Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30,
2020
OR
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission file number 001-32954
CLEVELAND BIOLABS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
|
20-0077155
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. Employer Identification No.)
|
|
|
73 High Street, Buffalo, New York
|
14203
|
(Address of principal executive offices)
|
(Zip Code)
|
(716) 849-6810
(Registrant’s telephone number, including area
code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
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 every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
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 Exchange
Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common stock, par value $0.005
|
|
CBLI
|
|
NASDAQ Capital Market
|
As of July 24, 2020, there were 13,016,387 shares outstanding
of the registrant’s common stock, par value $0.005 per share.
TABLE OF CONTENTS
In this Quarterly Report on Form 10-Q, unless otherwise stated or
the context otherwise requires, the terms "Cleveland
BioLabs," the "Company," "CBLI," "we,"
"us" and "our" refer to Cleveland BioLabs, Inc. and
its consolidated subsidiaries, BioLab 612, LLC and Panacela Labs,
Inc. Our common stock, par value $0.005 per share, is referred to
as "common stock."
CLEVELAND BIOLABS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
3,409,310 |
|
|
$ |
1,126,124 |
|
Short-term investments
|
|
|
357,391 |
|
|
|
452,301 |
|
Accounts receivable
|
|
|
246,552 |
|
|
|
378,865 |
|
Other current assets
|
|
|
56,751 |
|
|
|
45,381 |
|
Total current assets
|
|
|
4,070,004 |
|
|
|
2,002,671 |
|
Equipment, net
|
|
|
9,233 |
|
|
|
15,514 |
|
Other long-term assets
|
|
|
- |
|
|
|
18,667 |
|
Total assets
|
|
$ |
4,079,237 |
|
|
$ |
2,036,852 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
301,618 |
|
|
$ |
263,573 |
|
Accrued expenses
|
|
|
210,223 |
|
|
|
782,579 |
|
Accrued warrant liability
|
|
|
275,494 |
|
|
|
6,414 |
|
Total current liabilities
|
|
|
787,335 |
|
|
|
1,052,566 |
|
Non-current liabilities
|
|
|
— |
|
|
|
— |
|
Total liabilities
|
|
|
787,335 |
|
|
|
1,052,566 |
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.005 par value; 1,000,000 shares authorized as of
June 30, 2020 and December 31, 2019; 0 shares issued and
outstanding as of June 30, 2020 and December 31, 2019
|
|
|
— |
|
|
|
— |
|
Common stock, $.005 par value; 25,000,000 shares authorized as of
June 30, 2020 and December 31, 2019; 12,927,988 and 11,298,239
shares issued and outstanding as of June 30, 2020 and December 31,
2019
|
|
|
64,163 |
|
|
|
56,487 |
|
Additional paid-in capital
|
|
|
166,503,441 |
|
|
|
163,161,523 |
|
Accumulated other comprehensive loss
|
|
|
(612,124 |
) |
|
|
(568,030 |
) |
Accumulated deficit
|
|
|
(167,663,942 |
) |
|
|
(166,705,572 |
) |
Total Cleveland BioLabs, Inc. stockholders’ deficit
|
|
|
(1,708,462 |
) |
|
|
(4,055,592 |
) |
Noncontrolling interest in stockholders’ equity
|
|
|
5,000,364 |
|
|
|
5,039,878 |
|
Total stockholders’ equity
|
|
|
3,291,902 |
|
|
|
984,286 |
|
Total liabilities and stockholders’ equity
|
|
$ |
4,079,237 |
|
|
$ |
2,036,852 |
|
See Notes to Consolidated Financial Statements
CLEVELAND
BIOLABS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants and contracts
|
|
$ |
63,255 |
|
|
$ |
276,967 |
|
|
$ |
219,297 |
|
|
$ |
474,886 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
170,007 |
|
|
|
599,578 |
|
|
|
388,215 |
|
|
|
1,112,999 |
|
General and administrative
|
|
|
485,439 |
|
|
|
448,991 |
|
|
|
867,605 |
|
|
|
923,661 |
|
Total operating expenses
|
|
|
655,446 |
|
|
|
1,048,569 |
|
|
|
1,255,820 |
|
|
|
2,036,660 |
|
Loss from operations
|
|
|
(592,191 |
) |
|
|
(771,602 |
) |
|
|
(1,036,523 |
) |
|
|
(1,561,774 |
) |
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
508,811 |
|
|
|
25,930 |
|
|
|
511,711 |
|
|
|
18,282 |
|
Foreign exchange loss
|
|
|
(780 |
) |
|
|
(388 |
) |
|
|
(387 |
) |
|
|
(1,059 |
) |
Change in value of warrant liability
|
|
|
(292,385 |
) |
|
|
112,466 |
|
|
|
(453,074 |
) |
|
|
17,645 |
|
Total other income (expense)
|
|
|
215,646 |
|
|
|
138,008 |
|
|
|
58,250 |
|
|
|
34,868 |
|
Net loss
|
|
|
(376,545 |
) |
|
|
(633,594 |
) |
|
|
(978,273 |
) |
|
|
(1,526,906 |
) |
Net loss attributable to noncontrolling interests
|
|
|
6,707 |
|
|
|
16,766 |
|
|
|
19,903 |
|
|
|
37,135 |
|
Net loss attributable to Cleveland BioLabs, Inc.
|
|
$ |
(369,838 |
) |
|
$ |
(616,828 |
) |
|
$ |
(958,370 |
) |
|
$ |
(1,489,771 |
) |
Net loss attributable to common stockholders per share of common
stock, basic and diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
|
|
(0.08 |
) |
|
|
(0.13 |
) |
Weighted average number of shares used in calculating net loss per
share, basic and diluted
|
|
|
11,947,364 |
|
|
|
11,298,239 |
|
|
|
11,651,761 |
|
|
|
11,298,239 |
|
See Notes to Consolidated Financial Statements
CLEVELAND
BIOLABS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net loss including noncontrolling interests
|
|
$ |
(376,545 |
) |
|
$ |
(633,594 |
) |
|
$ |
(978,273 |
) |
|
$ |
(1,526,906 |
) |
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
44,395 |
|
|
|
14,580 |
|
|
|
(63,705 |
) |
|
|
55,330 |
|
Comprehensive loss including noncontrolling interests
|
|
|
(332,150 |
) |
|
|
(619,014 |
) |
|
|
(1,041,978 |
) |
|
|
(1,471,576 |
) |
Comprehensive loss attributable to noncontrolling interests |
|
|
(7,305 |
) |
|
|
12,054 |
|
|
|
39,514 |
|
|
|
18,432 |
|
Comprehensive loss attributable to Cleveland BioLabs, Inc.
|
|
$ |
(339,455 |
) |
|
$ |
(606,960 |
) |
|
$ |
(1,002,464 |
) |
|
$ |
(1,453,144 |
) |
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Common Stock
|
|
|
Treasury Stock
|
|
|
Paid-In
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
Balance at December 31, 2018
|
|
|
11,298,239 |
|
|
$ |
56,487 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
163,161,523 |
|
Exercise of warrants
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Unrealized loss on short-term investments
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at March 31, 2019
|
|
|
11,298,239 |
|
|
$ |
56,487 |
|
|
|
— |
|
|
$ |
- |
|
|
$ |
163,161,523 |
|
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at June 30, 2019 |
|
|
11,298,239 |
|
|
$ |
56,487 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
163,161,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
11,298,239 |
|
|
$ |
56,487 |
|
|
|
— |
|
|
$ |
- |
|
|
$ |
163,161,523 |
|
Exercise of warrants |
|
|
105,000 |
|
|
|
53 |
|
|
|
— |
|
|
|
— |
|
|
|
504,853 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at March 31, 2020
|
|
|
11,403,239 |
|
|
$ |
56,540 |
|
|
|
— |
|
|
$ |
- |
|
|
$ |
163,666,376 |
|
Issuance of common stock, net of offering costs |
|
|
1,515,878 |
|
|
|
7,579 |
|
|
|
— |
|
|
|
— |
|
|
|
2,775,846 |
|
Exercise of warrants |
|
|
8,871 |
|
|
|
44 |
|
|
|
— |
|
|
|
— |
|
|
|
61,219 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance at June 30, 2020 |
|
|
12,927,988 |
|
|
$ |
64,163 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
166,503,441 |
|
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Accumulated Deficit |
|
|
Noncontrolling Interests
|
|
|
Total
|
|
Balance at December 31, 2018
|
|
$ |
(611,370 |
) |
|
$ |
(164,058,585 |
) |
|
$ |
5,065,972 |
|
|
$ |
3,614,027 |
|
Exercise of warrants
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss
|
|
|
— |
|
|
|
(872,943 |
) |
|
|
(20,369 |
) |
|
|
(893,312 |
) |
Unrealized loss on short-term investments
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation
|
|
|
26,759 |
|
|
|
— |
|
|
|
13,991 |
|
|
|
40,750 |
|
Balance at March 31, 2019
|
|
$ |
(584,611 |
) |
|
$ |
(164,931,528 |
) |
|
$ |
5,059,594 |
|
|
$ |
2,761,465 |
|
Net loss
|
|
|
— |
|
|
|
(616,828 |
) |
|
|
(16,766 |
) |
|
|
(633,594 |
) |
Unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation
|
|
|
9,868 |
|
|
|
— |
|
|
|
4,712 |
|
|
|
14,580 |
|
Balance at June 30, 2019 |
|
$ |
(574,743 |
) |
|
$ |
(165,548,356 |
) |
|
$ |
5,047,540 |
|
|
$ |
2,142,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$ |
(568,030 |
) |
|
$ |
(166,705,572 |
) |
|
$ |
5,039,878 |
|
|
$ |
984,286 |
|
Exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
504,906 |
|
Net loss |
|
|
— |
|
|
|
(588,532 |
) |
|
|
(13,196 |
) |
|
|
(601,728 |
) |
Unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation |
|
|
(74,477 |
) |
|
|
— |
|
|
|
(33,623 |
) |
|
|
(108,100 |
) |
Balance at March 31, 2020
|
|
$ |
(642,507 |
) |
|
$ |
(167,294,104 |
) |
|
$ |
4,993,059 |
|
|
$ |
779,364 |
|
Issuance of common stock, net of offering costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,783,425 |
|
Exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
61,263 |
|
Net loss |
|
|
— |
|
|
|
(369,838 |
) |
|
|
(6,707 |
) |
|
|
(376,545 |
) |
Unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign currency translation |
|
|
30,383 |
|
|
|
— |
|
|
|
14,012 |
|
|
|
44,395 |
|
Balance at June 30, 2020 |
|
$ |
(612,124 |
) |
|
$ |
(167,663,942 |
) |
|
$ |
5,000,364 |
|
|
$ |
3,291,902 |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Six Months Ended June 30, |
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(978,273 |
) |
|
$ |
(1,526,906 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5,928 |
|
|
|
7,529 |
|
Gain on equipment disposal
|
|
|
— |
|
|
|
(37,250 |
) |
Accrued liability extinguishment
|
|
|
(501,892 |
) |
|
|
— |
|
Change in value of warrant liability
|
|
|
453,074 |
|
|
|
(17,645 |
) |
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable and other current assets
|
|
|
120,157 |
|
|
|
(56,925 |
) |
Other long-term assets
|
|
|
18,667 |
|
|
|
11,849 |
|
Accounts payable and accrued expenses
|
|
|
(19,665 |
) |
|
|
33,453 |
|
