstances, reduce the conversion price if we sell, or grant options to purchase, our common stock at a price lower than the then conversion price of the Series C Preferred Stock. During 2016, 132 shares of Series C Preferred Stock were converted into 1,400,000 shares of common stock. During 2017, 298 shares of Series C Preferred Stock were converted into 19,862,000 shares of common stock. In May 2017, in connection with the issuance of our Series D Convertible Preferred Stock discussed below, the conversion price of our Series C Preferred Stock was automatically reduced from $0.05 per share to $0.015 per share. As of December 31, 2017, there were 2,570 shares of Series C Preferred Stock outstanding, convertible into 171,349,733 shares of common stock.

 

F-11

 

 

Series D Convertible Preferred Stock

 

In May 2017, we issued 1,000 shares of our Series D Convertible Preferred Stock, $1,000 stated value (“ Series D Preferred Stock”), for gross proceeds of $1.0 million. Net proceeds, after deduction of certain expenses, were $980,000.

 

Each share of Series D Preferred Stock is entitled to a liquidation preference equal to the initial purchase price, has no voting rights, and is not entitled to a dividend. The Series D Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, with an initial conversion price of $0.015 per share. The Series D Preferred Shares contains price adjustment provisions, which may, under certain circumstances, reduce the conversion price on future dates according to a formula based on the then-current market price for our common stock.

 

We assessed the Series D Preferred Stock under ASC Topic 480, Distinguishing Liabilities from Equity ” (“ASC 480” ), ASC Topic 815, Derivatives and Hedging ” (“ASC 815” ), and ASC Topic 470, Debt ” (“ASC 470” ). The Series D Preferred Stock contains an embedded feature allowing an optional conversion by the holder into common stock which meets the definition of a derivative. However, we determined that the preferred stock is an “equity host” (as described by ASC 815 ) for purposes of assessing the embedded derivative for potential bifurcation and that the optional conversion feature is clearly and closely associated to the preferred stock host; therefore, the embedded derivative does not require bifurcation and separate recognition under ASC 815. We determined there to be a beneficial conversion feature (“BCF”) requiring recognition at its intrinsic value. Since the conversion option of the preferred stock was immediately exercisable, the amount allocated to the BCF was immediately accreted to preferred dividends, resulting in an increase in the carrying value of the preferred stock.

 

 

8 .

Common Stock

 

Increase in Authorized Shares of Common Stock

 

At a special meeting of our stockholders held on August 4, 2017, our stockholders approved an amendment to our certificate of incorporation to increase our authorized shares of common stock from 300,000,000 to 600,000,000 shares. The amendment to our certificate of incorporation was filed with the Delaware Secretary of State on August 4, 2017.

 

Common Stock Transactions

 

D uring 2017 and 2016, we issued 19,862,000 and 1,400,000 shares of our common stock, respectively, pursuant to the conversion of our Series C Preferred Stock (see Note 7 ).

 

During 2017, we issued 31,639,577 shares of our common stock related to the exercise of stock purchase warrants, resulting in net proceeds to us of $571,511. During 2016, we issued 21,884,420 shares of our common stock related to the exercise of stock purchase warrants, resulting in net proceeds of $1,339,801.

 

Stock Option Plans

 

In 2006 we adopted the GeoVax Labs, Inc. 2006 Equity Incentive Plan (the “2006 Plan”) and during 2016, our stockholders approved the GeoVax Labs, Inc. 2016 Stock Incentive Plan (the “2016 Plan”) which provides our Board of Directors broad discretion in creating equity incentives for employees, officers, directors and consultants. We have reserved 1,550,300 shares of our common stock for currently outstanding stock options under the 2006 Plan, and 6,000,000 shares for outstanding stock options and future issuances under the 2016 Plan. The 2016 Plan replaces the 2006 Plan, which expired September 28, 2016, and no further grants may be made under the 2006 Plan. As such, the 2016 Plan will serve as the sole equity incentive compensation plan for the Company . The exercise price for any option granted may not be less than fair value ( 110% of fair value for ISO’s granted to certain employees). Options have a maximum ten -year term and generally vest over three years.

 

F-12

 

 

Certain information concerning our stock opti on plans as of December 31, 2017, and a summary of activity during the year then ended is presented below:

 

   

 

 

 

Number

of Shares

   

 

Weighted-

Average

Exercise

Price

   

Weighted-

Average

Remaining

Contractual

Term (yrs)

   

 

 

Aggregate

Intrinsic

Value

 

Outstanding at December 31, 201 6

    3,499,475     $ 1.21                  

Granted

    3,680,000       0.05                  

Exercised

    -       -                  

Forfeited or expired

    (155,200 )     15.25                  

Outstanding at December 31, 201 7

    7,024,275     $ 0.29       8.8     $ -0-  

Exercisable at December 31, 201 7

    1,951,484     $ 0.90       6.6     $ -0-  

 

Stock Purchase Warrants

 

The following table presents a summary of stock purchase warrant activity during the year ended December 31, 2017:

 

   

 

Number of Shares

   

Weighted Average

Exercise Price

 

Outstanding at December 31, 2016

    32,751,578     $ 0.07  

Issued

    -       -  

Exercised

    (31,639,577 )     0.02  

Forfeited or expired

    (1,112,001 )     0.57  

Outstanding and exercisable at December 31, 2017

    -0-     $ -  

 

Common Stock Reserved

 

A summary of common stock reserved for future issuance as of December 31, 2017 is as follows:

 

Stock Option Plans

    7,550,300  

Series B Convertible Preferred Stock

    285,714  

Series C Convertible Preferred Stock

    171,349,733  

Series D Convertible Preferred Stock

    66,666,666  

Total

    245,852,413  

 

 

9 .

Stock-Based Compensation

 

Stock Option Plan s

 

We use the Black-Scholes model for determining the grant date fair value of our stock option grants. This model utilizes certain information, such as the interest rate on a risk-free security with a term generally equivalent to the expected life of the option being valued and requires certain other assumptions, such as the expected amount of time an option will be outstanding until it is exercised or expired, to calculate the fair value of stock options granted. The significant assumptions we used in our fair value calculations were as follows:

   

201 7

   

201 6

   

20 15

 

Weighted average risk-free interest rates

    2.40 %     2.26 %     1.99 %

Expected dividend yield

    0.0 %     0.0 %     0.0 %

Expected life of option (yrs)

 

7.0

    7.0     7.0  

Expected volatility

    89.73 %     88.72 %     91.43 %

 

Stock-based compensation expense related to our stock option plans was $57,224, $54,805, and $67,905 during the years ended December 31, 2017, 2016 and 2015, respectively. Stock option expense is allocated to research and development expense or to general and administrative expense based on the nature of the services provided by the related individuals. For the three years ended December 31, 2017, stock option expense was allocated as follows:

 

F-13

 

 

   

201 7

   

201 6

   

20 15

 

General and administrative expense

  $ 31,271     $ 31,191     $ 45,822  

Research and development expense

    25,953       23,614       22,083  

Total stock option expense

  $ 57,224     $ 54,805     $ 67,905  

 

As of December 31, 201 7, there was $218,280 of unrecognized compensation expense related to stock-based compensation arrangements pursuant to our stock option plans. The unrecognized compensation expense is expected to be recognized over a weighted average remaining period of 2.6 years.

 

Additional information concerning our stock options for t he years ended December 31, 2017, 2016 and 2015 is as follows:

 

   

201 7

   

201 6

   

201 5

 

Weighted average fair value of options granted

  $ 0.04     $ 0.05     $ 0.09  

Intrinsic value of options exercised

    -       -       -  

Total fair value of options vested

    58,337       54,757       66,622  

 

Other Non-E mp loyee Stock-Based C ompensation

 

We recorded general and administrative expense of $- 0 -, $912,862 and $- 0 - during the years ended December 31, 2017, 2016 and 2015, respectively, related to modifications made to certain stock purchase warrants.

 

 

10 .

Retirement Plan

 

We participate in a multi-employer defined contribution retirement plan (the “401k Plan”) administered by a third -party service provider, and the Company contributes to the 401k Plan on behalf of its employees based upon a matching formula. During the years ended December 31, 2017, 2016 and 2015 our contributions to the 401k Plan were $29,265, $33,871, and $40,296, respectively.

 

 

11 .

Income Taxes

 

At December 31, 2017 , we have a consolidated federal net operating loss (“NOL”) carryforward of approximately $70.9 million, available to offset against future taxable income which expires in varying amounts in 2019 through 2037. Additionally, we have approximately $949,000 in research and development (“R&D”) tax credits that expire in 2022 through 2037 unless utilized earlier. No income taxes have been paid to date. Section 382 of the Internal Revenue Code contains provisions that may limit our utilization of our NOL and R&D tax credit carryforwards in any given year as a result of significant changes in ownership interests that have occurred in past periods or may occur in future periods.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law in the United States. The Tax Act makes broad changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%. With regard to the Tax Act impact to the Company for the year ended December 31, 2017, we have recognized the impact of tax reform related to the revaluation of deferred tax assets and liabilities based on the rates we expect them to reverse in the future, which is generally 21%. The amount recorded as tax expense related to the remeasurement of the deferred tax balance was approximately $10.1 million, which was fully offset by a reduction in the valuation allowance.

 

F-14

 

 

Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities included th e following at December 31, 2017 and 2016:

 

   

201 7

   

201 6

 

Deferred tax assets:

               

Net operating loss carryforward

  $ 16,273,259     $ 24,689,298  

Research and development tax credit carryforward

    949,340       892,231  

Stock-based compensation expense

    1,709,867       2,748,899  

Accrued salaries and directors ’ fees

    185,961       -  

Depreciation

    5,532       1,331  

Total deferred tax assets

    19,123,959       28,331,759  
                 

Deferred tax liabilities

    -       -  
                 

Net deferred tax assets

    19,123,959       28,331,759  

Valuation allowance

    (19,123,959 )     (28,331,759 )
Net deferred tax asset after reduction for valuation allowance   $ -0-     $ -0-  

 

We have established a full valuation allowance equal to the amount of our net deferred tax assets due to uncertainties with respect to our ability to generate sufficient taxable income to realize these assets in the future. A reconciliation of the income tax benefit on losses at the U.S. federal statutory rate to the reported income tax expense is as follows:

 

   

201 7

   

201 6

   

20 15

 

U.S. federal statutory rate applied to pretax loss

  $ (737,855 )   $ (1,112,378 )   $ (936,936 )

Permanent differences

    436       2,012       2,914  

Research and development credits

    57,109       59,087       67,901  

Impact of Tax Act

    10,086,795       -       -  

Change in valuation allowance

    (9,406,485 )     1,051,279       866,121  

Reported income tax expense

  $ -0-     $ -0-     $ -0-  

 

 

12 .      Subsequent Event s

 

During January and February 2018, 300 shares of Series D Preferred Stock were converted into 20,000,000 shares of common stock.

 

During February 2018, we issued 5,000,000 shares of our common stock in connection with entering into a financial advisory and investment banking agreement.

