GeoVax Labs, Inc. (“GeoVax” or the “Company”), is a clinical-stage biotechnology company developing immunotherapies and vaccines against cancer and infectious diseases using a novel vector vaccine platform (Modified Vaccinia Ankara Virus-Like Particle, or “MVA-VLP”). Our recombinant MVA vector expresses target proteins on highly immunogenic VLPs in the person being vaccinated, resulting in durable immune responses while providing the safety characteristics of the replication-deficient MVA vector. Important attributes of GeoVax vaccines include single dose, no adjuvant, durable immunity, extensive safety and cost-effective manufacturing. 

Our current development programs are focused on preventive and therapeutic vaccines against Human Immunodeficiency Virus (HIV); preventive vaccines against hemorrhagic fever viruses (Ebola, Sudan, Marburg, and Lassa fever), Zika virus and malaria; a therapeutic vaccine for chronic hepatitis B virus infections; and immunotherapies for solid tumor 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 improve health to patients worldwide by advancing our vaccine platform, using its unique capabilities to design and develop an array of products addressing unmet medical needs in the areas of infectious diseases and oncology. Our goal is to advance products through to human clinical testing, and to seek partnership or licensing arrangements for achieving regulatory approval and commercialization. We also leverage third party resources through collaborations and partnerships for preclinical and clinical testing with multiple government, academic and corporate entities.

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 metropolitan Atlanta, Georgia.

The accompanying condensed consolidated financial statements at September 30, 2019 and for the three-month and nine-month periods ended September 30, 2019 and 2018 are unaudited, but include all adjustments, consisting of normal recurring entries, which we believe to be necessary for a fair presentation of the dates and periods presented. Interim results are not necessarily indicative of results for a full year. The financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. We expect our operating results to fluctuate for the foreseeable future; therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.

As described in Note 10, effective April 30, 2019, we enacted a one-for-five hundred reverse stock split of our common stock. The accompanying financial statements, and all share and per share information contained herein, have been retroactively restated to reflect the reverse stock split.

Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date the financial statements are available to be issued.  We are devoting substantially all of our present efforts to research and development of our vaccine candidates. 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 these activities. 

We believe that our existing cash resources, government funding and corporate collaboration commitments will be sufficient to continue our planned operations into the first quarter of 2020. 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 timeframe. We are currently exploring sources of capital through additional government grants and corporate collaborations. 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.

We disclosed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 those accounting policies that we consider significant in determining our results of operations and financial position. Other than as described below, there have been no material changes to, or in the application of, the accounting policies previously identified and described in the Form 10-K.

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02, Leases (ASU 2016-02). ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to classify leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to prior guidance for operating leases. We adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on our financial statements, given that the noncancelable term of our current lease is less than 12 months (see Note 8).

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2019, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which we expect to have a material impact on our financial statements.

Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares and potentially dilutive common share equivalents outstanding during the period. Potentially dilutive common share equivalents consist of convertible preferred stock, stock options and stock purchase warrants. Common share equivalents which potentially could dilute basic earnings per share in the future, and which were excluded from the computation of diluted loss per share, as the effect would be anti-dilutive, totaled 10,937,156 and 10,895,920 shares for the three-month and nine-month periods ended September 30, 2019, respectively, as compared to 86,783 and 75,740 shares for the three-month and nine-month periods ended September 30, 2018, respectively.

Property and equipment as shown on the accompanying Condensed Consolidated Balance Sheets is composed of the following as of September 30, 2019 and December 31, 2018:

Accrued expenses as shown on the accompanying Condensed Consolidated Balance Sheets is composed of the following as of September 30, 2019 and December 31, 2018:

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 “GRA Note”) to GRA in exchange for $50,000. The GRA Note bears an annual interest rate of 5%, payable monthly, with principal repayments beginning in the second year. Principal repayments are expected to be $2,084 for the remainder of 2019, $12,500 in 2020, 2021 and 2022, and $2,083 in 2023. Interest expense related to the GRA Note for the three-month and nine-month periods ended September 30, 2019 was $547 and $1,753, respectively, as compared to $625 and $1,458, respectively, for the same periods of 2018.

On December 27, 2018, we issued short-term non-interest-bearing Term Promissory Notes (the “Term Notes”) to two current investors in exchange for an aggregate of $250,000. In February 2019, the Term Notes were cancelled in exchange for shares of our convertible preferred stock (see Note 9).

Lease Agreement

We lease approximately 8,400 square feet of office and laboratory space pursuant to an operating lease which expires on December 31, 2019 and which is under negotiation for extension beyond that date. Rent expense for the for the three-month and nine-month periods ended September 30, 2019 was $40,316 and $120,949, respectively, as compared to $39,136 and $117,409, respectively, for the same periods of 2018. Future minimum lease payments total $40,316 for the remainder of 2019.

Other Commitments

In the normal course of business, we enter into various firm purchase commitments related to production and testing of our vaccine, conduct of research studies, and other activities. As of September 30, 2019, there are approximately $391,000 of unrecorded outstanding purchase commitments to our vendors and subcontractors, all of which we expect will be due in 2019 and 2020. We expect this entire amount to be reimbursable to us pursuant to existing government grants.