Net cash used in operating activities
|
|
|
(902,004 |
) |
|
|
(1,585,895 |
) |
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of short-term investments
|
|
|
(360,379 |
) |
|
|
(382,598 |
) |
Sale of short-term investments
|
|
|
403,624 |
|
|
|
535,637 |
|
Proceeds from sale of equipment
|
|
|
— |
|
|
|
37,250 |
|
Net cash provided by investing activities
|
|
|
43,245 |
|
|
|
190,289 |
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common stock, net of offering costs |
|
|
2,783,425 |
|
|
|
— |
|
Exercise of warrants
|
|
|
382,215 |
|
|
|
— |
|
Net cash provided by financing activities
|
|
|
3,165,640 |
|
|
|
— |
|
Effect of exchange rate change on cash and equivalents
|
|
|
(23,695 |
) |
|
|
16,189 |
|
Increase (decrease) in cash and cash equivalents
|
|
|
2,283,186 |
|
|
|
(1,379,417 |
) |
Cash and cash equivalents at beginning of period
|
|
|
1,126,124 |
|
|
|
3,617,234 |
|
Cash and cash equivalents at end of period
|
|
$ |
3,409,310 |
|
|
$ |
2,237,817 |
|
See Notes to Consolidated Financial Statements
CLEVELAND BIOLABS,
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of Business
Cleveland BioLabs, Inc. ("CBLI" or the "Company") is
an innovative biopharmaceutical company developing novel approaches
to activate the immune system and address serious medical needs.
Our proprietary platform of Toll-like immune receptor
("TLR") activators has applications in radiation protection
and oncology. We combine our proven scientific expertise and our
depth of knowledge about our products’ mechanisms of action into a
passion for developing drugs to save lives. Our most advanced
product candidate is entolimod, an immune-stimulatory agent, which
we are developing as a medical radiation countermeasure and other
indications in radiation oncology.
CBLI was incorporated in Delaware in June 2003 and is headquartered
in Buffalo, New York. CBLI conducts business in the United States
("U.S.") directly and in the Russian Federation
("Russia") through two subsidiaries: one wholly owned
subsidiary, BioLab 612, LLC ("BioLab 612"), which began
operations in 2012 and which the Company at
a September 2019 Board meeting decided to dissolve; and
Panacela Labs, Inc. ("Panacela"), which was formed by us and
Joint Stock Company "RUSNANO" ("RUSNANO"), our financial
partner in the venture, in 2011. Unless otherwise noted, references
to the "Company," "we," "us," and "our" refer to Cleveland BioLabs,
Inc. together with its subsidiaries.
In addition, the Company has an investment in Genome Protection,
Inc. ("GPI") that is recorded under the equity method of
accounting in the accompanying financial statements. The Company
has not recorded its 50% share of the losses of GPI
through June 30,
2020 as the impact would have reduced the Company's equity
method investment in GPI below zero, and there are no requirements
to fund the Company's share of these losses or contribute
additional capital as of the date of these statements.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited consolidated condensed financial
statements include the accounts of CBLI, BioLab 612, and Panacela.
All significant intercompany balances and transactions have been
eliminated in consolidation.
The consolidated condensed balance sheet as of December 31,
2019, which has been derived from audited financial statements,
and the unaudited interim consolidated condensed financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP")
for interim consolidated financial information and in accordance
with the instructions to Form 10-Q and Article 8 of Regulation S-X
of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with GAAP
have been condensed or omitted pursuant to such rules and
regulations. These consolidated condensed financial statements
should be read in conjunction with the audited consolidated
financial statements and notes thereto contained in the Company’s
Annual Report on Form 10-K for the year ended December 31,
2019, as filed with the SEC (the "2019
Form 10-K").
In the opinion of the Company’s management, any adjustments
contained in the accompanying unaudited consolidated financial
statements are of a normal recurring nature, and are necessary to
fairly present the financial position of the Company as of
June 30,
2020, along with its results of operations for
the three and six
month periods ended June 30, 2020 and 2019 and cash flows for
the six-month
periods ended June 30, 2020
and 2019. Interim results are not necessarily indicative of
results that may be expected for any other interim period or for an
entire year.
At June 30,
2020, we had cash, cash equivalents and short-term investments
of $3.8 million in the aggregate. Management believes this capital
will be sufficient to support operations beyond one year from this
filing. To ensure continuing operations beyond that point,
management is evaluating all opportunities, including seeking
additional capital through debt or equity financing, the sale or
license of drug candidates, the sale of certain of our tangible
and/or intangible assets, the sale of interests in our
subsidiaries or joint ventures, obtaining additional
government research funding, or entering into other strategic
transactions. Management believes that sufficient sources of
financing will be available to support operations into the future,
however there can be no assurances at this time. These financial
statements have been prepared under the assumption that the Company
will continue as a going concern and do not include any adjustments
that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the
Financial Accounting Standards Board ("FASB") or other
standard-setting bodies that are adopted by us as of the specified
effective date. Unless otherwise discussed, we believe that the
impact of recently issued standards that are not yet effective will
not have a material impact on our financial position or results of
operations upon adoption.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Short-Term Investments
The Company’s short-term investments are classified as held to
maturity and are recorded at amortized cost. Short-term investments
consisted of $0.4 million in certificates of deposit owned by
Panacela that have maturity dates falling beyond three months
and less than one year. These investments are classified as held to
maturity given the intent and ability to hold the investments to
maturity. Realized gains and losses, and interest and dividends on
short-term investments are recorded in our Consolidated Statement
of Operations as Interest and Other Income. The cost of securities
sold is based on the specific identification method.
Significant Customers and Accounts Receivable
The following table presents our revenue by customer, on a
proportional basis, for the three and six
months ended June 30, 2020 and 2019.
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
Customer
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
Department of Defense
|
|
|
86.8 |
% |
|
|
51.3 |
% |
|
|
35.5 |
% |
|
|
77.5 |
% |
|
|
43.3 |
% |
|
|
-34.2 |
% |
Incuron
|
|
|
13.2 |
% |
|
|
48.7 |
% |
|
|
(35.5 |
)% |
|
|
22.5 |
% |
|
|
56.7 |
% |
|
|
-34.2 |
% |
Total
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
— |
% |
Our current Department of Defense ("DoD") revenues come from
development contracts that expire in 2020. Revenues from
Incuron LLC, a company in which the Company previously
owned an equity interest ("Incuron"), come from a
service agreement.
Accounts receivable consist of amounts due under reimbursement
contracts with these customers. The Company extends unsecured
credit to the above customers under normal trade agreements, which
generally require payment within 30 days.
Other Comprehensive Income (Loss)
The Company applies the Accounting Standards Codification
("Codification") on comprehensive income (loss) that
requires disclosure of all components of comprehensive income
(loss) on an annual and interim basis. Other comprehensive income
(loss) is defined as the change in equity of a business enterprise
during a period arising from transactions and other events and
circumstances from non-owner sources. The following table presents
the changes in accumulated other comprehensive loss for the
six months
ended June 30, 2020.
|
|
Gains and losses on foreign exchange translations
|
|
Beginning balance
|
|
$ |
(568,030 |
) |
Other comprehensive income (loss) before reclassifications
|
|
|
(44,094 |
) |
Amounts reclassified from accumulated other comprehensive loss
|
|
|
— |
|
Ending balance
|
|
$ |
(612,124 |
) |
Accounting for Stock-Based Compensation
The Cleveland Biolabs, Inc. Equity Incentive Plan, adopted in 2018
(the "Plan"), authorizes CBLI to grant (i) options to
purchase common stock, (ii) restricted or unrestricted stock
units, and (iii) stock appreciation rights, so long as the
exercise or grant price of each are at least equal to the fair
market value of the stock on the date of grant. As of
June 30,
2020, an aggregate of 597,557 shares of common stock were
authorized for issuance under the Plan, of which a total
of 507,644 shares of common stock remained available for
future awards. In addition, a total of 89,913 shares of common
stock reserved for issuance were subject to currently outstanding
stock options granted under The Cleveland BioLabs, Inc. Equity
Incentive Plan, as in effect prior to the 2018 amendment and
restatement. A single participant cannot be awarded more than
100,000 shares annually. Awards granted under the Plan have a
contractual life of no more than 10 years. The terms and conditions
of equity awards (such as price, vesting schedule, term, and number
of shares) under the Plan are specified in an award document, and
approved by the Company’s board of directors or its management
delegates.