 

On February 28, 2018, we entered into a Senior Note Purchase Agreement with Georgia Research Alliance, Inc. (GRA) pursuant to which we issued a five -year Senior Promissory Note (the “Note”) in exchange for $50,000. The Note bears an annual interest rate of 5%, payable monthly, with principal repayments beginning in the second year. In connection with the Note, we also issued to the GRA a five -year warrant to purchase 178,571 shares of our common stock at a purchase price of $0.042 per share.

 

On March 5, 2018, we sold shares of our Series E convertible preferred stock to certain institutional investors for an aggregate purchase price of $600,000. The preferred stock is convertible at any time into shares of our common stock at $0.08 per share ( 7,500,000 shares in the aggregate), subject to possible adjustment as provided in the certificate of designation.

 

F-15

 

 

 

GEOVAX LABS, INC.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

 

For t he Years Ended December 3 1, 2017, 2016 and 2015

 

 

           

Additions

                 

 

 

Description

 

Balance at

Beginning

Of Period

   

Charged to

Costs and

Expenses

   

Charged to

Other

Accounts

   

 

 

Deductions

   

Balance at

End

Of Period

 

Reserve Deducted in the Balance Sheet From the Asset to Which it Applies:

                                       
                                         

Allowance for Deferred Tax Assets

                                       

Year ended December 31, 201 7

  $ 28,331,759     $ 9,207,800     $ -0-     $ -0-     $ 19,123,959  

Year ended December 31, 201 6

    27,131,034       1,200,725       -0-       -0-       28,331,759  

Year ended December 31, 201 5

    26,021,943       1,109,094       -0-       -0-       27,131,034  

 

F- 16

 

Exhibit 10.1.2

 

GEOVAX , INC.

SALARY DEFERRAL AGREEMENT

 

This Salary Deferral Agreement (the “Agreement”) is entered into as of April 25, 2016 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Robert T. McNally (the “Employee”).

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and

 

Whereas , as part of its cash conservation measures, the Company is asking certain of its employees to accept salary reductions and/or deferrals;

 

Whereas , Employee currently is currently earning an annualized gross salary of $275,000 (“Base Salary”), which has been previously reduced by 40% to $165,000, based on Employee’s reduction of his time devoted to the Company’s business;

 

Now, therefore , the parties hereby agree as follows:

 

1.

Salary Deferral.

  Effective May 1, 2016, Employee agrees to accept a deferral of all but $25,000 of his Base Salary, which amount will be accrued and paid to Employee as described below.

 

2.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the earlier of (i) a significant event (to include financing, corporate partnership, etc., as determined by the Company), or (ii) December 31, 2016 (the “Discontinuance Date”).

 

3.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

  

ACCEPTANCE

       
Employee     Date  
         
         
Agreed:        
  GeoVax, Inc.      
  By:      

 

Exhibit 10.1.3

 

GEOVAX , INC.

AMENDMENT NO. 1 TO SALARY DEFERRAL AGREEMENT

 

This Amendment No. 1 to Salary Deferral Agreement (the “Agreement”) is entered into as of July 1, 2017 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Robert T. McNally (the “Employee”).

 

Whereas , the Company and Employee entered into a Salary Deferral Agreement (the “Original Agreement”) dated April 25, 2016; and

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and as part of its cash conservation measures, the Company has asked certain of its employees to accept salary reductions and/or deferrals; and

 

Whereas , the Company and Employee acknowledge that the Original Agreement and this amendment have been entered into for the express purpose of conserving the Company’s cash resources and not for executive compensation tax planning purposes, and

 

Whereas , Employee currently is currently earning an annualized gross salary of $275,000 (“Base Salary”), which has been previously reduced by 40% to $165,000, based on Employee’s reduction of his time devoted to the Company’s business;

 

Now, therefore , the parties hereby agree as follows:

 

1.

Accumulated Salary Deferral.

  Employee acknowledges his prior verbal agreement to continue the salary deferral pursuant to the Original Agreement through June 30, 2017. The Company and Employee acknowledge and agree that the accumulated amount of deferred salary owed to Employee as of June 30, 2017 is $164,374.91.

 

2.

Continuation of Salary Deferral.

  Employee agrees to continue deferral of all but $25,000 of his Base Salary, which amount will be accrued and paid to Employee as described below.

 

3.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the occurrence of a significant event (to include financing, corporate partnership, etc., as determined solely by the Company) (the “Discontinuance Date”).

 

4.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

 

ACCEPTANCE

       

Employee

   

Date

 
         
         

Agreed:

       
 

GeoVax, Inc.

     
 

By:

     

 

Exhibit 10.2.2

 

GEOVAX , INC.

SALARY DEFERRAL AGREEMENT

 

 

This Salary Deferral Agreement (the “Agreement”) is entered into as of April 25, 2016 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Mark W. Reynolds (the “Employee”).

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and

 

Whereas , as part of its cash conservation measures, the Company is asking certain of its employees to accept salary reductions and/or deferrals;

 

Whereas , Employee currently is currently earning an annualized gross salary of $234,392 (“Base Salary”);

 

Now, therefore , the parties hereby agree as follows:

 

1.

Salary Deferral.

  Effective May 1, 2016, Employee agrees to accept a deferral of 40% of his Base Salary, which amount will be accrued and paid to Employee as described below.

 

2.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the earlier of (i) a significant event (to include financing, corporate partnership, etc., as determined by the Company), or (ii) December 31, 2016 (the “Discontinuance Date”).

 

3.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

 

 

ACCEPTANCE

       

Employee

   

Date

 
         
         

Agreed:

       
 

GeoVax, Inc.

     
 

By:

     

 

Exhibit 10.2.3

 

GEOVAX , INC.

AMENDMENT NO. 1 TO SALARY DEFERRAL AGREEMENT

 

This Amendment No. 1 to Salary Deferral Agreement (the “Agreement”) is entered into as of July 1, 2017 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Mark W. Reynolds (the “Employee”).

 

Whereas , the Company and Employee entered into a Salary Deferral Agreement (the “Original Agreement”) dated April 25, 2016; and

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and as part of its cash conservation measures, the Company has asked certain of its employees to accept salary reductions and/or deferrals; and

 

Whereas , the Company and Employee acknowledge that the Original Agreement and this amendment have been entered into for the express purpose of conserving the Company’s cash resources and not for executive compensation tax planning purposes, and

 

Whereas , Employee currently is currently earning an annualized gross salary of $234,392 (“Base Salary”);

 

Now, therefore , the parties hereby agree as follows:

 

1.

Accumulated Salary Deferral.

  Employee acknowledges his prior verbal agreement to continue the salary deferral pursuant to the Original Agreement through June 30, 2017. The Company and Employee acknowledge and agree that the accumulated amount of deferred salary owed to Employee as of June 30, 2017 is $109,382.84.

 

2.

Continuation of Salary Deferral.

  Employee agrees to continue deferral of 40% of his Base Salary, which amount will be accrued and paid to Employee as described below.

 

3.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the occurrence of a significant event (to include financing, corporate partnership, etc., as determined solely by the Company) (the “Discontinuance Date”).

 

4.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

 

ACCEPTANCE

       

Employee

   

Date

 
         
         

Agreed:

       
 

GeoVax, Inc.

     
 

By:

     

 

 

Exhibit 10.3.2

 

GEOVAX , INC.

SALARY DEFERRAL AGREEMENT

 

 

This Salary Deferral Agreement (the “Agreement”) is entered into as of April 25, 2016 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Harriet L. Robinson (the “Employee”).

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and

 

Whereas , as part of its cash conservation measures, the Company is asking certain of its employees to accept salary reductions and/or deferrals;

 

Whereas , Employee currently is currently earning an annualized gross salary of $265,750 (“Base Salary”), which has been previously reduced by 50% to $132,875, based on Employee’s reduction of her time devoted to the Company’s business;

 

Now, therefore , the parties hereby agree as follows:

 

1.

Salary Deferral.

  Employee agrees to accept a deferral of 50% of her remaining Base Salary as previously reduced, which amount will be accrued and paid to Employee as described below.

 

2.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the earlier of (i) a significant event (to include financing, corporate partnership, etc., as determined by the Company), or (ii) December 31, 2016 (the “Discontinuance Date”).

 

3.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

 

 

ACCEPTANCE

       

Employee

   

Date

 
         
         

Agreed:

       
 

GeoVax, Inc.

     
 

By:

     

Exhibit 10.3.3

 

GEOVAX , INC.

AMENDMENT NO. 1 TO SALARY DEFERRAL AGREEMENT

 

This Amendment No. 1 to Salary Deferral Agreement (the “Agreement”) is entered into as of July 1, 2017 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Harriet L. Robinson (the “Employee”).

 

Whereas , the Company and Employee entered into a Salary Deferral Agreement (the “Original Agreement”) dated April 25, 2016; and

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and as part of its cash conservation measures, the Company has asked certain of its employees to accept salary reductions and/or deferrals; and

 

Whereas , the Company and Employee acknowledge that the Original Agreement and this amendment have been entered into for the express purpose of conserving the Company’s cash resources and not for executive compensation tax planning purposes, and

 

Whereas , Employee currently is currently earning an annualized gross salary of $265,750 (“Base Salary”), which has been previously reduced by 50% to $132,875, based on Employee’s reduction of her time devoted to the Company’s business;

 

Now, therefore , the parties hereby agree as follows:

 

1.

Accumulated Salary Deferral.

  Employee acknowledges his prior verbal agreement to continue the salary deferral pursuant to the Original Agreement through June 30, 2017. The Company and Employee acknowledge and agree that the accumulated amount of deferred salary owed to Employee as of June 30, 2017 is $77,510.44

 

2.

Continuation of Salary Deferral.

  Employee agrees to continue deferral 50% of her Base Salary as previously reduced, which amount will be accrued and paid to Employee as described below.

 

3.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the occurrence of a significant event (to include financing, corporate partnership, etc., as determined solely by the Company) (the “Discontinuance Date”).

 

4.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

 

ACCEPTANCE

       

Employee

   

Date

 
         
         

Agreed:

       
 

GeoVax, Inc.

     
 

By:

     

 

Exhibit 10.4.2

 

GEOVAX , INC.

SALARY DEFERRAL AGREEMENT

 

This Salary Deferral Agreement (the “Agreement”) is entered into as of July 1, 2017 by and between GeoVax, Inc., a Georgia Corporation (the “Company”), and Farshad Guirakhoo (the “Employee”).

 

Whereas , the Company and Employee recognize that it is in the best interests of the Company, its shareholders, and its collective Employees to conserve the Company’s cash resources; and as part of its cash conservation measures, the Company has asked certain of its employees to accept salary reductions and/or deferrals; and

 

Whereas , the Company and Employee acknowledge that this Agreement has been entered into for the express purpose of conserving the Company’s cash resources and not for executive compensation tax planning purposes, and

 

Whereas , Employee currently is currently earning an annualized gross salary of $250,000 (“Base Salary”);

 

Now, therefore , the parties hereby agree as follows:

 

1.