Preferred Stock Summary

We are authorized to issue up to 10,000,000 shares of our Preferred Stock, $.01 par value, which may be issued in one or more series. The table below presents our issued and outstanding series of preferred stock as of September 30, 2019 and December 31, 2018. Each series of our outstanding preferred stock has a stated value of $1,000 per share. Further details concerning each series of preferred stock, and the changes in each series during the three-month and nine-month periods ending September 30, 2019 and 2018 are discussed in the sections that follow the table.

Series B Preferred Stock

During the nine-month period ended September 30, 2019, there were no conversions or other transactions involving our Series B Convertible Preferred Stock (“Series B Preferred Stock”). As of September 30, 2019, there are 100 shares of our Series B Convertible Preferred Stock outstanding. The Series B Preferred Stock may be converted at any time at the option of the holder into shares of our common stock at a conversion price of $175 per share.

Series C Preferred Stock

During January and February 2019, 587 shares of our Series C Convertible Preferred Stock (“Series C Preferred Stock”) were converted into 78,280 shares of our common stock. As discussed below, during February 2019, all remaining shares of Series C Preferred Stock (1,563 shares) were exchanged for Series F Preferred Stock.

Series E Preferred Stock

During the nine-month period ended September 30, 2019, there were no conversions involving our Series E Convertible Preferred Stock (“Series E Preferred Stock”). As discussed below, during February 2019, all remaining shares of Series E Preferred Stock (1,200 shares) were exchanged for Series F Preferred Stock.

Series F Preferred Stock

On February 18, 2019, we entered into Exchange Agreements with holders of our Series C and Series E Preferred Stock, pursuant to which the holders exchanged all shares of Series C and Series E Preferred Stock held by them for an aggregate of 2,763 shares of Series F Convertible Preferred Stock (“Series F Preferred Stock”). Each share of Series F Preferred Stock is entitled to a liquidation preference equal to its $1,000 stated value, has no voting rights, and is not entitled to a dividend. The Series F Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i) $7.50 per share and (ii) 90% of the volume weighted average price of the common stock immediately preceding the delivery of a notice of conversion. The Series F Preferred Stock contains price adjustment provisions, which may, under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series F Preferred Stock. During the three-month and nine-month periods ending September 30, 2019, 46 and 507 shares, respectively, of Series F Preferred Stock were converted into 88,400 and 381,700 shares, respectively, of our common stock. As discussed below, during July 2019, all remaining shares of Series F Preferred Stock (2,256 shares) were exchanged for Series H Preferred Stock.

Series G Preferred Stock

On February 25, 2019, we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of up to 1,000 shares of our Series G Convertible Preferred Stock (“Series G Preferred Stock”) and related warrants for gross proceeds of up to $1.0 million, which was funded at three different closings. Each share of Series G Preferred Stock is entitled to a liquidation preference equal to its $1,000 stated value, has no voting rights, and is not entitled to a dividend. The Series G Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i) $7.50 per share and (ii) 90% of the volume weighted average price of the common stock immediately preceding the delivery of a notice of conversion. The Series G Preferred Stock contains price adjustment provisions, which may, under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series G Preferred Stock.

At the first closing, which occurred on February 26, 2019, we issued 500 shares of Series G Preferred Stock in exchange for the payment by the Purchasers of $250,000 in the aggregate, plus the cancellation of Term Notes held by the Purchasers (see Note 7) in the amount of $250,000. At the first closing we also issued warrants to purchase an aggregate of 33,334 shares of our common stock. The warrants have an initial exercise price of $7.50 per share, are exercisable six months from the issuance date, and have a term of exercise equal to five years from the date they first become exercisable. The warrants contain anti-dilution and price adjustment provisions, which may, under certain circumstances reduce the exercise price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then exercise price of the warrants; in the event of such adjustment, the number of shares subject to the warrants will also increase so that the aggregate exercise price remains the same for each warrant. At the second and third closings, which occurred on April 26 and June 19, 2019, we issued an aggregate of 500 additional shares of Series G Preferred Stock in exchange for the payment by the Purchasers of a total of $500,000. We also issued the Purchasers warrants to purchase an aggregate of 66,668 shares of our common stock. As discussed below, during July 2019, all of the then-outstanding shares of Series G Preferred Stock (1,000 shares) were exchanged for Series H Preferred Stock.

Series H Preferred Stock

On July 16, 2019, we entered into Exchange Agreements with holders of our Series F and Series G Preferred Stock, pursuant to which the holders exchanged all shares of Series F and Series G Preferred Stock held by them for an aggregate of 3,256 shares of Series H Convertible Preferred Stock (“Series H Preferred Stock”). Each share of Series H Preferred Stock is entitled to a liquidation preference equal to its $1,000 stated value, has no voting rights, and is not entitled to a dividend. The Series H Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i) $7.50 per share and (ii) 80% of the lowest volume weighted average price of the Common Stock during the ten trading days immediately preceding the delivery of a notice of conversion. The Series H Preferred Stock contains price adjustment provisions, which may, under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series H Preferred Stock. During the three-month period ending September 30, 2019, 1,002 shares of Series H Preferred Stock were converted into 94,687,441 shares of our common stock. As of September 30, 2019, there are 2,254 shares of our Series H Preferred Stock outstanding, which may be converted at any time at the option of the holder into shares of our common stock at a conversion price determined based on the calculation described above.