The 2013 Employee Stock Purchase Plan (the "ESPP") provides
a means by which eligible employees of the Company and certain
designated related corporations may be given an opportunity to
purchase shares of common stock. As of June 30,
2020, there are 725,000 shares of common stock reserved for
purchase under the ESPP. The number of shares reserved for purchase
under the ESPP increases on January 1 of each calendar year by
the lesser of: (i) 10% of the total number of shares of common
stock outstanding on December 31st of the preceding year, or
(ii) 100,000 shares of common stock. The ESPP allows employees
to use up to 15% of their compensation to purchase shares of common
stock at an amount equal to 85% of the fair market value of the
Company’s common stock on the offering date or the purchase date,
whichever is less.
The Company utilizes the Black-Scholes valuation model for
estimating the fair value of all stock options granted where the
vesting period is based on length of service or performance, while
a Monte Carlo simulation model is used for estimating the fair
value of stock options with market-based vesting conditions. No
options were granted during the six months
ended June 30, 2020 and June 30,
2019.
Income Taxes
No income tax expense was recorded for the three and six
months ended June 30, 2020 and 2019 as the Company does not
expect to have taxable income for 2020 and did not have taxable
income in 2019. A
full valuation allowance has been recorded against the Company’s
net deferred tax asset.
At June 30,
2020, the Company had U.S. federal net operating loss
carryforwards of approximately $146.7 million, of which $139.7 million begins to expire if not
utilized by 2023, and $7.0 million, which has no expiration, and
approximately $4.2 million of tax credit carryforwards, which begin
to expire if not utilized by 2024. The Company also has state
net operating loss carryforwards of approximately $92.6 million,
which begin to expire if not utilized by 2027, and state tax credit
carryforwards of approximately $0.3 million, which begin to
expire if not utilized by 2022. The purchase of 6,459,948 shares of
common stock by David Davidovich on July 9, 2015 resulted in
Mr. Davidovich owning 60.2% of the Company at that time. We
therefore believe it highly likely that this transaction will be
viewed by the U.S. Internal Revenue Service as a change of
ownership as defined by Section 382 of the Internal Revenue
Code. Consequently, our ability to utilize approximately $124.8
million of U.S. federal net operating loss carryforwards, $3.65
million of U.S. tax credit carryforwards, approximately $73.4
million of state net operating loss carryforwards, and $0.3 million
of state tax credit carryforwards, all of which occurred prior to
July 9, 2015, are limited. As such, a significant portion of these
carryforwards will likely expire before they can be utilized, even
if the Company is able to generate taxable income that, except for
the foregoing transaction, would have been sufficient to fully
utilize these carryforwards.
Earnings (Loss) per Share
Basic net loss per share of common stock excludes dilution for
potential common stock issuances and is computed by dividing net
loss by the weighted average number of shares outstanding for the
period. Diluted net loss per share reflects the potential dilution
that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock. Diluted net
loss per share is identical to basic net loss per share as
potentially dilutive securities have been excluded from the
calculation of diluted net loss per common share because the
inclusion of such securities would be antidilutive.
The Company has excluded the following securities from the
calculation of diluted net loss per share because all such
securities were antidilutive for the periods presented.
Additionally, there were no dilutive securities outstanding as of
June 30,
2020.
|
|
As of June 30,
|
|
Common Equivalent Securities
|
|
2020
|
|
|
2019
|
|
Warrants
|
|
|
1,068,494 |
|
|
|
327,253 |
|
Options
|
|
|
89,913 |
|
|
|
136,813 |
|
Total
|
|
|
1,158,407 |
|
|
|
464,066 |
|
From time to time, the Company may have certain contingent
liabilities that arise in the ordinary course of business. The
Company accrues for liabilities when it is probable that future
expenditures will be made and such expenditures can be reasonably
estimated. The Company recorded a revenue loss contingency of
$544,000 in the fourth quarter of 2019 related to deposits paid to
a supplier in support of our JWMRP contract (as defined below)
which the Company may have been responsible for repaying to the
DoD. This amount was recorded as an accrued expense in the
December 31, 2019 Consolidated Balance Sheet. During
July 2020, the Company settled with the supplier for repayment
of the deposit. The Company used the proceeds from
the return of the deposit to repay the DoD in settlement
of any outstanding contingent event. Accordingly, the Company
recorded an extinguishment of the accrued liability to other income
in the amount of $501,892 during June 2020.
3. Fair Value of Financial Instruments
The Company measures and records warrant liabilities at fair value
in the accompanying financial statements. Fair value is defined as
the exchange price that would be received for an asset or paid to
transfer a liability, an exit price, in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the
use of observable inputs and minimize the use of unobservable
inputs. The three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value, includes:
|
•
|
Level 1 – Observable inputs for identical assets or liabilities
such as quoted prices in active markets;
|
|
•
|
Level 2 – Inputs other than quoted prices in active markets that
are either directly or indirectly observable; and
|
|
•
|
Level 3 – Unobservable inputs in which little or no market data
exists, which are therefore developed by the Company using
estimates and assumptions that reflect those that a market
participant would use.
|
Cash equivalents include United States Treasury Notes with original
maturities of three months or less at time of purchase and money
market funds. Short-term investments primarily include certificates
of deposit at commercial banking institutions, with maturities of
three months or more at time of purchase.
The valuation methodologies used to measure the fair value of the
Company’s assets and instruments classified in stockholders’ equity
are described as follows: Certificates of deposit are carried at
amortized cost, which approximates fair value and are included
within short-term investments as a Level 2 measurement in the table
below.
The following tables represent the Company’s fair value hierarchy
for its financial assets and liabilities measured at fair value on
a recurring basis.
|
|
As of June 30, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Short-term investments
|
|
|
— |
|
|
|
357,391 |
|
|
|
— |
|
|
|
357,391 |
|
Total assets
|
|
$ |
— |
|
|
$ |
357,391 |
|
|
$ |
— |
|
|
$ |
357,391 |
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued warrant liability
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
275,494 |
|
|
$ |
275,494 |
|
|
|
As of December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Short-term investments
|
|
|
— |
|
|
|
452,301 |
|
|
|
— |
|
|
|
452,301 |
|
Total assets
|
|
$ |
— |
|
|
$ |
452,301 |
|
|
$ |
— |
|
|
$ |
452,301 |
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued warrant liability
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
6,414 |
|
|
$ |
6,414 |
|
The Company uses the Black-Scholes model to measure the accrued
warrant liability. The following are the assumptions used to
measure the accrued warrant liability which were determined in a
manner consistent with grants of options to purchase common
stock:
|
|
June 30, 2020
|
|
December 31, 2019
|
Stock Price
|
|
$2.57
|
|
$0.60
|
Exercise Price
|
|
$2.03 - $20.40
|
|
$3.64 - $20.40
|
Term in years
|
|
0.54 - 1.10
|
|
1.04 - 1.60
|
Volatility
|
|
210.64 - 279.43%
|
|
84.59 - 98.24%
|
Annual rate of quarterly dividends
|
|
—%
|
|
—%
|
Discount rate- bond equivalent yield
|
|
0.09 - 0.16%
|
|
1.58 - 1.59%
|
The following table sets forth a summary of changes in the fair
value of the Company’s Level 3 fair value measurements for the
periods indicated:
|
|
Three Months Ended
|
|
|
Three Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
Accrued Warrant Liability |
|
|
Accrued Warrant Liability |
|
Beginning Balance
|
|
$ |
44,412 |
|
|
$ |
173,458 |
|
Total (gains) or losses, realized and unrealized, included in
earnings (1)
|
|
|
292,385 |
|
|
|
(112,466 |
) |
Issuances
|
|
|
— |
|
|
|
— |
|
Settlements
|
|
|
(61,303 |
) |
|
|
— |
|
Ending Balance
|
|
$ |
275,494 |
|
|
$ |
60,992 |
|
|
|
Six Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
Accrued Warrant Liability
|
|
|
Accrued Warrant Liability
|
|
Beginning Balance |
|
$ |
6,414 |
|
|
$ |
78,637 |
|
Total (gains) or losses, realized and unrealized, included in
earnings (1) |
|
|
453,074 |
|
|
|
(17,645 |
) |
Issuances
|
|
|
— |
|
|
|
— |
|
Settlements
|
|
|
(183,994 |
) |
|
|
— |
|
Ending Balance
|
|
$ |
275,494 |
|
|
$ |
60,992 |
|
As of June 30,
2020 and December 31,
2019, the Company had no assets or liabilities that were
measured at fair value on a nonrecurring basis.
The Company considers the accrued warrant liability to be Level 3
because some of the inputs into the measurements are neither
directly nor indirectly observable. The accrued warrant liability
uses management’s estimate for the expected term. As of
June 30,
2020, the Black-Scholes pricing model was used as the valuation
technique for the accrued warrant liability and used the
unobservable input for the expected term of 0.54 – 1.10
years.