Salary Deferral.

  Effective July 1, 2017, Employee agrees to accept a deferral of 25% of his Base Salary, which amount will be accrued and paid to Employee as described below.

 

2.

Discontinuance of Salary Reduction and/or Deferral

  Employee’s Salary Deferral pursuant to this Agreement shall end upon the occurrence of a significant event (to include financing, corporate partnership, etc., as determined solely by the Company) (the “Discontinuance Date”).

 

3.

Payment of Accumulated Deferred Salary.

  At the Discontinuance Date, the Company in its sole discretion will determine the form of payment to be made to Employee for the accumulated Deferred Salary. Such payment may be made in cash, in the form of Company Stock, or in a combination of cash and stock.

 

 

ACCEPTANCE

       

Employee

   

Date

 
         
         

Agreed:

       
 

GeoVax, Inc.

     
 

By:

     

 

Exhibit 10.7.2

 

SECOND AMENDMENT TO LEASE AGREEMENT

 

THIS SECOND AMENDMENT TO LEASE AGREEMENT (this " Amendment ") is made as of the 10th day of July, 2017 (the " Effective Date "), by and between UCB, INC. , a Delaware corporation (" Landlord "), and GEOVAX, INC., a Georgia corporation (" Tenant ").

 

WITNESSETH:

 

WHEREAS, Landlord and Tenant entered into that certain Office and Laboratory Lease dated as of August 31, 2009, as amended by that certain Amendment to Lease Agreement dated November 11, 2014 (as amended, the " Lease "), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain premises containing 8,430 rentable square feet (" Premises ") located in the building located at 1900 Lake Park Drive, Smyrna, Georgia 30080 (the " Building ") and more fully described in the Lease;

 

WHEREAS, the current Expiration Date of the Lease is December 31, 2017; and

 

WHEREAS, Landlord and Tenant desire to extend the term of the Lease and otherwise amend the Lease on the terms and conditioned contained herein.

 

NOW, THEREFORE, in consideration of the foregoing of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to be legally bound, hereby covenant and agree as follows:

 

1.

Recitals; Definitions. The foregoing recitals are hereby incorporated herein and made a part hereof by this reference. Except as otherwise specified herein, all capitalized terms in this Amendment shall have the meanings assigned thereto in the Lease.

 

2.

Term: Notwithstanding anything set forth in the Lease to the contrary, but subject to the further extensions set forth in Section 3 below, the " Expiration Date " of the Lease shall be December 31, 2018, and the Lease shall be deemed amended hereby.

 

3.

Year-to-Year Extension Term:   From and after December 31, 2018, this Lease and the Expiration Date shall automatically be extended on a year-to-year basis (each such extended period being a " Year-to-Year Extension Term " hereunder), except in the event either Landlord or Tenant gives the other party a cancellation notice as hereinafter provided.  During each Year-to-Year Extension Term all terms and conditions of the Lease shall apply except Base Rent shall be as set forth in Section 4 below.  In the event either Landlord or Tenant elects to cancel a Year-to-Year Extension Term, such cancellation notice may be given by Landlord or Tenant at any time but in any event must be given at least ninety (90) days prior to the then current Expiration Date (or, ninety (90) days prior to December 31, 2018, if either party desires the Lease to terminate as of December 31, 2018).  In the event Landlord or Tenant timely exercises such option to cancel a Year-to-Year Extension Term of this Lease, this Lease shall terminate as of the last day of the then current Year-to-Year Term (i.e., the then current Expiration Date).  Notwithstanding anything herein to the contrary, the Year-to-Year Extension Term shall not extend past December 31, 2022.

 

4.

Base Rental. The " Base Rental " for the period from and after January 1, 2018 shall be as follows:

 

Lease Year

Rental Rate

Annual Base Rental

Monthly Base Rental

01/01/18 – 12/31/18

$18.57

$156,545.16

$13,045.43

01/01/19 – 12/31/19

$19.13

$161,265.96

$13,438.83

01/01/20 – 12/31/20

$19.71

$166,155.36

$13,846.28

01/01/21 – 12/31/21

$20.31

$171,213.36

$14,267.78

01/01/22 – 12/31/22

$20.92

$176,355.60

$14,696.30

 

5.

Brokerage Commission. Landlord and Tenant each represent and warrant to the other that no broker has been employed in carrying on any negotiations relating to this Amendment. Landlord and Tenant shall each indemnify and hold harmless the other from any claim breach of the foregoing representation and warranty.

 

1

 

 

6.

Representation. Tenant hereby represents and warrants to Landlord that Tenant has full power and authority to execute and perform this Amendment and has taken all action necessary to authorize the execution and performance of this Amendment. Landlord hereby represents and warrants to Tenant that Landlord has full power and authority to execute and perform this Amendment and has taken all action necessary to authorize the execution and performance of this Amendment.

 

7.

Miscellaneous. This Amendment (a) shall be binding upon and inure to the benefit of the parties hereto and their respective representatives, transferees, successors and assigns (except as expressly otherwise provided in the Lease), and (b) shall be governed by and construed in accordance with the laws of Georgia. This Amendment may be executed in two (2) or more counterpart copies, all of which counterparts shall have the same force and effect as if all parties hereto had executed a single copy of this Amendment. Delivery of an executed counterpart of this Amendment by facsimile or other electronic means shall be equally as effective as delivery of an original counterpart of this Amendment.

 

8.

Ratification. Except as expressly amended by this Amendment, all other terms, conditions and provisions of the Lease are hereby ratified and confirmed and shall continue in full force and effect.

 

[ Signatures on Next Page ]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment under seal as of the day and year first hereinabove written.

 

 

LANDLORD:

 

UCB, INC. , a Delaware corporation

 

By: _______________________________

Name:

Title:

 

By: _______________________________

Name:

Title:

 

 

[CORPORATE SEAL]

 

 

TENANT:

 

GEOVAX, INC., a Georgia corporation

 

 

By _______________________________

Name:

Title:

 

 

[CORPORATE SEAL]

 

3

Exhibit 10.16

 

SENIOR NOTE PURCHASE AGREEMENT

 

This Senior Note Purchase Agreement, dated as of February 28, 2018 (this “ Agreement ”), is entered into by and among GeoVax Labs, Inc., a Delaware corporation, with an address at 1900 Lake Park Drive, Suite 380, Smyrna, GA 30080 (the “ Company ”), and Georgia Research Alliance, Inc., with an address at 191 Peachtree Street, NE, Suite 849, Atlanta, Georgia 30303 (“ Purchaser ”), with respect to the following:

 

Recital

 

The Company is obtaining financing from Purchaser.

 

Agreement

 

The parties hereby agree as follows:

 

1.      The Notes .

 

(a)      Issuance of the Note . In reliance upon the representations, warranties and covenants of the parties set forth herein, at a closing (the “ Closing ”) to be held simultaneously with the execution of this Agreement, the Company will issue, sell and deliver to Purchaser, and Purchaser will purchase from the Company, one or more promissory notes in the aggregate principal amount of up to Fifty Thousand Dollars ($50,000.00), collectively, the “ Notes ” and each, a “ Note ”). The purchase price for each Note shall be the principal amount thereof. Capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings set forth in the Notes.

 

(b)      Terms of the Notes . The terms and conditions of the Notes are set forth in the form of Note attached as Exhibit A hereto. Capitalized terms not otherwise defined herein shall have the meaning set forth in Exhibit A hereto.

 

(c)      Delivery . The Company will deliver to Purchaser the Notes against receipt by the Company of the purchase price for the Notes.

 

2.      Representations and Warranties of the Company . The Company hereby represents and warrants to Purchaser as follows:

 

(a)      Or ganization and Standing; Articles and Bylaws . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, having its principal office in the State of Georgia, and is authorized to do business in and is in good standing in Georgia, and has all requisite corporate power and authority to carry on its business as now conducted and proposed to be conducted.

 

(b)      Corporate Power; Authorization . The Company has all requisite legal and corporate power to enter into, execute, deliver, and perform this Agreement and the Notes. All corporate and legal action on the part of the Company, its officers, directors and shareholders necessary for the execution and delivery of this Agreement and the Notes, the sale and issuance of the Notes and the performance of the Company’s obligations hereunder, and under the Notes, has been taken. This Agreement is, and upon issuance of the Notes will be, valid and binding obligations of the Company, enforceable in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, moratorium and other laws of general application affecting the enforcement of creditors’ rights.

 

 

 

 

(c)      Compliance with Other Instruments, None Burdensome, Etc. The execution, delivery and performance of and compliance with this Agreement and the Notes will not result in nor constitute any breach, default or violation of (i) any material agreement, contract, lease, license, instrument or commitment (oral or written) to which the Company or any of its subsidiaries is a party or (ii) any law, rule, regulation, statute or order applicable to the Company, any of its subsidiaries or their respective properties, nor result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or its subsidiaries. No person has any right to participate in the sale by the Company of the Notes (other than rights that have been fully satisfied or waived).

 

(d)      Compliance with Laws . Each of the Company and each of its subsidiaries has complied, and its properties and business operations are in compliance, with all applicable laws, except where any failure to so comply could not reasonably be expected to have a material adverse effect upon the properties, operations, business, prospects or condition (financial or otherwise) of the Company or its subsidiaries or the validity, performance or enforceability of the Transaction Documents. No federal, state, local or provincial or other governmental authority has issued or, to the best of the Company’s knowledge, threatened to issue to the Company or any of its subsidiaries any citation, notice or order asserting or alleging any material non-compliance with, or material violation of, any applicable law.

 

(e)      Government C onsent, Etc . No consent, approval, order or authorization of, or designation, registration, declaration or filing with, any federal, state, local or provincial or other governmental authority on the part of the Company is required in connection with the valid execution, delivery and performance of this Agreement and the Notes, other than, if required, filings or qualifications under applicable federal and state securities laws, which filings or qualifications, if required, will be timely filed or obtained by the Company.

 

(f)      Offering . In reliance on the representations and warranties of Purchaser in Section 3, the Notes will be issued in compliance with all applicable federal and state securities laws.

 

(g)    Litigation . Except as disclosed to Purchaser in writing prior to the date of this Agreement, there are no suits or proceedings pending or, to the Company’s knowledge, threatened by or before any federal, state, local or provincial or other governmental authority against or affecting the Company or any of its subsidiaries, or their respective assets.

 

(h)      Agreements, Etc . Neither the Company nor any of its subsidiaries is a party to any agreement or instrument or subject to any order or decree of any federal, state, local or provincial or other governmental authority or any charter or other corporate restriction, adversely affecting its properties, operations, business, prospects or condition (financial or otherwise), nor is the Company or any of its subsidiaries in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party, or any law, regulation, decree or order to which it is subject.