Series I Preferred Stock

On July 24, 2019, we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of 700 shares of our Series I Convertible Preferred Stock (“Series I Preferred Stock”) for gross proceeds of $700,000. Each share of Series I Preferred Stock is entitled to a liquidation preference equal to its $1,000 stated value, has no voting rights, and is not entitled to a dividend. The Series I Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i) $7.50 per share and (ii) 80% of the lowest volume weighted average price of the Common Stock during the ten trading days immediately preceding the delivery of a notice of conversion. The Series I Preferred Stock contains price adjustment provisions, which may, under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series I Preferred Stock. During the three-month period ended September 30, 2019, there were no conversions involving our Series I Preferred Stock. As of September 30, 2019, there are 700 shares of our Series I Preferred Stock outstanding, which may be converted at any time at the option of the holder into shares of our common stock at a conversion price determined based on the calculation described above

Reverse Stock Split

Following approval by our shareholders at a meeting held on April 15, 2019, on April 30, 2019, we effected a one-for-five hundred reverse split of our common stock by the filing of an amendment to our certificate of incorporation with the State of Delaware. All share and per share information in our condensed consolidated financial statements and notes that relate to our common stock has been retroactively restated to reflect the reverse stock split.

Common Stock Transactions

As discussed in Note 9, during the nine-month period ended September 30, 2019, we issued 95,147,421 shares of our common stock pursuant to conversions our Series C, Series F and Series H Preferred Stock.

During the nine-month period ended September 30, 2019, we issued 41,954 shares of our common stock in exchange for consulting services. See “Stock-Based Compensation Expense” below.

Stock Options

During the nine months ended September 30, 2019, there were no transactions involving our stock option plans. As of September 30, 2019, there are 28,800 stock options outstanding ($53.99/share weighted-average exercise price), 13,585 of which are exercisable at that date ($93.92/share weighted-average exercise price).

Stock Purchase Warrants

During the nine months ended September 30, 2019, we issued an aggregate of 100,002 stock purchase warrants in connection with the sale of our Series G Preferred Stock as discussed above. As of September 30, 2019, there are 294,302 stock purchase warrants outstanding ($7.50/share weighted-average exercise price), 227,634 of which are exercisable at that date ($7.50/share weighted-average exercise price).

Stock-Based Compensation Expense

Stock-based compensation expense related to our stock option plans was $26,348 and $79,664 during the three-month and nine-month periods ended September 30, 2019, respectively, as compared to $85,370 and $132,569, respectively, during the same periods of 2018. Stock-based compensation expense related to stock options is recognized on a straight-line basis over the requisite service period for the award and is allocated to research and development expense or general and administrative expense based upon the related employee classification. As of September 30, 2019, there was $130,719 of unrecognized compensation expense related to stock options, which we expect to recognize over a weighted average period of 1.6 years.

During the three-month and nine-month periods ended September 30, 2019 we recorded stock-based compensation expense of $6,000 and $211,080, respectively, associated with common stock issued for consulting and financial advisory services, as compared to $57,143 and $142,856, respectively, during the same periods of 2018.

Because of our historically significant net operating losses, we have not paid income taxes since inception. We maintain deferred tax assets that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. These deferred tax assets are comprised primarily of net operating loss carryforwards and also include amounts relating to nonqualified stock options and research and development credits. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of our future profitability and our ability to utilize the deferred tax assets. Utilization of operating losses and credits will be subject to substantial annual limitations due to ownership change provisions of Section 382 of the Internal Revenue Code. The annual limitation will result in the expiration of net operating losses and credits before utilization.

We receive payments from government entities under our grants from the National Institute of Allergy and Infectious Diseases (NIAID) and from the U.S. Department of Defense in support of our vaccine research and development efforts. We record revenue associated with government grants as the reimbursable costs are incurred. During the three-month and nine-month periods ended September 30, 2019, we recorded $214,765 and $754,022, respectively, of revenues associated with these grants, as compared to $340,716 and $650,280, respectively, for the comparable periods of 2018. As of September 30, 2019, there is an aggregate of $1,835,225 in approved grant funds available for use during 2019 and 2020.

During the three-month and nine-month periods ended September 30, 2019, we recorded $118,444 and $153,360, respectively, of revenues associated with research collaboration agreements with third parties, as compared to $8,628 and $13,628, respectively, for the comparable periods of 2018.

During October and November (through November 6) 2019, holders of our preferred stock converted approximately 466 shares of our Series H Preferred Stock into 330,000,000 shares of our common stock. During October 2019, we issued 678,744 shares of our common stock in exchange for consulting services.