Management believes the value of the accrued warrant liability is
more sensitive to a change in the Company’s stock price at the end
of the respective reporting period as opposed to a change in the
unobservable input described above.
The carrying amounts of the Company’s short-term financial
instruments, which include cash and cash equivalents, accounts
receivable and accounts payable, approximate their fair values due
to their short maturities.
4. Stockholders’ Equity
During June 2020, the Company raised $2.8 million in net proceeds
from the issuance of 1,515,878 shares of common stock and 871,630
stock warrants. The stock warrants were recorded as a
equity instrument and valued at $1.0 million at the date of
issuance utilizing the following Black-Scholes assumptions.
|
|
June 3, 2020
|
Stock Price
|
|
$1.65
|
Exercise Price
|
|
$2.03 - $2.62
|
Term in years
|
|
5.00
|
Volatility
|
|
98.20%
|
Annual rate of quarterly dividends
|
|
0%
|
Discount rate- bond equivalent yield
|
|
0.38%
|
Issuance costs amounted to $391,581.
The Company has granted options to purchase shares of common stock.
The following is a summary of option award activity during the
six months
ended June 30, 2020:
|
|
Total Stock Options Outstanding
|
|
|
Weighted Average Exercise Price per Share |
|
December 31, 2019
|
|
|
136,105 |
|
|
$ |
40.07 |
|
Granted
|
|
|
— |
|
|
|
— |
|
Vested
|
|
|
— |
|
|
|
— |
|
Forfeited, Canceled
|
|
|
(46,192 |
) |
|
|
54.64 |
|
June 30, 2020
|
|
|
89,913 |
|
|
$ |
32.58 |
|
The following is a summary of outstanding stock options as of
June 30,
2020:
|
|
As of June 30, 2020
|
|
|
|
Stock Options Outstanding |
|
|
Vested Stock Options |
|
Quantity
|
|
|
89,913 |
|
|
|
89,913 |
|
Weighted Average Exercise Price
|
|
$ |
32.58 |
|
|
$ |
32.58 |
|
Weighted Average Remaining Contractual Term (in Years)
|
|
|
3.43 |
|
|
|
3.43 |
|
Intrinsic Value
|
|
$ |
— |
|
|
$ |
— |
|
For the six months
ended June 30, 2020 and 2019, the Company granted no stock
options. As of June 30, 2020
and 2019, the total fair value of options vested was $0.
As of June 30,
2020, there was no total compensation cost not yet recognized
related to unvested stock options.
5. Warrants
In connection with previous sales of the Company’s common stock and
the issuance of debt instruments, warrants were issued which
presently have exercise prices ranging from $2.03 to $20.40. The
warrants expire between one and seven years from the date of grant,
and are subject to the terms applicable in each agreement.
The following table summarizes the activity in our outstanding
warrants since December 31,
2019:
|
|
Number of Warrants |
|
|
Weighted Average Exercise Price |
|
December 31, 2019
|
|
|
327,253 |
|
|
$ |
8.89 |
|
Granted
|
|
|
871,630 |
|
|
|
2.11 |
|
Exercised
|
|
|
(130,389 |
) |
|
|
2.03 |
|
Forfeited, Canceled
|
|
|
— |
|
|
|
— |
|
June 30, 2020
|
|
|
1,068,494 |
|
|
$ |
3.85 |
|
Roswell Park Cancer Institute
The Company has entered into several agreements with Roswell Park
Cancer Institute ("RPCI"), including: various sponsored
research agreements, an exclusive license agreement and clinical
trial agreements for the conduct of the Phase 1 entolimod oncology
study and the Phase 1 Curaxin CBL0137 ("Curaxin")
intravenous administration study. Additionally, the Company’s Chief
Scientific Officer, or CSO, Dr. Andrei Gudkov, is the Senior
Vice President of Research Technology and Innovation at RPCI. The
Company incurred $0 and $1,197, and $57,951 and $57,951 in
research and development expense to RPCI for the three and six
months ended June 30, 2020 and 2019,
respectively.
The Cleveland Clinic
CBLI has entered into an exclusive license agreement with The
Cleveland Clinic pursuant to which CBLI was granted an exclusive
license to The Cleveland Clinic’s research base underlying our
therapeutic platform and certain product candidates licensed to
Panacela. CBLI has the primary responsibility to fund all newly
developed patents. However, The Cleveland Clinic retains ownership
of those patents covered by the agreement. CBLI also agreed to use
commercially diligent efforts to bring one or more products to
market as soon as practical, consistent with sound and reasonable
business practices and judgments. On August 6, 2018, CBLI
sublicensed the intellectual property underlying entolimod's
composition that CBLI licenses from The Cleveland Clinic to GPI.
There were no milestone or royalty payments paid to The Cleveland
Clinic during the three and six months
ended June 30, 2020 and 2019.
The Company incurred $0 and $0, and $0 and $30,710 in research
and development expense to The Cleveland Clinic during the three
and six months
ended June 30, 2020 and 2019, respectively.
Buffalo BioLabs and Incuron
Our CSO, Dr. Andrei Gudkov, has business relationships with
Buffalo BioLabs, LLC ("BBL"), where Dr. Gudkov was a
founder and currently serves as its uncompensated Principal
Scientific Advisor. The Company recognized no research and
development expense to BBL for the three and six
months ended June 30, 2020 and 2019, respectively. The
Company also recognized $0 and $0, and $9,255 and $20,808 from BBL
as sublease and other income for the three and six
months ended June 30, 2020 and June 30,
2019, respectively. Pursuant to our real estate sublease and
equipment lease with BBL, the Company had gross accounts
receivables of $6,285 and $224,491, and net accounts receivables of
$6,285 and $22,340 from BBL at June 30, 2020
and 2019, respectively.
Dr. Gudkov is also an uncompensated member of the board of
directors for Incuron. Pursuant to master service and development
agreements we have with Incuron, the Company performs various
research, business development, clinical advisory, and management
services for Incuron. The Company recognized revenue of $8,347 and
$49,357, and $134,964 and $269,031 for the three and six
months ended June 30, 2020 and 2019, respectively. In
addition, the Company recognized $0 and $0, and
$1,134 and $2,268 from Incuron for sublease and other income for
the three and six
months ended June 30, 2020 and 2019, respectively.
Pursuant to these agreements, the Company had accounts receivable
of $139,357 and $135,720 from Incuron at June 30, 2020
and 2019, respectively.
Genome Protection
GPI incurred $13,440 and $26,880, and $47,425 and $94,850 in
consultant expenses with members of the Company's Board of
Directors and management team during the three and six
months ended June 30, 2020 and 2019,
respectively. The Company also recognized $0 and $0, and $0
and $3,031 in sublease and other income from GPI during the
three and six
months ended June 30, 2020 and 2019, respectively.
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition
and results of operations and other portions of this quarterly
report on Form 10-Q contain forward-looking statements that involve
risks and uncertainties. All statements other than statements of
current or historical fact contained in this quarterly report,
including statements regarding our future financial position,
business strategy, new products, budgets, liquidity, cash flows,
projected costs, regulatory approvals, or the impact of any laws or
regulations applicable to us, and plans and objectives of
management for future operations, are forward-looking statements.
The words "anticipate," "believe," "continue," "should,"
"estimate," "expect," "intend," "may," "plan," "project," "will,"
and similar expressions, as they relate to us, are intended to
identify forward-looking statements. We have based these
forward-looking statements on our current expectations about future
events. While we believe these expectations are reasonable, such
forward-looking statements are inherently subject to risks and
uncertainties, many of which are beyond our control. Our actual
future results may differ materially from those discussed here for
various reasons. We discuss many of these risks in Item 1A
under the heading "Risk Factors" in our Annual Report on Form 10-K
for the year ended December 31,
2019. Factors that may cause such differences include, but are
not limited to, our need for additional financing to meet our
business objectives; our history of operating losses; our ability
to successfully develop, obtain regulatory approval for, and
commercialize our products in a timely manner; our plans to
research, develop and commercialize our product candidates; our
ability to attract collaborators with development, regulatory and
commercialization expertise; our plans and expectations with
respect to future clinical trials and commercial scale-up
activities; our reliance on third-party manufacturers of our
product candidates; the size and growth potential of the markets
for our product candidates, and our ability to serve those markets;
the rate and degree of market acceptance of our product candidates;
regulatory requirements and developments in the United States, the
European Union and foreign countries; the performance of our
third-party suppliers and manufacturers; the success of competing
therapies that are or may become available; our ability to attract
and retain key scientific or management personnel; our reliance on
government funding for a significant portion of our operating costs
and expenses; government contracting processes and requirements;
the exercise of control over our company by our majority
stockholder; our current noncompliance with the continued listing
requirements of the NASDAQ Capital Market; the impact of the novel
coronavirus ("COVID-19") pandemic on our business,
operations and clinical development; the geopolitical
relationship between the United States and the Russian Federation
as well as general business, legal, financial and other conditions
within the Russian Federation; our ability to obtain and maintain
intellectual property protection for our product candidates; our
potential vulnerability to cybersecurity breaches; and other
factors discussed below and in our other SEC filings, including our
Annual Report on Form 10-K for the year ended December 31,
2019.
Given these uncertainties, you should not place undue reliance
on these forward-looking statements. The forward-looking statements
included in this quarterly report are made only as of the date
hereof. We do not undertake any obligation to update any such
statements or to publicly announce the results of any revisions to
any of such statements to reflect future events or developments.