 

2

 

 

(i)      Authorizations . All authorizations, consents, approvals and licenses required under applicable law for the ownership or operation of the property owned or operated by the Company or any of its subsidiaries or for the conduct of any business in which the Company or any of its subsidiaries is engaged have been duly issued and are in full force and effect, and none of the Company or its subsidiaries is in default, nor has any event occurred which with the passage of time or the giving of notice, or both, would constitute a default, under any of the terms or provisions of any part thereof, or under any order, decree, ruling, regulation, closing agreement or other decision or instrument of any federal, state, local or provincial or other governmental authority having jurisdiction over the Company and its subsidiaries.

 

(j)      Taxes . The Company and its subsidiaries have filed all federal and state income and other tax returns which are required to be filed, and have paid all taxes as shown on said returns and all taxes, including withholding, Federal Insurance Contributions Act and ad valorem taxes, shown on all assessments received by any of them to the extent that such taxes have become due.

 

(k)    Sanctioned Persons; Sanctioned Countries . None of the Company, its subsidiaries or its affiliates does business in a Sanctioned Country or with a Sanctioned Person in violation of the economic sanctions of the United States administered by United States Department of the Treasury’s Office of Foreign Assets Control (together with any successor thereto, “ OFAC ”). The Company will not use the proceeds received from the sale of the Notes hereunder to fund any operation in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Country. “ Sanctioned Country ” means a country subject to the sanctions programs identified on the list maintained by OFAC, as published from time to time by OFAC. “ Sanctioned Person ” means (a) any person or entity named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC, as published from time to time by OFAC, (b) any agency, authority or subdivision of the government of a Sanctioned Country, (c) any person or organization controlled by a Sanctioned Country, or (d) any person or entity resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.

 

(l)      Intellectual Property . The Company possesses adequate assets, licenses, patents, patent applications, copyrights, service marks, trademarks and trade names (collectively, “ Proprietary Rights ”) adequate to continue to conduct its business as heretofore conducted by it and as presently proposed to be conducted by it without conflicting with any rights of others, and such Proprietary Rights are valid and enforceable. To the Company’s knowledge, neither the Company’s nor any of its subsidiaries’ use of any Proprietary Rights infringes upon or otherwise violates the rights of any third party in or to such Proprietary Rights, and no proceeding has been instituted against or notice received by the Company or any of its subsidiaries that is presently outstanding alleging that the use of any of the Proprietary Rights infringes upon or otherwise violates the rights of any third party in or to any of the Proprietary Rights. Neither the Company nor any of its subsidiaries has given notice to any person or entity that such person or entity is infringing on any of the Proprietary Rights. To the Company’s knowledge, no person or entity is infringing on any of the Proprietary Rights.

 

3

 

 

3.      Representations and Warranties by Purchaser . Purchaser represents and warrants to the Company as of the time of issuance of the Notes as follows:

 

(a)      Investment Intent . This Agreement is made with Purchaser in reliance upon such Purchaser’s representation to the Company, evidenced by Purchaser’s execution of this Agreement, that Purchaser is acquiring the Notes for investment for such Purchaser’s own account, not as nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933, as amended (the “ Securities Act ”) or applicable state securities laws.

 

(b)      Authority . Purchaser has the full right, power, authority and capacity to enter into and perform this Agreement and the Agreement will constitute a valid and binding obligation upon Purchaser, except as the same may be limited by bankruptcy, insolvency, moratorium and other laws of general application affecting the enforcement of creditors’ rights.

 

(c)    Notes Not Registered . Purchaser understands and acknowledges that the offering of the Notes will not be registered under the Securities Act or qualified under applicable state securities laws on the grounds that the offering and sale of the Notes contemplated by this Agreement are exempt from registration under the Securities Act and exempt from qualification under applicable state securities laws, and that the Company’s reliance upon such exemptions is predicated upon such Purchaser’s representations set forth in this Agreement. Purchaser acknowledges and understands that resale of a Note maybe restricted indefinitely unless the Note is subsequently registered under the Securities Act and qualified under applicable state securities laws or an exemption from such registration and such qualification is available.

 

(d)    No Transfer . Purchaser covenants that in no event will it dispose of any of the Notes other than in conjunction with an effective registration statement under the Securities Act or pursuant to an exemption therefrom, or in compliance with Rule 144 promulgated under the Securities Act, or to an entity affiliated with Purchaser and other than in compliance with the applicable securities regulations laws of any state.

 

(e)      Knowledge and Experience . Purchaser (i) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser’s prospective investment in the Notes; (ii) has the ability to bear the economic risks of Purchaser’s prospective investment; (iii) has been furnished with and has had access to such information as Purchaser has considered necessary to make a determination to purchase the Notes together with such additional information as is necessary to verify the accuracy of the information supplied; (iv) has had all questions that have been asked by Purchaser satisfactorily answered by the Company; and (v) has not been offered the Notes by any form of advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any such media.

 

(f)      Accredited Investor . Purchaser is an accredited investor as that term is defined in Regulation D promulgated by the Securities and Exchange Commission under the Securities Act.

 

4

 

 

(g)    No Brokers . There are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated by the Transaction Documents based on any agreement, arrangement or understanding with Purchase or any action taken by Purchaser.

 

4.      Covena nts and Agreements of the Company .

 

(a)      Company ’s Books and Records . The books and records of the Company shall at all times be maintained at the principal office of the Company, or within an accounting system accessible by the Company, and upon a prior notice in writing to the Company of at least five (5) business days, the books and records of the Company related to this Agreement shall be open to the reasonable inspection and examination of Purchaser, or its duly authorized representatives during reasonable business hours.

 

(b)      Company ’s Reporting Obligations . Until all obligations under the Notes are paid in full, the Company will furnish, or will cause to be furnished, to Purchaser copies of the following financial statements, reports and information:

 

(i)     within fi fteen (15) days after filing with the Securities and Exchange Commission, copies of 10Q and 10K reports;

 

(ii)     such other information with respect to the financial condition, business, property, assets, revenues and operations of the Company as Purchaser may f rom time to time reasonably request.

 

(c)      Other Covenants . Until the outstanding principal amounts due under the Notes and any other obligations under the Notes are paid in full, the Company and its subsidiaries shall not:

 

(i)     unless consented to in writing by Pur chaser:

 

a)     incur any additional debt senior or pari-passu to the Notes, including any debt senior or pari-passu to the Notes that is convertible into equity securities;

 

b)     sell or grant any license or sublicense to any material intellectual property or proprieta ry information related to the joint venture project with Viamune, Inc. (the “ Joint Venture ”);

 

c)     enter into any transaction with a related party not on arm ’s length terms and conditions;

 

d)     repurchase or redeem any equity security of the Company; or

 

e)     make, declar e or pay any dividend, or make any other distribution on, any Company capital stock or any securities convertible into or exchangeable for any shares of Company capital stock.

 

5

 

 

(d)      Legal Fees . The Company will pay for Purchaser’s legal fees and expenses associated with the preparation and negotiation of this Agreement, the first Note issued by the Company, and any Subsequent Note, up to a maximum of $1,000 in the aggregate.

 

(e)      Use of Proceeds . The proceeds of the Notes shall be used by the Company for working capital, sales and marketing, research and development and capital expenditures as described in the Company’s spending plan set forth in the investment application submitted to, and as accepted by, Purchaser. The Company shall not use the proceeds of the Notes for any purpose not described in such spending plan without the prior written approval of Purchaser.

 

(f)      Application of Distributions . Until all obligations under the Notes are paid in full, the Company will apply all distributions received or resulting from the Joint Venture to repayment of the Notes in the following order:

 

(i)     first, to any accrued interest; and

 

(ii)     second, to the principal amount outstanding.

 

(g)    Joint Venture Management Structure . After commencement of the Joint Venture and until all obligations under the Notes are paid in full, the Company will not, without the prior written consent of the Purchaser, cause or allow any change to the initial management structure of the Joint Venture, attached as Exhibit C hereto. The consent of the Purchaser is not to be unreasonably withheld.

 

5.      Restrictions on Use and Disclosure . Except to the extent expressly permitted under this Agreement, Purchaser shall neither disclose to any third party any of the Company’s (a) Confidential Information during the term of the Transaction Documents and for a period of five (5) years following the termination or satisfaction of the last such document; or (b) trade secrets for the period during which any such information continues to constitute a trade secret as defined under this Agreement or applicable laws (collectively, “ Trade Secrets ”) or otherwise use any such Confidential Information or Trade Secrets for any purpose whatsoever. “ Confidential Information ” shall mean any and all technical, financial, business and other information relating to the Company (or any affiliate thereof) in connection with this Agreement and is clearly marked as confidential at the time of disclosure, or, if disclosed orally or visually if such oral or visual disclosure is followed within thirty (30) days by a written confirmation of such confidential disclosure, is stated to be confidential information of the Company. For purposes of this Agreement, Confidential Information shall be deemed to include any and all reports, financial statements or other disclosures required to be made by the Company under the terms of the Transaction Documents, including, without limitation, any and all information provided to the Observer. If Purchaser becomes legally compelled to disclose any Confidential Information or Trade Secrets (whether by judicial or administrative order, applicable law, rule or regulation, or otherwise), Purchaser shall use all reasonable efforts to provide the Company with prior notice thereof so that the Company may seek a protective order or other appropriate remedy to prevent such disclosure. If such protective order or other remedy is not obtained prior to the time such disclosure is required, Purchaser may only disclose that portion of such Confidential Information or Trade Secrets that it is legally required to disclose. Confidential Information shall not include information (i) within Purchaser’s legitimate possession before disclosure by the Company, as evidenced by written records, (ii) in the public domain or which comes into the public domain through no fault of Purchaser, (iii) disclosed to Purchaser by a third party or a user having legitimate possession thereof and the right to make such disclosure (subject to any confidential obligation in connection with such right), or (iv) that ceases to constitute a Trade Secret during the period for which such restrictions under this Section 5 otherwise apply, unless and to the extent the same shall constitute Confidential Information, in which case such information shall be maintained confidentially for the period described under clause (a) above, if longer. The provisions of this Section 5 shall be construed as an agreement ancillary to the other provisions of this Agreement, and the existence of any claim or cause of action of Purchaser against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of this Article. Purchaser understands and agrees that money damages would not be a sufficient remedy for any breach of this Section 5, and that the Company shall be entitled to seek equitable relief, including any injunction and specific performance as a remedy for any breach or threat thereof. Such remedy shall not be exclusive but shall be in addition to all other remedies available to the Company at law or equity. Notwithstanding anything in this Agreement to the contrary, the maximum liability of Purchaser for money damages pursuant to this Section 5 will not exceed the aggregate amount paid by Purchaser to the Company for the Notes.

 

6

 

 

6.      Miscellaneous .

 

(a)      Waivers and Amendments . Any provision of this Agreement may be amended, waived or modified upon the written consent of the Company and Purchaser. Notwithstanding the foregoing, no failure or delay by either party in exercising any right, power or remedy hereunder shall operate as waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any party at law or in equity or otherwise.

 

(b)      Governing Law . This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to the conflicts of law provisions of the State of Georgia or of any other state.

 

(c)      Entire Agreement . This Agreement together with the Notes constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof.