This management’s discussion and analysis of financial condition
and results of operations should be read in conjunction with our
financial statements and the related notes included elsewhere in
this filing and with our historical consolidated financial
statements and the related notes thereto in our Annual Report on
Form 10-K for the year ended December 31,
2019.
OVERVIEW
We are an innovative biopharmaceutical company developing novel
approaches to activate the immune system and address serious
medical needs. Our proprietary platform of Toll-like immune
receptor activators has applications in mitigation of radiation
injury and radiation oncology. We combine our proven scientific
expertise and our depth of knowledge about our products’ mechanisms
of action into a passion for developing drugs to save lives. Our
most advanced product candidate is entolimod, an immune-stimulatory
agent, which we are developing as a radiation countermeasure and
other indications in radiation oncology. We conduct business in the
U.S. directly and in Russia through two subsidiaries, one of which
is wholly owned, BioLab 612 (which the Company has decided to
dissolve), and one of which is owned in collaboration with a
financial partner, Panacela. In addition, we conduct business with
a former subsidiary, Incuron, which will pay us a 2% royalty on
future commercialization, licensing, or sale of certain technology
we sold to Incuron. We also partner in a joint venture, GPI, with
Everon Biosciences, Inc ("Everon").
Recent Developments
NASDAQ Listing Status
As previously disclosed, on February 18, 2020, the Company received
written notification from the Listing Qualifications Staff (the
"Staff") of The Nasdaq Stock Market LLC (“Nasdaq”)
indicating that, based upon the Company’s continued non-compliance
with Nasdaq Listing Rule 5550(b), which requires an issuer to
maintain a minimum of $2,500,000 in stockholders’ equity (the
"Rule"), the Company’s common stock would be delisted from
the NASDAQ Capital Market on February 27, 2020 unless the Company
timely requested a hearing before the Nasdaq Hearings Panel (the
"Panel"). The Company appealed Nasdaq’s determination at a
hearing before the Panel on April 2, 2020. On May 1, 2020, the
Panel granted the Company a further extension to August 17, 2020 in
which to regain compliance with the Rule. If the Company does not
regain compliance with the Rule by August 17, 2020, then Nasdaq
will delist the Company’s common stock from The Nasdaq Capital
Market. As a result of the proceeds generated from the sale
of the Issued Shares on June 1, 2020, the Company is reporting
stockholders’ equity in excess of $2.5 million in the financial
statements included in this Quarterly Report on Form 10-Q.
Accordingly, the Company believes that it is demonstrating
compliance with the Rule. However, there can be no assurance
that the Company will otherwise be determined to be compliant with
the Rule or other listing standards for the Nasdaq Capital
Market.
Registered Direct Offering
On June 1, 2020, we entered into a Securities Purchase Agreement
(the "Purchase Agreement") with several institutional and
accredited investors for the sale by the Company of 1,515,878
shares (the "Issued Shares") of the Company’s common stock
at a purchase price of $2.0945 per share, in a registered direct
offering. Concurrently with the sale of the Issued Shares, the
Company also sold to the investors warrants to purchase up to an
aggregate of 757,939 shares of common stock (the "Issued
Warrants") under the Purchase Agreement. Subject to certain
ownership limitations, the Issued Warrants are immediately
exercisable at an exercise price equal to $2.033 per share of
common stock, subject to customary adjustments as provided under
the terms of the Issued Warrants. The Issued Warrants are
exercisable for five years from the issuance date. The Company also
issued warrants to purchase up to 113,691 shares of common stock to
designees of H.C. Wainwright & Co., LLC, which served as
placement agent for the offering (the "Placement Agent
Warrants"). The Placement Agent Warrants have substantially the
same terms as the Issued Warrants, except that the Placement Agent
Warrants have an exercise price of $2.6181 per share and have a
term of exercise of five years from the effective date of the
offering. The closing of the sales of these securities under the
Purchase Agreement occurred on June 3, 2020.
We received net proceeds of $2.8 million from the transaction,
after deducting the placement agent’s fees and other estimated
offering expenses, and excluding the proceeds, if any, from the
cash exercise of the Issued Warrants. We intend to use the net
proceeds from the offering for general corporate purposes,
including sales and marketing expenses associated with our product
candidates, funding of our development programs, payment of
milestones pursuant to our license agreements, general and
administrative expenses, acquisition or licensing of additional
product candidates or businesses and working capital.
The Issued Shares (but not the Issued Warrants or shares of common
stock issuable upon exercise of the Issued Warrants) were offered
and sold by the Company under a prospectus supplement and
accompanying prospectus filed with the SEC pursuant to an effective
shelf registration statement on Form S-3, which was filed on May
21, 2020 and subsequently declared effective on May 29, 2020 (File
No. 333-238578) (the "Form S-3 Registration Statement").
The Issued Warrants and the shares issuable upon exercise of the
Issued Warrants are being sold and issued without registration
under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on the exemptions provided by Section
4(a)(2) of the Securities Act as transactions not involving a
public offering and Rule 506 promulgated under the Securities Act
as sales to accredited investors, and in reliance on similar
exemptions under applicable state laws.
COVID-19 Pandemic
The COVID-19 pandemic has continued to affect multiple countries,
including the United States, where a national emergency was
declared, and several European and Asian countries. The continued
spread of COVID-19 in the United States and worldwide, as well as
the government-ordered shutdown and shelter-in-place orders imposed
to counter the pandemic, have led to severe disruptions to the
global economy. In this connection, on March 20, 2020, the Governor
of New York announced that 100% of the workforce of all businesses,
excluding essential services, must stay home. During the
effectiveness of this order , we have implemented a work-from-home
policy for all employees based in our Buffalo, New York
headquarters. Under new applicable state orders, our offices
may be occupied at 50% of their normal capacity if other safety
precautions are taken, however, generally very few of our employees
have returned to the office. We are continuing to monitor the
situation and will take such further action as may be
required by federal, state or local authorities, or that we
determine are in the best interests of our employees.
COVID-19 and the governmental responses to it may cause us to
experience disruptions that could severely impact our business,
operations, preclinical studies and clinical trials The global
outbreak of COVID-19 continues to rapidly evolve and has begun to
have indeterminable adverse effects on general commercial activity
and the world economy. The extent to which COVID-19 may impact our
business, research and development efforts, preclinical studies,
clinical trials, prospects for regulatory approval of our drug
candidates, and operations will depend on future developments,
which are highly uncertain and cannot be predicted with confidence,
such as the ultimate geographic spread of the disease, the duration
of the outbreak, the extent and duration of travel restrictions and
social distancing in the United States and other countries,
business closures or business disruptions and the effectiveness of
actions taken in the United States and other countries to contain
and treat the disease. In addition, a recession or market
correction resulting from the spread of COVID-19 could materially
affect our business prospects and the value of our common
stock. Furthermore, if we or any of the third parties with
whom we engage were to experience shutdowns or other business
disruptions, our ability to conduct our business in the manner and
on the timelines presently planned could be materially and
negatively impacted, which could have a material adverse effect on
our business, financial condition and results of operations.
Financial Overview
Our discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have
been prepared in accordance with GAAP. The preparation of these
financial statements requires us to make estimates and judgments
that affect our reported amounts of assets, liabilities, revenues,
and expenses.
On an ongoing basis, we evaluate our estimates and judgments,
including those related to accrued expenses, income taxes,
stock-based compensation, investments, and in-process research and
development. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and
the reported amounts of revenues and expenses that are not readily
apparent from other sources. Actual results may differ from these
estimates.
Our revenue, operating results, and profitability have varied, and
we expect that they will continue to vary on a quarterly basis,
primarily due to the timing of work completed under new and
existing grants, development contracts, and collaborative
relationships.
Revenue
Our revenue originates from grants and contracts from both United
States ("U.S.") federal government sources and service
contracts with Incuron. U.S. federal grants and contracts are
provided to advance research and development of entolimod, our lead
product candidate, which we believe is of interest for potential
sale to the DoD, or the Biomedical Advanced Research and
Development Authority of the U.S. Department of Health and Human
Services ("BARDA"). We provide various research,
management, business development, and clinical advisory services to
Incuron.
Research and Development Expenses
Research and development ("R&D") costs are expensed as
incurred. Advance payments are deferred and expensed as performance
occurs. R&D costs include the cost of our personnel (which
consists of salaries and incentive and stock-based compensation),
out-of-pocket pre-clinical and clinical trial costs usually
associated with contract research organizations, drug product
manufacturing and formulation, and a pro-rata share of facilities
expense and other overhead items.
General and Administrative Expenses
General and administrative ("G&A") functions include
executive management, finance and administration, government
affairs and regulations, corporate development, human resources,
and legal and compliance. The specific costs include the cost of
our personnel consisting of salaries, incentive and stock-based
compensation, out-of-pocket costs usually associated with attorneys
(both corporate and intellectual property), bankers, accountants,
and other advisors and a pro-rata share of facilities expense and
other overhead items.
Other Income and Expenses
Other recurring income and expenses primarily consists of interest
income on our investments, changes in the market value of our
derivative financial instruments, and foreign currency transaction
gains or losses.
Critical Accounting Policies and Significant Estimates
Our critical accounting policies and significant estimates are
detailed in our Annual Report on Form 10-K for the year ended
December 31,
2019. Other than as set forth below, our critical accounting
policies and significant estimates have not changed substantially
from those previously disclosed in our Annual Report on Form 10-K
for the year ended December 31,
2019.
Fair Value of Financial Instruments
We use the held-to-maturity accounting method to determine the fair
value of certain cash equivalents and short-term investments in
U.S. Treasury Notes or certificates of deposit. As of
June 30,
2020, we held approximately $0.4 million in certificates of
deposit which we classified as Level 2.