 

(d)      Notices . Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid or by recognized overnight courier, addressed (i) if to Purchaser, at the address first given above or at such other address as Purchaser shall furnish to the Company in writing, or (ii) if to the Company, at the address first given above or at such other address as the Company shall furnish to Purchaser in writing.

 

(e)      Validity . If for any circumstance whatsoever, fulfillment of any provision of this Agreement or the Notes, at the time performance of such provision is due, involves transcending the limit of validity presently prescribed by any applicable statute or any other applicable law, with regard to obligations of like character and amount, the obligation to be fulfilled must be reduced to the limit of such validity, so that in no event will any exaction be possible under this Agreement or the Notes that is in excess of the current limit of such validity, but such obligation must be fulfilled to the limit of such validity.

 

(f)      Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall be deemed to constitute one instrument.

 

 

 

 

(g)    Severability . Any term or condition of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining terms and conditions hereof or affecting the validity or enforceability of any such term or condition in any other jurisdiction.

 

(h)      Headings . The Article and Section headings in this Agreement are for convenience of reference and do not affect the construction of this Agreement.

 

(i)      Disp ute Resolution . If a conflict, issue or dispute (the “ Dispute ”) arises between the parties regarding the terms, conditions or interpretation of all or any portion of this Agreement, the Company and Purchaser shall attempt to negotiate in good faith a business resolution of the Dispute for no less than thirty (30) days after notice of the Dispute before resorting to any other remedy in law or equity, subject to the ability to obtain equitable relief pursuant to Section 5.

 

(j)      PATRIOT Act Notice . Purchaser hereby notifies the Company that pursuant to the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001) (the “ PATRIOT Act ”), Purchaser may be required to obtain, verify and record information that identifies the Company, including its legal name, address, tax ID number and other information that will allow Purchaser to identify the Company in accordance with the PATRIOT Act.

 

8

 

 

IN WITNESS WHEREOF , the parties have caused this Agreement to be duly executed under seal and delivered by their proper and duly authorized officers as of the date and year first written above.

 

 

COMPANY:

GEOVAX LABS, INC., a Delaware corporation



By:                                                                        
Name:
Title:

 

[SEAL]

 

 

PURCHASER:

GEORGIA RESEARCH ALLIANCE, INC.



By:                                                                       
Name: C. Michael Cassidy
Title: President and CEO

 

 

[ Senior Note Purchase Agreement]

 

 

 

 

EXHIBIT A

SENIOR PROMISSORY NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IT MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

 

GEOVAX, INC.

SENIOR PROMISSORY NOTE

 

Fifty Thousand Dollars, $50,000       [●]
  Atlanta, Georgia

 

FOR VALUE RECEIVED , GeoVax Labs, Inc., a Delaware corporation (the “ Company ”), promises to pay to Georgia Research Alliance, Inc. (the “ Holder ”), the principal sum of Fifty Thousand Dollars ($50,000.00), or such lesser amount as shall then equal the outstanding principal amount under this Promissory Note (this “ Note ”), together with interest thereon as specified herein.

 

The principal amount shall be due and payable in installments beginning on the one year anniversary of the date of the Closing, and continuing on the first business day of each calendar month thereafter, each in an amount equal to $[1,041.67], and ending on the Maturity Date.

 

Interest shall accrue on the principal amount of this Note from time to time remaining unpaid and outstanding at a rate of five percent (5.0%) per annum computed on the basis of the actual number of days elapsed and a year of 365 days. Interest accrued on the unpaid principal amount outstanding hereunder shall be due and payable in arrears (i) beginning April 1, 2018, on such date and on the first business day of each calendar month thereafter, (ii) on demand as provided in the immediately following paragraph, and (iii) on the Maturity Date (as defined herein).

 

All unpaid principal, together with the balance of unpaid and accrued interest and other amounts payable hereunder, shall be due and payable:

 

(a)     (i) on the Maturity Date, (ii)  immediately upon the occurrence of an Event of Default (as defined herein) described under Section 2(c) or 2(d); and

 

(b)     on demand at any time after the earlier of (i) the date on which the Company has achieved profitabilit y for a period of at least two (2) consecutive fiscal years in accordance with generally accepted accounting principles, (ii) the date on which a Qualified Financing (as defined herein) occurs, unless the Holder has consented to such Qualified Financing in advance and in writing, (iii) the date on which a Qualified Sale (as defined herein) occurs, unless the Holder has consented to such Qualified Sale in advance and in writing, and (iv) the occurrence of an Event of Default (other than an Event of Default described under Section 2(c) or 2(d)).

 

 

 

 

This Note is issued pursuant to the Senior Note Purchase Agreement of even date herewith (as amended, modified or supplemented, the “ Note Purchase Agreement ”) between the Company and the Holder named therein.

 

The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees:

 

1.      Definitions . As used in this Note, the following capitalized terms have the following meanings:

 

(a)     “ Maturity Date ” is the date that is five years from the date of this Note.

 

(b)     “ Obligations ” means all principal and accrued interest due hereunder (including any interest on pre-petition Obligations accruing after the commencement of any insolvency proceeding by or against the Company, whether or not allowable in such insolvency proceeding).

 

(c)     “ Qualified Financing ” means an equity financing of the Company in which the Company issues shares of common stock, preferred stock or other equity interests in the Company in a transaction or series of related transactions and receives an investment of at least $5 million in consideration of such issuance.

 

(d)     “ Qualified Sale ” means (i) a merger or consolidation of the Company with or into another entity after which the shareholders of the Company immediately prior to such transaction do not own, immediately following the consummation of the transaction and by virtue of their share ownership in the Company or securities received in exchange for such shares in connection with the transaction, a majority of the voting power of the surviving entity in proportions substantially similar to those that existed immediately prior to such transaction, (ii) the sale or transfer by the Company or the Company’s shareholders of capital stock of the Company representing more than 50% of the voting power of the Company in one transaction or a series of related transactions (but specifically excluding bona fide equity financing transactions), or (iii) the sale, transfer or other disposition (but not including a transfer or disposition by pledge or mortgage to a bona fide lender) of all or substantially all of the assets of the Company. Notwithstanding the foregoing, a merger effected exclusively for the purpose of changing the domicile of the Company shall not be deemed a Qualified Sale.

 

(e)      “ Transaction Documents ” means this Note and the Note Purchase Agreement.

 

 

 

 

2.      Events of Default . The occurrence of any of the following shall constitute an “ Event of Default under this Note and the other Transaction Documents:

 

(a)      Failure to Pay . The Company shall fail to pay (i) any principal payment on the due date hereunder or (ii) any interest or other payment required under the terms of this Note or any other Transaction Document on the due date and such payment shall not have been made within ten (10) days of the Company’s receipt of the Holder’s written notice to the Company of such failure to pay;

 

(b)      Breaches of Other Covenants . The Company shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note or any other Transaction Document, and after the Company’s receipt of the Holder’s written notice, such failure shall continue for ten (10) days;

 

(c)      Voluntary Bankruptcy or Insolvency Proceedings . The Company shall (i) apply for or consent to the appointment of a receiver, trustee or custodian of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its or any of its creditors, (iii) be dissolved or liquidated in full or in part, (iv) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (v) take any action for the purpose of effecting any of the foregoing;

 

(d)    Involuntary Bankruptcy or Insolvency Proceedings . Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement;

 

(e)      Failure to Pay Indebtedness . The Company fails to pay when due (giving effect to any applicable grace periods and any extensions thereof) any indebtedness for money borrowed by the Company in the principal balance of not less than [ ●] Dollars ($[ ●]), or any declared default of the Company under any such indebtedness that gives the holder thereof the right to accelerate such indebtedness (which such acceleration is not rescinded, annulled or otherwise cured within fourteen (14) days after receipt by the Company of notice of such acceleration), except to the extent such failure to pay or acceleration is the subject of a bona fide dispute that the Company is contesting in good faith and for which funds sufficient to pay such indebtedness have been set aside and reserved for payment by the Company;

 

(f)      Cessation of Company Operations . The Company’s board of directors votes to cease substantially all of the Company’s operations or wind up the Company’s affairs;

 

 

 

 

(g)    Relocation . The relocation of the Company headquarters, all or a significant portion of its assets or business operations or a majority of its employees to a location outside of the State of Georgia; or

 

(h)    Use of Proceeds . The use of the proceeds of this Note by the Company for any material purpose not described in the Company’s spending plan set forth in the investment application submitted to, and as accepted by, the Holder without the prior written approval of the Holder.

 

3.      Rights of the Holder Upon Default . Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Sections 2(c) and 2(d)) and at any time thereafter during the continuance of such Event of Default beyond any applicable cure periods, the Holder may declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 2(c) and 2(d), immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it by the Transaction Documents, or otherwise permitted to it by law. In case of an Event of Default, the Company must pay to the Holder such further amount as is sufficient to cover the cost and expenses of collection, including, without limitation, reasonable attorney’s fees, expenses and disbursements. No course of dealing and no delay on the part of the Holder in exercising any right will operate as a waiver of that right or otherwise prejudice the Holder’s rights, powers or remedies. No right, power or remedy conferred by this Note upon the Holder is exclusive of any other right, power or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.

 

4.      Prepayment . The principal amount of this Note and the accrued interest thereon may be prepaid without the written consent of the Holder. Any such permitted prepayment will be applied first to the payment of expenses due under this Note, second to interest accrued on this Note, if any, and third, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of principal of this Note.

 

5.      Suc cessors and Assigns . Subject to the restrictions on transfer described in Sections 7 and 8, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

6.      Waiver and Amendment . Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Holder.

 

 

 

 

7.      Transfer of this Note . This Note may be transferred by Purchaser without the Company’s prior written consent, subject to compliance with the Securities Act of 1933, as amended (the “ Securities Act ”). Any new Note issued upon transfer of this Note shall bear a legend as to the applicable restrictions on transfer ability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. Subject to compliance with the Securities Act, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary.

 

8.      Assignment by the Company . Neither this Note nor any of the rights, interests or obligations hereunder may be assigned in whole or in part by the Company without the prior written consent of the Holder.

 

9.      Notices . Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid or by recognized overnight courier at the respective addresses of the parties as set forth in the Note Purchase Agreement or on the register maintained by the Company. Copies of all notices provided hereunder shall be also delivered to the Holder’s legal counsel at the address provided by the Holder, and any such copy shall not constitute notice hereunder. Either party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when received.

 

10.   Ranking . The obligations of the Company under this Note shall rank senior in payment to all other indebtedness of the Company and its subsidiaries (other than accrued compensation of directors or officers); provided , however , that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes. In the event the Holder receives payments in excess of its pro rata share of the Company’s payments to the holders of all of the Notes, then the Holder shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

 

11.   Payment . Payment shall be made in lawful tender of the United States.

 

12.   Expenses; Waivers . If action is instituted to collect this Note, the Company shall pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred in connection with such action. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

13.   Time of Essence . Time is of the essence of this Note and the other Transaction Documents.

 

14.   Governing Law . This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to the conflicts of law provisions of the State of Georgia or of any other state.