We use the Black-Scholes model to determine the fair value of
certain common stock warrants on a recurring basis, and classify
such warrants as Level 3 in the fair value hierarchy. The
Black-Scholes model utilizes inputs consisting of: (i) the
closing price of our common stock; (ii) the expected remaining
life; (iii) the expected volatility using a weighted average
of historical volatilities of CBLI common stock and a group of
comparable companies; and (iv) the risk-free market rate.
As of June 30,
2020, we held approximately $0.3 million in accrued expenses
related to warrants to purchase common stock, which we classified
as Level 3.
Three Months Ended June 30,
2020 Compared to Three Months Ended June 30,
2019
Revenue
Revenue decreased from approximately $0.28 million for the three
months ended June 30,
2019 to approximately $0.06 million for the three months ended
June 30,
2020, representing a decrease of approximately $0.22 million,
or 77.2%. This decrease is primarily due to decreases in revenues
from our service contract with Incuron and decreases in revenue
from our JWMRP contract with the DoD for continued preclinical
development of entolimod, offset in part by an increase
in revenues from our PRMRP contract (as defined below) with
the DoD for continued clinical development of entolimod. The
decrease in Incuron service contract revenue is due to
delays in clinical trial activities being undertaken by
Incuron. Differences in our revenue sources, by program, between
the years are set forth in the following table.
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
Funding Source
|
Program
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
DoD
|
JWMRP Contract (1)
|
|
$ |
44,544 |
|
|
$ |
140,223 |
|
|
$ |
(95,679 |
) |
DoD
|
PRMRP Contract (2)
|
|
|
10,364 |
|
|
|
1,780 |
|
|
|
8,584 |
|
Incuron
|
Service contract
|
|
|
8,347 |
|
|
|
134,964 |
|
|
|
(126,617 |
) |
|
|
|
$ |
63,255 |
|
|
$ |
276,967 |
|
|
$ |
(213,712 |
) |
(1)
|
The Congressionally Directed Medical Research Programs (CDMRP)
Joint Warfighter Medical Research Program (JWMRP) contract was
awarded on September 1, 2015.
|
(2)
|
The CDMRP Peer Reviewed Medical Research Program (PRMRP) grant
was awarded effective as of September 30, 2015.
|
We anticipate our revenue over the next quarter will be
derived solely from the active government grants and
contracts, the funding for which will expire in the next
quarter. We anticipate that DoD revenue will increase slightly in
the next quarter compared to the current quarter as no further
studies will be initiated under the active contracts and the
Company works to complete the final reports for
studies completed during the period of performance
of the JWMRP and PRMRP Contracts. We anticipate a decrease
in Incuron revenue as the service contract has not
been extended. The following table sets forth information
regarding our currently active grants and contracts:
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2020
|
|
Funding Source
|
Program
|
|
Total Award Value |
|
|
Funded Award Value
|
|
|
Cumulative Revenue
|
|
|
Funded Backlog |
|
|
Unfunded Backlog |
|
DoD
|
JWMRP Contract
|
|
$ |
9,226,455 |
|
|
$ |
4,162,866 |
|
|
$ |
4,003,931 |
|
|
$ |
158,935 |
|
|
$ |
— |
|
DoD
|
PRMRP Contract
|
|
|
6,573,992 |
|
|
|
221,686 |
|
|
|
214,345 |
|
|
|
7,341 |
|
|
|
— |
|
|
|
|
$ |
15,800,447 |
|
|
$ |
4,384,552 |
|
|
$ |
4,218,276 |
|
|
$ |
166,276 |
|
|
$ |
— |
|
As previously disclosed, contract modification with the DoD entered
into during July 2020 that reduced the JWMRP and PRMRP funded
awards from an aggregate of $15,800,447 to an aggregate of
$4,384,552 has been reflected in the table above.
Research and Development Expenses
R&D expenses decreased from $0.60 million for the three months
ended June 30,
2019 to $0.17 million for the three months ended
June 30,
2020, representing a decrease of $0.43 million, or 71.6%.
Variances in individual development programs are noted in the table
below. The net decrease is primarily attributable to a $0.27
million decrease in R&D spending for biodefense applications of
entolimod, and a $0.16 decrease in R&D spending on Curaxins.
The decrease in spending for biodefense applications of entolimod
is primarily due to comparison against the second quarter
of 2019 during which certain studies that were completed in
2019 were still ongoing, as well as a reduction in personnel costs.
The remaining variances are not significant.
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
Entolimod for Biodefense Applications
|
|
$ |
163,505 |
|
|
$ |
431,740 |
|
|
$ |
(268,235 |
) |
CBLB612
|
|
|
— |
|
|
|
(161 |
) |
|
|
161 |
|
Entolimod for Oncology Indications
|
|
|
— |
|
|
|
92 |
|
|
|
(92 |
) |
|
|
|
163,505 |
|
|
|
431,671 |
|
|
|
(268,166 |
) |
Curaxins
|
|
|
1,146 |
|
|
|
159,404 |
|
|
|
(158,258 |
) |
Panacela product candidates
|
|
|
5,356 |
|
|
|
8,503 |
|
|
|
(3,147 |
) |
Total research & development expenses
|
|
$ |
170,007 |
|
|
$ |
599,578 |
|
|
$ |
(429,571 |
) |
General and Administrative Expenses
G&A expenses increased from $0.45 million for the three months
ended June 30,
2019 to $0.49 million for the three months ended
June 30,
2020, representing an increase of $0.04 million, or 8.1%. This
increase consisted primarily of an increase of $0.20 million in
professional fees in part due to the filing of the Company's
Form S-3 Registration Statement, the capital-raising
transaction that was consummated shortly thereafter, as well
as other activities, offset in part by a $0.13 million decrease in
personnel and consulting costs, a $0.02 million decrease in
facilities costs, and a $0.01 million decrease in other
costs.
Other Income and Expenses
Other income increased from $0.14 million of other income
for the three months ended June 30,
2019 to $0.22 million of other income for the three months
ended June 30,
2020, representing an other income increase of $0.08 million,
or 56.3%. This increase was primarily related to an increase
in other income of $0.5 million relating to the extinguishment
of an accrued liability, offset by an increase in the non-cash loss
related to the change in valuation of our warrant liability as a
result of stock price changes.
Six Months
Ended June 30,
2020 Compared to Six Months
Ended June 30,
2019
Revenue
Revenue decreased from approximately $0.47 million for
the six months
ended June 30, 2019 to approximately $0.22 million for the
six months
ended June 30, 2020, representing a decrease of approximately
$0.25 million, or 53.8%. This decrease is primarily due to
decreases in revenues from our service contract with Incuron and
JWMRP contract with the DoD for continued preclinical development
of entolimod, offset in part by an increase in revenues from
our PRMRP contract with the DoD for continued clinical development
of entolimod. The decrease in Incuron service contract revenue is
due to delays in clinical trial activities being undertaken by
Incuron. Differences in our revenue sources, by program, between
the years are set forth in the following table.
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Funding Source
|
Program
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
DoD
|
JWMRP Contract (1)
|
|
$ |
113,555 |
|
|
$ |
203,059 |
|
|
$ |
(89,504 |
) |
DoD
|
PRMRP Contract (2)
|
|
|
56,385 |
|
|
|
2,797 |
|
|
|
53,588 |
|
Incuron
|
Service contract
|
|
|
49,357 |
|
|
|
269,030 |
|
|
|
(219,673 |
) |
|
|
|
$ |
219,297 |
|
|
$ |
474,886 |
|
|
$ |
(255,589 |
) |
(1)
|
The Congressionally Directed Medical Research Programs (CDMRP)
Joint Warfighter Medical Research Program (JWMRP) contract was
awarded on September 1, 2015.
|
(2)
|
The CDMRP Peer Reviewed Medical Research Program (PRMRP) grant
was awarded effective as of September 30, 2015.
|
Research and Development Expenses
R&D expenses decreased from $1.11 million for
the six months
ended June 30, 2019 to $0.39 million for the six months
ended June 30, 2020, representing a decrease of $0.72 million,
or 65.1%. Variances in individual development programs are noted in
the table below. The net decrease is primarily attributable to
a $0.45 million decrease in R&D spending for biodefense
applications of entolimod, and a $0.27 decrease in R&D spending
on Curaxins. The decrease in spending for biodefense applications
of entolimod is primarily due to comparison against the first six
months of 2019 during which certain studies that were
completed in 2019 were still ongoing, as well as a reduction in
personnel costs. The remaining variances are not significant.
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
Entolimod for Biodefense Applications
|
|
$ |
364,460 |
|
|
$ |
801,924 |
|
|
$ |
(437,464 |
) |
CBLB612
|
|
|
— |
|
|
|
6,440 |
|
|
|
(6,440 |
) |
Entolimod for Oncology Indications
|
|
|
— |
|
|
|
8,474 |
|
|
|
(8,474 |
) |
|
|
|
364,460 |
|
|
|
816,838 |
|
|
|
(452,378 |
) |
Curaxins
|
|
|
12,690 |
|
|
|
280,817 |
|
|
|
(268,127 |
) |
Panacela product candidates
|
|
|
11,065 |
|
|
|
15,344 |
|
|
|
(4,279 |
) |
Total research & development expenses
|
|
$ |
388,215 |
|
|
$ |
1,112,999 |
|
|
$ |
(724,784 |
) |
G&A expenses decreased from $0.92 million for
the six months
ended June 30, 2019 to $0.87 million for the six months ended
June 30, 2020, representing a decrease of $0.05 million, or 6.1%.