 

[The Remainder of this Page is Intentionally Left Blank]

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be issued and executed under seal as of the date first written above.

 

 

GEOVAX LABS, INC., a Delaware corporation


By:                                                                        
Name:
Title:

 

 

[SEAL]

 

[Senior Promissory Note]

 

 

 

 

EXHIBIT B

Milestones

 

Milestone 1 - GeoVax’s 50% share (shared with ViaMune) of direct expenses associated with the conduct of the preclinical studies using the combined GeoVax and ViaMune technologies in tumor animal models at the University of North Carolina, Charlotte.

 

 

 

 

EXHIBIT C

 

Joint Venture
Initial Management Structure

 

 

Name

Position

Farshad Guirakhoo

CEO

Mark Reynolds

CFO

Kenny Offerman

CMO

Bob McNally

Managing Director

Russ Medford

Managing Director

 

Exhibit 10.17

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION. THIS WARRANT AND SUCH UNDERLYING SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.

 

GEOVAX LABS, INC.

COMMON STOCK PURCHASE WARRANT

 

This Common Stock Purchase Warrant (this “ Warrant ”) is issued as of the 28th day of February, 2018, by GeoVax Labs, Inc., a Delaware corporation (the “ Company ”), to Georgia Research Alliance, Inc. (the “ Holder ”).

 

1.      Issuance of Warrant; Term; Price .

 

1.1.      Issuance . Concurrently herewith, the Holder is making a loan to the Company in the amount of $50,000.00 (the “ Loan ”) pursuant to the terms of that certain Note Purchase Agreement, dated as of February 28, 2018, between the Company and the Holder (the “ Purchase Agreement ”). The Loan is evidenced by a Subordinated Promissory Note, dated as of February 28, 2018 (together with any and all extensions, replacements and renewals thereof, the “ Note ”). In consideration of the funding of the Loan, the receipt and sufficiency of which are hereby acknowledged, the Company hereby grants to Holder the right to purchase 178,571 shares (the “ Shares ”) of the Company’s Common Stock, par value $.001 per share (the “ Warrant Stock ”).

 

1.2      Term . This Warrant shall be exercisable in whole or in part from the date hereof until February 28, 2023 1 .

 

1.3      Exercise Price . Subject to adjustment as hereinafter provided, the exercise price (the “ Warrant Price ”) per share for which all or any of the Shares may be purchased pursuant to the terms of this Warrant shall be equal to $.042.

 

2.      Adjustment of Warrant Price, Number and Kind of Shares . The Warrant Price and the number and kind of Shares issuable upon the exercise of this Warrant shall be subject to adjustment from time to time as follows.

 

2.1.      Dividends in Stock Adjustment . In case at any time or from time to time on or after the date of this Warrant and while this Warrant is outstanding and unexpired, the holders of the Warrant Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional securities or other property (other than cash) of the Company by way of dividend or distribution, then and in each case, the holder of this Warrant shall, upon the exercise hereof, be entitled to receive, in addition to the number of shares of Warrant Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of such other or additional securities or other property (other than cash) of the Company which such holder would have been entitled to receive if it had exercised this Warrant on the date hereof and thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and/or all other additional securities or other property receivable by it as aforesaid during such period, giving effect to all adjustments called for during such period by this Section 2.

 


1 5 years from the date of issuance

 

 

 

 

2.2.      Reclassification or Reorganization Adjustment . In case of any changes in the class or kind of securities issuable upon exercise of this Warrant or any reclassification or change of the outstanding securities of the Company or of any merger, consolidation or reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) on or after the date hereof, then the holder of this Warrant, upon the exercise hereof at any time after the consummation of such reclassification, change, merger, consolidation or reorganization, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, and the Warrant Price therefore shall be appropriately adjusted, all subject to further adjustment as provided in this Section 2.

 

2.3.      Stock Splits and Reverse Stock Splits . If at any time on or after the date hereof the Company shall split, subdivide or otherwise change its outstanding shares of any securities receivable upon exercise of this Warrant into a greater number of shares, the Warrant Price in effect immediately prior to such subdivision shall thereby be proportionately reduced and the number of shares receivable upon exercise of this Warrant shall thereby be proportionately increased; and, conversely, if at any time on or after the date hereof the outstanding number of shares of any securities receivable upon exercise of this Warrant shall be combined into a smaller number of shares, the Warrant Price in effect immediately prior to such combination shall thereby be proportionately increased and the number of shares receivable upon exercise of this Warrant shall thereby be proportionately decreased, all subject to further adjustment as provided in this Section 2.

 

2.4      Other Impairment . The Company shall not, by amendment of its Articles of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but shall at all times in good faith assist in the carrying out of all such terms and conditions and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder against impairment.

 

2

 

 

3.      No Fractional Shares . No fractional shares of Warrant Stock will be issued in connection with any subscription hereunder. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the Warrant Price.

 

4.      No Stockholder Rights . This Warrant as such shall not entitle its holder to any of the rights of a stockholder of the Company until the holder has exercised this Warrant in accordance with Section 6 hereof.

 

5.      Reservation of Stock . The Company covenants that during the period this Warrant is exercisable, the Company will reserve from its authorized and unissued Warrant Stock a sufficient number of shares to provide for the issuance of Warrant Stock upon the exercise of this Warrant. The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Warrant Stock upon the exercise of this Warrant.

 

6.      Exercise of Warrant . This Warrant may be exercised by Holder by the surrender of this Warrant at the principal office of the Company, accompanied by payment in full of the purchase price of the shares purchased thereby, as described above. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person or entity entitled to receive the shares or other securities issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As promptly as practicable, the Company shall issue and deliver to the person or entity entitled to receive the same a certificate or certificates for the number of full shares of Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share as provided above. The shares of Warrant Stock issuable upon exercise hereof shall, upon their issuance, be fully paid and nonassessable. If this Warrant shall be exercised in part only, the Company shall, at the time of delivery of the certificate representing the Shares or other securities in respect of which this Warrant has been exercised, deliver to the Holder a new Warrant evidencing the right to purchase the remaining Shares or other securities purchasable under this Warrant, which new warrant shall, in all other respects, be identical to this Warrant.

 

7.      Notice of Certain Events; Certificate of Adjustment; Registration Rights . Whenever the Warrant Price or number or type of securities issuable upon exercise of this Warrant is adjusted, as herein provided, the Company shall promptly deliver to the record holder of this Warrant a certificate of an officer of the Company setting forth the nature of such adjustment and a brief statement of the facts requiring such adjustment. If the Company proposes at any time to declare or pay any dividend or distribution on the Warrant Stock, to effect a Deemed Liquidation Event, to register any shares of Warrant Stock, or to liquidate, dissolve or wind up, the Company shall provide the Holder with at least 15 days’ prior written notice prior to taking such action or, in the case of any contemplated dividend or distribution on the Warrant Stock, written notice at least 15 days prior to the record date for such dividend or distribution. In addition, if the Company shall take or propose to take any other action, notice of which is provided to holders of the Warrant Stock, then the Company shall provide written notice of same to the Holder at the same time and in the same manner it provides notice to the holders of Warrant Stock. Any merger, sale, consolidation, reorganization, sale or exclusive license of all or substantially all of the assets or similar transaction involving the Company, whether in one or a series of related transactions, will constitute a “ Deemed Liquidation Event .”

 

3

 

 

8.      Notice of Proposed Transfers . This Warrant is transferable by the Holder hereof subject to compliance with this Section 9. Prior to any proposed transfer of this Warrant or the shares of Warrant Stock received on the exercise of this Warrant (the “ Securities ”), unless there is in effect a registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), covering the proposed transfer, the Holder thereof shall give written notice to the Company of such Holder’s intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail, and shall, if the Company so requests, be accompanied (except in transactions in compliance with Rule 144) by either (i) a written opinion of legal counsel who shall be reasonably satisfactory to the Company addressed to the Company and reasonably satisfactory in form and substance to the Company’s counsel, to the effect that the proposed transfer of the Securities may be effected without registration under the Securities Act and any applicable state securities laws, or (ii) a “no action” letter from the Securities and Exchange Commission (the “ Commission ”) to the effect that the transfer of such Securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the Holder of the Securities shall be entitled to transfer the Securities in accordance with the terms of the notice delivered by the Holder to the Company; provided , however , no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder to any affiliate of such Holder if the transferee agrees in writing to be subject to the terms hereof to the same extent as if such transferee were the original Holder hereunder. Each certificate evidencing the Securities transferred as above provided shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

9.      Replacement of Warrants . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant, and in the case of any such loss, theft or destruction of the Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Warrant if mutilated, the Company will execute and deliver, in lieu thereof, a new Warrant of like tenor.

 

10.   Miscellaneous . This Warrant shall be governed by the laws of the State of Georgia, without regard to the conflict of laws provisions thereof. The headings in this Warrant are for purposes of convenience of reference only, and shall not be deemed to constitute a part hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provisions. All notices and other communications from the Company to the holder of this Warrant shall be given in writing and shall be deemed effectively given as provided in the Purchase Agreement.

 

4

 

 

11.   Amendment; Waiver . Any term of this Warrant may be amended, and any provision hereof waived, only with the written consent of the Company and the Holder.

 

 

 

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

5

 

 

IN WITNESS WHEREOF, the undersigned officer of the Company has set his hand as of the date first above written.

 

 

 

GEOVAX LABS, INC., a Delaware corporation     

 

 

 

By:                                                                           

Name:

Title:

 

 

SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT

 

Exhibit 10.18

 

 

 

February 14, 2018

 

Dr. Robert T. McNally

President & Chief Executive Officer

 

1900 Lake Park Drive

Suite 380

Atlanta, Georgia 30080

 

Dr . McNally:

 

We are pleased that GeoVax Labs, Inc. (“ GeoVax ” or the “ Company ”) has decided to retain Maxim Group LLC (“ Maxim ”) to provide general financial advisory and investment banking services to the Company as set forth herein. This letter agreement (“ Agreement ”) will confirm Maxim’s acceptance of such retention and set forth the terms of our engagement.

 

1.

Retention . The Company hereby retains Maxim as its financial advisor and investment banker to provide general financial advisory and investment banking services, and Maxim accepts such retention on the terms and conditions set forth in this Agreement. In connection with this Agreement, Maxim may provide certain or all of the following services (collectively referred to as the “ Advisory Services ”):

 

 

(a)

provide a valuation analysis of the Company including:  

 

I.

Comparable company analysis;

 

II.

Precedent transaction analysis;

 

 

(b)

assist m`anagement of the Company and a dvise the Company with respect to its strategic planning process and business plans including an analysis of markets, positioning, financial models, organizational structure, potential strategic alliances and capital requirements;

 

 

(c)

advise the Company on matters relating to its capitalization including a potential national exchange listing;

 

 

(d)

assist management of the Company with the preparation of the Company ’s marketing materials and investor presentations;

 

 

(e)

assist the Company with strategic introductions;

 

 

(f)

work closely with the Company ’s management team to develop a set of long and short-term goals with special focus on enhancing corporate and shareholder value. This will include assisting the Company in determining key business actions, including assistance with strategic partnership discussions and review of financing requirements, intended to help enhance shareholder value and exposure to the investment community;

 

 

(g)

advise the Company on potential financing alternatives and merger and acquisition criteria and activity, including facilitation and negotiation of any financial or structural aspects of such alternatives; and

 

 

(h)

provide such other financial advisory and investment banking services upon which the parties may mutually agree.

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 *   tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

New York, NY * Long Island, NY * Redbank, NJ * Boca Raton, FL * Lafayette, CA

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

It is expressly understood and agreed that Maxim shall be required to perform only such tasks as may be necessary or desirable in connection with the rendering of its services hereunder and therefore may not perform all of the tasks enumerated above during the term of this Agreement. Moreover, it is further understood that Maxim need not perform each of the above-referenced tasks in order to receive the fees described in Section 3. It is further understood that Maxim’s tasks may not be limited to those enumerated in this paragraph.

 

2.          Information . In connection with Maxim’s activities hereunder, the Company will cooperate with Maxim and furnish Maxim upon request with all information regarding the business, operations, properties, financial condition, management and prospects of the Company (all such information so furnished being the “ Information ”) which Maxim deems appropriate and will provide Maxim with access to the Company’s officers, directors, employees, independent accountants and legal counsel. The Company represents and warrants to Maxim that all Information made available to Maxim hereunder will be complete and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances under which such statements are or will be made. The Company further represents and warrants that any projections and other forward-looking information provided by it to Maxim will have been prepared in good faith and will be based upon assumptions which, in light of the circumstances under which they are made, are reasonable. The Company recognizes and confirms that Maxim: (i) will use and rely primarily on the Information and on information available from generally recognized public sources in performing the services contemplated by this Agreement without having independently verified the same; (ii) does not assume responsibility for the accuracy or completeness of the Information and such other information; and (iii) will not make an appraisal of any assets of the Company. Any advice rendered by Maxim pursuant to this Agreement may not be disclosed publicly without Maxim’s prior written consent, except as required by law. Maxim will treat all non-public information received from you confidentially and will not use such information for any purpose except to provide services to you hereunder. Maxim will not disclose such information except (i) to Maxim’s officers, employees, agents and representatives as necessary to perform the services (provided such persons are under obligation to keep such information confidential), (ii) with the Company's prior consent, (iii) if such information is made publicly available other than by Maxim in violation of this agreement, or (iv) as is otherwise required by law or judicial or regulatory process (provided that to the extent practicable, Maxim notifies the Company of such requirement in sufficient time to allow the Company the opportunity to seek a protective order or other means of maintaining the confidentiality of such Information

 

3.          Compensation . As consideration for Maxim’s services pursuant to this Agreement, Maxim shall be entitled to receive, and the Company agrees to pay Maxim, the following compensation:

 

 

(a)

The Company shall pay to Maxim a non-refundable monthly fee of $7,500 (USD) for the term of this Agreement; however in no event shall the Company pay fewer than six (6) monthly fee payments to Maxim. Upon execution of this Agreement, the monthly fee payments will accrue, without interest, on a monthly basis and the total monthly fee payment amount accrued will be payable on the six (6) month anniversary of the Agreement. Thereafter, monthly fee payments shall be payable at the beginning of each month until the termination of the Agreement (subject to the minimum six month time period detailed in the preceding sentence). The monthly fee payments shall be payable by wire or other immediately available funds. The fees appearing in Exhibit B (hereto, the “Fee Schedule”) shall be earned by and paid to Maxim by the Company in connection with any Financings (as such terms are defined hereafter) undertaken by the Company, the full terms of which will be will be mutually agreed upon under separate advisory, placement agency and/or underwriting agreements. The fees enumerated in Exhibit B are separate and apart from the monthly fee payments enumerated earlier in this paragraph.

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

 

(b)

Simultaneous to the execution of this Agreement, the Company will issue to Maxim or its designees 5,000,000 shares of its common stock (“ Common Stock ”). The shares of Common Stock will have customary piggyback registration rights similar to those that accompanied the shares it acquired upon exercise of the warrant to acquire the Company’s common stock it previously held, with the exception that such piggyback registration rights shall not apply to any registration statements filed by the Company related to shares held by, or issuable to, Sabby Management LLC or any of its affiliates.. Upon Maxim’s request, the Company will use its best efforts to promptly deliver an opinion of its counsel to the transfer agent to remove the restrictive legend from the Common Stock pursuant to Rule 144; however, this requirement does not apply if the Company reasonably believes in good faith that the conditions for removal of the restrictive legend under Rule 144 have not been met.

 

 

(c)

The Company and Maxim acknowledge and agree that, in the course of performing services hereunder and with the Company’s permission, Maxim may communicate with (as the Company’s advisor) or introduce the Company to third parties approved in advance by the Company who may be interested in providing equity financing to the Company (a “ Financing ”). The Company agrees that if during the term of this Agreement or within twelve (12) months from the effective date of the termination of this Agreement either the Company, on one hand, or any party to whom the Company was introduced by Maxim or who was contacted by Maxim on behalf of the Company during the term hereof in connection with a possible Financing for the Company on the other hand, proposes a Financing involving the Company, then, if any such Financing is consummated, the Company shall pay to Maxim fees in accordance with the Fee Schedule. Such fees shall be payable to Maxim in cash at the closing or closings of the Financing to which it relates. The parties agree and acknowledge that any Financing received from Sabby Management LLC or any of its affiliates are excluded from the rights detailed in this Section 3(c).

 

4.          Expenses . In addition to payment to Maxim of the compensation set forth in Section 3 hereof, the Company shall promptly upon request from time to time reimburse Maxim for all reasonable expenses (including, without limitation, reasonable fees and disbursements of counsel and all travel and other out-of-pocket expenses) incurred by Maxim in connection with its engagement hereunder. Maxim will provide the Company an invoice and copies of receipts pursuant to its expenses and such expenses shall not exceed $5,000 in the aggregate without prior and specific authorization of the Company; provided that the foregoing limitation and consent shall not apply to legal fees.

 

5.          Indemnification . The Company agrees to indemnify Maxim in accordance with the indemnification and other provisions attached to this Agreement as Exhibit A (the “ Indemnification Provisions ”), which provisions are incorporated herein by reference and shall survive the termination or expiration of this Agreement.

 

6.          Intentionally Left Blank .

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

7.          Other Activities ; Maxim Representation . The Company acknowledges that Maxim has been, and may in the future be, engaged to provide services as an underwriter, placement agent, finder, advisor and investment banker to other companies in the industry in which the Company is involved. Subject to the confidentiality provisions of Maxim contained in Section 2 hereof, the Company acknowledges and agrees that nothing contained in this Agreement shall limit or restrict the right of Maxim or of any member, manager, officer, employee, agent or representative of Maxim, to be a member, manager, partner, officer, director, employee, agent or representative of, investor in, or to engage in, any other business, whether or not of a similar nature to the Company’s business, nor to limit or restrict the right of Maxim to render services of any kind to any other corporation, firm, individual or association. Maxim may, but shall not be required to, present opportunities to the Company. Maxim represents that it is registered as a broker-dealer and has met and will continue to meet all registration, and licensing requirements that it is required to meet under applicable regulations in order to lawfully provide the services that Maxim has agreed to provide, or that Maxim contemplates that it will provide, to the Company. Maxim will not provide any services, for which it does not have the requisite licenses, registrations and approvals necessary to comply with all applicable regulations. Maxim is in good standing with FINRA.

 

8.          Term and Termination; Survival of Provisions . Either Maxim or the Company may terminate this Agreement at any time upon 30 days’ prior written notice to the other party, effective at any time after the six (6) month anniversary of this Agreement. Unless a termination occurs prior to such date, this engagement will expire on December 31, 2018. In the event of such termination, the Company shall pay and deliver to Maxim: (i) all compensation earned through the date of such termination (“ Termination Date ”) pursuant to any provision of Section 3 hereof, (ii) all compensation which may be earned by Maxim after the Termination Date pursuant to Section 3 hereof, and (iii) shall reimburse Maxim for all expenses incurred by Maxim in connection with its services hereunder pursuant to Section 4 hereof. All such fees and reimbursements due to Maxim pursuant to the immediately preceding sentence shall be paid to Maxim on or before the Termination Date (in the event such fees and reimbursements are earned or owed as of the Termination Date) or upon the closing of a Financing or any applicable portion thereof (in the event such fees are due pursuant to the terms of Section 3 hereof). If the Company terminates the Agreement for Cause (as hereinafter defined), upon thirty (30) days’ notice and effective within twelve months of the execution of this Agreement, Maxim shall return the pro rata amount of the Common Stock described in Section 3(b) above based on the amount of time remaining in such six (6) month period. Pursuant to this Agreement, “Cause” shall mean gross negligence, willful misconduct or an uncured material breach of this Agreement by Maxim of which the Company has provided Maxim with reasonable notice. Notwithstanding anything expressed or implied herein to the contrary: (i) any other agreement entered into between Maxim and the Company may only be terminated in accordance with the terms thereof, unless otherwise specifically provided therein, and (ii) the terms and provisions of Sections 3, 4, 5 (including, but not limited to, the Indemnification Provisions attached to this Agreement and incorporated herein by reference), 8, 9, 10, 11, 15 and 17 shall survive the termination of this Agreement.

 

9.           Notices . All notices will be in writing and will be effective when delivered in person or sent via U.S. Mail or private carrier or via facsimile or email and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

 

To the Company:   Dr. Robert T. McNally
    President & Chief Executive Officer
    GeoVax Labs, Inc.
    1900 Lake Park Drive
    Suite 380
    Atlanta, Georgia 30080
    Telephone: (678) 384-7220
    Facsimile:
    Email: rmcnally@geovax.com

          

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

 

  With a copy to:  
  Mark W. Reynolds  
  Chief Financial Officer  
  GeoVax Labs, Inc.  
  1900 Lake Park Drive  
  Suite 380  
  Atlanta, Georgia 30080  
  Telephone: (678) 384-7220  
  Facsimile: (678) 384-7281  
  Email: mreynolds@geovax.com  
     
  And  
  T. Clark Fitzgerald III  
  Womble Bond Dickinson (US) LLP  
  271 17 th Street NW  
  Suite 271  
  Atlanta, GA 30363-1017  
  Telephone: (404) 879-2455  
  Facsimile:  
  Email: clark.fitzgerald@wbd-us.com  
     
To Maxim: James Siegel, Esq.  
  Maxim Group LLC  
  405 Lexington Avenue  
  New York, NY 10174  
  Telephone: (212) 895-3508  
  Facsimile: (212) 895-38 60  
  Email:  
     
  Mr. Clifford Teller  
  Maxim Group LLC  
  405 Lexington Avenue  
  New York, NY 10174  
  Email:  

 

10.          Governing Law . This Agreement shall be enforced, governed by and construed in accordance with the laws of New York without regard to principles of conflict of laws. Any controversy between the parties to this Agreement, or arising out of the Agreement shall be resolved by arbitration before the American Arbitration Association (“ AAA ”) in New York City. The following arbitration agreement should be read in conjunction with these disclosure.