This decrease consisted primarily of a $0.28 million decrease
in personnel and consulting costs, and a $0.05 reduction in
facilities costs, partially offset by a $0.19 million
increase in professional fees associated with the filing of the
Company's Form S-3 Registration Statement, the capital-raising
transaction that was consummated shortly thereafter, as well
as other activities and a $0.8 million increase in CBLI's property
taxes compared to the quarter ended June 30,
2019, when we received a property tax refund.
Other Income and Expenses
Other income increased from $0.03 million of other income for
the six months ended June 30, 2019 to $0.06 million of other
income for the six months
ended June 30, 2020, representing an increase in other income
of $0.03 million, or 67.1%. This increase was primarily related to
an increase in other income of $0.5 million relating to
the extinguishment of an accrued liability, offset by an increase
in the non-cash loss related to the change in valuation of our
warrant liability as a result of stock price changes.
Liquidity and Capital Resources
We have incurred net losses of approximately $169 million from our
inception through June 30,
2020. Historically, we have not generated, and do not expect to
generate in the immediate future, revenue from sales of product
candidates. Since our founding in 2003, we have funded our
operations through a variety of means:
• From inception through June 30,
2020, we have raised $147.9 million of net equity capital,
including amounts received in connection with our June 2020
registered direct offering and from the exercise of options and
warrants. We have also received $7.3 million in net proceeds from
the issuance of long-term debt instruments;
• DoD and BARDA have funded grants
and contracts totaling $49 million for the development of
entolimod for its biodefense indication;
• The government of the Russian
Federation has funded a series of our contracts totaling $17.3
million, based on the exchange rates in effect on the date of
funding. These contracts included a requirement for us to
contribute matching funds, which we have satisfied;
• We have been awarded $4.0 million
in grants and contracts not described above, all of which have been
recognized at June 30,
2020;
• Incuron was formed to develop and
commercialize the Curaxins product line, including its lead
oncology drug candidate CBL0137. In 2015, we sold our ownership
interest in Incuron for approximately $4.0 million and retain a 2%
royalty interest in the CBL0137 technology;
• Panacela was formed to develop and
commercialize preclinical compounds, which were transferred to
Panacela through assignment and lease agreements. RUSNANO
contributed $9.0 million to Panacela and CBLI contributed $3.0
million plus intellectual property to Panacela. As of the date of
this filing, CBLI owns 67.57% of Panacela; and
• The Company formed its GPI joint
venture with Everon. GPI, which is currently 50% owned by the
Company and 50% owned by Everon, is undertaking a research and
development program aimed at clinical testing of entolimod and
GP532 (a variant of our entolimod drug candidate) and the
development of medications with anti-aging and other indications
associated with genome damage. GPI has been funded by an initial
investment of $10.5 million from venture capital fund Norma
Investments Limited.
As discussed above, the Company filed the Form S-3 Registration
Statement on May 21, 2020, which was subsequently declared
effective on May 29, 2020 (File No. 333-238578). The Form S-3
Registration Statement allows the Company to raise an aggregate of
$50,000,000 of common stock, preferred stock, warrants and/or
units, subject to the limitations on the use thereof by certain
smaller public companies, giving the Company greater flexibility to
access capital markets quickly.
We have incurred cumulative net losses and expect to incur
additional losses related to our R&D activities. We do not have
commercial products and have limited capital resources. At
June 30,
2020, we had cash, cash equivalents and short-term investments
of $3.8 million, which represents a increase of $2.2 million
or 138.6% since the end of our last fiscal year. This increase was
caused by our capital raise and warrant exercises, offset by
our net cash used in operations of $0.9 million during
the six months
ended June 30, 2020. We expect our cash, cash equivalents, and
short-term investments, along with the active government contracts
described above, to fund our projected operating requirements and
allow us to fund our operating plan, in each case, into August
2021. However, until we are able to commercialize our product
candidates at a level that covers our cash expenses, we will need
to raise substantial additional capital, which we may be unable to
raise in sufficient amounts, when needed and at acceptable terms.
Our plans with regard to these matters may include seeking
additional capital through debt or equity financing, the sale or
license of drug candidates, the sale of certain of our tangible
and/or intangible assets, the sale of interests in our subsidiaries
or joint ventures, obtaining additional government research
funding, or entering into other strategic transactions. There
can be no assurance that we will be able to obtain future financing
on acceptable terms, obtain additional government financing for our
operations, or enter into other strategic transactions. In
addition, the recent outbreak of the novel coronavirus known as
COVID-19 has significantly disrupted world financial markets,
negatively impacted U.S. market conditions and may reduce
opportunities for us to seek out additional funding. If we are
unable to raise adequate capital and/or achieve profitable
operations, future operations might need to be scaled back or
discontinued. The financial statements do not include any
adjustments relating to the recoverability of the carrying amount
of recorded assets and liabilities that might result from the
outcome of these uncertainties.
Cash Flows
The following table provides information regarding our cash flows
for the six months
ended June 30, 2020 and 2019:
|
|
For the Six Months Ended June 30, |
|
|
|
2020
|
|
|
2019
|
|
|
Variance
|
|
Cash flows used in operating activities
|
|
$ |
(902,004 |
) |
|
$ |
(1,585,895 |
) |
|
$ |
683,891 |
|
Cash flows provided by investing activities
|
|
|
43,245 |
|
|
|
190,289 |
|
|
|
(147,044 |
) |
Cash flows provided by financing activities
|
|
|
3,165,640 |
|
|
|
— |
|
|
|
3,165,640 |
|
Effect of exchange rate change on cash and equivalents
|
|
|
(23,695 |
) |
|
|
16,189 |
|
|
|
(39,884 |
) |
Increase (decrease) in cash and cash equivalents
|
|
|
2,283,186 |
|
|
|
(1,379,417 |
) |
|
|
3,662,603 |
|
Cash and cash equivalents at beginning of period
|
|
|
1,126,124 |
|
|
|
3,617,234 |
|
|
|
(2,491,110 |
) |
Cash and cash equivalents at end of period
|
|
$ |
3,409,310 |
|
|
$ |
2,237,817 |
|
|
$ |
1,171,493 |
|
Operating Activities
Net cash used in operating activities decreased by $0.7 million to
$0.9 million for the six months
ended June 30, 2020 from $1.6 million for the six months
ended June 30, 2019. Net cash used in operating activities for
the period ending June 30,
2020 consisted of a reported net loss of $0.98 million, which
was increased by $0.05 million of net non-cash operating
activities, and offset by $0.1 million of changes in operating
assets and liabilities. The $0.05 million of net non-cash operating
activities was due primarily to $0.5 million of other income from
an accrued liability extinguishment offset by a $0.45 million
change in the valuation of our warrant liability. The $0.1
million of changes in operating assets and liabilities consisted
primarily of a $0.1 million decrease in accounts receivable.
Net cash used in operating activities for the six months
ended June 30, 2019 of $1.6 million consisted of a reported net
loss of $1.5 million, which was increased by $0.05 million of
net non-cash operating activities, and further increased
by $0.01 million of changes in operating assets and
liabilities. The $0.05 million of net non-cash operating
activities was due primarily to changes in the valuation of
our warrant liability and a gain on disposal of equipment. The
$0.01 million of changes in operating assets and liabilities
consisted primarily of a $0.06 million increase in accounts
receivable offset by a $0.03 million increase in accounts payable
and accrued expenses.
Investing Activities
Net cash provided by investing activities decreased by $0.15
million to $0.04 million for the six months
ended June 30, 2020 from $0.19 million for the six months
ended June 30, 2019. The net cash provided by investing
activities for the six months ended June 30, 2020 consisted of
$0.04 million of net sales of short-term investments. Net cash
provided by investing activities for the six months ended
June 30, 2019 consisted of $0.15 million of net sales of
short-term investments and $0.04 million from the sale of
equipment.
Financing Activities
Net cash provided by financing activities increased by $3.2 million
for the six months
ended June 30, 2020 from $0.00 million for the six months
ended June 30, 2019 due to an issuance of common stock and
a cash payment from the exercise of warrants during the six months
ended June 30, 2020.
Impact of Exchange Rate Fluctuations
Our reported financial results are affected by changes in foreign
currency exchange rates between the U.S. dollar and the Russian
ruble. Between January 1,
2020 and June 30,
2020, this rate fluctuated by 13.0%. For calendar year 2019, this
rate fluctuated by 10.9%. Translation
gains or losses result primarily from the impact of exchange rate
fluctuations on the reported U.S. dollar equivalent of
ruble-denominated cash and cash equivalents, and short-term
investments. Variances in the exchange rate for these items have
not been realized; as such the resulting gains or losses are
recorded as other comprehensive income or loss in the equity
section of the balance sheet.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Item 3. Quantitative
and Qualitative Disclosures About Market Risk
Not required for smaller reporting company filers.
Item 4. Controls and
Procedures
Effectiveness of Disclosure
Our management, with the participation of our Vice President of
Finance (performing the functions of the Company's principal
executive officer and principal financial officer), evaluated the
effectiveness of our disclosure controls and procedures as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended, or the Exchange Act, as of June 30,
2020. Our management recognizes that any controls and
procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and
management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures
as of June 30,
2020, our Vice President of Finance (performing the functions
of the Company's principal executive officer and principal
financial officer) concluded that, as of such date, our disclosure
controls and procedures were not effective to ensure that
information required to be disclosed by us in reports that we file
or submit under the Exchange Act is (1) recorded, processed,
summarized, and reported within the time periods specified in the
SEC’s rules and forms, and (2) accumulated and communicated to
our management, including our Vice President of Finance (performing
the functions of the Company's principal executive officer and
principal financial officer), as appropriate to allow timely
decisions regarding required disclosure due to the material
weakness described below.