 

ARBITRATION IS FINAL AND BINDING ON THE PARTIES;

(b)

THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL;

(c)

PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDING; AND

(d)

THE ARBITRATORS’ AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDING OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

ARBITRATION AGREEMENT . ANY AND ALL CONTROVERSIES, DISPUTES OR CLAIMS BETWEEN THE UNDERSIGNED AND YOU OR YOUR AGENTS, REPRESENTATIVES, EMPLOYEES, DIRECTORS, OFFICERS OR CONTROL PERSONS, ARISING OUT OF, IN CONNECTION WITH, FROM OR WITH RESPECT TO (a) ANY PROVISIONS OF OR THE VALIDITY OF THIS AGREEMENT OR ANY RELATED AGREEMENTS, (b) THE RELATIONSHIP OF THE PARTIES HERETO, OR (c) ANY CONTROVERSY ARISING OUT OF YOUR BUSINESS SHALL BE CONDUCTED BY THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS COMMERCIAL RULES. ARBITRATION MUST BE COMMENCED BY SERVICE OF A WRITTEN DEMAND FOR ARBITRATION OR A WRITTEN NOTICE OF INTENTION TO ARBITRATE. IF YOU ARE A PARTY TO SUCH ARBITRATION, TO THE EXTENT PERMITTED BY THE RULES OF THE APPLICABLE ARBITRATION TRIBUNAL, THE ARBITRATION SHALL BE CONDUCTED IN NEW YORK, NEW YORK. THE DECISION AND AWARD OF THE ARBITRATORS(S) SHALL BE CONCLUSIVE AND BINDING UPON ALL PARTIES, AND ANY JUDGMENT UPON ANY AWARD RENDERED MAY BE ENTERED IN THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, OR ANY OTHER COURT HAVING JURISDICTION THEREOF, AND NEITHER PARTY SHALL OPPOSE SUCH ENTRY.

 

11.          Amendments . This Agreement may not be modified or amended except in a writing duly executed by the parties hereto.

 

12.          Headings . The section headings in this Agreement have been inserted as a matter of reference and are not part of this Agreement.

 

13.          Successors and Assigns . The benefits of this Agreement shall inure to the parties hereto, their respective successors and assigns and to the indemnified parties hereunder and their respective successors and assigns, and the obligations and liabilities assumed in this Agreement shall be binding upon the parties hereto and their respective successors and assigns. Notwithstanding anything contained herein to the contrary, neither Maxim nor the Company shall assign any of its obligations hereunder without the prior written consent of the other party.

 

14.         No Third Party Beneficiaries . This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person or entity not a party hereto, except those entitled to the benefits of the Indemnification Provisions. Without limiting the foregoing, the Company acknowledges and agrees that Maxim is not being engaged as, and shall not be deemed to be, an agent or fiduciary of the Company’s stockholders or creditors or any other person by virtue of this Agreement or the retention of Maxim hereunder.

 

15.          Waiver . Any waiver or any breach of any of the terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or of any other term or condition, nor shall any failure to insist upon strict performance or to enforce any provision hereof on any one occasion operate as a waiver of such provision or of any other provision hereof or a waiver of the right to insist upon strict performance or to enforce such provision or any other provision on any subsequent occasion. Any waiver must be in writing.

 

16.          Counterparts . This Agreement may be executed in any number of counterparts and by facsimile transmission, each of which shall be deemed to be an original instrument, but all of which taken together shall constitute one and the same agreement. Facsimile signatures and copies of signatures delivered by email shall be deemed to be original signatures for all purposes.

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

17.          Disclaimers . Maxim and the Company further agree that neither Maxim nor any of its affiliates or any of its/their respective officers, directors, controlling persons (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees or agents shall have any liability to the Company, its security holders or creditors, or any person asserting claims on behalf of or in the right of the Company (whether direct or indirect, in contract, tort, for an act of negligence or otherwise) for any losses, fees, damages, liabilities, costs, expenses or equitable relief arising out of or relating to this Agreement or the Advisory Services rendered herein, except for losses, fees, damages, liabilities, costs or expenses that arise out of or are based on any action of or failure to act by Maxim or any such officers, directors, controlling persons (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees or agents and that are finally and fully judicially determined to have resulted solely from the gross negligence or willful misconduct of Maxim officers, directors, controlling persons (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees or agents.

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

If the terms of our engagement as set forth in this letter are satisfactory to you, please confirm by signing and returning one copy of this letter.

 

 

 

Very truly yours,

 

     
  MAXIM GROUP LLC  
     

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Ritesh Veera  

 

 

 

Managing Director, Investment Banking  

 

 

 

 

 

       

 

 

 

 

 

By:

 

 

 

 

Clifford A. Teller  

 

 

 

Executive Managing Director, Investment Banking 

 

 

 

 

 

Agreed to and accepted this 14 th day of February , 2018

 

GeoVax Lab, Inc.

 

 

_____________________________

Dr. Robert T. McNally

President & Chief Executive Officer

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

Exhibit A

 

INDEMNIFICATION PROVISIONS

 

Capitalized terms used in this Exhibit shall have the meanings ascribed to such terms in the Agreement to which this Exhibit is attached.

 

The Company agrees to indemnify and hold harmless Maxim and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, “ Losses ”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, Maxim’s acting for the Company, including, without limitation, any act or omission by Maxim in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and Maxim to which these indemnification provisions are attached and form a part (the “ Agreement ”), any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, unless otherwise provided therein), or the enforcement by Maxim of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of an Indemnified Party. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Maxim by the Company, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal ) to have resulted primarily and directly from such Indemnified Party’s gross negligence or willful misconduct.

 

These Indemnification Provisions shall extend to the following persons (collectively, the “ Indemnified Parties ”): Maxim, its present and former current affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them. These indemnification provisions shall be in addition to any liability which the Company may otherwise have to any Indemnified Party.

 

If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided , however , that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder, except to the extent such failure to notify causes the Company to suffer actual and material prejudice as a result of such failure. If the Company so elects, the Company may assume the defense of such action or proceeding in a timely manner, including the employment of counsel (reasonably satisfactory to us) and payment of expenses, provided the Company permits an Indemnified Person and counsel retained by an Indemnified Person at its expense to participate in such defense. Notwithstanding the foregoing, in the event (i) the Company fails promptly to assume the defense and employ counsel reasonably satisfactory to us, or (ii) the Indemnified Person has been advised by counsel that there exist actual or potential conflicting interests between the Company or its counsel and such Indemnified Person, an Indemnified Person may employ separate counsel (in addition to any local counsel) to represent or defend


such Indemnified Person in such action or proceeding, and the Company agrees to pay the reasonable fees and disbursements of such separate counsel as incurred; provided however , that the Company will not, in connection with any one such action or proceeding, or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for fees and expenses of more than one separate firm of attorneys (in addition to any local counsel).

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

The Company shall not, without the prior written consent of Maxim, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an inaccurate adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party. Without the Company’s prior written consent, which will not be unreasonably withheld, delayed or conditioned, no Indemnified Person will settle or compromise any claim for which indemnification or contribution may be sought hereunder. Notwithstanding the foregoing sentence, if at any time an Indemnified Person requests that the Company reimburse the Indemnified Person for fees and expenses as provided in the Agreement, the Company agrees that it will be liable for any settlement of any proceeding effected without its prior written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the request for reimbursement, and (ii) the Company will not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement.

 

In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefits received by the Company on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Maxim in connection with such transaction or transactions. Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Maxim pursuant to the Agreement.

 

Neither termination nor completion of the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect. The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives.

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

 

 

 

 

February 14, 2018

GeoVax Labs, Inc.

 

Exhibit B

 

FEE SCHEDULE

 

Capitalized terms used in this Exhibit shall have the meanings ascribed to such terms in the Agreement to which this Exhibit is attached.

 

 

 

1.   For any Financing, the Company shall:

(i) pay Maxim a cash fee of eight percent (8.0%) of the amount of capital raised, invested or committed; and  

(ii) deliver a warrant to Maxim (the “ Agent Warrant ”) to purchase shares of the Company’s common stock (the “ Common Stock ”) equal to eight percent (8.0%) of the number of shares of Common Stock underlying the securities issued in the Financing. Such Agent Warrant will be issued at each Closing and shall provide, among other things, that the Agent Warrant shall (i) be exercisable at an exercise price of 110% to the price of the securities (or the exercise price of the securities) issued to the investors in the Financing, (ii) expire five (5) years from the date of issuance, (iii) contain standard anti-dilution protection and such other anti-dilution price protection provided to the investors in the Financing, (iv) include registration rights equal to those provided to the investors, (v) contain provisions for cashless exercise and (vi) include such other terms as are normal and customary for warrants of this type.

 

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

Exhibit 31.1

 

CERTIFICATION

PURSUANT TO RULE 13a-14(a) or 15d-14(a)

OF THE

SECURITIES EXCHANGE ACT OF 1934

 

I, Robert T. McNally, certify that:

 

 

(1)

I have reviewed this annual report on Form 10-K of GeoVax Labs, Inc.;

 

 

(2)

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

(3)

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

(4)

The registrant ’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant ’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant ’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

(5)

The registrant ’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant ’s ability to record, process, summarize and report financial information; and

 

 

b.

A ny fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Dated: March 23, 2018

 

/s/ Robert T. McNally

 

 

 

Robert T. McNally 

 

 

 

President and Chief Executive Officer 

 

 

Exhibit 31.2

CERTIFICATION

PURSUANT TO RULE 13a-14(a) or 15d-14(a)

OF THE

SECURITIES EXCHANGE ACT OF 1934

 

I, Mark W. Reynolds, certify that:

 

 

(1)

I have reviewed this annual report on Form 10-K of GeoVax Labs, Inc.;

 

 

(2)

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

(3)

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

(4)

The registrant ’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure control s and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant ’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant ’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

(5)

The registrant ’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant ’s ability to record, process, summarize and report financial information; and

 

 

b.

A ny fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

  Dated: March 23, 2018

 

/s/  Mark W. Reynolds

 

 

 

Mark W. Reynolds

 

 

 

Chief Financial Officer

 

 

Exhibit 32.1

 

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of GeoVax Labs, Inc. (the "Company") on Form 10-K for the year ended December 31, 2017, I, Robert T. McNally, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that to the best of my knowledge:

 

1.

The annual report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

  Dated: March 23, 2018

 

/s/  Robert T. McNally

 
    Robert T. McNally  
    President and Chief Executive Officer  

 

Exhibit 32.2

 

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of GeoVax Labs, Inc. (the "Company") on Form 10-K for the year ended December 31, 2017, I, Mark W. Reynolds, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that to the best of my knowledge:

 

1.

The annual report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company

 

 

 

  Dated: March 23, 2018

 

/s/  Mark W. Reynolds

 
    Mark W. Reynolds  
    Chief Financial Officer