Material Weaknesses in Internal Control Over Financial
Reporting
A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis. As previously
disclosed in our Annual Report on Form 10-K for the year ended
December 31, 2019, we identified material weaknesses in our
accounting for revenue transactions. Specifically, the Company does
not have adequate controls in place to monitor revenue recognition
with respect to specific elements of contracts. In addition,
controls to prevent or detect material misstatements on a timely
basis related to contract compliance and proper revenue recognition
are not operating effectively.
Remediation of Previously Reported Material Weakness
Management has been implementing changes to strengthen our internal
controls over the monitoring of revenue recognition and the
prevention or detection of material misstatements on a timely basis
related to contract compliance and proper revenue
recognition. These changes are intended to address the
identified material weaknesses and to enhance our overall control
environment and include the ongoing activities described below.
Management has performed a comprehensive review of all
contracts to which the Company is party, including a review of
underlying schedules, to ensure a more complete understanding
of these agreements to ensure compliance and proper application
of revenue recognition principles. Upon completion of
this review, management implemented certain system
controls to ensure compliance and prevent the recognition of
revenue in excess of specific elements of the contract
agreements. In addition, new processes have been
implemented related to periodic invoicing and revenue
recognition analysis designed to detect any potential issues and
correct as applicable.
We believe the measures described above will facilitate the
remediation of the control deficiencies we have identified and
strengthen our internal control over financial reporting. However,
these material weaknesses will not be considered remediated until
the applicable remediated controls operate for a sufficient period
of time and management has concluded, through testing, that these
controls are operating effectively. We are committed to continuing
to improve our internal control processes and will continue to
review, optimize and enhance our financial reporting controls and
procedures. As we continue to evaluate and work to improve our
internal control over financial reporting, we may take additional
measures to address control deficiencies, or we may modify, or, in
appropriate circumstances, not complete, certain of the remediation
measures described above.
Changes in Internal Control over Financial Reporting
Other than the mitigating controls referenced above, there was no
change in our internal control over financial reporting (as defined
in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during
the fiscal quarter ended June 30,
2020 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
PART II – Other
Information
Item 1. Legal
Proceedings
In the ordinary course of business, we may periodically become
subject to legal proceedings and claims arising in connection with
ongoing business activities. The results of litigation and claims
cannot be predicted with certainty, and unfavorable resolutions are
possible and could materially affect our results of operations,
cash flows, or financial position. In addition, regardless of the
outcome, litigation could have an adverse impact on us because of
defense costs, diversion of management resources, and other
factors.
While the outcome of these proceedings and claims cannot be
predicted with certainty, there are no matters, as of
June 30,
2020, that, in the opinion of management, might have a material
adverse effect on our financial position, results of operations or
cash flows, or that are required to be disclosed under the rules of
the SEC.
Item 1A. Risk
Factors
Not required for smaller reporting company filers.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds
On June 29, 2020, the Company issued 8,871 shares of its common
stock upon the exercise of previously outstanding warrants to
purchase an aggregate of 25,389 shares of common stock. The
exercise was made on a “cashless” basis pursuant to the terms of
the warrants, and accordingly, the Company did not receive any
proceeds upon such exercise. The exercise of the warrants did not
involve any underwriters, underwriting discounts or commissions, or
any public offering, and the Company believes that such
transactions were exempt from the registration requirements of the
Securities Act in reliance on Section 4(a)(2) of the Securities Act
as transactions by an issuer not involving a public offering.
On July 15, 2020, the Company issued 82,399 shares of its common
stock upon the exercise of previously outstanding warrants to
purchase an aggregate of 94,404 shares of common stock. In
connection with such exercise, the Company amended the warrant to
lower the exercise price thereof pursuant to that certain
Settlement and General Release Agreement (the “Release
Agreement”) between the Company and the holder of such warrant.
The parties to the Release Agreement also each released one another
from any liabilities arising out of the warrants. The exercise was
made on a “cashless” basis pursuant to the terms of the warrants
and the Release Agreement, and accordingly, the Company did not
receive any proceeds upon such exercise. The exercise of the
warrants did not involve any underwriters, underwriting discounts
or commissions, or any public offering, and the Company believes
that such transactions were exempt from the registration
requirements of the Securities Act in reliance on Section 4(a)(2)
of the Securities Act as transactions by an issuer not involving a
public offering.
Item 3.
Defaults Upon Senior Securities
None.
Item 4. Mine
Safety Disclosures
None.
Item 5. Other
Information
None.
Item 6.
Exhibits
|
(a)
|
The following exhibits are included as part of this report:
|
Exhibit
Number
|
|
Description of Document
|
|
|
|
3.1
|
|
Restated Certificate of
Incorporation filed with the Secretary of State of Delaware on
March 18, 2010 (Incorporated by reference to Exhibit 3.1 to
Form 10-K for the year ended December 31, 2009, filed on
March 22, 2010).
|
|
|
|
3.2
|
|
Certificate of Amendment to the
Restated Certificate of Incorporation, filed with the Secretary of
State of Delaware on June 20, 2013 (Incorporated by reference
to Exhibit 3.1 to Form 10-Q for the period ended June 30,
2013, filed on August 9, 2013).
|
|
|
|
3.3
|
|
Certificate of Amendment of Restated
Certificate of Incorporation (incorporated by reference to Exhibit
3.1 to Form 8-K filed on January 27, 2015).
|
|
|
|
3.4
|
|
Certificate of Amendment to Restated
Certificate of Incorporation, filed with the Secretary of State of
Delaware on April 20, 2016 (incorporated by reference to Exhibit
3.4 to Form 10-Q for the period ended March 31, 2016, filed May 16,
2016.
|
|
|
|
3.5
|
|
Certificate of Amendment to Restated
Certificate of Incorporation, filed with the Secretary of State of
Delaware on April 21, 2017 (incorporated by reference to Exhibit
3.5 to Form 10-Q for the period ended March 31, 2017, filed May 15,
2017.
|
|
|
|
3.6
|
|
Certificate of Designation of
Preferences, Rights and Limitations of Series A Convertible
Preferred Stock (incorporated by reference to Exhibit 3.1 to Form
8-K filed on February 9, 2015).
|
|
|
|
3.7
|
|
Certificate of Amendment of
Certificate of Designation of Preferences, Rights and Limitations
of Series A Convertible Preferred Stock (incorporated by reference
to Exhibit 3.2 to Form 8-K filed on February 9, 2015).
|
|
|
|
3.8
|
|
Second Amended and Restated By-Laws
(Incorporated by reference to Exhibit 3.1 to Form 8-K filed on
December 5, 2007).
|
|
|
|
3.9
|
|
Amendment to Second Amended and
Restated By-Laws of Cleveland BioLabs, Inc. (Incorporated by
reference to Exhibit 3.1 to Form 8-K filed on May 18,
2015).
|
|
|
|
4.1 |
|
Form of Warrant (Incorporated by
reference to Exhibit 4.1 to Form 8-K filed on June 3,
2020). |
|
|
|
4.2 |
|
Form of Placement Agent Warrant
(Incorporated by reference to Exhibit 4.2 to Form 8-K filed on June
3, 2020). |
|
|
|
4.3* |
|
Settlement and
General Release Agreement, dated as of July 15, 2020, between
Cleveland BioLabs, Inc. and Alpha Capital Anstalt |
|
|
|
10.1 |
|
Form of Securities Purchase
Agreement, dated as of June 1, 2020, between Cleveland BioLabs,
Inc. and the purchasers named therein (Incorporated by reference to
Exhibit 10.1 to Form 8-K filed on June 3, 2020). |
|
|
|
10.2 |
|
Award/Contract W81XWH-15-0101
modification dated July 31, 2020 issued by USA Med Research ACQ
Activity (Incorporated by reference to Exhibit 10.1 to Form 8-K
filed on July 31, 2020). |
|
|
|
10.3* |
|
Award/Contract
W81XWH-15-0570 modification dated July 31, 2020 issued by USA Med
Research ACQ Activity |
|
|
|
31.1*
|
|
Rule
13a-14(a)/15d-14(a) Certification of Christopher Zosh.
|
|
|
|
32.1*
|
|
Certification pursuant to 18 U.S.C.
Section 1350.
|
|
|
|
101.1
|
|
The following information from CBLI’s Quarterly Report on Form 10-Q
for the quarter ended June 30,
2020, formatted in Extensible Business Reporting Language
(XBRL): (i) Consolidated Condensed Balance Sheets as of
June 30,
2020 and December 31,
2019; (ii) Consolidated Condensed Statements of Operations for
the Three and Six
Months Ended June 30, 2020 and 2019; (iii) Consolidated
Condensed Statements of Comprehensive Loss for the Three and Six
Months Ended June 30, 2020 and 2019; (iv) Consolidated
Condensed Statement of Stockholders’ Equity for the Six Months
Ended June 30, 2020 and 2019; (v) Consolidated Condensed
Statements of Cash Flows for the Six Months
Ended June 30, 2020 and 2019; and (vi) Notes to Consolidated
Condensed Financial Statements.
|
|
|
|
*
|
|
Filed herewith.
|
Signatures
In accordance with the requirements 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.
|
CLEVELAND BIOLABS, INC.
|
|
|
|
Dated: August 14, 2020
|
By:
|
/s/ CHRISTOPHER ZOSH
|
|
|
Christopher Zosh
|
|
|
Vice President of Finance
|
|
|
(Principal Executive and Principal Financial Officer)
|
|
|
|